TMI Blog2015 (1) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 (in short the Act ) dated 28.10.2011, which is in conformity with the directions given by the Dispute Resolution Panel, Pune (in short the DRP ) dated 26.09.2011. 2. In this appeal, a substantive dispute is with regard to an addition of ₹ 8,79,44,950/- made by the income-tax authorities while determining the arm's length price of the international transaction of software development services rendered to the associated enterprises. 3. The appellant-assessee before us is a branch-office of M/s SunGard Trading Systems of USA (STS), which is one of the subsidiaries of SunGard Data Systems Inc (SDS). SDS is a global leader in integrated IT and e-Processing solutions for the financial services industry. Assessee provides software development services to STS, and such services include development of software and components of software products developed as per the requirements of SunGard group entities. For the assessment year under consideration, assessee filed a return of income declaring total income of ₹ 39,37,714/-. The said return of income was subject to a scrutiny assessment whereby the Assessing Officer passed an order u/s 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... length price, and accordingly, he computed adjustment of ₹ 8,79,44,950/- on this point. The Assessing Officer has passed the final assessment order dated 28.10.2011 (supra) after an addition of ₹ 8,79,44,950/- on account of the transfer pricing adjustment. 5. At the time of hearing, it was a common point between the parties that the dispute relating to the determination of arm's length price of the international transaction of software development services is identical to the dispute dealt with by the Pune Bench of the Tribunal in the assessee s own case for assessment year 2006-07 vide ITA No.122/PN/2011 dated 30.09.2014. 6. The Ld. Representative for the assessee pointed out that in case the following three concerns, namely, (i) KALS Information Systems Ltd.; (ii) Transworld Infotech Ltd.; and, (iii) Compucom Software Ltd. are excluded from the final set of comparables, based on the decision of the Tribunal in the assessee s own case for assessment year 2006-07 (supra), the resultant arm's length price would fall within the +/- 5% of the stated value of the international transactions and therefore in terms of section 92C(2) of the Act no adjustment would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to KALS Information Systems Ltd. for the assessment year under consideration before us. It has been pointed out that Bindview India (P.) Ltd. (supra) is a company which is engaged in software development activities, which is akin to the activities being carried out by the assessee for its associated enterprises. Therefore, the said concern i.e. KALS Information Systems Ltd. is liable to be excluded from the final set of comparables. The learned CIT-DR has not disputed that the decision of the Tribunal in the case of Bindview India (P.) Ltd. (supra) covers the argument being setup by the assessee before us. 15. In this context, we have perused the decision of the Bindview India (P.) Ltd. (supra) which also is a concern engaged in rendering of software development services to its parent company abroad. In the context of benchmarking the services rendered by Bindview India (P.) Ltd. (supra), which is similar to the services being rendered in the instant case, the Tribunal observed that KALS Information Systems Ltd. was not a functionally comparable concern. The following discussion in the order of the Bindview India (P.) Ltd. (supra) is relevant :- 16. Another issue rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the order of the Tribunal dated 30.09.2014 (supra), which reads as under :- 8. We have carefully considered the rival submissions on this aspect and we are unable to uphold the stand of the Revenue. The discussion made by the TPO in para 6.5.2 of his order on the impugned issue shows that he has considered a filter 25% of the RPTs for the purpose of excluding a concern from the list of comparables. While applying the said filter in the case of Compucon Software Ltd. he has aggregated the receipts for services rendered and the payments made for services received and thereafter he has divided the total figure by the total turnover of the assessee. Quite clearly, the numerator considered by the TPO comprises of receipts for services rendered as also the payments made for services received meaning thereby that sales as well as expenses having a component of RPTs are included, whereas the denominator comprised of only the sales component. Ostensibly, the aforesaid formula would give a distorted picture of the ratio of RPTs to the total transactions. If total expenses incurred by the assessee by way of payments to associated enterprises is divided by the total expenses incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For this purpose, the appellant has referred to pages 668 to 751 of the Paper book for the copy of the order of the TPO dated 29.10.2009 for A.Y. 2006-07, specifically at pages 689 to 690, where the TPO has taken either the sales or expenses as the appropriate base, as the case may be, and not aggregate of sales and total expenses even where related party transactions in one of the two was absent. 12. On this basis, it was sought to be canvassed that the aforesaid three concerns are liable to be excluded from the final set of comparables in order to determine the arm's length price of the international transactions of providing of software development services. The aforesaid precedents continue to hold the field as the same have not been altered by any higher authority. No change in the facts and circumstances of the case has been established before us and therefore following the above precedents, we hold that the concerns, namely, (i) KALS Information Systems Ltd.; (ii) Transworld Infotech Ltd.; and, (iii) Compucom Software Ltd. be excluded from the final set of comparables in order to compute the arm's length price of the international transactions. 13. At the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindustan Organics Chemicals Ltd. vide Income Tax Appeal no.399 of 2012 dated 11.07.2014 has held that such payment of employees contribution to Provident Fund could not be disallowed u/s 43B of the Act. The relevant discussion in the order of the Hon ble High Court reads as under :- 9. Even otherwise, we fail to understand this deduction could have been disallowed to the Assessee. Admittedly, the Assessment Year in question is 2006-07. The second proviso to section 43B quoted above was deleted with effect from 1st April, 2004 and simultaneously the first proviso was also amended bringing about a uniformity in deductions claimed towards tax, duty, cess and fee on the one hand and contribution to the employees provident fund, superannuation fund and other welfare funds on the other. These deductions being claimed in the return of income filed for the Assessment Year 2006-07, the amendments to Section 43B which came into force with effect from 1st April, 2004 would have clearly applied to the Assessee s case. In this view of the matter also, we find that the ITAT was fully justified in dealing the addition of ₹ 1,82,77,138/- on account of delayed payment of provident fun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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