TMI Blog2021 (6) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... c basis. On the failure of the Revenue to establish the comparability of this company chosen by the TPO, we direct to exclude it from the list of comparables. To sum up, we set-aside the impugned order and remit the matter to the file of AO/TPO for re-determining the ALP of the international transaction of Provision of Software Development services in the light of our above discussion - ITA No.173/PUN/2017 - - - Dated:- 17-6-2021 - Shri R.S. Syal, Vice President And Shri Partha Sarathi Chaudhury, Judicial Member For the Assessee : Shri Nikhil Pathak For the Revenue : Smt. Aparna M. Agarwal ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the final assessment order dated 30-11-2016 passed by the Assessing Officer (AO) u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) in relation to the assessment year 2012-13. 2. The assessee has raised an additional ground, which is nothing but an elaboration of the grounds taken in the Memorandum of appeal. The additional ground specifically refers to the name of the companies challenged, which were earlier, albeit not named, but assailed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no independent evaluation of the nature of transaction w.r.t the relevant Agreement or the Transfer pricing study report. The ld. AR invited our attention towards the Computer Programming and Product Support Services Agreement (hereinafter also called the Agreement ) dated 01-04-2007 under which the assessee rendered the Software services. As per clause 6, the Agreement shall commence on the effective date (01-04-2007) and remain in force until terminated by OYJ with three (3) months prior notice written notice to NNIPL. From the above clause, it is clear that the Agreement is relevant to the year under consideration. Clause 1 of the Agreement provides the `Description of the Deliverables regarding Computer Programming and Product Support services as `Deliverable(s) shall mean computer programming and related services, and product support services for OYJ, including all material in whatever form, which is generated. Deliverable may include, but is not limited to, the computer program or any part thereof. Source and Object Code, any enhancements thereof, all materials and documentation necessary for OYJ to use, modify, correct, adapt, and understand any computer program and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the InfoBeans Systems India Pvt. Ltd. (currently known as Seed Enterprises Private Limited) is demerged and transferred to the Company in pursuance to the Scheme of Arrangement as approved by the Hon ble Madhya Pradesh High Court dated 26/09/2012 vide Appointed date 1st April 2011. Accordingly these are the Revised financial statements including the Financial Statements of the said Software Business of Demerged Company. 7. On going through the above para, it is overt that demerger of the Software business of Seed Enterprises Private Limited took place effective from 01-04-2011 and the accounts of such company relating to the software business were transferred to the Infobeans Systems India Pvt. Ltd. from such date. Thus it is glaring that the merger took place on the first day of the relevant financial year only. By now, it is fairly settled that an extraordinary financial event, such as, merger or demerger or amalgamation render a company incomparable. However, our attention has been drawn towards a peculiar fact of this company, which is manifested on an examination of its Profit and loss account. All the figures of the Profit and loss account of the immediately preceding y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g feature leads us to the inevitable conclusion that InfoBeans, which is otherwise admittedly similar, cannot be filtered out from the final list of comparables. 10. To bolster his argument of exclusion of InfoBeans, the ld. AR banked on a Pune Tribunal order dated 17-12-2020 passed in eGain Communications Pvt. Ltd. Vs. DCIT (ITA No.544/PUN/2017) for the same A.Y. 2012-13. That order was passed by this very combination of the Members directing the exclusion of InfoBeans on account of the extra-ordinary financial event of merger vis- -vis the assessee-company in that case engaged in rendering software services in the manner similar to that of the assessee under consideration. On going through that order, it is discernible that the afore-noted peculiar fact of InfoBeans commencing its actual business operations with the merger only, without there being any earlier continued business, were not highlighted before the Bench by either side. Once the correct position has been made graphically clear, no party should impress upon the Bench to follow suit. In the hue of the foregoing discussion, we are satisfied that InfoBeans cannot be excluded from the tally of comparables on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware services. In other words, there is no segmental information available so as to cull out the figures relating to Software services. Since this comparable was chosen by the TPO, the primary onus of demonstrating its comparability, was upon him. Except for repeated accentuation of comparability in his order, the TPO has nowhere proved his point in the light of the Annual report of the company or any other relevant material. The ld. DR also could not point out from the Annual report of the company or any other material that it was rendering only Software services. Per contra, the Annual report of the company states that it is engaged in rendering Technical services in addition to Software services a situation, which does not match with the assessee on holistic basis. On the failure of the Revenue to establish the comparability of this company chosen by the TPO, we direct to exclude it from the list of comparables. 15. To sum up, we set-aside the impugned order and remit the matter to the file of AO/TPO for re-determining the ALP of the international transaction of Provision of Software Development services in the light of our above discussion. Needless to say, adequate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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