TMI Blog2020 (11) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. In view of this, we direct the learned transfer pricing officer to exclude the above comparable. Adjustment on account of the overdue receivable from the associated enterprises - working capital adjustment allowed - HELD THAT:- When working capital adjustment is granted to the assessee there is no requirement once again of making any adjustment on account of the overdue receivable from associated enterprises as the sundry debtors outstanding of the assessee includes outstanding receivable from associated enterprise. In view of this, we direct the learned transfer pricing officer to delete the adjustment on account of outstanding receivable from associated enterprise. - ITA No. 1291/Del/2015 - - - Dated:- 27-11-2020 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : Shri Abhishek Tilak, Adv Shri Priyansh Singh, Adv Shri Anshul Sharma, CA Revenue by: Shri Sanjay I Bara, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. Assessee has filed this appeal against the order of Deputy Commissioner of income tax, Circle 1 (2), New Delhi [ The Ld AO] dated 29/11/2014 passed u/s 143 (3) read with Section 144C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like the Appellant (in the software services segment) and excluding certain comparable companies on arbitrary/ frivolous grounds; 2.4 including reimbursement expenses amounting to INR 13,73,771 for software development segment for applying mark-up and consequently for the purpose of computing arm s length price; 2.5 ignoring the business/ commercial reality that since the Assessee is remunerated on an arm s length cost plus basis, i.e. it is compensated for all its operating costs plus a pre-agreed mark-up based on a benchmarking analysis, the Assessee undertakes minimal business risks as against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Assessee on account of this fact; 3. The Ld. AO has erred on facts and in law in enhancing the income of the Appellant by INR 88,20,574 in software development segment, by incorrectly computing the working capital adjusted operating margin of comparables and also arbitrarily modifying the final set of comparables in the assessment order. 4. The Ld. AO and Ld. DRP erred in enhancing the income of the Assessee by INR 1,17,22,269 by imputing interest on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,22,269/ . Consequently the final assessment order was passed by the learned assessing officer on 29/11/2014 determining the total income of the assessee at ₹ 115,775, 011/ . Assessee being aggrieved with the same has preferred this appeal. 5. The main contention of the assessee is with respect to the adjustment on account of adjustment of software development services segment for exclusion of only two comparables namely (1) Infosys technologies Ltd and (2) Tata Elexi Ltd. The claim of the assessee is that both these comparables have been excluded by the coordinate bench in assessee s own group entity s case. Therefore being similar functional profile, both these comparables should be excluded in the case of the assessee also. He also submitted the annual accounts of both these comparables and drawn attention to the bench with respect to the functional dissimilarity and quantitative dissimilarity of these comparable companies with the assessee and stated that both these comparables should be excluded from the comparability analysis. He also referred to several judicial precedents where these comparables were excluded from the comparability analysis in case of other assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to the AMP Brand expenditure it has been held that unless there is a specific finding to the fact that the advertisement marketing and promotion expenditure by any comparable has resulted into higher profit, this factor does not have an effect on benchmarking analysis. It was further stated that in the instant case the taxpayer has not brought any such evidence and therefore the expenditure on advertisement and marketing promotion is not a distinguishing factor. In view of this he submitted that above two comparables contested by the assessee for exclusion is incorrect. 8. With respect to the adjustment on account of outstanding receivables overdue from associated enterprise he submitted that all the four points that has been raised by the learned TPO and against which the objection has been raised by the assessee (1) whether the law provides for benchmarking of the interest on receivable as per the provisions of the income tax act, (2) whether the transfer pricing officer was justified in his approach of separately benchmarking the receivables as transaction by CUP method, (3) whether the TPO was justified in charging interest on receivable at arm s-length price beyond th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule 18 it is also shown that there is income from sale of goods. Further, the learned authorised representative referring to the order of the coordinate bench in case of a sister concern in ITA number 1084/del/2016 has stated that in para number 56 it shows that the comparable company provides global customer with service towards technology product development and outsourcing research and development including digital TV unable products such as advanced display and set-top boxes, multimedia and portable entertainment product such as audio and media players, consumer electronics such as digital video cameras, mobile phone et cetera and enable value to its customers through cost-effective and timely service deliver of its technology and domain expertise . Further it is also pointed out that the comparable company is a design company that blends technology, creative and engineering to help customers transform ideas into world-class products and solutions. The learned dispute resolution panel though has considered the above functions of the comparable company however it is directed that the comparable company provides software development services which are similar to the IT service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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