TMI Blog2019 (5) TMI 1828X X X X Extracts X X X X X X X X Extracts X X X X ..... ables on account of FAR differences. Persistent Systems and Solutions Ltd. is concerned, we find this company is functionally different since it provides support in software development, consultancy and systems integration services to Persistent group of companies and also enjoys the benefit being a part of the Special Economic Zone Scheme in India. It has incurred huge expenditure on account of Research Development activities and has abnormal profit during the year since its turnover has increased by 184% and the net profit has increased by 250% for the year ending 2011. Sankhya Infotech Ltd. , Sasken Communication Technologies Ltd. (Sasken) is functionally different from that of the assessee company. R. Systems International Ltd on the ground of its financial year being calendar year - We find the Tribunal in assessee s own case for assessment year 2010-11, has held that the comparables cannot be rejected merely on the ground that financial year followed is different. We, therefore, restore this issue to the file of A.O./TPO with a direction to include R. Systems International Ltd. in the list of comparables after extrapolation of the financial results. While doing so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as non-operating expenditure/income - HELD THAT:- TPO held that bank charges are usually not separately reported by the company and are clubbed along with the interest charges and, hence, these are to be treated in the same manner as interest. Similarly, provision for bad debt being in the nature of unascertained liability, has to be treated as non-operating income. The DRP simply upheld the action of the Assessing Officer/TPO. It is the submission of the ld. counsel for the assessee that bank charges and interest can be separately computed. Relying on various decisions it is his submission that the lower authorities have not given any valid reason to negate the claim of the assessee. We find the facts are not coming out clearly from the orders of the TPO/DRP. We, therefore, remit this issue back to the file of the Assessing Officer/TPO with a direction to adjudicate the issue afresh after giving due opportunity of being heard to the assessee. Risk adjustment - HELD THAT:- We are of the considered view that the assessee is entitled for risk adjustment to the net margin of the comparables for bringing them at par with the taxpayer on supplying the complete data b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of development of integrated circuit design and other activities related to wireless business. It filed its return of income on 28.11.2011 declaring the total income at ₹ 27,38,53,917/-. Since the assessee had undertaken international transactions with its AE which exceeds more than ₹ 15 crores, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) under the provisions of section 92CA of the IT Act for determining the ALP of the international transaction. The TPO, vide order dated 6th January, 2015, proposed upward adjustment of ₹ 35,31,33,463/- to the value of the international transactions entered into by the assessee company. The Assessing Officer, accordingly passed the draft order making addition of the same. The assessee filed objections against the draft order passed by the Assessing Officer. The DRP, vide order dated 12th August, 2015, directed the TPO to verify the correctness of the computation of the operating margin of the comparable companies and the assessee for determining the ALP of the international transaction of the assessee in accordance with the provisions of the Act. Subsequently, the TPO, vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 which was not available to the Appellant at the time of preparing TP documentation; 2.2 disregarding the ALP determined by the Appellant in the TP documentation maintained by it in terms of section 92D of the Income Tax Act, 1961 ( the Act ) by not accepting the economic analysis undertaken by the Appellant and conducting a fresh economic analysis and in particular modifying/rejecting the filters applied by the Appellant; 2.3 Not appropriately considering the functions, assets and risk profile of the companies used for comparison with the Appellant, thereby including in the final comparable set certain companies with completely different functional profile; 2.4 erroneously introducing companies having abnormal margins in the final comparable set that signify high element of entrepreneurial risk as opposed to the Appellant who is a captive service provider bearing limited risk; 2.5. excluding certain comparables considered by the Appellant in its TP documentation/ fresh search on arbitrary/frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 2.6. resorting to arbitrary rejection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,501,457 which was claimed by the Appellant during the course of assessment proceedings in accordance with the decision of Hon ble Supreme Court in the case of Smifs Securities Ltd. [2012] 24 taxmann.com 222 (SC) General Grounds 11. That on facts of the case and in law, the ld. A.O. has erred in levying interest under section 234B and 234D of the Act while completely disregarding the provisions of the Act and the judicial precedence in this regard. 