TMI Blog2020 (2) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... .S. Syal, Vice President And Shri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Shri Madhur Agarwal For the Revenue : Shri T. Vijaya Bhaskar Reddy ORDER PER R.S.SYAL, VP : This batch of three appeals comprises of one appeal by the assessee for the assessment year 2010-11 and two cross appeals for the assessment year 2011-12. For the sake of convenience, we have clubbed these appeals for disposal by this consolidated order. A.Y. 2010-11 2. The ld. AR submitted at the very outset that the assessee filed appeal after the filing of the appeal by the Revenue against the order passed by ld. CIT(A). Since the Revenue s appeal has already been dismissed because of low tax effect, the ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction. The TPO observed that the assessee adopted the Transactional Net Margin Method (TNMM) as the most appropriate method for benchmarking the international transaction. The assessee declared its Profit Level Indicator (PLI) of Operating Profit / Operating Cost (OP/OC) at 13.56% as against that of comparables at 5.54%. In the light of this factual panorama, it was claimed that the international transaction was at ALP. The TPO did not disturb the application of the TNMM as most appropriate method nor the PLI. He simply made certain inclusions and exclusions in/from the list of comparables put forth by the assessee and accordingly proposed transfer pricing adjustment of ₹ 2,58,17,445/- in the transaction. The ld. CIT(A) gave cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence, ceased to be comparable. The TPO did not accept the assessee s contention by finding that more than 50% of the revenue of E-Infochips Ltd. was from the provision of software and software consultancy services and hence, was comparable. The ld. CIT(A) echoed the assessment order on this score. 8. The TPO has drawn a chart at page 25 of his order containing break-up of the figures of revenue by E-Infochips Ltd., which transpires income from software services at ₹ 19.21 crore (74%); consultancy charges at ₹ 2.90 crore (11%); and hardware maintenance at ₹ 3.92 crore (15%). We have gone through the Profit Loss Account of this company, a copy of which is available at page 773 of Paper Book. It can be seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the assessee. In view of the fact that this company, apart from rendering software development services, is also engaged in manufacturing hardware products, we hold that it loses its comparability with the assessee company, which is engaged in providing software development services only and that too, as a captive service provider. We therefore, order to exclude this company from the list of comparables. 9. The ld. AR submitted that if E-Infochips Ltd. is excluded from the list of comparables, then there is no need to argue further on other issues taken up by the assessee in its appeal. 10. Now, we espouse the appeal of the Revenue in challenging the exclusion of five companies, viz., FCS Software Solutions Ltd., L T Info Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenses are only ₹ 67.61 crore. Thus, it is evident that the company, at standalone basis, is not only engaged in providing Software Development Services but also earning revenue from Education and Infrastructure Management. Nature of activity pursued under Infrastructure Management has been outlined at page 24 of the Annual report, which indicates that this company: has expanded the scope of the Infrastructure management services being provided by it by managing the client services either on client sites or at Data Centers or in our premises in 24x7 environment. We also set up data centers for clients globally, on which, our engineers remotely or onsite manage all Hardware, Network, LAN/WAN, Data and voice networks in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessee. The ld. CIT(A) directed to exclude the other three companies by observing that their turnover was several times higher vis- -vis assessee company. In this regard, we find that the view taken by the ld. CIT(A) echoes with that of the Hon ble jurisdictional Bombay High Court in CIT Vs. Pentair Water India Pvt. Ltd. (2016) 381 ITR 216 (Bom), in which the view of the Tribunal in excluding certain companies on the basis of higher turnover has been approved by the Hon ble Bombay High Court. Since the facts of the instant case are similar in as much as the TPO included these four companies in the list of comparables, which were having their respective turnovers several times more than that of the assessee, respectfully following the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|