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2019 (1) TMI 1895 - AT - Income TaxTP Adjustment - comparable selection - Higher profitability criteria - HELD THAT:- Assessee as characterised as a value added distributor of printed courseware/e-books in India which assumes normal/significant risks associated with carrying out such marketing/distribution activities in India, companies functinally dissimilar with that of assessee need to be deselected. Acropatel Technologies Ltd., (Information Technology service segment) company is engaged in provision of high end healthcare services and develops & owns related intellectual property providing substantial competitive advantage to this company, leading to higher profitability. As per annual report, this company is engaged in sale of software products. It is observed that assessee is undertaking software development relating to presentation of course material by way of including animation, graphics and audio training aids etc. Therefore, Acropetal Technologies Limited is functionally different from that of assessee and should have been excluded by Ld.TPO. The company is also engaged in two business segments, i.e., sale of products and sale of services but segmental profitability is not available in audited financial statements. Therefore, we direct Ld.TPO to exclude this company from comparables. E-Infochips Ltd since no segmental data of this company is available indicating operating profit from software development services, we order to exclude this company from the list of comparables. Wipro Technology Solutions Ltd disqualifies to become a comparable uncontrolled transaction for the purposes of inclusion in the final list of comparables under Rule 10B(1)(e)(ii). We, therefore, direct removal of this company from the list of comparables. Sasken Communication Technologies - As revenue generated from sale of software services/ products and other services are to the tune of ₹ 39,419.62 crores. Further it is observed from order of Ld.TPO that this company has been selected as a comparable only because it satisfies filter of applicability of 75% of its income from services. However on perusal of accounts, no segmental financials are available. Moreover in our considered opinion functionally itself this company is not comparable with that of assessee. Accordingly we direct this comparable to be excluded from the final list.
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