TMI Blog2019 (1) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... RDER PER S. RIFAUR RAHMAN, AM: This appeal filed by the assessee is directed against the order of CIT(A) 5, Hyderabad, dated, 21/08/2017 for AY 2005-06. 2. Brief facts of the case are, assessee a wholly owned subsidiary of Virtusa Inc. USA, and derives income from providing software development and maintenance services to its parent company, filed its return of income for the AY 2005-06 showing income at Nil, after claiming deduction u/s 10A for ₹ 114,281,750/-. 2.1 Since the international transactions entered into by the assessee with its AE exceeded ₹ 5 crores, the AO had made a reference to the TPO u/s 92CA(1) of the Act. The TPO vide his order date 31/03/2008, passed order u/s 92CA(3) determining the ALP of such international transactions entered into with its AE, at Rs. (Rs. 104,34,80,489 ₹ 95,39,59,994) towards adjustment u/s 92CA at ₹ 8,95,20,945/-. For analysing the arm s length margin the TPO adopted TNMM method and had identified the following 17 companies as comparables: Sl. No. Name of the Company WC adjusted 1 iG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparales chosen by him; Exensys Software Solutions Ltd, Infosys Technologies Ltd and Sat yam Computer Services Limited are to be excluded. 5. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal: 1. The learned CIT(A) has erred both in law and on facts of the case. 2. The learned CIT(A) has erred in excluding companies having higher turnover (Infoysys Technologies Limited) which is contrary to rule 10B(2) which prescribes comparability of international transactions with uncontrolled transactions with reference to functions performed, asset employed and risk assumed. 3. The learned CIT (A) failed to appreciate that- i) In service industry there is no linkage whatsoever between the profits and the turnover ii) Unless and until it is brought on record that the turnover of such companies, had undue influence on the margins, it is not the general rule to exclude the same; there is no economic rationale backed up with any statistical analydis to say that higher turnover companies or companies with brand have better margins than low turnover companies; iii) In the business model used in softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Maersk Global Centres (India) Private Limited (TS-74-ITAT-2014 (Mum)-TP), decision of ITAT Mumbai Bench in the case of Willis Processing Services Pvt Ltd (30 Taxmann.com 350) and Capgemini India Pvt Ltd (33 Taxamann.com 5). 6.1 Relying on the decision of ITAT in the case of Maersk Global Centers (India) Pvt Ltd, the revenue stated as under: 4. As can be seen from above, arithmetic mean being the measure of central tendency as adopted in this case, it would even out the effect of comparables with higher and lower margins. It is submitted that the CIT(A) removed the comparable merely on the ground of high turnover and did not specify how the turnover had bearing the profit margin. It is humbly submitted that removal of comparables which perform similar functions and which satisfy all filters could not be removed merely on the ground of high turnover because such removal is not automatic nor does it have the sanction of any provision of the Act. 5. In light of the above, the appeal may kindly be allowed.A humble request is also made in this regard that as there are decisions of other coordinate benches of ITAT and higher Courts on this matter stating that tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis Integrating Systems India P. Ltd., ITA No. 1231/Bang/2010. 10. Brigade Global Services Pvt. Ltd., ITA No. 1449/H/10. 11. Frost Sullivan India Pvt. Ltd., 50 SOT 517 (Mum.) 2.2 The learned DR, on the other hand, supported the orders of the DRP and TPO in so far as selection of the aforesaid company as comparable. 2.3 We have heard the submissions of the parties and perused the material on record. The issue of comparability of Infosys to companies which are merely captive service provider is no longer RES INTEGRA as different benches of the Tribunal have held that Infosys being a giant company and into diversified activities cannot be treated as comparable. In a recent decision in case of Intoto Software India Pvt. Ltd., (supra), the Hyderabad Bench while considering the comparability of Infosys Technologies Ltd held as follows: 20. We have heard both the parties. We find that Infosys Technologies Ltd., though, is into the similar business of the assessee as software development, cannot be considered as a comparable to any other companies which are also involved in similar activities. It is not only a giant company but is also engaged in developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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