Biesse Manufacturing Company Pvt. Ltd. Vs DCIT (ITAT Bangalore)
We have noticed that the turnover of the assessee company for software development segment was Rs. 4.56 crores and hence the assessee company falls in the category of companies having turnover of Rs. 1 to 200 crores. The coordinate bench in the case of Autodesk India Pvt. Ltd. has expressed the view that the companies having turnover of less than Rs.200 crores cannot be compared with the companies having turnover exceeding Rs.200 crores. Accordingly, we find merit in the submission of the assessee and accordingly direct the A.O. to exclude above said 6 companies from the list of comparable companies.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed this appeal challenging the assessment order dated 29.2.2016 passed for assessment year 2011-12 u/s 143(3) r.w.s 144C of the Act in pursuance of directions given by Ld. DRP.
2. Though the assessee has raised many grounds with regard to the Transfer pricing adjustment made by the AO/TPO in software development segment, at the time of hearing, the Ld. A.R. restricted his arguments with regard to exclusion of 6 comparable companies and inclusion of 3 comparable companies. Accordingly, all other grounds are rejected as not pressed.
3. The facts relating to the above said issue are stated in brief. The assessee company is wholly owned subsidiary of M/s. Biesse Spa, Italy. The assessee company is engaged in production and trading of wood working machinery and spare parts. In addition to these functions, the assessee company also provides some technology services to its A.E and others. The assessee has entered into various international transactions with its A.E. We are concerned with the transfer pricing adjustment made in respect of software development segment. The technology services were held to be “software development activity” by the Transfer Pricing Officer (TPO). During the year under consideration, the assessee has shown receipts of Rs.4,55,96,879/- from software development activity, which included Rs.1.78 crores received from it’s A.E. The assessee did not bench mark his transaction. The assessee submitted before TPO that the software testing and technical services are inextricably linked to its manufacturing activity and hence no separate bench marking was required. The TPO did not accept the contentions of the assessee and proceeded to determine ALP of software segment separately under TNM method. The TPO selected 13 comparables whose average margin worked out to Rs.24.82%. Accordingly, he made transfer pricing adjustment of Rs.49,16,335/- in respect of software development services. The assessee has also accepted the methodology adopted by the TPO and it is contesting only inclusion/exclusion of certain comparable companies. The 13 comparables selected by the TPO are as under:
