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2014 (12) TMI 50 - AT - Income TaxSelection of comparables – Exensys Software Solutions – Extraordinary event - Held that:- Following the decision in Invensys Development Centre (India) Pvt. Ltd. Versus The Addl. CIT, Hyderabad [2014 (3) TMI 171 - ITAT HYDERABAD] - There is merger of Holool Ltd. as a result of which the company’s income for the year under consideration was ₹ 737.79 lakhs - there is a clear mention that the company’s income is possible with the amalgamqation of Holool India Ltd. - Assessee company has got benefit by advanced latest technical expertise on various technology domains of the transferor company - claim was with reference to the AS-14 and also due to amalgamation of two companies - Not only in the correspondence with the TPO that Assessee expressed its inability to furnish separate accounts for two amalgamated companies but also further it has clearly mentioned to the TPO that there is a gap in the expenditure expected to incur and actual expenditure incurred which made the company record high operating margin on cost - there is an extra-ordinary event which resulted in high operating margin of that company – thus, the AO is directed to exclude the company from the list of comparables. Thirdware Solutions Ltd. – software development business - Held that:- Following the decision in Intoto Software India (P.) Ltd. Versus Assistant Commissioner of Income-tax, Circle -2(1), Hyderabad [2013 (10) TMI 599 - ITAT HYDERABAD] - there are software products that the company invoiced during the FY and the financial results are in respect of services only but still it held that though there is no sale of software products during the year but the company might have incurred expenditure towards development of software products - the AO/TPO is directed to exclude the company from the list of comparables. Bodhtree Consulting Ltd. –Related party transaction - Held that:- Related party transaction as a percentage to the total revenue is 34.68% which is more than the accept/reject matrix of more than 25% fixed by the TPO - in final filters adopted by the TPO he himself has excluded companies having RPT of more than 25% - the matter is remitted back to the AO/TPO to examine this aspect and exclude it from the list of comparables. Tata Elxsi Ltd. – Held that:- The company itself acknowledges that it is a specialized embedded software development service provider, hence, cannot be compared with any other software development company - The company also informed, because of specialization and diverse nature of its business, it is very difficult to scale up its operations - this company not to be a comparable to a pure software development service provider like the present assessee – the AO/TPO is directed to exclude it from list of comparables – Decided partly in favour of assessee.
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