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GXS India Technology Centre Pvt. Ltd Versus The Income-tax Officer, Ward-11 (2) , Banglore

Transfer pricing adjustment - selection of comparable - Held that:- Avani Cimcon company is engaged in the development of software products as well as software services. However, there are no segmental details available in the financial account of this company. Therefore, this company cannot be considered as a good comparable of the assessee company which is purely a software development company and not in software product. See M/s. 3DPLM Software Solutions Ltd. [2014 (12) TMI 612 - ITAT BANGALO .....

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r and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year also, thus we direct the TPO/AO to exclude this company from the list of comparables.

E-Zest Solutions Ltd. is engaged in the business of consultancy services and technical services which is categorized as KPO services hence, it is functionally not comparable to t .....

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ny cannot be taken into account for comparability analysis, we hold that this company ought to be omitted from the set of comparables for the year under consideration

Quintegra Solutions Limited be excluded from the list of comparables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider.

Tata Elxsi Ltd should not be regarded as a comparable as softwar .....

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to that of pure software development service provider. Wipro Ltd company is a industry leader and also owns tangibles. He has further submitted that this company is engaged in product development and services. However, the segmental information is not available. He has pointed out that there is a amalgamation during the year and the software service revenue to the sales is less than 75%., thus we direct the AO/TPO to exclude this company from the list of comparables.

Softsol India .....

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e of the considered opinion that the functional comparability as well as the applicability of RPT filter is required to be properly examined at the level of TPO. Accordingly, we set aside the functional comparability and application of the RPT filter to the record of the TPO.

Mindtree in the absence of relevant facts and record, we are not in a position to give any finding regarding the comparability of this company. Therefore, a lapse on the part of TPO in some other case cannot be .....

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dis-similar

Denial of deduction u/s 10A - Held that:- Following the order of the co-ordinate bench of this Tribunal in assessee’s own case we decide this issue in favour of the assessee and direct the AO to allow the claim of deduction u/s 10A of the IT Act, 1961 as where a firm is converted into a company and there was change only in the composition of ownership and not the undertaking and business, the exemption allowed to the firm u/s 10A of the Act, could not be denied to the com .....

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2012 for the assessment year 2008-09. 2. The assessee is a company incorporated in India and was established as 100% EOU registered under Software Technological Parks of India (SWTPI) at Bangalore. The assessee is a company primarily engaged in designing and development of software for its parent company. The assessee reported international transactions with its AE on account of provision of software development services of ₹ 27,42,51,262/-. The assessee has reported profit before tax on c .....

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nologies Ltd 38.85% 6 iGate Global Solutions Ltd 5.10% 7 Mindtree Ltd 15.61% 8 Nihar Info Global Ltd -3.23% 9 Orient Information Technology Ltd -21.85% 10 Prithvi Information Solutions Ltd 14.09% 11 R.S.Software (India) Ltd 14.58% 12 R.Systems International Ltd 18.08% 13 SIP Technologies & Exports Ltd 18.10% 14 Silverline Technologies Ltd -26.25% 15 Sonata Software 7.38% 16 VJIL Consulting Ltd 8.46% 17 VMF Soft Tech 3.08% 18 Zylo Systems Ltd 18.53% Arithmetic Mean 10.98% 3. Out of the 18 com .....

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e TPO as TNMM. The comparable companies selected by the TPO for determination of ALP are as under; Sl.No Company Name Unadjusted margins FY: 2007-08 1 Avani Comcon 25.62% 2 Bodhtree Ltd 18.72% 3 Celestial Biolabs Ltd 87.94% 4 E-Zest Solutions Ltd 29.81% 5 Flextronics Software (WSeg.) 7.86% 6 Igate Global Solutions Ltd(Seg.) 13.99% 7 Infosys Technologies Ltd 40.37% 8 Kals Info Systems (Seg.) 41.94% 9 LGS Global Ltd(Lanco) 27.52% 10 Mindtree Consulting (Seg.) 16.41% 11 Persistent Systems Ltd 20.31 .....

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ee challenged the action of the TPO in rejecting the comparables selected by the assessee and adding 16 more comparables in the list of comparables for determination of ALP before the DRP. The DRP did not accept objections raised by the assessee and confirmed the proposed adjustment on account of ALP in respect of international transactions of the assessee. Accordingly, the DRP rejected the objections raised by the assessee. 4. Before us the assessee has raised the following grounds; Grounds of .....

