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2020 (2) TMI 78 - ITAT BANGALORETP Adjustment - determination of arm’s length price (ALP) in respect of an international transaction of rendering software development services - comparable selection - HELD THAT:- 5 comparables to be excluded by the assessee in this appeal are; (1) Infosys Ltd., (2) L&T Infotech Ltd., (3) Mindtree Ltd., (4) Persistent Systems Ltd. and (5) Thirdware Solutions Ltd. as the turnover of these companies is 10 times greater than the turnover of the assessee Sagarsoft India Ltd. - if Sagarsoft (I) Ltd. has made a profit, then it shall not be excluded by applying the persistent loss filter. The TPO/AO will verify this aspect and consider inclusion of this company in the final comparables in accordance with law, after due opportunity to the assessee. Evoke Technologies P. Ltd. - assessee contains the annual report of this company for FY 2014-15 in which there is a reference to the revenue of this company for the year 2014-15 to be ₹ 55,60,87,264 and the export turnover, out of this to be ₹ 55,44,99,764. Attention was also drawn to pages 2397 and 2395 to show that the export income as per financial statement was 79.60%. In the light of the above statements, we are of the view that it would be just and appropriate to remand the issue for fresh consideration by the AO/TPO in accordance with law, after due opportunity to the assessee. Maverick Systems Ltd. - Since the R&D filter of 3% of revenue was not satisfied, this company deserved to be excluded. The ld. counsel for the assessee submitted before us that this was never a filter applied by the TPO in his TP analysis. Apart from the above submissions, it was also submitted that incurring of R&D expenses excluding capital expenditure was only ₹ 95.25 lakhs and that constituted 1.12% of turnover. We are of the view that this aspect also needs to be looked into afresh by the TPO/AO and accordingly we set aside the order of the DRP on this issue and remand the question of comparability of this company to the TPO/AO for fresh consideration in accordance with the law, after due opportunity to the assessee. Determination of ALP in respect of an international transaction whereby interest income was attributed by the TPO/AO on the delayed recovery of trade receivables - HELD THAT:- DR relied on the order of DRP wherein the DRP has placed reliance on the decision of Bectel India P. Ltd. [2015 (12) TMI 1560 - ITAT DELHI] wherein the earlier decision of the ITAT was distinguished and it was held that the mere fat that working capital adjustment is done while determining the ALP in respect of enhanced credit period will not subsume the determination of ALP in respect of enhanced credit period given for trade receivables. He also brought to our notice retrospective amendment to section 92B of the Act w.e.f. 1.4.2002 whereby deferred payment on receivables or any other debt arising during the course of business was also included as an international transaction. In view of the aforesaid decision cited by the ld. DR, we are of the view that the order of DRP has to be upheld. Accordingly, we uphold the order of DRP and find no merit in the grievances projected by the assessee. No other arguments were advanced on this issue except the contention that the extended credit period allowed to AE on account of trade receivables will not constitute an international transaction attracting the provisions of Sec.92 of the Act.
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