TMI Blog2018 (1) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... viding contract software services, back office support services, corporate IT support services and marketing support services to its Associated Enterprises [AE]. Assessee has furnished transfer pricing report along with return and submitted that assessee s PLI i.e., OP/TC is of 10.40% and justified on the basis of the comparables selected by assessee. However, the TPO on a reference from the AO conducted fresh search and bench marked the net operating profit margin at 17.03% after giving 3.78% relief on account of working capital adjustment. The 18 comparable companies selected by the TPO are as under: Sr. No. Name of the Company NCP after WCA% 1. Acropetal Technologies Limited (Seg) 30.09 2. Akshay Software Technologies Limited -0.52 3. C T I L Limited 0.5 4. Evoke Technologies Private Limited 6.22 5. E-Zest Solutions Limited 34.71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised various grounds contesting the issue but mainly focused on inclusion and exclusion of comparables. Since the order of DRP is causing confusion whether the selection of comparables by the TPO are upheld or not, Ld. Counsel argued the case keeping two scenarios in mind (i) that DRP has retained only three companies but the arithmetic mean to be taken at 17.03 and (ii) approving of the 18 comparables of TPO. The argument of the Ld. Counsel on scenario one is that the DRP wrongly excluded the company Evoke Technologies Private Limited which should have been retained. With reference to companies which are retained by the DRP, Ld. Counsel has objections as these three companies were excluded by various orders that these are not comparable. The reasons of each of the companies is as under: i. Evoke Technologies Pvt. Ltd. : 4.1. Ld. Counsel for assessee submitted that this company is strictly involved in software development services. She placed reliance on the following pages of the paper book: (i) PB pg. 419 Profit and Loss account Income Software Development Charges; (ii) PB pg. 426 Segment reporting, only one segment Software Development; (iii) PB pg. 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high turnover company as compared to that of assessee herein and ought to be rejected on the basis of the Hon'ble DRP order for AY. 2010-11 as upheld by the ITAT; Based on the above, Ld. Counsel prayed that this company be rejected as a comparable. 4.3.1. Ld. Counsel relied on the following case law: i. CIT Vs. Intoto Software India Pvt. Ltd., (ITTA No. 233 of 2014, High Court of Telangana and Andhra Pradesh) Page 2; ii. Aleatel Lucent India Ltd., Vs. DCIT (ITA No. 6856/Del-2015) para (vi) page 43; iii. Symantee Software and Services India Private Limited Vs. DCIT (ITA No. 614/Mds-2016) Para (10) Page 12; iv. Sasken Communication Technologies Ltd. : 4.4. Ld. Counsel for assessee submitted that this company is an abnormally high turnover company as compared to that of assessee-company herein and ought to be rejected on the basis of Hon'ble DRP order for AY. 2010-11 as upheld by this ITAT. Ld. Counsel claimed that the Hon'ble DRP has for AY. 2012-13 rejected this company as a comparable. In the AY. 2012-13, the department has not even challenged the DRP order before the ITAT. The facts of this company is same for AY. 2012-13 and AY. 2011- 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as contended by the Ld. Counsel. 8. Ld. Counsel in reply submitted that after exclusion of three companies selected by DRP, one company can be retained and relied on the Co-ordinate Bench decision in the case of Haworth India Pvt. Ltd., [11 Taxmann.com 76] to submit that even one company can be compared in the absence of any other comparable companies. It was further submitted that other grounds become academic, if these comparables are excluded. 9. We have considered the rival contentions and perused the orders placed on record. It is surprising that the DRP has not applied its mind correctly on many of the companies and retained only three companies, the arithmetic mean margin of the comparables retained works out to 22.46% which was more than the arithmetic mean arrived at by the TPO. In such circumstances, the DRP should have given clear directions, whether a fresh search is required or should have deleted the addition as those three companies retained by the DRP itself are excluded in previous year and later year by DRP itself on functionality. Ld. Counsel placed on record the order of the DRP for AY. 2012-13 in which the DRP excluded Sasken Communication Technologies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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