TMI Blog2021 (9) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue to the file of the AO for examining the claim of the assessee in accordance with law. Rejection of set off of brought forward business loss claimed in the return - HELD THAT:- We notice that the AO has not assigned any reason for not allowing set off of brought forward business loss. Accordingly, we restore this issue to the file of the AO for examining the claim of the assessee in accordance with law. Transfer pricing adjustment made in respect of ITES segment - HELD THAT:- Major source of income for this company is from Engineering Design Services which is an activity falling under the category of Knowledge Process Outsourcing (KPO) while the activities carried on by the assessee falls under the category of Business process outsourcing (BPO) - DRP has followed the decision rendered by the coordinate bench in the case of Symphony Marketing Solutions India Pvt. Ltd. [ 2014 (2) TMI 83 - ITAT BANGALORE] - Hence, we do not find any reason to interfere with the decision of Ld. DRP on this comparable company. Computation of deduction u/s. 10A - HELD THAT:- A.O. to exclude certain expenditure both from export turnover and total turnover while computing deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by operating cost (OP/OC) as profit level indicator (PLI). The assessee declared PLI of 15.05%. The assessee selected 13 comparable companies whose average margin was 13.71%. Accordingly, the assessee claimed that international transaction of export of software is at arm's length. 6. The Ld. TPO rejected the TP study of the assessee and he selected 13 comparables. After giving credit for working capital adjustment, the average margin of the comparable companies selected by TPO was determined at 23.55%. Accordingly, the TPO made transfer pricing adjustment of ₹ 88.46 crores. The Ld. DRP excluded 10 comparable companies and retained 3 comparable companies, viz., Persistent Systems Solutions Ltd., Persistent Systems Ltd. and Sasken Communication Technologies Ltd. It is pertinent to note that the Ld. DRP suo motu excluded three companies viz., R.S Software (India) Ltd., Evoke Technologies P Ltd. and Mind Tree Ltd. Pursuant to the directions of the Ld. DRP, the TP adjustment was reworked to ₹ 87.90 crores in the final assessment order. 7. In its appeal, the assessee seeks exclusion of all the three companies retained by Ld. DRP and inclusion of following five com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered by Ld. DRP in respect of some of the companies. Accordingly, all those companies are required to be examined vis- -vis the Tribunal decisions and facts relating to each of the comparable companies. 10. The Ld. A.R submitted that the assessee is making an alternative prayer in the additional grounds in order to put quietus to this matter, i.e., the assessee is agreeable for adopting the margin at 16.99% in respect of non-USA based transactions also. He submitted that the non-USA based transactions constitute major portion of the transactions, still the MAP settled rate of 16.99% may be adopted to those transactions also, as neither the assessee nor TPO treated the USA and non-USA transactions separately. In this regard, he placed his reliance on the decision dated 03.08.2021 rendered by co-ordinate bench in the case of assessee's own case for AY 2010-11 in IT(TP)A No. 637/Bang/2016, wherein the assessee had settled under MAP solution in respect of ITES services for USA based transactions at 15.69% and the Tribunal has directed for adoption of the same rate for non-USA based transactions also. 11. We heard Ld. D.R on this additional ground and perused the record. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ground that the profit margin of the assessee adopted in MAP ought to be adopted as ALP mark-up for non-US based AE transactions also. It is submitted that the transactions entered by the Assessee with its US based AE is similar to the transactions entered into with the non-US based AEs and that no distinction has been made by the Assessee between the two in its TP study and while preparing its audited financial statements. It has further been submitted that no distinction has been made by the TPO also in the comparability analysis carried out by him. Therefore, the assessee prays that the Tribunal may adopt the same arm's length mark-up cost for the international transactions entered into with the Non-US AEs as well and, accordingly, dispose of the TP grounds with respect to the ITES revenue earned by the Assessee from its Non-US based AE transactions. 42. The learned Counsel for the assessee in this regard placed reliance on the decisions of this Tribunal in the case of CGI Information System Management Consultants (P.) Ltd. v. DCIT ([2017] 81 taxmann.com 169 (Bangalore - Trib.)) and the Hon'ble Tribunal - Mumbai Bench in J.P Morgan Services (P.) Ltd. v. DCIT ( [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO may be directed to allow credit for correct amount. 