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2018 (7) TMI 2074

..... ssessee has to succeed. See M/s Triology E-Business Software Ltd. v. DCIT [2013 (1) TMI 672 - ITAT BANGALORE]. Exclusion of comparable - HELD THAT:- Turnover filter is very important and the companies having a turnover of ₹ 1 Crore to ₹ 200 crores have to be taken as a particular range and the assessee being in the range having turnover of ₹ 8.15 crores, the companies which also have turnover of ₹ 1 to ₹ 200 crores only should be taken into consideration for the purpose of making TP study. Companies functionally dissimilar with that of assessee need to be deselection. Sufficient reason to invoke Section 260-A - We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an 'Arm's Length Price' in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is n .....

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..... le by following the decision in the case of Nethawk Network Pvt. Ltd V/s. ITO even when the said decision is not applicable to instant case? (4) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not accepting the CG-VAK Software & Exports Ltd as a comparable by following its earlier decision in the case of M/s. Cisco Systems Pvt. Ltd even when same is not applicable to facts of present case?" 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Regarding substantial question of law No.1: "25. As for inclusion of Forex loss/income while working out the operating margin, we are of the opinion that the assessee has to succeed. In the case of M/s Triology E-Business Software Ltd. v. DCIT [2011] 140 ITD 540 it was held as under, with regard to forex gain/loss. ** ** ** 26. Before parting, it will be inappropriate, if we do not deal with the decision of Bombay Bench of the Tribunal in the case of M/s Capgemini Ltd., v. ACIT [2014] 147 ITD 337 strongly relied on by the learned DR. No doubt, it was held by the Tribunal in the above decisi .....

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..... hey do not satisfy the test of comparability. Companies operating on large scale benefit from economies of scale, higher risk taking capabilities, robust delivery and business models as opposed to the smaller or medium sized companies and therefore, size matters. Two companies of dissimilar size therefore, cannot be assumed to earn comparable margins and the impact of difference in size could be removed by a quantitative adjustment to the margins or price being compared if it is possible to do so reasonably accurately. He submitted that size as one of the selection criteria has also been approved by various Benches of the Tribunal, in the following cases: 8.1 He further submitted that size as a criteria for selection of comparables is also recommended by OCED in its TP guidelines. The observation of OCED in para 3.43 of the chapter on guidelines reads as follows: ** ** ** 8.2 The learned counsel for the assessee submitted that similar observations were also made by ICAI in para 15.4 of TP guidance note. He submitted that TPO's range of ₹ 1 crore to infinity has resulted in selection of companies like M/s Infosys which is having a turnover of ₹ 9,028 crores which is .....

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..... rnover of ₹ 1 to ₹ 200 crores only should be taken into consideration for the purpose of making TP study." The appeal filed by the Revenue against the judgment of the Hon'ble Tribunal in the case of Genisys (P.) Ltd. v. Dy.CIT [2011] 64 DTR 225 has been considered by this Court in ITA No.17/2012 and the same has been dismissed on 09.07.2018 as no substantial questions of law arose for consideration. Regarding substantial question of law Nos.3 and 4: "21. As for M/s Bodhtree Consulting Ltd., learned DR has not rebutted the argument of the assessee that it was software product company and functionally different from the assessee which was into software development services. In the case of M/s Cisco System Pvt. Ltd. v. DCIT (ITA No.271/Bang/2014 dated 14-08-2014 which was also a company rendering software development services with regard to adoption of M/s Bodhtree Consulting Ltd., as a comparable, it was held as under at para-20 of the order; 20. We have perused the orders and heard the contentions. There is no dispute that the M/s.Cisco Systems India (P.) Ltd. (supra) is an affiliate of the assessee company and engaged in similar business like that of the a .....

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..... y the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are found to be devoid of merit and the same are liable to be dismissed. 57. We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an 'Arm's Length Price' in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke Section 260-A of the Act before this Court. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs." 5. In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question of law arises for consideration .....

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