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TMI Blog2024 (9) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... o its associated enterprises, Reimbursement of expenses received from the associated enterprises & interest chargeable on the amounts due from the associate entities. 2. In confirming the rejection of the transfer pricing study conducted by the assessee. The transfer pricing study of the Transfer Pricing Officer resulted in selection of 19 companies as comparables and an Arm's Length Margin of 23.87% was arrived at. However, a relief was granted by the DRP to exclude Infosys Technologies Ltd. and L & T Infotech Ltd from the list of final comparables of the TPO. 3. In rejecting the objections of the assessee against the selection companies with extraordinary margins as comparables. 4. In retaining companies viz., E-Infochips Bangalore Limited and Kals Information Systems Limited as comparables which are into diversified business and has intangible assets and operates at full-fledged risk bearing entity. 5. In retaining company Persistent Systems Limited as comparable which in into product development apart from software services, and there is no segmental information available in respect of such services. 6. In retaining company Mind Tree Limited as comparable which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring total income at Rs 'NIL' and claiming deduction u/s 10A amounting to Rs. 7,69,85,754/-. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 27.08.2011 and served on the assessee. In response to the said notice, the A.R of the assessee appeared before the Assessing Officer and furnished the requisite details as called for from time to time. Based on the material furnished by the assessee, the Assessing Officer completed the assessment and assessed the net tax demand at Rs. 1,66,66,539/-. 4. The assessee has international transaction with its Associated Enterprises amounting to Rs. 24,69,512,177/-. The assessee has carried out the economic analysis and TP documentation which was filed along with Audit Report in Form 3CEB. The assessee short listed 13 comparables with an arithmetic mean PLI (OP/OC) at 9.67% as against the margin of the ass at (-) 12.38%. 5. The TPO rejected the TP study of the assessee. The profit of the assessee to the cost is worked out to 1.47% (OP/OC) as per the order of the TPO. The TPO arrived at the figure after adjusting arms length margin of 23.87% by considering 18 comparables as per TPO order page No.28. The TPO rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adopt LIBOR Plus 250 basis points for charging interest on delayed receivables from its AEs. 12. The assessee reiterated its submission before the TPO and submitted that no specific method was followed in imputing interest and the assessee neither charged interest on recoverables from AE as well as from Non-AEs. In this regard, the assessee relied on the decision of Global Logic India Ltd vs. ACIT (2020) 185 ITD 795(Del.). It is the submission of the learned Counsel for the ass that the TPO treated reimbursement of Rs. 1,51,36,893/- received from AEs as international transaction and considered the same as operating revenue and cost. The TPO rejected the contention of the assessee that they are purely recovery expenses from AEs and without any mark up. 13. The learned counsel for the assessee submitted that the Assessing Officer erred in setting off the profits of Rs. 7,69,85,754/- of Pune STPI unit against the loss of Rs. 8,53,79,564 of the Hyderabad Unit and in denying deduction u/s 10A of the Act to the Pune Unit. Further, the business loss of Hyderabad Unit of Rs. 8,53,79,564 ought to have been allowed to be carried forward. 14. The learned Counsel for the assessee submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the development of computer software which is similar to the functions performed by the assessee and therefore, the functions performed by the company are broadly comparable to that of the assessee. In view of the above, we do not find any reason to exclude this company as a comparable. We may point out that merely because this company has earned some extra ordinary profit is no reason to exclude this company as long as this company continues to be comparable with that of the assessee on FAR analysis. In view of the above, we do not find any reason to exclude this company and accordingly, the ground raised by the assessee is dismissed. Persistent Systems Ltd. 22. With regard to Persistent Systems Ltd, the submission of the assessee that this company is a product development company and our attention was drawn to page 260 of the paper book. It was submitted that the assessee being into product development, therefore, this company is required to be excluded from the list of comparables. 23. Per contra, the learned DR drew our attention to the order passed by the lower authorities and supported the orders passed by the TPO/DRP. 24. We have gone through page 260 of the Paper B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet date but pertains to period on or before the date of Balance Sheet as per the requirement of Schedule VI of the Companies Act, 1956." 25. In view of the above, we do not agree with the contention of the assessee and accordingly, this ground is also dismissed. Mindtree 26. In this regard, the learned AR submitted that Mindtree company owns intangible and our attention was drawn to the page No.376 of the paper book. Further, the learned AR drew our attention to page 360 to 366 and 374 of the paper book to show that the profit of this company has increased exponentially. 27. Per contra, the learned DR relied upon the order of the TPO and the DRP. 28. We have gone through the record and considered the documents filed before us. In this regard, it is relevant to mention here that the assessee has not objected to the inclusion of this company in the list of comparable selected by the TPO while filing objection in response to the show cause notice before the TPO. Before the learned TPO, the assessee has only raised objection with respect to E-Infochips Bangalore Ltd, Infosys Technologies Ltd, Kal Infosystems Ltd, L&T Infotech Ltd. No objection has been filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade receivable will be restricted to LIBOR Plus 250 point basis, as there is no appeal of the Revenue and the assessee cannot be worsened off in its appeal by following the decision in the case of Satyam Ventures (Supra). Thus, this ground of appeal is dismissed. Set off of losses 33. Finally, the last ground raised by the assessee is with regard to the set off of losses of the Hyderabad Unit against the profit of the Pune Unit. In this regard the submission of the assessee is as under: "11. The Assessing Officer erred in setting off the profits of Rs. 7,69,85,754/- of Pune STPI unit against the loss of Rs. 8,53,79,564 of the Hyderabad Unit, and in denying deduction under section 10A of the Act to the Pune Unit. Further, the business loss of Hyderabad unit of Rs. 8,53,79,564/- ought to have been allowed to be carried forward. This issue has not been raised by the appellant before the DRP. However, since the same is also arising from the final assessment order, the same is raised for the kind consideration of the Hon'ble ITAT. The issue is squarely covered by the judgment of Hon'ble Supreme Court in the case of CIT Vs. Yokogawa India Limited reported in (2017) 391 ITR 274 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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