Case Law Details
M/s. Virage Logic International Vs JDIT (ITAT Delhi)
Tata Elexi Ltd.
i. Before the Ld. TPO, the assessee submitted that company is engaged in non-comparable services, which included IT enabled and software product services and, therefore, the company needs to be rejected. According to the Ld. TPO, the services of product design, innovation design engineering, visual computing labs are sub segment of software development industry and, therefore, he selected the company as comparable. The CIT(A), affirmed the action of the Ld. TPO.
ii. Before us, the Ld. counsel submitted that the company was excluded by the Tribunal in the case of the assessee for assessment year 2008-09 on the ground of functional dissimilarity and there being no change in functional profile of the assessee as well as the company, the company should be excluded from the set of comparables in the year under consideration also. The Ld. counsel also referred to page 347 of the Annual Report Compendium and submitted that the business constituting the software development and service segment, included product design services of hardware and software, innovation design engineering with focus on mechanical design and visual computing labs division, which are functions different from software development. The Ld. counsel also drawn our attention to page 348 of the Annual Report Compendium and submitted that during the year the company has successfully animated commercial film co-produced by 2 leading Indian and overseas studios. The Ld. counsel also referred to page 361 of the Annual Report Compendium and submitted that design services included design of hardware products which is altogether different from the function of software development and accordingly, he requested to exclude the company from the set of comparables. The Ld. counsel also submitted that company has been excluded in the case of Sun Life India Service Centre Private Limited Vs. DCIT (supra) by the Tribunal as not comparable to an assessee providing contract software development services.
iii. On the contrary, the Ld. DR submitted that the TPO has compared segment of software development services and not compared the company at entity level. The Ld. DR submitted that in preceding year the company has been excluded on the ground of being engaged in Niche Product, whereas the assessee is also engaged in developing Niche products. The Ld. DR submitted that the assessee as well as the company both are enaged developing chipset software development and therefore the company is comparable at segment level.
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