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2023 (4) TMI 224 - AT - Income TaxTP Adjustment - comparable selection - R. Systems International Limited failed the different financial year filter adopted by the TPO - HELD THAT:- There is no dispute that R. Systems International Ltd. is following different financial year and the assessee objected inclusion of the comparable which is having different financial year. Being so, as recorded by the Ld. DRP itself, R. Systems International Ltd. fails the financial year filter. Accordingly, we direct the TPO/AO to exclude R. Systems International Ltd. as a comparable to the assessee’s case. Accordingly, this company R. Systems International Ltd. is to be excluded from the list of comparables. This ground of the appeal of the assessee is allowed. Persistent Systems Ltd. - This comparable fails the functionality test and this company Persistent Systems Ltd. is not functionally similar to assessee’s case as held by the coordinate bench of the Tribunal in the case of M/s. SAP Labs India Pvt. Ltd. . [2022 (7) TMI 1391 - ITAT BANGALORE] Thus we direct the AO/TPO to exclude this company Persistent Systems Ltd. from the list of comparables. Nihilent Ltd. - This comparable fails the functionality test and this company Nihilent Ltd. is not functionally similar to assessee’s case as held by the coordinate bench of the Tribunal in the case of M/s. SanDisk India Device Design Centre Pvt. Ltd. [2022 (6) TMI 1299 - ITAT BANGALORE]. Thus we direct the AO/TPO to exclude this company Nihilent Ltd. from the list of comparables. OFS Technologies Ltd. - This comparable fails the functionality test and deserves to be excluded. Determining the Arm’s length margin by applying Rule 10CA of the I.T. Rules, 1961 - As there are sufficient comparables available in the present facts of the case for the year under consideration, we uphold the applicability of Rule 10CA of the I.T. Rules subject to our findings herein below and the question of excluding high margin companies cannot be agreed with. Accordingly, this ground of appeal of the assessee in Ground No.7.9 is dismissed. We direct the AO/TPO to verify the functional similarities of these 3 comparables being 1) Threesixty Logica Pvt. Ltd. 2) Cybage Software Ltd. and 3) Concilient Technologies Ltd. and then to apply Rule 10CA of the I.T. rules in accordance with law. In the event these comparables found to be not functional, they may be excluded. Ordered accordingly.
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