HEWLETT-PACKARD (INDIA) SOFTWARE OPERATION PRIVATE LIMITED,BANGALORE vs. DCIT, BANGALORE

Vide order dated 05/12/2009, this Tribunal recalled additional ground pertaining to Sasken Communication Technologies Pvt Ltd., wherein assessee sought exclusion of this comparable.

We have perused the order dated 7/8/2019 passed by this Tribunal, wherein additional ground was admitted. However, inadvertently Sasken Communication Technologies Pvt. Ltd., raised in additional ground 11, remained to be adjudicated which reads as under:

In the original order dated 7/8/2019, comparables sought for inclusion/exclusion in assessee’s appeal has been dealt with from para 14 onwards. In paragraph 16 therein this Tribunal analysed FAR of assessee under software development service segment and has categorised assessee to be a low risk bearing contract service provider to its associated enterprises. Referring to comparability analysis carried out by this Tribunal in original order dated 7/8/2019, we in paragraph 17 are convinced that Sasken Communications Technologies Ltd., raised in additional Page 3 of 6 IT(TP)A 668/Bang/2016 A. Y : 2011 – 12 ground No.11 was inadvertently not adjudicated which was a mistake apparent on record.

We have perused our notings in the log book, wherein Ld.AR submitted as under, seeking exclusion of Sasken Communications. Therefore this comparable is adjudicated as under: Sasken Communications Technologies Ltd Assessee seek exclusion of this comparable for the reason that it is engaged in development of software products and has inventory is an intangible assets. It has been submitted by Ld.AR that this company is also having huge expenditures on our and the. He further submitted that during the year under consideration revenue from software products is more and it launched a new product called VYAPAR SEVA. Ld.AR submitted that this company has significant intangibles and inventory is and therefore should be rejected to be compared with a captive service provider like assessee. In support of his contentions he placed reliance upon decision of this Tribunal in case of Sexo India Pvt.Ltd. vs ITO in IT(TP)A No.166 & 181/B/2016, vide order dated 22/02/2017. On the contrary, Ld.CIT DR placed reliance on orders passed by authorities below. He submitted that, though there is revenue from 3 separate segments, segmental information are available. It is submitted that product launched is for a future period and has not generated any revenue during the year under consideration. There is no impact of this launch on financials of this company for year Page 4 of 6 IT(TP)A 668/Bang/2016 A. Y : 2011 – 12 under consideration. In all fairness he submitted that the issue may be set aside to Ld.AO/TPO for verification of the same. We have perused submissions advanced by both sides in light of records placed before. At page 1476 and 1486 of annual report, placed in volume – III it is observed that segmental detail is available. All details relevant for computing margin of this comparable are available at page 604 and 659 of paper book volume I. It has also been submitted that Ld. TPO computed working capital adjustment of this comparables wrongly. We therefore direct Ld. TPO to consider segmental figure appearing in segmental breakup at page 1486 instead of considering consolidated profits from software services of this company and to compute correct margin as per law. We therefore set aside this comparable to Ld.AO/TPO to verify relevant observations recorded herein above and to recompute margins of this comparable. Accordingly this comparable is set aside to Ld.AO/TPO.

Accordingly, Additional Ground.11 raised by assessee stands allowed for statistical purposes Order pronounced in the open court on 16th March, 2020 Sd/- Sd/- (B. R. BASKARAN) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 16th March, 2020. /Vms/ Page 5 of 6 IT(TP)A 668/Bang/2016 A. Y : 2011 – 12 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore 6. Guard file