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TMI Blog2017 (2) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequently arriving at a high arithmetic mean of 18.84% as a ratio of OP/OC. 4. The Ld DRP /Ld AO is not justified in law in making an adjustment u/s 92CA of Rs. 3,81,82,837/- to the price received by the appellant. 5. The Ld DRP erred in not accepting the assessee's contention of rejecting 12 companies on the grounds of functional comparability, Super Profit, High turnover companies. 6. Any other ground that may be urged at the time of hearing with the prior approval of the Hon'ble Tribunal". Additional Grounds 1. The learned TPO/DRP erred in making/ confirming an adjustment when the appellant company was claiming exemption u/s 10A and hence there is no intention to shift profits outside India and more so when the tax rates in USA where the AE is located were higher than those prevailing in India. 2. The learned AO as well as the CIT (A) failed to apply their mind to the TP study report of the appellant company, while making reference to the learned TPO u/s 92CA(1) of the I.T. Act, 1961 and also failed in giving an opportunity of hearing to the appellant company before making such reference to Learned TPO". 2. It is submitted by the learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. ACIT reported in (2009) 309 ITR 0194 wherein it was held that it is sufficient if opportunity is given by the TPO before making any ALP adjustment and it is not necessary that the AO should give an opportunity before making reference to the TPO. As regards the assessee's contention that the tax rates are very high in USA as compared to the tax rates in India, the learned DR has placed before us a document stating that in USA the statutory and corporate income tax rate is ranging from 15 to 35%. Therefore, according to her, the tax rates in US are not higher than in India and therefore, the assessee's contention that it cannot have any intention to shift profit from India to US cannot be accepted. The learned DR also submitted that the decision in the case of Aztech Software & Technology Services Ltd & Anr. Vs. ACIT covers the issue as the Special Bench of the Tribunal at Bangalore, has clearly held that before referring to the TPO, the AO need not give any hearing to the assessee. She submitted that the decision of the Special Bench still holds the ground and therefore, the decision of the Income Tax Appellate Tribunal, Mumbai Bench, in the case of Tata Consultancy Services Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no provision exempting the computation of total income arising from an international transaction having regard to its ALP, in the case of an assessee entitled to deduction u/s 80IC or any other such relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary, we find that sub- section (4) of section 92C plainly stipulates that where an ALP is determined, the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction, is required to be necessarily computed having regard to its ALP without any exception. Thus, the ld. AR's argument that since its income is subject to deduction u/s 80IC, the provisions of the Chapter-X of the Act should not be applied, in our considered opinion, has no force in view of the clear statutory mandate contained in proviso to section 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92CA. Similar view has been taken by Pune Bench of the Tribunal in the case of ACIT vs. MSS India (P) Ltd. (2009) 123 TTJ 657 (Pune) and several other orders. The reliance of the ld. AR on the order of the Mumbai Bench of the Tribunal in the case of DCIT vs. Tata Consultants Services Ltd. (ITA No. 7513/M/2010) dated 4.11.2015, in our considered opinion is misconceived, because, in that case, the Tribunal primarily found that the AO erred in not himself examining the issue of TP and failed to apply his mind to the TP report filed by the assessee. The last sentence in para 54 of the order upholding the assessee's contention that no TP adjustment can be made where the assessee enjoys benefit of deduction u/s 10A or 80HHE, etc., is only obiter dicta inasmuch as the addition was found to be not sustainable on the other main grounds as discussed in the body of the order. On the contrary, we find that the decision of the Special bench in Aztech Software (supra) permitting the applicability of sections 92C and 92CA to an assessee availing the benefit of section 80IC etc. of the Act is its ratio decidendi. The ld. AR has not pointed out any judgment of some Hon'ble High Court decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture services and business process outsourcing. He observed that the services include maintenance, re-engineering technology, architecture, designing, testing, and implementation Technology and