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TMI Blog2015 (3) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... in confirming the action of the Ld. AO is not allowing deduction u/s.10B of the Act amounting to INR 2,30,81,297/- on the ground that the approval granted by the Software Technology Park of India (STPI) to the Bopodi unit of the Appellant is not ratified by the Board of Approval constituted u/s.14 of the Industrial Development Regulation Act. 3. Without Prejudice to the claim of deduction u/s.10B of the Act, on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the action of the Ld. AO in denying the alternate claim of deduction u/s.10A of the Act on the ground that the Appellant does not meet the fundamental condition of having been located in 'free trade zone' and that the claim of deduction cannot be switched from one section another". 3.1 Facts of the case, in brief, are that the assessee is a wholly owned subsidiary of Approva US which provides software development activities and quality assurance services to its AE on exclusive basis. It also provides software maintenance and support functions like documentation of the programmed code, IT integration and configuration management to its AE. It filed its return of income on 23-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit of ETHP unit, it is the Development Commissioner and for STP unit (i.e. Softwate Technology Park) unit, it is the officer designated by Ministry of Information Technology (i.e. the STPI Director). All the rest of the units, the approval is to be sought for from BOA (Board of Approval). As the 100% EOU status under the STP scheme is bestowed upon the assessee by the STPI Director, the assessee has fulfilled the conditions of registration as per IDRA Act. 4.1 It was submitted that if a pedantic view has to be taken that yet the assessee should have availed IDRA registration it would lead to a proposition that the same status, i.e. 100% EOU will be granted by two authorities which is unworkable, unreasonable and unacceptable. Various decisions were also brought to the notice of the AO. It was further submitted that the issue was examined in scrutiny proceedings for A.Y. 2006-07 and the AO after satisfying himself on this issue had granted deducted u/s.10B of the Act. Various decisions were also relied upon before the AO in which deduction u/s.10B was granted on obtaining approval either from the Board of Approval of STPI or Development Commissioner of SEZ. 5. However, the AO wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94. It was amended by the Notification No. SO 388(E) dated 30th April 1995. It was contended that the STPI appointed by the Central Government under section 14 of IDRA can also be confirmed from the Custom Notification No. 138 and 140 dated 22 October 1991. Thus, on a combined reading of above Notifications it is clear that the Board had authorized IMSC, who in turn delegated the powers to the Director of STPI for granting approval to STPI units for claiming the benefit as 100% ECU. For the above proposition the assessee relied on the following decisions : i. The Commissioner of Income Tax vs K Sudha Rani - AP High Court ITA 87 of 2013 dated 25 June 2013 ii. Bebo Technologies PLtd. vs JCIT 20 taxmann.com 812 Similar view has also been taken in the cases of: i. Visu International Ltd vs DCIT (ITA 696/Hyd/2011 ) ii. Secunderabad Software vs DIT (ITA 1501/Hyd/2011) iii. Valliant Communications Ltd vs DCIT (ITA. 2706/Del/2008 6.1 It was submitted that a view favourable to the assessee should be adopted in the case of conflicting decisions. For the above proposition, the assessee relied on the following case law : i CIT vs Vegetable Products 88ITR 195 (SC) ii. Suryalatha Spinni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are same. Therefore, if there is a technical defect, only on account of technicality or venial defect, the benefit, otherwise allowable to the assessee, should not be disallowed by the AO. For the above proposition, the assessee relied on the following decisions : i. Efextra Esolutions Pvt Ltd vs DIT-Delhi Tribunal ITA. 313/Del/2012 ii. ACIT vs Yeshwant Kanetkar- 150/Nag/2011-Nagpur Tribunal iii. Mantec Consultants P Ltd vs CIT-II - Delhi HC - ITA 1295/2008 Krishnan Nair vs CIT- Kerala High Court - 180 CTR 364 iv. N Makro Technologies (P) Ltd. vs. ACIT- Hyderabad Tribunal -1057/H/2010 v. Infosage Systems (India ) vs. DCIT - ITA No. 952/Hyd/10 vi. Supreme Netsoft Pvt Ltd vs DIT - ITA No. 1301/Hyd/2011 vii. Legato Systems India (P) Ltd. v /TO - 203 CTR 101 6.7 Various decisions were also brought to the notice of the Ld.CIT(A) to the proposition that in case deduction u/s.10B is not allowed then alternatively deduction u/s.10A should be granted to it. 7. However, the Ld.CIT(A) also was not convinced with the arguments advanced by the assessee and rejected the claim of deduction both u/s.10B as well as u/s.10A by observing as under : "2.2.23 I have carefully considered the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court on Regency Creations Limited is a comprehensive decision, which pertains to the AYs 2003-04, 2004-05, 2006-07 and 2007-08. Therefore, it covers part of the period of the new foreign trade policy. In this case, the High Court has expressly held that mere approval