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TMI Blog2022 (12) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... e international transaction. 2.3 On reference being made, the Ld.TPO called for economic details of the international transactions which are as under: Particulars Amount in Rs. Purchase of fixed assets Rs. 1,42,71,849/- Software development services Rs. 429,81,72,137/- Reimbursement of expenses Reimbursement of travel expenses Rs. 3,06,70,299/- Reimbursement of expat salary related expenses Rs. 5,24,18,236/- Reimbursement of expenses for employee stock purchase plan Rs. 1,80,66,453/- Reimbursement of software expenses Rs. 2,08,70,149/- Reimbursement of training expenses Rs. 1,15,98,967/- Reimbursement of employees' contribution to employee stock purchase plan Rs. 4,97,22,765/- Reimbursement of repairs and maintenance Rs. 12,41,012/- Recovery of expenses Recovery of expenses at cost Rs. 2,12,68,240/- Recovery of travel expenses Rs. 2,83,70,976/- Recovery of CSR expenses Rs. 37,63,400/- Reimbursement of training expenses Rs. 93,483/- Recovery of withholding taxes of employees on restricted stocks unit and ESOP granted and remitted to local tax authorities Rs. 7,47,14,054/- 2.4 The Ld.TPO noted that the assessee used TNMM as most appropriate method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.7 However, the Ld.TPO was of the view that, the subcontracting charges formed a part of the operating cost of the assessee for provision of SWD services and thus cannot be excluded from either its cost base or operating revenue as it would not give a correct picture of the profit margin earned by it. The Ld.TPO thus computed assessee's margin at 10.02% as under: Operating Income Rs.429,81,72,137/- Operating Cost Rs. 390,68,94,345/- Operating Profit (Op. Income - Op. Cost) Rs. 39,12,77,792/- Operating/Net mark-up (OP/TC) 10.02% 2.8 Dissatisfied with the TP analysis by assessee, the Ld.TPO applied the following filters: Step Description 1. Companies whose data is not available for FY 2014-15 - excluded. 2. Companies having different financial year ending (i.e., not March 31, 2014) or data of the company does not fall within 12 month period i.e., 01-04-2013 to 31-03-2014 - rejected. 3. Companies whose software development service income < Rs. 1 Cr- excluded. 4. Companies whose software development service income is less than 75% of the total operating revenues - excluded. 5. Companies which have more than 25% related party transactions of the sales - excluded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystems (India) Pvt. Ltd. (j) Inteq Software Private Limited (k) Infosys Ltd. (l) Cybage Software Private Limited 2.14. In respect of Thirdware Solutions Ltd., and CG-VAK Software exports Ltd,, the DRP accepted contention of the Assessee and directed their exclusion from the final list of comparables. The DRP also accepted contention of the Assessee and directed inclusion of the software service segment of Sasken Technologies Ltd. However in respect of Akshay Software Technologies Ltd., Evoke Technologies Ltd., Infomile Technologies Ltd., and I2T2 India Ltd., the DRP rejected the contentions of the Assessee and upheld their exclusion. 2.15. The DRP rejected the contentions of the Assessee that the subcontracting charges incurred by the assessee for provision of the software development services ought to be considered as pass-through costs and thus ought not to have been included in the operating revenues or costs while determining the arm's length price of the services provided by it to its AE. 2.16. The DRP upheld the action of the Ld.TPO in determining the TP adjustment in respect of the delayed receivables. While doing so, the DRP remanded the matter to the Ld.TPO to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 187 ITR 688, we are admitting the additional ground raised by the assessee. Accordingly applications for admission of additional grounds stands allowed. We thus restrict adjudication of issues in respect of the grounds argued by the Ld.AR before this Tribunal in Ground no.4.1, 5.11,&5.11(a), Ground Nos. 5.10 and additional ground no. 5.13(a) and Ground no.10 to12. 4. Ground No. 4.1: is in respect of Exclusion of subcontracting charges: 4.1 It is submitted by the Ld.AR that the determination of net cost margin excluding the sub-contract charges is decided against the assessee by coordinate bench of this Tribunal in assessee's own case for the AY 2011-12 in IT(TP)A No. 17/Bang/2016 by order dated 21-9-2016. It is submitted that for assessment year 2014-15 in assessee's own case reported in (2022) 141 taxmann.com 421 this Tribunal followed the view taken in assessment year 2011-12(supra) by observing as under: 18. The ld. AR submitted that the determination of net cost margin excluding the sub-contract charges is decided against the assessee by the Tribunal in assessee's own case for the AY 2011-12 in IT(TP)A No. 17/Bang/2016 dated 21-9-2016 (pages 2265 to 2269 of PB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Respectfully following the above decision of the coordinate bench of the Tribunal, we see no reason to interfere with the decision of the lower authorities and hence these grounds of the assessee are dismissed. Respectfully following the above decision of the coordinate bench of the Tribunal, we see no reason to interfere with the decision of the lower authorities and hence these grounds of the assessee are dismissed. Accordingly this ground raised by the assessee stands dismissed. 