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2015 (11) TMI 1579 - ITAT BANGALORE

2015 (11) TMI 1579 - ITAT BANGALORE - TMI - Eligible deduction u/s.10A - Held that:- We find that CIT (A) had relied on the decision of jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd (2011 (8) TMI 782 - KARNATAKA HIGH COURT ), wherein it was held unequivocally by their Lordships that items excluded from export turnover had to be excluded from the total turnover also while working out the eligible deduction. - TPA - selection of comparable - Held that:- Infosys Ltd could not b .....

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ftware development services to its principal abroad and such services were provided by it through projects and assignments contracted to it by their principals abroad. Thus, according to us, DRP was justified in directing exclusion of persistent Systems and Solutions Ltd, considering the functional profile of the assessee as dissimilar from that of Persistent Systems and Solutions Ltd. - ITA No. 137/Bang/2015 and Cross objection No.109/Bang/2015 - Dated:- 10-11-2015 - Shri. Abraham P. George, Ac .....

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e is taken up first for disposal. Revenue has altogether taken six grounds out of which, grounds 1, 5 and 6 are general needing no specific adjudication. 03. Vide grounds 2 and 3, grievance raised by the Revenue is that DRP directed exclusion of expenditure deducted from export turnover, from total turnover also while computing eligible deduction u/s.10A of the Act. We find that CIT (A) had relied on the decision of jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd (349 ITR 98), whe .....

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P directed exclusion of M/s. Infosys Ltd, M/s. ICRA Techno Analytics Ltd, M/s. Kals Information Systems Ltd and M/s. Persistent Systems Ltd from the list of comparables considered by the TPO for analysing the pricing of the international transactions of the assessee with its Associated Enterprises (AE). 05. Ld. DR submitted that assessee was providing contract software development services to its principal at USA, called Ikanos Communications Inc. USA and Ikanos Technology Ltd, Cayman Island. As .....

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certain comparables which had branding expenditure in its profit and loss account. As per the Ld. DR revenue from software products sale of Infosys Ltd was only 4.3% of its total revenues and its R &D expenditure was only 1.26% of its revenues. Relying on the decision of Mumbai Bench of the Tribunal in the case of Capgemini India Pvt. Ltd v. ACIT [(2014) 147 ITD 330], Ld. DR submitted that size of the company had no relevance and there was no correlation between sales volume and profits in .....

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ldwide India P. Ltd, was also into software development services and the Tribunal had considered the comparability of Infosys Ltd, in the said case. 07. We have perused the orders and heard the rival contentions. It is not disputed that Infosys brand has a significant intangible value and it had revenue from software product segment also. Hon ble Delhi High Court in the case of CIT v. Agnity India Technologies P. Ltd [93 DTR 375], while affirming a decision of this Tribunal where it was held tha .....

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opinion of DRP which is consistent not only in Assessee's case but also in the case of M/s. Sumtotal Systems India Pvt. Ltd., (supra), extracted above while considering the exclusion of L&T Infotech Ltd. Since DRP's decision is consistent with the stand taken by the Revenue in other cases and also by the ITAT in a number of cases on reason of turnover, brand equity, functional dissimilarity, we are of the opinion that DRP is correct in excluding the above company from the list of com .....

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providing technology solutions and the services rendered done by it were not different from that of the assessee. As per the Ld. DR, DRP had erroneously held that services segment of the said company comprised of software consultancy, engineering services, web development, web hosting etc., in addition to software development and segmental information was not available. As per the Ld. DR even if segmental information was not readily available, DRP should have directed the AO to obtain such data .....

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e directors report of the said company for F. Y. 2009-10. 10. We have perused the orders and heard the rival contentions. Notes to accounts of ICRA Techno Analytics Ltd forming a part of its audited financial statement of accounts and annual report for year ended 31.03.2010 mentions as under : In the note detailing of the revenue recognition which also form a part of its annual report it has been stated that its revenue stream consisted of software development consultancy, engineering services, .....

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submitted that Kals Information Systems Ltd was a software development services company not a software product development company. As per the ld. DR though the assessee had stated that Kals Information Systems Ltd was a full-fledged product development company, the data which was relied on by the assessee for coming to such conclusion was not available in the annual report. As per the Ld. DR, the said company did not own any software product of its own, but was only providing software developm .....

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urrent assets. Inventory held by Kals Information Systems Ltd came to ₹ 60,47,977/-. We also find that Hyderabad bench in the case of Pegasystems Worldwide India P. Ltd (supra) had held as under at para 10.1 of its order vis-à-vis the comparability of M/s. Kals Information Systems Ltd : 10.1. Assessee s main objection before us is on functionality of the comparable company. As seen from the annual report of 2008-09 and 2009-10 and comparative statement placed by Assessee, the compan .....

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earlier year on functional analysis by ITAT in the case of Planet Online Pvt. Ltd., in ITA No. 464/Hyd/2014 where in it was held that company is engaged in development of software products. Since its annual report states the same facts in this assessment year also, we are of the opinion that the company cannot be selected as a comparable as it was engaged in development of software and software products. Accordingly, Assessee s objections are accepted and AO is directed to exclude the company. .....

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the contentions of the assessee without verifying the data furnished by it. 16. Per contra, Ld. AR submitted that Persistent Systems and Solutions Ltd was rendering outsourced product development services and not any software development as such. According to him, its revenue was from sale of product software development services and segmental results were not available. Relying on the annual report of Persistent Systems and Solutions for F. Y. 2009-10, Ld. AR submitted that it was providing en .....

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However before the DRP assessee had stated that the said company was engaged in outsourced product development services and not into software development services. Annual report of Persistent Systems and Solutions, states as under : It is also mentioned that they were providing out-sourced product development services and significant portion of its revenue was from export of software services as well as products. In the P & L account for the year ending 31.03.2010, revenue from sale of softw .....

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