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2015 (8) TMI 3 - ITAT DELHI

2015 (8) TMI 3 - ITAT DELHI - TMI - Transfer pricing adjustment - international related party transaction of the Appellant with respect to the provision of software development services - selection of Wipro Technology Services Ltd. as comparable - Held that:- We uphold that the submission of the assessee that Wipro Technology Services Ltd. cannot be considered as a comparable, in view of the binding judgement of the Jurisdictional High Court in the assessee’s own case for the AY 2006-07 which wa .....

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is an appeal filed by the assessee and is directed against the order of the AO passed u/s 143(3) r.w.s. 144C(5) of the Income Tax Act, 1961 (the Act) dated 24.12.2002 pertaining to the Assessment Year (AY) 2010-11. 2. Facts in brief:- The assessee is a company and is engaged in the business of software development and its export. The issue that arises for our consideration is the transfer pricing adjustment made by the A.O. 3. The grounds raised by the assessee are as follows. That on the facts .....

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assed in complete disregard to the scheme of the Act which mandates the AO to incorporate the directions of the DRP in the final order. 2. The Ld. AO / Ld. TPO and the Hon'ble DRP erred in ignoring the fact that the reference made by the LdAO suffers from jurisdictional error as the Ld. AO did not record any reasons in the draft assessment order based on which it was concluded that it was 'necessary or expedient' to refer the matter to the Ld. TPO for computation of the Arm's Len .....

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rtially confirming the adjustment of ₹ 11,587,357 in the assessment order passed under section 143(3) of the Income-tax Act, 1961 ('the Act'), by holding that the international related party transaction of the Appellant with respect to the provision of software development services do not satisfy the arm's length principle envisaged under the Act. In doing so the Ld. AO/Hon'ble DRP has erred: 5.1 by disregarding the economic analysis conducted by the Appellant to determine .....

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the same was not necessarily available to the Appellant at the time of preparing its TP documentation; 5.3 by rejecting comparability analysis in the TP documentation/Fresh search and in conducting a fresh comparability analysis based on application of the following additional! arbitrary filters in determining the ALP for software development services; • Rejection of companies whose data is not available for the current year (i.e. FY 2009-10); • Rejection of companies having operating .....

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marking a low risk captive unit such as the Appellant, thus demonstrating an intention to arrive at a pre-formulated opinion without complete and adequate application of mind with a single-minded intention of making an addition to the returned income of the Appellant; 5.5 by including certain companies in the final set of comparables which are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 5.6 by excluding certain companies on arbitrary/ frivo .....

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ding judicial pronouncements in India while computing an adjustment to the transfer price of the international transaction entered into by the Appellant. 5.9 The Ld. AO has erred by not limiting the amount of adjustment to the lower end of the arithmetic mean as envisaged under second proviso to section 92C sub section 2 of the Act. 6. That the learned AO, on the facts and in the circumstances of the case and in law, has erred in levying an interest u/s 234A, B C & D of the Act. 7. Ignoring .....

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prejudice to each other. The Appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal, as may be considered necessary, either before or during the hearing of this appeal. 4. We have heard Sh. Rohit Tiwari, the Ld.Counsel for the assessee and Mr.Judy James, the Ld.Standing Counsel on behalf of the Revenue. Mr.Rohit Tiwari restricted his arguments to the issue of elimination of Wipro Technology Services Ltd. as a comparable. He submitted that in the assessee s own case .....

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sue about exclusion of above list of comparables while making the TP adjustments in assessees case has been settled by Hon'ble Delhi High court. It has been unequivocally held that those companies ( like Infosys and others) are full fledged risk bearing companies and are functionally dissimilar as a comparable to assessee who is a captive software service provider by following observations: "8. It is a common case that Satyam Computer Services Ltd. should not be taken into consideration .....

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