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2015 (6) TMI 724 - AT - Income TaxTransfer pricing adjustment - adjustment in the arm’s length price(ALP) of international transaction - selection of comparable - Held that:- M/S.Accel Transmatic Limited (seg.), Avani Cincom Technologies Ltd., Celestial labs Limited and KALS Infosystems Ltd. need to be excluded from the list of comparable as decided in ase of First Advantage Offshore Services Pvt.Ltd. Vs. DCIT IT [2012 (2) TMI 478 - ITAT BANGALORE ]. Avani Cincom Technologies Ltd. (‘Avani Cincom’)unusually high profit during the financial year 06-07. The operating revenues increased 63.03% which indicates that it was an extraordinary year for this company. Even the growth of software industry for the previous year as per NASSCOM was 32%. The growth rate of this company was double the industry average, thus accordinglr rejected Celestial Labs Ltd. company was basically/admittedly in clinical research and manufacture of bio products and other products, there is no clear basis on which the TPO concluded that this company was mainly in the business of providing software development services. We therefore accept the plea of the Assessee that this company ought not to have been considered as comparable. KALS Information Systems Ltd. t this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the Assessee that this company is not comparable. Accel Transmatic Ltd. to be excluded from the final list of comparable companies for the purpose of determining ALP M/S.Ishir Infotech Ltd. is out-sourcing its work and, therefore, has not satisfied the 25% employee cost filter and thus has to be excluded from the list of comparables And Lucid Software Ltd.nvolved in the development of software as compared to the assessee, which is only into software services. omputation of the net margin for Mega Soft Ltd. Is therefore remitted to the file of the TPO to compute the correct margin by following the direction of the Tribunal in the case of Trilogy E-Business Software India Pvt.Ltd. [] M/S.Infosys Technologies Limited, Tata Elxsi Ltd. (Seg.) & Wipro Limited re not comparable companies in the case of software development services provider. M/S. E-Zest Solutions Ltd., Persistent Systems Ltd., Quintegra Solutions Limited and Third ware Solutions Ltd., this Tribunal in the case of 3DPLM Software Solutions Ltd. (2014 (12) TMI 612 - ITAT BANGALORE ) was pleased to hold that the aforesaid companies are not comparable with a company engaged in Software Development Services such as the Assessee. M/S.Helios & Matheson Information Technology Ltd., we find that the said company has been held to be not comparable with a software service provider like the Assessee . The AO is directed to compute the Arithmetic mean by excluding the aforesaid companies from the list of comparable. According to the learned counsel for the Assessee, if the submissions of the assessee are accepted, then the arithmetic mean of the comparables retained would be within the range of +/- 5% of the Assessee’s Net Margin. Computation of deduction u/s.10A - Held that:- Hon’ble Court in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] held that whatever is excluded from the export turnover should also be excluded from the total turnover for the purpose of computing deduction u/s.10A of the Act.
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