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Digest Of 4000 Important Judgments On Transfer Pricing, International Tax And Domestic Tax (Jan To Dec 2018)

Dr. Sunil Moti Lala, Advocate, has prepared a Digest of 4000 Important judgments on Transfer pricing (1150 cases), International Tax (200 cases) and Domestic Tax (2650 cases) pronounced in the period January 2018 to December 2018. The author has meticulously and systematically classified the judgments into various categories to enable ease of reference. A PDF copy of the Digest is available for download. He has also given the appeal numbers in all cases so as to enable the judgements to be retrieved from the website of the respective Court or Tribunal. The digest will prove invaluable to all practitioners of taxation law

The Digest comprises of all the important judgements dealing with transfer pricing, international taxes and domestic taxation laws. A brief head note is given for each case. The Digests for the earlier periods are available here

I. Transfer Pricing

a. International Transactions / Specified Domestic Transactions

1. Following the coordinate bench decision in assessee’s own case for earlier year, the Tribunal held the assessee and Kaybee Exim Pte Limited, Singapore fell under the meaning of AEs as per the provisions of section 92A since Mr. Govind Karunakaran who was a Director and 99.9% shareholder of the assessee company was also a Director and Chief Operating Officer of Kaybee Exim Pte Limited, Singapore and, therefore, the condition of one enterprise participating directly or indirectly or through one or more intermediaries in its management or control or capital as prescribed under clause (a) & (b) of sub section (1) of section 92A were satisfied. Considering that the assessee had not brought any change in facts from the preceding year, the Tribunal dismissed assessee’s appeal challenging the AO’s treatment of KEPTL, Singapore as an AE of assessee on account of common director.
Kaybee Private Limited vs ITO [TS-898-ITAT-2018(Mum)-TP] ITA No.2166 and 2167/Mum/2015 dated 08.08.2018

2. The TPO had made the disallowance of foreign travel expenses incurred to the extent of Rs.24.66 lakhs since he was of the view that expenses were incurred for the benefit of AE and treated it as an international transaction accordingly, made the adjustment. The DRP accepted assessee’s contention that expenses of Rs 24.66 lakh were incurred on foreign travel of employees and could not be considered as expenses incurred for benefit of AE and accordingly could not be considered as international transaction. Further, the DRP sustained addition to the extent of Rs 8.49 lakhs on account of details being furnished only to the extent of Rs 16.16 lakhs. The Tribunal deleted the disallowance of Rs 8.49 lakhs towards foreign travel expenses incurred for employees’ visit to places of AE noting that assessee furnished two sets of statements, one containing full details of travel expenses (which was furnished before the TPO) and another one containing details of Rs 8.49 lakhs ( which was furnished before the TPO) and opined that addition of Rs 8.49 lakhs could not be sustained since full details had been furnished by the assessee before the TPO and the expenses were incurred for the purpose of business.
Essar Power Limited vs ACIT [TS-1100-ITAT-2018(Mum)-TP]ITA No.1332/Mum/2017 dated 19.09.2018

3. The Tribunal remitted assessee’s claim of expenditure with respect to payment of remuneration of directors (which fell under the erstwhile specified domestic transactions provisions under clause (i) of Sec. 92BA) back to the file of AO for AY 2014-15 noting that the issue was squarely covered by co-ordinate bench ruling in assessee’s own case for earlier year wherein similar issue was remitted with a direction to the AO to adjudicate the issue of claim of expenditure in accordance with law after affording opportunity of being heard to the assessee after holding that directors remuneration transaction no longer fell within the definition of specified domestic transactions after omission of Clause (i) of Sec. 92BA(i) by the Finance Act, 2017 (which would be deemed to be omitted since inception) and hence the proceedings initiatied or action taken under clause (i) become otiose.
Texport Overseas Private Limited vs Dy.CIT (TS-996-ITAT-2018(Bang)-TP) IT(TP)A No.2213/Bang/2018 dated 12.09.2018

4. The assessee-company derived income from business of providing advisory and consulting services to companies engaged in business of general insurance and life assurance. It entered into an agreement with Amway (AE), and availed data processing services.However, AO made a disallowance under section 40A(2)(b) of said data processing charges paid to Amway on ground that the payments made by assessee to were excessive and unreasonable as regards the legitimate needs of business or benefits derived by it. The Tribunal deleted the said adjustment relying on coordinate bench ruling in assessee’s own case for earlier year wherein it was held that a) the adhoc disallowance made by the A.O was arbitrary and without any basis. The A.O. had not given a finding as to what as per him, was the fair market value b) Amway had duly disclosed the amount received from the assessee company on account of data processing charges and paid tax thereon c) assessee had chosen to use transfer pricing provisions to demonstrate its claim that the expenditure in question was at arm’s length and that the same was not excessive or unreasonable and when the transfer pricing reports submitted by the assessee were not rejected, it could be concluded that the assessee had discharged the burden of proof.
Amserve Consultants Ltd vs ADIT [TS-1167-ITAT-2018(DEL)-TP] ITA No.3062/Del/2015 dated 29.10.2018

5. The assessee had entered into the following transaction a) purchase of loans of HDFC Ltd of more than 5000 crores b) payment to HBL Global for rendering of services c) payment of interest to HDB Welfare Trust (Trust created by assessee for its employees. The AO was of the view that the transactions fell within the ambit of specified domestic transactions and made a reference to TPO.The Court held that for transactions to fall within meaning of a Specified Domestic Transaction, assessee has to have a transaction (not being an international transaction) with a person as listed in sub-clauses (i) to (vi) of section 40A(2)(b). The Court examined the transactions and held that purchase of loans from HDFC Ltd did not fall within the ambit of SDT for the reason that HDFC Ltd did not have a substantial interest in assessee, as HDFC Ltd. admittedly held 16.39 per cent of shareholding in assessee, and was thus not a person as contemplated under section 40A(2)(b)(iv) for present transaction to fall within meaning of SDT as set out in section 92BA(i) .Further it could not be said that HDFC Ltd. indirectly had 20 per cent of voting power in assessee even though HDFC Investments which was a wholly owned subsidiary of HDFC Ltd. and had approximately 6 per cent shareholding of assessee as such clubbing of shareholding, in law, is clearly impermissible because a shareholder of a company can never have any beneficial interest in the assets of that company. This would be contrary to all canons of Company Law. It is well settled that a shareholder of a company can never be construed either the legal or beneficial owner of the properties and assets of the company in which it holds the shares. Thus, the Court opined that HDFC Ltd. did not have a substantial interest in assessee as required and stipulated in Explanation (a) to section 40A(2)(b). In the case where it received services from HBL Global, the Court opined that merely because assessee held 29 per cent shareholding of ADFC which in turn held 98.4 per cent of shares of HBL Global, it did not have beneficial ownership and voting rights of more than 20 per cent of HBL Global as assessee being a shareholder of ADFC did not have any interest (beneficial or otherwise) in properties/assets of ADFC and that being case, even this transaction was not entered into with a person as mentioned in section 40A(2)(b). In case of welfare trust, since trust had been set up exclusively for welfare of its employees and there was no question of assessee being entitled to 20 per cent of profits of such trust, this transaction clearly would not fall within meaning of section 40A(2)(b) to be a SDT as understood and covered by section 92BA(i). Thus, it held that AO was clearly in error in concluding that transactions undertaken by assessee were specified domestic transactions which required to be disclosed in Form 3CEB and thus AO could not have referred the transactions to TPO for determining the ALP. It allowed the assessee’s petition by holding that said order and said reference were without jurisdiction.
HDFC Bank Ltd vs ACIT [TS-1299-HC-2018(Bom)-TP] Writ Petition No.462 of 2017 dated 20.12.2018

6. The Tribunal restored the issue of determination of Carpro Netherlands as an AE of the tested party i.e. assessee to the CIT(A) noting that the CIT(A) had not passed a speaking order in accordance with the principles laid down u/s.250(6). The CIT(A) had held that Carpro Netherlands was an AE of the assessee as per sec 92A(2)(g) since it provided its platform for the provision of software services and thus, he opined that the assessee was dependent on the knowhow of the aforesaid entity and could not provide its services without it. The Tribunal considered the assessee’s contention that it was a general industry practice to share the platforms on which software was to be developed with parties who had been appointed to develop software and further, the business of assessee was not wholly dependent upon the knowhow of Carpro Netherlands and apart from export of software services (which constituted only 20% of revenue), it was providing software development services as well as trading of software licenses in local market.The assessee relied on the coordinate bench decision of Page Industries wherein it was held that assessee and foreign company were not AEs due to absence of defacto control in the business inspite of the assessee being a licensor of the brand name of the foreign company for exclusive manufacturer and marketing of goods. The Tribunal directed the CIT(A) to adjudicate the issue after considering the ratio of the aforesaid decision.
Magic Software Enterprises India Pvt Ltd vs ITO [TS-747-ITAT-2018(PUN)-TP] CO No.98/Pun/2014 dated 18.07.2018

7. Where the assessee had sold its IPRs to its AE in the prior years (which was benchmarked under the TP provisions) and the AE in the capacity of owner had exploited the impugned IPR in the year under review by entering into transactions with third parties, the Tribunal held that the TPO was incorrect in imputing an adjustment in the hands of the assessee contending that the economic ownership of the IPR was still with the assessee and that income earned by the AE from exploitation of IPR was in effect an international transaction between the assessee and the AE. The Tribunal held that once IPR was sold and the arm’s length price of such sale was determined, the IPR became the property of AE and any subsequent transaction between AE with outsiders or outside the jurisdiction of the Indian territory did not give rise to international transaction between assessee and AE. Accordingly, it deleted the TP adjustment made.
DQ Entertainment International Ltd v ACIT – TS-19-ITAT-2018(HYD)-TP – ITA No.441/Hyd/2017 dated 12.01.2018

8. The assessee claimed expenditure relating to payment of remuneration of directors. The TPO upon reference by the AO benchmarked the ALP of the transaction at Nil observing that the transaction was a specified domestic transaction as defined under clause (i) of Section 92BA (transactions referred to under Section 40A(2)(b). The assessee raised an additional ground before the Tribunal contending that since transactions under Section 40A(2)(b) were omitted from the definition of international transactions vide amendment made in Finance Act., 2017, transactions under Section 40A(2)(b) could not be considered as international transactions even for the impugned AY 2013-14. Relying on the rulings of the Apex Court in Kolhapur Canesugar Works and General Finance Co & of the jurisdictional HC ruling in GE Thermometrics, the Tribunal held that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. Noting that clause (i) of Sec. 92BA was omitted by Finance Act, 2017 w.e.f. April 1, 2017, it observed that it would be deemed that clause (i) was never on the statute more so since while omitting the clause (i) of section 92BA, nothing was specified whether the proceedings initiated or action taken under the section would continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all”; Accordingly, it quashed the reference made by AO to TPO u/s 92CA as well as the consequential order passed by TPO/DRP and directed AO to re-adjudicate the issue of claim of expenditure incurred which could not be done on account of provisions of Sec. 92BA(i).
Texport Overseas Private Limited vs. DCIT – TS-1032-ITAT-2017(Bang)-TP – IT(TP)A No.1722/Bang/2017 dated 22.12.2017

9. The Apex Court dismissed Revenue’s SLP challenging the order of the Gujarat High Court wherein the High Court upheld the order of the Tribunal wherein it was held that the assessee and its supplier of rough diamonds viz. Blue Gems BVBA (Belgian entity) were not associated enterprises notwithstanding the fact that there was common control between the two enterprises as none of the conditions laid down in Section 92A(2) were fulfilled.
Pr. CIT vs. Veer Gems – TS-2-SC-2018-TP – SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 37719/2017 dated 05-01-2018

10. The Tribunal deleted the TP-adjustment in case of Renault India (assessee) as the transaction of purchase of cars from a resident entity RNAIPL (related entity with 30% shareholding from Renault France and 70% from Nissan Japan) was not international transaction subject to transfer pricing. It rejected TPO’s contention that as per the Master Supply Agreement and Master License Agreement, the terms and conditions of transactions were predominantly determined by assessee’s foreign parent (Renault France) and therefore, the transaction was an international transaction. Further, the TPO also noted that while the assessee suffered losses, RNAIPL was paying royalty at 5 percent of turnover to Renault France. It held that the master supply agreement between assessee and RNAIPL as well as master License agreement between Renault France and RNAIPL did not show any influence of Renault France on the price determination for supply of cars by RNAIPL to assessee and that Renault France only had 30% of shareholding in RNAIPL whereas balance 70% was held by Nissan. It observed that the influence that could be exerted by M/s. Renault S.A.S France on M/s. RNAIPL was not such that it could freely decide on the pricing of latter’s products. It further held that there was nothing in methodology followed by assessee that could lead to belief that the arrangement was sham or type of scheming which resulted in exorbitant loss for assessee. Accordingly, it held that the transaction could not be classified as a deemed international transaction and accordingly deleted the TP addition.
Renault India P Ltd – TS-87-ITAT-2018(CHNY)-TP – ITA No 1078 / Mds / 2017 dated 30.01.2018

11. The Tribunal deleted TP adjustment in the case of the assessee (engaged in business of providing animation production services) with respect to profit attributed under PSM by the TPO considering the income generated by the AE out of the Intellectual Property Rights sold by the assessee to its AE. It noted that sale of IPR had taken place in earlier AY and the coordinate bench had already deleted the TP adjustment on the basis that once IPR is sold and arm’s length price is determined, IPR becomes the property of AE and any transaction of AE with 3rd party would be outside the jurisdictional territory of India and would not fall under the ambit of international transaction.
M/s DQ Entertainment (Intl) Ltd vs ACIT Circle 14(1)- TS-332-ITAT-2018(HYD)-TP ITA No 546/HYD/2016 dated 06.04.2018

12. The Tribunal deleted the disallowance of alleged excess price paid for purchase of components u/s 40A(2)(b) by following the decision of the coordinate bench in assessee’s own case for earlier year wherein the said disallowance was deleted noting that the parties were not related in terms of definition provided u/s.40A(2)(b) but they were related to the assessee only in accordance with AS-18 issued by the ICAI.
Hero Moto Corp Ltd vs DCIT [TS-823-ITAT-2018(DEL)-TP] ITA No.6990/Del/2017 dated 20.06.2018

b. Most Appropriate Method
Comparable Uncontrolled Price Method

13. The assessee was engaged in the business of providing assistance in sourcing and procurement of yard textile etc. from sources within India and outside India to its AE i.e. KB Exim Pte. Ltd. (KEPTL) in Singapore and was charging a brokerage for the same. The AO determined the ALP of brokerage rate for yarn products at 2% by taking a comparable instance of assessee’s own international transaction with another AE. It was assessee’s contention that brokerage rate ought to be adopted between 0.5% to 0.75% in view of comparable instances. The Tribunal restored the matter to re-compute the ALP afresh noting that the AO had not adopted the method under section 92C(1) of the Act as he considered related party transaction as a base for benchmarking of brokerage rate for yarn product and further directed the assessee to furnish documentary evidence to substantiate its contention.
Kaybee Private Limited vs ITO [TS-898-ITAT-2018(Mum)-TP] ITA No.2166 and 2167/Mum/2015 dated 08.08.2018

14. The Tribunaldismissed Department’s appeal and upheld the CIT(A)’s order wherein CUP was accepted to be the MAM and assessee was taken as the tested party following the decision of coordinate bench in assessee’s own case wherein it was held that the assessee [engaged in procuring medicines and disposables from suppliers] and not the AE should be the tested party. The Tribunal in the earlier year had rejected the contention of the TPO that AE should bethe tested party since the AE was sourcing materials from the Indian manufacturers much before the setting up of the assessee companyhence had intangibles in form of supplier list and bore all types of risksand thus, it was the more complex entity.
ACIT vs Missionpharma Logistics Pvt Ltd [TS-872-ITAT-2018(Ahd)-TP] ITA No.1352/Ahd/2015 dated 02.08.2018

15. The Tribunal held that CUP was the MAM to benchmark the transaction of sale of printed circuit boards (PCBs) by assessee to its AE in Austria [for further sale in Europe as distributor] as against TNMM adopted by the TPO at entity level; and deleted the TP adjustment following the coordinate bench ruling in assessee’s own case for earlier year wherein adoption of entity level TNMM was rejected in respect of the export transaction since the Revenue was not able to demonstrate or bring any cogent evidence or material as to how CUP method was not applicable and that TNMM was the more appropriate method. The Tribunal further held that assessee was to be taken as the tested party and not its AE as testing had to be done in order to examine if the Indian entity was offering its profits to lawful taxation in India and thus keeping the AE as tested party would defeat the purpose of TP regulations.
AT&S India Private Limitedvs DCIT [TS-1179-ITAT-2018(KOl)-TP] ITA No.69/Kol/2018 dated 10.10.2018

16. The Tribunal held that DRP erred in applying CUP for indenting segment of assessee and comparing the commission earned fromAE and non-AE segments; noting that CUP required a high degree of similarity and there were various dissimilarities in transaction with AE and non-AE such as volume of transactions, contractual terms, geographical location and markets which affected the pricing. It held that TNMM was the MAM in view of the fact that TPO had accepted it from AY(s) 2003-04 to 2006-07 (noting that OP/TC was taken and not the berry ratio which assessee had adopted) and b) from AY 2011-12 to 2018-19 under MAP, TNNM had been agreed to be MAM as there was no change in FAR analysis and assessee was a low risk service provider. Further, it observed that berry ratio (profit/value added expenditure) was to be taken as base for computing PLI as the assessee was acting as an indenting agent/ service provider incurring mainly operating expenses and thus, the operating expenses represented the functions performed and risks undertaken by assessee. It remanded the matter back to the file of TPO to examine and benchmark the transaction by adopting TNMM as the MAM by taking berry ratio as PLI.
Sumitomo Corporation India Pvt Limitedvs ACIT[TS-1204-ITAT-2018(Del)-TP] ITA No.5095/Del/2011, 5850/Del/2012, 328 and 6646/Del/2014 and 1321/Del/2016 dated 22.10.2018

17. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s orderdeleting the addition made to the ALP by TPO by applying CUP (as against TNMM applied by assessee) on account of export by assessee (manufacturer of spices) to its AE by following the coordinate bench decision in assessee’s own case for earlier year. In the earlier year the Tribunal restored the issue back to TPO on ground that TPO had not selected comparables which were selling similar type of spices in public domain and had computed ALP on erroneous basis by computing the average rate of carton by dividing the total value of invoice with total number of cartons ignoring that the said cartons did not have same/comparable items. The said average was then compared with the average computed for the bills raised on uncontrolled party during the same period and then the difference therein was multiplied with the number of cartons to arrive at the amount of addition. In the remand proceedings, the TPO had accepted TNMM as the MAM and deleted the addition.
Asst CITvs Manashin Di Hatta Ltd. [TS-1403-ITAT-2018(Del)-TP] (ITA No.1799/Del/2015 dated 29.10.2018

18. The Tribunal held that CUP was not the MAM and TNMM applied by assessee was the MAM for export of finished product in case of assessee (engaged in the business of manufacturing of aromatic ingredients, natural and synthetic perfumery, flavoring and derivatives) noting that price at which finished products were sold to AE were not comparable to non-AEs owing to difference in volume of transaction (quantity sold to non-AE much lower than AE’s), geography, functions performed and risks assumed. Further, it observed that as per Rule 10B(3) (uncontrolled transaction not to be comparable unless differences between transaction are eliminated so like comparison can be made), the TPO was unable to quantify the differences. It relied on coordinate bench decision in Amphenol Interconnect India Pvt Ltd. (which was subsequently upheld by Bombay HC) wherein it was held that CUP would not be the MAM in case of geographical differences, volume differences, timing differences, risk differences and functional differences and accepted assessee’s stand of applying TNMM.
Firmenich Aromatics Product ion (India) Pvt.Ltd. vs ITO [TS-1214-ITAT-2018(MUM)-TP] (ITA No.7145/Mum/2017) dated 13.11.2018

19. The Court upheld Tribunal’s order wherein it rejected the TPO’s imputation of markup of 3% on cost since it was without any basis against the assessee’s claim of 10% in respect of its fees for IT services. The Revenue also admitted that nowhere on record were there any specific comparables before the TPO to justify the estimation adopted by the TPO.
Pr.CIT vs Sabic Innovative Plastic India Pvt. Ltd. [TS-1089-HC-2018 (Guj)] ITA No.248&231 of 2018 dated 31.07.2018

20. The Tribunal dismissed assessee’s appeal against the DRP’s denial of 3% adjustment which was made by the assessee [ engaged in export of sea food] to the sale price in each sale made to its AE so as to bring it at ALP under CUP method. Such rates were compared to the rates published by the Marine products Export Development [“MPEDA”] weekly data. The Tribunal rejected the assessee’s contention that the adjustment ought to be provided on account of difference in glaze content in sea food i.e. assessee’s sea food glaze (25%) while MPEDA’s sea food glaze (20%) which resulted in a difference in price. It observed that assessee failed to bring on record any evidence to show that assessee’s products were having glaze of 25% so that the MPEDA price could not be compared with it.
Torry Harris Sea Foods Pvt Ltd vs ACIT [TS-508-ITAT-2018(COCH)-TP] IT(TP)A No.447/Coch/2016 dated 05.07.2018

21. The Tribunal rejected TPO’s selection of TNMM as the MAM and accepted the CUP method applied by assessee for benchmarking its import transactions in manufacturing segment by following the coordinate bench decision in assessee’s own case for AY 2006-07 wherein CUP method was accepted on basis of consistency as even in subsequent years, the TPO had applied the CUP method. The coordinate bench in assessee’s own case for AY 2010-11 had directed the AO/TPO to follow DRP’s directions which was to adopt the internal CUP in view of product category being identifiable. It also noted that the findings of the DRP in the subject year appeared to be on wrong appreciation of facts since it had stated that the assessee had applied weighted average rate of purchase of products from AE’s itself as internal CUP and thus, concluded that assessee had benchmarked under internal CUP on basis of controlled transactions which was incorrect whereas the TPO in his order had clearly stated that the assessee had adopted weighted average price of unrelated vendors as an internal CUP.
Lenovo (India) Private Ltd vs Dy.CIT [TS-802-ITAT-2018(Bang)-TP] IT(TP)A No.74/Bang/2014 dated 06.07.2018

22. The Tribunal remitted the ALP-determination in respect of assessee’s import of goods from AE back to CIT(A). It noted that the TPO/CIT(A) made a TP-addition on imports considering variation in import price for the same unit of good from AE at €204.64 in October 2001 and €75 in February 2002 by discarding the market quote furnished by assessee which supported its contention that there was a drastic fall in the product prices. Relying on the decision of Adani Wilmar [TS-114-HC-2014(GUJ)-TP], wherein the Court held that authentic and reliable market quotes on price publication were relevant while determining the ALP employing the CUP method, the Tribunal directed the CIT(A) to examine the evidence produced by the assessee and verify its authenticity and reliability instead of rejecting it at the threshold level.
DCIT vs. Alcatel India Ltd. – TS-1085-ITAT-2017(DEL)-TP – ITA No. 339/Del/2012 dated 06/12/2017

23. The Tribunal deleted the TP adjustment on call centre services provided by assessee to its US-based AE noting that the assessee’s transactions were at ALP under internal CUP, internal TNMM as well as external TNMM. Vis-à-vis internal CUP, it noted that the average hourly rate earned from AE in USA (Rs. 274.39 per hour) was higher than rate earned from Non AEs in UK (Rs. 108.82 per hour) and dismissed the contention of the Revenue that the internal CUP was not an appropriate method considering different pricing mechanism for AE and Non AEs. As regards the TPO’s contention i.e. that there was a difference in risk profile between AE and Non-AE transactions for which no accurate adjustment could be made, it held that even if the adjustment was made, it would further reduce the average hourly rate charged from the Non-AEs which was lower than the average hourly rate charged from AE in any case. The Tribunal also adjudicated on the appropriateness of internal TNMM and observed that the services provided to AE and non-AEs were identical and that the functions performed, assets used and risks assumed (FAR) in AE as well as non AE business were also similar and therefore held that even internal TNMM could be considered as most appropriate method as per which the operating margin for the AE transactions (74.92%) was higher than non-AE transactions (30.90%).
Vis-à-vis External TNMM, it rejected the Revenue’s argument for the exclusion of All sec and CG VAK and held that i) All Sec was wrongly excluded on account of non-satisfaction of the export filter of 75 percent whereas its export sales to total sales was 74.45% and ii) CG Vak though functionally comparable was wrongly excluded merely because its segmental turnover was less than 1 crore. Accordingly, it noted that once these two companies were included as comparable, even under External TNMM, the assessee’s international transactions would be at ALP.
Effective Teleservices Pvt Ltd vs. ACIT – TS-75-ITAT-2018(Ahd)-TP – ITA. No: 2411/AHD/2014 dated 16 -01-2018

24. The Court admitted the assessee’s appeal on the following questions of law – “1. Did the ITAT fall into error in reversing the CIT (A)’s decision on the appropriateness/maintainability of CUP as the most appropriate for determining the ALP in the circumstances of the case? 2. Did the ITAT fall into error in its treatment of the foreign exchange fluctuation as far as the ALP determination was concerned?”
Ecocat India Pvt. Ltd vs. Pr. CIT – TS-111-HC-2018(DEL)-TP – ITA 152/2018 dated 09.02.2018

25. The Tribunal restricted TP-adjustment in respect of assessee’s s sale of finished goods to AEs in Thailand & Hong Kong. The Tribunal noted that while had assessee applied TNMM, TPO/CIT(A) rejected the same and proceeded to apply CUP-method for benchmarking the transaction. However, the Tribunal considered assessee’s submission that CUP rates for Hong Kong only should be compared to work out the said disallowance as against average rates of various countries taken by TPO. The Tribunal thus restricted the TP adjustment and clarified that the above approach shall remain valid only for this impugned AY and would not be applicable in any other AY.
Lupin Ltd vs ACIT (LTU)-TS-398-ITAT-2018(Mum)-TP-ITA No. 7488/Mum/2013 dated 27.04.2018

26. The Tribunal rejected Revenue’s contention relating to rejection of books of accounts maintained by the assessee by relying on assessee’s own order passed by the Co-ordinate bench for the earlier year as well as the HC order upholding the same on further appeal by the department. In the earlier year, it was held that since the assessee had followed the recognized accounting standard issued by ICAI and no major defects had been found by the AO in the assessee’s books, the AO could not reject the said books.
Further, the Tribunal held that the transaction of executing the onshore part of a project by the Indian PE of the Chinese entity (where the project was awarded by Indian companies to the HO of Chinese entity) between the Indian PE of Chinese entity and its HO in China was an international transaction and subject to transfer pricing provisions. The Tribunal further upheld the CIT(A)’s order, relating to rejection of TNMM (applied by TPO) and accepting of CUP method for benchmarking the said transaction consequent to which there would be no adjustment. Further, the Tribunal also held that there was no difference in the functions performed, asset employed, risk undertaken, price charged in comparable uncontrolled transactions and the entire profit of the foreign entity was charged to taxation through its PE in India and thus there was no shifting base of profits.
ADIT (Intl Tax)-II vs Shandong Tijun Electronic Power Eng. Co Ltd – TS-353-ITAT-2018(Ahd)-TP- ITA No 2926/Ahd/2014 dated 13.04.2018

27. Assessee was engaged in the business of leasing and hiring heavy cranes and had purchased nine cranes from it AE during the relevant year. The assessee got these cranes valued from custom authorities and chartered engineers and accordingly benchmarked the said international transactions. The method adopted by assessee for benchmarking the international transactions was rejected by the TPO who applied the CUP Method. The TPO took the written down value of the cranes in books of AE as ALP which resulted into certain adjustments to assessee’s ALP. The DRP held that the written down value of cranes in books of AE could not be considered as ALP as it was not derived from transactions between enterprises other than associated enterprises and accordingly the TPO was directed by the DRP to accept the valuation report of the assessee and delete the additions made on account of ALP of cranes. The Tribunal on appeal did not find any illegal infirmity in the order of the DRP and upheld the same.
ACIT v. Sarens Heavy Lift (I) (P.) Ltd. – [2018] 93 taxmann.com 431 (Delhi – Trib.) – IT Appeal No. 1027 (DELHI) Of 2015 dated April 2, 2018

28. The Tribunal remanded the issue of benchmarking of transaction with respect to payment of management service fee to AE back to the TPO, noting that the TPO and DRP had rejected the assessee’s TNMM and had adopted CUP method without selecting any comparable for benchmarking the said transaction so as to arrive at Nil ALP by applying benefit test. It held that for selecting CUP method, the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transaction was to be identified and thereafter MAM was to be decided.
Gates Unitta India Company (P.) Ltd. v. ITO – [2018] 93 taxmann.com 10 (Chennai – Trib.) – IT Appeal No. 2745 (CHNY) of 2017 dated April 6, 2018

29. The Apex Court dismissed Revenue’s SLP against Rajasthan HC decision that had upheld Tribunal’s order deleting Rs.2.07cr TP-adjustment. The Tribunal had followed the earlier year decision in the assessee’s own case wherein the Tribunal had rejected the TPO’s approach of adopting CUP method and determining the ALP at Nil (by applying benefit test). Thus, in the earlier year, the Tribunal had accepted the assessee’s benchmarking of the royalty payment to AE using TNMM, holding that the TPO/ AO could not justify the application of CUP method.
Pr. CIT vs. Sakata Inx (India) Ltd [TS-326-SC-2018-TP] SLP (Civil) Diary No.(s) 14221/2018 dated 04.05.2018

30. The Tribunal relied upon the coordinate bench ruling in assessee’s own case and adopted CUP as the MAM in respect of the export transaction and deleted the TP-adjustment in respect of export of printed circuit boards (PCBs) by assessee to its AE in Austria [for further sale in Europe as distributor]. It rejected the TPO’s adoption of entity level TNMM in respect of the export transaction since the Revenue was not able to demonstrate or bring any cogent evidence or material to prove that CUP method was not suitable for the assessee. The Tribunal noted that that there was no value addition by the AEs in the goods manufactured by assessee and prices at which PCBs were sold by the assessee to AE were equal to the prices at which PCBs were sold by AE to independent customers in Europe. Accordingly, the Tribunal adopted the CUP-method as MAM.
AT & S India (P) Ltd v/s. DCIT [TS-336-ITAT-2018(Kol)-TP] ITA No.77/Kol/2017 dated 11.05.2018

31. The Tribunal remitted the matter of ALP determination of assessee’s international transaction in respect of management group cost back to AO/TPO under the CUP method. The Tribunal upheld the TPO’s rejection of the assessee’s approach of aggregating the “management group cost” and “R&D assistance cost” as a single international transaction and opined that management group costs had to be separately benchmarked since the assessee had failed to establish any inextricable link between the transactions as one not surviving without the other. The Tribunal also observed that in assessee’s own case for AY 2011-12, the Tribunal had approved CUP as the MAM. Thus, it directed the TPO to apply CUP and in case of non-availability of relevant data vis-à-vis comparables or any other genuine reason, to apply appropriate method.
Atotech India Pvt Ltd vs. ACIT [TS-340-ITAT-2018(DEL)-TP] ITA Nos.3419&6571/Del/2016 &1112/Del/2014 dated 11.05.2018

32. The Tribunal remitted the ALP determination in respect of assessee’s guarantee commission received back to AO/TPO since the TPO had used the CUP data obtained by issuing notice u/s. 133(6) of the Act without providing an opportunity to the assessee with it. The Tribunal observed that no one should be condemned unheard and restored the issue so that the TPO could confront the CUP data to the assessee. Further, the Tribunal directed the AO/TPO to keep in mind the directions of the DRP in the subsequent assessment years wherein it was held that no addition could have been made on account of receipt of guarantee commission and for which the department had not preferred an appeal.
The Bank of Tokyo-Mitsubishi UFJ Ltd. vs. DCIT [TS-824-ITAT-2018(DEL)-TP] ITA No.7212/Del/2017 dated 11.06.2018

Cost Plus Method

33. The assessee (engaged in developing customized commercial application software) adopted CPM to benchmark its sale and purchase of services with its AE. The TPO was of the view that question of applicability of CPM did not arise as assessee itself had taken PBIT/Sales as profit indicator which was PLI used in TNMM. Thus, TPO rejected CPM and used TNMM. The TPO made certain addition on basis of mean margin of comparables selected by him. The Tribunal deleted the addition noting that assessee had fulfilled all conditions of CPM except using a terminology by mistake as PBIT instead of GP. Moreover, CPM was the MAM for sale of services by manufacturer or service provider. It was also undisputed that difference between two ratios GP to Sales and PBIT to sales was only 0.67% and thus, if tolerance band of 5% was taken, no adjustment would sustain.
RS Software (India) Ltd vs ACIT [2018] 100 taxmann.com 165(Kol Trib) ITA No.741 of 2017 dated 25.10.2018

34. The TPO had applied CPM as MAM and made a TP adjustment since the gross profits earned on exports 23.22% were far lesser than the profit of 50.65% earned by the domestic consumer division. The Tribunal accepted the assessee’s TNMM as the MAM over TPO’s CPM for exports to AE noting that under CPM ,the functions performed, assets employed and risks undertaken in export and domestic segments were not the same and suitable adjustments could not be made. It observed that the TPO had disregarded the mandate of Rule 10B(1)(c ) when adjusted profit markup under CPM had to be determined by adjusting the GP margin for functional and other differences between export and domestic segment. The Tribunal accepted assessee’s contention that CPM was not the MAM as it had incurred huge expenditure on discount, marketing, advertising and selling expenditure etc. in the domestic segment which resulted in selling price and gross profit of domestic segment being higher and there were transactional and functional difference between domestic and export sales. It relied on the coordinate bench decision of Alfalevel to reject CPM wherein it was held that in view of the fact that there were various differences in export segment and domestic segment, such as market fluctuations, geographic differences, volume difference, credit risk, RPT, etc., the TPO was not justified in adopting CPM as the MAM as suitable adjustments were not possible. Accordingly, the Tribunal deleted the TP adjustment since under TNMM the net margin of exports to AE was higher than net margin of personal consumer division of assessee demonstrating that it was at ALP.
The Himalaya Drug Company vs Dy.CIT [TS-614-ITAT-2018(Bang)-TP] IT (TP) A No.807/Bang/0216 dated 04.07.2018

35. The Tribunal following the coordinate bench decision of the assessee for earlier year (subsequently upheld by the High Court) accepted the assessee’s application of TNMM over the TPO’s CPM for benchmarking assessee’s domestic ticketing, tour and package business (direct customer) and ticketing and tour packaging services (where it was acting as a subagent for its AE). The assessee had entered into customer and data handling management with its AE where it would act as an agent for the customers of the AE for ticketing and tour and packaging business. The Tribunal in the earlier year order noted that the lower authorities failed to appreciate the value of functions and risks assumed in relation to the international transaction carried out by the assessee vis-à-vis customer handling and data management with its AE, since it was acting as a routine back office service for its AE without being assigned any risk or carrying out any entrepreneurial functions and accordingly, accepted the approach of the assessee adopting TNMM as the MAM by finding comparables engaged in similar business.
MakeMy Trip (India) Pvt Ltd vs DCIT [TS-882-ITAT-2018(DEL)-TP] ITA No.6055/Del/2010 dated 30.07.2018

36. The Tribunal rejected TPO’s selection of external TNMM as the most appropriate method (MAM) for benchmarking of assessee’s (engaged in the business of processing blended tea) international transaction of sale of tea to AE and directed the TPO to adopt internal Cost Plus Method (CPM) as adopted by the assessee. It noted that the assessee had adopted internal CPM for export of tea and export of PP Bags and PP Geo frabric but the TPO adopted entity level TNMM and using external comparables proposed an adjustment of Rs. 7.54 Cr despite the fact that the TPO had accepted assessee’s CPM as MAM for earlier years. Noting that the nature of international transactions, functions performed and risks assumed by the parties and method adopted were similar to those adopted by the assessee in the earlier years, it held that there was no reason for the TPO to take a different stand in the year under consideration. Accordingly, it remanded the matter back to the file of the AO.
Madhu Jayanti International Ltd vs. DCIT – S-1069-ITAT-2017(Kol)-TP – I.T.A No. 214/Kol/2016 – dated 01.12.2017

37. The assessee had exported spools to its AE wherein cost plus 10% of product cost was charged. However, TPO was of the view that 10% of indirect cost also needed to be charged and hence made an addition. The Tribunal relied on co-ordinate bench ruling in assessee’s own case in earlier year wherein it was held that there was nothing on record to suggest that any indirect expenses were considered for determining the ALP of export of spools and the TPO had made no such adjustment for AY 2004-05. Accordingly, the Tribunal deleted the adjustment made on account of indirect costs while computing ALP of the export transaction.
Bekaert Industries Pvt Ltd vs. ACIT [TS-349-ITAT-2018(PUN)-TP] ITA No.2376/Pun/2012 dated 14.05.2018

Resale Price Method

38. The TPO rejected RPM applied by the assessee (trader of switch, isolation amplifier and level switch) on its import transaction of switch, isolation amplifier and level switches to determine ALP of the transactionobserving that there would be distortion in GP margin in case of functions performed by comparables (in case of distributors) like advertising, marketing, distributing and guaranteeing the goods, financing the stock and warranty risk, and alsoas the gross profit margin could not be calculated as the costs incurred by comparables were not in public domain. The DRP upheld the TPO’s order rejecting RPM and adopting TNMM noting that gross profit margins would be affected by considerations like accounting policies of assessee and comparable companies, presence of brand value and contractual terms regarding payments etc. and further, noted that the assessee after importing goods was performing functions like assembling and packing which partake value addition. The Tribunal allowed the assessee’s appeal and accepted RPM as the MAMas the assessee was not undertaking any value additionsince expenses incurred on packing material could not create any value additionthus, the finding of DRPthat assessee was not a simple reseller (as it assembled and did packing) was incorrectand RPM had consistently been adopted in the previous years. It relied on the coordinate bench decision in Citizen Watches wherein it was held that there was no value addition for expenses incurred on packing of goods.
Pepperl & Fuchs (India) Pvt Ltd vs Dy.CIT [TS-1134-ITAT-2018(Bang)-TP] IT(TP)A No.227/Bang/2014 dated 14.09.2018

39. The assessee (engaged in supplying cranes and mechanical equipment) in its TP-study, had specifically stated thatTNMMand not RPM was MAM and that assessee should be selected as the tested party since its functions were the least complex. However, during proceedings before DRP,assessee stated that RPM should be selected as MAM since assessee’s functions were that of a mere dealer of goods (which even the TPO had stated) but also stated that foreign AE (though it was a manufacturing entity) should be selected as the tested party on the ground that the AE had least complex functions.The TPO applied TNMM as MAM and considered assessee as a tested party. The DRP rejected RPM as the MAM on the ground that there was qualitative addition and that assessee performed function of market research, customer mining, order program from customers, requirement analysis, quality checks, apart from bearing marketing, price, credit, bad debt, warranty, forex, inventory and manpower risk. The Tribunal concurred with the DRP’s view and opined that with such a complicated profile, RPM could not be the MAM. It upheld the application of TNMM as MAM. Further, noting that AE was a leading manufacturer and supplier of wide range of lifting and transport systems and had a notable presence and leadership in international markets, it rejected contention of assessee that AE should be the tested party since the assessee was performing only distribution and marketing function of the assessee, and concluded that assessee was the party which had the least complex functions.
Jaso India Private Limited vs Dy.CIT [TS-1065-ITAT-2018(Kol)-TP] ITA No.507/Kol/2017 dated 28.09.2018

40. The Tribunal accepted the TPO’s application of RPM as the MAM noting that assessee purchased products from its AE’s and these products were resold without any further value addition and further, assessee had categorized itself to be low risk bearing entity. However, it held that TPO/DRP erred in not carrying out a fresh search of comparables with similar functions as assessee to determine the ALP of the transaction by using RPM as MAM. Thus, it restored the issue to AO/TPO with direction to adopt RPM as MAM and admit additional evidence regarding fresh comparables for determining the ALP. The TPO was of the view that RPM would be the MAM to benchmark the import of automotive components for trading as against the TNMM method applied by the assessee after doing FAR analysis observing that assessee was a minimal risk distributor who did not bear any inventory risk, promotion of product, market risks etc.
Mitsubishi Electric Automotive [I] Pvt Ltd vs Dy.CIT [TS-1147-ITAT-2018(DEL)-TP] ITA No.312/Del/2015 dated 29.10.2018

41. The Tribunal rejected TPO’s adoption of RPM method as MAM for trading segment of assessee noting that RPM would not be appropriate as assessee purchased goods from its AE and also resold them to another AE. The Tribunal opined that the method was nothing but a backward calculation from resale price to obtain the purchase value in an independent scenario which was the reason why it would be applicable only when resale wasmade to an unrelated party, because if the resale price per-se was
tainted then it would be impossible to compute ALP inrespect of purchase of property. It remanded the benchmarking of trading segment to TPO to analyze whether TNMM (as applied by assessee) ought to be adopted (as done in the earlier years), and to carry out fresh search of comparables.
Kehin India Manufacturing Pvt Ltd vs DCIT [TS-1220-ITAT-2018(DEL)-TP] ITA No.312/Del/2015 dated 05.10.2018

42. The Tribunal held that RPM (as against TNMM adopted by TPO) was to be adopted for assessee’s distribution activity following the coordinate bench ruling in assessee’s own case for earlier year wherein it was held that RPM was the most appropriate method as there was no value addition in case of assessee’s import of finished goods transaction from its AE which were resold to non-AEs.
Fresenius Kabi India Private Limited vs ACIT [TS-1212-ITAT-2018(PUN)-TP] (ITA No.2572/PUN/2016) dated 02.11.2018

43. The Tribunal held that assessee had rightly applied RPM which was the MAM (as against TNMM confirmed by lower authorities) noting that assessee was a routine distributor engaged in trading of lighting products to the independent customers without any value addition to the products purchased from its AEs. Further, the TPO/AO had accepted RPM method applied by assessee in earlier years and there was no change in facts and circumstances in subject year. Thus, applying rules of consistency, the Tribunal directed TPO/AO to adopt RPM method for computing PLI in case of lighting division.
GE India Industrial Private Limited vs ACIT [TS-1315-ITAT-2018(DEL)-TP] ITA No.2781/Ahd/2012 dated 04.12.2018

44. The Tribunal followed the coordinate bench decision in assessee’s own case for earlier year to apply RPM to benchmark the import of seeds transaction from its AE for purpose of resale by assessee (as in against TNMM adopted by TPO). The Tribunal in the earlier year had relied on coordinate bench decision assessee’s own case for earlier year (wherein AO’s order was set aside to pass directions in conformity with DRP accepting RPM) holding that principle of consistency was to be followed. It was assessee’s contention that RPM was the MAM when a trader purchases from an AE and resells to an independent enterprise without adding substantially to the value of the product; or does not contribute substantially to the creation or maintenance of intangible property associated with the product.
Seminis Vegetable Seeds(India) Pvt Ltd vs Dy.CIT [TS-1381-ITAT-2018(Mum)-TP] ITA No.4202/Mum/2014 dated 18.12.2018

45. Relying on the Bombay HC ruling in L’Oreal India Pvt. Ltd, the Tribunal accepted assessee’s resale price method (RPM) as the most appropriate method (MAM) over TPO’s TNMM for transaction of purchase of finished watches/clocks for resale noting that TPO’s conclusion that loss incurred by assessee was indicative of carrying out value-added functions was not borne out by the facts on record. The Tribunal further held that expenses in assessee’s profit and loss account did not establish value-added functions. It also observed that packing expenses did not create any value for product.
Dy.CIT vs Citizen Watches (India) Pvt Ltd [TS-963-ITAT-2018(Bang)-TP] IT(TP)A No.26/Bang/2014 dated 06.07.2018

46. The Court dismissed Revenue’s appeal against the Tribunal’s order wherein it was held that RPM was the most appropriate method for assessee’s import and resale of equipments by relying on the coordinate bench ruling of L’oreal wherein RPM was held to be MAM in case of reselling products without any value addition. The Court dismissed the appeal opining that no substantial question of law arose in the present case since the Revenue failed to establish perversity in the findings of the Tribunal.
CIT Bangalore vs Tetronix India Pvt Ltd [TS-694-HC-2018(KAR)-TP] ITA No.118/2013 dated 11.07.2018

47. The Tribunal upheld the CIT(A)’s acceptance of assessee’s selection of RPM over TPO’s TNMM for benchmarking assessee trader’s import transaction for AY 2003-04. The TPO rejected RPM and adopted TNMM as MAM observing that assessee’s P&L account revealed that there were certain expenses which were directly connected with selling & distribution function which had not been considered for comparability in either the case of the assessee or the comparables under RPM and that the benchmarking conducted was faulty. Noting that the TPO had accepted RPM as the MAM in the subsequent years, the CIT(A) reversed TPO’s order. Observing that the Revenue had not brought anything on record to substantiate that the facts for the year under consideration were different from the subsequent assessment, the Tribunal held that the CIT(A) was justified in accepting RPM based on the principle of consistency. Further, it relied on the decision of the Bombay High Court in L’Oreal India (P.) Ltd. (2015) 53 Taxmann.com 432 (Bom.), wherein it was held that the RPM was the most appropriate method for benchmarking the ALP of the trading segment.
JCIT v M/s Michelin India Pvt. Ltd – TS-15-ITAT-2018(DEL)-TP – ITA No. 1874/Del/2011 dated 10.01.2018

48. The Tribunal upheld DRP’s selection of RPM as MAM for assessee’s export of iron ore to AEs and dismissed the TPO’s application of CUP method as faulty. The DRP had held that that the TIPS database (used as CUP by the TPO) was unreliable tool to determine ALP of assessee’s transaction noting that it provided prices of iron ore exported from Vishakhpatanm port as per iron content which did not match the iron content in the assessee’s transaction (50.60 percent). It upheld the DRP’s observation that the difference in iron content would directly impact the market value and therefore held that the CUP method could not be adopted. Accordingly, it upheld the DRP’s direction to consider the mean GP-rate realised in the exports to non-AEs to benchmark the AE-transactions.
ACIT vs. Billion Wealth Minerals Pvt. Ltd. – TS-43-ITAT-2018(Mum)-TP – /I.T.A./1818/Mum/2015 dated 19.01.2018

49. The Tribunal upheld CIT(A)’s deletion of TP-adjustment in respect of international transaction of import of finished goods, accessories, components and spares by the assessee (engaged in trading) from its AE. The assessee adopted RPM as MAM and compared the gross profit margin earned by it on sale of finished goods imported from AE with margin earned on sale of finished goods purchased from unrelated parties. TPO rejected assessee’s approach of computing such gross profit margin earned by considering cost of components, spares, accessories, consumables etc. within the total cost of finished products resold (as their sale price was included in the sale value charged to customers). The Tribunal observed that the assessee was providing power solutions to its customers for which it was not only importing UPS or DP power systems from its AEs but was also attaching various other components, spares, accessories etc. to it including batteries and racks to provide an end-solution to the customers and the assessee had not charged separately for such components. Accordingly, it rejected the TPO’s contention and accepted the assessee’s transactions to be at ALP.
DCIT vs. Eaton Power Quality Pvt Ltd – TS-186-ITAT-2018(PUN)-TP – ITA No.1025/PUN/2014 dated 12.03.2018

50. The TPO rejected RPM and adopted TNMM as MAM which was upheld by the DRP by observing that the assessee was not a simple distributor since the assessee had incurred substantial advertising, marketing and promotion expenses which had also not been demonstrated by the assessee to have been incurred by the comparables. The Tribunal accepted the assessee’s selection of RPM over TNMM applied by the TPO and held that the assessee was a routine market distributor who was selling/distributing products without any value addition on the products. The Tribunal also relied on the order of the coordinate bench in Nokia India Private Limited vs. DCIT (2015) 153 ITD 508 (Delhi Trib.) and held that incurring of high advertisement and marketing expenses by the assessee vis-a- vis the other comparable companies does not in any manner affect the determination of ALP under the RPM.
Burberry India Pvt Ltd vs ACIT [ TS-615-ITAT-2018(DEL)-T ] ITA No.758/Del/2017 dated 22.06.2018

51. The Tribunal set aside the issue of selection of the most appropriate method (MAM) and determination of ALP for the assessee engaged in distribution of medical equipments like capital equipment and surgical implants. It noted that the assessee had selected Resale Price Method (RPM) on the ground that it was engaged in reselling the imported products without any value addition whereas the TPO applied TNMM on the ground that product profile of assessee was totally different. It noted that the co-ordinate bench of the Tribunal for AY 2002-03 had observed that TPO had accepted RPM as the most appropriate method for AY 2007-08 onwards and had remitted the issue back to AO/TPO in view of lack of clarity as to why the Department had adopted TNMM for earlier years while accepting RPM for later years. Accordingly, relying on the Tribunal order for AY 2002-03, it remitted the matter to AO/TPO for fresh adjudication.
Stryker India Pvt. Ltd v DCIT – TS-441-ITAT-2018(DEL)-TP – ITA No. 351-53/DEL/2015 dated 04.05.2018

52. The Tribunal directed the AO/TPO to apply RPM as the MAM method for benchmarking assessee’s import of finished goods from its AE for onwards sale as against the CPM method applied by the TPO. The TPO applied a markup of 11% to benchmark the arm’s length price of international transaction undertaken. In arriving at the above decision, the Tribunal noted that the assessee was importing finished goods from its AE and there was no value addition.
Bekaert Industries Pvt Ltd vs. ACIT [TS-349-ITAT-2018(PUN)-TP] ITA No.2376/Pun/2012 dated 14.05.2018

Transactional Net Margin Method

53. The CIT(A) deleted the TP adjustment made in respect of the export transaction of diamond cutting tools noting that after allocating expenses on actual basis, the average margin of assessee (9.53%) vis-à-vis comparables (9.22%) was within the range of +/-5%. Further, he restricted the TP adjustment for import of raw material from its AE noting that TPO had segregated purchases i.e. import of raw materials on basis of turnover instead of actual consumption (for which assessee had submitted cost sheet). The Tribunal restored the matter to CIT(A) for fresh adjudication and directed it to confront the material to AO/TPO (calling for remand report) noting that CIT(A) had granted relief on basis of certain cost sheets and computations which were not produced before it or not examined by AO/TPO.
DCIT vs. W Diamant India Ltd [TS-998-ITAT-2018(DEL)-TP] ITA No.5993/Del/2014 dated 21.08.2018

54. The Tribunal directed the TPO to adopt Internal TNMM based on man hour rates as the MAM for determining the ALP of specialized engineering services provided by the assessee to its AE by following the coordinate bench decision in assessee’s own case for earlier year. In the earlier year, the Tribunal accepted assessee’s plea that hourly rates charged by it in providing specialized services to its AEs can be the basis for verifying its stand as to whether the services provided by the assessee to its AEs were at ALP.
Magna Steyr India Private Limited vs ACIT[TS-881-ITAT-2018(PUN)-TP] ITA No.517/Pun/2015 dated 08.08.2018

55. The assessee was an Indo-Russian JV company which merely facilitated after sales product and support services rendered by the Russian AE to Ministry of defence by co-ordinating between the Ministry and theRussian AE. The Russian company raised bill on the assessee-companyfor the product supplied and services rendered, which in turn, would raise bill on the Ministry of Defence by adding its profit. In its T.P study, the assessee did not furnish any comparable due to peculiar nature of the “After sales services” provided by the assessee-company. At the instance of the TPO, the assessee furnished certain comparable companies. Noting that the after sales service involved supply of materials as well as providing services, the TPO segregated the services rendered into two segments, viz. ‘Trading segment’ for supply of materials and ‘Services segment’ for services actually rendered, to determine the ALP of transaction, based on the comparables given by the assessee.The same was upheld by the DRP. The Tribunal considered the assessee’s submission that provision of after sales support services involved supply of materials as well as providing services i.e. composite services and thus TPO was wrong in determining ALP separately for products and services. Further, noting that this aspect, which went to the root of the issue, had not been considered by the TPO, it remanded the matter back to the AO/TPO to examine the assessee’s contention of aggregation of the transactions for determination of ALP.
Rosoboronservice India Ltd vs. DCIT [TS-810-ITAT-2018(Mum)-TP] ITA No.7418/Mum/2017 dated 01.08.2018

56. The assessee adopted RPM as the MAM for ALP determination of its transaction of purchase of water heaters(trading segment) and CPM for transaction of purchase of raw materials(manufacturing segment) from its AE. The TPO applied TNMM as against RPM applied by assessee as the functions performed by the assessee before reselling the products of its AE and costs for performing such functions were not available. Further, in the case of transaction of purchase of raw materials, TPO observed that theassessee had not shown how its gross profit was computed. The DRP set aside the TPO’s order and accepted RPM and CPM as MAM for its manufacturing and trading segment respectively observing that TNMM being applied resulted in abnormal gross profit margins in assessee’s trading segment (60.08%) and manufacturing segment (83.61%) as against gross margin stated in TP documentation (11.38% and 25.53%) and the adjustment made by the TPO was more than theinternational transaction entered into in the segments. The Tribunal held that the TPO’s reason for rejecting CPM for the manufacturing segment couldnotbe sustained on account of assessee having submitted cost of sales and other indirect costs before the TPO. However, the Tribunal also held that RPM ought to be adopted followingits ruling in the assessee’s own case for earlier year wherein it was held that RPM was the MAM for trading segment of assesseeasthe assessee sold the water heater imported from its AE in India without making any value addition. It set aside DRP’s order and remanded the determination of ALP on basis of TP study (i.e. methods applied by the assessee) to TPO/AO noting that DRP fell into error while accepting the price of international transactions was at ALP on the basis that the profit margins of the assessee would be abnormal if the TPO’s method was to be accepted and did not determine ALP in a manner mandated by the Act and Rules.
ACIT vs AO Smith India Water Products Pvt Ltd [TS-1175-ITAT-2018(Bang)-TP] IT(TP)A No.216/Bang/2016 dated 12.09.2018

57. The TPO segregated the transaction of payment of license fee and management fee made by assesseeand benchmarked them separately by adopting CUP as MAM. He determined the ALP of license fees and management fees to be nil and made a TP adjustment. The action of TPO was upheld by CIT(A). The Tribunal set aside CIT(A)’s order not accepting aggregation of payment of license fee and management fees made by assessee and it held that they were closely linked with the transaction relating to manufacture and export of drug formulations by assessee following the coordinate bench ruling in assessee’s own case for earlier year wherein it had relied on Sony Ericsson Mobile Communication India (P) Ltd (wherein it was held that that aggregation of transactions was permissible considering the legislative intent manifested by way of Rule 10A(d) read with Rule 10B of the Rules, and the position clearly emerged that in appropriate circumstances where closely linked transactions exist, the same should be treated as one composite transaction and a common transfer pricing analysis be performed for such transactions by adopting the MAM.) It remanded back the comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the MAM noting that determination of ALP at entity level had not been examined by either of the authorities below who merely concentrated on the issue of aggregation/segregation of transactions.
Adcock Ingram Ltd. vs Dy. CIT [2018] 97 taxmann.com 668 (Bangalore – Trib.) IT (T.P.) APPEAL NO. 2728 (BANG.) OF 2017 dated 14.09.2018

58. The TPO treated the services provided by assessee to be IT and ITES services (as against the assessee’s claim of rendering management consultancy services to its AE) and adopted TNMM as against RPM applied by the assessee. The DRP upheld TPO’s order observing choice of comparables in TP study report showed profile of such entities to be IT and ITES and in absence of clear depiction of functions performed as per the TP study report, the assessee’s contention that it was rendering management consultancy services could not be accepted. Before the Tribunal, the assessee also sought admission of additional evidence in form of segmental profits and contended that the adjustment should be restricted to only value of international transaction and accordingly the TPO had erred in taking entity level margin. The Tribunal admitted the additional evidence [relying on Bombay HC rulings in the case of Tara Jewels Export Pvt. Ltd. and Alstom Projects (I) Ltd. and Delhi HC ruling in case of Kaihin Peanalfa wherein it has been held that only international transactions with AE are to be considered in TPO’s proceedings and not the entire corresponding figures at entity level] and remanded the matter back for afresh adjudication. Further, it held that assessee’s assertions that it was providing tax regulatory services and consultancy services appeared to be prima facie correct. However, in view of the fact that the entire issue of correctness of TP adjustment had been remanded back to the AO/ TPO, the Tribunal remanded this issue also back to the AO/ TPO.
PriceWaterhouse Coopers. vs ACIT TS-1247-ITAT-[2018] ITA No.483/Kol/2017 dated 12.09.2018

59. The TPO applied TNMM method as against CPM method applied by the assessee who was engaged in the business of sale of packages for leisure travel where two or more components of travel such as flights, hotels, car rentals, transfer and ground handling services were bundled together for sale to customers and Air Charter business.The Tribunal rejected the TPO’s adoption of TNMM over CPM noting that Revenue had accepted CPM in earlier years and in the instant case, the business model of the assessee was the same vis-à-vis previous years hence CPM ought to be applied by applying the rules of consistency.
Greaves Travel India Pvt Ltd vs ACIT [TS-1145-ITAT-2018(DEL)-TP] ITA No.6722/Del/2015 dated 24.10.2018

60. The TPO was of the view that CPM was the MAM (as against TNMM applied by assessee) for determining the ALP of sale of manufactured products to AE in case of assessee engaged in business of manufacturing of glass mosaic.The Tribunal remitted the matter to TPO for determining ALP by applying TNMM following the coordinate bench decision in assessee’s own case wherein it was held that DRP erred in applying CPM on basis that there was imperfect data.It noted that if at all there was a residuary method or default method which could be applied under such conditions, it was TNMM. It observed that for TNMM, it was only broad similarity in the product and economic similarity in the conditions which was needed (as there was difference between the product that the assessee is manufacturing vis-a-vis the products being manufactured by the comparables adopted). Further, TNMM would also be more appropriate for use in certain situations where there were data limitations on gross margins (difference in treatment of costs as cost of goods sold or operating expense) as net profit margins are analyzed.
Gemstone Glass Pvt Ltd vs DCIT [TS-1221-ITAT-2018(Ahd)-TP] ITA (TP) No.3533 /Ahd/2015 dated 23.10.2018

61. The TPO had rejected use of foreign AE as a tested party and taken assessee as the tested party for benchmarking the transaction of supplying CD’s to its AE which used to be resold and distributed further by its AE’s.The Tribunal following the decision of coordinate bench in assessee’s own case for earlier year directed the assessee to submit financials of the foreign AE which it wanted to take as a tested party and also directed the TPO to verify whether the foreign AE could be considered as the least complex and for which comparables were easily available in public domain.
Moserbaer India Ltd vs ACIT [TS-1139-ITAT-2018(DEL)-TP] ITA No.6042/Del/2012 and 2395/Del/2014 dated 03.10.2018

62. The assessee was engaged in manufacture and sale of cars (Mercedes Benz) in the Indian market and wasalso importing cars in form of Completely built units (CBU) , importing raw materials and importing spares from its AEs. The assessee had adopted combined transaction approach and applied TNMM in order to benchmark its international transactions. However, the TPO did not accept the approach adopted by assessee using TNMM. The TPO benchmarked the international transaction related to import of CBUs by using RPM and compared the gross margin earned from transaction of import of spares with import of CBUs and thus, made an upward adjustment which was confirmed by CIT(A) noting that DRP in previous year had made a similar addition and no new facts had emerged. It was assessee’s contention before the Tribunal that a) aggregation approach had to be applied for manufacturing activities, import of spares and import of CBUs b) under RPM, gross margin earned hadbeen compared with another uncontrolled transaction of assessee. The Tribunal held that TPO erred in segregating the transaction as import of CBUs and spares were closely linked with the manufacturing activities noting that the assessee was only manufacturing C and E class brands in India and in order to widen its customer base was importing CBUs from AEs while the spares were being imported for the manufactured cars and CBUs in order to fulfill warranty commitments of passenger cars. Further, it also held that TPO erred in applying RPM method and comparing the margin earned by assessee on import of CBUs with import of spares observing that controlled transaction had to be comparedwith uncontrolled transactions as held incoordinate bench ruling in assessee’s own case. The ALP had to be determined without being influenced by AE. It remitted the issue of determination of ALP of transactions to TPO and directed them to look into the comparability aspect of margins of assessee with mean margin of comparables after aggregating the transactions and applying TNMM.
Mercedes-Benz India Pvt Ltd (formerly known as Daimler Chrysler India Pvt. Ltd.)vs ACIT [TS-1164-ITAT-2018(PUN)-TP] ITA No.1083/Pun/2013 dated 25.10.2018

63. The Tribunal directed the TPO to adopt Internal TNMM for determining the ALP of engineering design services to its AE following the coordinate bench ruling in assessee’s own case for earlier year (noting that there was no change in facts) wherein Internal TNMM based on man hour rates as the MAM for determining the ALP of specialized engineering services provided by the assessee to its AE. It accepted the assessee’s plea that hourly rates charged by it in providing specialized services to its AEs can be the basis for verifying its stand as to whether the services provided by the assessee to its AEs were at ALP. It rejected the Revenue’s contention that domestic segment (costs having transactions with AE) was itself tainted for its controlled transactions and could not be compared to export transactions (whose costs also had AE transactions). It further relied upon the coordinate bench decision of DCIT v/s. ManTrucks Pvt. Ltd. [ITA No.547/Pun/2014] wherein it was held that even if costs were identical for providing services to AE, Non-AE’s or domestic parties, the margins earned from domestic parties could be compared to benchmark ALP of international transaction.
Magna Steyr India Pvt Ltd vs ACIT[TS-1154-ITAT-2018(PUN)-TP] ITA No.468 /Pun/2016 dated 12.10.2018

64. The Tribunal dismissed Revenue’s appeal and held that internal TNMM was the MAM for assessee’s manufacturing segment following the coordinate bench in assessee’s own case for earlier year wherein it was observed that assessee had explained that it had bifurcated the manufacturing segment on product basis into AE (vane/pistons, pumps, power units, cylinders control valves etc. manufacturing of which required raw materials imported from AE) and non-AE segment (gear pumps and cylinders) which was fair and apt and emphasis of TNMM was on functional similarity and not product similarity.
Dy.CIT vs Eaton Power Fluid Pvt Ltd vs ACIT[TS-1217-ITAT-2018(PUN)-TP] ITA No.493 /Pun/2015 dated 15.10.2018

65. The Tribunal upheld DRP’s adoption of TNMM for benchmarking the international transactions (relating to purchase of raw materials, components and spare parts) of assessee (engaged in manufacture of earth moving and construction equipment) on basis that facts and circumstances remained unchanged vis-à-vis previous years wherein the same method was adopted by the assessee and accepted by the TPO.
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1196-ITAT-2018(DEL)-TP] (ITA No.930/Del/2013) dated 02.11.2018

66. The TPO had wrongly understood that assessee (engaged in manufacturing and trading of light commercial air conditioning system) had selected RPM (as opposed to “other method prescribed” by taking GP/Sales) and arbitrarily rejected the PLI i.e. GP/Sales adopted for the manufacturing segment and instead applied net profit margin under TNMM. The Tribunal noted that in subsequent year, the TPO in the manufacturing segment had accepted the same PLI i.e. G.P to Sales ratio thus, in the very first year when manufacturing activity started, selection of most appropriate method should not have been arbitrarily interfered with. It further noted assessee’s concession that if adjustments as permissible under TNMM (i.e. capacity utilization) were to be considered, there would not be much impact in the subject year, and hence the issue of selection of most appropriate method may be left open for adjudication in some other year. Thus, the Tribunal held that in view of the relief maintainable to the assessee even in the method selected by the TPO the issue of most appropriate method in terms of the concession of the assessee would become academic and left open for adjudication.
Carrier Midea India P. Ltd vs Dy.CIT [TS-1256-ITAT-2018(DEL)-TP] (ITA No.7675/Del/2017) dated 22.11.2018

67. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order accepting internal TNMM for benchmarking sale of polyester film products to AE’s to USA and UK by relying on coordinate bench decision in assessee’s own case for earlier year wherein it had restored the matter to apply TNMM as MAM for determining ALP (as both parties agreed to it) and carry out fresh comparability analysis. The Tribunal in earlier year upheld CIT(A)’s rejection of TPO’s application of CUP vis-à-vis prices charged to non-AEs in African countries, Middle East, Russia and other countries as it had failed to take into account the geographical, economical market differences where the A.E and non-A.E. agents were carrying out their business activities.
Dy.CIT vs Garware Polyester Ltd. [TS-1402-ITAT-2018(Mum)-TP] ITA No.6537/Mum/2016 & 5083/Mum/2015dated 27.12.2018

68. The Tribunal held that the TPO erred in segregating assessee’s transaction of trading with AE and commission income from AE (which were aggregated by the assessee) and benchmarking the said transactions separately by relying on the coordinate bench decision of the assessee’s own case. The TPO had rejected the assessee’s application of TNMM on entity level and adopted CUP for benchmarking the commission income. It noted that the Tribunal in assessee’s own case for earlier year had held that the TPO had discarded the economic analysis of assessee by segregating the two activities and erred in rejecting TNMM as the MAM for benchmarking international transaction. It was observed in the earlier year that there was no change in FAR analysis and business model of the assessee and it was identical to the previous years wherein TNMM was consistently applied and segregation solely on basis of income without reference to either GP or sales was the most unreliable and that the adoption of TNMM at entity level was safe and plausible.
Viavi Solutions India P Ltd (Formerly known as JDSU India P.Ltd.) [TS-884-ITAT-2018(DEL)-TP] ITA No.1483/Del/2016, ITA No.1478/Del/2016 and ITA No.231/Del/2017 dated 11.07.2018

69. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order accepting TNMM as MAM for exporter assessee and held that since the assessee was an exporter of goods the TPO had wrongly used Resale Method (RM), which was only to be applied to importers. Accordingly, it held that TNMM method was rightly used for exporters and therefore, the resultant concession granted to the assessee on this count was correct.
Pr CIT v Rahman Exports Pvt. Ltd – TS-23-HC-2018(ALL)-TP dated INCOME TAX APPEAL No. – 7 of 2017 dated 11.01.2018

70. The Tribunal upheld the application of TNMM as MAM for benchmarking the export of finished goods by the assessee to AE and deleted the TP-adjustment computed by the TPO adopting the CUP method by benchmarking the transactions with transactions with the Non-AEs. It held that the CUP method was inappropriate owing to i) difference in the volume of goods, and ii) geographical differences and noted that the Tribunal in the assessee’s own case for AY 2002-03 had rejected CUP Method for the identical issue wherein products were supplied to AEs and non-AEs in different countries.
Intervet India Private Limited vs. DCIT – TS-1087-ITAT-2017(PUN)-TP – ITA No.721/PUN/2014 dated 21.12.2017

71. The Tribunal dismissed Revenue’s appeals seeking the use of external controlled comparables in the same sector such as JP Morgan Chase and Bank of America under the Profit Split Method, over uncontrolled comparables under TNMM to benchmark assessee’s marketing of derivative products on behalf of AEs. It deleted the TP- addition which was based on the difference between assessee’s global TP policy prescribed remuneration @ 24.40% of initial net present value (INPV) of derivative transactions as against the 60% multiplier on the same offered by controlled comparables to their Indian branches. At the outset, the Tribunal noted the unavailability of information on the controlled transaction in the public domain, and held that the TPO had violated the principles of natural justice by not confronting the assessee with the comparables used against it which itself was sufficient basis to have the adjustment validly deleted. On the merits, the Tribunal held that it was inappropriate to apply a uniform multiplier effect on the value of sales credit/INPV as the INPV computation was dependent on unique discounting factors that will lead to different values for different banks. Further, following the decision of the Court in Johnson and Johnson ruling, it held that the TPO’s application of PSM was adhoc and not as per the rules, since the said method could not be applied for benchmarking marketing support service functions and was mainly adopted when transactions involved unique intangibles. Considering that the TPO did not adhere to the prescribed methods consciously and that the order of CIT(A) suffered from no legal or factual infirmity, it refused to restore the matter to the file of TPO.
Barclays Bank PLC vs. ADIT – TS-11-ITAT-2018(Mum)-TP – /I.T.A./178/Mum/2011 dated 12.01.2018

72. Where the assessee sought to apply internal TNMM to benchmark its international transactions, the Tribunal rejected Revenue’s contention that internal comparable could not be considered in view of miniscule turnover of the third party transactions and relying on the decision of the Delhi Tribunal in Lummus Technology Heat Transfer BV ([TS-48-ITAT-2014(DEL)-TP] it held that, in a transaction level comparison within same entity, mere difference in size of uncontrolled transactions would not not render the transaction incomparable. Noting that the assessee has separately submitted segmental accounts reflecting business with AEs, non-AEs and idle capacity, the Tribunal opined that there was no bar in adopting uncontrolled transaction for the purpose of internal TNMM. Vis-à-vis the capacity utilization adjustment, the Tribunal noted that the profit margins were arrived without factoring for idle capacity (70% under-utilization in this case), and held that profitability of the organization would be impacted when there was huge underutilization of the capacity. Accordingly, it held that there had to be an adjustment internally within the organization or an adjustment of idle capacity when compared with outside comparables. Considering that the assessee had not properly maintained allocation of overheads, it set aside the issue to the file of the TPO and directed the assessee to submit the segmental results based on the absorption of overhead on utilized capacity and idle capacity considering segments export to AE, export to non-AE, domestic sales to non-AE and idle capacity; Accordingly, the Tribunal remitted the TP issue back to TPO directing it to consider the revised segmental profit and loss reports and arrive at the ALP adjustment by considering non-AE transactions as one of the comparable in determining ALP.
Srini Pharmaceuticals Ltd vs. DCIT – TS-60-ITAT-2018(HYD)-TP – ITA No. 102/Hyd/2015 dated 19-01-2018

73. The Court admitted assessee’s appeal on the following question of law “Whether on the facts and circumstances of the case and in law, the Tribunal was justified in upholding the rejection of segmental Transactional Net Margin Method and adopting the comparable Uncontrolled Price method for determining any adjustment under Chapter X in respect of the purchase of raw materials and sale of finished goods made by the Appellant?”
Henkel Adhesives Technologies India Pvt Ltd vs. DCIT – TS-106-HC-2018(BOM)-TP – INCOME TAX APPEAL NO. 817 OF 2015 dated 20.02.2018

74. In a departmental appeal, The Tribunal set aside the order of the CIT(A) deleting the TP-adjustment as the impugned order was cryptic, non-speaking and stereotyped. The TPO had proposed adjustment on export of cables to AE by using internal TNMM based on margin earned on domestic sale which was deleted by the CIT(A) who observed that the export transaction could not be compared with domestic transaction in view of different economic conditions in different geographic markets. The Tribunal held that under TNMM, a preference was to be given to an internal comparable and that the CIT(A) ought to have carried out FAR analysis for the international transaction and internal comparable transaction (domestic sales) and then made adjustment for differences such as geographical location, etc. Accordingly, it remanded the matter to the file of the CIT(A) to re-adjudicate the issue.
DCIT V Lapp India P. Ltd – TS-129-ITAT-2018(Bang)-TP – LT(TP).A No.114/Bang/2014 dated 17.01.2018
DCIT vs. Lapp India P Ltd – TS-128-ITAT-2018(Bang)-TP – I.T(TP) .. ANos.1017 & 1018/Bang/2014

75. The Court dismissed Revenue’s appeal and held that the Tribunal was justified in holding TNMM as MAM for benchmarking exports to AEs. It noted that the TPO made adjustment on approx. 5% of total exports by applying CUP-method on the basis that there were similarities between goods sold to AE and third parties but the Tribunal, considering the customization of finished goods and the geographical, volume, timing, risk and functional differences, came to a conclusion that CUP method could not be MAM and upheld the assessee’s stand that TNMM was MAM. It dismissed Revenue’s contention that Tribunal had adopted TNMM as MAM without considering FAR-analysis as ’unjustified’ noting that Tribunal had done the necessary FAR analysis and therefore opined that the view taken by the Tribunal on the facts before it, was a possible view on the application of appropriate tests.
Amphenol Interconnect India P. Ltd – TS-205-HC-2018(BOM)-TP] INCOME TAX APPEAL NO. 1131 OF 2015 dated 7th MARCH, 2018

76. The Court admitted assessee’s appeal on the following substantial question of law i.e. whether the Tribunal was justified in rejecting the principle of aggregation of closely linked transactions using the Transactional Net Margin Method.
JCB India Ltd vs DCIT Circle 13(1)- TS-301-HC-2018(DEL)-TP-ITA No 525/2017 dated 18.04.2018

77. The Tribunal ruled on selection of Internal TNMM Most Appropriate Method (MAM) and use of internal comparables for benchmarking export and import transactions of assessee engaged in manufacture of heavy commercial vehicles. In respect of assessee’s export of trucks to developing countries (like South Africa, Ethiopia and Indonesia) through its German AE, it was observed that billings were raised on German AE, but trucks were not routed through Germany and were directly sent to developing countries due to stricter emission norms in Germany. The Tribunal discarding TPO/DRP’s approach of rejecting internal comparables (sale of similar products in India) opined that geographical differences would not be relevant where the products were exported to markets similar to Indian markets, where emission norms were less stringent as compared to Germany.
DCIT Circle-9 vs Man Trucks India Pvt Ltd- TS-228-ITAT-2018(PUN)-TP- ITA No 547/PUN/2014 dated 03.04.2018

78. The Tribunal, in the department’s appeal, upheld the DRP’s aggregation of assessee’s distribution & commission segments and application of entity level TNMM for benchmarking analysis following approach adopted by DRP in assessee’s own case in preceding AYs and noted that though, the TPO had segregated the financials into 2 segments viz. distribution and commission and applied TNMM and CUP-method to benchmark distribution and commission segments respectively, the Tribunal upheld assessee’s reliance on DRP orders for previous years after noting similarity of the international transactions to be benchmarked, assessee’s business model over the past few years and absence of any compelling reasons submitted by Revenue for discarding earlier years’ approach (of aggregating the two aforesaid two transactions). It rejected TPO’s view that higher appellate authorities had not decided the issue at all and therefore there was no question of accepting assessee’s stand to apply aggregation approach accepted in earlier years
DCIT Circle 13(1) vs JDSU Indian Pvt Ltd- TS-287-ITAT-2018(DEL)-TP- ITA No 1120/Del/2015 dated 02.04.2018

79. The Court rejected admission of question of law raised by assessee involving rejection of CUP method by Revenue as the most appropriate method (MAM) for the transaction of sale of railway wagons to AE based on the sale price charged by the AE from the ultimate third-party buyer and noted that Revenue rejected CUP method having regard to the fact that it unduly restricted the choices of the Revenue and TNMM was considered to be a more appropriate method where greater choice was available. The Court thus concluded that appropriateness of the MAM per se does not give rise to a question of law since it involves analysis of facts done first by the Revenue authorities and settled by the Tribunal and held that unless the facts show glaring distortion in the adoption of one or the other method, a question of law cannot be said to arise.
The Court thereafter admitted 3 legal questions raised by the assessee in respect of Tribunal’s order on the issues of cherry-picking of comparables, deletion of comparables selected by the assessee, and intra-group services related to management support. The same are as under:
• Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the action of the TPO in cherry-picking comparables and considering Titagarh and Texmaco as comparable companies for undertaking benchmarking analysis of international transaction of main line segment applying TNMM, not appreciating that the said companies did not satisfy the test of comparability as provided in Rule 10B (2) of the Rules?
• Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the action of the TPO in deleting the comparables proposed by the appellant, viz., Braithwaite and Bharat Wagon, (without prejudice and in response to the additional comparables selected by the TPO),completely ignoring that the same are identical in functional profile to the comparables introduced by the TPO for undertaking benchmarking analysis of international transaction of main line (MLN) segment applying TNMM, not appreciating that the said companies satisfy the test of comparability as provided in Rule 10B(2) of the Rules?
• Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the addition made by the TPO on account of intra-group services related to management support by President and his team, human resources, Six Sigma and operation, and quality and other services, received by the appellant from its associated enterprises, on the erroneous reasoning that such services, rendered by the AEs are in the nature of shareholders activities and of no economic and commercial value to the business of the appellant?
Bombardier Transportation India Pvt Ltd vs DCIT- TS-244-HC-2018(Del)-TP-ITA No 223/2018 dated 09.04.2018

80. The Court dismissed Revenue’s appeal and upheld Tribunal’s application of TNMM as Most Appropriate Method (MAM) for benchmarking assessee’s export & import transactions and noted that Tribunal rightly followed co-ordinate bench ruling in assessee’s own case for previous AYs (which was subsequently confirmed by HC) wherein for the same transactions, TNMM was upheld as MAM over TPO’s CUP-method. Thus, in the absence of any distinguishing facts in subject AY, the court held that the said ratio would equally apply to the facts of the present appeal and accordingly dismissed revenue’s appeal
PCIT- 5 Pune vs Amphenol Interconnect India P Ltd- TS-275-HC-2018(Bom)-TP- ITA No. 1388 of 2015 dated 18.04.2018

81. The Tribunal relying on its order of earlier years allowed assessee’s selection of foreign AE as a tested party and noted that TNMM was rightfully followed as the most appropriate method for benchmarking transactions of payment of fees for advisory and other services to its AE. In the earlier year, the Tribunal had accepted the assessee’s stand of selecting the foreign AE as the tested party, noting that (i) the AE was rendering service to various other entities also (ii) the AE was following a scientific method of allocating cost and charging the same with markup to all the entities at same level and (iii) the relevant details to compute the cost allocation on account of services had been certified and filed before the AO. The Tribunal sent back the matter to AO for limited purpose of verification of assessee’s claim that margin was within 5% range of average comparables margin.
Emerson Climate Technologies (India) Pvt Ltd vs DCIT Circle 1(2)- TS-362-ITAT-2018(PUN)-TP- ITA no’s 359 & 2847/PUN/2016 dated 25.04.2018

82. Where the assessee was engaged in distribution of books, software, electronic products and reprinting of books, publications, noting that the reprinting of books required deployment of assets, employees and involved risk in publishing and selling, the Tribunal held that TPO was correct in adopting TNMM as opposed to RPM as RPM could not be adopted where there was value addition and application of technology. Therefore, it upheld the order of the TPO.
Cengage Learning India Pvt. Ltd vs ITO – TS-736-ITAT-2018(DEL)-TP – ITA No. 5926/DEL/2010 dated 11.05.2018

83. The Tribunal restored the benchmarking of assessee manufacturer’s international transactions for AY 2010-11, noting that the TPO rejected assessee’s entity level TNMM and adopted internal TNMM for benchmarking and proposed a TP-adjustment and that the co-ordinate bench in assessee’s own case in subsequent AY 2011-12 on similar facts had restored matter back to AO for fresh examination as the DRP had failed to adjudicate the issue.
ASB International Pvt. Ltd vs. ACIT – TS-422-ITAT-2018(Mum)-TP – ITA No.1068/Mum/2015 dated 29/05/2018

84. Relying on the co-ordinate bench ruling in assessee’s own case for the assessment year 2011-12 and 2012-13, the Tribunal restored the matter to the file of the AO/TPO to benchmark the assessee’s provision of software development services by adopting internal TNMM (adopted by the assessee) as internal TNMM was to be preferred over external TNMM adopted by the TPO.
Brillio Technologies Pvt. Ltd. vs. DCIT – TS-427-ITAT-2018(Bang)-TP – IT(TP)A No.1897/Bang/2017 dated 31/05/2018

85. The Tribunal upheld assessee’s [manufacturer of bulk drugs, chemicals and intermediates] application of TNMM over TPO’s adoption of CUP-method as the Most appropriate method for benchmarking international transactions of product sales and receipts for contract research services. It noted that while TPO had stated that CUP-method was better than TNMM, he did not mention how TNMM was not applicable on the given set of facts. Further, it held that the DR could not improve the case of the TPO at this level. It also observed that the co-ordinate bench in assessee’s own case for AY 2002-03 had upheld assessee’s adoption of TNMM as MAM and therefore held that there was no justification for deviating from order of the ITAT passed in similar facts of the same assessee.
DCIT vs. Dishman Pharmaceuticals & Chemicals Ltd – TS-440-ITAT-2018(Ahd)-TP – ITA No 692/Ahd/2011 dated 23 /05/2018

86. In a case where the assessee contested the exclusion of the comparables selected by the assessee itself and no comparables were introduced by the Revenue while determining the ALP under the TNMM method, the Tribunal held that the onus was more on assessee to justify the exclusion / inclusion of the comparables. It held that under TNMM method, only a broad functional comparability is required and the statute, itself, has provided for a tolerance range of +/-5% to weed out the dissimilarities since no two entities could exactly be the identical / similar in all respect. It took note of the judicial pronouncements relied on by the assessee to contend that the comparables initially selected by the assessee could be excluded subsequently, finding them to be functionally or otherwise uncomparable in the circumstances. However, it held that there could not be any cherry picking to suit the requirement of the assessee. The Tribunal thus held that keeping in view the overall factual matrix of the case, the matter was to be remitted back to the file of the AO /TPO for fresh determination of ALP of the transactions.
Roche Diagnostics India Pvt Ltd vs ACIT Range 8(3)-TS-803-ITAT-2018(Mum)-TP- ITA No 7566/Mum/2012 dated 04.05.2018

87. The Tribunal rejected TPO’s approach for entity wide benchmarking of the assessee’s international transactions vis-à-vis International express and International freight forwarding segments without considering the segmental accounts, noting that (i) the TPO had not considered segment accounts since he was of the view that the domestic business was suffering losses on account of incorrect allocation of expenses whereas the domestic courier business was suffering losses on account of stiff competition being faced (ii) TPO’s observation of volume being the basis of allocation of expenses was flawed since the assessee had actually allocated the expenses on the basis of revenue, weight and volume. (iii) TPO’s observation that domestic business was an extension of international business was factually incorrect since the assessee’s domestic segment was 10 times the size of the international express segment and was an independent business and also the FAR profile was entirely different.
Aramex India Pvt. Ltd vs. DCIT [TS-351-ITAT-2018(Mum)-TP] ITA No.6749/Mum/2017 dated 18.05.2018

88. The Tribunal upheld the application of TNMM as MAM for benchmarking the sale of products by the assessee to AE and deleted the TP adjustment computed by the TPO adopting the CUP method by benchmarking the transactions with the Non-AEs. It relied on the findings of coordinate bench in the earlier year in assessee’s own case wherein CUP method was rejected in light of the geographical factors and difference in the quantity of the products sold.
Dishman Pharmaceuticals & Chemicals Ltd vs DCIT [TS-958-ITAT-2018(Ahd)-TP] ITA No.955/Ahd/2012 dated 20.06.2018

89. The assessee had benchmarked sale of goods to its AE’s in Bangladesh, Dubai and the United Kingdom (AE) using TNMM which was rejected by TPO who applied CUP. The CIT(A) accepted TNMM adopted by the assessee. The Tribunal dismissed Revenue’s appeal and upheld the CIT(A)’s application of the TNMM as the MAM as against the CUP applied by the TPO. It observed that the TPO/AO had not made any adjustments owing to the differences in market and economic conditions of countries in which products were sold to independent third parties. Further, TPO had failed to take into account the profile of consumers, preference amongst consumers, purchasing power, etc. Thus, It opined that selective application of CUP Method by TPO was ad hoc, and without any cogent basis, hence the entire approach followed by the TPO in rejecting TNMM was unjustified.
DCIT/ACIT vs. Emami Limited [TS-468-ITAT-2018(Kol)-TP] ITA Nos. 1065 and 1066/Kol/2017 dated 15.06.2018

90. The Tribunal directed the TPO to adopt Internal TNMM based on man hour rates as the MAM for determining the ALP of specialized engineering services provided by the assessee to its AE. The Tribunal accepted the assessee’s plea that hourly rates charged by it in providing specialized services to its AEs can be the basis for verifying its stand as to whether the services provided by the assessee to its AEs were at ALP. It further relied upon the coordinate bench decision of DCIT v/s. ManTrucks Pvt. Ltd. [ITA No.547/Pun/2014] wherein it was held that even if costs were identical for providing services to AE, Non-AE’s or domestic parties, the margins earned from domestic parties could be compared to benchmark ALP of international transaction and accordingly, it rejected the Revenue’s contention that since the cost incurred for transaction with AEs as well as domestic transactions were same, the domestic transactions were controlled and thus tainted.
Magna Steyr India Pvt Ltd [TS-625-ITAT-2018(PUN)-TP] ITA No.314/Pun/2014 dated 05.06.2018

91. The Tribunal relying upon the ITAT order in assessee’s own case for the prior year upheld the approach of assessee aggregaring all transactions in the manufacturing segment and adoption of TNMM to benchmark the transaction as compared to CPM applied by the TPO as the MAM. Further, in line with the earlier year, the Tribunal also directed the AO to verify assessee’s claim by applying single year data and accordingly, compute the TP-adjustment, if any.
Sandvik Asia Pvt. Ltd (formerly known as Sandvik Asia Ltd) vs. DCIT [TS 444 ITAT 2018] ITA No.1459/Pun/2010 dated 06.06.2018

92. The Tribunal accepted the stand of the assessee of aggregating installation and commissioning/ engineering services with the manufacturing activity (while determining ALP by applying TNMM) by relying on the co-ordinate bench ruling in assessee’s own case in AY 2007-08 wherein it was held that activity of installation and commissioning/engineering services are closely linked with manufacturing and ought to be combined and construed as single transaction for determining the ALP of transaction.
Terex India Pvt. Ltd (as successor of Demag Cranes and Components (India) Pvt. Ltd) vs. DCIT [TS-477-ITAT-2018(PUN)-TP] ITA No.583/Pun/2016 dated 06.06.2018

