TMI Blog2017 (5) TMI 1651X X X X Extracts X X X X X X X X Extracts X X X X ..... or for selecting the comparable companies for the purpose of determining the ALP however a proper parameter of turnover has to be applied - Held that:- Tribunal is taking a consistent view of applying the turnover filter of 10 times of assessee's turnover on both sides for selecting the comparable companies. Further the RPT is also a relevant factor for selecting comparable companies though the comparable price should be uncontrolled and unrelated however it is not possible to find a company without having RPT therefore, in due course of consideration and in analyzing this issue, this Tribunal has taken a view that a tolerance range of 5% to 25% can be considered depending upon the availability of the comparable companies. Accordingly, in normal course 15% of RPT can be a tolerance range for selection of comparable entity. Since the TPO has not applied and also not given the details of turnover as well as RPT of the comparable. Therefore we are of the considered opinion that the entire issue of TP Adjustment requires a fresh consideration at the level of TPO. Provision towards Long Term Retention Bonus - AO held that this amount is a provision and accordingly he has added back t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement therefore it cannot be accepted that the assessee has not incurred any expenditure for earning the dividend income. Accordingly, when there is a change and reshuffling in the investment portfolio then the indirect expenditure is bound to be incurred which is allocable to the tax exempt income - we confirm the disallowance made by the Assessing Officer on account of administrative expenses and delete the disallowance made by the Assessing Officer on account of interest expenditure. Disallowance of provision towards creditor - AO noted that the assessee has not complied with the TDS provision as required under Section 40(a)(ia) - Held that:- As regards the telephone expenses payable to Tata Teleservices, we find that though the amount was not paid till date however if the amount was accrued during the year then the claim of expenditure cannot be disallowed on the ground of non-deduction of TDS as the TDS provisions are not applicable on such expenditure. Accordingly, this amount of ₹ 20,00,000 is an allowable claim. As regards Office Rent, since the assessee has not complied with the TDS provisions, therefore the provisions of Section 40(a)(ia) are attracted on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an, Advocate for the Appellant. G.R. Reddy, CIT (DR) for the Respondent. ORDER Vijay Pal Rao, These two appeals by the assessee are directed against the assessment order dt.25.9.2012 and 31.1.2014 passed under Section 143(3) r.w.s. 144C in pursuant to the directions of the Dispute Resolution Panel (in short DRP) for the Assessment Years 2008-09 2007-08 respectively. 2. First we take up the appeal for the Assessment Year 2008-09 wherein the assessee has raised the following grounds : 1 Assessment and reference to Transfer Pricing Officer are bad in law (a) The final order issued by the Deputy Commissioner of Income Tax - Circle 12(4) ['ITO' or 'AC], is bad on facts and in law and is in violation of the principles of natural justice. Without prejudice to the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to Tavant Technologies India Private Limited ('the Appellant or the Company'), a show cause notice, as per proviso to section 92C(3) of the Income- tax Act, 1961 [the Act]. (b) The AO has erred in law in making a reference to the Transfer Pricing Officer ['TPO'], inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ables. (e) The AO/TPO grossly erred in law in deviating from the uncontrolled party transaction definition as per the Income-tax Rules and arbitrarily applying a 25% related party criteria in accepting/rejecting comparables. (f) The AO/TPO grossly erred on facts in arbitrarily rejecting companies having software development revenue less than 75% of total operating revenue. (g) The AO/TPO erred on facts in arbitrarily rejecting companies having export sales less than 25% of total sales. (h) The AO/TPO erred on facts in arbitrarily rejecting companies having onsite revenue more than 75% of the export revenue. (i) The AO/TPO erred on facts in arbitrarily rejecting companies having employee cost less than 25% of the operating revenue. (j) The AO/TPO also erred on facts and in law in arbitrarily rejecting companies with different year ending (i.e. other than 31 March 2008). (k) The AO/TPO also erred on facts in arbitrarily rejecting companies based on their financial results without considering the functional comparability. (l) The TPO erred on facts and in law in considering a set of 'secret data', i.e. data which was not available in public domain, in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court decision in the case of Virtual Soft System Ltd. 13. The Assessing Officer grossly erred in making the addition of ₹ 9,82,999/- under the head 'Exempt Income' without appreciating any of the plea of the appellant. 