TMI Blog2021 (9) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the final assessment order dated 10-10-2018 passed u/s.143(3) r.w.s.144C(13) of the Income-tax Act, 1961 (hereinafter also called the Act ) in relation to the assessment year 2014-15. 2. The only issue raised in this appeal is against the transfer pricing addition of Rs.13,48,02,885/-. 3. Briefly stated, the facts of the case are that the assessee company is engaged in rendering software support services. A return was filed declaring total income of Rs.32,84,75,510/-. Certain international transactions were reported in Form No. 3CEB. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining the Arm s Length Price (ALP) of the international transactions. We are concerned only with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstand the nature of activity carried on by the assessee. The TPO has recorded that the assessee is engaged in the business of rendering Software support services. We have gone through the Agreement dated 01-04-2013 between the assessee and its Associated Enterprise (AE) namely, Redknee, Inc, (RI) Canada, whose copy has been provided at page 394 onwards of the paper book. The Agreement provides that the RI (i.e. the assessee s AE) is a global provider of OSS/BSS software products solutions and services to the telecommunication industry and is the owner of all applicable rights, titles and interest in the Technology (entire Technology platform owned by RI, as existing on the Effective Day, comprising of the Products and RI Intellectual Prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility or otherwise of the companies challenged before us ad seriatim. (1) PERSISTENT SYSTEMS LTD. : 6. The TPO included this company in the list of comparables. The assessee s objections about the functional dissimilarity did not weigh with the TPO. The assessee remained unsuccessful before the DRP as well. 7. Having heard both the sides and gone through the relevant material on record, we observe from the Annual report of this company, a copy of which has been placed at page 77 of the paper book, that it acquired a company called CloudSquads, Inc through stock acquisition in February, 2014. Without examining the functional similarity or dissimilarity of this company, we find that the extraordinary financial event of acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and going through the relevant material on record, we find from the Annual report of this company, a copy of which has been placed in the paper book, that its revenue consists mainly of sale of user licenses. In the Profit and loss account, the main item is `Revenue from sale of products with the value of Rs.20,675.74 lakhs. In fact, `Revenue from sale of Services has been shown at Nil. This shows that the company is into the business of software products and not rendering the software services. This fact is further corroborated from the Note given under the head `Revenue Recognition , that: `. . . . . . . . . . revenue from sale of user licenses for software applications is recognized on edelivery of software license key to end user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been placed at page 508 onwards of the paper book, that it is engaged in providing software solutions in various facets of industrial needs as under: Switching and authorisation: Solution: RS Software assists leading brands in the global payments business address the challenges of switching and authorization in a competitive 24x7 marketplace, improving availability, scalability and security. We have worked for more than 20 years to enable the speed of a transaction throughout to grow from 500 transactions as per second to more than 20,000 transactions per second today. Clearing and settlement: Solution: RS Software provides clearing and settlement solutions that handle large transactions in an environment marked by cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Our competence has been built around a comprehensive understanding of the dispute lifecycle from the perspective of the network, issuer and acquirer. RS Software uses a proprietary set of tools to accelerate development and integration of the dispute management system. This comprises of the following. *A reference architecture created for dispute/chargeback processing. *A requirements and features checklist for dispute/chargeback solutions. *Business test cases for the comprehensive testing of a dispute/chargeback system. *Industry-best practices for managing disputes/chargebacks. . 15. When we compare the nature of work carried out by R.S. Software Ltd. with the contractual R D of software activity carried on by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