93. The Tribunal upheld the CIT(A)’s adoption of TNMM as MAM over RPM applied by the TPO.since the assessee had incurred huge selling, marketing and advertising and promotion in respect of the import of goods for the subject year. The Tribunal relied upon the co-ordinate bench ruling in assessee’s own case for earlier year wherein the reason assigned by the TPO for rejecting RPM was accepted i.e. that the business model of the assessee could not be compared with comparable companies on account of the selling, marketing and advertising and promotion expenses incurred and hence concluded that TNMM would be the MAM.
Abbott Medical Optics Pvt. Ltd. v DCIT (formerly Advanced Medical Optics India Pvt. Ltd) [TS-517-ITAT-2018(Bang)-TP] IT(TP) A No.08/Bang/2014 dated 22.06.2018
Profit Split Method

94. The assessee had sold the IP rights of Jungle Book Animation series to its AE based on average of values adopted by two independent valuers. The TPO was of the view that even though the legal ownership had been transferred to the AE, but the economic ownership still was with the assessee. The TPO adopted PSM as the instant case was of two AEs contributing their respective intangibles to develop a new product or process and earn income therefrom. He assigned a profit share of 80% on IP contribution to assessee after concluding that assessee had as many as 8 directors with a trained and skilled combined work force of 3000+, as compared to its AE in Ireland which had no other set up other than the presence of 2 directors. He concluded that it was only due to the identity and standing of assessee in Global arena, the persons in Ireland got hired. The Tribunal following the order of coordinate bench in assessee’s own case for earlier year deleted the TP adjustment arising on account of sale of Intellectual property (Jungle Book) under profit split method by TPO. Noting that the Tribunal in earlier year had observed that the assessee (engaged in the business of providing animation production services for Television and Film Production Companies) had sold “IP” (Jungle Book) to its “AE” at development stage and hence any revenue generated by the AE at a later stage could not be attributed to the assessee since there was no international transaction after outright sale of IP to its AE.
DQ Entertainment (International) Ltd vs. ACIT[TS-879-ITAT-2018(HYD)-TP] ITA No.1890/Hyd/2017 dated 17.08.2018

95. The TPO had rejected the assessee’s TP study on the ground that there was no separate FAR analysis of the transactions performed with the AEs and had recharacterized the activity/functions performed by the assessee company as a KPO instead of “IT services” classified by the assessee company. The assessee had argued that principle of consistency would be applicable and even for the previous years i.e. from AYs 2009-10 to 2011-12, the assessee had been accepted as an IT service provider. The Tribunal opined that the TPO was justified in rejecting the TP analysis undertaken by the assessee since it was not made based on each of the functions performed with the AEs. The Tribunal thus remanded the entire TP issue to the file of AO/TPO with a direction to afford a reasonable opportunity to the assessee to furnish a TP study report covering the functions performed, risks analysed and assets employed in respect of the international transactions with AEs.
The Tribunal however also directed the AO/TPO to aggregate the functions having a direct nexus with AdWords distribution programme having regard to the TP study and to benchmark such aggregated transactions by adopting profit split method, relying on the decisions of Orange Business Services and Global one India wherein it was held that Profit split method was the most appropriate method for cases involving multiple interrelated international transactions which could not be evaluated separately.
Google India Private Limited v. Jt.DIT(IT) & others [TS-335-ITAT-2018(Bang)-TP] – IT(IT)A No.69 & 1190/Bang/2014, 374/Bang/2013, 387, 949 & 950/Bang/2017, 68/Bang/2015 & 559/Bang/2016 dated 11.05.2018
Any other Method

96. Where the assessee had adopted TNMM for benchmarking its international transactions in all previous years but sought to use residual method which was effective for subject AYs and resorted to TNMM only for transactions not covered by the other method, which was rejected by the AO who applied TNMM on all transactions, the Court held that the Tribunal was not justified in remanding the issue back to TPO stating that it did not find any reasons for change in assessee’s approach (from TNMM to the Other Method). It observed that the TP-report clearly claimed that ‘other method’ was MAM and also outlined the reason for shifting from TNMM to the ‘Other method’, which had neither been considered by the Tribunal nor DRP. Noting that the ‘other method’ was introduced for the first time during the impugned AY, the Court held that the Tribunal ought to have proceeded with the matter afresh instead of having remanded the matter totally to the TPO. Accordingly, it remitted the matter to the file of the Tribunal.
Springer (India) Private Limited vs. ACIT – TS-1062-HC-2017(DEL)-TP – ITA 1148/2017dated 15.12.2017
General

97. The Tribunal, relying upon ITAT order in assessee’s own case for the prior AY remitted the entire TP-issue in case of assessee engaged in import/export and trading of various agricultural/food products. It noted that the TP-adjustments were made in respect of 3 types of transactions viz. a) merchanting transactions b) purchase of fertilizers and c)sale of rice which were benchmarked by the assessee under TNMM for the merchanting transactions and CUP for the others. The TPO rejected the methods selected by the assessee and adopted RPM for the merchanting activities, TNMM for the purchase of fertilisers and TNMM for the sale of rice [which was charged to RPM by the CIT(A)]. Since the issue had not been dealt with properly by the lower authorities so as to reach a logical and reasonable conclusion it directed the AO/TPO to adjudicate the issue de novo.
Cargill India P Ltd v DCIT – TS-92-ITAT-2018(DEL)-TP – ITA No. 2988/Del/2011 dated 09.01.2018

c. Comparability– Inter and Intra Industry
ITES Sector / Software Development Services

98. The Tribunal held that the assessee engaged in provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd. as it was engaged in providing diversified services like software development and IT Enabled Services and that its services and solutions was focused on healthcare receivables cycle and no separate segmental information was available. Further, the Revenue could not point out any change in the functional profile of the company vis-à-vis preceding year where the company was excluded in assessee’s own case
• Eclerx Services Ltd. as the company was a KPO providing data analytics and data process solutions which could not be compared to the ITES segment of the assessee. Further, the Revenue could not point out any change in the functional profile of the company vis-à-vis preceding year where the company was excluded in assessee’s own case.
• Genesys International Corporation Ltd as the company operated as a high end KPO service provider. Further, the Revenue could not point out any change in the functional profile of the company vis-à-vis preceding year where the company was excluded in assessee’s own case
• TCS E serve Ltd. as it was engaged in diversified services including ITeS and certain other technical services involving software testing, verification and validation of software at the time of implementation, data center management activities etc. and no separate segmental information pertaining to ITes and technical services was available. Another aspect was the brand value for which it relied on the coordinate bench ruling in the case of BC Management Services.
• TCS E-Serve International Limited it was engaged in diversified services including ITeS and technical services like software testing, verification, data processing services and validation of software at the time of implementation and data center management activities and no separate segmental information pertaining to ITes and technical services was available. [ The Tribunal followed the coordinate bench decision of Vertex Customer Services India Pvt.Ltd.]
OSC Services Pvt. Ltd Vs. DCIT [TS-1005-ITAT-2018(DEL)-TP] ITA No.1846/Del/2015 dated 14.08.2018

99. The Tribunal held that assessee engaged in providing IT Enabled services to its AE could not be compared to:
• E-Clerx Services Ltd as it was a high end KPO Company which provided data analytics, business knowledge process outsourcing company, re-engineering and automation services and the coordinate bench in assessee’s own case had held the company to be a non-comparable with assessee following Delhi HC ruling in Rampgreen Solutions P Ltd.
• Vishal Information Technologies Ltd. as it had a different business model all together i.e. outsourcing model as against the assessee which carried out its work through its own resources as it reflected huge difference in employee cost ratio to turnover. [ The Tribunal relied on Delhi HC ruling in Rampgreen Solutions P Ltd.
Further,
• The Tribunal included ICRA Online Ltd (even though categorized as KPO) as it was functionally similar to assessee in the field of financial and economic analysis. Noting that the Tribunal in the earlier year had held assessee’s back office, call centre operations to be ITES, it observed that assessee’s functions of preparing of financial reports from a raw data and preparation of balance sheet and profit and loss account and data analytics were high end ITES. It also noted that there is actually a thin line of demarcation between BPO and KPO. Further, it also observed that the assessee had included the comparable in TP study report and had not disputed it before the AO.
• It also included Allsec Technologies Ltd. noting that the main contention of TPO for excluding the company was diminishing revenue for last three years which would not hold good as operating revenue for AY 2008-09 had increased from previous year. Further, it rejected Revenue’s contention that the comparable did not satisfy export filter of 75% of revenue applied by the TPO noting that the export turnover to total turnover of the comparable was 74.45% (difference was only 0.5%) It observed that there was no rule or mechanism for putting specific ceiling of limit in a particular filter.
• It included R system International Ltd. as data for quarterly results was available and directed TPO to consider quarterly results to work out profit margin. thus, ground of different financial year could not be a reason for exclusion.
• It included CG VAK Software and Export Ltd. following the ratio laid down in Delhi HC ruling in Chryscapital Investment Advisors India (P.) Ltd. (wherein it was held that if company is functionally comparable, it could not be rejected on basis the turnover.) noting that low turnover could not be ground for exclusion.
• It restored the comparability of Cepha Imaging Ltd. to examine aspect of export turnover noting that TPO had rejected it for not meeting export turnover however from the financials, its entire turnover was from export.
• It remitted back the comparability of Fortune Infotech Ltd. and Microland Ltd. noting that assessee had taken the ground before DRP which was not discussed by it.
American Express (India) (P.) Ltd. vs ACIT [2018] 97 taxmann.com 180 (Delhi – Trib.) IT APPEAL NOS. 1973 & 2577 (DELHI) OF 2014 dated 03.08.2018

100. The Tribunal held that the assessee engaged in provision of ITeS services to its AE could not be compared to:
• Infosys BPO Ltd. as it had a high brand value and had undergone an extraordinary event during the year impacting profitability etc.
Further, it remanded the issue of comparability of the following comparables:
• Universal Print Systems Ltd by relying on the decision of CGI Information Systems wherein comparability of this company was remanded for analysis at segmental level.
• BNR Udyog Ltd. noting that benchmarking of BNR was done taking medical transcription segment and issue of RPT on entity level exceeding 25% was not raised before AO/DRP. It directed the AO/TPO to verify how much RPT pertains to the medical transcription segment by relying on the decision of Indegene Pvt.Ltd. wherein comparability had been remanded back on similar facts.
• TCS E-serve Ltd. as the assessee had not brought out as to which of the services out of KPO services would come under technical services in case of TCS and further, the TPO had held that all services rendered by assessee were BPO services without any proper analysis.
• Excel Infoways Ltd. for examination and verification of the assessee’s contentions on the issue of abnormality of profits and of failing of the employees cost filter of 25% at segmental level.
Further,it remitted the comparability of Accentia Technologies Ltd. and Jindal Intellicom Ltd. sought to be included by the assessee on the ground that they had been selected by the TPO and assessee however the DRP had suo moto rejected the comparable inspite of no objections being raised by the assessee.
Mobily Infotech India Pvt. Ltd. vs. DCIT TS-1059-ITAT-2018(Bang)-TP] IT(TP)A No.2055/Bang/2016 dated 08.08.2018

101. The Tribunal remanded the comparability of the comparables in case of assessee engaged in ITES to the TPO for fresh adjudication after taking into account the functional profile of the assessee, comparable concern and taking into account the decision of the Tribunal in the case of sister concern i.e. Evalueserve SEZ (Gurgoan) P. Ltd. It observedthat for AY 2010-11, the assessee had not argued comparables but only submitted chart according to the decision given by the Tribunal in case of the sister concern and also failed to demonstrate the functional profiles of the assessee and the sister concerns are similar.
Evalueserve.Com Pvt. Ltd vs. ACIT [TS-817-ITAT-2018(DEL)-TP] ITA Nos.6310 and 1466/Del/2015 dated 03.08.2018

102. The Tribunal accepted assessee’s plea for exclusion of Bodhtree Consulting Ltd and Kals Information Systems Ltd as comparables for its software development services segmentby following the coordinate bench decision of JohnDeere India wherein it was held that the said concerns were not functionally comparable since they were also engaged in the sale of software products apart from software services for which separate segmental information was not available. Further, Bodhtree Consulting Ltd. also had abnormal fluctuating profit margins which was another reason for exclusion.
Nihilent Limited, (Formerly Nihilent Technologies Limited) vs ACIT [TS-1001-ITAT-2018(PUN)-TP] ITA No.304/Pun/2014 dated 31.08.2018

103. The TPO had included/excluded certain comparables in case of assessee’s software development services and accordingly, made a TP adjustment. The assessee and Revenue had come up in appeal against the CIT(A)’s order which gave certain directions. The Tribunal remitted the benchmarking of software development services to the file of TPO(to select comparables and determine the ALP afresh) in light of the audited segmental accounts of the company submitted as additional evidenceby assesseewhich demonstratedthatthe company within the overall segment of software development had two divisionssoftware development services and software product. The Revenue did not object to the same. Further,it directed that the assessee had liberty to file any fresh evidence/material before the TPO/AO in such fresh proceedings, if required.
Infrasoft Technologies Limited vs DCIT [TS-1013-ITAT-2018(DEL)-TP] ITA No.1987 and 2236/Del/2014 dated 29.08.2018

104. The Tribunal following the decision of coordinate bench in assessee’s own case upheld by the Court restored the ALP determination for benchmarking of assessee’s software design and development services and set aside the action of TPO rejecting the internal TNMM adopted by the assessee. The Court had upheld the findings of the Tribunal wherein observing that the assessee was providing services to AE as well as Non-AE, it was held that the assessee’s transactions with Non-AE can be used for benchmarking the AEtransactions. The issue had been restored back by the Tribunal who directed the TPO for making an internal comparison of the net margin earned by assessee from its international transactions with AE and profit earned by the assessee from foreign transaction with unrelated parties.
BIRLASOFT (INDIA) LTD vs ACIT [TS-811-ITAT-2018(DEL)-TP] ITA Nos.1028 and 7180/Del/2017 dated

105. The Tribunal remanded the comparability of the following comparables in case of an assessee engaged in the provision of software development services to its AE:
• Spry Resources (India) Pvt. Ltd to verify if it passed the filter of employee’s cost to salesof 50% as bench marked by TPO.
• Lucid Software Limited to verify if it passed the filter of employee’s cost to salesof 50% as bench marked by TPO.
• PreludeSys (India) Ltd. to verify as to whether the said company failed the RPT filter adopted by TPO.
• ASM Technologies Ltd. to verify as to whether the said comparable failed the RPT filter adopted by the TPO.
• E-InfoChips Ltd. to verify as to whether the said company failed the RPT filter as well as employee’s cost filter adopted by the TPO.Also, it had undergone amalgamation which was not addressed by TPO/DRP.
Further, the Tribunal accepted theassessee’s plea for exclusion of Infosys Consulting (India) Ltd. as the turnover of the said company vis-à-vis the assessee was disproportionate and the said company failed the employee’s cost filter adopted by the TPO.
Orga Systems India Pvt. Ltd. vs DCIT [TS-924-ITAT-2018(KOL)-TP] ITA No.2152 /Kol/2016 dated 21.08.2018

106. The Tribunal held that assessee engaged in providing Software development services to its AE could not be compared to:
• Genesys International Corpn Ltd. as it rendered mapping and geospatial services and there was no basis for TPO to conclude that company was into software development services
• Infosys Ltd. as it was a giant risk-taking company and engaged in development and sale of software products and also owned intangible assets [ It relied on coordinate bench ruling of CGI Information Systems and Management Consultants Pvt Ltd.]
• Larsen and Toubro Infotech Ltd. as it was a software product company and segmental information on Software development services was not available. [It relied on coordinate bench ruling in CGI Information Systems and Management Consultants Pvt Ltd.]
• Persistent Systems Ltd. as it was a software product company and segmental information on Software development services was not available. [ It relied on coordinate bench ruling in CGI Information Systems and Management Consultants Pvt Ltd.]
MICROSEMI STORAGE SOLUTIONS INDIA PVT. LTD. vs ACIT [2018] 53 CCH 0496 (Mum- Trib.) IT (TP)A No.2103/Bang/2016 dated 24.08.2018

107. The Court upheld the Tribunal’s order wherein it was held that on the basis of examination of agreements entered into between the assessee and McKinsey USA, the assessee was providing high end services in terms of research and intelligence segment where assessee’s services included knowledge management systems and infrastructure issues which would encompass infrastructure support, application support, application operations group and survey development centre which were knowledge based and hence the assessee ought to be categorized as a KPO. Relying on the ratio laid down by the HC ruling in case of Rampgreen Solutions India Pvt Ltd., the Courtobserved that since the services rendered by the assessee were specialized and required specific skill based analysis and research that was beyond the rudimentary nature of services rendered by a BPO, the services provided by the assessee were more akin to KPO.
McKinsey Knowledge Centre India Pvt. Ltd vs Pr.CIT [TS-812-HC-2018(DEL)-TP] ITA 461/2017 dated 09.08.2018

108. The Court upheld exclusion of i) Mercury Outsourcing Management byTribunal applying the turnover filter and rejected the assessee’s reliance on case laws observing that analysis of the comparables may be in a different context and the same need not adopted in all cases and the inclusion/exclusion of comparables is a decision to be taken by the Tribunal which is a final fact finding authority ii) Maple E-Solutions on the ground that finding of the Tribunal that alleged fraud by the director in the earlier year does not make the financial statements non-reliable was not perverse by relying on its decision in Softbrands iii) Genesys International Corporation as it failed RPT filter of 25% and the finding of the Tribunal that when the receipt from the Related Party are falling under the definition of international transactions then the same will be treated as part of the RPT was not perverse.
Acusis Software India Pvt Ltd vs ITO [TS-973-HC-2018(KAR)-TP] ITA No.223/2017 dated 14.08.2018

109. The Tribunal held that the assessee engaged in rendering data processing and data entry services to its AE could not be compared to:
• e4e Healthcare as it provided high end services to its clients in the field of healthcare business and was also also engaged in receivables cycle management and further developing software for the healthcare industry which was functionally dissimilar to the assessee.
• Fortune Infotec as it was engaged in rendering BPO and KPO services and also providing services like document management, insurance claim processing, cheque processing and taxation which was functionally dissimilar to the assessee. Furtherit relied on the coordinate bench decision of Equant Solutions India (P) Ltd wherein the said company was held to be not comparable with a company providing ITES services and having no intangibles of its own on account of developing and owning unique web based software since it was providing niche services
• I-Gate Global as it was providing customized global solutions and shared corporate services and was also engaged in CIS & BPO services for the insurance, financial services, telecom, life sciences and offshoring services of the entire benefits administration lifecycle which made it functionally dissimilar to the asssessee. Further, the said comparable was excluded by following the coordinate bench decisions of Ameriprise India (P) Ltd vs DCIT and Techbooks International (P) Ltd vs DCIT on ground of extraordinary event of amalgamation for AY 2010-11.
• Jindal Intellicom Ltd as the financials covered a period of 15 months as against 12 months of the assessee and the Revenue could not point out that financials for the 12 months period were available in case of the company
• Omega Heathcare as the company was engaged in services like medical coding, medical billing, providing facilities, rehabilitation centres and acute care facilities and was functionally dissimilar to the assessee.
• TCS E-Serve International Limited as it provided ITes or BPO services to the banking and financial industrial services industry & Travel, Tourism and Hospitality services in different geographic segments unlike the assessee who was only providing data processing and data entry services. Further, relied on the coordinate bench decision of Bechtel India where the said company was excluded on account of payment being made for use of Tata brand which had increased its operating profit.
• TCS E-Serve Ltd as the said company was making payments for use of Tata brand which had increased its operating profit by relying on the coordinate bench decision of Bechtel India
• Accentia Technologies Ltd as it was functionally dissimilar by following the coordinate bench decision of the assessee in its own case for earlier year having regard to the principle of consistency since the functional profile of the assessee and the company remaining unchanged
• Cosmic Global Ltd. as it was functionally dissimilar by following the coordinate bench decision of the assessee in its own case for earlier year having regard to the principle of consistency since the functional profile of the assessee and the company remaining unchanged
• Infosys BPO Limited as it was functionally dissimilar by following the coordinate bench decision of the assessee in its own case for earlier year having regard to the principle of consistency since the functional profile of the assessee and the company remained unchanged
• Microgenetic Systems Limited as it was engaged in activity of medical prescription, which could not be considered to be a low end BPO as the activity involved a process of knowledge and hence functionally dissimilar to the assessee by following the coordinate bench decision in the assessee own case for earlier year
Further, the Tribunal remanded the comparability of the companies viz. BSI Financial Services (as no reason was assigned for the exclusion of the comparable) and Suntech Web Services P. Ltd noting that on perusal of the annual reports no mention of services had been made from which income was generated and hence exclusion on ground of functional dissimilarity was incorrect.
OKS Span Tech Pvt Ltd vs DCIT [TS-972-ITAT-2018(DEL)-TP] ITA No.1551/Del/2015 dated 23.08.2018

110. The Tribunal dismissed the Revenue’s appeal and upheld the CIT(A)’s order that the assessee engaged in providing ITES and BPO services to its AE could not be compared to Mold Tek Technologies Ltd. as the company was providing CAD support, product development and software customization which are high-end technical services while the assessee was a routine low end service provider by following the decision of Special Bench in the case of Maersk and HC ruling in the case of Rampgreen Solutions (P.) Ltd. Further, the company in one of its segments had 100% tax exemption while the assessee company paid tax and the cost of sales was low vis-à-vis assessee.
ACIT vs. WNS Business Consulting Services Pvt Ltd [TS-956-ITAT-2018(DEL)-TP] ITA No.919/Del/2013 dated 14.08.2018

111. The Tribunal following the decision of coordinate bench in the case of TE Connectivity (where the assessee was also providing software development services and for the same assessment year) excluded Bodhtree Consulting as it was a software product company and therefore functionally dissimilar to the assessee. Further, it restored the comparables to CIT(A) to be decided afresh which were excluded applying the turnover filter in light of the HC ruling of Chryscapital Investment Advisors(India) (P.) Ltd. (wherein it was held that turnover could not be basis for exclusion of the comparables when the functionality was similar)and directed the CIT(A) to decide other aspects of the matter such as functional comparability.
ACIT vs Telsima Communications Pvt Ltd [TS-954-ITAT-2018(Bang)-TP] IT(TP)A No.1112/Bang/2014 dated 03.08.2018

112. The Tribunal held that the assessee engaged in the provision of ITES could not be compared to:
• TCS E-Serve International Ltd as the company provided high-end technology services and owned substantial intangibles in the form of software licenses, no separate segmental information was available and noted that the company would also benefit from Tata brand. [It relied on the coordinate bench decision in the case of Omniglobe Information Technologies Pvt. to exclude the company.]
• TCS E-Serve Ltd as the company was in business of providing technology service such as software testing, verification and validation. It had also developed a transport management software therefore it was functionally dissimilar to the assessee/ company provided high-end technology services and owned substantial intangibles and noted that the company would also benefit from Tata brand. [It relied on the coordinate bench decision in the case of Omniglobe Information Technologies Pvt. to exclude the company.]
• Infosys BPO Ltd. as the Infosys brandwould result in higher operating profits of the company and wasengaged in high end integrated services which made it functionally dissimilar to the assessee. [It relied on the coordinate bench decision in the case of Omniglobe Information Technologies Pvt. to exclude the company.]
• Accentia Technologies Ltd. as the company was engaged in diversified activities such as Knowledge Process outsourcing (KPO), Legal process outsourcing (LPO), Data process Outsourcing (DTO), high end software services and no separate segmental information was available and further, the company had undergone restructuring during the year. [It relied on the coordinate bench decision in the case of Bechtel India. to exclude the company.]
• e4e Healthcare Business Services Ltd. as the company provided health care outsourcing services and in addition it also rendered software development services and no separate segmental information was available. [It relied on the coordinate bench decision in the case of Bechtel India. to exclude the company.]
• Eclerx Services Ltd as the company provided high value financial services in respect of consultancy business and solution testing besides the web content management merchandising execution, web analytics which made it functionally dissimilar and ithad no separate segmental information. [It relied on the HC ruling in the case of B C Management Services P Ltd.to exclude the company.]
• ICRA Techno Analytics Ltd. as the company was engaged in providing software development and consultancy and engineering services/web development services which made it functionally dissimilar and it had no separate segmental information. [It relied on the HC ruling in the case of B C Management Services P Ltd.to exclude the company.]
Further, it remanded the comparability of Acropetal Technologies Ltd. to the TPO relying on the coordinate bench decision in the case of Cadence Design wherein AO was directed verify whether assesseepassed the “employee cost percentage to the total cost” filterof 25% and then decide the matter in afresh.
Torus Business Solutions Pvt Ltd vs DCIT [TS-929-ITAT-2018(DEL)-TP] ITA No.1974/Del/2015 dated 10.08.2018

113. Relying on the coordinate bench ruling of Commscope Networks India Pvt Ltd, the Tribunal held that assessee engaged in software development services to its AE could not be compared to
• ICRA Techno Analytics Ltd. as the RPT filter exceeded 15%
• Acropetal Technologies Ltd. (Seg) as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd on the ground that it did not satisfy the filter of IT revenue of 75% applied by the TPO himself.
• e – Zest Solutions Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd since it was engaged in KPO services and was functional dissimilar.
• Infosys Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd due to its huge brand value, intangibles and huge turnover.
• Larsen & Toubro Infotech Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd since it exceeded 15% RPT filter.
• Persistent Systems & Solutions Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd. on the ground that it was functionally incomparable being engaged in diversified activities including licensing of products, royalty on sale of products as well as income from maintenance contract.
• Persistent Systems Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd. on the ground that it was functionally incomparable being engaged in diversified activities including licensing of products, royalty on sale of products as well as income from maintenance contract
• Sasken Communication Technologies Ltd. as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd. in absence of segmental details.
• Tata Elxsi Ltd as it was excluded by coordinate bench ruling of Applied Materials India Pvt Ltd on the ground that the company did not qualify the export earning filter of 75% applied by TPO himself.
• E-Infochip Ltd as it was excluded by coordinate bench ruling of Saxo India Pvt Ltd on the ground of absence of segmental details
It allowed Revenue’s appeal partly and directed for inclusion of Evoke Technology Pvt Ltd, RS Software Ltd and Mindtree Ltd. as the assessee did not contest the inclusion. Further, it upheld DRP’s order which directed for exclusion of Intertec Communication Technologies Ltd. noting that DRP had followed the coordinate bench ruling in case of Navisite India Pvt Ltd. and Del HC ruling in Rampgreen Solutions India Pvt Ltd. and the assessee could could not point out any difference in facts. It rejected assessee’s plea for inclusion of MYM Technologies Ltd noting that the data for current financial year was not available and the Annual report submitted by the assessee did not contain audited P&L and balance sheet for 12 months. It also upheld DRP’s order with respect to exclusion of FCS software on basis of absence of segmental information pertaining to software development, employee cost filter, onsite revenue filter etc. and rejected assessee’s reliance on the coordinate bench ruling of Marvell India Pvt Ltd. wherein the said comparable was excluded for reason of high working capital adjustment and there was no discussion about the reasons for exclusion which the DRP had dealt with like absence of segmental information, employee cost filter and onsite revenue filter (in addition to high working capital).
ACIT vs AT & T Global Business Services India Pvt Ltd [TS-1092-ITAT-2018(Bang)-TP] IT(TP)A No.171/Bang/2016 dated 31.08.2018
AT & T Global Business Services India Pvt Ltd vs ACIT [TS-1092-ITAT-2018(Bang)-TP] IT(TP)A No.190/Bang/2016 dated 31.08.2018

114. The Tribunal pursuant to the recall of the its order vis-à-vis adjudication of comparable relying on the decision of Hewlett Packard India Software Operation directed for exclusion of Accel Transmatics. It held that the said company was engaged in business of application of products in the health care, education segment, had also ventured into areas of animation and gaming software and was therefore functionally different from assessee which was engaged in providing software development services to its AE.
Broadcom India Private Ltd vs. DCIT [TS-887-ITAT-2018(Bang)-TP] ITA No.1514/Bang/2010 dated 03

115. The Tribunal relying on the coordinate bench decision of CGI Information Systems and Management Consultants Pvt Ltd. held that the assessee engaged in the provision of software development services could not be compared to:
• Genesys International Corpn. Ltd as it was rendering Geospatial based services and hadpresence of intangible assets which was indicative of the fact that the company was not in software development services.
• Infosys Ltd. as it was engaged in the development and sale of software product and had intangible assets.
• L& T Infotech Ltd. as it was also a software product company and segmental information vis-à-vis software development services was not available.
• Persistent Systems Ltd. as it was a software product company and segmental information on software development services was not available.
Microsemi Storage Solutions India Pvt Ltd vs ACIT [TS-927-ITAT-2018(Bang)-TP] IT(TP) A No.2103/Bang/2016 dated 24.08.2018

116. The Tribunal held that assessee engaged in providing consultancy services to its AE could not be compared to:
• Coral Hubs Ltd. as it outsourced majority of its activities [It relied on the HC decision of PTC Software.]
• E-Clerx as it wasengaged in diversified activities like data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management, revenue management and also offered financial services such as real-time capital markets, middle and back-office support, portfolio risk management services and various critical data management services. [ It relied on the coordinate bench decision of Fractal Analytics.]
• Accentia Technologies Ltd. as it developed its software and rendered medical transcription services and had undergone an extraordinary event of merger. [It relied on the HC decision of PTC Software.]
• Cosmic Global Ltd. as it was outsourcing its services to vendors. [It relied on the HC decision of PTC Software.]
• Excel Infoway Ltd. as it had super normal profit for the subject year and the employee cost could not computed properly on account of the entire cost being allocated to the BPO segment though its 49% of its revenues were from the infra segment. [ It relied on the coordinate bench decision of Baxter India.]
Swiss Re- services India Pvt Ltd vs DCIT [TS-1120-ITAT-2018(Mum)-TP] ITA No.1493/Mum/2014 dated 31.08.2018

117. The Tribunal relying on the coordinate bench decision of Electronics for Imaging India in case of a software service development provider (for the same AY namely AY 2011-12) accepted assessee’s plea for exclusion of (i) Acropetal Technologies (ii) E-Zest Solutions Ltd. (iii)E-Infochips Ltd (iv) ICRA Techno Analytics Ltd and (iv) Persistent Systems and Solutions Ltd. as they were in the business of developing software products and could not be compared to assessee engaged in software development services.
ACIT vs Yokogawa Technologies India Pvt Ltd [TS-1046-ITAT-2018(DEL)-TP] IT(TP)A No.466/Bang/2016 dated 8.08.2018

118. The Tribunal allowed the Revenue’s plea for inclusion of Allsec Technologies as a comparable in case of assessee engaged in ITES segment as the assessee did not object to the same being included. It was pointed out by Revenue that the basis for rejection of the comparable by CIT(A) was that it was a loss-making company; however, CIT(A) failed to appreciate the fact that the comparable’s connectivity and data base expenses (being extraordinary in nature) were factored in while computing the margin.
Dy.CIT vs JDA Software Private Limited (formerly i2 Technologies India Private Limited) [TS-1102-ITAT-2018(Bang)-TP] IT (TP)A No.1239/Bang/2013 dated 28.09.2018

119. The Tribunal remitted the comparability of Informed Technologies Ltd. noting that the assessee’s (engaged in IT services) plea for exclusion of the company on account of the it not qualifying the filter of operating income exceeding 70% of revenue was not raised before the TPO and DRP. It directed the TPO to re-examine the comparability after giving an opportunity to the assessee to raise all contentions before the TPO and place necessary evidence before it.
Navigant BPM (India) Private Limited (Formerly known as M/s.RevenueMed India (P) Ltd) vs ACIT [TS-1143-ITAT-2018(COCH)-TP] IT(TP)A No.146/Coch/2015 dated 07.09.2018

120. The Tribunal upheld DRP’s order excluding iGATE Global Solutions Ltd. as a comparable in case of assessee engaged in ITES as it was earning revenue from providing IT Services and IT enabled services and there was no segmental information.
Dy.CIT vs Goldman Sach Services [TS-1239-ITAT-2018(Bang)-TP] IT (TP) A NO. 581(BANG.) OF 2016 dated 12.09.2018

121. The Tribunal excluded Cosmic Global Solution as a comparable for assessee engaged in providing back office support services on the ground that its employee cost to sales was low (21%) which showed it was outsourcing its operations whereas the assessee’s employee cost to sales was high (55%) which showed it had inhouse operations. It relied on coordinate bench decision of Xchanging Technology wherein the said comparable was excluded on account of different business model (outsourcing its operations). Thus, the Tribunal remitted the ALP-determination of the international transaction for fresh determination to AO/TPO after excluding the said comparable.
Integreon (India) Private Ltd vs ITO [TS-1122-ITAT-2018(DEL)-TP] ITA No.2059/Del/2014 dated 14.09.2018

122. The Tribunal held that an assessee engaged in provision of ITES and financial support service to its AE could not be compared to:
• Cosmic Global Ltd. as income from medical transcription segment which was similar to assessee’s business was barely 1% of its total revenue and the major part of its income was from translation charges the business which was dissimilar to that of assessee.
• Eclerx Services Ltd. as it was engaged in providing data analytics and customized process solutions and had undergone demerger for the subject year(extraordinary event).
• Genesys International Corpn. Ltd. as it was engaged in rendering geospatial services catering to the needs of consumer mapping, navigation and internet portals.
• Vishal Information Technology as it was mainly engaged in e-publishing business apart from document scanning work (similar to assessee’s business) and there were no separate segmental results available for document scanning.
• Accentia Technology as there was a merger of an entity by way of amalgamation and its asset base had increased substantially.
• Infosys BPO Ltd as it had acquired McCamish Systems Ltd. being an extraordinary event Further, it remanded the comparability of Acropetal Technologies which was contested by assessee on ground that it was not provided an opportunity to rebut the data collected u/s.133(6) by the TPO in light of Delhi HC judgment in Cashedge India Pvt Ltd wherein the TPO order was set aside for affording an opportunity to assessee to cross examine the data collected and used by the TPO.
GE India Business Private Ltd vs ACIT [TS-1190-ITAT-2018(DEL)-TP] ITA No.6008/Del/2012 dated 25.09.2018

123. The Tribunal held that an assessee engaged in provision of data processing and back office support services to its AE could not be compared to:
• Apex Knowledge Solution Pvt Ltd. as it was primarily a software development company andfurther even where the TPOhad rejected companies selected by assessee on the ground that they were engaged in software development activities.
• Asit C. Mehta Financial Services Ltd. (formerly known as Nuclues Netsoft and GIS (I) Ltd.) as it was engaged in providing ITES and software development services and no separate segmental data was available.
• Cosmic Global Ltd.as it outsourced part of the business activities to others, whereas the assessee had carriedout the entire activities itself.
• Goldstone Infotech Ltd. as its export turnover was less than 25% of sales and hence did not satisfy the filter applied by TPO.
• Maple E-solutions Ltd. as the financial results of a company were not reliable due to fraud committed by thedirectors.
• Datamatics Financial Services Ltd. as it had significant related party transactions greater than RPT filter of 25%
• MCS Ltd as it was engaged in handling public issue and acting as Registrar and Share Transfer agent and the activities were restricted to domestic segment unlike the assessee who was providing services to international customers.
• Tata Share Registry Ltd. as the activities were limited to domestic segment unlike the assessee who was providing services to international customersand the business model and field of operation of assessee were different.
Further, it restored the comparability of CS Software Enterprises Ltd. in view of the coordinate bench
ruling in DBOI Global Services wherein the Tribunal had observed that it appeared that the said company
was engaged into ITeS/BPO service, however restored the comparability to TPO to examine FAR
analysis to conclude whether comparable to assessee engaged in ITES. It rejected Ask Me Info Hubs on
the ground that its export turnover was less than 25% of total sales and did not satisfy the filter applied
by TPO.
Deutsche Networking Services Private Ltd. Vs. The Dy.CIT [TS-1177-ITAT-2018(MUM)-TP] ITA No.8972/Mum/2010 dated 14.09.2018

124. The Tribunal remitted the matter of functional comparability of Acropetal Technologies noting that though the assessee had characterized itself as a software development company however it was recharacterized by the AO as an engineering design service provider which was not contested by the assessee. However, the assessee had not filed TP documentation as an engineering design service provider which had to be done.Thus, it remitted back the matter for the TPO(who had rejected assessee’s comparables for software development segment and selected the aforesaid comparable for engineering design service provider) to re-examine the comparability after considering the TP documentation ( to be filed by assessee as an engineering design company) noting that assessee relying on coordinate bench decision in Bloom Energy had rightly contended that comparable should be excludedfor the subject year on the ground of high operating profit margin(61.11%).
GE Power Conversion India Private Limited, (Successor to GE Power Conversion Technology Pvt Ltd) [TS-1117-ITAT-2018(CHNY)-TP]

125. The Tribunal held that assessee engaged in software development, competency centre and IT support services (clubbed and aggregated by TPO) could not be compared to:
• Cat Technologies Ltd. as it was rendering other services in the nature of advisory and consulting besides launching the job portal, namely, Logtalent.com. apart from software development and IT support services and there was no information on the mode of earning revenues from such activities. The Tribunal noted that the company derived Rs.8.49cr out of software development and consulting services but no segmental data was available and from the Accounting Policies and Notes on Account it was evident that the company’s exclusive business was medical transcription and training software development and consulting services which was treated as the only reportable segment. [ It relied on the coordinate bench ruling of SunLife India Service centre ruling wherein the comparable was excluded in case of an assessee engaged in software development and maintenance support services as it was running both software development and maintenance support services with IT support services low or high end whether onsite or offsite.]
• Infosys Technologies Ltd as it was a giant company operating on full-fledged risk leading to maximum profit, had huge revenue and expending its turnover on R&D having huge intangibles vis-à-vis taxpayer which was a captive service provider operating on a minimum risk and only having turnover of RS.109 crores as against turnover of Infosys of Rs.15648 crores. [ It relied on coordinate bench decision in assessee’s own case for earlier year since no change in facts was pointed out by the Revenue.]
• Tata Elxsi as it was not a mere software developer and was involved in products and Innovative functions like visual computing labs with the track record of making India’s first full length animated film.
• Thirdware Solutions Ltd. as the company derived revenue from various services, sale of licences, export from SEZ unit, revenue from subscription etc. and the company engaged in diversified business including software products and further, no segmental information was available.
Siemens Industry Software (I) P Ltd vs DCIT [TS-1045-ITAT-2018(DEL)-TP] ITA No.1307/Del/2014 dated 14.09.2018

126. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order excluding Indusind Information Technology Ltd as a comparable for assessee engaged in providing BPO services to its AE following the coordinate bench decision in assessee’s own case for preceeding year wherein the said comparable was excluded on the ground that it was a software development company whereas the assessee was a BPO company. Further, the software development company had a completely different functional profile as compared to a company engaged in BPO Services and the risk undertaken and the assets employed by a software development company could not be compared to a BPO company.
ACIT vs Acclaris Business Solutions (P) Ltd [TS-1056-ITAT-2018(Kol)-TP] ITA No.1457/Kol/2017 dated 14.09.2018

127. The Tribunal held that a company engaged in rendering software development services to its AE could not be compared to:
• iGate GlobalSolutions, Flextronics Ltd. (Seg.), L & T Infotech Ltd, Satyam Computers Ltd,., Infosys Technologies Limited as these companies had a turnover exceeding 200 crores whereas the assessee’s turnover was merely 24 crores. [ It relied on the coordinate bench ruling in Dell International which inturn had relied on coordinate bench decision in Genisys International.]
• Tata Elxsi as it was engaged in development of niche product and development services, which was entirely different from the assessee company and no segmental information available. [ It relied on the coordinate bench ruling in assessee’s own case since there was no change in factual matrix.]
• Bodhtree Consulting Ltd. as it was engaged in product development, software development and ITES and segmental details were not available which was not controverted by Revenue.
• Geometric Software Solutions Co. Ltd. as it was engaged in developing and licensing of products and product life cycle management services which were not similar to the functions of the assessee.
Further,
• It remanded the comparability of Exensys Software Solutions Ltd. and Thirdware Solutions Ltd to the CIT(A) as the CIT(A) had excluded on basis of abnormal profits without any discussion and the comparability of the companies had also not been discussed.
• It excluded Quintegra Solutions Ltd. as no evidence had been brought on record that the financial results could be extrapolated. It distinguished coordinate bench ruling of Exevo India Pvt. Ltd. relied on by assessee (wherein it was held if a company was functionally similar, it could not be excluded on basis that data for entire financial year was not available, if data could be reasonable extrapolated with available data on record) noting that data had to be on record for reasonable extrapolation which was not the case of said comparable.
• It included VJIL Consulting as it was predominantly an exporter of software development services which was even the finding of CIT(A). [ It relied on coordinate bench ruling in Qualcomm.]
• It includedAkshay Software Technologies Ltd. as it was engaged in provision of software development servicesby relying on coordinate bench ruling in Qualcomm India (P.) Ltd.which was not controverted by Revenue.
DY.CIT vs ABB Global Industries & Services P Ltd [TS-1051-ITAT-2018(Bang)-TP] IT(TP)A No.620/Bang/2013 dated 07.09.2018

128. The Tribunal held that assessee engaged in export of software development to its AEs could not be compared to:
• Bodhtree Consulting Ltd as it was engaged in software development and product as well as ITES services and segmental details were not available.
• Kals Information System as it was a software product company. [ It relied on ratio laid down in Bombay HC ruling of PTC Software Pvt Ltd.]
• Compucom Software Ltd. as it was engaged in ITES sector and also software development services and segmental details were not available.
• TVS Infotech Ltd. as it was a persistent loss-making company. (assessee had not furnished details of margins of earlier year and later years)
Further,
• It included Quintegra Solutions Ltd. noting that Tribunal in preceding year had remitted the comparability of the said company and in the remand proceedings, the TPO had found it functionally comparable to the assessee.
• It accepted assessee’s plea for inclusion of ICRA TechnoAnalytics on basis that reimbursements from AE’s should not be included while computing RPT percentage and thus, it would pass the RPT filter of 25%.
Starent Networks (India) Private Ltd. vs JCIT [TS-1205-ITAT-2018(Pune)-TP] ITA No.585/Pune/2014 dated 26.09.2018

129. The Tribunal held that assessee engaged in providing software development services to its AEs could not be compared to:
• Bodhtree Consulting Ltd. as it was in the business of software product and was engaged in providing open and end to end web solutions software consultancy and design and development of software using latest technology [ It relied on coordinate bench ruling of Infinera India]

• Tata Elxsi Ltd. as it operated in the segments of software development services which comprised of embedded product design services, industrial design and engineering services and visual computing labs and system integration services segment that made it functionally different from assessee [ It relied on coordinate bench ruling of Infinera India]
• Infosys Ltd. as it was a giant company in the area of development of software and it assumed all risks leading to higher profits [ It relied on coordinate bench ruling of Infinera India]
• L&T Infotech Ltd. as it was a global IT service and solutions provider. [ It relied on coordinate bench ruling of Cisco]
• Persistent System Ltd. as it was in product designing services and into software product development. [ It relied on coordinate bench ruling of Infinera India]
• Sasken Communciation Technologies Ltd. as it was engaged in sale of software products and had intangible assets. [ It relied on coordinate bench ruling in Novell Software development]
Further,
• It remanded the comparability of Kals Information Systemanddirected the TPO to call for information u/s.133(6) whether it was engaged in software product development as Revenue pointed out to the Tribunal that TPO’s order stated that company had not carried out research and development for instant year and the company only rendered training services and had no software products.
• It also remanded the comparability of CG-VAK Software and Exports Ltd. to consider employee cost vis-à-vis total turnover by taking correct employee cost
LSI India Research and Development Pvt Ltd vs ITO [TS-1224-ITAT-2018(Bang)-TP] IT(TP)A Nos 44 and 45/Bang/2014 dated 07.09.2018

130. The Tribunal held that assessee engaged in providing software development services to its AEs could not be compared to:
• Acropetal Technologies Ltd. as there was no breakup of its employee cost and export sales due to absence of segmental information and thus, it was not possible to ascertain if it passed export earnings and/or employee cost filters [It was Revenue’s contention that DRP had arbitrarily applied the onsite revenue filter to exclude the comparable and it was immaterial if they generate revenue from onshore or offshore services when they are functionally similar. The Tribunal upheld DRP’s order noting that it had relied on coordinate bench ruling in CGI Information System Ltd and cited other reasons (i.e. absence of segmental information containing breakup of employee cost and export sales) in addition to onsite filter]
• L&T Infotech Ltd. as it was a software product company having significant intangibles.[It was Revenue’s contention that DRP had arbitrarily applied the onsite revenue filter to exclude the comparable and it was immaterial if they generate revenue from onshore or offshore services when they are functionally similar. The Tribunal upheld DRP’s order noting that it had relied on coordinate bench ruling in CGI Information System Ltd and cited other reasons (i.e. showing revenue from three segments i.e. financial services, manufacturing and telecom without any segmental breakup) in addition to onsite filter]
• E-Infochips Ltd. as it had diversified services with no segmental information and its income from software development services was less than 75% of its operating revenue.[It was Revenue’s contention that DRP had arbitrarily applied the onsite revenue filter to exclude the comparable and it was immaterial if they generate revenue from onshore or offshore services when they are functionally similar. The Tribunal upheld DRP’s order noting that it had relied on coordinate bench ruling in CGI Information System Ltd and cited other reasons (i.e. fluctuating revenue, failed service filter, lack of segmental information) in addition to onsite filter]
Further, it included RS Software noting that assessee and TPO had selected it as a comparable whichwas excluded by DRP on its own by applying onsite filter and further, both assessee and Revenue wanted it to be included.
Dy.CIT vs Goldman Sach Services [TS-1239-ITAT-2018(Bang)-TP] IT (TP) A NO. 581(BANG.) OF 2016 dated 12.09.2018

131. The Court dismissed Revenue’s appeal against Tribunal’s order wherein relying on the co-ordinate bench ruling in the assessee’s own case involving identical grounds held that the comparables selected by the TPO were not comparable at all with the assessee since the said comparables were engaged in ITeS as against software design and development services rendered by the assessee. The Court relying on division benchdecision in the case of Pr.CIT v. Barclays Technology Centre India Private Ltd noted that Revenue routinely brings such factual matters before the Court knowing fully well that exclusion and inclusion of certain comparables to determine ALP would not necessarily give rise to purely legal question or substantial question of law. It held that findings of the Tribunal could not be termed as perverse or vitiated by error of law apparent on the face of record and the issue involved was factual.
Pr CIT vs TIBCO Software (India) Pvt Ltd – TS-1077-HC-2018(BOM) – ITA No.522 of 2016 dated 24.09.2018

132. The Tribunal held that the assessee was a contract research and development software service provider and not a routine low-end software service provider as contended by it. It was assessee’s contention that it was involved only in coding and testing which were a part of the phase development of products done by its AE located in USA and its role was limited. The Tribunal on perusing the Parent Subsidiary agreement (PSA) concluded that clauses of the PSA provided for the assessee to undertake research and development and actual creation of intellectual property in India patented in the USA (which were around 113 patents), Thus it was substantiated that the assessee was involved in research and development work. Further, it noted that the assessee was satisifying the CBDT guidelines for a contract R&D service provider for the following reasons (i) Microsoft, USA was performing most of the economically significant functions involved in research or product development cycle, while the assessee as an Indian Development Centre carried out the work assigned to it by the foreign principal (ii) Microsoft, USA was remunerating the assessee with cost plus 15% for the work carried out by it and was also providing its intangibles in the shape of Process tools (customised software, readymade templates and guidelines, etc.) to the assessee for doing the work (iii)The assessee was working under the direct supervision of Microsoft, USA, which was actually controlling or supervising research or product development through its strategic decisions and also monitoring activities on regular basis. (iv) The assessee in India did not assume or had no economically significant realized risks. (v) The assessee had no ownership right (legal or economic) on the outcome of the research which vested with Microsoft, USA, and that this wasevident from the contract as well as from the conduct of the parties. Thus, the Tribunal termed the assessee as a contract research and development service provider.
The Tribunal held that the assessee who was providing contract research and development software development services could not be compared to:
• E-Infochips Bangalore Limited as it had revenues from software services and IT enabled services in a common pool, and no separate segmental information apart from revenues from software services and ITES services was availablewhereas the assessee had only revenue from software development services.
• Infosys Technology Ltd. as its total profit included profit from software development services as well as software products and there was no separate profit available of the software development services.
Persistent Systems Ltd. as it was engaged in rendering software development services as well as sale of software products and no seperate segmental information was available.
• Wipro Technology Services Ltd as it was earlier part of Citi Group and subsequently, it was acquired by Wipro and the arrangement of earning revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services was actually a prior arrangement between assessee’s AE (Wipro Ltd) and third party (Citigroup Inc.) and hence in light of the transaction ceased to be a comparable uncontrolled transaction.
• Akshay Software Ltd. as it was engaged in rendering software development services as well as sale of software products and no seperate segmental information was available.
• Blue Star Infotech Ltd. as apart from being a product company and dealing in hardware also, it was also not providing any research and development services.
• Caliber Point Business Solutions Ltd as it was not rendering any research and development software services and was providing only BPO services whereas the assessee was rendering only software development services.
• Cat Technologies Ltd. as it was engaged in rendering software development services as well as ITES and no seperate segmental information was available.
• CG-VAK Software & Exports Ltd as it was a persistent loss-making company and assessee failed to prove it was rendering any software development under the relevant segment.
• Evoke Technologies Pvt. Ltd. as it was not providing research and development software services
LGS Global Ltd as it was not rendering any research and development services and was a simple software service provider.
• Maveric Systems Ltd. as research and development activity done by this company was meant for its own use and it had not earned any revenue from rendering R&D services.
• RS Software as income from the relevant segment of ‘Software development & Customization services’ taken by the assessee for the purposes of comparison included sale of products not only of its own but also those of third parties.
• Silverline Technologies Ltd. as it also hadincome from software products and was not engaged in rendering research and development software services,
Further, it included Mindtree Ltd. (IT Service Segment) in the list of comparable as it fulfilled the
parameters, namely, rendering of research and development software services and also Product
engineering services to its customers leading to the creation of patents. It directed the TPO to examine
the PLI of this company from the IT services and Product engineering services and then treat the same
as comparable with the segment of the assessee under consideration for the purposes of
benchmarking
Microsoft India (R&D) Pvt. Ltd vs DCIT [TS-1015-ITAT-2018(DEL)-TP] ITA No.1479/Del/2016 dated 14.09.2018

133. The Tribunal dismissed Revenue’s order and upheld the DRP’s order excluding Accentia Technology as a comparable for assessee engaged in rendering backoffice support services to its AE noting that DRP had given a detailed finding with respect to exclusion and Revenue was not able to point out any infirmity in the directions of DRP and any judicial precedent wherein Accentia Technology was retained as a comparable. The DRP had excluded it on the ground that it was engaged in diversified activities in the nature of medical transcription services, medical billing, practice management consulting services, medical coding, claims processing and software development including SAAS and implementation services and segmental information was not available and further, it had undergone acquisition during the year.
ITO vs Actis Global Services Pvt Ltd [TS-1150-ITAT-2018(DEL)-TP] ITA No.6710/Del/2015 dated 30.10.2018

134. The Tribunal held that assessee engaged in providing BPO/data processing and ITES to its AE could not be compared to:
• iGate Solutions Ltd as the RPT filter was more than 25% and the TPOhimself had rejected companies with RPT filter of more than 25%. Further, it had undergone restructuring by way of amalgamation which would have financial impact on its results.
Further
• It remanded the comparability of Capgemini Business Services (India) Pvt. Ltd with direction to TPO to verify if the company had segmental information observing that KPO was an extension of BPO.
• It upheld the action of AO/TPO to include E4E Healthcare pursuant to remand proceedings by DRP noting that it had satisfied the employee cost filter
Omniglobe Information Technologies (India) Pvt Ltd vs Addl CIT [TS-1146-ITAT-2018(DEL)-TP] ITA 6980/Del/2017 dated 15.10.2018

135. The Tribunal held that assessee engaged in providing medical transcription services to its AE could be compared to:
• UltraMarine and Pigments Ltd observing that assessee before the CIT(A) had stated that the company’s RPT filter exceeded 25%, but the CIT(A) had found that its RPT filter was 10%. It rejected assessee’s reliance on the website extract which showed the comparable was carrying out R&D and project implementation (to hold that it was functionally not comparable to the assessee) since the year to which it pertained to was not known.Further, the assessee was not able to demonstrate the reason forwhich TPO had excluded itin the subsequent year.
• Fortune Infotech Ltd.as it was carrying on business of medical transcription. Merely because it was doing business through different tools simply could not make it non comparable. It noted that for the subject year, the company had developed webbased software and therefore, it was apparent that it did not carry its business with different tools.
• Tricom Ltd.as the functions performed were similar to the assessee. Itrejected assessee’s contention that merely because the company was undertaking R&D it was not comparable. Further, itrejected the contention of assessee that company had abnormal growth as it was not backed up by the profitability statement.
• AceSoftware as it was functionally comparable and the Tribunal noted that the TPO had erred in rejecting it on basis of single transaction with Apex Data Services (since it was with a related party) without reliable data.
• Tulisian Technologies as the Revenue could not point any infirmity in CIT(A)’s order wherein it had stated that it would be unjust to exclude it on the ground that turnover (94Lakhs) was marginally less than 1 crore
• Mapro Industries as it was functionally similar.Itrejected Revenue’s plea for its exclusion on account of non-utilization of assets noting that non utilization of the assets or under utilization thereof may be internal inefficiency built in of the comparable company however, when it was functionally comparable it could not be rejected.
Further, it excluded
• Vishal Information Technologies as it was outsourcing majority of its operations and hence had a different business model
• Wipro BPO Solutions Ltd as its turnover was 30 times that of the assessee
ITO vs Transcend M T Services Pvt Ltd (Formerly Heartland Bangalore Transcription and Services Pvt. Ltd merged with Heartland Informati [TS-1168-ITAT-2018(DEL)-TP] ITA No.2372/Del/2011 dated 05.10.2018
Transcend M T Services Pvt Ltd vs ITO (Formerly Heartland Bangalore Transcription and Services Pvt. Ltd merged with Heartland Informati [TS-1168-ITAT-2018(DEL)-TP] CO No. 214/Del/2011 dated 05.10.2018

136. The Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to:
• Infosys BPO Ltd. as the export turnover was approx. Rs.1356 crores whereas assessee’s export turnover was only Rs.14.5 crores thus, there was undisputedly a wide gap in size and turnover
• Hartron Communication as it had diversified activities and had achieved extraordinary profits during AY 2013-14.
• Cenlub Industries, Demba Valva and SE Electricals Ltd. as TPO had selected the said companies as comparables observing that under TNMM only broad functional comparability is required inspite of giving a clear cut finding they were functionally dissimilar.
Further,
• It remitted Caliber Point Business Solution to the file of the TPO observing that the manner in which profits were extrapolated were not placed before it. It accepted assessee’s contention that the comparable could not be excluded on merely a different financial year.
• It remitted the comparability of MPS Ltd. as TPO had not examined the issue with respect to its inclusion. It directed the TPO to pass an appropriate order in accordance with merit after examining the objections raised by the assessee.
Cameron Manufacturing India Pvt Ltd. vs DCIT[TS-1254-ITAT-2018(CHNY)-TP] ITA No.336/Chny/2018 dated 16.10.2018

137. The Tribunal held that assessee engaged in providing the business of financial data processing and analysis could not be compared to:
• Eclerx Services Ltd. as it provided services through two business units i.e. Financial Services and Sales & Marketing Services. It also observed that the assessee company was providing services to the comparable. Under the Financial Service Segment, it. provided professional services including consulting, business analysis and solution testing. Further, under Sales & Marketing Services, it provided web content management and merchandising execution, web analytics, social media moderation and analytics.
Further,
• It remanded the comparability of Omega Healthcare Management Services Ltd, Zavata India Ltd., Rsystem (different financial year ending) to the TPO as they had been rejected on account of the financials not being available which did not seem to be a proper reason since the the database was available in public domain. Italso noted that the quarterly financials of RSystems was available
Markit India Services Pvt Ltd vs DCIT [TS-1160-ITAT-2018(DEL)-TP] ITA No.84/Del/2016 dated 29.10.2018

138. Relying on the coordinate bench ruling in E4E business solutions, the Tribunal held that assessee engaged in providing ITES to its AE could not be compared to a) Vishal Information Technologies and and b) Accurate Data Converts Ltd. as the employee cost was less than 25% of operating revenue in case of the said comparables and did not satisfy the employee cost filter applied by TPO.
Mphasis Ltd vs ACIT [TS-1197-ITAT-2018(Bang)-TP]IT(TP)A No.14/Bang/2012 dated 05.10.2018

139. The Tribunal held that assessee engaged in software development services to its AE could not be compared to
• Infosys Ltd. as it was excluded in assessee’s own case for earlier year (by relying on Delhi HC in Agnity India) on basis that it was a giant company in terms of risk profile, scale, nature of services, revenue ownership of branded/proprietary products, on site and offshore services, etc.
• Wipro Technology Services Ltd. as it earned majority of revenue from Citigroup Inc and was earlier part of Citi Group and subsequently, it was acquired by Wipro and the arrangement of earning revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services was actually a prior arrangement between assessee’s AE (Wipro Ltd) and third party (Citigroup Inc.) and hence the transaction ceased to be a comparable uncontrolled transaction. [It relied on coordinate bench ruling in Microsoft India]
Global Logic India Ltd.vs Dy.CIT [TS-1249-ITAT-2018(DEL)-TP] ITA No.1690/Del/2016 dated 30.10.2018

140. The Tribunal restored the determination of ALP of ITES segment of assessee noting that assessee had raised objections before the TPO and DRP vis-à-vis comparables (ICRA Online Ltd., Acropetal Technologies, Accentia Technologies Ltd, Jeevan Scientific Technology Ltd.) on segmental account details being absent, presence of intangibles and failure to satisfy certain filters which was disposed off by DRP confirming TPO’s order without passing a speaking order. Thus, it restored the matter with directions to the assessee to raise contention vis-à-vis comparables to be excluded before the TPO.
Navigant BPM (India) Pvt Ltd.vs ACIT [TS-1223-ITAT-2018(COCH)-TP] IT(TP)A No.57 /Coch /2016 dated 23.10.2018

141. The Tribunal upheld DRP’s order excluding Acropetal Technologies Ltd. in case of assessee engaged in ITES segment noting that TPO had considered the engineering design service segment (functions performedwere Architectural, Structural, Electrical, Plumbing, Steel Detailing,External Utilities, Design Engineering) of said comparable, which was functionally dissimilar to the ITES segment of assessee (functions performed were back office services relating to finance and human resource functions). It relied on coordinate bench ruling in Novo Nordisk (I) P Ltd. wherein Acropetal Technologies Ltd. was excluded as it was providing high end engineering services which could not be compared to ITES segment of assessee.
ACIT vs. Flextronics Technologies (India) Pvt Ltd. [TS-1208-ITAT-2018(Bang)-TP] IT(TP)A No.576 /Bang /2016 dated 31.10.2018

142. The Tribunal held that assessee engaged in software development services could not be compared to:
• Bodhtree Consulting Ltd. as it was engaged in sale of software product apart from providing software services and segmental information was unavailable.
• Kals Information Systems Ltd. as it was engaged in developing software products, development of software services and in running a training center for software professional on online projects unlike assessee which was engaged only in providing software services.
Further, it included SIP Technologies and Exports Ltd by relying on coordinate bench decision in John Deere India Pvt Ltd. for same assessment year wherein it was held that the comparable had profit in one out of the three year and thus, could not be considered to be a persistent loss-making company. Accordingly, the Tribunal held that the said comparable could not be excluded on ground of persistent loss-making concern when it was otherwise functionally comparable.
SAS Research and Development (India) Pvt Ltd. vs.Jt.CIT [TS-1276-ITAT-2018(Pun)-TP] ITA No.1539 /Pun /2014 dated 24.10.2018

143. The Court allowed Revenue’s appeal against ITAT’s order deleting TP adjustment in case of assessee providing call centre services to its AE wherein it was noted that the transaction was at ALP under internal CUP as the average hourly rate received from AE in USA was higher than that of the Non-AEs in UK
CIT vs.EFFECTIVE TELESERVICES PVT LTD [TS-1081-HC 2018(Guj)-TP] ITA No.893 of 2018 dated 01.10.2018

144. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Bodhtree Consulting Ltd as it was in the business of software product and was engaged in providing open and end to end web solutions software consultancy and design and development of software using latest technology.
• Persistent System Limited as it was in product designing services and into software product development
• Tata Elxsi Ltd as it operated in the segments of software development services which comprised of embedded product design services, industrial design and engineering services and visual computing labs and system integration services segment. There were no sub-services break up/information provided in the annual report or the databases based on which the margin from software services activity only could be computed. Also, the company had in its response to the notice u/s 133(6) stated that it could not be considered as comparable to any other software service company because of its complex nature
• L&T Infotech Ltd as it had a turnover exceeding 1000 crores and it had multifaceted activities.
• Sasken Communication Technologies Ltd. as it earned revenue from software services, software products and other services for which it had no segmental information available.
Further
• It remanded the comparability of Kals Information System Ltd to DRP for deciding the issue of inclusion or exclusion (as assessee had not raised the issue of exclusion before DRP) and directed it to consider coordinate bench rulings of TE Connectivity (wherein said comparable was excluded for being a product company) and contrary decision of AOL India P Ltd (wherein it was held that said comparable was not developing products as it did not have any such revenue and held it was functionally similar to software development companies).
Coreone Technologies India P Ltd vs Dy.CIT [TS-1292-ITAT-2018(Bang)-TP] (IT(TP)A No.263/Bang/2014) dated 26.10.2018

145. Relying on coordinate bench decision of CGI Systems and Management Consultants (P) Ltd (which was for same AY i.e. AY 2012-13)., the Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
Genesys International Ltd as it was engaged in mapping and geospatial services (which clearly showed that it was not into software development and there was no basis for TPO to conclude that it was a software development company)
• Infosys Technologies Limited as it was a giant risk-taking company and engaged in development and sale of software products and also owned intangible assets.
• L&T Infotech Ltd as it was a software product company and segmental information pertaining to software development services was not available.
• Persistent Systems Ltd as it was a software product company and segmental information pertaining to software development services was not available
Huawei Technologies India P Ltd vs JCIT [TS-1318-ITAT-2018(Bang)-TP] (IT(TP)A 1939/Bang/2017)) dated 31.10.2018

146. The Tribunal accepted assessee’s plea for inclusion of CG-VAK Software and Export Ltd. noting that it was not a persistent loss-making concern as it showed profitability for FY 2008-09, FY 2010-11 and FY 2012-13 when foreign exchange gains were included as part of operating profits. It remitted the matter to AO to verify whether after the above direction, whether addition to ALP in case of assessee’s software development segment would survive or would be modified.
Gateway Technolabs Pvt Ltd vs Dy.CIT [TS-1293-ITAT-2018(Ahd)-TP] (ITA No.677/Ahd /2017) dated 22.10.2018

147. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Persistent Systems Ltd as it was excluded by coordinate bench in assessee’s own case for earlier year (subsequently affirmed by HC) for being engaged in diversified activities like licensing of products, royalty on sale of products as well as income from maintenance contract and further, there was no segmental information for services and product.
• Persistent System and Solution Ltd as it was excluded by coordinate bench in assessee’s own case for earlier year (subsequently affirmed by HC) on ground that it had sale of products and there was no segmental bifurcation between software development services and products.
• Sasken Communication and Technologies Limited as it was excluded by coordinate bench in assessee’s own case for earlier year (subsequently affirmed by HC)for earning revenue from three segments (software services, software products and other services) for which there were no segmental bifurcation.
• Evoke Technologies as expenses had increased by 1118% vis-à-vis preceding year which clearly indicated low margin due to peculiar economic circumstance.
• Mindtree as DRP had given a categorical finding that due to extraordinary event of merger in investment and product development business, margin had declined. Further, the company had also incurred substantial revenue from onsite services which could not be compared with company engaged in offshore software development.
• Acropetal Technologies Ltd as it was predominantly engaged in onsite software development whereas assessee was engaged in software development in India. It also failed software development services filter greater than 75% of operating revenues and failed employee cost filter of 25% applied by TPO.
• L&T Infotech Ltd as it incurred expenses in foreign currency and had onsite revenue of 50%, revenue from operations were from three segments (financial management, manufacturing and telecom). Further, it was excluded by coordinate bench ruling in assessee’s own case for earlier year on basis of size, scale, products, intangible etc.
• E-Infochip Ltd as DRP had given a finding (which the Revenue was not able to controvert) that it earned revenue from software development, IT Enabled services and products for which there was no segment bifurcation, abnormal trend in profit and also it failed the filter of software development services greater than 75% of total operating revenue.
• ICRA Techno Analysis Ltd as revenue from software development, consultancy, licensing, sublicensing, annual maintenance charges for software support, web development were reported in single segment. Further it failed the RPT filter of 15% and was also functionally dissimilar (consultancy, webhosting etc)
• E-Zest Solutions as it was engaged in product engineering and software development and demonstrated abnormal trend in profit.
• Infosys Ltd as it had been rejected by coordinate bench ruling in assessee’s own case for earlier year on ground that it had brand value as well as intangible assets. It was also engaged in diversified services including design as well as technical consultancy, consulting, re-engineering, maintenance, systems integration as well as products for banking industry
• Tata Elxsi as it had been rejected by coordinate bench ruling in assessee’s own case for earlier year on ground that it was engaged in diversified activities under software development segment (product design services, innovation design, engineering services and visual computing etc.)
Further
• It included RS Software (India) as it accepted assessee’s contention that it had passed filters applied by TPO and also was considered as comparable in assessee’s own case for earlier year (functionally similar)
Asst CITvs Arcot R&D Software Pvt Ltd [TS-1331-ITAT-2018(Bang)-TP] (IT(TP)A No.437/Bang/2016 and CO No.14/Bang/2017) dated 15.10.2018

148. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Kals Information Systems Ltd as it was developing software products and not purely a software development service provider
• Accel Transmatic Ltd as it was engaged in services in form of ACCEL IT and ACCEL animation services for 2D and 3D animation and thus functionally different.
• Tata Elxsi as it was engaged in development of niche products and services provided were different from assessee
• Bodhtree Consulting as it had a consistent change in profit margins due to variation in revenue recognition method (revenue was recognized based on software developed and billed to clients, there was a possibility of expense in relation to revenue was booked in earlier year.)
• Lucid Software as its segmental details with respect to software design and software products were not available
Further, it accepted assessee’s contention to reject entity level margin of MegaSoft (on account of the company having software product segment) and compute margins only for software service segment.
Asst CITvs Electronics for Imaging India Pvt Ltd [TS-1323-ITAT-2018(Bang)-TP] (IT(TP)A No.1725/Bang/2017 dated 31.10.2018

149. The Tribunal restored the TP study conducted by TPO in respect of software distribution segment to be re-examined and directed the TPO to consider issue afresh after giving an opportunity to assessee in light of the claim by assessee that the DRP had made a factually incorrect observation that assessee had not filed annual reports of comparables selected by assessee and TPO during its proceedings. It was assessee’s contention that TPO had not applied his mind and selected comparables which were functionally dissimilar (engaged in manufacture of raw material and chemical and trading of commodities.)
Asst CITvs Arcot R&D Software Pvt Ltd [TS-1331-ITAT-2018(Bang)-TP] (IT(TP)A No.437/Bang/2016 and CO No.14/Bang/2017) dated 15.10.2018

150. The Tribunal upheld DRP’s order excluding MindTree Ltd, Infosys Technology Ltd, L&T Infotech Ltd., Persistent Systems Ltd. and Sasken Communication Tech Ltd.in case of assessee’s software development segment on basis of higherturnover. It also held that Maveric Systems Ltd., Evoke Technologies Ltd and Silverline Technologies Ltd. were to be included by relying on ratio laid down in coordinate bench decision in Dar Al-Handasah Consultants India Pvt Ltd wherein it was held that comparables which were found to be functionally comparable though selected by assessee during TP proceedings, needed to be considered in case they fulfill all the other filters, by the TPO.
ACITvs MSC Software Corporation of India Pvt Ltd [TS-1370-ITAT-2018(PUN)-TP] (ITA No.577/Pun/2015) dated 24.10.2018

151. The Tribunal held that assessee engaged in providing BPO/data processing and ITES to its AE could not be compared to:
• Infosys BPO Ltd as it had high brand value and assessee was providing routine BPO services (not high end BPO or KPO services) and further, coordinate bench in assessee’s own case had held it was not a good comparable as it had goodwill and high turnover, incurred marketing and selling expenses as well as provisions for bad and doubtful debts which indicated that Infosys had taken marketing risk, therefore, FAR undertaken was different from the assessee..
Further
• It remanded the comparability of Acropetal Technologies Ltd. as it was remitted by the coordinate bench in preceding year with direction to TPO to verify the segmental analysis (It was remitted by the coordinate bench with a direction to verify segmental analysis as it was assessee’s contention that said comparable’s healthcare segment provided niche IT solutions/ software development services (software expenses to total operating expenses were 65%) which could not be compared to low end ITES and further, segmental verification would be needed as software expenses were allocated on basis of allocation and not actual.)
• It remanded the comparability of RSystem International Ltd. with direction to AO to verify if the company was a persistent loss-making concern and was incurring losses consistently for three years continuously. It observed that said company could not be excluded due to different financial year when data was available in public domain for extrapolation.
• It directed the AO to include Caliber Point Solution Ltd. as a comparable inspite of different accounting period (financial year ending being December instead of March) in view of RSystems being accepted as a comparable in preceding years inspite of different accounting year
Maersk Global Service Centre India Pvt. Ltd. vs ACIT [TS-1280-ITAT-2018(MUM)-TP] ITA 653/Mum/2017 dated 20.11.2018

152. The Tribunal held that assessee providing software development services to its AE could not be compared to:
• Kals Information System as it was engaged in the business of developing and selling software products.
• Bodhtree Consulting Ltd. as it was involved in providing open and end-to-end web solutions, software consultancy, design and development of solutions. Further, it had fluctuation margins over the years.
• FCS Software Solution Ltd. as operating margins of said concern did not reflect consistent trend over the years and the current year’s margins i.e. for assessment year 2008-09 in comparison to earlier years were quite abnormal.
• E-Zest Solutions Ltd as it was engaged in e-business consultancy services consisting of web strategy services, ITES services and technology consultancy services including portal development services which were KPO services.
• E-Infochips Ltd. as it was engaged in software development and ITES for which segmental data was not available.
Further,
• It included SIP Technologies Ltd. as it was not a persistent loss-making concern in light of coordinate bench ruling of John Deere for AY 2009-10 wherein it was held that the said comparable had made profit in one out of three years and hence could not be a lossmaking concern.
Renishaw Metrology Systems Pvt. Ltd. vs Dy.CIT [TS-1282-ITAT-2018(PUN)-TP] ITA No.271/PUN/2013 dated 16.11.2018

153. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Persistent Systems Ltd as it was engaged in both software products, services and technology innovation and segmental details were not available, whereas the assessee was into software development. It further observed that the said company had high intangibles.
• L&T Infotech Ltd. as the revenue from IT services of said company for AY 2013-14 was Rs. 3613 Crs and it had huge intangibles and further, relied on Del HC ruling in Saxo India (P.) Ltd. wherein it was held that segmental information for said comparable was not available (break-up between product and software development services not provided.)
Further,
• It remanded the comparability of Infobeans Technologies Ltd. observing that as per the company’s financials, the export of goods and services was calculated under FOB basis. However, except for the said reporting in financials, there was no material to demonstrate that the company was carrying on business of sale of software and that it was functionally different from the assessee company.
EPAM Systems India Pvt Ltd vs ACIT [TS-1311-ITAT-2018(Hyd)-TP] ITA No.2122/Hyd/2017 dated 20.11.2018

154. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Comp-U-Learn Tech India Ltd. as it had revenue from ITES and software and there was no segmental bifurcation. Further, it was also seen that said comparable was into research & development to enhance the quality of its products whereas the assessee was a routine software provider.
• E-Infochips Bangalore Ltd. as it had revenue from ITES and software for which segmental details were not available.
• Persistent Ltd. as it was engaged in sale of software product, owned significant intangibles and segmental data for services and products was not available.
• Sasken Communication Technologies Ltd. as it earned revenue from three segments and segmental data was absent.
• Kals Information Systems Ltd. as it had revenue from developing software products and was not purely a software development service provider.
• Tata Elxsi Ltd. as it was predominantly into product design services, Innovation Design Engineering and visual computing labs division which are specialized services under software development which are complex in nature and further no breakup based on which margin from software services could be computed.
• Satyam Computers Services Ltd. as it was being investigated by various authorities and courts
Further,
• It included CG-VAK Software Software and Exports Ltd (which was rejected by TPO for failing to satify the employee cost filter) noting that TPO ignored contribution to PF & ESI, Gratuity and Ex Gratia payments and arrived at the employee cost.
Ivy Comptech Pvt Ltd vs Dy.CIT [TS-1316-ITAT-2018(Hyd)-TP] ITA No.334 /Hyd/2015 dated 29.11.2018

155. By relying on coordinate bench decision of Hyundai Motors India Engg. P Ltd.,the Tribunal held that assessee engaged in providing ITES to its AE could not be compared to a) TCS E-serve International Ltd. as it had acquired Citi group India based captive BPO arm which was exceptional event affecting the financials b) Accentia Technologies Ltd as it was into diversified KPO, owned goodwill/IPRs and had undergone an extra-ordinary event which would have an effect on profit margins of said company.
Ivy Comptech Pvt Ltd vs Dy.CIT [TS-1316-ITAT-2018(Hyd)-TP] ITA No.334 /Hyd/2015 dated 29.11.2018

156. The Apex Court dismissed Revenue’s SLP against HC order upholding application of RPT filter of 25% (It had opined that such related party transactions in excess of a certain threshold may result in a profit-making capacity that presented a distorted picture) and it had also upheld ITAT’s exclusion of Wipro Ltd for comparability analysis owing to significant brand presence in the market inspite of similar functionality. The Apex Court opined that no ground for interference was made out in exercise of its jurisdiction under Article 136 of the Constitution of India.
Pr.CIT vs Oracle (OFSS) BPO Service Pvt Ltd [TS-1248-SC-2018-TP] SPECIAL LEAVE PETITION (CIVIL) Diary No(s).32469/2018 dated 30.11.2018

157. The Tribunal held that assessee engaged in providing ITES services to its AE could not be compared to:
• Infosys BPO Ltd as it had a brand value along with high turnover (It relied on coordinate bench in assessee’s own case for earlier year)
• Jeevan Scientific Technology Ltd. as its BPO segment had foreign exchange earnings which was absent in case of assessee and further, there was huge fluctuation in its BPO segment.
Further,
• It included ICRA Online Ltd. noting that its RPT filter was less than 25% after excluding reimbursement transactions and thus did not fail the RPT filter of 25%.
ITO vs Knoah Solutions Pvt Ltd. [TS-1263-ITAT -2018 (Hyd)-TP] ITA No.584/Hyd/2016 dated 30.11.2018

158. The Tribunal upheld DRP’s order to exclude Infosys Technologies Ltd and L&T Infotech Ltd as they were having super profit and very high turnover by relying on coordinate bench of Wissen Infotech Pvt Ltd wherein the companies had been excluded for the same reason in case of assessee engaged in providing software development services to its AE. Further, vis-à-vis assessee’s ITES segment, it also upheld DRP’s order with respect to exclusion of a) Infosys BPO as it had the benefit of market value and brand value b) Eclerx Services Ltd as KPO services are distinct from BPO services. c) TCS e-serve Ltd as it was engaged in diversified activities.
Dy.CIT vs Ivy.Comptech Ltd [TS-1316-ITAT -2018 (Hyd)-TP] ITA No.222/Hyd/2015 dated 29.11.2018

159. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• AvaniCimcom Technologies Ltd as it had revenue from software products and segmental details were not available.
• Celestial Labs Ltd. as it was engaged in clinical research and manufacture of bio products and other products which were functionally different from assessee.
• Flextronics SoftwareSystems Ltd as it had a different financial year ending.
• Infosys Ltd as it owned intangibles and had huge revenue from software products and the breakup of revenue from software services and software products was not available
• Ishir Infotech Ltd as it was outsourcing its work
• Lucid Software Ltd. as it was into development of software whereas assessee was providing software development services.
• Wipro Ltd as it owned intangibles and company owning intangibles could not be compared to a low risk captive service provider who does not own any such intangible.
• KalsInformation Systems Ltd as it was developing software products and not purely or mainly software development service provider.
• Tata Elxsi Ltd as the segment ‘software development services’ related to design services and are not similar to software development services performed by the assessee.
Further,
• It included Megasoft and directed TPO to rework its segmental results after considering only the software development services.
NI Systems India Pvt. Ltd vs DCIT. [TS-1270-ITAT -2018 (Bang)-TP] IT(TP)A No.1355/Bang/2011 dated 07.11.2018

160. The Tribunal held that assessee engaged in providing ITES (data management services, data collection, organization, validation, analysis and filtering of accounts) to its AE could be compared to:
• Accentia Technologies Ltd as it had undergone extraordinary activity of amalgamation during year 2008-09 which had no impact on financials of AY 2010-11 and the merger in its case was with a business similar to it (that of healthcare receivable management and had same income streams of Medical Transcriptions and Coding alongwith Bills and Calculations Systems).
• R Systems International Ltd as results could be reasonable extrapolated (in presence of reliable and authentic data submitted by assessee for three months).
• E4E Healthcare as assessee had relied upon judicial precedents for its exclusion without submitting financials and also not contested the said comparable before TPO and DRP. It noted that the judicial precedent of excluding the one company against the other cannot be judged as such without comparing functions of that comparable company with the assessee company.
• TCS E-serve Ltd. as it had diversified services like software testing verification and validation software for which segmental analysis was not available, high turnover and brand value.
• TCS E-serve International Ltd. as it was engaged in technical services of software testing, high turnover and brand value.
• Infosys BPO as it provided Business process management services (business not carried out by assessee), prepared segments on basis of customers related to particular industry and not according to functions brand value, huge goodwill, had huge intangibles and higher risk.
VAILDOR CAPITAL INDIA PVT LTD vs ITO [TS-1329-ITAT-2018(DEL)-TP] (ITA No.1961/Del/2015) dated 22.11.2018

161. The Tribunal held that assessee engaged in providing ITES to its AE could not be compared to:
TCS E-serve Ltd. as it was a KPO whereas assessee was a low end BPO
Further,
• It remanded the comparability of Universal Print Systems Ltd.(seg)(BPO) noting that said company had 4 segments viz., Repro, Label Printing, Offset Printing and Pre-press BPO. Whether the other segments supplemented the functions performed by BPO segment had to be seen and if it did reasonable accurate adjustments had to be made in terms of Rule 10B(3) (segmental adjustment) for comparing with the assessee. It afforded assessee an opportunity of being heard with respect to functional comparability.
• It included BNR Udyog Ltd as it passed RPT filter and income from providing ITES being more than 75% at segmental level.
• It included Excel Infoways Ltd as it earned revenue from BPO segment which clearly demonstrated it was engaged in ITES segment.
Zyme Solutions Pvt Ltd vs Asst CIT [TS-1272-ITAT-2018(Bang)-TP] (IT(TP)A No.1661/Bang/2016) dated 16.11.2018

162. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Accentia Technologies as it was engaged in KPO services in health care sector. Further, it owned various software products and segmental financials to work out the profitability of ITES segment and software segment were also not available
• Acropetal Technologies Ltd. as it was engaged in KPO services in health care segment
• E-Clerx Services Ltd. as it was providing high end KPO services
• ICRA Techno Analytics Ltd. as it was providing software development and high-end analytic services
• Infosys BPO Ltd as it was providing business process management services and operating as a full-fledged risk-bearing entrepreneur and had high turnover, huge brand value and considerable R&D activities
• TCS E-Serve Ltd. as it was providing high end KPO services and was also exploiting brand TATA
Timex Group India Limited vs DCIT [TS-1366-ITAT-2018-(Del)-TP] ITA No.845 /Del/2016 dated 20.12.2018

163. The Tribunal restored the benchmarking of ITES segment to TPO/AO directing it to examine contentions of assessee to arrive at a proper finding and directed assessee to file relevant documents. The assessee had contested inclusion of 4 of the comparables, namely, Maple e-Solution Ltd, Goldstone Infratech Ltd., Datamatics Financial Services Ltd. and Apex knowledge Solutions Pvt Ltd. It was also assessee’s contention that suitable adjustment ought to be provided vis-à-vis comparable for substantial difference of working capital adjustments, however TPO had not provided basis for same in his order.
Monsanto Holdings P. Ltd vs Addl. CIT [TS-1365-ITAT-2018(Mum)-TP] ITA No.8081/Mum /2010 dated 14.12.2018
164. Relying on coordinate bench decision in AT&T Global Business Services India P Ltd, the Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Acropetal Technologies Ltd. as it failed the filter of 75% of Revenue from software development services applied by TPO. [It relied on coordinate bench decision of Commscope Networks India Pvt Ltd.]
• E-InfochipsLtd as it was engaged in diversified activities like software development services, ITES and sale of products and segmental information was not available.
• Infosys Ltd as it had huge brand, huge intangibles and high turnover
• Persistent Systems Ltd as as it was engaged in diversified activities including licensing of products, earned royalty on sale of products as well as income from maintenance contract and segmental information was not available
• Sasken Communication Technologies Ltd as it earned revenue from software product, software services and other services and segmental margins were not available in absence of segmental data.
• Tata Elxsi Ltd as it was engaged in development of niche products and development services which was entirely different from the assessee company.
Salesforce.com India P. Ltd vs DCIT [TS-1325-ITAT-2018-(Bang)-TP] IT(TP)A No.697/Bang/2016 dated 21.12.2018

165. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Infosys Ltd. as it was a giant risk-taking company and engaged in development and sale of software products and also owned intangible assets and therefore not comparable with a software development service provider
• L&T Infotech Ltd as it was also a software product company and segmental information on software development services was not available.
• Persistent Systems Ltd as it was also a software product company and segmental information on software development services was not available.
• Genesys International Corporation Ltd. as it rendered mapping and geospatial services which was under GIS based services segment (which was only segment as per reports) and there was no basis for TPO to conclude that it was predominantly software development services. Further, presence of intangible assets was indicative of the fact that company was not into software development services business.
Evolving Systems Network India Pvt. Ltd vs ITO [TS-1361-ITAT-2018-(Bang)-TP] IT(TP)A No.216/Bang/2017 dated 21.12.2018

166. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• E-Infochip Ltd. as it earned revenue from software development, hardware maintenance, information technology consultancy, information technology services and sale of products. Thus, it did not satisfy the functionality test to initiate the process of comparability
• Wipro Technology Ltd as it earned its revenue from Citigroup Inc which was a related party transaction. Wipro (its parent company) had acquired company known as ‘Citi Technology Services Ltd. which was carrying out the software development and maintenance services for Citi Group Inc and thereafter Wipro had entered into an agreement with aforesaid company for delivery of same set of services. Wipro Technology services Ltd was providing services to Citi Group out of India as a part of said agreement and thereby it fell within the deeming ambit of section 92B (2), whereby it had to be treated as deemed AE as the service agreement earlier entered was between the related party and same terms and agreement was continuing, hence had to be reckoned in the category of related party transactions (Clause (2) of section 92B provides that, if a transaction entered into by an enterprise with a person other than AE, shall for the purpose of sub-section (1), be deemed to be an international transaction entered into between two AE, if there exists a prior agreement in relation to the relevant transaction between the other person and the AE, then the terms of the relevant transaction in substance remains the same when it was a related party transaction)
Further, it included R System on ground that it could not be rejected on ground of different financial year if results of company could be reasonably extrapolated.
Navisite India Pvt Ltd vs ITO [TS-1367-ITAT-2018-(Del)-TP] ITA No.1054 /Del/2016 dated 17.12.2018

167. The Tribunal held that assessee engaged in the provision of software development services could not be compared to:
• Avani Cimcon Technologies Ltd as it was engaged in both software development services as well as product development and segmental details were not available
• Bodhtree Consulting Ltd as it failed the RPT transactions for subject year as its RPT filter exceeded threshold of 25%
• E-Zest Solutions Ltd as it was into product development and also provided high end technical services in the category of KPO services
• Helios and Matheson Technology Ltd as it was involved in development of software products.
• Kals Info System Ltd as it was engaged in development of software products
• Lucid Software Ltd as it was into software product development
• Persistent System Ltd as it was engaged in product development and product design services and segmental details were not available
• Sasken Communication Ltd as it was engaged in licensing of products / technology which demonstrated that the company was engaged in development of products also and also there was an amalgamation / merger in the company which might have impacted the profitability
• Tata Elxsi Ltd as it was engaged in diversified activities including development of niche product and development services.
• Thirdware Solutions Ltd as it was involved in development of products and trading in software licenses
• Ishir Infotech as it was outsourcing most of its operations and the employee cost of the company was 3.96% of the operating revenue.
Further, the Tribunal remanded the comparability of
• MegaSoft and directed AO /TPO to include the company only if segmental details of software development segment were available
• Rsystem for TPO to ascertain if segmental details of software development segment were available and if so, to extrapolate the financial data for 9 months (i.e. March to December) to the subsequent three months (from December to March).
• LGS Global for TPO to ascertain if segmental details of software development were available as it was engaged in development of software products also
• Accel Transmatic Ltd for TPO to ascertain if segmental details of software development were available as it was engaged in development of software products also
• PSI Data Systems Ltd. for TPO to ascertain if related party transaction of the company as a percentage of sales worked out to 22.42% and if so, it could not be rejected as a comparable as it would satisfy TPO’s filter of 25%
Infor Global Solutions India (P.) Ltd. vs. Dy.CIT [2019] 102 taxmann.com 58 (Mumbai – Trib.) IT APPEAL NO. 520 (MUM.) OF 2012 dated 04.12.2018

168. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Birla Soft Ltd as its RPT transactions constituted 80% of its sales thus, it did not satisfy the filter applied by TPO of RPT of 25%
• Wipro Ltd as it was engaged in provision of IT services including BPO and IT products, has significant brand presence and owned intangibles
• L&T Infotech Ltd. as it earned revenue from three segments namely, service cluster, industrial cluster and telecom cluster and its unallocable expenses were not allocated between the segments in absence of availability of nature of expenses and proper allocation keys, and thus correct operating margin could not be ascertained
• Tata Technologies Ltd as RPT transactions came to about 87% of sales thus, it did not satisfy the filter applied by TPO of RPT of 25%
Pitney Bowes Software India Pvt Ltd vs Addl CIT [TS-1313-ITAT-2018-(Del)-TP] ITA No.5052 /Del/2018 dated 17.12.2018

169. The Tribunal while adjudicating on recalled order (arising from miscellaneous petition) in case of assessee engaged in software development directed TPO/AO to consider Megasoft Ltd. as a comparable after taking only the relevant segment by relying on ratio laid down in case of coordinate bench decision of Core Objects India (P) Ltd wherein Megasoft was held to be a good comparable in case of software development after considering only software development segment.
Infinera India Pvt Ltd vs ITO [TS-1313-ITAT-2018-(Del)-TP] ITA No.5052 /Del/2018 dated 17.12.2018

170. The Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd as it was providing KPO services in medical transcription segment
• E-clerx Limited as it was engaged in providing data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management and revenue management and offered financial services such as real-time capital markets, middle and back office support, portfolio risk management. It was providing KPO services
• Infosys BPO Ltd as it had a high turnover and high brand value
• Fortune Infotech Ltd. as it developed its own software for performing specialized services in medical transcription due to which it had derived substantial benefit/advantage as compared to company engaged in routine ITES services
Further, it included TCS E-serve Ltd and TCS E-Serve International Ltd noting that activities of both the companies were similar to assesssee’s activities (ITES) and the technical servicesof software testing, verification and validation the software were carried out at the time of implementation of software only and were in the nature of back-office support. Further, in case of TCS E-Serve International Ltd, the Tribunal observed that the expenditure corresponding to contribution of “Tata” brand by companies was a very small part of total operational expenses by company.
Avaya India Pvt Ltd vs ACIT [TS-1290-ITAT-2018-(Del)-TP] ITA No.1904 /Del/2015 dated 03.12.2018

171. Relying on coordinate bench decision in assessee’s own case for earlier year, the Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to:
• E-clerx Services Pvt Limited as it was engaged in providing data analytics, operations, management, audits and reconciliation, metrics management and reporting services and was a KPO [ The coordinate bench decision in assessee’s own case for earlier year had relied on coordinate bench decision of Maersk]
• Moldtek Technologies was a provider of engineering and design services with specialization in civil, structural and mechanical engineering services and providing high-end services to its clients involving higher special knowledge and domain expertise in the field and the same could not be taken as comparable to the assessee company which is mainly involved in providing low-end services. [The coordinate bench decision in assessee’s own case for earlier year had relied on coordinate bench decision of Maersk]
• Accentia Technologies Ltd. as it had undergone amalgamation/merger which was an extraordinary event impacting profitability and further, segmental data was not available.
Stream International Services Pvt Ltd vs ACIT [TS-1378-ITAT-2018-(Mum)-TP] ITA No.6869 /Mum/2012 dated 13.12.2018

172. The Tribunal remanded back the inclusion/exclusion of comparables to DRP with respect to ITES/ Software development services noting that DRP had not given a reasoned and cogent finding while allowing/disallowing the plea of assessee with respect to comparables. It restored back the entire matter to the file of DRP to pass a reasoned speaking order and to afford assessee an opportunity of hearing before passing a detailed order. It directed DRP to consider the Delhi HC’s decision in ChryscapitalInvestment Advisors (India) (P) Ltd wherein it was held that high turnover or low turnover do not affect the comparability of the company while adjudicating the grounds.
ITO vs Dell International Services India P Ltd [TS-1291-ITAT-2018-(Bangalore)-TP] IT(TP)A No.340/Bang/2015 dated 13.12.2018

173. The Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to TCS E-Serve Ltd noting that TPO in previous year had excluded it as a comparable and TPO in succeeding year had relied on Bombay HC decision in Pentair Water India Ltd wherein it was held that while making the selection of comparables, turnover filter had to be basis of selection to exclude the said comparable. It disregarded Revenue’s reliance on Delhi HC judgment in case of Chryscapital Investment Advisors (India) Ltd. wherein it was held that a comparable having huge profit or a huge turnover ipso facto does not lead to its exclusion noting that Revenue could not produce any contrary decision of jurisdictional High Court nor any decision of Apex Court was cited which had taken a view in favour of Revenue.
Integreon Managed Solutions (India) Pvt. Ltd vs ACIT [TS-1385-ITAT-2018-(Mum)-TP] ITA No.6927/Mum/2016 dated 14.12.2018

174. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Infinite Data Systems Private Ltd. as it derived its revenue from technical support and infrastructure management services and was also rendering technical consultation, design & development of software, maintenance system integration, implementation, testing & infrastructure, management services and its segmental information was not available and its profitability increased by 1496% as compared to the preceding year
• Infosys Ltd. as it was incurring huge expenditure of its total revenue on its R&D activities leading to creation of intangible property, brand, it assumed entrepreneurial risk and also dealt in software products. It relied on Delhi HC decision in Agnity India Technologies Pvt Ltd. wherein said comparable was excluded on ground that Revenue was not able to controvert Tribunal’s findings that it operated as full-fledged entrepreneur had huge turnover, engaged in diversified activities (consulting application design, reengineering and maintenance system integration, package evaluation and implementation and process management) and half of its services rendered were onsite.
• Persistent Systems Ltd as it was involved in software development, software products and marketing and its segmental data was not available. [It relied on Delhi HC in Cashedge India Pvt Ltd.]
• Sonata Software Ltd as it was primarily engaged in development of software product and it also provided IT solutions, IT consulting, and also provided both onsite as well as offshore services in the area of RP customization conversion and migration projects, data warehousing, Business Intelligence, Web Development, Infrastructure Management amongst others and further it did not satisfy TPO’s filter of RPT to sales of 25% ( as its RPT to sales was 53.83%).
• Tata Elxsi as it was functioning into specialized domain of software products / services (software development and services is broken up into three distinct business groups viz. Productive Design Services (PDS) innovation, design, Engineering and visual computing labs). [ It relied on coordinate bench decision in case of NEC Technologies India Ltd. (formerly known as NecHcl Systems technologies Ltd)
• Zylog Systems Ltd. as it had undergone business restructuring due to acquisition which was an extraordinary event and had significant intangibles and was also carrying out research and development activities creating significant intangibles. [It relied on coordinate bench decision in Equant Solutions India Pvt. Ltd.]
• Thirdware Solution Ltd. as it earned income from development and sale of software products, services and subscription and sale of license and segmental information was not available. [It relied on coordinate bench decision in Open Solutions Software Services Pvt Ltd.]
Lime Labs (India) Pvt. Ltd vs ITO [TS-1307-ITAT-2018-(Del)-TP] ITA No.1703/Del/2015 dated 12.12.2018

175. The Tribunal rejected the ground in miscellaneous petition that CyberMateInfoteck Ltd. (CIL) was to be excluded in view of jurisdictional HC decision in case of PTC Software Pvt Ltd. wherein it had held that the software services and software products were not identical activities and therefore, the two separate companies or entities providing respective services would not give rise to comparable instances and further, in assessee’s own case for earlier year, the Tribunal had taken a favourable view. On appeal from the said Order rejecting the assessee’s rectification application in part, the Court directed Tribunal to undertake a fresh and detailed inquiry as to the permissibility of comparing the instances of CIL with that of the petitioner/assessee with special focus on the aforesaid decision noting that Tribunal is even otherwise hearing the tax appeal and Tribunal in earlier AY had dealt with same issue differently.
Lionbridge Technologies Pvt Ltd vs UOI [TS-1294-HC -2018-(Bom)-TP] WP No.2906 of 2018 dated 13.12.2018

176. The Tribunal held that assessee engaged in provision of software development services to its AE could be compared to:
• ICRA Techno Analytics Ltd, Persistent System and Solution Ltd and Think Soft Global Services Ltd. as RPT transactions were below threshold of 15%. [It relied on coordinate bench decision of Autodesk India Pvt Ltd. wherein it was held that depending on availability of comparables RPT of 25% or RPT of 15% have to be taken, considering there is no dearth in comparables in software development services, RPT of upto 15% was taken.]
Further, it remanded comparability of Kals Information Systems Ltd. directing TPO to exercise his power u/s.133(6) to find whether company was a product company and that no segmental information was available noting that assessee’s contention for exclusion on ground that it was a software product company evident from snapshot of website of company that it was a customized product manufacturing company and had significant inventory.
Sunquest Information Systems (India) Pvt Ltd vs Dy.CIT[TS-1390-ITAT -2018-(Bom)-TP] IT(TP)A No.552/Bang/2015 dated 21.12.2018

177. The Tribunal held that assessee engagedin the business of research and development for the design and development of semi-conductor IC (software segment) to its AE could not be compared to:
• SIP Technology and Exports Ltd. as there was no comparable data for AY 2005-06 on account of it closing its books on September 2004 and no information was filed about yearend closing of results on 31.03.2005 [ it relied on coordinate bench decision of PTC Software Ltd. wherein it was held that only data pertaining to financial year to be considered for comparability purposes.]
• VMF Soft Tech Ltd. as no segmental breakup was available between software services and infrastructure support services and no information about the nature of business was also available from annual reports regarding the type of products/services
• Helios and Matheson Information Technology Ltd. as assessee had 100% RPT.
• Geometric Software Solutions Ltd as it was engaged in developing and licensing of products and product life cycle management services
• ICSA Ltd. as it had a different business model of outsourcing its services whereas assessee had adopted an in-house business model of providing services \
• Further,
• It restored the comparabilityof Compucom Software Ltd. directing TPO to conduct a segmental analysis as it had operations in software and software products and if it was found that segmental data was not available, to eliminate the comparable
• It restored the issue of computation of margin of Visual Soft Technologies Ltd to determine proper OP/TC and adopt the same as proper margin in arriving at ALP
• It included Saksoft Ltd. rejecting assessee’s contention for excluding on basis of its RPT exceeding 25% (74.16%) on ground that assessee was a 100% subsidiary like the aforesaid comparable and assessee’s entire revenue was generated from its AE. Further, the TPO had not applied RPT filter to any of its comparables.
Conexant Systems Pvt Ltd vs Dy. CIT [TS-1396-ITAT -2018-(Bom)-TP] ITA 1694/Hyd/2016 dated 26.12.2018

178. The Tribunal held that the assessee engaged in the provision of ITES to its AE could not be compared to:
Accentia Technologies Ltd. as it had acquired stake in companies viz. Geo-Soft Technologies (Private) Ltd and Indium Technologies India Pvt Ltd. Further, its business model was different vis-à-vis assessee since it incurred 68% of operating expenses towards overseas business expenses as against nil in case of assessee.
Bodhtree Consulting Ltd. as it was into software development and data cleansing segment.
E-Clerx Ltd. as it was providing high level services involving specialized knowledge and it was a KPO. [relied on the Del HC decision of Rampgreen Solutions India Pvt. Ltd.]
Informed Technologies India Ltd as it was operating as knowledge based back office processing centre and consisted of providing financial database and backoffice activity for research and advisory division reports. Also as per the TP study report, its focus was on niche market segment of financial content and outsourcing services.
Infosys BPO Ltd as it had huge turnover, owned IPR and brand value on products and provided services to vast clientele.
Moldtek Technologies Ltd. as it was involved in providing structural engineering services and also had undergone merger. Further, there was a huge change in business module due to revision of accounts post amalgamation. [ It relied on coordinate bench decision of Tribunal in case of Cienna India Pvt Ltd and Petro Araldite wherein it was held that a company could not be considered as comparables in case of its financial results distorted due to merger.]
Wipro as it owned IPR, incurred expenses on research and development, risk profile and nature of services whereas the assessee was a captive service provider with minimal risks and no intangibles. [It relied on the coordinate bench decision of ICC India Pvt Ltd which in turn relied on the decision of Caliberated Healthcare Systems]
Asit C Mehta as it derived income from various activities like brokerage, arbitrage and trading in securities. Its business involved immense knowledge and experience for advising its client towards investment in stock.
Vishal Information Technology Ltd. as it was a KPO.[ relied on Delhi HC decision of Rampgreen Solutions India Pvt Ltd.]
Maple E-solutions Ltd and Triton Corporation Ltd. as the directors of the companies were involved in frauds and money laundering.
Further, it restored the functional comparability of HCL Comnet Systems and Services Ltd as it had a separate segment for ITes and also directed the TPO to consider forex fluctuation while computing PLI margin. It restored Flextronics Software for recomputation of PLI margin since forex fluctuation at entity level was considered.
NTT Data Global Delivery Services Ltd. vs ITO [TS-953-ITAT-2018-(Del)-TP] ITA No.5339/Del/2011 dated 12.07.2018

179. The Tribunal held that the assessee engaged in the provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd. as it had acquired stake in companies viz. Geo-Soft Technologies (Private) Ltd and Indium Technologies India Pvt Ltd and was also engaged in diversified activities like healthcare management receivables, medical transcription, software development and film production and there was no segmental information available
• Vishal Information Technologies Ltd. as it was considered as a KPO service provider in the Del HC decision of Rampgreen Solutions Pvt. Ltd.
• Eclerx Services Ltd as the company was engaged in providing high level services involving specialized knowledge and domain expertise and is a KPO service provider. [It relied on the Special bench decision of iQor India Services (P.) Ltd ]
• Genesis International Corporation Ltd as the company provided cadastral mapping, navigation maps, 3-D mapping, photogrammetry /remote sensing services, power etc., which were highly skilled and knowledge-based services. Further, it disregarded the reliance placed by the TPO on CBDT Circular no.890(E) which listed 15 products or services under the umbrella of IT enabled services by following the decision of coordinate bench decision of Macquaireb Global Services Pvt Ltd wherein it was held that Genesis International Corporation Ltd. (even though covered under the list of ITES falling under the head geographic information system services) could not be compared to assessee which was engaged in providing backoffice operations and call centre services (which was also covered under the list of ITES) as 15 products or services under overall umbrella of ITES of the CBDT Circular were entirely diverse in nature due to different proportion of skills and extent of capital employed required for such services.
• HCL Comnet Systems and Services Ltd. (Seg.) as the company incurred significant R&D expenses and also developed several tools as reported in the annual report. It also had a high RPT of 23 per cent as against the 15 per cent threshold applied by the TPO. The company also owned sufficient intangible assets in the form of computer software and there was inconsistency in the information between the annual report and the data obtained under 133(6) as a different financial year has been adopted. Also, the company earned from sale of networking equipment and software. [It relied on the Delhi HC decision of Rampgreen Solutions Pvt. Ltd.]
• Infosys BPO Ltd. as the company had huge turnovers, owned IPR and brand value on products.
• Acropetal Technologies Ltd,(segment) as the company was engaged in the development of computer software involved in engineering design services and also had products, which were high end functionally dissimilar. [It relied on the coordinate bench decision of Capital IQ Information Systems (India) (P.) Ltd.]
Cengage Learning India P Ltd vs Dy.CIT [TS-828-ITAT-2018(DEL)-TP] ITA No.6484/Del/2012 dated 19.07.2018

180. The Tribunal held that assessee engaged in providing ITES to its AE could not be compared to:
• Accentia Technologies Ltd. as it was engaged in development of software products for healthcare. Further, it was engaged in diersified activities like KPO,LPO, Data processing, LPO high end software services and segmental details were not available.
• TCS E-Serve Ltd as it had made payment for use of TATA brand and use of such brand increased its operating profits.
• Informed Technologies India Ltd. as it was a KPO and analysed data on financial fundamentals serving the needs of financial content sector in USA
Further, the Tribunal included R Systems International Ltd. as a comparable directing the assessee to furnish its quarterly report to extrapolate the financials
INDUCTIS INDIA PVT. LTD. vs. Dy CIT (2018) 53 CCH 0329 DelTrib ITA No. 1438/Del/2016 dated 13.07.2018

181. The Tribunal adjudicated on the functional profile of the company and held that the DRP had mis-read itself in determining assessee as a high end service provider, whereas assessee was only providing ordinary technical support which was categorized as ITeS BPO services provider in earlier years. Thus, it held that the assessee should be treated as a BPO providing ordinary support services to its AE.

Further, it held that assessee engaged in the provision of ITES services to its AE could not be compared to:
TCS EServe Ltd as it was engaged in diversified business like providing IT Consulting, KPO services etc and it was deriving benefit of huge brand value of TATA resulting in high margins and high turnover. [ It relied on the coordinate bench decisions of BC Management Services (P.) Ltd., S&P Capital IQ (India) Pvt. Ltd, Infor (India) (P.) Ltd., Baxter India Pvt. Ltd]
Infosys BPO Ltd. as it was providing diversified services including high end KPO and LPO, product based solutions and BPO services and therefore, was functionally incomparable and had acquired another company during the year which impacted its profitability. [ It relied on various rulings including assessee’s own case for earlier year, Agnity India Technologies (Delhi HC), Monster.com and Aginity India Technologies (Del Trib)]
Eclerx Services Ltd as it was a high end KPO and the only reason for inclusion of the company for the subject year was recategorization of assessee as KPO and once it had held that the assessee was only a ordinary BPO, this company had to be excluded.
Accentia Technologies Ltd. as it was functionally not comparable in light of the coordinate bench decisions of the assessee’s own case for earlier years.
C3i Support Services Private Limited vs Dy.CIT [TS-797-ITAT-2018(HYD)-TP] ITA No.503/Hyd/2017 dated 25.07.2018

182. The Tribunal restored the issue with respect to determination of the functional profile of the company (engaged in the business of software design and development of services in respect of layout of chips) to the TPO with a direction to examine and decide the issue afresh. The TPO had examined the agreement with its AE and held that the assessee was a KPO service provider and the DRP had concurred with the view of the TPO and held that the assessee was a KPO as it was involved in services related to IC designing with help of large specialized workforce. The Tribunal noted that a) the coordinate bench in assesse’s own case wherein co-ordinate bench had examined same agreement with AE (as referred to by TPO in subject AY) and found that assessee was providing software development services and b) that even in subsequent years on the same facts, the TPO had characterized the assessee as software development service provider. Thus, the Tribunal remanded the matter back and directed the TPO to consider the above observations and provide the assessee with an opportunity of being heard.
Open Silicon Research Pvt Ltd vs. Dy.CIT [TS-799-ITAT-2018(Bang)-TP] IT(TP)A No.244/Bang/2016 dated 06.07.2018

183. The Tribunal upheld the DRP’s order with respect to exclusion of the following comparables in case of assessee engaged in the provision of ITes to its AE:
Infosys BPO as it was into high end services and had a turnover of Rs 1130 Cr which was more than 10 times assessee’s turnover of Rs. 66.44 Cr. Further, it had a huge brand value which would impact its profitability for the relevant year. [ It relied on Del HC ruling in Agnity India Technologies Pvt Ltd.]
TCS-E-Serve Ltd as it had a huge brand value which affected its profitability and had a turnover of Rs 1405 Cr which was more than 10 times assessee’s turnover.
e-Clerx Services Ltd as the company was a KPO service provider. [It relied on HC ruling in Rampgreen Solutions (P) Ltd.]
ACIT vs DST Worldwide Services India Pvt Ltd [TS-813-ITAT-2018(HYD)-TP] ITA No.291/Hyd/2015 dated 18.07.2018

184. The Court upheld inclusion of i) ICRA Online Ltd by the ITAT order and dismissed assessee’s appeal. It rejected the assessee’s contention that the comparable was a KPO whereas the assessee was a low end BPO service provider providing voice call services noting that the KPO-definition as per Rule 10TA(g) indicated that it was a specie of genus BPO and both being ITES services provided by the software industry to their clients, the area of KPO may fall in the areas of operation and the exclusion as specified in Rule 10TA(g) was only for Research and Development Services whether or not in the nature of contract. Further, if the concerned KPO falls within the genus category of BPO then assessee could persuade the authorities to compare only segmental account available in public domain. It also observed that the Tribunal had clearly noted that the comparable and assessee were engaged in different streams of operation and included the company since the Tribunal had observed that the assessee was engaged in analysis of results, testing for which it had to use market intelligence, maintain e-tools, reporting analytics and thus, it had held that once level of knowledge that was being used for outsourcing was at a reasonable comparable pedestal, the type of service industry to which companies cater need not fit in the mould of comparables while adopting TNMM.
Further, the Court also held that no substantial question of law arose with regard to remand by the Tribunal of comparability of Jeevan Scentific Technologies. The assessee contended that the TPO had reinstated its prior order and not taken into consideration the segmental revenue (i.e.71.219L) of BPO operations as opposed to the total revenue considered which would result in failing the turnover yardstick of less than one crore applied by the TPO. With respect to the above, a miscellaneous petition had been filed with the Tribunal which was rejected and the Court observed that no appeal from such order was raised by the assessee and the aforesaid order passed was not part of the records.
Swiss Re global Business Solutions India Pvt Ltd vs ACIT [formerly known as Swiss Re Shared services (India) Pvt Ltd] [TS-766-HC-2018(KAR)-TP] ITA No.616/2016 dated 16.07.2018

185. The Tribunal held that the assessee engaged in the provision of software development services to its AE could not be compared to:
Persistent Systems Ltd. as it was engaged in diversified activities and and earning revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, and segmental data not available. [ It relied on the coordinate bench decision of Applied Materials]
Sasken Communication Technologies Ltd as there was no break-up of operating costs and net operating revenues of the two segments viz. software services and software products. [It relied on the coordinate bench decision of Applied Materials which in turn relied on the Delhi HC ruling of Saxo]
Further, the Tribunal included R S Software (India) Ltd as comparable as the assessee contended that the DRP had wrongly excluded it after applying onsite filter and the Revenue also agreed with the inclusion of the said comparable. The Tribunal also included Mindtree and Evoke Technologies observing that the profile of these companies were functionally comparable with the assessee and it also qualified the tests applied by TPO and upheld the DRP’s finding.
Cypress Semiconductor Technology India P. Ltd. vs. DCIT [TS-1060-ITAT-2018(Bang)-TP] IT(TP) A No.356/Bang/2016 dated 31.07.2018

186. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Persistent Systems Ltd. as it was dealing in software products and earned income from sale of both software products as well as services for which segmental details were not available
• Sasken Communication Technologies Ltd. as revenue generated from software products was high and though there was a break-up of revenue from software services and software products the operating cost and net operating revenues from 2 segments was not separately given.
• Zylog systems Ltd as it was into research and development activities and owned significant intangibles
• Wipro Technology Services Ltd. as it earned majority of revenue from Citigroup Inc and was earlier part of Citi Group and subsequently, it was acquired by Wipro and the arrangement of earning revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services was actually a prior arrangement between assessee’s AE (Wipro Ltd) and third party (Citigroup Inc.) and hence the transaction ceased to be a comparable uncontrolled transaction.
• E-Info Chips Ltd. as there was no segmental information available in respect of sale of products and revenue from software development segment.
Further, the Tribunal dismissed Revenue’s appeal for exclusion of Calibre Point Business Solutions (absence of segmental details) as it was pointed out by assessee that segmental information for software development services was considered by the TPO while giving effect to DRP’s directions.
NEC Technologies INDIA PVT. LTD. vs. Dy CIT (2018) 53 CCH 0344 DelTrib ITA No. 6283/Del/2015 dated 11.07.2018
Dy.CIT vs NEC Techologies India Pvt Ltd (2018) 53 CCH 0344 DelTrib ITA No. 312/Del/2016 dated 11.07.2018

187. The Tribunal held that assessee engaged in software development services could not be compared to:
• AcropetalTechnologiesLtd as it was a software product company. Further, its revenue from software development service was less than 75%of total revenue. [ It relied on the coordinate bench decisions of Electronic Imaging India and Microsoft Research].
• E-Infochips Ltd as it was a software development , software product and ITeS company and segmental data was not available. [ It relied on the coordinate bench decision of Electronic Imaging India].
• ICRA TechnoAnalytics Ltd. as the company was not functionally comparable as it was engaged in diversified activities of software development and consultancy, engineering services, web development & hosting and substantially diversified itself into domain of business analysis and business process outsourcing. [ It relied on the coordinate bench decision of Electronic Imaging India]
• PersistentSystems Ltd. as it developed software products. [ It relied on the coordinate bench decision of Electronic Imaging India]
MetricStream Infotech (India) Pvt Ltd vs ACIT[TS-749-ITAT-2018(Bang)-TP] IT(TP)A No.493/Bang/2016 dated 20.07.2018

188. The Tribunal held that assessee engaged in software development services could not be compared to:
Kals Information Systems Ltd. as it was a software product company.
• FCS Software Solutions Ltd. even though the company was engaged in provision of ITes services and as segmental information was not available.
• LGS Global as it failed the export filter applied by the TPO since its overall exports was only 14% of the total turnover.
Further, it remanded the comparability of E-Infochip to the file of CIT(A) on the ground that CIT(A) had not passed a speaking order.
ITO vs. Magic Software Enterprises India Pvt Ltd [TS-747-ITAT-2018(PUN)-TP] ITA No.1802/Pun/2013 dated 18.07.2013

189. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Acropetal Technologies Ltd. (Seg) as the company had substantial on–site development activities The Tribunal noted that out of Rs.36.4 crores relating to employee cost and on-site development expenditure , 31.45 crore was towards on-site development expenditure in addition to which the company had also reported expenditure in foreign currency amounting to Rs.32.38 crores and thus, the onsite expenses worked out to more than 73% of total expenditure. If the proportionate revenue from on–site development was taken, it worked out to more than 60% of the export revenue which failed the filter applied by the TPO. Further, it also observed that the TPO was not justified in applying selective approach since in the case of RS Software where there was no breakup of on-site and off shore revenue, the TPO had relied upon the foreign currency expenditure of the company to assume that company had similar proportion of on-site revenue which exceeded the filter of 60% of export revenue applied by Revenue. [ It relied on co-ordinate bench decisions in IBM India Pvt. Ltd. and Ness Technologies which excluded Acropetal Technologies Ltd. as a comparable since it had substantial on–site expenses.]
• Kals Information System Ltd. as it was also involved in development and sale of product and absence of segmental details.
• Thirdware Solutions Ltd. as it was involved in sale of products. [ It relied on the coordinate bench decision in assessee’s own case for earlier year.]
• E-Zest Solutions Ltd as the company was rendering product developmentservices and high end technicalservices which came under the category of Knowledge Process Outsourcing (KPO) services. [It relied on the coordinate bench decision in the case of Invensys Development Centre.]
Accenture Services Pvt Ltd vs ACIT [TS-737-ITAT-2018(Mum)-TP] IT(TP)A No.7686/Mum/2012 dated 20.07.2018

190. The Tribunal held that assessee engaged in provision of ITES or BPO services to its AE could not be compared to:
• Genesys International Corporation Ltd. as it was engaged in engineering design services (CAD/CAM) and Geographic Information System (GIS) which are in the nature of KPO services.[ It relied on coordinate bench decision in assessee’s own case for earlier year.]
• Nucleus Netsoft & GIS India Ltd. (SEG) as it was engaged in KPO services.[ It relied on coordinate bench decision in assessee’s own case for earlier year.]
• E-Clerx Services Ltd. as it was engaged in providing KPO services in data analytics and data process solutions and further that the TPO had himself excluded this company for AY 2009-10. [ It relied on the decisions of Delhi HC in Rampgreen Solutions and jurisdictional HC in PTC Software.]
• CrossDomain Solutions as it was providing diversified activities like providing KPO services related to software development and maintenance services, software testing services etc. and had segmental data was not available. [ It relied on the decision of jurisdictional HC in Aptara Technology India Pvt Ltd.]
• Accentia Technologies Ltd as it had undergone merger for the year which impacted the profitability and the Tribunal also noted that if a particular comparable selected by assessee could not be accepted due to merger, for the same reason, the company selected by the Transfer Pricing Officer also could not be accepted as a comparable.
• Allsec Technologies Ltd. as it had undergone merger and in absence of authentic and reliable data to assess the impact of merger on the profitability of this company, the company could not be considered as a comparable.
Accenture Services Pvt Ltd vs ACIT [TS-737-ITAT-2018(Mum)-TP] IT(TP)A No.7686/Mum/2012 dated 20.07.2018

191. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Infosys Limited as the company was functionally dissimilar, had brand value and substantial intangible assets. [ It relied on the coordinate bench decision in assessee’s own case for earlier year.]
• Persistent Systems Ltd as it earned royalties from licensing and sale of products. Further segmental information was not available. It also had significant portion of its revenue from export of software services and products. [It relied on the coordinate bench decision in assessee’s own case for earlier year.]
• Wipro Technology Services Ltd as the company was earlier part of Citi Group and subsequently, it was acquired by Wipro and the arrangement of earning revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services was actually a prior arrangement between assessee’s AE (Wipro Ltd) and third party (Citigroup Inc.) and hence in light of the transaction ceased to be a comparable uncontrolled transaction. [ It relied on the coordinate bench decision of Saxo India Pvt Ltd.]
• Tata Elxsi Ltd. as its software development services performed were akin to research and development services. Its software development services included but were not limited to product &innovation design, engineering and visual computing labs and it also performed R&D activities towards software and electronic system development for industries such as wireless multimedia and broadcasting.
Pyramid IT Consulting P Ltd [TS-618-ITAT-2018(DEL)-TP] vs ACIT ITA No.7083/Del/2014 dated 11.07.2018

192. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Acropetal Technologies Ltd. (Seg) as the company failed 2 of the filters applied by the TPO viz. employee cost filter of greater than 25% (as Acropetal’s employee cost was only 7.48%) and onsite development less than 60% (as onsite development revenue was as high as 73%). Further, it was engaged in diversified activities like education services, healthcare services, hospital administration management etc. and was also in the business of sale of products. [ It relied on the coordinate bench decision of Ness Technologies.]
• Avani Cincom as it was into production of products such as DExchange, lTrak, Law firm Solution, hotel and restaurant booking engines etc and no revenue bifurcation between Software development services and products was given. [ It relied on the coordinate bench decision of Infor (Bangalore)]
• Bodhtree Consulting Ltd. as it was engaged in providing Data management and Data warehousing services (which were classified as lTES). Further, segmental data was not available and during the subject year, it had undergone restructuring activity by hiving off its e-paper business. [ It relied on the coordinate bench decision of Mindteck (India) Ltd.]
• Celestial Labs Ltd. as the employee cost of Celestial Labs was only 21.56% and hence it failed the employee cost filter of 25% applied by the TPO himself. On perusal of annual report, it was observed that the entire income of this company was from sale of products and this company had incurred substantial expenditure on product development of drug molecule. The Tribunal also noted that the company was engaged in software development services as well as ITES services which were considered the only segment as per AS-17. [ It relied on the coordinate bench decision of Ness Technologies.]
• E-Infochips Ltd. as it was engaged in the development and maintenance of computer software and also manufacturing EVM and VDB Electronic Board (Hardware Division) and the company earned income from software services and products and further, there was no segmental bifurcation between software services and products.
• E- Zest Solutions Ltd. as it was engaged in KPO services, helpdesk services, infrastructure management, Vendor Management services, etc. The Tribunal also noted that this company had inventories and that no segmental data was available pertaining to the software development activity due to which the margins could not be drawn up. [It relied on the coordinate bench decision of lnfor (Banglore).]
• Igate Global Solutions Ltd. as its turnover was Rs.781 crores vis-à-vis assessee’s turnover (Rs.13.5 crores) and its scale of operations were entirely different. Further, the company was engaged in application development, Application management, Business Process Management etc. and provides Business Intelligence and Data Warehousing Solutions which made it functionally dissimilar. [ It relied on coordinate bench decision of assessee’s own case for earlier year.]
• Infosys Ltd. as its turnover was 1160 times that of assessee’s turnover (Rs.13.5cr). Its service offerings include custom application development, maintenance and production support, package enabled consulting and implementation, technology consulting and other solutions etc. to clients across multiple industry verticals including banking and capital markets, communications, energy, manufacturing and retail which made it functionally not comparable to the assessee.
• Kals Information Systems Ltd. as it was also a software product company (On account of holding high percentage of inventories) and revenue from products and services were reported under the segment of Application software as a single business segment and bifurcation between products and services was not available in order to consider this company for comparison.[ It relied on the coordinate bench decision of Infor(Bangalore).]
• Persistent Systems Ltd. as the company had four types of business segments, namely ISV5, Telecom, Enterprises and VLSI and others and was also engaged in the sale of products and segmental information was not available. [ It relied on coordinate bench decision of assessee’s own case for earlier year.]
• Quintegra Solutions Ltd.as this company was engaged in product engineering and extensive R&D and its goodwill constituted approximately 78% of its total assets as against assessee who did not have any goodwill / intangible assets. [ It relied on the coordinate bench decision of 24/7 Customer.Com Pvt. Ltd.]
• Tata Elxsi Ltd. as the company was predominantly engaged in product designing services and not purely software development services. The details in the Annual Report showed that the segment “software development services” related to design services which were not similar to software development services. .[It relied on the coordinate bench decision of Infor(Bangalore).]
• Thirdware Solutions Ltd.as the company was also engaged in trading of software and licenses and had not disclosed any segmental information in the annual report. .[It relied on the coordinate bench decision of Infor(Bangalore).]
• Wipro Ltd. as the company had a high turnover, brand value and was engaged in IT Services, acquisitions, IWO services, etc. and segmental data for the above services was not available. .[It relied on the coordinate bench decision of Infor(Bangalore).]
Further, the Tribunal remitted Softsol India Ltd. for considering the correct operating margin since the TPO made an arithmetical error in computing the operating margin of this company and considered a figure of 42.33% in place of 15%. The Tribunal directed the Revenue to take 15% operating margin in the case of this company while working out the OP margin.
Dialogic Networks (India) Pvt Ltd vs ACIT [TS-807-ITAT-2018(Mum)-TP] ITA No.7280/Mum/2012 dated 27.07.2018

193. The Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd. as it had undergone reconstruction during the relevant year, that it acquired 2 entities which had an impact on the profits of the company. It operated as a single segment of Healthcare receivables management and had its own line of products which made it functionally not comparable to the assessee. [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd, Symphony Marketing Solutions India Pvt Ltd. and Capital IQ Information Systems Pvt Ltd.]
• Acropetal Technologies Ltd. as the services provided showed that it was a high end KPO services provider. [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd and Symphony Marketing Solutions India Pvt Ltd.]
• Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd) as it had incurred negligible employee cost of 2.92% of operating revenue, signifying that it was engaged in outsourcing of services unlike the assessee providing services himself. . [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd. and Symphony Marketing Solutions India Pvt Ltd.]
• Crossdomain Solutions Ltd. as it was engaged in KPO services in insurance, Healthcare, HR & accounting and also offered Business Excellence, Market Research & Data Analytics and IT Services. [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd. and Symphony Marketing Solutions India Pvt Ltd.]
• Datamatics Financial Services Ltd. as it was engaged in diversified activities providing registrar & transfer agency services and also offered issue management services and ITeS and there was no segmental information. [It relied on the decision of HSBC Electronic Data Processing Ltd]
• Eclerx Services Ltd. as it was a leading third party data analytics KPO in Financial Services and Retail and Manufacturing and hence, functionally not comparable. . [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd. Lionbridge Technologies and and Symphony Marketing Solutions India Pvt Ltd.]
• Genesys International Corporation Ltd as it was engaged in rendering geospatial services and catered to the needs of consumer mapping, navigation, internet portals etc. providing geographical information service Photogrammetry, Remote Sensing, and other related services and hence functionally not comparable.
• HCL Comnet Systems& Services Ltd as the scale of operation (i.e. turnover of Rs 495 cr) was very different from the assessee (turnover of 1.43 cr).
• Infosys BPO Ltd as the company had high turnover of Rs.825 crores and acquired entities ai.e. ILFS Holding B.V, Netherlands and had 11 delivery centers across in India and overseas. . [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd. and Symphony Marketing Solutions India Pvt Ltd.]
• Mold-Tek Technologies Ltd. as the company had undergone restructuring for the subject year and the company’s IT division specialized in providing structural engineering and design services for construction of buildings.
• Wipro Ltd as it did not have a BPO segment on a standalone level and hence, it could not be considered as a comparable to the IT support services rendered by the assessee. The comparable had undergone restructuring and its turnover was Rs.1,781.9 Crores as against that of the assessee. i.e. 1.43 crores. [ It relied on the coordinate bench decisions of Flextronics Technologies (India) Pvt Ltd. and Symphony Marketing Solutions India Pvt Ltd.]
Dialogic Networks (India) Pvt Ltd vs ACIT [TS-807-ITAT-2018(Mum)-TP] ITA No.7280/Mum/2012 dated 27.07.2018

194. The Tribunal held that the assessee engaged in providing ITES services to its AE could not be compared to:
• Accentia Technologies Ltd as the company had undertaken a extra-ordinary event during the year under consideration.
• Genesys International Corporation Ltd as the company was engaged in KPO service which required advance skill and hence, not comparable with assessee’s BPO activity.
• Coral Hubs Ltd as the company outsourced its activities rendering it functionally different to the assessee.
• Eclerx Services Ltd as it was providing high end KPO services
Tracmail (India) Private Limited vs. DCIT – TS-8-ITAT-2018(Mum)-TP – /I.T.A./7519/Mum/2012 dated 05/01/2018

195. The Tribunal held that the assessee engaged in providing ITeS to its AE could not be compared to:
• Accentia Technologies Limited as it had undergone extra ordinary events on account of amalgamation and also was engaged in providing the entire gamut of services under healthcare receivables cycle management viz., medical transcription, medical coding and billing and receivables management services and did not have adequate segmental results.
• Cosmic Global Limited as the company had a different business model as it had outsourced significant work to outside ventures and as such, its employee cost was less than 21.30%
• Fortune Infotech Limited as the company was into web application development including mobile applications, e-Commerce applications and SEO services, developing CMS based website using Drupal, Joomla, WordPress, e-Commerce Magento etc., offering onsite and offsite services to various clients and also into web designing services whereas the assessee was into providing routine ITES to its AE.
• Igate Global Ltd as the company was engaged into providing IT and ITES whereas no segmental information was available in its annual report company and it had also undergone restructuring by way of amalgamation.
• Infosys BPO Limited as it was engaged in different and diversifying services like customer service outsourcing, finance and accounting, knowledge services, human resource outsourcing, legal process outsourcing, sales and fulfillment, sourcing and procurement outsourcing, banking and capital outsourcing, media outsourcing, energy outsourcing, retail, etc. as against assessee which was into routine ITES. Moreover, it noted that the said company had i) huge turnover of Rs.1126.63 crores ii) goodwill of Rs.19.30 crores as per annual report iii) incurred selling and marketing expenses to the tune of 6.96% to enhance its business and iv) had an exceptional year of operation due to acquisition of McCamish Systems LLC to provide end to end services.
• TCS e-Serve International Limited and TCS e-Serve Limited as their operations broadly comprised of transaction processing and technical services and therefore was not comparable to the activities of the assessee
• Satyam BPO Limited as the creditability of a company due to the scam was at stake and therefore could not be considered as a reliable comparable
• Vis-à-vis R Systems it accepted the assessee’s plea that a comparable could not be rejected merely on account of different financial year where the company was functionally comparable and the results for the relevant year could be reconciled and remitted the comparability of the said company back to the file of the TPO directing the assessee to provide reconciliation of the profitability with authentic and reliable data
Vertex Customer Services India Private Limited (now merged with Vertex Customer Management India Private Ltd) vs. DCIT – TS-1052-ITAT-2017(DEL)-TP – ITA No.1508/Del./2015 dated 28.11.2017

196. The Tribunal remitted the question of inclusion/exclusion of 5 comparables for assessee’s provision of ITeS to AE noting that there was no observation of the DRP on the said issue. Vis-à-vis i) Alphageo, it observed that the company had been excluded in co-ordinate bench ruling in Flour Daniel on grounds of functional dissimilarity and for having a very high net fixed asset/sales ratio as compared to the assessee and accordingly, directed the AO/TPO to verify if the same held good for this case and ii) Mahindra Engineering, it directed the AO/TPO to reject the company as a comparable if its RPT was found to be greater than 25% as the said issue had not been brought before TPO/DRP.
Eigen Technical Services Pvt. Ltd. vs. DCIT – TS-78-ITAT-2018(DEL)-TP – ITA No.244/Del/2012 dated 22-01-2018

197. The Tribunal held that the assessee engaged in providing liasioning, administrative support and other ITeS could not be compared to:
• E-Clerx Services Ltd as the company was engaged in high-end KPO not comparable to the assessee and also since the company had acquired a UK-based Igentica Travel Solutions Limited (“ITS”) company during the year
• Accentia Technology Ltd as the revenue earned by it from services was less than 75 percent, the company was engaged in software development and it had undertaken mergers / demergers during the year under review
• Coral Hub Ltd as the working model of the company was outsourcing based and therefore it could not be compared with the assessee moreso considering its employee costs were merely 4.39 percent of its total costs.
• Mod-Tek Technologies Ltd as the company was engaged in providing structural engineering service not comparable to the activities of the assessee.
NCS Pearson India Private Ltd. vs. DCIT – TS-99-ITAT-2018(DEL)-TP – ITA No.5577/Del/2014 dated 03.01.2018

198. The Tribunal held that the assessee engaged in providing call centre services could not be compared to:
• Accentia Technologies Ltd & E4e-health Solutions Ltd as it was engaged in providing high-end KPO services
• Cosmic Global Limited as it was engaged in translation and prescription of data which was entirely different from the functions performed by the assessee and also since it was operating a different business model as it was outsourcing its activities.
• Vishal Information Technologies Limited as it was functionally incomparable to concern providing BPO services since it was outsourcing its work.
• Cross Domain Solutions Ltd & E-clerx Services Ltd as they were engaged in KPO services
Further, it held that CG Vak could not be excluded as comparable on the ground of persistent losses as it earned profits in the earlier years.
Ventura (India) Pvt. Ltd. vs. ACIT – TS-201-ITAT-2018(PUN)-TP – ITA No.1788/PUN/2014 dated 09.03.2018

199. The Tribunal held that the assessee engaged in providing ITES / BPO services to its AE could not be compared to:
• Infosys BPO Ltd as the company was a KPO and it also had huge brand value and possessed intangible assets rendering it functionally dissimilar to the assessee.
• TCS e-Serve Limited as it was engaged in core business processing services, analytics & insights (KPO) and support services for both data and voice processes and no segmental information regarding BPO services were available
• Universal Print Systems Limited as it was into the business of printers whereas the assessee was into the Business Process Outsourcing
Further, it held that BNR Udyog Limited (Medical Transcription segment) could not be excluded as a comparable as medical transcription services fell within the definition of ITES and therefore it could not be held that the company was functionally dissimilar to the assessee.
It also dismissed assessee’s contention for exclusion of Excel Infoways Limited and held that the assessee did not furnish any evidence in support of its plea that the company was functionally dissimilar as it was engaged in both IT and ITES services.
Vis-à-vis assessee’s plea for inclusion of R Systems and Caliber Point, it held that the said companies could not be taken as comparable as they followed a different financial year ending.
XLHealth Corporation India Pvt. Ltd vs. ACIT – TS-162-ITAT-2018(Bang)-TP – IT{TP)A No. 2311/Bang/2016 dated 09.02.201S

200. The Tribunal held that the assessee engaged in providing IT enabled services to its AE could not be compared to Accentia Technologies Ltd as it earned income from various streams and did not have segmental income. Further, the company had undertaken acquisitions during the year under review rendering functionally dissimilar.
It rejected assessee’s contention and held that TCS e-serve International ltd and TCS e-serve Ltd were to be included as comparable. It held that mere high turnover / profit could not be valid grounds for exclusion and further that the companies software testing and validation of software formed part of ITES services and could not be considered as software development . It rejected the assessee’s argument that the company had high brand value noting that the companies expended only 0.43 percent of its total expenditure on brand. Further
Further, it rejected assessee’s contention to exclude Infosys BPO holding it to be functionally similar to assessee and also rejected the plea relating to brand value and acquisition during year noting that the company incurred insignificant expenses on brand building and had infact incurred loss in the acquired business.
However it accepted assessee’s plea to include CG- VAK Software & Exports Ltd and R Systems International Limited as comparable and held that the TPO incorrectly rejected the said companies as comparables. It held that CG Vak could not be excluded merely because it did not satisfy the turnover filter as turnover could not be the basis for rejection of an otherwise functionally similar comparable. Further vis-à-vis R Systems, it held that merely because the company followed a different financial year it could not be excluded where the results of the relevant financial year could be reasonably extrapolated from the data in public domain.
Cadence Design Systems (India) Pvt. Ltd. vs. DCIT – TS-191-ITAT-2018(DEL)-TP – ITA No. 380/Del/2015 dated 05.01.2018

201. The Tribunal held that the assessee engaged in providing ITES services to its AE could not be compared to:
• Eclerx Services Ltd as it was a KPO and mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field of retail, manufacturing and financial services (including consulting, process outsourcing, process re-engineering and automation services )
• TCS e-serve Ltd as it was engaged in transaction processing and technology services and separate segmental details were not available.
H&S Software Development & Knowledge Management Centre Pvt Ltd vs. ITO – TS-136-ITAT-2018(DEL)-TP] – ITA No. 2200/Del/2014 dated 15.02.2018

202. The Court dismissed Revenue’s appeal challenging Tribunal’s exclusion of 6 comparables for assessee providing ITeS to its AE. With respect to 3 comparables (TCS E-Serve, TCS E-Serve International and Infosys BPO), it noted the Tribunal had correctly excluded these companies as they had high brand value and therefore, were able to command greater profits, besides they operated on economic upscale. Further, it held that the Tribunal was justified in excluding Accentia Technologies and ICRA Techno Analysis on the grounds of lack of segmental data. It held that e-Clerx Services, a KPO service provider, was also rightly excluded on grounds of functional dissimilarity to assesse BPO.
Pr.CIT vs. Evalueserve SEZ (Gurgaon) Pvt. Ltd – TS-125-HC-2018(DEL)-TP – ITA 241/2018 dated 26.02.2018

203. The Court upheld the order of the Tribunal wherein the Tribunal:
Excluded Infosys BPO as comparable on the ground of its huge brand value
Included R Systems International following the order of the Court in Mckinsey Knowledge Centre wherein it was held that if from the available data on record, the results for financial year could be reasonably extrapolated then the comparable could not be excluded.
However, it admitted 2 questions of law regarding comparability of Surya Pharmaceutical Ltd. and Excel Infosys with the assessee engaged in providing ITES.
Pr. CIT vs. Baxter India Pvt Ltd – TS-135-HC-2018(DEL)-TP – ITA 260/2018 dated 27.02.2018

204. The Tribunal held that the assessee providing business support services & ITeS to AE could not be compared to:
• Infosys BPO Limited as it was a giant company with turnover of INR1,312 crores as against the assessee’s turnover of only INR 11.47 crores.
• TCS E-Serve Limited as it had significantly high turnover of INR1,578 crores as against the assessee’s turnover of only INR 11.47 crores
• Informed Technologies India Limited as it had granted interest free loan of INR74.56 lakhs to related party which was irrecoverable which had a direct impact on its profitability.
XM Software Solution Private Limited vs. ACIT – TS-190-ITAT-2018(COCH)-TP dated 07/02/2018

205. The Tribunal held that for benchmarking IT enabled services Excel Infoways Ltd was to be excluded as a comparable, as the said company was in the process of shutting down its BPO business for the year under consideration. As regards another comparable namely Universal Print Systems, the Tribunal, relying on the judgement in case of Goldman Sachs directed the TPO to verify employee cost to sales ratio of one comparable company and to exclude the same if the said ratio was less than 25%.
Emerson Climate Technologies (India) Pvt Ltd vs DCIT Circle 1(2)- TS-362-ITAT-2018(PUN)-TP- ITA no’s 359 & 2847/PUN/2016 dated 25.04.2018

206. The Tribunal held that assessee providing IT enabled services in the nature of research and analyst services to its AE could not be compared to:
• Infosys BPO Limited considering the huge turnover or giantness of the company (by relying on the precedent judgment namely CIT vs Pentair Water India Pvt Ltd [TS-763-ITAT-2016(PAN)-TP] and New River Software Services Pvt. Ltd Delhi HC)
• Accentia Technologies Ltd due to occurrence of an extraordinary event of amalgamation in the said case.
Further, the Tribunal remanded the following comparable to the file of the TPO
• E4e health care services Pvt Ltd as the annual accounts were not available in public domain. (The Tribunal directed the TPO/AO to provide the copy of financial statements and then decide on the issue of retaining or excluding it as a comparable.)
• Datamatics Financial Services, Optimus Global Services & Sparsh BPO Services as objections raised by the assessee (i.e. negative net worth and export sales filter) were factual in nature, thus required verification.
Further, TCS e serve International Ltd was included as a comparable and the Tribunal held that it was functionally comparable to assessee by relying on Cadence Designs System vs DCIT.
M/s. Smart Cube India Pvt Ltd vs ITO ward 24(1) Delhi-TS-379-ITAT-2018(DEL)-TP- ITA No. 1103/Del/2015 dated 27.04.2018

207. The Tribunal held that the assessee engaged in providing IT enables services could not be compared to:
• E4 Health care business services as it was engaged in transcription of medical prescription and thus functionally dissimilar to the assessee
• ICRA Techno Analytics as it was engaged in various activities namely software development, consultancy services web development etc however, no segmental information was available.
• Infosys BPO Ltd as it had huge turnover and goodwill
The Tribunal included Cosmic Global at segment level and directed inclusion only of its medical transcription and consultancy services segment as comparable and further included Jindal Intellicom P Ltd as not specifically pressed by assessee for exclusion.
Keystroke Pro India P Ltd vs ITO Ward 14(3) – TS-333-ITAT-2018(DEL)-TP ITA No 537/Del/2015 dated 10.04.2018

208. The Tribunal relying on the judgement of Special Bench and co-ordinate bench in assessee’s own case held that assessee engaged in providing IT enabled services and back office support services to its AE could not be compared to:
• Accentia Technologies Ltd as it provided high-end KPO services
• Infosys BPO Ltd on account of its high goodwill, brand value and higher turnover
As regards Acropetal Technologies Ltd the Tribunal remitted back to AO/TPO for fresh adjudication with reference to segmental results and cost allocations.
Further, the Tribunal included R System International Ltd (following different FY-ending) as comparable after relying on the co-ordinate bench decision in assessee’s own case wherein it was held that data available for 9 months in public domain could be extrapolated to make a reasonable comparability analysis.
ACIT 15(2)(2) vs Maersk Global Services Centre (I) P Ltd- TS-299-ITAT-2018(Mum)-TP- ITA No 944/Mum/2016 dated 19.04.2018

209. As the functional profile of Rampgreen Solutions P Ltd and that of the assessee (rendering IT enabled services to its AE) were similar, relying on the judgement of Rampgreen Solutions Pvt Ltd, the Tribunal excluded from the list of comparables Accentia Technologies, I-gate Global Ltd, Infosys BPO Ltd & TCS E-Serve International Ltd stating functionally dissimilarity and extraordinary event of merger.
Further, the Tribunal remitted back the issue with respect to inclusion/exclusion of TCS E-serve Ltd to the file of AO/TPO to decide afresh in light of assessee’s submission that the said comparable had substantial related party transactions
GE India Business Services P Ltd. Vs DCIT Circle 10(1)- TS-330-ITAT-2018(Del)-TP- ITA No 6906/Del/2014 dated 27.04.2018

210. The Tribunal held that the assessee company rendering ITES services to AE could not be compared with –
• Acropetal Technologies Ltd as the company was involved in providing engineering design services.
• eClerx Services Ltd. as the company provided high end KPO services.
• TCS E-serve Ltd. as the company was providing technical services involving software testing, verification and validation of software at time of implementation.
DCIT v. Progressive Digital Media (P.) Ltd. – [2018] 92 taxmann.com 426 (Hyderabad – Trib.) – IT APPEAL NO. 426 (HYD.) OF 2016 dated APRIL 11, 2018

211. The Court held that assessee, a captive unit engaged in IT & ITeS to its AE could not be compared to:
• Kals Information Solutions Ltd as it was engaged in software services as well as software product.
• Vishal Information Technology (now known as Coral Hubs) & Cosmic Global Ltd as it was outsourcing the services to be rendered to third party vendors.
• Accentia Technologies Ltd as it was engaged in developing its own software and rendering medical transcription services (the Tribunal had relied on the ruling in Aptara Technology Ltd.)
• Eclerx Services Ltd as it was providing Knowledge Process Outsourcing (the Tribunal relied on the ruling in case of Aptara Technology Ltd and Rampgreen Solutions)
Further, the Court admitted Revenue’s appeal for inclusion of one comparable namely Bodhtree Consulting Ltd (which was excluded by the Tribunal) after relying on the HC judgement in case of Mindteck India & Cummins Turbo Technologies
PCIT -2 Pune vs PTC Software (I) Pvt Ltd- TS-276-HC-2018 (Bom)-TP- ITA No 598 of 2016 dated 16.04.2018

212. The Tribunal held that assessee engaged in provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd as it was engaged in diversified activities like healthcare management receivables, medical transcription, software development and film production and there was no segmental information available. [ It relied on coordinate bench rulings in assessee’s own case for earlier years.]
• E Clerx Ltd as it was KPO company, outsourcing substantial work to third parties whereas the assessee was providing back office support services with their own human resource. [ It relied on coordinate bench ruling in assessee’s own case which in turn had followed the ratio laid down in Delhi HC in Rampgreen Solutions.]
• Infosys BPO Limited as the company had a high employee cost base and turnover and intangible in form of brand value which would have huge effect while computing PLI and vitiated the comparability with a company which is a captive service provider without much tangibles and risk.[ It relied on the jurisdictional HC decision in BC Management Services Ltd.]
• TCS e-Serve Limited as the company had a high employee cost base and turnover and intangible in form of brand value which would have huge effect while computing PLI and vitiated the comparability with a company which is a captive service provider without much tangibles and risk. [ It relied on the jurisdictional HC decision in BC Management Services Ltd.]

Further, it included R Systems International Ltd as a comparable relying on the decision of P&H HC ruling in the case of Mercer Consulting India P. Ltd, wherein it was held that R Systems could not be rejected owing to different financial year ending and the financials could be extrapolated if the quarterly financial results were in public domain. The Tribunal relying on the jurisdictional High Court decision in Chryscapital Investment Advisors India Ltd. wherein it was held that turnover could not be the basis of exclusion if the company was functionally comparable included the companies (i) CG Vak Software and Exports Ltd. (ii) Informed Technologies India Ltd. (iii) Microgenetics Systems Ltd. which were rejected by the TPO on account of low turnover.
Cadence Design Systems (I) P Ltd vs ACIT [TS-955-ITAT-2018(DEL)-TP] ITA No.6315 of 2015 dated 02.04.2018

213. The Tribunal held that assessee engaged in provision of ITES services could not be compared to:
• ICRA Online Limited as it failed to satisfy the 75% export filter
• Infosys BPO Limited as it had a high brand value which would impact its pricing and margins
• Accentia Technologies Ltd. as it had undergone merger for the subject year which would impact its profitability
• Infosys BPO Ltd. as it had high brand value and acquired Australian based company thus impacting profitability.
• TCS E-serve Ltd as it was engaged in diversified business activities such as software testing, verification and validation of software.
• Excel Infoway Limited as it had consistent diminishing revenues.
Further, it rejected assessee’s plea with regard to the exclusion of BNR Udyog Ltd noting that on consideration of segmental data of ITES, it passed the RPT filter and 100% of the revenue was from providing ITES (medical transcription) and thus, the company satisfied the filters. The Tribunal accepted the assessee’s plea for inclusion of (i) Informed Technologies Limited (ii) Jindal Intellicom Ltd. since they had been consistently considered as a comparable in the previous years. The Tribunal remanded the comparability of Universal Print systems Ltd on the ground that TPO and DRP had not dealt with various objections of the assessee on its functional comparability.
CGI Information Systems and Management Consultants Private Limited vs ACIT [TS-492-ITAT-2018(Bang)-TP] IT(TP)A Nos. 586 (Bang) of 2015 and 183(Bang) of 2017 dated 11.04.2018

214. The Tribunal held that assessee providing IT and IT enabled services to its AE was comparable to:
• Infosys Ltd, Satyam Ltd, Nucleus Netsoft & Vishal Information relying on HC judgement in case of Chryscapital Investment Advisors. It further held that for an otherwise comparable company high/low turnover was not a valid criterion for rejection.
• Blue Star as CIT(A) had while excluding the same failed to provide proper calculation of RPT.
• Maars Software as the merger was called off and hence, no extraordinary event occurred to justify exclusion
The Tribunal further held that Encore Software was to be excluded as comparable by relying to co-ordinate bench judgement in case of Navisite India wherein it was held that company having diminishing revenue not in conformity with normal operations results could not be considered as comparable. Further, the Tribunal excluded Quintegra on the grounds of high RPT percentage and different financial year ending.
DCIT Circle 11(1) Delhi vs FIS Global Business India Pvt Ltd- TS-321-ITAT-2018(DEL)-TP- ITA No 5944/DEL/2010 dated 11.04.2018

215. The Tribunal held that the following could not be included in the final set of comparables in case of assessee rendering ITES to its AE –
• Coral Hubs Ltd. as it was engaged in e-publishing.
• Cross domain Solutions Ltd. as it was providing high-end KPO services and geographical information services.
• Persistent loss making concerns
• Triton Corporation Ltd. and Maple eSolutions Ltd. as both the concerns were fraud companies.
KPIT Cummins Global Business Solutions Ltd. v. ACIT – [2018] 93 taxmann.com 368 (Pune – Trib.) – IT APPEAL NOS. 246 (PUN) OF 2013 AND 459 AND 525 (PUN) OF 2014 dated April 9, 2018

216. In case of an assessee engaged in IT enabled services to its AE, the Tribunal relied on the co-ordinate bench judgements in case of Ameriprise India, Bechtel India & Sun Life India and accepted assessee’s plea for exclusion of TCS e-serve International on grounds of functional dissimilarity, absence of segmental details, possession of intellectual property and usage of Tata Brand,
Further the Tribunal accepted assessee’s plea for inclusion of Karvy Global as comparable on the basis of functional similarity and similar operating revenues.
Stefanini India Pvt Ltd vs ITO Ward 3(4)- TS-338-ITAT-2018(DEL)-TP- ITA No 5479/Del/2016 dated 25.04.2018

217. The Court dismissed Revenue’s appeal and upheld Tribunals exclusion of 5 comparables for an assessee providing BPO services to its AE. The Court noted that the Tribunal rightly relying on the ruling in case of PTC Software excluded 5 companies namely Accentia Technologies, Cosmic Global, Eclerx Services, Coral Hubs and Crossdomain Solutions on grounds of functional dissimilarity, as the said comparables were engaged in distinct activities such as payroll activity, KPO service, development of products etc.
PCIT -1 vs BNY Mellon International Operations (I) Ltd- TS-293-HC-2018(BOM)-TP- ITA No 1226 of 2015 dated 23.04.2018

218. The Tribunal held that assessee engaged in providing IT Enabled services to its AE could not be compared to:
• Flextronics Software Systems Ltd as the company was engaged in the business of both software products and services and no break-up was available.
• HCL Comnet Systems and Services Ltd due to unavailability of financial data for the same financial year as that of the assessee
• Informed Technologies Ltd on the ground that the company had super normal growth and abnormally high fluctuating profits
• Infosys BPO, relying on the decision of the co-ordinate bench in American Express [India] {P} Ltd vs DCIT [TS-551-ITAT-2017(DEL)-TP] wherein it was held that since the said company had huge turnover it was not comparable to companies operating on a smaller scale such as the assessee
• Wipro Ltd, relying on the decision of the co-ordinate bench in American Express [India] {P} Ltd vs DCIT [TS-551-ITAT-2017(DEL)-TP], wherein it was held that companies such as Wipro having huge turnover and scale of operations could not be compared to companies operating on a much smaller scale such as the assessee.
• Bodhtree Consulting Ltd as the said company was engaged in both software sales and services and no segmental data was available
Cengage Learning India Pvt. Ltd vs ITO – TS-736-ITAT-2018(DEL)-TP – ITA No. 5926/DEL/2010 dated 11.05.2018

219. The Court admitted Revenue’s appeal on whether Tribunal was justified a) in excluding Wipro as a comparable when the TPO/DRP established that the peculiar economic circumstances did not have a bearing on the profits and also whether Tribunal wrongly relied on Sunlife India ruling disregarding the fact that TPO had already established Wipro’s functional similarity and b) in excluding TCS as a comparable when TPO/DRP had established that peculiar economic circumstances and higher turnover did not impact its margins.
Pr. CIT vs. Adobe Systems India Pvt. Ltd – TS-429-HC-2018(ALL)-TP – INCOME TAX APPEAL No. – 59 of 2018 dated 24.5.2018

220. The Court admitted Revenue’s appeal against Tribunal-order and admitted the following questions – i) Whether the Tribunal was justified in directing TPO to exclude 4 comparables (Accentia Technologies, E-Clerx Services, TCS E-Serve and TCS E-Serve International) when the TPO had already established the functional similarity of these companies with assessee. Ii) Whether Tribunal was justified in relying on its earlier order which in turn relied on Bechtel ITAT ruling & Rampgreen HC ruling (against which SLP was admitted by SC) without appreciating the fact that a company which was held as incomparable in one case may actually be a good comparable in another case and iii) Whether Tribunal (being the last fact finding authority) was justified in deciding the issue of inclusion / exclusion of comparables without upsetting the findings of fact recorded by TPO after appreciating the material and evidence available on record.
Pr. CIT vs. Samsung Heavy Industries India Pvt. Ltd – TS-431-HC-2018(ALL)-TP – INCOME TAX APPEAL No. – 60 of 2018 dated 24.5.2018

221. The Tribunal held that the assessee, engaged in provision of ITES to its AE could not be compared to:
• Accentia Technologies Ltd. as the his company providing high-end medical transcription services, and having substantial income from coding coming to about 16% gross receipts without availability of segmental results.
• Acropetal Technologies Ltd. as the company was providing high end services.
• Jeevan Scientific Technology Ltd. as the turnover of BPO services segment was less than 1 Cr.
Further, ICRA online Ltd. was remitted back to decide comparability and to verify whether RPT exceeded 15%. iGate Global Solutions Ltd. was remitted back since the Revenue’s plea was accepted that this comparable be remanded to AO/TPO to enable them to issue notices u/s 133(6) to get the required segmental details to consider the comparability.
Finastra Software Solutions (I) P Ltd. (formerly Misys Software Solutions India Private Limited) vs. ACIT [TS-404-ITAT-2018(Bang)-TP] – IT(TP)A No.529 & 491/Bang/2016 dated 02.05.2018

222. The Tribunal held that the assessee engaged in the provision of BPO services to its AE could be compared to:
• Ace Software Exports Ltd. as it was not a consistent loss making concern.
• Flextronics Software Systems Ltd. and Genesys International Corporation Ltd as the revenue cannot seek exclusion of comparables which were included by TPO in his TP-analysis.
• Aditya Birla Minacs Ltd and Maple Esolutions Ltd. as they were included in TP study
Further, the Tribunal revised the margins of R Systems International Ltd. after considering audited quarterly results of March 2007 and 20006. The Tribunal also excluded of the comparables viz. Asit C Mehta Financial Services Ltd, Ecterx Services Ltd, Informed Technologies India Ltd., Mold-Tek Technologies Ltd and Vishal Information Technologies Ltd by relying on the decision of Steam International. It rejected Infosys BPO Ltd. since it rendered KPO services.
ACIT v/s.Capita Offshore Services Pvt Ltd [TS-399-ITAT-2018(Mum)-TP] IT(TP) A/7141/Mum/2012 dated 16.05.2018

223. The Tribunal held that the assessee engaged in the provision of CAD/CAE services for automotive services to its AE could not be compared to:
• Jeevan Softech as the said concern was engaged in medical writing, clinical data management, bio-statistics and other services and hence functionally dissimilar.
• BNR Udyog Ltd. as the said comparable was engaged into medical transcription, construction and financial activities and therefore, functionally dissimilar. The Tribunal also noted that the said concern failed the RPT filter since the said entity had a filter of 739.04% greater than 25%.
Faurecia Interior Systems India Private Limited vs. ACIT [TS-396-ITAT-2018(PUN)-TP] ITA No.781/Pun/2015 dated 23.05.2018

224. The Tribunal held that assessee engaged in provision of ITeS and financial support services for AY 2009-10 could not be compared to:.
• Coral Hub Ltd as it was outsourcing majority of its activity;
• Cosmic Global and eClerx Services as they were providing high end services. [The Tribunal relied on the rulings of Mercer Consulting (India), PTC Software and Maersk Global Service Centres to exclude the said comparable.]
GE India Business Services Pvt. Ltd. vs. DCIT [TS-381-ITAT-2018(DEL)-TP] ITA No.1423/Del/2014 dated 18.05.2018

225. The Court admitted the appeal of the assessee [engaged in ITeS] for AY 2010-11 on the question whether the Tribunal erred in holding that M/s. TCS E-Serve Limited, TCS E-Serve International and M/s. Infosys BPO Limited could be taken into account as comparables for ALP determination of the asseessee’s international transactions. The Tribunal had included Infosys BPO as comparable and rejected the assessee’s plea that it was not comparable in view of its brand value and acquisition made by it during year and further on the ground that only insignificant expense was incurred on brand building and infact loss had been incurred in the acquired business.
The Tribunal had also included TCS E-Serve and TCS E-Serve International, holding that the companies were functionally comparable since the companies were engaged in ITes and BPO segment and that rise in turnover/profit could not be considered to be a ground for exclusion since the company was to be compared on the basis of FAR. There was no information brought on record as to how Tata’ brand impacted profitability and it was noted that the expenditure incurred on the brand was miniscule (0.43% of total expenses only).
Cadence Design Systems (India) Private Limited v DCIT [TS-369-HC-2018(DEL)-TP] ITA 592/2018 dated 18.05.2018

226. The Tribunal accepted the Revenue’s plea for exclusion of the comparables viz. R System International and Coral Hub for failing financial year filter for assessee providing ITeS to AE for AY 2011-12. Inspite of being functionally similar, they failed the financial year filter adopted by TPO as data for R System International was maintained only from January 1, 2010 to December 31, 2010 and from July 1, 2010 to June 30, 2011 for Coral Hub. The Tribunal relied on the HC ruling in PTC Software and opined that the accounting periods of said two concerns were at variance to the accounting period followed by the assessee and consequently, the margins of said concerns could not be applied to benchmark the arm’s length price of international transactions undertaken by the assessee.
DCIT vs. Ocwen Financial Solutions Pvt. Ltd. [TS-350-ITAT-2018(PUN)-TP] ITA No. 511/Pun/2016 and CO No.01 and 14/Pun/2018 dated 14.05.2018

227. The Tribunal held that the assessee engaged in providing low-end ITES services could not be compared to:
• Persistent Systems Limited as it was engaged in software product development services, which was functionally dissimilar to the activities carried out by the assesse.
• Thirdware Solutions Limited as it was into acquisition/purchase of hardware and software including software as a service and was also engaged in software development, implementation and support services
Further, it held that R Systems International Limited was to be included as a comparable even though its financials were prepared for a different Financial year (December ended) as the data for the relevant financial year could be reasonably extrapolated from the data available in the public domain.
Vis-à-vis Acropetal Technologies Ltd, it directed the TPO to consider the margin of the ITES segment as opposed to the health care segment.
It also included Aspire Systems (India) Private Limited as comparable noting that this company and assessee broadly engaged in the same activities and the assessee could not rebut the reasoning for inclusion as provided by the TPO and DRP.
Vis-à-vis Infobeans Technologies Limited it held that since the assessee could not prove how the extra-ordinary event undertaken by the company had an impact on its profits, the company was to be included as a comparable.
Lionbridge Technologies Private Limited vs. ACIT – TS-438-ITAT-2018(Mum)-TP – I.T.A. No. 7304/Mum/2017 dated 21.05.2018

228. The Tribunal held that the assessee engaged in rendering ITeS to AE could not be compared to Infosys BPO and TCS eServe as they had a high turnover, brand value and intangibles and also had been excluded by the coordinate bench in the assessee’s own case for earlier year
Further, the Tribunal rejected the contention of the assessee as regards the inclusion of E-Clerx Services Ltd since it opined that acquisition of a new company in USA would not have an impact on the financials of the assessee and the coordinate bench in the assessee’s own case had included the said comparable as a company. The Tribunal also retained Crossdomain Solutions as a comparable following the coordinate bench decision of the prior year wherein it had upheld the DRP’s observations that engineering design services rendered by assessee are akin to KPO services rendered by the said company.
The Tribunal remanded the comparability of Crystal Voxx to TPO observing that the DRP had not provided an opportunity to the assessee to be heard while holding that the company was functionally not comparable to the assessee.
Hyundai Motor India Engg Pvt Ltd [TS-503-ITAT-2018(HYD)-TP] ITA No.87/Hyd/2017 dated 08.06.2018

229. The Tribunal upheld the DRP’s order excluding the following comparables for assessee engaged in the provision of call centre services to its AE:
• Infosys BPO Ltd. as it offered wide range of services viz. platforms like Source-to-pay, Business Order Management, Business platform etc. and had high brand value and segmental information was not available. [ It relied on the coordinate bench decision in case of Equant Solutions.]
• TCS E-Serve Ltd. as it was engaged in providing high end technology services like software testing, verification and validation of software and was using Tata brand. [It also noted that DRP in subsequent year had excluded the comparable and relied on the coordinate bench decision of Equant Solutions.]
• TCS E-Serve International Ltd. as it was engaged in providing high end technology services like software testing, verification and validation of software and was using Tata brand.
DCIT vs BA Call Centre India Pvt. Ltd. [TS-470-ITAT-2018(Del)-TP] ITA No.387/Del/2015 dated 08.06.2018

230. The Tribunal held that the assessee engaged in rendering ITES services to its AE could not be compared to Genesys International Corporation Ltd as the company was engaged in diversified business operations providing high-end and complex services such as GIS consulting, 3D mapping, navigation maps, Lidar, photogrammetry etc. as against assessee’s rendering of mere back office ITeS. It also held that comparability failed on account of the company being full-fledged risk taking entity vis-à-vis assessee’s limited risk profile and had significant intangible whereas the assessee did not own any intangibles.
Exl Service.com India Pvt Ltd vs DCIT [TS-486-ITAT-2018(DEL)-TP] ITA No.2559/Del/2014 dated 18.06.2018

231. The Tribunal upheld CIT(A)’s order deleting TP-adjustment in respect of assessee providing IT enabled services. Relying on ITAT order in assessee’s own case for prior year, it excluded Vishal Information Technologies, Wipro Limited, MoldTek Technologies as comparables since there were no change in facts in the present year. Further, it relied on the categorical findings of CIT(A) to exclude Genesys International since its geospatial services were functionally not comparable to assessee and it needed skilled manpower.
DCIT vs Everest Business Advisory India (P) Ltd [TS-622-ITAT-2018(DEL)-TP] ITA No.2562/Del/2013 dated 13.06.2018

232. The Tribunal accepted assessee’s plea for exclusion of TCS E-Serve Limited as comparable while benchmarking the assessee’s IT-enabled services by relying on the order of the coordinate bench in assessee’s own case for earlier year wherein the said comparable was excluded owing to functional dissimilarity, ownership of significant intangibles and impact of ‘TATA’ brand on its profitability. It observed that there was no change in the facts and circumstances as discussed in the assessee’s own case for AY 2011-12, hence the said company was to be excluded as a comparable.
Capital India Private Limited vs DCIT [TS-864-ITAT-2018(Mum)-TP] ITA No.6795/Mum/2017 dated 19.06.2018

233. The Tribunal relying on the decision of co-ordinate bench in the case of Symphony Marketing Services held that the assessee engaged in rendering IT-ES to it AE could not be compared to:
• Acropetal Technologies Ltd. as it was providing high end services such as engineering design service.
• Coral Hubs Ltd as it had low employee cost.
• Crossdomain Solutions Ltd as it was providing high end KPO services, development of product suites and routine low end ITES service and segmental data was unavailable.
• Eclerx Services Ltd as it had super normal profits and provided KPO services
• Genesys International Corporation Ltd as it provided KPO services.
• Infosys BPO Ltd as it was functionally not comparable to to an ITeS provider, had brand value and owned significant intangibles.
• Mold-tek Technologies Ltd as it was providing high end services such as engineering design service
• Wipro Ltd as it was not functionally comparable to an ITeS provider, had brand value and owned significant intangibles
Further the Tribunal upheld the inclusion of Cosmic Global Ltd and held that whether a company provides medical transcription or medical translation, they have to be regarded as being in the ITeS field. It rejected the assessee’s contention that as it was engaged in medical translation andwas not comparable with an ITeS company.
DCIT vs Mphasis Limited [TS-890-ITAT-2018(Bang)-TP] ITA 325/Bang/2014 dated 01.06.2018

234. The Tribunal held that the assessee, engaged in providing medical transcription services could not be compared to:
• Vishal Information Technologies Ltd as it’s employment cost as a ratio of turnover was much less than assessee and it outsourced most of its work.
• Nucleus Netsoft & GIS India Ltd as it had undertaken an amalgamation and also outsourced most of its work.
• Tricom India Ltd as it developed its own software and also since it had a related party to sales ratio of 61.86% percent.
Transcend MT Services Pvt. Ltd. vs. ACIT – TS-1091-ITAT-2017(DEL)-TP – ITA No.4048/Del./2013 dated 12.12.2017

235. Where the assessee was a software development service provider in the gaming sector and could not be compared with the general software development providers due to its unique utilization of technical manpower as selected by the TPO, the Tribunal held that since the activities carried on by the assessee were not properly appreciated by the TPO, the entire matter was to be remitted for fresh benchmarking.
Gameloft Software Pvt Ltd v ACIT – TS-16-ITAT-2018(HYD)-TP – ITA No.598/Hyd/2016

236. The Tribunal held that the assessee, engaged in providing software development services to its AE could not be compared to:
• Infosys Ltd on account of its huge turnover (reliance placed on Agnity India Technologies Pvt. Ltd. [TS-312-ITAT-2013(DEL)-TP])
• Exensys Software Solutions Ltd as there was merger of said company and Holool India Ltd which had a material impact on the financial results of the company for the year.
• Thirdware Solutions Ltd as the company was into both software services as well as product development and the segmental details and in particular, details of the expenditure incurred towards software products were not available.
Capgemini Technology Services India Ltd (formerly known as IGATE Global Solutions Ltd vs. ITO – TS-1095-ITAT-2017(HYD)-TP – ITA No.633/Hyd/2011 – dated 29.12.2017

237. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared to:
• Celestial Bio-labs Limited as it had undergone an extra-ordinary event which resulted in distorted profits
• Avani Cimcon Technologies Ltd as the company had diversified activities and the segmental accounts were not available
• Infosys Technologies Ltd as it owned significant intangible and had huge revenues from software products and the breakup of revenue from software services and software products was also not available
• Kals Information Systems Ltd as this company was engaged in developing of software and was thus not comparable
• Persistent Systems Ltd as it was engaged in product development and product design service and therefore could not be compared to the assessee
• Quintegra Solutions Ltd as it had undergone an extraordinary event and also since it was engaged in business of dealing in proprietary software products.
• Tata Elxsi Ltd since it was predominantly engaged in product designing services and not purely software development services
• Wipro Ltd as it was engaged both in software development and product development services and segmental details were not provided separately and the company also owned intellectual property in the form of registered patents and had several pending applications for grant of patents.
• Lucid Software Ltd as it was engaged in the development of software products
DCIT vs. Verisign Services India Pvt Ltd – TS-1081-ITAT-2017(Bang)-TP – I.T.(T.P) A. No.1230/Bang/2013 dated 25.10.2017.

238. The Court upheld the order of the Tribunal wherein it held that the assessee engaged in software development could not be compared with:
• E-Infochips and Infinite Data Systems as these companies carried out high-end technology-driven services which were entirely different from activities carried on by the assessee
• Accentia Technologies as it operated from multiple locations throughout the globe in healthcare receivable cycle management and also ventured into legal process outsourcing and high-end software service delivery which were functionally different from the assessee‟s activities
• TCS E-Serve Ltd. and TCS E-Serve International Ltd since their established ‘brand value’ drew the profitability upward and also since the merger undertaken during the year had resulted in distortion of the profit figures
Vis-à-vis I-Gate Global Solutions, the Court held that having regard to the submissions made and the material on record, especially the Tribunal’s observations that I-Gate’s functioning was similar to that of the assessee, it admitted the Revenue’s appeal against the Tribunal’s exclusion of the said company as comparable on the ground that it underwent significant change in its profitability in view of the amalgamation undergone.
Pr CIT v UNITED HEALTH GROUP INFORMATION SERVICES (P) LTD. – TS-1080-HC-2017(DEL)-TP ITA 1180/2017 dated 21.12.2017

239. The Tribunal held that the assessee engaged in providing software development services could not be compared to:
• Accel Transmatics Limited as its business activities (i.e. services in the form of ACCEL IT and ACCEL animation services for 2D and 3D) were functionally different from that of the assessee, and its related party transactions were more than permitted level.
• Avani Cimcon Technologies Limited as it was engaged in the software products business and was also earning unusually high profit margin for the subject year
• Celestial Labs Limited as this company was mainly engaged in clinical research and manufacture of software products
• KALS Infosystems Ltd this company was engaged in development of software products as well as providing training
• Helios & Matheson Information Technology Limited as this company was found to be functionally incomparable
• Infosys Technologies Limited as this company owned significant intangibles and had huge revenues from software products with no segment break-up.
• lshir lnfotech Limited as the company outsourced its work and did not pass 25% employee-cost filter.
• Lucid Software Ltd as it was engaged in development of software products and thus, was functionally not comparable to assessee.
• Wipro Limited & Tata Elxsi Ltd as they owned intellectual property and had significant R&D activity, brand value, etc. and therefore was not functionally comparable
• Megasoft Limited as the details of the software service segment were not available
• E-Zest Solutions Limited as the company rendered product development and high end technical services which came under the category of KPO services
• Persistent Systems Ltd & Third ware Solutions Ltd as they were engaged in product development & no segmental details were available.
• Quintegra Solutions Limited as the company developed proprietary software products and owned intangibles.
Yodlee lnfotech Pvt. Ltd vs. DCIT – TS-1077-ITAT-2017(Bang)-TP – 1138/Bang/2011 dated 15.12.2017

240. The Tribunal set aside the DRP’s order and remitted the benchmarking exercise of the assessee’s international transactions (viz. provision of back office support services, corporate IT support services and marketing support services to AE) to TPO. It noted that out of 18 comparables selected by the TPO, the DRP had excluded 15 and retained 3 comparables which were either excluded by it in the earlier or subsequent years. Noting that out of TPO’s 18 comparables, DRP had excluded 15 and the other 3 were also liable to be excluded based on earlier / subsequent years DRP orders, the Tribunal opined that the TPO’s selection of comparables was not proper and therefore restored the matter back to TPO.
Electronic Arts Games (India) Private Limited vs. DCIT – TS-1074-ITAT-2017(HYD)-TP – I.T.A. No. 325/HYD/2016 dated 29-12-2017

241. The Tribunal remitted the comparability of Bodhtree Consulting Ltd vis-à-vis the assessee (engaged in providing software development services) back to the DRP observing that the DRP’s order was very cryptic as it included Bodhtree Consulting by only stating that the TPO made elaborate discussion regarding the comparability of entities engaged in providing software development services with entities engaged in development of software product and therefore, there was hardly any ground for rejecting this entity. The Tribunal directed the DRP to pass a speaking order. Further, the Tribunal rejected the Revenue’s contention for exclusion of FCS Solutions & Thinksoft Global Services as comparables and following the decision of the co-ordinate bench in Logica [TS-187-ITAT-2016(Bang)-TP] it held that the said comparables could not be excluded merely because of a working capital impact of over 4%.
Sonus Networks India Pvt. Ltd vs. DCIT – TS-1076-ITAT-2017(Bang)-TP – l (TP) A No. 193/Bang/2014 dated 01.12.2017

242. The Apex Court admitted Revenue’s SLP against the order of the Delhi High Court wherein the High Court dismissed the Revenue’s appeal and upheld the Tribunal’s exclusion of 3 comparables while benchmarking the ITeS transactions of the assessee. The High Court confirmed exclusion of a). Coral Hub Ltd (which had different business model as services were outsourced) b) e-Clerx Services (on account on functional dissimilarity), observing that the issue was covered against the Revenue by the judgment in Rampgreen Solutions Pvt. Ltd. V. Commissioner of Income Tax” and c) Infosys observing that the issue of exclusion of Infosys as a comparable stood covered against the Revenue by way of the decision of the Court in CIT v. Agnity India Technologies Pvt. Ltd.
Pr. CIT Vs Vertex Customer Services India Pvt Ltd – TS-35-SC-2018-TP] – SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 41889/2017 dated 19-01-2018

243. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared to:
• E-Infochips Limited as it was engaged in diversified activities viz. software development, hardware maintenance, IT consultancy and did not have segmental information, it was involved in R&D, and had an exceptional year (grew at rate 5 times more than industry average)
• Infosys Limited as it provided a wide range of services encompassing technical design, engineering design etc and in addition offers software products for the banking industry and did not have segmental information, it owned marketing intangibles and Intellectual Property Rights and was also engaged in R&D.
• Persistent Systems Limited as the company was functionally not comparable being engaged in provision of outsourced product development services and did not have segmental information, it owned intangibles, was engaged in R&D, and had undertaken several acquisitions in the year in consideration
• Acropetal Technologies Ltd. (Seg.) as it was functionally dissimilar
• ICRA Techno Analytics Ltd.engaged in the provision of ITeS services along with software development and did not have segmental details
• Larsen &Turbo Infotech Ltd. as the company owned intangibles for its propriety products & services.
• Sasken Communication Technologies Ltd. as it was engaged in ITeS and also outsourced its services.
• Tata Elxsi Ltd. (Seg) as it owned intangibles
DCIT vs. Philips India Ltd – TS-1088-ITAT-2017(Kol)-TP – ITA No.863 & 539/Kol/2016 dated 15-12-2017

244. The Court uphelds exclusion of i) Eclerx Services Ltd and Vishal Information Technologies Ltd considering both companies transacted entirely different business i.e. Knowledge Processing Outsourcing (KPO) ii) Infosys BPO and Wipro BPO Ltd as they had a significant brand presence for profits and large corporate size which could not be compared to the assessee’s transactions and iii) HCL Commet Systems & Services Ltd. on the ground that it did not pass the appropriate filter and related party transactions were used for the pricing exercise. However, regarding Accentia Technology Pvt. Ltd. and Bodhtree Consulting Ltd, it admitted the following questions of law: “(1) Did the ITAT err in its consideration as to whether the amalgamation undertaken by Accentia Technology Pvt. Ltd. for A.Y. 2007-08 had any effect on its finance or profitability in the circumstances of the case. and (2) Did the ITAT err in excluding the reliance placed by the TPO upon information collected by him under Section 133(6) of the Act, having regard to Section 92CA(7) read with Section 92D(3) of the Act”.
Pr. CIT vs. H & S Software Development and Knowledge Management Centre Pvt. Ltd – TS-9-HC-2018(DEL)-TP – ITA 912/2017 dated 03.01.2018

245. The Tribunal held that the assessee engaged in providing software development services to its AEs could not be compared to:
• KALS Information Systems Ltd as it was developing software products and not purely or mainly software development service provider.
• Bodhtree Consulting Ltd as it was a software product company and could be considered as comparable to the assessee merely providing software development services to its AEs
• Tata Elxsi Limited as it operated in the segments of software development services which comprised of embedded product design services, industrial design and engineering services and visual computing labs and system integration services segment and there were no sub-services break up provided in the annual report
• Infosys Technologies Limited as it owned significant intangibles and was functionally different as it generated huge revenues from software products
• Persistent Systems Limited as it was engaged in software product development and product design services, and could not be compared to the assessee merely providing software development services to its AEs.
Further, it included Larsen & Toubro Infotech Ltd and held that the assessee was incorrect in contending that the 15% RPT filter be applied as the RPT filter of 25 percent was well accepted.
Vis-à-vis Thinksoft Global Services Ltd and FCS Software Solutions Ltd it held that the TPO was unjustified in rejecting the companies as comparable merely because their working capital adjustments exceeded 4 percent and accordingly directed the inclusion of the companies as comparable.
TE Connectivity Global Shared Services India Pvt. Ltd vs. ITO – TS-1049-ITAT-2017(Bang)-TP – I.T.(T.P) A. No.1280/Bang/2014 dated 13.12.2017.