5. Ground No. 5.11 and 5.11(a) in the appeal: 5.1 In this ground, the assessee is seeking exclusion of the following list of comparables: * Tata Elxsi Ltd. * Rheal Software Pvt. Ltd. * Mindtree Ltd., * R S Software (India) Ltd. * Larsen and Toubro Infotech Ltd * Infobeans Technologies Ltd. * Persistent Systems Ltd. * Nihilent Technologies Ltd. * Aspire Systems (India) Pvt. Ltd. * Inteq Software Pvt. Ltd. * Infosys Ltd. * Cybage Software Pvt. Ltd. * CG-VAK Software Exports Limited 5.2 Before we undertake the comparability analysis it is sine qua non to understand the FAR of the assessee under the SWD segment for the year under consideration, which is as under. FAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this company is engaged in diverse activities. The assessee placed reliance on the information in the annual report under the Directors Report and submitted before the DRP that even under the software development services segment, this company is engaged in various diversified activities including product design service, innovation design, engineering service, visual computing labs, etc. The assessee also placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Telcordia Technologies Pvt. Ltd. v. ACIT, 137 ITD 1 (Mum). 31. The DRP found that this company is not functionally comparable with assessee company as it is engaged in diversified activities even in the software development services. The DRP has followed the decision of the Mumbai Bench of the Tribunal in the case of Telcordia Technologies Pvt. Ltd. (supra). 32. We have heard the ld. DR as well as ld. AR and considered the relevant material on record. We find that this company even in the software development segment is engaged in diversified activities of product design services, innovation design, engineering services, visual computing labs, etc. We further note that in the case of Telcordia Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the final list of comparables. On the contrary, the Ld.DR relied on the observations of the DRP/TPO. We have perused the submissions advanced by both sides in the light of records placed before us. B.3 The Ld.AR vehemently submitted that the comparability analysis could be conducted only if the details are available on public domain. It is submitted that the Ld.TPO in the instant case collected information from this comparable u/s. 133(6) which was not accessible to assessee. It is the contention of the Ld.AR that without a fair representation, the comparable has been selected by the Ld.TPO. Before us, the Ld.AR has alleged on the issues that has not been submitted before the Ld.AO and therefore in the interest of justice, we direct this comparable to be reconsidered by the Ld.AO based on the submissions filed by the assessee. In the event, this comparable does not satisfy the filters applied by the Ld.TPO, the same may be excluded. Needless to say that proper opportunity of being heard must be granted to assessee. C. Infobeans Technologies Ltd.: C.1 It is submitted that the company is a software services company specializing in business applications development for web ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.AR also submitted that the segmental information is not available for the company and the company is into diversified activities such as providing business IT services (comprising application development and maintenance, Big Data, UX & UI, Automation engineering services, including product engineering and lifecycle solutions, and business process management); in the Verticals of Storage & Virtualization, Media & Publishing, HR & Payroll and e commerce The Ld.AR referred to page 854 of the paper book in support of the submission. The Ld.DR on the contrary relied on orders passed by the authorities below and decision of Coordinate Bench of this Tribunal in case of BORQS Software Solutions Pvt. Ltd. vs. ITO in IT(TP)A No. 310/Bang/2021 by order dated 25/10/2021 for A.Y. 2016-17. We have perused the submission advanced by both sides in light of records placed before us. 6. We note that coordinate bench of this Tribunal in case of M/s.SanDisk India Device Design Centre Pvt. Ltd. vs. JCIT (supra) observed and held as under: "17.3 At the outset, the Ld.AR submitted that the above comparables have been considered by Coordinate Bench of this Tribunal, Hon'ble Hyderabad Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bang.) of 2018, dated 28-5-2019]. In this order rendered in a case of assessee rendering SWD services such as the assessee, the Tribunal excluded 3 out of 5 companies referred to in the earlier paragraph and remanded 1 company for fresh consideration with the following observations:- "5. The Ld A.R submitted that M/s Infosys Ltd, M/s Persistent Systems Ltd and M/s Thirdware Solutions Ltd have been excluded by the co-ordinate bench in the assessee's own case in AY 2008-09 in IT(TP)A No. 1673/Bang/2012. 