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TMI Blog2015 (1) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... /s SunGard Trading Systems of USA (STS), which is one of the subsidiaries of SunGard Data Systems Inc (SDS). SDS is a global leader in integrated IT and e-Processing solutions for the financial services industry. Assessee provides software development services to STS, and such services include development of software and components of software products developed as per the requirements of SunGard group entities. For the assessment year under consideration, assessee filed a return of income declaring total income of Rs. 39,37,714/-. The said return of income was subject to a scrutiny assessment whereby the Assessing Officer passed an order u/s 143(3) r.w.s. 144C(13) of the Act dated 28.10.2011 determining the total income at Rs. 9,30,21,450/-. As assessee was found to have undertaken international transactions with its associated enterprise abroad by way of rendering software development services, Assessing Officer made a reference to the Transfer Pricing Officer (in short "the TPO") u/s 92CA(1) of the Act for determination of the arm's length price of such international transactions. The TPO passed an order u/s 92CA(3) of the Act dated 29.10.2010 whereby the arm's length pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2006-07 (supra), the resultant arm's length price would fall within the +/- 5% of the stated value of the international transactions and therefore in terms of section 92C(2) of the Act no adjustment would be required to be made. It is pointed out that the aforesaid three concerns were also directed to be excluded by the Tribunal from the final set of comparables in assessee's own case for assessment year 2006-07 (supra). It was also asserted, without controversion from the side of the Revenue, that the facts and circumstances prevailing in this assessment year qua the aforesaid aspect are similar to those considered by the Tribunal in assessment year 2006-07 (supra). It was therefore submitted that the appeal be heard on this limited aspect. The Ld. CIT-DR, appearing for the Revenue has not opposed the aforesaid plea of the appellant as the order of the Tribunal for assessment year 2006-07 dated 30.09.2014 (supra) continues to hold the field. 7. Although, assessee has raised multiple Grounds of Appeal in order to assail the addition of Rs. 8,79,44,950/- on account of transfer pricing adjustment, but the said dispute is being disposed-off after adverting to the limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that KALS Information Systems Ltd. was not a functionally comparable concern. The following discussion in the order of the Bindview India (P.) Ltd. (supra) is relevant :- "16. Another issue relating to selection of comparable by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of IT enabled services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspect, assessee succeeds." 16. Following the aforesaid decision, we direct the Assessing Officer to exclude KALS Information Systems Ltd. from the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torted picture of the ratio of RPTs to the total transactions. If total expenses incurred by the assessee by way of payments to associated enterprises is divided by the total expenses incurred, the ratio of RPTs to the total transactions exceed 25%, as per the working made by the assessee. In view of the aforesaid incorrect approach of the TPO in order to calculate the level of RPTs, Compucon Software Ltd. has been wrongly included as a comparable. Moreover, the assessee has also referred to a decision of the Pune Bench of the Tribunal in the case of Bindview India (P.) Ltd. vs. DCIT, (2013) 34 taxmann.com 164 (Pune-Trib.) relating to the assessment year 2006-07 wherein the RPTs in the case of Compucon Software Ltd. have been accepted as being in excess of 25% of the total transactions. On this basis also, we find that the plea of the assessee to exclude Compucon Software Ltd. from the list of comparables has been wrongly negated by the lower authorities. We order accordingly and assessee succeeds on this aspect." 11. At the time of hearing, the Ld. Representative for the assessee also pointed out that for the instant assessment year i.e. 2007-08, the level of Related Party Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpucom Software Ltd. be excluded from the final set of comparables in order to compute the arm's length price of the international transactions. 13. At the time of hearing, it was stated by the Ld. Representative for the assessee that if assessee were to succeed on its plea for the exclusion of (i) KALS Information Systems Ltd.; (ii) Transworld Infotech Ltd.; and, (iii) Compucom Software Ltd. from the final set of comparables, then the variation between the arm's length price determined and the stated value of the international transaction would fall within the +/- 5% and therefore in terms of section 92C(2) of the Act no adjustment would be required to be made. Since we have upheld the plea of the assessee for exclusion of (i) KALS Information Systems Ltd.; (ii) Transworld Infotech Ltd.; and, (iii) Compucom Software Ltd. from the final set of comparables, the other Grounds of Appeal raised by the assessee in order to assail the addition of Rs. 8,79,44,950/- on account of transfer pricing adjustment are rendered academic and are not being adjudicated for the present. Thus, on this aspect assessee partly succeeds. 14. The only other issue in the appeal relates to a disallo ..... 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