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M/s. Mindteck (India) Ltd. Versus The Income Tax Officer, Circle 12 (1) , Bangalore.

2015 (11) TMI 1308 - ITAT BANGALORE

Transfer pricing adjustment - adjustment to the Arms’ Length Price (“ALP”) to an international transaction - Held that:- The turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores (as laid down in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT [2011 (8) TMI 952 - ITAT BANGALORE]) . Thus, companies havin .....

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ly not comparable with that of the assessee

Geometric Software Ltd. (Seg.) & Ishir Infotech Ltd.the related party transaction in the case of companies exceeds 15% ( 19.98 % in the case of Geometric Software Ltd. and 21.97% in the case of Ishir Infotech Ltd.) and in view of the decision of the Tribunal in the case of 24 X 7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] followed by this Tribunal in the case of Logica Private Ltd.[2015 (3) TMI 401 - ITAT BANGALORE] wherein i .....

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urpose direct the TPO/AO to examine as to whether there is any change in the profile of the said company so that it can be regarded as comparable with an Assessee rendering software development service such as the Assessee.

Computing deduction under section 10A - Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] we are of the view that it would be just and appropriate t .....

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in this regard before the DRP, the DRP did not consider the claim of the Assessee. We are of the view that it would just and appropriate to direct the AO to verify the claim of the Assessee for set off of current year unabsorbed depreciation against the adjustments made to the business income, if the claim of the Assessee is found to be correct, the AO shall give consequential relief to the Assessee. - IT(TP)A No.1082/Bang/2011 - Dated:- 14-5-2015 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI .....

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, Ground No.1, Ground No.2 & 3 are relating to Transfer Pricing adjustment on account of determination of ALP. Ground No.2.5 to 7 and Ground No.3 in so far as it relates to allowing working capital adjustment was alone pressed for adjudication. Ground No.6 was not pressed for adjudication Ground No.7 with regard to levy of interest u/s.234A & B of the Act is purely consequential. Ground No.8 with regard to initiation of penalty proceedings u/s. 271(1)(( c) of the Act cannot be subject ma .....

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he total income by way of adjustment to the Arms Length Price ( ALP ) to an international transaction carried out by the assessee u/s. 92CA of the Act. At the time of hearing of the appeal it was submitted that the comparable companies chosen by the TPO and the addition made by the AO in the draft assessment order which was confirmed by the DRP are identical to the case decided by the Tribunal in. July Sytstems & Technologies (P) Ltd., Vs. ITO (2014) 33 ITR (TRIB) 643 (ITAT Bang)., 3DPLM Sof .....

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-07 as considered by this Tribunal in the case of M/S.Actiance India Private Limited Vs. The ITO in I.T.(TP)A.No.1295/Bang/2010 order dated 17.10.2014 It was also submitted that the business profile of the Assessee and that of the Assessee and the aforesaid cases are also identical. This submission was found to be correct at the time of hearing. With this background we will now consider the factual basis of the present case and the decision rendered in the case referred to above. 4. The assessee .....

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e transaction of providing software research & development support services by the Assessee to its related party viz., group companies was an international transaction with the Associated Enterprise ( AE ) and therefore the price at which the assessee renders services to its AE has to pass the Arm s Length Price (ALP) test as laid down by section 92C of the Act. 5. In support of the assessee s claim that the price charged by it for services rendered to its AE was at arms length, the assessee .....

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ofit Level Indicator ( PLI ). The PLI of the assessee was arrived at as follows: Operating Revenue Rs.18,58,84,791 Operating Cost Rs.17,68,70,698 Operating Profit Rs.90,14,093 Op.pr/cost% 5.09% 7. The TPO arrived at a final set of 26 comparables. The set of 20 comparables is as follows: Sl. No Name of company OP/TC Turnover Rs. in Crores 1 Accel Transmatic Ltd (Seg.) 21.11% 9.68 2 Avani Cimcon Technologies Ltd 52.59% 3.55 3 Celestial Labs Ltd 58.35% 14.13 4 Datamatics Ltd 1.38% 54.51 5 E-Zest So .....

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0.23% 139.33 17 Mindtree Ltd 16.90% 590.35 18 Persistent Systems Ltd 24.52% 293.75 19 Quintegra Solutions Ltd 12.56% 62.72 20 R S Software (India) Ltd 13.47% 101.04 21 R Systems International Ltd (Seg.) 15.07% 112.01 22 S I P Technologies & Exports Ltd 13.90% 3.80 23 Sasken Communication Technologies Ltd (Seg.) 22.16% 343.57 24 Tata Elxsi Ltd (Seg.) 26.51% 262.58 25 Thirdware Solutions Ltd 25.12% 36.08 26 Wipro Ltd (Seg.) 33.65% 961.09 Arithmetic Mean 25.14% 8. The assessee raised various ob .....

