Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 100902 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 7 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-09-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
K
Next Hearing Date
08-04-2015
Assessment Year
2009-2010
Appeal Filed On
24-01-2014
Judgement Text
3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K , MUMBAI . . , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , J UDICIAL MEMBER ITA NO. : 634 /MUM/20 1 4 ( ASSESSMENT YEAR: 200 9 - 1 0 ) 3DPLM SOFTWARE SOLUTIONS LTD , SUCCESSOR TO DELMIA SOLUTIONS P LTD., PLOT NO. 15/B PUNE INFOTECH PARK, MIDC, HINJEWADI TALUKA, LULSHI, PUNE - 411 057 .: PAN: AAACZ 1421 B VS DY COMMISSIONER OF INCOME TAX CIRCLE 10 ( 2 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRIYANK GANDHI MS PRIYANKA SINGH RESPONDENT BY : SHRI K R VA SUDEVAN /DATE OF HEARING : 24 - 06 - 201 5 / DATE OF PRONOUNCEMENT : 07 - 0 9 - 201 5 ORDER , . . : PER AMIT SHUKLA, AM : THE A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST FINAL ASSESS MENT ORDER PASSED IN PURSUANCE OF DIRECTION GIVEN BY DISPUTE RESOLUTION PANEL (DRP) U / S 144 C (5) FOR THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS MAINLY AGGRIEVED BY TRANSFER PRICING ADJUSTMENT OF RS. 2,59,53,826/ - I N RESPECT OF INTERNATIONAL TRANSACTION WI TH THE ASSOCIATED ENTERPRISE (AE) ON SOFTWARE DEVELOPMENT SERVICES ON THE GROUND OF INCLUSION OF CERTAIN COMPARABLE COMPANIES BY THE TPO TO BENCHMARK THE PROFIT MARGIN OF THE ASSESSEE ON SUCH TRANSACTIONS. 2 . THE ASSES S EE COMPANY IS A SUBSIDIARY OF SOME RO ENTERPRISES INC MAURITIUS , WHICH IN TURN IS A SUBSIDIARY OF DASSAULT SYSTEMS FRANCE WHICH IS PREMIER GLOBAL SOFTWARE DEVELOPER AND PRODUCT LIKE CYCLE MANAGEMENT SOLUTIONS. IT IS THE HOLDING COMPANY OF DELMIA 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 2 CORP ORATION , USA. THE ASSESSEE WAS ESTABLISHED AS 100 % EXPORT ORIENTED UNIT REGISTERED UNDER STPI. IT IS MAINLY ENGAGED IN THE PROVISION OF SOFTWARE DEVELOPER AND OTHER RELATED SERVICES PRIMARY TO ITS GROUP COMPANIES. THE INTERNATIONAL TRANSACTIONS REPORTED IN THE AUDIT REPORT IN FORM 3CEB BY THE ASSE SSEE DURING THE YEAR WERE AS UNDER : - INTERNATIONAL TRANSACTION VALUE (R S ) SOFTWARE DEVELOPMENT AND CONSULTANCY 33,60,14,698 RECOVERY OF EXPENSES 1,28,87,202 PURCHASE OF SOFTWARE LICENSES 31,88,736 3 . ASSESSE E HAD SHOWN ITS NET MARGIN ON O P/OC AT 15.29% IN THE FOLLOWING MANNER : - PARTICULARS AMOUNT (INR) OPERATING INCOME 34,32,61,561 OPERATING COSTS 29,77,30,334 OPERATING PROFIT (OP. INCOME OP. EXPENSES 4,55,31,227 OPERATING NET MARGIN (OP/TC) 15.29% TO BENCHMARK ITS MARGIN, THE ASSESSEE CARRIED OUT TRANSFER PRICING ANALYSIS BY SELECTING TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD AND SEARCHED FOR UNCONTROLLED COMPARABLES BY USING PR OWESS AND C APITALINE NEO DATA BASE . THE ASSESSEE SELECTED FOL LOWING COMPARABLES WITH MEAN AVERAGE MARGIN OF THREE YEARS , WHICH WERE AS UNDER : - SL NO. NAME OF COMPANY UNADJUSTED AVERAGE MARGIN 3 YEARS 1 AKSHAY SOFTWARE TECHNOLOGIES LTD. 6.88% 2 HELIOS & MATHESON INFORMATION TECHNOLOGYLTD 25.12% 