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2020 (4) TMI 913 - AT - Income TaxTP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- CG Vak Software & Exports Ltd. company excluded as it is consistent loss making company - We noted that before the DRP the assessee stated that this comparable is having profit in the current year at 7.14% and can be considered as a comparable. It was also stated that merely because a company is incurring losses, it would not lose its status as a comparable and that losses and incidental of business which is at par with the profit. However, the contention of assessee was not accepted by DRP by taking view that those companies with fluctuating margins are to be excluded. As this comparable is not consistent loss making as it had made profit in the relevant assessment year, hence, we direct the TPO/AO to include this comparable in the final set of comparable. Infosys Ltd. was excluded by tribunal from compatibility on the ground of that Infosys ltd is engaged in Software product and have huge turnover is not comparable to the assessee as a captive service provider to its associated enterprises, therefore, we direct the assessing officer to exclude this comparable from the final set of comparable. Exclusion of Wipro Technology Services Ltd. as it had related party transaction. e Infochips Ltd has provided hardware maintenance and product, providing back officer services and have substantial inventory. Sasken Communication Technology Ltd is engaged in software product. And Persistent system Ltd has huge intangible, made investment in intellectual property right and huge turnover. Therefore, accepting the similar view we are also of the view that these comparable cannot be compared with captive service provider. Hence, we direct the AO/TPO to exclude these four comparable. Zylog System Ltd. company is engaged in R&D activities, has a license fee and developed in house intangible. Thus, cannot be compared with captive service provider. Thus we direct the TPO/AO to include CG Vak Software & Export Ltd and exclude Infosys Ltd, Wipro Technology Services Ltd., e Infochips Ltd, Sasken Communication Technology Ltd, Persistent system Ltd and Zylog System Ltd from final set of comparable and recompute the ALP afresh.
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