by the STPI is not enough. The approval should be granted by the Board constituted in accordance with the provisions of the Section 14 of IDRA. Further, the honourable High Court has also held that the power of approval to be granted by an authority by express provision of the statute has to be exercised by that authority and cannot be delegated. Therefore, the approval given only by the STPI is not sufficient to claim the deduction u/s 10B. The honourable High Court in para 17 of the judgment has held as under: "In the instant case, there is no notification or official document suggesting that either the Interministerial Committee, or any other officer or agency was nominated to perform the duties of the Board (constituted under section 14 of the /OR Act), for purposes of approvals under section 10-B. Though the considerations which apply for granting approval under sections 10-A and 10-B may to an exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the AO to deny the deduction, which was already granted to it in the earlier years. The learned AO has already distinguished the decisions relied on by the Appellant on this issue in the assessment Order. According to me, the fundamental issue is that the Appellant's deduction is not in accordance with the provisions of the law. Hence, the conduct of the AO granting of deduction in the earlier year will not estopp operation of law in the current year. A deduction which is legally erroneous cannot become lawful by the consent of the Department because it reached erroneous conclusion in the earlier years. Therefore, I do not accept the Appellant's argument on this Ground. For the same reasons, I do not accept the Appellant's arguments on upholding principle of consistency. In my opinion, 'principle of consistency' has no application to the facts of the case. 2.2.32 The Appellant has taken alternative Ground of Appeal vide which it has requested for granting the deduction u/s10A. I have considered the Appellant's plea. I am unable to accept the Appellant's argument because the provisions of Section10A and Section 10B though similar in many aspects, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong either on facts or on law while following its earlier decision in same assessee's case. Since nowhere it is suggested that the aforesaid earlier decision of the Tribunal has not been accepted or that the appeal has been preferred against the said decision and the Hon'ble High Court interfered with the order of the Tribunal. Accordingly, the appeal filed by the Revenue was dismissed. 8.1 Referring to the decision of the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. Vs. DCIT reported in 155 taxmann 330 he drew the attention of the Bench to the following observations : "26. In the result the effect of dismissal of tax appeal by the High Court holding that no substantial question of law arises is that the order of the Tribunal on the issue which was agitated by the appellant before the High Court stands merged in the order of the High court, and for all intents and purposes it is the decision of the High Court which is operative and which is capable of being given effect to. It is not open to any person to contend that there is no decision of the High Court and the subordinate forum is entitled to take a contrary view than the one adopted in the earlier proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee originally claimed relief under Section 10B, it was cautious enough to make an alternative plea under Section 10A in view of the fact that the assessee's vendor had the benefit under Section 10A. It is not denied by the Revenue that the assessee had the whole business transferred to its favour and that the factum of transfer was also intimated to the Software Technology Park of India. Thus, as a Software Technology Park, the assessee is entitled to place his claim under Section 10A. In any event, even assuming for a moment, the assessee had not referred to the Section correctly, the fact remains that if the claim could be favourably be considered under any of those special deduction provisions and on the conditions specified therein being satisfied, we do not think that there exists any justifiable ground for the Revenue to contend that the assessee shall not be entitled to have the benefit of Section 10A." 8.4 Referring to the decision of the Hyderabad Bench of the Tribunal in the case of Cloud Softtech India Pvt. Ltd., vide ITA No.483/Hyd/2013 order dated 13-09-2013 the Ld. Counsel for the assessee drew the attention of the Bench to para 9 to 11 of the order which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee for deduction under section 10A requires to be examined in accordance with law and hence, we remit the issue to the file of Assessing Officer to decide denovo the claim of the assessee in the present case." He accordingly submitted that either the benefit of deduction u/s. 10B should be granted to the assessee or alternatively deduction u/s.10A should be granted since assessee fulfils all the conditions prescribed for claiming the same deduction. 