6. We notice that the co-ordinate bench has excluded M/s Infosys Ltd in AY 2008-09 by following the decision rendered by another co-ordinate bench in the case of 3DPLM Software Solutions Ltd (IT(TP)A No. 1303/Bang/2012 dated 28-11-2013, wherein the decision rendered in the case of Triology E Business Software India P Ltd (ITA No. 1054/Bang/2011) was followed and it was held that M/s Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It was further observed that the break-up of revenue from software services and software product is not available. 6.1 It was stated that there is no change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables however it failed to apply upper limit considering the functions performed assets owned and risk assumed by assessee under this segment for the year under consideration." 17.8 Before us, the Ld.AR has not been able to place anything on record contrary to the above observation. We therefore respectfully following the above view, direct the Ld.AO/TPO to exclude Persistent Systems Ltd., L& T Infotech Ltd., Thirdware Solutions and Infosys Ltd. from the final list. 17.9 In respect of Nihilent Ltd., Infobeans Technologies Ltd. and Aspire Systems (India) Pvt. Ltd., Hon'ble Mumbai Tribunal in case of Red Hat India Pvt. Ltd. vs. Addl. CIT (supra) observed as under: "Comparable Sought to be excluded by the assessee Aspire System India Pvt. Ltd. (Aspire) 40. The assessee sought exclusion of Aspire from the final set of comparables for benchmarking SDS segment on the ground that it fails Related Party Transaction (RPT) filters as its RPT/ sales ratio is more than 25%. The assessee computed the significant related party transactions at 37.58% whereas the Ld. TPO computed it at 23.55%. The TPO is directed to recalculate the RPT/sales ratio by providing opportunity of being he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Infobeans Technologies Ltd. (Infobeans) 49. The assessee sought exclusion of Infobeans on the ground that it is also functionally dissimilar being into providing business IT services (CAD) (application development and maintenance, Big Data, UX and UI, Automation engineering services, including product engineering and lifestyle solutions and business process management) in verticals of storage and virtualization, media and publishing, HR and Payroll and e-commerce. It is also providing software engineering services primarily in Custom Application Development (CAM), enterprise mobility and Big Data Analytics (BDA). 50. Perusal of financials available at page A303, A418 to A421, Infobeans shows that it is into diversified services but its segmental financials are not available without which it is difficult to compute the correct profit margin of the relevant segment. So Infobeans is also ordered to be excluded as a comparable being not a comparable to the assessee." 17.10 Perusal of the annual report, filed before us in respect of the above two comparables, we note that the segmental financials are not available in respect of Nihilent and Infobeans and the RPT in respect of As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fluctuation in margin: The revenue increased from Rs.35 crore (F.Y.2014- 2015) to Rs.62 crore (FY 2015-2016) in a period of 1 year (76%). Also, the company's profitability increased by 147%. Also, the company's margin fluctuates widely (34.98% - F.Y.2015-016, 20.78% - F.Y. 2014-2015, 41.95% - F.Y.2013-2014) which demonstrates that there exists some factor having an impact on the margin, and therefore the company cannot be selected as a comparable. (v) Sales Tax: The annual report of the company shows that it incurs Central Sales Tax liability, which demonstrates that the company is not a pure software development company. 9. For all the above noted reasons, this company has been consistently excluded from the final set of comparables. Reference is made to the following orders of the ITAT :- (i) SanDisk India Device Design Centre Pvt. Ltd. v. JCIT (Order dated 30.06.2022 passed by this Hon'ble Tribunal in IT(TP)A No. 288/Bang/2021 for AY 2016-17)- at para 17.9 and 17.10 (on account of functional dissimilarity as company renders diverse services and lack of segmental details); (ii) ADP Pvt. Ltd. v. DCIT [Order dated 03.02.2022 in ITA Nos. 227&228/Hyd/2021 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the DRP, which in turn relied on the reply filed by the company in response to notice u/s 133(6) of the I.T.Act. Further, this Tribunal held the finding of DRP has not been countered by the assessee in the said case. However, the company's response to the notice u/s 133(6) of the I.T.Act is contrary to the functions set out in the audited financial statements (enclosed as Annexure-A to this order), and therefore, the same cannot be relied upon. 