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2015 (10) TMI 2248 - AT - Income TaxTransfer pricing adjustment - Arm’s Length Price (ALP) of the international transaction representing software development services provided to the AEs is determined by applying Transactional Net Margin Method (TNMM) - selection of comparable - Held that:- FCS SOFTWARE - annual report states that the said company is engaged in software consultancy, technical support services, e-learning and other related allied services and it is recorded in the annual report that it is not possible to give the quantitative details of sales reveals that the assessee is engaged in E-Learning and Digital Consulting which constitutes 30% of its functions; application support is 11%, infrastructure management service is 15% and IT consulting is 44%; and thus contended that the said company is engaged in different activities and so is not a comparable with the functional profile of the assessee. The ld. DR could not point out from the annual report of the said company the segmental breakup which is essential to work out the PLI, because admittedly this company operates in different segments. In such circumstances, we deem it fit to remand the matter back to the file of the TPO to examine whether the segmental data relating to software development are available to compute the PLI at segmental level of this company. In case, it is not able to discern the segmental data as aforesaid of this company then this company should be excluded from the list of comparables. GOLDSTONE TECHNOLOGIES - after perusal of the annual report that the company in the present assessment year is engaged in the software development, so is functionally similar, therefore, we uphold the decision of TPO/DRP to include this company as a comparable. LANCO GLOBAL SYSTEMS - We find that the TPO in assessee’s own case for assessment year 2009-10 has not included this company as a comparable. We are of the opinion that the TPO may de novo decide whether to include this company as a comparable for the instant year under consideration. Accordingly, we remand the matter back to the file of the TPO for de novo consideration. Disallowance of risk adjustment - Held that:- initial onus for claiming any adjustment in the computation of ALP is always on the assessee. It is only when such initial onus is discharged that the turn of the TPO comes for ascertaining whether the claim so made by the assessee is correct or not. Adverting to the facts of the instant case, we find that there is no material worth the name justifying the claim of risk adjustment by comparatively showing particular risks undertaken or not undertaken by the assessee vis-a-vis the comparables. A generalized submission about the assessee assuming low/no risk vis-a-vis its comparables, cannot be countenanced. The assessee has to expressly exhibit that the specific risks undertaken by the comparables were absent in its case and vice versa. In the absence of any such working available either before the authorities below or us, we are disinclined to direct the granting of any risk adjustment. - Decided against assessee.
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