TMI Blog2016 (8) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, Magma Design Automation India Private Limited ( Magma India or the Company or the Appellant ) respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 ( Act ) against the order passed by Assistant Commissioner of Income-tax-12(I) ( AO ) in pursuance of the directions issued by Dispute Resolution Panel ( DRP ), Bangalore dated 22 August 2011 Ion the following grounds: General 1. The order of the learned AO and directions of the Hon'ble DRP are based on incorrect interpretation of law and therefore are bad in law. 2. On the facts and in the circumstances of the case and in law and based on the directions of DRP, the learned AO erred in assessing the total income at ₹ 5,80,49,828 as against returned income of ₹ 2,32,78,452/- computed by the Appellant. Corporate tax matters 3. On the facts and in the circumstances of the case and in law and based on the directions of Hon'ble DRP, the learned AO erred in holding that the telecommunication expenses (i.e. leased line charges) amounting to ₹ 35,41 ,839 is attributable to the delivery of computer software outside India should be reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rables considered by the Appellant in the comparability analysis by applying different quantitative and qualitative filters: a. the learned AO / TPO erred in rejecting certain comparable companies identified by the Appellant where consolidated results had been used for analysis. b. the learned AO / TPO erred in rejecting certain comparable companies identified by the Appellant using turnover Rs. I Crore as a comparability criterion; c. the learned AO / TPO erred in rejecting certain comparable companies identified by the Appellant as having economic performance contrary to the industry behavior (e.g. companies which showed a diminishing revenue trend); d. the learned AO / TPO erred in rejecting certain comparable companies identified by the Appellant on the ground that the comparables were having different accounting year (other than March 31 or companies whose financial statements were for a period other than 12 months); and 11. The learned TPO erred in obtaining information which was not available in public domain by exercising powers u/s 133(6) of the Act and relying on the information for comparability analysis. 12. The learned AO / TPO erred in not consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was applied to Software Segment The Petitioner submits that the above additional ground is being by way of abundant caution. The additional ground raise issue which is fundamental to the appeal and the non-admission and non-adjudication of the same would result in an incomplete appreciation and adjudication of the matter. The Petitioner submits that the failure to raise these grounds at an earlier stage is neither wilful nor wanton but due to the reasons stated above. No prejudice would be caused to the Respondent by reason of the above additional grounds being admitted and adjudicated and accordingly the balance of convenience is in favour of such an order being passed by this Hon'ble Tribunal. The Petitioner states and submits that the issues raised in the additional ground above are legal issues and arise out of the order of the lower authorities. Reliance is based on the decisions of the Hon'ble Supreme Court in the case of Jute Corporation of India vs. C.I.T. (187 ITR 688) and National Thermal Power Corporation vs. C.I.T. (229 ITR 383) as well as the full Bench of the Bombay High Court in the case of Ahmadabad Electricity Co. Ltd. (199 ITR 351). In the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue from ITES operation and sold two time of such revenue and in support of his contention he has drawn our attention to the annual report of this company on pages-3353 3435 of the paper book. Thereafter, he submitted that he assessee is also seeking exclusion of ne more company i.e. M/s Apollo Healthstree Ltd., on the basis of the Tribunal order rendered in the case of AOL Online India Pvt. Ltd.,(Supra). Thereafter, he submitted that these two companies rejected by the TPO i.e. M/s R.S.Software Ltd., and M/s Microland Ltd., these companies should be treated as good comparable, because the basis on rejection of this comparable adopted by the TPO Is not proper. He submitted a copy of the annual report of these two companies available on page 3299 - 3352 and 3747 - 3793 of the paper book respectively. 6. Ld. DR of the revenue supported the order of authorities below. 7. We have considered rival submissions. Fist, we take up software services segment. In this segment the TPO had adopted 26 comparables out of which the assessee is seeking exclusion of 14 Marvel India Pvt. Ltd., Vs ACIT in IT(TP)A No.1033(B)/2011 dated 17-06-2016. Copy of this order is furnished along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in these two cases also, the assessee company was engaged in the software development services as in the present case and therefore, these two Tribunal orders are squarely applicable to the present case and hence, these 15 comparables, as per these two Tribunal orders should be excluded in the present case. 6. The ld. DR of the revenue supported the orders of the authorities below. 