TMI Blog2015 (4) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... ef, are that the assessee is a company engaged in the business of embroidery software designing and document creation. It filed its return of income on 31-10-2007 disclosing NIL income. During the course of assessment proceedings, the AO noted that the assessee has entered into international transactions with the related parties/Associated Enterprises, the details of which are as under: Sr.No. Description of transaction Amount (Rs.) Method used 1 Provisions of Digitizing Services 11,48,73,761 TNMM 2 Provision for Data Conversion/Creation Service 19,05,53,874 TNMM 3 Import of Capital goods 0 4 Import of consumables 1,18,265 TNMM 5 Receipt of loan 1,10,88,000 TNMM 6 Repayment of loan 6,30,709 TNMM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15.48% 5 Vama Industries Limited 8.88% Grand Average 9.64% AEIPL 14.00% The assessee accordingly submitted that the international transaction of providing of services is at arm s length. However, the TPO in the order worked out profit level indicator of the assessee company at 7.41% as against the PLI of comparable companies at 14.78%, the details of which are as under : Sr.No. Company Operating Margin OP/OC) 1 Ace Software Exports Ltd., (-) 6.79% 2 C.S. Software Enterprise Limited 22.13% 3 Genesys International Corporation Ltd., 13.35% 4 Vama Industries Limited 9.18% 5 K L G Systel Ltd. 21.24% 6 Bodhtree Consulting Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) directed the AO to exclude M/s. Bodhtree Consulting Ltd. from the list of comparables. While doing so, he observed that the various parts of the directors report as well as other references in the annual report make it clear that M/s. Bodhtree Consulting Ltd. is into software development and therefore this company cannot be treated as comparable with the assessee company which renders ITES. 9. Aggrieved with such order of the CIT(A) the revenue is in appeal before us with the following grounds : 1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner of Income-tax (Appeals) grossly erred in allowing the assessee's appeal instead of confirming the Assessing Officer's order. 3. The learned Commissioner of Income-tax (Appeals) grossly erred in directing to exclude M/s. Bodhtree Consulting Limited from the set of six comparables selected by the Transfer Pricing Officer by holding that the said company is engaged in software development. 4. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that out of the six comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr.No. Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 A Operating Revenue (OR) 42,647,090 38,685,845 53,189,165 103,528,905 103,665,824 B Year-on-year variation in the OR -9.29% 37.49% 94.64% 0.13% C Operating Cost(OC) 35,399,302 30,985,406 46,709,532 57,294,338 85,803,159 D Year-on-year variation in the OC -12.47% 50.75% 22.66% 49.76% E Operating Profit (OP) 7,247,788 7,700,439 6,479,633 46,234,567 17,86 2,665 F Year-on-year variation in the OP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Relying on various decisions the Tribunal accepted the contention of the assessee that M/s. Bodhtree Consulting Ltd. should be excluded from the list of comparables. He accordingly submitted that the order of the Ld.CIT(A) be upheld. 14. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute in the grounds raised by the revenue is regarding the exclusion of M/s. Bodhtree Consulting Ltd. as a comparable which has been included by the TPO as a comparable. We find the Ld.CIT(A) directed the AO to exclude the same from the list of comparables on the ground that M/s. Bodhtree Consulting Ltd. is engaged into software development whereas the assessee company renders IT enabled services. The submission of the Ld. Counsel for the assessee that from A.Y. 2006-07 till date M/s. Bodhtree Consulting Ltd. was never considered as comparable except for the impugned assessment year could not be controverted by the Ld. Departmental Representative. Therefore, we find merit in the submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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