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TMI Blog2021 (7) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officers and the Transfer Pricing Officer vide orders for A.Y. 2010-11 and 2011-12, however, for the present year i.e. A.Y. 2013-14, the Transfer Pricing Officer characterized the Appellant as ITES Service Provider only rejecting its claim of providing IT Services in the nature of Software Development which had been accepted for all preceding years. The claim of the assessee before the Dispute Resolution Panel that it had two distinct segments of IT i.e. Software Development and ITES were also rejected and the findings of the TPO were upheld. The Assessee appellant filed an appeal before the ITAT and during the course of hearing on 8th February, 2018, the Appellant was directed by the ITAT to submit additional evidence demonstrating that the appellant was engaged in IT services including software development activity. The hearing on 8th February, 2018 being a Thursday was adjourned to 12th February, 2018, thus, the Appellant was provided one working day before the final hearing on 12 February, 2018 which was a Monday. The present appeal has been filed alongwith an application for additional evidence wherein voluminous evidence has been filed by way of Annexure A-6 to A-13 indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 323,000 marketing leading IP VPN access points in 172 countries. 3. The taxpayer, an Indian entity and a part of Orange Group is a subsidiary of EGN BV, Netherlands, which is into providing information technology enabled network management / technical support and other back office support services to its group companies. It also undertakes software developments services for developing software applications which are used within the Orange Group. 4. The IT enabled network management/technical support and other back office support services performed by the taxpayer primarily include remote monitoring and maintenance of Orange's Global network platforms and services, coordination, remote configuration and implementation of quality customer networking solutions. Further, under the category of software development services, the taxpayer is engaged in providing routine Contract Software Development Services (CSDS) relating to development and maintenance of applications used within the Group like Human Resource, Accounting etc. 5. The taxpayer filed its return of income at Rs. 32,82,84,980/- declaring three international transactions in Form 3CEB. Matter was referred to ld. TPO fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing objections before the ld. DRP who have not accepted the same and upheld the order passed by the ld. TPO. In compliance with the orders passed by the ld. TPO/DRP, AO made adjustment in the final assessment order. The Tribunal vide order dated 15.02.2018 also upheld the aggregation of IT and ITES segment and remanded the matter back to ld. TPO for selection of comparables operating in both IT and ITES segment. The taxpayer carried the matter before the Hon'ble High Court challenging the segmentation of rejection of CSDS and ITES segment by the TPO/DRP and the Tribunal. 10. Hon'ble High Court set aside the matter and remanded the case back to the Tribunal to examine the issue, "whether the assessee is engaged in the activities of software development after considering the additional evidence placed before this court, namely, Annexure A-6 to A-13 and any other evidence which may be produced after hearing both the parties to the appeal." 11. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 12. Undisputedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd implementation of product methodologies and standards. It is also proved on record that Project Managers IT are having knowledge in WEB development environments (LAMP, WAMP), on OS such as Windows 2008 and UNIX (Workstation) and in Oracle database management and design. 15.1 The taxpayer also employed Lead Programme Manager having experience of 15 years in software application programming and development in telecommunications in multicultural and international environment. The taxpayer has brought on record screenshots of application that are developed by the taxpayer, functional specification documents, internal e-mails regarding deliverables etc., which are available in the convenience compilation at pages 285 to 345. 16. All these facts substantiate the claim of the taxpayer that it has a full-fledged team of software development engineers to carry out its software development activities and they are carrying out software development activities independently. The taxpayer has also brought on record list of employees working in contracts of contract software development services /ITES services along with the monthly cost of each employee available at pages 285 to 345 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of the "headcount" basis was rejected by the TPO, DRP and later by the ITAT in the impugned order. 4. Mr. Srivastava, learned counsel appearing on behalf of the assessee relied upon the judgment of the this Court in Commissioner of Income Tax vs. EHTP India Pvt. Ltd. (2013) 350 ITR 41(Del.). In that decision, the Court indicated broadly that if headcount had been the basis for proportionate allocation of costs, there was no objection or illegality attached to it. The Court of course in that case was cognizant of the circumstances that the principle of headcount had been applied consistently in the past by the assessee. Learned counsel for the Revenue relied upon the Tribunal's order and submitted that the rejection of the headcount principle was justified. The Tribunal's reasoning was that the headcount principle was irrational given the disparity of salaries of the employees of the different segments. 5. It is apparent that the headcount basis is an acceptable principle and known to law. EHTP India Pvt. Ltd. (supra) recognized it; although the Court took note of the previous practice of the assessee, at the same time it did not in any manner frown upon the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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