TMI Blog2019 (2) TMI 1731X X X X Extracts X X X X X X X X Extracts X X X X ..... any basis. How to compute the working capital adjustment and the extent of adjustment to be granted to a particular assessee would depend on the facts of each individual case - IT(TP)A Nos.1418 & 2735/Bang/2017 Assessment year : 2013-14 - - - Dated:- 27-2-2019 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member Appellant by : Shri Narendra Jain, Advocate Respondent by : Shri Pradeep Kumar, CIT(DR)(ITAT), Bengaluru. ORDER N.V. Vasudevan, Both these are appeals by the assessee against the final order of assessment dated 21.04.2017 of the Dy. Commissioner of Income-tax I/c, Circle 4(1)(2), Bengaluru passed u/s. 143(3) r.w.s. 144C(13) of the Act. 2. The appeal in ITA No.1418/Bang/2017 was filed by the assessee against the order referred to in the earlier para on 19.06.2017 wherein Form 36 and Grounds of Appeal was signed by the Country Controller of Finance Administrative Operations of the assessee. Later on, the assessee realised that before the Tribunal Form 36B and grounds of appeal should be signed by the Director where there is no Managing Director. Accordingly, another appeal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Representative has prayed and submitted that the delay if any should not be condoned, we are of the view that the question of delay is only a technical as the assessee has filed the appeal within the time on 1.3.2017 though the same was defective. Accordingly, we hold that the appeal filed is within time and in any event there was a reasonable cause for the delay in filing the appeal. 4. In view of the above conclusion, we are of the view that the appeal which requires adjudication is IT(TP)A No.2735/Bang/2017 and therefore the appeal in ITA No.1418/Bang/2017 is dismissed as superfluous and infructuous. 5. As far as the merits of the appeal filed by the assessee is concerned, the issue raised therein is with regard to determination of arm's length price (ALP) in respect of international transaction of rendering software development services by the assessee to its Associated Enterprise (AE) u/s. 92 of the Income-tax Act, 1961 [ the Act ]. As far as determination of ALP of international transaction is concerned, it is not in dispute that TNMM is the most appropriate method of determination of ALP and that the Profit Level Indicator (PLI) chosen for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.83% Adjusted mean margin after working capital adjustment 18.18% Operating Cost (A)* 81,90,91,343 Arm's length price - 119.05% of operating cost (B) 97,50,88,448 Total Operating Revenue (C) 92,56,57,818 Short fall being Adjustment u/s 92CA (B - C) 4,94,30,630 7. Consequently, a sum of ₹ 4,94,30,630 was added to the total income of the assessee on account of shortfall in the price charges in the international transaction. 8. The assessee filed objections before the DRP. The DRP excluded ICRA Techno Analytics from the 7 comparable companies chosen by the TPO and retained the other comparable companies chosen by the TPO. 9. In this appeal, the assessee has prayed for exclusion of 3 more comparable companies out of 6 companies retained after the order of DRP. The 3 companies which the assessee seeks to exclude are L T Infotech Ltd., Persistent Systems Ltd. and Tech M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is company by application of RPT filter. 14. The ld. Counsel for the assessee drew our attention to ground No.13 of the grounds of appeal of the assessee as follows:- The ld. AO/learned TPO/Hon'ble DRP has grossly erred in rejecting companies that ought to have been included as comparable to the Appellant: - Akshay Software Technologies Pvt. Ltd. - CAT Technologies Ltd. - Cigniti Technologies Ltd. - Sasken Communication Technologies Ltd. - FCS Software Solutions Ltd. - Lucid Software Ltd. - Maveric Systems Ltd. - Thinksoft Global Services Ltd. - Ybrant Digital Ltd. 15. It was submitted that the assessee seeks to include the following 3 companies viz., Lucid Software Ltd., Maverick Systems Ltd. and Thinksoft Global Services Ltd. These companies were regarded as not comparable by the TPO for the reason that no data relating to results of these companies were available in the public domain. Our attention was drawn by the ld. Counsel for the assessee to page Nos. 764 to 828 of the assessee's PB which gives the financial results of these companies as available in the publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it will not matter whether the company develops complete software for its client e.g. develops a final product as per demand of the client or develops only some software modules, as per the requirements of its client, the function remains same. However, a company needs to be considered in the business of Software Products, if it is itself developing and selling the products developed by it as then it owns the TPR of the product and exploits it by selling the product/software license to different customers. In the case of M/s. Akshay, as discussed supra, it is operating in multiple segments including software products, however segmental data of the same is not available. For ERP products, its annual report refers to 'support and maintenance' and there isn't any detail about the nature of this activity as to whether the assessee is into software development activities relating to ERP or just offering IT enabled services in relation to the said product. The reliance of the assessee on Rangachary Report is also misplaced as the issue under consideration is Software Development services and the same has not been defined therein. Further purpose of the said report was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment to be granted to a particular assessee would depend on the facts of each individual case. We, however, observe that the factors mentioned by the DRP in its order could be of relevance only in deciding the quantum of working capital adjustment. We, therefore, set aside the finding of the DRP that the assessee is not to be granted working capital adjustment and in the interest of justice, we direct the TPO to examine, recompute and grant the assessee's working capital adjustment as per law after affording the assessee adequate opportunity of being heard in the matter and to file details / submissions required. Consequently Ground No.8 of assessee's appeal is allowed for statistical purposes. 21. In the light of the aforesaid decision of the Tribunal rendered against a similar order of the DRP, we are of the view that it would be just and proper to direct the TPO to allow working capital adjustment. We hold and direct accordingly. 22. All other grounds relating to transfer pricing was not pressed for adjudication and accordingly those grounds are dismissed as not pressed. 23. In the result, the appeal of the assessee is partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