14. The Assessing Officer grossly erred in disallowing a sum of ₹ 44,19,798/- under the head 'Provision' without appreciating the plea of the appellant and without appreciating that the provision made for expenditure was actuals and incurred in the normal course of the appellant's business. 15. Directions issued by the Honorable Dispute Resolution Panel ['DRP'] (a) The DRP has erred in law and facts in not taking cognizance of the objections filed by the Appellant in relation to the draft assessment order issued by the AO in the proceedings before them. (b) The DRP further erred on facts and in law confirming the draft order of the AO. (c) Without prejudice, the additions/disallowances are excessive, arbitrary and unreasonable and ought to be reduced substantially. 16. The Assessing Officer further erred in charging the interest u/s. 234B and 234D of the Act. 17. Penalty under section 271(l) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unutilized. However, the assesseehas not given the proper details as well as evidences to show the level of capacity of utilization of the assessee as well as comparable companies. The learned Authorised Representative of the assessee has submitted that it was not feasible for the assessee to give all the details of the comparable companies regarding capacity utilization. We do not find any merit in the claim of the assessee when the assessee failed to produce the relevant details regarding the level of capacity utilization of each and every comparable company in comparison to the assessee's capacity utilization. Therefore in the absence of necessary details and evidences, this ground of the assessee's appeal is rejected. 8. Ground Nos. 5 to 8 are regarding determination of Arm's Length Price (ALP) and TP Adjustment made by the TPO/A.O. 9. The assessee is a software development services provider to its Associated Enterprise (AE). To determine the ALP, the TPO has selected 20 comparable companies as under : Sl. No. Name of the company OP/TC % 1 Avani Cincom Technologies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Celestial Labs Ltd. 4. E-zest Solutions 5. Flextronics Software Systems Ltd. (Seg.) 6. Geometric Ltd. (Seg.) 7. Helios Matheson IT Ltd. 8. Infosys Technologies Ltd. 9. Ishir Infotech Ltd. 10. KALS Information Systems Ltd. (Seg.) 11. Lucid Software Ltd. 12. Persistent Systems Ltd. 13. Tata Elxsi Ltd. (Seg.) 14. Thirdware Solutions Ltd. 15. Wipro Ltd. (Seg.) 11. The learned Authorised Representative of the assessee has submitted that the functional comparability of all these 15 companies have been examined by the co-ordinate bench of this Tribunal vide order dt.28.2.2013 in the case of Logica (P.) Ltd. v. Asstt. CIT [2013] 36 taxmann.com 374 (Bang. - CESTAT), in the case of Tesco Hindust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of the assessee has stated at Bar that the assessee does not press Ground Nos. 9, 10 15 and the same may be dismissed as not pressed. The learned Departmental Representative has raised no objection if the Ground Nos. 9, 10 15 are dismissed. Accordingly, Ground Nos. 9, 10 15 of assessee's appeal for the Assessment Year 2008-09 are dismissed being not pressed. 16. Ground No. 11 is regarding the addition made on account of provision. 17. The Assessing Officer noted that the assessee has reflected an amount of ₹ 39,99,683 under the head Provision towards Long Term Retention Bonus. The Assessing Officer held that this amount is a provision and accordingly he has added back the said amount to the income of the assessee. 18. Before us, the learned Authorised Representative of the assessee has submitted that this is not a provision for uncertain liability but this is an actual amount paid by the assessee therefore no addition is called for. He has relied upon the decision of Hon'ble Supreme Court in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61. He has also relied upon the decision of Hon'ble Supreme Court in the case of Tapar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the assessee has debited a sum of ₹ 11,86,981 as part of rent expenditure however, no record has been furnished by the assessee to show how this liability has arisen and what is the basis of this liability. We further note that the assessee has even not filed the rent agreement under which this liability is claimed to be discharged by the assessee in future. 26. As regards the decision of the co-ordinate bench of this Tribunal, we find that the said decision is only with regard to the legal proposition that once the assessee has brought on record, the liability to be discharged by the assessee in future then the same cannot be disallowed merely because the actual payment has to be made in future. In the case on hand, the assessee has failed to produce the primary evidence on the basis of which the liability has been recognized and provision is made. Accordingly, we do not find any reason to interfere with the orders of the authorities below qua this issue. 