246. Pursuant to miscellaneous petition of the assessee wherein the Tribunal accepted the assessee’s contention and recalled the order to decide on the comparability of Bodhtree Consulting, Tata Elxsi Limited (Seg.) and Infosys Ltd, the Tribunal i) excluded Bodhtree Consulting as comparable as it was engaged in software products as well as services and therefore could not be compared to companies providing software development services ii) remitted the comparability of Tata Elxsi Limited (Seg.) and Infosys Ltd. back to the file of CIT(A) noting that CIT(A) had not specifically dealt with, examined or considered any of the objections specifically raised by the assessee for non-inclusion / exclusion of these two companies.
Narus Networks Pvt. Ltd vs. DCIT – TS-1047-ITAT-2017(Bang)-TP – i.T. (T.P) A. No.1631/Bang/2014 dated 23.11.2017.

247. The Tribunal held that the assessee, engaged in providing software development services could not be compared to:
• Infinite Data Systems Private Limited as the company was providing services of technical consulting, design and development of software, maintenance system integration, implementation, testing and infrastructure management services which was not comparable to the assessee
• E-Infochips Bangalore Ltd as it was engaged in development and maintenance of computer software, production and sale of software without adequate segmental results
• Infosys Limited as it was functionally different and had significant R&D, huge brand value, huge turnover, and also has a leading banking product known as “Finacle
• Sonata Software Limited if upon verification it was found that the company did not satisfy the RPT filter.
Freescale Semiconductor India Pvt. Ltd. vs. DCIT – TS-1098-ITAT-2017(DEL)-TP – ITA No1263 /Del/2015 dated 08/12/2017

248. Relying on the decision of the co-ordinate bench in Electronics for Imaging India Pvt Ltd [TS-279-ITAT-2016(Bang)-TP], the Tribunal held that the assessee engaged in providing software development services to its AE could not be compared with:
• ICRA Techno Analytics Ltd as it was engaged in diversified activities of software development and consultancy, engineering services, web development & hosting and substantially diversified itself into domain of business analysis and business process outsourcing, which was functionally not comparable to the assessee
• Persistent Systems Ltd as the company was engaged in diversified activities and earned revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, etc. the same could not be considered as functionally comparable with the assessee.
• Persistent Systems & Solutions Ltd as this company was earning revenue from software products and services and segmental data was not available
• Infosys Ltdas it had brand value and intangible assets and thus could not be compared with an ordinary entity providing captive services
• Kals Information Systems Ltd as the inventory in the books of accounts of this company showed that it was in the software product business and hence, it could not be compared with a pure software development service provider.
ACIT vs. Cypress Semi – Conductor (I) Pvt. Ltd – TS-118-ITAT-2018(Bang)-TP – IT (TP) A No. 434/Bang/2015

249. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared to:
• KALS information System Ltd as there was an enormous difference in asset base when compared to assessee. (Reliance was placed on the prior years ITAT order – FreescaleSemiconductor India P.Ltd. [TS-366-ITAT-2014(DEL)-TP]
• Infosys Technologies Ltd and Wipro Ltd as it owned branded / proprietary products.
Further, it remitted the comparability of Bodhtree Consulting back to the file of the TPO to examine the assessee’s claim i.e. that the accounting policy followed by the said company (revenue was recognised based on software developed and billed to client) impacted its profitability.
Freescale Semiconductor India Pvt. Ltd. vs. DCIT – TS-1100-ITAT-2017(DEL)-TP – ITA No. 2427/Del/2015 dated 07/12/2017

250. The Court dismissed Revenue’s appeal challenging the Tribunal’s exclusion of Tata Elxsi Limited and Thirdware Solutions noting that the Tribunal had rightly concluded that they were functionally not comparable to the assessee who was engaged in providing software development services. Further, it held that the Tribunal was justified in including SIP Technologies and Exports Limited as comparable by ignoring its low margin (on the basis of which the TPO had excluded the comparables). However, it admitted the questions of law regarding Tribunal’s exclusion of Tata Consultancy Services Limited (TCS) and Infosys Technologies Limited.
Pr. CIT vs. S.T. Ericsson India Pvt. Ltd (Chemical Construction International Pvt Ltd) – TS-59-HC-2018(DEL)-TP – ITA 821/2017 dated 31.01.2018

251. The Tribunal held that the assessee engaged in providing software design and development services could not be compared to:
• Persistent Systems Ltd as it was engaged in product development which was different from software development services and earned revenue from licensing of products, royalty on sale of products as well as income from maintenance contracts and no segmental details were available
• Sasken Communication Technologies Ltd as this company earned revenue from software services as well as software products and the breakup of operating costs and the net profitability between the two segments was not available
Further, it held that Conexant Systems Private Limited vs. DCIT could not be excluded as a comparable merely because of increase in consultancy charges and held that the increase in consultancy charges were proportionate to the increase in turnover.
Conexant Systems Private Limited vs. DCIT – TS-95-ITAT-2018(HYD)-TP – I.T.A. No. 464/HYD/2016 dated 24-01-2018

252. The Tribunal, relying on the co-ordinate bench decision in Cerner Healthcare Solutions P Ltd [TS-28-ITAT-2017(Bang)-TP]held that the assessee, engaged in providing software development services to its AE could not be compared to:
• Infosys Ltd as the company owned intangibles, had huge brand value as well as bargaining power and it was also engaged in diversified services.
• Tata Elxsi Ltd as it was engaged in diversified activities even in software development segment.
• Kals Information Systems Ltd & Persistent Systems & Solutions Ltd as they was functionally dissimilar being engaged in software product business.
• Sasken Communications Tech Ltd as it earned revenue from 3 segments, but segmental margins were unavailable.
• Persistent Systems Ltd as it was earning revenue from various activities including licensing of products, and segmental data was unavailable.
• L & T Infotech Ltd as it had Revenues reported from software development services and products and segmental information was unavailable.
ITO vs. CSR India Pvt. Ltd – [TS-83-ITAT-2018(Bang)-TP – IT (TP) A No. 256/Bang/2015 dated 24.01.2018

253. The Tribunal held that the for the purpose of benchmarking the provision of software development services the application of the onsite filter was a very relevant filter. Accordingly, noting that RS Software had incurred expenses on foreign branches to the extent of Rs. 12.42 crores (82%) out of total expenses of R.s. 15 crores debited in P & L account, evidencing that it was predominantly an onsite software development company it held that the said company could not be retained as comparable. However, the Tribunal noted that the DRP applied the said filter only in respect of one comparable – RS Software India Ltd and thus directed the DRP to apply the filter to all companies as well as to examine the applicability of all other relevant filters and all other objections such as functional similarity/dissimilarity etc vis-à-vis the other comparables.
ACIT vs. Broadcom Communication Technologies Pvt. Ltd – TS-1105-ITAT-2017(Bang)-TP – IT(TP)A No. 347/Bang/2015 dated 17.11.2017

254. The Tribunal held that assessee engaged in providing software development services to its AE could not be compared to:
• Infosys Technologies Ltd as it provided diversified services viz. end to end business solutions spanning across entire software life cycle as well as offer software product (viz. “finacle” which is owned by Infosys) for banking industry, for which segmental details were not available
• 3K Technologies Ltd as its employee cost was only 3.70 percent which did not satisfy the employee cost filter of 25 percent as applied by the TPO
• KALS Information Systems as it was engaged in development of software, software products as well as training of professionals of which segmental details were not available
• Persistent Systems Ltd as it was Outsourced Software Product Development (OPD) specialist and therefore not comparable to the assessee providing software development services
• Bodhtree Consulting Ltd as the company provided product engineering services ranging from application development and maintenance, web development and outsourced product development to QA and managed testing services; and had highly volatile margins.
• Zylog Systems Ltd as the company acquired two companies during the year under review and also was a software product company not comparable to the assessee.
Siemens Product Lifecycle Management Software (India) Pvt. Ltd. vs. ACIT – TS-182-ITAT-2018(DEL)-TP – ITA No.5922/Del./2012 dated 22.01.2018

255. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared to:
• Helios & Matherson Information Technology Ltd as it had turnover of Rs. 213 crore which failed the turnover filter applied by the TPO i.e. Rs.200 crore. It dismissed the Revenue’s contention that the company be included as its turnover exceeded the filter marginally
• FCS Software Ltd as it provided both IT services and ITeS and did not have adequate segmental results
• E-Zest Solutions Ltd and Kals Information Systems as the company was engaged in the business of software products which was not functionally comparable to the business carried on by the assessee.
Further, it accepted the assessee’s plea for inclusion of CG Vak Software & Exports Ltd and held that the TPO was unjustified in excluding the company as comparable merely because it suffered losses for the year under consideration. It noted that the company earned profits in the earlier years and accordingly held that the TPO incorrectly held that the company suffered persistent losses. Accordingly, it held that the company ought to have been considered as a comparable.
Amber Point Technology India Pvt. Ltd. vs DCIT – TS-172-ITAT-2018(PUN)-TP – ITA Nos.756 & 757/PUN/2014 dated 25.01.2018

256. The Tribunal held that the assessee engaged in providing software development services to its AEs could not be compared to L&T Infotech as the TPO failed not allocate ‘Unallocable expenses’ to L&T Infotech’s Industrial cluster segment which was considered for benchmarking without which the correct amount of operating profits could not be ascertained. Noting that neither the nature of common unallocated expenses was known nor the information concerning the appropriate allocation keys was available in the present case, the Tribunal held that the inclusion of Larsen & Toubro Infotech Ltd. (Seg.) in the list of comparables would vitiate the comparability. Accordingly, it directed its exclusion.
Pitney Bowes Software India Pvt. Ltd vs. ACIT – TS-163-ITAT-2018(DEL)-TP – ITA No.7034/Del/2017 dated 13.03.2018

257. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared with:
• Akshay Software Technologies Ltd as it was dealing in software products.
• Thinksoft Global services Ltd as it was engaged in software testing which required different skills, software and assets rendering it functionally dissimilar.
It rejected DRP’s stand of not considering assessee’s contention to include 4 other comparables for which it had filed additional documentary evidence and held that the proceedings before the DRP was a continuation of the assessment proceedings and the purpose of providing the proceedings before the DRP was to ensure due and fair adjudication of the ALP by comparing the operating profit / operating cost of the assessee with that of the functionally comparable companies. Accordingly, it remitted the 4 comparables to the file of the TPO for fresh consideration.
WM Global Technology Services (India) P. Ltd vs. ACIT – TS-144-ITAT-2018(Bang)-TP – I.T(TP).A No.1963/Bang/2017 dated 28.02.2018
258. The Tribunal held that the assessee, engaged in providing software development services could not be compared to:
• Infinite Data Systems Private Limited as the company was providing services of technical consulting, design and development of software, maintenance system integration, implementation, testing and infrastructure management services which was not comparable to the assessee
• E-Infochips Bangalore Ltd as it was engaged in development and maintenance of computer software, production and sale of software without adequate segmental results
• Infosys Limited as it was functionally different and had significant R&D, huge brand value, huge turnover, and also has a leading banking product known as “Finacle
• Sonata Software Limited if upon verification it was found that the company did not satisfy the RPT filter.
Freescale Semiconductor India Pvt. Ltd. vs. DCIT – TS-1098-ITAT-2017(DEL)-TP – ITA No1263 /Del/2015 dated 08/12/2017

259. The Tribunal dismissed the Revenue’s appeal and held that the assessee engaged in providing software development services could not be compared to Infosys Technologies Ltd as it had huge turnover and brand value.
Tieto IT Services India Pvt Ltd vs. DCIT – TS-155-ITAT-2018(PUN)-TP – ITA No.242/PUN/2015 dated : 07.03.2018

260. In the case of an assessee engaged in IT services, the Court dismissed Revenue’s appeal and upheld the Tribunal’s decision of exclusion of 4 comparables company namely Coral Hub, Datamatics Financial (BPO Division), Geneysis International and Mold Tek on the ground of functional dissimilarity between assessee and comparables.
PCIT-6 Vs MPS Ltd-TS-306-HC-2018(DEL)-TP ITA No 255/2018 dated 18.04.2018

261. The Tribunal held that assessee engaged in providing software development & IT services to its AE was not comparable to:
• Aricent Technologies (holding) Ltd. as no separate segment result for software services were available.
• CAT Technologies Ltd.as the company had revenue earnings from consulting services along with software development.
• KPIT Cummins Infosystems Ltd.- as related party transactions were 98.87%,
• Tech Mahindra Ltd as the RPT was greater than 25%, being a filter deployed by the TPO.
• Thirdware Solutions Ltd as the revenue stream of the company consisted of sale of license and revenue from subscription along with software and export services.
As regards Bodhtree Consulting Ltd- The Tribunal remanded the said comparable to verify the issue of accounting entries of revenue recognition from software development and its consequent impact on profit margin of the said company.
M/s. Opera Solutions Management Consulting Services Pvt. Ltd. Vs ITO ward 13(4), New Delhi- TS-389-ITAT-2018(DEL)-TP-ITA no 5761/Del/2014 dated 27.04.2018

262. In the case of an assessee providing software development services to its AE, the Tribunal rejected Revenues plea for inclusion of 3 companies as comparables viz: Infosys Ltd, Sasken Communications Ltd & Sonata Software Ltd- The same were excluded as they had huge turnover as compared to assessee and also had patents. Further, the Tribunal concluded that the above companies fell beyond the Rs 200cr turnover filter, applied by the TPO and thus excluded them from list of comparables.
ITO Ward 1(2) vs Billion Hands Technologies P Ltd- TS-331-ITAT-2018(PUN)-TP- ITA No 372/PUN/2016 dated 27.04.2018

263. In case of an assessee engaged in providing software development services to its AE the Tribunal rejected assessee/TPO’s comparable viz: Thirdware Solutions on grounds of functional dissimilarity and absence of segmental results.
The Tribunal further directed the TPO to consider forex fluctuation as operating in nature for both assessee and comparable company relying on the co-ordinate bench ruling in assessee’s own case.
Further, the Tribunal allowing assessee’s claim for working capital adjustment restored the matter to the file of the AO relying on Co-ordinate Bench ruling in assessee’s own case.
Wipro Ltd vs DCIT Central Circle 7(1)-TS-323-ITAT-2018(Del)-TP- ITA No 1594/DEL/2014 dated 11.04.2018

264. The Tribunal relying on the judgement of coordinate bench in case of Hewlett Packard (I) Software Operation Pvt Ltd held that assessee engaged in providing software development services to its AE could not be compared to:
• Avani Cimcon Technologies Ltd due to absence of segmental data with respect to revenue from software services
• Celestial Labs Ltd as it was engaged in clinical research and manufacture of bio products.
• E-zest Solutions Ltd as it was engaged in development services and high end technical services.
• Flextronics Software Systems Ltd as it had different financial year ending and no reconciliation was made by the department.
• Helios & Matheson Information Tech Ltd as it was engaged in sale of software products.
• Infosys Technologies Ltd as it had huge revenues and significant intangibles
• Ishir Infotech as it outsourced its work and failed employee cost filter.
• Kals Information Systems Ltd as it was not purely a software development service provider.
• Lucid Software as it outsourced its work and failed employee cost filter.
• Persistent Systems as Ltd segmental data were unavailable.
• Wipro Ltd as segmental data were not available, and it owned huge intellectual property.
The Tribunal further, remitted back the comparable of Tata Elxsi after relying on coordinate bench in case of Quark System which has been upheld by the HC (wherein the Tribunal had remanded the issue of comparability of companies considered in the assessee’s own TP study consequent to assessee’s ground challenging the comparability of its own comparable).
M/s. SCM Microsystems (India) Pvt Ltd vs ACIT CC VI(1)-TS-358-ITAT-2018(CHNY)-TP- ITA No 2155/Chny/2011 dated 04.04.2018

265. The Tribunal held that assessee providing software development and consultancy services to its AE could not be compared to:
• Bodhtree Consulting Limited as it was functionally different, and it also failed to qualify turnover filter
• John Deere India P Ltd due to absence of segmental result
• E-zest Solutions Ltd as KPO services of company were not functionally comparable to software development services of assessee
• Helios & Matheson Info Technology Ltd.
• KALS Systems as it was engaged in development of software and other activities.
Further the Tribunal included SIP Technologies & Exports Ltd as comparable based on co-ordinate bench judgement in case of John Deere India P Ltd, where in it was held that exclusion was not warranted as it was not a persistent loss making company and loss in one financial year cannot make it a persistent loss making company
SAS Research & Development (I) Pvt Ltd vs ACIT Circle -6 Pune- TS-313-ITAT-2018(PUN)-TP- ITA No 254/PUN/2013 dated 13.04.2018

266. The Court held that the assessee company rendering software development services to its AE could not be compared with –
• CG Vak Software & Exports Ltd. because apart from earning income form software services it also earned income from ‘Business process outsourcing services’ which fell in realm of IT enabled services and there was no segmental information qua software services alone.
• Quintegra Solutions Ltd. as the company was incurring persistent losses coupled with declining turnover which indicated its abnormal functional circumstances.
Further, the Court dismissed assessee’s plea and included Thirdware Solutions as comparable upholding TPO’s view that the company’s overseas segment encompassed only export of software services, as identical to the assessee.
Steria India Ltd. v. DCIT – [2018] 92 taxmann.com 120 (Delhi) – IT APPEAL NO. 403 OF 2017 dated APRIL 9, 2018

267. The Tribunal held that assessee engaged in software development services and ITeS could not be compared to:
• Acropetal Technologies Ltd as segmental details relating to export sales was unavailable.
• E- infochips Ltd after upholding DRP’s finding that the company did not meet 75% software service income filter.
• Accentia Technologies as the company primarily catered to healthcare industry and lacked segmental data. (The Tribunal relied on the case of Swiss Re Shared Services India Pvt Ltd.)
Further, the Tribunal included RS Software (India) Pvt Ltd as comparable since assessee and TPO both contested to include the comparable and DRP’s suo moto exclusion due to its onsite development activities was not justified.
DCIT Circle 2(1)(2) vs M/s. EMC Software and Services (I) Pvt Ltd- TS-487-ITAT-2018(Bang)-TP- IT (TP) No 273/Bang/2016 dated 25.04.2018

268. The Tribunal held that assessee engaged in software development services could not be compared to:
• Accentia Technologies Ltd due to lack of segmental information
• Acropetal Technologies due to functional differences as compared to assessee
• Eclerx Services as it was engaged in KPO activities
• Infosys BPO Limited due to its exceptional size and brand value.
• TCS eServe Ltd due to functional dissimilarity.
• Microgenetic Systems Ltd as significant expenditure of 23% was incurred towards medical transcription services
• Cosmic Global as it had substantial sub-contracting expenses, which represented a different business model from the assessee.
Further, the Tribunal included Crossdomain Solutions Pvt Ltd as comparable to the assessee
M/s. Excellence Data Research Pvt Ltd vs DCIT Circle 17(1)- TS-484-ITAT-2018(HYD)-TP- ITA No 93 & 34/ HYD/2016 dated 25.04.2018

269. The Tribunal held that the assessee engaged in rendering software development services to AE could not be compared to –
• Acropetal Technologies Limited as the segmental information containing break-up of its export sales and employee cost was not available and, thus, it was not possible to ascertain if it passed export earnings and/or employee costs filters.
• L & T Infotech Ltd. as the company was developing its own software products and had huge marketing intangibles.
• E-Infochips Ltd. as it failed to satisfy software service income filter at 75 per cent.
DCIT v. CGI Information Systems & Management Consultation (P.) Ltd. – [2018] 93 taxmann.com 9 (Bangalore – Trib.) – IT APPEAL NO. 502 (BANG.) OF 2016 dated April 6, 2018

270. The Tribunal held that the assessee company rendering software development services to AE could not be compared with –
• Cat Technologies Ltd. as the company was earning Revenue from software development services as well as consultancy services and did not contain any segmental information.
• Thirdware Solutions Ltd. as the company was earning income from software development services as well as sale of licences and the segmental information was unavailable for the same.
• Tata Elexi Ltd. as the company was engaged in making animated films and there was a functional difference between the assessee and the company.
• Akhay Software Technologies Ltd. as the company was earning income from sale of software products as well as software development services and the segmental information about the same was not available.
Virage Logic International-India Branch Office v. JDIT – [2018] 93 taxmann.com 54 (Delhi – Trib.) – IT APPEAL NOS. 6919 & 7044 (DELHI) OF 2014 dated APRIL 16, 2018

271. The Tribunal held that assessee engaged in provision of software development services to its AE could not be compared to:
• Infosys Ltd as it had significant assets and high brand value and was a full-fledged risk taking entrepreneur developing and engaged in selling of software products. [The Tribunal held it that it could not compared with the captive service and contract software development companies as the comparability analysis failed on all the factors of FAR. It relied on coordinate bench decision in assessee’s own case which in turn had relied on Delhi High Court ruling in Agnity India.]
• Wipro Technology Services Ltd as it earned majority of revenue from Citigroup Inc and was earlier part of Citi Group and subsequently, it was acquired by Wipro and the arrangement of earning revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services was actually a prior arrangement between assessee’s AE (Wipro Ltd) and third party (Citigroup Inc.) and hence in light of the transaction ceased to be a comparable uncontrolled transaction. [It relied on the coordinate bench decisions in Orange business Systems and Ness Technologies.]
• Acropetal Technologies Ltd. as it failed the filter applied by the TPO viz. employee cost filter of greater than 25% (as Acropetal’s employee cost was only 13.74%).
• E-Infochips Limited as Ltd as it was a software development , software product and ITeS company and as segmental data was not available and not a good comparable to pure software development services undertaken by assessee as a captive service provider.[ It relied on the coordinate bench decision in Saxo India and Ness Technologies.]
• E-Zest Solutions Ltd. as it was engaged in diversified business activities, including product engineering services and outsourced product development services, inventory in the books of account and company’s special expertise in emerging technologies. [ It relied on coordinate bench decision in Symantec Software.]
Further,
• it remitted the comparability of CG-VAK Software and Exports Ltd. and directed the AO to verify the employee cost filter after considering the cost of services under the expenditure head and accept it as comparable if it passes the employee cost filter.
• With respect to R Systems International Ltd. (having a different financial year from the assessee), it directed the TPO to consider the quarterly financial statements for FY 2010-11 for the purpose of inclusion observing that the coordinate bench decision for assessee’s own case had considered it to be functionally comparable.
• It directed the TPO to verify the export sales of Thinksoft Global Ltd. vis-a-vis the total operating revenue from the annual report and to include it in the list of comparables if it passed the export earnings filter.
• It also remanded the comparability of Cat Technologies Ltd. to the file of the TPO to reach a fresh conclusion on the aspect of whether it passes the RPT filter or not.
• It remitted the comparability of LGS Global Ltd. to the TPO to verify whether classification of expenses under the head “purchase and personnel cost” were mainly on account of employee cost since the assessee had pointed out that there were no tangibles or inventory in the books of accounts and directed the TPO to verify again if employee cost filter is satisfied.
• It included Goldstone Technologies Ltd. noting that the DRP in assessee’s own case had held it to be a comparable and Revenue was not able to point out any change in business model of the assessee for the subject year.
Cadence Design Systems (I) P Ltd vs ACIT [TS-955-ITAT-2018(DEL)-TP] ITA No.6315 of 2015 dated 02.04.2018

272. The Tribunal held that assessee engaged in provision of software development services could not be compared to:
• Infosys Ltd. as it provided end to end services encompassing technical consulting, design, re-engineering, systems integration etc. and had a high brand value and owned intangible assets.
• KALS Information Systems Limited as it was engaged in sale of software products.
• Persistent Systems Ltd. as it was engaged in diversified activities and and earning revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, and segmental data was not available.
• Tata Elxsi Ltd.as it was engaged in development of niche products and services coupled with lack of segmental information
• Persistent Systems and Solutions Limited as it was engaged in software development products and no segmental details were available.
• L& T Infotech Ltd as it was a software product company and segmental details for software development services were unavailable.
• Genesys International Corporation Ltd as it was engaged in rendering mapping and geospatial services and and as part of rendering these services it developed software.
CGI Information Systems and Management Consultants Private Limited vs ACIT [TS-492-ITAT-2018(Bang)-TP] IT(TP)A Nos. 586 (Bang) of 2015 and 183(Bang) of 2017 dated 11.04.2018

273. The Tribunal held that assessee engaged in provision of Software Development services to its AE could not be compared to:
• Avani Cincom as it was into production of products such as DExchange, lTrak, Law firm Solution, hotel and restaurant booking engines etc and no revenue bifurcation between Software development services and products was given.
• Bodhtree Consulting Ltd. as it was engaged in Software consulting, web services integration ,Data management and Data warehousing services (which were classified as lTES).
• E-Zest Solutions Ltd as the company was rendering product developmentservices and high end technicalservices which came under the category of Knowledge Process Outsourcing (KPO) services
• Infosys Technologies Ltd. as it owned intangibles and engaged in sale of software products and had no segmental bifurcation between revenue from software development services and products.
• PersistentSystems Ltd. as it was engaged in product development and product design services.
• Quintegra Solutions Ltd.as it was engaged in product engineering and extensive R&D and owned its own intangible
• Tata Elxsi Ltd. as it was predominantly engaged in product designing services and not purely software development services.
• Thirdware Solutions Ltd. as it was engaged in product development and earned revenue from sale of licenses and subscription.
• Wipro Ltd. as it was engaged both in software development and product development services and no segmental bifurcation between them was available.
• Softsol India Ltd. as it had RPT of 18.3% thereby failing the RPT filter of 15%
• Lucid Software Ltd. as it was engaged in software product development and hence functionally dissimilar.
SAP Labs India Pvt Ltd vs Addl CIT [TS-298-ITAT-2018(Bang)-TP] IT(TP)Appeal Nos.981 and 1070 of 2016 dated 06.04.2018

274. The Tribunal held that the assessee engaged in providing software development services could not be compared to:
• Bodhtree Consulting Ltd it was engaged in product engineering and engineering services while the assessee was engaged in software development.
• E-Zest Solutions Ltd as it rendered product development and technology services, which fell under the category of KPO services which could not be compared to the assessee engaged in providing software development services
• Helios & Matheson Information Tech, relying on the decision John Deere India Pvt. Ltd. [TS-553-ITAT-2015(PUN)-TP], wherein it was held that the company was functionally dissimilar.
• Kals Information System as the company was engaged in development and sale of software products and was not comparable to software development services provided by the assessee.
• Goldstone Technologies Ltd as it was engaged in activities related to Media & IP TV and further carried inventory of set top boxes and movie rights in its Balance Sheet for the previous year rendering it functionally dissimilar to the assessee.
Further, it held that SIP Technologies and Exports Ltd and CG-Vak Software Exports Ltd could not be excluded merely on the ground that they incurred losses for the year under review. It held that companies could be excluded only if they were persistent loss making companies i.e. incurred losses for three continuous years.
Nihilent Technologies Pvt. Ltd vs ITO – TS-658-ITAT-2018(PUN)-TP – ITA No.2428/PUN/2012 dated 10-05-2018

275. The Tribunal held that the assessee engaged in providing software development services to its AE cannot be compared to:
• Thirdware Solution Ltd as it was engaged in the business of software products as well and therefore functionally dissimilar
• Kals Information Technology System Ltd as it was engaged in software services as well as Software products and had reported inventory and work in progress in annual report indicative of the fact that it was functionally dissimilar to the assessee.
• Bodhtree Consulting Ltd as it was a product company and had also undertaken major business restructuring during the year
Vis-à-vis Goldstone Technologies Ltd, it held that the company was erroneously excluded by the TPO on the ground that it was loss making as only companies that were persistently loss making were to be excluded.
MSC Software Corporation India Pvt. Ltd vs. ACIT – TS-489-ITAT-2018(PUN)-TP – ITA No.379/PUN/2014 dated 31-05-2018

276. The Tribunal held that an assessee providing software development services could not be compared to E-infochips engaged in IT, ITES and sale of products due to absence of segmental details following Alcatel Lucent ruling (which was subsequently confirmed by Delhi HC)
M/s. Labvantage Solutions Pvt Ltd vs ACIT Circle 2(1)- TS-405-ITAT-2018(Mum)-TP- ITA No 927 & 2400/Kol/2017 dated 11.05.2018

277. Where the assessee was engaged in providing software services to its AEs and distribution of products on behalf of its AEs, the Tribunal held that the following companies could not be considered as comparable:
• CompU Learn Tech India Ltd as the company was also engaged in R&D to enhance the quality of its products while assessee was into simple software development services.
• E-Infochips Bangalore Ltd as it was not only into software development services but was also into consultancy services and segmental data was unavailable
• Kals Information System Ltd as it was engaged in software services, software products and ITeS and no segments were available.
• Tata Elxsi as the company was functional dissimilarity because of its complex activities.
Further, it held that the following companies were to be included as comparables:
E-Zest Solutions Ltd (‘E-Zest’) as its operations were similar to the software services rendered by the assessee.
Open Text Corporation India Pvt Ltd (earlier known as Cordys Software India Products Ltd) vs. DCIT – TS-500-ITAT-2018(HYD)-TP – ITA No.486/Hyd/2015 dated 18.05.2018

278. The Tribunal held that the assessee engaged in providing IT based engineering design services to its AE could not be compared to:
• Coral Hub Ltd as it adopted a different business model (outsourcing) and therefore was functionally dissimilar to the assessee
• Chakkilam Infotech Limited as the company did not satisfy the 75 percent export turnover filter
• ICRA Techno Analytics Limited as the financials of the said company and segmental data of the engineering design segment were not available
• ISmart International limited as the financials of the said company were not available in public domain.
• Valuemart Info Technologies Limited as the company was engaged in consultancy and software development which fell within the ambit of KPO Services and could not be compared to the services rendered by the assessee.
Visteon Engineering Center (India) Private Limited vs. ACIT – TS-462-ITAT-2018(PUN)-TP – ITA No.316/PUN/2015 dated 28-05-2018

279. Noting that the assessee’s business activities i.e. software development services were similar to the activities carried on by Yodlee Infotech, the Tribunal relying on the decision of the co-ordinate bench in Yodlee Infotech Pvt Ltd [TS-465-ITAT-2014(Bang)-TP] held that the following companies could not be considered as comparable to the assessee:
• Bodhtree Consulting Ltd as it was software product company and therefore functionally different to the assessee
• Infosys Technologies Ltd as it had considerable intangibles like IPR and was also engaged in software product development.
• Persistent Systems Ltd as the company was into product designing services and into software product development.
• Tata Elxsi Ltd as the company was engaged in developing niche products and rendering product designing Services
It remitted the comparability of Larsen & Toubro Infotech to the file of the TPO and held that merely because the company had turnover in excess of 10 times the turnover of the assessee it would not render it non-comparable. Relying on the decision of the Court in Chryscapital Investment Advisors (India) Pvt Ltd [TS-173-HC-2015(DEL)-TP] it remitted the matter to the TPO directing him to attempt to provide a reasonable adjustment to eliminate the material effect of such difference.
Manhattan Associates (India) Development Centre Pvt. Ltd vs. DCIT – TS-464-ITAT-2018(Bang)-TP – IT(TP)A No. 1293/Bang/2014 dated 31.05.2018

280. The Tribunal held that the assessee engaged in providing software development services could not be compared to:
• Infosys Ltd as the company had been rejected as a comparable on account of functionality, high turnover, brand value and significant AMP expend by the co-ordinate bench in its own case for the earlier year which had been upheld by the High Court – MentorGraphics (India) P Ltd [TS-420-HC-2017(DEL)-TP] and Mentor Graphics (India) Private Limited [TS-799-ITAT-2017(DEL)-TP]
• KALS Information Systems Ltd as the company was engaged in development of software products rendering it functionally dissimilar (as also held in the assessee’s own case for the prior year)
• Bodhtree Consulting Ltd as it had fluctuating profitability and was excluded by the co-ordinate bench in its own case for the earlier year which had been upheld by the High Court
• Tata Elxsi Ltd as it was engaged in the development of specialized/niche products which was entirely different from the assessee. (as also held in the assessee’s own case for the prior year)
• Avani Cincom Technologies Ltd as the company was engaged in both software products and services and the segmental data was not available.
• Wipro Ltd as the company was engaged in both software products and services and the segmental data was not available.
• E-Zest Solutions Ltd as the company was into software products development services and providing high end technical services which fell under the ambit of KPO services.
• Persistent Systems Ltd as the company was engaged in both software products and services and the segmental data was not available.
Mentor Graphics (India) Pvt. Ltd. vs. DCIT – TS-432-ITAT-2018(DEL)-TP – I.T.A .No. 410/DEL/2013 dated 23.05.2018

281. The Tribunal held that assessee engaged in software development services could be compared to:
• CG Vak Software Exports Ltd- as the company was into software product development which would tantamount to software development services
• L&T Infotech- as it provided software development services to 3 clusters (Banking, manufacturing and telecom), rejecting the assessee’s contention that it was functionally dissimilar because assessee was servicing banking segment only. It also rejected the assessee’s contention of presence of intangibles and non-availability of segmental data, noting that the said company didn’t not own any intangibles in the form of brand and that there was only one segment of software development.
• Persistent Systems as its entire revenue was from software services and there was no software product segment.

The Tribunal also held that assessee engaged in software development services could not be compared to:
• Cigniti Technologies Ltd. engaged insoftware testing by holding that though software testing was only a part of software development life cycle but could not be equated with software development services
Further, the Tribunal remitted the issue of comparability of Helios and Matheson Information Technology Ltd. (having different financial year-end vis-à-vis the assessee) back to the file of TPO in view of assessee’s submission that on the basis of financial results for two years, which financial results for relevant financial period could be ascertained.
Advice America Software Development Center Pvt. Ltd. vs. ITO [TS-373-ITAT-2018(Bang)-TP] IT(TP)A No.2531/Bang/2017 dated 23.05.2018

282. The Tribunal held that the assessee, engaged in provision of software development to its AE could not be compared to:
• Acropetal Technologies Ltd. as the company did not satisfy the 75% revenue filter of software development services revenue applied.
• E-Infochips Ltd. as the company was earning revenue from softwareproducts and segmental details were unavailable.
• ICRA Technologies Ltd. as the company was functionally incomparable with pure softwaredevelopment service provider and its RPT was exceeding 15%.
• Infosys Ltd as the company had huge brand value, intangibles and huge turnover.
• Larsen & Toubro Infotech Ltd. as the company’s RPT filter was exceeding 15%.
• Persistent Systems Ltd. since it was engaged in diversified activities and earning revenue from various activities including licensing of products, royalty on sale of products as well as income from maintenance contract.
• Sasken Communication Technologies Ltd. as the segmental details were not available for its 3 segments of activities.
The Tribunal held that the assessee, engaged in provision of software development could be compared to Thinksoft Global Ltd on the ground of being functionally comparable and could be excluded for the reason that the working capital adjustment to be done was very high.
Further, with regard to the assessee’s contention of excluding E-Zest Solutions Ltd. the issue of functional comparability was remitted back to AO/TPO by following the decision in Toluna India [TS-247-ITAT-2014(DEL)-TP], wherein also the issue of comparability was remanded back to the AO/TPO noting that insignificant variation in activity could not be a determinative factor under TNMM. Similarly, as regards the assessee’s contention for inclusion of LGC Global Ltd, the Tribunal remitted the issue of functional comparability back to AO/TPO by relying on the decision of the Tribunal in Applied Materials Pvt. Ltd wherein also the matter was remanded to decide on functional comparability.
Finastra Software Solutions (I) P Ltd. (formerly Misys Software Solutions India Private Limited) vs. ACIT [TS-404-ITAT-2018(Bang)-TP] – IT(TP)A No.529 & 491/Bang/2016 dated 02.05.2018

283. The Tribunal accepted the assessee’s contention and excluded E-infochip Ltd. as a comparable relying on the decisions of Philips India and Ness Technologies where the said comparable was excluded in case of assessee’s engaged in like activities of provision of software development and technical support services as E-Infochip was engaged in manufacturing and trading of printed electronic circuit boards and had income from software development, hardware maintenance, information technology consultancy and information technology services and selling software product and no separate segmental information was available and was also held to be an undertaking engaged in ITES.
Redknee (India) Technologies Private Limited vs. DCIT ITA No.486/Pun/2016 dated 29.06.2018

284. The Tribunal relying on the decision of co-ordinate bench in the case of 3DPLM Software Solutions held that the assessee engaged in providing software development services to its AE could not be compared to:
• Celestial Lab Ltd. as it was engaged in the manufacture of industrial enzymes and pharmaceutical ingredient
• Avani Cimcon Technologies Ltd as the company was into software products
• E-Zest Solutions Ltd as it was engaged in rendering product developmental services and high end technical services which come under the category of KPO services
• KALS Information Systems Ltd as the company was developing software products and was not purely or mainly a software service provider.
• Persistent Systems Ltd as the company was engaged in product development and product design services and no separate segmental details available
• Tata Elxsi Ltd as the company was predominantly engaged in design services and the segment ‘software development services’ relates to design services and are not similar to software development services performed by the assessee
• Thirdware Solutions Ltd. as the company was engaged in product development and earns revenue from sale of licences and subscription, which is different from software developmental services.
• Wipro Ltd as the company was into software products also and no seperate segmental details were available.
• Soft Sol India Ltd as RPT filter exceeded 15%
• Lucid Software Ltd as it was engaged in development of software products.
• Infosys Technologies Limited as segmental breakup of towards the products and services segments was unavailable.
DCIT vs Mphasis Limited [TS-890-ITAT-2018(Bang)-TP] ITA 325/Bang/2014 dated 01.06.2018

285. The Tribunal held that a company engaged in providing software development services to its AE could not be compared to:
• Infosys BPO Ltd as the company had a high turnover, global brand value, operations on a large scale, large talent pool and significantly different FAR and was also excluded by ITAT in assessee’s own case for earlier years
• TCS E Services Ltd. as the company provided technology services involved in software testing, verification and validation of software at the time of implementation and data in the management. to the assessee. Also it had its own brand value and its scale and operations were different from the assessee.
Further, the Tribunal rejected assessee’s plea for exclusion of E-Clerx Services Ltd. on the ground that it was a KPO and provided data analytics, operations management and process improvement and thus functionally different. It observed that since the assessee had been categorized as a KPO in its own case for the earlier year, E-Clerx could not be excluded on the basis of functional dissimilarity.
Avineon India Pvt Ltd vs Dy.CIT [TS-893-ITAT-2018(HYD)-TP] ITA No.82/Hyd/2017 dated 27.06.2018

286. The Tribunal remanded the following comparables to file of TPO for the assessee engaged in the provision of software development services:
• R Systems International Limited with a direction to include the company if the financial results for the year ending on 31.03.2013 can be worked out from audited accounts by relying on the HC ruling in the case of Mercer Consulting (India) Pvt Ltd
• ICRA Techno Analytics Ltd for computing the RPT and also held that RPT filter of 25% was proper
• L&T Infotech Limited for the TPO to be satisfied whether the brand value, hugh profits or high turnover materially affected the price or cost and secondly, an attempt to be made to eliminate the effect of such differences in light of the HC ruling in the case of Chryscapital Investment Advisors Ltd wherein it was held that high profits or high turnover cannot be a reason to exclude a company.
• Mindtree Ltd noting that orders of TPO and DRP were not speaking order on the aspect that the company was engaged in diversified activities and had high IP with a direction to provide the assessee with an opportunity of being heard before considering the aforesaid aspects.
• Persistent Systems Limited noting that the orders of the TPO and DRP were not speaking orders on the aspect that the company was functionally dissimilar and was engaged in product engineering, technology consulting, strategic partnership to build platforms and IP-led business etc. with a direction to provide the assessee with an opportunity of being heard.
Tecnotree Convergence Pvt Ltd vs DCIT [TS-925-ITAT-2018(Bang)-TP] IT (TP) A No.1616/Bang/2017 dated 27.06.2018

287. The Tribunal directed the TPO to conduct a fresh search for comparables for the assessee engaged in software development to determine the arm’s length price. The Tribunal observed that the DRP erred in upholding the set of 13 comparables selected by TPO even after noticing that 9 out the 13 comparables were functionally dissimilar. In so far as the assessee’s plea for exclusion of Persistent Systems as comparable was concerned, the Tribunal noted that the assessee itself had taken Persistent Systems Ltd as one of the comparables and no objection against the same was raised before the DRP. The turnabout by the assessee at a later stage without raising a specific ground of appeal was rejected by the Tribunal.
Steelwedge Technologies Pvt Ltd [TS-473-ITAT-2018(HYD)-TP] ITA No.385/Hyd/2017 dated 06.06.2018

288. The Tribunal remitted the functional classification of services rendered by assessee to AE for fresh adjudication. The Tribunal noted that the AO/DRP had considered nature of services rendered by assessee as software development services instead of manpower supply/ IT Consulting Services as claimed by assessee. The Tribunal opined that there was merit in the contentions of the assessee that services rendered were of man power/personnel on perusal of the Service Agreement between assessee & AE as well as invoices raised which showed that billing was done on man days of employees, billing rates were different for various grades.
Enzen Technologies Private Limited vs ACIT [TS-533-ITAT-2018(Bang)-TP] IT (TP) A No.2540/Bang/2017 dated 04.06.2018

289. Relying on the co-ordinate bench decisions in the case of Alcatel Lucent and Symantec Software, the Tribunal excluded the following comparables for the assessee engaged in providing software development services to its AE:
• Persistent System and Solutions Ltd. as it was a product development company with diversified services and separate segmental information was not available.
• Sankhya Infotech Limited as it was engaged in diversified services, which included the provision of customized products and services for training purposes. It also owned a research and development center.
• E-Zest Solutions Ltd. as it was engaged in diversified services such as product engineering, outsourced product development, enterprise application development, IT services, industries solutions and technical expertise, without any segmental information. Its high end services were classified as KPO.
• Infosys Ltd as it was not functionally comparable, had hugh scale of operations, high brand value, R&D with significant revenue and capital expenditure which created significant intangibles.
• Wipro Ltd. as it was engaged in the development of a product, namely FLOW which was used in the retail sector and was a result of significant R&D activities
• Sasken Communication Technologies as it was functionally different
• Zylog Systems Limited as the company had earned income from both, software development services and products but no separate segmental information was available
Clear 2 Pay India Pvt Ltd vs ITO TS-757-ITAT-2018(DEL)-TP ITA No.2788,2744 and 594/Del/2017 dated 22.06.2018

290. The Tribunal held that the assessee engaged in providing software development services to its AE could not be compared to:
• Tata Elxsi as the company was engaged in diverse activities, which included product design, services, innovation design, engineering services within the software development segment.
• Akshay Software as the company had onsite revenue.
The Tribunal also included R S Software as a comparable since both the parties i.e. the assessee and Revenue contested against the exclusion of the said comparable by the DRP and had agreed for its inclusion.
Further, the Tribunal remanded the comparability of Evoke Technologies in view subsequent availability of relevant data which was not available during assessment proceedings and also remanded L&T Infotech with specific directions to consider segmental results of the services segment, if available
Autodesk India Private Limited vs DCIT [TS-532-ITAT-2018(Bang)-TP] IT (TP) A Nos.303/Bang/2015 and 422/Bang/2015 dated 08.06.2018

291. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order wherein the Tribunal had excluded the following comparables in case of assessee providing software services:
• Kals Information System Ltd. as it was a software product company. [The Court noted that the Revenue was not able to distinguish the decision of jurisdictional High Court in PTC Software wherein the aforesaid comparable was excluded in case of assessee engaged in similar business applicable.]
• Cosmic Global Ltd.as it had a different business model (subcontracted its work) as against the assessee which had an in-house business model. [The Court noted that jurisdictional High Court in Aptara affirmed the Tribunal’s order in not including Cosmic Global because of identical difference in business model.]
• Transworld Infotech Ltd. as its data pertained to July 2008 to June 2009 whereas the assessee ‘s financial year was from April to March and did not satisfy TPO’s filter. The Court noted that the finding of fact was a possible view and hence no substantial question of law arose
• Compucom Software Ltd as its software development services were different from the assessee and it customer profile was that of government companies whereas the assessee company rendered services to only its AE. The Court noted that the finding of fact was a possible view
• Infosys BPO Ltd. as its turnover was high i.e.( Rs.9028 crores) vis-à-vis assessee (Rs.18 crores). The Court noted that that the finding of fact was a possible view.
CIT vs. Principal Global Services [2018] 95 taxmann.com 315 (Bombay) ITA No.57 of 2016 dated 12.06.2018
Investment advisory services

292. The Tribunal upheld the CIT(A)’s order excluding Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable for assessee engaged in the rendering of investment sub-advisory services to its AE by noting that TPO after selection of the company as a comparable had observed that the company wasengaged in diversified activities including merchant banking / investment banking concerning private placement of equity, debt and convertible instrument, mergers and acquisitions, advisory and re–structuring advisory and implementation, services like private wealth management, asset management and commodities with no segmental details. Further, in response to a letter from the assessee, the CEO of Motilal Oswal had stated that the company wasin merchant banking and investment banking and was not engaged in providing investment research and advisory services. Thus, it concluded that the comparable was functionally different from the assessee and the Revenue had failed to bring anything on record to controvert it.
ACIT vs Sandstone Capital Advisors Pvt Ltd ITA No.7067/Mum/2016 dated 31.08.2018

293. The Tribunal held that assessee engaged in providing investment advisory services to its AE could not be compared to:
• Ladderup Corporate Advisory as it was engaged in merchant banking which was distinct from investment advisory services. [ It relied on the coordinate bench decision of Temasek Holdings Advisors (India) Pvt. Ltd.]
Further, it accepted assessee’s plea for inclusion of Informed Technologies Ltd. noting that coordinate bench in Temasek Holdings had considered the functional profile of said comparable and held it to be comparable to assessee engaged in providing investment advisory services and further, the TPO himself had accepted it to be a good comparable.
Goldman Sachs Asset Management (India) Pvt. Ltd vs ACIT [TS-1103-ITAT-2018(Mum)-TP] ITA No.1427/M/2017 dated 31.08.2018

294. The Court dismissed Revenue’s appeal and upheld Tribunal’s order wherein Motilal Oswal Investment Advisors (“MOIL”) was excluded as a comparable for assessee engaged in rendering non-binding investment advisory services relying on its decision in case of Carlyle India Pvt. Ltd wherein it was held that MOIL was declaring a solitary stream of operating income under the head “advisory fee” but engaged in diversified activities without segmental information in respect of each of them. It held that that the factual finding of the Tribunal was not perverse and it was in full agreement with respect to the Tribunal’s findings that MOIL was engaged in diversified activities and no segmental information was available in respect of the activites and thus, no substantial question of law arose.
Pr.CIT vs NVP Venture Capital India Pvt. Ltd [TS-1016-HC-2018(BOM)-TP] (IT No. 406 of 2016 )(Bom) dated 18.09.2018

295. The Tribunal held that assessee engaged in provision of investment advisory services to its AE could not be compared to Motilal Oswal Private Equity Advisors Pvt. Limited. as it was undertaking portfolio management work on behalf of its clients by actually investing funds of the clients in the equity market whereas assessee was only rendering investment advisory services. It noted that there was difference in functions and risks of both the companies. Further, it also observed that business income of comparable was only from investment management. It relied on coordinate bench ruling in case of Temasek Holding Advisors India Pvt. Ltd. wherein it was held that aforesaid comparable should be excluded as the functional analysis of the aforesaid comparable substantially differed from the functions carried out by the assessee of undertaking investment advisory.
Further, it included IDC (India) Ltd and ICRA Online Ltd. relying on coordinate bench ruling in Temasek Holdings Advsiors (I) P Ltd. wherein it was held that M/s IDC (India) Limited and ICRA Online Ltd. were considered to be good comparables as they were engaged in investment advisory.
Blackstone Advisors (India) P. Limited vs ACIT [TS-1211-ITAT-2018(Mum)-TP] ITA No.1581/Mum/2014 dated 26.09.2018

296. The Court dismissed Revenue’s appeal and upheld ITAT’s order excluding Motilal Oswal Investment Advisors Pvt Ltd [“MOIL”] as comparable in case of assessee engaged in providing investment advisory services to AE, by relying on HC ruling of NVP Venture wherein it held that Tribunal’s findings that MOIL was declaring a solitary stream of operating income under the head “advisory fee” but engaged in diversified activities without segmental information in respect of each of them and thus could not be compared with a non-binding investment advisory company were not perverse. Further, the Court observed that the findings of Tribunal had not been shown to be perverse nor vitiated by error of law apparent on face of the record.
Pr.CIT vs. Arisaig Partner India Pvt Ltd [TS-1115-HC-2018(BOM)-TP]] ITA No.609 of 2016 dated 10.10.2018

297. The Tribunal held that assessee engaged in rendering non-binding investment advisory services to its AE could not be compared to:
• Motilal Oswal Investment Advisors Pvt. Ltd as it was engaged in diversified activities and segmental bifurcation was not available and it was also registered as a merchant banker.
• Ladderup Corporate Advisory Pvt. Ltd as it was registered as a Category–1 merchant banking company with SEBI and was engaged in Merchant Banking service from July 2010
Further, it included
• It included ICRA Management Consulting Services Ltd. as it was engaged in providing consultancy services in area of strategy, risk management, process consulting transaction advisory, policy and development consultantancy.
• IDC(India) as its profitability, operational efficiencies, future outlook, etc. were similar to that of the functions and activities performed by the investment advisory service providers.
Carlyle India Advisors Pvt Ltd vs ACIT [TS-1285-ITAT-2018(Mum)-TP] IT(TP)A No.2410/Mum/2017 dated 20.11.2018
ACIT vs Carlyle India Advisors Pvt Ltd [TS-1285-ITAT-2018(Mum)-TP] IT(TP)A No.2506/Mum/2017 dated 20.11.2018

298. For AY 2011-12, the Tribunal held that assessee engaged in rendering non-binding investment advisory services to its AE could be compared to:
• ICRA Management Consulting Services Ltd. as it was engaged in providing consultancy services in area of strategy, risk management, process consulting transaction advisory, policy and development consultantancy. (Relied on coordinate bench decision in General Atlantic Pvt Ltd for same AY and coordinate bench ruling in assessee’s own case for earlier year)

• IDC(India) Ltd as it was found to be functionally similar to companies engaged in investment advisory services(Relied on coordinate bench decision in General Atlantic Pvt Ltd for same AY and coordinate bench ruling in assessee’s own case for earlier year wherein it was held that said comparable was in the business of marketing research and management consultancy which were similar to the activities carried out by assessee).
Further, it excluded
• Ladderup Corporate Advisory Pvt. Ltd as it was registered as a Category–1 merchant banking company with SEBI and was engaged in Merchant Banking service from July 2010.
• Motilal Oswal Private Equity Advisors Pvt Ltd. as it had four different business verticals, such as, financial advisory, investment advisory, management and facilitation services and identifying investment opportunities with no segmental data available. It relied on coordinate bench ruling in Temasek Holding Advisors India Pvt Ltd wherein it was held said company could not be compared due to difference in functional profile while considering the comparability vis-à-vis investment advisory services provider.
• Motilal Oswal Investment Advisors Pvt. Ltd as it was engaged in the business of investment banking, merchant banking, merger and acquisition, private equity syndication, etc., which was no way similar to the assessee’s activities.
Blackstone Advisors India Pvt. Ltd vs ACIT [TS-1298-ITAT-2018(Mum)-TP] ITA No.1370/Mum/2016 dated 30.11.2018
ACIT vs Blackstone Advisors India Pvt. Ltd [TS-1298-ITAT-2018(Mum)-TP] ITA No.928 /Mum/2016 dated 30.11.2018

299. For AY 2011-12, the Tribunal held that assessee engaged in rendering non-binding investment advisory services to its AE could be compared to:
• Cyber Media Research Ltd. (formerly IDC(India) Ltd) relying on coordinate bench ruling in General Atlantic Pvt Ltd for same AY. It also relied on other coordinate bench rulings in AGM Advisors and Goldman Sachs wherein it was held that said comparable was in the business of marketing research and management consultancy which were similar to the activities carried out by assessee.
Further, it excluded
• Ladderup Corporate Advisory Pvt. Ltd as it was registered as a Category–1 merchant banking company with SEBI and was engaged in Merchant Banking service from July 2010.
• Motilal Oswal Private Equity Advisors Pvt Ltd. as it had four different business verticals, such as, financial advisory, investment advisory, management and facilitation services and identifying investment opportunities with no segmental data available. It relied on coordinate bench ruling in Temasek Holding Advisors India Pvt Ltd wherein it was held said company could not be compared due to difference in functional profile while considering the comparability vis-à-vis investment advisory services provider.
• Motilal Oswal Investment Advisors Pvt. Ltd as it was engaged in the business of investment banking, merchant banking, merger and acquisition, private equity syndication, etc., which was no way similar to the assessee’s activities.
New Silk Route Advisors Pvt. Ltd vs ACIT [TS-1304-ITAT-2018(Mum)-TP] IT(TP)A No.1148/Mum/2016 dated 30.11.2018
ACIT vs New Silk Route Advisors Pvt. Ltd [TS-1304-ITAT-2018(Mum)-TP] IT(TP)A No.2092/Mum/2016 dated 30.11.2018

300. For AY 2011-12, the Tribunal held that assessee engaged in rendering non-binding investment advisory services to its AE could not be compared to
• Ladderup Corporate Advisory Pvt. Ltd as it was engaged in the merchant banking/investment banking and other similar activities, which could not be compared to investment advisory services [ It relied on coordinate bench in Temasek Advsiors wherein the said comparable was excluded for being engaged in merchant banking]
• ICRA Online Ltd as it was operating in KPO and ITES, further activities performed under outsourced services were in nature of maintenance and management of data.
• Integrated Capital Services Ltd. as it was providing advisory and consulting services in area of mergers, acquisition and reconstruction, and activities were in nature of investment banking
Further, it included
• ICRA Management Consulting Services Ltd. as it was engaged in providing consultancy services in area of strategy, risk management, process consulting transaction advisory, policy and development consultantancy.( It relied on coordinate bench decision in General Atlantic Private Ltd which in turn had relied on AGM India Advisors Pvt Ltd wherein it was held it was functionally similar and observations of TPO were rejected that there was a difference in skill set of employees and value addition to functions as it was based on wrong appreciation of facts)
SBI Macquarie Infrastructure Management Pvt Ltd vs DCIT [TS-1304-ITAT-2018(Mum)-TP] IT(TP)A No.1148/Mum/2016 dated 30.11.2018

301. The Tribunal held that assessee engaged in provision of non-binding investment advisory services to its AE could be compared to ICRA Management Consulting Services Ltd relying on by coordinate bench decision in Temasek and others wherein it was held that it was offering consultation services in the area of strategy, risk management, operations, improvement, regulatory economics and translations advisory and entire revenue was generated from consultation fee and thus was providing consultation to various types of industries through investment advisory. Also, in assessee’s own case in earlier year wherein the Tribunal had clearly stated that the said comparable was functionally comparable and rejected TPO’s reasons for exclusion on basis of being a loss-making company and significant RPT for being factually incorrect. (It was not a loss-making company and had RPT of 14%).
TPG Capital India Private Limited vsDy.CIT (As a successor to TPG Growth Advisors (India) Private Limited) [TS-1321-ITAT-2018(Mum)-TP] ITA No.5411/Mum/2016 dated 07.12.2016

302. The Tribunal allowed Revenue’s appeal and set aside DRP’s cryptic order excluding 2 companies (Motilal Oswal Investment Advisors P Ltd and IM Capital) as comparable for assessee providing investment advisory services for AY 2011-12 noting that DRP excluded these companies (registered with SEBI as Merchant Banking companies) merely on the ground that TPO had rejected Birla Capital Financial Services Ltd which was also a merchant banking company as comparable. It opined that the order of the DRP was very cryptic and they had not considered the various issues raised by the TPO. Thus, Tribunal remanded the issue to the file of the DRP with a direction to pass a speaking order on the issue of selection of the above two comparables as per fact and law.
ACIT vs Wolfensohn India Advisors Pvt Ltd [TS-1281-ITAT-2018(DEL)-TP] ITA No.705 /Del /2016 dated 06.12.2016

303. The Tribunal for AY 2011-12 held that assessee engaged in provision of non-binding investment advisory services to its AE could not be compared to:
• Ladderup Corp. Advisory Pvt. Ltd. as it was a category-I merchant banker registered with SEBI and was functionally dissimilar. [It relied on the decision of General Atlantic (Pvt.) Ltd. in view of factual findings being the same for AY 2011-12.]
• Primary Real Estate Advisors Pvt. Ltd as it was engaged in real estate investment and was servicing landowners, overseas and domestic developers and hence the functional profile was different vis-à-vis assessee.

Further, the Tribunal included Cyber Media Research Ltd. (formerly known as IDC (India) Ltd) as a comparable and rejected the reliance placed by Revenue on the case of Teva Pharma (P.) Ltd wherein the comparable was excluded in case of assessee engaged in like activities since it was for the assessment year AY 2007-08. Further the Tribunal also dissented with the case of Actis Advisors (P.) Ltd relied on the by the Revenue noting it was on the wrong footing since the functional profile was obtained from the website link of its holding company which was discussed in the case of TPG Capital India (P.) Ltd. (The TPO had rejected the above comparable on the ground that it was engaged in market research and survey services not comparable to the assessee.)
Mount Kellett Capital Management India Pvt. Ltd. vs Dy.CIT [TS-967-ITAT-2018(Mum)-TP] IT (TP)A No.1552/Mum/2016 dated 27.07.2018

304. The Tribunal held that the assessee engaged in providing non-binding investment advisory services could not be compared to ICRA Online which was engaged in providing e.knowledge Process Outsourcing and information Services and Technology Solutions which was functionally different as compared to the activities of the assessee.
Sparkles Dhandho Advisors Pvt. Ltd v ITO – TS-18-ITAT-2018(Mum)-TP – I.T.A./1047/Mum/2015 dated :03/01/2018

305. The Tribunal held that the assessee engaged in providing non-binding investment advisory services (‘IAS’) to AE could not be compared with Ladderup Corporate Advisory as the said comparable was engaged in providing merchant banking services which was functionally dissimilar.
Following its order in the case of the assessee for the earlier assessment year, it held that ICRA Management Consulting and Informed Technologies were to be considered as comparable.
Vis-à-vis CRISIL and ICRA Techno Analytics, it remanded the matter to the file of AO/TPO considering that that no reasonable opportunity of being heard had been afforded to the assessee by DRP on these companies and also observed that i) CRISIL ought to be excluded if found to have RPT of more than 25% and ii) ICRA Techno Analytics ought to be excluded if verified to be a software development service provider.
Temasek Holdings Advisors India Private Limited v ITO – TS-17-ITAT-2018(Mum)-TP – ITA No. 1429/Mum/2017 dated 03.01.2018

306. The Tribunal held that the assessee engaged in providing non-binding investment advisory services to its AE could not be compared with:
• Ladderup Corporate Advisory Pvt. Ltd. as the company was registered with SEBI for engaging in merchant banking services which was also duly substantiated by the website of the company as well as its Annual Reports
• ICRA online Ltd as the assessee failed to bring anything on record to prove that the company was comparable to the assessee other than the contention that the Revenue had accepted it to be comparable in the subsequent year.
Further, it held that ICRA Management Consulting Ltd and IDC Ltd were to be included as comparables as they were carrying out investment advisory services similar to that of the assessee.
SUN-Ares India Real Estate Private Ltd (formerly known as SUN AREA Real Estate Pvt. Ltd) vs. DCIT – TS-84-ITAT-2018(Mum)-TP – /I.T.A. No.621/Mum/2016 dated 09 /02/2018

307. The Tribunal held that the assessee engaged in providing non-binding investment advisory services to its AE could not be compared with
• Ladderup Corporate Advisory Pvt. Ltd. as the company was engaged in providing merchant banking services.
• Motilal Oswal Investment Advisors Ltd as it was engaged in four different business verticals such as equity capital markets, merger and acquisition, profit equity syndications and structure debts and its core competence is in the field of merchant banking
Further, relying on the decision of AGM India Advisory Pvt. Ltd [TS-1-ITAT-2017(Mum)-TP] wherein it was held that this company was a valid comparable for assessee providing non-binding investment advisory services. Accordingly, it upheld the assessee’s contention for inclusion of ICRA Management Consulting Services Ltd.
It also held that IDC (India) Ltd was to be included as a comparable as it was considered as a valid comparable to companies engaged in providing non-binding investment advisory services by the High Court in General Atlantic Pvt. Ltd and had also been considered as comparable in the assessee’s own case for earlier years.
DCIT vs. General Atlantic Pvt. Ltd – [TS-181-ITAT-2018(Mum)-TP – ITA no.1717/Mum./2016 dated – 21.02.2018

308. The Tribunal, relying on the decision of the co-ordinate bench in Temasek Holding Advisors India [477/Mum/2016] held that the assessee engaged in providing non-binding investment advisory services could not be compared with:
• Motilal Oswal Private Equity Advisers India Private Ltd as the company was engaged in investment in portfolio companies, managing the ‘India Business Excellence Fund I’ and ‘India Reality Excellence Fund I’ and also had multiple sectors of operations for which no segmental information was available.
• Ladderup Corporate Advisory Private Ltd.as it was engaged in merchant banking /investment banking services.
Further, it held that the TPO erred in excluding i) ICRA Management Consulting Services Ltd merely on the ground that it had fluctuating profit margins without appreciating that the company was accepted to be comparable in the prior assessment year and ii) Informed Technologies Ltd on the ground that it had declining turnover without appreciating that the company was accepted to be comparable in the prior years. Vis-à-vis Informed Technologies, it held that declining turnover was not relevant for service companies as their margins were not dependent on the scale of operations.
Wells Fargo Real Estate Advisors Pvt. Ltd. (Previously known as Wachovia Management Services Private Limited) vs. DCIT – TS-66-ITAT-2018(Mum)-TP – /I.T.A./1520/Mum/2016 dated 17/01/2018

309. The Court dismissed Revenue’s appeal and held that assessee engaged in Investment advisory could not be compared to:
• Brescon Corporate Advisors Ltd as segmental result in case of income schemes were not available
• Keynote Corporate Services Ltd due to occurrence of an extraordinary event of Amalgamation approved by the HC
PCIT- 2 vs M/s Chrys Capital Investment Advisors- TS-295-HC-2018(Del)-TP- ITA no 634/2017 dated 16.04.2018

310. The Tribunal held that the assessee engaged in providing investment advisory services could not be compared with:
• Motilal Oswal Investment Advisors Private Ltd as the said company providing a variety of services and had delivery capacity in cross border product acquisition for its clients, which could not be compared to the work done by the assessee
• Khandwala Securities Ltd business operations of this company included investment banking, corporate advisory services, institutional broking and private client broking which could not be compared to the activities of the assessee
• Axis Private Equity Ltd as it was an asset/funds management company entrusted with the responsibility of investing funds in the best possible way whereas the assessee only provided research based information and advised the clients so that they could take informed decisions about where they should invest their money to get maximum returns.
• Almondz Global Securities Ltd as it was engaged in merchant banking, investment advisory and loan syndication fee which was functionally dissimilar to the activities carried out by the assesse.
• Milestone Capital Advisors Private Ltd as the company was more into asset management rather than investment advisory
Sungroup Enterprises Private Limited vs. DCIT – TS-461-ITAT-2018(DEL)-TP – ITA No.1029/Del/2014 dated 21.05.2018

311. The Tribunal restored the functional characterization & selection of comparables in the case of the assessee back to the TPO, noting that the TPO had wrongly characterized the assessee as a stock broking and trading firm whereas the assessee did not provide such services and rendered other financial services. It observed that the Tribunal in the assessee’s own case for AY 2010-11 & 2011-12 remitted a similar issue back to the TPO to carry out FAR analysis of assessee after characterizing its activity on the basis of evidence on record and then proceed to select comparables as per law, pursuant to which the TPO had passed orders for AY 2010-11 & 2011-12 admitting that assessee was incorrectly characterized as provider of investment and financial advisory. Accordingly, it remitted the matter back to the TPO in line with the earlier years orders.
Control Risks India Pvt. Ltd vs. ACIT – TS-723-ITAT-2018(DEL)-TP – ITA No. 1480/Del/2017 – 30.05.2018

312. The Tribunal relying upon the ITAT order in assessee’s own case for earlier year held that under TNMM, a foreign AE could be used as a tested party in respect of the transaction of payment of fees by the assessee to its AE for advisory and other services and the said transaction was to be benchmarked by comparing the margins of the tested party with the margin of external comparables i.e. foreign companies engaged in providing similar advisory services. In the earlier year, the Tribunal had accepted the assessee’s stand of selecting the foreign AE as the tested party, noting that (i) the AE was rendering service to various other entities also (ii) the AE was following a scientific method of allocating cost and charging the same with markup to all the entities at same level and (iii) the relevant details to compute the cost allocation on account of services had been certified and filed before the AO. Thus following the earlier year’s order, the Tribunal remitted the matter back to the AO for limited verification that the margin shown by the AE was at ALP vis-à-vis foreign comparables selected by the assessee.
Emerson Climate Technologies (India) Private Limited [TS-531-ITAT-2018(PUN)-TP] SA.No 70/Pun/2017 arising out of ITA No.2432/Pun/2017 dated 06.06.2018

313. The Tribunal held that the assessee engaged in providing investment research services to its AE could not be compared with:
• Brescon Corporate Advisors Limited as the company was mainly carrying out merchant banking, restructuring and syndication of debt. Further, the Tribunal noted that there was no segmental information vis-à-vis various streams of fees, i.e., financial restructuring and re-capitalisation, syndication of debt equity related advisory, M & A Advisory, etc
• Khandelwal Securities as the company was engaged in diversified activities like institutional equity sales, sales trading and research, private client broking and portfolio management services and no separate segmental information was available.
• India Venture Capital as the company was into software products & services while assessee was purely into ITeS in the nature of business and investment research services.
Pipal Research Analytics and Information Services India Pvt Ltd [TS-733-ITAT-2018(DEL)-TP]- ITA No.6374/Del/2012 dated 18.06.2018

314. The Tribunal held that the assessee engaged in providing non-binding investment research services to its AE could not be compared with Motilal Oswal Investment Advisors Ltd as the company was engaged in the business of investment banking/merchant banking activity.
Further it held that ICRA Management Consulting Services Ltd and IDC (India) Ltd were to be included as comparables as they were carrying out investment advisory services similar to the assessee.
IIML Assets Advisors Ltd v DCIT [TS-800-ITAT-2018(Mum)-TP]-ITA No.4060/Mum/2016 dated 20.06.2018

315. The Tribunal following the coordinate bench decision in assessee’s own case for AY 2008-09 and held that the assessee was a mere investment advisory company and could not be categorized as a KPO as alleged by the TPO.
The Tribunal excluded the following comparables for assessee engaged in rendering investment advisory to its AE:
• Coral Hubs Ltd. as it was engaged in outsourcing and also the TPO had included it while categorizing assessee as a KPO;
• E-Clerx Ltd. as it was rejected by the Tribunal in assessee’s own case for the previous year;
• Cosmic Global as it was engaged in the business of translation services and had a different business model which was functionally different from the assessee
The Tribunal included ICRA Management consultancy P. Ltd relying on the coordinate bench in assessee’s own case.
Further, the Tribunal dismissed the Revenue’s appeal with regard to the inclusion of IDC(India) Ltd as a comparable since it could not bring anything on record to contradict the findings of the DRP that the company was a market research company dealing in research services and products.
Apax Partners India Advisers Pvt Ltd [TS-832-ITAT-2018(Mum)-TP] ITA No.1682/Mum/2014 and 1738/Mum/2014 dated 08.06.2018
Manufacturing and contracting

316. The Tribunal held that the TPO erred in excluding the following companies as comparable while benchmarking the manufacturing and contracting activities of the assessee:
Dragger-Frost Tools Ltd as the company was wrongly excluded by the TPO on the ground that the company stopped operations during the year under review, which was not the case.
Hittco Tools Pvt. Ltd.as the TPO wrongly excluded the company as comparable as it was a consistent loss maker whereas the company was consistently making profits in the subsequent years
Rajasthan Udyog and Tools Ltd as the company was wrongly excluded on the ground of persistent losses whereas it had earned profits in the earlier years.
DCIT vs. Seco Tools (India) Pvt. Ltd. – TS-1101-ITAT-2017(PUN)-TP] – ITA No.606/PUN/2014 dated 29.11.2017

317. The Tribunal held that Assessee engaged in manufacturing and marketing of measuring instruments, could not be compared to
• Schrader Duncan Ltd as the product manufactured by this company (tyre pressure gauges) were different from assessee as observed, by the Tribunal in assessee’s own case for previous A.Y.
• Areva T&D India Ltd as the company was engaged in different business activity (power transmission and distribution business), further it did not meet the turnover filter applied for comparable selection and had different accounting period as observed, by the Tribunal in assessee’s case for previous A.Y.
Further, the Tribunal accepted assessee’s contentions for inclusion of Aplab Ltd as comparable since the strike of 8 days during relevant year, which was the TPO’s basis for rejection the said comparable had insignificant impact on the comparable company’s turnover.
The Tribunal also held that ALP-adjustment should be restricted to transactions with AEs only and cannot be made at entity level, relying on Bombay HC ruling in case of Thyssen Krupp Industries India P. Ltd. It further accepted the additional ground raised by assessee and directed the Revenue to consider foreign exchange fluctuations as part of operating income by relying on Pune ITAT ruling in case of Approva Systems (P.) Ltd
WIKA Instruments India Pvt. Ltd vs DCIT Circle 12 Pune -ITA No 760&764/ PUN/2015- TS-425-ITAT-2018(PUN)-TP dated 25.04.2018

318. The Tribunal rejected assessee’s contention and held that Hindustan Copper Ltd, engaged in the manufacture and production of copper wires was comparable to the assessee who was engaged in the manufacture, production and export of Steel Wire Ropes and held that what was required under TNMM was broad comparability and therefore copper and steel being includible within the broad category of metals was indeed comparable.
Usha Martin Limited (Earlier known as Usha Beltron Limited) vs. ACIT – TS-442-ITAT-2018(RAN)-TP – ITA No .68/Ran/2017 dated 31.05.2018

319. The Tribunal noted the proposition laid down in the Delhi High Court decision in Rampgreen Solutions wherein it was held that though product comparability can be of broad level under TNMM, the nature of products manufactured by the comparables, vis-a-vis that of the tested party should be considered and if found to be entirely different from the tested party, such comparables should be excluded. On the above basis, the Tribunal held that the assessee, engaged in manufacturing of a wide range of equipments used for Dynamic Weighing, Feeding and Controlling flow of sold materials could not be compared to Bharat Bijli Limited (manufacturing Electric Motors and Transformers), CTR Manufacturing Industries Limited(manufacturing engineering and electronics products being tap changers, capacitors, railway equipments, fire systems, wind turbine generation etc.), GMM Pfaudler Limited (manufacturing chemical process equipments, mixing system, filtration and separation), and even Greaves Cotton Limited (manufacturing diverse products such as high-pressure pumps, gear boxes, etc.) and Lincoln Helios (manufacturing of lubrication systems).
DCIT vs. Schenck Process India Limited [TS-397-ITAT-2018(Kol)-TP] ITA No.130/Kol/2016 dated 18.05.2018
Support Services

320. The Tribunal held that an assessee engaged in the business of providing financial accounting supporting services to its AE could not be compared to:
• Accentia Technologies Limited as it owned significant amount of brand, IPR and goodwill while the assessee on the other hand, was a simply captive service provider, which provided services related to accounts payable management, payroll, processing invoice processing and handling of related queries and hence not functionally comparable
• Eclerx Services Limited as the company was a KPO engaged in providing data analytics, data solutions services etc. and relying on Delhi HC in the case of Rampgreen Solutions held that it would be flawed to benchmark IT enabled service provider using KPO companies. Noting that the DRP had wrongly categorized the assessee as a KPO, whowas a captive service provider and hence the said company was not comparable.
• TCS E-Serve Limited as this company was engaged in diversified activities customer service, transaction processes, collections, risk management, and analytics which made it functionally different. It also relied on the findings of the coordinate bench decision for assessee’s own case in earlier year while excluding the company that use of TATA and TCS brand had substantially increased the operating profits.
Bechtel India Pvt Ltd vs DCIT [TS-1026-ITAT-2018(DEL)-TP] ITA No.6779/Del/2015 dated 20.08.2018

321. The Tribunal held that an assessee engaged in the business of providing IT Infrastructure supporting services to its AE could not be compared to:
• Infosys Limited as it had a high turnover, incurred significant expenditure on R&D, advertisement and marketing resulting in non-routine marketing intangibles, ownership of brands and diversified product portfolio.
• Wipro Technology Services Ltd as its sale transactions was with Citicorp Banking from which shares were purchased by the holding company viz. Wipro Ltd hence its RPT filter exceeded 25% by relying on the decision of coordinate bench in the case of Saxo India Pvt Ltd.
• Acropetal Technologies Limited as its employee cost filter (being 15.3%) failed the 25% filter applied by the TPO.
• Sankya Infotech Ltd as company was engaged in the e- learning activities and training solutions and also in the development of simulation and virtual training products which made it functionally dissimilar to the activities performed by the assessee under IT Infrastructure support services.
• Sasken Communication Technologies Limited as the company was not considered a good comparable IT Infra Support Services segment in light of the coordinate bench decisions in the cases of Saxo India Pvt. Ltd, ION Trading India Pvt. Ltd., Tibco Software etc. wherein it was held that the company was engaged in rendering testing, satellite communication services, and production of software products, had significant involvement in R&D and had a high proportion of marketing and advertising expenses.
Bechtel India Pvt Ltd vs DCIT [TS-1026-ITAT-2018(DEL)-TP] ITA No.6779/Del/2015 dated 20.08.2018

322. The Tribunal remanded the comparability of Just Dial Ltd. to DRP for benchmarking the sales support transaction of the assessee with its AE on the ground that financials for the subject year were not available in public domain to indicate that it was functionally dissimilar when proceedings before the DRP were completed. Therefore, it remanded the comparability of the said company and directed the DRP to consider exclusion of Just Dial Ltd from the list of comparable companies based on the Financials.
Microsemi Storage Solutions India Pvt Ltd vs ACIT [TS-927-ITAT-2018(Bang)-TP] IT(TP) A No.2103/Bang/2016 dated 24.08.2018

323. The Tribunal restored the comparability of Just Dial Ltd to DRP for an assessee engaged in providing sales support services to its AE noting that financials for subject year were available in public domain which was not the case when proceedings were completed before DRP and TPO (relied on financials for AY 2013-14). It was pointed out by the asseessee that financials showed that the comparable was functionally different.
MICROSEMI STORAGE SOLUTIONS INDIA PVT. LTD. vs ACIT [2018] 53 CCH 0496 (Mum- Trib.) IT (TP)A No.2103/Bang/2016 dated 24.08.2018

324. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order excluding Media Research Users Council (MRUC) as a comparable to assesseeengaged in marketing support services noting that Tribunal had excluded MRUC from the list of comparables on grounds of functional dissimilarity as no risk was assumed by MURC being a non-profit organization, failure to meet turnover filter, and difference in risk profile, etc. It observed that MRUC was outsourcing most of its activities to a third party research agency unlike the assessee and also the element of quid pro quo or payment of consideration commensurate with the service given was absent in MRUC’s case as major source of its income was in form of membership fees and subscription fee for Indian Readership Survey (IRS) and Indian Outdoor Survey (IOS) reports which were prepared for its members; Thus, it held that since the working pattern and model adopted by MRUC was unlike a commercial organization and completely different, the Tribunal was justified in exluding MRUC from list of comparables.
Pr.CIT vs Belkin India Private Ltd [TS-1098-HC-2018(DEL)-TP] ITA No.966/2018 dated 04.09.2018

325. The Tribunal held that assessee providing marketing support services to its AE could not be compared to:
• Aptico Limited as it prepared project feasibility reports, carried out market / other surveys, arranged seminars and trainings and also provided energy related services, skill development etc. which were functionally dissimilar to business profile of assessee under MSS segment.
• Choksi Laboratories Ltd as the company was engaged in in clinical research, assaying and hall marking and instrument calibration and validation having assets of high value required for chemical testing whereas the assessee was a routine service provider.
• Rites as the ratio of consultancy fee to the total income came to 45.15% and, therefore, failed the filter of more than 75% of revenue adopted by the TPO.
• Wapcos Ltd. as it was engaged in diversified activities like pre-feasibility studies, feasibility studies, simulation studies, diagnostics studies, socio economic studies, master plans and regional development plans, field investigations, details engineering including design, detailed specifications, tendering process, contract and construction management, commissioning and testing, operation and maintenance, quality assurance and management, software development and human resource development whereas the assessee was a routine service provider.
Further, it restored the inclusion/exclusion of Best Mulyankan Consultants Ltd and directed the TPO to verify if it had a RPT filter of 27.30% of the total revenue, which would exceed the 25% RPT filter applied by TPO and if so, to exclude the same.
Lufthansa Technik Services India Pvt Ltd vs Dy.CIT [TS-1133-ITAT-2018(DEL)-TP] ITA No.5451/Del/2012 dated 15.10.2018

326. Relying on the coordinate bench ruling in Philip Morris Services Ltd. (Revenue could not distinguish findings given related to comparables), the Tribunal held that assessee providing marketing support services to its AE could not be compared to:
• Aptico Limited as it was providing diversified services like Project report preparation, Technical and economic studies, feasibility studies, Micro enterprise development, Skill development, Project management consulting, Industrial clusterdevelopment, Environmental management consulting, Energy management consulting, Market and social research and Asset reconstruction management services and segmental details were not available.
• Global Procurement Consultants Ltd. as it was providing services aimed at providing advice onprocurement and also carrying out procurement audit whereas the activities of assessee were strictly confined to marketing support.
• TSR Darashaw Ltd. as it was undertaking registrar and share transfer activities, recorded management activity and trust fund activity which was functionally dissimilar to the assessee’s marketing support services rendered by the assessee to its AE.
• Quippo Valuers as it was providing mainly asset management services (It was engaged in sale of construction andearthmoving equipments through auctions and provision of valuation services in respect of assets).
GECAS Services India Pvt Ltd vs ITO [TS-1187-ITAT-2018(DEL)-TP] CO No.217/Del/2015 dated 18.10.2018

327. The Tribunal held that assessee engaged in provision of marketing support services to its AE could not be compared to:
• Asian Business Exhibition and Conference Ltd. as it was deriving income from conducting exhibitions, road shows, conferences, customer events and not from marketing support services.
• HCCA Business Services P Ltd. as its functions were not similar to the assessee. [ It relied on coordinate bench ruling in Alcolab which inturn relied on Electronics for Imaging India wherein it was held that payroll processing was a main part of company’s operations and thus, DRP’s order thatits functions weredifferent from marketing support activities was upheld.]
Intuit India Software Solutions P Ltd vs Dy.CIT [TS-1201-ITAT-2018(Bang)-TP] ITA No.2090/Bang/2017 dated 18.10.2018

328. The Tribunal held that assessee engaged in rendering business support services to its AE could not be compared to:
• Certification Engineers International Ltd. as it was engaged in certification, re-certification, safety audit and HSB management systems for offshore and onshore oil and gas facilities. It also supplied manpower to its holding companies which made it functionally incomparable.
• Engineers India as it was engaged in high end diversified activities i.e. in providing engineering procurement, construction, lumpsum turnkey projects and total solutions consultancy,high end and full-fledged engineering and related technical services for petroleumrefineries, pipelines and other industrial projects.
• NTPC Electric Supply Co Ltd as it was engaged in electrification services (87% of its operating revenues) and had undertaken several activities for the generation of power during the year.
• Kitco Ltd as it was engaged in providing technical services including services like asset valuation, energy audits, revival studies and was a multi-functional, multi-disciplinary organization offering wide range of services to the industrial and infrastructure.
• Rites Ltd. as it was providing project management consultancy services in diversified fields like rail infrastructure, building and airport transportation and economics, technical services, transport infrastructure, urban infrastructure, quality assurance and training.
Further, the Tribunal observed that the said comparables were government companies whose business models were different and hence was also a ground for exclusion.
Boeing International Corporation India P Ltd vs DCIT [TS-1253-ITAT-2018(Del)-TP] ITA No.1127 /Del/2015 dated 30.10.2018

329. The Tribunal held that assessee engaged in rendering support services to its AE in network division could not be compared to:
• Aptico Ltd. as it was a government undertaking and engaged in turnkey implementation, preparation of reports and into core activities and also provided high end technical consultancy which made it functionally different. Further, segmental details were not available and it failed TPO’s export filter of greater than 25% of total income.
• IDC(India) Ltd. as it was a research company, primarily dealing in research and survey services and product and a high-end service provider rendering varied services in the nature of data measurement products, subscription services, industry research, IT executive program, Custom Solutions and events which made it functionally different.
• Rites (seg)as it was providing comprehensive engineering and project management services such as pre-project planning involving project identification, feasibility studies and project appraisal. It was a full risk bearing company and thus, could not be compared to a service provider like assessee.
• WPCOS Ltd. (seg) as it was into provision of engineering consultancy services and turnkey projects and had diverse business activities. Further, it had grants by government and the same were treated as fee from other services. Thus, the company was functionally different.
Nokia Siemens Networks Pvt Ltd vs ACIT [TS-1203-ITAT-2018(Del)-TP] ITA No.332 /Del/2013 dated 01.10.2018

330. The Tribunal held that assessee engaged in marketing support services and business support services could not be compared to:
• Times Innovation Media Ltd as it was solely engaged in organizing and executing events which was different from the functions performed by assessee.
• Agrima Consultants International Ltd. as it was engaged in providing financial consultancy.
Eaton Technologies Pvt Ltd vs ACIT [TS-1297-ITAT-2018(Pun)-TP] (ITA No.1650/Pun /2013) dated 31.10.2018

331. The Tribunal held that assessee engaged in provision of marketing support to its AE could not be compared to:
• Bharat Earth Movers Ltd as it did not pass the turnover filter on account of high turnover (more than 7.5 times the turnover of assessee company)
• Telco Construction Equipment Company as it had intangible in form of know-how which was an added advantage as the assessee company did not possess any intangible. Further, the turnover was also substantially higher (more than 12 times the turnover of assessee company).
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1196-ITAT-2018(DEL)-TP] (ITA No.930/Del/2013) dated 02.11.2018

332. The Tribunal held that assessee engaged in provision of marketing support to its AE could not be compared to:
• Global Procurement Consult Ltd. as it was engaged in providing full-fledged procurement and financial management support services and further was rejected as a comparable by DRP in AY 2011-12
• Kellick Agencies and Marketing Ltd as it failed to satisfy TPO’s revenue filter of 75% (Its revenue came upto 27.7% only).
• TSR Darashaw Ltd as it was engaged in providing share registry, record management, fund management and payroll processing services.
• MCS Ltd and Times Innovation Ltd as they failed to satisfy TPO’s employee cost filter of less than 25%
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1225-ITAT-2018(DEL)-TP] (ITA No.1882/Del/2014) dated 14.11.2018

333. The Tribunal held that assessee engaged in provision of marketing support services to its AE could not be compared to:
• Asian Business Exhibition and conference Ltd. as it was primarily and fundamentally engaged in event management.
Further,
• It remanded ICC International Agencies Ltd. (segmental) back to file of TPO for fresh decision to examine complete facts in this regard as it was a new ground raised by assessee
Citrix Systems India Pvt Ltd vs Dy.CIT [TS-1368-ITAT-2018(Bang)-TP] IT(TP)A No.318/Bang/2016 dated 31.12.2018

334. The Tribunal held that assessee engaged in provision of management support services to its AE could not be compared to:
• TSR Darashaw Ltd as it was engaged in the activity of record management, handling payroll etc which were more in the nature of back-office support services
• HCCA Business Services Pvt Ltd as it was engaged in payroll processing (activities which were similar to the comparable TSR Darashaw Ltd excluded by Tribunal).
Avaya India Pvt Ltd vs ACIT [TS-1290-ITAT-2018-(Del)-TP] ITA No.1904 /Del/2015 dated 03.12.2018

335. The Court dismissed Revenue’s appeal and upheld ITAT’s order excluding five comparables namely, Aptico Ltd., Cameo Corporate Services, Global Procurement Consultants, Killik Agencies and Marketing Ltd. TSR Darashaw in case of assessee engaged in marketing support services to its AE noting that the reasoning given by Tribunal was factual and disclosed the functional and other reasons to elucidate, dissimilarities between the five entities and the assessee. ITAT had excluded a) Aptico as it was a government enterprise not comparable with a private service provider b) Cameo Corporate Services as functional profile was similar to TSR Darashaw (which was a comparable excluded on grounds of functional dissimilarity) c) Global Procurement Consultants Ltd as its business model was different since it was established by the government to serve the purpose of professional procurement and management services needs and also to provide combined management services required by the government departments d) Killik Agencies and Marketing Ltd. as it acted as an agent for various foreign companies for sale of dredgers, Dredging Equipments, steerbableRuddar propulsion, maritime and aviation lighting, acoustic communication equipmentsand also exported micro switches, engineering items, acoustic items and headsets, etc) TSR Darashaw Ltd as it undertook the registrar and transfer agent activity functions for equity and preference shares, venture instruments and bonds, commercial paper and private placements and undertook storage, retention and tribal of physical and/or electronic records and handled activities handled by Payroll and retirement ”funds”.
CIT-International Taxation-2 vs PHILIP MORRIS SERVICES INDIA SA [TS-1377-HC -2018-(Del)-TP] INCOME TAX APPEAL No. 1468/2018 dated 18.12.2018

