TMI Blog2019 (12) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set aside the impugned order dated 28.01.2016 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Act qua the assessment year 2007-08 on the grounds inter alia that :- On the facts and circumstances of the case and in law, the learned Assessing Officer CAO') has erred in passing the assessment order under section 254/143(3) read with section 144C of the Income-tax Act, 1961 ('file Act') after considering the adjustments made by the learned Transfer Pricing Officer ('learned TPO') in his order passed under section 254 read with 92CA(3) of the Act and subsequently confirmed by the Hon'ble Dispute Resolution Panel ( DRP') Each of the ground is referred to separately, which may kindly be considered independent of each other That, on the facts and circumstances of the case and in law 1. The learned TPO / AO / DRP have erred m making an addition of INR 180,674,599 to the total income of the Appellant in respect of International transactions pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The learned TPO / AO / DRP have erred in not making suitable adjustments to account for differences in the risk profile of the Appellant vis-a-vis the comparable companies 10. The learned TPO / AO have erred in not passing an assessment order in conformity with the directions of the Hon'ble DRP in respect of certain items (viz. treatment of fringe benefit tax and computational errors while computing operating margins of the Appellant and comparable companies), thus acting in contravention of provisions of section 144C(10) of the Act. 11 The learned AO has grossly erred In initiating penalty proceedings under section 271 (1)(c) of the Act 12. The learned AO has erred in levying interest under section 2348 and 234C of the Act while completely disregarding the provisions of the Act and the judicial precedence. 3. Briefly stated the facts necessary for adjudication of the controversy at hand are : M/s. Agilent Technologies (International) Pvt. Ltd., the taxpayer is a wholly owned subsidiary of Agilent Technologies International Europe, BV and is into the business of providing Software Development (IT) Services and Information Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating cost 370,821,101 Price charged in the international transactions 321,644,804 Shortfall being adjustment u/s 92CA 49,176,297 9.2 IT Enabled services segment : Operating Cost 1,293,732,265 Arms Length Margin 30.05% of the Operating Cost Arms Length Price (ALP) 1,682,498,810 Price received vis- -vis the Arms Length Price : The price charged by the taxpayer to its Associated Enterprises is compared to the Arm s Length Price as under :- Arms Length Price as computed above 1,682,498,810 Price shown in the international transactions 1,453,039,699 Shortfall being adjustment u/s 92CA 229,459,111 10. In view of the same, following adjustments can be made :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnologies Ltd (Seg) 27.87% 2 Aditya Blrla Mincas Worldwide Ltd (Earlier Transworks Information Services Ltd 12.75% 3 Allsec Technologies Ltd 27.44% 4 Appollo Healthstreet Ltd (-)9.99% 5 Cosmic Global Ltd 13.1% 6 Datamatics Financial Services Ltd 10.34% 7 Flextroncs Software Systems Ltd. (Seg) 7.8% 8 Genesys International Corporation Ltd 10.28% 9 HCL Com net Systems Services Ltd (Seg.) 45.83% 10 I C R A Techno Analytics Ltd (Seg.) 13.15% 11 Informed Technologies I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. ITA 124/2018, H S Software Development and Knowledge Management Centre Pvt. Ltd., New River Software Services Pvt. Ltd. ITA 924/2016, Pentair Water India Pvt. Ltd. vs. CIT ITA 18/2015 Everest Business Advisory India (P) Ltd. ITA No.41/Del/2013 1191/Del/2013. 14. When we examine the letter issued by the Wipro to ld. TPO pursuant to the notice issued u/s 133 (6) of the Act, available at page 989 of the paper book, it is categorically mentioned in para 4 that BPO segment of Wipro covers various activities i.e. IT Services and product. Furthermore, when we examine summary of segmental profit loss for FY 2006-07, available at page 991 of the paper book, Wipro has sold goods worth ₹ 63,13,70,75,351/-. Furthermore, when we examine TPO s order at page 92, external page 139 of the appeal set, it has come on record that Wipro has acquired 9 companies detailed as under :- (i) mPower Software Services Inc. and subsidiaries (100% stake acquired in December 2005) - Customer Related Intangibles ₹ 513.13 million (ii) BVPENTE Beteiligungsverwaltung GmbH and subsidiaries (100% stake acquired in December, 2005) - Customer Related intangibles - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensative on a cost plus mark-up basis, having significant customer related, market related and technology related intangibles and also into acquisitions during the year under assessment. 