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ure B For details of computation of PLI of the comparables). Based on this, the arms length price of the software development services rendered by the taxpayer to its AE(s) is computed below. It needs to be pointed out that allocation of cost in respect of AE transactions taken in this computation is the same as intimated to the taxpayer vide notice dated 11.6.2010. The taxpayer has not given any comments in this regard. Arms Length mean margin on cost Operating Cost 25.14% ₹ 17,68,70,698 .....

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nsactions ₹ 18,58,84,791 Shortfall being adjustment u/s. 92CA ₹ 3,54,51,200 The above shortfall of Rs.3,54,51,200/- is treated as transfer pricing adjustment u/s 92CA. 9. Against the said adjustment proposed by the TPO which was incorporated in the draft assessment order by the AO, the assessee filed objections before the DRP. The DRP rejected those objections and confirmed the transfer pricing adjustment suggested by the TPO. The adjustment confirmed by the DRP was added to the tota .....

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crores: (1) Flextronics Software Systems Ltd. (2) iGate Global Solutions Ltd. (3) Mindtree Ltd. (4) Persistent Systems Ltd. (5) Sasken Communication Technologies Ltd. (6) Infosys Technologies Ltd. (7) Tata Elxsi Ltd. (8) Wipro Ltd.(seg.) 11. Our attention was drawn to the observations of the Tribunal in the case of Trilogy E-Business Software India Pvt.Ltd. (supra) (ITA No.1338/Bang/2010) for assessment year (07-08) on the application of turnover filter and it was submitted that the aforesaid co .....

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filter of ₹ 1 crore, but has not chosen to apply any upper turnover limit. In this regard, it was submitted by him that under rule 10B(3) to the Income-tax Rules, it was necessary for comparing an uncontrolled transaction with an international transaction that there should not be any difference between the transactions compared or the enterprises entering into such transaction, which are likely to materially affect the price or cost charged or paid or profit arising from such transaction .....

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T Chandigarh Bench in the case of DCIT v. Quark Systems Pvt. Ltd. 38 SOT 207, wherein the Special Bench had laid down that it is improper to proceed on the basis of lower limit of 1 crore turnover with no higher limit on turnover, as the same was not reasonable classification. Several other decisions were referred to in this regard laying down identical proposition. We are not referring to those decisions as the decision of the Special Bench on this aspect would hold the field. Reference was als .....

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the transaction entered into by a ₹ 10 crore company. The two most obvious reasons are the size of the two companies and the relative economies of scale under which they operate. The fact that they operate in the same market may not make them comparable enterprises. The relevant extract is as follows [on Rule 10B(3)]: Clause (i) lays down that if the differences are not material, the transactions would be comparable. These differences could either be with reference to the transaction or wi .....

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₹ 13,149 crores as compared to ₹ 47.47 crores of Assessee). It was submitted that an appropriate turnover range should be applied in selecting comparable uncontrolled companies. 14. Reference was made to the decision of the ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010, wherein relying on Dun and Bradstreet s analysis, the turnover of ₹ 1 crore to ₹ 200 crores was held to be proper. The following relevant .....

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be considered. We agree with the contention of the learned counsel for the assessee that the size matters in business. A big company would be in a position to bargain the price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, the turnover also would come down reducing profit margin. Thus, as held by the various benches of the Tribunal, when companies which arc loss .....

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the turnover filter is very important and the companies having a turnover of ₹ 1.00 crore to 200 crores have to be taken as a particular range and the assessee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study. 15. It was brought to our notice that the above proposition has also been followed by the Honourable Bangalore ITAT in the following cases: 1. .....

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f more than ₹ 200 crores as comparables. In these circumstances, it was submitted by him that the assessee cannot have any grievance in this regard. 17. We have considered the rival submissions. The provisions of the Act and the Rules that are relevant for deciding the issue have to be first seen. Sec.92. of the Act provides that any income arising from an international transaction shall be computed having regard to the arm s length price. Sec.92-B provides that international transaction m .....

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any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. Sec.92- A defines what is an Associated Enterprise. In the present case there is no dispute that the transaction between the Assessee and its AE was an international transaction attracting the provisions of Sec.92 of the Act. Sec.92C provides the manner of computation of Arm s length price in an international transaction and it provi .....

