THE PR COMMISSIONER OF INCOME TAX CIT (A) vs. M/S APTEAN INDIA PVT LTD

THE PR. COMMISSIONER OF INCOME TAX, CIT (A), 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560095.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560095. …APPELLANTS (BY SRI. RAVIRAJ Y.V., ADV. A/W SRI DILIP M., ADV.)

This

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in directing Transfer Pricing Officer to include FCS Software Solutions on ground of on account of functional dissimilarity even when the said comparable satisfies qualitative and quantitative filters and as per Rule 10B of I.T. Rules?

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in law in directing the Transfer Pricing Officer to exclude comparables namely, exclude, Larsen & Tourbo, Mind Tree Ltd, Persistent Systems Ltd, R.S.Software India Ltd, Tech Mahindra Ltd as comparables on account of turnover filter even when the said comparable satisfies qualitative and quantitative filters and as per Rule 10B of I.T.Rules and ignoring its earlier decision in case of M/s.Societe Generale Global Solution Centre Pvt Ltd and M/s.Vmoksha Technologies Pvt Ltd whereby it is held that turnover is not a relevant criteria for deciding the comparability?

Whether on the facts and in the circumstances of the case and in law, the Tribunal in allowing deduction under section 37(1) of the Act by relying on clarificatory amendment brought vide finance Act, 2022 by inserting Explanation 3 to Section 40(a)(ii) making it explicitly clear that the term 'tax' shall include and shall be deemed to have always included any surcharge?

Whether the Hon'ble Tribunal is correct in holding that M/s. Persistent Systems ltd cannot be considered as a comparable as the company is engaged in software product development and

Whether on the facts and circumstances of the case, whether the Tribunal was correct in comparable's chosen by Transfer Pricing Officer cannot be taken as a comparable as the company is engaged in product development and earns revenue from sale of licenses and subscription and segmental details are not available, whereas as per the annual report of the companies finalized by said officer, it can be seen that the entire income is from software development service?

Whether the Tribunal was right in fact and in law holding that M/s. Larsen Toubro Infotech Ltd. cannot be taken as comparable as the company is engaged in diversified activities and no segmental details are available and the company has significant intangibles, significant brand value whereas as seen from the fixed assets schedule of the company, it can be seen that the company does not own any IPR. If at all, business rights are to be considered as IPR, they are very miniscule and insignificant. The internal software is still a work in

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not acknowledging that there is no direct relationship between brand value and the margin earned by the company. Brand name may generate higher revenue of the company but it does not necessarily mean that it would increase the profit margin and as seen from 'Note AB- segmental information' available on S-1258, it is seen that the company has disclosed segment based on the client's business?

Whether the Tribunal is right in law in not acknowledging that the segment classification has been done on vertical line of business and therefore, they do not constitute a separate and distinct business segment per-se, therefore discontinuing of one of such vertical line of business during the year will not have any material impact on the company's functional comparability and profit margin during the year?

Whether on the facts and in the facts and circumstances of the case, the Tribunal is right in law in holding directing Transfer Pricing Officer to include M/s. FCS Software Solutions on ground of

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing to allow negative working capital adjustment without appreciating the facts of the case where making a working capital adjustment based on such broad approximations estimations and assumptions may not lead to reliable results and failed to demonstrate the impact of difference in working capital?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not acknowledging that to allow working capital adjustment without an upper limit would result into abnormal adjustment and would make the profit earned within the permitted range even if no operating profit is earned?”

It is noticed that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal would not

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.