Scientific Games India Private Limited Vs DCIT (ITAT Chennai)
ITAT Chennai held that recharacterization of business from ‘software development service provider’ to ‘contract R&D service provider’ not justifiable as BAPA and TPO’s earlier assessment accepted characterisation of the Assessee to be a Software Development service provider. Hence, upward transfer pricing adjustment deleted.
Facts- The Assessee is a Company was incorporated in the year 2005, as a wholly owned subsidiary of Bally Technologies Inc., USA. (currently known as LNW Gaming Inc.) The Assessee had entered into a software development agreement with its associated enterprise and performs coding/decoding, debugging and quality test and assurance functions for its Group companies.
During scrutiny assessment, TPO selected 9 comparable companies with the arithmetic mean OP/OC margins of 26.87% and increased the margins of the assessee from 13.72% to 15.11% after treating the foreign exchange gain as operating in nature. The TPO accordingly proceed to make an upward TP adjustment of Rs.25,26,64,677/- on account of the difference in the margins earned by the Assessee. AO passed the draft assessment order dated 24.09.2018 after incorporating the upward Transfer Pricing addition of Rs.25,26,64,677/- made by the TPO and disallowing the finance lease rent payment made to the tune of Rs.62,55,408/-. AO passed the final assessment order. Being aggrieved by the same, the present appeal is filed.
