Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 0153 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 4 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-07-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
15-06-2016
Assessment Year
2007-2008
Appeal Filed On
21-03-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.V.VASUDEAVAN, JUDICIAL MEMBER AND SHRI A.K.GAODIA, ACCOUNTANT MEMBER IT (TP) A NO.404(BANG) 2012 (ASSESSMENT YEAR : 2007-08) M/S TEXTRON INDIA PVT. LTD., FLOOR-2, BLOCK B (TOWER 2) SEZ, CAMPUS, GLOBAL VILLAGE, RVCE POST, MYLASANDRA, OFF MYSORE ROAD, BANGALORE-560 059 PAN NO.AACCT0118M APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX OFFICER, CIRCLE-12(4), BANGALORE RESPON DENT AND (IT(TP)A NO.477(BANG)/2012 (ASSESSMENT YEAR : 2007-08) (BY REVENUE) AND C.O NO.1(BANG)/2015 (IN IT(TP)A NO.477(BANG)/2012) (ASSESSMENT YEAR : 2007-08) (BY ASSESSEE) ASSESSEE BY: SHRI P.K.PRASAD AND SHRI UMASHANKAR, C A REVENUE BY: SHRI V AR SREENIVASAN, JCIT DATE OF HEARING : 15-06-2016 DATE OF PRONOUNCEMENT: : 22-07-2016 O R D E R PER SHRI A.K.GARODIA, AM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE AND THE CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE WHIC H ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-IV, BANGALORE DATED 31-01-2 011 ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 2 OF 14 2. IN IT(TP)A NO.404(B)/2012, THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS: 1.THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - IV , BANGALORE [ ' CIT (APPEALS) ' ] I S BAD IN LAW AND LIABLE TO BE QUASHED . 2 THAT THE CIT ( APPEALS ) E RRED IN IGNORING THE FUNCTIONAL PROFILE OF THE APPELLANT AND ESTABLISHED COMPARABILIT Y W I T H ENTR E PRENEURIAL SOFT W ARE DE V ELOPMENT SER V ICE PRO V IDERS. 3. THAT THE CIT (APPEALS) ERRED IN IGNORING THE LIM ITED RISK NATURE OF THE ENGINEERING DESIGN SERVICES PROVIDED B Y THE APPELLANT AND IN NOT PRO V IDING AN APPROPRIATE ADJUSTMENT TOWARDS THE RISK DIFFERENT I AL . 4. THAT THE CIT (APPEALS) ERRED IN NOT CONSIDERING THE RE V ISED SET OF COMPARABLES SUBMITTED B Y THE APPELLANT WHICH ARE MORE CLOSEL Y COMPARABLE TO THE FUNCTIONAL PROFILE OF THE APPELLA NT. 5. THAT THE CIT (APPEALS) ERRED IN NOT PRO V IDING AN OPPORTUNIT Y OF BEING HEARD BEFORE ARRIVING A T A CON C LUSION ON THE FUNCTIONAL PROFILE OF THE APPELLANT AND CONSEQUENTL Y WHILE DETERMIN I NG THE TRANSFER PRICING ADJUSTMENT. 6.THAT THE CIT (APPEALS) ERRED IN NOT APPLY I NG MULTIPLE YEAR/ PRIOR Y EAR DATA FOR COMPARABLE COMPANIES WHILE DETERMINING ARM ' S LENGTH PRICE. 7 . THAT THE CIT (APPEALS) ERRED IN UPHOLDING THE APPRO ACH ADOPTED B Y THE TRANSFER PRICING OFFICE R OF COLLECTING SELECTI V E INFORMATION OF THE COMPANIES B Y EXERCISING POWER GRANTED TO HIM UNDER SECTION 133(6) OF THE INCOME TAX ACT , 1961 ( ' ACT') THAT WAS NOT A V AILABLE TO THE APPELLANT IN THE PUBLIC DOMAIN. 8. TH A T THE CIT (APPEALS) ERRED IN UPHOLDING THE TRANSFER PRICING OFFICER ' S APPROACH OF US I NG DATA A S AT THE TIME OF ASSESSMENT PROCEEDINGS , INSTEAD OF THAT A V AILABLE AS ON THE DATE OF PREPARING THE TP DOCUMENTATION FOR COMPARAB LE COMPANIES WHILE DETERMINING ARM ' S LENGTH PRICE. 