broad functional demeanor. Therefore, according to the TPO, the assessee is providing wide range of services to its AEs. The international transactions reported by the assessee are for an amount of Rs. 25,02,22,520 from the provision of software development services. The assessee has reported a margin of 3.09% by adopting the TNMM method. The assessee had adopted 5 companies as comparables and since the ALP of the assessee was within +/-5% range of the arithmetic mean margin of the comparables, the assessee treated the international transaction to be at ALP. The TPO, however, observed that the mode of search adopted by the assessee suffers from defects which resulted in selection of inappropriate comparables and rejection of companies that are appropriate comparables. He therefore, rejected the TP study of the assessee and conducted independent analysis under the TNMM. He accepted 3 comparable companies adopted by the assessee and rejected 2 companies. Further, the AO also arrived at other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the high turnover filter, the learned Counsel for the assessee placed reliance upon the following decisions: 1. Genisys Integrating Systems (India) (P) Ltd v. DClT [2012) 20 taxmann.com 715 (Bang.) 2. CIT Pentair Water India P. ltd (2016)69 taxmann.com 180 (Bombay) (HC) 3. Agnity India Technologies (P)Ltd vs. CIT [2013) 36 taxmann.com 289 (Delhi) (HC) 4. Obopay Mobile Technlogy India (P) Ltd v. DClT [2016) 66 Taxmann.com 119 (Bang Trib) 5. ITO v. Avalara Technologies (P) Ltd [2016] 69 Taxmann.com 453 (Pune _ Trib) 6. Sysarris Software P. Ltd v. DCIT (2016) 67 Taxmann.com 243 (Bang Trib) 7. Starent Networks India (P.) Ltd 69 taxmann.com 434 (Pune-Trib.) 8. PMC-Sierra India (P.) ltd. [2016) 74 Taxmann.com 110 (Bangalore _ Trib.) 9. Capital IQ Information Systems (India) (P) Ltd v. DClT [2013) 32 taxmann.com 21 (Hyderabad - Trib.) 10. Teva India (P.) ltd. v. DCIT [2011) 44 SOT 105 (Mum.) 11. Electronic Arts Games (India) Pvt. Ltd vs ACIT [2015) 58 taxmann.com 13 (Hyderabad Trib.)/[2015]69 SOT 2 (Hyderabad Trib.){URO) 12. Google India (P.) ltd. [2013]25 Taxmann.com 412 (Bangalore-Trib.) 12. The learned DR, however, supported the orders of the AO and submitted that the hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excluded from the final list of comparables as compared to the assessee. However, this Tribunal had remitted its consideration to the AO in the case of Electronic Arts Games (India) Pvt. Ltd (Supra). Respectfully following the same, we remit the consideration of this company as a comparable to the assessee to the TPO. Needless to mention that the assessee shall be given a fair opportunity of hearing. 16. As regards Comp-U-Learn Tech India Ltd, the learned Counsel for the assessee submitted that this company is functionally dissimilar as it is engaged in internet based solution, education and training, e-commerce solutions, software design/development, web designing/development and therefore, it is different in line from the activities of the assessee company. It is also submitted that this company has been directed to be excluded in the cases of Pegasystems Worldwide, Symphony Services (P) Ltd, and E-Infochips Bangalore Ltd and also in the case of 3 Global Services at Mumbai. The learned DR however, supported the orders of the authorities below. 17. Having regard to the rival contentions and the material on record, we find that in the case of Pegasystems Worldwide, the Coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such companies is not available, they are to be excluded, the learned Counsel for the assessee placed reliance upon the following decisions: (a) Google India (P) Ltd (2013) 29 taxman.com 412 (Bang. Trib) (b) 3 Global Services (P) Ltd (2011) 11 taxmann.com 136 (Mum.) (c) SAP Labs India (P) Ltd (2011) 44 SOT 156 (Bang.) (d) ITAT decision in the case of Pegasystems Worldwide (P) Ltd (Supra). 22. The learned DR, on the other hand, submitted that as per the website information available, the assessee also is into software and commerce, system integration, re-engineering, independent testing services, etc. and therefore, it cannot be considered as a simple software service provider as claimed by the assessee. Therefore, according to the learned DR, these two companies are also comparable to the assessee. 23. Having regard to the rival contentions and the material on record, we find that the assessee had challenged the comparability of the above two companies before the TPO on the ground of functional dissimilarity, but the TPO held that the assessee has not substantiated its objection with any evidence and hence rejected assessee's objections. The assessee objected to their compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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