TMI Blog2023 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. This issue of assessee s appeal is allowed. TPO rejecting Akshay Software Technologies Limited - As before us, argued that Akshay Software Technologies Ltd., is involved in procurement, installation, implementation, support and maintenance of ERP products services. It was also argued that Akshay Software Technologies Ltd., is financially comparable as it is engaged in providing computer software services with the assessee company. Actually this fact needs to be verified whether the Akshay Software Technologies Ltd., is comparable with the functions of the assessee or not. Hence, this issue needs to be referred back to the file of the TPO who will find out whether Akshay Software Technologies Ltd., is comparable to the assessee or not. R Systems International Ltd. rejected as adopted statutory year ending on 31 st December, 2012 as financial year as against the financial year ending for tax 31 st March, 2013 in the present year - We noted that this does not make any difference whether a company is maintaining its books of accounts for the December ending or March ending. Only a suitable adjustment has to be made in view of different fiscals. Hene, we direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited, the assessee, is primarily engaged in the business of providing Contract Development Services and Sales Support Services to Atmel Group. Having regard to the functions performed, assets employed and risks assumed, assessee was remunerated for the services provided on the basis of cost plus arm's length mark-up for the financial year 2012-13. During the financial year 2012-13 relevant to assessment year 2013-14, assessee had earned revenue from Contract Development Segment amounting to Rs. 27,25,56,931/- and Sales Support Segment amounting to Rs. 2,28,36,962/-. A copy of the Audited Financial Statements of the Company and the return of income filed with the tax department is also filed by assessee in its paper-book. The assessee has entered into a Service agreement with the respective entities within the Atmel Group for rendering of the aforesaid services and is compensated on a cost plus mark- up basis for the same. Copy of the intercompany agreement is also enclosed in its paper-book. The TPO while dismissing the claim of adjustment of working capital submitted that comparables margin should be adjusted for working capital intensities but it should be relevant only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade Debtors - - - Advances to suppliers 2,150 2,150 Trade Creditors 1,88,76,402 2,12,62,013 2,00,69,208 Advances from customers 47,56,137 60,89,955 54,23,046 Working Capital -2,36,32,539 -2,73,49,819 -2,54,90,104 Operating Cost (Assessee) 26,08,80,963 Working Capital / Cost (%) -9.77% According to assessee, since the assessee s working capital was negative, the TPO erred in not granting working capital adjustment as the TPO has factually erred in mentioning that in the instant case there is no grievance which is factually incorrect. The assessee gave working after analyzing the financials of comparables margin i.e., unadjusted and adjusted after working capital adjustment, which provides a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India) Pvt. Ltd., in ITA No.1264/PN/2013, wherein the Tribunal following other orders held as under:- 9. We find that similar issue of allowing working capital adjustment to the assessee has been held in favour of the assessee by series of decision on various Benches of the Tribunal including Pune Bench of Tribunal in DCIT Vs. Emptoris Technologies India Pvt. Ltd. in ITA No.1500/PN/2012 and Emptoris Technologies India Pvt. Ltd. Vs. DCIT in ITA No.1550/PN/2012, relating to assessment year 2007-08, order dated 08.07.2015. The CIT(A) on the other hand had placed reliance on the decision of Delhi Bench of Tribunal in Vedaris Technologies Pvt. Ltd. v ACIT (supra) and the OECD Guidelines. In view of the above, we find merit in the order of CIT(A) in directing the Assessing Officer to grant working capital adjustment to the assessee on the basis of average credit/debit period for the year and commercial rate of interest. In view thereof, we find no merit in the grounds of appeal raised by the Revenue and the same are dismissed. 6. Contradicting the above arguments of the ld.counsel, the ld.CIT-DR argued that in case the assessee has positive working capital, assessee is not entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required. We have gone through the facts in the present case and noted that the Atmel India CDS segment operates with relatively favourable working capital position than that of comparable companies and as a result of this Atmel India working capital percentage on operating cost turns out to be negative i.e, -9.71%. We noted that this fact does not hamper from claiming of working capital adjustment as the Tribunal is consistently allowing this claim as held by Co-ordinate Bench of ITAT, Pune in the case of Software AG (India) Pvt. Ltd., supra. Hence, we direct the TPO to allow the claim of assessee accordingly. This issue of assessee s appeal is allowed. 8. Coming to the TPO rejecting Akshay Software Technologies Limited which is functionally comparable and basis of revenue also similar. For this, assessee has raised following Ground No.2.7:- 2.7 Further, the Ld.TPO erred in rejecting Akshay Software Technologies Limited (CDS Segment) and Cyber Media Research Limited (SSS Segment) which are functionally comparable and ought to be accepted. 9. Brief facts related to this issue are that the assessee company is primarily engaged in the business of providing Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Delhi Tribunal decision in the case of Qualcomm India Pvt. Ltd., vs. ACIT in ITA No.5239/DEL/2010, wherein it is held that Akshay Software Technologies Ltd., is a comparable company and hence, should be selected. The Tribunal held as under:- 26. ..On perusal of profit and loss account of the Akshay Software, we find that schedule-12 of it shows break up of the sales of the company as Rs. 4,97,88,191 towards exports of Software services, Rs. 1,17,29,263/- towards domestic software services and Rs. 6,30,000/- towards sale of product. Under these circumstances, we find substance in the contention of the Ld. A.R that Akshay Software should have been accepted as comparable to bench mark the international transaction of the assessee also because in the assessment year 2007-08, the Ld. T.P.O himself has accepted the company as comparable. We accordingly direct the Ld. T.P.O to accept Akshay Software as comparable to determine the Arms Length Price of the assessee. 11. On the other hand, the ld.CIT-DR argued that Akshay Software Technologies Limited is predominantly engaged in onsite development whereas the assessee is engaged in offshore development. Further the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Aggrieved, assessee preferred objections before the DRP. The DRP rejected the ground vide para 6.1 as under:- 6.1 Panel : The arguments of the assessee cannot be accepted as sufficient number of comparable companies with same accounting period is available in public domain, there is no need to consider the comparables ending with different accounting year which leads to the deviation in the number reported. Hence the above ground has been dismissed. Aggrieved, assessee came in appeal before us. 15. Now before us, the ld.counsel argued that the fact that the company R Systems International Ltd., has a statutory year ending on 31 st December, 2012 as against financial year ending on 31 st March, 2013 does not by itself render that company incomparable for the reason that the financial information is very much contemporaneous and falls within the permitted period as permitted by the Act. Additionally assessee s counsel argued that company conducting its business in any industry goes through a business cycle, wherein it begins as a start-up company and then matures to a grown up company. Thus, a mere difference of a few months between the tested party s financial clo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
