TMI Blog2024 (3) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this aspect and thereafter decide whether it can be treated as a comparable. Cybage Software Pvt. Ltd. design and overall guidance relating to the specific software is provided by the AEs. The assessee only has to do the coding and testing as per the design provided by the AE. Thus, not only the assessee doesn t bear any risk but the work executed is limited in its scope. Whereas, from the annual report of the comparable, it is observed that it has incurred sales promotion and marketing expenses and also owns plant, equipment and other intangible assets which presupposes that it is a full risk bearing entity unlike the assessee which is more or less a no risk-entity. Therefore, in our considered opinion, the company cannot be selected as a comparable. Rheal Software Pvt. Ltd. excluded as it is a persistent loss making company - The company has made profit in financial year 2015-16. Thus, in our view, applying the filter of persistent loss making company of the TPO, the company cannot be rejected. Accordingly, we direct the Assessing Officer to include this company. DCIS Dot Com Solutions India Pvt. Ltd - As per the annual report of the company, it has only one segment of softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer for de novo adjudication keeping in view the observations made by us (supra) and applying the ratio laid down by the Hon'ble jurisdictional High Court in case of Kusum Healthcare Pvt. Ltd. The assessee must be provided reasonable opportunity of being heard before deciding the issue. Ground is allowed for statistical purposes. Difference in the income as per the books and as reflected in Form 26AS - HELD THAT:- We are of the view that the issue needs re-examination at the end of the AO as facts brought on record by the assessee have not been properly examined. It goes without saying, if a particular item of income has already been offered to tax, either in the preceding assessment years or in subsequent assessment years, the same income cannot be added in the impugned assessment year again as it amounts to double addition of the same income. If the assessee has not been given credit of TDS corresponding to such income due to the fact that income was recognized in a different assessment year but TDS was in the impugned assessment year, the credit for such TDS has to be given. With the aforesaid observations, issue is restored back to the AO for fresh adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly engaged in distribution and sale of digital switching equipments, cellular exchange equipments and other telecommunication equipments and provision of related services. He has also stated that the assessee provides intra group marketing and technical support and CSD services. 7. As discussed earlier, presently, we are concerned with the dispute relating to transfer pricing adjustment to the ALP of CSD. In the transfer pricing study report, assessee selected Transactional Net Margin Method (TNMM) as the most appropriate method to benchmark the transactions with Associated Enterprises (AE). By applying certain filters, assessee selected comparables from the database. Since, the profit level Indicator (PLI) of the assessee computed at 7.9% on cost was more than the average PLI of the comparables computed at 6.58%, the transaction with the AE was claimed to be at arm s length. The TPO, however, was not satisfied with the benchmarking of the assessee. Pointing out various deficiencies in the transfer pricing analysis done by the assessee, the TPO rejected it. 8. Having done so, he applied certain additional filters and in the process accepted certain comparables of the assessee while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the said concern is at pages 261 to 282 of the Paper Book of Annual Report Compilation. At page 267 of the Paper Book of Annual Report Compilation, the Revenue is recognized from operations and at page 274 of the Paper Book of Annual Report Compilation, the break-up is given up for sale of export as revenue from operations. Further, for the year under consideration, Infobeans Technologies Ltd. had declared that it was engaged in providing custom development services to offshore and was engaged in software engineering services in different fields. No segmentals were available. In such facts and circumstances, we find no merit in inclusion of the said concern in the final list of comparables. We direct its exclusion and also direct the Assessing Officer to re-compute the arms length price of the international transaction, if any in the hands of the assessee, after excluding 04 concerns as directed in the para above. Thus, Ground Nos. 6 6.1 raised by the assessee are allowed. 12. It is observed, in assessment years 2016-17, 2017-18, learned DRP had directed the Assessing Officer to exclude the company as a comparable in case the department had not filed any appeal against order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofitability. 14. Drawing our attention to the annual report of the company, learned Departmental Representative submitted that it has only one segment of software development services, hence, is a comparable to the assessee. 15. We have considered rival submissions and perused material on record. 16. The annual report of the company reveals, in the year under consideration, process for amalgamation with another company has started. However, before us, learned Departmental Representative has made a submission that whether the amalgamation has attained finality is not known. He has further submitted that since the financial results are available up to 14.02.2018, this can be extrapolated to get the financial results up to 31.03.2018. 