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x payer u/s 92CA of the Income Tax Act. 1. The learned AO and TPO ought to have accepted the arm's length price as determined by the Appellant. 2. The learned TPO and the learned AO ought to have accepted the difference in risk profile of the appellant vis-a-vis the comparable companies. The learned TPO and the learned AO erred in not allowing the benefit of market risk adjustment to the Appellant. 3. The learned TPO and the learned AO erred in concluding that the Appellant is exposed to sin .....

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iary data put forward by the Appellant during the course of the proceedings before them, and in doing so have grossly erred: 6.1 In rejecting the comparability analysis carried in the TP documentation and conducting a fresh comparability analysis for determining the arm's length price by the learned TPO. 6.2 In adopting the arm's length mark up to be 23.65%, in respect of the international transaction pertaining to the rendering of software development services by the Appellant; 6.3 In c .....

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s been adopted without any judicial precedence or reasonable basis. 6.5 In rejecting the upper limit for sales turnover filter proposed by the appellant without providing any empirical analysis. In doing so, the learned TPO erred in not appreciating that the software industry is clearly demarcated based on Size. 6.6 In accepting companies like Infosys Limited and Wipro Limited as comparable companies even though the sales of Infosys and Wipro are driven based on brand developed by them. In doing .....

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are Solution Limited which are functionally not comparable to the Appellant's business. 6.8 In accepting Tata Elxsi Limited as a comparable company even though the company in its reply to the learned TPO under section 133(6) had mentioned that the company provides product design services, which is functionally not comparable to the Appellant's business. 6.9 In accepting companies such as Celestial Labs Limited, Flextronics Software Systems Limited and Softsol India Limited which are func .....

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ra Solutions Limited, Sasken Communications Technologies Limited, Wipro Limited and R Systems International Limited without taking into consideration the peculiar economic circumstances surrounding their operations during the year under review; 6.12 In accepting companies having Related Party Transactions exceeding 10% such as Soft801 India Limited arid Infosys limited. In doing so the learned AO has disregarded the Delhi IT A T ruling in case of Sony India Pvt. Ltd. (reference ITA No.1189/Del/2 .....

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, Prithvi Information Solutions Limited, Silverline Technologies Limited, Zylog Systems Limited and V JIL Consulting Limited. I 6.15 In not maintaining consistency in applying the filters of rejecting companies with abnormal fluctuating margin, diminishing revenue/ persistent losses for the period under consideration, companies with peculiar economic circumstances, companies with different financial year ending, companies for which in database/ public domain and companies with related party 6.16 .....

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of multiple year data, and ought to have accepted the use of contemporaneous data due to non-availability of current year data in the public domain at the time of preparing the documentation. ., 11. Denial of benefit under section 10A of the Act a. The learned AO erred in not allowing tax benefit under section lOA amounting to Rs. 19,82-1,474/- b. The learned AO has failed to appreciate that the Appellant is eligible for deduction under section lOA of the Act since the undertaking of the Appell .....

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earned AO has erred in concluding that the undertaking has been formed by the splitting up or the reconstruction of a business already in existence. f. The learned AO has erred in concluding that the undertaking of the Company has been formed out of plant and machinery previously used. g. The learned AO erred in not relying. on the decision of the Honorable Income Tax Appellate Tribunal, Bangalore in the Appellant's own case for AY 2004-05 vide order dated 10 August 20 I 0, wherein the Honou .....

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is consequential in nature. The appellant craves leave to add, alter and modify the above grounds during the course of the appeal. For the above and any other grounds which may be raised at the time, of hearing, it is prayed that the order of the Assessing officer b set aside . 5. Ground No.(i to vii) pertain to TP adjustment. In the course of hearing, learned AR of the assessee submitted that the assessee raised the objection against 13 companies selected by the TPO, out of the set of comparabl .....

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arity/dissimilarity of these companies are discussed one by one as under; Avani Cimcon : The learned AR of the assessee submitted that this company is engaged in the development of software products as well as software services. However, there are no segmental details available in the financial account of this company. Therefore, this company cannot be considered as a good comparable of the assessee company which is purely a software development company and not in software product. In support of .....

