M/S INFINEON TECHNOLOGIES INDIA PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(1), BANGALORE

The assessee has filed an appeal against the order under Section 143(3) r.w.s. 144C r.w.s. 254 of the Income Tax Act, 1961 (in short 'the Act') passed in pursuance to the directions of the Dispute Resolution Panel (DRP) order under Section 144C(5) Dt.25.09.2018.

At the time of hearing, the learned Authorized Representative has pressed Grounds of appeal Nos.14, 16 & 17 only and made endorsement in the appeal memo. Hence, other grounds of appeal are not pressed and treated as withdrawn and dismissed. The effective grounds of appeal are as under:

The TPO computed the ALP in order at page 6 Para 4 as under :

The TPO has passed the order under Section 92CA r.w.s. 254 of the Act dt.20.10.2017 and the draft assessment order was passed by the Assessing Officer under Section 143(3) r.w.s. 144C r.w. 254 of the Act along with Transfer Pricing Adjustment and the addition in respect of software expenditure and assessed the Rs.13,76,81,822. Aggrieved by the order, the assessee has filed objections in Form 35A before the DRP, whereas the DRP has passed the order under Section 144C (5) of the Act dt.25.09.2019. Further, the final assessment order was passed under Section 143(3) r.w.s. 144C of the Act with total income of Rs.9, 86,91,148/- after considering the relief granted by the DRP in Transfer Pricing Adjustment. Aggrieved by the order, the assessee has filed an appeal before the Tribunal.

At the time of hearing, the learned Authorized Representative has argued only Ground Nos.14, 16 & 17. Whereas Ground No.14 relates to exclusion of comparables in the software development segment and ld. AR prayed for exclusion of the following six comparables – a) Infosys Limited b) Tata Elxsi Limited c) Kals Information Systems Limited d) Persistent Systems Limited e) Aztec Soft Limited f) Bodhtree Consulting Limited The learned Departmental Representative supported the orders of lower authorities and filed written submissions.

The learned Authorized Representative filed chart and paper book to support the submissions on the comparables to be excluded on the functional dissimilarity and turnover filter. – a) Infosys Limited - The company.s turnover is Rs.9,028 Crores and has a brand value and also engaged in diversified operations apart from Software Development Services, R&D Activities and fails the uppeer turnover filter. b) Aztec Software Limited - The company sales are Rs.128.61 Crores and fails the RPT filter and functionally dissimilar. c) Kals Information Systems Limited - The company sales turnover is Rs.1.96 Crores and is functionally different and engaged in software products and training apart from provision of Software Development Services. d) Persistent Systems Limited - The company turnover is Rs.2.917 Crores and it is functionally dissimilar and fails the upper turnover filter. e) Tata Elxsi Limited - The company has turnover of Rs.235.63 Crores and functionally dissimilar, and is engaged in product development activity which include Multi Media Imaging Process and involved in activities such as hardware design, industrial design, engineering design and visual computing.

Further the learned Authorized Representative submitted that these comparable companies were excluded by the co-ordinate bench of this Tribunal in the case of Novell Software Development Pvt. Ltd. Vs. DCIT in IT(TP)A No.1483/Bang/2010 Dt.29.11.2016 observed at pages 9, 10 & 11 in respect of above comparables as under :

The comparable(f) Bodhtree Consulting Limited, whose the turnover is Rs.5.31 Crores and functionally dissimilar and is also engaged in product sales. The learned Authorized Representative submitted that the co-ordinate bench of this Tribunal in the case of ACIT Vs. Electronics Imaging Pvt. Ltd. in IT(TP)A No.1725/Bang/2017 dt.31.10.2018 has dealt on the issue of exclusion of Bodhtree Consulting Ltd at page 15 para 16 as under :