TMI Blog2017 (2) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding M/s. Flextronics Ltd, iGate. Global Solutions Ltd., Infosys Technologies Ltd., Mindtree Ltd., Persistent Systems Ltd., Sasken Communication Technologies Ltd., Tata Elxsi Ltd. and Wipro Ltd. as com parables. 2.The learned CIT(A), in the facts and circumstances of the case, erred in excluding the comparable company M/s. Celestial Biolabs Ltd. on the basis of high profit margin. 3.The Ld. CIT (A) erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 4. The Ld. CIT(A) erre1 in not appreciating that the different year ending filter applied by the TPO is necessary to exclude companies which do not have the same or comparable financial cycle as the tested party. 5. The Ld. CIT(A) erred, in rejecting the employee cost filter applied by the TPO to select companies which are predominantly into software development services and thereby including !MIs Indus Networks ltd as a comparable. 6. The learned CIT(A), i~ the facts and circumstances of the case, erred in holding that M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored. 18. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal. . 3. Similarly, the grounds raised by the assessee in its C.O. are as under; 1. That the learned CIT(A) erred in upholding the rejection of the Respondent's TP documentation on the basis that the data used in the computation of the arm's length price was not reliable. 2. That the learned CIT(A) erred in upholding the learned TPO's approach of using data as at the time of assessment proceedings, instead of that available as on the date of preparing the TP documentation for comparable companies while determining the arm's length price, ignoring the fact that this data was not available to the Respondent at the time of complying with the TP documentation requirements. 3. That the learned CIT(A) erred in upholding the learned TPO's approach of disregarding application of multiple year/prior year data as used by the Respondent in the TP documentation and holding that current year (i.e. Financial Year 2007-08) data for companies should be used for comparability. 4.That the learned CIT(A) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Tech Ltd, Wipro Limited (Seg) and Tata Elxi Limited) fail the test of comparability, even apart from having a turnover ₹ 200 crores and thus not comparable to the Respondent in respect of its software development service services. 13. That the learned CITCA) erred in rejecting M/s Computech International Limited on the ground that it had a negative operating margin. 14. That the learned CIT(A) has erred in upholding the learned TPO's approach of not considering the one- time adjustment made under AS-IS with respect to valuation of leave encashment and long term service benefit in arriving at the operating profit margin of the Respondent. 15. That the learned CIT(A) erred in upholding the learned TPO's approach of not considering the recovery of payment of FBT made on behalf of the AEs in arriving at the operating margin of the Respondent. 16. That the contention of the learned AO is bad in law and on facts while stating that the deletion of the addition on account of adjustments in arm s length price of the international transactions are not base on correct facts and circumstances and established principals of law and procedures in this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfy the turnover filter of 1/10th of turnover of the assessee company. 7. We have considered the rival submissions and we examine various comparables one by one in the light of the chart submitted by ld. AR of the assessee. 8. The first comparable as per this chart is M/s Avani Cimcon Technologies. The turnover of this company is ₹ 2.93 Crores and the turnover of the assessee company is ₹ 90.00 Crores approximately and therefore, the turnover of this company is less than 1/10th of the turnover of the assessee company. Hence, by applying this turnover filter of 1/10th or 10 times of the turnover of the assessee company, this company is to be excluded from the list of final comparables. We uphold the order of the ld. CIT(A) regarding this comparable. 9. The second comparable is M/s Bodhtree Consulting Ltd. This company was excluded by the ld. CIT(A) on this basis that services provided are in the nature of ITES and no break-up of segmental data is available and also for this reason that this is functionally different and we find that exclusion of this company is squarely covered in favour of the assessee by the Tribunal order rendered in the case of GXS India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Infosys Ltd. 15. The next comparable as per the chart is M/s Kals Information Systems Ltd.(Seg.). The turnover of this company is ₹ 2.05 Crores and therefore, this company has to be excluded because the turnover of this company is less than 1/10th of the assessee s turnover. Therefore, we decline to interfere with the order of the ld. CIT(A) regarding exclusion of this comparable. 16. The Ninth comparable as the chart is M/s LGS Global Ltd. this comparable was retained by the ld.CIT(A) and we find no reason to interfere with the order of the ld. CIT(A) regarding this comparable. 17. The tenth comparable as per the chart is M/s Mindtree Ltd.(Seg.). The ld. AR of the assessee fairly conceded that this company has to be included in the final list of comparable because this company was excluded by the ld.CIT(A) by applying turnover filter of ₹ 200 Crores. But if we apply the turnover filter of 10 times of the turnover of the assessee company, this company is a good comparable. Accordingly, we reverse the order of the ld. CIT(A) regarding exclusion of this company and direct the TPO/AO to include this company in the list of final comparables. 18. The eleventh c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Comparable no.18 in the chart is M/s Wipro Ltd( Seg.) and this company has to be excluded as per the same Tribunal order rendered in the case of M/s GXS (Supra) and accordingly, regarding exclusion of this company also, we decline to interfere with the order of the ld,. CIT(A). 24. Comparable no.19 in the chart is M/s Softsol India Ltd. As per the Tribunal order rendered in the case of M/s GXS (Supra), the issue regarding exclusion of this company was restored back to the file of AO/TPO to find out the RPT percentage of this company which is claimed to be 18.38% and if it is found that the RPT percentage is morethan15% then this comparable should be excluded by applying the RPT filter. Respectfully following this Tribunal order, in the present case also, we restore the matter back to the file of the AO/TPO to find out the RPT percentage of this company with the direction that if it is found that RPT percentage of this company is more than 15% then this company should be excluded from the list of final comparables. If the same is less than 15% then it should remain in the list of final comparables. 25. The comparable no.20 in the chart is M/s Lucid Software Ltd. This company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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