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that this company fulfills all filters and category of software solutions and software development company. 7. We have considered the rival submissions as well as the relevant material on record. At the outset we note that in the case of 3DPLM Software Solutions Ltd.,(Supra) the co-ordinate bench of this Tribunal had the occasion to examine the functional comparability of this company with that of a software development company. The Tribunal also relied upon the decisions of the co-ordinate benc .....

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period under consideration (i.e. Assessment Year 2008-09). In support of this contention, it was submitted that :- (i) The extract from the Website of the company clearly indicates that it is primarily engaged in development of software products. The extract mentions that this company offers customised solutions and services in different areas; (ii) The Website of this company evidences that this company develops and sells customizable software solutions like DX Change, CARMA, etc. . 7.1 Thus, i .....

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as included this company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act. In these circumstances, it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables. Non-furnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection o .....

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cial decision cited above, including the assessee s own case for AY: 2007-08, the assessee has brought on record evidence that this company is functionally dis-similar and different from eh assessee and hence it is not comparable. Therefore, the finding excluding it from the list of comparables rendered in the immediately preceding year is applicable in this year also. Since the functional profirs and other parameters by this company have not undergone any change during the year under considerat .....

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ude this company from the list of comparables. 8. Bodhtree Ltd: The learned AR of the assessee submitted that this company is in the business of software products and engaged in providing open and end to end as well as software consultancy and design, development and software. He has referred and relied upon the decisions of the co-ordinate bench of this Tribunal in case of M/s CISCO Systems India Pvt. Ltd., dated 14-08-2014 in ITA No.271(B)/2014 and submitted that this company was found to be n .....

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that in the list of comparables chosen by the assessee, this company .was also included by the assessee. The assessee, however, submits before us that later on it came to the assessee s notice that this company is not being considered as a comparable company in the case of companies rendering software development services. In this regard, the learned counsel for the assessee has brought to our notice the decision of the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. v. I .....

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The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid decision of the Mumbai Bench of the Tribunal, we hold that Bodhtree Consulting Ltd. cannot be re .....

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ables. 9. Celestial Labs Ltd., The learned AR of the assessee submitted that this company is engaged in the product development in the field of biotech and pharmaceuticals etc. This company has also incurred R&D expenditure which is morethan 3% of the sales. Therefore, this company cannot be treated as functionally similar to the assessee for the purpose of determining the ALP. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal in case of .....

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Software Solutions Ltd (Supra), in para-9.4.1 & 9.4.2 as under; 9.4.1 We have heard both the parties and perused and carefully considered the material on record.While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an assumption that it would continue to be applicable for this year as well, the same parity of reasoning is applicable to the TPO as well who seems to have selected this company a .....

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ter (supra), the assessee has brought on record substantial factual evidence to establish that this company is functionally dis-similar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year also. We agree with the submissions of the assessee that this company is functionally different from the assessee. It has also been so held by .....

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r 2007-08 in ITA No.845/Bang/2011 and Triology E-Business Software India Pvt. Ltd. in ITA No.1054/Bang/2011, we hold that this company ought to be omitted form the list of comparables. The A.O./TPO are accordingly directed. Following the decision of the co-ordinate bench of this Tribunal(Supra), we direct the TPO/AO to exclude this company from the list of comparables. 10. E-Zest Solutions Ltd. The learned AR of the assessee has pointed out that this company is engaged in the business of consult .....

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arned AR relied upon the order of the authorities below and submitted that this company is mainly in the business of software development and therefore, it is functionally comparable. 10.2 Having considered the rival submissions as well as relevant material on record, at the outset, we note that the functional comparability of this company has been examined by the co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra) in para-14.4 as under; 14.4 We have heard the riva .....

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. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd. Supra) that KPO services are not comparable to software development services and are therefore not comparable. Fol .....

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s company cannot be considered as good comparables of the assessee because this company own intangibles apart from the industry leader in the field. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal in the case of M/s Cisco Systems (Ind.) Pvt.Ltd. 11.1 On the other hand, learned DR has relied upon the orders of the authorities below and submitted that this company is engaged in the same business that of the assessee and therefore, it is a goo .....

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mple software development services, as this company owns significant intangibles and has huge revenues from software products. In this regard, we find that the Bangalore Bench of the Tribunal in the case of M/s. TDPLM Software Solutions Ltd. v. DCIT, ITA No.1303/Bang/2012, by order dated 28.11.2013 with regard to this comparable has held as follows:- 11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the compan .....

