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2019 (6) TMI 1567 - AT - Income TaxTP Adjustment - comparable selection - assessee had selected TNMM as the most appropriate method for determining ALP - HELD THAT:- The assessee renders software development services in the field of telecom and communication segments to its parent AE Uniwiredsoft USA. The conceptual framework, technical specifications and basic design for development of software is provided by Uniwiredsoft, USA to the assessee and on the said design and specifications, assessee designs, develops and tests the software. The assessee has entered in to an agreement with the AE for provision of software development service in the nature of providing roaming solutions. The assessee operates as a software development service provider for which it earns remuneration at cost plus 15% markup from its AE. Thus companies functionally dissimilar with that of assessee need to be deselected from final list. E-Infochips Ltd. is not comparable to the assessee, which is mainly engaged in providing software development services to its AE, hence, we direct the AO/TPO to exclude E-Infochips Ltd. from the list of comparables. Wipro Technologies Limited (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. E Zest solutions Ltd. 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. C G VAK Software & Exports Ltd. (‘CG VAK’) - TPO as well as the DRP were erred in excluding CG VAK Software and Exports Ltd. from the list of final set of comparables even though there is no adverse remark about functional similarity between two companies, hence we direct the TPO to include CG-VAK Software and Exports Ltd. in the final set of comparables for determination of arithmetic mean margin to benchmark international transactions with its AE. R Systems International Ltd.- TPO has accepted this company as comparable in earlier AY 2010-11 and later AY 201213. Therefore, we are of the considered view that when functions carried out by this company are similar to the functions carried out by the assessee and also the TPO accepted this company in earlier years and subsequent years, there is no reason for the TPO to exclude this company for the year under consideration without their being any change in facts and circumstances. DRP after considering relevant facts has rightly directed the TPO to include R Systems International Ltd. in the final set of comparables for determination of Arm’s Length Price of international transactions with AE. We are inclined to uphold the findings of Ld. DRP and dismissed the appeal filed by the Revenue. Interest receivables from both AE as well as non-AE for delay in receipt of sale proceeds - HELD THAT:- In absence of any findings as to the fact that the assessee has allowed undue benefit to the AE by extending credit period for realisation of sundry debtors and such extension of credit period benefits the AE, no adjustment could be made under the TP provisions of the Act to benchmark interest receivables on hypothetical or notional basis because late realisation of export receivable /sundry debtors cannot be considered as advancing loans and advance to the subsidiary or AE. This finding is fortified by the decision of in the case of CIT vs Indo American Jewellers Ltd.[2013 (1) TMI 804 - BOMBAY HIGH COURT]where it was held that there was complete uniformity in act of assessee in not charging the interest from AE as well as non-AE debtors for delay in realisation of export proceeds, then no adjustment could be made towards interest on delayed realisation of sundry debtors in course of TP proceedings. Therefore,we are of the considered view that the AO as well as the DRP were erred in benchmarking interest receivables on delayed recovery of sundry debtors from AE, hence, we direct the AO to delete adjustment made towards interest receivable on sundry debtors.
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