TMI Blog2017 (5) TMI 1728X X X X Extracts X X X X X X X X Extracts X X X X ..... - IT APPEAL NO. 4403 (DELHI) OF 2012 - - - Dated:- 19-5-2017 - S.V. Mehrotra, Vice-President And Kuldip Singh, Judicial Member Nageswar Rao, Advocate for the Appellant. Amrendra Kumar, CIT, DR for the Respondent. ORDER S.V. Mehrotra, The assessee has filed this appeal on 14th August, 2012 against the assessment order dated 30th December, 2011. As per the report of the Registry, the appeal is time barred by 148 days. The assessee has filed a condonation petition dated 13th August, 2012, wherein it is, inter alia, stated that the assessment order was received by the assessee on 19th January, 2012. However, though the assessee was not agreeable to the additions proposed in the assessment order, but, in order to avoid the cost of long drawn litigation, the assessee was initially advised not to pursue the matter further. However, subsequently, the assessee has been advised that not filing an appeal before the Tribunal may prejudice its tax related cases on similar matters pending adjudication before different forums within the Indian dispute resolution chain. The assessee has also filed an affidavit of Mr. Chandra Sekhar Mishra of the assessee company being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that reasons given as sufficient cause for delay in filing the appeal are not such which were beyond the control of the assessee. He submitted that delay cannot be condoned in anticipation of benefits. In this regard, he relied on the decision in the case of Office of the Chief Post Master General v. Living Media India Ltd. [2012] 348 ITR 7/207 Taxman 163/20 taxmann.com 347 (SC). The ld. DR further relied on the decision in the case of J.B. Advani Co. (P.) Ltd. v. R.D. Shah, CIT [1969] 72 ITR 395 (SC) and submitted that every day delay has to be explained. 3. We have considered the submissions of both the parties and have perused the case record. The issue is adjustment in regard to international transaction related to software development segment of the assessee. Various comparables have been taken into consideration for determining the arm's length price (ALP). Therefore, it cannot be denied that this issue permeates through all the years and, therefore, if in one year on account of wrong advice of the counsel appeal is not preferred in time, then, the adverse finding for that year should not prejudice the assessee's claim for other years. Under such circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. As regards the working capital adjustment, ld. DRP confirmed the TPO's action, inter alia, observing as under:- As has been brought out, the issue of working capital will be relevant when there is a situation of inventory remaining tied up or receivables being held up. Frankly speaking these situations may not be so relevant to the service industry. The assessee, as also the comparables used, shall launch into a project only when they have been awarded a contract. It is not as if these parties have manufactured goods that await buyers. This being the case, there is a serious question on the very need for a working capital adjustment in the service industry. A working capital adjustment will be required only when the varying levels of the working capital deployed is actually making a difference to the margins earned by the assessee and the comparables. This is actually at the heart of every comparability adjustment. The assessee has not been able to demonstrate that the difference in the working capital deployed is making a difference in the margin earned by the assessee and the comparables in this year. 7. The assessee has assailed the final assessment order primar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained to demonstrate that no product related expenses were debited to Profit Loss Account. He referred to schedule 15 relating to sales, services and training and pointed out that no software product is mentioned there. Ld. CIT, DR further referred to page 256, wherein the significant accounting policies are contained in which at para 6, it has been pointed out as under:- The company is engaged in the business of development of computer software and other related services. The production and sale of such software is not capable of being expressed in any generic unit and hence it is not possible to give the quantitative details of the sales and information as required under paragraphs 3, 4C and 4D of Part II of Schedule VI of the Companies Act, 1956. 10. With reference to the above statement in the financial statement, ld. DR submitted that exclusion of Kals Information Systems Ltd., on the ground of dealing in products is not justified. 11. We have considered the submissions of both the parties and have perused the record of the case. The ld. counsel has relied on the following decisions in support of its contention that Kals Information Systems Ltd., is not to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled 9 services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspect, assessee succeeds. 9.3. Above bind view case has been followed in the case of Trilogy EBusiness Software India (P.) Ltd. v. DCIT [2013] 29 taxmann.com 310, ITA No 1054/2011; the Bangalore Bench of ITAT has held: 46. As far as this company is concerned, the contention of the assessee is that the aforesaid company has revenues from both software development and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment service provider. We therefore accept the plea of the Assessee that this company is not comparable.' 15. The decision in the case of DHL Express (India) (P) Ltd. v. Asstt. CIT [2011] 11 taxmann.com 40/46 SOT 379 (Mum.) was also cited as under:- 10.1. In the case of DHL Express (India) (P.) Ltd. v. ACIT [2011] 11 taxmann.com 40 (Mum.) Mumbai Tribunal held that though segmented results are now required to be published in India, but still it is a common experience that in many such results certain expenditures, particularly expenditure on account of interest and head office, are generally not allocated and shown in the published results as separate expenditure. Therefore, the TPO was correct that when direct comparables were available there was no need to consider the segmented results of TCI. It is only the operating profit which can be considered. It is important to note that in this case it was the department's contention that segmented results should not be considered when direct comparable are available. As in assessee's the direct comparable are available, hence KALS Information Systems Ltd should not be taken as comparable. 16. The Tribunal noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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