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2018 (3) TMI 940 - AT - Income TaxTransfer pricing adjustment - TPO rejected the approach adopted by assessee i.e. segmental profitability of AE segment and benchmarked the international transactions by considering the entity level profitability of assessee - assessee had applied man-hour basis for preparing segmental details of AE segment - Held that:- The assessee has filed on record the copies of orders of TPO / Assessing Officer in this regard. In the totality of the above said facts and circumstances, we hold that while benchmarking international transactions of provision of services to Tieto Group companies by the assessee, the segmental details of AE segment need to be applied and not the results at entity level are to be applied. The assessee had applied a systematic manner of allocating the expenses to the AE segment i.e. on the basis of man-hour which is accepted method of allocation of cost. The same has also been applied under APA agreement signed by the assessee. Further, the assessee has also explained in detail the allocation of other costs either on actual basis or turnover basis and the same cannot be rejected. Accordingly, we reverse the order of Assessing Officer / TPO in applying the margins at entity level and direct to accept margins shown in segmental profitability of AE segment by the assessee. The case of assessee is that in case the segmental profitability of AE segment is applied, then the margins shown by the assessee are within +/- 5% range of mean margins of comparables as worked out by the TPO and no adjustment needs to be made on account of international transactions undertaken by the assessee. Accordingly, we hold so. Comparability analysis - Rejection of concern on turnover basis - Held that:- Though the ground of appeal raised by the Revenue is vague in this regard but the perusal of order of DRP shows that it had directed exclusion of Infosys Technologies Ltd. on turnover basis. We find that the issue is covered by the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Pentair Water India Pvt. Ltd. (2016 (5) TMI 137 - BOMBAY HIGH COURT ), wherein it has been held that the concern Infosys Technologies Ltd. having high turnover and having intangibles is not comparable to the concern providing software services to its associated enterprises. Applying the said ratio to the facts of present case, we uphold the order of DRP in excluding Infosys Technologies Ltd. from final set of comparables.
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