TMI Blog2018 (6) TMI 1568X X X X Extracts X X X X X X X X Extracts X X X X ..... ables and thus in view of proviso to Sec.92C(2) of the Act, no addition would survive and therefore even other grounds raised would be rendered infructuous. We therefore direct the AO to re-compute the margins of comparables by excluding E-Infochips Limited from the list of comparables and thereafter compute the TP adjustment, if any, in the hands of assessee. Thus, the grounds of the assessee are allowed for statistical purposes. - ITA No.486/PUN/2016 - - - Dated:- 29-6-2018 - SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM For the Appellant : Shri Chinmay Nagawat Shri Vinay Baldota For the Respondent : Shri Rajeev Kumar. ORDER PER ANIL CHATURVEDI, AM : 1. This appeal filed by the assessee is emanating out of the order of Dy.Commissioner of Income Tax, Circle 5, Pune dt.30.12.2015 for the assessment year 2011-12. 2. The relevant facts as culled out from the material on record are as under : Assessee is a company stated to be engaged in the business of research and development services to Redknee Inc, in order to assist it in designing and developing software products and rendering technical support services. Assessee filed its original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ) in pursuance of the directions of the learned Dispute Resolution Panel, Pune ( DRP ) for the Assessment Year ( A Y ) 2011- 12 on the following among other grounds: 1. General : The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in making an adjustment amounting to INR 1,71,78,297/- to the value of international transactions entered into by the Appellant with its associated enterprise ( AE ) with respect to provision of software development support services. 2 . Erroneous selection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and circumstances of the case in confirming the following companies as the comparable companies: 2.1 E Infochips Limited 2.2 Persistent Systems Limited 2.3 Sasken Communication Technologies Ltd 2.4 Acropetal Technologies Ltd 3. Erreneous rejection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in rejecting Helios Matheson Information Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Redknee Inc, 2560 Matheson Blved East, Suite 500, Mississauga, Ontario L4@4Y9, Canada. Reimbursement of expenses incurred by the Company on behalf of AE 3,05,178 TNMM As per the TPO Report, it was noticed that assessee had selected five companies as comparables and had followed TNMM method for bench marking analysis. The five comparables selected by the assessee were rejected by the TPO and after considering the submissions of the assessee, considered the following companies as comparables. S.No. Name of Company Unadjusted PLI Adjusted PLI 1 Akshay Software Technologies Ltd. 0.89 4.65 2 Acropetal Technologies Ltd. 21.78 21.78 3 Infosys Technologies Ltd. 43.74 47.73 4 LGS Global Limited 13.57 14.19 5 L T Infotech 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofitability of EInfochips Limited, it can be observed that profitability shows an abnormal trend. It has shown operating loss of 18.12% in 2009 and thereafter the profitability of E-Infochips Limited has risen to 56.44% while the operating cost has remained more or less constant. He further submitted that during the year it had earned abnormal profit of 58.46% as per the TPO s calculation. He further submitted that E-Infochips Limited was functionally different from the assessee and therefore it cannot be taken as comparable. In support of his contention that E-Infochips Limited is not comparable, Ld.A.R. pointed to its Annual Report placed at pages 690 to 758 of the Paper Book. From the Schedule of Inventories at page 715, he pointed that it carries inventories of raw-material, inventories of finished goods traded and inventories of finished goods. He thereafter pointed to the notes to account to demonstrate that it is engaged into hardware sales and purchases and manufacturing printed circuit electronic boards. He thereafter pointed to page 732 of the Paper Book which contains the information about the Primary Segment, wherein it was stated that it is primarily engaged in Softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover of trading account is not substantial and therefore it cannot be considered to be not comparable to assessee. He further pointed to the findings of the TPO, wherein he has held that there is no material change in the revenue composition as more than 70% of the revenue are from software services which clearly means the income of E-Infochips Limited from software services to be more than 50% as set by the assessee himself. He further pointing to the decision of Kolkata Tribunal in the case of M/s. Philips India Limited (supra) submitted that there is no discussion with respect to software development and therefore the matter may be sent back to TPO. With respect to the adjustment on account of risk, he submitted that the ground was not pressed before DRP and in A.Y. 2010-11, the issue was decided against the assessee. He pointed to para 16 of the DRP s order. He thus supported the order of lower authorities. 8. We have heard the rival submissions and perused the material on record. In the present appeal, assessee is mainly aggrieved by the inclusion of E-Infochips Limited as comparable. It is assessee s submission that if E-Infochips Limited is excluded, then international ..... X X X X Extracts X X X X X X X X Extracts X X X X
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