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TMI Blog2017 (4) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... ['the Act' for short] dated 292/01/2015 for the assessment year 2010-11. 2. The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is wholly owned subsidiary of SMS Mauritius and SMS US. It is engaged in the business of provision of marketing data management services to customers of SMS USA. It has filed return of income for assessment year 2010-11 on 24/09/2011 declaring total income of Rs. 25,55,666/-. The assessee-company also reported the following international transaction with its AE in Form 3CEB: Sl. No. Type of transaction Amount 1 Provision of software development services 109,36,86,188 2 Reimbursement of expenses received by SMS India 69,16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 14,29,87,975/-. The TPO accepted the TNMM adopted by the assessee-company but rejected the transfer pricing study report as according to the TPO, information used by the assessee-company is not reliable. The TPO proceeded to identify different set of comparable entities for the purpose of determining the ALP. While doing so, the ld. TPO had applied the following filters: * Use of current year data only; * Companies whose IT enabled Services income is less than Rs. 1 crore excluded. * Companies whose service income is less than 75% of the total operating revenues were excluded. * Companies who have more than 25% related party transactions (sales as well as expenditure combined) of the sales were excluded. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the DRP contending inter alia that the TPO was not justified in rejecting TP study report and ought to have applied upper limit of turnover filter of Rs. 2 crores to all the comparables, ought not to have rejected the employee cost filter of 25% of revenue. It was also contested the doubtful debts should be treated part of operating cost and risk adjustment should have been granted to the assessee-company as it is only on captive service provider to its only AE. 8. The DRP, after considering the submissions of the assesseecompany issued directions dated 12/12/2014 wherein the DRP upheld rejection of TP study report and upheld the contention that companies whose turnover is more than Rs. 200 crores should be exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bang/2013 dated 06/04/2016, to which one of us is party i.e. Accountant Member is the author. The relevant para. is extracted below: "24. We now deal with each of these companies. Before adverting to the comparables, it is worth mentioning here that there are divergent decisions of the Tribunal whether high turnover is a relevant for accepting/rejecting a comparable in the case of a service company. For example, the Mumbai bench of the Tribunal in the case of Capgemini India Pvt Ltd. Vs. ACIT (TS 45 ITAT 2013(Mum)(TP) held that the turnover was relevant only to the manufacturing concerns not to the service oriented companies. On the other hand, the coordinate (Bangalore) bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate (Bangalore) bench of the Tribunal in the case of Genesis Integrating Systems (India) Pvt. Ltd. (cited supra) held that turnover is a relevant factor for accepting/rejecting the comparable. However, without going into the turnover factor, we hold that Infosys Ltd., cannot be considered as comparable with that of the assessee-company since Infoysis Ltd. is a giant in the area of software development and it assumed all risks leading to higher profit. On the other hand, the assessee-company is a captive unit of its parent company in US and assumed only limited risk. In the similar circumstances, the Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P.Ltd. held that Infosys cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 154 petition, DRP vide order dated 26/02/2015 had directed the AO to reduce this expenditure from export turnover as well as total turnover for the purpose of calculating benefit u/s 10A in the light of the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Tata Elxsi Ltd. (349 ITR 98). The AO passed modification order to the assessment order dated 31/3/2015 giving effect to the DRP direction. 14. Being aggrieved, revenue is in appeal before us in the present appeal. The revenue raised the following grounds of appeal: 15. The issue sought to be raised in the above grounds is covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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