9. The Ld. Departmental Representative on the other hand strongly supported the order of the CIT(A). He submitted that the Hon'ble Delhi High Court in the case of Regency Creations has passed a very detailed order on this issue. Therefore, the order of the AO which is based on the decision of the Hon'ble Delhi High Court has to be followed. So far as the decision of the Hon'ble AP High Court relied on by the Ld. Counsel for the assessee is concerned, he submitted that merely because the revenue had not filed any appeal in the past, the Hon'ble High Court dismissed the appeal filed by the Revenue. Therefore, that cannot be considered as a precedent and the decision of the Hon'ble Delhi High Court will be a bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction u/s.10A, the Ld.CIT(A) rejected the same also holding that the unit of the assessee will not meet the fundamental condition of having been located in free trade zone for claiming the deduction u/s.10A. Further, according to him, the availability of the deduction from one section to another cannot be switched so easily because otherwise the legislature would not have provided 2 different sections in the first place. He accordingly rejected the claim of the assessee. 11.2 We find a somewhat similar issue had come up before the Hon'ble Madras High Court in the case of CIT Vs. Heartland KG Information Ltd.(Supra). In that case, the assessee was an industrial undertaking engaged in Medical Transcription business. There was another undertaking K which got approval as 100% EOU from STPI and started its new business of medical transcription during F.Y. 1999-2000. It also had another undertaking engaged in the business of development of software exported outside India. In respect of business income earned from export the said undertaking claimed exemption u/s.10A of the I.T. Act. In July, 2001 the company K transferred its entire undertaking engaged in the export business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions and are to be liberally construed. If the assesses otherwise fulfils all the legal requirements for claiming the deduction u/s.10A of the Act but inadvertently claimed the same u/s.10B of the Act which was granted to it in the past, we find no reason as to why the alternate claim of the assessee should not be accepted. 11.4 However, since the lower authorities have not thoroughly examined the allowability of deduction u/s.10A of the Act and merely rejected the claim on the ground that the same was not claimed in the original return filed, therefore, we in the interest of justice deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate its eligibility for deduction u/s.10A of the I.T. Act. We hold and direct accordingly. Since we are restoring the issue to the file of the AO for deciding the alternate claim of the assessee for deduction/s.10A, therefore, we refrain ourselves from adjudicating the allowability of deduction u/s.10B of the I.T. Act. The grounds raised by the assessee are accordingly allowed for statistical purposes. 12. In the result, ground of appeal No. 3 is allowed for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al cost COP/ TC') of the Appellant and comparables On the facts and in the circumstances of the case and in law, the learned CIT(A)/the learned AO erred in calculating OP/TC of the Appellant and the comparables. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the Ld AO/TPO in treating loss/gain on account of foreign exchange fluctuations as nonoperating for the purposes of computing the OP/TC margin of the Appellant and in not following the ratio laid down by various Appellate Tribunal/Supreme Court decisions. 6. Unjust rejection of TP study filters and unjust introduction of additional filters for selecting final set of comparables. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned AO/TPO in applying additional filters for selecting companies as comparables, without providing cogent reasons and by ignoring the Appellant's submission for not applying the additional filters. The learned CIT(A ) has erred in confirming the action of the Ld AO/TPO in rejecting Appellant's filters for selecting companies as comparables, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the same in the submissions and hearings. 14. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in confirming the action of the Ld AO/TPO in computing transfer pricing adjustment using the financial information of the comparables pertaining to financial year ended March 2009 only, available at the time of assessment, although such information was not available at the time when the Appellant complied with the Indian TP regulations as per the Act. 15. No motive, circumstances, intention of tax evasion by the Appellant On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in not appreciating that the Appellant had no motive to shift profits since it entitled to benefit under section 10B of the Act. 13.1 Facts of the case, in brief, are that during the previous year under consideration the assessee has entered into international transaction with its AE aggregating to Rs. 16,06,78,428/- as envisaged in section 92A and 92B of the I.T. Act. The assessee has adopted TNMM method for the international transaction of software development and related support services to its AE. The AO referred the matter to the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final comparables set are as under : A. Companies not having financials for atleast 2out of 3years B. Sales