27. Ground No. 13 is regarding disallowance under Section 14A of the Act. 28. The assessee has received exempt income of ₹ 1,56,53,449 as dividend. The Assessing Officer made disallowance under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, we confirm the disallowance made by the Assessing Officer on account of administrative expenses and delete the disallowance made by the Assessing Officer on account of interest expenditure. 32. Ground No.14 is regarding disallowance of provision towards creditor. 33. The Assessing Officer noted that an amount of ₹ 1,15,26,772 has been claimed as provision but the same has not been added back to the total income of the assessee. The Assessing Officer made the addition of the said amount to the total income of the assessee. The assessee challenged the action of the Assessing Officer before the Dispute Resolution Panel (DRP). The DRP on examination of the fact found that the disallowance made by the Assessing Officer was on the basis that the assessee has failed to substantiate the claim. Accordingly, the DRP directed the Assessing Officer to consider the relevant record in support of the claim and then decide the issue after affording a reasonable opportunity to the assessee. In the final order, the Assessing Officer has made a disallowance of ₹ 44,19,778 on the ground that this is only a provision not allowable as expenditure. Further the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion had been made as per the estimated value but no basis of estimation has been provided. The payment has not been made till date and no TDS has been deducted Staff welfare expenses 2,25,000 Estimated amount As can be seen from the annexure, the assessee had just stated that the provision had been as per the estimated value. But no basis of estimation has been provided. The payment has not been made till date. Total amount 44,19,798 In view of the above, an amount of ₹ 44,19,798/- is found to be not allowable and hence the same has been added to the returned income of the assessee. It may be mentioned here that provision can be made only in respect of ascertained liability which can be reasonably estimated on some basis. There may be minor variations in the actual payments as is happened in the case of the assessee company in respect of some of the items. But in respect of the aforesaid items for which disallowances were made there is no acceptable basis of estimation which has also been corroborated by the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in law and is in violation of the principles of natural justice. Without prejudice to the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to Tavant Technologies India Private Limited ('the Appellant or 'the Company'), a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act']. (b) The AO has erred in law in making a reference to the Transfer Pricing Officer ['TPO'], inter alia, since he has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case. The AO also erred in not following the provision contained in section 92CA(1) of the Act. 2. The fresh comparable search undertaken by the AO/TPO is bad in law (a) The AO/TPO erred on facts and in law in conducting a fresh benchmarking analysis using non contemporaneous data and substituting the Appellant's analysis with fresh benchmarking analysis on his own conjectures and surmises. (b) On the facts and in the circumstances of the case and in law, the learned AO/TPO erred in not demonstrating that the motive of the Appellant was to shift prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his power under section 133(6), which is grossly unjustified. 4. Erroneous data used by the AO/TPO (a) The AO/ TPO has erred in law in using data, which was not contemporaneous and which was not available in the public domain at the time of conducting the transfer pricing study by the Appellant. (b) The AO/TPO erred in law and on facts in disregarding the application of multiple-year data while computing the margins of alleged comparable companies. 5. Non-allowance of appropriate adjustments to the comparable companies, by the AO/TPO (a) The TPO erred in law and on facts in not allowing appropriate adjustments under Rule 10B to account for, inter alia, differences in (a) accounting practices, (b) marketing expenditure adjustment, (c) research and development expenditure adjustment; and (d) risk profile between the Appellant and the comparable companies. 6. Variation of 5% from the arithmetic mean (a) The AO/TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant. Mark-up on recovery transactions (a) The AO/ TPO erred in facts in the circumstances of the case and in law in holding that the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft order of the AO. 16. Penalty under section 271(1)(c) (a) The learned AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act. 17. Without prejudice, the additions and disallowances as made by the ld. Assessing Officer are excessive, arbitrary and unreasonable and ought to be deleted in total. 