TMI Blog2019 (11) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... ultiple services like custom software development in addition to cloud computing, application services and mobile technology, enterprise application services, QA and testing, BPO and strategic sourcing. The RPT is 87% of the operating revenue as compared to the filter of 20% applied in the case of the assessee company by the TPO. E-infochips Bangalore Ltd be excluded from the list of comparable companies for the reason that this company provides software development and IT enabled services like hardware designing, complete product lifecycle development, application development, enterprise IT consulting. RPT is 37.96% of the operating revenue as compared to the filter of 20% applied by the TPO in the case of the assessee company. Acropetal Technologies Limited company to be excluded from the list of comparable companies for the reason that this company has Employee cost percentage of 11.51% and whereas the filter applied by the TPO was 25% of Employee cost in the case of the assessee company. Axis IT T Ltd. be excluded from the list of comparable companies for the reason that this company provides software services. The RPT is 43.18% of the operating revenue while a filte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical purposes. - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI ABY T. VARKEY, JUDICIAL MEMBER For the Assessee : Sh. J.P. Khaitan, Adv. Sh. Pratyush Jhunjhunwala, Adv. For the Revenue : Dr. P.K. Srihari, CIT(DR) ORDER PER J. SUDHAKAR REDDY, AM :- This is an appeal filed by the assessee directed against the order of the Assessing Officer ( AO for short) passed u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 ( the Act for short) for the AY 2011-12. 1. Atlas Healthcare Software India Private Limited ( the appellant ) is an Indian company engaged in the business of providing software development services. The appellant is a captive software service provider and caters to the requirements of its Associated Enterprise ( AE ). During the previous year relevant to the assessment year 2011-12, the appellant had provided software development services to its AE for Rs. 7,75,64.883/-. The Assessing Officer in his order dated December 7, 2015, passed after directions dated October 26, 2015 of the Dispute Resolution Panel ( DRP ), made a transfer pricing adjustment of Rs. 1,05,70,181/- to the appellant s income. Being aggrieved, the appellant preferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the following companies which were considered as comparables by the TPO, while computing the ALP, have to be excluded, on merits as they are not comparable due to various reasons. 4. He submitted that the company, LUCID Software Limited has to be excluded as the functional profile of this company is different when compared with the functional profile of the assessee company and that this issue is covered by the decision of the Tribunal in the case of Nomura Research Institute Financial Technologies India (P) Ltd. vs. DCIT, Circle-2(2), Kolkata (ITA Nos. 284/Kol/2016 and 485/Kol/2016) order dated 26.10.2018. 5. On the same basis he submitted that, Sagarsoft (India) Ltd., Prelude Sys (India) Ltd., E-Infochips Bangalore Ltd., Acropetal Technologies Ltd. and Axis IT T Ltd. have to be eliminated from the list of comparable companies, for various reasons by relying on the order of the Tribunal in the case of Nomura Research Institute Financial Technologies India (P) Ltd.(supra). In the case of Zylog Systems (India) Ltd. he relied on the decision of the ITAT Delhi Bench in the case of Alcatel-Lucent India Ltd. vs. DCIT, Circle-2(1), New Delhi, order dated 24.08.2016 and subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the DRP on each of the disputed comparables and argued that the decision taken by the DRP be upheld. He submitted that the argument of the assessee that Related Party Transaction ( RPT for short) filter has been wrongly applied, be tested by restoring the issue to the file of the AO for fresh adjudication. 11. In reply the ld. Counsel for the assessee submitted that in case Tribunal comes to a conclusion that the decision in the case of Nomura Research Institute Financial Technologies India (P) Ltd.(supra) is to be followed for the purpose of inclusion and exclusion of comparable companies from the list, one more opportunity may be provided to the assessee for leading further arguments on merits. 12. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, perusal of the papers on record and the orders of the authorities below, as well as case law cited we hold as follows. 13. Both the parties agreed that the Tribunal need not adjudicate the issue whether CUP or TNMM is the MAM for determination of ALP for the assessee company s international transactions in this appeal and that the issue may be let open for adjudication in an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like hardware designing, complete product lifecycle development, application development, enterprise IT consulting. The RPT is 37.96% of the operating revenue as compared to the filter of 20% applied by the TPO in the case of the assessee company. v. Acropetal Technologies Limited: Consistent with the view taken by the coordinate Bench of the Tribunal in the case of Nomura Research Institute Financial Technologies India (P) Ltd. (supra) we direct this company to be excluded from the list of comparable companies for the reason that this company has Employee cost percentage of 11.51% and whereas the filter applied by the TPO was 25% of Employee cost in the case of the assessee company. vi. Axis IT T Ltd.: Consistent with the view taken by the coordinate Bench of the Tribunal in the case of Nomura Research Institute Financial Technologies India (P) Ltd. (supra) we direct this company be excluded from the list of comparable companies for the reason that this company provides software services. The RPT is 43.18% of the operating revenue while a filter of 20% has been applied by the TPO. The TPO wrongly applied the entire revenue of ₹37.16 crores as from software servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) has directed the inclusion of this company as a comparable company. Consistent with the view taken therein we direct the AO to include this company as a comparable company. ii. Maveric Systems Limited: The TPO excluded this company on the ground that it is functionally different and that the project expenses is 70% higher when compared with the same expenses of the previous year and hence FAR analysis is not possible. The DRP has not commented on this issue. We find that the company is engaged in software development and testing services and it is the only reportable segment. 99% of the operating revenue for the period ending 31.03.2011 was received from software development. This Bench of the Tribunal in the case of Nomura Research Institute Financial Technologies India (P) Ltd. (supra) considered this company as a comparable company on similar facts. Consistent with the view taken therein we direct the AO to include this company as a comparable company for the purpose of computation of ALP. iii. Thinksoft Global Services Limited: The TPO excluded this company on the ground that it is engaged in software services and not in development activity and hence not functiona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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