10.1 Further, the website of the company shows tht the company is engaged in diverse service, which are not similar to functions of a captive service provider like the assessee in the instant case. Since the Ld.AR has clearly established that Infobean Technologies Limited is not functionally comparable to that of the assessee, we follow the orders of the ITAT referred in para 9 (supra) and direct the Ld.AO / TPO to exclude Infobean Technologies Limited from comparable list. It is ordered accordingly." C.4 No contrary view has been brought to our notice regarding comparability of this company with that of a pure software development service provider. Respectfully following the above view we direct exclusion of Infobean Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in outsoursed product engineering services. The company is also engaged in ITES and BPO services and also a diverse range of digital marketing services. Thus, the company is into diversified activities. However, segmental details of the company are not available. F.2 The Ld.AR also relied on the decision of * Coordinate bench of this Tribunal in case of ARM Embedded Technologies Pvt. Ltd. v. DCIT by order dated 30.08.2022 passed in IT(TP)A No. 235/Bang/2021 for assessment year 2016-17 * Hon'ble Hydrabad Tribunal in case of Infor (India) Pvt. Ltd. v. ACIT by order dated 19.10.2020 passed in ITA No. 1689/Hyd/2019 wherein the said company was directed to be excluded. On the contrary, the Ld.DR relied on the observations of the DRP/TPO. We have perused the submission advanced by both sides in light of records placed before us. F.3 We note that the above comparables have been considered by coordinate bench of this Tribunal in case of ARM Embedded Technologies Pvt. Ltd. v. DCIT(supra) by observing as under: "22. Aspire Systems (India) Pvt. It is submitted that, this company is functionally not comparable with the assessee as it earns income from power generation. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the area of the enterprise transformation, change and performance management, digital transformation, business intelligence and data science services and also providing related IT services. The Ld.AR submitted that, software-consulting services include end-to-end solutions, onsite management and IT functions, and planning & system designing, which are in no way comparable to the captive software development activities as provided by the assessee. The Ld.AR further submitted that, this company has incurred significant expenses in foreign currency of 37.68%, 33.27% and 37.47% of its total expenditure during the FYs 2015-16, 2014-15 and 2013-14, respectively, which suggests that is engaged in provision of onsite services. And that, during the FY relevant to assessment year under consideration, this company acquired GNet Group LLC, a business intelligence and analytical company, and Intellect Bizware Services Pvt. Ltd., specialising in ERP and enterprise innovation. The Ld.AR submitted that, these acquisitions are bound to have a significant impact on the financials of the company. The Ld.AR thus submitted that, for all the above reasons this company cannot be considered to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid comparable vis-àvis assessee which is a routine software development service provider working on cost + markup model, hence ordered to be excluded. We note that the assessee in Red Hat India Pvt. Ltd. v. ACIT (supra) was a captive service provider to its AE for assessment year 2016-17. Nothing has been placed by the Revenue to deviate from the above view taken by the coordinate bench of this Tribunal in Red Hat India Pvt. Ltd. v. ACIT (supra). We are of the view that, based on the functions performed by this company as submitted by the Ld.AR and the observations of Hon'ble Mumbai Tribunal, this comparable deserves to be excluded from the final list. We therefore respectfully following the above view, direct the Ld.AO/TPO to exclude Nihilent Technologies Ltd from the final list. 24. Cybage Software Pvt.Ltd. It is submitted that this company is engaged in the provision of diversified services which include product engineering, testing & quality assurance services, specialized services, support services, etc. It is submitted that this company is engaged in product development and has developed a product called 'excelshore' apart from providing spectrum of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been considered by coordinate bench of this Tribunal in case of Global Logic India Ltd., (supra) in a captive service provider by observing as under: INTEQ SOFTWARE LTD. (INTEQ) 46. The taxpayer sought exclusion of Inteq again on account of functional dissimilarity being into providing outsourced product development services and Healthcare BPO services to its customers as per website extracted at pages 83 to 85 of the appeal memo set. It being a private limited company its financials are not available in the public domain. Its annual report made available at pages 848 to 909 of the annual reports paper book does not provide segmental profitability earned from software development services, outsourced product development services and Healthcare BPO services. 