12. Without prejudice to the above and assuming without accepting the levy of interest under section 234D, the Ld. AO has erred in the facts and in law in computing excess interest under section 234D of the Act of ₹ 56,805. 13. That on facts of the case and in law, the Ld. AO has grossly erred in initiating penalty proceedings under section 271(l)(c) of the Act. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, alter, amend, vary or rescind any of the above grounds either before or at the time of hearing in the interest of natural justice. 4. The assessee has also filed an application under Rule 11 of the ITAT Rules for filing an add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... press grounds of appeal Nos.2.1 and 2.7 of the transfer pricing grounds for which the ld. DR has no objection. Accordingly these grounds are dismissed as not pressed. 10. So far as the remaining grounds are concerned, i.e., grounds of appeal Nos.2 and 2.2 to 2.6, the ld. counsel for the assessee submitted that the assessee during the impugned assessment year has entered into international transaction with its AE in respect of provision of IC design and software development services totaling to ₹ 2,14,75,27,845/-. The assessee had adopted TNMM as the most appropriate method and the PLI was determined by OP/OC. The assessee used 23 comparables and the average arithmetic mean of the comparables was 8.68% whereas the arithmetic mean of the assessee was 5.43%. It was accordingly submitted before the TPO that the ALP of the international transaction is at arm s length price. However, the TPO disregarded the same and used 19 comparables with average OP/OC at 21.49% and determined an adjustment of ₹ 35,31,33,463/-. The assessee objected the comparables before the DRP and the DRP, vide order dated 7th August, 2015, directed the TPO to treat the foreign exchange loss/gain as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which are as under:- Particulars Post DRP directions (Page 439/Vol-I) Operating Cost 2,02,81,19,445 Arms Length Margin(%) 21.03% Arms Length Margin(Rs.) 42,65,13,519 Arms Length Price (ALP) 2,45,46,32,964 Price charged by the Appellant 2,18,66,31,535 International Transaction 2,14,75,27,845 Difference between ALP and price charged 26,80,01,429 Percentage of service to AE to total revenue 98.21% Proportionate Adjustment 26,32,08,740 12. The ld. counsel for the assessee submitted that ST-Ericsson India Private Limited (STE) is engaged in provision of services of intermediate stage of design and development of software of parts of integrated circuits (ICs) involving implementation, verification, maintenance services. The assessee company works as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is company was rejected by the Tribunal during Assessment year 2009-10 in assessee s own case and on appeal by the Revenue, the Hon'ble High Court in ITA No.821/2017, order dated 31st January, 2018, dismissed the appeal filed by the Revenue. He accordingly submitted that Thirdware Solutions Ltd. be excluded from the list of comparables. 16. So far as Wipro Technology Services and E-Zest Solutions Ltd. are concerned, he submitted that the Tribunal, in assessee s own case for assessment year 2010-11 has excluded these companies from the list of comparables. Therefore, these two companies should be excluded from the list of comparables. 17. So far as the Tata Elxsi Ltd. is concerned, he submitted that the Tribunal in assessee s own case for assessment year 2009-10 had excluded this company from the list of comparables and on appeal by the Revenue, the Hon'ble High Court vide ITA No.821/2017, order dated 31st January, 2018, has upheld the action of the tribunal. Therefore, he submitted that the above five companies should be excluded from the list of comparables. 