18. Coordinate Bench of the Tribunal in case of [PAGE 61 OF case laws PAPER BOOK] examined the suitability of Wipro vis- vis American Express (India) Pvt. Ltd., a routine ITES provider, and ordered to exclude the same from the final set of comparables. 19. The ratio laid down by Hon ble Delhi High Court in the case of Avaya India Pvt. Ltd. in ITA 532/2019 order dated 24.07.2019 is also applicable to the facts and circumstances of the case to the extent that scale of operation of a company vis- -vis tested party is required to be kept in view and a giant company cannot be compared with a captive contract service provider working on a small scale by returning following findings :- 27. There is merit in the contention of the Assessee that the scale of operations of the comparables with the tested entity is a factor that requires to be kept in view. TCS E-Serve has a turnover of ₹ 1359 crores and has no segmental revenue whereas the Assessee s entire segmental reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion of Wipro by the Tribunal on ground of significant brand presence for profits at large corporate size. So, in view of the facts and circumstances of the case and following the law laid down by Hon ble Delhi High Court in the cases supra, we are of the considered view that Wipro is not a suitable comparable vis- -vis taxpayer, hence ordered to be excluded. MAPLE ESOLUTIONS LTD. (MAPLE) 23. The taxpayer sought exclusion of Maple from the final set of comparables for benchmarking the international transactions on ground of merger and acquisitions which has affected its profit leading to abnormal results with growth of 64% in sales over the previous year. The taxpayer has made analysis of revenue and profit of Maple for AY 2006-07, 2007-08 2008-09 in tabulated form as under :- Maple Esolutions Ltd. FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 Particulars Amount (INR) Amount (INR) Amount (INR) Amount (INR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration, there was acquisition of 100% shares of Maple Esolutions Ltd. by Triton Corp. Ltd. and thus, Maple Esolutions Ltd. became a wholly owned subsidiary of Triton Corp. Ltd. w.e.f 01.01.2007. It can be seen that this merger/acquisition has taken place during the year under consideration, thereby shattering their comparability. . 11. We find that there is a direct order by the Delhi Benches of the Tribunal in which these two companies have been excluded because of financial irregularities committed by their directors. In the absence of any contrary order brought on record by the ld. DR permitting the inclusion of companies under cloud, in the list of comparables, respectfully following the precedent we direct the exclusion of these two companies from the list of comparables. 26. Maple has been ordered to be excluded in many other cases decided by the Tribunal on the ground that its financial results are not credible as its Directors have been indicted in frauds. So, in view of the matter, we find that Maple is not a suitable comparable vis- -vis taxpayer, hence ordered to be excluded. TRITON CORP. LTD. (TRITON) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in Cabliberated Healthcare Systems India Pvt. Ltd. (supra), Triton has been ordered to be excluded as a comparable because of financial irregularities committed by their Directors as its financials were not credible. So, in view of the matter, we are of the considered view that Triton is also not a suitable comparable, hence ordered to be excluded from the final set of comparables. INFOSYS BPO LTD. (INFOSYS BPO) 30. The taxpayer sought to exclude Infosys BPO on the grounds inter alia that it is a giant company with huge turnover and significant intangibles; that Infosys BPO has a brand expenditure of ₹ 56 lakhs vis- -vis nil in case of the taxpayer; that Infosys BPO has a brand value of ₹ 31,617 crores and relied upon the decision rendered by the coordinate Bench of the Tribunal in case of Flextronics Technologies (India) Pvt. Ltd. in ITA No.1559/Bang/2012, Avaya India Pvt. Ltd. in ITA No.1904/Del/2015, Evalueserve SEZ (Gurgaon) Pvt. Ltd. in ITA 241/2018 and Oracle (OFSS) BPO Services Pvt. Ltd. It has also been ordered to be excluded in taxpayer s own case in ITA No.4191/Del/2018 for AY 2014-15 order dated 06.05.2019. 