336. The Tribunal held that assessee engaged in provision of marketing support services to its AE could not be compared to:
• Aptico Ltd as it was engaged in highly technical services which included Asset Reconstruction and Management Services, Projects Related services, Micro Enterprise Development, Infrastructure, Planning and Development etc.
• Choksi Laboratories Ltd. as it was a Commercial Testing House engaged in testing of various products including chemicals and also offers consultancy services in the field of pollution control as an allied activity
• WAPCOS Ltd. as it was engaged in high-end consultancy and works on engineering projects and was also a government company.
• IDC Ltd. as it was engaged in the business of rendering market research and management consulting services in the field of IT, telecommunications and consumer technology.
• Rediff.com as revenues comprised of revenues from online advertising and fee-based services and no segmental bifurcation was available in the financials.
Beam Global Spirits & Wine (India) Pvt. Ltd. vs CIT [TS-1305-ITAT-2018-(Del)-TP] ITA No.252/Del/2013 dated 11.12.2018

337. The Tribunal following the order of the coordinate bench in assessee’s own case for AY 2008-09 restored the matter to TPO for carrying out search and selection of comparables having functions similar to the assessee’s segment of sales support services noting that it was factually similar to the earlier year where the assessee and TPO had chosen comparables which were functionally different from the functions of the assessee.
Comverse Network Systems [India] Pvt Ltd. vs. ACIT [TS-1012-ITAT-2018(Del)-TP] ITA No.6704/Del/2015 and ITA No.7328/Del/2017 dated 31.07.2018

338. The Tribunal held that the assessee engaged in provision of marketing support services to its AE could not be compared to:
• Techprocess Solutions Ltd. as it developed various online platforms for financial services distributors and earned a significant percent of its revenue from transaction processing fees, software development &maintenance services, which were incomparable to the assessee. Further, the company owned unique capabilities and proprietary tools, had 27.38% of its asset in the form of software and was engaged in software services, document management and transaction processing services, which could not be compared to those of the assessee, which was engaged in routine marketing support services.
• Vapi Waste & Effluent Mgmt Co. Ltd as it was a non-profit making entity engaged in treatment of polluted water, industrial effluents and deposition and treatment of solid wastage of the member units. Further, the majority of its capital was contributed by its members and government and hence the price could not be treated as independent and uncontrolled.[ It relied on the coordinate bench decision of Actis Advisers India Pvt. Ltd affirmed by Del HC wherein it was held that the comparable was functionally different from the assessee who was a routine market support distributor).
• Choksi Laboratory Ltd. as the company provided laboratory services and was engaged in business of testing, analysis and research services. Further, it expended significant amount on glassware and laboratory consumables and had a high fixed asset ratio.
Intercontinental Hotels Group [India] Pvt Ltd [TS-894-ITAT-2018(DEL)-TP] ITA No.5809/Del/2014 and ITA No.5479/Del/2014 dated 27.07.2018

339. The Tribunal held that the assessee engaged in provision of business/technical support services to its AE could not be compared to:
• Engineering India, Rites Ltd and HSCC (India) as the companies was a government based company having limited risk factor since the customers were mainly of Government and therefore had different functional profile as compared to assessee. Further, from the annual report of Engineering India, Rites Ltd and HSCC (India), it was evident that the OP/OC margin of this company was higher as compared to assessee.
• IBI Chematur as it was engaged in diversified activities like providing basic and detailed engineering services in the field of petrochemicals, fine chemicals, cosmetics, pharmaceuticals, industrial explosives and waste acid recovery and there were no segmental details available. It undertook significant R&D efforts. It had high related party transactions.
• TCE Consultancy Engineering Ltd as the company was functionally different since it offered multidisciplinary services relating to project engineering, industry of power plants, water supply, waste water projects and segmental information was not available.
Parsons Brinchkerhoff India Pvt Ltd [TS-886-ITAT-2018(DEL)-TP] ITA No.1037/Del/2015 dated 31.07.2018

340. The Tribunal held that the assessee engaged in provision of market support services could not be compared to:
• Apitco Ltd as it was engaged in diversified activities in the nature of project report preparation, technical and economic studies, feasibility studies, microenterprise and skill development etc. and there was no segmental information available. It noted that apart from the market and social research activity, none of the other activities appeared to be functionally comparable to the assessee. The Tribunal relied on the Delhi HC ruling in Rampgreen Solution India Pvt. Ltd. to reject the Revenue’s contention that there was no requirement to have identical services under TNMM.
• Global Procurement Consultants Limited as the company focused on procurement and provided related technical assistance, transparency, efficiency and effectiveness of procurement, procurement audits and implementation services to various sectors including power, water resources, transportation, etc. thus, the services provided by the company were different from the services rendered by the assessee, which were confined to market support. [A similar view was taken by the coordinate bench assessee’s own case for earlier year.]
• TSR Darashaw Limited as there was a huge functional disparity between the companies noting that the company undertook registrar and transfer agent functions for equity and preference shares, debenture instruments and bonds commercial paper and private placements. As part of its records management activity, the company storage, retention & retrieval of physical and/or electronic records and under the payroll and trust fund activity, it handled payroll and retirement funds, including interface with the government organizations. [A similar view was taken by the coordinate bench assessee’s own case for earlier year.]
• Quippo Valuers as the company was engaged in asset management services, including a sale of construction and earthmoving equipment, execution of live auctions for financial institutions, valuation of assets and hence was functionally different.
Philip Morris Services India S A vs ACIT (Now known as Philip Morris Services India SARL) [TS-806-ITAT-2018(DEL)-TP] ITA No.1408/Del/2015 dated 19.07.2018

341. The Tribunal remitted the issue of determining the ALP of business support services of the assessee to its AE with direction of selecting comparables afresh on account of TP analysis carried out by the TPO based on wrong FAR of the assessee and comparables and further, the TPO had assumed wrong functions (marketing support services) were performed by the assessee. It also observed that TPO had himself accepted comparables challenged by assessee in present appeal in subsequent AYs and assessee’s business model had not undergone any change. Thus, the Tribunal remitted the issue back by applying the principle of consistency and co-ordinate bench ruling in Adidas Technical Services.
Wolters Kluwer (India) Pvt Ltd vs DCIT [TS-521-ITAT-2018(DEL)-TP] ITA No.1700/Del/2015 dated 06.07.2018

342. The Tribunal held that the assessee, engaged in providing marketing support services to its AE could not be compared to:
• Aptico Ltd as it derived the revenue from various sources like skill development, tourism and research studies, project related services etc. thus not functionally comparable to the assessee.
• Choksi Laboratories Ltd as the said company was a leading analysis and research group providing complete solution for improving quality in process, products and services, that it provides contract laboratory services including pharmaceutical analysis, food and beverages analysis, etc and the company treated analytical charges and consultancy receipts as a single segment and the details of segments were not separately reported.
• Genins India TPA Ltd as the company provided third party administrative services in the field of health insurance including receiving of insurance claim and revenue was recognized as and when Medicare policy was issued by general insurance companies in favour of the policyholders and therefore was not functionally comparable
• Rites Ltd as this company has business operations in four distinct fields namely consultancy in transportation infrastructure section, construction activities, export and leasing of railway equipments and running railway system on concession and therefore was not functionally comparable
• WAPCOS Ltd as it was basically engaged into project engineering consultancy and therefore not comparable to the functional profile of the assessee.
Abacus Distribution Systems (India) Pvt Ltd vs. DCIT – TS-34-ITAT-2018(Mum)-TP – ITA Nos.1766 & 2183/Mum/2015 dated 10/01/2018

343. The Tribunal excluded 8 of the TPO’s comparables on the ground of non-satisfaction of the 25% export-filter, functional dissimilarity, extraordinary events like amalgamation impacting profitability, non-availability of segmental results, unreliable financial data etc and observed that the TPO had adopted faulty search process wherein only ‘ITeS’ companies and not those from the fields of ‘Back-Office Support Services’ and ‘Software Development Services’ were analyzed for potential comparables. It dismissed the Revenue’s contention to remand the matter to the TPO noting the discrepancies between TPO’s order (finalizing 13 comparables) vis-a-vis the show cause notice issued to assessee (wherein 17 comparables were selected) and accordingly held that if the Revenue’s contention of remanding the matter was to be accepted it would tantamount to allowing the TPO premium on his carelessness and callousness of the and would encourage unnecessary litigation.
Franklin Templeton International Services (India) Private Limited vs. DCIT – TS-10-ITAT-2018(Mum)-TP – /I.T.A./7472/Mum/2010 dated 10.01.2018

344. The Tribunal held that CG-VAK Software and Export Private Limited could not be excluded as comparable merely because its margin post accounting for working capital adjustments was negative moreso since the company was accepted to be comparable to the assessee in the earlier AY.
Further, it held that following companies were to be excluded while benchmarking the engineering support services rendered by the assessee to its AE:
• Jindal Intellicom as it had different financial year reporting period (15-month) as against that of the assessee (April to March).
• Coral Hub Limited as the company followed an outsourcing model and also followed a different accounting period (April – June) in its preparation of financial statements as compared to that of the assessee
• Cosmic Global Ltd as it had a different business model (outsourcing) as compared to that of the assessee
• Accentia Technologies Ltd as it had undergone and extra-ordinary event during the year and also since the company was not functionally comparable being engaged in transcription, hoarding and billing.
• E4e Healthcare Business Services Pvt. Ltd. as it was engaged in providing healthcare outsourcing services.
Schlumberger India Technology Centre Pvt. Ltd. (formerly known as Schlumberger Global Support Centre Pvt. Ltd. ) vs. DCIT – TS-36-ITAT-2018(PUN)-TP – ITA No.640/PUN/2014 dated 10.01.2018

345. The Tribunal held that the assessee engaged in providing marketing support services to its AE could not be compared to:
• Aptico Ltd. (AL) as it was generating revenue from 10 different sources like skill development, tourism and research studies, environmental management etc.
• Choksi Laboratories Ltd.(CLL) as it was a leading analysis and research company providing complete solution for improving quality in process, products and services
• Genins India TPA Ltd.(GITL) as it provided third-party administrative services in the field of health insurance including receiving of insurance claims
• Rites Ltd as it was engaged in the consultancy business in relation to transport infrastructure sector, construction activities, export and leasing of railway equipments and running railway system on concession
• WAPCOS Ltd as it was engaged in project engineering consultancy
.Abacus Distribution Systems (India) Pvt. Ltd vs. DCIT – TS-116-ITAT-2018(Mum)-TP – ITA Nos.1402/Mum/2014 dated 05/01/2018

346. The Tribunal held that the assessee, engaged in providing marketing support services to its AE could not be compared to TSR Darshaw Ltd as it was engaged in provision of share registry and related financial services and therefore could not be compared with the assessee, a captive market support service provide. Further, it held that Global procurement Consultants Ltd providing shipping logistics, payment and accounting, know-how transfer (training) and bid support services was to be considered as comparable to the assessee.
Freescale Semiconductor India Pvt. Ltd. vs. DCIT – TS-1098-ITAT-2017(DEL)-TP – ITA No1263 /Del/2015 dated 08/12/2017

347. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order rejecting TPO’s re-characterization of assessee as ‘trader’ instead of business support services provider. Relying on the decision of the High Court in Li & Fung, it observed that in view of the undisputed fact that AEs of the taxpayer was into trading activities of various product and the assessee was merely rendering business support services to these AEs in the form of facilitation services to source goods from India, the activities carried out by the assessee could not be classified as trading activities. It further noted that the assessee did not bear any risk in the nature of credit risk, price risk, inventory risk, storage and handling risk etc and accordingly held that the TPO erred in his recharacterization. Considering that assessee had not developed any intangibles or accorded location savings to AE and had earned net operating profit margin on cost of 129.34% against that of its comparables i.e. 14.05%, it held that the assessee was adequately compensated.
ACIT vs. Itochu India Private Ltd. – TS-120-ITAT-2018(DEL)-TP – ITA No.6612/Del./2014 dated 21.02.2018

348. The Tribunal held that assessee providing marketing support services to its AE was not comparable to:
• Choksi Laboratories as the same was a heavy asset-based company
• WAPCOS as it was a Government Company undertaking engineering contracts and turnkey contracts
• Basiz Fund Services as it possessed huge intangibles.
• HCCA Business Services P Ltd as it was engaged in payroll processing services.
The Tribunal included Cyber Media as comparable as it was engaged in providing marketing and advertisement services being functionally similar to assessee. Further, it remitted back to TPO for evaluating inclusion of one comparable namely ICRA management, after verifying the filter of 25% RPT
Genzyme India Pvt Ltd vs ACIT Circle 1(1)- TS-339-ITAT-2018(DEL)-TP- ITA No 892/Del/2014 dated 20.04.2018

349. The Tribunal held that assessee engaged in Marketing Support and Technical Support Services could not be compared to:
• Aptico Ltd as segmental data was not available. Further, it rejected Revenue’s argument that there was no requirement to have identical services for applying TNMM after relying on Rampgreen Sales P Ltd case.
• Mahindra Consulting Engineers Ltd as the company was providing consultancy services in the areas of SEZ, water supply and sewage etc as against the assessee providing installation, commissioning and testing of telecommunication equipment; post implementation equipment support; and after-sales support and maintenance services.
• STUP Consultants Pvt Ltd as the segment being compared was of Civil Engineering and Architecture Consultancy.
• Semac Ltd as the company was primarily engaged in engineering consultancy of industrial projects and related activities.
• Intarvo Technologies as the company was providing call centre services of technical support catering to hardware of computers and installation of BTS equipment for telecom towers.
• Microland Ltd as it was engaged in providing end to end IT infrastructure management services.
• Alphageo (India) Ltd as it was engaged in providing seismic services to the oil exploration and production centres.
Alcatel- Lucent India Ltd vs ITO Ward (1)(4)- TS-256-ITAT-2018(Del)-TP- ITA No 2209/Del/2014 dated 06.04.2018

350. The Tribunal held that the assessee rendering marketing support services to its AE could not be compared with-
• Aptico Ltd. as it provided services in nature of project management consulting, feasibility studies and micro enterprise development.
• Choksi Ltd. as it was engaged in providing testing services for various products and was also offering services in the field of pollution control.
• WAPCOS Ltd. as it was awarded with project of Emergency Transport and Infrastructure development and projects of development and hygiene education development.
Fujifilm Corporation v. ITO – [2018] 92 taxmann.com 411 (Delhi – Trib.) – IT APPEAL NOS. 5826 (DELHI) OF 2011 & 195 (DELHI) OF 2013 dated APRIL 4, 2018

351. The Tribunal held that assessee providing marketing support services to its AE could not be compared to Empire Industries Ltd as its major chunk of revenue was from trading activity whereas the assessee was predominantly a service providing entity.
ACIT 14(2)(1) vs Hitachi Data Systems India Pvt Ltd- TS-420-ITAT-2018(Mum)-TP-ITA No 1012/Mum/2016 dated 04.05.2018

352. The Tribunal held that the assessee, engaged in provision of marketing support services to its AE could not be compared to:
• Asian Business Exhibition & conferences Ltd. as it was engaged in organization of exhibitions and events as well as conducting conferences on behalf of the various clients for their various products and businesses.
• AMD India P Ltd as the company derived its income from trading activity and also maintained inventories.
Finastra Software Solutions (I) P Ltd. (formerly Misys Software Solutions India Private Limited) vs. ACIT [TS-404-ITAT-2018(Bang)-TP] – IT(TP)A No.529 & 491/Bang/2016 dated 02.05.2018

353. The Tribunal deleted the TP adjustment and the rejected the TPO’s approach of discarding 2 comparables selected by assessee for benchmarking technical support services to BMWAG [a German entity] on the basis that they were not from Germany but from USA and Japan respectively. The Tribunal relied upon the decision of Bharati Airtel and held that difference in geographical location of market is not sufficient reason to reject a comparable until it can be substantiated that the same resulted in different market conditions. The Tribunal accepted assessee’s contention that pricing /cost structures and market dynamics of developed countries like Germany, USA Japan were similar and the service providers from developed countries like USA and Japan have similar economic environment as Germany.
BMW India Pvt Ltd v/s. ACIT [TS-401-ITAT-2018(DEL)-TP] ITA No.6160/Del/2014 dated 14.05.2018

354. The Tribunal held that assessee engaged in providing sourcing support services to AE for AY 2013-14 could not be compared to Axis Integrated Systems. The Tribunal noted that assessee was a routine captive sourcing service provider while Axis Integrated Systems was engaged in the business of issuing digital certification, however, TPO/DRP included it as a comparable after holding there was a broad similarity in the functionality as both the companies were providing business support services. The Tribunal observed that TPO/DRP had not elaborated as to how it had reached the conclusion that there was a broad functional similarity between assessee and Axis Integrated Systems. The Tribunal relied on Rampgreen Solutions HC ruling and co-ordinate bench ruling in Avenue Asia Advisors and held that DRP as well as the TPO had overlooked the essential requirement that even under TNMM the standard for selection of the comparable transactions could not be diluted. Thus, it dissented with the findings of the lower authorities that a captive sourcing service provider like the assessee could be considered functionally similar to a company providing liaisoning services like Axis Integrated Systems Ltd and directed exclusion of the said company.
Li & Fung (India) Pvt. Ltd vs. ACIT [TS-352-ITAT-2018(DEL)-TP] ITA No.7549/Del/2017 dated 14.05.2018

355. The Tribunal held that assessee engaged in rendering market support services for AY(s) 2007-08 and 2008-09 could not be compared to:
• Priya International Ltd. – as the said entity’s business model of earning commission on sales was different from assessee’s business model of getting remunerated at Cost plus basis. It was observed that Priya International Ltd. (Seg.) had a huge amount of unallocated expenses which was ignored by the TPO in computing the segmental margin of this company.
• Hightemp Techmat Pvt. Ltd.as the said entity was mainly into Processing business which was different from assessee’s business.
• ICRA Management Consulting Services- as the company apart from the corporate advisory practices, had established two specialized divisions, viz., Information technology and Research activities
• IDC (India) Ltd.- as the comparable was a research company, primarily dealing in research and survey services and products, and it was also engaged in selling products
• IL & FS Ecosmart Ltd.- as the company was engaged in four business lines, namely, Waste management; Resource conservation; Information systems; and Consulting & advisory services and there was ostensible differences in activities carried out by this company
• Inmacs Management Services Ltd.- as the true nature of services was not discernible even from its Annual report.
• RITES Ltd.- as the said entity had diverse nature of services and segmental details were not available.
• Shree Raj Travels and Tours Ltd- as the said entity’s business model of earning commission on sales was different from assessee’s business model of getting remunerated at Cost plus basis irrespective of actual sales.
• Spencer’s Travel Services- as the company was engaged in making sales which was not similar to the assessee company
• Choksi Lab Ltd.- as it was engaged in providing testing services unlike assessee company engaged in marketing support services.
• WAPCOS Ltd- as it was engaged in infrastructure development projects
• Interads Ltd.- as the company was earning income from participation fee, onsite service fee and other miscellaneous receipts and thus the nature of services rendered by this company were nowhere close to that of the assesee.
• PL Worldways Ltd- as the company was earning income on commission basis which was distinct from the cost-plus model followed by the assessee.
Brown Forman Worldwide LLC India vs.DDIT [TS-347-ITAT-2018(DEL)-TP] ITA Nos.433 and 6139/Del/2012 dated 11.05.2018

356. The Tribunal restored back to AO/TPO, the issue of TP-adjustment in respect of assessee’s project management services (PMS) and marketing support services (MSS) segment for AY 2009-10 to verify as to whether it was a combined segment or a single segment respectively and accordingly, make adjustments. During the assessment proceedings, the TPO had rejected the assessee’s approach of aggregating PMS and MSS services and had proceeded to examine the income pertaining to both these services on standalone basis whereas, the coordinate bench in assessee’s own case for subsequent year(s) AY 2010-11 and 2011-12 had combined the segments and compared them with comparables providing low end services. However, the Tribunal also noted that assessee had not given any plausible reason as to why these segments should be combined for benchmarking other than relying on the Tribunal order in its own case for AY 2010-11 and 2011-12 .The Tribunal also observed that neither the TPO nor DRP elaborated on this aspect.
Rolls Royce India Pvt. Ltd vs. DCIT [TS-367-ITAT-2018(DEL)-TP] ITA No.1042/Del/2014 dated 02.05.2018

357. The Tribunal directed the AO/TPO to re-examine the functional comparability of the three government companies viz. Certification Engineers International Limited, Wapcos Limited and NTPC Electric Supply Co Limited via-a-vis the assessee providing business development, advisory and other support services to Boeing Group and also to verify if these companies were benefitting from preferential treatment from Government in getting contracts impacting profits, any grants/ subsidies and if so, to exclude the same from the list of comparables.
Boeing International Corporation India Private Limited [TS-471-ITAT-2018(DEL)-TP] ITA No.1118/Del/2014 dated 07.06.2018

358. The Tribunal remanded the comparability of the following comparables for assessee engaged in providing technical support services in the nature of erection, installation, commissioning, etc. of power plants and turbines to its AE:
• HSCC India Ltd as it was not clear whether the company being a government company had received any grants or subsidies. Further, it also directed the TPO to keep in mind that the said company was rejected as a comparable in the assessee’s own case for the previous year.
• Mahindra Consulting Engineers Limited to verify the functional profile and clearance of RPT filter.
• Mitcon Consultancy Engineering Services Ltd to verify the RPT filter and segmental information to decide comparaibility..
• Mahindra Engineering Services as the RPT of the company was 58.63 observing that it had been retained as a comparable in the assessee’s own case for the last two years.
• EDCA Engineering to decide on the functional comparability
Further, the Tribunal directed for inclusion of MN Dastur & Company Pvt Ltd as the company was functionally comparable since it is engaged in the provision of engineering services which are akin to the assessee’s functions and it was selected as a comparable for the previous two years.
Granite Services International India Private Limited vs DCIT [TS-628-ITAT-2018(DEL)-TP] ITA No.740/Del/2017 dated 19.06.2018

359. The Tribunal held that the assessee engaged in providing marketing support services could not be compared to Asian Business Exhibition & Conferences Ltd as the said company was in the business of organizing exhibitions and conferences and it operated as an event manager and hence was functionally dissimilar to the marketing and support activities performed by the taxpayer.
Autodesk India Private Limited vs DCIT [TS-532-ITAT-2018(Bang)-TP] IT (TP) A Nos.303/Bang/2015 and 422/Bang/2015 dated 08.06.2018

360. The Tribunal upheld the DRP’s order excluding Basiz Fund Services as a comparable for benchmarking the marketing support services provided by the assessee to its AE. Noting that the detailed analysis of the international transaction, financial statements of the company justify the findings of the DRP that the company was functionally not comparable to the assessee in as much as the company was involved in the fund accounting services, possessed significant intangible assets, had a different employees profile, significant growth in the revenue and was earning of profits at supernormal level. It also observed that the Revenue had not filed an appeal against the DRP order of the earlier year excluding the said comparable and held that the Revenue ought to follow a consistent view.
Microsoft Corporation India Pvt. Ltd vs DCIT [TS-926-ITAT-2018(DEL)-TP] ITA No.1206 and 2529/Del/2014 dated 22.06.2018

361. The Tribunal held that assessee engaged in the distribution, agency & marketing support segments could not be compared to:
• Apitco Limited- as it was into diversified business like asset re-construction and management services, project related services, infrastructure planning & development, research studies and tourism, skill development, environment management, cluster development and no separate segmental information is available.
• Choksi Laboratories Ltd as it was providing end to end solution and was into commercial testing and analysis laboratory engaged in analyzing food and agricultural products while the assessee was a routine market service support provider and also there were no segmental details
• Wapcos as it is engaged in high end technical services by rendering technical consultancy services for various projects and absence of segmental details
Corning SAS-India Branch Office vs. DDIT [TS-495-ITAT-2018(DEL)-TP] ITA No.5713/Del/2012 dated 18.06.2018

362. The Tribunal held that assessee engaged in provision of market support services to AE could not be compared to:
• Apitco Ltd as its operations were mainly based on the policy requirements of the government whereas the assessee was a private company in the field of providing business support services.
• Cameo Corporate Services as it was engaged in diversified activities and no separate segmental information was available
• Global Procurement Consultants Ltd. as the company was primarily engaged in preparing and reviewing technical specifications, estimation of castes, selection of vendors, inspection and expediting and quality control and time management and also rendered financial advisory services with a high volatile margin which would not be comparable with routine market distributors.
• Killik Agencies and Marketing Ltd as it was engaged in diversified activities such as agent for various foreign clients for sale of dredgers, Dredging Equipment, steerable Ruddar propulsion, maritime and aviation lighting, acoustic communication equipment etc. and also offered after sales services hence it was functionally dissimilar
• TSR Darashaw Ltd as it was involved in outsourcing with a new global payroll ERP application called RAMCO for its payroll business and undertook registrar and transfer agent activity functions for equity and preference shares, venture instruments and bonds, commercial paper and private placements.
Philip Morris Services India S.A v DDIT [TS-488-ITAT-2018(DEL)-TP] ITA No.827/Del/2014 dated 21.06.2018
Research & Development Services

363. The Tribunal held that the assessee, engaged in providing contract research and development services
to its AEs could not be compared to:
Chocsi Laboratories as the said company performed diverse activities and did not have segmental results
TCG Lifesciences Ltd & Transgene Bioteck Ltd as the said companies, engaged in the pharmaceutical industry were functionally dissimilar to the assessee engaged in the automobile industry. Further, it noted that the companies owned intangible assets and undertook high risks and therefore held that they could not be adopted as comparable.
DCIT vs Akzo Noble Car Refinishes India Pvt. Ltd – TS-51-ITAT-2018(DEL)-TP – ITA No. 2936/Del/2014 dated 08.01.2018

364. The Tribunal remanded comparability of the two companies viz. Celestial Lab Ltd. and Tonira Pharma Ltd. to the AO/TPO for benchmarking product development services carried out by the assessee engaged in research and development activities for its AE:
• Celestial Lab Ltd. as the authorities did not reach a conclusion as to how the company was functionally dissimilar since the company was engaged in activities of research and development in the pharma industry which were similar to the product development services rendered by the assessee to its AE in the pharma industry. Further, noting that the said company launched an IPO which was an extraordinary event, it directed the AO/TPO to exclude the expenses incurred in connection with it for arriving at the PLI;
• Tonira Pharma as the basis of exclusion adopted by TPO that the the said company was having effluent treatment plant/waste disposal system was not justified since the requirement of having the said system was State Policy mandate. Noting that one of the units of Tonira Pharma was hit by an extra-ordinary event of attachment of its inventory by the Excise and Custom Departments, the Tribunal directed that the impact of extraordinary event should be excluded while computing PLI
Ferring Pharmaceutical Private Limited [TS-457-ITAT-2018(Mum)-TP] ITA No.6072/Mum/2014 dated 01.06.2018

365. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order as regards the inclusion of Dolphin Medical Services Ltd in case of the assessee providing contract manufacture, contract research and development of drugs services to its AE since Revenue had not disputed the Tribunal’s finding that the said company was engaged in the business of clinical trial and was broadly similar to assessee
CIT vs Watson Pharma Pvt Ltd [TS-480-HC-2018(BOM)-TP] ITA 124 of 2014 dated 25.06.2018
Others

366. The Tribunal held that the assessee engaged in providing engineering and design services to its AE could not be compared to:
• Kitco Limited as it was a 100% Government owned undertaking rendering services primarily to Central/State Government undertaking and PSUs and derived benefit out of this relationship. Its profit margins could not be said to be indicative of a free market economy since profit motive was not a relevant consideration in case of government undertakings and hence the company wouldn’t be a good comparable. [ It relied on the coordinate bench decision in assessee’s own case for earlier year which had in turn relied on decision in case of Thyssenkrupp Industries]
• TCE Consulting Engineers Ltd as the as the company was engaged in pre-project activities, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision which was functionally different from the assessee and in absence of segmental data, profitability of engineering design segment could not be known. [[ It relied on the coordinate bench decision of the assessee’s own case for earlier year]
• Certification Engineering International Ltd as it was functionally dissimilar, distinct in the geographical market in the light of foreign exchange fluctuation risk in addition to high RPT undertaken by the company. [ It relied on the coordinate bench decision of the assessee’s own case for earlier year]
• Global Procurement Consultants Ltd as the company undertook valuation, consultancy and financial advisory assignments not linked with services provided by the assessee to its AE
• IBI Chematuru Engineering and Consultancy Ltd. as the company was engaged in diversified activities like project planning, management services, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision etc. and had no separate segment information. Further, the company also undertook substantial R&D activities which was not a function performed by the assessee. [ It relied on the coordinate bench decision of the assessee’s own case for earlier year]
• Mitcon Consultancy and Engineering Services as the company was engaged in diversified activites like providing technical consultancy, rendering vocational trainings, IT trainings and laboratory services, executing environment monitoring assignments, etc which was not functionally comparable to the assessee.
• REC Power Distribution Company Ltd. as the company was a wholly owned subsidiary of of REC Ltd which is a government company and hence could not be comparable in light of the findings given by the co-ordinate bench in the case of Thyssenkrupp Industries.
• RITES Limited as it was functionally not comparable since it was engaged in activities like engineering consultancy, traffic studies, and export of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy assignments. [ It relied on the coordinate bench decision of the assessee’s own case for earlier year]
• Usha Hydro Dynamics Ltd as the services offered by the company were different from the assessee since it was engaged in the business of cleaning of various machines and equipment for various industries and was also doing trading business.
• UB Engineering Ltd as the company was engaged in mechanical erection/engineering procurement and construction [EPC] and EPC Electrical and therefore was functionally dissimilar to the assessee.
• The Tribunal relying on the coordinate bench decision in assessee’s own case for earlier year included Accuspeed Engineering Services India Ltd as a comparable since it provided consultancy services in engineering solutions and services covering designs, detailed engineering, project construction and management which was functionally similar to the assessee
Bechtel India Pvt Ltd vs DCIT [TS-1026-ITAT-2018(DEL)-TP] ITA No.6779/Del/2015 dated 20.08.2018

367. Relying on the coordinate bench decision in assessee’s own case for earlier year, the Tribunal held that assessee engaged in providing tour services to AE could not be compared to Cox & Kings Limited as it was involved in different activities besides tour operation and had its own brand value. Therefore, it could not be held to be a good comparable for determination of the ALP for the international transactions. [The coordinate bench decision in assessee’s own case for earlier year had in turn relied on HC decision of Oracle (OFSS) BPO Services wherein said comparable was excluded on the ground that thesaid company’s brand plays its own role in price or cost determination].
Enchanting Travels Pvt Ltd vs ITO [TS-1123-ITAT-2018(Bang)-TP] IT(TP)A No.444/Bang/2017 dated 14.09.2018

368. The Tribunal dismissed Revenue’s appeal and held that assessee engaged in manufacture and export of silk fabric could be compared to:
• Zenith Exports Ltd as it was engaged in manufacture and trading of silk fabrics and its segmental results were available and rejected Revenue’s contention of high turnover and assets since in AY 2010-11 TPO himself had selected the comparable with similar turnover and comparable assets.
• Eastern Silk Ind. Ltd as its RPT filter of 16.25% was within the tolerance range of 15%-25% as considered by coordinate bench decisions and also the TPO had accepted this comparable in subsequent year even though the comparable had a higher RPT.
Further, it excluded Silktex Ltd. from the list of comparables included by the TPO and confirmed by the CIT(A) since its asset base was a mere 23.47 crores as against the tested party’s asset base of 64.21 crores.
DCIT vs JJ Exporters Ltd. [TS-1047-ITAT-2018(Kol)-TP] ITA No.1371/Kol /2017 and CO No.71/Kol/2018 and ITA No.1372/Kol/2017 and and CO No.72/Kol/2018 dated 19.09.2018

369. The Tribunal held that assessee engaged in manufacturing of laboratory and processing equipments could be compared to Shree Pacetronix, Hindustan Syringes and Medical Devices Limited, Centennial Surgical Suture Limited, Allengers Medical Systems Limited Ganson Ltd. and Span Diagnostic Ltd as it was acceptable to broaden the scope of the comparability analysis to include transactions involving products that are different, but functionally similar and rejected assessee’s contention that they should be excluded on the basis of product differences.
IKA India Pvt Ltd vs DCIT [TS-1049-ITAT-2018(Bang)-TP] IT(TP)A No.2192/Bang/2017 dated 17.09.2018

370. The Tribunal remitted the TP adjustment made in case of an assessee engaged in the provision of engineering design services to its AE noting that CIT(A) had passed a cryptic order and not considered the grounds of rejection by TPO. He had simply stated that FAR analysis of comparables was same as that of assessee vis-à-vis selections and in case of rejection of comparables given a reason that profit and loss statement were not available, thus ignoring the aspect pointed out by Revenue that PLI of such comparables was calculated which would not have been possible in the absence of financial statements. It also noted that CIT(A) in his order had observed that TPO did not provide an opportunity to the assessee to have the audited financial statements along with the FAR analysis of the comparables selected by him and there was thus violation of principles of natural justice by the TPO. He should have remanded the matter back to TPO for providing an opportunity to the assessee to have the audited financial statements along with the FARanalysis of the said comparables, in view of alleged violation of principles of natural justice. He ignored the portion of TPO’s order which clearly stated that financial statements were available in public domain and the same were not asked for by the assessee specifically. Thus, the Tribunal set aside CIT(A)’s order and remitted the matter back to CIT(A) for deciding the same afresh after obtaining a remand report from AO/TPO.
Dy.CIT vs Steel Plus Ltd. (2018) 54 CCH 0036 KolTrib ITA Nos. 1320 & 1321/Kol/2017 dated 12.09.2018

371. The Tribunal held that the assessee engaged in trading in cash counting machines could be compared to:
• CCS Infotech Ltd as it was in similar line of business and was accepted by the TPO as a comparable for earlier years. The Tribunal noted that the business profile of the comparable and the assessee had not changed over the years.
• ACI Infocom Ltd as it was in similar line of business and was accepted by the TPO as a comparable for earlier years. The Tribunal noted that the business profile of the comparable and the assessee had not changed over the years.
• Compuage Inforcom Ltd. as it was accepted by the TPO as a comparable for earlier year since its business profile was similar to assessee and the DRP had directed for its inclusion for AY 2009-10 but failed to include it in the subsequent year AY 2010-11 without any justifiable reason.
• Priya Limited as it was accepted by the TPO as a comparable for earlier year since its business profile was similar to assessee and the DRP had directed for its inclusion for AY 2009-10 but failed to include it in the subsequent year AY 2010-11 without any justifiable reason.
• Iris Computers Ltd as it was in similar line of business and was accepted by the TPO as a comparable for earlier years. The Tribunal noted that the business profile of the comparable and the assessee had not changed over the years.
• CMS Computers Ltd as it was in similar line of business and was accepted by the TPO as a comparable for earlier years. The Tribunal noted that the business profile of the comparable and the assessee had not changed over the years.
De La Rue Cash Processing Solutions India Pvt Ltd vs ACIT [TS-1121-ITAT-2018(DEL)-TP] ITA Nos.1113/Del/2014 and ITA No.1606/Del/2015 dated 28.08.2018

372. The assessee was engaged in the manufacture of headliners, door panels, parcel trays, etc (covered in auto ancillary segment). for its AE. The TPO rejected three of the eleven comparables selected by assessee. The Tribunal held that a) K.R. Rubberite Ltd b) Lifelong India Ltd. which were engaged in production/manufacture of autoparts were comparable to assessee as the auto parts were covered in auto ancillary units. Further, it rejected Bright Autoplast Ltd.as its RPT was very high and hence did not satisfy the RPT filter applied by TPO. It directed TPO to recompute mean margin of comparables and determine the ALP, if any.
Grupo Antolin India Pvt. Ltd (Erstwhile known as Grupo Antolin Pune Pvt. Ltd vs Dy.CIT) [TS-1128-ITAT-2018(PUN)-TP] ITA No.299/Pun/2013 dated 17.10.2018

373. The assessee was engaged in the business of distribution of subscription rights of satellite channels. The Tribunal following the coordinate bench decision of assessee’s own case for earlier year included 4 comparables namely, Softcell Technologies Ltd., Sonata Information Technologies Ltd., Empower Indsutries India Ltd. (In the earlier year’s decision, the Tribunal noted that the said comparables were accepted by assessee) and Trijal Industries (The Tribunal in the earlier year noted that software distribution company were held to be a good comparable to distribution companies in case of coordinate bench ruling in case of NGC India Pvt Ltd and also was accepted as a valid comparable by TPO in AY 2013-14.) as there was no change in material facts from previous year.
DCIT vs Turner International Pvt Ltd. [TS-1238-ITAT-2018(DEL)-TP] ITA No.1149/Del/2015 and CO No.43/Del/2018 dated 08.10.2018

374. The Tribunal remanded the entire matter to CIT(A) to decide afresh noting that CIT(A) had passed a cryptic order on the issue raised by the assessee that TPO had erred by not restricting the TP adjustment to AE transaction only,although it was observed by CIT(A) that assessee had two manufacturing units in two buildings (one in respect of goods manufactured and exported to AE and one for non-AE). Observing that the CIT(A)’s order had not given a finding when the assessee had specifically taken a ground before CIT (A) that the AE segment under the manufacturing activities was concerned, its transactions were at arm’s length even if the comparables adopted by the TPO were to be considered, it restored the appeal to CIT(A) directing that he should decide all the aspects of the matter afresh by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides.
Sartorius Stedim India Pvt Ltd. vs Dy.CIT [TS-1218-ITAT-2018(DEL)-TP] ITA No.2084/Bang/2017 dated 12.10.2018

375. The Tribunal held that assessee engaged in provision of engineering design to its AE could not be compared toAcropetal Technologies as the margin for subject year (57.66%) was abnormal when compared to margins in preceding and succeeding financial years.
Cameron Manufacturing India Pvt Ltd. vs DCIT [TS-1254-ITAT-2018(CHNY)-TP] ITA No.336/Chny/2018 dated 16.10.2018

376. The Tribunal held that assessee engaged in providing engineering design services to its AE could be compared to:
• Mahindra Consulting Ltd as it was providing services in civil and structural similar to the assessee.
• STUP Consultants Private Limited as it was providing consultancy services in civil engineering similar to the assessee.
• KITCO and MM Dastur Ltd. for the same reasons as inclusion of Mahindra Consulting Ltd. and STUP Consultants Private Limited as the function profiles of said comparables was similar to assessee
Further
• It remanded the comparability of Alphageo India Ltd. in line with earlier coordinate bench decision in assessee’s own case with direction to TPO to give an opportunity to the assessee to substantiate that said comparable was engaged in providing other engineering services and assets employed were comparatively higher than assessee company
• It remanded the comparability of Semat Ltd. with a direction to TPO to call for the Annual report for the subject year and to decide the comparability afresh.
• It remanded the comparability of Consultant Engineers Services (India) Pvt Ltd and Development Consultants Private Limited with direction to TPO to call for annual reports of the companies for subject year and decide the issue in accordance with DRP’s directions for subsequent year (accepted as good comparables).
• It excluded Kirloskar Consultants Ltd. as it had undergone financial restructuring which was an extraordinary event
Eigen Technical Services Pvt Ltd vs Dy.CIT [TS-1286-ITAT-2018(DEL)-TP] (ITA No.806/Del/2013) dated 22.10.2018

377. The Tribunal restored the issue of determination of ALP in case of assessee engaged in leasing and sub-leasing of vessel from AE and to its AE noting that none of the companies selected by TPO were engaged in the same activity as the assessee. It directed the TPO/AO to select the correct comparables functionally, asset wise to arrive at PLI to benchmark and determine ALP. Further, it rejected assessee’s plea that adjustment for government policies should be granted while determining ALP noting that assessee intended to buy the vessel from AE however RBI had not granted permission for ECB Borrowing due to which it had leased the vessel from AE and the assessee failed to explain the reasons as to why it had leased the vessels from AE at a higher rate.
Lewek Altair Shipping Pvt Ltd. vs ACIT [TS-1114-ITAT-2018(Viz)-TP] ITA No.93/Viz/2017 and ITA No.559/Viz/2017 dated 10.10.2018

378. The Tribunal restored the comparability of Supraj Engineering Ltd (manufacturing brake lining for four wheelers and two wheelers) in case of assessee engaged in the business of manufacturing brake lining to automobile industry, more particularly, 4-wheeler noting that assessee’s ask for exclusion was on basis that there were no segmental details in respect of manufacture for 4 wheelers and 2 wheelers however Revenue could obtain the segmental details. It directed TPO to issue necessary notice under Section 133(6) to find whether segmental details were available and thereafter decide issue afresh in law.
Infac India Pvt Ltd vs Dy.CIT [TS-1369-ITAT-2018(Chny)-TP] (IT(TP)A No.27 /Chny /2018 dated 05.10.2018

379. The Tribunal held that assessee engaged in provision of designing services to its AE could not be compared to:
• Archohm Consults Pvt Ltd. as it was providing architect services whereas assessee was engaged in designing, development of new product and computer aided designing.
• Zipper Trading Enterprises as it was into trading and received commission from acting as an agent from trading.
Further, it included
• Neilsoft Ltd as it was engaged in software engineering services which were similar to assessee’s designing services.
• Tata Elxsi’s software development and services segment (which included product design services, innovative design engineering and visual computing) as nature of services provided were similar to assessee.
• Software development and services segment of Varna Industries as its segment was similar to the services provided by the assessee
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1225-ITAT-2018(DEL)-TP] (ITA No.1882/Del/2014) dated 14.11.2018

380. The Tribunal held that assessee engaged in manufacturing products assembled in manufacture of air conditioners for its AE could not be compared to:
• Rexnord Electronics. as it was a turnkey provider for industrial refrigeration where its compressors manufactured and packaged condensers were used in food and chemical industries and as per financials on record, the company had undertaken several research developmental activities.
• Frick India Ltd. as it was into manufacturing fans, motors, blades and accessories.
Further,
• It included Blue Star Limited subject to TPO being able to compute the profit margin from assembly of airconditioners otherwise on failure of TPO to do so, the comparable was directed to be excluded.
Carrier Midea India P. Ltd vs Dy.CIT [TS-1256-ITAT-2018(DEL)-TP] (ITA No.7675/Del/2017) dated 22.11.2018

381. In case of assessee engaged in manufacture of autoparts, the Tribunal remanded comparability of a) Munjal Showa Ltd. so as to enable assessee to submit financials which were not submitted before the TPO. (The assessee was contesting its exclusion on basis high turnover and that it was engaged in manufacture of different products) b) Bosch Chasis Systems India Ltd directing the TPO to call for comparable’s data to verify if results could be reasonable excluded (It relied on Del HC decision of Mckinsey Knowledge Centre wherein it was stated that a comparable having different financial year could not be excluded if its results could be reasonably extrapolated.)
Nissin Brake India Pvt Ltd vs DCIT [TS-1252-ITAT-2018(DEL)-TP] ITA No.6366/Del/2017 dated 16.11.2018

382. The Tribunal held that assessee engaged in provision of medical transcription services to its AE could not be compared to:
• Accentia Technologies Ltd as it earned revenue from three sources (medical transcription, coding and software development) and there were no segmental details available and it had been categorized under a single segment namely healthcare receivables management. Further, the company had undergone an extraordinary event of merger
• Cat Technologies Ltd as it had revenue from three sources (namely, medical transcription; software development and consultancy services; and training income) however there was no segmental details available and further, majority of its revenue was from software development
DCIT vs Transcend India Pvt. Ltd [TS-1319-ITAT-2018(DEL)-TP] ITA No.2754/Del/2015 and CO No.446/Del/2015 dated 10.12.2018

383. The Tribunal held that assessee engaged in provision of business facilitation services (consulting services) to its AE could be compared to a) Cyber Media Research Ltd. and b) ICRA Online Ltd. as it was accepted by TPO in the last two preceding years then there was no premises to reject the comparables when TPO/DRP had not brought out that that the functional profile of either of the aforementioned comparables or that of the assessee had witnessed a change during the subject year as against the preceding year. It opined that in the absence of any change in the circumstances a company which has been accepted as a good comparable by the Revenue in the earlier years cannot be whimsically rejected in a subsequent year by relying on Bombay HC judgment in Aptara Technology Ltd. wherein it was held that in the absence of Revenue being able to establish any difference in the facts from that existing in the earlier AY to that existing in the subject AY, there was no reason to exclude the comparable.
Basell Polyolefins India Pvt. Ltd vs ACIT[TS-1388-ITAT-2018(MUM)-TP] ITA No. 2659/Mum/2016 dated 19.12.2018

384. The Tribunal remitted a) Cosmic Global Ltd and b) Calibre Point Business Solutions Limited (not part of assessee’sTP study as financials were not available in public domain and submitted during scrutiny proceedings) in case of assessee engaged in providing engineering design services to its AE to verify assessee’s contention that they were functionally comparable and if they satisfied the filters applied by TPO. Further, it directed to determine whether after inclusion of comparables, the margin of assessee vis-à-vis comparables would be within +/-5%.
Carraro Technologies India Pvt. Ltd. vs Dy.CIT[TS-1386-ITAT-2018(PUN)-TP] ITA No. 1281/Pun/2015 dated 05.12.2018

385. The Tribunal remitted the issue of adjustment made to ALP of international transactions for denovo adjudication by the TPO accepting assessee’s contention for set aside on ground that the comparables were not considered by TPO/DRP. It directed assessee to submit necessary documentation in support of its contention and to adduce fresh evidences.
Foster Wheeler Bengal Pvt. Ltd. vs ACIT[TS-1269-ITAT-2018(Kol)-TP] ITA No. 41/Kol/2017 dated 07.12.2018

386. The Tribunal held that assessee engaged in the provision of vessel related services could not be compared to:
• Aegis Logistic Ltd. as the functional profile vis-à-vis assessee was different on account of it providing liquid logistics outside port area, to the destination through pipelines. Further, the DRP had directed the TPO to retain the said comparable only if segmental data was available.
• Malabar Coast Services Pvt. Ltd. as the turnover of Rs.1.96 crores vis-à-vis assessee company of 275 crores could not be comparable. Further, the Tribunal noted that the comparable had a high margin of 42.33% as compared to its holding company also which was an anomaly and should have been investigated by the TPO before its inclusion.[It relied on the decision of Bom HC in Pentair Water India Pvt. Ltd for excluding on basis of turnover.]
Bothra Shipping Services (Currently known as Bothra Shipping services Pvt) vs ACIT [TS-814-ITAT-2018(Kol)-TP] ITA No.188/Kol/2017 dated 31.07.2018

387. The Tribunal held that assessee engaged in the manufacture of jewellery could not be compared to Gitanjali Export Corporation Pvt Ltd as it was into polished diamond export and the content of gold in the jewellery exported by the company was negligible i.e.1.10% as against assessee’s average gold content of 40%. Thus, could not be compared owing to product dissimilarity.
DCIT vs Uni Design Jewellery Pvt Ltd [TS-769-ITAT-2018(Mum)-TP] ITA No.4341/Mum/2016 dated 02.07.2018

388. The Tribunal restored the issue of benchmarking the transport segment of the assessee by comparing the non-AE refrigeration segment of the assessee as an internal comparable in light of the Calcutta HC decision of Trimline Vyapaar Ltd. wherein it was held that additional evidence could not be permitted to be adduced without giving an opportunity to the AO. The TPO had rejected the refrigeration segment as an internal comparable since the nature of work carried out was different. The TPO adopted external comparables and proposed a TP adjustment. The Tribunal noted that the coordinate bench decision in assessee’s own case had restored the issue to TPO to examine the functional profile of the relevant two segments with a direction to obtain the opinion of technical expert on functions performed by the assessee under the two segments to find out the similarily/dissimilarity.In the remand proceedings, the TPO had relied on the valuation officer’s report to hold that functions were not similar of the two segments however it was noted by the Tribunal that there was no detailed discussion on functions, assets and risks in the two segments of the assessee. Thus, the Tribunal restored the issue to the TPO/AO to examine the technical expert opinion submitted by the assessee as additional evidence and report of the valuation officer to adduce if the functions performed by the assessee under two segments were similar considering that the facts of each year need to be separately examined.
Carrier Air-conditioning & Refrigeration Ltd vs. ACIT [TS-798-ITAT-2018(DEL)-TP] ITA No.1126/Del/2014, ITA No.728/Del/2015, ITA No.2140/Del/2016 and ITA No.7312/Del/2014 dated 13.07.2018

389. The Tribunal held that the assessee engaged in manufacture and export of frequency control products (FCP) could not be compared to:
• Bharat Electronics Ltd as it was a manufacturer of equipment whereas the assessee was only a manufacturer of components used in making equipment.
• Bharath Heavy Electricals Ltd. as it was engaged in diverse activities of manufacture of power station equipment and was also involved in erection and commission, engineering and consulting services
• MIC Electronics Ltd as it was manufacturer of equipment such as LED display systems, LED lighting products, solar grid etc. whereas assessee was only manufacturer of components used in making equipment.
DCIT vs. Centum Rakon India Pvt. Ltd [TS-750-ITAT-2018(Bang)-TP] IT(TP) A No.472/Bang/2016 dated 20.07.2018

390. The Tribunal held that the assessee engaged in provision of staffing services to its AE could be compared to HCCA Business Services Pvt Ltd as the company was engaged in human resource services and based on its agreements with its customers it provided staffing services.
Further, the Tribunal remitted Ma Foi Management Consultants Ltd to analyse if financial results could be extrapolated owing to different financial year endings between the comparable and assessee. It also remitted the comparability of Nirbhay Management Services Pvt Ltd to the file of the TPO for analyzing the functional profile with direction to the assessee to provide all relevant information and material required for verification on account of the company being introduced during course of proceedings before DRP and TPO not being given reasonable opportunity to verify the functional profile of the company.
Pyramid IT Consulting P Ltd [TS-618-ITAT-2018(DEL)-TP] vs ACIT ITA No.7083/Del/2014 dated 11.07.2018

391. The Tribunal admitted the assessee’s additional ground with respect to TP study report not being rejected by the TPO and hence improper on the part of the Revenue to proceed with their own determination of ALP, but rejected assessees contention that since TPO categorically accepted assessee’s TP Study, his order modifying economic analysis of international transaction was unsustainable. The assessee had relied on the Del HC ruling in the case of Li and Fung and coordinate bench decision in COIM wherein it was held that without first discarding the methodology of the assessee the TPO cannot proceed to make any alterations The Tribunal noted that vis-a-vis benchmarking of IT enabled services and software development services, though TPO had accepted assessee’s TNMM for both the segments, he had rejected the economic analysis of the software development segment, filters applied by the assessee and assessee’s use of multiple year data. Accordingly, the TPO had directed the assessee to carry out fresh search and had modified qualitative as well as quantitative filters giving reasons. Thus, it observed that the TPO’s order clearly and unambiguously demonstrated that the TPO had objected to the TP Study and overruled the objections of the assessee on various aspects of the TP study. Further it noted that the TPO had stated that assessee was not a mere contract software developer but involved in coding and testing of particular items. Thus, it rejected assessee’s additional ground, but also clarified that its observations were only restricted to the context of whether the TPO had accepted assessee’s TP Study and not on whether the TPO’s approach was correct, accordingly scheduled the hearing of the appeal to hear parties on merits.
Microsoft India (R&D) P. Ltd vs Dy.CIT [TS-753-ITAT-2018(DEL)-TP] ITA No.1479/Del/2016 dated 23.07.2018

392. The Tribunal held that the assessee engaged in rendering freight and forwarding services in domestic and international sector (including ancillary services) could not be compared to:
• Balmer Lawrie & Co. Ltd. as company earned revenue from sale of Manufactured goods, Trading goods, Turnkey projects and Services and that the Logistics Segment of the company could not be accurately compared as there were unallocable costs which were wrongly apportioned to the segment based on gross revenue as there were many other considerations such as cost of capital and labour which were to be factored.
• ABC India Limited as the company had 2 streams of income, namely, Transport division and Petrol pump division which could not be compared to the assessee’s activities
• S.E.R. Industries Ltd and Delhi-Assam Roadways Corporation Ltd as the companies were not providing any ancillary services, such as, storage and warehousing and custom clearance & documentation etc which were being provided by the assessee
• Transport Corporation of India Ltd. as computation of the profit margin of the Transportation Division of this company by allocating common unallocated expenses in the proportion of revenue was not accurate as held above in the case of Balmer Lawrie.
Further, it held that the following companies were to be included as comparables:
• Premier Road Carriers Ltd as the basis of exclusion adopted by the TPO i.e. it had a high ratio of lease rent to sales of 79.01% was not justified as the assessee itself had a similar ratio of 66.56%
• Roadways India Ltd. as the TPO was incorrect in excluding it merely based on low profits without disputing the functional similarity of the company
• Skypack Service Specialists Ltd as the company was wrongly excluded on the ground of persistent losses wheras it had suffered losses only for the year under review and the immediately preceding year.
CEVA Freight India Private Limited (Formerly Known as EGL Eagle Global Logistics (India) Pvt Ltd) vs. DCIT – TS-40-ITAT-2018(DEL)-TP – ITA No. 4956/Del/2013 dated 18.01.2018

393. The Court dismissed Revenue’s appeal against the Tribunal order confirming CIT(A)’s inclusion of three companies as comparables for benchmarking the transactions of the assessee engaged in manufacturing and trading of medical devices and diagnostic equipments. Noting that the CIT(A) and Tribunal observed that the companies all qualified as manufacturers and sellers of medical and diagnostic equipment (Span Diagnostic – manufacture of diagnostic regents, elissa kits for AIDS; Hicks Thermometers – manufacture of elissa kits, thermometers and Centenial Surgical – manufacture of surgical suture), it held that the TPO was unjustified in excluding the comparables. It further held that the exclusion or inclusion of one or the other comparable would by itself not constitute a question of law unless it was shown that there were important functional dissimilarities or that vital material facts which go to the route of profitability or other material circumstances were involved, which was not so in the instant case and accordingly, it dismissed the appeal.
CIT vs. Becton Dickinson India Pvt. Ltd – TS-45-HC-2018(DEL)-TP – ITA 48/2018 dated 16.01.2018

394. The Court admitted 2 questions of law raised by Revenue on comparables selection and risk adjustment viz.- “1. Did the Income Tax Appellate Tribunal (ITAT) fall into error by including M/s. Petron Engineering Consultants Ltd. and M/s. Simon India Ltd. in the list of comparables for the purpose of ALP determination in the circumstances of the case? and 2. Was the ITAT correct in law in concluding that the risk adjustment could be allowed in the comparability analysis on general appraisal of facts and without returning any findings, to displace the reasoning of the Disputes Resolution Panel (DRP), in the circumstances of the case?”
Pr. CIT vs. Haldor Topsoe India Pvt Ltd – TS-44-HC-2018(DEL)-TP – ITA 74/2018 dated 23.01.2018

395. The Tribunal held that Arcadia Shipping Ltd (ASL) could not be rejected as comparable to the assessee engaged in the business of ship management services considering both these companies were engaged in shipping business and were conducting similar activities. It rejected Revenue’s contention that while the overall functions of ASL were similar to assessee some of the activities were different, and opined that TP proceedings especially selection of valid comparables-are not meant to put the proverbial fly in place of a fly and that there might be some differences in each model of business and therefore two comparables could not be expected to be mirror image of each other. Further, it noted that that in earlier year TPO himself had included ASL as a valid comparable and Revenue could not bring out any difference in facts in the subject years and accordingly directed inclusion of ASL. Additionally, it excluded HSCC (a government of India enterprise), selected by TPO/DRP, as comparable on grounds of functional dissimilarity as it was awarded the work of rendering consultancy services for design and engineering, project management, procurement of medical equipments, drugs and pharmaceuticals for various prestigious and big projects and it was participating in exhibitions organised by various agencies & also since it was earning abnormal profit vis-à-vis the previous year. However, it clarified that a government enterprise could not be rejected as a valid comparable merely because it is a government undertaking.
Anglo-Eastern Ship Management (India) Pvt. Ltd. vs. DCIT – TS-29-ITAT-2018(Mum)-TP – /I.T.A./1500/Mum/2016 dated 03/01/2018

396. Relying on the decision of the co-ordinate bench in the assessee;’s own case for the prior year, the Tribunal held that the assessee, engaged in the business of engineering, design and related support services could not be compared to:
• Accentia Technologies Ltd as the company was engaged in sale of products apart from rendering ITeS and both these components of income for which no segmental details were available
• Eclerx Services Ltd as the company was rendering Financial as well as Sales & Marketing services and income from both these services was clubbed without any segmental break-up
• TCS E-Serve Ltd as the company’s operations broadly comprised of transaction processing and technical services which was not functionally comparable to the assessee
Samsung Heavy Industries Pvt. Ltd. vs. DCIT – TS-117-ITAT-2018(DEL)-TP – ITA No. 402/Del/2017 dated 01.01.2018

397. The Tribunal held that assessee engaged in business of formulations, purchased from its AE could not be compared to:
• Engineers India Ltd, Rites Ltd and Water & Power Consulting Services Ltd (WAPCOS) as they were Government entities and had different business model
• TCE Engineers Consulting Limited as it was engaged in providing high end engineering services as against the assessee who was engaged in providing low end business support services.
Further, the Tribunal upheld CIT(A)’s decision to determine ALP based on single year data instead of multiple year data as assessee had failed to bring on record any evidence indicating influence of earlier 2 years data on ALP-determination.
M/s Eli Lily & Co (India) Ltd. Vs ACIT Gurgaon- TS-407-ITAT-2018(DEL)-TP- ITA No 6819/Del/2014 dated 11.04.2018

398. The Tribunal held that the assessee company carrying out R & D activities in relation to development of hybrid seeds for its group could not be compared to –
• Venus Diagnostics Ltd. as it was operating a diagnostic centre and was not engaged in research services.
• Syngene International Ltd. as it had two sets of income i.e. income from contract research fees and sale of compounds and the segmental details were absent.
DDIT v. Pioneer Overseas Corporation India – [2018] 93 taxmann.com 274 (Delhi – Trib.) – IT APPEAL NOS. 2934 (DELHI) OF 2013 dated APRIL 13, 2018

399. In respect of the assessee engaged in outsourced publishing services the Tribunal remitted back the issue of inclusion/exclusion of comparables to AO/TPO for fresh consideration based on the following particulars and judgements submitted by the assessee:
• Cosmic Global by taking into consideration assessee’s reliance on the decision in case of Xchanging Technology Services, Rampgreen Technologies, Parexel International & Cummins Turbo Technologies on the contention of functional difference
• Fortune Infotech Ltd by taking into consideration assessee’s relinace on Symphony marketing solutions and Capital IQ Information system decision for exclusion of the said comparable due to occurrence of extraordinary events
• Jeevan Scientific Technologies Ltd by taking into consideration assessee’s reliance on Amtel R&D India Pvt Ltd to emphasize that entire ITeS as classified in schedules of P&L should be considered.
Further, with respect to inclusion of 2 comparable companies namely Caliber Point Business Solution Ltd & R Systems International Ltd, the Tribunal directed assessee to furnish comparables data for verification by TPO.
M/s. MPS Ltd vs DCIT CC 4- TS-337-ITAT-2018(CHNY)-TP- ITA No 963/Chny/2015 dated 03.04.2018

400. The Tribunal after relying on coordinate bench ruling in assessee’s own case for previous AY, held that the assessee engaged in rendering advance analytic service related to market research to its AE could not be compared to E Clerx Services Ltd (engaged in diverse functions comprising of consulting, business analysis and solution testing) due to absence of segmental data
M/s. Fractal Analytics Pvt Ltd vs ACIT Circle 9(3)(2)- TS-236-ITAT-2018(Mum)-TP-ITA No 6621/Mum/2017 dated 06.04.2018

401. The assessee was a wholly owned subsidiary of Oriflame Investments Ltd., Mauritius and was engaged in the distribution and sale of cosmetic products manufactured by AE primarily through direct selling channel. During the TP proceedings, the TPO included a comparable viz Modi Care Ltd which apart from cosmetics was also engaged in the marketing of other products. The assessee challenged the inclusion before the Tribunal on the ground that dissimilarity with respect to products sold and the proportion borne by each of the products on turnover would impact profitability of the comparable entity. Although the Tribunal accepted the plea of functional dissimilarity, yet it did not pass an order for exclusion of the comparable and remanded back the matter to the TPO. The Court on further appeal, remanded the matter back to the Tribunal with a direction for disposal of the case on merits and directed the order of the Tribunal, to remand the matter to the TPO, to be set aside.
Oriflame India (P.) Ltd. v. ACIT – [2018] 93 taxmann.com 185 (Delhi) – IT Appeal Nos. 811 to 813 & 825 of 2017 dated April 10, 2018

402. The Tribunal held that assessee being a captive design centre and engaged in providing design services could not be compared to:
• Rolta India Ltd as the company had expertise in CAD/CAM/GIS providing IT solutions addressing customers total requirement of engineering services and generated 90% income from such activity.
• Infosys Technology Ltd as it had high brand values and ownership of proprietary products. (The Tribunal relied on assessee’s own case in previous AY and Agnity India Technologies ruling.)
• Quintegra Solutions Ltd as it was mainly engaged in software development and developing own software products.
Further, the Tribunal held that assessee could be compared to:
• Infotech Enterprises Ltd after considering segmental results.
• Federal Technologies Ltd as it was rendering design and development services comparable to assessee
• Mindteck (India) Ltd as it was engaged in area of embedded systems and segmental information were available.
Motorola Solutions India Pvt Ltd vs DCIT Circle-2 – TS-346-ITAT-2018(Del)-TP-ITA No 1652/Del/2014 dated 27.04.2018

403. The Court dismissed Revenue’s appeal challenging Tribunal’s exclusion of Wipro Technology Services as comparable to assessee and held that exclusion was justified as the said comparable had a strong brand presence and unusual events such as amalgamation, merger which could have a miserable impact on the profits.
PCIT Delhi-1 vs Agnity India Technologies P Ltd- TS-273-HC-2018(Del)-TP- ITA No. 447 of 2018 dated 13.04.2018

404. The Tribunal followed co-ordinate bench ruling in assessee’s own case for previous AY 2011-12 wherein the assessee had selected software distributors as comparables in absence of data available in public domain with regard to channel distributors and the Tribunal had remitted the benchmarking of assessee’s payment of distribution fee on the ground that the assessee had not furnished agreement with AEs and revenue sharing agreement with Non-AEs (so as to enable the AO to apply internal CUP). Thus, the Tribunal also remitted the benchmarking of assessee’s payment of distribution fees to AEs (channel operators) for AY 2012-13.
MSM Discovery Private Limited vs. ACIT [TS-316-ITAT-2018(Mum)-TP] ITA No.1935/Mum/2017 dated 02.05.2018

405. The Tribunal held that the assessee [engaged in the business of transportation to various destinations in the domestic and international sectors] could not be compared to:
• Sical Logistics Ltd. as the company was engaged in the business of port handling, customs house agency, ship agency, road logistics and goodwill travel. It also did not have segmental information and did not have any earnings in foreign exchange, indicating that the company did not have international operations
• All Cargo Logistics Ltd as the consolidated financial statements included financial results of not only the Indian operations but also of the multimodal transport business carried on by the company’s subsidiaries in other countries. The Tribunal also noted the asset base of the company vis-à-vis the assessee which was Rs.1330 crores as against the assessee’s asset base of Rs. 11crores.
• SDV International Logistics as the company was following a different financial year and quarterly audited financial data was not available in public domain, hence no such adjustment could be made
• Om Logistics Ltd as it was was engaged in providing air cargo, train Cargo services factory relocation, home shifting/office relocation services which by no stretch of imagination could be compared to courier business of assessee.
Further, the Tribunal also held that Indo Arya Central Transport Ltd. could be included as a comparable and the TPO was unjustified in rejecting the company on the reasoning that it was incurring losses. TheTribunal observed that the reasoning was factually incorrect since the said comparable had earned a profit but only post working capital adjustment, it was showing a loss.
Aramex India Pvt. Ltd vs. DCIT [TS-351-ITAT-2018(Mum)-TP] ITA No.6749/Mum/2017 dated 18.05.2018

406. The Tribunal, in second round of proceedings, excluded 7 channel/content owner companies as comparables for assessee’s distribution segment. Further, it noted that distribution segment of the assessee was different and independent from assessee’s production/ancillary activities which was carried out as a captive service provider and found to be at arm’s length by the TPO. It disapproved the action of DRP/TPO of mixing functionality of independent activities of distribution and production/ancillary to distort the functionality to justify the selection of channel owner companies especially when the transaction from such production/ancillary services constituted only 4% of the value of the international transaction. The Tribunal relied on the co-ordinate bench ruling in assessee’s own case for subsequent AYs 2007-08 & 2008-09 to re-iterate that that Satellite TV channels and cable network operators had significantly different operating models and directed exclusion of the said companies. The Tribunal accepted the stand of the the assessee that software distribution companies could be considered for comparability analysis by following the co-ordinate bench decision in NGC Network wherein it was held that the aforesaid companies can be taken for comparability analysis, when no direct comparable dealing with distribution of satellite channels are available. Thus, Trijal Industries Ltd (trader in computer packages) as a comparable was accepted and the Tribunal further noted that TPO in subsequent years also had accepted software distributors as valid comparables. However, it excluded Syam Software (also a software distributor) in view of its persistent losses.
Turner International India Pvt. Ltd v ACIT [TS-483-ITAT-2018(DEL)-TP] ITA No.1204/Del/2018 dated 18.06.2018

407. The Tribunal excluded Hindustan Syringe and Medical devices as a comparable for assessee engaged in business of import of assembly of component and re-export of assembled medical disposable balloon catheters] for AY 2010-11 by relying upon co-ordinate bench ruling in assessee’s own case for AY 2009-10 wherein it was held that the said company was functionally dissimilar with the assessee since the said company had been using intangible assets for which royalty was paid whereas the assessee was merely a job worker. Further, an observation was made that the said company was engaged in trading activities without any segmental accounts available for different activities whereas the assessee was only an assembler.
Degania Medical Devices Pvt Ltd v Dy.CIT [TS-523-ITAT-2018(DEL)-TP] ITA No.1254/Del/2015 dated 27.06.2018

408. The Tribunal dismissed the assessee’s appeal for exclusion of Advanced Micronic Devices as it was also engaged in trading of health-care products like the assessee and only the relevant segmental details were considered. Further, the Tribunal remanded the comparability of RFL Ltd. to the AO/TPO to bring on record sources of information since the TPO was silent on this aspect and also remitted the calculation of margin as it was engaged in diversified activities and segmental information was not available.
Abbott Medical Optics Pvt. Ltd. v DCIT (formerly Advanced Medical Optics India Pvt. Ltd) [TS-517-ITAT-2018(Bang)-TP] IT(TP) A No.08/Bang/2014 dated 22.06.2018

409. The Tribunal held that assessee engaged in providing tourism services to customers of AE could not be compared to:
• Kerala Travels Interserve Ltd as the revenue was from different activities such as airline commission and not from tour operations
• Cox & Kings Limited as the company had its own brand value and was engaged in multiple activities.
Enchanting Travels Private Limited vs ITO [TS-744-ITAT-2018(Bang)-TP] IT (TP) A No.2149/Bang/2017

410. The Tribunal rejected the contention of the assessee for inclusion of Neelkanth Rock Minerals as comparable on the ground that it was functionally dissimilar since it had activities of granite quarrying and processing whereas the assessee was not into mining but only processing. Further, the Tribunal also rejected the contention of the assessee for inclusion of Vajra Granites Ltd. as comparable on the ground that it was functionally dissimilar since unlike the assessee it had quarry land on which the company had claimed depreciation also on the basis of depletion of mineral resources.
Indigra Exports Pvt Ltd v DCIT [TS-509-ITAT-2018(Bang)-TP] IT (TP)A No.488/Bang/2016 dated 22.06.2018

411. The Tribunal remitted the issue of determining the ALP to AO/TPO and directed them to include two comparables viz. Haldiram Bhujiawala and Capital Foods for benchmarking assessee’s sale of Ready-to-Serve products to AE. It observed that the comparables had been accepted by the assessee in subsequent assessment year and relied on the ruling of Bobst India where the TPO was directed to include a company in the list of comparables as the said company was found to be comparable entity in the subsequent assessment year.
Tasty Bite Eatables Limited vs DCIT [TS-730-ITAT-2018(PUN)-TP] ITA No.337/Pun/2014 dated 11.06.2018

412. The Tribunal observed that the TPO excluded the three comparables viz. Akasaka Electronics Ltd, DR Electricals & Switchgears Pvt. Ltd. and JK Switchgears& Cable Pvt. Ltd by merely stating that they did not meet the criteria of one or more filters with respect to the assessee engaged in manufacturing of medium voltage switchgear components, ring main unit components, etc. Further, the DRP had confirmed the TPO’s order of exclusion without any findings. The TPO/DRP had failed to consider the submissions of the assessee vis-à-vis the comparables satisfying all the filters. Thus, the Tribunal directed the DRP/TPO to give clear finding on their inclusion/exclusion after considering all details and evidence available and remanded the matter.
Efacec Switchgear India Pvt Ltd vs DCIT [TS-830-ITAT-2018(DEL) TP] ITA No.7817/Del/2014 dated 13.06.2018

General

413. The Tribunal upheld the DRP’s order excluding companies with turnover of less than 200 crores and exceeding 2000 crores relying on the coordinate bench decision in Genisys Integrating Systems wherein a guideline in the matter of turnover was suggested that companies having turnoverless than 200 crores are small companies, companies with turnover between 200 to 2000 crores are medium companies and companies exceeding turnover of 2000 crores are large companies and hence taxpayer being a medium company, small and large companies had to be excluded as comparables.
Thomson Reuters International Service Pvt Ltd vs DCIT [TS-1090-ITAT-2018(MUM)-TP] ITA No. dated 03.08.2018

414. The Tribunal remitted the matter, with respect to determination of ALP for benchmarking of the debt collection services & telemarketing rendered by assessee on the basis of adopting the foreign AE as the tested party, for fresh determination at the assessment stage. Noting that the TPO and CIT(A) had not assigned any reason for rejecting the foreign AE as a tested party, considered the submissions of the assessee that the tested party has to be the least complex entity which was the case as the foreignAE owned insignificant infrastructure whereas operating assets were mostly owned by the assessee and the risk of performance of services and risk of quality and timeliness of services werealso with the assessee and further the assessee was involved in the actual business of debt collection. It notedpeculiar business model and functional relationship between the assessee and AEandrestored the matter to the AO/TPO.
Global Vantedge Pvt Ltd vs. ACIT [TS-895-ITAT-2018(DEL)-TP] ITA Nos.2093 and 2386/Del/2014 dated 23.08.2018

415. The Tribunal set aside the TPO’s order and remitted the issue of comparables, computation of margins for them and ALP-determination back to the file of AO/TPO in case of an assessee engaged in providing content design and development support services for online courseware to AE in USA. It was assessee’s contention that the TPO had erred in computing the margin of comparables namely Sasken Communications Technologies Ltd) and Sonata Software Ltd. The Tribunal set aside all comparables finally selected by TPO/AO in terms of FAR analysis of assessee. It directed the AO to decide the comparability of comparables on the basis of functions performed by these companies, risks assumed and assets owned by the comparables vis-a-vis that of assessee and also to verify the computation of margins.
Element K India Pvt Ltd vs ITO [TS-1119-ITAT-2018(DEL)-TP] ITA No.1153/Del/2014 dated 06.09.2018

416. The assessee a resident of UK entered into an agreement with its parent company (Tata Motors Ltd.) for rendering of design, engineering, testing, validation services etc. for which it sent its employees to India (constituted a service PE). The assessee had selected UK companies as comparables as it (foreign tested party) was incurring operating costs in UK, and had employees based in UK. The DRP upheld TPO’s rejection of foreign comparables selected by assessee.The assessee had challenged the rejection of foreign companies selected as comparables by the assessee for benchmarking the international transactions with its Associated Enterprises (AE) which was decided in its favour by the coordinate bench decision of preceeding years wherein foreign comparables were selected. The Tribunal noted that the issue had been raised before DRP who had not adjudicated on it since on the basis of its directions no TP-adjustment had survived. It observed that the issue was a merely academic one and there was no need to delve into it but kept it open for decision if need be in future in light of the favourable coordinate bench ruling in its own case.
Tata Motors European Technical Centre Plc vs DCIT [TS-1022-ITAT-2018(Mum)-TP] ITA No.850/Mum/2017 dated 12.09.2018

417. Following the coordinate bench decision in assessee’s own case for earlier year, the Tribunal held that forassessee engaged in sale of IC Engines, spares, components, manufacturing and procurement activities should be aggregated under TNMM since they are inextricably linked together and the TPO erred in segregating the transactions. Further, it also held that margins of assessee were to be compared with average margins of external comparable companies in view of Tribunal’s order in the assessee’s own case for earlier year wherein it was held that while applying TNMM on aggregate basis, since various transactions were interlinked, comparison had to be made with uncontrolled transactions.
Cummins India Limited vs Dy.CIT [TS-1099-ITAT-2018(PUN)-TP] ITA No.556/Pun/2015 dated 25.09.2018

418. The Tribunal remitted the issue of comparability of companies in case of assessee engaged in software development to DRP in view of DRP passing a cryptic and non-speaking order noting that it had not dealt with any of the objections filed by assessee vis-à-vis exclusion of comparables (export filter, employee cost filter etc.) and had only observed that the TPO had given reasons for rejecting the comparables.
Sun Tec Business Solutions (P) Ltd vs Dy.CIT [TS-1206-ITAT-2018(Coch)-TP] ITA No.113/Coch/2016 and 509/Coch/2016 dated 12.09.2018

419. The assessee-company sold liquor under two segments viz. (i) ‘Bottled in India Scotch’ (“BIIS”) segment – under which, it processed compound alcholic preparation imported from its AE into scotch/whiskey and then sold it in India and (ii) India Made Foreign Liquor (“IMFL”) segment (pertaining to domestic business) – under which it sold the liquor manufactured from raw materials by it in India. The TPO clubbed BIIS and IMFL segment for benchmarking of the import transaction from its AE and made a TP adjustment by considering companies mainly into manufacturing of IMFL as comparable under TNMM. The Tribunal held that segmental approach adopted by assessee by segregating BIIS and IMFL business for purpose of computing ALP was justified. It held that only because the assessee, in its financials, had not shown the aforesaid two segments separately for purpose of reporting as per AS-17 (segmental reporting), it could not be concluded that transactions / segments were interlinked or connected. It followed the coordinate bench ruling in assessee’s own case for an earlier year wherein assessee’s segregation approach was upheld noting that IMFL and BIIS segment were distinct because of functional and product differences. The Tribunal also held that the TPO had not carried out comparability analysis properly and, accordingly, set aside the issue to TPO to determine comparables which were exclusively in manufacturing/processing of BIIS product only (as comparable companies selected by TPO were mainly into manufacturing of IMFL).
Beam Global Spirits and Wines (P) Ltd vs Dy.CIT [2018] 99 taxmann.com 128 (Delhi – Trib.) IT APPEAL NO. 3530 (DELHI) OF 2010 dated 12.09.2018

420. The Tribunal dismissed assessee’s plea for inclusion of comparable companies on the basis of additional filter of export sales less than 75% of the total income noting that assessee had failed to rebut the DRP’s finding that more than 86% of the operating revenue was earned by assessee out of export sales and thus, opined that the lower authorities had rightly applied an appropriate filter for comparability analysis.
Omniglobe Information Technologies (India) Pvt Ltd vs Addl CIT [TS-1146-ITAT-2018(DEL)-TP] ITA 6980/Del/2017 dated 15.10.2018

421. The Tribunal restored the entire TP matter to DRP directing it to apply onsite filter for all the comparables (and then to decide objections on functional similarity/dissimilarity) noting that DRP had applied onsite filter to only three out of thirteen comparables and the aforesaid filter was not applied by TPO. It followed the coordinate bench ruling in Broadcom Communication Technologies (P.) Ltd. wherein the DRP had applied onsite filter to only one comparable and the Tribunal had restored back with directions to DRP that for comparables passing the onsite filter, DRP should examine the applicability of all other relevant filters also and decide about inclusion/exclusion of comparables after providing adequate opportunity to the assessee to be heard.
ACIT vs IMS Health Technology Solutions Pvt Ltd. [TS-1199-ITAT-2018(Bang)-TP] IT(TP)A 577/Bang/2016 dated 12.10.2018

422. The Tribunal restored the matter back to TPO for examination noting that turnover was not relevant criteria if companies were otherwise functionally comparable in case of power control division of assessee. The assessee had relied on Delhi HC decision of Chryscapital Investment Advisors (India) P Ltd. wherein it was held that high turnover does not ipso facto lead to the exclusion of comparables and TPO had to satisfied that such differences do not materially affect price or cost and an attempt would have to be made to eliminate such differences.
GE India Industrial Private Limited vs ACIT [TS-1315-ITAT-2018(DEL)-TP] ITA No.2781/Ahd/2012 dated 04.12.2018

423. The Tribunal held that AO erred in holding that there was no logic in bifurcating trading and manufacturing activity and considering the operations of assessee in entirety following the coordinate bench in assessee’s own case for earlier year wherein it had accepted that assessee was engaged in export of finished goods apart from trading of components. It remitted the matter back to AO/TPO to benchmark two activities separately and apply TNMM, accordingly,determine ALP under umbrella of manufacturing and trading activities.
Dy. CITvsStauff India Pvt Ltd. [TS-1362-ITAT-2018(PUN)-TP] ITA No.1579/PUN/2014 dated 18.12.2018

424. The Tribunal accepted assessee’s application of 50% manufacturing/trading income filter as against TPO’s 75% service income filter since the filter was in fact broader one leading to the broader set of potential comparables noting that the TPO in the subsequent year accepted the assessee’s 50% manufacturing/trading income filter.
Wolters Kluwer (India) Pvt Ltd vs DCIT [TS-521-ITAT-2018(DEL)-TP] ITA No.1700/Del/2015 dated 06.07.2018

425. The Apex Court dismissed Revenue’s SLP challenging HC’s rejection of 100% government owned undertakings as comparables for assessee providing emergency assistance and support services to its AE. The High Court had affirmed the Tribunal’s order and concurred with the Tribunal’s view in Thyssenkrupp Industries (subsequently affirmed by Bombay HC) with respect to public sector undertakings not being comparable and opined that view taken by the ITAT in the present case, was consistent with the view expressed by the Mumbai Bench of the ITAT which had been affirmed by the Bombay High Court, and was a plausible view.
Pr.CIT vs International SOS Service India P Ltd [TS-493-SC-2018-TP] SLP 18255/2018 dated 03.07.2018

426. The Tribunal remitted issue of determination of functional profile of assessee (engaged in the business of integration of hardware and software in the simulation and services) back to TPO . It noted that the assessee contended that its functions were divided into various departments such as marketing department, technical department, quality department, pricing department and finance, human resource and administration and therefore considered itself to be in the field of project management while TPO considered assessee to be engaged in software development services since the assessee undertook independent verification and validation of software including design, coding and testing in various programming languages. As both assessee & Revenue agreed that these aspects in assessee’s TP study were not examined by TPO/DRP while adjudicating the main issue with regard to functional profile of the assessee, the Tribunal opined the matter ought to go back to the TPO to first re-examine the issue with regard to functional profile of the assessee and thereafter adopt the comparables of same profile.
CAE India Pvt. Ltd vs. ITO – TS-1096-ITAT-2017(Bang)-TP – IT(TP) A No 762 / Bang / 2017 dated 22.12.2017

427. The Tribunal relying on the decision of the High Court in Mckinsey Knowledge Centre ITA 217/2014 held that a functionally comparable company cannot be rejected merely because of different financial year. Accordingly, it remitted the inclusion of R Systems International Ltd for software developer assessee provided that the results for financial year could reasonably be extrapolated.
ST Microelectronics Pvt. Ltd vs. Addl. CIT – TS-48-ITAT-2018(DEL)-TP – ITA No. 4396/Del/2017 dated ITA No. 4396/Del/2017

428. The Apex Court dismissed revenue’s SLP against Delhi HC judgment wherein the Court upheld the Tribunal order regarding comparable selection and had upheld exclusion of 2 comparables for the purposes determining the ALP of international transactions observing that no substantial question of law arose from Tribunal order.
Pr. CIT vs. ST Microelectronics Pvt Ltd – TS-46-SC-2018-TP – SPECIAL LEAVE PETITION (CIVIL) Diary No. 42218/2017 dated 22.01.2018

429. The Court admitted 2 questions of law raised by Revenue on comparables selection and risk adjustment; Questions admitted are – “1. Did the Income Tax Appellate Tribunal (ITAT) fall into error by including M/s. Petron Engineering Consultants Ltd. and M/s. Simon India Ltd. in the list of comparables for the purpose of ALP determination in the circumstances of the case? and 2. Was the ITAT correct in law in concluding that the risk adjustment could be allowed in the comparability analysis on general appraisal of facts and without returning any findings, to displace the reasoning of the Disputes Resolution Panel (DRP), in the circumstances of the case?”. It listed the final hearing on April 23, 2018.
Pr. CIT vs. Haldor Topsoe India Pvt Ltd – TS-44-HC-2018(DEL)-TP – ITA 74/2018 dated 23.01.2018

430. The assessee was engaged in business of electronic manufacturing service provider and assembling electronic components in printed circuit board for mobile chargers. While proposing TP-adjustment, TPO made certain adjustment to PLI of comparables observing that assessee’s capacity utilization was higher than comparables while ratio of depreciation to operating income was higher for comparables companies as against that of assessee. The Tribunal accepted the contention of the assessee that it’s capacity utilization was in fact lower than average capacity utilization of the comparables and that the cause of higher employment cost of the comparable companies could not be attributable to their level of capacity utilization as incorrectly done by the TPO. Therefore, it noted that the higher employee cost of the comparables indicated use of skilled labour which was not required in the work done by the assessee. Accordingly, considering the above findings, it held that the comparable companies adopted by the assessee company and the Revenue could not be strictly viewed as comparable companies as the functional analysis with respect to employee cost had not been carried out. Accordingly, it remitted the matter to the file of TPO for fresh adjudication.
Flextronics Technologies (India) Pvt. Ltd. V ACIT – TS-1090-ITAT-2017(CHNY)-TP – I.T.A.No.1195/Mds/2016 dated 04.12.2017

431. The Tribunal accepted Revenue’s plea for exclusion of Jindal Intellicom as a comparable while benchmarking the assessee’s ITES transactions as the company had a different financial year ending (on 31.12.2008) as compared to assessee’s (on 31.03.2009). Referring to Rule 10B(4) as well as the decision of the Bombay High Court in PTC Software (I) Pvt Ltd [TS-835-HC-2016(BOM)-TP] it held that Rule 10B mandated that the comparable ought to have data for the same financial year in which the international transaction had been entered into and if such a data was not available, then, a company could not be considered as functionally comparable.
ITO vs. Copal Research (I) Pvt. Ltd. – TS-32-ITAT-2018(DEL)-TP – ITA No.1865/Del/2014 dated 09.01.2018

432. The Tribunal remitted the functional comparability of 7 companies back to the DRP observing that the DRP passed a cryptic order without deciding on the issue of functional comparability of the individual companies and merely mentioned that assessee’s arguments were dealt with by the TPO. It directed the DRP to pass a reasoned and speaking order on comparability of individual companies. Regarding the treatment of foreign exchange gains/loss while computing the margin of companies, the Tribunal noted that the DRP had not applied its mind while rendering its decision rejecting the assessee’s claim, even though arguments were raised before it and accordingly restored the issue to the file of the DRP for examination and adjudication by passing a reasoned and speaking order.
Telsima Communications Pvt. Ltd. vs. DCIT – TS-1084-ITAT-2017(Bang)-TP – IT(TP)A No.1178/Bang/2010 dated 17.11.2017

433. The Tribunal allowed Revenue’s appeal and held that the CIT(A) erred in applying the 25% related party transaction (RPT) filter for excluding Wipro BPO Solutions as comparable, noting that the assessee did not raise any ground to that effect before the CIT(A). However, it held that it’s finding on the CIT(A)’s erroneous application of the RPT filter would not in any way affect the finding of the learned CIT (Appeals) in excluding Wipro BPO Solutions Limited from the list of comparables on grounds of brand and intangible ownership and huge turnover. Further, it also accepted Revenue’s contention that the CIT(A) erred in holding that assessee was eligible to benefit of standard deduction of 5% from ALP under the proviso to Sec. 92C(2) and held that by virtue of the retrospective amendment to the Act made by Finance Act, 2012 w.r.e.f. 1.4.2002 it was clear that the + / – 5 % variation was to be allowed only to justify the price charged in international transactions and not for adjustment purposes.
DCIT vs. Nirvana Business Solutions Pvt. Ltd – TS-56-ITAT-2018(Bang)-TP dated I.T. (T.P) A. No.171/Bang/2012 dated 19.01.2018