18. So far as Acropetal Technologies Ltd. (Acropetal) is concerned, he submitted that this company should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that it earns income from software products and services and no segmental data is available. He submitted that the above decision was upheld by the Hon'ble Delhi High Court vide ITA No.515/2017, order dated 18th July, 2017. He also relied on the following decisions where E-Infochips was excluded from the list of comparables:- a) Ness Technologies (India) Pvt. Ltd. vs. DCIT, ITA No.696/Mum/2016, order dated 11.11.2016; b) Philips India Limited vs. DCIT and vice versa vide ITA No.893 539/Kol/2016, order dated 15th December, 2017, for assessment year 2011-12; c) M/s Electronic Imaging India Pvt. Ltd. vs. DCIT, ITA No.1506/Bang/2015, order dated 14th July, 2015 for assessment year 2011-12; and various other decisions. He accordingly submitted that this company should be rejected from the list of comparables. 21. So far as Sankhya Infotech Limited is concerned, he submitted that this company also should be excluded from the list of comparables as it is functionally dissimilar. It provides end to end simulation solutions which are customized to the end user and the company has developed customizable products for imparting training which can cater to any industry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-progress amounting to ₹ 103.83 crore whereas the assessee does not own any brand. He submitted that L T during the impugned financial year has strengthened its business in Canada by acquiring a transfer agency business for Canadian $ 62.3 million from a globally reputed bank servicing local clients represented by Asset Management Companies, banks, insurance companies, etc., whereas the assessee has no such acquisition. Further L T bears entrepreneurial risk and other business risks whereas the assessee has not undertaken any risk. Referring to the decision of the Tribunal in assessee s own case for assessment year 2010-11, he submitted that this company was excluded from the list of comparables. Further, the Hon'ble Delhi High Court in the case of Alcatel-Lucent (supra) has upheld the order of the Tribunal in excluding this company from the list of comparables. Relying on various other decisions placed in the synopsis, he submitted that this company was excluded from the list of comparables on account of functional dissimilarities. He accordingly submitted that this company also should be excluded from the list of comparables. 24. So far as Persistent Systems and So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that this company should be excluded from the list of comparables. 27. So far as Sasken Communication Technologies Ltd. (Sasken) is concerned, he submitted that this company also has to be excluded from the list of comparables on account of functional dissimilarities. While Sasken operates as a full-fledged risk taking entrepreneur, the assessee company operates at minimal risk as the 100% of the services are provided to AEs and is remunerated on a cost plus basis. Sasken has revenue earning from software services and software products and no segmental information is available and holds inventory of 0.95 crore as on 31st March, 2011 whereas the assessee is mainly engaged in software development related to design, implementation and maintenance with respect to ICs. The assessee does not own any brand or proprietary products. He submitted that Sasken has invested in R D during the year in multi-media wireless and broadband and mobile value added services whereas the assessee has not incurred any expenditure on R D. While Sasken bears entrepreneurial risk and other risks, the assessee has not undertaken any risk in this behalf. Referring to the decision of the Bangalore Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10, he submitted that this company was accepted as a comparable by the Tribunal. On appeal by the Revenue, the Hon'ble High Court has upheld the order of the Tribunal. Further, the company is also selected as a comparable by the TPO for assessment year 2010-11. He accordingly submitted that this company should be included in the list of comparables. 32. So far as Thinksoft Global Services Ltd. is concerned, he submitted that the TPO rejected the same on the ground that it is functionally dissimilar as it provides software validation and verification services which is part of software development services whereas the functions of the assessee are high in functional hierarchy. He submitted that the assessee is not engaged in high end activity and is a routine and intermediary as it provides software development and design services as per the specifications provided by the AE. Therefore, this company should be considered as a comparable. Referring to the decision of the Bangalore Bench of the Tribunal in the case of Finastra Software Solutions Ltd. vide IT(TP)A No.529/Bang/2016, he submitted that this company was accepted as a comparable. Similar view has been taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... margin of comparables for bringing them at par with the tax payer. Relying on various other decisions, he submitted that the assessee is entitled to risk adjustment. He, however, submitted that he has no objection if the matter is restored to the file of the Assessing Officer with similar directions as per assessment year 2010-11 and 2013-14. 