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2020 (1) TMI 1628 - AT - Income TaxTP Adjustment - selection of MAM - CUP or TNMM - HELD THAT:- Both the parties agreed that the Tribunal need not adjudicate the issue whether CUP or TNMM is the MAM for determination of ALP for the assessee company’s international transactions in this appeal and that the issue may be left open for adjudication in an appropriate year. Inclusion and exclusion of companies from the list of comparable companies determined by the TPO for the determination of the ALP - Axit IT & T Ltd company be excluded from the list of comparable companies for the reason that this company provides software services. The RPT is 43.18% of the operating revenue while a filter of 20% has been applied by the TPO. Moreover, we also note that this company has stopped its software business from December, 2010. Therefore this company is any way functionally different for this assessment year. Zylog Systems (India) Ltd. company be excluded from the list of comparable companies for the reason that this company provides broadband services and wireless internet-based communication services as well as enterprise computing, mobile computing. Employee cost filter of 25% is not met as the assessee’s employee cost percentage is only 20.14%. E-infochips Bangalore Ltd.this company is primarily engaged in software development and IT enabled services and products and no further segmental break up between two functions is provided in the annual report and it is also involved in the R&D activities. This company has incurred significant expenditure of approximately ₹2 crores on account of research and development activities. Therefore it is directed to be excluded. Thirdware Solutions Ltd was engaged in the provision of software development services and also involved in the provision of other information technology enabled services. The segmental break up of revenue attributable to software development services and ITeS is not available in the case of Thirdware - segmental break up not available has been taken note of and the said company was excluded from the comparables. Therefore we also direct this exclusion of this company from the comparables. Infinite Computer Solutions (India) Ltd company is involved in the provision of information technology services of Application management, Infrastructure management, Product engineering services, Next-generation messaging platforms, Enterprise mobility solutions to the telecom, Healthcare and Financial services sectors, R&D and Intellectual property leveraged solutions and related IT services. Therefore this company is functionally different and also it fails in the RPT percentage on total operating revenue of 47.01%. Working capital adjustment - We note that the DRP has directed the AO/TPO to provide the benefit of working capital adjustment to the assessee. As brought to our notice while giving effect the DRP order to AO/TPO has not given effect to it. It is well settled that the direction of DRP is binding on the TPO and we direct the TPO to implement the DRP direction and the assessee to provide the necessary input data necessary to the TPO in this regard. In the result this ground of the appeal is allowed for statistical purposes.
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