Brief of the case: In case of M/s. AT & T Global Business Services India Pvt.Ltd. VS. ITO , assessee-company, engaged in business of software development and providing application services to its AE. TPO on basis of mean margin earned by his own set of comparables, made addition to assesse’s ALP. Assesse challenged comparables selected by TPO on ground of functional dissimilarity i.e. they were developing their own software products. In 3DPLM Software Solutions vs. DCIT , in similar circumstances Tribunal set aside comparables selected by TPO. Following said order, comparables selected in present case were also to be rejected.
Facts of the case: The assessee-company, engaged in the business of software development and providing application services, claimed deduction u/s 10A of the Act. The assessee had entered into international transaction with its Associated Enterprise (AE) and determination of the arm’s length price (ALP) of the international transaction was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act. The TPO made a transfer pricing adjustment of Rs.2,40,00,290/-. The AO, thereafter, passed draft assessment order incorporating the said transfer pricing adjustment. The DRP confirmed the transfer pricing adjustment. Thus, the AO passed the final assessment order.
Contention of the Assesse: There is no dispute with regard to the adoption of the TNMM as the most appropriate method for determination of the ALP but the only challenge is to the comparable companies adopted by the TPO. The assessee had adopted 7 companies as comparables, of which 6 have been rejected by the TPO and the TPO has adopted 20 companies as comparables out of which the assessee is challenging 12 companies on the ground of functional dissimilarity. These companies were also considered by the TPO as comparable companies in the case of 3DPLM Software Solutions vs. DCIT (IT(TP) A No.1303/Bang/2012 dated 28/11/2013) for the very same assessment year 2008-09 and this Tribunal, after considering the issue at length has held these companies to be functionally dissimilar from the 3DPLM Software Solutions Pvt. Ltd. which were also into the similar business of the assessee i.e. software development services. It was prayed that these companies be excluded from the list of comparables and ALP adjustment may accordingly be modified.
HELD by ITAT: The court find that the assessee is challenging the following companies as comparables:
i) Celestial Biolabs Ltd. ii) Infosys Technologies Ltd. iii) Tata Elxsi Ltd. iv) Wipro Ltd. IT(TP)A No.1604/Bang/2012 M/s.AT&T Global Business Services India Pvt.Ltd. Page 4 of 12 v) Kals Information Systems Ltd. vi) Persistent Systems Ltd. vii) Avani Cimcon Technologies Ltd. viii) Thirdware Solutions Ltd. ix) Lucid Software Ltd. x) Quintegra Solutions Ltd. xi) E-Zest Solutions Ltd. xii) Softsol India Ltd.
All these comparables challenged by the assessee were also taken as comparables in the case of 3DPLM Software Solutions Ltd., and this Tribunal has held these companies to be functionally dissimilar with the said company and has directed them to be excluded from the list of comparables. In order to apply the said decision to the case before us, it is necessary to examine whether the nature of services rendered by both the companies under the respective international transactions are similar. The assessee herein is the subsidiary of VSi Services Holdings Pvt. Ltd., Mauritius and is engaged in providing software support solutions to VSI group companies. The international transaction which has been considered for ALP adjustment is software support or development services. In the case of 3DPLM also, the international transaction considered for ALP adjustment is in respect of software development services and the relevant assessment year is 2008-09. Therefore, the court opined that, the decision of the Tribunal in the case of 3DPLM Software Solutions Ltd., is applicable to the case before the court. The decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd.,(cited supra) on similar set of facts, the court direct the AO to exclude these companies from the list of comparables and re-compute the ALP.