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2022 (11) TMI 1320 - AT - Income TaxTP Adjustment - comparable selection - Software Development Services - Application of upper turnover filter - HELD THAT:- The assessee’s turnover for the year under consideration in software development segment is Rs.198 crores. Therefore, respectfully following the decision AUTODESK INDIA PRIVATE LTD [2018 (7) TMI 1862 - ITAT BANGALORE] we hold that the companies whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. Accordingly Larsen & Toubro Infotech Ltd., Nihilent Ltd., Persistent Systems Ltd., Thirdware Solution Ltd., Infosys Ltd., Aspire Systems (India) Pvt Ltd., and Cybage Software Pvt Ltd., are excluded from the list of comparables. Inteq Software Pvt. Ltd. is not a suitable comparable vis-a-vis the taxpayer which is a routine software development service provider working on costplus mark up model, hence ordered to be excluded from the final set of comparables. Minvesta Infotech Ltd. - We are not in agreement with the decision of the lower authorities to exclude Minvesta Infotech Ltd only on the basis that the company fails different financial year filter. We therefore remit the issue back to the AO/TPO to examine the relevant financial data from which the details can be extrapolated for the purpose of comparison and accordingly decide the inclusion of the company after giving a reasonable opportunity of being heard to the assessee. Sagar Soft (India) Ltd. and Evoke Technologies Pvt. Ltd. - We are of the view that the comparability of this company has to be remanded to the TPO for fresh consideration as relying on Infor India P. Ltd. Vs. DCIT [2016 (1) TMI 410 - ITAT BANGALORE] wherein it was held that availability unaudited accounts cannot be the reason to reject the comparability of the company which satisfies all filters. Also case of Zynga Game Network India Pvt. Ltd. [2021 (4) TMI 208 - ITAT BANGALORE] in which the comparability of this company was remanded to the TPO for fresh consideration. Inclusion of Sagarsoft (India) Ltd. - Given that the basis on which the TPO came to the conclusion that the company fails the SWD service revenue filter is not clear. Further the assessee has made the submission before the TPO bringing the above fact to his notice - We notice that the TPO has not examined this. The DRP has rejected stating that the assessee has not brought any documentary evidences - As relying on M/S. RED HAT INDIA PRIVATE LIMITED case [2022 (2) TMI 1283 - ITAT MUMBAI] comparability of the company requires to be examined afresh. Considering all we remit the issue back to the TPO with a direction to examine the facts properly. Selection of comparables for IT Enable Services - HELD THAT:- Where data for current year is not available at the time of furnishing the return of income, data of 2 preceding years out of 3 years would be used. Therefore we see merit in the argument that the company cannot be rejected merely for the reason that the current year data is not available. In the given case the company is excluded also for the reason that the financial year end is different. Interest on delayed receivables - whether the interest on receivable is a separate international transaction and the rate of interest to be considered? - realizations in respect of certain invoices were made after the period of 30 days - TPO equated the outstanding receivables from AEs to loans and accordingly proposed a notional interest on the outstanding balances (exceeding 30 days) taking Prime Lending Rate of SBI at 5.39% as arm’s length interest rate - HELD THAT:- Treatment of interest on deferred receivables is an independent international transaction and the interest rate to be adopted is LIBOR rate and it would be appropriate to take the LIBOR rate + 2. It is ordered accordingly, Disallowance of deduction claimed u/s 80G - donations made in pursuance of CSR policy - HELD THAT:- As relying on FIRST AMERICAN (INDIA) PVT. LTD. [2020 (5) TMI 187 - ITAT BANGALORE] remit the issue to the AO with a direction to verify the details and allow the deduction to the extent of eligibility. The assessee is directed to furnish the relevant details to substantiate the claim and cooperate with the proceedings. It is ordered accordingly.
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