TMI Blog2019 (2) TMI 1753X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. - IT(TP)A Nos.1418 And 2735/Bang/2017 - - - 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued that Form 36, grounds of appeal and other documents signed by the Director of the Company alone is considered as proper filing of the appeal. It has been explained in the petition of condonation of delay that the Directors controlling the affairs of the assessee was outside India and therefore they could not sign the same. It has also been submitted that there was no deliberate or intentional reason for the defective filing of the appeal, if any. 6. Though the learned Departmental 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 concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52% 7 Tech Mahindra Ltd. (Segmental) 18.72% 17.24% Arithmetic Mean 20.01% 18.18% Computation of arm's length price by the AO/TPO and the adjustment made: Arm's length mean margin 20.01% Less: Working capital adjustment 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction Transaction /Net Sales 25,739,000,000 60,019,000,000 42.88% (Source: AR 2012-13 0 pg. 69, 70 71) Hence, the company fails the RPT filter applied by the TPO and hence should be rejected. 13. The DRP, however, has not considered this submission, but has confirmed the order of TPO. We are of the view that it would be just and proper to set aside the order of DRP on this issue and remand the issue to AO/TPO for consideration of the contention of the assessee with regard to the exclusion of this 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. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings:- 15.3 As regards assessee's argument that ERP systems are software systems and as such the same should be considered as software development, the same is devoid of any merit. For determining the functionality of a company, it needs to be determined as to what is the exact nature of functions. In case a company is in Software Development, it would not matter as to what kind of customer it serves as the broad range of services remain the same and that is the development of software. Further, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple by a plethora of judicial pronouncements by various benches of the Tribunals that the taxpayer shall be granted working capital adjustment in order to bring the assessee on par with the comparable companies selected. After perusal of the DRP's order, we are of the view that the statement of the DRP in its order that the Tribunals have not examined the issues highlighted in its order is a general sweeping statement bereft of 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. 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 all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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