31. Ld. DR for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual accounts, it is apparent that comparable company has contributed INR 50,000,000 towards brand building and advertisement expenditure. Admittedly the company does not have any goodwill which can impact the profitability of the price of the business of it services because the goodwill is recorded on amalgamation in the nature of purchase only. This is mentioned at page number 51 in para number 1.5 of the annual report and corroborated by page number 58 of the fixed assets schedule in paragraph number 2.6 of the report. Based on the above analysis, it is apparent that Infosys BPO Ltd has a huge brand backing of the Infosys group behind it which can definitely impact the revenue as well as the profitability of the comparable company, therefore in absence of any such assets available to the assessee company, Infosys BPO Ltd is required to be excluded from the comparability analysis of ITeS segment. Accordingly we direct the learned TPO/AO to exclude the above comparable and then compute the arm s-length price of the ITeS segment of the assessee. 33. Undisputedly, there is no change in the business model of the taxpayer. Moreover, when we examine scale of business of Info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able be set aside to the ld TPO to examine its suitability afresh. In view of the matter, we set aside the issue as to examining suitability of HCL Comnet as a comparable vis- -vis the taxpayer to the ld TPO by providing adequate opportunity of being heard to the taxpayer. ACCENTIA TECHNOLOGIES LTD. (ACCENTIA) 28. Ld. AR for the taxpayer sought exclusion of Accentia on ground of extra ordinary events and that the company is having goodwill on amalgamation of ₹ 2.8 crores during the year under assessment and that Accentia is earning revenue from software services with no segmental data available. 29. Ld. DR for the Revenue, on the other hand, relied upon the orders passed by the ld. TPO/DRP. 30. Perusal of the reply given by Accentia u/s 133 (6) of the Act to the TPO shows that Geosoft Technologies (Trivandrum) Ltd. and Iridium Technologies (India) Pvt. Ltd. has become subsidiaries of Accentia w.e.f. April 1, 2006 and thereby increased the revenue and profit of Accentia to the extent of 528% and 57% respectively. The revised revenue and profit increase post removing sale of investment are 100683% and 5148%. 31. Coordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the tune of ₹ 4,60,46,062/- by finally selecting 24 comparables which are as under :- No. Company Name OP to total Cost% 1 Avani Cimcon Technologies Ltd. 50.29% 2 Datamatics Ltd. 1.38% 3 E-Zest Solutions Ltd. 35.63% 4 Flextroncs Software Systems Ltd. (Seg) 25.31% 5 Geometric Ltd (Seg) 10.71% 6 Helios Matheson Information Technology Ltd 36.63% 7 Igate Global Solutions Ltd 7.49% 8 Infosys Technologies Ltd 40.30% 9 Ishir Infotech Ltd 30.12% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (ALP) @ 131.56% of operating cost 36,76,90,866/- Price charged in the international transactions 32,16,44,804 Shortfall being adjustment u/s 92CA 4,60,46,062/- 36. Ld. AR for the taxpayer in order to compress the controversy raised by way of grounds no.6 7 qua adjustment in SDS segment contended that the ld. TPO/DRP have erred in selecting 12 out of 24 comparables and as such sought their exclusion viz. (i) Infosys Technologies Ltd., (ii) Wipro Ltd. (IT Seg.), (iii) KALS Informations Systems Ltd, (iv) Persistent Systems Ltd., (v) Tata Elxsi Ltd (Seg.), (vi) Megasoft Ltd., (vii) Hellos Matheson Information Technology Ltd., (viii) Thirdware Solutions Ltd., (ix) Avani Cincom Technologies Ltd., (x) Sasken Communication Technologies Ltd. (Seg.), (xi) Flextronics Software Systems Ltd. (Seg), and (xii)Ishir Infotech Ltd.. We would decide the suitability of each of the aforesaid comparables one by one. INFOSYS TECHNOLOGIES LTD. (INFOSYS TECHNOLOGIES) 37. The taxpayer challenged the inclusion of Infosys Technologies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s- -vis SDS provider, a captive service provider by the Tribunal by returning following findings :- 5. The tribunal has observed that the assessee was not comparable with Infosys Technologies Ltd., as Infosys Technologies Ltd. was a large and bigger company in the area of development of software and, therefore, the profits earned cannot be a bench marked or equated with the respondent, to determine the results declared by the respondent-assessee. In paragraph 3.3 the tribunal has referred to the difference