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2019 (6) TMI 437 - AT - Income TaxTPA - comparable selection - functional similarity - inclusion of Vama Industries Ltd. in the final set of comparables - HELD THAT:- “Software Development & Services” segment of Vama Industries Ltd., which has been considered as comparable not only includes revenues from Software development services but also from I.T. enabled services as well. It goes without saying that I.T. services and I.T. enabled services are as distinct in connotation and nature as north pole is from the south pole. Whereas IT services include software development services, IT enabled services means services rendered with the already developed software. As IT and ITeS services are not comparable, the assessee rendering only IT services cannot be compared with a company which renders both IT and ITeS. In view of the foregoing discussion, we are satisfied that Vama Industries Ltd. is not a functionally comparable company and the same should be excluded from the list of comparables. AR submitted that if Vama Industries Ltd. is excluded then its profit margin would fall within +/-5% range and there would be no need to examine other comparables challenged in the instant appeal. In view of our decision on exclusion of Vama Industries Ltd., we do not deem it appropriate to delve into other companies from the angle of comparability. We set-aside the impugned order and restore the matter to the file of the AO for recomputing the ALP of the international transaction of the assessee of rendering software development services by excluding Vama Industries Ltd. from the final set of comparables. Appeal of assessee allowed for statistical purposes.
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