17. We heard the parties on this issue and perused the record. It appears that the AO has given credit for the amounts wherein the PAN number of the present assessee is shown. It is the case of the assessee that the payments made under the name and PAN number of merged entities also should be given credit, when the corresponding income is assessed in the hands of the present assessee. We find merit in the said contentions. However, this issue requires factual verification. Accordingly we restore this issue to the file of the AO for examining the claim of the assessee in accordance with law. 18. The last issue urged by the assessee relates to the issue of rejection of set off of brought forward business loss of ₹ 16.60 crores claimed in the return. We notice that the AO has not assigned any reason for not allowing set off of brought forward business loss. Accordingly, we restore this issue to the file of the AO for examining the claim of the assessee in accordance with law. 19. We shall now take up the appeal of the revenue. The grounds urged by revenue in Software development segment have been covered by our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh end services amongst the BPO which require high skill whereas the services performed by the assessee are routing low end ITES function. We therefore hold that this company could not have been selected as comparable, especially when it performs engineering design services which only a knowledge processing outsourcing (KPO) would do and not a business processing outsourcing (BPO).' Similar View was taken by Hon'ble Bengaluru ITAT in the case of -Symphony Marketing Solutions India Pvt., Ltd. vs. ITO (IT (TP) A No. 1316/Bang/2012), held that Acropetal cannot be considered as comparable as it performs engineering design services accordingly we direct the assessing officer to exclude the company from the comparables. Infosys BPO Limited Having considered the submissions, it is noticed by us that the Hon'ble ITAT, Bengaluru in the case of Symphony Marketing Solutions India Pvt. Ltd. (presently merged with Genpact India) [(IT(TP)A No. 1316/Bang/2012, TS-234-ITAT-2013 (Bang) TP ITAT Bengaluru] and the Hon'ble Hyderabad ITAT in the case of International Specialty Products (I) Pvt. Ltd. in ITA No. 210/Hyd/2014 for A.Y. 2009-10 has excluded the company by observin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic Technologies Ltd., the Ld. A.R. placed his reliance on the decision rendered by coordinate bench in the case of DCIT Vs. C-Cube Solutions Pvt. Ltd. (109 Taxmann.com 293) and Finastra Software Solutions (India) Pvt. Ltd. (93 Taxmann.com 460). In the case of C-Cube Solutions Pvt. Ltd. the coordinate bench has excluded this company with the following observations: 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find that the DRP has dealt with the comparability of the company 'Jeevan' at pages 7 and 8 of its order and excluded it from the list of comparables to the assessee, by holding as under: Jeevan Scientific Technology Ltd: The objection against the wrong PLI becomes academic in nature in view of our findings in the subsequent para wherein this company has been rejected on functional analysis. 2.6 Ground of Objection 7: The Learned Transfer Pricing Officer and in turn the Assessing Officer erred in its functional analysis of Jeevan Scientific technologies Ltd., and went on to wrongly consider the same as a comparable company. Having considered the submissions, it is noticed by us from the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm exclusion of this company. 25. The revenue is challenging exclusion of Infosys BPO Limited by Ld. DRP. Before us the Ld. A.R. placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of PCIT Vs. H S Software Development and Knowledge Management Centre Pvt. Ltd. (Order dated 3.1.2018 passed in ITA No. 912/2017). We notice that the Ld. DRP has followed the decisions rendered by the coordinate benches in the case of Symphony Marketing Solutions India Pvt. Ltd. (supra) and in the case of International Specialty Products Pvt. Ltd. (ITA No. 218/Hyd/2014), wherein it is observed that Infosys BPO Limited cannot at all be considered as comparable to the assessee not only because of its size but also due to its brand value, diversified activities and other functional disabilities. The Hon'ble Delhi High Court in the case of H S Software Development and Knowledge Management Centre Pvt. Ltd. (supra) has expressed the view that the ITAT has correctly held that the Corporate entities had a significant brand presence for profits and large corporate size, which could not be compared with the assessee before the Hon'ble High Court of Delhi. In view of the ..... 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