TMI Blog2017 (9) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Act dated 30.01.2015. The assessee has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Learned AO/Hon'ble Dispute Resolution Panel ( DRP ) have erred in making an addition of ₹ 4,80,48,856 to the provision of software development services. 2. On the facts and in the circumstances of the case and in law, the Learned AO and Hon'ble DRP have erred in: i. rejecting the Transfer Pricing ( TP ) documentation which was maintained in good faith and with due diligence; ii. rejecting the search process followed by the Appellant in the TP documentation and carrying out a fresh comparability analysis for determining the arm's length price; iii. using the data available at the t*ime of assessment proceedings instead of those available as on the date of preparing the TP documentation; iv. rejecting multiple year data and using data for the financial year 2009-10 alone; v. including companies in the comparability analysis which are different from the Appellant in functions, asset base and risk profile; vi. not considering companies similar to the Appellant in fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent analysis by aggregating all the transactions under TNMM and particularly on the provisions of software development services, being the pre-dominant activity. Thereafter, the TPO discussed about the various filters adopted by the assessee and rejected the some of the filters and has adopted additional filters. The TPO observed that the assessee has adopted sixteen companies as comparables out of which the TPO accepted only three companies, i.e., Mindtree Ltd, Sasken Communication Technologies Ltd and Thinksoft Global Services Ltd. Thereafter, including these three companies, the TPO suggested 19 companies as final comparables to the assessee. After discussing the acceptability of the objections of the assessee on the filters and the other factors such as working capital adjustment, risk adjustment etc., the TPO discussed on the assessee s specific objections on each of the comparables. Finally, the TPO adopted 18 companies as comparable to the assessee and arrived at the average margin of the comparables at 22.69% and after giving the working capital adjustment of 2.33%, he arrived at the adjustment to be made u/s 92CA of the Act at ₹ 5,28,16,043. 8. In addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under challenge before us, we find that the assessee s objection before the TPO against Persistent Systems Solutions Ltd, has been that this company is functionally different as it is engaged in rendering outsource product services development as against software development services and that this company is also having income from sale of software services and products. It has also been submitted that during the years, the said company had also acquired the assets in Paxonic Inc, and therefore, it should not be taken as a comparable. The TPO however, rejected the assessee s contention by holding that the said company is providing software support services to the product developing companies rather than developing a product on its own and therefore, assessee s objections are not sustainable. The DRP has confirmed comparability of this company to the assessee. 14. The learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below and has drawn our particular attention to the page Nos 523, 524 572 and 615 of the paper book filed by the assessee before us to demonstrate that the said company s outsource software product develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the said case is applicable to the facts before us. The Tribunal at Para 16 of its order has considered the decision of another Coordinate Bench in the case of Ciena India Pvt. Ltd. v. DCIT in ITA Nos. 2948, 3324/Del/2013 to hold that Persistent Systems Solutions Ltd is not comparable to the assessee therein and this decision of the Tribunal has been confirmed by the Hon'ble Delhi High Court in ITA No.279/2016. Respectfully following the said decision, we direct that this company should be deleted from the final list of comparables. For the sake of ready reference, the Tribunal s order at para 16 is reproduced hereunder: 16. We have considered the rival submission and perused the material on record. A co-ordinate Bench of the Delhi Tribunal in the case of Ciena India Pvt. Ltd. v. DCIT in ITA Nos. 2948, 3324/Del/2013, has held as under: 9.2. We have heard the rival submissions and perused the relevant material on record. It can be seen from the information supplied by this company u/s 133(6) of the Act, a part of which has been reproduced in the TPO's order, that this company 'has developed a few of its own products in the area of identity manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the comparability of E-Infochips Bangalore Ltd to the assessee is concerned, the assessee s objection was that this company is having two different segments i.e. software development and I.T. enabled services and that the segmental information is not available. The TPO however, rejected this contention and held that the said company has reported its income to be derived from software services only. 18. The learned Counsel for the assessee submitted that the said company, in its annual report (at Para 16) has reported that it is primarily engaged in software development and I.T. enabled services which is considered as the only business segment as per A.S. 17. Thus, according to the learned Counsel for the assessee, the said company is also engaged in I.T. enabled services and the reporting is of aggregate of both the segments and hence it should be excluded from the final list of comparable. 19. The learned DR, however, relied upon the decision of the Hon'ble Gujarat High Court in the case of Pr.CIT vs. Allscripts (India) (P) Ltd reported in (2016) 72 Taxmann.com 305 (Guj.) wherein for the very same A.Y, the Hon'ble Gujarat High Court has held that the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India (P) Ltd vs. ITO in ITA No.1810/Hyd/2012. 23. The learned DR, however, supported the orders of the authorities below and submitted that E-Zest Solutions Ltd is not a product developing company but it outsources product development services and the fact that it does not have intangible assets proves that it is not a product development company. As regards the decisions relied upon by the assessee, the learned DR submitted that there is no specific case for the A.Y 2010-11 wherein E-Zest Solutions Ltd has been directed to be excluded. 24. Having regard to the rival contentions and the material on record, we find that the said company is offering services in product development life cycle including product design and development and product feature enhancement, product platform migration, software product testing product maintenance and support, product release and license management, SAAS/SOA services and Web 2.0 services. The assessee has not filed any document to show that the said company owns intangible assets or that it has any products in its inventory. Therefore, we are unable to accept the assessee s contention that E-Zest Solutions Ltd is a product development c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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