turnover more than 75% of total income in the latest year c. Companies not having profit before tax of less than zero for at least 2 out of 3 years D. Companies with R&D not more than 3% of sales of the latest year E. Companies with NFA not more than 200% of sales F. Companies with less than one crore sales G. Companies with net worth not less than zero in the latest year H. Companies having Govt ownership I. Companies having Government ownership J. Companies having different functions K. Companies not having IT-S - companies results L. Companies not partially engaged in IT-S companies results 13.3 The TPO after considering the details furnished by the assessee observed that the following additional/modified filters or criteria may lead towards selecting appropriate comparables functionally similar to that of the assessee : (a) As per Rule 10B(4) it is mandatory to use the current year data, i.e. data for A.Y. 2008-09. However, as per TP report at the time of preparation of the same the data for A.Y. 2008-09 was not available and therefore the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between 1 to 200 crores were considered as comparables. (c) Companies whose software development service revenue is less than 75% of the total operating revenue or segmental revenue were excluded. (d) Companies who have more than 25% related party transactions were excluded. (e) Companies who have less than 75% of the operating revenue as export sales were excluded. (f) Companies who have persistent losses for the period under consideration were excluded. (g) Companies having different financial year ending (i.e. not March 31, 2009) or data of the company does not fall within 12 month period i.e. 01-04-2008 to 31-03-2009, were rejected. However, if the data of at least 9 months of FY 2008-09 is available for analysis, then such companies were considered acceptable provided other filters are also fulfilled. (h) Companies that are functionally different from that of taxpayer or having peculiar circumstances were excluded. 13.5 On the basis of the above filters or criteria, the TPO analysed the comparables selected by the assessee and noted that none of the companies are comparable to that of the assessee. The reasoning given by the TPO are as under : Sr. No. Name of compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software service is -0.34 lakhs in total turnover of 4.58 crores. Thus it comes to -7.14% of total turnover. There are no foreign exchange earnings. Similarly there is segmental expenditure for software segment. Hence the net result of software segment is shown as -0.34 lakhs, which means that there is no profit. Therefore the company is not comparable to the assessee 8 Vama Industries Ltd. (Software Development & Services Segment) In this case, the foreign exchange earnings is 36.08%. Since export turnover is less than75% of the operating revenue, the company is not considered as a comparable. The TPO accordingly held that the information as well as the data used in computation of the ALP is not reliable and correct. He therefore invoked the provisions of section 92C(3)(c) of the Act and rejected the TP document. 13.6 The TPO considered the operating profit to operating cost as the appropriate PLI. The Profit before interest and tax was considered by him for computing the operating margins. However, the incomes and expenses related to the operations of the relevant financial year alone were considered by him for the computation of operating margins of the comparables. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as an operating income. Similarly, it was argued that the TPO had erred in computing the operating margin of the following companies : Sr Company Name OP/TC as per TP order OP/TC reworked by Appellant Before adjustment After WC adjustment Before adjustment After WC adjustment 1 Acropetal Technologies Ltd 21.81% 26.60% 21.30 20.80% 2 Kals Information Technologies Systems Ltd 42.55% 42.89% 41.91% 37.31% 3 ThinkSoft Global Service Ltd 16.61% 22.62% 19.02% 21.34% Accordingly, it was argued that the TPO be directed to adopt the correct operating margin. 15.1 The assessee also challenged the unjust rejection of TP study filters and unjust introduction of additional filters for selecting final set of comparables. It was submitted that the TPO has applied filter of excluding companies having less than 75% of operating revenue of export sales. This filter according to the assessee is without any basis and there is no logic for the criteria of 75%. If criteria of comparing turnover of 100% export making unit is to be used, then this criteria can also be relaxed to include companies having turnover of having minimum 50% of export tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides training services. The assessee reproduced relevant part of the information from the Annual Report of the company and snap shots of the company's website. It was stated that as mentioned on the website of the Company, the Company has developed two products namely, Virtue Insure and Law vision. Relying on the decision of the Pune Bench of the Tribunal in the case of Bindview India Pvt. Ltd., vide ITA No.1386/PN/2010 for A.Y. 2006-07 it was submitted that the Tribunal in the said decision has rejected Kals Information System Ltd. as comparable company on the ground that the company is engaged into development of product and is rendering of ITES. 15.7 So far as rejection of comparables selected in the TP study is concerned it was submitted that the TPO has applied filter of export sales exceeding 75% of total sales. This filter is without any logical basis. Therefore, it would be incorrect to ignore the companies rejected by applying this filter. The assessee argued that the TPO be directed to drop this filter and include the comparables selected by the assessee in the TP study. 