434. The Tribunal upheld TPO’s aggregation of ITES and software development services (SDS) for benchmarking under TNMM absent assessee’s substantiation for bifurcation of the segments as the assessee failed to indicate number of employees actually rendering SDS and ITES and provide evidence such as worksheets/reports of work done for substantiating revenue bifurcation between 2 segments. Further, there was no separate mention of service fee for ITES or SDS in the invoices issued as well as relevant bifurcation in annual accounts and accordingly rejected assessee’s contention that since SDS & ITES were benchmarked separately in the past, no deviation should be allowed in subject year. However, it rejected TPO’s approach of benchmarking the transactions by only selecting comparables relating to ITES segment and accordingly remitted the ALP-determination for considering comparables which are rendering both SDS and ITES.
Orange Business Services India Solutions Pvt. Ltd vs. DCIT – TS-88-ITAT-2018(DEL)-TP – ITA No.6570/Del/2016 dated 15.02.2018

435. The Court upheld ITAT’s application of 25% RPT filter for comparability analysis and held that the RPT filter is relevant and fits in with the overall scheme of a transfer pricing study. It held that if a particular entity predominantly had transactions with its AE in excess of a certain threshold percentage its profit making capacity may result in a distorted picture and therefore the RPT filter was necessary. Further, it upheld the exclusion of Wipro Ltd owing to its significant brand presence in the market, opining that brand value of an entity has a significant role in its ability to garner profits and negotiate contracts despite the fact that the companies are otherwise similar in terms of services or products they offer. Accordingly, it dismissed Revenue’s appeal.
Pr. CIT vs. Oracle (OFSS) BPO Services Pvt. Ltd. – TS-67-HC-2018(DEL)-TP – ITA 124/2018 dated 05.02.201

436. The Court admitted Revenue’s appeal challenging the exclusion of E-Infochips as comparable on ground of unavailability of segmental data by framing the following question of law as “Is the impugned order in error of law in so far as it excludes M/s. E-Infochips Limited from the list of comparables on the ground of unavailability of segmental data, in thecircumstances of the case?”
Pr.CIT vs. Sapient Consulting Pvt. Ltd – TS-124-HC-2018(DEL)-TP – ITA 261/2018 dated 27.02.2018

437. The Tribunal remanded the TP-issue to the file of AO/TPO since the TPO/DRP rejected assessee’s TP study and selected a fresh set of comparable without considering turnover filter as a result of which the TPO/DRP’s selection of comparables was not correct. Accordingly, it directed the AO/TPO to re-examine matter and give assessee opportunity of being heard on selection of comparables.
PB Systems (India) Pvt. Ltd v DCIT – [TS-132-ITAT-2018(CHNY)-TP – ITA No.3164/Mds/2016 dated 28.02.2018

438. The Tribunal held that Government undertakings/companies are not suitable comparables for benchmarking of assessee rendering network support services and accordingly directed the AO to verify all the Government undertakings either benefitting from preferential treatment from Government in getting contracts etc. or those that are not driven by profit motive alone and to exclude from the list of comparables.
AT & T Communication Services India Private Limited vs. ACIT – TS-127-ITAT-2018(DEL)-TP – ITA No.1016/Del./2015 dated 15.02.2018

439. The Court dismissed Revenue’s appeal on selection of foreign AE as tested party issue absent discussion in CIT(A) / ITAT order on the said issue. It noted that the assessee had used 2 tested parties (Dupont Asia Pacific and Dupont USA) and selected 7 and 20 comparables respectively for benchmarking its transactions, however the TPO rejected the same and applied CUP instead of assessee’s TNMM. It observed that even the assessee met with only limited success in its transfer pricing exercise and its most appropriate method was also rejected. Accordingly, it dismissed the appeal holding that the question of law framed did not arise for consideration.
Pr. CIT vs. E.I. Dupont India Pvt Ltd – TS-138-HC-2018(DEL)-TP – ITA 25/2017 dated 13.02.2018

440. Where the assessee sought the exclusion of 5 of its own comparables, the Tribunal observing that nothing precluded the assessee from doing so and that prima facie there was a case in favour of the assessee on facts and in law, remitted the matter to the file of the TPO observing that the matter would require input from the TPO.
Vis-à-vis assessee’s claim for economic adjustments (capacity utilisation adjustment, working capital adjustment, custom duty adjustment and cash PLI adjustment), noting that the similar issues were remanded by the Tribunal for the earlier year in assessee’s own case with a direction to note that such adjustments were allowed in subsequent AYs but were not considered by the DRP/TPO/AO for the impugned AY, it remanded the issue to the file of AO/TPO for fresh adjudication.
NORD Drive systems Private Limited vs. ACIT – TS-140-ITAT-2018(PUN)-TP dated ITA No.509/PUN/2015 dated 07.02.2018

441. Noting that while selecting comparables the TPO failed to apply the filters uniformly to all the comparables the Tribunal remitted the issue back to the TPO to re-examine the comparables of the assessee as well as those of the TPO by applying the same filters uniformly.
Swiss Re Global Business Solutions India Private Ltd vs. DCIT – TS-161-ITAT-2018(Bang)-TP – IT(TP)A No.2028/Bang/2017dated 28.02.2018

442. The Court admitted Revenue’s appeal on question of law viz. “Did the ITAT fell into error in upsetting the concurrent view of the TPO and the DRP with respect to desegregation of the intra group service transaction for the purpose of ALP determination under Section 92CA of the Income Tax Act, 1961 in the circumstances of the case?”.
CIT vs. Corning SAS- India – TS-184-HC-2018(DEL)-TP – ITA 1074/2017 dated 19.03.2018

443. The Court remitted the issue of comparability of Keynote Corporate Service Ltd and Motilal Oswal Investment Advisors Pvt. Ltd vis-à-vis the assessee engaged in investment advisory service back to the file of the Tribunal. As regards Keynote Corporate Service Ltd, it accepted Revenue’s contention that abnormal profits could not be a ground for exclusion of an otherwise functionally comparable company in view of co-ordinate bench ruling in assessee’s own case (for earlier years i.e. AY 2006-07). However, it also noted assessee’s argument that after High Court ruling (wherein the HC remitted the comparability of Keynote back to the DRP), the Tribunal had held Keynote Corporate Services as functionally incomparable to assessee in the earlier year. Accordingly, it remitted the matter back to Tribunal to consider the findings of the Tribunal in the earlier year and to record its appropriate findings year-wise on the issue of functional similarity. With respect to Motilal Oswal Investment Advisors Pvt. Ltd, the Court noted that the Tribunal had adopted RPT filter only in the case of this company and held that adopting one procedure for only one entity and adopting another for all other entities or comparables would lead to a distorted picture. Accordingly, it remitted the matter to the Tribunal for consistent application of the filter.
Chryscapital Investment Advisors (India) Pvt Ltd vs DCIT – TS-173-HC-2015(DEL)-TP – ITA 417/2014 dated 27.03.2018

444. The Court held that the mere fact that an entity makes high/extremely high profits/losses does not, ipso facto, lead to its exclusion from the list of comparables for the purposes of determination of ALP. It held that that mere huge profit or huge turnover of a company which otherwise conforms to all stipulations in Rule 10B, ipso facto does not lead to its exclusion. It held that the TPO should first ensure that such differences do not materially affect the price or cost, and then attempt to ‘adjust’ or ‘eliminate the material effects’. Further, it rejected assessee’s contention for relying on previous years’ data and held that while there could be a wide fluctuation in the profit margins of comparables from year-to-year, this by itself does not justify the need to take into account previous years’ profit margins and held that Rule 10B(3) would account for such volatility. It dismissed assessee’s reliance on OECD Guidelines, firstly, observing that since India is not an OECD member, the Guidelines would only have persuasive status without legal sanction. Further, it acknowledged that in the present case, both OECD Guidelines and Income-tax Rules were in consonance since both did not prescribe automatic exclusion of entities with extreme financial results, and provide for consideration of multiple year data only for the purposes of factoring in material changes in, inter alia, economic conditions, third party variables, etc. Further, remits comparability of 3 high-profit companies to DRP, with the direction to first conduct fresh enquiry regarding functional similarity and then to carry out analysis under Rule 10B(3) for these companies to determine if there were material differences on account of exceptionally high profits, capable of elimination and only if such differences could not be eliminated, would the company be excluded.
Chryscapital Investment Advisors (India) Pvt Ltd vs DCIT – TS-173-HC-2015(DEL)-TP ITA 417/2014 dated 27.03.2018

445. The Court dismissed Revenue’s appeal and upheld Tribunal’s deletion of TP-adjustment. It observed that the Tribunal deleted the adjustment on the ground that the TPO had wrongly compared transaction of export of components with net margin of domestic sales of finished goods which was unjustified considering the difference in the nature of customers in the domestic and export market and the fact that the exports were of parts whereas the domestic sales were of finished goods. Noting that both the CIT(A) and the Tribunal, on facts, had held that the comparable adopted by the TPO was incorrect, it held that since the finding of fact was not shown to be perverse the question raised by the Revenue did not give rise to any substantial question of law.
CIT vs. Keihin Fie Pvt. Ltd – TS-189-HC-2018(BOM)-TP – INCOME TAX APPEAL NO. 1176 OF 201 dated 21.03.2018

446. The Tribunal dismissed Revenue’s appeal and upheld assessee’s segregation approach for benchmarking the purchase of Compound Alcoholic Preparation (CAP) from its AE. The assessee, under Bottled in India Scotch (“BIIS”) segment, processed CAP, imported from its AE, into scotch/whiskey and sold it in India while in India Made Foreign Liquor (“IMFL”) segment [pertaining to domestic business], IMFL was manufactured from a purified form of spirit/alcohol called the Extra Neutral Alcohol which was manufactured by the assessee in India. The assessee benchmarked the import from its AE by segregating the BIIS segment from its IMFL segment. The TPO clubbed assessee’s BIIS and IMFL segments and compared the net profit margin (NPM) of the combined manufacturingoperations of the assessee with those of broadly comparable companies. Observing that the manufacturing of ultimate product, market conditions, price and functions of both segments were completely different and distinct, the Tribunal opined that both the segments of the assessee are totally different and independent after noting that TPO / AO did not scrutinize the differences in both segments. It rejected the Revenue’s reference to AS-17 stating it was not applicable for undertaking TP-adjustment and observes that assessee had adopted same accounting method on year-to-year basis and filed segmental accounting on both the segments before the authorities below which was undisputed; Thus, it held that the economic analysis undertaken by the assessee in respect of international transaction pertaining to the purchase of CAP following segmental approach by segregating manufacturing operations into BIIS and IMFL business verticals was in accordance with the relevant Transfer Pricing Regulations.
DCIT vs. Allied Domecq Spirits & Wine India Pvt. Ltd – TS-147-ITAT-2018(DEL)-TP – ITA.No.54/Del./2011 dated 09.03.2018

447. The Tribunal in this case sent back the matter to TPO for reapplication of TP analysis as the assessee had not used data for relevant FY for benchmarking its various international transactions. Further the TPO had also made adjustments to non AE transactions.
Makino India Pvt. Ltd. Vs ACIT Circle 4(1)(2) Bangalore- TS -416-ITAT-2018(Bang) TP- IT(TP) No 3/Bang/2012 dated 20.04.2018

448. The Tribunal remitted TP adjustments on various international transactions of assessee such as receipt of licensing revenue, corporate guarantee, payment for media rights and signage fees. With respect to international license revenue receivable by the assessee from its AE, the Tribunal also noted that the assesse had not applied RPT filter for comparables selection and remitted the issue for fresh consideration with a direction to assessee to furnish fresh set of comparable after applying RPT filter. With respect to transaction of purchase of signage and media advertisement rights, it accepted assessee’s request for remand back for selection of fresh set of comparables.
Nimbus Communications Ltd. vs. DCIT – TS-520-ITAT-2018(Mum)-TP – LT.A. No. 1988 / Mum / 2016 dated 21.05.2018

449. The Tribunal held that the assessee engaged in the business of market development, dissemination of product information, research and development activities and providing onsite and back office support services could not be compared with Neeman Medical International Asia Ltd as the company was a consistent loss making company.
Further, it accepted assessee’s contention that Pfizer was to be included as a comparable observing that the said company had adequate segmental results and was accepted as a comparable by the DRP in the assessee’s own case for the preceding years.
ExxonMobil Company India Private Limited vs. CIT – TS-390-ITAT-2018(Mum)-TP – /I.T.A./3601/Mum/2014 dated 23/05/2018

450. The Tribunal upheld the CIT(A)’s order accepting separate benchmarking of assessee’s transactions under Business model 1 – receipt of marketing & support services from AE (choosing foreign AE as tested party) and Business model 2 – assessee’s rendering of ITeS to AE (choosing assessee as tested party). It noted that under Business model 1, risks and rewards were with the assessee and AEs [which were remunerated on cost plus basis] were insulated from the risks borne by assessee as an entrepreneur and therefore upheld CIT(A)’s view that AE was rightly chosen as the tested party being the least complex entity. Vis-à-vis Business model 2, it noted that major risks were borne by WNS UK, which functioned as an entrepreneur and therefore held that the assessee (which was only a captive service provider bearing limited risks) was rightly chosen as the tested party. Observing that the transactions undertaken by assessee were not interlinked as various transactions formed part of different business models adopted by assessee, the Tribunal held that the TPO’s approach of aggregating these international transactions and benchmarking the assessee at an entity level was not appropriate since the far profile of the Indian assessee was different in both the transactions.
ITO vs. WNS Global Services Pvt. Ltd – TS-474-ITAT-2018(Mum)-TP – ITA No 2318 / Mum / 2009 dated 04.05.2018

451. The Tribunal allowed Revenue’s miscellaneous petition against its order and accepted Revenue’s submission that while remitting comparability of Denison Hydraulics India for verification of RPT filter, Tribunal had inadvertently mentioned RPT percentage at 25% instead of 15%. Accordingly, finding merit in Revenue’s petition, the Tribunal modified its order to reflect RPT percentage at 15% and allowed the miscellaneous petition.
DCIT v British Engines (India) P Ltd – TS-430-ITAT-2018(Bang)-TP – MP 114 / Bang / 2018 dated 14.05.2018

452. Where the TPO had excluded India Japan Lighting Ltd [introduced by TPO himself] as a comparable though assessee had not requested for its exclusion and also rejected assessee’s contention for inclusion of 6 more comparables having FAR similar to India Japan Lighting Ltd, on perusal of the TPO/DRP’s order, the Tribunal observed that the assessee’s plea for including 6 new comparables was rejected in a summary manner without giving a proper reasoning and therefore held that the comparables had not been properly analysed by the Ld. TPO in light of the submissions of the assessee which had been simply disregarded without any reasoning. Accordingly, it restored the entire issue of the selection of the comparables to the file of the TPO for making a fresh comparability analysis after duly considering the evidences and submissions of the assessee.
Denso India Limited vs. ACIT – TS-456-ITAT-2018(DEL)-TP – ITA No. 4788/Del/2010 dated 31.05.2018

453. In the case of assessee engaged in manufacturing of chemicals, the Tribunal remitted back to the file of AO/TPO, comparability of Calchem Industries (India) Limited as comparable which was rejected due to non-availability of annual report, which was later filed by assessee as additional evidence before the Tribunal.
Imerys NewQuest (India) Pvt Ltd vs DCIT [TS-727-ITAT-2018(PUN)-TP]- ITA No 590/Pun/2015 dated 23.05.2018

454. The Tribunal remitted back to the file of AO/TPO, the issue of TP-adjustment in case of assessee engaged in import and distribution of biomedical diagnostic equipment, where the dispute arose as regards the rejection of comparables selected by the assessee by TPO applying the turnover filter exceeding 1000 crores. The Tribunal took note of the fact that the assessee and the Revenue were not able to demonstrate whether turnover filter was relevant for arriving at the margins in the peculiar line of business that the assessee was engaged in.
Roche Diagnostics India Pvt Ltd vs ACIT Range 8(3)-TS-803-ITAT-2018(Mum)-TP- ITA No 7566/Mum/2012 dated 04.05.2018

455. In the case of an assessee engaged in manufacturing of optical and magnetic storage media, the Tribunal directed the AO to re-examine issue of selection of assessee’s foreign AE [GDM Dubai] as tested party for AY 2005-06 and 2006-07 in the event the assessee was able to provide complete financials of GDM Dubai along with complete financials of relevant comparables required to benchmark the international transaction. The Tribunal also directed the TPO to verify if the AE was the least complex entity requiring minimum adjustment and for which comparables are available in public domain. It rejected assessee’s submission regarding its inability to obtain the required financials of tested party. The Tribunal opined that in case the assessee was not able to provide the financials of its AE as mentioned, it shall be treated as tested party and TPO shall consider the other argument advanced by assessee that it cannot be expected to earn profit more than the combined profit of assessee and AE which was accepted by the Tribunal for earlier year.
Moser Baer India Ltd. vs. DCIT [TS-334-ITAT-2018(DEL)-TP] ITA Nos.883,894/Del/2008 and 988, 1139 and 4484/Del/2013 dated 01.05.2018

456. With regard to assessee engaged in investment advisory services, the Tribunal accepted the assessee’s contention by relying on the ruling of Goldstar Jewellery that reimbursements not affecting profitability should be excluded for RPT transactions and hence directed the AO/TPO to recompute the RPT filter for Future Capital which was previously excluded for the reason that its RPT filter exceeded 25%.
Apax Partners India Advisers Pvt Ltd [TS-832-ITAT-2018(Mum)-TP] ITA No.1682/Mum/2014 and 1738/Mum/2014 dated 08.06.2018

457. The Tribunal relying on the Bombay HC ruling in Pentair Water India held that turnover filter is an important filter to select comparables for assessee engaged in the manufacture of bulk drugs. Further, observed that though there were conflicting judgments on the aspect of application of turnover filter, the Revenue failed to bring to its attention any judgment of jurisdictional HC which prohibited application of turnover filter. The Tribunal affirmed the turnover filter criteria applied by the CIT(A) which held that since the assessee has a turnover of 15.84 crores, turnover of companies exceeding Rs.30 crores could not be considered to be comparable. On the basis of filter set by the CIT(A), the Tribunal included Welcure Drugs which was bulk manufacturer of drugs as a comparable and deleted the adjustment since no adjustment would be required as per the provisions of section 92(3) of the Act after the inclusion.
Schutz Dishman Biotech P Ltd [TS-472-ITAT-2018(Ahd)-TP] ITA No.1229/Ahd/2012 and 954/Ahd/2012 dated 05 June 2018

458. The Tribunal held that the assessee engaged in the business of manufacturing of power conditioning systems for solid oxide fuel cell using power electronics technology to its AE could not be compared to Acropetal Technologies as its average operating margin (57.66%) was significantly high vis-à-vis other comparables.
Bloom Energy India Pvt. Ltd v DCIT [TS-626-ITAT-2018(CHNY)-TP] ITA No.2857/Chny/2017 dated 20.06.2018

459. The Tribunal held that the assessee engaged in manufacture of material handing equipments could not be compared to WMI Cranes Ltd. as it had undergone extraordinary event of demerger during the AY 2011-12
Further, the Tribunal included Brady & Morris Engineering Company Ltd. observing that increase in profits from ₹ 28.61 crores to ₹ 30.24 crores i.e. turnover shown in the last year as against the turnover of this year, cannot be said to be exceptional.
Terex India Pvt. Ltd (as successor of Demag Cranes and Components (India) Pvt. Ltd) vs. DCIT [TS-477-ITAT-2018(PUN)-TP] ITA No.583/Pun/2016 dated 06.06.2018

460. The Tribunal held that the assessee engaged in the business of trading in Uninterrupted Power Supply (UPS)/ Invertors with its AE could not be compared to Su-Kam Power Systems Ltd. (Rs.680.41 crores) and Swelect Energy Systems Ltd (turnover of Rs.534.64 crores) since it failed the turnover filter criteria applied by the TPO of more than one crore and less than 200 crores.
The Tribunal further noted that as a result of the two comparables being excluded the PLI applying the Berry ratio of comparable left would be within the ±5% margin and there would be no need for any further adjustments.
Socomec Innovative Power Solutions Private Ltd [TS-428-ITAT-2018(CHNY)-TP] ITA No.848/Chny/2018

461. The Tribunal set aside TPO’s application of 75% export revenue filter which was neither used in the past or subsequent years and opined that rule of consistency demands uniform filter to be applied for transactions on year to year basis unless there is a material change in facts.
Tasty Bite Eatables Limited vs DCIT [TS-730-ITAT-2018(PUN)-TP] ITA No.337/Pun/2014 dated 11.06.2018

d. Computation / Adjustments
Capacity Utilization Adjustment

462. The Tribunal granted the adjustment for capacity under-utilization directing the TPO to obtain necessary information for the comparables noting that the Indian TP guidelines, OECD guidelines and the US transfer pricing guidelines clearly provided that in case of material difference between the controlled and uncontrolled transaction, adjustments must be made if ithe effect of such differences on prices or profits could be ascertained with sufficient accuracy to improve the reliability of the results. It relied on the coordinate bench decisions in Mando India Steering Systems Pvt Ltd (adjustment made on account of underutilization of production capacity in the initial years by making allowance for the higher overhead expenditure during the initial period of production) , Panasonic AVC Network India (which discussed that capacity utilization should be granted subject to being reasonable since lower capacity utilization results in higher per unit costs, which, in turn, results in lower profits), Biesse Manufacturing Company Ltd. (adjustment for underutilization of capacity was granted following coordinate bench decision of PetroAraldite), GE Intelligent Platform Pvt Ltd. (If the underutilization is more than average underutilization of the industry then necessary adjustment was required to be made to the margin of computing ALP), Genisys Integrating system (assessee was given adjustment for underutilization of infrastructure). It was assessee’s contention that subject year was just the third year of commercial operation of the assessee during which the installed capacity was under-utlized to a significant extent. The TPO and CIT(A) rejected the plea of the assessee to provide an adjustment for idle capacity which was granted by the Tribunal.
IKA India Pvt Ltd vs DCIT [TS-1049-ITAT-2018(Bang)-TP] IT(TP)A No.2192/Bang/2017 dated 17.09.2018

463. The Tribunal restored the issue of capacity utilization to be granted in case of manufacturing activity of assessee directing the TPO to give necessary relief in accordance with law noting that in the peculiar case like that of the assessee, the manufacturing costs would necessarily have certain fixed overheads and these costs would be met only when manufacturing activity reached a certain level. The assessee had demonstrated the claim of underutilization of capacity through a chart (not available before lower authorities) and also substantiated that after certain threshold, assessee had broken even and reached a profit.
Carrier Midea India P. Ltd vs Dy.CIT [TS-1256-ITAT-2018(DEL)-TP] (ITA No.7675/Del/2017) dated 22.11.2018

464. The Tribunal restored the issue of capacity utilization to be granted noting that DRP had stated that complete data for claiming capacity utilization adjustment by assessee (engaged in manufacture of auto components) was not on record. It directed the assessee to provide complete data to substantiate its claim and TPO to afford a reasonable opportunity to the assessee to do so.It noted the assessee’s contention that assessee was operating at a different capacity (started commercial production in October 2008) vis-à-vis its comparables who were in existence for last 17 to 51 years. Further, assessee had also pointed out that coordinate bench in assessee’s own case for earlier year had allowed assessee’s claim of capacity utilization and there was no change in business model vis-à-vis previous year.
Nissin Brake India Pvt Ltd vs DCIT [TS-1252-ITAT-2018(DEL)-TP] (ITA No.6366/Del/2017) dated 16.11.2018

465. The assessee had incurred a loss of 3.93% at net level and reason for same was low capacity utilization (assessee had built one of the biggest plants in India for manufacturing earth moving machinery but was unable to use it fully) and high establishment cost of the assessee company vis-à-vis the comparable company.The Tribunal restored the issue of capacity utilization directing TPO to call for information from comparables u/s.133(6) for correct determination of ALP relying on coordinate bench decision of IKA India Ltd. wherein the TPO was directed to collect information u/s.133(6) by holding that benefit of underutilization of capacity could not be denied to the assessee only for the reason that the data about comparable companies was not available.Further, it directed TPO to compute appropriate adjustment after carrying out the exercise of examining the capacity utilization of the assessee company and to ensure that the capacity utilization of the assessee company i.e. the tested party and that of the comparables was on the same parameters.
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.)vs ACIT [TS-1233-ITAT-2018(DEL)-TP] ITA No.5828/Del/2011 dated 02.11.2018

466. The Tribunal directed the AO to make suitable adjustment to assessee’s employee cost in case of underutilization of employees and thereafter re-compute operating margin of comparables while benchmarking assessee’s provision of software development services to AE noting that DRP had retained 3 comparables whose average ratio of employee cost to sales was 58% as against assessee’s ratio of 76%. It observed that the difference was not negligible to be ignored and accordingly, the difference which was likely to affect the comparability analysis had to be taken note of and suitable adjustment had to be made to bring the comparables on par with the assessee for comparing their operating margin.
Planet Online Private Limited vs ACIT [TS-739-ITAT-2018(HYD)-TP] ITA No.279/Hyd/2016 dated 18.07.2018

467. The Tribunal upheld the assessee’s claim for grant of capacity under-utilization adjustment in manufacturing segment and explained the step by step mechanism for computing capacity under-utilization adjustment viz. – (I) ascertain the percentage of capacity utilization vis-a-vis the installed capacity for assessee and comparables, (ii) give effect (positive or negative) to the difference in the percentage of capacity utilizations of the assessee vis-a -vis comparables, one by one, in the operating profit of comparables by adjusting their respective operating costs. Noting that the operating costs could be variable, semi-variable and fixed costs, it held that adjustment was required only in respect of fixed cost and fixed portion of semi-variable cost. Noting that complete financials of comparables were not on records it remitted the issue of computation of adjustment for under-utilization of capacity to AO/TPO with a direction that adjustment should be computed with respect to installed capacity and not licensed capacity.
Daikin Airconditioning India Pvt. Ltd. v DCIT – TS-176-ITAT-2018(DEL)-TP – ITA Nos.2536/Del/2014

468. The Tribunal allowed the in principle, capacity adjustment claim of assessee [engaged in business of manufacture and trade of in-line helical gear boxes, electric motors, shaft mounted gear boxes and related sub assembly and spare parts that from parts of the Machine Tools and Component industry in India] observing that the assessee’s business had taken a hit mainly on account of change in the business conditions in respect of wind mills on account of withdrawal of the accelerated depreciation benefit and the withdrawal of the generation based incentive under the wind power sector (amendments made in 2012). It noted that consequent to such changes the assessee’s manufacturing capacity utilization fell to 47% as against national average of 75% (as indicated in RBI’s report) during the year under review and therefore held that the assessee was entitled to have the benefit of capacity utilization adjustments. However, observing that capacity utilization data was not available, it granted liberty to assessee to obtain variable data and prove its claim before TPO.
Bonfigioli Transmissions Private Limited vs. DCIT – TS-388-ITAT-2018(CHNY)-TP – /I.T.A.No.2977/CHNY/2017 dated 14-05-2018

469. The Tribunal relied on the coordinate bench ruling in assessee’s own case for AY 2008-09 and allowed the adjustment towards rent and maintenance of unutilized area of premises. It directed the TPO to work out the requisite adjustment after giving assessee an opportunity of being heard. The assessee had taken on lease a premises with 6.5 floors out of which only 4.5 floors were being utilized during relevant year while balance remained vacant in anticipation of future growth of business. The Tribunal noted that DRP had accepted that approximately 25% of the assessee’s premises were lying vacant/idle and co-ordinate bench in assessee’s own case for AYs 2004-05 and 2006-07 had allowed capacity under-utilization adjustment considering assessee was bearing substantial risk of idle capacity.
C.R.M. Services India Pvt. Ltd vs. DCIT [TS-343-ITAT-2018(DEL)-TP] ITA No.5930/Del/2012 and 1630/Del/2014 dated 14.05.2018

470. The Tribunal remitted the issue of grant of adjustment for unutilized capacity cost to AO for AY 2007-08, in respect of assessee’s international transactions relating to manufacture of crop protection products for verification of material facts relevant to tested party i.e. assessee as well as to the comparables . The Tribunal had noted that the coordinate bench in assessee’s own case for the previous year had remitted the issue of capacity under-utilization adjustment to the TPO while determining ALP of purchase of raw material from AE under TNMM. Further, on Revenue’s appeal against the Tribunal’s order for previous year, the Court had upheld the remand but kept the question open to be decided on merits whether the adjustment of unutilized capacity cost could be worked out by excluding the unused capacity cost and whether such unutilized capacity cost should be excluded/included in the case of comparables also.
DCIT vs. E.I. Dupont India Private Ltd [TS-354-ITAT-2018(DEL)-TP] ITA Nos.5043&4774/Del/2014 dated 10.05.2018

471. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order as regards the inclusion of comparable Thirumalai Chemicals Ltd. was concerned. Noting that the Tribunal on facts had held that the assessee and the said company dealt in specialty chemicals and that the capacity utilization of assessee (working at 46% of capacility utilization) and said comparable (working at 50% of capacity utilization) was approximately the same due to an economic downturn, the Court held that on facts the view taken by the Tribunal was a reasonable view.
Pr. CIT vs. Petro Araldite Pvt. Ltd [TS-446-HC-2018 (Bom)] ITA No.368 of 2015 dated 06.06.2018

472. The Court dismissed Revenue’s appeal and upheld Tribunal’s invocation of Rule 10B(1)(e) (iii) for allowing capacity utilization adjustment to the assessee who was engaged in the business of manufacturing and dealing in basic liquid and solid resins including formulations. The Court noted that the Tribunal had upheld assessee’s capacity utilization claim after illustrating how higher capacity utilization would lead to higher profitability as fixed costs would be spread over a larger number of units manufactured and considering that capacity utilization materially affected the profit margin, upheld thus the invocation of rule is valid.
Further, the Court also stated that it was a self-evident position that all aspects/differences between the international transactions and the comparable uncontrolled transactions materially affecting the net profit margin have to be taken into account so as to have the fair comparison while determining the ALP.
The Court also upheld the Tribunal order restricting TP-adjustment only to assessee’s international transaction, relying on various precedents including co-ordinate bench ruling in assessee’s own case.
CIT -8 vs Petro Araldite P Ltd.- TS-317-HC-2018(BOM)-TP- ITA No 1540 of 2014 dated 26.04.2018
Profit Level Indicator

473. Noting that the TPO himself had taken donation and provision for bad debts to be non-operating while calculating the PLI of comaparables, the Tribunal held that in case of computing assessee’s PLI the TPO had erred in treating the donation and provision for bad debts to be operating when he could not show interlinkof the same with day to day operations of the assessee.
Evalueserve.Com Pvt. Ltd vs. ACIT [TS-817-ITAT-2018(DEL)-TP] ITA Nos.6310 and 1466/Del/2015 dated 03.08.2018

474. The Tribunal restored the issue of treating miscellaneous income as operating or non-operating in case of comparables to the TPO after considering the assessee’s submission that in the absence of details and nature of ‘miscellaneous income’ received by comparables, it could not be taken to be an operating item and TPO had erred in its treatment as operating item.
Evalueserve.Com Pvt. Ltd vs. ACIT [TS-817-ITAT-2018(DEL)-TP] ITA Nos.6310 and 1466/Del/2015 dated 03.08.2018

475. Relying on the coordinate bench ruling in the case of Emerson Process Management (India) (P.) Ltd wherein it was held that liquidated damages paid on delay in completion of order by assessee company are contingent in nature and not a regular feature of the business hence could not be treated as operating while computing operating profit margin , the Tribunal held that liquidated damages are not direct cost for computing profit margin of assessee.
Rosoboronservice India Ltd vs. DCIT[TS-810-ITAT-2018(Mum)-TP] ITA No.7418/Mum/2017 dated 01.08.2018

476. The assessee had computed the ALP manufacturing/processing transactions by applying CPM Method and trading segments by applying RPM method. However, the TPO adopted OP/OC as PLI (as against assessee’s method of OP/OR as PLI) and ignored adjustments for startup phase and abnormal expenses. The Tribunal restored the issue vis-à-vis assessee’s claim for adjustment of abnormal items to be considered for examination by the AO on meritsnoting that provisions of Rule 10B(1)(b) (relating to RPM) as well as Rule 10B(1)(c) (relating to CPM) speak about adjustment to be made to account for functional and other differences in international transaction which include abnormal items and in so far as assessee’s claim with respect to startup phase adjustment was concerned, it held that the assessee had failed to substantiate the adjustment with any credible material.
Hoya Lense India Pvt Ltd vs DCIT [TS-883-ITAT-2018(Mum)-TP] ITA No.127/Mum/2018 dated 08.08.2018

477. The Tribunal dismissed Revenue’s appeal and upheld the DRP’s order noting that fixed assets written off is not a normal expenditure and moreover it could not be equated with depreciation and thus, the DRP rightly held that it should be treated as non-operating and excluded itwhile calculating the profit margin.
Swiss Re- services India Pvt Ltd vs DCIT [TS-1120-ITAT-2018(Mum)-TP] ITA No.1493/Mum/2014 dated 31.08.2018

478. The Tribunal upheld the DRP’s order treating forex loss as operating noting that the assessee had taken an inconsistent view in treating the forex gains/loss as non-operating for the subject year when previously it had treated the forex gains/loss for earlier years as operating.
De La Rue Cash Processing Solutions India Pvt Ltd vs ACIT [TS-1121-ITAT-2018(DEL)-TP] ITA Nos.1113/Del/2014 and ITA No.1606/Del/2015 dated 28.09.2018

479. The Tribunal held that provisions written back should be treated as operating in nature for computation of operating profit margin in view of them being treated as operating when they were written off in earlier years.
De La Rue Cash Processing Solutions India Pvt Ltd vs ACIT [TS-1121-ITAT-2018(DEL)-TP] ITA Nos.1113/Del/2014 and ITA No.1606/Del/2015 dated 28.09.2018

480. The Tribunal directed the TPO to treat both income from management support service and corresponding expenses as non-operating in nature noting that the TPO had erred by blowing hot and cold in the same breath by the treating the income from management support services as non-operating and on the other hand, expenses allocated to the said services as operating.
De La Rue Cash Processing Solutions India Pvt Ltd vs ACIT [TS-1121-ITAT-2018(DEL)-TP] ITA Nos.1113/Del/2014 and ITA No.1606/Del/2015 dated 28.09.2018

481. The Tribunal dismissed Revenue’s appeal and upheld DRP’s order accepting treatment of forex fluctuation as operating by relying on the Delhi HC decision in Ameriprise India wherein it was held that foreign exchange loss which arose as a consequence of trading items would be operating.
ACIT vs Yokogawa Technologies India Pvt Ltd [TS-1046-ITAT-2018(DEL)-TP] IT(TP)A No.466/Bang/2016 dated 8.08.2018

482. The assessee had applied RPM in respect of its purchase of bakery shortening transaction which the TPO rejected and adopted TNMM to determine the ALP of the transaction and on comparing the margin of the assessee with the comparables made an adjustment. It was assessee’s contention that import expenses incurred for customs duty paid for opening stock and purchases during the year had been taken for calculating the margin by the TPO and if apportioned only to the purchases during the year, the operating margin from purchases of AE would be 1.64%. The Tribunal restored the matter to TPO for verification if import expenses attributable to opening stock had been included noting that if the claim of assessee was valid, then no adjustment for ALP would be called for as the margin was within +/-5% of comparables (mean margin of comparables was 4.75%).
ACIT vs Vijay Solvex Ltd. [ TS-1088-ITAT-2018(JPR)-TP] CO No.12/JP/2014 dated 24.08.2018

483. The Tribunal remitted the matter back to the TPO to consider the assessee’s claim of premium on forward exchange contract on account of proximity with export turnover to be a part of operating margins noting that the DRP had not adjudicated on the specific plea of the assessee. It directed the assessee to place necessary evidence before the TPO to claim that premium on forward exchange contract was earned in the normal course of the business to hedge against fluctuations in foreign currency exchange rate and gains from such contract.
Navigant BPM (India) Private Limited (Formerly known as M/s. RevenueMed India (P) Ltd) vs ACIT [TS-1143-ITAT-2018(COCH)-TP] IT(TP)A No.146/Coch/2015 dated 07.09.2018

484. The Tribunal held that forex fluctuation arising out of revenue transactions should be treated as operating income/cost of the assessee as well as comparables relying on the Special Bench decision in Prakash Shah wherein it was held that gain due to fluctuations in the foreign exchange rate emanating from export was its integral part and could not be differentiated from the export proceeds simply on the ground that the foreign currency rate had increased subsequent to sale but prior to realization, hence should be treated as operating income/cost.
Siemens Industry Software (I) P Ltd vs DCIT [TS-1045-ITAT-2018(DEL)-TP] ITA No.1307/Del/2014 dated 14.09.2018

485. The Tribunal accepted the plea of assessee to treat foreign exchange gains/losses connected to the business of assessee as operating and further distinguished the decisions cited by Revenue that foreign exchange gains/losses not relating to turnover of relevant AY should be excluded from computing profit margin( Revenue’s stand was that TPO should examine if foreign exchange gain/losses pertain to subject year) by observing that earlier decisions (SAP Labs and E-Triology) rendered on the subject do not lay down any such condition, thus the later decisions relied on by Revenue (Commscope, Akamai Technologies) would be per incuriam .
Further, it also held that write back of liabilities no longer required should be treated as operating on basis that they were related to operating expenses in the year when it was expected to be incurred. It relied on coordinate bench rulings of Sony India (P) Ltd., Logica Pvt. Ltd. and CGI Information Systems and Management Consultants Pvt Ltd.
LSI India Research and Development Pvt Ltd vs ITO [TS-1224-ITAT-2018(Bang)-TP] IT(TP)A Nos 44 and 45/Bang/2014 dated 07.09.2018

486. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order accepting assessee’s (manufacture of silk fabric and engaged in trading of yarn) PLI as OP/ Sales as against the PLI considered by the TPO as OP/OC noting that OP/OC may not reflect true results.
It also held that TPO erred in excluding directly related amounts to sales such as export incentives and foreign exchange fluctuations and since they formed a part of operating revenue, they should be included while calculating PLI.
DCIT vs JJ Exporters Ltd. [TS-1047-ITAT-2018(Kol)-TP] ITA No.1371/Kol /2017 and CO No.71/Kol/2018 and ITA No.1372/Kol/2017 and and CO No.72/Kol/2018 dated 19.09.2018

487. The Tribunal remitted the matter back to the TPO to consider the assessee’s claim that the TPO erred in treating the penalty charges paid to RBI and loss on sale of assets as part of operating cost. The Revenue also did not raise any objections hence the Tribunal remitted the matter back with direction to the TPO to verify and grant relief.
Element K India Pvt Ltd vs ITO [TS-1119-ITAT-2018(DEL)-TP] ITA No.1153/Del/2014 dated 06.09.2018

488. The assessee had restructured its business and closed down the installation and assembly segment. The TPO excluded the profit from sale of assets from the operating profits while computing the margin of the assessee. It was assessee’s contention before the CIT(A) that six months operation of the assessee in installation and erection activity should be compared and bench marked and also that the assessee was incurring fixed costs which were not recovered through business activity, thus, excess costs towards unutilized capacity ought to be excluded from operating cost. The Tribunal dismissed the Revenue’s appeal and upheld the CIT(A)’s order accepting assessee’s contention that 6 months operation of the assessee in installation and erection activity upto the sale of business segment should be compared and bench marked and excess fixed costs needed to be excluded from operating expenses noting that on sale of segment in the middle of the year, the assessee was incurring unutilised capacity in the form of fixed costs which were no longer recoverable through normal business activity.
ADIT vs ERICSSON Telephone Corporation India AB [India Branch] [TS-1106-ITAT-2018(DEL)-TP] ITA No.2018/Del/2012 dated 28.09.2018

489. The Tribunal dismissed the Revenue’s appeal and upheld CIT(A)’s order directing the TPO to adopt the operating margin of Goldstone Technologies as 7.33% computed by treating bad debt written off as operating. It relied on the coordinate bench decision of Techbooks International Pvt. Ltd. wherein it was held that bad debts written off are in the realm of operations of the assessee’s business and directed the TPO to treat provision for bad debts / bad debts as an item of operating expense of the assessee.
Dy.CIT vs JDA Software Private Limited (formerly i2 Technologies India Private Limited) [TS-1102-ITAT-2018(Bang)-TP] IT (TP)A No.1239/Bang/2013 dated 28.09.2018

490. The Tribunal held that export incentives were to be treated as operating income noting the decision of Bombay High Court in Welspun Zucchi Textiles Ltd. wherein it was held that that DEPB benefit arising to the assessee therein was operating revenue includable in arriving at operating profit and observed that the coordinate bench ruling in Carraro India had relied on the proposition in said HC ruling to hold that export incentives are to be considered as operating income of assessee
Cummins India Limited vs Dy.CIT [TS-1099-ITAT-2018(PUN)-TP] ITA No.556/Pun/2015 dated 25.09.2018

491. The TPO and CIT(A) had treated provision for bad and doubtful debts as operating expenses. The Tribunal accepted assessee’s contention that provision for debts could not be treated as operating as they were connected to the sales made in the previous year by HSG ( company which was acquired by assessee) relying on the coordinate bench ruling in Marble India Pvt Ltd. wherein it was held that provision for doubtful debt respect to sale of the earlier year had to be ignored for determining correct ALP. (which if reduced from the profit of the subsequent year, the numerator would be reduced but the denominator would not be reduced because corresponding sale stood considered in earlier year, which could not be considered in the subsequent year.)
Philips Medical Systems Private Limited vs ITO (now merged with Philips Electronics India Limited [TS-1165-ITAT-2018(Kol)-TP] ITA No.3412/Mum/2008 dated 26.09.2018

492. The Tribunal remitted the matter back to the AO/TPO to consider the foreign exchange gain as operating income of the assessee and held that AO erred in not following the directions of DRP to treat the foreign exchange gains as operating income since they were connected with services rendered to its AE.
Omniglobe Information Technologies (India) Pvt Ltd vs Addl CIT [TS-1146-ITAT-2018(DEL)-TP] ITA 6980/Del/2017 dated 15.10.2018

493. The Tribunal dismissed Revenue’s appeal against DRP’s order wherein the DRP had directed that for the purpose of computing PLI of OP/TC, the denominator had to be total costs incurred by assessee and not the FOB value of goods sourced through the assessee noting that HC had ruled in favour of the assessee on the issue holding that the Act did not authorize broadening of the cost base in such circumstances.
ACIT vs Li & Fung India Pvt Ltd [TS-1163-ITAT-2018(DEL)-TP] ITA No.2480/Del/2015 dated 31.10.2018

494. The TPO rejected the working of PLI of the assessee (in manufacturing segment) as the assessee had reduced abnormal cost on account of wastage which were extraordinary in nature ( a unit in Chennai was set up which produced wastage in the initial months). The Tribunal accepted assessee’s plea for exclusion of extraordinary costs while computing PLI of assessee by relying on coordinate bench ruling in Hov Services Ltd. wherein the Tribunal while determining PLI of tested party had laid down the proposition that extraordinary expense incurred by assessee such as expenses on account of GDR issue, buy back of shares, restructuring options like ESOP, etc. were to be granted adjustment while determining arm’s length price..A similar ratio was also laid down by the coordinate bench ruling inPangea3 and Legal Database Systems (P.) Ltd. wherein due toa material difference which arose in case of assessee vis-à-vis comparables due to abnormal feature (abnormal loss on cancellation of contratcs), it was held thata suitable adjustment had to be made to factor in material difference in PLI and thus, abnormal loss shouldbe excluded from operating costs.
Grupo Antolin India Pvt. Ltd (Erstwhile known as Grupo Antolin Pune Pvt. Ltd vs Dy.CIT) [TS-1128-ITAT-2018(PUN)-TP] ITA No.299/Pun/2013 dated 17.10.2018

495. The Tribunal directed the TPO to treat foreign exchange gain as operating in nature while computing assessee’s PLI relying on Delhi HC rulings of Fiserve and Agilis Information Technologies International [I] Pvt Ltd. wherein it was held that the Safe Harbour notification was prospective in nature thus, foreign exchange gain would be treated as operating for the year when the notification was not applicable.
Global Logic India Ltd.vs Dy.CIT [TS-1249-ITAT-2018(DEL)-TP] ITA No.1690/Del/2016 dated 30.10.2018

496. The DRP had not adjudicated on the assessee’s plea that premium on forward exchange contract should be treated as operating. The Tribunal restored the issue with same directions which were given in coordinate bench decision in assessee’s own case for earlier year wherein the DRP had not given directions with respect to the said plea of assessee and the Tribunal had relied on coordinate bench decision in Ambattur Clothing Ltd. ( wherein it was held that premium on forward exchange contract having nexus with export turnover should be treated as operating) to restore the issue to TPO to afford assessee an opportunity to place necessary evidence to substantiate its claim that premium on forward exchange contract was earned in the normal course of the business.
Navigant BPM (India) Pvt Ltd.vs ACIT [TS-1223-ITAT-2018(COCH)-TP] IT(TP)A No.57 /Coch /2016 dated 23.10.2018

497. The Tribunal directed AO to exclude foreign exchange loss or gain from operating income relying on the ratio laid down in coordinate bench decision in Hanil Tube India Pvt Ltd wherein it was held that loss incurred by the assessee in foreign exchange fluctuation due to international transaction did not give any extra benefit to the AE who supplied the material. The loss arose due to exchange difference between the foreign currency and Indian currency and thus, had to be excluded from operating income while computing PLI.
Infac India Pvt Ltd vs Dy.CIT [TS-1369-ITAT-2018(Chny)-TP] (IT(TP)A No.27 /Chny /2018 dated 05.10.2018

498. The Tribunal held that the payment of customs duty, freight, insurance, etc. we’re not payment to AE and thus, such payment was to be excluded from the value of international transactions while making adjustment on account of ALP. It noted that the same view was taken in assessee’s own case for AY 2006-07 by the DRP.
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1196-ITAT-2018(DEL)-TP] (ITA No.930/Del/2013) dated 02.11.2018

499. The Tribunal rejected assessee’s contention to treat forex loss as non-operating relying on Delhi High Court decision of Cashedge wherein it was held that for relevant AY, the Safe Harbour Rules would not be applicable (where forex fluctuation gains/losses are to be treated as non-operating) and thus, the stand of the coordinate bench decision(s) wherein it has been held that forex fluctuation losses/gains arising out of nexus with business should be treated as operating would prevail.
The Tribunal rejected assessee’s contention that customs duty adjustment would have to be made to gross profit margin on account of assessee paying a higher customs duty (100% of its purchases) than comparables (only on 2% of its purchases) observing that if assessee has made costly purchases, it would naturally earn more revenue from the sales. It stated that no adjustment to gross profit could be permitted as the figure of gross profit, took into account not only the higher debit side of cost of purchases but also the higher credit side of the revenue earned from sales.
Fresenius Kabi India Private Limited vs ACIT [TS-1212-ITAT-2018(PUN)-TP] (ITA No.2572/PUN/2016) dated 02.11.2018

500. The Tribunal held that foreign exchange gains should be treated as part of operating income of assessee noting that foreign exchange gain arose on account of export of services relying on ratio laid down in Delhi HC in Rampgreen Solutions Pvt Ltd wherein it was held that foreign exchange fluctuation ought to be treated as operating if it had nexus with business. It also observed that safe harbor rules (where foreign exchange gains/ were treated as non-operating) were like presumptive taxation and had been made applicable from 18 September 2013 and therefore not applicable for th subject year
VAILDOR CAPITAL INDIA PVT LTD vs ITO [TS-1329-ITAT-2018(DEL)-TP] (ITA No.1961/Del/2015) dated 22.11.2018

501. The Tribunal set aside CIT(A)’s order and remitted the issue of computation of PLI for benchmarking marketing cost paid by assessee to its AE back to TPO/AO for AYs 2003-04 and 2004-05. It directed the TPO to follow guidelines provided by co-ordinate bench in assessee’s case for AY 2003-04 wherein it had rejected TPO’s computation of PLI using operating profit / marketing cost, noting that since ALP to be determined was that of the marketing cost paid by the assessee marketing cost, or, for that matter cost itself, could not be considered as the denominator, and accordingly, restored the matter to AO consider to examine assessee’s claim of adopting PLI of operating profit / operating revenue.
First Source Solutions Ltd. vs DCIT [TS-1265-ITAT-2018(Mum)-TP] (ITA No.3095/M/2014 and 3096/M/2014) dated 12.11.2018

502. The assessee filed a miscellaneous petition against Tribunal’s order in view of the fact that it had stated that assessee had placed reliance on coordinate bench decision in Kenexa Technologies wherein the issue of treatment of provision for bad and doubtful debt was not discussed. The Tribunal rectified the impugned order noting though there was no dispute that provision for bad and doubtful debts are operating expenditure due to the said order, but the order had not examined the aspect whether the provision for bad and doubtful debts or excess provision written back was in respect of turnover of the same year or of an earlier year and provision for bad and doubtful debts could not be considered for TP analysis as it was not shown that such provision were for the current year’s turnover.
Marvell India Pvt Ltd vs Asst CIT [TS-1358-ITAT-2018(Bang)-TP]. MP No.338/Bang/2018 (ITA No.2173/Bang/2017) dated 27.11.2018

503. The Tribunal rejected the claim of assessee to exclude customs duty while computing the margin of transportation divison of assessee vis-à-vis comparable (as total cost of goods sold of signaling segment included 64% of import cost, but in the comparables, the average import over total cost of goods sold was only 14%) noting that DRP had rightly concluded that there was no peculiar circumstance in case of assessee to warrant adjustment as import of inputs was not a compulsion in its case. Therefore, there was no need of even neutralizing the impact of custom duty paid. DRP had distinguished the coordinate bench decision of Skoda relied on by assessee to ask for adjustment of customs duty noting that the Tribunal has not suggested that the custom duty should be excluded from the purchase price. Rather, the Tribunal held that the TPO should find out the means of neutralizing the impact of high Custom duty rate in the case of Skoda where it was a compulsion to import car parts as vehicle manufacturers did not have sufficient facilities to indigenize the components.
GE India Industrial Private Limited vs ACIT [TS-1315-ITAT-2018(DEL)-TP] ITA No.2781/Ahd/2012 dated 04.12.2018

504. The Tribunal restored the recomputation of correct margin of assessee to the TPO in light of the fact that the TPO had not considered forex loss as operating despite the directions of the DRP.
NTT Data Global Delivery Services Ltd. vs ITO [TS-953-ITAT-2018-(Del)-TP] ITA No.5339/Del/2011 dated 12.07.2018

505. The DRP had directed the TPO to treat foreign exchange fluctuation as operating while recomputing the margin of comparables which it failed to do so. The Tribunal held that foreign exchange fluctuation had to be treated as operating income by relying on Delhi HC decision of Fiserve India Ltd. and further, it noted that DRP in the subsequent year had decided the issue in favour of the assessee.
NEC Technologies INDIA PVT. LTD. vs. Dy CIT (2018) 53 CCH 0344 DelTrib ITA No. 6283/Del/2015 dated 11.07.2018

506. The Tribunal restored the computation of correct margin of assessee to the AO to verify the claim of the assessee that the AO had committed an error in computation of PLI at 0.2% as against 3.88% as per assessee’s working.
Bothra Shipping Services (Currently known as Bothra Shipping services Pvt) vs ACIT [TS-814-ITAT-2018(Kol)-TP] ITA No.188/Kol/2017 dated 31.07.2018

507. The Tribunal accepted Revenue’s contention that depreciation could not form part of operating costs as there was a substantial variation in the manner of charging depreciation between assessee and comparables by relying on the co-ordinate bench rulings in Honeywell Technology Solutions Lab (which in turn followed 24/7 Customer.com ruling) and BA Continuum India ruling wherein it was held that if there were differences in the method of charging depreciation between the Tested party and the comparable companies, then there would be impact on the operating profits and thus, PLI was to be computed without considering depreciation as part of the operating cost. Thus, the Tribunal set aside the DRP’s order and directed the AO/TPO to consider the determination of PLI by considering the ratio of the aforesaid decisions.
DCIT vs. Centum Rakon India Pvt. Ltd [TS-750-ITAT-2018(Bang)-TP] IT(TP) A No.472/Bang/2016 dated 20.07.2018

508. The Apex Court admitted Revenue’s SLP against Delhi HC order treating foreign exchange fluctuation as operating for assessee while working out TP-adjustment. The High Court had dismissed Revenue’s appeal noting that the Tribunal after considering that the assessee in its distribution segment imported its finished goods from AEs was exposed to high economic foreign exchange risk and due to a sharp depreciation of the Indian Rupee against the Euro by about 16% in a short span of 6 months, i.e. from February, 2008 to July, 2008, had treated foreign exchange fluctuation as operating. The Court opined that the view taken by the Tribunal was a plausible one and did not call for any interference.
Pr.CIT vs SCHNEIDER ELECTRIC INDIA PVT LTD [TS-505-SC-2018-TP] SLP 19004/2018 dated 03.07.2018

509. The Tribunal relying on the decisions of the Apex Court in Woodward Governor and Ameriprise India rejected the Revenue’s treatment of foreign exchange fluctuation income/loss as non-operating cost while computing assessee & comparables margin.
ST Microelectronics Pvt. Ltd vs. Addl. CIT – TS-48-ITAT-2018(DEL)-TP – ITA No. 4396/Del/2017 dated ITA No. 4396/Del/2017

510. The Court upheld the Tribunal’s consideration of forex gain/ losses as operating for assessee & comparables while determining ALP for AY 2010-11 and its rejection of the applicability of Safe Harbour Rules for subject AY 2010-11 (which provided that forex gain/ losses was to be treated as non-operating in nature).
Pr. CIT vs. Rolls Royce India Pvt. Ltd – TS-1066-HC-2017(DEL)-TP – ITA 419/2016 dated 23.10.2017

511. The Tribunal held that foreign exchange gains were to be considered as operating income as it pertained to debtors and thus were revenue items. It rejected Revenue’s reliance on Safe Harbour Rules in this respect, observing that Safe Harbour Rules are applicable only to the assessees who have opted for them.
Effective Teleservices Pvt Ltd vs. ACIT – TS-75-ITAT-2018(Ahd)-TP – ITA. No: 2411/AHD/2014 dated 16 -01-2018

512. The Tribunal set aside TPO’s order and directed him to consider forex fluctuation gains as operating income for the purpose of PLI computation for AY 2012-13 since the forex fluctuation gains were earned in normal course of business and derived on account of trade sales made during the year. It rejected Revenue’s reliance on Safe Harbour Rules (Rule 10TA) and relying on the decision of the Delhi HC ruling in BC Management Services held that Safe Harbour Rules came into force in 2013 and therefore could not apply to AY 2011-12.
Digital Group Infotech Pvt. Ltd. vs. DCIT – TS-185-ITAT-2018(PUN)-TP – ITA No.475/PUN/2017 dated 28.02.2018

513. The Tribunal rejected assessee’s plea of adjusting forex loss against interest income and upheld TPO’s consideration of considering forex loss as business loss and directed that forex gain/loss should be part of operating income/expense while computing assessee’s margin.
Keystroke Pro India P Ltd vs ITO Ward 14(3) – TS-333-ITAT-2018(DEL)-TP ITA No 537/Del/2015 dated 10.04.2018

514. Relying on the Delhi High Court ruling of Ameriprise India (P.) Ltd, the Tribunal held that foreign exchange gains on sale proceeds in respect of its international transaction should be treated as operating in nature.
SAP Labs India Pvt Ltd vs Addl CIT [TS-298-ITAT-2018(Bang)-TP] IT(TP)Appeal Nos.981 and 1070 of 2016 dated 06.04.2018

515. Relying on the decision of the Tribunal in Haworth (India) P Ltd [TS-940-ITAT-2017(PUN)-TP], the Tribunal held that the write back of provision for doubtful debts was to be treated as operating income for computing PLI. Further, relying on the decision of the Tribunal in Approva System Pvt. Ltd [TS-23-ITAT-2015(PUN)-TP], it held that foreign exchange fluctuation gains were to be treated as operating income. It rejected Revenue’s reliance on the Safe Harbor Rules to claim these items as non-operating in nature, follows Delhi HC ruling in Cashedge India Pvt Ltd and Rolls Royce India Pvt Ltd wherein it was held that safe harbor rules would not apply retrospectively prior to AY 2013-14.
Imersys NewQuest (India) Pvt Ltd vs DCIT – TS-727-ITAT-2018(PUN)-TP – ITA No. 590/PUN/2015 – dated 23.05.2018

516. The Tribunal dismissed the assessee’s appeal praying for treatment of foreign exchange loss as non-operating in nature and followed the assessee’s own ruling for AY 2012-13 wherein it was held that forex loss was operating in nature.
Infac India Pvt Limited (TS-387-ITAT-2018(CHNY)-TP) – I.T.A. No.3195/CHNY/2017 dated 03-05-2018

517. The Tribunal restored the issue of consideration of foreign exchange gain as operating income to the file of TPO. The Tribunal noted that the coordinate bench in the assessee’s own case for AY 2010-11 and AY 2012-13 had held that forex gains should be treated as operating income since the same related to the business of the assessee.
Rolls Royce India Pvt. Ltd vs. DCIT [TS-367-ITAT-2018(DEL)-TP] ITA No.1042/Del/2014 dated 02.05.2018

518. The Tribunal directed TPO to treat forex gain/ loss as operating in nature considering that it was a part and parcel of trading transactions with AE and followed Ramgreeen HC ruling and DRP’s approach of treating the same as operating item for subsequent AY.
M/s. Labvantage Solutions Pvt Ltd vs ACIT Circle 2(1)- TS-405-ITAT-2018(Mum)-TP – ITA No 927 & 2400/Kol/2017 dated 11.05.2018

519. The Tribunal held that the foreign exchange gain and loss was to be treated as an operating item by relying upon the co-ordinate bench ruling in assessee’s own case for AY 2009-10 wherein it was held that the fluctuations pertaining to forward contract with respect to purchase of materials was revenue in nature and hedging was a risk mitigating exercise to reduce the cost of imports.
Degania Medical Devices Pvt Ltd v Dy.CIT [TS-523-ITAT-2018(DEL)-TP] ITA No.1254/Del/2015 dated 27.06.2018

520. The Tribunal accepted the assessee’s stand that treatment of forex fluctuation gain/loss should be treated as non-operating item following the rulings of co-ordinate bench in BNY Mellon International Operations and DHL Express wherein it was held that forex losses are non-operating since it had no nexus with the main operations of the assessee.
Tasty Bite Eatables Limited vs DCIT [TS-730-ITAT-2018(PUN)-TP] ITA No.337/Pun/2014 dated 11.06.2018

521. The Court admitted the assessee’s appeal on the question whether the Tribunal erred in concluding that reimbursement of assessee’s expenses by AE could form part of the receipts as well as cost base of the marketing support services segment while determining operating profitability of such segment.
Pernod Ricard India Pvt. Ltd vs. CIT – TS-1082-HC-2017(DEL)-TP – ITA 1177/2017 dated 21.12.2017

522. The Court admitted the assessee’s appeal on the following question of law ” Did the Tribunal fall into error in upholding the allocation of expenses as computed by the TPO in the Marketing Support Services segment in complete ignorance of the fact that only one employee was devoted full time to such activity and the other employee spent only a meagre of his time in respect of such activity?”
Pernod Ricard India Pvt. Ltd vs. CIT – TS-28-HC-2018(DEL)-TP – ITA 1177/2017 dated 09.01.2018

523. Where the AO failed to exclude depreciation from the operating margin of the assessee as well as the comparables as per the directions of the DRP, the Tribunal refused to adjudicate on the other grounds raised by the assessee (i.e. on incorrect selection of comparables) as the AO had failed to follow the directions of the DRP. Accordingly, it remitted the matter to the AO / TPO to calculate the TP adjustment excluding depreciation from the computation of operating margin.
GSS Infotech Ltd. vs. DCIT – TS-1086-ITAT-2017(HYD)-TP – ITA No. 267/Hyd/2014 & 329/Hyd/2016 & ITA No. 602/Hyd/2017 dated 30-11-2017

524. The Tribunal held that while determining the PLI of comparables, cash profits i.e. profits prior to depreciation should be taken by relying on the coordinate bench decision in ICON Clinical Research wherein it was held that profit before depreciation should be considered while computing PLI on account of higher rate of depreciation charged by the company vis-à-vis comparables which followed Companies Act. It accepted assessee’s contention that cash profits should be adopted for computing PLI of comparables as the method of depreciation adopted by various comparables was variable.
Bonfigioli Transmissions Private Limited vs. DCIT [TS-388-ITAT-2018(CHNY)-TP] ITA No.2977/Chny/2017 dated 14.05.2018

525. The Court admitted the Revenue’s appeal on the Tribunal’s exclusion of depreciation from operating expenses while computing the PLI on account of difference in method of charging depreciation (SLM basis) by the assessee vis-à-vis comparable companies (WDV) and difference in asset turnover ratio between the assessee (ranging from 17%-29%) vis-à-vis comparable companies (71%-177%) .
Pr.CIT vs. Sabic Research and Technology Pvt. Ltd. – TS-1026-HC-2018(Guj)-TP – Tax Appeal No. 243 of 2018 dated 01.05.2018

526. The Tribunal directed the AO/TPO to consider margin after excluding depreciation in case of assessee and comparables. The Tribunal followed the DRP’s direction in assessee’s own case for AY 2012-13 which had relied upon the HC ruling in BA Continuum wherein it was held that PBDIT to Total Cost should be taken as PLI on account of the difference in rate of depreciation charged by the comparables and the assessee .
Indigra Exports Pvt Ltd v DCIT [TS-509-ITAT-2018(Bang)-TP] IT (TP)A No.488/Bang/2016 dated 22.06.2018

527. The Tribunal accepted assessee’s plea for inclusion of Rs. 37.49cr representing write back in connection with revenue items as part of operating profit for AY 2007-08 but treated write back in connection with purchase of capital goods made in earlier years as non-operating income. It dismissed the TPO’s contention that the write back amount of Rs.37.84cr was non-operating income as it was a mere book entry and not connected with assessee’s business operations. Relying on the co-ordinate bench ruling in Sony India and Gillete Diversified Operations (which were both accepted by Revenue absent appeal on this ground before HC) it held that if the reversal of provision / write back was on account of revenue in nature, it was to be included as part of operating income and if the liabilities originally created were on account of capital items then their write back could not be considered to be a normal instance of business and hence to be excluded as operating income. Considering the assessee’s argument that if such write back amount was included as operating income, the operating margin would be 42.94% as against 14.36% of comparables requiring no TP-adjustment, it remitted the matter back to TPO for the limited purpose of verifying this contention.
Suessen Asia Private Limited (merged with Rieter India Private Limited) vs. ACIT – TS-1055-ITAT-2017(PUN)-TP – ITA No.1629/PUN/2011 dated 20.10.2017

528. The Tribunal rejected assessee’s plea of considering provisions written back as operating income, noting that no specific ground had been raised in respect of the issue. However, the Tribunal stated that the issue of write back related to business taken over by the assessee and therefore any profit arising out of business taken by the assessee constituted capital receipt and cannot form part of the operating income for calculating operating margin of the assessee
Abbott Medical Optics Pvt. Ltd. v DCIT (formerly Advanced Medical Optics India Pvt. Ltd) [TS-517-ITAT-2018(Bang)-TP] IT(TP) A No.08/Bang/2014 dated 22.06.2018

529. The Tribunal upheld TPO/DRP’s consideration of provision for doubtful debts as non-operating item while computing profit margins of comparable and stated that provision for doubtful debts cannot be considered for reduction from the profit as it impacts the profit percentage (which is worked out by dividing such profit of the tested party/comparable by its turnover) since only the numerator would be reduced & not the denominator i.e. turnover would not be reduced because turnover is considered in earlier year and not in the present year and thus opined that provision for doubtful debts has to be ignored and added back in the profit of the tested party or of the comparable
Separately, it remitted comparability of 4 companies namely Persistent Systems Ltd, L&T Infotech Ltd, Tech Mahindra Ltd CG- VAK Software & Exports which were excluded by applying 10 times turnover range back to AO/TPO to be decided considering Chryscapital HC ruling (wherein it was held that huge profit or huge turnover ipso facto did not lead to the exclusion of a comparable and the TPO, first, should be satisfied that such differences did not materially affect the price or cost and if it did, an attempt should be made for making reasonable adjustment to eliminate the material effect of such differences.)
M/s. Marvell India Pvt Ltd vs ACIT Circle 4(1)(2)- TS-253-ITAT-2018(Bang)-TP- ITA No 2173/Bang/2017 dated 06.04.2018

530. The Tribunal relying on the co-ordinate bench ruling in case of Kenexa Technologies held that operating expenses of comparable company should include bad debts and provision for bad debts and directed AO/TPO to re-compute the margins of comparable companies.
Hyundai Motor India Engg Pvt Ltd [TS-503-ITAT-2018(HYD)-TP] ITA No.87/Hyd/2017 dated 08.06.2018

531. The Tribunal remanded the issue of computation of operating profit margins of the comparables back to the file of AO/TPO to be adjudicated after considering the submissions and the relevant material furnished by the assessee to contend that the TPO had considered non operating expenses as operating and hence the operating cost base was incorrect. The DRP had not given any finding on the issue.
GE India Business Services Pvt. Ltd. vs. DCIT [TS-381-ITAT-2018(DEL)-TP] ITA No.1423/Del/2014 dated 18.05.2018

532. The Tribunal upheld CIT(A)’s order vis-à-vis treatment of export benefits received for R&D services as part of operating income considering its direct and intimate connection with export of R&D services transaction. Further, the Tribunal also observed that the said benefit arose from usual activities carried on by the assessee and were part & parcel of the same transaction and therefore, formed part of operating income only.
ACIT vs. Colgate Palmolive (India) Limited [TS-319-ITAT-2018(Mum)-TP] ITA No.2778/Mum/2011 &CO No.126/Mum/2011 dated 04.05.2018

533. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order accepting assessee’s treatment of deferred revenue expenditure (written off over a period of five years) incurred before the start of commercial production as non-operating noting that the Tribunal had rightly observed that deferred revenue expenditure was not in the nature of research and development and not recovered from AE after examining the the agreement with its AE where research and development cost could only be reimbursed by the AE. The Tribunal had also observed that the assessee had suo-moto disallowed the deferred revenue expenditure and it relied on the coordinate bench ruling in Pole to Win wherein it had been held that expenses disallowed while computing taxable income are excluded from operating margin. Thus, the Court rejected the plea of Revenue to treat the deferred revenue expenditure as operating.
Pr.CIT vs. Sabic Research and Technology Pvt. Ltd. – TS-1026-HC-2018(Guj)-TP – Tax Appeal No. 243 of 2018 dated 01.05.2018

534. The assessee made a provision on account of change in stock valuation policy and claimed it to be a non-operating expense on the ground that it was a one-time extraordinary event. The Tribunal noted that the adjustment was made while arriving at ‘Stock valuation of raw material / finished goods/work-in-progress at year end and since there was a discrepancy in the corporate tax treatment of this provision, remitted the matter back to the file of Ld. AO / TPO for appreciation of the factual matrix and re-adjudicate the same and directed the assessee to demonstrate / substantiate his stand in this regard. However, on principles, it held that since the stock valuation was done in accordance with policy adopted by the management, the same constituted part and parcel of assessee’s trading operations.
Vishay Semiconductor India Private Limited vs ACIT – TS-478-ITAT-2018(Mum)-TP – I.T.A. No.7503/Mum/2012 dated 04/05/2018

535. The Tribunal dismissed the assessee’s contention that outsourcing cost incurred by it was non-operating in nature and held that the outsourcing cost was directly related to the software development and services. Noting that the assessee had merely developed a part of the software through outsourcing instead of in-house development and the outsourced work was incorporated in the work of the assessee in the final software prior to providing the same to the AE it held that the TPO had correctly considered the outsourcing cost as operating expense of the assessee
Lionbridge Technologies Private Limited vs. ACIT – TS-438-ITAT-2018(Mum)-TP – I.T.A. No. 7304/Mum/2017 dated 21.05.2018

536. The Tribunal directed the TPO to verify margins of three comparables viz.Liners India, India Nippon Electricals and Lucas-TVS on merits since expenses (i.e. sundry expenses written back and excess provision credited back in the case of Liners, -Bank charges in the case of India Nippon Electricals and Bill discounting and cash discount in the case of Lucas TVS) had erroneously been considered as non-operating. Further, with respect to Liners India, it considered assessee’s contention that TPO had not considered working capital adjustment and that the difference between assessee and the TPO’s margin was due to computation error. It thus directed the TPO to verify and re-compute the same.
The Tribunal directed the TPO to treat the provision of doubtful debts as non-operating as provided in Safe Harbour Rules for AY 2009-10. The Tribunal noted that DRP while dealing with the foreign exchange fluctuation losses in the assessee’s own case had followed Safe Harbour Rules. The Tribunal observed that sinceAO did not object to the said direction of the DRP, the claim of the assessee with respect to doubtful debts following the similar rules could not be objected to.
Federal Mogul Ignition Products India Ltd (formerly known as Federal Mogul Automotive Products India Pvt Ltd) vs. DCIT [TS-394-ITAT-2018(DEL)-TP] ITA No.2691/Del/2014 dated 14.05.2018

537. The Tribunal directed the AO/TPO to calculate the margins of the comparables after treating the bank charges as operating expenses and remitted the issue back. The Tribunal also observed that the DRP had given clear directions to the TPO that the assessee’s submissions ought to be considered yet the AO has failed to consider the same.
Efacec Switchgear India Pvt Ltd vs DCIT [TS-830-ITAT-2018(DEL) TP] ITA No.7817/Del/2014 dated 13.06.2018

538. In case of an assessee engaged in providing to its AE engineering and design services including offshore construction and drilling in oil and gas sector, the Tribunal deleted TP-adjustment and noted that for working out assessee’s PLI, using TNMM, the TPO had allocated operating cost considering man hours committed for AE (81,962 hrs) instead of man-hours actually utilized for AE (8,695 hrs) and accordingly, arrived at TP adjustment. The Tribunal accepted assessee’s contention that man-hours actually utilized should be considered as allocation key and not man-hours committed to AE and held that different yardsticks cannot be adopted for cost allocation to AE and non-AE segment. The Tribunal observed that man-hours actually utilized for AE was only 2% of total man-hours utilized and thus, applying the same for cost allocation purpose, concluded that the assessee’s transaction would be at ALP.
M/s Triune Energy Services Pvt. Ltd. Vs DCIT Circle 25(2), New Delhi- TS-424-ITAT-2018(DEL)-TP- ITA No. 1744/Del/2015 dated 27.04.2018

539. The Tribunal upheld assessee’s approach of benchmarking the international transaction of export to AE by using external comparables with net profit to sales as PLI as against TPO’s approach of adopting internal comparables in the form of domestic sales with net profit to cost as PLI, relying on the Tribunal’s order in the assessee’s own case for previous year wherein it was held that while applying TNMM on aggregate basis, since various transactions are interlinked, comparison had to be made with uncontrolled transactions.
It further held that procurement services were to be aggregated with manufacturing for the purpose of benchmarking after relying upon Delhi HC ruling in Sony Ericsson case and Tribunal’s ruling in assessee’s own case for previous AY. Further, the Tribunal held that the benefit of 5% varaitaion would not be available if the variation did not exceed the tolerance band.
Cummins India Ltd-TS-805-ITAT-2018(PUN)-TP ITA No. 309/Pun/2014 dated 15.05.2018

540. The Tribunal remitted the matter back to the Assessing Officer to consider the assessee’s claim of adopting the PLI of net margin/operating revenue. The assessee engaged in the business of supporting services had used the services of its AE vis-à-vis marketing support services. The TPO had rejected the assessee’s method of computing PLI i.e. operating profit/ total cost and was of the view that in case of operating profit of marketing support service, the PLI should be net margin divided by marketing cost. The Tribunal rejected the contention of the TPO on the ground that in the instant case the ALP of the marketing costs had to be determined and hence could not be considered as a denominator.
First Source Solutions Ltd v/s. ACIT [ TS-423-ITAT-2018 (Mum)] ITA No.3094/Mum/2014 dated 01.06.2018

541. The Tribunal dismissed Revenue’s appeal and upheld the DRP’s order of adjustment to PLI of comparables on account of higher cost of import duty on materials noting that co-ordinate bench in assessee’s own case in earlier years had remitted the issue in light of the coordinate bench decision of Skoda auto India to examine the claim of the assessee vis-à-vis higher import cost incurred by it compared to the comparables and eliminate the difference which was materially likely to affect the profit in open market in terms of Rule 10B(3).
DCIT v Terex India Pvt. Ltd [as successor of Demag Cranes and Components (India) Pvt. Ltd] [TS-477-ITAT-2018(PUN)-TP] ITA No.552 & 583/Pun/2016 dated 06.06.2018

542. The Tribunal upheld CIT(A)’s allowance of adjustment of expenses on recall of products for AY 2005-06 which failed quality check conducted by AE, accepting that it was extraordinary event leading to abnormal cost. It further observed that TPO had allowed adjustment for expenses incurred by customer and reimbursed by assessee, however CIT(A) had rightly enhanced adjustment to cover expenses relating to goods recalled and lying in factory.
However, the Tribunal reversed the CIT(A)’s direction to grant adjustment of Rs. 10.73 Cr towards higher cost incurred on material procured from AE which was supplied to customer at lesser price. It held that merely because the assessee had imported a new product from its sister concern for onward supply and subsequently, the prices stabilized, it did not make the cost as extraordinary. Further, it held that it was on account of increase in the cost of production which is in the normal course of business.
Further it remanded back the issue of adjustment on account of valuation of the inventory of ‘Unicorn’ products (where realizable value was less than the cost) allowed by CIT(A) while noting that risk of diminution in value of inventory was inherent in business. The Tribunal held that any claim to treat expenditure as extra-ordinary and not arising in normal course of business needs to be demonstrated with strict evidence.
Munjal Showa Ltd [TS-345-ITAT-2018(DEL)-TP] ITA No.3296/Del/2013 dated 14.05.2018

543. The Tribunal remitted TP-issue for fresh consideration in case of an assessee engaged in Jewellery business and rejected TPO’s comparison of PLI of MD Overseas Ltd (comparable) [-1.14%] with the PLI of assessee’s non-AE segment [6.36%] to arrive at adjusted margin of Non-AE segment at 7.5% [6.36%+1.14%]. The Tribunal remitted the issue to the file of the AO to refer the matter afresh to the TPO for further TP study.
Joy Alukkas vs ACIT Corporate Circle 1(2)-TS-374-ITAT-2018(COCH)-TP- ITA No 190/Coch/2015 dated 10.04.2018

Restrict adjustment to AE transactions

544. The Tribunal upheld CIT(A)’s order wherein it was held that TP adjustment should be restricted to sales with AE and not to total sales with AEs and non-AEs. It relied on ratio laid down in Bombay HC ruling in CIT vs Alstom Projects India Ltd. wherein it was held that TP adjustment was done under Chapter X of the Act and mandate of Chapter X was only to re-determine consideration received or given to arrive at income arising from international transactions with AE’s.
JCIT. vs IBM Business Consulting Service Pvt Ltd [2018] 53 CCH 0431 (Kol- Trib.) ITA No.1068/Kol/dated 01.08.2018

545. The Tribunal dismissed Revenue’s appeal against the CIT(A)’s order accepting transaction margin only and rejecting entity level margin relying on coordinate bench ruling in assessee’s own case for earlier year wherein it was held that it was clear from the statutory provisions especially Rule 10B( e) (i) to (iii) that it is only the international transaction that had to be compared with uncontrolled transaction and not the transaction undertaken by the entity as a whole. It relied on coordinate bench decision in UCB India (P) Ltd. V. ACIT (2009) 121 ITD 131wherien it has been held that sec, 92C read with Rule 10B(l) (e) deals with TNMM and it refers to only net profit margin realized by an enterprise from an international transaction or a class of such transactions but not operating margins of enterprises as whole and noted the same view was taken in various coordinate bench decisions.
DCIT vs JJ Exporters Ltd. [TS-1047-ITAT-2018(Kol)-TP] ITA No.1371 /Kol /2017 and ITA No.1372/Kol/2017 dated 19.09.2018

546. The Tribunal dismissed Revenue’s appeal and upheld DRP’s order accepting adjustment should be restricted only to AE sales and not to be done at AE level noting that DRP had accepted the same in preceding year and there was no change in facts in subject year. Further, it relied on Bombay HC ruling in case of Alstom Projects India Ltd. wherein it was held that proportionate adjustments were to be made only in respect of the international transactions with Associated Enterprises.
DCIT vs Magna Steyr India Pvt Ltd. [TS-1154-ITAT-2018(PUN)-TP] ITA No.352/Pun/2016 dated 12.10.2018

547. The Apex Court dismissed Revenue’s SLP against High Court’s order wherein it was held that while determining ALP of international transactions, benchmarking had to be done only on AE transactions and not for entire turnover.
CIT vs Hindustan Unilever Ltd [2018] 99 taxmann.com 135 (SC) SLP 2238 of 2017 dated 29.10.2018

548. The Tribunal directed AO to restrict ALP adjustment to transactions of assessee with its AE as against the adjustment made with respect to total transactions of assessee including AE and non-AE relying on ratio laid down in Bombay HC in Alstom Projects India Ltd. wherein it was held that TP adjustment was permissible only on transaction with associate enterprise and not on entire turnover.
Infac India Pvt Ltd vs Dy.CIT [TS-1369-ITAT-2018(Chny)-TP] (IT(TP)A No.27 /Chny /2018 dated 05.10.2018

549. The Tribunal held there was no infirmity in the CIT(A)’s stand where it restricted the adjustment computed at entity level to the extent of international transactions with AEs vis-à-vis total turnover of the assessee ASSISTANT COMMISSIONER OF INCOME TAX vs. Sodexo Food Solutions India Pvt Ltd (2018) 54 CCH 0056 Mum Trib ITA No. 5781/Mum/2016 and ITA 5707/Mum/2016 dated 03.10.2018

550. The Tribunal restored the matter back to TPO for examination (to consider assessee’s written submissions and case laws relied on) noting that assessee had submitted workings for proportional adjustments on ground that import of raw materials from AE was a miniscule portion that is only around 9.72% to total material costs and thus, the TP adjustment was to be restricted only to proportionate purchases from AE and relied on a catena of case laws (including Del HC of KeihenPalfa, Alstom Projects Ltd in Bombay HC) wherein it was held that adjustment should be restricted only to the extent of international transaction with AEs.
GE India Industrial Private Limited vs ACIT [TS-1315-ITAT-2018(DEL)-TP] ITA No.2781/Ahd/2012 dated 04.12.2018

551. Relying on the Bom HC decision of Ratilal Becharlal & Sons and Delhi HC decision of Keihin Panalfa, the Tribunal opined that the issue of restricting the adjustment, if any, to the international transactions undertaken with AEs only and not with the third party, was covered in favour the assessee and thus remanded back the issue to be decided afresh by the CIT(A) after considering the ratio of the aforesaid decisions.
Magic Software Enterprises India Pvt Ltd vs ITO [TS-747-ITAT-2018(PUN)-TP] CO No.98/Pun/2014 dated 18.07.2018

552. The Tribunal rejected TPO’s application of entity level approach for benchmarking assessee’s international transactions for AY 2009-10 and following the ruling of the co-ordinate bench in the assessee’s own case for the earlier year (ITA/7868/M/2010) which was upheld by the High Court (ITA No.1873 of 2013) held that TP-adjustment should be restricted to international transactions.
Hindustan Unilever Limited v Addl. CIT – TS-21-ITAT-2018(Mum)-TP – I.T.A./1321/Mum/2014 dated 05/01/2018

553. The Tribunal remitted the computation of TP-adjustment on representation services rendered by the assessee to its AE to the file of the TPO for fresh consideration noting that while computing the TP adjustment, the TPO had included the non-AE transactions as well. Observing that the TPO failed to take into consideration the segmental results of the assessee, the Tribunal directed the TPO to examine the same and compute ALP accordingly.
Messe Dusseldorf India Pvt Ltd vs. DCIT – TS-33-ITAT-2018(DEL)-TP – ITA No.5059/Del./2010 dated 04.01.2018

554. The Tribunal ruled against Revenue’s consideration of entity level margin under TNMM to determine ALP of its international transactions of providing software development services despite presentation of segmental results (albeit unaudited) by assessee. It noted that while TPO had complete opportunity to examine the segmental results, he instead simply rejected the segmental result by citing reason that transaction with non-AE is minuscule. It placed reliance on the decisions of Lummus Technology as well as Honeywell Electrical (which in turn relied on 3i Infotec ruling) wherein it was held that segmental results could not be rejected on the ground that the same were not audited and TPO/DRP was required to examine the same if the same were maintained in the ordinary course of business. It held that only international transactions with AEs were to be adjusted for ALP adjustment since non-AE transactions operate on a different model. Accordingly, it remanded the matter to the TPO for fresh adjudication taking into account the assessee’s segments.
CSR Technology (India) Pvt. Ltd. vs. ACIT – TS-1071-ITAT-2017(DEL)-TP – ITA No.1895/Del./2017 dated 14.12.2017

555. The Tribunal reversed the DRP order wherein the DRP made entity level TP-adjustment and held that rules that TP-adjustment has to be made only in respect of transactions with AE after comparing the transaction made by similarly placed companies in uncontrolled transaction with non-AEs. Thus, it set aside DRP’s order and remitted the matter back to AO.
Yongsan Automotive India Pvt. Ltd. vs. ACIT – TS-1046-ITAT-2017(CHNY)-TP – /ITA No.357/Mds/2017 dated 16.11.2017

556. Where the TPO made a TP-adjustment by considering total costs incurred by assessee in respect of transactions with AEs and non-AEs, the Tribunal held that under TNMM it was not permissible to make transfer pricing adjustment by applying the average operating profit margin of the comparables, on the assessee’s universal transactions entered into with both the AEs and non-AEs. It held that the entire exercise under Chapter-X of the Act is confined to computing total income of the assessee from international transactions having regard to the arm’s length price and there was no scope for computing income from non-international transactions also having regard to the ALP. Accordingly, it remitted the matter back to AO/TPO for deciding the issue afresh;
Syniverse Technologies Services (India) Pvt. Ltd. vs. ACIT – TS-169-ITAT-2018(DEL)-TP – ITA No.500/Del/2018 dated 13.03.2018

557. The Tribunal dismissed Revenue’s appeal and restricted TP Adjustment only to assessee’s international transactions, as against TPO’s computation of assessee’s PLI on entire sales, by relying on the HC ruling in case of Thyssen Krupp Industries and upheld the CIT(A) order.
ACIT Circle-1 nashik vs M/s. Haldex India Ltd.- TS-357-ITAT-2018(PUN)-TP- ITA No 1731/PUN/2015 dated 25.04.2018

558. The Court dismissed Revenue’s appeal and upheld restriction of TP adjustment only to assessee’s International transactions. Further, the Court upheld Rajasthan Udyog &Tools Ltd & HITCO Tools as comparable on the ground that the Tribunal rendered a finding of fact and the Department had not attempted to show that the finding was perverse and/or arbitrary and thus no question of law arose.
PCIT-5 vs Sandvik Asia Pvt Ltd-TS-315-HC-2018(BOM)-TP- ITA no 1088 of 2015 dated 26.04.2018

559. The Tribunal upheld CIT(A)’s order and directed AO/TPO to re-compute TP adjustment with regard to the international transactions only and to exclude third parties.
DCIT 8(3) Mumbai vs Tara Jewels-TS-309-ITAT-2018(Mum)-TP- ITA no 1385/Mum/2014 dated 12.04.2018

560. The Tribunal dismissed Revenue’s appeal and upheld the CIT(A)’s order accepting that the adjustment should be made vis-à-vis AE transaction only. It relied on the Bom HC ruling of Tara Jewel Exports Ltd., ThyssenKrup and Goldstar Jewellery Design
SAP Labs India Pvt Ltd vs Addl CIT [TS-298-ITAT-2018(Bang)-TP] CO No.41 (Bang) of 2016 dated 06.04.2018

561. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order wherein the AO/TPO was directed to benchmark only the transactions only with AE and not at the entity level.
Pr. CIT vs. Petro Araldite Pvt. Ltd [TS-446-HC-2018 (Bom)] ITA No.368 of 2015 dated 06.06.2018

562. The Tribunal relying upon the coordinate bench in Demag Cranes & Components directed the AO/TPO to restrict TP-adjustment only to international transactions with the AE’s.
Terex India Pvt. Ltd (as successor of Demag Cranes and Components (India) Pvt. Ltd) vs. DCIT [TS-477-ITAT-2018(PUN)-TP] ITA No.583/Pun/2016 dated 06.06.2018

Risk Adjustment

563. The Tribunal directed the AO/TPO to provide for economic adjustments on account of difference in risk profile between the assessee and the comparables by relying on ITAT order for assessee’s own case for earlier year noting that the assessee was a captive service provider who was remunerated on cost plus model and hence insulated from business risk while the comparables operated as entrepreneurs and were subjected to risks associated with conducting a business.
Bechtel India Pvt Ltd vs DCIT [TS-1026-ITAT-2018(DEL)-TP] ITA No.6779/Del/2015 dated 20.08.2018

564. The Tribunal allowed Revenue’s appeal and set aside DRP’s order allowing standard deductionof1% in view of risk by relying on the coordinate bench decision of Actis Global Services (P) Ltd wherein it was held that the assessee should demonstrate the nature of risk and as to how the risk had affected the margin. It directed the TPO to reexamine the adjustment on account of risk afresh after giving assessee an opportunity to furnish necessary details of the nature of risk and the impact on profit margins and quantification of adjustment towards risk.
ACIT vs Yokogawa Technologies India Pvt Ltd [TS-1046-ITAT-2018(DEL)-TP] IT(TP)A No.466/Bang/2016 dated 8.08.2018

