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2019 (8) TMI 1604 - AT - Income TaxTP adjustment - DRP applying "onsite revenue filter" - whether function carried out is "Software Development" irrespective of whether onsite or offshore? - DRP excluding M/s RS Software Pvt. Ltd. and M/s Acropetal Technologies and M/s L&T Infotech ltd on the ground that they have significant onsite revenue - Assessee used TNMM as most appropriate method with PLI s op/OC and determined its margin at 15.10% - HELD THAT:- We agree with contention raised by Ld. CIT DR that a filter cannot be applied once TP analysis has been concluded by Ld.TPO However on perusal of observations recorded by DRP, Acropetal Technologies Ltd., L &T Infotech Ltd., has primarily excluded on basis of functional dissimilarities and that segmental information not being available. DRP further observed that these comparables cannot be considered comparable with contract service provider like assessee. Therefore, in our considered opinion, these grounds raised by revenue becomes academic. No dispute between parties and observations regarding financials of these companies by DRP are concurrent with annual reports placed in paper book filed before us. Thus, in our considered opinion, these comparables cannot be held to be functionally similar with of assessee, who is a contract service provider, working on a cost plus business model. It is observed that RS software (India) Ltd, has been excluded by DRP on application of on-site revenue filter. Both parties do not have objection for inclusion of this company. We are therefore of the view that this company should be included in the list of comparables. Accordingly, Ld. TPO is directed to consider this comparable in the list. Accordingly grounds raised by revenue stands partly allowed. Exclusion of comparable with recorded finding in respect of service income being less than 75%.
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