3 IGATE GLOBAL SOLUTIONS LTD 10.30% 4 MINDTREE LTD. 23.72% 5 NETRIPPLES SOFTWARE LTD. - 19.50% 6 PRITHVI INFORMATION SOLUTIONS LTD. 11.08% 7 R S SOFTWARE (INDIA) LTD. 9.56% 8 SAGARSOFT (INDIA) LTD. 14.66% 9 SERVEALL ENTERPRISE SOLUTIONS LTD. 16.08% 10 S I P TECHN OLOGIES & EXPORTS LTD. - 9.78% 11 THIRDWARE SOLUTIONS LTD. 21.43% 12 VMF SOFT TECH LTD. 0.20% 13 ZYLOG SYSTEMS LTD. 17.64% MEAN 9.80% 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 3 4. HOWEVER, THE TPO, REJECTED MOST OF THE ASSESSEES COMPARABLE AND FINALLY SELECTED FOLLOWING COMPARABLES WITH AR ITHMETIC MEAN OF 24.32% BY TAKING THE DATA FOR FINANCIAL YEAR 2008 - 09 : - NO. NAME OF COMPANY UNADJUSTED AVERAGE MARGINS FY 2008 - 09 1 KALS INFORMATION SYSTEMS LIMITED 13.89% 2 AKSHAY SOFTWARE TECHNOLOGIES LTD. 8.11% 3 BODHTREE CONSULTING LIMITED 62.27% 4 R S SOFTWARE (INDIA) LTD. 9.97% 5 TATA FLEXI LIMITED 20.28% 6 SAQSKEN COMMUNICATION TECHNOLOGIES LIMITED 27.91% 7 PERSISTENT SYSTEMS LIMITED 41.40% 8 ZYLOG SYSTEMS LTD. 7.81% 9 MINDTREE LIMITED (SEGMENTAL) 5.52% 10 LARSON & TOUBRO INFOTE CH LIMITED 24.72% 11 INFOSYS LIMITED 45.61% ARITHMETIC MEAN 24.32% ACCORDINGLY, THE COMPUTATION OF ARMS LENGTH PRICE AND ADJUSTMENTS MADE BY THE TPO WAS AS UNDER : - DESCRIPTION AMOUNT (INR) ARMS LENGTH MEAN MARGIN 24.32% LESS: WORKING CA PITAL ADJUSTMENT (3.83%) OPERATING COST 29,77,30,334 ARMS LENGTH PRICE (128.15% OF OPERATING COST) 38,15,41,423 PRICE CHARGED IN INTERNATIONAL TRANSACTIONS 34,32,61,561 SHORT FALL BEING ADJUSTMENT U/S 92CA 3,8 2,79,862 SHORTFALL BEING ADJUSTMENT U/S 92CA IN CRORE 3.83 5. FROM THE STAGE OF THE DRP, TWO ADDITIONAL COMPARABLES WERE SELECTED AND INCLUDED IN THE FINAL LIST, WHICH WE RE AS UNDER: SL. NO. COMPANY NAME UNADJUSTED MARGINS FY 2008 - 09 1 FCS SO FTWARE SOLUTIONS LIMITED 16.27% 2 THINKSOFT GLOBAL SERVICES LIMITED 15.83% THEREAFTER, DRP GAVE DIRECTION TO GIVE ADJUSTMENT FOR WORKING CAPITAL. AFTER GIVING EFFECT TO THE DRPS DIRECTION, THE COMPUTATION OF ARMS LENGTH PRICE WAS DETE RMINED IN THE FOLLOWING MANNER : - 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 4 DESCRIPTION AMOUNT (INR) ARMS LENGTH MEAN MARGIN 24.32% PRICE CHARGED IN INTERNATIONAL TRANSACTIONS 34,32,61,561 OPERATING COST 29,77,30,334 OPERATING PROFIT ON COSTS 4,55,31,227 ARMS LENGTH MARGIN BASED ON DRP DIRECTIONS 24.01% REVISED ARMS LENGTH PRICE 36,92,15,387 TRANSFER PRICING ADJUSTMENT AS PER DRP DIRECTIONS 2,58,53,826 6. BEFORE US, THE LD. COUNSEL SUBMITTED THAT MOS T OF THE COMPARABLES ARE EITHER NOT OBJECTED TO OR HAVE BEEN ACCEPTED BY THE ASSESSEE . O UT OF THE 13 F INAL C OMPARABLES, THE ASSESSEE IS ONLY CHALLENGING SIX COMPARABLES BEFORE US, NAMELY: S/ NO. COMPANY NAME UNADJUS - TED MAR - GINS FY 08 - 09 AS PER TPO O RDER AS PER DRP DIRECTOR BASED ON ASSESSEES ARGUMENTS FOR REJECTION UNADJUS - TED ADJUSTED AS PER AO ORDER 1 BODHTREE CON SULTING LTD 62.27% 62.27% 63.08% FLUCTUATING MARGIN & FUNCTIONA LLY NOT COMPARABLE 2 TATA ELXI LTD. 20.28% 20.28% 21.09% TURNOV ER FILTER AND FUNCTIONALLY NOT COMPARABLE 3 SASKEN COMMUNICATIO N TEC HNOLOGIES LTD. 27.91% 27.91% 29.61% TURNOVER FILTER, FUNCTIONALLY NOT COMPARABLE & OWNER SHIP OF PARTNERS 4 PERSISTENT SYS T EMS LIMITED 41.40% 41.40% 42.23% TURNOVER FILTER AND FU NCTIONA LLY NOT COMPARABLE 5 LARSON & TOUBRO INFOTECH LTD. 24.72% 24.72% 26.63% TURNOVER FILTER AND FUNCTIONALLY NOT COMPARABLE 6 INFOSYS LTD. 45.61% 45.61% 45.22% TURNOVER FILTER AND PRESENCE OF BRAND LD. COUNSEL, FIRST OF ALL SUBMITTED THAT SO FA R AS M/S BODHTREE CONSULTING LTD., TATA EL XI LTD. & M/S INFOSYS LTD. ARE CONCERNED , THE SAME ARE COVERED BY THE VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THAT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2007 - 08 & 2008 - 09. THE RELEVANT ARGUMENTS AND OUR FINDING IN BRIEF ON EACH OF SIX COMPARABLES CHALLENGED BEFORE US ARE AS UNDER : - 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 5 7 . BODHTREE CON SULTING LTD : - LD. COUNSEL THOUGH ADMITTED THAT FOR THE AY 2008 - 09, THE TRIBUNAL HAS INCLUDED THIS COMPARABLE FOR BENCHMARKING THE MARGIN, H OWEVER THIS COMPARABLE HAS TO BE REJECTED AS IT IS FUNCTIONALLY DISSIMILAR TO SOFTWARE DEVELOPMENT SERVICES COMPANY LIKE ASSESSEE. IN A RECENT DECISION , THE TRIBUNAL IN THE CASE OF CISCO SYSTEMS (INDIA) PRIVATE LIMITED VS DCIT ( I.T . NO. 130/BANG/2014 & IT(TP) A NO. 2 71/BANG/2014)(AY 2009 - 10 HAS HELD THAT THIS COMPANY IS ENGAGED NOT ONLY IN THE BUSINESS OF SOFTWARE PRODUCTS BUT ALSO ENGAGED IN PROVIDING OPEN AND END TO END WEB SOLUTION, CONSULTANCY AND DESIGN & DEVELOPMENT OF SOFTWARE. FURT HER THERE IS A WIDE FLU CTUATION OF MARGIN WHICH INDICATES VOLATILE TREND IN ITS PROFITS EARNING . FURTHER I N THE CASE OF WILLIS PROCESSING AND SERVICES, ITAT, MUMBAI BENCH AND AIR BU S INDIA OPERATIONS P LTD IT NO. 35/BANG/2014, BANGALORE BENCH HAVE HELD THAT THIS COMPANY IS TO BE REJECTED AS FUNCTIONALLY NOT COMPARABLE WITH COMPANIES ENGAGED IN PURELY SOFTWARE DEVELOPMENT SERVICES. 7 . 1 LD. DR ON THE OTHER HAND, SUBMITTED THAT , ONCE IN EARLIER TWO YEARS, THIS COMPANY HAS BEEN FOUND TO BE COMPARABLE IN ASSESSEES OWN CASE, WHICH HAS BEEN UPHELD BY THE TRIBUNAL IN A Y S 2007 - 08 & 2008 - 09, THE N , SUCH A COMPARABLE SHOULD NOT BE REJECTED. 7.2 AFTER CONSIDERING THE RIVAL SUBMISSION S AND ON PERUSAL OF THE TRIBUNAL ORDER FOR THE EARLIER YEARS, WE FIND THAT IN AY 2008 - 09, THE TRIBUNAL HAS REJECTED THE ASSESSEES CONTENTION FOR EXCLUDING THE SAID COMPARABLE AND DIRECTED THE AO TO INCLUDE THE SAID COMPARABLE AFTER OBSERVING AND HOLDING AS UNDER : - WE GAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. ADMITTE DLY, THERE IS NO DISPUTING THE FACT THAT THE ASSESSEE HAD NEVER OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES IN EARLIER PROCEEDINGS BEFORE THE TPO AND THE DRP. IT IS ALSO SEEN THAT 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 6 EVEN IN THE GROUNDS OF APPEAL RAISED BEFORE US, THE ASSESSEE HAS NOT RAISED ANY GROUNDS CHALLENGING THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPANIES. IN FACT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08, THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE ASSESSEE ITSELF. WE, THEREFORE, FIND NO MERIT IN THE CONTENTIONS RAISED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN RESPECT OF THIS COMPANY AT THIS STAGE OF PROCEEDINGS. IT IS ALSO SEEN FROM THE SUBMISSIONS MADE BEFORE US THAT THE ASSESSEE HAS ONLY POINTED OUT FLUCTUATING MARGI NS IN THE RESULTS OF THIS COMPANY OVER THE YEARS. THIS, IN ITSELF, CANNOT BE REASON ENOUGH TO ESTABLISH DIFFERENCES IN FUNCTIONAL PROFILE OR ANY CLINCHING FACTUAL REASON WARRANTING THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. IN THIS VIEW OF THE MATTER, THE CONTENTIONS OF THE ASSESSEE ARE REJECTED AND THIS COMPANY IS HELD TO BE COMPARABLE TO THE ASSESSEE AND ITS INCLUSION IN THE LIST OF COMPARABLE COMPANIES IS UPHELD. THUS, WITHOUT THERE BEING ANY DISTINGUISHING FEATURE OR CHANGE OF FACTS I N THIS YEAR, WE ARE INCLINED TO FOLLOW THE EARLIER YEARS PRECEDENCE, AND ACCORDINGLY , UPHELD INCLUSION OF SUCH COMPANY BY THE ASSESSING OFFICER IN THE LIST OF FINAL COMPARABLES. 8. TATA ELXSI LTD. : - REGARDING TATA EL XSI LTD., THE LD. COUNSEL SUBMITTED TH AT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, THIS COMPANY HAS BEEN HELD TO BE NOT COMPARABLE AND, THEREFORE, IT CANNOT BE INCLUDE D IN THE SET OF FINAL COMPARABLES . LD. DR ALSO ADMITTED TO THIS FACT. 8 . 1 AFTER CONSIDERING THE RELEVANT M ATERIAL ON RECORD AND THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEAR (I.E. AY 2008 - 09) , WE FIND THAT THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SAID COMPARABLE AFTER OBSERVING AND HOLDING AS UNDER : - 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 7 WE HAVE HEARD BOTH PARTIES AND CARE FULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAILS ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWARE DEVELOPMENT SERVICES. THE DETAILS IN THE ANNUAL REPORT SHOW THAT THE S EGMENT SOFTWARE DEVELOPMENT SERVICES RELATES TO DESIGN SERVICES AND ARE NOT SIMILAR TO SOFTWARE DEVELOPMENT SERVICES PERFORMED BY THE ASSESSEE. THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT LTD V ACIT (ITA NO. 7821/MUM/201 1) HAS HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEVELOPMENT SERVICE PROVIDER AND THEREFORE IT IS NOT FUNCTIONALLY COMPARABLE. IN THIS CONTEXT THE RELEVANT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED BELOW : - THAT ELXSI IS ENGAGED IN DEVELOPME NT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY DIFFERENT FROM THE ASSESSEE COMPANY . WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERE NT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMPARABILITY ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR THE ASSESSEE, HENCE, SHOULD BE EXCLUDED FOR THE LIST OF COMPARABLE PORTION. AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REPORT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINING TO TATA ELXSI HAVE NOT CHANGED FROM ASSESSMENT YEAR 2007 - 08 TO ASSESSMENT YEAR 2008 - 09. WE, THEREFORE, HOLD THAT THIS COMPANY IS NOT TO 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 8 PER CONTRA, THE GENERAL DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E STAND OF THE TPO IN INCLUDING COMPANY IN THE LIST OF COMPARABLE. THUS, THERE BEING NO MATERIAL CHANGE I N FACTS, WE DIRECT THE A O NOT TO INCLUDE TATA EL XI LTD IN THE LIST OF COMPARABLE S S AND ACCORDINGLY , THE ASSESSEES PLEA ON THIS ISSUE IS ACCEPTED. 