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TMI Blog2015 (10) TMI 2716X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Enterprises (AE) during the relevant previous year. Ground no.4.6 is on the benefit of +/-5% as stipulated u/s 92C(2) of the IT Act. These grounds 4.4 to 4.6 are taken up together for disposal. 3. Facts apropos are that the assessee a wholly owned subsidiary of M/s LightSurf Technologies India Pvt.Ltd., USA had filed its return for the impugned assessment year on 29-11-2006 declaring an income of Rs. 11,61,159/-. Since assessee had international transactions with its Associated Enterprises (AE) the issue of evaluating the pricing of such international transactions was referred to the TPO. The TPO has summarized the business profile of the assessee as under; " VeriSign Services India provides software design and development services to VeriSign Group, working as an independent contractor. As per the taxpayer, the software designed, developed, amended, tested or modified is the property of VeriSign Group and at no point of time, such ownership vests with VeriSign Services India either wholly or in part. The Company is an offshore development centre to aid the parent company, which is primarily a provider of MMS Services, Picture-Message and Premium Content Delivery. VeriSign Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds ALP. 9. However, the TPO did not accept the contentions of the assessee either with regard to the working of the PLI or with regard to selection of the comparables. As per the TPO comparables selected by the assessee did not satisfy the test of far analysis and other functional criteria. He therefore, accepted only three comparables out of the list provided by the assessee. He also accepted an additional comparable suggested by the assessee during the course of proceedings before him. The four comparables accepted out of assessee's list were M/s Aztec Software Ltd. M/s Accel Transmatics Ltd (Segment) M/s Mega soft Ltd., and SIP Tech. & Exports Ltd. Thereafter the TPO conducted his own study of the public data bases and zeroed in on 20 comparables including the four of the assessee. The comparables selected by the TPO and their average PLI read as under; Sl. No. Company Name Sales (Rs.Cr.) OP. to Total cost% 1 Aztec Software Ltd 128.61 18.09 2 Geometric Software Ltd (Seg.) 98.59 6.70 3 Infosys Limited 9028.00 40.38 4 KALS Info Systems Limited 1.97 39.75 5 Mindtree Consulting Ltd 448.79 14.67 6 Persistent Ssystems Ltd 209.18 24.67 7 R Sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of turnover filter was not put before the lower authorities. a. iGate Global Solutions Limited b. Infosys Limited c. Mindtree Limited d. Persistent Systems Limited e. Sasken Communication Limited f. Flextronics Softtware Systems Limited For admitting the additional grounds learned AR placed reliance on the Special Bench decision in the case of DCIT Vs M/s Quark Systems Pvt. Ltd (2010) 42 DTR 0414. 11. Per contra, learned DR strongly objecting admission of above additional grounds submitted that in case these were admitted, the comparability of the concerned companies had to be referred back to the AO/TPO for verification fresh. 12. After considering the averments of the counsels with regard to admission of additional grounds, we find force in the contention of the learned AR that by virtue of Special Bench decision in the case of M/s Quark Systems Pvt. Ltd (Supra), assessee can raise additional grounds seeking exclusion of comparables selected by it or not objected by it before the lower authorities. However, the Hon'ble Pubjab & Haryana High Court in (2011) 62 DTR 0182 had upheld the Special Bench decision in the case of M/s Quark Systems Pvt.Ltd., ( Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. M/s Infosys Ltd.(Supra) was directed to be excluded on application of turnover filter at para 6.2 of very same decision. M/s Kals Info Systems Ltd(Supra) was held to be functionally not comparable to a software development services provider at para 6.4 to 6.5 of the very same decision. M/s Mindtree Consulting Ltd and M/s Persistent System Ltd. excluded on application of upper turnover of Rs. 200 Crores at para-6.2 of the very same decision. M/s Sasken Communication Ltd.(Seg.) was directed to be excluded for the very same reason. M/s Tata Elxsi Ltd. was found to be functionally not comparable at 6.4 to 6.5 of the same decision. M/s Accel Transmatics Ltd(Supra) was also found functionally not comparable to a software development services provider in the very same para. M/s Flextronics Software System Ltd (Supra) was directed to excluded applying the turnover filter at para-6.2 of the same ruling. M/s Megasoft Ltd(Supra) was directed to be excluded applying the RPT filter of 15% at para-6.3 of the very same decision. M/s iGate Global Solutions Ltd(Supra) was directed to be excluded by application of turnover filter again at para- 6.2 of the same order. These paras 6.2, 6.3, 6.4 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RPT filter and was also functionally different. The learned counsel for the assessee has relied upon the following decisions for exclusion of these companies: i. M/s.Ariba Technologies India Pvt.Ltd. (ITA No.1179/Bang/ 2010) ii. Agile Software Enterprise Private Limited (ITA 1172/Bang/ 2010 iii. EMC Data Storage Systems (India) Pvt. Ltd., (ITA No.1274/Bang/2010), and iv. Huawei Technologies India Pvt. Ltd.,(ITA No.1338/Bang/ 2010). In all these cases, the Tribunal had considered the functional dissimilarity of these companies with software development companies like the assessee and has held as under for exclusion of these companies". 15. We also find that 15% as the threshold limit for applying RPT filter was laid down by the Co-ordinate Bench decision in the case of 24/7 Customer.com Pvt.Ltd Vs DCIT(2013) 140ITD 344. Similarly, Co-ordinate Bench in the case of M/s Genesis Integrating System (Ind.) Pvt.Ltd., Vs DCIT (2011) 64 DTR 0225 had directed exclusion of companies, applying the turnover filter of 1 to 200 Crores. 16. However, out of the very many companies which prima facie have to be excluded on account of the decision of the Co-ordinate Benches in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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