36. So far as ground of appeal No.5 is concerned, the ld. counsel for the assessee submitted that the Tribunal in assessee s own case for assessment year 2009-10 and 2010-11 has decided on the treatment of time based software licence in favour of the assessee holding that the expenses of time based software licence are revenue in nature which are incurred for the purpose of business. Further, the Tribunal has also held that the aforesaid one time expenditure cannot be deferred as such and are revenue expenses to run the business. He submitted that if the ground of appeal No.5 is decided in favour of the assessee, then, ground of appeal No.6 become infructuous. 37. So far as ground of appeal No.7 is concerned, he submitted that the Tribunal in assessee s own case for assessment year 2009-10 and 2010-11 has decided the issue of allowabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find the assessee during the impugned assessment year has entered into international transaction with its AE amounting to ₹ 2,14,75,27,845/- being provision of IC design and software development services. The assessee adopted TNMM as the most appropriate method and the PLI was determined at Operating Profit (OP)/Operating Cost (OC) of 8.68% whereas OP/OC of the assessee was at 5.43%. Accordingly, it was argued that the ALP of the international transaction is at arm s length. However, the TPO, rejecting the various arguments of the assessee applied certain other filters and excluded certain comparables for benchmarking the international transaction and arrived at an average of 21.49% and accordingly proposed an adjustment of ₹ 35,31,33,463/- being the ALP of the international transaction. We find the DRP gave certain directions based on which the Assessing Officer finally took 17 comparables with average margin of 21.03% and after considering the margin of the assessee at 7.82% finally made adjustment of ₹ 26,32,08,740/- to the ALP of the international transaction. It is the submission of the ld. counsel for the assessee that the assessee company works as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O/ to exclude this company from the list of comparables. The Hon'ble Delhi High Court in the case of Alcatel Lucent India Ltd. has also upheld the action of the Tribunal in excluding Persistent Systems Ltd. as a comparable for the purpose of determination of the ALP of the international transaction on account of functional dissimilarities when compared with the assessee. In view of the above, we direct the TPO/Assessing Officer to exclude Persistent Systems Ltd. from the list of comparables. 43. So far as Thirdware Solutions Ltd. is concerned, a perusal of the Schedule-12 Sales, copy of which is placed at page 1510, Volume III of the paper book, shows the following details:- Schedule 12: SALES Export from SEZ Unit 617,464,837 475,840,447 Export from STPI Unit 70,626,764 112,090,633 Revenue from Subscription 19,602,931 15,313,736 Sale of Licence 33,814,861 15,138,618 Software Services 47,509,261 57,223,072 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom STPI Unit; and revenue from subscription and its segmental results are not available, it is functionally incomparable, so it cannot be taken as a valid comparable. Hence, we order to exclude the same. 45. Respectfully following the decision of the Tribunal in assessee s own case, we hold that Thirdware Solutions Ltd. cannot be considered as a comparable. We accordingly direct the TPO to exclude the same from the list of comparables. 46. So far as Wipro Technology Services Ltd. is concerned, we find this company was rejected by the Tribunal in assessee s own case for assessment year 2010-11 by observing as under:- WIPRO TECHNOLOGY SERVICES LTD. (WIPRO) 36. The taxpayer sought exclusion of Wipro on the ground that it involved in providing software related services to its sole customer Citi Group entities which were acquired by Wipro and has signed a Master Service Agreement with Citi Group for the delivery of services for a period of six years; that Wipro's transaction with Citi Group falls within the ambit of section 92B (2) and as such, is deemed international transaction and has relied upon the decision of Hon'ble Delhi High Court in Cashedge India Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) it is deemed to be transaction entered into between related parties (two A.Es) if there exists prior agreement in relation to the relevant transaction between third party and the A.E. In other words, as per terms of Section 92B(2), even if the transaction is between unrelated party and an enterprise, then, it would be deemed to be an international transaction if there was any prior agreement between the related parties on the basis of which present transaction is being undertaken. 