9 INFOSYS TECHNOLOGIES LIMITED (INFOSYS) : - BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE INFOSYS COMPANY HAS BEEN DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES DUE TO VARIOUS REASONS AND ACCORDINGLY , IN THIS YEAR ALSO THE SAME SHOULD BE EXCLUDED , T O WHICH LD. DR ADMITTED THAT IN THE EARLIER YEAR S THIS HAS BEEN EXCLUDED BY THE TRIBUNAL. 9 . 1 AFTER CONSIDERING THE RELEVANT MATERIAL AND ORDER OF THE TRIBUNAL FOR THE EARLIER TWO YEARS, WE FIND TH AT INFOSYS LTD. HAD BEEN DIRECTED TO BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES OWING TO THE FACT THAT IT IS NOT COMPARABLE ON ALL COUNTS OF FAR, INCLUDING HUGE TURNOVER, INTELLECTUAL PROPERTY RIGHTS, HUGE R&D EXPENDITURE, ABNORMAL MARGINS , ASSETS DEPLOYED ETC. THUS, RESPECTFULLY FOLLOWING THE EARLIER YEARS P RECEDENCE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SAID COMPANY FROM THE LIST OF THE FINAL COMPARABLES . ACCORDINGLY, THE ASSESSEES CONTENTION ON THIS SCORE IS ACCEPTED. 10. SASKEN COMMUNICATION TECHNOLOGIES LTD. : - BEFORE US, THE LD. COUNSEL SUBMI TTED THAT IN AY 2007 - 08, THIS COMPANY HAS BEEN HELD TO BE NOT INCLUDABLE IN THE LIST OF FINAL COMPARABLES ON THE GROUND OF TURNOVER FILTER. SIMILARLY IN THE FOLLOWING THREE DECISIONS ALSO THIS COMPANY HAS BEEN HELD TO BE EXCLUDED ON ACCOUNT OF HUGE TURNOVE R : - A ) TRIOLOGY E - BUSINESS - ITA 1054/B A NG/2011 B ) GENESIS INTEGRATING SYSTEMS 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 9 C ) AIRBUS INDIA OPERATIONS LTD. ( SUPRA ) HE FURTHER POINTED OUT THAT SASKEN DEVELOPS AND OWNS SEVERAL PATENTS AND EARNS HUGE RETURNS ON THE SAME , WH EREAS THE ASSESSEE DOES NOT DEVELOP A NY PRODUCTS NOR OWN S ANY PATENT. SASKEN IS ALSO INVOLVED IN HUGE R&D ACTIVITIES WHICH IS ABSENT IN THE CASE OF THE ASSESSEE. THUS ON VARIOUS COUNTS, THIS COMPANY CANNOT HELD TO BE FUNCTIONALLY COMPARABLE. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE TPO AS WELL AS DRP. 1 0 . 1 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE FIND THAT ON FAR ANALYSIS, SASKEN CANNOT BE HELD TO BE COMPARABLE, FIRSTLY, I T S SALES TURNOVER IS MORE THAN R S. 405 CRORES AS COMPARED TO THE ASSESSEES TURNOVER OF ONLY R S 34 CRORES. S UCH A HUGE VARIATION IN TURNOVER ITSELF GOES TO SHOW THAT THERE IS A HUGE DIFFERENCE IN FAR ANALYSIS NOT ONLY IN THE A SSETS DEPLOYED BUT ALSO A R ISK ASSUMED. FURTHER THE SASKEN HAVE SEVERAL PAT ENTED PRODUCTS AND CARRIES OUT HUGE R&D ACTIVITY, WHICH HAS HUGE IMPACT ON THE OVERALL PROFIT MARGINS AND ACCORDINGLY , IT CANNOT BE HELD THAT THE MARGIN OF THE SASKEN CAN BE HELD TO BE COMPARABLE TO THE ASSESSEE; AND LASTLY, IN AY 2007 - 08 THIS COMPANY HA S BEEN HELD NOT TO BE INCLUDED IN THE LIST OF COMPARABLE BY THE TRIBUNAL OWING TO THE TURNOVER FILTER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO REJECT THE SAID COMPANY FROM THE FINAL LIST OF COMPARABLES. 11. L ARSON & T OUBRO INFOTECH LIMITED . : - BEFOR E US, THE LD. COUNSEL SUBMITTED THAT THIS COMPANY CANNOT BE HELD TO BE COMPARABLE FOR THE REASON THAT IT HAS A HUGE TURNOVER OF MORE THA N R S. 1 , 950 CRORES , WHEREAS THE ASSESSEES TURNOVER I S ONLY R S. 34.23 CRORES. THUS, ON THIS GROUND ALONE THIS COMPANY CA NNOT BE HELD TO BE COMPARABLE. 