18. For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed. 19. Relief (a) The Appellant prays that directions be given to grant all such relief arising from the above grounds and also all relief consequential thereto. (b) The Appellant craves leave to add to or alter, by deletion, substitution, modification or otherwise, the above grounds of appeal, either before or during the hearing of the appeal. (c) Further, the Appellant prays that all the above adjustments / additions / disallowances made by the learned Assessing Officer and upheld by the Hon,ble DRP are bad in law and liable to be deleted. 41. Ground Nos.1 2 are not pressed by the assessee as the learned Authorised Representative of the assessee has stated at Bar that the assessee does not press these gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese companies and submitted that without examination of FAR Analysis of each and every comparable company with the assessee, it cannot be excluded merely on the basis of the finding of the Tribunal in some other case. He has relied upon the orders of the authorities below. 47. Having considered the rival submissions as well as the relevant material on record, at the outset we note that the functional comparability of following 8 companies are examined by the co-ordinate bench of this Tribunal in the case of Logica (P.) Ltd. (supra) dt.21.2.2013 one by one in para Nos.12 to 15 as under : 12. The next aspect which was highlighted by the ld. counsel for the assessee was that out of the 26 comparables, comparables at Sl.No.1, 2, 3 12 have to be rejected as they were held to be functionally not similar to a software services provider as held by this Tribunal in the case of Trilogy E-business Software India (P.) Ltd. v. Dy. CIT [2013] 140 ITD 540/29 taxmann.com 310 (Bang). The relevant paragraphs 39 to 50 of the aforesaid order of the Tribunal are as follows:- '(b) Avani Cimcon Technologies Ltd. 39. As far as this company is concerned, the plea of the Assessee has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % 52.59% 25.62% - 9.87% 40. It was submitted that this company has made unusually high profit during the financial year 06-07. The operating revenues increased 63.03% which indicates that it was an extraordinary year for this company. Even the growth of software industry for the previous year as per NASSCOM was 32%. The growth rate of this company was double the industry average. In view of the above, it was argued that this company ought to have been rejected as a comparable. 41. We have given a careful consideration to the submissions made on behalf of the Assessee and are of the view that the same deserves to be accepted. The reasons given by the Assessee for excluding this company as comparable are found to be acceptable. The decision of ITAT (Mumbai) in the case of Telcordia Technologies Pvt. Ltd. v. ACIT (supra)also supports the plea of the assessee. We therefore accept the plea of the Assessee to reject this company as a comparable. (c) Celestial Labs Ltd. 42. As far as this company is concerned, the stand of the assessee is that it is absolutely a research development company. In this regard, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and market initially two Enzymes, Alpha Amylase and Alkaline Protease in India and overseas. The company is planning to set up a biotechnology facility to manufacture industrial enzymes. This facility would also include the research laboratories for carrying out further R D activities to develop new candidates' drug molecules and license them to Interested Pharma and Bio Companies across the GLOBE. The proposed Facility will be set up in Genome Valley at Hyderabad in Andhra Pradesh.' According to the learned D.R. celestial labs is also in the field of research in pharmaceutical products and should be considered as comparable. As rightly submitted by the learned counsel for the Assessee, the discovery is in relation to a software discovery of new drugs. Moreover the company also is owner of the IPR. There is however a reference to development of a molecule to treat cancer using bio-informatics tools for which patenting process was also being pursued. As explained earlier it is a diversified company and therefore cannot be considered as comparable functionally with that of the Assessee. There has been no attempt made to identify and eliminate and make adjustment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above there is no other detail in the TPO's order as to the nature of software development services performed by the Assessee. Celestial labs had come out with a public issue of shares and in that connection issued Draft Red Herring Prospectus (DRHP) in which the business of this company was explained as to clinical research. The TPO wanted to know as to whether the primary business of this company is software development services as indicated in the annual report for FY 06-07 or clinical research and manufacture of bio products and other products as stated in the DRHP. There is no reference to any reply by Celestial labs to the above clarification of the TPO. The TPO without any basis has however concluded that the business mentioned in the DRHP are the services or businesses that would be started by utilizing the funds garnered though the Initial Public Offer (IPO) and thus in no way connected with business operations of the company during FY 06-07. We are of the view that in the light of the