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the Annual Report of this company to submit that this company commands substantial brand value, owns intellectual property rights and is a market leader in software development activities, whereas the assessee is merely a software service provider operating its business in India and does not possess either any brand value or own any intangible or intellectual property rights (IPRs). It was also submitted by the learned Authorised Representative that :- (i) the co-ordinate bench of this Tribunal .....

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Bench in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856 (Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and market leader assuming all risks leading to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such reve .....

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see, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assesse .....

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enues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. The decision rendered as aforesaid pertains to A.Y. 2008- 09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstance .....

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t of software and software products. This company is also engaged in the provision of training services and software services. 12.1 The learned AR thus, submitted that this company is functionally not comparable with the business of the assessee. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra) as well as in the case of Cisco Systems India Pvt. Ltd., (Supra). 12.2 On the other hand, learned DR .....

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td.,(Supra) the relevant finding of the Tribunal in case of Cisco Systems (Supra) in para-26.3 as under; 26.3 KALS Information Systems Ltd.:- As far as this company is concerned, it is not in dispute before us that this company has been considered as not comparable to a pure software development services company by the Bangalore Bench of the Tribunal in the case of M/s. Trilogy e-business Software India Pvt. Ltd. (supra). The following were the relevant observations of the Tribunal:- (d) KALS In .....

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re the salary cost filter test fails in this case. Reference was made to the Pune Bench Tribunal s decision of the ITAT in the case of Bindview India Private Limited Vs. DCI, ITA No. ITA No 1386/PN/1O wherein KALS as comparable was rejected for AY 2006-07 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 ha .....

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hat 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. 47. We have given a careful consideration to the submission made on behalf of the Assessee. We find t .....

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ftware products and not purely or mainly software development service provider. We therefore accept the plea of the Assessee that this company is not comparable. Following the aforesaid decision of the Tribunal, we hold that KALS Information Systems Ltd. should not be regarded as a comparable . Following the decision of the co-ordinate bench we direct the AO/TPO to exclude this company from the list of comparables. 13. Persistent Systems Ltd: The learned AR of the assessee submitted that this co .....

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nt material on record. As pointed out by the learned AR of the assessee that the functional comparability of the company has been examined by the coordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd.,(Supra) inpara-17.13 as under; 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design service .....

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ed from the set of comparables for the year under consideration. It is ordered accordingly. 13.3 It is clear from the finding of this Tribunal that this company is engaged in the product developing and product design services which is similar with the software development services provided by the assessee. Accordingly, following the decision of the co-ordinate bench of this Tribunal (Supra) we direct the TPO/AO to exclude this company from the list of comparables. 14. Quintegra Solutions Limited .....

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olutions Ltd.(Supra). 14.1 On the other hand, learned DR relied upon the orders of the authorities below. 14.2 Having considered the rival submissions and relevant material on record, we note that the co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra), has examined the functional profile of this company inpra-18.3.1 to18.3.3 as under; 18.3.1 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details .....

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co-ordinate bench of this Tribunal in thecase of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010 dt.9.11.2012) has held that if a company possesses or owns intangibles or IPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted from the list of comparables, as in the case on hand. 18.3.2 We also find from the Annual Report of Quintegra Solutions Ltd. that there have been acquisitions made by it in the period under consideration. .....

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s and owns its own intangibles unlike the assessee in the case on hand who is a software service provider. 14.3 Thus, it is clear from the finding of this Tribunal that this company is engaged in the product engineering services and also owns intangible/intellectual property rights. Following the finding of the coordinate of this Tribunal (Supra) we direct the AO/TPO to exclude this company from the list of comparables. 15. Tata Elxsi Ltd; The learned AR of the assessee has submitted that softwa .....

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upon the orders of the authorities below and submitted that TPO has considered the segmental data of this company pertaining to software development services therefore, this company is a good comparables. 15.2 We have considered the rival submissions as well also relevant material on record. We note that the functional comparability has been considered and decided by the co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra) as well as in case of Cisco System (Ind.) P .....

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I. UNREASONABLE COMPARABILITY CRITERIA : 19. The learned Chartered Accountant pleaded that out of the six comparables shortlisted above as comparables based on the turnover filter, the following two companies, namely (i) Tata Elxsi Ltd; and (ii) M/s. Flextronics Software Systems Ltd., deserve to be eliminated for the following reasons : (i) Tata Elxsi Ltd., : The company operates in the segments of software development services which comprises of embedded product design services, industrial desi .....