47. When we examine profit & loss account at page 873 of the annual report paper book, software development and service charges are shown in composite manner with no segmental profitability. In these circumstances, we are of the considered view that Inteq is not a suitable comparable vis-à-vis the taxpayer which is a routine software development service provider working on cost-plus mark up model, hence ordered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Toubro Infotech Ltd. : I.1 It is submitted that the company ought to be excluded from the final list of comparables for the reason that it is functionally incomparable to the Assessee on various counts. It is submitted that the Ld.TPO and DRP erred in not appreciating the contentions of the Assessee and consequently erred in upholding the inclusion of the company in the final list of comparables. I.2 It is submitted that this company renders infrastructure management services, digital consultation, data and analytics which cannot be equated to the routine SWD services rendered by the Assessee. The Ld.AR submitted that this company is also engaged in trading IT related products, and owns proprietary software products like Unitrax(r), Accurusi and Scriptor TM which are developed in-house. The company is also engaged in activities such as cloud computing, infrastructure management, analytics & information management etc., and no segmental details are available in respect of the variety of services rendered by this company. The Ld.AR submitted that this company ownes huge marketing intangibles, intellectual property rights and business rights and brand value, as a result of this h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excluded as being functionally dissimilar. On the contrary, the Ld.DR relied on the observations of the DRP/TPO. K. Persistent Systems Ltd : K.1 The Ld.AR submitted that this company is functionally not similar to the assessee, as it is engaged in rendering IT services and in the development of software products without there being separate segmental information disclosed in its Annual Report for such activities. The company focuses mainly on product development and during the year under consideration launched a new product brand 'Accelerite'. Further, the company develops in-house software products such as eMee and Enterprise Content Search Connector. K.2 Further, it is submitted that, this company made significant investments towards research and development activities in the relevant previous year. The company has incurred significant expenses in foreign currency amounting to 15.03% of its total revenue which suggests that is engaged in provision of onsite services. Persistent has established "persistent labs" which focuses on latest technologies viz., gesture computing, machine learning etc. Using the innovations of Persistent labs. The company has developed 'SimplE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Also, the company has significant intangibles as a part of its fixed assets in the nature of intellectual property. The company owns significant brand value, and focuses immensely on brand building. For this purpose it incurs significant brand building expenses, which goes to help the company have a premium pricing for its services. The company has also incurred significant selling and marketing expenses. The company derives more than 50.4% of its revenue from onsite activities and places high reliance on the onsite activities as they generate higher revenue when compared to services performed at their own facilities. The company also heavily focuses on research and development activity and incurs significant expenditure for this account. For the concerned financial year the company has incurred research and development expenses of Rs. 605 crores. The company for the relevant financial year has earned abnormally high profit with margin of 38.61%, which makes it incomparable to the Assessee. In any event, the turnover of the company is much higher when compared to the Assessee's, and hence it ought to be excluded from the list of comparables. Detailed submissions in this regard are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the company offers software products and platforms. However, the TPO observed that from the annual report of the company, under the segmental break-up does not disclose revenue from sale of products. It was submitted that while the company earns income from both rendering software services and development of products, there are no segmental details in respect of the services rendered. Further, the services rendered by the company are not functionally comparable to the routine SWD services rendered by the Assessee. The company also invests in products which helped the company establish itself as a credible IP Owner. Also, the company has significant intangibles as a part of its fixed assets in the nature of