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2022 (11) TMI 1336 - AT - Income TaxTP Adjustment - Comparables - comparables to be excluded on functional dissimilarities - HELD THAT:- We direct the Ld.TPO/AO to exclude Persistent Systems Ltd., Thirdware Solution Ltd., Larsen & Toubro Infotech Ltd., Infosys Ltd., Nihilent Ltd. and Aspire Systems (India) Pvt Ltd. for not satisfying functional similarity under SWD segment. Cybage Software Ltd. - The main contention of the Ld.AR is that this assessee is having super profit in immediate two financial years and also having huge turnover is more that 200 crores in the assessment year under consideration. In our opinion, these facts to be examined by the Ld.AO/TPO. Accordingly, the issue remitted to the Ld.AO/TPO. If the functionality of the Cybage Software Pvt. Ltd. is not similar to the assessee and/or if the turnover is more that Rs.200 crores for the assessment year under consideration, it deserves to be excluded on any one of the above reasons. Comparables i.e. Tech Mahindra Business Services Ltd., Infosys BPM Ltd., SPI Technologies India Pvt. Ltd. and Eclerx Services Ltd. to exclude from the final list for failing the turnover filter under ITES segment. R S Software (India) Ltd. - This comparable underwent a shift in the revenue generating segments. This comparable has made investments in developing tools and platforms and has also enhanced the sales and marketing activities. These are any ways not the functions performed by the assessee before us which is a captive service provider, only catering to its AE. Thus we hold that R.S. Software(India) Ltd., should be excluded from the list of comparables. Microland Ltd. - As we have excluded various comparables that exceeded 200 crores turnover, this comparable also deserves to be excluded on the same principle - we direct the Ld.TPO to exclude the above comparables from the Final list of SWD segment for failing in functionality tests. Interest on receivables - We direct the Ld.TPO that in the event the WCA subsumes the outstanding recievables, no separate characterisation is to be made. However for those recievables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down by Hon’ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt.Ltd.[2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days. Assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings.
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