between the respondent-assessee and Infosys Technologies Ltd. For the sake of convenience, we are reproducing the same:- Basic Particular Infosys Technologies Ltd. Agnity India Risk Profile Operate as full-fledged risk taking entrepreneurs Operate at minimal risks as the 100% services are provided to AEs Nature of Services Diversified-consulting, application design, development, reengineering and maintenance system integration, package evaluation and implementation and business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted. 40. So, by following the ratio laid down by the Hon ble High Court in Agnity India Technologies Pvt. Ltd. (supra) and order passed by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2011-12 (supra), we are of the considered view that Infosys Technologies having turnover of ₹ 13,149 crores with asset base of ₹ 2150 crores having brand expenditure of ₹ 69 lakhs as against turnover of ₹ 32 crores of taxpayer with nil brand expenditure and asset base of ₹ 29 crores; and that Infosys Technologies has also incurred ₹ 49 crores on the R D expenditure and its revenue from the software product has increased to 67.6% whereas segmental financials are not available, so Infosys is not a suitable comparable. So, in these circumstances, we are of the considered view that Infosys Technologies is not a suitable comparable vis- -vis taxpayer, hence ordered to be excluded. WIPRO LIMITED (WIPRO) 41. The taxpayer sought exclusion of Wipro for benchmarking its international transactions qua SDS segment on the grounds inter alia that Wipro is a product company; that its segmental accounts are not prepared on con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - -vis the taxpayer who is a captive SDS provider, hence ordered to be excluded. KALS INFO SYSTEMS LTD. (KALS) 45. The taxpayer sought exclusion of Kals for benchmarking its international transactions qua SDS segment on the grounds inter alia that Kals is functionally dissimilar; that it has shown inventory of ₹ 1.01 crores in its books of accounts and relied upon the decisions of Toluna India Pvt. Ltd. in ITA No.6407/Del/2012, AVL India Software (P) Ltd. vs. DCIT in ITA No.6454/Del/2012 279/Del/2013 and Aircom International (India) Pvt. Ltd. in ITA No.6402/Del/2012. 46. However, on the other hand, ld. DR for the Revenue drew our attention towards letter dated 13.01.2009 issued by the Kals to the TPO in response to notice issued u/s 133 (6) of the Act wherein in para 5, it is categorically mentioned that income from export/ sales/software products and export of sales/software training is shown as nil. 47. No doubt, in the Notes to the Financial Statement, available at page 1913 of the paper book, categorically claims that Kals is engaged in development of software and software products since its inception. The company consisting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) that the mere availability of the turnover allocable for software product sales per se cannot lead to an assumption that segmental accounts are available. From page 2177 of the paper book, it further shows that during the year under assessment, Control Net (India) Pvt. Ltd. was amalgamated with Persistent w.e.f. 01.04.2006. It is also proved from page 2142 of the paper book that expenses incurred by Persistent also includes 12 month expenses of Control Net (India) Pvt. Ltd. which shows that during the year under assessment, Persistent also performed additional functions for rendering services to the customers having different functional profile. 53. Persistent has been ordered to be excluded as comparable vis- -vis the routine software development service provider in case of AVL India Software (P.) Ltd. (supra) by returning following findings :- 37. We find that in the case of Toluna India Pvt. Ltd (supra), the Tribunal has excluded this comparable from the list of comparables by observing as under: 33. After considering the rival submissions and perusing the relevant material on record, we hold that this company also cannot be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us on Industrial Design) and Animation and Visual Effects (Animation and Special Effect). Annual report at page 2512 of the paper book under the head Management Discussion Analysis for the year ended 31st March, 2007 shows that Tata Elxsi provides global customers with service towards technology product development and outsourced R D, including Digital TV enabled products such as advanced displays and set top boxes, multimedia and portable entertainment products such as audio and media players, consumer electronics such as digital video cameras, mobile phones etc. and enables value to its customers through the cost-effective and timely service delivery of its technology and domain expertise. 