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2021 (3) TMI 1321 - AT - Income TaxTP adjustment - Comparable selection - HELD THAT:- There is no dispute between the parties about the assessee being engaged in software development business having carried out the corresponding international transactions with its overseas AE(s) thereby disclosing net cost + margin of 17.18%. It is thus purely an issue of the alleged wrongful exclusion and inclusion of comparable entities only. M/s.Mind Tree Ltd - We thus hold in this factual backdrop that the learned panel has rightly directed exclusion of M/s.Mindtree since lacking not only the reliable functional similarity but also having extraordinary events in the relevant time span in FY.2009-10. We therefore see no reason to accept the Revenue’s instant ground. The same stands rejected. M/s.E-Infochips Bangalore Ltd., Kals Information Systems and Persistent Systems P. Ltd.- It transpires at the outset that this tribunal’s co-ordinate bench’s order in M/s.Pegasystems Worldwide India Pvt. Ltd. [2015 (10) TMI 2495 - ITAT HYDERABAD] has already held in the very assessment year i.e., AY.2010-11 that former twin entities are not functionally similar in software development activity; and therefore, are not to be taken as valid comparables. M/s.Persistent Systems Ltd. as not a valid comparable in assessee’s line of business of international transactions in the relevant previous year. The same is directed to excluded therefore. Interest of receivables - DRP’s directions take note of the TPO’s observations having merely proposed to charge interest @12% p.a. regarding the receivables exceeding the credit period of 30 days - Suffice to say, the DRP has admittedly directed the TPO to ascertain LIBOR rate for 12 months in FY.2009-10 without even indicating the corresponding comparables in the relevant segment involving the receivables in issue. We make it clear that Chapter-X in the Act is a special provision wherein each and every upward and downward adjustment ought to be made after analysing the array of comparables in the very segment than based on mere proposal lacking any uncontrolled transactions information. We thus deem it proper to delete the impugned arm’s length price for this precise reason alone. The assessee succeeds in its 10 to 12 substantive grounds and the Revenue’s corresponding second substantive ground is declined.
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