TMI Blog2015 (7) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions with its AE's with respect to provision of contract software development services during the FY 2004-05 is at arm's length. CIT(A) has rightly held that the assessee‟s international transaction was at arm‟s length and thus no addition as directed by the TPO was warranted. In the background of the aforesaid discussions and respectfully following the precedent as aforesaid as laid in Agnity India Technologies (2010 (11) TMI 852 - ITAT DELHI ), we do not find any infirmity in the impugned order of the Ld. CIT(A) on the ALP issue, which does not need any interference on our part, hence, we uphold the same - Decided in favour of assessee. - ITA No. 2634/Del/2011 - - - Dated:- 30-6-2015 - Shri R. S. Syal and Shri A. T. Varkey, JJ. For the Petitioner : Sh. Bhaskar Goswami, Sr. DR For the Respondent : Sh. Rohit Tiwari, CA ORDER PER A.T. VARKEY, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order dated 14.1.2011 passed by the Ld. CIT(A)-XX, New Delhi pertaining to assessment year 2005-06. 2. The Revenue has raised the following grounds in its Appeal:- 1. The order of the Ld. CIT(A) is erroneous and contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok value of these international transactions is ₹ 26,37,53,585/-. Therefore, the book value of international transactions is understated by ₹ 2,31,97,273/-. In view of above, AO shall enhance the total income of the assessee by ₹ 2,31,97,273/- for the AY 2005-06 for the international transactions undertaken by the assessee during the FY 2004-05 to bring the international transactions at arm s length price. 6. Pursuant to the TPO direction, Assessing Officer made the addition of ₹ 2,31,97,273/- to the total income of the assessee; and also added the addition of ₹ 25,97,918/- on account of depreciation on computer accessories and peripherals by reducing the same from 60% to 25% and thus the AO completed the assessment u/s. 143(3) vide his order dated 17.11.2008 on total income of ₹ 2,38,38,750/-. 7. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide his order dated 14.1.2011 was pleased to allow the claim of the assessee in respect to claim for depreciation on computers @ 60% ; And in respect to ALP, the ld. CIT (A) after excluding two companies from seven (7) comparable companies i.e. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the ld. CIT (A) may be reversed. 10. On the other hand, the ld. AR relied on the order of the ld. CIT (A) and does not want us to interfere 11. We have heard both the parties and perused the records. With regard to ground no. 2 to 2.1 relating to disallowance of ₹ 2,597,918/- on account of depreciation on computer accessories and peripherals is concerned, we find that Ld. CIT(A) after going through the facts of the case, and considering the nature of the items being switches, back-up storage devices, servers, projectors and other items held that they are integral part of the computer systems. We find that the issue is no longer res integra and the ground no. 2 to 2.1 is squarely covered by the decision of the Hon‟ble Delhi High Court in the case of CIT vs. BSES Rajdhani Powers Limited wherein the Hon‟ble Jurisdictional High Court has held that computer accessories form an integral part of the computer system and thus depreciation on them is allowable @60%. We find that Ld. CIT(A) was quite right in observing that the items for which assessee claimed depreciation appear to be integral to the computer systems. Therefore, he was opinion that with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar to that of the assessee company and the ld. CIT (A) erred in directing exclusion of both companies. So he wants us to reverse the order of the ld. CIT (A) and restore the order of Assessing Officer. 14. On the contrary, Ld. Counsel of the assessee has relied upon the order of the Ld. CIT(A) and defended the same and does not want us to interfere in the same. 15. We find that Ld. CIT(A) after considering the facts of the case and the submission of the AR observed that with regard to Infosys Technologies Ltd. it was evident from the Annual Report of the company that Infosys Technologies provides much wider range of services, performs extensive functions, undertakes diversified business activities and assumes significant risks as compared to routine software development service providers like the assessee. Further, the company undertakes substantial R D activities and derives majority of its revenues the sale of proprietary products unlike the assessee. Also, the turnover of the company is significantly higher than that of the appellant and in no manner is comparable to the size/ operations of the assessee. 16. We note that all the above facts highlight that Infosys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nature of services Diversified-consulting, application design, development, re-engineering and maintenance system integration, package evaluation and implementation and business process management, etc. (refer page 117 of the Paper Book) Contract software development services Turnover 20,264 crores 209.83 crores Ownership branded/proprietary products Develops/owns proprietary products like Finacle, Infosys Actice Desk, Infosys iProwe, Infosys mConnect. Also the company derives substantial portion of its proprietary products (including its flagship banking product suite Finacle‟) Onsite vs. Offishore As much as half of the software development services rendered by Infosys are onsite (i.e. services performed at the customer‟s location overseas). And offshore (50.20 per cent) Refer p. 117 of the Paper Book) than half of its service, income from onsite services The appellant provides only offshore services (i.e. remotely from India) Expenditure on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly, it cannot be said to be comparable with the assessee. The said proposition also find support by the decision of Delhi Tribunal in the case of Agnity Technologies vs. ITO passed in ITA No. 3856/Del/2010) wherein the Tribunal agreed with the DRP decision to exclude Satyam Computers Services Ltd. that since data of Sat yam is not reliable is a common knowledge . Accordingly, Ld. CIT(A) directed exclusion of M/s. Satyam Computer Service Ltd. from the comparable set of companies, which, according to us, is a correct decision which does not need any interference and we affirm exclusion of M/s. Satyam Computer Service Ltd. from the list of comparables. 21. Thus, finally, after rightly excluding the above mentioned two companies the following list of comparable companies emerges : S.NO. Name of the Company OP/TC 1. Sonata Software Ltd. 14.94% 2. Aztec Software Technology Services Ltd. 17.54% 3. Geometric Software Solutions Co. Ltd. 20.32% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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