TMI Blog2014 (6) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 crores of the assessee - There were related party transaction of 59% as against assessee 25% which were engaged in diverse functions - the objections by the assessee are glaring and the same needed to be addressed cogently by the TPO and the DRP - even administrative orders have to be consistent with the law of natural justice - the comparable TCS should be rejected from the list of comparables on both the ground that the same was not functionally comparable as well as the fact that assessee’s objections were not at all addressed – Decided in favour of Assessee. - I.T.A. No. 1062/DEL/2014 - - - Dated:- 27-5-2014 - Shri R. P. Tolani And Shri Shamim Yahya,JJ. For the Petitioner : Sh. Sachit Jolly, Adv., Ms. Roohina Dua, Advocate and Sh. Gargi Bhatt, Adv. For the Respondent : Sh. Peeyush Jain, CIT(DR) ORDER Per Shri Shamim Yahya : AM This appeal by the assessee is against the order of the Assessing Officer passed u/s. 143(3) of the I.T. Act read with section 144C for the asstt. year 2009-10. 2. Various grounds have been raised by the assessee. However, the ld. Counsel of the assessee submitted that only following grounds are relevant which shall be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ABM Knowledgeware Ltd. 28.91 2. Accel Transmatics Ltd. (Seg.) 10.58 3. Compucon Software Ltd. (Seg) 22.28 4. Compulink Systems Ltd. (Seg) 5.17 5. Sagarsoft (I) Ltd. 11.97 6. Synetairos Technologies Ltd. 24.93 7. Kerala Ayurveda Ltd. (Seg.) 9.53 8. SAARC Net Ltd. (Seg.) 1.57 9. Vama Industries Ltd. (Seg.) 9.76 However, the TPO did not agree with the above. He rejected the some of the comparable of the assessee and added some and came to arm s length margin of 29.50% of OC. Accordingly, enhancement of income of the assessee of RS. 4,08,55,412/- was proposed by the TPO. 4.1 Before DRP assessee made elaborate submissions. The DRP directed the TPO with regard to adjustment on account of working capital. Consequently, the arm s length price of software development services was determined as under:- Operating cost 2,77,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may refer to the objections filed by the assessee against the draft order with regard to Cat Technologies as under:- In response to the show cause notice issued by the Ld. TPO, the assessee submitted that Cat Technologies Ltd. should be rejected since the company is earning supernormal profits during the FY 2008-09. The Ld. TPO has rejected the submission made by the assessee on the ground that the assessee was not able to point out show this growth in sales is an aberration and on account of factors which are not on account of providing software development services and has included Cat Technologies Limited in final set of comparable companies. The assessee does not agree to the selection of Cat Technologies as a comparable. The contention of the assessee in this regard is provided below: The assessee humbly submits during the financial year 2008-09 the Company recorded turnover of Rs. 99.01 millions and incurred a net profit after tax of Rs. 22.99 million compared to turnover of Rs. 65.42 million and net profit after tax of Rs. 9.23 million during the previous financial year, thus a registering a growth of 51% and 149% respectively. It would be appreciate that a growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. 6.4 Thus, from the above we find that it is true that assessee s elaborate submissions were not at all dealt with by the TPO and the DRP. As regards the comparable Cat Technology assessee has duly submitted that the company is not only engaged in software development services, but also runs job portal which was launched during the relevant previous year and accordingly, the Revenue grew by 51% and profit by 149%. In this regard, Ld. Counsel of the assessee submitted that segmental data were not available. The TPO did not obtain the segmental data from the above comparable by using his powers u/s. 133(6). In light of the above we find that assessee s objections regarding the above comparables have not been properly dealt with. We proposed that the matter pertaining to the above may be sent back to the file of the TPO to consider the issue fresh. Ld. Counsel of the assessee agreed to this proposition. However, he submitted that direction should be given to the TPO that where necessary segmental data are not available the same may be obtained by issuing direction under Section 133(6) and if the comparables are found functionally not comparable, the same may be rejected. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company shall be selected as a comparable. 7.2 Ld. DRP in an absolute laconic order dismissed the elaborate objections of the assessee by holding that TPO has considered all these objections in the order. 7.3 We find that the above is not at all a tenable approach. Assessee has elaborately submitted that TCS is engaged not only in software development services but also sale of products, assurance services, cloud consulting, industrial services etc. The turnover of TCS was Rs. 2,245 crores as against Rs. 31.86 crores of the assessee. There were related party transaction of 59% as against assessee 25% which were engaged in diverse functions. All the above objections by the assessee are glaring and the same needed to be addressed cogently by the TPO and the DRP. However, we find that the same were rejected and brushed aside in a laconic manner devoid of cogency. We find that it is settled law that even administrative orders have to be consistent with the law of natural justice. In these circumstances, we are in agreement with the submissions of the Ld. Counsel of the assessee that the comparable TCS should be rejected from the list of comparables on both the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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