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2019 (9) TMI 1664 - AT - Income TaxTP Adjustment - comparable Companies selection - HELD THAT:- In facts of present case, assessee is doing part of software development cycle and therefore has been categorised as a captive software development service provider catering to needs of the group. Assessee in TP study held to be comprise of Software Engineers, who develop project based on inputs received from AE. Engineers employed by assessee designs functional specifications for the project identification of interfaces components coding and bug fixing. Ultimate approval and owner of project developed is the AE. In our view, by involving itself in process of Software development for AE, assessee cannot be held to be fulfledged Software Development Company. One has to look into transaction in regards to services rendered and FAR, which catagorises it to be a captive service provider, working on business model of cost plus margin. It is observed that comparables sought to be excluded are 100 % Software Development Companies, having high turnover and therefore respectfully following aforestated view in case of Genesis Integrating Systems India Pvt. Ltd., [2011 (8) TMI 952 - ITAT BANGALORE] these comparables are to be excluded on both the counts of functionally not being similar with that of assessee and also because they have a high turnover of more than 200 crore. For assessment year 2009-10, excluded these companies following Genesis Integrating systems Indi Pvt. Ltd vs. DCIT [2011 (8) TMI 952 - ITAT BANGALORE] Reliance has been placed on decision of this Tribunal in case of Autodesk India Pvt.Ltd. [2018 (7) TMI 1862 - ITAT BANGALORE] followed similar view to exclude identical comparables by applying turnover filter, wherein all the decisions relied upon by Ld. CIT DR has been considered and dealt with. Therefore, respectfully following above decisions, we uphold exclusion of Infosys Ltd, Larsen & Toubro Infotech Ltd., and Persistent Systems Ltd., by Ld. CIT (A) from final list. Now coming to Zylog Systems Ltd., Mindtree Ltd. held that, turnover is a relevant criteria for choosing companies as comparables for determining ALP of international transaction. Even otherwise, all above referred comparables are functionally not similar with that of assessee, which is only a captive software development service provider, which does not design/develop/sell software products and does not own any IP. We therefore uphold exclusion of this comparable is by Ld. CIT (A). Disallowing depreciation as an adjustment in comparables - For assessment year 2005-06 in assessee’s own case when this issue was remanded by this Tribunal is Ld.TPO/AO had inter alia granted the adjustment on depreciation after taking into consideration the detailed working submitted by assessee and held that instead of allowing any adjustment on this account, the AO is directed to compute the margin in respect of the comparables after excluding the depreciation from the cost and also in the case of the appellant the depreciation to be excluded from the cost for computing the arm’s length difference. The appeal on the above issue is disposed accordingly. TDS u/s 194J - disallowance under section 40 (a) (ia) - not deducting tax at source at the time of purchase of software - HELD THAT:- This issue stands settled against assessee is by decision of this Tribunal in case of DCIT vs WS Atkins India Pvt.Ltd. [2015 (11) TMI 917 - ITAT BANGALORE] and Kawasaki Microelectronics Inc [2015 (9) TMI 9 - ITAT BANGALORE] Disallowance u/s 14 A read with Rule 8D - HELD THAT:- As submitted that there is no exempt income earned by assessee during year under consideration. Both parties admittedly submitted that, issue stands squarely covered by decision of Hon’able Delhi High Court in case of Cheminvest Ltd vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT]
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