intellectual property. It company owns seven Edge products/platforms and six other product based solutions. It leverages on its premium banking solution 'Finnacle (r)', owns significant brand value and focuses immensely on brand building. For this purpose it incurs significant brand building expenses, which goes to help the company have a premium pricing for its services. IT derives more than 51% of its revenue from onsite activities and places high reliance on the onsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces businesses under a separate subsidiary of L&T. Pursuant to this the product engineering services business of the company was transferred to its subsidiary L&T Technology Services Ltd., and thereafter its wholly owned subsidiary GDA Technologies Inc. which was a part of the aforesaid business was wound up. It is submitted that no reasonably accurate adjustments can be made to eliminate the material effects of the said differences between the company and the Assessee. The annual report of the company also discloses significant amount of capital work-in-progress which indicates that the company is into development of products. (c) Persistent Systems Ltd. : It is submitted that this company ought to be excluded from the final list of comparables inter alia for the reasons that it is functionally not comparable to the Assessee and as there exists peculiar economic circumstances for which no appropriate adjustment can be made to its mark-up to eliminate the material effects thereof. It is functionally dissimilar as it is engaged in rendering IT services and in the development of software products without there being separate segmental information disclosed in its Annual Report for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of this Tribunal in the case of DCIT v. Electronics for Imaging India Pvt. Ltd. (supra) in paras 60 and 61 & paras 24 to 26 as under: 60. ** ** ** 61. ** ** **' (4) Persistent Systems Ltd. 24. We have heard the ld. DR as well as ld. AR and considered the relevant material on record. The assessee raised objections against selection of this company on the ground that this company is functionally not comparable as engaged in the product development. The segmental information for services and product is not available. Further, the assessee has also pointed out that there was an acquisition and restructuring during the year under consideration. 25. The DRP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer. It also contended that the turnover of this company is Rs. 21,140 crores, which is 442 times higher than the assessee.' Following the decision of this Tribunal in the case of DCIT v. Electronics for Imaging India Pvt. Ltd. (supra), we do not find any reason to interefere with the directions of the DRP on this issue. (iv) L&T Infotech Ltd. 19. ** ** ** We further find that the comparability of this company has been considered by the co-ordinate bench of the this Tribunal in the case of DCIT v. Electronics for Imaging India Pvt. Ltd. (supra) in paras 62 to 65 as under: '62. The assessee has raised objection against this company on the basis of high turnover in comparison to the assessee. It was also contended that related party transaction (RPT) of this company is 18.66%. The DRP rejected objections of the assessee on the ground that TPO has applied 25% filter of RPT and annual report of the company does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts Ltd. 5.4.1 In this regard, it is submitted that the DRP on accepting the contentions of the Assessee had directed the exclusion of CGVAK (page 69-70 of the DRP directions). However, the Assessing Officer included the same in the final list of comparables. It is therefore prayed that the Assessing Officer be directed to exclude the same in line with the directions issued by the DRP. We direct the Ld.AO to follow the directions of the DRP and exclude this comparable from the final list. Accordingly, this ground raised by assessee stands allowed. 6. Ground Nos. 5.10 and additional ground no. 5.13(a) 6.1 Vide these grounds, the Assessee is seeking the inclusion of Akshay Software Technologies Ltd., I2T2 India Limited, Infomile Technologies Limited, Isummation Technologies Pvt. Ltd., Orangescape Technologies Ltd., Maveric Systems Limited and Batchmaster Software Private Limited in the list of comparables. All these comparables are remanded to Ld.AO to consider for inclusion. 6.2 It is submitted that these companies are engaged in providing MSS services. It is submitted that these comparables were not considered by the Ld.TPO, as they did not appear in the search matrix carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee adopted TNMM as the MAM for computing its margin, and therefore no separate adjustment is required to be made. 7.5 On the contrary, Ld.CIT.DR submitted that, interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of her contentions, she placed reliance on decision of Delhi Tribunal order in Ameriprise India Pvt. Ltd. vs. ACIT (2015- TII-347-ITAT-DEL-TP) wherein it is held that, interest on receivables is an international transaction and the transfer pricing adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to Section 92B, with retrospective effect from 1.4.2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include-- ...... (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;....' . 