9. THAT THE CIT (APPEALS) ERRED IN PERFORMING HIS OWN ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 3 OF 14 ECONOMIC ANAL Y SIS DURING THE APPEAL PROCEED I NGS B Y MODIFYING THE FILTERS APPLIED B Y THE TRANSFER PRICING OFFICER WITHOUT PROVIDING AN Y OPPORTUNIT Y OF BEING HEARD TO THE APPELLANT . 10 . THAT THE CI'T(APPEALS) ERRED IN UPHOLDING THE ORD ER OF THE DEPUT Y COMMISSIONER OF INCOME TAX, CIRCLE 12(4), BANGALORE (HEREINAFTER REFERRED TO AS THE 'LEARNED ASSESSING OFFICER ' ) IN CONSEQUENTL Y L EV YING INTEREST UNDER SECTION 234B OF THE ACT. 11 . TH A T THE CIT(APPEALS) E R R E D IN UPHOLDING THE ORDER OF THE L E ARNED ASSESSING OFFICE R IN CONSEQUENTL Y LE VY ING INTEREST UNDER SECTION 234D OF THE ACT . 12 .THAT THE LEARNED ASSESSING OFFICER ERRED IN INITIA TING PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT . THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTE R, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. SIMILARLY, THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL NO. IT(TP)A NO.477(B)/2012 ARE AS UNDER; 1 . THE ORDER OF THE LD . CIT (A) IS OPPOSED TO L AW AND FACTS OF THE CASE . 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO EXCLUDE EXPENSES I NCURRED IN FOREIGN CURRENCY TOWARDS TRAVEL OF RS . 1 , 51 ,82 , 578/- , FREIGHT , TELECOMMUNICATION AND INSURANCE CHARGES AMOUNTING TO RS . 2,26 , 78 , 338/- , FROM TOTAL TURNOVER AS WELL WHEREAS SUCH EXCLUSION IS PERMITTED TO ARRIVE AT THE EXPORT TURNOVER ONLY AS PER THE DEFINITIONS GIVEN IN SEC . 1 - DA OF THE ACT AND TOTAL TURNOVER HAS NOT BEEN DEFINED IN THE SECTION . - 3. THE CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ORDER OF THE JU R ISD I CT I ONA L H I GH COURT ON THE ABOVE ISSUE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLP H AS BEEN F I LED . ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 4 OF 14 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEA R NED CIT(A) ERRED IN HOLDING THAT THE TPO OUGHT TO HAVE EXCLUDED COM PARABLES HAVING ANY RELATED PARTY TRANSACTIONS , NOT ONLY THOSE WITH MORE THAN 25% RELATED PARTY TRANSACTIONS ON SALES . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE ID . CIT(A) ERRED I N HOLDING THAT M/S FLEXTRONICS SOFTWARE SYSTEMS LTD ., AND M/S CELESTIAL LABS CANNOT BE TAKEN AS COM PARAB LES BEING FUNCTIONALLY DIFFERENT . 6. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESS EE IS ELIGIBLE FOR A STANDARD DEDUCTION OF 5% FROM THE ARM'S LENGT H PRICE(ALP) UNDER THE PROVISO TO SECTION 92C(2) OF T HE INCOME TAX ACT . FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEAR I NG , IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESS I NG OFFICER MAY BE RESTORED . THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR DELETE ANY OF THE GROUNDS MENT I ONED ABOVE . 4. THE GROUNDS RAISED IN THE CROSS OBJECTION OF THE ASSESSEE ARE AS UNDER; 1. THAT THE CONTENTION IN THE APPEAL FILED BY THE REVENUE IS BAD IN LAW WHILE STATING THAT THE CASE LAWS RELI ED UPON BY THE LD. CIT(A) WHILE DECIDING THE ISSUE OF RE- COMPUTATION U/S 10A ARE NOT APPLICABLE ON THE GROUN DS THAT THE REVENUE HAS NOT ACCEPTED THOSE ORDERS AND HAS FILED APPEALS BEFORE THE HONBLE SUPREME COURT AS FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IS MANDATORY. 