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 10 ON THE OTHER HAND, THE LD. DR STRONGLY RELIED UPON THE ORDER OF THE TPO AS WELL AS D RP. 1 1 . 1 AFTER CONSIDERING THE SUBMISSION AND ON PERUSAL O F THE MATERIAL ON RECORD, WE FIND THAT L&T INFOTECH LTD. HAVE HUGE TURNOVER OF R S. 1 , 905.83 CRORES WHICH ITSELF PROVES THAT THE A SSETS DEPLOYED AND R ISK S ASSUMED ARE QUITE DIFFERENT AS COMPARED TO THE ASSESSEE. I N THE CASE OF AIRB U S OPERATION INDIA P LTD IN ITA NO. 35/BANG/2014, THE TRIBUNAL HAS REJECTED TH IS COMPARABLE ON THE GROUND OF TURNOVER ONLY . THAT APART, IT IS SEEN FROM THE RECORDS THAT L&T I S MAINLY ENGAGED IN PRODUCT DEVELOPMENT, INFRASTRUCTURE MANAGEMENT SERVICES ALONG WITH SOFTWARE DEVELOPMENT SERVICES. THERE ARE NO SEGMENTAL INFORMATIONS IN RESPECT OF SUCH ACTIVITIES IN T HE PUBLIC DOMAIN . THUS, ON ALL THESE GROUND S WE HOLD THAT L&T INFOTECH LTD CANNOT BE HELD TO BE COMPARABLE COMPANY FOR BENCHMARKING THE ASSESSEES MARGIN. ACCORDINGLY, THE SAME IS DIRECTED TO BE EXCLUDED. 12. PERSISTENT SYSTEMS LIMITED : - BEFORE US, THE LD. COUNSEL SUBMITTED THAT IN THE ASSESSEES OWN CASE FOR AY 2007 - 08 AND 2008 - 09 THIS COMPANY IS HELD TO BE NOT COMPARABLE AND WAS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLE. 13. AFTER CONSIDERING THE MATERIAL ON RECORD AND THE RELEVANT FINDING , WE FIND THAT THE TRIBUNAL IN AYS 2007 - 08 & 2008 - 09 HA S EXCLUDED THIS COMPARABLE. FOR AY 2008 - 09, THE TRIBUNAL HAS GIVEN A CATEGORICAL FINDING THAT THE SAID COMPANY IS ENGAGED IN THE PRODUCT DEVELOPMENT AND PRODUCT DESIGN SERVICES AS COMPARED TO THE ASSES SEE, WHICH IS PURELY SOFTWARE DEVELOPMENT SERVICE PROVIDER . ACCORDINGLY, RESPECTFULLY FOLLOWING EARLIER YEARS PRECEDENCE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SAID COMPANY FROM THE COMPARABILITY ANALYSIS. 1 4 . THUS, IN VIEW OF OUR FINDING GIVEN A BOVE, WE DIRECT THE ASSESSING OFFICER TO BENCHMAR K THE ASSESSEES MARGIN BASED ON THE 3DPLM SOFTWARE SOLUTIONS LTD ITA NO. 634 /M UM/20 1 4 11 OVERALL COMPARABLES AS DISCUSSED ABOVE AND ALSO COMPARABLES WHICH HA VE BEEN ACCEPTED BY THE ASSESSEE AND HAD NOT BEEN DISPUTED BEFO R E US AND DETERMINE THE ARMS LENGTH PR ICE AND ACCORDINGLY , MAKE THE SUITABLE ADJUSTMENT , IF AT ALL IS REQUIRED TO BE MADE . 1 5 . IN THE RESULT, THE GROUND RELATING TO TRANSFER PRICING ADJUSTMENT IS TREATED AS PARTLY ALLOWED. 1 6 . AS REGARDS GROUNDS RELATED TO LEVY OF INTEREST U/S 234B , 234C & 2 34D THE SAME ARE ADMITTED TO BE CONSEQUENTIAL. ACCORDINGLY THE SAID GROUND IS TREATED AS DISMISSED. 1 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER , 2015. SD/ - SD/ - ( . . ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOU NTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 7 TH SEPTEMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 15 , MUMBAI. 4 ) THE CIT 8 , MUMBAI. 5 ) , , / THE D.R. K BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS
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