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2023 (8) TMI 1170 - AT - Income TaxTP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Admittedly, the assessee is a captive service provider to its AE. FAR analysis of assessee establishes that it does not undertake any risk in terms of projects undertaken or services rendered. The functions carried out by the assessee are strictly on the basis of directions from its AE and the payment by the AE to the assessee is on cost+markup. The comparables sought by assessee herein for exclusion carry out diverse activities and has significant brand values. These companies are owning huge intangibles and also undertakes its own R&D which is not the case of the assessee before us. The decisions herein above relied by the assessee on functional dissimilarities goes to establish that these are functionally not similar with that of the assessee. The relevant extract of the observation in case of Yahoo Software Development India Pvt. Ltd. [2022 (7) TMI 1349 - ITAT BANGALORE] in respect of Larsen & Toubro Infotech Ltd., Mindtree Ltd., Persistent Systems Ltd. and Infosys Ltd direct exclusion from the final list. Exclusion of Nihilent Ltd. and OFS Technologies Ltd. from the final list as not functionally similar to that of assessee. Case followed SUBEX LIMITED [2023 (4) TMI 224 - ITAT BANGALORE] Assessee seeking inclusion of only two comparables Maveric Systems Ltd. and Evoke Technologies Pvt. Ltd. - We note that the authorities below has not verified the annual reports to come to a conclusion that the export revenue filter is not satisfied. In the interest of justice, we direct these comparables back to the Ld.AO/TPO to verify the FAR analysis of these comparables with that of assessee and to consider its inclusion in case it satisfies all the relevant filters. Margins of Harbinger Systems Pvt. Ltd. and CG-Vak Software and Exports Limited has been wrongly computed - We direct the Ld.AO/TPO to recompute the margins of these comparables in accordance with law. Considering bad debts and provision for bad debts as non-operating expenses while computing the operating margin of comparable companies - HELD THAT:- As relying on M/S. MAXIM INDIA INTEGRATED CIRCUIT DESIGN PVT. LTD. [2020 (11) TMI 563 - ITAT BANGALORE] we direct the Ld.AO to consider the bad and doubtful debts and provision for bad debts to be operating in nature while computing the PLI of the comparable companies.
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