7.6 Ld.CIT DR submitted that expression 'debt arising during the course of business' refers to trading debt arisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es rate of interest. He, therefore, concluded by summing up that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. He thus submitted that the Interest on outstanding receivables have been rightly constituted as independent international transaction 7.7 We have perused the submissions advanced by both the sides in the light of the records placed before us. This Bench referred to decision of Special Bench of this Tribunal in case Instrumentation Corpn. Ltd. v. Asstt. DIT in ITA No. 1548 and 1549 (Kol.) of 2009, dated 15/07/2016, held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Alternatively, it has been argued that working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and lones and advances to international transaction would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT in ITA No. 6570/Del/2016 vide its order dated 15.2.2018 observed that: "There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce u/s. 40(a)(ia) of the Act for salary cost reimbursed to Applied Material Inc. on an 'at cost' basis. 8.1.1 At the outset, the Ld.AR submitted that the issue is regarding disallowance under section 40 (a) (i) of the act for nondeduction of TDS on reimbursement of salary expenses made on behalf of the seconded employees as fee for technical services. 8.1.2 The Ld.AR submitted that TDS has been deducted on the entire salary paid by assessee to the seconded employees and what is reimbursed is the payment which has been partly made by the AE to the families of such seconded employees. The Ld.AR submitted that though the 100% salary has been subjected to TDS assessee has paid only part of the salary to the seconded employees in India and balance of such salary has been reimbursed to the AE as the same has been paid by the AE to the employees. The Ld.AR submitted that all the details relevant in respect of the salaries and the TDS deduction which were submitted before the authorities below which has not been considered. 8.1.3 The Ld.AR relied on the following decisions. * Decision of Hon'ble Karnataka High Court in case of DIT(IT) vs. Abbey Business Services India (P.) Ltd. repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But in the present case, the legal requirement requires a finding to be recorded to treat a service as 'FIS' which is "make available" to the Indian Company. (xi) Accordingly, any conclusion on an interpretation of secondment as contained in the M.S.A. to determine who the employer is and determining the nature of payment by itself would have no conclusive bearing on whether the payment made is for 'FIS' in light of the further requirement of "make available."" On the contrary, the Ld.DR placed reliance on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 8.1.5 We note that the evidences filed by assessee has not been considered by the revenue authorities. 8.1.6 We therefore remand this issue to the Ld.AO to consider the claim in accordance with the decision of Hon'ble Karnataka High Court in case of M/s. Flipkart Internet Pvt. Ltd. vs. DCIT (IT) (supra) and Coordinate Bench of this Tribunal in the above referred cases M/s. Toyota Boshoku Automotive India Pvt. Ltd. vs. DCIT (supra) Goldman Sachs Services Pvt. Ltd. vs. DCIT(supra) having regard to the evidences filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore. b. Ground Floor, Inventor Building, International Tech Park, Whitefield Road, Bangalore. 52. In connection with the above, the assessee undertook various civil and interior work in the nature of putting up of modular furniture, lab design and installation activities, electrical and cable networking, fire safety systems, etc. Accordingly during the year an addition of Rs.6,78,99,990/- was made towards leasehold improvements, falling within the block of 'Furniture and Fixtures' and consequent depreciation on the same was claimed. 53. The AO disallowed the claim on the ground that the claim is on the basis of date of bill and not on the basis of the asset being put to use. The AO disallowed the entire depreciation on leasehold improvement for Rs.25,31,31,220/-. 54. The DRP upheld the disallowance on the ground that the assessee failed to produce any document to show that the assets were ready to use/put to use. 55. Before us, the ld. AR submitted that the assessee had capitalised the leasehold improvements after receiving the invoices from the relevant vendor, which was after the asset was completed and was ready to be put to use. The ld AR brought to our attent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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