40. So, when Wipro has received the revenue by virtue of MSA with Citi Group on account of pre-arrangement, it is deemed to be international transactions and in these circumstances, Wipro fails RPT filter applied by the TPO. 41. Ld. DR for the Revenue in order to repel the arguments addressed by the ld. AR for the assessee contended that in the annual report in the related party transactions, nowhere the name of Citi Group entities have been mentioned as related party and as such, this comparable does not fail RPT filter by virtue of provisions of section 92B(2) of the Act. 42. However, this contention of the ld. DR is not sustainable because this issue has already been examined at length by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een from the robust market practice as well. 48. In view of the above discussion, we hold that Wipro Technology Service Ltd. cannot be considered as a comparable. 49. So far as E-Zest Solutions Ltd. is concerned, we find this company was rejected as a comparable by the Tribunal in assessee s own case for assessment year 2010-11 on account of functional dissimilarities. Since during the impugned assessment year also E-Zest Solutions Ltd. deals in software products and holds inventory of ₹ 1.64 crores and has diversified services, therefore, this company, in our opinion, cannot be considered as a comparable as there is no change in the facts of E-Zest for assessment year 2011-12 vis- -vis assessment year 2010-1. We find, the Tribunal, while excluding E-Zest Solutions Ltd. for assessment year 2010-11 has observed as under:- E-ZEST SOLUTIONS LTD. (E-ZEST) 55. The taxpayer sought exclusion of E-Zest on ground of functional dissimilarity being into broad portfolios of services (diversified services) with no segmental reporting. Perusal of Profit Loss account for the year ending 31.03.2010, available at page 1946 of the Paper Book - IV shows that the E-Zest has substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as a comparable on account of functional dissimilarity and absence of segmental details. The various other decisions relied on by the ld. counsel for the assessee in the paper book also supports his case. Accordingly, E-Zest Solutions Ltd. is directed to be excluded from the list of comparables. 51. So far as Tata Elxsi Ltd. is concerned, we find this company was excluded by the Tribunal in assessee s own case for assessment year 2009-10 as well as for assessment year 2010-11 on account of functional dissimilarities. On further appeal by the Revenue, the Hon'ble High Court in assessee s own case for assessment year 2009-10 dismissed the appeal filed by the Revenue. Since this company is engaged in high end services, therefore, it cannot be compared with that of the assessee company. In view of the above and in view of the consistent view of the Tribunal in assessee s own case for assessment year 2009-10, 2010-11 and 2011-12, we direct the TPO to exclude this company from the list of comparables. 52. So far as Acropetal Technologies Limited (Seg.) is concerned, we find this company is engaged in diversified operations such as provision of engineering design services, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment, Quality Assistance and Certification, reengineering, sustenance and volume production, Software Consulting and manufacturing EVM and VDB Electronic Board etc and is functionally dissimilar. The Id. AR has relied on the decision rendered by the IT AT Delhi Bench in Saxo India Private Limited (ITA No. 6148/Del/2015), wherein the 1TAT Delhi Bench has held that E-lnfochips is to be rejected as a comparable on the ground that it earns income from software products and services and no segmental data is available. We do find from the FAR analysis that assessee company is functionally dissimilar to E- lnfochips and hence finding support from the decision rendered by the 1TAT Delhi Bench in Saxo India Private Limited (ITA No. 6148/Del/2015), we direct the TPO to exclude this comparable. 54. We find the Hon'ble Delhi High Court upheld the order of the Tribunal by holding as under:- 2.The question urged by the Revenue is whether the ITAT erred in directing the TPO to exclude M/s. E-Infochips Ltd., M/s. Larsen Toubro Ltd., M/s. Persistent Systems Ltd., M/s. Infosys Limited, Saxo India Ltd. and Zylog Ltd. from the list of comparables for the purposes of determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the decision of the Tribunal in assessee s own case for the immediately preceding assessment year, we deem it proper to restore this issue to the file of the TPO for considering the exclusion of this company from the list of comparables. The Assessing Officer shall keep in mind the various decisions relied on by the assessee including the decision of Hon'ble Delhi High Court in the case of Alcatel-Lucent (supra) and the FAR analysis and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. 