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he list of comparables. (ii) Flextronics Software Systems Ltd. : The learned TPO has considered this company as a comparable based on 133(6) reply wherein this company reflected its software development services revenues to be more than 75% of the "software products and services" segment revenues. Flextronics has a hybrid revenue model and hence should be rejected as functionally different. Based on the information provided under "Revenue recognition" in its annual report, it .....

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t would be inappropriate to compare the business operations of the assessee with that of a company following hybrid business model comprising of royalty income as well as regular software services income, for which revenue break-up is not available. He finally submitted that this was a good reason to exclude this company also from the list of comparables. 20. On the other hand, the learned DR supported the order of the lower authorities regarding the inclusion of Tata Elxsi and Flextronics Softw .....

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ware development. Thus this segment is into software development services. 3.The contribution of the embedded services segment is to the tune of ₹ 230 crores in the total segment revenue of ₹ 263 crores. Even if we consider the other two sub-segments pertain to IT enabled services, the 87.45% (›75%) of the segment's revenues is from software development services. 4.This segment qualifies all the filters applied by the TPO." Regarding Flextronics Software Systems, the .....

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ing to it. How the company is functionally similar in the earlier FY 2005-06 but the same is not functionally similar for the subsequent FY 2006-07 even when no facts have been changed from the preceding year. Thus the taxpayer is arguing against this comparable as the company was not considered as a comparable by the taxpayer for the present FY 2006-07." 21. We have heard the rival submissions and considered the facts and materials on record. After considering the submissions, we find that .....

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Thirdware Solutions Ltd: The learned AR of the assessee has submitted that this company is engaged in the software development products as well as software development. However, no segmental information is available on this company. Further this company acquired intangible assets and derived revenue based on sales of licences. In support of his contention, he has relied upon the orders of the co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra) and submitted that t .....

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ons and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications Pvt. Ltd. (supra) has .....

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-ordinate bench, we direct the AO/TPO to exclude this from the list of comparables. 17. Wipro Ltd: The learned AR of the assessee submitted that this company is a industry leader and also owns tangibles. He has further submitted that this company is engaged in product development and services. However, the segmental information is not available. He has pointed out that there is a amalgamation during the year and the software service revenue to the sales is less than 75%. He has relied upon the d .....

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rability of this company in para-12.4.1 and 12.4.2 as under; 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have a .....

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ts and several pending applications for grant of patents. In this regard, the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010) has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the coordinate ben .....

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tangibles cannot be compared to low risk captive services provider. Following the finding of the co-ordinate bench of this Tribunal, we direct the AO/TPO to exclude this company from the list of comparables. 18. Softsol India Ltd: The learned AR of the assessee submitted that this company is engaged in the software development services and also having related party transactions of more than 15%. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribun .....

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he comparable cases. 18.2 We have considered the rival submissions as well as relevant material on record. The learned AR of the assessee has heavily relied upon the order of this co-ordinate bench of this Tribunal in case of 3DPLM Software Solutions Ltd (Supra) wherein the Tribunal has excluded this company on the ground of related party transaction in excess of 15% as it was considered in the case of 24/7 Customer.com Pvt.Ltd. The relevant finding of the Tribunal are in para-19.3 as under; 19. .....

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n record also indicates that RPT is 18.3%, following the afore cited decisions of the co-ordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand . 18.3 Since the functional comparability has not been examined by the Tribunal in the case of 3DPLM Software Solutions Ltd., (Supra) and this company was directed to be excluded only on the ground of related party transaction. It is pertinent to note that the Tribunal in seri .....

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arty transactions can be fixed at a lower level to say 10% to 15% as against the case where number of comparables are very few, the tolerance range can be relaxed upto 25%. This view of varying the range of RPT percentage has been considered by this Tribunal in number of cases depending upon the peculiar facts of each case. Thus, if the filter of RPT at 15% is applied in a particular comparable then, this filter should also applied to all other comparables companies. The assessee has also disput .....

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we set aside the functional comparability and application of the RPT filter to the record of the TPO. Needless to say the assessee be given an appropriate opportunity of hearing. 18.4 We make it clear that the RPT filter if any is applied in this case, then, the same would be applicable in all the comparable companies to be considered for the purpose of determining the ALP. 19. Lucid Software and Mindtree: Though, these two companies were selected by the assessee itself and also accepted by the .....