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ctional net margin method; (f) such other method as may be prescribed by the Board. (2) The most appropriate method referred to in subsection (1) shall be applied, for determination of arm s length price, in the manner as may be prescribed: Provided that where more than one price is determined by the most appropriate method, the arm s length price shall be taken to be the arithmetical mean of such prices: Provided further that if the variation between the arm s length price so determined and pri .....

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not been determined in accordance with sub-sections (1) and (2); or (b) any information and document relating to an international transaction have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or (c) the information or data used in computation of the arm s length price is not reliable or correct; or (d) the assessee has failed to furnish, within the specified time, any information or d .....

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section 92C, the arm s length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :- (a)……. to (d)…….. (e) transactional net margin method, by which,- (i) the net profit margin realised by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets emp .....

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comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm s length price in relation to the international trans .....

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e formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition .....

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such differences. (4) The data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into : Provided that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions .....

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by the ld. counsel for the assessee as well as the decisions referred to by the ld. counsel for the assessee clearly lay down the principle that the turnover filter is an important criteria in choosing the comparables. The assessee s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores (as laid down in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010) . Thus, comp .....

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n Communication Technologies Ltd. 343.57 crores (6) Tata Elxsi Ltd. 262.58 crores (7) Wipro Ltd. 961.09 crores. (8) Infosys Technologies Ltd. 131.49 crores.' 13. Respectfully following the aforesaid decision of the Tribunal in the case of Trilogy E-Business Software India Pvt.Ltd. (supra) and Assessee s case for AY 06-07, we hold that the aforesaid companies (listed at S.No.6, 9, 10, 17, 18, 23, 24 and 26 of the final list of comparable companies set out in the chart given para-4 of this ord .....

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ble ITAT Bangalore Bench in the case of Trilogy E-Business Software India Pvt.Ltd. (supra) wherein these companies were held to be not functionally comparable with that of a pure software developer like the Assessee. 15. The following were the relevant observations of the Tribunal on the aforesaid comparable companies in the case of Trilogy E-Business Software India Pvt.Ltd.(supra): (d) KALS Information Systems Ltd. 3. As far as this company is concerned, the contention of the assessee is that t .....

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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 has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pa .....

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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. 4. We have given a careful consideration to the submission made on behalf of the Assessee. We find that the TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act .....

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the Assessee that this company is not comparable. (e) Accel Transmatic Ltd. 48. With regard to this company, the complaint of the assessee is that this company is not a pure software development service company. It is further submitted that in a Mumbai Tribunal Decision of Capgemini India (F) Ltd v Ad. CIT 12 Taxman.com 51, the DRP accepted the contention of the assessee that Accel Transmatic should be rejected as comparable. The relevant observations of DRP as extracted by the ITAT in its orde .....

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elopment (iii) Accel IT Academy (the net stop for engineers)- training services in hardware and networking, enterprise system management, embedded system, VLSI designs, CAD/CAM/BPO (iv) Accel Animation Studies software services for 2D/3D animation, special effect, erection, game asset development. 4.3 On careful perusal of the business activities of Accel Transmatic Ltd. DRP agreed with the assessee that the company was functionally different from the assessee company as it was engaged in the se .....

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omparability 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 .....

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e India Pvt.Ltd. (supra). Respectfully following the decision of the Tribunal referred to above in the case of Trilogy E-Business Software India Pvt.Ltd.(supra), we direct that the following companies be excluded from the list of 26 comparable arrived at by the TPO. a) KALS Information Systems Limited b) Accel Transmission Limited. 17. As far as the comparable chosen by the TPO viz., Megasoft Ltd. in the list of final comparables chosen by the TPO is concerned, this Tribunal in the case of Trilo .....

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ntal margin (Software service segment) in the case of Geometric, Kals Info systems, R Systems, Sasken Communication and Tata Elxsi. Before DRP the Assessee pointed out that the segmental margin of 23.11% alone should be taken for comparability. The DRP has not given any specific finding on the above plea of the Assessee. Perusal of the order of the TPO shows that the TPO relied on information which was given by this company in which this company had explained that it has two divisions viz., BLUE .....

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ed software. The company also explained that 30 to 40% of the product software (software developed) would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, boarding and lodging expense. Based on the above reply, the TPO proceeded to hold that the comparable company was mainly into customization of software products developed (which was akin to software development) internally and that the portion of the revenue from dev .....

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the margin of this company at the entity level. In terms of Rule 10B(3)(b) of the Rules, an uncontrolled transaction shall be comparable to an international transaction if- (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to .....

