Galax E Solutions India Pvt. Ltd. Vs ACIT (ITAT Bangalore)
ITAT held that companies having turnover more than 200 crores upto 500 crores has to be regarded as one category and those companies cannot be regarded as comparables with companies having turnover of less than 200 crores.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal is filed by assessee against final assessment order dated 25/09/2017 passed under section 143(3) read with section 144C of the Act by the Ld.ACIT Transfer Pricing officer, Circle 3(1)(2), Bangalore on following grounds of appeal:
“1. The Learned Transfer Pricing Officer [TPO], Assessing Officer [AO] and Honorable Dispute Resolution Panel [DRP] have erred in law as well as on facts in passing the order which is bad in law and disregarding principle of natural justice.
2. The Ld. TPO, AO as well as DRP have erred in law as well as on facts by considering companies which are functionally not comparable to the functions performed, assets employed and risk assumed by the assesse company viz., (i) Larsen & Toubro Infotech Ltd, and (ii) Persistent Systems Ltd
3. The Ld. TPO, AO as well as DRP have erred in law as well as on facts by excluding five companies which have passed through all filters and are functionally comparable to the functions performed, assets employed and risk assumed by the assesse company viz, (i) Akshay Software Technologies Ltd (ii) Batchmaster Software Pvt Ltd (iii) Cigniti Tech and (iv) E-Zest Solutions Limited .
4. The Learned Transfer Pricing Officer [TPO], Assessing Officer [AO] and Honorable Dispute Resolution Panel [DRP] have erred in law as well as on facts by rejecting the assessee’s filters and adopting inappropriate filters like one sided turnover filter ignoring the upper turnover filter a lied b the assessee at 10 times of the turnover of the assesse company and thereby erred in considering comparable companies having turnovers greater than 10 times the turnover of Rs. 95 Crores reported by the assessee company.
5. The Ld. TPO, AO as well as DRP have erred in law by excluding communication charges amounting to Rs.17,22,189/- and traveling and conveyance expenses of Rs. 10,35,631/, from the export turnover in the process of Computation of deduction u/s 10AA without reducing the same from the total turnover ignoring the decision of the Hon’ble Karnataka High Court in the case of CFI Vs. M/s Tata Elxsi Ltd. & Others [(2012) 247 CTR (Kar.) 334 by stating that the issue is pending before the Hon’ble Supreme Court.
6. For these and other grounds that may be urged at the time of hearing with the permission of the bench. The respondent craves leave to add, alter, amend and / or delete any of the grounds mentioned above. It is prayed that the total addition of Rs. 4,38,97,053/- may please be deleted.”
Brief facts of the case are as under:
2. Assessee is a software development service provider and filed its return of income for your under consideration on 13/11/2013 declaring income of ₹ 8,67,56,210/-. The case was selected for scrutiny and notice under section 143(2) of the Act was issued to assessee, in response to which representative of assessee appeared before the Ld. AO and filed requisite details as called for. The Ld. AO observed that associate had international transaction exceeding ₹ 15 crores, and accordingly reference was made to the transfer pricing officer.
3. On receipt of reference under section 92CA, the Ld. TPO called for the economic details of international transaction in Form 3 CEB. The Ld. TPO observed that assessee had following international transaction with its associated enterprise:
