TMI Blog2019 (11) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... RI PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Appellant : Shri P. K. Prasad, Advocate and Umashankar For The Respondent : Shri C. H. Sundar Rao, CIT(DR) ORDER Per PAVAN KUMAR GADALE, JM: The assessee has filed the appeal against the final assessment order dated 26/9/2017 passed u/s 143(3) r.w.s 144C(13) of the Income-tax Act,1961 ['the Act' for short] passed in pursuance to the directions of the DRP vide order u/s 144C(15) No.243/DRP/BNC/76-77 dated 23/08/2017. 2. At the time of hearing, ld. AR submitted that the Additional grounds of appeal filed on 7/6/2018 and 8/6/2018 are not pressed and made endorsement in the grounds of appeal. Whereas in the main grounds of appeal, the ld. AR has not pressed ground No.2 and the effective grounds of appeal are grounds No.1, 3, 4, 5 6 which are as under: 1. That the learned Deputy Commissioner of Income Tax, Circle 2(1)(1), Bangalore ( Assessing Officer or AO ) and the learned Dispute Resolution Panel ( learned Panel ) erred in upholding the rejection of Transfer Pricing (TP) documentation by the learned D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 48,33,37,510/-. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) were issued. In response, the ld. AR appeared from time to time and furnished the details. The AO found that the assessee has international transactions in the relevant financial year exceeding ₹ 15 crores and with prior approval of the Principal CIT, the matter was referred to the TPO. TPO observed that the assessee has management functions, software service functions and considered the financial results and PLI on operating cost/operating revenue as under: The TPO also dealt on segmental financials at para 3.1, 3.2 and foreign exchange loss in operating nature. Whereas in the said financial year the assessee has international transactions which are as under: 3. THE ENTITY LEVEL FINANCIAL RESULTS FOR THE F Y 2012-1 COMPUTED BY THE TPO Particulars Amount Total Revenue 314,94,32,203 Less: Other income 1,20,09,335 Ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.16 2 Microgenetic Systems Ltd. 16.34 3 Jindal Intellicom Ltd. -3.01 4 Hartron Communications Limited(seg) 44-07 5 Microland Ltd. 8.62 6 Capgemini Business Services (India) Pvt. Ltd. -26.78 7 Tech Mahindra Ltd. (Seg) 22.27 8 E4E Healthcare business private limited 17.26 9 Infosys B P O Ltd. 29.28 AVERAGE 20.64 Finally, TPO determined adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n IT(TP)A No.2531/Bang/2017 dated 23/5/2018 in page 6 para.11 11. As far as the objection by the Assessee that this company owns intangibles, it is seen from the order of the TPO that the intangibles are nothing but Operating systems, office tools, development tools, testing tools etc., that are used in the process of rendering SWD services by the IT(TP)A No.2531/Bang/2017 Assessee and therefore cannot be the basis to hold that this company is functionally not comparable with the Assessee. We agree with this reasoning of the TPO which was confirmed by the DRP. 8. The ld. AR in reply submitted that the above decision relied by the Revenue was considered in the decision of CGI Information Systems Management Consultant Pvt. Ltd. at page 14 para 9 which is as under: 9. The learned AO and the learned DRP have erred in law and on facts in upholding the actions of the TPO by including Larsen Toubro Infotech Ltd. as a comparable to the Appellant on the ground that it is functionally comparable, whereas this company should have been excluded on the grounds that it is functionally dissimilar to the Appellant and has significant intangib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusion of comparable Persistent Systems Ltd., in the case of M/s.Metric Stream Infotech (India) Pvt. Ltd (supra) is a subsequent decision where technical and financial profile has been considered. Therefore, we, considering the judicial decisions and the material filed in the paper book and supported with the annual reports, are of the considered view and follow judicial precedent and Restore the disputed matter to the file of the TPO to verify/examine and exclude from the list of comparables for determination of ALP. Further ld. AR argued the comparable M/s.Akshay Software Technologies Ltd. be included where the adopted margin is 8.91% and functionally similar to the assessee profile. The ld. AR referred to assessee s own case in ITA 1289/Bang/2014 at page 3 the comparable was included in the final list of comparables by the TPO and also in the case of M/s.Labvantage Solution Pvt. Ltd. in ITA 1051/Cal/2015 the Tribunal has included the above comparable referred at page 29 at para. 8.5 which read as under: 8.5. Inclusion of Akshay Software Technologies Ltd We find that this company had reported NCP of 10.38%. It is not in dispute that the assessee is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product. Under these circumstances, we find substance in the contention of the Ld. A.R. that Akshay Software should have been accepted as comparable to bench mark the international transaction of the assessee also because in the assessment year 2007-08, the Ld. T.P.O himself has accepted the company as comparable. We accordingly direct the Ld. T.P.O to accept Akshay Software as comparable to determine the Arms Length Price of the assessee. In view of the aforesaid findings and judicial precedent relied upon, we direct the ld TPO to include the aforesaid comparable i.e Akshay Software Technologies Ltd as functionally comparable with the assessee company. Further, ld. AR also argued for inclusion of comparable M/s.Spy Resources Pvt. Ltd., where functionality is similar and referred to Annual Report at pages 71 and 74 and also supported the stand relying on the decision in the case of M/s.WM Global Technology Services (India) P.Ltd. vs. ACIT in IT(TP)A No.1963/Bang/2017 dated 28/2/2018 where the Tribunal has held at para.21 page 21 : 21. We have heard the rival contentions and perused the material. It is an admitted position that the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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