15.8 As regards the inclusion of high super profit making companies in the final set of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isk undertaken by the tested party in a controlled transaction. Relying on various decisions and the provisions of Rule 10B(2) and Rule 10B(3) it was submitted that some risk adjustment has to be granted since the assessee is a risk mitigated entity. 15.13 The assessee further submitted that the TPO has erred in not sharing the search strategy, accept reject matrix, source of additional comparables and computation of OP/TC of comparables selected in final set of comparables even though same was demanded by the assessee during the course of hearing. It was argued that the rules of evidence demand that the assessee be given the evidence gathered and intended to be used against the assessee. Such evidence should be open to cross verification. Since the information used by the TPO was neither publicly nor contemporaneously available, therefore, the new additional comparable companies considered by the TPO should be rejected. For the above proposition the assessee relied on various decisions. 15.14 As regards the rejection of multiple year data by the TPO and adopting single year data, the assessee submitted that use of multiple year data reduces variation or distortion to the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and services and is not comparable to software development services provided by the assessee. Similarly, the Pune Bench of the tribunal in the case of Bitwise Solutions Pvt. Ltd. (Supra) has also held that Kals Information System Ltd., cannot be considered as comparable. Similar view has been taken by the various other Benches of the Tribunal, the details of which are given above below : 1. Symphony Services Pune Pvt. Ltd. Vs. ITO - ITA No.257/PN/2013 2. PTC Software (India) Pvt. Ltd., - ITA No.1605/PN/2011 3. Toluna India Pvt. Ltd. Vs. ACIT - ITA No.5645/Del//2011 4. United Health Group Information Services Pvt. Ltd., Vs. ACIT - ITA No.6312/Del/2012 5. M/s. HCL EAI Services Ltd. Vs. DCIT IT(TP) A.No.1348/Bang/2011 6. Intoto Software India Pvt. Ltd. Vs. ACIT - ITA No.1196/Hyd/2010 19.1 Since the Ld.CIT(A) following the decision of the Pune Bench of the Tribunal has rejected Kals information System Ltd. holding the same to be functionally different, therefore, in absence of any contrary material brought to our notice, we find no infirmity in the order of the CIT(A). Accordingly, the same is upheld and the grounds raised by the Revenue are accordingly dismissed. 19.2 Now co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 4650-TIOL- 379 (Mum) (ITAT). Referring to the Safe Harbour Guidelines issued by the CBDT he submitted that foreign exchange fluctuation gain/loss is not a part of operating cost. He accordingly submitted that the order of the CIT(A) should be upheld. 22. We have considered the rival arguments made by both the sides. As reproduced above in para 20 in the arguments advanced by the Ld. Counsel for the assessee, we find the Delhi Bench of the Tribunal in the case of Westfalia Separtator India Pvt. Ltd., (Supra) following various decisions has held that foreign exchange loss/gain is a part of the operating revenue/cost. In the following decisions also (filed in the paper book by the assessee), it has been held that foreign exchange fluctuation cannot be excluded from the computation of the operating margin of the assessee company : 1. SAP Labs India P. Ltd. Vs. ACIT - 44 SOT 156 (bang) 2. Prakash I Shah reported in (2008) 115 ITD 167 (Mum) (SB) 3. Smt. Sujata Grover Vs. Dy.CIT (2002) 74 TTJ (Del) 347 4. M/s. S. Narendra Vs. Addl.CIT - ITA No.6839/Mum/2012 - Mumbai Tribunal 5. M/s. Mercedes Benz Research & development India Pvt. Ltd. Vs. DCIT (IT/TP A.No.1222/Bang/2011 -Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to eliminate the companies which have controlled transactions and thereby have a significant influence on the margins earned. The TPO in his order has observed that in principle the tax payer has no objection for applying this filter. However, its two main contentions are-one-availability of RPT information and second the threshold limit of 15% in place of 25%. At the same time we also find considerable force in the submission of ld. Counsel for the assessee that ideally if sufficient number of 100% uncontrolled comparables are found, then no comparable having related party transactions should be considered. We are in agreement with ld. Counsel that only when sufficient comparables are not found, the related party threshold should be relaxed and only gradually to the extent that sufficient comparables are found, the limit should be relaxed. Therefore, we accept the assesse's plea that no sacrosanct threshold limit should be fixed for this filter. Ld. DRP has also noted that neither there is any judicial consensus on the numerical limit nor the section so prescribes. However, there is consensus on the effect of RPT i.e. it should not materially affect the international t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit making companies and exclusion of loss making companies. 