Quicklogic Software (India) Pvt. Ltd. Vs DCIT (ITAT Bangalore)
ITAT Bangalore applies Rs. 200 crore turnover filter to exclude large software comparables; ITAT Bangalore remands five software comparables for FAR verification and fresh adjudication; ITAT Bangalore sends delayed receivables adjustment back to AO/TPO for fresh decision; Transfer pricing: ITAT Bangalore excludes high-turnover comparables for captive software provider; ITAT Bangalore partly allows Quicklogic appeal on comparables, receivables and forex loss
Summary: The Bangalore Bench of the Income Tax Appellate Tribunal partly allowed the appeal of M/s. Quicklogic Software (India) Pvt. Ltd. for Assessment Year 2017-18, principally concerning transfer-pricing adjustments in its software-development-services segment and interest on delayed receivables. The assessee was a wholly owned subsidiary of QuickLogic Corporation, USA, providing software development services to its associated enterprise. It had declared total income of Rs.1,58,96,300/- and its international transactions exceeded Rs.15 crores, resulting in a reference to the Transfer Pricing Officer under section 92CA.
For the software-development segment, the assessee used TNMM with OP/OC as the PLI and reported a margin of 11.69%. It selected 16 comparables having an average margin of 9.59%. The TPO rejected 10 comparables, selected 20 comparables with an average margin of 21.24% and proposed an adjustment of Rs.1,75,34,230/-. The TPO also computed notional interest on outstanding trade receivables at 5.975%, resulting in a further adjustment of Rs.24,25,718/-. The aggregate adjustment under section 92CA was therefore Rs.1,99,59,948/-. Following the DRP directions, the final assessment order contained a transfer-pricing adjustment of Rs.1,78,89,497/-.