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f the software service segment be taken for comparability. In view of the above conclusion, we do not wish to go into the question as to whether less than 25% of the revenues of the comparable are from software products and therefore the comparable satisfied TPO s filter of more than 75% of revenues from software development services. 18. In view of the aforesaid decision of the Tribunal, segmental margins in so far as it relates to providing software services by Megasoft alone should be taken f .....

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of Logica Private Ltd. ITA No.1129/Bang/2011 for AY 07-08, wherein it was held as under:- 7.2 Lucid Software Limited It has been submitted before us that this company, besides doing software development services, is also involved in development of software product. The learned AR has tried to distinguish by pointing out that product development expenditure in this case is around 39% of the capital employed by the said company, and, therefore, such a company cannot be considered as tested party. .....

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ich is used for civil engineering structures and the product development expenditure itself is substantial vis-a-vis the capital employed by the said company, this criteria for being taken as comparable party, gets vitiated. For the purpose of comparability analysis, it is essential that the characteristics and the functions are by and large similar as that of the assessee company and T.P. analysis/study can be made with fewest and most reliable adjustment. If a company has employed heavy capita .....

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s length price in the case of the assessee. 20. The facts and circumstances under which the aforesaid company were considered as comparable is identical in the case of the Assessee as well as in the case of Logica Private Ltd., (supra). Respectfully following the decision of the Tribunal referred to above in the case of Logica Pvt.Ltd..(supra), we direct that the company listed as Sl.No.14 of the list of comparable companies chosen by the TPO and listed in para-4 of this order to be excluded fro .....

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nal in the case of 24 X 7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2010, followed by this Tribunal in the case of Logica Private Ltd. (supra) wherein it was held that where the RPT exceeds 15%, such companies should not be taken as comparable companies. Following the said decision, we hold that companies at Sl.Nos. 7 & 11 referred to above of the list of the comparable companies chosen by the TPO be excluded from the list of comparable companies while working out the ALP. 22. As far as comp .....

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t from the assessee. Based on the information available in the company s website, which reveals that this company has developed a software product by name DXchange , it was submitted that this company would have revenue from software product sales apart from rendering of software services and therefore is functionally different from the assessee. It was further submitted that the Mumbai Bench of the Tribunal to the decision in the case of Telcordia Technologies Pvt. Ltd. v. ACIT - ITA No.7821/Mu .....

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d so as to see whether the profit ratio of this company can be taken into consideration for comparing the case that of assessee. In absence of any kind of details provided by the TPO, we are unable to persuade ourselves to include it as comparable party. Learned CIT DR has provided a copy of profit loss account which shows that mainly its earning is from software exports, however, the details of percentage of export of products or services have not been given. We, therefore, reject this company .....

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this company has made unusually high profit during the financial year 06-07. The operating revenues increased 63.03% which indicates that it was an extraordinary year for this company. Even the growth of software industry for the previous year as per NASSCOM was 32%. The growth rate of this company was double the industry average. In view of the above, it was argued that this company ought to have been rejected as a comparable. 41. We have given a careful consideration to the submissions made on .....

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hat it is absolutely a research & development company. In this regard, the following submissions were made:- i. In the Director s Report (page 20 of PB-Il), it is stated that the company has applied for Income Tax concession for in-house R&D centre expenditure at Hyderabad under section 35(2AB) of the Income Tax Act. ii. As per the Notes to Accounts - Schedule 15, under Deferred Revenue Expenditure (page 31 of PB-II), it is mentioned that, Expenditure incurred on research and development .....

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oftware development activities and is not engaged in R&D activities is bad in law. 43. Further reference was also made to the decision of the Mumbai Bench of the Tribunal in the case of Teva Pharma Private Ltd. v. Addl. CIT - ITA No.6623/Mum/2011 (for AY 2007-08) in which the comparability of this company for clinical trial research segment. The relevant extract of discussion regarding this company is as follows: The learned D.R. however drew our attention to page- 389 of the paper book whic .....

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d the IPR by filing the patent. The patent details have been discussed with Patent officials and the response is very favorable. The cloning and purification under wet lab procedures are under progress with our collaborative Institute, Department of Microbiology, Osmania University, Hyderabad. In the industrial biotechnology area, the company has signed the Technology transfer agreement with IMTECH CHANDIGARH (a very reputed CSIR organization) to manufacture and market initially two Enzymes, Alp .....