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are subsequent findings of this Tribunal on the functional comparability of these companies. Thus, the learned AR has submitted that these two companies should be excluded from the list of comparables. In support of his contention, he has relied upon the decision of the coordinate benches of this Tribunal in case of 3DPLM Software Solutions Ltd.,(Supra) as well as in case of Cisco Systems (Ind.) Pvt. Ltd (Supra) and submitted that the functional comparability of these two companies have been exa .....

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he other hand, learned DR submitted that the assessee did not raise any objection regarding the functional comparability of these two companies either before the TPO or before the DRP. Then, he assessee cannot be allowed to raise this objections at this stage. He has further contended that the facts relevant to the comparability of functions have not been examined by the TPO or by the DRP. Therefore,the facts which has been contended now were not raised before the authorities below and therefore .....

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e comparables of this company, whereas in case of NetHawk Networks India Pvt.Ltd., it was rejected as comparable. 19.5 It is pertinent to note that in the case of NetHawk Networks India Pvt. Ltd (Supra) the functional profile of the company per se was not examined by the Tribunal but, the Tribunal has followed the decision in case of Wills Processing Services (I)Pvt. Ltd. The relevant part of the finding was also reproduced which suggests that the TP analysis of the company was analysed in the s .....

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Bodhtree Consultancy Ltd. In the absence of relevant facts and record, we are not in a position to give any finding regarding the comparability of this company. Therefore, a lapse on the part of TPO in some other case cannot be a ground of rejection of this company in the present case. Accordingly, in the facts and circumstances of the case, we remit this issue to the record of the TPO/AO to re-examine the functional comparability of this company by verifying the relevant facts. 20. As regards t .....

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of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A No.845/Bang/2011), LG Soft India Pvt. Ltd. (supra), CSR India Pvt. Ltd. (supra); the ITAT, Mumbai Bench in the case of Telecordia Technologies India Pvt. Ltd. (supra) and the Delhi ITAT in the case of Transwitch India Pvt. Ltd. (supra) have held, that since this company, is engaged in the software product development and not softwa .....

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decisions of the co-ordinate benches of this Tribunal and of the ITAT, Mumbai and Delhi Benches (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand. 20.1 Thus, it is clear from the examination of the fact that this company was found to be functionally not comparable with the software development service provider company. Accordingly, following the order of the co-ordinate bench of this Tribunal(Supra), we direct the .....

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se of selecting the suitable comparables apart from the comparables which are accepted by both the parties in the present of comparables. 21. Ground no.II is regarding the denial of deduction u/s 10A. 21.1 We have heard the learned AR as well as the learned DR and considered the relevant material on record. At the outset, we note that this issue has been considered and examined by this Tribunal in assessee s own case for the assessment year 2004-05 in ITA No.616/Bang/2009, by order dated 10-08-2 .....

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u/s 154 and pursuant to the same, further refund of ₹ 74,465/- was granted. Thereafter, proceedings u/s 143(3) were initiated. During the course of 143(3) proceedings, the AO observed from the appendix filed along with the return of income for the assessment year 2004-05, that the assessee-company has acquired from GE India Technology Centre, the fixed assets, employees customers, liabilities, obligations and others in all consulting an undertaking and has continued the business of softwar .....

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onditions of sec.10A(2)(1)(b), 10A(2)(ii) and 10A(2)(iii) and therefore, the assessee is not eligible for deduction u/s 10A(2)(iii) and therefore, the assessee is not eligible for deduction u/s 10A of the Act. He, however, considered the assessee s alternative claim of deduction u/s 80HHEE of the Act. Aggrieved, the assesee preferred an appeal before the CIT(A) who allowed the same holding that the undertaking has existed in the same shape and form and has carried on the same business both befor .....

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y.CIT Vs M/s L.G Soft India Pvt.Ltd in ITA Nos.623 & 847/Bang/2010 dated 19-05-2010 wherein it has been held that where an undertaking existed in the same place, form and substance and did carry on the same business before and after the change in the legal character of the form of organization, the assessee is eligible for deduction u/s 10A of the Act. He also placed reliance upon the decision of the Calcutta High Court in the case of CIT Vs P.K.Engg & Forging (P) Ltd, reported in 87 Tax .....

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