57. So far as Persistent Systems Ltd. is concerned, we find the company operates as a full-fledged risk taking entrepreneur and is predominantly engaged in outsourced software product development services. It has income from sale of software services and products and also entered into acquisition of OPD business of of Infospectrum India Pvt. Ltd. and has entered into JV with Sprint Nextel Corporation which has benefitted the company to grow its operations. It owns huge intangibles and also entrepreneurial risk and other business risks. However, the assessee company operates at minimal risk as the 100% services are provided to AEs and is rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of functional difference which was confirmed by the Hon ble High Court. This company was merged with its parent company Persistent Solutions Limited in this year which was an extra ordinary event. Therefore, this company has to be excluded. We, therefore, direct TPO to exclude this company from comparable. 59. We find the Hon'ble Delhi High Court has upheld the decision of the Tribunal on this issue. Further the Bangalore Bench of the Tribunal in the case of Electronic Imaging India Pvt. Ltd. has also excluded this company from the list of comparables on account of functional dissimilarities. The various other decisions relied on by the ld. counsel for the assessee which are placed in the paper book also supports the case that Persistent Systems and Solutions Ltd. cannot be considered as a comparable. We accordingly direct the Assessing Officer/TPO to exclude this company from the list of comparables. 60. So far as Sankhya Infotech Ltd. is concerned, we find this company also is functionally different from that of the assessee company. The company overview as mentioned in the Notes to Accounts forming part of the accounts for the year ending 31st March, 2011 reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated to any specific segment as the underline services are used interchangeably. Thus, this segmental information is incomplete and cannot be considered for comparability purposes. It is also seen that Sankhya lnfotech Limited has been rejected on the ground that it owns software products in the following cases - Colt Technology Services India Private Limited [(TS-774-ITAT- 2012(Del)], Integrated Decisions Systems India (Private) Limited [(TS-629-1TAT2011(JPR)], NTT Data India Enterprise Application Services Private Limited [IT-293-ITAT-2013(HYD-TP), Adaptech India (Private) Limited (ITA No. 481/Hyd./2011), Sunquest Information Systems (TS-299-1TAT-2015 (Bang)TP).Further, non availability of segmental information in case of diversified operations renders a company not comparable, has been held in the following decisions - Telcordia Technologies India P. Ltd. (ITA No. 7821/Mum/2011), Trilogy E-Business Software India Pvt. Ltd. vs. DCIT (ITA No. 1054/Bang/2011, Transwitch India P. Ltd. vs. DCIT [ITA No. 948/Bang/2011, TS-105- ITAT-2012(Bang)-TP], First Advantage Offshore Services Pvt. Ltd. (ITA No. 1252(Bang)/2010), CSR India (P) Ltd. vs. ITO [IT(TP)A (reference no. No. 1119/Bang/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, directed to include this company as comparable on the ground that if from the available data on record, the results for financial year can reasonably be extrapolated, then, the companies cannot be excluded. We, therefore, restore this issue to the file of A.O./TPO with a direction to include R. Systems International Ltd. in the list of comparables after extrapolation of the financial results. While doing so the TPO shall give due opportunity of being heard to the assessee. 67. So far as CG VAK Software Exports Ltd. is concerned, we find the TPO rejected this company as it is making persistent losses in software services segment. It is the submission of the ld. counsel that this company is not making persistent losses and has earned profit in one of the two preceding years. Further, this company was accepted by the TPO as a comparable for assessment years 2009-10 and 2013-14. We, therefore, restore this issue to the file of the A.O./TPO to examine the record and decide the issue afresh and as per law after giving due opportunity of being heard to the assessee. 68. So far as CAT Technologies Ltd. is concerned, we find the company earned revenue from information technol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue to the file of the A.O./TPO to decide the issue afresh by extrapolating the result after giving due opportunity of being heard to the assessee. 