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2015 (8) TMI 227 - AT - Income TaxTransfer pricing adjustment - selection of comparable - Held that:- Avani Cimcon company is engaged in the development of software products as well as software services. However, there are no segmental details available in the financial account of this company. Therefore, this company cannot be considered as a good comparable of the assessee company which is purely a software development company and not in software product. See M/s. 3DPLM Software Solutions Ltd. [2014 (12) TMI 612 - ITAT BANGALORE] Bodhtree Ltd is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology unlike a software development services company as like assessee, thus we direct the AO/TPO to exclude this company from the list of comparables. See M/s CISCO Systems India Pvt. Ltd case [2014 (11) TMI 849 - ITAT BANGALORE]. Celestial Labs Ltd. ompany is functionally dis-similar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year also, thus we direct the TPO/AO to exclude this company from the list of comparables. E-Zest Solutions Ltd. is engaged in the business of consultancy services and technical services which is categorized as KPO services hence, it is functionally not comparable to the assessee Infosys Technologies Ltd. cannot be considered as good comparables of the assessee because this company own intangibles apart from the industry leader in the field. Kals Information Systems Ltd 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. Persistent Systems Ltd. in the absence of segmental details / information a company cannot be taken into account for comparability analysis, we hold that this company ought to be omitted from the set of comparables for the year under consideration Quintegra Solutions Limited be excluded from the list of comparables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider. Tata Elxsi Ltd should not be regarded as a comparable as software segment of this company comprises the activity of product designing services and therefore, this company is not purely software development service provider Thirdware Solutions Ltd company is engaged in the software development products as well as software development. However, no segmental information is available on this company. Further this company acquired intangible assets and derived revenue based on sales of licences. Thus this company was found to be functionally dissimilar to that of pure software development service provider. Wipro Ltd company is a industry leader and also owns tangibles. He has further submitted that this company is engaged in product development and services. However, the segmental information is not available. He has pointed out that there is a amalgamation during the year and the software service revenue to the sales is less than 75%., thus we direct the AO/TPO to exclude this company from the list of comparables. Softsol India Ltd - if the filter of RPT at 15% is applied in a particular comparable then, this filter should also applied to all other comparables companies. The assessee has also disputed functional comparability of this company and contended that this company is engaged in the software product development. However, the relevant record has not been produced before us to show the functional profile and the revenue generated activity of this company. In view of the facts and circumstances of the case, we are of the considered opinion that the functional comparability as well as the applicability of RPT filter is required to be properly examined at the level of TPO. Accordingly, we set aside the functional comparability and application of the RPT filter to the record of the TPO. Mindtree in the absence of relevant facts and record, we are not in a position to give any finding regarding the comparability of this company. Therefore, a lapse on the part of TPO in some other case cannot be a ground of rejection of this company in the present case. Accordingly, in the facts and circumstances of the case, we remit this issue to the record of the TPO/AO to re-examine the functional comparability of this company by verifying the relevant facts. Lucid Software be omitted from the list of comparables for the period under consideration in the case on hand as , is engaged in the software product development and not software development services, it is functionally different and dis-similar Denial of deduction u/s 10A - Held that:- Following the order of the co-ordinate bench of this Tribunal in assessee’s own case we decide this issue in favour of the assessee and direct the AO to allow the claim of deduction u/s 10A of the IT Act, 1961 as where a firm is converted into a company and there was change only in the composition of ownership and not the undertaking and business, the exemption allowed to the firm u/s 10A of the Act, could not be denied to the company merely because it had been separately granted recognition. - Decided in favour of assessee.
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