7. We have considered the rival submissions. We find that in the present case, it is noted by the TPO on page no.2 3 of his order that the assessee company is engaged in rendering services to the AE relating to designing of integrated circuits and the testing of integrated circuits along with customer support. It is also noted by the TPO that the international transactions are mainly of ₹ 15,03,62,370/- for software services apart from re-imbursement of expenses of ₹ 21.45 lacs and 22.61 lacs. In the case of M/s Hewlet Packard (Ind.) Software Operation Ltd.(Supra) also, the international transaction included mainly the services rendered as software development services of ₹ 5854.51 lacks. Similarly, in the case of M/s Meritor LVS India (P) Ltd., (Supra) also, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be excluded in addition to other 11 comparables, which were directed to be excluded as per Tribunal order in the case of M/s Hewlet Packard (Ind.) Software Operation Ltd., (Supra). We therefore, direct the AO/TPO to exclude 14 comparables including 11 comparables as per Tribunal order in the case of M/s Hewlet Packard (Ind.) Software Operation Ltd., (Supra) and three comparables as per Tribunal order in the case of M/s Meritor LVS India (P) Ltd., (Supra), as noted above. One comparable M/s Megasoft Ltd., should be considered for inclusion as per its segmental results only. The AO/TPO should pass necessary order as per law and as per above discussion after providing an opportunity of being heard to the assessee. These four grounds are disposed of in this manner. From the above paras reproduced from the Tribunal order rendered in the case of M/s Marvel India Pvt. Ltd., (Supra), it is seen that in that case, the company was engaged in software services and it was held by the Tribunal in that case that following 14 comparables should be excluded and for one comparable i.e. M/s Megasoft Ltd., it was directed that this company should be considered for inclusion as per its segmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd., I IT(TP)A No.819(B)/2011 dated 26-05-2015. Para-29 30 of this Tribunal order are relevant for this issue. Hence, we reproduce the same herein for the sake of ready reference; 29. The assessee seeks to challenge the action of the TPO in considering the IServices India Ltd., as a comparable. This company is listed at sl.no.18 of the list of comparables chosen by the TPO. For choosing this company as a comparable, the TPO has made the following observations :- 33.18 IServices India Pvt Ltd (OP/TO for the FY 2006-07 - 49.47%) The company was not part of the companies considered by the taxpayer in the accept I reject matrix given as Appendix-D to the TP report. However, the data of the company is available in Capitaline database. The Annual Report was not available for tile FY 2006-07. RPT information was not available. Thus notice 133(6) notice was issued to the company. As per the reply received from the company and the annual report submitted, it is seen that the company is into IT enabled services and qualifies all the filters applied by the TPO. Thus the company is proposed as a comparable vide this office letter dated 17- 05-2010. In response, the taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of considering this company as a comparable company after affording opportunity of being heard to the assessee. From the above two paras of this Tribunal order, it can be seen that in that case, the matter was restored back to the file of the TPO for fresh decision. Accordingly, in the present case also, we restore the matter back to the file of the TPO for fresh decision with the same directions as given by the Tribunal in that case. 10. The assessee is also seeking exclusion of one more company i.e. Apollo Healthstreet Ltd. on the basis of same Tribunal order rendered in the case of AOL Online India Pvt. Ltd. and regarding this comparable, the discussion is available on pages 2377 2378 of the paper book. The relevant Para is reproduced below; Assessee objects to the above comparable on the reason of RPT filter. Even though RPT filter at 15% is accepted in some of the cases by the Co-ordinate Benches, the RPT filter can be considered up to 25% depending on the facts of the case. As worked out by assessee, RPT filter is only 17.7%. How it is worked out is not available. Since TPO has given valid reasons to include the above comparable, we are of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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