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2022 (8) TMI 892 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- As assessee is doing part of software development cycle and therefore has been categorised as a captive software development service provider as well as ITeS segment, catering to needs of the group. The assessee in TP study held to be comprise of Software Engineers, who develop project based on inputs received from AE. Engineers employed by assessee designs functional specifications for the project identification of interfaces components coding and bug fixing. Ultimate approval and owner of project developed is the AE. In our view, by involving itself in process of Software development for AE, assessee cannot be held to be fulfledged Software Development Company. One has to look into transaction in regards to services rendered and FAR, which catagorises it to be a captive service provider, working on business model of cost plus margin. It is observed that comparables sought to be excluded are 100 % Software Development Companies, having high turnover and therefore respectfully following aforestated view in case of Genesis Integrating Systems India Pvt. Ltd. [2011 (8) TMI 952 - ITAT BANGALORE] these comparables are to be excluded on both the counts of functionally not being similar with that of assessee and also because they have a high turnover of more than 200 crore. Thus respectfully following above decisions, we uphold exclusion of Tata Elxsi Ltd., Sasken Communication Technologies Ldt, Persistent Systems Ltd., L&T Infotech Ltd., and Infosys Ltd., by applying turnover filter under SWD Segment and for ITeS Segment, Infosys BPO Ltd., iGate Global Ltd., and Mindtree Ltd., by applying turnover filter, from final list. Foreign exchange loss or gain as part of operating expenditure and excluding depreciation cost - Whether DRP erred in directing the Ld.AO/TPO to consider the foreign exchange fluctuation to be operating in nature? - HELD THAT:- As relying on Finastra Software Solutions (India)(P.)Ltd. [2018 (5) TMI 1808 - ITAT BANGALORE] we uphold the treatment of foreign exchange loss/gain to be operating in nature. Depreciation cost treated as being non-operating in nature - AR submitted that for year under consideration also the assessee charged higher rate of depreciation as compared to companies selected by Ld.TPO - HELD THAT:- Facts being the same with assessment year 2009-10, we do not find any infirmity in adopting the consistent view to in computing the margin in respect of the comparables after excluding the depreciation from the cost. In the result the appeal filed by revenue stands dismissed. Comparable selection - Companies being functionally dissimilar to the SWD services segment of Assessee need to be deselected. Working capital adjustment - We are of the view that it would be appropriate to direct the Ld.TPO/AO to examine the grievance of the Assessee in this regard and rework the working capital adjustment in accordance with law. Short-Grant of TDS Credit - We direct the Ld.AO to verify the claim based on the evidence filed by the assessee in accordance with law.
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