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2020 (11) TMI 1099 - AT - Income TaxTP Adjustment - comparable selection - seeking exclusion of only two companies from the final list of comparables i.e. Persistent Systems Ltd. and Sasken Communication Ltd. in respect of software development service transactions - HELD THAT:- We find that the assessee is engaged in the software development services, whereas, Persistent Systems Ld. is engaged in the product development services. The company Persistent Systems Ltd has income from outsourced product development and outsourced enabled services. No adjustment has been made by the TPO on account of these two distinguishing features. The Persistent Systems Ltd., in its P&L Account has declared its income from software development services and products. The TPO ought to have enquired from Persistent Systems Ltd. as to the income from the products that is included in the income from software development services. Therefore, we are satisfied that the said company is functionally different from the assessee company and, therefore, has to be excluded from the list of final comparables as comparable. Sasken Communication Technologies Ltd. - As decided in SAXO INDIA PVT. LTD VERSUS. ACIT, [2016 (2) TMI 604 - ITAT DELHI] though the break-up of revenue from software services and software products is available, but, the break-up of operating costs and net operating revenues from these two segments have not been the TPO has taken entity level figures for the purposes of making comparison. Since such entity level figures contain revenue from both software services and software products, as against the assessee only providing software services, we are disinclined to treat this company as comparable. The assessee's contention is accepted on this issue we direct the AO/TPO to exclude Sasken Communication Technology Ltd. from the list of final comparables.
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