2. THAT THE CONTENTION OF THE REVENUE IS BAD IN LAW AND ADJUSTMENTS IN ARMS LENGTH PRICE OF THE INTERNATIO NAL ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 5 OF 14 TRANSACTIONS ARE NOT BASED ON CORRECT FACTS AND ESTABLISHED PRINCIPLES OF LAW AND PROCEDURES IN THI S REGARD. 3. THAT THE RESPONDENT CRAVES LEAVE TO ADD TO AND/O R TO ALTER, AMEND, RESCRIND MODIFY THE GROUNDS HEREIN AB OVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 5. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT OUT OF 26 COMPARABLES SELECTED BY THE TPO FOR MAKING TP ADJUS TMENT IN THE PRESENT CASE, T HE ASSESSEE HAS REQUESTED FOR EXCLUSION OF FOLLOWIN G COMPARABLES. SL. NO . NAME OF THE CO . PLI %AGE BASIS FOR SEEKING EXCLUSION. 1M/S AVANI CIMCON TECH. LTD., 52 .59 FUNCTIONAL DISSIMILARITY 2.M/S CELESTIAL LABS LTD., 58.35 FUNCTIONAL DISSIMILARIT Y 3.M/S FLEXTRONICS SOFTWARE SYS.LTD (SEG.) 25.3 1 DIVERSIFIED SEGMENT AN NO SEGMENT DISCLOSURE 4.M/ GEOMETRIC LTD.(SEG.) 10.71 HIGHER RPT PERCENTAGE 5. M/S INFOSYS LTD. 40.30 BRANDING, OWNERSHIP OF INTANGIBLES & R&D 6. M/S ISHIR INFOTECH LTD., 30.12 HIGHER RPT PERCENTAGE 7. M/S KALS INFORMATION SYSTEMS LTD., 30. 55 SIGNIFICANT REV. FROM PRODUCT AND NO SEGMENTAL DETAILS AVAILABLE 8. M/S LUCID SOFTWARE LTD., 19.37 FUNCTIONAL DISSIMILARITY 9. M/S MEGASOFT LTD., 60.23 FUNCTIONAL DISSIMILARITY 10.M/S TATA ELXSI LTD., 26.51 FUNCTIONAL DISSIMILARITY 11.M/S WIPRO LTD (SEG.) 33.65 BRANDING, OWNERSHIP OF INTANGIBLES & R&D 6. HE SUBMITTED A CHART AND POINTED OUT THAT THE I SSUE REGARDING EXCLUSION OF THESE COMPARABLES IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS JUDGMENTS AS INDICATED IN THE CHART SUBMITT ED BY HIM BEFORE US. HE ALSO SUBMITTED THAT IF THESE COMPARABLE ARE EXCLUDE D THEN, THE AVERAGE PLI OF REMAINING COMPARABLES WILL BE 17.72% BEFORE WORKING CAPITAL ADJUSTMENT AND 16.68% AFTER WORKING CAPITAL ADJUSTMENT AS AGAI NST PROFIT PERCENTAGE OF ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 6 OF 14 THE ASSESSEE COMPANY, BEING TESTED PARTY AT 13.16% AND SINCE THE DIFFERENCE IS WITHIN THE RANGE OF +- 5% NO TP ADJUSTMENT IS CA LLED FOR. 7. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. BOTH SIDES AGREED THAT IF THE ASSESSEE SUCCEEDS ON THE ISSUE REGARDING EXCLUSION OF VARIOUS COMPARABLES AS PER C HART SUBMITTED BY THE LD. AR OF THE ASSESSEE THEN NO OTHER ISSUE REMAIN TO BE DECIDED EXCEPT THE ISSUE REGARDING COMPUTATION OF DEDUCTION ALLOWABLE U/S 10 A OF THE IT ACT, 1961. ON THIS ISSUE, IT WAS SUBMITTED BY THE LD. AR OF TH E ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMEN T OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S TATA ELXSI LTD., AS REPORTED IN 349 ITR 98. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE TAKE UP CORPORATE TAX ISSUE I.E. THE ISSUE REGARDING ALLOWA BILITY OF DEDUCTION U/S 10A OF THE IT ACT. THE AO HAS EXCLUDED EXPENSES IN CURRED IN FOREIGN CURRENCY TOWARDS TRAVEL, FREIGHT, TELECOMMUNICATION AND INSURANCE CHARGES FROM THE EXPORT TURNOVER BUT NOT FROM THE TOTAL TUR NOVER. AS PER THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDER ED IN THE CASE OF M/S TATA ELXSI LTD. (SUPRA), IT WAS HELD THAT TOTAL TUR NOVER IS SUM TOTAL OF EXPORT TURNOVER AND DOMESTIC TURNOVER. THEREFORE, IF AN A MOUNT IS EXCLUDED FROM EXPORT TURNOVER THEN THE TOTAL TURNOVER GOES DOWN B Y THE SAME AMOUNT, AS A CONSEQUENCE. RESPECTFULLY FOLLOWING THIS JUDGMENT O F THE HONBLE KARNATAKA HIGH COURT, WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND GROUND NO.2 & 3 OF THE REVENUES APPEAL A RE REJECTED AND THE ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 7 OF 14 GROUNDS RAISED IN THE C.O. BY THE ASSESSEE ARE ALLO WED. 10. NOW WE DECIDE THE TP ISSUE I.E. REGARDING THE EXCLUSION OF VARIOUS COMPARABLES AS PER THE CHART SUBMITTED BY THE LEARN ED AR OF THE ASSESSEE. FIRST COMPANY FOR WHICH EXCLUSION HAS BEEN REQUESTE D IS M/S AVANI CIMCON TECH. LTD. APART FROM OTHER TRIBUNAL ORDERS, RELIAN CE HAS BEEN PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S TRILOGY E-BUSINESS SOFTWARE IND. PVT. LTD., IN ITA NO.1054(BANG)/2011, COPY AVAILABL E ON PAGE 926 OF THE CASE LAW COMPENDIUM. AS PER THE PROFILE OF THIS COMPAN Y, I.E. M/S TRILOGY E- BUSINESS SOFTWARE IND. PVT. LTD.,(SUPRA) NOTED IN P ARA-3 OF THIS TRIBUNAL ORDER, THIS COMPANY IS PROVIDING SOFTWARE RESEARCH AND DEVELOPMENT SERVICES TO THE AE ON A CONTRACT BASIS AND IN THE PRESENT CA SE ALSO, THE ASSESSEE IS PROVIDING SOFTWARE SERVICES TO THE AE AND THEREFORE , BOTH THESE COMPANIES PROFILE ARE SIMILAR. IN THE CASE OF THAT ASSESSEE I .E. M/S TRILOGY E-BUSINESS SOFTWARE IND. PVT. LTD.,(SUPRA), IT WAS HELD BY THE TRIBUNAL THAT M/S AVANI CIMCON TECH. LTD., (SUPRA) IS FUNCTIONALLY DIFFEREN T AND THEREFORE, THIS COMPANY HAS TO BE EXCLUDED FROM THE LIST OF COMPARA BLES AND WHILE HOLDING SO, THE TRIBUNAL FOLLOWED ANOTHER TRIBUNAL ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF M/S TELECORDIA TEC H. PVT. LTD., VS ACIT IN ITA NO781(MUM)/2011. THE LD. DR OF THE REVENUE COU LD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT CASE AND IN THES E TWO CASES WHERE THE TRIBUNAL HELD THAT THIS COMPANY I.E. M/S AVANI CIMO N TECH. LTD. CANNOT BE CONSIDERED AS A COMPARABLE. HENCE, RESPECTFULLY FO LLOWING THESE TRIBUNAL ORDERS, WE DIRECT THE AO/TPO IN THE PRESENT CASE AL SO TO EXCLUDE THIS COMPANY FROM THE LIST OF FINAL COMPARABLES. ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 8 OF 14 11. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING REQUESTED BY THE ASSESSEE IS M/S CELESTIAL LABS LTD. FOR THIS COMPA NY ALSO, RELIANCE HAS BEEN PLACED ON THE SAME TRIBUNAL ORDER RENDERED IN THE C ASE OF M/S TRILOGY E- BUSINESS SOFTWARE IND. PVT. LTD.,(SUPRA) AND OUR AT TENTION WAS DRAWN TO PAGE NO.927 TO 931 OF THE CASE LAW COMPENDIUM. IN THAT CASE, THE TRIBUNAL HELD THAT THIS COMPANY WAS BASICALLY IN CLINICAL RE SEARCH AND MANUFACTURE OF BIO-PRODUCTS AND OTHER PRODUCTS AND THERE IS NO CLE AR BASIS ON WHICH THE TPO CONCLUDED THAT THIS COMPANY WAS MAINLY IN THE B USINESS OF PROVIDING SOFTWARE SERVICES AND ON THIS BASIS, IT WAS HELD BY THE TRIBUNAL THAT THIS COMPANY SHOULD NOT BE CONSIDERED AS A COMPARABLE AN D NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY THE LD. DR OF THE REV ENUE. THEREFORE, RESPECTFULLY FOLLOWING THIS TRIBUNALS ORDER, WE DI RECT THE AO/TPO IN THE PRESENT CASE ALSO THAT THIS COMPANY M/S CELESTIAL L ABS LTD., (SUPRA) SHOULD NOT BE CONSIDERED IN THE FINAL LIST OF COMPARABLES. 12. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING REQUESTED BY THE ASSESSEE IS M/S FLEXTRONICS SOFTWARE SYSTEMS LTD.,( SEG.). FOR EXCLUSION OF THIS COMPANY, RELIANCE HAS BEEN PLACED ON THE JUDGM ENT OF THE HONBLE TELANGANA & ANDHRA PRADESH HIGH COURT RENDERED IN T HE CASE OF DE SHAW INDIA SOFTWARE PVT. LTD., IN ITTA NO.433 OF 2014, C OPY OF WHICH IS AVAILABLE ON PAGES 212 & 213 OF CASE LAW COMPENDIUM. HE ALSO SUBMITTED THAT THE TRIBUNAL ORDER IN THAT CASE IS IN ITA NO.2071/HYD/2 011 AND COPY OF THE SAME IS AVAILABLE ON PAGES 226 OF CASE LAW COMPENDI UM AND SINCE THIS TRIBUNAL ORDER IN THAT CASE HAS BEEN APPROVED BY TH E HONBLE TELANGANA & ANDHRA PRADESH HIGH COURT, IN THE PRESENT CASE ALSO , THIS COMPANY SHOULD ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 9 OF 14 BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IN THE CASE OF DE SHAW INDIA PVT. LTD.,(SUPRA), IT WAS HELD BY THE TRIBUNAL THAT M/S FLEXTRONICS SOFTWARE SYSTEMS LTD.,(SEG.) CANNOT BE CONSIDERED AS A COMPARABLE BECAUSE THIS COMPANY IS INTO PRODUCT DEV ELOPMENT. THE TRIBUNAL IN THAT CASE HAS FOLLOWED ANOTHER TRIBUNAL ORDER RENDERED IN THE CASE OF M/S INTOTO SOFTWARE INDIA PVT. LTD., AND TH E LD. DR OF THE REVENUE COULD NOT PINT OUT ANY DIFFERENCE IN FACTS IN THE P RESENT CASE AND IN THE CASE OF M/S DE SHAW INDIA PVT. LTD.(SUPRA). HENCE, RESPE CTFULLY FOLLOWING THESE TRIBUNAL ORDERS AS WELL AS THE JUDGMENT OF THE HON BLE TELANGANA & ANDHRA PRADESH HIGH COURT RENDERED IN THE CASE OF DE SHAW INDIA PVT. LTD.,(SUPRA), WE DIRECT THE AO/TPO THAT IN THE PRESENT CASE ALSO, THIS COMPANY I.E. M/S FLEXTRONICS SOFTWARE SYSTEMS LTD., (SEG.) (SUPRA) S HOULD BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES. 14. THE NEXT COMPANY FOR WHICH EXCLUSION IS SOUGHT FOR IS M/S GEOMETRIC LTD.,(SEG.)(SUPRA). EXCLUSION OF THIS COM PANY IS REQUESTED ON THIS BASIS THAT RPT PERCENTAGE IN THIS CASE IS 17% AND A S PER VARIOUS TRIBUNAL ORDERS, ANY COMPANY HAVING RPT PERCENTAGE OF MORE T HAN 15% IS TO BE EXCLUDED AND THEREFORE, WE DIRECT THE AO/TPO TO EXC LUDE THIS COMPANY I.E. M/S GEOMETRIC LTD.,(SEG.)(SUPRA) FROM THE LIST OF F INAL COMPARABLES BECAUSE OF HIGHER RPT PERCENTAGE AT 17%. 15. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S INFOSYS LTD., IN SUPPORT OF HIS CLAIM FOR EXCLUSIO N OF THIS COMPANY, IT WAS SUBMITTED THAT IN ASSESSEES OWN CASE, IN IT(TP)A N O.49(BANG)/2012 FOR AY: ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 10 OF 14 2006-07 AVAILABLE ON PAGE 882 OF CASE LAW COMPENDIU M, IT WAS HELD BY THE TRIBUNAL IN PARA-16 OF THIS TRIBUNAL ORDER THAT THI S COMPANY SHOULD BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES AND APA RT FROM THIS, IN SO MANY CASES, THE TRIBUNAL HAS TAKEN CONSISTENT VIEW BECAU SE OF VARIOUS FACTORS SUCH AS BRANDING, OWNERSHIP OF INTANGIBLES AND R&D AND SOFTWARE PRODUCTS, THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. WE THEREFORE, DIRECT THE AO/TPO IN THE PRESENT CASE ALSO TO EXCLUDE THIS COMPANY FROM THE LIST OF FINAL COMPARABLES. 16. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S ISHIR INFOTECH LTD., THE RPT PERCENTAGE OF THIS COM PANY IS AT 22%. CONSIDERING THIS FACT, WE DIRECT THE AO/TPO TO EXCL UDE THIS COMPANY FROM THE LIST OF FINAL COMPARABLE. 17. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S KALS INFORMATION SYSTEMS LTD., FOR THIS PURPOSE, RE LIANCE HAS BEEN PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S DE SHAW INDIA PVT. LTD., (SUPRA) IN ITA NO.2071/HYD/2011, COPY AVAILABLE ON PAGE NO.227 TO 230 OF CASE LAW COMPENDIUM. IN THAT CASE, THE TRIBUNAL HA D FOLLOWED VARIOUS OTHER TRIBUNAL ORDERS SUCH AS RENDERED IN THE CASE OF M/S TRILOGY E-BUSINESS SOFTWARE INDIA PVT. AND M/S HCL EAI SERVICES LTD., AND IT WAS HELD THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE LIST OF FINAL C OMPARABLES. SINCE LD. DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE I N FACTS IN BOTH THESE CASES, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY I.E. M /S KALS INFORMATION SYSTEMS LTD(SUPRA) FROM THE LIST OF FINAL COMPARABL ES. ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 11 OF 14 18. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S LUCID SOFTWARE LTD. AND FOR THIS PURPOSE, RELIANCE HAS BEEN PLACED ON THE SAME TRIBUNAL ORDER RENDERED IN THE CASE OF DE SHAW INDIA PVT. LTD., (SUPRA). THE RELEVANT PORTION IS AVAILABLE ON PAGE NO.230 OF CASE LAW COMPENDIUM. SINCE IN THAT CASE, THE TRIBUNAL HELD T HAT THIS COMPANY I.E. M/S LUCID SOFTWARE LTD., (SUPRA) SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE AND THE LD. DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS, WE DIRECT THE AO/TPO IN THE PRESENT CASE ALSO TO EXCLUDE THIS COMPANY I.E. M/S LUCID SOFTWARE LTD., FROM THE LIST OF COMPARABLES. 19. THE NEXT COMPANY FOR WHICH THE EXCLUSION IS REQ UESTED IS M/S MEGASOFT LTD., AND IN THIS REGARD, RELIANCE HAS BEE N PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S TRILOGY E-BUSINES S SOFTWARE INDIA PVT. LTD.,(SUPRA) AND IT WAS POINTED OUT THAT THE RELEVA NT DISCUSSION IS ON PAGE NO.916 TO924 OF CASE LAW COMPENDIUM. WE FIND THAT IN THIS CASE, AS PER PARA-38 OF THE TRIBUNAL ORDER, IT WAS HELD BY THE T RIBUNAL THAT PROFIT MARGIN OF 23.11% WHICH IS THE MARGIN OF SOFTWARE SERVICES SEGMENT BE TAKEN FOR COMPARABILITY. HENCE, IT IS SEEN THAT REGARDING THI S COMPANY I.E. M/S MEGASOFT LTD.,(SUPRA), THIS IS NOT THE DECISION OF THE TRIBUNAL THAT THIS COMPANY SHOULD BE EXCLUDED AND IN FACT, THE TRIBUNA L DECISION IS THIS THAT THIS COMPANY SHOULD NOT BE EXCLUDED BUT THE PROFIT MARGIN IN THIS COMPANY SHOULD BE CONSIDERED IN RESPECT OF SOFTWARE SERVICE S SEGMENT ONLY AND THE PROFIT MARGIN OF THAT SEGMENT HAS BEEN NOTED AS 23. 11%. ACCORDINGLY, IN THE PRESENT CASE ALSO, WE DIRECT THE AO/TPO TO CONS IDER THE PROFIT MARGIN OF SOFTWARE SERVICES SEGMENT ONLY OF THIS COMPANY I.E. M/S MEGASOFT LTD., ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 12 OF 14 (SUPRA) WHICH HAS BEEN NOTED AT 23.11%. 20. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S TATA ELXSI LTD.,(SEG.). FOR THIS COMPANY, RELIANCE HAS BEEN PLACED ON TWO TRIBUNAL ORDERS IN ASSESSEES OWN CASE FOR AY: 2005 -06 & 2006-07, COPY AVAILABLE ON PAGES 854 873 OF THE CASE LAW COMPEN DIUM. IN ADDITION TO THIS, RELIANCE IS ALSO PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S TELECORDIA TECH. INDIA PVT. LTD., IN ITA NO.782 1/MUM/2011, COPY AVAILABLE ON PAGE 830 OF CASE LAW COMPENDIUM AND TH IS TRIBUNAL ORDER IS FOR THE SAME ASSESSMENT YEAR I.E. AY: 2007-08. AS PER THIS TRIBUNAL ORDER RENDERED IN THE CASE OF M/S TELECORDIA TECH. INDIA PVT. LTD., IT IS NOTED BY THE TRIBUNAL THAT THIS COMPANY IS ENGAGED IN THE DE VELOPMENT OF NICHE PRODUCT DEVELOPMENT AND RELATED SERVICES, AS IN THE PRESENT CASE. THEREFORE, BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE D IRECT THE AO/TPO IN THE PRESENT CASE ALSO TO EXCLUDE THIS COMPANY I.E. M/S TATA ELXSI LTD., ALSO FROM THE LIST OF FINAL COMPARABLES. 21. THE NEXT COMPANY FOR WHICH EXCLUSION IS BEING R EQUESTED IS M/S WIPRO LTD., (SEG.) AND FOR THIS, RELIANCE HAS BEEN PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S TELECORDIA TECH. INDIA PVT. LTD. (SUPRA) AND IT WAS POINTED OUT THAT IT IS NOTED BY THE TRIBUNAL IN THIS ORDER THAT THIS COMPANY I.E. M/S WIPRO LTD., IS A GLOBAL IT COMPANY HAVING VARIETIES OF SERVICES AND PRODUCTS AND LOOKING INTO MAGNITUDE OF ITS OPERATIONS, SALES AND EXPENSES, THE SAME CANNOT BE TAKEN INTO CONSIDE RATION FOR COMPARABILITY ANALYSIS. 22. THE LD. DR OF THE REVENUE COULD NOT POINTING OU T ANY DIFFERENCE IN ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 13 OF 14 FACTS AND THEREFORE, RESPECTFULLY FOLLOWING THIS TR IBUNAL ORDER, WE DIRECT THE AO/TPO THAT IN THE PRESENT CASE ALSO, THIS COMPANY I.E. M/S WIPRO LTD., SHOULD NOT BE CONSIDERED AS A COMPARABLE. 23. AS PER ABOVE DISCUSSION, WE FIND THAT AS AGAINS T THE REQUEST OF THE ASSESSEE FOR EXCLUSION OF 11 COMPANIES OUT OF TOTAL 26 COMPANIES CONSIDERED BY THE TPO AS COMPARABLE, WE HAVE HELD THAT ALL BUT ONE COMPANY SHOULD BE EXCLUDED AND IN RESPECT OF ONE COMPANY I.E. M/S MEG ASOFT LTD., WE HAVE DIRECTED THE AO/TPO TO CONSIDER THE PROFIT MARGIN O F COMPUTER SERVICES SEGMENT ONLY OF THAT COMPANY WHICH HAS BEEN NOTED A S 23.11% BY THE TRIBUNAL. 24. WE THEREFORE DIRECT THE AO/TPO TO RE-COMPUTE TH E AVERAGE PLI OF COMPARABLE COMPANIES AS PER ABOVE DIRECTIONS AND IF THE SAME IS WITHIN +/- 5% OF THE PROFIT OF THE ASSESSEE COMPANY I.E. TESTE D PARTY THEN, NO TP ADJUSTMENT IS TO BE MADE. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND T HE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (N.V.VASUDEVAN) (A.K.GARODIA) JUDICIAL MEMER ACCOUNTANT MEMBER BANGALORE: D A T E D : 22-07-2016 AM ITA NO.404& 477-12 & CO NO.1(B)/15162/BANG/2012 PAGE 14 OF 14 COPY TO : 1 APPELLANT 2 RESPONDENT 3. CIT(A), BANGALORE 4. CIT, BANGALORE 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER AR, ITAT, BANGALORE 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES T O THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER
