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2019 (4) TMI 289 - AT - Income TaxTP adjustment - comparable selection - comparable analysis - Related party transactions - segmental details availability - Functions Assets and Risk analysis (FAR) - HELD THAT:- Sonata Software Limited - Related party transactions, as reported in the annual report by Sonata Software Limited, is indeed more than 50% of sales and therefore, this company does not pass the related party filter applied by the TPO. E Infochips Bangalore Ltd. company is primarily engaged in software development and IT enabled services which is considered as the only one reportable segments and therefore there is no segmental information available with respect to the software development activities as well as IT enabled services. In view of this the above comparable is required to be excluded from the comparability analysis of the software development service segment of the assessee. Infinite Data Systems Private Limited is engaged in a wide variety of services including software technical consultancy services etc. It is our considered opinion that these services cannot be compared with software development services provided by a captive service provider like the assessee in the absence of segmental information. Infosys limited has a huge brand value, it has huge turnover, and its Finacle' Software is a leading product in banking industry. Therefore, it is functionally different and has significant R&D. Working capital adjustment - HELD THAT:- It is necessary to allow working capital adjustment for better comparability. Accordingly, we direct the AO/TPO to grant working capital adjustment on the final set of comparables Risk adjustment - HELD THAT:- It is not necessary to give any directions on the issue of risk adjustment. We note that the contentions of the Ld. AR on risk adjustment in the present case have been rendered academic as the entire TP adjustment gets deleted consequent to the exclusion of the 4 companies as directed above and upon grant of the working capital adjustment. We, therefore, feel that it is not necessary to return any findings on the above issue. - Appeal of the assessee stands partly allowed
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