submissions made by the Assessee and the fact that this company was basically/admittedly in clinical research and manufacture of bio products and other products, there is no clear basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.6.2010 to the TPO. We also find that in the decision referred to by the learned counsel for the Assessee, the Mumbai Bench of ITAT has held that this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the Assessee that this company is not comparable. (e) Accel Transmatic Ltd. 48. With regard to this company, the complaint of the assessee is that this company is not a pure software development service company. It is further submitted that in a Mumbai Tribunal Decision of Capgemini India (F) Ltd v. Ad. CIT 12 Taxman.com 51, the DRP accepted the contention of the assessee that Accel Transmatic should be rejected as comparable. The relevant observations of DRP as extracted by the ITAT in its order are as follows: In regard to Accel Transmatics Ltd. the assessee submitted the company profile and its annual report for financial year 2005-06 from which the DRP noted that the business activities of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 137 ITD 1/22 taxmann.com 96 (Mum.) wherein it was held as under:- 7.2 Lucid Software Limited It has been submitted before us that this company, besides doing software development services, is also involved in development of software product. The learned AR has tried to distinguish by pointing out that product development expenditure in this case is around 39% of the capital employed by the said company, and, therefore, such a company cannot be considered as tested party. Even as per the information received in response to notice under Section 133(6), the company has described its business as software development company or pure software development service provider. This information itself is very vague as the segmental details of operating revenue has not been made available to examine how much is the ratio of sale from software product and sale of software service and development. Looking to the fact that it has developed a software product named as Muulam which is used for civil engineering structures and the product development expenditure itself is substantial vis-a-vis the capital employed by the said company, this criteria for being taken as comparable party, gets v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing comparability analysis with the assessee company. The comparability of lnfosys Technology of the company as that of an assessee has been dealt with ITAT Delhi Bench in the case of 'Agnity India Technologies Private Limited' (ITA No.3856/Delhi/2010), wherein it was held that lnfosys is a giant in the area of development of software and it assumes all risks, leading to higher profit and cannot be compared with the company which is a captive unit of its parent company assuming only limited currency risk. In view of the above finding, we hold that the Infosys cannot be taken as a comparable for determining the arms length price in the case of the assessee. 7.5 Wipro Ltd.-IT Services Seqment ('Wipro'): This company is also a global IT Company having varieties of service and products and looking to the magnitude of its operations, sales and expenses, the same cannot be taken into consideration for comparability analysis. Moreover, 67% of its sales relates to its product which are sold on premium resulting into higher profitability, therefore, cannot be compared with the assessee company at all. There are several judgments of ITAT which have been referred in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct and services. Thus, on these facts, we are unable to treat this company fit for comparability analysis for determining the arms length price for the assessee, hence, should be excluded from the list of comparable parties. 15. In view of the above, the ld. counsel for the assessee fairly admitted that comparable company at Sl.No.6 viz., Flextronics Software Systems Pvt. Ltd. should be taken as a comparable, while comparable at Sl.No.24 viz., Tata Elxsi Ltd. should be rejected as a comparable. Following the earlier order of this Tribunal, we direct the TPO/A.O. to exclude the above mentioned 8 companies from the set of comparables. E-Zest Solutions Ltd. 48. The learned Authorised Representative of the assessee has submitted that the functional comparability of this company has been examined by the co-ordinate bench of this Tribunal in the case of Tesco Hindustan Service Centre (P.) Ltd. (supra) and accordingly this company is required to be excluded from the set of comparables. 49. On the other hand, the learned Departmental Representative has objected to the exclusion of this company and submitted that without examination of FAR Analysis, it cannot be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (India) (P) Ltd. in ITA No.1961(Hyd) of 2011, dated 23-11-2012 and prayed that in view of the above reasons, this company i.e. e-Zest Solutions Ltd., ought to be omitted from the list of comparables. 14.