TMI Blog2020 (9) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2013-14 u/s 143(3) r.w.s. 144C of the Act in pursuance of directions given by Ld Dispute Resolution Panel (DRP). 2. At the time of hearing, the Ld A.R pressed grounds numbered as 3(d), 3(f), 3(g) and 3(h). In ground no.3(d) also, the Ld A.R did not press contentions relating to comparable companies named ICRA Techno Analytics Ltd, R.S. Software (India) Ltd and CG-Vak Software Exports Ltd. Accordingly, all other grounds, except those are pressed, are dismissed as not pressed. 3. The grounds pressed by the Ld A.R related to the addition made by way of Transfer pricing adjustment. Under these grounds, the assessee seeks exclusion of three companies, viz., Persistent Systems Ltd; Larsen Toubro Infotech Ltd and Mind Tree Ltd. The assessee also inclusion of two companies, viz., R Systems Ltd and Akshay Software Technologies Ltd., in the list of comparables. 4. The assessee herein is providing technical support services on behalf of M/s Autodesk Singapore to its Associated Enterprises. As per T.P documentation, it has provided various types of services to its Associated Enterprises. We are concerned herewith services rendered under the title Technical Support S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. 7. The Ld DRP accepted the contentions of the assessee in respect of M/s Tech Mahindra Ltd and accordingly directed the AO/TPO to exclude the same. The Ld DRP retained remaining comparable companies selected by TPO. The directions so given by Ld DRP enhanced the Transfer Pricing adjustment to ₹ 1,67,94,970/-. Accordingly, the AO passed the final assessment order by making addition of ₹ 1,67,94,970/- towards Transfer pricing adjustment. Aggrieved, the assessee has filed this appeal. 8. The final set of comparables upheld by Ld DRP is as under:- Sl.No. Name of the Company 1. CG-VAK Software Exports Ltd. 2. ICRA Techno Analytics Ltd. 3. Larsen and Toubro Infotech Ltd. 4. Mindtree Ltd. (seg.) 5. Persistent Systems Ltd. 6. RS Software (India) Pvt. Ltd. 9. Now, the assessee seeks exclusion of following comparable companies out of the list of comparables upheld by Ld DRP:- (a) Persisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws:- 17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt. Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a nonjurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT Vs. Pentair Water India Pvt. Ltd. Tax Appeal No.18 of 2015 judgment dated 16.9.2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra). 15. In the light of the aforesaid decision of the Tribunal, ground No.6.5 raised by the assessee is allowed. Accordingly, we find merit in the prayer of the assessee for application of upper turnover filter. However, as submitted by Ld D.R, the said filter should be applied across the board. Accordingly, we direct the AO/TPO to apply the upper turnover filter and exclude comparable companies, which are having turnover of more than ₹ 200/- crores. 12. The assessee also seeks inclusion of following two companies:- (a) R Systems International Ltd (b) Akshay Software Technologies Ltd 13. The Ld A.R submitted that the TPO has rejected M/s R systems International Ltd., only for the reason that it adopts different accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The Ld D.R submitted that the TPO has obtained the details of functions performed by M/s Akshay Software Technologies Ltd in response to the notice issued u/s 133(6) of the Act. The Ld DRP has also examined the nature of functions performed by this company from its annual report. Both the tax authorities have given a finding that this company is engaged in divergent functions. Accordingly the Ld D.R submitted that this company cannot be taken as good comparable. 17. We heard the parties on this issue and perused the record. We notice that the TPO has obtained information u/s 133(6) of the Act from M/s Akshay Software Technologies Ltd, as per which it is engaged in providing professional services, procurement, installation, implementation and support maintenance of ERP products and services. In the case of Mercedes-Benz Research Development India (P) Ltd (supra), we notice that the co-ordinate bench has considered the nomenclature of income from software services given under the head Revenue from Operations , which mentioned that the Income from software services was ₹ 19.83 crores. Now the dispute boils down to the nature of functions performed by this company. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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