9911796707
TMI Blog2017 (6) TMI 1295X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue, wherein the following grounds of appeal have been raised:- 1. The order of the Dispute Resolution Panel u/s 144C(5) of the Income-tax Act is contrary to law and to the facts and circumstances of the case. 2. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel has erred in including CAT Technologies Ltd., R S Software (India) Ltd in the final set of comparables. 3. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel has erred in excluding FCS Software Ltd., Infosys Technologies Ltd. from the final set of comparables. 4. For this and such other reasons as may be urged at the time of hearing, the order of the Dispute Resolution Panel may be vacated and that of the Assessing Officer be restored. 4. The grounds of appeal No.1 and 4 are general in nature and hence, the same are dismissed. 5. The issue in ground of appeal No.2 is against inclusion of two concerns in the final list of comparables i.e. CAT Technologies Ltd. and RS Software (India) Ltd. Further, the Revenue is aggrieved by the order of Dispute Resolution Panel (DRP) in excluding FCS S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 7. In reply to the show cause notice, the assessee carried out fresh search and requested for inclusion of certain concerns totaling seven. However, the TPO rejected all the said concerns and finally selected 13 companies in the final set of comparables whose average of adjusted PLI worked out 24.82%. The PLI of assessee for the year under consideration was 15.21% and consequently, the TPO proposed an adjustment of Rs. 10,92,90,108/-. The Assessing Officer issued draft assessment order to the assessee, against which the assessee filed objections before the DRP. The DRP directed exclusion of FCS Software Solutions Ltd. and Infosys Systems Ltd. The DRP also directed the inclusion of CAT Technologies Ltd. and RS Software (India) Ltd. in the final set of comparables, consequent to which the TPO re-worked the average of adjusted PLI of final set of comparables at 18.99% and the TP adjustment of Rs. 10.9 crores as earlier proposed was deleted. The Assessing Officer consequently, passed the assessment order under section 143(3) r.w.s. 144C(13) of the Act. 8. The Revenue is in appeal before us against the directions of DRP. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Infosys Technologies Ltd. and FCS Software Solutions Ltd. were held to be product companies which have functionally not comparable to the concerns engaged in providing software services to its associated enterprises, by the Tribunal in TIBCO Software India Pvt. Ltd. Vs. DCIT and vice versa in ITA No.276/PUN/2015 & ITA No.334/PUN/2015 and CO No.04/PUN/2016, relating to assessment year 201011, order dated 31.01.2017. Following the same parity of reasoning, where the assessee before us is also a provider of software services, the two concerns i.e. FCS Software Solutions Ltd. and Infosys Technologies Ltd. have to be excluded from the final set of comparables as they are functionally not comparable. 13. Now, coming to the directions of DRP in including CAT Technologies Ltd. and RS Software (India) Ltd. in the final set of comparables. The said concerns were not picked up by the assessee in its TP study report. However, when the TPO changed the filters and asked the assessee to apply single year data, the assessee carried out fresh search and included both these concerns along with other companies as comparable. The concern CAT Technologies Ltd. was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 90% of the receipts of the said company were from software development and consulting services. Hence, the said concern is functionally comparable to the assessee and is to be included in the final set of comparables. 16. In respect of RS Software (India) Ltd., the first contention raised by the assessee before the DRP was that based on the rulings of Hon‟ble High Court of Punjab & Haryana in CIT Vs. Quark Systems Pvt. Ltd. in ITA No.594 of 2010, judgment dated 16.05.2011, the assessee should be allowed to select certain comparable companies during the proceedings. It was further pointed out from the annual report of the said concern that the company had more than 75% of the revenue from computer software development services. The relevant extract of the Profit and Loss Account was filed before the DRP and it was pointed out that without prejudice to the objections of export earning filter, the said concern satisfied 75% export earning filter. The DRP directed the inclusion of the said concern in case the filters approved by the DRP were satisfied. The TPO has not given any adverse comments on the satisfaction of the fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include CAT Technologies Limited and RS Software India Private Limited in the final set of comparables. b) directed to exclude FCS Software Limited and Infosys Technologies Limited from the final set of comparables 2. Without prejudice to the above, on the facts and in the circumstances of the case, the Hon'ble DRP has:- a) erred on facts and in circumstances of the case and in law by inappropriately applying filter of rejection of companies with less than 75% earnings from exports b) erred in accepting certain inappropriate companies as comparable to the Appellant c) erred in rejecting certain other companies identified by the Appellant which can be considered as comparable d) erred on the facts and circumstances of the case and in law by not making any adjustments for difference in risk profile of comparable companies vis-à-vis the Appellant and thereby comparing the operating margins of the comparable companies assuming high business risk with the Appellant's captive risk mitigated operations. 20. Further, the learned Authorized Representative for the assessee pointed out that the grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