27. We have considered the rival arguments made by both the sides. In the above grounds, the assessee has basically challenged the inclusion of Thirdware solutions Ltd. and exclusion of Vama Industries Ltd. as a comparable. The Ld. Counsel for the assessee submitted that Thirdware Solutions Ltd. should be rejected as comparable since the margin of this company at 39.79% is abnormally high as compared to the margin of the assessee. Referring to the decision of the Special Bench of the Tribunal in the case of Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT vide ITA No.7466/M/2012 he submitted that the Special Bench in the said decision has held that companies earning high profit margin should invite further investigation to ascertain as to whether the entities earning such high profits should be included in the list of final comparables or not. He submitted that Thirdware Solutions Ltd. is also engaged in trading of software licence and trading implementation activities apart from software development. Therefore, the above activities render the company functionally different. Referring to the decisions of different benche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He accordingly submitted that Vama Industries Ltd. should not be excluded as a comparable. So far as the other 2 comparables taken by the Assessing Officer/TPO are concerned he did not challenge the same. 28. The Ld. Departmental Representative on the other hand supported the order of the CIT(A). He submitted that although functionally Thirdware Solutions Ltd. is similar to that of the assessee company, however, the assessee challenges the same because it is in the high profit category. He submitted that nowhere in the annual report it is mentioned that it is product company. Referring to page 739 of the paper book he drew the attention of the Bench to Schedule 12 which contains the details of sales. Referring to the same he submitted that the sale of licence has been shown at Rs. 2,32,37,588/- on a turnover of Rs. 77.03 crores which is less than 5%. Similarly, purchase of licence has been shown at Rs. 1.93 crores. The margin is not abnormally high. He accordingly submitted that the same cannot be rejected as a comparable. So far as Vama Industries Ltd. is concerned, he submitted that the turnover includes Hardware sale also. 29. We have considered the rival arguments made by bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale-cum-licence of software which is available from the audited accounts, the details of which are as under : Schedule : Sales As on 31-03-2009 As on 31-03-2008 Sale of Licence 22,237,588 3,916,427 Software Services 89,177,023 76,724,371 Export from SEZ unit 478,572,420 263,971,033 Export from STPI unit 162,900,630 168,863,049 Revenue from Subscription 16,433,714 9,293,874 770,321,376 522,768,754 Apart from the above the company is also having dividend income, interest income and profit on sale of investment as well as premium of software contract totalling to Rs. 2,30,48,603/- which is as per Schedule-13 "other sources". From the various decisions relied on by the Ld. Counsel for the assessee we find Thirdware Solutions Ltd. has been rejected on the ground that it is functionally dissimilar. The Hyderabad Bench of the Tribunal in the case of Intoto Software India Pvt. Ltd. Vs. ACIT and Viceversa in consolidated order dated 24-05-2013 for A.Y. 2005-06 and 2007-08 at para 26 of the order has observed as under : "26. As far as Thirdware Software Solution Limited is concerned, we find from the information furnished by the said company that thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. According to him he could have done filtering and considered the same since these are functionally comparable for the impugned assessment year also. 31. The Ld. Departmental Representative on the other hand supported the order of the CIT(A). He submitted that there cannot be presumption of inappropriate working on part of the public authority. Referring to the order of the CIT(A) he submitted that the Ld.CIT(A) has correctly held that there cannot be presumption of inappropriate working on part of the public authority. The assessee was confronted by the TPO by issuing show cause notice. Adequate opportunity was given. Therefore, it cannot be said that certain information was used against the assessee without providing any opportunity to rebut the same. Therefore, this ground should be outrightly rejected. 32. After hearing both the sides, we do not find any infirmity in order of Ld.CIT(A) on this issue. Admittedly, during TP assessment proceedings, the assessee was given show cause notice. The matter was thoroughly discussed with the authorised representative. Therefore, it cannot be said that no opportunity was granted to the assessee. Therefore, this ground is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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