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2021 (1) TMI 358 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- The assessee is engaged in the business of developing software titled as "computer radiated designing and development of commercial vehicle systems". The assessee is developing specific software for its Associated Enterprises, i.e., it is captive software developer. Acropetal Technologies Ltd - As revenue from Information Technology transactions services is less than 75% and consequently this company does not satisfy the filter of information technology revenue applied by the TPO itself. E-infochips Ltd - There is no segmental information available as regards the revenue from sale of products and revenue from software development segment. As the assessee is simply engaged in rendering software development services and there is no sale of any software products, this company, in our considered opinion, ceases to be comparable. It is obvious that from the common pool of income from both the streams of software products and software services, one cannot deduce the revenue from software services and no one knows the impact of revenue from Products on the overall kitty of profit, which may be significant. Since no segmental data of this company is available indicating operating profit from software development services, we order to exclude this company from the list of comparables. Persistent Systems and Solutions Ltd - As per Schedule 11, the entire revenue has been shown under one segment i.e., sale of software services and products. Therefore, no separate segment has been given in respect of software services. Accordingly, the composite data of revenue as well as margins of this company pertaining to the sale of software services and products cannot be considered as comparable with the software development services segment of the assessee. In view of the above facts and circumstances, we do not find any error or illegality in the directions of the DRP in excluding this company from the list of comparables. Include M/s. CG VAK Software and Export Ltd. as a comparable company ALP of the transactions relating to Software segment requires to be re-determined. Accordingly, we restore this issue to the file of AO/TPO with the direction to re-compute the ALP of Software development Services segment.
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