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2019 (6) TMI 1696 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- Tata Consultancy Services Ltd (TCS) has expended Rs.42.31 crores on its R&D and a highly risk bearing company and as such, cannot be a suitable comparable vis-à-vis taxpayer which is a captive software provider being remunerated on cost plus mark up basis for rendering 100% services to its AE. Thus we direct Ld. TPO to exclude this company from final set of comparables. Infosys Ltd. company has been ordered to be excluded in case cited as CIT v. Agnity India Technologies (P.) Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] as observed that this Tribunal while examining comparability of this company with Agnity India Technologies which was also a captive service provider operating on minimal risk providing software development service has excluded this company from list of comparables for reason that it is a giant company in area of development of software, assumption of risk leading to high profits etc. Hon’ble High Court upheld view expressed by this Tribunal for excluding Infosys from list of comparables. We, therefore, direct Ld.TPO/AO to exclude this company from final list of comparables for benchmarking international transactions. Cat Technologies Ltd. (standalone) - This company is running both software development and maintenance support services. Further, Schedule IX of the Profit and loss account of this company shows that this company is deriving a sum of Rs.8,49,39,375/- from out of software development and consulting services. However no segmental data is available and as stated by Note No.7 of Notes on Account that the company's exclusive business is medical transcription and training software development and consulting services which should be treated as the only reportable segment. We, therefore, direct Ld.TPO to exclude this company from the final list of comparables. Thirdware Solutions Ltd. - As observed that that this company derives income from sales whereas other income in Schedule XII relates to sales shows that this company is deriving income from sales of licences, from software services, from export of SEZ unit, from export from STPUI unit and a sum from subscriptions. No segmental information is available. We accordingly direct Ld.AO to exclude this company from the final list of comparables. Tata Elxis Ltd (segmental) - This company cannot be considered to be a mere software developer and over and above, it is involved in products and Innovative functions like visual computing labs. We, therefore, direct Ld. AO/TPO to exclude this company from final list of comparables. Carving out technical support services from business support services by Ld. TPO without any basis - As in facts of present case Ld.TPO arbitrarily, without any basis, segregated transaction without analysing agreement under which such services has been applied along with business support service. Further in preceding as well subsequent assessment years revenue has accepted approach adopted by assessee. We are inclined to set aside this issue back to TPO to be analysed on basis of equipment entered into by assessee actual nature of transaction being interlinked with each other in the light of aforestated principles laid down by Hon’ble High Courts and Coordinate bench of this Tribunal reproduced hereinabove. Proper opportunity shall be granted to assessee as per law. Accordingly we set aside Ground No. 11 back to Ld.TPO for fresh adjudication.
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