Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1628 - AT - Income TaxTP adjustment - comparable selection - Provision of Software Development Services - HELD THAT:- PERSISTENT SYSTEMS AND SOLUTIONS LTD. (PERSISTENT) being a product development company and into diversified services having no segmental information is not a valid comparable vis-à-vis the taxpayer which is a routine software development service provider, so we order to exclude the same from the final set of comparables. SANKHYA INFOTECH LTD. (SANKHYA) - being into diversified services providing customized services to end users and has developed customized products for imparting training and having its own research and development centre cannot be a valid comparable visà-vis the taxpayer which is a routine software development service provider. E-ZEST SOLUTIONS (E-ZEST) - Coordinate Bench of the Tribunal in M/s. Symantec Software and Services India Pvt. Ltd. Vs. DCIT [2017 (1) TMI 1388 - ITAT CHENNAI] examined comparability of the taxpayer with routine software service provider and ordered to exclude the same on the ground that it is providing high end technical services and as such, is a KPO and not a software development company. So, in view of the matter, we order to exclude E-Zest from final set of comparables. Working capital adjustment denied - HELD THAT:- The taxpayer has filed detailed working capital computation and has also filed submissions on working capital adjustment as per OECD Guidelines. It is also an uncontroverted fact that the working capital adjustment has been allowed to the taxpayer by the TPO in AY 2012-13 and business model of the taxpayer has not undergone any change. In these circumstances, we are of the considered view that the issue is required to be sent back to AO/TPO to decide allowability of working capital adjustment in view of the settled principle of law applied by the Revenue itself in taxpayer’s own case for AY 2012-13 after providing an opportunity of being heard to the taxpayer. Computing correct margins of the comparables - HELD THAT:- We are of the considered view that when the taxpayer has argued its case on the basis of facts and figures brought on record by way of evidence as well as submissions, AO/TPO is required to compute the correct margin. So, this issue is remanded back to the AO/TPO to compute the correct margin to be consistent with directions issued by the ld. DRP in taxpayer’s own case for AY 2012-13 as there is no change in the business model of the taxpayer. INFOSYS LTD. (INFOSYS) - keeping in view the functional dissimilarity, scale of operation, high brand value impacting profit, having own research and development centre with capital expenditure of ₹ 5 to ₹ 7 crores and revenue expenditure of ₹ 570 crores, creating huge intangibles for the company and the fact that Infosys is a full-fledged risk bearing company, hence cannot be a valid comparable vis-à-vis the taxpayer which is a routine captive software service provider working on minimal risk having no brand value nor having any research and development centre to produce its own intangibles. So, ld. CIT (A) has rightly excluded Infosys from the final set of comparables. WIPRO TECHNOLOGIES LTD. (WIPRO) has generated its entire revenue pursuant to the master service agreement having its huge scale of operation as compared to taxpayer and the fact that the taxpayer is a routine captive service provider, the ld. CIT (A) has rightly excluded Wipro as a comparable from final set of comparables for benchmarking the international transactions. Companies with diversified business activities with no segmental financials and is also into research and development activities, product engineering and end to end product life scale management solutions, etc. and as such, cannot be a valid comparable vis-à-vis the taxpayer which is a routine captive software development service provider.
|