57. Furthermore, perusal of page 2501 of the paper book under the head Annexure A to Director s Report proves that Tata Elxsi incurred ₹ 10.91 crores i.e. 3.54% of the total revenue as R D expenditure and all these functions are not being performed by the taxpayer which makes it incomparable to the taxpayer. 58. Coordinate Bench of the Tribunal in case of Mentor Graphics (India) Pvt. Ltd. (supra) ordered to exclude Tata Elxsi as a comparable vis- -vis SDS provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis for determining the arm s length price for the assessee, hence, should be excluded from the list of comparable parties. Following the aforesaid decisions, this company cannot be considered as comparable with the assessee and we direct exclusion of the aforesaid company from the final list of comparable while determining ALP. 59. Similarly, coordinate Bench of the Tribunal in Toluna India Pvt. Ltd. (supra), upheld by Hon ble Delhi High Court, ordered to exclude Tata Elxsi as a comparable vis- -vis routine SDS provider by returning following findings :- 39.2. After considering the rival submissions and perusing the material on record, we find from page No. 206 of the paper book, which is Annexure to the Director's report of this company, that the nature of its activity is quite distinct from that of the assessee. It can be seen that this company is into development of hardware and software for embedded products such as multi-media and some other electronics, etc. Apart from that, this company is also engaged in making some programmes developing technology intellectual property. As the nature of activity carried out by the assessee in question is nowhere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Megasoft on ground of amalgamation by returning following findings :- 31.2. Having heard the rival submissions and perused the relevant material on record, we find from the Director's report of this company, a copy of which is available on page 193 of the paper book, that the financial results for the year include the business performance of Visual Soft Technologies Ltd. w.e.f 1st October, 2006 consequent to the amalgamation. The Mumbai Bench of the Tribunal in Petro Araldite (P) Ltd. vs. DCIT [(2013) 154 TTJ (Mum) 176} has held that a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers etc. Since the financial results of Megasojt Ltd. have the impact of the merger of Visual Software Technologies Ltd., w.e.f. 1st October, 2006, obviously, this company cannot be considered as comparable. Accordingly, this company is directed to be excluded. The assessee succeeds. 65. Similarly, coordinate Bench of the Tribunal in AOL Online India Pvt. Ltd. (supra) also ordered to exclude Megasoft as comparable vis- -vis routine SDS provider by returning following findings :- 4.2. Assessee is objecting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d employee cost filter of 25% over sales but when we examine the objections filed by the taxpayer before ld. DRP, relevant page 927, employee cost/ operating revenue is calculated at 3.96% of operating revenue. However, it is brought to our notice that ld. TPO while computing employee cost included professional fee as employee cost, which is not includible as contended by the ld. AR for the taxpayer. 69. Ishir has been excluded on ground of failing employee cost filter by the coordinate Bench of the Tribunal in M/s. Softbrands India Pvt. Ltd. (supra) by returning following findings :- 21. As for as comparable companies listed at Sl.No.11 14 of the final list of comparable companies chosen by the TPO viz., M/s. Ishir Infotech Ltd. and Lucid Software Ltd., is concerned, this Tribunal in the case of First Advantage Offshore Services Pvt. Ltd. Vs. DCIT IT (IP) No.1086/Bang/2011 for AY 07-08 held that the companies should be excluded for the reasons as held in the following paras: 22. The learned counsel for the assessee submitted that these two companies are also to be excluded from the list of comparables on the basis of the finding of this Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions as stated in the above column were examined in detail and the above said companies were held to be not comparable to the functionality of the said assessee's company. Since the facts are similar and assessee's business is also similar and TPO has selected the same comparables, we are of the opinion that the said comparables listed above cannot be considered as suitable for inclusion in the list for TP analysis. AO/TPO is directed to exclude the above comparables. 