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2014 (12) TMI 429 - AT - Income TaxSelection of comparables Held that:- The discussion made by the TPO on the issue shows that he has considered a filter 25% of the RPTs for the purpose of excluding a concern from the list of comparables in 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 - if total expenses incurred by the assessee by way of payments to associated enterprises is divided by the total expenses incurred, the ratio of RPTs to the total transactions exceed 25%, as per the working made by the assessee - assessee rightly referred to Bindview India (P.) Ltd. vs. DCIT [2013 (6) TMI 113 - ITAT PUNE] - the RPTs in the case of Compucon Software Ltd. have been accepted as being in excess of 25% of the total transactions - the plea of the assessee to exclude Compucon Software Ltd. from the list of comparables has been wrongly negated by the lower authorities. Inclusion of Avani Cincom Technologies Ltd. as a comparable Held that:- The assessee is justified in seeking exclusion of Avani Cincom Technologies Ltd. from the final list of comparables - the order of the TPO brings out that the concern is engaged in providing State of Art Technology solution and services to organizations in different verticals like Travel, Insurance, Financial services, Healthcare, Law, Transportation and others - The factum of the concern being engaged in development of products and sale thereof apart from being engaged in software development services is not denied - in such a situation, only the segment relating to development of software services, which can be said to be similar to the assessee, can only be considered for the purposes of comparability analysis - The segmental data is not available and it would be inappropriate to consider the financial results of the concern as a whole for the purposes of carrying out comparability analysis vis-ΰ-vis the tested transactions the company is liable to be excluded from the list of comparables. Inclusion of SIP Technologies and Export Ltd. - Financial data of the concern which has been considered does not correspond to the financial year of the assessee Held that:- The financial year of the assessee is from 01.04.2005 to 31.03.2006 whereas the financial year of SIP Technologies and Export Ltd. ending on 31st March, 2006 is comprised of a period of 18 months starting from 01.10.2004 as per rule 10B(4) of the Rules, the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into - the financial data of SIP Technologies and Export Ltd. adopted by the TPO for the period ended 31.03.2006 does not relate to the FY in which the international transaction has been carried out by the assessee because of the variation in the financial year of the two concerns the AO is directed to exclude SIP Technologies and Export Ltd. from the list of comparables. The plea setup by the assessee for exclusion of Synetairos Technologies Ltd. from the list of comparables is quite justified - assessee had included the concern as a comparable in its Transfer Pricing Study in principle assessee cannot be denied an opportunity to seek exclusion of the concern from the list of comparables if the same is founded on justifiable grounds. M/s Synetairos Technologies Ltd. Held that:- The company is engaged in not only providing software development services but is also engaged in providing software professionals to other software companies, an activity which is not being carried out by the assessee at all - in absence of adequate credible information relating to the said concern, it would be inappropriate to consider it as a comparable concern for the purposes of carrying out the comparability analysis - M/s Synetairos Technologies Ltd. be excluded from the final set of comparables Decided partly in favour of assessee.
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