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TMI Blog2020 (12) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds are that the DRP erred in holding that the following comparables to be excluded from the list of comparables that though it satisfies all the qualitative and quantitative criteria adopted by the Transfer Pricing Officer (TPO) in Software Development Segment: i) Acropetal Technologies Limited ii) E-Infochips Limited iii) Infosys Limited iv) L & T Inoftech limited and v) R S Software 3. i) Acropetal Technologies Limited-The ld. DR submitted that there is no objection by the assessee before the DRP in spite of that the DRP suo moto excluded this company as comparable which is not possible. According to ld. DR, it satisfies all the filters adopted by the TPO and it should be included as comparable in the list of comparables to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under: "10.2. After considering the rival submissions and perusing the relevant material on record, we find that the Annual report of this company is available in the paper book with its Profit and loss account at page 1025. Schedule of Income indicates its operating revenue from software development, hardware maintenance, information technology, consultancy etc. Revenue from hardware maintenance stands at Rs. 3.92 crore, which has been considered by the Transfer Pricing Officer himself as sale of products. Such sale of products constitutes 15% of total revenue. There is no segmental information available as regards the revenue from sale of products and revenue from software development segment. As the assessee is simply engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities. 3.3.1. We have heard the rival contentions and perused the material on record. This company has huge turnover of Rs. 25,385 Crores as against the assessee's turnover of Rs. 35.87 Crores. Further the company has high brand value and as such it cannot be considered as comparable. The co-ordinate Bench of this Tribunal in the case of Applied Materials India Pvt. Ltd. Vs. ACIT In IT(TP)A No. 17/Bang/2016 for the Asst. Year 2011-12 vide order dt. 21.09.2016, this comparable was excluded in the list of comparables. Accordingly, the exclusion of the DRP is justified. 3.4. L & T Infotech Limited-The ld. DR submitted that this comparable cannot be excluded on the reason of high turnover from the list of comparables and more s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated party transaction (RPT) of this company is 18.66%. The DRP rejected objections of the assessee on the ground that TPO has applied 25% filter of RPT and annual report of the company does not show any other services rendered other than software development services provided by this company. Thus the DRP held that software development segment is comparable to the assessee and therefore this company has to be retained as comparable. 63. We have heard the ld. AR as well as ld. DR and considered the relevant material on record. The ld. AR has submitted that this company is having 18.66% RPT and further this company earns revenue from both services and products. Thus, the ld. AR submitted this company is also in the software products and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 166 & 181/Bang/2016 Dt. 22.2.2017. Accordingly, the exclusion of this company from the comparison list by DRP is justified. 3.5. (v) R S Software Limited-This company considered as acceptable by the assessee and the TPO in the TP Study however the DRP excluded it from list of comparables. In our opinion, when the assessee as well as the TPO excluded it as comparable without any objection by the assessee, it cannot be excluded by the DRP. Accordingly, this company is to be included as a comparable. The exclusion of this company as comparable suo moto by the DRP cannot be approved. We direct the TPO to include this company in the list of comparables. 3.6. In the ITES Segment, the Revenue has raised grounds for inclusion of following compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange transactions to be considered as operating in nature ignoring the presence of Rule 10B(2)(d) of the Act that the net profit margin realized by the tax payer in the international transactions shall alone be computed under the TNMM method. 3.10. After hearing both the parties, this issue was considered by this Tribunal in IT(TP)A No. 270/Bang/2014 in the case of Cisco Systems Services BE wherein it was held that the foreign exchange fluctuation gain arising to the assessee on realization of trade debtor, payment to creditor, etc. were nothing but operational income. On the same analogy, we are of the opinion that the foreign exchange gain or loss relating to the trading transaction of the assessee should be considered as operating inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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