565. The Tribunal allowed assessee’s claim for risk adjustmentof 13.89% on operating marginof comparables following the coordinate bench ruling in assessee’s own case for earlier year wherein it was noted that DRP had rejected the claim on basis that assessee had not quantified the adjustment and it was held that the aforesaid reason could not be a ground for rejection of risk adjustment by relying on coordinate bench ruling in Hyundai Rotem Company vs. ACIT where similarly risk adjustment could not be quantified, and the bench had directed the AO to recompute risk adjustment in line with coordinate bench decision in Sony India Pvt Ltd. (wherein it had allowed 20% risk adjustment considering the fact that it may not be possible to quantify risk adjustments)
St Ericsson India Pvt Ltd. vs Dy.CIT (2018) 54 CCH 0042 DelTrib ITA No.4434/Del/2018 dated 26.09.2018

566. The Tribunal restored issue of risk adjustment to file of DRP for fresh decision by way of reasoned and speaking order noting that DRP without any discussion had allowed 1% of risk adjustment to the average margin by merely following coordinate bench decisions in case of Intellinet Technologies India Pvt. Ltd and Hello Soft Pvt Ltd (wherein it was held that Where if marketing and technical risk attached to comparables were not similar to that of assessee who was having a single customer, risk adjustment had to be given to net margin of comparables for determining ALP) and stated that 1% adjustment to the average margin was to be allowed towards risk differential because the facts of the present case were same as in those two cases without any discussion. Thus, the Tribunal restored the matter to DRP in view of its cryptic order.
ACIT vs Momentive Performance Materials (India) Pvt Ltd [TS-24-ITAT-2018-(Bang)-TP] IT(TP)A No.385/Bang/2016 dated 08.12.2018

567. The Court dismissed assessee’s appeal and upheld the Tribunal’s order denying 1% of risk adjustment to assessee relying on Zyme Solutions ruling wherein it was held that that when the assessee has not given any details and computation for risk adjustment then the claim of the assessee was purely hypothetical in nature. The Court opined that no substantial question of law arose in the present case as the Tribunal had given sufficient reasons for not allowing any risk adjustment following its earlier view in the case of Zyme Solutions.
SOLIDCORE TECHSOFT SYSTEMS (INDIA) PVT LTD vs ITO (NOW MERGED WITH McAfee SOFTWARE INIDA PVT. LTD.) [TS-722-HC-2018(KAR)-TP] ITA No.848/2017 dated 04.07.2018

568. The Tribunal admitted Revenue’s appeal by refusing to accept DRP’s 1% risk adjustment to the average margin by arbitrarily relying on Intelligent and Hello Soft rulings to account for the risk differential between assessee and comparable companies. Noting that the risk adjustment workings were not provided by assessee before DRP and DRP’s order was also cryptic, it restored matter to file of DRP for fresh decision by way of a speaking and reasoned order.
ACIT v Momentive Performance Materials (India) Pvt. Ltd – TS-24-ITAT-2018(Bang)-TP – IT(TP)A No. 385/Bang/2016 dated 08.12.2017

569. The Tribunal held that though OECD guidelines allows a risk adjustment wherever necessary, it does not say that any such adjustment was to be given merely based on estimates. It distinguished the ruling of the Bangalore ITAT ruling in Philips Software Centre which had allowed a flat risk adjustment of 5.25% and noted that the order had been stayed by HC and also distinguished Delhi Tribunal’s decision in Sony India ruling which had also allowed a flat 20% as a fair and reasonable risk adjustment and opined that the essential requirement for allowing a risk adjustment was that the assessee should quantify the risk adjustment in its TP documentation based on a clear and logical workings, considering the risk profile of tested party and comparables companies and not based on surmises. Further, it held that just because the assessee was serving a single customer would not mean that it was bearing market risk different from any other competitor and therefore denied the assessee’s claim of 5% risk adjustment.
Infac India Pvt. Limited vs. DCIT – TS-387-ITAT-2018(CHNY)-TP – I.T.A. No.3195/CHNY/2017 dated 03-05-2018

570. The Tribunal upheld the DRP order rejecting assessee’s claim for risk adjustment in the absence of any working and held that (i) the DRP had rightly rejected the assessee’s claim for risk adjustment and held that the assessee’s claim was only a theoretical one since it could not quantify the difference in risk adjustment between the tested party and comparables.(ii) the TPO had also given a categorical finding that the assessee had not been able to demonstrate the risk difference, thus in absence of working it dismissed the assessee’s appeal.
Tecnotree Convergence Pvt Ltd vs DCIT [TS-925-ITAT-2018(Bang)-TP] IT (TP) A No.1616/Bang/2017 dated 27.06.2018

571. With respect to the allowance of risk adjustment by the Tribunal, the Court observed that Tribunal had recorded the fact that the necessary material supporting assessee’s claim (i.e. detailed working of risk adjustment using CAPM) was given by the assessee to the DRP before passing the order which was not shown to be perverse by the Revenue.
CIT vs Watson Pharma Pvt Ltd [TS-480-HC-2018(BOM)-TP] ITA 124 of 2014 dated 25.06.2018

Segments

572. The Tribunal relying on the coordinate bench decision in assessee’s own case for earlier year rejected Revenue’s approach of applying TNMM atentity level and TPO’s rejection of segmental results on the basis that transaction with non-AE were miniscule. The earlier year’s order had relied on the Special Bench decision in LG Electronics wherein it was held that computation of ALP at entity level was inappropriate when Section 92C unequivocally provides that the ALP in relation to ‘an’ international transaction shall be determined by any of the prescribed methods andRule 10B(1)(e) also talks of the net profit margin realized by the enterprise from ‘an’ international transaction. The earlier year’s order with regard to the second issue on rejection of segment results had examined decisions and taken a view that segmental results need not be audited and the TPO erred in disregarding the results citing transaction with non-AE were miniscule. It had remitted the matter back to decide afresh after considering segmental result of the taxpayer for TP analysis and held that TP adjustment at entity level was not sustainable. Accordingly, for the year under appeal, it directed TPO to decide issue afresh after considering decision of coordinate bench in earlier year.
CSR Technology (India) Pvt Ltd vs ACIT [TS-1138-ITAT-2018(DEL)-TP] ITA No.6805/Del/2015 dated 22.10.2018

573. The Tribunal upheld the CIT(A) order deleting TP-adjustment (made in the manufacturing segment of the assessee) on royalty paid by assessee to AE. It held that the TPO was unjustified in rejecting assessee’s segmental profitability working (wherein royalty was allocated to the manufacturing as well as trading segments) and in allocating the entire royalty to the manufacturing segment considering that the royalty agreement provided that the assessee had to pay royalty on goods manufactured as well as traded. Further, the TPO had also included the entire depreciation in the financials towards the manufacturing segment of the assessee which was rightly corrected by the CIT(A) who noted that the amortization of goodwill and other intangibles on acquisition of unit from Hindustan Lever Ltd was to be treated as extra-ordinary item and that the balance depreciation had to be allocated to all segments. It also noted that as even if the TPO’s faulty re-casted segments were considered, the margin of the assessee was still higher than the margin of the 5 comparable companies and accordingly, it held that there was no fault in the order of the CIT(A).
ACIT v Diversity India P Ltd (Formerly known as Johnson Diversity India P Ltd) – TS-85-ITAT-2018(Mum)-TP – I.T.A./305/Mum/2012 dated 03/01/2018
574. The Tribunal upheld assessee’s contention that while determining ALP of software development services rendered to AE, the segmental result of AE-transactions was to be compared and not entity -level results. It noted that the assessee (engaged in telecom software development for domestic and European market) was incorporated to provide services to third parties, however, due to surplus workforce and other resources availability, it started rendering services to AE and revenue from AE was 43% of total revenue. Further, it observed that for the purpose of arriving at the segmental profits, it observed that assessee had applied scientific method of allocating expenses based on man-hours spent and the same method was applied in APA signed by assessee in other years. It accepted assessee’s contention that if segmental profitability was compared, assessee’s PLI would be within 5% range of comparables’ margin and accordingly held that no TP-adjustment would be required.
Tieto IT Services India Pvt Ltd vs. DCIT – TS-155-ITAT-2018(PUN)-TP – ITA No.242/PUN/2015 dated : 07.03.2018

575. The Tribunal remitted assessee’s international transaction of provision of BPO services back to the AO/TPO for verification after considering segmental results. The Tribunal noted that TPO had rejected the segmental results for want of adequate details and justification for allocation of common expenditure and thereafter accepted assessee’s plea that segmental results were available on record and allocation of common expenditure details were also submitted. Thus, the Tribunal remitted the file back for re-adjudication.
Your Lifestyle Pvt Ltd vs DCIT 14(3)(1)- TS-288-ITAT-2018(Mum)-TP- ITA No 314/Mum/2016 dated 13.04.2018
Working capital adjustments

576. The Tribunal confirmed CIT(A)’s order granting working capital adjustment to assessee based on OECD formula and by taking 10.25% as the Prime Lending Rate (PLR). It rejected Revenue’s contention that assessee was ineligible for any adjustments, observing that under Rule 10(3) it is the duty of the AO/TPO/DRP to minimize/eliminate the difference which is likely to materially affect the price. It relied on the rulings in the case of Mentor Graphics, and Sony India to reiterate the settled proposition that working capital adjustment is an adjustment that is required to be made in TNMM, thus dismissing the Revenue’s appeal.
DCIT vs Imsofer Manufacturing India Pvt Ltd [TS-970-ITAT-2018(DEL)-TP] ITA No.5155 and 5158/Del/2015 dated 14.08.2018

577. The Tribunal held that in absence of any legal infirmity pointed out in direction of CIT(A) by Revenue, the CIT(A) was justified in allowing assessee’s claim of working capital adjustment and directing TPO to grant working capital adjustment based on OECD formula and by taking 10.25 percent as Prime Lending Rate (PLR)
Dy.CIT. vs Imsofer Manufacturing India (P.) Ltd [2018] 97 taxmann.com 110 (Delhi – Trib.) IT APPEAL NO. 5155 and 5158(Delhi) OF 2015 dated 14.08.2018

578. By relying on the coordinate bench decisions in Philips India Ltd., Acusis Software India Pvt Ltd etc the assessee contented that CIT(A) erred in not granting mandatory working capital adjustment. which would bring the arithmetic mean of comparable entities to 9.32% as against 12.25%. The CIT(A) while denying the working capital adjustment had observed that the issue of working capital was introduced by the assessee as an afterthought and assessee by its own admission employed a very meager working capital, and the same would not weigh for consideration of comparables. The Tribunal restored the issue of working capital adjustment back to TPO to be considered or granted as per law by following the DRP directions for AY 2014-15 wherein the DRP had allowed the working capital adjustment vis-à-vis comparable companies and directed the AO to apply SBI’s PLR and the coordinate bench decisions relied on by assessee.
Lexmark International (India) Pvt Ltd vs DY.CIT (TS-1086-ITAT-2018(Kol)-TP) ITA No.268/Kol/2017 dated 28.09.2018

579. The Tribunal directed the TPO/AO to consider the claim of assessee and allow adjustment to profit margins towards working capital adjustment and distinguished the decisions relied on by CIT(A) noting that in all those cases, the data was not available however in the instant case, the assessee had submitted workings. The CIT(A)had rejected the claim of the assessee for the reason the assessee had to demonstrate the impact on profit margins by reason of a particular level of working capital requirement in the case of the assessee and that of comparable companies by relying on the coordinate bench rulings in Mobis India and SAM Deutz Fahr India Pvt Ltd. It was assessee’s plea that there was significant difference in working capital between the assessee and comparable companies and relied on the coordinate bench decisions of Demag Crane and components (India) Pvt Ltd., Capgemini India Pvt Ltd. in support of its contention that working capital adjustment was warranted.
IKA India Pvt Ltd vs DCIT [TS-1049-ITAT-2018(Bang)-TP] IT(TP)A No.2192/Bang/2017 dated 17.09.2018

580. The Tribunal directed the TPO to consider working capital adjustment relying on coordinate bench ruling in Zafin Softwares wherein it was held that without comparing the working capital employed by comparable companies and assessee, there could not be any TP adjustment. Thus, the TPO was directed to consider working capital adjustment while computing ALP of international transaction.
Sun Tec Business Solutions (P) Ltd vs Dy.CIT [TS-1206-ITAT-2018(Coch)-TP] ITA No.113/Coch/2016 and 509/Coch/2016 dated 12.09.2018

581. The Tribunal upheld the TPO’s negative working capital adjustment relying on the coordinate bench decision in Tecnotree Convergence Pvt Ltd. wherein it was held that working capital adjustment ought to be made on ground that it affects pricing of any goods or services and working capital adjustment made for time value of money lost on basis the credit time provided to the customers was incorrect because comparison is made of operating profit marhin (PBIT) and therefore interest cost had no relevance.
Coreone Technologies India P Ltd vs Dy.CIT [TS-1292-ITAT-2018(Bang)-TP] (IT(TP)A No.263/Bang/2014) dated 26.10.2018

582. The Tribunal held that CIT(A) (who used the power of enhancement to deny working capital adjustment) was not justified in denying adjustment on account of working capital adjustment relying on coordinate bench decision of Evalueserve.com wherein it was held that adjustment had to be based on opening and closing working capital deployed and insisting on daily balances of working capital adjustment requirements to compute adjustment was not proper and it was impossible to carry out such an exercise. Further, it also observed that there was no merit in objection of CIT(A) regarding absence of cost of working capital funds, when OECD guideline clearly advocate adopting rate(s) of interest applicable to a commercial enterprise operating in the same market as tested party. It noted that no defect had been pointed out by CIT(A) in the working submitted by assessee and if for reasons given by CIT(A), adjustment was not granted, transaction would not be comparable in terms of Rule 10B(3) (which allowed accurate adjustment to be made to eliminate material differences between transaction), and thus TP exercise would fail. It allowed working capital adjustment made by assessee observing that in keeping with OECD guidelines, comparison should be made of comparable companies on broad basis.
Huawei Technologies India P Ltd vs JCIT [TS-1318-ITAT-2018(Bang)-TP] (IT(TP)A 1939/Bang/2017)) dated 31.10.2018

583. The Tribunal upheld DRP’s order deleting negative working capital adjustment noting that assessee did not bear any working capital risk as it was fully funded by its AEs. It relied on coordinate bench decision of Capco IT Services India Pvt Ltd. wherein it was held that that there was no need for making any negative working capital adjustment when the assessee did not carry any working capital risk and in fact the TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee.
Dy.CIT vs Ivy. Comptech Ltd [TS-1316-ITAT -2018 (Hyd)-TP] ITA No.222/Hyd/2015 dated 29.11.2018

584. The Tribunal deleted the negative working capital adjustment made by TPO relying on coordinate bench decision in NTT Data Enterprise Application Services (P) Ltd wherein it was held that where assessee did not pay interest on working capital loans and did not bear any working capital risk, revenue authorities were not justified in making negative working capital adjustment in course of transfer pricing proceedings
Zyme Solutions Pvt Ltd vs Asst CIT [TS-1272-ITAT-2018(Bang)-TP] (IT(TP)A No.1661/Bang/2016) dated 16.11.2018

585. The Tribunal restored the issue of working capital adjustment for fresh decision after providing reasonable opportunity to assessee of being heard noting that assessee had not submitted information pertaining to trade creditors, trade debtors, unbilled revenue and advance from customers before it or the lower authorities and thus, it could not decide on the allowability of working capital adjustment. It restored it back in the interest of justice.
NI Systems India Pvt. Ltd vs DCIT. [TS-1270-ITAT -2018 (Bang)-TP] IT(TP)A No.1355/Bang/2011 dated 07.11.2018

586. The Tribunal directed the TPO to grant assessee the working capital adjustment on actual basis if the assessee had given the detailed working to the lower authorities. However, if no such working was given by the assessee to the lower authorities then the assessee would not be entitled to such claim. The TPO had worked out working capital adjustment on hypothetical figure of 1.63% instead of on actual basis.
Salesforce.com India P. Ltd vs DCIT [TS-1325-ITAT-2018-(Bang)-TP] IT(TP)A No.697/Bang/2016 dated 21.12.2018

587. The Tribunal restored the isse for computing working capital adjustment by considering provisions written back as operating without applying safe harbor rules. It relied on the coordinate bench decision of Rolls Royce India wherein it was held that rules were effective from 18.09.2013. It also observed that the TPO after directions by DRP had not granted working capital adjustment by not considering the written back amount as operating items.
The Tribunal also set aside the issue in respect of working capital adjustment in case of Telecommunication Consultants India Ltd.
BT (India) Pvt. Ltd. vs ACIT [TS-1010-ITAT-2018 (DEL)] ITA No.442/Del/2016 and ITA No.302/Del/2017 dated 19.07.2018

588. The Tribunal held that the working capital adjustment should be provided while comparing the margins of the tested party with the comparables relying on the coordinate bench decision of assessee’s own case for earlier year wherein the DRP’s order was upheld that working capital adjustment should be provided in view of the impact of trade receivables, payables and inventories on interest cost .
Viavi Solutions India P Ltd (Formerly known as JDSU India P.Ltd.) [TS-884-ITAT-2018(DEL)-TP] ITA No.1483/Del/2016, ITA No.1478/Del/2016 and ITA No.231/Del/2017 dated 11.07.2018

589. The Tribunal directed the working capital adjustment to be allowed at 2.54% as against TPO’s restriction of such adjustment to 1.63%, following the co-ordinate bench decision in Zyme Solutions wherein the TPO had similarly unreasonably restricted the said adjustment and the Tribunal had directed the TPO to compute adjustment based on actual figures from the final list of comparables without such restriction.
MetricStream Infotech (India) Pvt Ltd vs ACIT[TS-749-ITAT-2018(Bang)-TP] IT(TP)A No.493/Bang/2016 dated 20.07.2018

590. The Tribunal dismissed Revenue’s appeal and upheld the DRP’s order directing TPO to grant working capital adjustment to assessee based on the calculation of working capital adjustment furnished by the assessee. Regarding the TPO’s objection that assessee had not demonstrated that there was a difference in the levels of working capital employed by it vis-a-vis the comparables which affected price, the Tribunal upheld the finding of the DRP i.e. that holding of inventories, trade debtor/creditors, trade receivable/payable has always an interest cost and also accepted DRP’s finding that the average of opening and closing balance of debtors/ creditors would give representative level of working capital over the year.
ITO v H&S Software Development & Knowledge Management Centre Pvt Ltd – TS-41-ITAT-2018(DEL)-TP – ITA No. 6662/Del/2014 dated 04.01.2018

591. The Tribunal, pursuant to the assessee’s miscellaneous petition against the original Tribunal order (wherein the issue of working capital adjustment was not adjudicated upon) accepted assessee’s contention that the matter be sent back to AO to allow the working capital adjustment based on the actual numbers of the comparables.
Zyme Solutions Pvt. Ltd vs. ACIT – TS-156-ITAT-2018(Bang)-TP – IT(TP) A No 85 / Bang / 2016 dated 09.02.2018

592. The Tribunal relying on Demag Cranes & Components allowed assessee’s claim for working capital adjustment.
Further, the Tribunal allowed admission of additional evidence filed by assessee with respect to its transactions relating to cost allocation and cost recharges from its AE and remitted back the computation of ALP to the file to AO/TPO for fresh adjudication considering the additional evidences filed.
Lear Automotive India P Ltd. Vs DCIT Circle- 9 Pune – TS-355-ITAT-2018(PUN)-TP- ITA No 515/Pun/2014 dated 26.04.2018

593. The Tribunal granted working capital adjustment to assessee engaged in IT enabled services to its AE, by holding that working capital difference could materially affect the amount of net profit margin in the open market and hence was allowable as adjustments
Stefanini India Pvt Ltd vs ITO Ward 3(4)- TS-338-ITAT-2018(DEL)-TP- ITA No 5479/Del/2016 dated 25.04.2018

594. The Tribunal upheld the DRP’s order directing the TPO to give working capital adjustment while working out the average margin of comparables noting that the direction of DRP was justified view of the impact of trade receivables, trade payables and inventory on interest cost.
Dy.CIT vs JDSU Indian (P.) Ltd. [ 2018] 93 taxmann.com 295(Delhi-Trib) ITA No.1120 of 2015 dated 02.04.2018

595. The Tribunal remitted the issue of risk adjustment to AO/TPO for fresh consideration since in the subsequent year in AY 2011-12 in assessee’s own case, the same was allowed by the Tribunal.
Rolls Royce India Pvt. Ltd vs. DCIT [TS-367-ITAT-2018(DEL)-TP] ITA No.1042/Del/2014 dated 02.05.2018

596. The Tribunal dismissed Revenue’s appeal against DRP order allowing working capital adjustment in respect of assessee’s international transactions for AY 2011-12. The Tribunal noted that DRP had considered various judicial decisions while allowing working capital adjustment and Revenue did not bring on record any contrary decision to rebut it. The Tribunal observed TPO had actually allowed working capital adjustment after considering assessee’s detailed computation of margin of comparables.
DCIT vs. Kyocera Asia Pacific India Pvt. Ltd [TS-376-ITAT-2018(DEL)-TP] ITA No.1029/Del/2016 dated 17.05.2018

597. The Tribunal relied on co-ordinate bench ruling in Capgemini India Private Limited and held that working capital adjustment should be granted to account for differences in working capital employed by the assessee and the comparable companies. The Tribunal accepted the assessee’s contention that in case of companies additionally identified by TPO, the TPO had wrongly considered the unadjusted margins.
Aramex India Pvt. Ltd vs. DCIT [TS-351-ITAT-2018(Mum)-TP] ITA No.6749/Mum/2017 dated 18.05.2018

598. The Tribunal upheld the CIT(A) and the AO’s order rejecting/denying the assessee’s claim for working capital adjustment since the assessee had not furnished sufficient data for proving the said claim. It noted that the assessee had not taken the actual rate of interest paid on the loans by itself or the comparables but considered the prime lending rate @18.5% and there was no data pointing out whether the actual rate of interest paid was @18.5% or if there was any deviation. The Tribunal thus opined that the claim of working capital adjustment at 3.18% was based on mere estimate.
Infac India Pvt Limited (TS-387-ITAT-2018(CHNY)-TP) – I.T.A. No.3195/CHNY/2017 dated 03-05-2018

599. The filed a Miscellaneous petition for rectification of the Tribunal’s mistake in not adjudicating the ground raised by the assessee against the TPO’s action of unreasonably restricting the working capital adjustment to 1.63%, whereas the TPO had himself worked out the same at 2.72% (before such unreasonable restriction). The Tribunal allowed the assessee’s petition and directed the TPO to allow adjustment of 2.72%, following the decision in the case of Zyme Solutions Pvt. Ltd. v ITO [M.P. No.36/Bang/16 in TP(TP) No.465/Bang/2015] wherein the TPO had similarly restricted the said adjustment on identical reasoning and the Tribunal had directed the TPO to compute adjustment based on actual figures from the final list of comparables without such restriction.
Obopay Mobile Technology India Pvt. Ltd v DCIT [TS-525-ITAT-2018(Bang)] IT(TP)A No.238/Bang/2016 dated 04.06.2018

600. The Tribunal dismissed the assessee’s appeal against the TPO/ AO’s computation of negative working capital adjustment on the margins of the comparable companies (thus increasing the said margins), where the asessee claimed that it did not bear any working capital risk as it did not have any borrowings and thus no working capital expenditure was incurred. The Tribunal held that the working capital risk and whether there is interest burden or not are not relevant factors for deciding working capital adjustment since the said adjustment is done because working capital position affects the pricing of any service or goods in the open market. In the present case, the TPO had given a finding that working capital position affected the pricing. The Tribunal also refused to follow binding decision relied upon by the assessee for deletion of working capital adjustment wherein adjustment was made for the time value of money lost when credit time is provided to the customers. According to the Tribunal, the aforesaid stand of the assessee had no basis since in TP analysis comparison is made of profit before interest and therefore the interest cost has no relevance. It also held that in those decisions, the aspect that working capital position affects the pricing of any goods and services was not dealt with.
Tecnotree Convergence Pvt Ltd vs DCIT [TS-925-ITAT-2018(Bang)-TP] IT (TP) A No.1616/Bang/2017 dated 27.06.2018

601. The Tribunal directed the AO to compute working capital adjustment only on the opening & closing balance of working capital employed at the beginning and end of the year by relying on the co-ordinate bench ruling in assessee’s own case in AY 2009-10.
Degania Medical Devices Pvt Ltd v Dy.CIT [TS-523-ITAT-2018(DEL)-TP] ITA No.1254/Del/2015 dated 27.06.2018
+ / – 5% adjustment

602. Noting the assessee’s contention that the price of exported items charged to its AE would be at ALP if an adjustment of commission expenses was granted in the price from unrelated parties and the assessee was granted the +/- 5 percent adjustment, the Tribunal remitted the matter to the file of the TPO for fresh adjudication as the supporting details for adjustment in commission were not provided by the assessee.
DCIT v JSL Ltd. – [TS-1079-ITAT-2017(DEL)-TP] – ITA No.4111/Del/2013 dated 03-11-2017

603. The Tribunal remitted the ALP determination of the assessee’s international transaction of purchase of automotive parts directing the AO to verify assessee’s claim that ALP is within 5% tolerance range. It noted that the TPO made a downward adjustment of Rs.1.92 crore in respect of international transaction, price of which was Rs.40.24 crore and had therefore arrived at an ALP of Rs.38.32 crore and held that based on the aforesaid figures, the contention of the assessee that the ALP determined by the TPO was within ±5% range as provided in the second proviso to section 92C(2) prima–facie appeared to be correct. It held that as per the said proviso, the ±5% range was applicable to the arm’s length price and not arm’s length profitability. Accordingly, it remitted the matter back to AO to verify the working of 5% and held that that if the assessee’s claim was found to be correct, no TP-adjustment was to be made.
DCIT vs. Exedy India Ltd. (Formerly known as Ceekay Daikin Limited) – TS-160-ITAT-2018(Mum)-TP – ITA no.7220/Mum./2016 dated 21.02.2018

604. The assessee was engaged in in foreign inward money transfers, buying and selling of foreign currencies and traveller’s cheques, air ticketing, corporate agency for insurance and provision of other exchange house services. With respect to the assessee’s international transaction of selling foreign currency to its AE, the TPO applied RBI reference rate as the ALP and computed the TP adjustment without giving the 5% tolerance benefit under proviso to Sec 92C(2) on the ground that the said benefit was not available when the ALP is determined based on only one price/ rate. DRP upheld the TPO’s order. The Tribunal set aside the TPO/ DRP’s order denying 5% tolerance benefit under proviso to Sec 92C(2) relying on the co-ordinate bench ruling in assessee’s own case for an earlier year wherein it was held that the assessee was justified in claiming benefit under proviso to Sec 92C(2) as the RBI reference rate itself was derived as an average of several rates. It also noted that the DRP had confirmed the TP-addition primarily on the ground that the Revenue had appealed before HC against Tribunal orders of earlier years. Thus, the Tribunal held that till the time the co-ordinate bench order was not reversed it would hold good for the present case and accordingly it set aside the TPO/DRP’s order
UAE Exchange & Financial Services vs DCIT Circle 7(1)(1) TS-261-ITAT-2018(Bang)-TP- IT(TP) No 2788/Bang/2017 dated 13.04.2018
Others

605. The Tribunal rejected AO’s attribution of 50% profits made by Corning SAS in France (AE), from direct sales made in India, to its India Branch office (BO) noting that the BO earned commission income @ 3% on direct sales made by it to customers in India and that in all other AYs (preceding as well as succeeding), AO himself had accepted the 3% commission without attributing additional profits to BO in respect of direct sales made by Corning SAS France in India. It rejected AO’s assignment of a relative weightage of 60% to the assets utilized by the BO [without providing any rational basis], observing that the BO only provided sales representation services in India and the same prima facie did not involve utilization of assets. Since the sales made by Corning SAS France to the Indian customers were wholly channeled through the BO for which it was remunerated with 3% commission and no substantial functions were performed, and no risks undertaken or assets were employed by BO in India in relation to the direct sales made by Corning SAS France in India, the Tribunal held that no additional profit in addition to the 3% commission income earned, was required to be attributed. Further, stating that “the Economic Nexus is an important feature for Attribution of Profits (profits attributable to the PE) in Corporate World”, it held that the ratio of Morgan Stanley SC ruling was applicable to the present case as there was no direct economic nexus between the assessee and the Corning SAS, France in respect of the transaction in dispute.
Corning SAS- India Branch Office (Formerly known as Corning SA-India Branch Office) vs. DDIT – TS-421-ITAT-2018(DEL)-TP – I.T.A .No. 4678/Del/2010 dated 30.05.2018

e. Specific Transactions
Advertisement, Marketing and Promotion expenses

606. The Tribunal deleted the AMP adjustment made by the TPO solely on the basis of bright line testing(BLT) by relying on the HC rulings in Bacardi India and Sony Ericsson case wherein BLT was negatived. Noting that the Revenue authorities in subsequent assessment years had not considered AMP expenses to be an international transaction where there were no change in facts and the assessee had been able to demonstrate that part of the AMP expenses were for distribution and the balance were not even incurred on behalf of its AE for brand building, it rejected the AMP adjustment made by the TPO/DRP on alleged engagement by assessee (engaged in importing/ distribution of wines and spirits) in brand promotion on behalf of AE. Further, it was also observed that the TPO’s allegation vis-à-vis excess AMP expenditure was without any basis as similar companies dealing with alcohol had incurred such equivalent percentage of expenses which aspect the TPO had not delved into. It rejected the Revenue’s contention to remit the matter back to the TPO observing that a remand to the assessment stage cannot be a matter of routine and it has to be so done only when there is anything in the facts and circumstances to so warrant or justify.
Moet Hennessy India Pvt Ltd vs ACIT [TS-923-ITAT-2018(DEL)-TP] ITA No.1906/Del/2014 dated 23.08.2018

607. The Tribunal restored the AMP adjustment made by the TPO observing that there was no mention of any specific agreement which clearly proved it was an international transaction. It directed the TPO to verify the samein light of the agreements signed by the assessee with its AEs. It was the assessee’s [distributor of Cannon] contention that the AMP expenses were incurred locally for domestic independent third parties and could not be categorized as an international transaction and the burden of proving an arrangement was on the Revenue which it failed to demonstrate. Further, The Tribunal following the coordinate bench decision of the assessee’s own case for earlier year directed the TPO to exclude exclude sales trade discount, commission and other sales related expenditure and subsidy from the ambit of AMP expenditure since they were not the nature of brand promotion and were to push sales in the Indian market.
Cannon India Pvt Ltd vs DCIT [TS-870-ITAT-2018(DEL)-TP] ITA No.1405 and 2275/Del/2015 dated 21.08.2018

608. The assessee was party to a Share Purchase Agreement (SPA) signed by existing shareholders of a Mauritius based company, EMSHL for transfer of a portion of shareholding of that company to Kuki Investments Ltd.(Kuki) represented by husband of the assessee (‘RK’) and under same SPA, Kuki was also to subscribe to additional shares to be issued by company EMSHL. The assessee was neither a buyer nor a seller of shares of EMSHL in SPA. However, under SPA assessee provided brand ambassadorship services to Jaipur IPL Cricket Private Limited (JICPL), an Indian Company that was a 100 per cent subsidiary of EMSHL, in relation to promotional activities of cricket team without any charge. The AO in the assessment order treated the assessee and EMSHL as AEs and held that services rendered by assessee to JICPL under SPA involving shareholders of EMSHL constituted an international transaction and computed the ALP adjustment towards the brand ambassadorship services based on another contemporaneous brand ambassadorship agreement of the assessee with Hindustan Unilever Limited (HUL). The CIT(A) held that the assessee and Kuki were AEs in view of section 92A(1) and further applied section 92B(2) to hold that there was a deemed ‘international transaction’ between assessee and JICPL due to the share purchase agreement and confirmed the adjustment. The Tribunal deleted the TP adjustment made by the AO towards the brand ambassadorship services observing that (i) section 92A(2)(J) deems the two enterprises to be AE’s if one of the enterprise is controlled by an individual and the other enterprise is controlled by such an individual or his relatives and the Revenue had failed to bring any argument on record with respect to the second limb as to how RK or his relative controlled the other enterprise, the CIT(A) had wrongly presumed that assessee’s Profession (not a person u/s. 2(31) and separate from her) was the other ‘enterprise’ and RK’s relative, i.e. assessee, controlled that other ‘enterprise’, i.e. her ‘profession’. (ii) section 92B(2) cannot be applied to hold that transaction between assessee and JICPL was an ‘International transaction’ as neither any of the parties to the SPA were an AE of the assessee nor JICPL entered into a prior agreement with the AE of the assessee and as such the prerequisite of a prior agreement between a non-AE with the AE of an assessee were not fulfilled (iii) Section 92 was not an independent charging section to bring in a new head of income or to charge tax on income which is otherwise not chargeable under the Act. Accordingly, since no income had accrued to or received by the assessee under section 5, no notional income could be brought to tax under section 92.
Shilpa Shetty vs ACIT [TS-885-ITAT-2018(Mum)-TP]ITA No.2445/Mum/2014 dated 21.08.2018

609. The Tribunal restored the issue of TP adjustment on AMP expenses incurred by assessee [ distributor of Canon products imported from its AEs] to verify if the AMP expenses constitute an international transaction as there was no mention of specific agreements to the effect of the AMP being an international transaction. It directed the TPO to verify the issue in light of agreements signed by the assessee with its AE. It was assessee’s contention that existence of an international transaction could not be a matter for inference or surmise and the onus to prove the existence of an agreement/arrangement prior to incurring of the AMP expenses was on the Revenue.
CAMPM OMDOA PVT. LTS & ORS vs Dy.CIT [2018] 53 taxmann.com 110 (Delhi – Trib.) IT APPEAL No. 5155 and 5158(Delhi) OF 2015 dated 14.08.2018

610. The TPO was of the view that the assessee had incurred certain AMP expenditure in the consumer segment which had benefited the overseas AE in building its brand and determined the ALP of AMP expenditure by applying Brightline testing following the SB decision of LG Electronics. The Tribunal deleted the AMP adjustment made by the TPO noting that in assessee’s own case for assessment year 2011–12, the DRP had held that AMP expenditure did not fall within the definition of section 92 B of the Act and after verifying the terms of agreement had categorically observed that the agreement does not reveal any arrangement between the assessee and its AE for incurring of AMP expenditure. It further applied the ratio laid down in Del HC ruling in Maruti Suzuki wherein it was held that in absence of arrangement or agreement, AMP expenss incurred could not be categorized as an international transaction and method of applying BLT was not provided in statute.
Johnson And Johnson Pvt. Ltd. vs ACIT [TS-1028-ITAT-2018(Mum)-TP] ITA No.6142/Mum/2017 dated 19.09.2018

611. The Tribunal deleted the AMP adjustment made by the TPO in case ofthe assessee [ engaged in manufacturing and sale of confectionary products] following the coordinate bench ruling in assessee’s own case wherein the HC ruling of Maruti Suzuki and Sony Erricson had been relied on to hold that AMP expenses incurred by the assessee could not be treated and categorized as an international transaction under section 92B of the Act. It noted that there was no change in facts and circumstances from the preceeding year. It was assessee’s contention that it, being a licensed manufacturer for its domestic segment for which AMP expenses were incurred, the benefit from these expenses accrued solely to it and any benefit arising to the AE was purely indirect and incidental.
Wrigley India Pvt Ltd vs DCIT [TS-1064-ITAT-2018(DEL)-TP] ITA NO.656/Del/2016 dated 25.09.2018

612. The Court dismissed the Revenue’s appeal and upheld the Tribunal’s order accepting CIT(A)’s deletion of the AMP adjustment noting that co-ordinate bench in Sony Ericsson Mobile Communication had disapproved bright line test (“BLT Test”) applied by TPO while making AMP adjustment and to treat the advertising marketing and promotion as a function performed by the assessee, who was engaged in marketing and distribution.
Pr.CIT vs MARY KAY COSMETIC PVT LTD [TS-1063-HC-2018(DEL)-TP] ITA 1010/2018 dated 18.09.2018

613. The Tribunal by relying on Delhi HC ruling in Sony Ericson Mobile Communication, Maruti Suzuki India Ltd. and Whirlpool India Ltd.dismissed Revenue’s appeal and upheld DRP’s order deleting AMP adjustmenton the basis that there existed no agreement or understanding or arrangement between the assessee and the AE for sharing of AMP expenses and the TPO has not shown anything except BLT to benchmark the alleged excess AMP expenses.
The DRP had remanded the AMP adjustment to be decided afresh by the TPO in light of the Delhi High Court ruling of Sony Ericson Mobile Communication. The TPO in the remand report had also examined the issue of royalty, intra group services and other international transaction and suggested an alternative disallowance of Rs.31,48,74,320/- for royalty and Rs.18.44 crores for intra group services towards availing market support services. The DRP, on fresh information received by the TPO, benchmarked the royalty payment at 3% of sales by applying internal CUP and proceeded to make the adjustment. In so far as intra group services were concerned, DRP made a TP adjustment on intragroup services accepting TPO’s view that assessee had failed to demonstrate that services were received by the assessee or that it benefitted from such services as claimed. The Tribunal rejected assessee’s contention when DRP was silent on the issue, the TPO did not have jurisdiction to suggest alternative disallowances and examine issues not mentioned. However, the Tribunal restored the issue of royalty and intragroup services on the ground that proper opportunity was not given to the assessee to make the submissions on the alternative disallowances.
Loreal India Private Ltd vs Dy.CIT [TS-1061-ITAT-2018(Mum)-TP] ITA No.963/Mum/2016 and CO No.139/Mum/2016 dated 11.09.2018
Dy.CIT vs Loreal India Private Ltd [TS-1061-ITAT-2018(Mum)-TP] ITA No.1264/Mum/2016 dated 11.09.2018

614. The Tribunal deleted the TP adjustment on AMP adjustment incurred by assessee(engaged in sales and distribution of headphones, microphones, headsets), noting it was not possible that TPO was not aware of the BLT testing being discarded in view of the Delhi HC ruling of Sony Ericson Mobile Communication India Pvt Ltd but he made the adjustment on basis of BLT. It observed that the focus of AMP spend was to sell product by highlighting its features to potential customers on one to one basis, commonly through direct mail, e-mail and online marketing, thus the AMP expenses were not incurred with a view to benefit the AEs but only to increase assessee’s own sales.It rejected Revenue’s plea to remand back the matter observing that a remand could not be a matter of routine. It had to be so done only when the facts and circumstances so warrant or justify.
Sennheiser Electronics India Ltd vs ACIT [TS-1018-ITAT-2018(DEL)-TP] ITA No.7574/Del/2017 dated 19.09.2018

615. The Tribunal restored the TP adjustment towards AMP expenses incurred by assessee noting that the assessee had filed belated submissions dated 09.12.2014 and though the TPO’s order was dated 09.01.2015, the said submissons found no mentionin the order and TPO had not considered and acted upon the same. It observed that the primary role of the Tribunal was of an adjudicator and not of an investigator, thus the matter was restored to AO/TPO to enable them to consider the material and carry out any required investigation.
Stanley Black and Decker India Pvt Ltd vs ACIT [ TS-1019-ITAT-2018(Bang)-TP] IT(TP)A No.675/Bang/2016 dated 07.09.2018

616. The TPO had applied BLT for computing ALP of AMP expenses and made a TP adjustment on assessee (engaged in business of sales and distribution of headphones, microphones, receivers, monitoring systems, tour guide systems and aviation headsets). which was upheld by DRP. The Tribunal deleted the AMP adjustment made noting that TPO had segregated AMP expenses as separate international transaction requiring independent benchmarking which lead to unusual results following the HC ruling in case of Sony Ericsson Mobile Communication India [P] Ltd. (wherein it held that once the AO/TPO accepted and adopted TNMM but chose to treat a particular expenditure like AMP as a separate international transaction without bifurcation/segregation, it would lead to unusual and incongruous results as AMP expenses was the cost or expenses and was not diverse.) It rejected Revenue’s stand to remit the matter observing that TPO was aware of the aforesaid HC ruling wherein BLT had been discarded in view of the discussions in its order.
SENNHEISER ELECTRONICS INDIA PVT. LTD vs ACIT (2018) 54 CCH 0219 DelTrib ITA No.7574/Del/2017 dated 19.09.2018

617. The TPO was of the view that the entire amount of AMP expenses was to be considered as expenditure for creation of marketing intangibles for its AE, which should have been compensated by the AE to the assessee and determined the ALP of AMP expenses by imputing a markup of 5% to the AMP expenses incurred by assessee ( who was engaged in both manufacturing and distribution of pharmaceutical formulations). The DRP confirmed the TPO’s treatment of AMP transaction as an international transaction and upheld the action of TPO in determining the ALP of AMP expenses. The Tribunal rejected Revenue’s argument that the Delhi HC decision of Maruti Suziki would not be applicable in view of assessee being only a distributor noting that assessee was both a manufacturer and distributor asevident from its financials (in terms of consumption of raw materials, inventories and products manufactured by outsourcing) and accepted assessee’s contention that AMP expenses could not be treated as international transaction relying on the coordinate bench decision of Philips India Ltd. wherein it was held that where the assessee was a manufacturer cum distributor ratio laid down in Del HC decision of Maruti Suzuki would be applicable and AMP transaction could not be treated as an international transaction. It also observed that entire AMP expenditure has been incurred and paid only to third parties and not to AEs and also the expenditures incurred were purely related to products of the assesee and not for any brand.
Organon (India) Pvt Ltd vs DCIT [TS-1141-ITAT-2018(Kol)-TP] ITA Nos.633 and 2459/Kol/2017 dated 24.10.2018

618. The TPO was of the view that the entire amount of AMP expenses was to be considered as expenditure for creation of marketing intangibles for its AE, which should have been compensated by the AE to the assessee and determined the ALP of AMP expenses by imputing a markup of 5% to the AMP expenses incurred by assessee ( who was engaged in both manufacturing and distribution of pharmaceutical formulations). The DRP confirmed the TPO’s treatment of AMP transaction as an international transaction and upheld the action of TPO in determining the ALP of AMP expenses. The Tribunal rejected Revenue’s argument that the Delhi HC decision of Maruti Suziki would not be applicable in view of assessee being only a distributor noting that assessee was both a manufacturer and distributor asevident from its financials (in terms of consumption of raw materials, inventories and products manufactured by outsourcing) and accepted assessee’s contention that AMP expenses could not be treated as international transaction relying on the coordinate bench decision of Philips India Ltd. wherein it was held that where the assessee was a manufacturer cum distributor ratio laid down in Del HC decision of Maruti Suzuki would be applicable and AMP transaction could not be treated as an international transaction. It also observed that entire AMP expenditure has been incurred and paid only to third parties and not to AEs and also the expenditures incurred were purely related to products of the assesee and not for any brand.
Organon (India) Pvt Ltd vs DCIT [TS-1141-ITAT-2018(Kol)-TP] ITA Nos.633 and 2459/Kol/2017 dated 24.10.2018

619. The Tribunal deleted the TP adjustment on AMP expenses made by TPO in case of assessee (engaged in the business of manufacturing and sale of malted food and drinks as well as chocolates) relying on coordinate bench decision in assessee’s own case for earlier year wherein it was held that the disputed transaction was not an international transaction in absence of an agreement entered into between assessee and its AE for sharing/ reimbursement of AMP expenses. It observed that assesseehad incurred the AMP expenditure for creating product awareness and to recall the value of existing products and that it had a local marketing strategy of making advertisement/slogans in local language. Further, nothing was brought on record by TPO to prove that the assessee was directly or indirectly promoting the global brand rather than promoting its own products.
Mondelez India Foods Pvt. Ltd. vs Addl.CIT [TS-1288-ITAT-2018(Mum)-TP] ITA No.1512/Mum/2013 dated 28.11.2018

620. The TPO was of the view assessee (leading marketer, distributor and producer of quality branded automotive and industrial products and services) had incurred huge non-routine expenditure to promote brand of AE to develop marketing intangibles for the AE. The TPO benchmarked AMP expenses using BLT and made an addition. The Tribunal noted that issue was covered in favour by HC in assessee’s own case wherein it was held that ITAT was not justified in remanding the AMP expenses when Revenue was unable to demonstrate that there existed an international transaction between assessee and AE. Thus, it opined that AMP adjustment made was to be deleted in view of no change in business model of assessee following the HC decision in assessee’s own case however, it held that it could not ignore the submission of the Revenue that the HC decisions of assessee, and Sony Ericsson (which had been relied on by HC decision of assessee on not treating AMP expenses as an international transaction in absence of agreement and issue of applicability of BLT) were pending before Apex Court and the decision of Hon’ble Apex Court would be binding upon all the authorities. It restored the issue back to AO holding that AO could pass order afresh if the above decisions of HC were reversed by Apex Court.
Valvoline Cummins Pvt Ltd vs DCIT [TS-1236-ITAT-2018(DEL)-TP] ITA No.527/Del./2016 dated 26.11.2018

621. The assessee-company was manufacturing motorcycle and it had entered into technical collaboration agreement with its AE (Suzuki Japan) which was owning significant intangibles like patents, trademarks, manufacturing know-how. Suzuki Japan also granted right to use its trademarks and brand to assessee TPO noted that assessee had expended huge amount in excess of bright line limit in order to promote brand/trade name of its AE which was required to be compensated by AE and made TP adjustment by applying BLT. The Tribunal noted that there was not an iota of material to affect that assessee had incurred huge AMP/sales expenses to extent of 10.26 per cent and no cogent material was there to treat incurring of AMP expenses as international transaction more particularly when basis for treating AMP expenses as international transaction, i.e., BLT, was not a legally sustainable method. Thus, it opined that since AMP expenses incurred by assessee were not for benefit of AE but only to enhance sales of assessee, adjustment made by TPO on this account was not sustainable in eyes of law but restored the matter back to AO as further issue of applicability of Bright line test (Sony Ericsson case) was pending before Apex Court holding that AO could pass order afresh if the above decisions of HC were reversed by Apex Court.
Suzuki Motorcycles (I) (P.) Ltd.vsDy.CIT [TS-1237-ITAT-2018(DEL)-TP] ITA No.476/Del./2015 dated 26.11.2018

622. The assessee-company was into manufacturing, selling and distribution of home appliances. The TPO noted that assessee had expended huge amount in excess of bright line limit in order to promote brand/trade name of its AE which was required to be compensated by AE and accordingly made TP adjustment by applying BLT. The Tribunal relied on Delhi HC in Sony Ericsson India Pvt Ltd wherein it had categorically held that BLT was not an appropriate yardstick for determining the existence of an international transaction for calculating the ALP of such transaction and thus, it opined that the said order of TPO/DRP was not correct. It also noted that High Court in assessee’s own case had held that the Revenue had been unable to demonstrate by some tangible material that there was an international transaction involving AMP expenses between assessee and AE. Though it opined the TP adjustment was not sustainable, in view of the HC decision of Sony Ericsson, Bausch and Lomb Eye Care and Honda Siel pending before the Apex Court, it restored the matter to AO directing it to pass an order afresh if the said decisions of HC were reversed by Apex Court.
Whirlpool of India Ltd.vsDy.CIT [TS-1240-ITAT-2018(DEL)-TP] ITA No.1254/Del./2014 dated 26.11.2018

623. Where assessee’s (engaged in sale of high quality information and education books and music and video products of Reader’s digest brand) business model was only a mail order marketing use as promotion for products sales and there was no advertisement in media nor were the products available in shop, the Tribunal remanded the TP adjustment made on AMP expenses incurred by assessee noting that Revenue had failed to bring on record as to how the advertising and marketing promotion activities were an international transaction for carrying out brand building of AE. It also held that components of AMP expenses being postal expenses i.e.billing expenses, premium, sweeptakes, judging, paper and printing of brochures and also postage were different from advertising expenses and said expenses could not in any circumstances be categorized for creation of making intangible for AE as these expenses were incurred by the assessee wholly and exclusively on account of its own business and any benefit to the AE was only incidental. It remitted the matter as done in earlier assessment years and directed assessee to be given opportunity of hearing by following principles of natural justice.
Readers Digest Book and Home Entertainment India (P) Ltd vs DCIT [TS-1360-ITAT-2018-(Del)-TP] ITA No.1080/Del/2016 dated 20.12.2018

624. The Assessee was engaged in manufacturing and sale of watches and is also into distribution of watches imported from its AE. The Tribunal noted that TPO had applied BLT in case of assessee and imputed AMP adjustment on ground that it had allegedly incurred AMP expenses on behalf of its AE for developing marketing intangible for AE and building brand for its AE. It opined that Revenue had failed to discharge the onus of proving an international transaction as held by Delhi HC in Maruti Suzuki. It also noted that Delhi HC in Sony Ericcson and Maruti Suzuki had held that BLT was not a valid basis for determining the existence of international transaction. Thus, it held that TP adjustment was not sustainable but remanded the matter back to AO on account of the aforesaid decisions of Delhi HC pending before the Apex Court (with the direction to it to decide afresh in accordance with order of Apex Court )
Timex Group India Limited vs DCIT [TS-1366-ITAT-2018-(Del)-TP] ITA No.845 /Del/2016 dated 20.12.2018

625. The Tribunal, pursuant to the remand proceedings of HC [where it had discarded BLT method applied by assessee (distributor of Sony products) and directed Tribunal that when figures and calculations as per TNMM or RPM method adopted and applied showed that net/gross margins are accepted (which include AMP expenses), the appeal of assessee is to be allowed] held that AMP expenditure was not incurred for the AE, though assessee did exploit intangibles created by its AE in India for which no royalty payment was made. It could not be denied that brand name Sony was a global brand across globe and it could not be said that Sony brand had become popular as a result of efforts of assessee company. Merely because there was an incidental benefit to AE, it could not be said that AMP expenses were for promoting the brand. Further, it observed that operating margins of assessee were higher than that of comparables, thus it could be concluded that assessee had been suitably remunerated and no further adjustment was required to benchmark AMP expenses.
Sony India Pvt Limited vs Addl.CIT [TS-1371-ITAT-2018-(Del)-TP] ITA No.4978/Del/2011 dated 21.12.2018

626. The TPO had made TP adjustment on AMP expenses incurred by assessee (manufacturer of consumable products) by applying CUP (incurred AMP to sales 16.04% as compared to external comparable where AMP to sales of 3.87% had been incurred) on ground that AMP expenses over and above normal AMP expenses incurred by comparable companies was towards brand building. He also imputed a markup of 15% on AMP spend on account of trained manpower, staff salaries, office expenses, travelling etc. and indirect expenses. TPO proposed an adjustment on account of difference in the ALP of AMP incurred by assessee and the subsidy received from AE. The DRP confirmed TPO’s order but varied the markup from 15% to 9%. The Tribunal in the first round had remanded the matter back to TPO in view of Delhi HC decision in case of Sony Ericsson Mobile Communications (wherein BLT method had been discarded and the Tribunal was directed that when figures and calculations as per TNMM or RPM method adopted and applied showed that net/gross margins are accepted (which include AMP expenses), no TP adjustment on AMP expenses would sustain). On appeal to HC against the Tribunal’s order, it restored the matter back to Tribunal noting that such directions by Tribunal could not be sustained when it had not examined if there was an international transaction between assessee and its AE. The Tribunal in the second round of proceedings accepted asseessee’s contention that issue to be adjudicated on factual matrix (assessee did not want to get into discussion on whether incurring of AMP expenses was an international transaction) and held that direct marketing and sales related expenses or discounts/concessions would not form part of AMP expenses( not related to brand building exercise) and that no TP adjustment would survive as grant received by assessee exceeded the ALP of AMP expenses(with markup of 9%).
Haier Appliances India Limited vsDy.CIT [TS-1296-ITAT-2018-(Del)-TP] ITA No.1515 /Del/2014 dated 03.12.2018

627. The Tribunal restored the AMP issue to the TPO to decide whether the AMP transaction was an international transaction and to further determine the ALP of the transaction noting that the TPO had not brought anything on record to demonstrate existence of international transaction whereby assessee [exclusive distributor of products like cartridges, scanners, projectors, spares and other consumables] was obliged to incur AMP expenses for purpose of promoting brand, intangibles of its AE and the assessee had also not submitted FAR analysis of AMP functions in its TP study. It also observed that assessee was an exclusive distributor for its AE and was also earning income in the form of commission by arranging direct customers for its AE.
Epson India Pvt Ltd vs ACIT [TS-768-ITAT-2018(Bang)-TP] IT(TP)A No.293 and 2479/Bang/2017 dated 27.07.2018

628. The Tribunal restored the AMP issue following the coordinate bench decision of the assessee for earlier year wherein it had relied on the Special bench decision of LG Electronics to remit the matter back for adjudication for determining the cost/value of international transaction and determine the ALP of the transaction in light of certain guidelines in the Special Bench order.
LG Electronics India (P) Ltd vs ACIT [TS-738-ITAT-2018(DEL)-TP] ITA Nos.3612 and 3613/Del/2017 dated 18.07.2018

629. The Tribunal in second round of proceedings pursuant to remand by the High Court deleted the AMP adjustment for assessee (engaged in distribution of mobile handsets in India) noting that the TPO had merely presumed that extraordinary expenses in excess of normal routine expenditure were AMP expenses incurred for brand building of its AE. It referred to the OECD guidelines wherein it was clearly mentioned that it is sufficient to compensate distributors with a service fee and not provide it with a return on marketing intangibles. It also observed that the assessee had to advertise aggressively since it was the first year of business in India, and hence such expenditure could not be considered as expenditure for brand building absent any added value to Sony Ericsson brand owned by AE, at most it could be considered as having been incurred for ‘brand maintenance’ and also clarified that the business promotion expenses incurred by the assessee were towards its promotion. It also rejected the contention that the amount of Rs. 73.83 crores received by the assessee by way of credit notes represents the excess price charged by AE which had been credited to the assessee and observed that the business model of the assessee with its AE was structured in such a manner that AE ensured that assessee achieved an arm’s length return on sales.
Soni Mobile Communications [India] Pvt. Ltd vs Addl CIT [TS-741-ITAT-2018(DEL)-TP] ITA No.6410/Del/2012 dated 26.07.2018

630. The TPO held that through advertisement expenses incurred, the assessee had increased brand awareness and brand value of the product which benefitted its AE and hence a markup had to be charged on the advertisement expenses reimbursed by assessee from its AE for the assessee’s efforts. The Tribunal following the coordinate bench decision in assessee’s own case for earlier year deleted the markup. In the earlier year, the Tribunal had noted that there was a memorandum( for promoting sales and enhancing the image of brand) in terms of which the assessee and AE shared expenses incurred towards advertisement which provided for major portion of advertisement expenses incurred towards Indian model being borne by assessee while major portion of other advertisment expenses was reimbursed by AE. It observed that there was no service element involved since the assessee had not provided any services to its AE which was evident from the expenses reimbursed (professional charges, magazine press and sales promotion expenses) for Indian brand ambassadors that the third parties were providing services to assessee. Thus, it opined that no services were being provided by the assessee and further, the AE was reimbursing the assessee for any indirect benefit. Accordingly, it deleted the markup.
Dy.CIT vs Citizen Watches (India) Pvt Ltd [TS-963-ITAT-2018(Bang)-TP] IT(TP)A No.26/Bang/2014 dated 06.07.2018

631. The Tribunal deleted the AMP-adjustment made by TPO/DRP on alleged engagement by assessee (trader of life saving devices) in brand promotion on behalf of its AE by i) rejecting TPO’s application of the Bright Line Test to assess the alleged AE-benefit and arrive at an arm’s length compensation by observing that no such method was prescribed under the Act and the Rules; and ii) observing that in the absence of any agreement for sharing AMP expenses between the assessee and the AE, the marketing expenditure of the assessee could not considered as an international transaction. It noted that the agreements between the assessee and the AE in the present case merely mentioned “best efforts to market and distribute the product or promote the products in a commercially reasonable manner”, but did not contain any ‘condition’ or ‘indication’ about sharing of AMP expenses.
It held that if the AE was benefitted indirectly by the AMP expenditure incurred by the assessee, it could not be held that the assessee and the AE had entered into agreement for sharing AMP expenses.
India Medtronic Private Limited vs. DCIT – TS-38-ITAT-2018(Mum)-TP – /I.T.A./1600/Mum/2015 dated 17.01.2018

632. Where the Tribunal in the first round of proceedings had remitted the AMP TP adjustment back to the TPO with the specific direction to recompute the ALP after allowing marketing expenses as a deduction but the TPO proceeded to determine ALP afresh, the Tribunal, in the second round of proceedings, remitted the issue back to the TPO observing that the TPO had not been granted any discretion in the first remand and directed the TPO to to calculate ALP exactly in the way directed by it in the first round of proceedings.
St. Jude Medical India Pvt. Ltd vs. DCIT – TS-64-ITAT-2018(HYD)-TP – ITA No.1425/Hyd/2014 dated 24.01.2018
633. The Tribunal, in second round of proceedings, remitted the AMP-issue back to AO/TPO for determining ALP afresh. It noted that, in first round of proceedings, the Tribunal had remitted matter back to AO/TPO for determining AMP-adjustment by applying Special Bench ratio in LG Electronics and also giving certain specific directions for such computation. It rejected assessee’s contention that credit notes issued by foreign AE were towards compensation for brand promotion observing that they were only in respect of sales price of product to assessee and not to compensate it for other expenses and therefore held that such credit notes could not be considered as reimbursement of AMP expenses. Regarding assessee’s claim for exclusion of selling expenses from the base amount of AMP-expenses, the Tribunal remitted the matter back to AO/TPO for deciding the same after stressing that each and every item of expenditure should be properly examined for ascertaining if it was for promotion of sales or in connection with the sales It rejected the assessee’s contention that incurrence of AMP-expenses is not an international transaction as this issue was not raised in first round of proceedings and Tribunal had not restored the entire AMP issue to be decided de novo.
Motorola Solutions (India) Pvt. Ltd vs. DCIT – TS-102-ITAT-2018(DEL)-TP – ITA No. 1933/Del/2017 dated 07.02.2018
634. The Court dismissed Revenue’s appeal against the order of the Tribunal setting aside the TPO’s application of bright line method in determining whether the advertisement, marketing and promotional (AMP) expenses incurred by the assessee amounted to an international transaction and remanding matter to AO/TPO. It noted that Special Bench’s decision in LG Electronics India case (upholding the use of Bright Line Test) was set aside by the High Court judgment in Sony Ericsson Mobile Communication and accordingly held that no question of law arose.
Pr. CIT vs. Sony India Pvt Ltd – TS-137-HC-2018(DEL)-TP – ITA 159/2018 dated 09.02.2018

635. The Tribunal remitted the issue of TP-adjustment on Advertising, marketing and promotion (AMP) expenses incurred by assessee for fresh consideration following earlier year ITAT order wherein the co-ordinate bench directed the AO/TPO to decide on existence of international transaction and also to exclude selling expenses from ALP-computation.
Daikin Airconditioning India Pvt. Ltd. v DCIT – TS-176-ITAT-2018(DEL)-TP – ITA Nos.2536/Del/2014

636. The Tribunal deleted TP-adjustment on Advertising, Manufacturing and Publicity (AMP) expenses incurred by the assessee absent any agreement/arrangement with AE for incurring of AMP-expenses. It observed that the assessee was a new entrant in the field of manufacturing & sale of cosmetic/personal care products and had incurred AMP expenses to promote its products to compete with similar products of other players. It held that there was a subtle but definite difference between product promotion and brand promotion, i.e. in the first case product is the focus of the advertisement campaign and the brand takes secondary or back seat, whereas in second case, brand is highlighted and not the product and held that since the basic purpose for incurring expenses by assessee was to expand its business in India and not to look after AE’s interest, it could safely be said that the expenses incurred by the assessee were wholly and exclusively for its own business and not an international transaction. Accordingly, it deleted the TP adjustment.
Nivea India Pvt. Ltd vs. ACIT – TS-187-ITAT-2018(Mum)-TP – /I.T.A./7744/Mum/2012 dated 21/03/2018

637. In assessee’s appeal against the Tribunal’s order remanding Advertising, Marketing and Promotion (AMP) adjustment back to TPO/AO, the Court noted that TPO made the adjustment on account of AMP’s expenses on the basis of bright line test and the Tribunal remanded the same to TPO/AO for re -examination. Further the Court observed that TPO/DRP had applied the reasoning of HC judgement in case of Sony Ericsson Mobile Communication and thus the Court stated that the Tribunal ought to address the issue in light of the Court findings and thus directed the Tribunal to consider the matter afresh and report on the merits of the case.
Callaway Golf India P Ltd Vs PCIT-2- TS-300-HC-2018(DEL)-TP-ITA No 106/2018 dated 20.04.2018

638. The Tribunal dismissed Revenue’s appeal challenging deletion of AMP-adjustment in case of assessee engaged in the business of production, marketing and sale of instrument, implants and biomaterials for surgical fixation and noted that issue was covered against Revenue by order of co-ordinate bench in assessee’s own case for previous AY’s wherein AMP-adjustment was deleted after noting that assessee had made payment under AMP head for promotion of its own business and there was no agreement between assessee & AE for sharing AMP-expenses.
Synthes Medical Pvt Ltd vs JCIT LTU-1- TS-266-ITAT-2018(Mum)-TP- ITA No. 1784/Mum/2016 dated 13.04.2018

639. The Tribunal remitted back to AO/TPO AMP-adjustment in respect of assessee engaged in the business relating to import, manufacture, sale and export of all kind of high end crystal components for jewellery, fashion accessories and home decoration after following co-ordinate bench ruling in assessee’s own case for previous AY wherein AMP-issue was remitted for determining existence of international transaction following HC decisions in various cases including Sony Ericson, Rayban Sun Optics & Toshiba India.
Swarovski India Pvt Ltd vs ACIT Circle 22(2)- TS-250-ITAT-2018(Del)-TP-ITA No 4080/Del/2013 dated 02.04.2018

640. The assessee ‘Fujifilm’ had an Indian branch which was engaged in import and resale of Fujifilm products in India and ‘Provision of marketing and technical support services’ to its head office. The TPO observed that huge AMP expenditure was incurred by the Indian branch on promoting the brand name ‘FUJI’ and considered the said AMP expenses as a separate international transaction and proposed the transfer pricing adjustment by applying the bright line test. On appeal, the Tribunal restored the matter back to the TPO and held that the bright line test could not be applied for determining ALP of international transactions of AMP expenses and stated that the TPO applied the bright line test as he did not have any occasion to consider the ratio laid down in various judgments of jurisdictional High Court. The Tribunal further held that as per Article 7 and Article 9 of DTAA between India and Japan, though deduction of AMP expenses was to be allowed but simultaneously, ALP of AMP expenses for brand promotion was also to be determined and the adjustments to the profits had to be made accordingly.
Fujifilm Corporation v. ITO – [2018] 92 taxmann.com 411 (Delhi – Trib.) – IT APPEAL NOS. 5826 (DELHI) OF 2011 & 195 (DELHI) OF 2013 dated APRIL 4, 2018

641. The Tribunal deleted the TP adjustment of AMP expenses by following the High Court ruling in assessee’s own case stating that TP adjustment was not sustainable as the Revenue failed to demonstrate existence of international transactions. Further, it deleted TP adjustment on royalty payment made to AE by relying on assessee’s previous tribunal judgement, wherein it was held that if goods are sold on principal to principal basis, disallowance of royalty on export was unjustified.
Honda Siel Power Products Ltd vs DCIT Circle 11(1)- TS-402-ITAT-2018(DEL)-TP- ITA No. 1579/DEL/2017 dated 17.04.2018

642. The Tribunal deleted the AMP adjustment by relying upon the decision of coordinate bench in assessee’s own case for AY 2010-11 wherein it was held that in absence of any agreement/arrangement between the assessee and its AE for sharing of AMP expenses, it could not be termed an international transaction.
India Medtronic Private Limited vs. DCIT [TS-400-ITAT-2018(Mum)-TP] ITA No.7555/May/2012 dated 04.05.2018

643. The Tribunal deleted the TP adjustment on AMP expenses incurred by the assessee following the coordinate bench decision in assessee’s own case for earlier year which had relied on the coordinate bench decision of Thomas Cook to hold that the in absence of agreement between the assessee and AE for sharing of AMP expenses, it was not an international transaction. It also noted that the TPO erred in applying BLT to determine the existence of international transaction after the HC decision in Sony Ericsson. Thus, the Tribunal allowed the assessee’s appeal.
India Medtronic Private Limited vs DCIT [TS-318-ITAT-2018(Mum)-TP] ITA No.1246/Mum/2016 dated 02.05.2018

644. The Tribunal deleted the AMP-adjustment for assessee [engaged in manufacturing and marketing of diversified pharmaceutical products] in absence of any agreement obliging assessee to undertake brand building on AE’s behalf for AYs 2005-06 & 2007-08. The TPO proposed AMP-adjustment and noted that sales on which royalty was being paid by assessee had recorded a faster growth and AMP expenses [which were the driving force for enhancing business] were to be shared by overseas AE in proportion to benefit accruing to it. It rejected revenue’s only argument that brand value of assessee group as a whole had reflected healthy growth during the period 2000-2006. The Tribunal observed that there was no evidence to demonstrate the co-relation between the growth and quantum of AMP-expenditure, and hence the addition on basis of mere surmises could not be sustained. It distinguished Sony Ericsson ruling as it was rendered in the context of distributor of products manufactured by foreign AE and further relied on Bombay HC ruling in Johnson & Johnson and various Delhi HC rulings including Maruti Suzuki & Bausch & Lomb and deleted the AMP adjustment.
ACIT vs. Colgate Palmolive (India) Limited [TS-319-ITAT-2018(Mum)-TP] ITA No.6073/Mum/2014 &CO No.243/Mum/2014 dated 04.05.2018

645. The Court remitted the issue pertaining to advertising, marketing and promotion expenditure and directed the Tribunal to carry out necessary inquiry if needed by resorting to a limited remand to the TPO/DRP as the case may be and decide whether the AMP expenses in the instant case involved international transaction and if so, to what extent.
Vodafone Mobile Services Ltd [TS-419-HC-2018(DEL)-TP] ITA 660/2018 dated 01.06.2018

646. The Tribunal deleted the assessee’s AMP adjustment made by TPO in the second round of proceedings on a ‘protective’ basis for AY 2009-10 by relying upon the co-ordinate bench ruling in assessee’s own case for subsequent years.The Tribunal, at the outset, noted that the addition proposed by TPO was on a ‘protective’ basis and no substantive addition had been made. The Tribunal relied on Delhi HC ruling in Sony Ericsson that Bright Line Test Method cannot be applied for making any kind of adjustment under AMP expenses.
Toshiba India Private Limited vs ACIT [TS-609-ITAT-2018(DEL)-TP] ITA No. 1438/Del/2018 dated 18.06.2018

Loans / Receivables / Corporate Guarantee

647. Relying on the decision of HC in Kusum Healthcare, the Tribunal directed the AO/TPO to examine if there is a pattern that can be discerned in the payment of outstanding receivables which reflects thatthe transaction is intended to benefit the AE in any manner. The High Court had held that interest on delay in payment of outstanding receivables from AEs needs to be charged on case to case basis after evaluation. Further, the Tribunal in line with the HC ruling also directed the AO/TPO to verify if the impact of receivables had already been factored in the working capital adjustment since any further adjustment on basis of outstanding receivables would not be warranted. Noting that the CIT(A) did not have the benefit of the HC ruling while passing the impugned order the Tribunalremitted the TP adjustment on account of notional interest on delayed payment of outstanding receivables to the AO/TPO with the said directions.
Gillette Diversified Pvt Ltd vs ACIT [TS-1007-ITAT-2018(DEL)-TP] ITA Nos.5736,5675 to 5677/Del/2015 dated 23.08.2018

648. The assessee had advanced loan in foreign denominated currency to its subsidiary in Russia and applied CUP to benchmark its transaction and charged 5% interest on the loan. The TPO determined the ALP of interest on the aforesaid transaction to be 19% and accordingly made an upward adjustment. The CIT(A) deleted the adjustment after considering the decisions cited by assessee noting that for a foreign currency loan the rate of interest was to be adopted on LIBOR and at most LIBOR plus 2% (accordingly arrived at a rate of 2.89% considering LIBOR rate of 0.89%) and held that the interest rate of 5% was at ALP. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order following the coordinate bench ruling in assessee’s own case for earlier year wherein it was held that LIBOR rate had to be considered while determining the ALP of the transaction. Wherever the transaction of loan between the associated enterprises was in foreign currency then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction. Therefore, the domestic prime lending rate would have no applicability and the international rate LIBOR would come into play.
ACIT vs MK Shah Exports Ltd [TS-1191-ITAT-2018(Kol)-TP] ITA No.977 and 978/Kol/2018 dated 17.08.2018

649. The Tribunal deleted TP adjustment on account of interest payment made by the AEs to the assessee towards the dollar denominated loan extended to them. It rejected the TPO/DRP’s imputation of interest at SBI rate +150 bps and accepted the assessee’s stand of charging interest at 6% on the loan advanced to be at ALP by following the coordinate bench decision in assessee’s own case for earlier year wherein it was held that for one of the concerns in Bangladesh, interest at 6% was accepted to be at ALP and the TPO could not take an inconsistent view in case of two other concerns and state that ALP should be determined on the basis of interest rate expected by an Indian lender from bank or from any mutual fund etc. when assessee was the tested party in case of all three concerns and hence deleted the TP adjustment made by the TPO.
House of Pearl Fashions Limited vs DCIT [TS-820-ITAT-2018(DEL)-TP] ITA No.744/Del/2015 dated 06.08.2018

650. The Court upheld Tribunal’s order vis-à-vis TP adjustment on account of outstanding receivables relying on coordinate bench decisionsin Ameriprise and BT e-serve wherein it was heldthat after the amendment by Finance Act 2012in Explanation to s 92B inserted with retrospective effect from 01.04.2002, once any debt transaction arising during course of business has been considered an international transaction,any corresponding non-charging of interest payment/ under charging of interest on excess period of credit allowed to AE amounts to an international transaction and hence ALP of said interest transaction needs to be determined.
McKinsey Knowledge Centre India Pvt. Ltd vs Pr.CIT [TS-812-HC-2018(DEL)-TP] ITA 461/2017 dated 09.08.2018

651. The Tribunal directed deletion of interest imputed by the TPO on delayed payments received from AEs by following the decision of coordinate bench in assessee’s own case for earlier year wherein it was held that assessee was a debt free company and it was not justifiable to presume that the borrowed funds are utilized to pass on the facility to its AE.
Bechtel India Pvt Ltd vs DCIT [TS-1026-ITAT-2018(DEL)-TP] ITA No.6779/Del/2015 dated 20.08.2018

652. The Tribunal deleted the interest imputed by the TPO on delay in realization of sale proceeds from AE following the coordinate bench decision of the assessee for earlier year which in turn had relied on MicroInk ruling wherein it washeld that operating profit under TNMM factors in the interest adjustment on delay in receivables and hence any further adjustment of interest on excess credit allowed on sales to AE would not be needed. It accepted assessee’s contention that no separate adjustment was needed since TNMM factored the interest cost for recovery of sale proceeds from debtors and thus. deleted the adjustment made by the TPO to determine ALP.
Bisazza India Pvt Ltd vs DCIT [TS-1095-ITAT-2018(Ahd)-TP] ITA No.2350/Ahd/2017 dated 08.08.2018

653. The Tribunal upheld CIT(A)’s order deleting the notional interest on delay in receivables computed by TPO using PLR rate noting that once the TPO had accepted TNMM as the MAM then delay in realization of debt and consequential income arising therefrom had been factored in while computing the margin in respect of sale made to AE. It observed that since the realization from the AE was in foreign currency, interest should be computed in LIBOR and not PLR as done by the TPO and even if the interest on delay of trade debts was given effect, the margin of the assessee would still be arm’s length.
ACIT vs Vijay Solvex Ltd. [ TS-1088-ITAT-2018(JPR)-TP] CO No.12/JP/2014 dated 24.08.2018

654. The Tribunal relying on the decision of the coordinate bench in the assessee’s own case for earlier year deleted the TP adjustment on account of corporate guarantee. The Tribunal in the assessee’s own case had approved the ALP of the corporate guarantee charged by the assessee at 1% by relying on various decisions of coordinate bench as against the addition of 3.35% made by the TPO on the basis of differential ability of the assessee and AE to raise bonds in the market. The Tribunal followed the same parity of reasoning applied by the HC decision of Everest Kanto Cylinder where it was held that consideration for bank guarantee and corporate guarantee are distinct and separate andobserved that the consideration for raising of bonds in Indian market are distinct and incomparable with the instance of providing guarantee to a bank in Nepal. While approving the guarantee fee charged at 1%, it noted that the assessee’s AE had adequate debt equity ratio to obtain loan from the bank and also the corporate guarantee advanced by the assessee was only to the extent of 35% of sanctioned loan hence was not critical for obtaining the loan.
Grindwell Norton Ltd vs DCIT [TS-1004-ITAT-2018(Mum)-TP] ITA No.3589/M/2016 dated 30.08.2018

655. The assessee had advanced loans out of its internal accruals to its subsidiary company in Singapore. The TPO was of the view that interest charged at 4.5% was not at ALP and thus determined the ALP at the PLR rate prevailing in the financial year i.e. 14.45%. The CIT(A) deleted) deleted the addition holding that on the loan granted by the assessee to its AE located at abroad, LIBOR rate of interest was applicable for determining the arm length price. The Tribunal dismissed Revenue’s appeal noting that a similar addition was deleted in earlier year wherein it was held that on outbound loans, the LIBOR rate ought to be adopted and in the instant case, the assessee had charged interest at a rate higher than LIBOR.
Dy.CIT vs CCL Products (India) Pvt Ltd [TS-1171-ITAT-2018(VIZ)-TP] ITA No.191/Viz/2018 dated 28.09.2018

656. The TPO treated the money advanced by the assessee to its branches to be in nature of loans and imputed interest of 5% on it. The Tribunal rejected assessee’s contention that advances given to the branches were outside the purview of TP Regulations and further, TPO had computed interest on basis that assessee had charged the same rate on loan advanced to AE in Germany (which was not an internal comparable uncontrolled transaction). The Tribunal relied on coordinate benchruling in assessee’s own case for earlier year wherein it was held that advance given by the assessee to its AEs in UK and USA came within the ambit of international transaction as per the amendment made in provisions of sec 92B of the Act which would be applicable restrospectively. Further, it rejected assessee’s plea of LIBOR to be charged on loan relying on coordinate benchruling in assessee’s own case wherein it was held that 5% of interest rate was correctly applied.
Sun Tec Business Solutions (P) Ltd vs Dy.CIT [TS-1206-ITAT-2018(Coch)-TP] ITA No.113/Coch/2016 and 509/Coch/2016 dated 12.09.2018

657. The TPO made addition of guarantee charges @1.3% on the corporate guarantee given to its AE for which it had not charged any fees. The CIT(A) deleted the additionby holding that corporate guarantee given on behalf of its 100% subsidiary AE would not constitute an international transaction within the meaning of section 92B of the Act and accordingly no adjustment was warranted relying on the coordinate ruling in case of Batronics India Ltd. The Tribunal dismissed Revenue’s appeal and accepted assessee’s contention that where the assessee had not incurred any corporate guarantee charges on behalf of its AE it would not constitute international transaction within the meaning of sec 92B of the Act. It relied on coordinate bench rulings in case of EIH Ltd., Dr.Reddy Laboratories Ltd., Batronics wherein it was held that corporate guarantee was not an international transaction where the assessee had not incurred any expenditure for corporate guarantee and the guarantee was given to protect the interest of shareholders and for securing the credit facilities to its 100% subsidiaries.
Dy.CIT vs CCL Products (India) Pvt Ltd [TS-1171-ITAT-2018(VIZ)-TP] ITA No.191/Viz/2018 dated 28.09.2018

658. The TPO arrived at arm’s length interest rate of 20.15%, by applying CUP method and benchmarking the same against local interest rates in respect of loan denominated in foreign currency advanced by the assessee company to its AE and made an adjustment. The CIT(A) relying on coordinate bench decision in Kohinoor foods ltd. held that that international transactions involving cross- border country loans to AE could be bench marked against LlBORand interest rate of Libor+2% could be charged to arrive at ALP. The Tribunal dismissed Revenue’s appeal and upheld the CIT(A)’s order noting that CIT(A) had followed the propositions of law laid down by different benches of the Tribunal (including the jurisdictional bench decision in EIH Ltd.) on the issue.
Dy.CIT vs Manaksia Limited [TS-1101-ITAT-2018(Kol)-TP] ITA No.980/Kol/2017 dated 28.09.2018

659. The Tribunal dismissed Revenue’s appeal and upheld the CIT(A)’s order deleting the TP adjustment on corporate guarantee provided on loans availed by AE on account of TP provisions not being applicable to such transaction prior to the amendment brought in by way of an explanation to Section 92B of the Act, by Finance Act, 2012.It relied on the coordinate bench decision in EIH Ltd. wherein it was held that provision of corporate guarantee was covered under ‘any other transaction having bearing on profits, income, losses or assets’ of an enterprise as contained in s 92B and held that as per aforesaid section the requirement would have to fulfilled for guarantee to be considered as an international transaction and the Explanation introduced by Finance Act 2012 could be made applicable only from AY 2013-14 since the rules were only notified on 10.06.2013 and hence the assessee could not be expected to report the transaction as an international transaction in its transfer pricing study and the audit report thereon.
Dy.CIT vs Manaksia Limited [TS-1101-ITAT-2018(Kol)-TP] ITA No.980/Kol/2017 dated 28.09.2018

660. The assessee had advanced loan to its AE and charged an interest rate at 3.3%. The TPO determined the interest rate to be L+600 bps and accordingly made an addition. The DRP restricted the interest rate to L+400bps. The Tribunal restored the issue of benchmarking of aforesaid transaction in view of assessee submitting additional evidence and revised workings that a credit spread of 217bps over and above the Libor rate needed to be considered and it was assessee’s plea that then the interest charged would be at ALP.
The assessee had not charged any corporate guarantee fee from its AE since it considered to be in nature of shareholder services warranting no charge. The TPO determined the fee to be charged at 3% which was upheld by DRP. The Tribunal restored the issue of benchmarking of guarantee fee transaction in view of assessee submitting additional evidence that credit rating of AE and itself was same thus no benefit in terms of interest saved could have passed on to its AE and thus, guarantee was only for providing implicit support warranting no charge.
Apeejay Shipping Limited vs DCIT [TS-1058-ITAT-2018(Kol)-TP] ITA No.119/Kol/2017 and ITA No.2238/Kol/2017 dated 12.09.2018

661. The TPO charged a guarantee commission of 2.25% while determining the ALP of the transaction of corporate guarantee provided by the assessee to its AE as against Nil charged by the assessee. The CIT(A) relying on Bombay High Court decision of Everest Kanto restricted the guarantee commission at 0.5% and held that corporate guarantee transaction falls within the ambit of international transaction u/s.92B of the Act. The Tribunal dismissed Revenue’s appeal and confirmed the CIT(A)’s order since it was in consonance with the view expressed by the Hon’ble Jurisdictional High Court (supra) and by different Benches of the Tribunal including Mumbai Benches.
Dy.CIT vs Rolta India Ltd [TS-1021-ITAT-2018(Mum)-TP] ITA No.882/Mum/2017 dated 07.09.2018

662. The Tribunal deleted the TP adjustment on interest paid by the assessee to its AEs on the Fully and Compulsory Convertible Debentures (FCCDs) issued by it by following the coordinate bench decision of earlier year wherein it was held that that FCCDs being hybrid instruments i.e. a mix of debt and equity, carried a higher risk and hence could not be compared with a plain vanilla loan or bond and the interest rate ofPLR of SBI plus 300 basis points adoptedby the assessee was in accordance with FEMA regulations and further, the variance in the rate of interest as per TPO/AO to be adjusted and added was 3.75% which was within the permissible range of 5% as permitted by second proviso to Section 92C(2) of the Act.
Granite Gate Properties Pvt Ltd vs ACIT [TS-1025-ITAT-2018(DEL)-TP] ITA No.7025/Del/2017 dated 14.09.2018

663. The Tribunal deleted the TP-adjustment on corporate guarantee fees following the coordinate bench decision inassessee’s own case for earlier year wherein a similar adjustment was deleted considering thatobjective behind providing corporate guarantee was not to earn fee, but to protect its interest by fulfilling shareholder’s obligation. It also noted that there was no guarantee fee charged by assessee from its subsidiary, thus held that issuance of Corporate Guarantee by the assessee to its subsidiary company did not fall under the ambit of International transaction u/s 92B.
Further, the Tribunal remitted the issue of determination of ALP of interest on loan to AE to the AO/ TPO, relying upon earlier year order in assessee’s own case noting that the LIBOR and basis points should be the criteria for meeting the cost of interest on the international transaction in respect of interest to be charged on the loan advanced to AEas against domestic PLR and credit spread considered by TPO. For this purpose, the credit rating of the assessee as well as the credit rating of the AE should be taken into account.
EIH Limited vs DCIT [TS-1020-ITAT-2018(Kol)-TP] ITA No.2225/Kol/2017 dated 14.09.2018

664. The Court dismissed Revenue’s appeal and upheld the Tribunal’s order directing the TPO/AO to adopt 0.5% as the ALP of the guarantee commission charged as against the TPO’s rate of 3.25% as the ALP noting that the issue of guarantee commission was squarely covered by the decision of Bombay High Court in the case of Everest Kento Cylinder Ltd wherein the Court had upheld the Tribunal’s order restricting the ALP for guarantee commission to 0.5% as against the rate of 3% adopted by the TPO by considering the rates for bank guarantee. In the said case, the Court had held that the consideration which applied for issuance of corporate guarantees were separate and distinct from the bank guarantees. Further, it held that the comparison could not sustain since it was not between like transactions but were between guarantees issued by commercial bank on one hand as against the corporate guarantee issued by the holding company for the benefit of its AE.
With respect to another transaction, being certain amount advanced by the assessee to its subsidiary (AE) in form of share application money, the TPO recharacterized the same as loan advanced to its AE. With respect to TP adjustment of interest, it noted that the only reason for recharacterizing the share application money as loan was delay in receipt of share certificates from the AE and accordingly, the Tribunal remanded back the issue to AO so that the assessee could furnish the said certificate.The Court noted that the Tribunal had not answered the question clearly in favour of the assessee and the Tribunal had held that subject to verification of the share capital by the AO, the share application money could not be treated as loan amount because of mere delay in issuance of shares by the subsidiary in the name of assessee and thus dismissed Revenue’s appeal holding no substantial question of law arose.
Pr.CIT vs Couceutrix Services India Pvt. Ltd. [TS-960-HC-2018(BOM)-TP] (ITA No.303 of 2016) (Bom) dated 04.09.2018

665. The Tribunal upheld CIT(A)’s order deleting TP adjustment on account of interest charged on foreign denominated loan advanced by assessee to its subsidiary in Russia following the coordinate bench decision in assessee’s own case for earlier year wherein it was held that interest should be charged at LIBOR and not domestic PLR in respect of transaction of loan in foreign currency with its AE and accordingly, the interest charged by assessee at 8% (which was more than the Libor rate or even more than a markup of 2% on Libor) was held to be at ALP. Thus, it dismissed Revenue’s appeal.
ACIT vs MK Shah Exports Ltd [TS-1232-ITAT-2018(Kol)-TP] ITA No.1974/Kol/2017 dated 16.10.2018

666. The Tribunal dismissed Revenue’s appeal and upheld DRP’s order deleting TP-adjustment on interest on foreign currency denominated loan advanced to AE relying on Delhi HC ruling in Cotton Naturals wherein it was held that when a loan was given or taken in foreign currency loan, then same had to be benchmarked with reference to the market determined interest rate applicable to the currency loan which had to be repaid. The Tribunal noted that assessee had advanced loan to AE in foreign currency at EURIBOR plus 0.25% which was benchmarked by applying CUP method, the ALP of said transaction was determined at EURIBOR Plus 0.12%, however TPO treated the loan as rupee loan since the loan amount was advanced out of account maintained in India and determined the ALP at SBI PLR plus 7.50%. It upheld DRP’s view that there was no rational basis for AO to treating the foreign currency loan to be given in INR.
DCIT vs Siegwerk India Pvt. Ltd [TS-1118-ITAT-2018(Del)-TP] ITA No.6702/Del/2015 dated 08.10.2018

667. The assessee had granted foreign currency loan to its foreign AE and received interest (EURIBOR+200 bps) equivalent to 6.41%.TPO benchmarked the aforesaid transaction at 17.26% by applying the yield rate on corporate bonds. The DRP directed the TPO to apply PLR prescribed by RBI at 13.25% to benchmark the transaction. The Tribunal deleted the adjustment made noting that interest rate in respect of loan advanced to foreign AE should be computed based on interest rate applicable to currency in which loan had to be repaid by relying on the ratio laid down in Delhi HC ruling in Cotton Naturals and thus, the interest rate charged by assessee was appropriate and further, the interest rate was accepted at ALP by TPO in previous year.
Moserbaer India Ltd vs ACIT [TS-1139-ITAT-2018(DEL)-TP] ITA No.6042/Del/2012 and 2395/Del/2014 dated 03.10.2018