71. So far as Maveric Systems Ltd. is concerned, we find the TPO rejected this company on the ground that this company has incurred higher indirect cost in this year and also incurred cost on establishing delivery mechanisms. It is the submission of the ld. counsel for the assessee that the TPO has not demonstrated that any indirect cost is involved and its impact on the net margin. It is his submission that the revenue of the company has increased in the year over the previous year. Further, the company passes all the filters applied by the TPO himself and, therefore, this company should be taken as a comparable. It is also his submission that the TPO himself in assessee s own case for assessment year 2010-11 has accepted Maveric Systems Ltd. as a comparable. We, therefore, restore this issue to the file of the A.O./TPO with a direction to adjudicate the issue afresh as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. 72. Ground of appeal Nos.2 to 2.6 are accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , after giving due opportunity of being heard to the assessee. The ground raised by the assessee is accordingly allowed for statistical purposes. 77. Ground of appeal No.5 relates to treatment of software expenses of ₹ 69,45,581/- as capital expenditure and thereby making addition of ₹ 27,78,233/- after allowing depreciation. 78. After hearing both the sides, we find the TPO/A.O. treated the software expenses amounting to ₹ 69,45,581/- as capital in nature and after allowing depreciation on the same, made addition of ₹ 27,78,233/- which was upheld by the DRP. We find identical issued had come up before the Tribunal in assessee s own case for assessment year 2009-10 and 2010-11 and the Tribunal has decided the issue on the treatment of time based software licence in favour fo the assessee holding that the expenses on time based software licence are revenue in nature which are incurred for the purpose of business. The Tribunal further held that the one time expenditure so incurred cannot be deferred as such and are revenue expenses to run the business. The relevant observation of the Tribunal from para 55 of the order reads as under:- 55. Assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 79. We find, following the above decision, the Tribunal in assessee s own case for assessment year 2010-11 has treated the software expenses as revenue in nature. Therefore, following the decision of the Tribunal in assessee s own case for assessment year 2009-10 and 2010-11 and in absence of any distinguishable feature brought before us by the Revenue, we direct the Assessing Officer to treat the expenses on rental of time based software licence as revenue in nature. The ground raised by the assessee is accordingly allowed. In view of our above decision, ground of appeal no.6 becomes infructuous. 80. Ground of appeal No.7 relates to expenditure on training of employees amounting to ₹ 9,85,574/- as capital in nature. 81. After hearing both the sides, we find the Assessing Officer/TPO/DRP have treated the expenditure of ₹ 9,85,574/- claimed by the assessee as expenditure on training of employees as capital in nature being giving enduring benefit to the assessee. We find identical issue had come up before the Tribunal in assessee s own case for assessment year 2010-11 and the Tribunal vide ITA No.609/Del/2015, order dated 3rd July, 2018, has decided the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in assessee s own case and in absence of any contrary material brought to our notice against the order of the Tribunal, this ground of the assessee is allowed. 83. In view of the above discussion grounds of appeal Nos.8 and 9 of the assessee become infructuous. 84. Ground of appeal No.10 relates to depreciation on goodwill amounting to ₹ 2,45,01,457/- 85. After hearing both the sides, we find the assessee claimed depreciation on goodwill amounting to ₹ 2,45,01,457/- during the course of assessment proceedings, in accordance with the decision of Hon'ble Supreme Court in the case of Smifs Securities Ltd. We find the ld. DRP, relying on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd (supra) rejected the claim of the assessee on the ground that the assessee has not made such claim in the return of income. We find this issue had come up before the Tribunal in assessee s own case for the assessment year 2010-11 and the Tribunal has restored the issue to the file of the A.O. for deciding the issue afresh by observing as under:- 75. Ld. AO/DRP have denied the depreciation on goodwill amounting to ₹ 2,64,53 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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