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2020 (10) TMI 32 - AT - Income TaxTP Adjustment - addition in respect of international transaction of software development services rendered by the Appellant to its parent company in USA - comparable selection - HELD THAT:- Persistent Systems Ltd - The mandate of the law clearly provides that FAR should be compared for this reason also we reject the reliance placed by the assessee on other judicial precedents, as there was no comparability made of the functional profiles of the assessee with the assessee in whose case such comparables are held to be excluded or included. No infirmity in the order of the learned transfer pricing officer as well as the direction of the learned that DRP in holding that persistent Systems Ltd is a good comparable. Therefore, we reject the argument for its exclusion. L&T Infotech Ltd - As assessee submitted that it filed an objection before the ld DRP as per para No. 4.5.2 however same has not been considered by the DRP, therefore, we set aside this comparable before the learned dispute resolution panel to decide on the objections of the assessee. Sasken Communication Technology Ltd. - Only objection of the assessee is that above comparable company has different margin shown in the show cause notice and order of the TPO - order the margins of this comparable was shown to be 7.28% whereas in the TP order as well as the effect order passed by the TPO on direction of the learned dispute resolution panel the margin of this comparable were taken at 33.2%. There is no justification or reasons were found in the TP order for change in the margins and the basis of such changes. Therefore, we set aside this comparable to the file of the learned transfer pricing officer to show assessee how he has changed the above margin and on what basis the margins have gone up to 33.2% from 7.28%. Cybercom Datamatics information solutions Ltd - as challenged by the assessee stating that it was never part of the show cause notice issued by the learned transfer pricing officer but featured in the final order of the learned transfer pricing officer - As carefully gone through the showcause notice issued by the learned transfer pricing officer dated 18 August 2017 and find that in para number seven this comparable company was not at all considered in the show cause notice but was taken into the order u/s 92CA (3) of the act straight. In view of this, we direct the learned transfer pricing officer to exclude the above comparable company from the comparability analysis as no proper opportunity was given to the assessee to contest the same before the learned transfer pricing officer. Adjustment of the margins with respect to the working capital and risk adjustment - There were no arguments raised before the learned transfer pricing officer also with respect to the adjustment of margin on account of working capital differences. On careful perusal is of the objections raised before the learned dispute resolution panel, where six objections were raised, we do not find any objection with respect to granting of the working capital adjustment and other risk adjustment. Even before us, no working of the working capital adjustment or other risk adjustment is provided. Therefore, in absence of any working, provided by assessee before us or before the lower authorities or even raising this claim before the lower authorities we do not find any merit in this ground. Hence dismissed. Appeal of the assessee is partly allowed.
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