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2018 (7) TMI 2294 - AT - Income TaxTP Adjustment - comparable selection for Software services - HELD THAT:- Persistent systems Ltd. Ld. - Assessee has developed software during the year, and has earned royalties from sale of products. Assessee has earned revenues from Licensing of products. It is also observed from the notes to the accounts of this company that the segment information has been provided on consolidated financial statements. It is also observed that assessee owns the software developed by it on which depreciation is claimed. Thus this company has been characterised itself as engaged in providing outsourced product development services to independent software vendors and enterprises. It has been characterised to having earned significant portion of its revenues from export of software services and products. This function, the assets owned by this company and the risk assumed are not comparable with that of the present assessee and hence has to be excluded from the final list of comparable. Wipro Technology Services 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. TATA Elxsi Ltd. - Functions performed by this company under software development services are basically on the basis of research and development. It is also observed that there is no segmental information regarding the same. On perusal of the audited reports of this company, we are of the considered opinion that this company is not performing services on the basis of contract as per the requirements of the clients but is into innovative development of its own. Staffing services - Comparable selection - HCCA Business Services Pvt. Ltd company is into services providing human resource to companies. It is also observed that this company has only staffing services and therefore entire revenues earned by this company is from providing manpower as per the agreements with its customers. Under such circumstances we do not find any functional dissimilarity of this company with that of the assessee before us. Accordingly we uphold the inclusion of this company in final list of comparables. Ma Foi Management Consultants Ltd - This company was rejected by Ld.TPO due to different financial year ending. It is also observed that Ld.TPO has not verified whether quarterly financial details could be extrapolated to match the financial year ending of assessee. We also observe that functions performed by this company are identical to functions performed by assessee, and therefore could be considered as a comparable. Merely because it has a different financial year ending cannot be a sole reason to reject it as a comparable. We therefore set aside this comparable to Ld.TPO to verify having regard to extrapolating quarterly details of this comparable. Nirbhay Management Services Pvt. Ltd. - We accordingly set aside this issue to ld.TPO to verify the FAR analysis of this company. Assessee is directed to provide all necessary information/details regarding TP report, audited accounts for verification. Ld.TPO is directed to verify the same for considering it for the purposes of comparability.
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