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2022 (7) TMI 1512 - ITAT BANGALORETP Adjustment - comparable selection - as submitted high amount of turnover companies cannot be compared to the assessee company as assessee’s turnover is very low compared to those companies - HELD THAT:- As relying on Barracuda Networks India Pvt. Ltd. [2022 (5) TMI 322 - ITAT BANGALORE] we direct the AO to exclude those high turnover companies from the list of comparables. Tata Elxi Ltd. - We have already directed the AO/TPO to exclude this comparable from the list of comparables on the basis of turnover filter while adjudication in ground No.1(iii). Persistent Systems Ltd. company is predominantly engaged in the business of providing outsourced software product development services to customers across the Globe from following industries verticals, infrastructure and systems, telecom and wireless, Life Science and Health care and finance services. However, the present assessee before us is in the business of computer radiated designing and development of commercial vehicle systems. The company is developing specific software for associated enterprises. It is also subsidiary of the ultimate holding company. The software development is used enhanced integrating the same with the main produce. Finally, what is being marketed is a final product by the ultimate holding company. The role of company has been that it is a contract software development support services provider. Being so, it cannot be considered as functionally comparable to assessee. Accordingly, on the basis of functionality, we direct the AO/TPO to exclude this company from the list of comparables. Infobeans Technologies Ltd is providing wide range of services under four verticals i.e. services, automation, enterprise and industries and under the automation services verticals, the company is providing advanced robotic process automation services. Since Infobeans is into diversified activities it cannot be a suitable comparable vis-à-vis the taxpayer which is a routine software development services provider. Thus we direct the AO/TPO to exclude this company from the list of comparables. Thirdware Solutions - As decided in M/S BORQS SOFTWARE SOLUTIONS PVT. LTD. [2021 (10) TMI 1351 - ITAT BANGALORE] this comparable has been excluded on the basis of turnover filter but before us the assessee stated that it has to be excluded on the basis of non-matching of margin. In our opinion, this has to be examined by the AO/TPO. Accordingly, we remit this issue to the file of AO/TPO for fresh consideration. Cybage Software Ltd. - as submitted this company having super profit in immediate two financial years and also having huge turnover of Rs. 722.25 crores in the assessment year under consideration - If the functionality of the Cybage Software Pvt. Ltd. is not similar to the assessee and if the turnover was Rs. 722.25 crores in the assessment year under consideration, it has to be excluded on any one of the above reasons. The issue is remitted back to the file of AO/TPO for fresh consideration. Exclusion of Sagar Soft India Ltd - According to the Ld. A.R., this company is having persistent loss and only in assessment year 2016-17, it was declared profit - If there is loss consistently in immediate previous 3 years then only it would have excluded. On the other hand, if the loss is only in one assessment year out of 3 immediate previous assessment years, this company is to be considered as comparable. Accordingly, this issue is remitted to the AO/TPO for fresh consideration. Include M/s. S.K. Mile Software Solutions Pvt. Ltd. and stated that the segmental data may be obtained by TPO after calling information u/s 133(6) - We accede to the request of assessee’s counsel and set aside the matter to the file of AO/TPO to procure the relevant data by issuing notice u/s 133(6) of the Act and decide it afresh. Non-following the direction of Ld. DRP regarding comparable company, M/s. ASM Technology Ltd., wherein Ld. DRP has given specific direction to verify the claim of the assessee that company does not fail in export turnover criteria and the TPO has passed the final order without any verification rejecting the comparable - The issue has to be reconsidered by TPO in accordance with the direction given by the Ld. DRP. Ordered accordingly. Adjustment of notional interest on outstanding receivables - international transaction or not? - HELD THAT:- As similar issue came up for consideration in the case of MetricStream Infotech (India) Pvt. Ltd.[2020 (4) TMI 883 - ITAT BENGALURU] as held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Also following the earlier decision in Kusum Healthcare [2017 (4) TMI 1254 - DELHI HIGH COURT] it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision (supra), the Hon’ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions - thus we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment - ground raised by assessee stands allowed for statistical purposes.
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