TMI Blog2015 (1) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.34%. Coordinate Benches of the Tribunal are consistently following 15% as cut off mark for applying the RPT filter. Accordingly, we direct exclusion of Megasoft Ltd., Aztech Software Ltd. and Geometric Software Ltd. from the comparables. The AO is, therefore, directed to re-compute the ALP after excluding the companies directed by this Tribunal in this order. - Decided in favour of assessee by way of remand. Computation of deduction u/s 10A - Held that:- Computation of deduction u/s 10A of the Act and to adjust both export turnover as well as total turnover by reducing 50% of data link charges of ₹ 33,96,939/- for computing deduction u/s 10A of the Act is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). Thus we allow the said ground of appeal of the assessee and direct the AO to exclude data link charges both from the export turnover as well as the total turnover for computing deduction u/s 10A of the Act. - Decided in favour of assessee - ITA No. 1129/Bang/2010 - - - Dated:- 31-12-2014 - Smt. P. Madhavi Devi And Shri Jason P. Boaz,JJ. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 200 crores since the assessee s turnover is only ₹ 80 crores. The learned Departmental Representative, however, opposed the additional ground on the ground that the assessee has not adopted such filter at the time of its own TP study and selecting the comparables and has not raised any objection before the Transfer Pricing Officer (TPO) or the Disputes Resolution Panel(DRP). Therefore, according to him, the assessee is precluded from raising such a ground at this stage. 2.3 Having regard to the rival contentions and the material on record, we find that the additional ground raised by the assessee is for the adoption of the turnover filter in selecting the comparables for determination of the ALP of the international transaction. This Tribunal, in the case of Agile Software Enterprise Pvt. Ltd. in IT(TP)A No.1172/Bang/2010 dated 26/09/2014 for assessment year 2006-07 has held that this point can be raised at any stage of the proceedings. In view of the same, we admit the said additional ground of appeal for the turnover filter to be applied and the exclusion of the comparable companies from the list of comparable companies. The learned counsel for the assessee has file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atic Ltd. Product company The learned counsel for the assessee submitted that the assessee had raised objections with regard to these companies before the DRP. However, the DRP has confirmed the order of the AO without considering the assessee s objections at length with regard to each of the comparable companies. He submitted that these companies have been considered as not comparable by the Tribunal in the case of Agile Software Enterprise Pvt. Ltd., (cited supra) wherein it was directed that these companies are to be excluded. He has drawn our particular attention to the relevant paragraphs of the said order. 3.1 The learned Departmental Representative, however, supported the orders of the authorities below. 3.2 Having regard to the rival contentions and the material on record, we find that Agile Software Enterprise Pvt. Ltd., is a company which is engaged in software development services and the relevant assessment year before the Tribunal is also assessment year 2006-07. In the case before us also, the assessee is a software development services company and not a software product company. Therefore, facts of the case before us are similar to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006-07 on account of it being functionally different from software companies. The relevant extract are as follows: 16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185- 186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspect, assessee succeeds. Based on all the above, it was submitted on behalf of the assessee that KALS Information Systems Limited should be rejected as a comparable. We have given a careful consideration to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer to exclude ACCEL Transmatic Ltd. from the final list of comparables for the purpose of determining TNMM margin. Besides the above, it was pointed out that this company has related party transactions which is more than the permitted level and therefore should not be taken for comparability purposes. The submission of the ld. counsel for the assessee was that if the above company should not be considered as comparable. The ld. DR, on the other hand, relied on the order of the TPO. 50. We have considered the submissions and are of the view that the plea of the assessee that the aforesaid company should not be treated as comparables was considered by the Tribunal in Capgemini India Ltd (supra) where the assessee was software developer. The Tribunal, in the said decision referred to by the ld. counsel for the assessee, has accepted that this company was not comparable in the case of the assessees engaged in software development services business. Accepting the argument of the ld. counsel for the assessee, we hold that the aforesaid company should be excluded as comparables. 13. The facts and circumstances under which the aforesaid companies were considered as compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it was held as under:- 17. As far as comparable at Sl.No.9 of the list of comparable chosen by the TPO listed in the chart given at para-4 of this order viz., Tata Elxsi Ltd., is concerned, the comparability of the aforesaid two companies with that of the software service provider was considered by the Mumbai Bench of this Tribunal in the case of Logica Pvt.Ltd. IT (TP) 1129/Bang/2011 AY 07-08) wherein on the aforesaid company, the Tribunal held as follows:- 14. As far as comparable at Sl.No.6 24 are concerned, the comparability of the aforesaid two companies with that of the software service provider was considered by the Mumbai Bench of the Tribunal in the case of Telcordia Technologies India Private Ltd. (supra) wherein on the aforesaid two companies, the Tribunal held as follows:- 7.6 Flextronics Software Systems Ltd.: As per the statement of the learned AR, this company is also involved in the development of the software product and is also involved in BPO services, besides joint software consultancies for the use in telecommunication industries. Thus, being product and service company, it cannot be taken as comparable. However, the learned CIT DR has amply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Elxsi Ltd. be excluded from the comparables. 8.10 Lucid Software Ltd.: The ld. counsel for the assessee raised similar contentions as in the case of Tata Elxsi Ltd. here also. According to him, Lucid Software Ltd. was functionally dissimilar and was developing products and was not an software development services company. 8.10.1 We find that Lucid Software Ltd. was also one of the comparables which came up for consideration before the coordinate Bench of this Tribunal in the case of EMC Data (supra). EMC Data was also doing software development services in one of its segments and TPO had considered Lucid Software Ltd. also for comparison. The coordinate Bench in the aforesaid decision held as under:- 14. The learned counsel for the Assessee brought to our notice that the comparable company chosen by the TPO at sl.No.10 of the chart given in para-4 of this order viz., Lucid Software Limited, has to be excluded as functionally not comparable with that of the assessee in view of the decision of the Mumbai Bench of the Tribunal in the case of Telcordia Technologies India Private Ltd. in ITA No.7821/MUM/2011, which was followed by the ITAT Bangalore Bench in the case of Logica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the list of comparable companies chosen by the TPO and listed in para-4 of this order to be excluded from the list of 20 comparable arrived at by the TPO. 8.10.2 Respectfully following the said decision, we hold that Lucid Software Ltd. was not functionally similar to the assessee and the same has to be excluded from the comparables. Directed accordingly. 8.11 Megasoft Ltd. 8.12 Aztech Software Ltd. 8.13 Geometric Software Ltd. Ld. AR submitted that in each of the above companies the RPT filter exceeded 15%. According to him, RPT filter has been upheld by this Tribunal in a host of decisions including that of EMC Data (supra). Per contra, the ld. DR supported the orders of authorities below. We have perused the orders and heard the rival contentions. Application of RPT filter while selecting the comparables has been held to be an appropriate criteria by this Tribunal in a number of decisions. In the case of EMC Data (supra), it was held as under:- 16. As far as comparable companies at Sl.No.1 2 19 of the chart of comparable companies chosen by the TPO at page-4 of this order viz., Aztec Software Limited and Geometric Software Ltd. (Seg.) and Megasoft Ltd., is co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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