TMI Blog2022 (8) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... ntant Member And mt. Beena Pillai, Judicial Member For the Assessee : Shri Padam Chand Khincha, CA. For the Revenue : Shri Sumer Singh Meena, CIT DR-1. ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against final assessment order dated 23/10/2019 passed by the Ld. DCIT, Circle-7(1)(2), Bangalore on following grounds of appeal: Based on the facts and circumstances of the case and in law, Xchanging Solutions Limited (hereinafter referred to as XSL or the Company or the Appellant ), respectfully craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income-tax, Circle - 7(1)(2) (the learned AO ), dated 23 October 2019 for the Assessment Year ( AY ) 2015-16. under section 143(3) read with section 144C(13) of the Income-tax Act. 1961 ( the Act ) in pursuance of the directions issued by Dispute Resolution Panel ( Hon'ble DRP ), Bangalore dated 09 September 2019 under section 144C(5) of the Act ( impugned order ) inter-alia on the following grounds: That on the facts and circumstances of the case and in law: General 1. The impugned order and directions of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act to obtain information which was not available in public domain and relying on the same for comparability purposes. 4.6 The learned DRP/ AO / TPO erred in law and in facts, by rejecting the following companies forming part of TP Study based on unreasonable comparability criteria: Akshay Software Technologies Limited R Systems International Limited TVS Infotech Limited 4.7 The learned DRP / AO / TPO erred in law and in facts, by rejecting the following companies identified by the Assessee in the search conducted by the TPO which were wrongly rejected by the TPO based on unreasonable comparability criteria: Celstream Technologies Private Limited Infomile Technologies Limited Mudunuru Limited 4.8 The learned DRP / AO / TPO erred in law and in facts, by rejecting the following companies identified by the Assessee in the search conducted by the Assessee itself which were rejected by the Assessee at the time of TP study for the reason that sufficient information was not available at the time of TP Study: Maveric Systems Ltd I2T2 India Ltd Evoke Technologies Ltd Harbinger Systems Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.17 The learned DRP/AO/TPO have erred, in law and in facts, by re-characterizing the outstanding receivables as on 31 March 2015 as a loan transaction. 4.18 Without prejudice to our ground of appeal 4.15 above, the learned DRP/AO/TPO have erred. In law and in facts, by not considering that once the working capital adjustment is granted, it appropriately takes into account the delayed/ outstanding receivable and separate TP Adjustment is unwarranted. 4.19 Without prejudice to our ground of appeal 4.15 above, the learned DRP / AO / TPO have erred, in law and in facts, by considering invoice-wise method as against a more suitable approach of weighted average method (as originally used by the learned TPO) for computation of interest adjustment on account of delayed/ outstanding receivable. 4.20 Without prejudice to our ground of appeal 4.15 above, the learned DRP / AO / TPO have erred, in law and in facts. by not considering the average credit period provided to third party customers as the benchmark to calculate the interest adjustment on account of delayed/ outstanding receivable. Consequential grounds: 5. The learned AO has erred in levying intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with third parties under comparable circumstances. Accordingly, internal comparable data could not be obtained. External Comparable Data To identify external comparable data, a search was conducted to identify transactions / companies that could be considered as comparable to XSL. The detailed search process has been set out in Section 5.1.3 for software development services below. Based on such analysis, comparable transaction level data which involved information about uncontrolled transactions, including prices, quantity, and transaction terms, was identified. 5.1.2.3 Conclusion Based on the nature and characteristics of the transaction analysed, CUP ,CPM and TNMM were found applicable. Out of the above, CUP method cannot be applied in the present case due to non-availability of transaction level data through both internal and external sources of data. Further, RPM/CPM was also not considered due to the following reasons: Absence of reliable data on functional comparability (same or similar services) of comparable companies, i.e., the degree of comparability existing between the international transaction and the uncontrolled transaction an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of this arguments. Birlasoft (India) Ltd [(ITA No. 200/Del/2015 for AY 2010-11] Lummus Technology Heat Transfer BV [(ITA No. 1047/De1/2014 for AY 2009-10]; Tecnimont ICB (P) Ltd [ITA No. 4608 5085/Mum/2010 for AY 200506] Xchanging Solutions Limited [(IT(TP)A 1385/Bang/2011 for AY 200708] e4e Business Solutions India Pvt Ltd [IT(TP)A Nos.324 (B)/15 220(B)15 for A 2010-11] Quark Systems (P.) Ltd [ITA No. 100/Chd/2009 for AY 2004-05] Nvidia Graphics Pvt Ltd [ITA No.1360/Bang/2018 for AY 2013-14] S.B. T. International Ltd [IT(TP)A No. 51/Mum./2017 for AY 2012-13] In Trading Pvt Ltd [ITA No. 3712/De1/2018 for AY 2011-12] 4. On the contrary, the Ld.DR vehemently opposed the above submissions of the assessee and relied on the orders passed by the authorities below. 5. We have perused the submissions advanced by both sides in the light of records placed before us. 6. It is submitted before us that the assessee provides software development service to its AE and the amounts outstanding from the AE was to be settled as on-going basis in the normal course of business having regard to commercial and economic factors. The Ld.AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on . Therefore in our view, the expanded meaning of international transaction as contemplated in clause (i) of explanation to section 92B(1), any delay in realisation of receivables from the associated enterprises would certainly fall within the ambit of international transaction. 11. However, as the receivables are closely associated to the primary rendering of software development services, a credit period has to be granted to the AE and has to be considered along with the main international transaction being the sale of software service development. 12. We therefore are of the view that the adjustment proposed by the Ld.TPO in respect of outstanding trade receivables has to be considered along with the main transaction being the software development service rendered by the assessee to the AE by considering a credit period of 90 days. The Ld.AO shall verify if the same is subsumed in the computation of the Working Capital Adjustment. In the event, the receivables stands subsumed, no adjustments deserves to be made. On the contrary, if any trade payables falls outside the credit period of 90 days, adjustment on such receivables would be restricted to LIBOR + 300 basis points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner prays that this Hon'ble Tribunal be pleased to; (i) admit and adjudicate the above additional ground(s), (ii) pass any other order that may be required in the circumstances of the case and render justice. 15.1 It has been submitted that no new facts needs to be considered in order to dispose of the additional ground raised by the assessee. It is submitted that the additional grounds are issues that does not require investigation of any new facts. The Ld.AR, thus prayed for the admission of additional grounds so raised by assessee. 15.2 On the contrary, the Ld.CIT.DR though opposed admission of the additional grounds, could not bring anything on record which would challenge such a right available to assessee under the Act. 15.3 We have perused the submissions advanced by both sides in light of records placed before us. 15.4 The Ld.DR did not object for the additional grounds being admitted. 15.5 We note that one of the additional grounds is directly connected with the main issue of disallowance and no new facts needs to be investigated for adjudicating the same. Another issues alleged by the assessee is a legal issue that does not require inves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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