SKILLNET SOLUTIONS INDIA P. LTD,MUMBAI vs. DCIT CIR 3(3)(2), MUMBAI

At the outset, the learned Counsel for the assessee, referring to ground no.4, submitted that if one of the comparables i.e., Infobeans Technologies Ltd. is removed, assessee’s margin would be within arm's length margin of the rest of the comparables requiring no further adjustment. Therefore, in that event, the other grounds raised would become academic. Considering the aforesaid submission, we proceed to deal with ground no.4, at the very outset.

Brief facts relating to this ground are, the assessee, a resident company, is a subsidiary of Skillnet Solutions Inc., USA. It is stated that the assessee is engaged in providing routine software development services to customers through Skillnet Solutions Inc., USA. During the year under consideration, the assessee earned revenue of ` 22,79,88,050, from providing software development services through its Associated Enterprises (AE). The assessee benchmarked the aforesaid transaction by applying comparable uncontrolled price (CUP) method. The Transfer Pricing Officer, however, did not accept the benchmarking of the assessee. Noticing that in assessment year 2010–11, CUP method followed by the assessee was rejected and the arm's length price was determined by applying transactional net margin method (TNMM), the Transfer Pricing Officer followed the same and proceeded to determine the arm's length price under TNMM. While doing so, he selected seven

The learned Counsel for the assessee submitted, Infobeans Technologies Ltd. being engaged in diversified activities and the segmental results not being available in public domain, cannot be compared to a routine software development service provider like the assessee. In support of such contention, learned Counsel for the assessee relied upon the following decisions:–

We have considered rival submissions in the light of the decisions relied upon and perused materials on record. As could be seen from the facts on record, the assessee operates in a single segment of providing routine software development services to its AE. Whereas, Infobeans Technologies Ltd. is providing a range of services, such as, automation engineering, service now, UX and UI, customized software, storage and virtualization, data mining, data modeling, statistical analysis, machine learning technique, etc. Considering the fact that Infobeans Technologies Ltd. is engaged in diversified activities and segmental details are not available, the Tribunal, Pune Bench, in Pubmatic India Pvt. Ltd. (supra) has held that this company cannot be treated as comparable. In case of M/s. Emersion Electric Co. India Pvt. Ltd. (supra) which is for the very same assessment year, the Co– ordinate Bench following the decision rendered in case of Pubmatic India Pvt. Ltd. (supra) has held that Infobeans Technologies Ltd. cannot be considered as comparable to a routine software development service provider. The same view was again expressed by the Tribunal, Delhi Bench, in M/s. Abhay India Pvt. Ltd. (supra). Keeping in view the consistency in the decisions of the Tribunal with regard to the comparability of Infobeans Technologies Ltd. with a routine software development service provider, we hold that this company cannot be a comparable to the assessee. Accordingly, we

In the result, appeal is partly allowed. Order pronounced in the open Court on 24.02.2021