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2018 (2) TMI 2054 - AT - Income TaxTP Adjustment - comparability - application of turnover filter in the selection of comparables - HELD THAT:- Bodhtree Consulting Ltd - The coordinate bench in the matter of M/s. Infinera India Pvt. Ltd [2016 (6) TMI 1280 - ITAT BANGALORE] had examined the profile of Bodhtree Consulting Ltd. from the Annual Report of the said company and have come to the conclusion that Bodhtree Consulting Ltd. is a product company and therefore it cannot be compared to software development company Exclusion of Sasken Communication Technologies Ltd. Persistent Systems Ltd., Larsen & Toubro infotech Ltd. and Infosys Ltd. Persistent Systems Ltd., Larsen & Toubro infotech Ltd. and Infosys Ltd - The question of application of turnover filter is a vast question and the Tribunal has been taking the stand of 1 to 200 Crores turnover filter, however thereafter 1/10 tribunal has decided to follow 10times to 1/10 times of turnover and thereafter now sending the matters to the TPO for the purposes of examining, whether the turnover of the comparables are having any effect on the profit margin/price charged by the comparable or assessee in the light of judgment of Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.) Ltd. [2015 (4) TMI 949 - DELHI HIGH COURT] In the present set of appeal Persistent Systems Ltd., Larsen & Toubro infotech Ltd. and Infosys Ltd. were required to be examined on the touch stone of FAR analysis by the ld. CIT(A), but it has not been done as these comparables were removed from the list of comparables on account of turnover filter. Therefore we are remitting back the matter with respect to FAR analysis of Persistent Systems Ltd., Larsen & Toubro infotech Ltd. and Infosys Ltd. to the file of CIT(A) with the direction to decide the functionality of these companies in accordance with the rules and regulations and by following the judicial pronouncements of High Court and Tribunal decisions. FCS Software Solutions Ltd. and Thinksoft Global Services Ltd. - inclusion of these two companies FCS Software Solutions Ltd. and Thinksoft Global Services Ltd. is covered in favour of the assessee and we accordingly hold the same. Comparability for ITES segment - Infosys BPO Ltd. and Aditya Birla Minacs Worldwide Ltd.inclusion - These companies are required to be send back to file of CIT(A) for FAR analysis. We accordingly do so. As we are sending back for FAR analysis of Infosys BPO Ltd. and Aditya Birla Minacs Worldwide Ltd. to the file of CIT(A), therefore we are not examining the applicability of turnover filter. Accordingly we direct the CIT(A) to examine the functionality (FAR analysis) of these two companies on the tests of parameter laid down by the rules, by the judicial pronouncements of High Court as well as decision rendered by the coordinate bench while examining the Infosys BPO Ltd. and Aditya Birla Minacs Worldwide Ltd. Exclusion of M/s. Accentia Technologies Ltd., M/s. Cosmic Global Ltd., M/s. Eclerx Services Ltd - This issue is covered by the decision rendered by the coordinate bench in the case of e4e Business Solutions India Pvt. Ltd. [2016 (3) TMI 356 - ITAT BANGALORE] Therefore following the decision of coordinate bench we direct the exclusion of these companies from the list of comparables. Thus the TPO/AO is directed to re-compute the arms length price in the ITES segment on the basis of the remaining comparable companies needless to say the benefit of second proviso to section 92C(2) be considered. Working capital adjustment - putting a cap by the CIT (A) and the TPO - HELD THAT:- Law is settled to the extent that the assessee would be entitled to working capital adjustment in accordance with Act and Rules without any cap and therefore we direct the TPO to calculate the working capital adjustment of the assessee, vis-à-vis of the assessee on actual basis, if any. Accordingly the ground of working capital adjustment is allowed for statistical purpose. Risk adjustment - HELD THAT:- Though the CIT(A) has directed the TPO to work out the risk adjustment as per the prevailing norms and grant the same to the assessee however it is pertinent to note that the onus is on the assessee is to provide all the relevant details and computation of quantum of level of risk in the case of the assessee as well as comparables. Therefore we direct the AO/TPO that in case the assessee provides these details the TPO has to consider and decide this issue as per the rules.
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