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is also in the field of research in pharmaceutical products and should be considered as comparable. As rightly submitted by the learned counsel for the Assessee, the discovery is in relation to a software discovery of new drugs. Moreover the company also is owner of the IPR. There is however a reference to development of a molecule to treat cancer using bio-informatics tools for which patenting process was also being pursued. As explained earlier it is a diversified company and therefore cannot .....

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ued that this company is into research in pharmaceutical products. The ITAT concluded that this company is owner of IPR, it has software for discovery of new drugs and has developed molecule to treat cancer. In the ultimate analysis, the ITAT did not consider this company as a comparable in clinical trial segment, for the reason that this company has diverse business. It was submitted that, however, from the above extracts it is clear that this company is not into software development activities .....

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ompany to a notice u/s.133(6) of the Act in which it has said that it is in the business of providing software development services. The Assessee in reply to the proposal of the AO to treat this as a comparable has pointed out that this company provides software products/services as well as bioinformatics services and that the segmental data for each activity is not available and therefore this company should not be treated as comparable. Besides the above, the Assessee has point out to several .....

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mental data was given or not. Besides the above there is no other detail in the TPO s order as to the nature of software development services performed by the Assessee. Celestial labs had come out with a public issue of shares and in that connection issued Draft Red Herring Prospectus (DRHP) in which the business of this company was explained as to clinical research. The TPO wanted to know as to whether the primary business of this company is software development services as indicated in the ann .....

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06-07. We are of the view that in the light of the submissions made by the Assessee and the fact that this company was basically/admittedly in clinical research and manufacture of bio products and other products, there is no clear basis on which the TPO concluded that this company was mainly in the business of providing software development services. We therefore accept the plea of the Assessee that this company ought not to have been considered as comparable. 23. Respectfully following the dec .....

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re Development Service Provider such as the Assessee. In view of the above, the said company is directed to be excluded from the list of comparable companies. 25. As far as comparable at Sl.No.5 of the list of comparable chosen by the TPO listed in the chart given at para-4 of this order viz., E-Zest Solutions Ltd., is concerned, the comparability of the aforesaid company with that of the software service provider was considered by the Bangalore Bench of ITAT in the case of 3DPLM Software Soluti .....

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the information received in response to notice under section 133(6) of the Act, this company is engaged in software development services and satisfies all the filters. 14.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It is submitted by the learned Authorised Representative that this company is engaged in e-Business Consulting Services , consisting of .....

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escriptive information on the business of the company, the assessee places reliance on the details available on the company s website which should be considered while evaluating the company s functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering KPO services ought not to be considered as comparable to software development companies and relied on the decision of the .....

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seen from the record that the TPO has included this company in the list of comparables only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give a finding whether the services performed by this company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software d .....

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in the aforesaid case, we hold that this company, i.e. e-Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. / TPO is accordingly directed. 26. The learned DR however submitted that the comparability of this company with a software development service provider was not objected to by Assessee s who are in similar business in several cases like the case of Telecordia (supra), Logica (supra) and Trilogy E-Business(supra). Acco .....

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ission of the learned DR and are of the view that the first objection raised by him is without any basis. The fact that one Assessee in the software development services sector accepts a company as a comparable does not bar any other Assessee in the same line of business to take a stand that such a company is not comparable. In this regard the important aspect to be noticed is that the Assessees in the cases cited by the learned DR have not raised a plea that the said company is not functionally .....

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y and non-comparability of companies in the matter of determination of ALP is not dependent upon any concession either at the instance of the Assessee or the revenue. At any stage it can be demonstrated that a company chosen as a comparable is in fact not comparable and that which has been accepted as non-comparable is in fact comparable. 28. With regard to the objection of the leaned DR that the functional profile of the company E-Zest Solutions Ltd. in AY 07-08 has to be compared with that in .....

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parable company M/S.Megasoft Ltd., as was directed and held in the case of Trilogy EBusiness Software India Pvt.Ltd. (supra). The ground relating to Transfer pricing are decided accordingly. 30. Ground No.4 raised by the Assessee project the grievance of the Assessee regarding the action of the learned Assessing Officer and Honorable Dispute Resolution Panel excluding expenses incurred on travel expenses in foreign currency and expenses incurred towards communication expenses from export turnove .....

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ssessee has also made an alternate prayer that expenses that are reduced from the export turnover should also be reduced from the total turnover and in this regard has placed reliance on the decision of the Hon ble Karnataka High Court in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn). 31. We have heard the ld. counsel for the assessee and the ld. DR on the issues raised in ground No.4. Taking into consideration the decision rendered by the Hon ble High Court of Karnataka in the case .....

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