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Income Tax Appellate Tribunal, BANGALORE BENCHES “ B ” BENCH: BANGALORE
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALE
O R D E R
PER SHRI PAVAN KUMAR GADALE, JM :
The assessee has filed an appeal against the order passed under Section 143(3) r.w.s. 144C(13) in pursuance to the directions of the Dispute Resolution Panel (DRP) under Section 144C(5) of the Income Tax Act, 1961 dt.19.09.2016.
. At the time of hearing, the learned Authorized Representative submitted that he is pressing only Ground of appeal Nos.4(d) & 6 and sent email on the same day.
2 IT(TP)A No.78/Bang/2017 Accordingly, the other grounds of appeal are treated as not pressed and dismissed. The effective grounds of appeal are as under:
“ 4(d) - Rejecting additional comparables proposed by the appellant without giving any cogent reasons and on unjustifiable grounds. 6. Granting TDS Credit of Rs.78,994 as against Rs.82,440 claimed by the appellant in the Return of Income.”
The Brief facts of the case are that, the assessee company is engaged in Software Development Services (SDS) and provides software design, coding, testing, maintenance services, innovative web based management software and management solutions to its parent company Zee Omega INC.The assessee company has filed the Return of Income for the Assessment Year 2012-13 on 11.12.2013 with total income of Rs.2,95,65,600/-. Subsequently, Notice u/sec143 (2)andU/sec142(1) of the Act along with questionnaire were issued. In compliance, the LdAr appeared from time to time and the details were furnished. The Assessing Officer on perusal of financial statements, find that the assessee has international transactions with its Associate Enterprises, exceeding the prescribed limits, and was referred to Transfer Pricing Officer (TPO) for determination of Arm’s Length Price (ALP).Whereas the assessee company has submitted financials details of the Software Development Services segment with PLI(OP/OC) referred at page 2 Para 1.2 of the TPO order as under :
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The assessee has international transactions referred at Page 3 Para 3 of the TPO order as under:
The assessee company has applied TNMM method as Most Appropriate Method (MAM) and calculated PLI(OP/OC).The TPO has issued letter calling for documents required under Section 92D along with financials, annual report and copies of agreement. The assessee company has submitted the details. The TPO on perusal of the TP document found that the assessee has selected 7 comparables in software development services segment and applied the filters. Whereas, the TPO has rejected the TP Study and has selected the comparables and tested the filters.
4 IT(TP)A No.78/Bang/2017 The final set of comparables selected by the TPO after analysis as per page 11 Para 8.3 of TPO order as under :
The TPO after granting the Working Capital Adjustment has determined the PLI of assessee, OP/OC at 14.87% and on the selected the comparables at 22.63%.Further has computed the ALP at page 15 Para 12.4 of the order as under :
5 IT(TP)A No.78/Bang/2017 Further,the TPO has passed the order under Section 92CA of the Act dt.27.1.2016. The Draft assessment order was passed under Section 143(3) r.w.s. 144C(1) of the act on 1.3.2016 with Transfer Pricing Adjustment and other disallowances. Whereas, the assessee has filed objections in Form 35A with the DRP against the Draft assessment order. The DRP issued directions and passed the order under Section 143(3) r.w.s. 144C (5) of the Act dt19.09.2016. In compliance to the directions of DRP, the final assessment order under Section 143(3) r.w.s. 144C(13) of the Act was passed on 30.11.2016 determining the total income of Rs.4,34,28,753/-. Aggrieved by the final assessment order, the assessee has filed an appeal with the Tribunal.
At the time of hearing, the learned Authorized Representative restricted his arguments to the extent of ground of appeal No. 4(d) and 6, and filed chart, Paper
6 IT(TP)A No.78/Bang/2017 Book to support the arguments. Further The LdAr made submissions on exclusion of three comparables and grant of TDS credit. Contra the learned Departmental Representative supported the orders of lower authorities.
We heard the rival submissions and perused the material on record. The learned Authorized Representative submitted that three comparables considered in determining the ALP are to be excluded and supported his arguments with the judicial decisions. i) M/s. Infosys Limited – The company has a turnover of Rs.31,254 Crores and is a global brand and also has intangible assets. Further it is functionally different and operates on full fledged risk model with vide range of functions in comparison with operating profile of the assessee. The ld. AR submitted that the said comparable was excluded by the co-ordinate Bench of tribunal in the case of M/s CGI Information Systems and Management Consultants Pvt. Ltd. Vs. ACIT (TS- 320-ITAT-2018 (Bang)-TP) . (ii) Larsen & Toubro InfoTech Limited - The company has a turnover ofRs.2,959 Crores and has substantial onsite revenues. Further the operations are functionally different and derived benefit of L & T brand.This company was excluded in the coordinate bench decision of M/s CGI Information Systems and Management Consultants Pvt. Ltd. Vs. ACIT (supra). iii) Persistent Systems Limited – This Company has a turnover of Rs.810 Crores and has substantial Related Party Transactions. Further has high R&D expenses and is functionally different and no segmental data is available. This company was 7 IT(TP)A No.78/Bang/2017 also excluded in the coordinate bench decision of CGI Information Systems and Management Consultants Pvt. Ltd. Vs. Acit(Supra) . 7. We found the above three comparable companies were excluded from the list of final comparables in the case of CGI Information Systems and Management Consultants Pvt. Ltd. Vs. ACIT (supra) refered at page 15 Para 28 to 30 which are read as under :
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9 IT(TP)A No.78/Bang/2017 We respectfully fallow the Hon’ble tribunal decision were the above three comparables companies are excluded by the co-ordinate Bench of this Tribunal for the same assessment year from the final list. Accordingly, we direct the TPO to exclude (i) Infosys ltd (2)Larsen&Toubro infotech ltd and (iii) Persistent systems from the final list of comparables for determination of ALP.
The learned Authorized Representative argued that the Assessing Officer has granted the Tds credit to the extent of Rs.78,994 as against Rs.82,440 claimed. we upon hearing the submissions, direct the Assessing Officer to examine and verify the correctness of claim and allow the credit.
In the result, appeal of the assessee is partly allowed. Pronounced in the open court on the date mentioned on the caption page.