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparables by the TPO. 14.4 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the list of comparbales only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give a finding whether the services performed by this company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. (ii) In the case of E-Gain communications Pvt. Ltd. (2008-TII-04- ITAT-PUNE-TP), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The learned A.R. prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to obtain information us/133(6), the object of which is primarily only to supplement the information already available on record, but not, as rightly submitted by ld. Counsel for the assessee, to replace the information. If there is a complete contradiction between the information obtained u/s 133(6) and annual report then the said information cannot be substituted for the information contained in annual report. We, therefore, are in agreement with ld. counsel for the assessee that this company cannot be included as a comparable in the set of comparables selected by ld. TPO on account of clear contradiction between contents of annual report and information obtained u/s 133(6). 27. Rule 10D(3) specifies the information and documents that are to be maintained by a person who is entering into international transactions. These are official publications, published accounts or those which are in public domain except for agreements and contracts to which assessee is privy. Once the annual report of a company is for a year different from the financial year ending 31st March, then without doubt, it will cease to be a good comparable, unless the information received in pursuance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of each case in each year, the RPT filter is being used / approved. Learned Counsel fairly admitted that Co-ordinate Bench in the case of ITO v. Sunquest Information Systems (India) (P.) Ltd. [2015] 61 taxmann.com 81 (Bang. - Trib.) a (Sunquest) has followed the other decisions on the issue and held that in various other cases companies having related party transaction upto 15% of total revenues can be considered. Considering the above, it was contended that the Revenue's Ground No. 2 may have to be allowed and the companies rejected by Ld.CIT(A) has to be reconsidered. At the same time, Learned Counsel also submitted that the companies which are functionally not similar, having RPT of more than 15% and high turnover cases require reconsideration and made various submissions on the issue. Ld. DR also made submissions on the filters of RPT, turnover etc., and comparability of each of the companies. Accordingly, a consistent view has been taken by the Tribunal that in normal circumstances the tolerance range of RPT should not exceed more than 15%. Hence, we direct the TPO/A.O. to exclude these two companies from the set of comparables. Helios Matheson Information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were available. Therefore, it was held that this company was not comparable with that of the assessee-company. Similar observations have been made in the following decisions: Bearing Point Business Consulting (P.) Ltd.'s case (supra) CSR India (P.) Ltd.'s case (supra) LG Soft India (P.) Ltd.'s case (supra) Mercedes Benz R D India (P.) Ltd.'s case (supra); NDS Services Pay-TV Technology (P.) Ltd.'s case (supra) Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable. (xii) Thirdware Solution Ltd., This company was excluded from the list of comparables by this Tribunal in the case of LSI Research (India) (P.) Ltd. (supra) following the decision of Pune Bench of Tribunal in the case of E-Gain Communication (P.) Ltd. v. ITO [2009] 118 ITD 243 (Pune - Trib.) on the ground of functional dissimilarities. The Pune Bench of the Tribunal observed that this company had income from other sources like interest and deposits which jacked up the profit margin o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the invoice / bills. However, the Assessing Officer has not conducted a proper enquiry and verification regarding the nature of expenditure incurred by the assessee from the invoices / bills. Accordingly in view of the facts and circumstances of the case, we set aside this issue to the record of the Assessing Officer for re-adjudication of this issue after verification of the invoices / bills as well as in the light of the decision of the Special Bench of the Tribunal in the case of Amway India Enterprises v. Dy. CIT [2008] 111 ITD 112 (Delhi). 71. Ground No.13 - The learned Authorised Representative of the assessee has stated at Bar that the assessee does not press Ground No.13 and the same may be dismissed as not pressed. The learned Departmental Representative has raised no objection if the Ground No.8 is dismissed. Accordingly, Ground No.13 of assessee's appeal is dismissed being not pressed. 72. Ground No.14 is regarding levy of interest under Section 234A 234B which are mandatory and consequential in nature. 73. Ground No.15 is general in nature and not pressed. Accordingly, this ground is dismissed as not pressed. 74. Ground No.16 is regarding le ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
