DEPUTY COMMISSIONER OF INCOME-TAX vs. M/S. IGNIFY SOFTWARE PVT. LTD.,, PUNE

This issue raised in the appeal filed by the Revenue is against the order of DRP in including certain comparables for benchmarking the Arm’s Length Price of the international transaction undertaken by the assessee.

The cross objections filed by the assessee are against rejection / selection of certain comparables in the final list of comparable drawn by the AO / DRP / TP.

Briefly, in the facts of the present case the assessee company was engaged in the business of Web Site Services, Support Centre, Revenue Accounting, Data Processing, Software Product and related services. The company provides software development support services to Ignify USA. The case of the assessee was selected for scrutiny. The AO made reference under Section 92CA(1) of the Act. The assessee had applied TNMM method as the most appropriate method to benchmark the international transaction of provision of software development services of Rs. 15.96 crore. The PLI applied by the assessee was operating profits over operating cost. The margin of the assessee company was 17.96%. The assessee had initially applied three years’ average margins of the comparable companies selected by it, but later had applied single year margin and the mean margin was 10.73%. The assessee had selected eleven concerns as comparable. The TPO, however,

The Revenue has filed statement of facts and has pointed out that inclusion of the concern, Cat Technologies Limited, has been accepted by the TPO and hence, no appeal is filed on this issue. However, other issues are raised against the order or DRP.

The Ld. DR for the Revenue had moved an application for adjournment; however, the Ld. AR for the assessee pointed out that in case the comparables which were finally selected by the TPO are included and also concern Cat Technologies Limited is included then the margin shown by the assessee falls within the Arm’s Length Margin of +/-5%.

We have heard the rival contentions and perused the record. In view of the concession given by the Ld. AR for the assessee, we proceed to decide the present appeal on the preliminary issue itself, without going into merits of issues raised by the Revenue and the cross objections filed by the assessee. The TPO in the final analysis had selected nine concerns as comparables and the mean margin of the comparables was determined at 25.47% as against the margin of the assessee at 17.94%. The DRP has directed the inclusion of Cat Technologies Limited and the mean margins of the comparables worked out to

In the result, the appeal of the Revenue is allowed and the cross objections filed by the assessee are dismissed.