71. So, we are of the considered view that when Ishir fails to qualify employee cost filter applied by ld. TPO himself, it cannot be a suitable comparable vis- -vis taxpayer because professional fee otherwise included by the TPO for employee cost cannot be part and parcel of employee cost by any stretch of imagination because it falls in the category of outsourced function by the company. So, we order to exclude Ishir from the final set of comparables. HELIOS MATHESON INFORMATION TECHNOLOGIES LTD. (HELIOS MATHESON) 72. The taxpayer sought to exclude Helios Matheson on the grounds inter alia that it is functionally dissimilar being engaged in software sales and services a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its TP study for AY 2006-07 on functional comparability. It was admitted that these objections were considered in the Co-ordinate Bench decision in the case of Broadcom India Research Private Limited in IT(TP)A No.1180/Bang/2011. Further, in the case of NXP Semiconductors India P. Ltd., Vs. ACIT in IT(TP)A No.1174/Bang/2011 also examined the above comparables. Similarly in the case of Capgemini India P. Ltd., Vs. ACIT (46 SOT 195) (Mum) has also examined these comparables. In all these decision of the Co-ordinate Benches, the objections as stated in the above column were examined in detail and the above said companies were held to be not comparable to the functionality of the said assessee's company. Since the facts are similar and assessee's business is also similar and TPO has selected the same comparables, we are of the opinion that the said comparables listed above cannot be considered as suitable for inclusion in the list for TP analysis. AO/TPO is directed to exclude the above comparables. 76. In view of the matter, we are of the considered view that Helios and Matheson cannot be a suitable comparable vis- -vis the taxpayer being functionally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue of 55% by organic and inorganic growth led by acquisition; that Sasken has intangibles of ₹ 5.72 crores during the year under assessment and it is also engaged in creation of intellectual property; that Sasken has incurred huge R D expenditure to the tune of ₹ 22.23 crores as against nil of taxpayer and that asset base of Sasken is ₹ 95 crores as against ₹ 29 crores of the taxpayer and relied upon the decisions in Toluna India Pvt. Ltd. (supra), Tata McGraw Hill Education Pvt. Ltd. in ITA No.5857/Del/2011 an Saxo India Pvt. Ltd. (supra). 82. Ld. DR for the Revenue, on the other hand, contended that assessee has failed to show the impact of mergers on margin of profit and relied upon the orders of the lower authorities below. 83. Perusal of annual report of Sasken, available at pages 2388 2445 of the paper book, shows that Sasken has acquired Botnia Hightech and its subsidiaries situated in Finland in March 2007, completed mergers of Sasken Network Systems Ltd. and Integrated Softech Solutions Ltd. leading to robust growth as its revenue have increased by 55% from ₹ 308.1 crores in 2005-06 to ₹ 477.1 crores in 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the tune of 4.6% of the total turnover and relied upon the decisions of Avaya India Pvt. Ltd. in ITA No.5528/Del/2011 and Toluna India Pvt. Ltd. (supra). 87. Perusal of annual report, available at page 1558 of the paper book, shows that Flextronic is end to end provider of communication products, services and solutions to network equipment providers, handset manufacturers, service providers and business process outsourcing sectors and that it has hybrid business model of supplying both products and services to its customers. Perusal of the profit loss account, available at page 1568 of the paper book, shows that Flextronic has amortized product development cost of ₹ 5.15 crores during the year under assessment. 87.1 Furthermore, perusal of Scheduled D forming part of the balance sheet shows that it has asset base of ₹ 125.84 crores as against ₹ 29 crores of the taxpayer. Flextronic has also incurred R D expenditure as per Annexure to the Director s Report, available at page 1561 of the paper book, to the tune of 4.6% of the total turnover as against nil R D expenditure of the taxpayer. So, all these facts make Flextronic not a suitable comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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