TMI Blog2014 (6) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... nses from export turnover as well as total turnover while computing deduction u/s 10A - ITA No. 1885/Hyd/2011 - - - Dated:- 27-6-2014 - Shri B. Ramakotaiah, Accountant Member And Shri Saktijit Dey, Judicial Member Assessee by : Shri P. Murali Mohan Rao Revenue by : Shri P. Soma Sekhar Reddy ORDER Per Saktijit Dey, J.M.: This appeal of the assessee is directed against the assessment order passed u/s 143(3) read with section 144C of the Act in pursuance to the directions of the Dispute Resolution Panel (DRP), Hyderabad, pertaining to the AY 2007-08. 2. Briefly the facts are, the assessee company earlier known as Lanco Global Systems Ltd., was incorporated under the Companies Act, 1956. The assessee is registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transactions with its AE made a reference u/s 92CA of the Act to the TPO for determining the ALP. In course of the proceeding before him, though the TPO accepted TNMM as the most appropriate method, however, ultimately he rejected the TP study of the assessee by pointing out various defects and deficiencies. The TPO by applying some filters adopted by the assessee as well as certain additional filters selected by him searched the data bases which yielded 25 companies as comparables having average PLI of 25.51%. With a negative working capital adjustment of (-) 0.05% , the adjusted arithmetic mean PLI was worked out to 25.57%. By applying this adjusted arithmetic mean PLI to the total operating cost of ₹ 39,19,54,735/-, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee raised objections before the DRP. 3. The DRP, however, vide order dated 25/08/2011 rejected all the objections raised by the assessee and directed the Assessing Officer to finalize the assessment accordingly. In accordance with the direction of the DRP, the Assessing Officer passed the impugned assessment order, which is under challenge in the present appeal before us. 4. Ground Nos. 1 to 15 relate to various transfer pricing issues. However, at the time of hearing the learned AR confined his argument only to the issue of selection of certain comparables by the TPO and sustained by the DRP. Out of the 25 comparables selected by the TPO, the assessee has objections in respect of 5 comparables. Hereinafter we will deal wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulings of the different benches of the Tribunal excluded this company from the list of comparables by holding as under: It is very much evident from the TP order that the assessee has been categorised as a software development service provider. Coordinate Bench of this Tribunal in the case of Virtusa (India) Pvt. Ltd. (ITA No. 1962/Hyd/2011 dated 30/08/2013) after following some other decisions of the Tribunal has held this company cannot be treated as comparable as this company is also into product development. As segmental details of operating income of software development services and sale of software products are not available, it could not be ascertained whether the profit ratio of this company can be taken into consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved in development of software services have differed from the final order passed by the panel. In the aforesaid facts and circumstances, we are of the view that Celestial Labs cannot be treated as comparable to the assessee. 3. Infosys Technologies Ltd. and Wipro Ltd. i) Objecting to the aforesaid companies, learned AR submitted that both these companies cannot be considered to be comparable to the assessee as they are industrial giants not only on account of quantum of revenue earned by them but due to various other factors like reputation, brand value, goodwill etc. It was submitted that due to the aforesaid factors not only these companies command premium in the pricing of their products and services, but, due to scale of opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt services is only 23.11%. Further, the learned AR submitted that during the year there is amalgamation in the company which has impacted its profits. The learned AR submitted that if at all this company has to be selected as comparable then only segmental profit can be considered for comparability analysis. In support of such contention, he relied upon the following decisions: 1. Intoto Software India P. Ltd., 1196/H/10. 2. M/s Sumtotal Systems India P. Ltd., ITA No. 1710/Hyd/2011, order dated 09/05/2014. ii) The learned Departmental Representative, however, supported the orders of the TPO/DRP. iii) We have considered the submissions of the parties and perused the materials on record. As can be seen from the order passed in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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