17. We have further noted from the financial statement of the company, it has derived substantial revenue from software development services. Thus, in our view, the company is functionally similar to the assessee. However, the impact of amalgamation on profitability needs to be examined. Since, both the sides have not brought any material on record to establish the impact or otherwise of amalgamation on profitability, we restore the issue to the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee submitted, the only reason for which the TPO has excluded the company is that it is a persistent loss making company. However, he submitted, in assessment year 2015- 16, it has reported profit. Therefore, it does not satisfy the persistent loss making company filter applied by the TPO. 25. Learned Departmental Representative submitted, not only the company had made loss in financial years 2016-17 and 2017-18 but its income has progressively diminished. Thus, he submitted, the company was rightly rejected. 26. Having considered rival submissions, we find, while applying the persistent loss making company filter, the TPO has observed that company having persistent losses for the last three years up to and including financial year 2014-15 are to be excluded. In fact, the only reason for which the company was excluded by the TPO was that it is a persistent loss making company. However, learned counsel for the assessee has furnished cogent evidence before us to demonstrate that the company has made profit in financial year 2015-16. Thus, in our view, applying the filter of persistent loss making company of the TPO, the company cannot be rejected. Accordingly, we direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it has already been subsumed in the working capital adjustment. He submitted, while deciding assessee s appeal in assessment year 2017- 18, the co-ordinate Bench has deleted the adjustment in ITA No.366/Del/2022 dated 19.01.2023. 33. Per contra, learned Departmental Representative submitted, the TPO has examined the transaction invoice-wise and found delay of various degrees exceeding credit period of 30 days. He submitted, though, the TPO has examined delay in receipt of payment only in one year, however, facts on record clearly reveal a pattern spread over more than one year in the past which shows delay in receivable intentionally made by the assessee to provide benefit to its AEs. He submitted, in assessment year 2017-18 also similar adjustment was made on account of outstanding receivables. He submitted, the fact that delay in receivable is an international transaction is clearly discernible from the definition of international transaction provided under Section 92B of the Act. In this context, he drew our attention to the decision of the co-ordinate Bench in case of Techbooks International Pvt. Ltd. vs. DCIT ITA No. 788/Del/2016 dated 10.10.2022. He submitted, in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal transaction, takes within its ambit receivables also. In case of Kusum Healthcare Pvt. Ltd. (supra), the Hon'ble jurisdictional High Court, while dealing with the issue, has held as under: 10. The court is unable to agree with the above submissions. The inclusion in the Explanation to section 92B of the Act of the expression receivables does not mean that dehors the context every item of receivables appearing in the accounts of an entity, which may have dealings with foreign associated enterprises would automatically be characterized as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper inquiry by the Transfer Pricing Officer by analyzing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative, the co-ordinate Benches have held that the invoices raised within the financial year and payment made within the financial year but with delay may not have an impact on the opening and closing balance of outstanding receivables. Therefore, it could not have been factored by the assessee in working capital adjustment. 39. Though, we are conscious of the fact that in assessment year 2017-18, the co-ordinate Bench has decided the issue in favour of the assessee, however, we are of the view that in the impugned assessment year, the issue has not been examined in the context of principles laid down by the Hon'ble jurisdictional High Court in case of Kusum Healthcare Pvt. Ltd. (supra). However, in all fairness, it must be said that there is delay in trade payable to AEs. Therefore, some benefit on account of delayed payables must have percolated to the assessee. Thus, it needs to be examined whether and to what extent the benefit received by the assessee on account of trade payables can be set off against the purported benefit given to the AEs on account of trade receivables. 40. In view of the aforesaid, we are inclined to restore the issue to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax. In case of C-DOT Alcatel Lucent Research Centre Pvt. Ltd., it is the case of the assessee that the interest credited by the entity is not recoverable and hence not offered to tax. In case of HCI Infosystems Ltd., the assessee has stated that the corresponding revenue has been offered to tax in assessment year 2019-20. 47. Upon due consideration of the factual position, we are of the view that the issue needs re-examination at the end of the Assessing Officer as facts brought on record by the assessee have not been properly examined. It goes without saying, if a particular item of income has already been offered to tax, either in the preceding assessment years or in subsequent assessment years, the same income cannot be added in the impugned assessment year again as it amounts to double addition of the same income. Further, if the assessee has not been given credit of TDS corresponding to such income due to the fact that income was recognized in a different assessment year but TDS was in the impugned assessment year, the credit for such TDS has to be given. With the aforesaid observations, issue is restored back to the Assessing Officer for fresh adjudication after provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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