668. The assessee had given foreign currency denominated loans to its AE in USD and Euro currency and was of the view that no benchmarking exercise under TP provisions had to be undertaken as it was in nature of trade advances,however the TPO determined the ALP of interest rate at 20%/22% in respect of the aforesaid loans by pricing at the cost of funds in the hands of the assessee at 14.5% and made an appropriate adjustment for the credit risk being borne by the assessee, having regard to the borrower’s independent credit rating at 550 bps and 750 bps. Noting that substantial portion of own surplus funds had been deployed for loans, the CIT(A) held that TPO’s calculation of cost of funds was not sustainable and opined that TPO’s methodology adopted was not in conformity with the methods prescribed in Rule 10B and relied on various decisions to conclude that the settled view was that the foreign currency denominated loans advanced to AEs should be benchmarked against the relevant currency denominated
LIBOR rate. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s findings noting that a catena of case laws has already concluded that foreign currency denominated loans have to benchmarked at LIBOR.
DCIT vs Rohit Ferro Tech Ltd. [TS-1399-ITAT-2018(Kol)-TP] (ITA Nos.262 and 263 /Kol /2018 dated 12.10.2018

669. The Tribunal deleted TP-adjustment on outstanding AE-receivables noting that the TPO had charged interest @ 14.45% p.a. on the receivables received beyond the credit period allowed observing that with the retrospective introduction of explanation to Section 92B, receivables formed a part of international transaction. It also noted assessee’s submission that the outstanding receivables were consequent to the international transactions of provision of software development services and not in the nature of any advance/loans and the working capital adjustment had duly considered the impact of such receivables. It relied on Delhi HC ruling in the case of Kusum Healthcare Pvt Ltd wherein after noting that the assessee therein had already factored the impact of receivables on the working capital and thereby on its pricing/profitability vis-à-vis that of its comparables, the HC had held that any further adjustment only on the basis of the outstanding receivables would distort the picture. Following the ratio in the aforesaid HC decision, the Tribunal directed the AO to delete interest charged on the outstanding receivables.
Dhanush Infotech Pvt Ltd vs ACIT [TS-1193-ITAT-2018(HYD)-TP] ITA No.2082/Hyd/2017 dated 17.10.2018

670. The Apex Court dismissed Revenue’s SLP against the order of High Court wherein it was held that assessee would be entitiled to the benefit of Libor rate existing at that time (ie 0.79%) when assessee had advanced interest free loan in foreign currency to foreign owned subsidiary and addition of 2 per cent interest in income was required to be quashed and set aside.
CIT vs Vaibhav Gems Ltd [TS-1079-SC-2018-TP] SLP (Civil) Diary No(s).30849/2018 dated 01.10.2018

671. The Tribunal deleted the TP adjustment on account of notional interest charged on excess delay beyond the credit facility extended to AE in realization of sale invoices relying on coordinate bench ruling in case of Bisazza India (P.) Ltd. wherein it was held that if the ALP of transaction is benchmarked on basis of TNMM, an adjustment for interest on excess credit allowed on sales to AEs will distort the picture as TNMM analysis by taking operating profit figure already incorporates the financial impact of excess credit period, which would be adjusted again separately as well.
Gemstone Glass Pvt Ltd vs DCIT [TS-1221-ITAT-2018(Ahd)-TP] ITA (TP) No.3533 /Ahd/2015 dated 23.10.2018

672. The TPO recharacterized the redeemable preference shares as loan and made an ALP addition to interest on redeemable preference shares (RPS). In the first round of proceedings, the Tribunal had restored the issue to AO to decide afresh in conformity with view of higher appellate authority for preceding year however on appeal by the assessee, the Court directed the Tribunal to decide the issue on merits and not wait for the decision for preceding year. The Tribunal, in the second round of proceedings, examining the transaction whether preference shares could be characterized as loans and held that actual transaction as undertaken should be seen and relied on Delhi HC ruling in EKL Appliances wherein the action of TPO was judged by relying on OECD guidelines which stated that barring exceptional cases, tax administration could not disregard the actual transaction or substitute other transactions for them and the examination of a controlled transaction should ordinarily be based on the transaction as it had been actually undertaken and structured by the associated enterprises. Relying on Globe United Engineering and Foundry HC ruling (wherein it was held that preference shares were really apart of the company’s share capital and not loans) and Apex Court ruling in Sahara India (wherein it was held that Optionally Fully Convertible Debentures were ‘securities’ under the Companies Act and therefore neither ‘loans’ or ‘deposits’), the Tribunal noted that redeemable preference shares could not be characterized as loans and therefore, conclusion of the TPO/AO that the assessee had given loans/advances to its AE under the disguise of redeemable preference shares does not hold good. Accordingly, the Tribunal held that TPO/AO grossly erred in making notional addition being Arm’s Length interest on RPS and deleted the adjustment.
Cairn India Ltd vs ACIT [TS-1151-ITAT-2018(DEL)-TP] ITA No.1459/Del/2016 and ITA No.263/Del/2016 dated 24.10.2018

673. The CIT(A) had deleted the addition made by AO in respect of the corporate guarantee issued by assessee to its wholly owned foreign subsidiary towards the bank loan availed by holding that corporate guarantee transaction did not amount to an international transaction and the instant case was guarantee provided to infuse third party funds as a shareholder service meriting no monetary considerationby relying on ratio laid down in case of Bharti Airtel Ltd vs Addl CIT wherein it was held that the corporate guarantee provided by the assessee, which did not involve cost to the Taxpayer, did not have a bearing on profits, incomes, losses or assets of the Taxpayer and hence the transaction did not fall within the ambit of the amended definition of “international transaction” and coordinate bench decision in Tega Industries wherein it was held that no TP adjustment on account of corporate guarantee could be made where it was a case of shareholder activity. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order.
DCIT vs Rohit Ferro Tech Ltd. [TS-1399-ITAT-2018(Kol)-TP] (ITA Nos.262 and 263 /Kol /2018 dated 12.10.2018

674. The TPO rejected assessee’s claim that the interest rate of 3.24% charged on loan advanced to AE in USA was at ALP vis-à-vis LIBOR, and made TP adjustment by considering the annual average yield for BB rated bonds for 5 years or more term at 13.46%. The Tribunal restored the said TP adjustment made while benchmarking the interest transaction arising out of loan advanced by assessee to its subsidiary in USA with a direction to assessee to submit TP-study on the said loan noting that no material was brought on record indicating the terms of loan i.e. tenure of loan, security offered,terms of repayment of loan, currency in which loan is to be repaid etc. and RBI policy governing advancing of loans by Indian holding company to its foreign subsidiary companies credit rating etc. determination of credit rating of the lender and borrower,identification of comparable, third party loan agreements. It observed that domestic PLR lending or yield rate on corporate bonds in India would have no applicability and LIBOR rate should be taken as bench mark for international transactions relying on Bombay High Court judgment in case of Tata Auto Comp Systems Ltd. (wherein it was held that that ALP in case of loans advanced to AE would be determined on the basis of rate of interest being charged in the country where loan was received and consumed).
Sasken Technologies Ltd. vs Dy.CIT [TS-1284-ITAT-2018(Bang)-TP] IT(TP)A No.627/Bang/2016 dated 16.11.2018

675. The Court dismissed Revenue’s appeal and upheld Tribunal’s order a) restricting rate of interest at Libor+2%on foreign currency loan given by assessee to its AE (as against TPO’s imputation of 17.26%) and b) restricting rate of commission at 0.5% on corporate guarantee given by assessee to its AE (as against 6% charged by TPO) noting that Tribunal had followed coordinate bench decision in Everest Kanto(subsequently affirmed by HC) wherein it was held that a) LIBOR was an internationally recognized rate for benchmarking foreign denominated loans and also held that b) corporate guarantee was distinct from bank guarantee and thus, TPO’s adoption of 3% using external comparable (bank) could not be sustained, thus no substantial question of law arose.
Pr.CIT vs Manugraph India Ltd [TS-1382-HC-2018(BOM)-TP] ITA No.454 of 2016 dated 19.11.2018

676. The Tribunal remitted the benchmarking of ALP of interest on loans advanced by assessee to its AE directing TPO to verify as to the currency in which loan was granted and the currency in which it was to be repaid (so that same could be benchmarked at LIBOR if assessee had advanced loan in terms of USD). It rejected assessee’s contention that ALP of interest on outstanding loans was to be NIL in view of loan becoming a non performing asset and assessee not recovering any interest therefrom thus notional income could not be offered to tax by observing that as loan as the transaction is an international transaction within framework of law, the computation of income therefrom had to be on basis of ALP.
Laqshya Media Limited [earlier known as Lakqshya Media Pvt Ltd] vs ACIT [TS-1261-ITAT-2018(Mum)-TP] IT(TP)A No.1984/Mum/2017 dated 14.11.2018

677. The assessee borrowed monies from bank and advanced the same to its AE for setting up of manufacturing facility charging the same rate of interest (Libor+250 bps) as the bank. The TPO concluded that the transaction was not at ALP by observing that assessee was to be compensated for additional risk borne (loan was advanced to third party and thus interest should be charged at cost plus markup) and accordingly determined the interest rate at 5.82%. The DRP confirmed the action of TPO noting that loan obtained from bank was secured while loan advanced to AE was unsecured and since assessee was risk bearing, it should have been compensated for additional risk borne. The Tribunal held that interest charged by assessee was at ALP since it had used CUP method by charging LIBOR+250 bps and relied on coordinate bench decision in Everest Kanto (wherein it was held that LIBOR is apt rate to be charged for loans denominated in foreign currency) to delete the interest adjustment made by TPO.
Aries Agro Limited vs Dy.CIT [TS-1326-ITAT-2018(Mum)-TP] ITA No.1452 /Mum/2017 dated 28.11.2018

678. The assessee had furnished corporate guarantee in respect of loan taken by AE without charging any fee for the same. TPO determined the interest rate of 1.84% by considering the difference between the yield rates of corporate bonds applicable to BBB+(AE’s credit rating) and AA+ (assessee’s credit rating) The TPO was of the view that that corporate guarantee fee at 50 per cent of 1.84 per cent of loan i.e.0.92% was to be charged by assessee and accordingly made an addition. The Tribunal remitted the TP adjustment on corporate guarantee fee made by noting that as regards corporate guarantee fee, terms and conditions on which loan was given, risk undertaken, relationship between bank and client, economic and business interest etc. were some of major factors which are required to be taken into consideration to arrive at appropriate rate of said fee and as neither assessee nor TPO analyzed transactions in terms of aforesaid factors, impugned addition was to be set aside and, matter was to be remanded back for disposal afresh.
Sasken Technologies Ltd. vs Dy.CIT [TS-1284-ITAT-2018(Bang)-TP] IT(TP)A No.627/Bang/2016 dated 16.11.2018

679. The Tribunal restricted the rate of TP adjustment on corporate guarantee given by assessee on behalf of its step down subsidiary to a bank at 0.5% as opposed to 2.25% charged by TPO by following the coordinate bench decision in assessee’s own case for earlier year wherein adjustment to the extent of 0.5% was sustained in view of Bombay HC decision in case of Everest Kanto Cylinders Ltd. wherein the Court had upheld the Tribunal’s order restricting the ALP for guarantee commission to 0.5% as against the rate of 3% adopted by the TPO by considering the rates for bank guarantee observing that bank guarantees are distinct from corporate guarantee.
Laqshya Media Limited [earlier known as Lakqshya Media Pvt Ltd] vs ACIT [TS-1261-ITAT-2018(Mum)-TP] IT(TP)A No.1984/Mum/2017 dated 14.11.2018

680. The assessee issued corporate guarantee to the lenders on behalf of its AE acting as distributor of stainless steel manufactured by it. For AY 2007-08 it had received a commission at 1.5% of loan availed by AE (in conformity with rates quoted by Indusind Bank and ING Vysa Bank). TPO had benchmarked it after obtaining quotations from banks at 2.68% and for AY 2008-09 further added 2% as markup because of security and margin adjustment. The Tribunal deleted the said adjustments relying on HC decision in Everest Kanto Cylinders wherein the commission was restricted to 0.5% by holding that considerations which applied for issuance of a corporate guarantee were distinct and separate from that of bank guarantee.
Jindal Steel Limited vs ACIT [TS-1231-ITAT-2018(Mum)-TP] ITA No.4249/Del/2013 and ITA No.4110/Del/2013 dated 19.11.2018

681. The Tribunal relying on Delhi HC decision in case of Kusum Healthcare Pvt Ltd held that no separate adjustment of interest on receivables was required to be made as it was subsumed in working capital adjustment.
EPAM Systems India Pvt Ltd vs ACIT [TS-1311-ITAT-2018(Hyd)-TP] ITA No.2122/Hyd/2017 dated 20.11.2018

682. The Tribunal deleted the addition on interest on receivables (transaction of sale of network products) where invoicing was beyond 90 days period relying on coordinate bench ruling in case of MicroInk wherein it was held that interest was already factored in operating income in case of TNMM and once the operating profit had been accepted as reasonable, there could not be any occasion to be make adjustment for notional interest on delayed realization of debtors. Also, it observed that assessee was not charging any interest from non-AEs for delay in realization beyond 90 days period which could be taken as a valid CUP input and thus, adjustment would not survive.
Sophos Technologies Private Limited (Formerly known as Cyberoam Technologies Pvt Ltd) vs Dy.CIT [TS-1213-ITAT-2018(Ahd)-TP] ITA No.1565 /Ahd/2017 dated 16.11.2018

683. The Tribunal held that benchmarking of interest transaction of loan advanced by assessee to its AE given in USD should be on Libor plus 200 bps only and rejected TPO’s benchmarking at 14.45% (i.e. as per SBI PLR). It directed TPO to compute interest for a period of 139 days and on day wise outstanding basis ( assessee had given short term advances for an overall period of 139 days without charging any interest which were paid back by its AE in instalments) by adopting Libor +200 bps.
BS Ltd vs AsstCIT [TS-1330-ITAT-2018(HYD)-TP] ITA No.2187/Hyd/2017 dated 29.11.2018

684. The assessee charged interest at 6% on loan advanced to its AE which was denominated in USD currency. The TPO was of the view that the CUP method was to be applied and the arm’s length interest rate was to be computed as a combination of the cost of funds in the hands of the assessee and a credit spread for taking the risk of advancing loan to the AE and thus, concluded that Libor +760bps was an apt rate. He adopted Libor rate of 510 bps and accordingly made an adjustment considering interest rate at 12.70%. The CIT(A) deleted the adjustment and directed the TPO to adopt Libor rate for AY 2009-10 at 113 bps(by relying on various decisions inter-alia HC decision in Cotton Naturals wherein it was held that the foreign currency denominated loans advanced to AEs should be benchmarked against the relevant currency denominated LIBOR rate, which is the present case is US LIBOR. It also noted that even according to TPO’s methodology that the interest rate would be 8.74% [113bps +760bps], and the actual interest charged was within +/-5% range would be at ALP. The Tribunal rejected Revenue’s contention that CIT(A) should have remanded back the case for adjudicating on LIBOR rates of all three years and affirmed CIT(A)’s decision noting that there were no specific particulars challenging correctness of CIT(A)’s finding on LIBOR rate.
DCIT vs Britannia Industries Ltd [TS-1279-ITAT-2018(HYD)-TP] ITA No.1390-1392/Kol/2017 dated 22.11.2018

685. The assessee had benchmarked interest on foreign currency denominated loans advanced to its 100% subsidiary (outside India) at Libor+200% applying CUP. The TPO had adopted Libor+400 bps on basis information available in public domain on websites of Indian banks. Further, the TPO made an adjustment of 300 bps on interest charged by assessee on loan advanced to its foreign subsidiary on account of transaction cost of hedging cost, lack of security and single customer risk on interest rate. The Tribunal adopted the rate charged by assessee noting that commercial expediency and related benefits of close connection would not be factored in by lending rates shown by bank. The Tribunal deleted the transaction cost of 300 bps imputed by TPO by relying on Delhi HC in Cotton Naturals (wherein it was held that transaction cost of hedging is normally borne by the borrower and it is not relevant when loan had to be repaid in foreign currency) and coordinate bench decision of Bharti Airtel (wherein it was held that when assessee had advanced monies to its subsidiaries which are under its control it substantially reduced the risk rather than increasing it thus there is no rationale for adjustment on account of higher risks.)
JSL vs ACIT [TS-1231-ITAT-2018(Del)-TP] ITA No.4249/Del/2013 and ITA No.6337/Del/2012 dated 19.11.2018

686. The Tribunal upheld CIT(A)’s order deleting TP adjustment on corporate guarantee by treating corporate guarantee not to be in nature of international transaction noting that coordinate bench in EIH Ltd. held that the Explanation in sec 92B inserted by Finanace Act 2012 (covered corporate guarantee) applies from financial year 2012-13 only without having any retrospective effect.
DCIT vs Britannia Industries Ltd [TS-1279-ITAT-2018(HYD)-TP] ITA No.1390-1392/Kol/2017 dated 22.11.2018

687. The Tribunal following the coordinate bench decision in assessee’s own case for earlier year remitted the issue of benchmarking of corporate guarantee provided by assessee on behalf of its AE in Singapore. The Tribunal in the earlier year had remitted the issue to TPO to determine the actual exposure of contingent liability for this AY and apply the rate of 0.53% as per the ratio of coordinate bench decision of Glenmark Pharmaceutical (wherein distinction was made between bank guarantee and corporate guarantee) on the actual contingent liability. However, the Tribunal in subject year accepted assessee’s contention that benchmarking was to be based on bank rates and when banks in Singapore were charging 0.15% on guarantee, the same was to be adopted to benchmark.
BS Ltd vs AsstCIT [TS-1330-ITAT-2018(HYD)-TP] ITA No.2187/Hyd/2017 dated 29.11.2018

688. The Tribunal dismissed Revenue’s appeal and upheld CIT(A)’s order deleting TP adjustment on corporate guarantee (where there was no commission charged by parent company to its subsidiary) relying on coordinate bench in assessee’s own case for earlier year wherein it was held that corporate guarantee prior to amendment brought about by Explanation was not an international transaction. It had relied on the coordinate bench decision in EIH Ltd. wherein it was held that provision of corporate guarantee was covered under ‘any other transaction having bearing on profits, income, losses or assets’ of an enterprise as contained in s 92B and held that as per aforesaid section the requirement would have to be fulfilled for guarantee to be considered as an international transaction and the Explanation introduced by Finance Act 2012 could be made applicable only from AY 2013-14 since the rules were only notified on 10.06.2013 and hence the assessee could not be expected to report the transaction as an international transaction in its transfer pricing study and the audit report thereon.
Dy.CIT vs Manaksia Limited [TS-1277-ITAT-2018(Kol)-TP] ITA No.208-209 /Kol/201 dated30.11.2018

689. The TPO treated outstanding receivables as a loan and adopted 13.46% as the rate of interest. The Tribunal remitted the TP adjustment to be worked out by AO at 6 months Libor+400 bps (as submitted by assessee adjustment could not exceed the rate adopted by TPO in previous year). It distinguished the coordinate bench ruling in case of Bechtel (relied upon by assessee) wherein interest was not imputed as company was a debt free company and presumption arose that assessee was not using any interest bearing borrowed funds by observing that even in a case where the assessee was not using any interest bearing borrowed fund, if the actual credit period allowed was more than the agreed credit period then it had to be accepted that earlier price charged as per the agreement was less than the actual prices which was to be charged and in such situation, TP adjustment was to be called for.
Naunce Transcription Services India Pvt Ltd vs DCIT [TS-1353-ITAT-2018(Bang)-TP] IT(TP)A No.307 /Bang/2016 dated 07.11.2018

690. The Tribunal deleted the notional interest imputed on receivables noting that the margin of assessee was within+/-5% tolerance range of margin of comparables and was held to be at ALP, there was no need to make a separate addition for interest additionally. Interest had already been considered in the margins.
Pitney Bowes Software India Pvt Ltd vs Addl CIT [TS-1313-ITAT-2018-(Del)-TP] ITA No.5052/Del/2018 dated 17.12.2018

691. The Tribunal deleted the TP adjustment on interest on outstanding receivables for provision of ITES services by assessee (treated as an unsecured loan) to its AE by relying on coordinate bench decision of Evonik Degussa India Pvt Ltd. wherein the similar adjustment was deleted on basis that assessee did not have any external borrowings and even if payment was made beyond normal credit period to assessee, there would be no interest cost to assessee and moreover, TP adjustment could not be made on hypothetical and notional basis until there was some under charging of real income noting that even in assessee’s case there was no interest liability or any external borrowings and agreement did not provide for any charging of interest for delayed payment by the AEs. It also observed that it was not possible for the assessee to include inter-company receivable in the international transactions in the TP study report as the amendment including “such receivables” in ‘international transaction’ made by Finance Act, 2012 with retrospective effect was made subsequent to the AY in question. (AY 2010-11).
Metlife Global Operations Support Center Private Ltd vs ITO [TS-1309-ITAT-2018(DEL)-TP] ITA No.826/Del/2015 dated 20.12.2018

692. The assessee provided corporate guarantee to a foreign bank (“ABN Ambro”) for providing loan to its AE in foreign currency for which it charged nil commission from its AE. TPO determined ALP of the said transaction at 4.75% by addition of markup of 200bps on rate of 2.75% charged by SBI and accordingly, made an addition which was restricted to 0.5% by CIT(A) holding that approach of TPO was not reasonable as bank guarantee and corporate guarantee are distinct and different. Further, the CIT(A) arrived at the rate of 0.5% assuming that had the AE availed loan without corporate guarantee it would have paid an additional interest rate of 1% (interest saving) which had to be split between assessee and AE equally. The Revenue filed an appeal to the Tribunal.The Tribunal directed AO to re-compute ALP for corporate guarantee fee @1% by relying on coordinate bench decision in assessee’s own case for earlier year wherein the Tribunal did not fully agree with the findings of the CIT(A) in this regard that the benefit of interest saving of 1% should be shared between the AE and the assessee equally as no cogent reasoning has been given for the same and adopted a corporate guarantee rate of 1%.
ASSISTANT COMMISSIONER OF INCOME TAX vs. FRESENIUS KABI ONCOLOGY LTD. (2019) 54 CCH 0440 DelTrib/)(TS-1443-ITAT-2018(DEL)-TP) ITA No. 3013/Del/2015, 6264/Del/2015 dated 31.12.2018

693. Assessee had charged a rate of interest of 7% on the foreign loan provided to its AE and determined it to be at ALP on basis of CUP on the ground that the loan was taken from HDFC bank it would have charged an interest rate at 6.5% and TPO made an addition by computing interest at 14% [i.e. domestic PLR] , CIT(A) deleted the addition holding that Libor+1.5% was to be charged for a foreign currency loan which was less than 7% charged by the assessee. However, CIT(A) did not consider the DRP’s direction for immediately preceding year where Libor+300bps (inclusive of risk adjustment) was charged against which assessee had not raised an appeal. The Tribunal remanded the matter to CIT(A) to decide afresh after considering the aforesaid direction of DRP and giving assessee a proper opportunity to be heard.
ASSISTANT COMMISSIONER OF INCOME TAX vs. FRESENIUS KABI ONCOLOGY LTD. (2019) 54 CCH 0440 DelTrib/)(TS-1443-ITAT-2018(DEL)-TP ITA No. 3013/Del/2015, 6264/Del/2015 dated 31.12.2018

694. Where TPO made addition of notional interest to ALP in respect of delay in realization of payment from AE, the Tribunal deleted the addition in view of fact that in terms of agreement there was no condition to charge any interest for delayed payment by AEs. Moreover, case of assessee pertained to AY 2010-12 during which inter-company receivables were not included in category of international transactions.
METLIFE GLOBAL OPERATIONS SUPPORT CENTER (P.) Ltdvs. ITO(2019) 101 taxmann.com 249 (Del Trib) ITA No. 826 (delhi) of 2016 dated 20.12.2018

695. The TPO benchmarked the interest rate based on SBI PLR for delay in receivables beyond period stipulated in service agreement by treating it as an unsecured loan to the AEs in case of assessee (engaged in providing IT enabled network management, technical support and other back-office support services to its group company). The DRP upheld TPO’s action for taking SBI PLR but directed to add 300 bps to the same and further directed 60 days to be reasonable period beyond which interest was to be charged on said receivables. The Tribunal noted that margin of assessee (16.19%) was higher than comparables (15.72%) which more than compensated for excess credit period extended to AEs and relied on ratio laid down in coordinate bench in Kusum Healthcare Pvt Ltd. (subsequently affirmed by HC) wherein it was held that assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterized the transaction. Thus, the Tribunal deleted the TP adjustment on interest on receivables.
Orange Business Services India Solutions Pvt Ltd vs Dy. CIT [TS-1384-ITAT-2018-(Del)-TP] ITA No.6751/Del/2018 dated 31.12.2018

696. The TPO treated the outstanding receivables from AE’s for provision of software development services (for a period of more than 3 months) as loan and computed notional interest at 11.25% (being SBI PLR) applying CUP. The DRP directed the TPO to verify whether the AE was recovering interest from third parties for late recovery and if this was found to exist the interest on extended credit period could be reasonable, on contrary facts its adjustment could not sustain. The Tribunal deleted the TP adjustment on interest on receivables accepting assessee’s plea that giving a credit period could not be considered as a separate international transaction and was in fact an integral part of transaction of rendering of software development services by the assessee to its AE and had to be considered as part of the international transaction of Software Development Services. Further, it relied on coordinate bench decision in case of Avnet India Pvt. Ltd. wherein it was held that there could be no separate determination of ALP of international transaction of realization of sale proceeds with extended credit period as it was only incidental to transaction of sale and not an international transaction.
Sunquest Information Systems (India) Pvt Ltd vs Dy.CIT[TS-1390-ITAT -2018-(Bom)-TP] IT(TP)A No.552/Bang/2015 dated 21.12.2018

697. The assessee provided USD loans to its AEs, (i) ILFS Maritime Offshore PTE Limited; and (ii) IL&FS International PTE Limited at an interest rate of USD LIBOR plus 5.5%. Further, loan was given by assessee in Euros to its AE, Elsamex at Euribor+1.75%. The assessee had applied external CUP and interest rates derived from the Reuters Loan Connector, Bloomberg and claimed the interest rate charged to be within the permissible range. The TPO applied CUP and used the annualized average yield of bonds to determine ALP at 15.41%. The CIT(A) upheld the TPO’s order. The Tribunal set aside CIT(A)’s order and held that assessee had rightly benchmarked the transaction as per LIBOR and EURIBOR and same could not have been determined as per the domestic rate by relying on Delhi HC decision in Cotton Naturals (I) Pvt Ltd. wherein it was held that interest rate applicable should be that of the currency concerned in which the loan has to be repaid and had disagreed with the view that the interest rates were to be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party.
IL&FS Transportation Networks Ltd vs Addl.CIT [TS-1383-ITAT-2018(Mum)-TP] ITA No.2393/Mum/2015 dated 19.12.2018

698. The Apex Court dismissed Revenue’s appeal against HC order wherein Tribunal’s order deleting TP adjustment on guarantee fee had been upheld. The Tribunal had rejected benchmarking of 3% of guarantee fee on basis of commission rates charged by bank noting that commercial considerations for corporate guarantee and bank guarantee were distinct and different since in Bank Guarantee, the customer could recover the default amount from bank and bank in turn could recover the same from customer. As against this, in corporate guarantee, failure to honor the guarantee would attract corporate laws but it was not as foolproof as bank guarantee. It had relied on coordinate bench decision of Everest Kanto (subsequently affirmed by HC) in which rate of 0.5% was considered to be at ALP. Thus, the HC had affirmed the Tribunal’s order noting that no distinction in facts and/or law had been brought on record warranting a different view from what was held in the jurisdictional HC in case of Everest Kento Cylinders Ltd.
CIT (LTU) vs GLENMARK PHARMACEUTICALSvsAddl CIT [TS-1268-SC- 2018–TP] Civil Appeal No(s).12632/2017 dated 11.12.2018

699. The Court dismissed Revenue’s appeal against Tribunal’s order deleting TP adjustment made by TPO to the extent of 3% of the amount of guarantee givenby the assessee on behalf of its AE by relying on coordinate bench decision in assessee’s own case wherein it was held that ALP of corporate guarantee could not be determined on basis of bank guarantee by relying on coordinate bench of Everest Kanto Cylinders noting that the issue was decided by High Court in assessee’s own case wherein it was held that no substantial question of law arose as no distinction in facts and/or law had been brought on record warranting a different view from what was held in the jurisdictional HC in case of Everest Kento Cylinders Ltd.
CIT vs Glenmark Pharmaceuticals Ltd[TS-1391-HC-2018(BOM)-TP] (IT) No.834 of 2016 dated 10.12.2018

700. The assessee had benchmarked the commission rate for corporate guarantee given on behalf of its AE at 0.5% by applying CUP. The TPO accepted CUP but determined the ALP at 3% (commission charged by banks for giving corporate guarantee). The Tribunal deleted the said adjustment relying on Bombay HC decision of Everest Kanto Cylinder Ltd. wherein the commission was restricted at 0.5% by holding that commercial consideration for corporate guarantee and bank guarantee are distinct and different.
UTV Software Communications Ltd.vsAsst.CIT [TS-1295-ITAT-2018–TP] ITA No.1258/Mum/2018 dated 11.12.2018

701. Where the assessee had charged guarantee commission at 0.38% of the outstanding guaranteed amount and the TPO/AO assessed commission at 3% in place of 0.38% which adjustment was deleted by CIT(A), the Tribunal allowed Revenue’s appeal and benchmarked the aforesaid transaction at 1% by relying on coordinate bench decision in assessee’s own case for earlier year wherein it was held that that the Tribunal in various cases had accepted guarantee commission chargeable between 0.5% to 1%, thus, transaction ought to be benchmarked by taking rate of 1% of outstanding guarantee amount.
DCIT vs National Engineering Industries Ltd.[TS-1401-ITAT-2018–TP] ITA No.1791/Kol /2017 dated 28.12.2018

702. The Tribunal restricted addition of guarantee fee to 0.9% (normally charged by an Indian bank) for issuance of SBLC relying on coordinate bench in assessee’s own case for earlier year wherein it had adopted internal CUP and benchmarked at 0.9% noting that the Indian bank had charged the assessee at the same rate. It rejected the assessee’s reliance on various coordinate bench decision for adopting guarantee fee ALP in the range of 0.25% – 0.5% observing that the said rate was in the case of benchmarking corporate guarantee transaction.
Technocraft Industries (I) Ltd vs Dy.CIT [TS-1397-ITAT-2018(Mum)-TP] ITA No.7565/Mum/2014 dated 27.12.2018

703. Where the assessee had charged interest rate at 8% in respect of loans provided to its AE in China, for the said transaction, TPO worked out interest at 11.5% and made an upward adjustment to the interest charged, the Tribunal directed AO to restrict the addition on account of interest as per rates applicable to currency in which loan was to be repaid to the assessee i.e. Libor relying on coordinate bench decision in assessee’s own case for earlier year which in turn relied on Delhi High Court decision in Cotton Naturals wherein it was held that the ALP on loan advanced to its AE should be computed based on market determined interest rate applicable to currency in which loan is required to be repaid.
Technocraft Industries (I) Ltd vs Dy.CIT [TS-1397-ITAT-2018(Mum)-TP] ITA No.7565/Mum/2014 dated 27.12.2018

704. The Tribunal restored the issue to TPO in respect of interest on outstanding receivables in conformity with the coordinate bench decision in case of Orange business Solutions wherein similar issue was restored after relying on the decision of Delhi High Court in Kusum Healthcare wherein it was held that several factors are to be considered before holding that interest on receivable is an international transaction and the same also requires assessment of working capital of assessee. The TPO had imputed interest of L+300 points for delay of receivables beyond 30 days from its AE however it was noted by the Tribunal that there was no specific period mentioned for payments to be received from AEs.
BT (India) Pvt. Ltd. vs ACIT [TS-1010-ITAT-2018 (DEL)] ITA No.442/Del/2016 and ITA No.302/Del/2017 dated 19.07.2018

705. The Court dismissed Revenue’s appeal and upheld the order of the Tribunal which accepted the assessee’s contention that notional interest should be charged on the delay in recovery of export receivables and expenses by assessee[engaged in the business of providing EPC in field of petrochemicals to its AE] in terms of LIBOR as against TPO’s method of charging at PLR rate. It noted the Tribunal’s finding of facts (i) no interest was charged by assessee from its AEs as well as non-AEs for delayed payment of export receivables beyond a period of 60 days (ii) assessee’s operating margin in respect of AE transactions was higher than margin earned on non-AE transactions. It observed that it was only the notional interest which was being computed as in fact no interest was charged by the respondent for delayed payments universally i.e. from AEs and non-AEs. Further, it also observed that in cases where any business enterprise is required to pay interest on delayed payment, it would examine the cost of interest and if the same is higher than the amount of interest payable on funds obtained locally, it would take a loan from local sources and pay the amounts payable for exports and expenses within time. Thus, the Court held that order of the Tribunal computing interest at LIBOR rates as prevailing in country where the loan is received/ consumed by the AE was in line with the decision of Bombay HC in Tata Autocomp and could not be faulted with
Tecnimont Pvt. Ltd. vs Dy.CIT [TS-880-HC-2018(BOM)-TP] ITA No.56 of 2016 dated 03.07.2018

706. The Tribunal directed adoption of internal CUP and charging of 0.9% as ALP for benchmarking the guarantee transaction for issuance of standby letter of credit noting that the Indian bank had charged the assessee at the same rate. It rejected the assessee’s reliance on various coordinate bench decision for adopting guarantee fee ALP in the range of 0.25% – 0.5% observing that the said rate was in the case of benchmarking corporate guarantee transactions.
Technocraft Industries (I) Ltd vs Dy.CIT [TS-827-ITAT-2018(Mum)-TP] ITA No.6686/Mum/2014 dated 31.07.2018

707. The Tribunal relying on the decision of Delhi High Court in the case of Cotton Naturals held that the ALP on loan advanced to its AE should be computed based on market determined interest rate applicable to currency in which loan is required to be repaid.
Technocraft Industries (I) Ltd vs Dy.CIT [TS-827-ITAT-2018(Mum)-TP] ITA No.6686/Mum/2014 dated 31.07.2018

708. The Tribunal restored the TP-adjustment on interest on Compulsory Convertible Debentures (CCDs) borrowed by assessee. The TPO considered CCDs as loan and benchmarked the interest at LIBOR+200bps and accordingly made the said adjustment which was confirmed by the DRP in light of its findings that interest received is in foreign currency and debt to be repaid in foreign currency.It was the assessee’s contention that weighted average rate of SBI PLR ought to be applied and the assessee’s rate of interest would be at ALP resulting in deletion of TP adjustment. In support of the above contention, the assessee submitted a copy of the debenture certificate dated 27.03.2014 showing that amount was in Indian currency for each of the debenture and relied upon the coordinate bench decision of ADAMA India wherein assessee’s payment of interest @ 12% on CCDs was held at ALP based on weighted average rate of SBI-PLR at 12.26%. Observing that assessee produced debenture certificate issued on March 27, 2014, the Tribunal noted that debenture issued on 27.03.2014 was not relevant for deciding the issue in present year and particularly when the finding given by DRP was that the amounts was received in foreign currency and was to be repaid in foreign currency. Thus, the Tribunal restored the matter to the file of DRP in light of the Tribunal order placed before the bench and to consider any other judgments available with them while deciding the issue afresh.
ADAMAS Builders Pvt Ltd vs. Dy. CIT [TS-795-ITAT-2018(Bang)-TP] IT(TP)A No.2477/Bang/2017 dated 20.07.2018

709. The Tribunal deleted the interest on the outstanding receivables from AE noting that the assessee had granted a 180 days credit period to the AE in line with the RBI guidelines and the one-month credit period limit by the DRP was arbitrary and without any basis. Relying on the Del HC decision of Kusum Healthcare, it held that if impact of outstanding receivables was already factored in the working capital adjustment then no further adjustment could be made. Thus, it held that the since the assessee’s grant of 6-month period was reasonable no interest could be levied and accordingly, deleted the interest adjustment.
C3i Support Services Private Limited vs Dy.CIT [TS-797-ITAT-2018(HYD)-TP] ITA No.503/Hyd/2017 dated 25.07.2018

710. The TPO computed interest on outstanding receivables (SBI PLR +200 bps) pending from AE for beyond 90 days. It was assessee’s contention there was no change in functional profile of the company from preceding year where the Tribunal in its own case had deleted similar adjustment made by noting that assessee was a debt free company, there was no question of charging any interest on receivables by recharacterizing the transaction as loan from its AE and as such, no adjustment on account of ALP on receivables could be made. The Tribunal noted that even for the subject year, it was a debt free company however it restored the matter to decide in conformity with coordinate bench ruling in Orange Business Services India Solutions Pvt Ltd. wherein it was observed that when there was a delay in collection of receivables, TPO had to analyze the statistics to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE. Further, the coordinate bench ruling relied on Delhi HC ruling in Kusum Healthcare wherein it was held that there are several factors which would have to be investigated which need to be considered before holding that every receivable is an international transaction and its impact on working capital has to be studied.
INDUCTIS INDIA PVT. LTD. vs. Dy CIT (2018) 53 CCH 0329 DelTrib ITA No. 1438/Del/2016 dated 13.07.2018

711. The Tribunal restored the issue of interest on outstanding receivables relying on the decision of Del HC in Avenue Asia Advisors Pvt Ltd. which followed the decision of Del HC in the case of Kusum Healthcare wherein it was held that a pattern has to be discerned after examining whether the transaction is an international transaction and and its impact on working capital and accordingly, the Court directed the TPO to investigate whether delay in collection of receivable beyond a stipulated period was due to any other factors and whether it was as an international transaction intended to benefit the AE and what impact it would have on the working capital.
Carrier Air-conditioning & Refrigeration Ltd vs. ACIT [TS-798-ITAT-2018(DEL)-TP] ITA No.1126/Del/2014, ITA No.728/Del/2015, ITA No.2140/Del/2016 and ITA No.7312/Del/2014 dated 13.07.2018

712. The Tribunal directed the AO/TPO to compute the ALP of the loan transaction by applying LIBOR rate relying on the ratio laid down in the rulings of Rain Commodities, Cotton Natural (I) Pvt Ltd. and Vaibhav Gems Ltd. wherein it was held that if the transaction is in foreign currency, domestic prime lending rate would not be applicable and international rate being LIBOR should be taken to benchmark the international transaction. The DRP had applied interest rate at 12.13% as against the SBI PLR at 14.75% applied by the TPO.
Nagarjuna Fertilizers and Chemicals Ltd vs ACIT [TS-734-ITAT-2018(HYD)-TP] ITA Nos.93 and 2021/Hyd/2017 dated Nil.07.2018

713. The Tribunal restricted the TP adjustment in respect of guarantee fee to 0.5% relying on various coordinate bench decisions as against 1% charged by the CIT(A) as ALP of the corporate guarantee provided by the assessee on behalf of its AE. The CIT(A) had reduced the 3% on the loan availed by the AE’s determined by the TPO as ALP of the transaction to 1% since it was excessive. The TPO had arrived at the said rate by addition of 0.6% on account of risks to the rate of 2.4% charged by the bank on loans exceeding Rs.10 crores.
Piramal Enterprises Ltd vs Addl. CIT [TS-808-ITAT-2018(Mum)-TP] ITA No.5471/Mum/2017 and ITA No.5583/Mum/2017 dated 30.07.2018

714. The Tribunal, in the second round of proceedings, restored the ALP determination on interest free loans advanced by assessee to its AE noting that in the first round of proceedings the Tribunal had directed the TPO to apply CUP-method as MAM by taking into account prices at which similar transactions happened with unrelated parties. However, in the remand proceedings, the TPO adopted the average anuual yield rate of BB rated bonds which was Libor+500 bps. The Tribunal observed that the action of the TPO was in contravention of mandate given by the Tribunal and accordingly remitted the matter back to TPO for deciding the issue afresh strictly in accordance with directions given by the Tribunal in first round.
Aithent Technologies Pvt Ltd vs DCIT[TS-731-ITAT-2018(DEL)-TP] ITA No.1564/Del/2015 dated 23.07.2018

715. The Court dismissed Revenue’s appeal against the Tribuna’s order benchmarking the interest free loan advanced by the assessee to its AE at Mauritius at LIBOR + 200 bps relying on the coordinate bench decision of Aurinpro Solutions wherein it was held that where cost of funds for the AE’s to whom loan had been advanced is to be measured by the rate of interest in foreign country in which the AE is located. It observed that Revenue had submitted that its appeal against the Aurinpro Solutions was dismissed by the Court and no distinguishing feature from the above ruling was pointed out and thus, dismissed the Revenue’s appeal
Pr.CIT vs S B & T International Ltd [TS-506-HC-2018(BOM)-TP] ITA 66 of 2016 dated 03.07.2018

716. The Tribunal remitted the issue of TP-adjustment on corporate guarantee given by assessee to its AE back to the DRP to pass a speaking order after considering the assessee’s objections, noting that (i) the DRP had not given any reason for accepting the TPO’s benchmarking of commission rate @ 4.61% to 4.76% and (ii) various coordinate bench decisions have accepted guarantee commission to be benchmarked at 0.5%.
Punjab Chemicals & Crop Protection Ltd vs. Addl.CIT [TS-965-ITAT-2018(CHANDI)-TP] ITA No.60/Chd/2013 and ITA No.100/Chd/2014 dated 23.07.2018

717. The Tribunal dismissed Revenue’s appeal against CIT(A)’s deletion of Rs. 14.91 crore TP-addition on account of discounted interest rate charged on AE-loan, noting that CIT(A) order on the same issue for prior AY had not been challenged on this issue by the Revenue authorities. It relied on the Apex Court decision in Radhasoami Satsang [(1992) 193 ITR 321 (SC)] and held that once the Revenue authorities accepted the stand of the CIT(A) on an issue and allow it to reach finality in one assessment year, it could not be open to them to challenge the same in the subsequent assessment year.
Separately, it deleted the TP-adjustment in respect of corporate guarantee provided by assessee on behalf of its AEs by rejecting the 0.75% guarantee fee confirmed by CIT(A). Following the decision of the coordinate bench in assessee’s own case for AY 2008-09 which in turn relied on the decision Micro Ink ruling (wherein it was held that issuance of corporate guarantees was in the nature of ‘shareholder activities’ / ‘quasi-capital’ and thus could not be included within the ambit of ‘provision for services’ under the definition of ‘international transaction’ u/s 92B), it held that the provision of corporate guarantee without any charge of commission would not constitute an international transaction.
Suzlon Energy Limited vs. DCIT – TS-1089-ITAT-2017(Ahd)-TP – ITA No.2074 & 2179/Ahd/2013 dated 22.12.2017

718. The Tribunal allowed assessee’s appeal against DRP/TPO’s imputing of notional interest on outstanding receivable from AEs noting that the assessee had huge outstanding balances exceeding 6 months in respect of AE-debtors. Relying on the decision of AMD India Private Ltd [TS-840-ITAT-2017(Bang)-TP], it held that the extra credit allowed was to be considered as an independent international transaction and the same was to be compared with the internal CUP being average cost of the total funds available to the assessee. Since no specific period of credit was agreed upon in the case of the assessee it restored the matter to the file of TPO to ascertain the agreed credit period and benchmark the transaction accordingly.
Ingersoll Rand (India) Ltd. vs. DCIT – TS-1061-ITAT-2017(Bang)-TP – ITA 251/Bang/2014 dated 10.11.2017

719. Where the assessee had outstanding receivables from its AEs, the Tribunal, relying on its decision in the assessee’s own case for earlier years (ITA No.1338/PN/2010), held that the TPO was incorrect in imputing notional interest @ LIBOR + 300 basis points + 200 basis points [as guarantee commission] and directed the AO / TPO to re-compute the adjustment on account of interest on outstanding receivables from AEs on the basis of LIBOR plus 300 basis points only on those receivables which were outstanding for a credit period exceeding 25 days after allowing the assessee the benefit of interest received by it, if any.
Capgemini Technology Services India Limited, (in the matter of iGate Computer Systems Limited) vs. DCIT – TS-58-ITAT-2018(PUN)-TP – ITA No. 360/PUN/2015 dated 25.01.2018

720. Relying on the decision of the co-ordinate bench in the assessee’s own case for the earlier year – [TS-129-ITAT-2015(DEL)-TP] (which was subsequently upheld by jurisdictional HC – [TS-412-HC-2017(DEL)-TP]), the Tribunal held that interest adjustment on the outstanding receivables was not warranted if the working capital adjustment took into account the outstanding receivables. Accordingly, it remitted the issue back to TPO for verification of whether while making the working capital adjustment the outstanding receivables were taken into account or not.
Kusum Healthcare Pvt. Ltd vs. DCIT – TS-65-ITAT-2018(DEL)-TP – ITA No.-1440/Del/2016

721. Relying on the decision of the High Court in Kusum Healthcare, the Tribunal deleted the TP-adjustment towards notional interest on outstanding receivable from AE (beyond 30 days) and held that since the assessee earned significantly higher margin than comparables, there was no justification for charging interest on outstanding AE-receivables. It noted assessee’s contention that payments were received only after satisfaction of the customers and therefore, there was delay in receiving the payments and that credit period extended to AE was 57 days as against 66 days in case of non-AEs and accordingly held that the decision of the Bombay HC in Indo American Jewellery was squarely applicable to assessee’s case. Accordingly, considering the nature of business of assessee, it held that there was no justification for the authorities below to make adjustment to the income declared by assessee.
Motherson Sumi Infotech & Designs Limited v DCIT – TS-131-ITAT-2018(DEL)-TP – ITA.No.6331/Del./2016 dated 26.02.2018

722. The Tribunal deleted the TP -adjustment towards interest on outstanding AE receivables The TPO had re-characterized outstanding AE-receivable as loan and imputed notional interest at SBI base rate plus 300 points i.e. at 12.87%. The Tribunal relying on the order of the Delhi High Court in Kusum Healthcare held that every AE-receivable could not be characterized as international transaction and such characterization was permissible only where the TPO undertook proper inquiry by analysing the statistics over a period of time to discern a pattern which would indicate that there existed an international transaction intended to benefit the AE. Relying on the aforesaid decision, it held that since the assessee had already factored in the impact of receivables on working capital and thereby on its pricing/profitability vis-a-vis that of comparables, adjustment only on the basis of outstanding receivables was impermissible.
Terradata India Pvt. Ltd v ACIT – TS-133-ITAT-2018(DEL)-TP – ITA.No.7885/Del./2017 dated 21.02.2018

723. The Tribunal relying on co-ordinate bench ruling in Kadimi Tool Manufacturing Co (subsequently confirmed by HC & SC) deleted the TP-adjustment in respect of outstanding AE-receivables observing that the taxpayer was a debt free company and therefore there was no question of charging any interest on receivables by recharacterizing the transaction as loan from its AE and as such, no adjustment on account of arm’s length interest on receivables could be made.
Inductis (India) Private Ltd. vs. ITO – TS-154-ITAT-2018(DEL)-TP – ITA No.2075/Del./2015 dated 06.03.2018

724. The Tribunal held that interest on delayed outstanding receivables amounts to an international transaction for subject AY i.e. AY 2013-14 in light of Finance Act 2012 amendment, and held that once any debt arising during the course of business had been ordained by the legislature as an international transaction, if there was any delay in the realization of debts arising during the course of business, it would be liable to be visited with the TP adjustment on account of interest income short charged or uncharged. However, it remitted the issue back to TPO to verify assessee’s claim that in none of the cases, assessee realized invoices beyond 30 days and then decide the issue afresh.
Pitney Bowes Software India Pvt. Ltd vs. ACIT – TS-163-ITAT-2018(DEL)-TP – ITA No.7034/Del/2017 dated 13.03.2018

725. The Court dismissed Revenue’s appeal against Tribunal’s deletion of TP-adjustment on loan given to AE considering LIBOR as a comparable for ALP-determination noting that the co-ordinate bench had dismissed Revenue’s appeal for the earlier AY on the same issue. Further, it dismissed Revenue’s appeal against Tribunal’s deletion of TP-adjustment on advance given to AE in the form of share application money by considering LIBOR as comparable for ALP-determination, relying on the decision of Tata Autocomp Systems and Aurionpro Solutions rulings. However, it admitted Revenue’s appeal on whether the Tribunal was justified in holding that provisions of corporate guarantee do not affect profits/income/assets of the assessee.
Pr. CIT vs. Videocon Industries Ltd – TS-194-HC-2018(BOM)-TP – ITA NO. 1178 OF 2015 dated 21st MARCH, 2018.

726. Where the TPO re-characterised the outstanding AE receivables of the assessee as a loan and imputed interest @ 17.22 percent thereon, the Tribunal noting that for delays on similar receivables from non-AEs (average 300 days delay, highest being 1178 days delay), no interest had been charged by assessee; deleted the TP adjustment observing that the assessee’s transaction were at ALP under the internal CUP. It held that since under both the scenarios (AE and Non-AE), no interest had been charged on similar nature of receivables, then the transaction with the related parties meets the arm’s length requirement vis-a -vis, the transactions with the unrelated third parties and no addition could be made.
Axis Risk Consulting Services Private Limited – TS-168-ITAT-2018(DEL)-TP – I.T.A. No.3693/DEL/2014
dated 22.02.2018

727. The Tribunal held that TP-adjustment towards notional interest on outstanding AE receivable was required to be made noting that the credit period extended to AE was higher than credit period extended to non-AEs. However, it rejected interest rate of 6.75% applied by TPO based on cost of capital, and directed that the adjustment should be made using interest rate for export packing credit of 1.92%.
Mahindra & Mahindra Ltd. vs. DCIT – TS-199-ITAT-2018(Mum)-TP dated /I.T.A./6074/Mum/2013 dated 21/03/2018

728. The Tribunal deleted the TP-adjustment made by TPO/CIT(A) in respect of outstanding AE-receivables noting that the AO invoked Explanation (1)(c) to Sec 92B inserted by Finance Act, 2012 w.e.f. April 1, 2002 in order to determine interest-ALP to be charged by assessee from its AE on extending credit facility/delay in realization of debit balances outstanding in AEs account by considering it as an international transaction and relying the co-ordinate bench ruling in KGK Enterprises held that Explanation (1)(c) to Sec 92B could not have retrospective effect from April 1, 2002. It held that assuming the transaction was an international transaction, it had to be treated as one from AY 2013-14 whereas taxpayer was before the Tribunal for AY 2009-10. On merits, noting that the Agreement with AE allowed a grace period of 180 days for making the payment of the cost plus mark up it held that when the business agreement was categoric enough to grant the grace period of 180 days to make the payment and all the payments have been made within six months, no adjustment on account of interest on receivables could be made. Further, relying on Kusum Health Care HC ruling it held that when undisputedly the profit margin of the taxpayer has been held to be at arm’s length, there was no need to make separate addition.
Globerian India Pvt. Ltd vs. DCIT – TS-200-ITAT-2018(DEL)-TP – ITA No.1170/Del./2016 dated 20.03.2018

729. Noting the assessee’s contention that no separate adjustment was required to be made on account of receivables as it was subsumed in the working capital adjustment made by the TPO and following the decision of the Tribunal in the assessee’s own case for preceding AYs, the Tribunal remitted the TP adjustment on account of interest on receivables to the file of the TPO absent in-depth analysis of receivables. It directed the TPO to recalculate interest in conformity with Kusum Healthcare HC ruling [wherein HC had stated that the impact of working capital of the assessee was to be studied] and noted though the TPO had allowed working capital adjustment to the assessee, it was not clear as to what point of time whether the receivables, inventory and payables were computed on the basis of the yearly average, as required.
D.E. Shaw India Advisory Services Private Ltd vs. ACIT – TS-72-ITAT-2018(DEL)-TP – ITA No.6735/Del/2017 dated 18.01.2018

730. Where the assessee, a Singapore based company, had provided interest free loans to its Indian AE and the TPO imputed interest @ 10.50 percent based on the PLR, the Tribunal rejected assessee’s contention that since the interest free loan was given by it to strengthen the Indian AE which in turn would improve its own business, no TP adjustment was required. However, it held that the TPO was unjustified in applying the PLR and held that the adjustment ought to have been computed based on LIBOR. Relying on the decisions of the Bombay High Court and the co-ordinate bench it held that LIBOR + 200 basis points was to be used to benchmark the transaction.
Sabre Asia Pacific Pte Ltd (Earlier Known as Abacus International Pte Ltd.) vs. DCIT – TS-112-ITAT-2018(Mum)-TP – I.T.A. No. 486/Mum/2016 dated 16.02.2018

731. Relying on the co-ordinate bench ruling in the assessee’s own case, the Tribunal deleted the TP-adjustment relating to the interest on assessee’s foreign currency loan to AE and held that when a loan was advanced to foreign subsidiary in foreign currency, LIBOR and not the domestic prime lending rate was to be used to benchmark the international transaction. It noted that the earlier year’s orders were upheld by the High Court and that the DRP in assessee’s subsequent year proceedings directed the deletion of the TP-adjustment on interest while in the preceding AY, the TPO himself chose not to propose any such adjustment. Accordingly, it deleted the TP adjustment in the impugned year.
Cotton Natural (I) Pvt. Ltd vs. DCIT – TS-1068-ITAT-2017(DEL)-TP – ITA No.6910/Del/2014 dated 04-12-2017

732. Noting that as per Section 10A(3) of the Act (which was applicable to the assessee) foreign exchange receivables (whether from AEs or Non-AEs) were to be realized within 6 months from the end of the financial year, the Tribunal held that the TPO was unjustified in imputing notional interest on AE receivables outstanding for a period 3 month as the 6 month period as provided in Section 10A was a reasonable period to be allowed to debtors. Accordingly, it directed the TPO to charge interest of LIBOR + 200 basis points only on those receivables outstanding for a period of more than 6 months.
GSS Infotech Ltd. vs. DCIT – TS-1086-ITAT-2017(HYD)-TP – ITA No. 267/Hyd/2014 & 329/Hyd/2016 & ITA No. 602/Hyd/2017 dated 30-11-2017

733. Where the assessee had provided an interest free loan to its parent company AE against which the AE issued shares to the assessee after a period of 3 years, the Tribunal held that the case of the assessee could not be considered as an investment in share capital and therefore distinguished its reliance on the decision of Prithvi Information Solutions Ltd., ITA No. 472/Hyd/2014. However, it remitted the matter to the file of the TPO to determine when the AE had decided to issue shares against the interest free loan and held that if the decision to do so was made in the impugned AY, then the decision of Prithvi Information would apply and the interest free loan would take the nature of investment in share capital on which no notional interest could be computed but if the decision to issue shares was taken subsequently, the TPO was justified in imputing interest @ LIBOR + 3 percent as the transaction could not be considered as investment in equity share capital.
GSS Infotech Ltd. vs. DCIT – TS-1086-ITAT-2017(HYD)-TP – ITA No. 267/Hyd/2014 & 329/Hyd/2016 & ITA No. 602/Hyd/2017 dated 30-11-2017

734. The Tribunal deleted TP-addition in respect of interest on delayed AE-receivables for assessee (engaged in the business of manufacturing of studded gold jewellery) noting that the assessee did not charge any interest on delay in receiving the payment from AE (where average delay was about 290 days) as well as non-AEs (where average delay was about 340 days). Relying on the assessee’s own case in the prior assessment year, it held that the TPO was not justified in making adjustment by applying interest @ 10.68% as there was uniformity in the act of the assessee in not charging interest from both AE and Non-AE debtors for delayed realization of export proceeds.
Dania Oro Jewellery Pvt. Ltd vs. ITO – TS-27-ITAT-2018(Mum)-TP – I.T.A./7635/Mum/2014 dated 03/01/2018

735. The Tribunal in the cross appeals for AY 2007-08 and AY 2008-09 deleted TP adjustment towards notional interest on shareholder’s deposits by following the Tribunal’s decision in assessee’s own case for AY 2012-13. It was noted that the outstanding technical know-how fee receivable from the JV entity for period 1981 to 1995 was treated by the JV partners (one of them being the assessee) as shareholder deposits and RBI had permitted assessee to obtain the repayment by 2015. In AY 2012-13, the Tribunal had held that the said deposit could not be considered as international transaction as there was no inflow or outflow of funds during the subject year. In AY 2012-13, the Tribunal had also observed that the standard of arms length is inherent in the provision of the foreign exchange laws of India, under which the permission was obtained by the assessee.
The tribunal further deleted TP adjustment towards interest on outstanding AE- receivables relying on the assessee’s previous order wherein it was held that outstanding debit balances could not be considered as international transaction. Further, it also confirmed the CIT(A) order and noted that extending Corporate Guarantee solely is not an international transaction u/s 92B.
M/s Bombay Dyeing & Mfg Co Ltd vs ACIT 2(1) – TS-364-ITAT-2018(Mum)-TP- ITA No 588/Mum/12 dated 02.04.2018

736. The assessee had advanced loan in Australian dollars to its AE in Australia and benchmarked the transaction by adopting CUP method and took ALP rate of interest at 8.91% as was prevailing in Australia. The AO was of the view that 10% interest rate would be a reasonable rate and accordingly, made an adjustment.The Tribunal deleted the TP adjustment on interest on loan advanced by the assessee to its AE noting that the rate adopted by the assessee was at ALP since the assessee had adopted interest rate which an Australian company borrowing from Australian bank would have paid. It relied on the ratio laid down in the Delhi HC ruling of Cotton Natural wherein it was held that ALP on loan advanced to its AE should be computed based on market determined interest rate applicable to currency in which loan is required to be repaid.
Dy.CIT vs Russell Credit Ltd. (2018)52 CCH 0315 KolTrib ITA No.629/Kol/2013 and ITA No.674/Kol/2013 dated 11.04.2018

737. The Tribunal confirmed CIT(A)’s order upholding interest adjustment on advances given by assessee to its AE. The assessee tried to justify non-collection of interest from its AE by submitting that it did not pay commission to its AE on the sale procured by it. The Tribunal observed that assessee had neither brought any material on record to substantiate its claim that AE did some marketing efforts on behalf of the assessee nor any correspondence, to demonstrate that both the parties were waiving their right to collect interest/commission in view of cross services. Further, the Tribunal accepted Revenue’s contention that loan and agency were 2 different transactions and opined that alleged marketing efforts could not be linked to the advance given by the assessee interest free and accordingly upheld CIT(A)’s TP Adjustment.
M/s Virgo Engineering Ltd vs ACIT 10(3) Mumbai- TS-303-ITAT-2018(Mum)-TP- ITA No 685/Mum/2014 dated 20.04.2018

738. The Tribunal deleted secondary adjustment towards notional interest computed on amount of TP- adjustment on international transaction of sale of business to AE.
The Tribunal noted that such additional consideration was not received by assessee from its AE and the TPO treated the same as interest free advances to AE and charged interest at 12%. The Tribunal followed its earlier year’s order in assessee’s own case wherein similar secondary adjustment was deleted and held that, as per the requirement of law, there is nothing further provided to impute any secondary adjustment and the charging interest over and above the amount of adjustment, was not found to be in accordance with the provisions of law.
ACIT 15(2)(2) vs Prudential Process Management Services India Pvt Ltd- TS-804-ITAT-2018(Mum)-TP- ITA No 5526/Mum/2015 dated 13.04.2018

739. The Tribunal remanded the matter back to the Assessing officer and decided the matter in line with assessee’s own case before Tribunal for previous A.Y. The tribunal noted that if the loans were advanced to the Associated Enterprise on the basis of LIBOR/WIBOR + then the said transaction would be at arm’s length price, if not the TPO could recompute the arm’s length price of the transaction
KPIT Technologies Ltd vs ACIT Circle -14 Pune- TS-408-ITAT-2018(PUN)-TP- ITA no 594/PN/2015 dated 12.04.2018

740. The Tribunal accepted assessee’s plea for considering Euro PLR as benchmarking rates as against Indian PLR for interest free loan given to step down subsidiary. The Tribunal noted that since the interest free loans were given in Euro Currency, the ALP should be adopted at the rate on the basis of prime lending rate prevalent in Europe.
Synchron Research Services Pvt Ltd vs ACIT Circle 4(1)(2)- TS-363-ITAT-2018(Ahd)-TP- ITA No 899/Ahd/2014 & 418/Ahd/2015 dated 18.04.2018

741. The assessee was providing intragroup services relating to external commercial borrowings made by third parties from assessee’s AE. The AE earned interest income and commission fees in respect of the said borrowings/loans which was added by the TPO in the hands of the assessee. The Tribunal relying on its order of the earlier year, directed TPO to restrict TP-adjustment on services rendered by Indian Branch of assessee bank to AE at 20% of agency/commission fee and directed deletion of adjustment towards interest as the assessee had a limited role in sanctioning of loan to Indian customers and the loan was granted by AE who had borne risk as well as reward from such activity.
Further, the Tribunal confirmed CIT(A)’s order deleting TP-adjustment on interest received/paid on money market deposits given to AE/accepted from AE by assessee, observing that the TPO had ignored similar transactions wherein the assessee had earned excess interest from AE or paid lesser interest to AE as compared to benchmarkand therefore held that all such closely linked transactions were required to be aggregated to determine TP-adjustment. Thus, relying on co-ordinate bench ruling in Audco India Ltd. and Essar steel ruling, it held that the Tribunals were consistently taking the view that arm’s length price should be determined after aggregation and there was no scope for adjustment without aggregation.
Barclays Bank PLC vs ADIT (Intl Tax)-3 -TS-360-ITAT-2018(Mum)-TP- ITA No 2242/Mum/2015 dated 13.04.2018

742. Where the TPO made an adjustment on account of interest (@ 14.45 percent) on receivables outstanding for a period of more than 2 months (the normal credit period of 30 days and a grace period of 30 days) , the Tribunal relying on the decision of the co-ordinate bench in GSS Infotech Limited held that there was no basis for adopting only two months as credit period where the RBI itself allows a year for realization of foreign receivables. It noted that whether it was AE or non-AE receivables, it would be in the interest of business that assessee receives the foreign exchange early so that it can claim deduction u/s. 10A. Accordingly, it held that imposing a limit of two months of credit period was arbitrary and therefore deleted the addition.
United States Pharmacopeia India Pvt Ltd vs DCIT – TS-536-ITAT-2018(HYD)-TP – ITA No. 1927/Hyd/2017 dated 11/05/2018

743. The Court upheld Tribunal’s rejection of TPO’s re-characterization of assessee’s notional interest transaction on delayed realization of trade debts from AE noting that the Tribunal had relied on EKL Appliances Delhi HC-ruling wherein HC had slated the only 2 possible situations where re-characterization of a transition is possible- (i) when the economic substance of a transaction differs from its form and (ii) when the form and substance of the transaction are the same but arrangements made in relation to the transaction, differ from those which would have been in uncontrolled transaction and had categorically held that none of these conditions were satisfied in the present case. Further it noted that the assessee had not charged interest on the delayed realization of debts in non-AE cases as well and therefore held that there could not be any occasion to make ALP adjustment for notional interest on delay in realization of trade debts from AEs. Accordingly it held that the finding given by the Tribunal was based on the facts of the case and therefore no question of law emerged.
Pr. CIT vs. Sharda Spuntex Pvt. Ltd – TS-436-HC-2018(RAJ)-TP – D.B. Income Tax Appeal No. 56 / 2017 dated 11/05/2018

744. The Tribunal considered the outstanding amount of travelling & accommodation expenses incurred by assessee on behalf of AE as an international transaction noting that the expenses were incurred on behalf of and for the benefit of the AEs. It held that the expenses so incurred by the assessee on behalf of its AE, if outstanding, would come within the meaning / explanation of international transaction in section 92B of the Act and rejected assessee’s plea of granting 6 months period for recovery of cost incurred from AE. It observed that a prudent businessman would always recover the outstanding amounts at the earliest point of time and therefore held that a period of 60 days (as against DRP’s 15 days) was a reasonable period within which the expenses ought to have been recovered from AE. Regarding rate of interest, it rejected assessee’s plea to adopt LIBOR since expenditure was incurred in Indian currency and not in dollars and held that SBI-PLR rates alone was to be adopted as the ALP interest rate (without any spread). Noting that the weighted average interest of SBI-PLR on FDs had been calculated at 8.15%, it held that 8.15% was to be adopted while calculating ALP interest on the amounts outstanding from the assessee’s AEs.
Allianz Cornhill Information Services Private Limited vs. DCIT – TS-433-ITAT-2018(COCH)-TP IT(TP)A No.489/Coch/2016 dated 30.05.2018

745. The Tribunal relied on the decision of coordinate bench in assessee’s own case for AY 2007-08 and restored the TP-adjustment in respect of software developer assessee’s outstanding receivables from AE for AY 2010-11. The Tribunal relied on the assessee’s own case for AY 2007-08, wherein ALP-determination of similar outstanding receivables was restored back to AO/TPO. The AO/TPO was directed to re-do the exercise of determination of ALP after considering the credit period allowed to AE on realization of sale proceeds along with the main international transaction in respect of sale to AE. It further held that working capital adjustment appropriately takes into account the outstanding receivable, and concluded that any further adjustment on the pretext of outstanding receivables was not warranted.
Information System Resource Centre Pvt Ltd. (Now amalgamated with Larsen & Toubro Infotech Ltd) vs. ACIT[TS-384-ITAT-2018(Mum)-TP] – I.T.A. No. 3712/Mum/2016 dated 22.05.2018

746. The Tribunal deleted the notional interest adjustment made on delay in collection of receivables received by assessee from its AE. The Tribunal accepted assessee’s contentions that the notional interest did not accrue or arise in the year under consideration since the invoices were raised on March 31, 2013 and credit period allowed was of 60 days. The Tribunal observed that the assessee was following mercantile system of accounting and interest accrues only when the debt falls due and the same remained unpaid. Since the debt did not fall due for the year under consideration, there was no question of interest accruing or being crystallized. The Tribunal also relied on the Motherson Sumi Infotech ruling and held that the assessee had not indulged in providing any undue credit to its AE. Further, the Delhi HC decision of B.C. Management Services(P) Ltd. was also relied on to hold that notional income on account of delayed payment made by the AO could not be treated as part of income and made subject matter of adjustments.
GVK Power & Infrastructure Ltd v ACIT [TS-385-ITAT-2018(VIZ)-TP] ITA No.530/Vizag/2017 dated 18.05.2018

747. The assessee had charged interest at 8% on loans given to some AEs and the TPO had taken a view that interest should have been charged at uniform rate of 8% to all AEs. Further, the TPO held that assessee should have charged certain fees from AE for meeting its administrative expenses and estimated the same at 0.5% of the average amount of loan given to its AE’s and thus proposed TP-adjustments on the above grounds of interest and fees. The CIT(A) upheld the adjustment made towards interest and deleted the adjustment towards administrative expense.
The Tribunal followed co-ordinate bench ruling in assessee’s own case for previous AY which had held that LIBOR+300bps should be considered as interest ALP and directed the Assessing Officer to compute TP adjustment by adopting LIBOR rate plus 300 bps as ALP rate of interest. Further, regarding TP-adjustment on administrative charges, the Tribunal, in line with Circular No. 21/2015 dated 10.12.2015 issued by CBDT stated that admittedly, tax effect involved on the above said issue was less than Rs.10 lakhs and hence the Revenue was precluded from pursuing this appeal.
ACIT CC-43 vs Roha Dyechem Ltd- TS-417-ITAT-2018(Mum)-TP- ITA No 1334/Mum/2014 dated 30.05.2018

748. The Tribunal allowed assessee’s appeal and deleted the TP adjustment towards interest on loans given to its AE for infrastructure facilities. Noting that the TPO had made an addition on the ground that one of the AE’s was charged interest at Euribor+ 3.75% from a bank, it observed that the assessee was the tested party and not the AE. The addition made by the TPO could not be sustained since the assessee was able to demonstrate that the interest charged was at market rate and the assessee was not charging interest at a higher rate than Libor+1% to any of the other parties.
Dishman Pharmaceuticals & Chemicals Ltd vs DCIT [TS-958-ITAT-2018(Ahd)-TP] ITA No.955/Ahd/2012 dated 20.06.2018

749. The Tribunal relying on the decision of the coordinate bench in Pregasystems Worldwide India Ltd (ITA Nos.1758 and 1936/Hyd/2014) held that notional interest on outstanding receivables is not chargeable to tax under the provisions of transfer pricing and accordingly no TP adjustments ought to be made and further, relied on the HC ruling of Kusum Healthcare and decision of coordinate bench in EPAM Systems India to hold that since the working capital adjustment was considered by the A.O, interest on receivables had been considered.
Hexagon Capability Center India Private Limited [TS-449-ITAT-2018(HYD)-TP] ITA No.258/ Hyd/2016 dated 08.06.2018

750. The Tribunal held that advancing interest-free loans to subsidiary companies constituted international transaction on plain reading of of sub-clause (c) of clause (i) of Explanation to section 92B relating to capital financing. It was the contention of the assessee that the interest free loan advanced to its AE later converted into equity was not an international transaction. The Tribunal rejected the recharacterization of transaction by assessee and called it a colourable device. Further, the Tribunal relied on the co-ordinate bench ruling in CIT vs Tech Mahindra Limited and held that rate of interest prevailing in the country where loans were received by the AE should be applied.
EIT Services India Pvt. Ltd v ACIT EIT Services India Pvt. Ltd. (formerly known as Hewlett Packard Global Soft Pvt. Ltd. [TS-612-ITAT-2018(Bang)-TP] IT(TP)A No.1394/Bang/2012, ITA No.1332/Bang/ 2010 and IT(TP) A No.163/Bang/2012 dated 28.06.2018

751. The Tribunal dismissed Revenue’s appeal and upheld the CIT(A)’s deletion of interest adjustment. The Tribunal noted that assessee had granted loan to its AE namely, Emami International FZE of USD 45 million and charged interest @8% p.a. However, the TPO had computed ALP of such loan at 11% p.a. [5% (cost of funds) + 600bps (risk premium)] and made an upward adjustment of Rs. 48.94 lakhs. The Tribunal opined that the risk premium of 600 bps taken by the TPO was excessive. It noted that suitable risk premium would work out to be lower than 300 bps considering the facts of the case and credit rating of the assessee. In view of the aforesaid findings, it appreciated the CIT(A)’s view that even following the methodology proposed by the TPO viz., cost of funds plus risk premium, the ALP of the loan would work out to 8%. Thus, the Tribunal held that the TPO/Assessing Officer had grossly erred in applying notional interest @11% (i.e. cost of procurement of funds by assesse @5% + 600 basis points) whereas the cost of procurement of similar funds from third part was LIBOR + 600 basis points, which worked out to 7.20%.(that is, prevailing USD LIBOR rate, which was 1.2% plus 600bps). Hence it confirmed CIT(A)’s order that the interest rate of 8% charged by the assessee from its AE was at arm’s length. Further, it also observed that the Revenue had accepted the interest of 8% charged on the same loan to be at arm’s length in the earlier as well as succeeding transfer pricing assessments and following the priniciple of consistency, the same would prevail.
DCIT/ACIT vs. Emami Limited [TS-468-ITAT-2018(Kol)-TP] ITA Nos. 1065 and 1066/Kol/2017 dated 15.06.2018

752. The Tribunal remanded the matter to the file of the AO/TPO to compute the adjustment in respect of the interest due on loans advanced by the assessee to its AE’s for AY 2011-12 following its earlier year order. AO had applied BPLR rates whereas the DRP applied the benchmark of LIBOR + 5%. The co-ordinate bench in assessee’s own case in earlier year had directed AO to verify whether the loans were advanced to associated enterprises on LIBOR+ or WIBOR+ rates, as the case may be, and if so, to consider the said transaction to be at arm’s length price. If the loan was not advanced at the said rates, the TPO was directed to re-compute the arm’s length price of the international transactions.
KPIT Technologies Ltd (earlier known as KPIT Cummins Infosytems Limited.) v DCIT [TS-522-ITAT-2018(PUN)-TP] ITA No.505/ Pun/2016 dated 04.06.2018

753. The Tribunal upheld the deletion of TP-adjustment in respect of guarantee fee received by assessee noting that the assessee applied CUP-method based on third party quotation (from HSBC India) to determine arm’s length guarantee fee commission at 0.75% but the TPO determined guarantee fee ALP at 2.0833% based on the bank guarantee rate. Relying on the decision of the Bombay High Court in Everest Kento Cylinder [TS-200-HC-2015(BOM)-TP]it held that the considerations which applied for issuance of a corporate guarantee were distinct and separate from those in a case of bank guarantee and accordingly upheld the First Appellate Authority’s deletion of the TP adjustment made.
ACIT vs. Wockhardt Ltd. – TS-39-ITAT-2018(Mum)-TP- I.T.A./4156/Mum/2012 & I.T.A./5557/Mum/2012 dated 05/01/2018

754. The Tribunal deleted the TP-adjustment in respect of corporate guarantee provided to 100% Mauritius subsidiary for which no consideration was charged accepting assessee’s contention that corporate guarantee was provided as a matter of commercial prudence to protect the interest and fulfill the shareholder obligation as any financial incapacitation of the subsidiary would jeopardize the investment of the assessee. It rejected Revenue’s contention that under Explanation to Sec 92B there was no requirement of international transaction of guarantee to have a bearing on profits, incomes, losses or assets of such enterprises and held that the explanation had to be read along with Section 92B(1) of the Act. It held that the provision of corporate guarantee neither fell under ‘purchase, sale or lease of tangible or intangible property, provision of services or lending or borrowing of money’ contained in Section 92B(1) and therefore was covered under ‘any other transaction having bearing on profits, income, losses or assets’ of an enterprise as contained in the impugned Section. Accordingly, notwithstanding that the Explanation to Section 92B did not specifically mandate such impact on profits / losses etc, it held that as per Section 92B the requirement would have to be fulfilled for the guarantee to be considered as an International transaction. Observing that no consideration was received by assessee for providing guarantee from its AE, the Tribunal concluded that when a parent company extends an assistance to the subsidiary, being associated enterprise, which does not cost anything to the parent company, and which does not have any bearing on its profits, income, losses or assets, it would be outside the ambit of international transaction under section 92B(1) of the Act. Accordingly, it deleted the TP-adjustment.
DCIT vs. EIH Ltd – TS-13-ITAT-2018(Kol)-TP – I.T.A No. 153/Kol/2016 dated 12.01.2018
755. The Tribunal rejected TPO/DRP’s treatment of corporate guarantee as an international transaction for AY 2010-11 and accepted assessee’s submission that Finance Act 2012 amendment [wherein a clarificatory amendment was inserted w.r.e.f. April 1, 2012 specifying that corporate guarantee will be included within the definition of international transaction] was applicable only prospectively from AY 2013-14 and therefore not applicable to subject AY. It relied on the decision of the co-ordinate bench in Reddy Laboratories wherein it was held that the Finance Act, 2012 amendment could not be applied retrospectively as it would amount to retrospective levy of tax and would impose an impossible obligation on assessees. Accordingly, it deleted the ALP adjustment.
DCIT vs. Cyient Ltd (Formerly Infotech Enterprises Ltd) – TS-159-ITAT-2018(HYD)-TP] – ITA No. 474/Hyd/2015 dated 28/02/2018

756. The Tribunal dismissed assessee’s appeal challenging TP-adjustments in respect of corporate guarantee, loan, outstanding receivables ex parte noting that none appeared on behalf of assessee despite notice being served on assessee. On examination of the impugned order of CIT(Appeals) and the order passed by the AO u/s. 143(3) r.w.s. 144C of the Act, it held that there was no infirmity therein.
Opto Circuits India Ltd. vs. DCIT – TS-89-ITAT-2018(Bang)-TP – IT(TP)A Nos.1315/Bang/2017 dated 31;01.2018.

757. The assessee provided corporate guarantee to its AE in Mauritius for which it did not charge any fee. The TPO determined the ALP at 2.75 percent based on rates for financial guarantee charged by various third-party banks which was reduced to 1.75% by the DRP. The Tribunal held that the benchmarking adopted by the TPO and DRP was unacceptable and relying on the decisions of the HC rulings of Everest Canto and Glenmark Pharmaceuticals, wherein it was held that corporate guarantees could not be compatred to bank guarantees, determined the ALP rate of guarantee fee on corporate guarantee provided by the assessee to its Mauritian AE at 0.5%.
Laqshya Media Pvt. Ltd v ACIT – TS-20-ITAT-2018(Bang)-TP – ITA Nos. 1774 /Mum/2016 dated January 2018

758. The Court admitted assessee’s appeal on the substantial question of law i.e. whether corporate guarantee given by the assessee with respect to the loans given by the subsidiary would come under the purview of section 92 of the Act or not.
Minacs Pvt Ltd vs DCIT 8(1)- TS-302-HC-2018(BOM)-TP- ITA No 1132 of 2015 dated 25.04.2018

759. The Tribunal held that the DRP erred in determining the ALP of guarantee commission received by the assessee at 1.5% (TPO determined the commission @ 3%) and noted that the co-ordinate bench in the assessee’s own case had sustained addition to the extent of 0.5% in the earlier and subsequent year. Accordingly, following the rule of consistency, ITAT directed the AO/TPO to restrict the addition towards guarantee commission by adopting the rate of 0.5%.
Nimbus Communications Ltd. vs. DCIT – TS-520-ITAT-2018(Mum)-TP – LT.A. No. 1988 / Mum / 2016 dated 21.05.2018

760. The Tribunal, relying on the order of the co-ordinate bench in the assessee’s own case in the earlier year, deleted the TP-adjustment in respect of corporate guarantee provided to 100% Mauritius subsidiary for which no consideration was charged accepting assessee’s contention that corporate guarantee was provided as a matter of commercial prudence to protect the interest and fulfill the shareholder obligation as any financial incapacitation of the subsidiary would jeopardize the investment of the assessee. It rejected Revenue’s contention that under Explanation to Sec 92B there was no requirement of international transaction of guarantee to have a bearing on profits, incomes, losses or assets of such enterprises and held that the explanation had to be read along with Section 92B(1) of the Act. It held that the provision of corporate guarantee neither fell under ‘purchase, sale or lease of tangible or intangible property, provision of services or lending or borrowing of money’ contained in Section 92B(1) and therefore was covered under ‘any other transaction having bearing on profits, income, losses or assets’ of an enterprise as contained in the impugned Section. Accordingly, notwithstanding that the Explanation to Section 92B did not specifically mandate such impact on profits / losses etc, it held that as per Section 92B the requirement would have to be fulfilled for the guarantee to be considered as an International transaction. Observing that no consideration was received by assessee for providing guarantee from its AE, the Tribunal concluded that when a parent company extends an assistance to the subsidiary, being associated enterprise, which does not cost anything to the parent company, and which does not have any bearing on its profits, income, losses or assets, it would be outside the ambit of international transaction under section 92B(1) of the Act. Accordingly, it deleted the TP-adjustment.
DCIT vs. EIH Ltd – TS-426-ITAT-2018(Kol)-TP – ITA No.117/Kol/2017 dated 16-05-2018

761. The Tribunal restricted guarantee commission ALP at 0.5% of average amount of loan outstandingduring the year in respect of corporate guarantee on overdraft facility given by assessee by following the co-ordinate bench ruling in assessee’s own case for previous AY (wherein relying on various decision of the jurisdictional benches of the Tribunal it was held that ALP of the guarantee commission was to be considered as 0.5%) as against TPO’s computation of guarantee fees @ 1.50%.
In respect of counter guarantee given by assessee for guarantee given by IDBI Bank on behalf of Taj TV (AE), the Tribunal accepted assessee’s contention following Asian Paints ruling that non fund based facility could not be treated at par with fund based facility and directed AO to compute TP-adjustment in respect of counter guarantee at 0.2% of counter guarantee amount.
ACIT 16(1) vs Zee Entertainment Enterprises Ltd- TS-418-ITAT-2018(Mum)-TP- ITA No 1640/Mum/2016 dated 28.05.2018

762. The Tribunal restricted ALP of corporate guarantee provided by assessee to Singapore-AE at 0.5% p.a. and noted that while assessee did not benchmark the transaction on the premise that the underlying liability was contingent in nature and that the same was given for overall business consideration, TPO made an adjustment by determining ALP at 5% p.a. The Tribunal opined that corporate guarantee provided by the assessee brought certain benefits to its AE by way of credit facility and therefore, the same were required to be compensated by its AE. The Tribunal relied on Bombay HC ruling in Everest Kanto Cylinders wherein 0.5% commission rate was adopted, and thus directed addition @0.5% per annum.
Apar Industries vs DCIT CC 6(1)- TS-405-ITAT-2018(Mum)-TP- ITA No 956/Mum/2015 dated 04.05.2018

763. The Tribunal accepted assessee’s contention that the corporate guarantee commission charged at 0.9% was at arm’s length price and deleted the adjustment by holding that the corporate guarantee commission rates @ 0.25% to 0.53% have been accepted in various rulings of Courts/Tribunals such as Videocon Industries, Nimbus Communications and Glenmark Pharmaceuticals, as reasonable. Further, the Tribunal also opined that bank guarantee and corporate guarantee are at different footing due to factors such as terms,conditions and risk factors and hence the TPO was not justified in determining the ALP at commission rates charged by bank.
GVK Power & Infrastructure Ltd v ACIT [TS-385-ITAT-2018(VIZ)-TP] ITA No.530/Vizag/2017 dated 18.05.2018

764. The Tribunal deleted the TP-adjustment in respect of corporate guarantee given by assessee [engaged in the business of manufacturing yarn, marketing its products under the CLC brand name] on behalf of its AE for AYs 2008-09 to 2010-11. It relied on Bharti Airtel ruling wherein it was held that no TP-adjustment is to be made in case of there being no diversion of profits out of India. The Tribunal noted that the assessee had not incurred any cost in providing corporate guarantee and relied on various ITAT rulings in Micro Ink, Redington India and Videocon Industries wherein it was held that when an assessee extends assistance to the AE, without any cost to itself, it does not have any bearing on profits, income, losses or assets and therefore the same is outside the ambit of ‘international transaction’. The Tribunal opined that since the flagship company of the assessee had accumulated brought forward losses to the tune of Rs. 290 crores and subsidiaries were also in heavy losses, it could not be said that there was any intention of diversion of profits out of India. Further, the Tribunal also relied on Vivimed Labs and Siro Clinpharm rulings wherein it was held that amendment to Sec 92B vide Finance Act 2012 is prospective in nature and is applicable only from AY 2013-14 onwards.
DCIT vs. Spentex Industries Ltd [TS-382-ITAT-2018(DEL)-TP] ITA Nos.4959,6234 and6244/Del/2014 dated 17.05.2018

765. The Tribunal directed adoption of 0.25%, based on free quote given by Royal Bank of Scotland (RBS), as ALP for provision of corporate guarantee by assessee on behalf of its AEs for AY 2012-13 since the free quote considered the credit rating of assessee and other financial data and the said guarantee was given to RBS itself for loan given to its AE. The Tribunal noted that assessee had adopted ALP of 0.2% based on average rate of free quotes obtained from RBS (0.25%) and Indusind Bank (0.15%) while DRP had adopted ALP at 1.5% based on interbank lending rate. The Tribunal held that the average rate adopted by the assessee as ALP was not the right approach as averages do not give logical result.The Tribunal also observed that issuance of corporate guarantee is a non-fund based transaction, and hence opined that interbank lending rate adopted by DRP as a bench mark for determination the ALP of the charge for giving a corporate guarantee, is not appropriate, as these rates are for fund based transaction.
Britannia Industries Ltd vs. DCIT [TS-359-ITAT-2018(Kol)-TP] ITA No.745/Kol/2017 dated 18.05.2018

766. The Tribunal upheld the order of DRP determining the ALP of the guarantee fee at 2.28% as against guarantee fee determined by TPO at 3%. It noted that the DRP had observed as per the CRISIL data that the assessee could be rated as BBB and AE as B and its AE had a weaker financial standing. The DRP adopted the difference of 4.56% between interest rate for BBB (10.37% for 1-2 years) and B (14.93% for 1-2 years) and held that 50% benefit (2.28%) should have been received by assessee. Accordingly, it rejected the Revenue’s contention that the rate of guarantee fee determined at 3% by TPO ought to be considered.
United Breweries (Holdings) Ltd [TS-746-ITAT-2018(Bang)-TP]- IT (TP) A No.561/Bang/2016 dated 15.06.2018

767. The Tribunal following the order of the co-ordinate bench in assessee’s own case restricted the ALP of the guarantee commission at 0.5% of the average amount of the loan outstanding as against the TPO’s determination at 1.5%.
Zee Entertainment Enterprises Limited [TS-448-ITAT-2018(Mum)-TP] ITA No.1475/Mum/2017 dated 08.06.2018

768. The Tribunal upheld CIT(A)’s order and held that corporate guarantee does not fall within the ambit of international transaction by relying on the decisions of the coordinate bench and therefore no adjustment on account of guarantee commission should be made. It rejected TPO’s addition of guarantee fee at 2% of the guaranteed money.
Dishman Pharmaceuticals & Chemicals Ltd vs DCIT [TS-958-ITAT-2018(Ahd)-TP] ITA No.955/Ahd/2012 dated 20.06.2018

769. The Tribunal upheld CIT(A)’s deletion of TP-adjustment in respect of corporate guarantee given by assessee to AEs for AY 2012-13. Further, it noted that AO/TPO treated corporate guarantee as an international transaction and determined 2% per annum of the loan amount as guarantee ALP and observed that CIT(A) deleted the adjustment following co-ordinate bench ruling in assessee’s own case for earlier years wherein it was held that corporate guarantee was not an international transaction u/s 92B and accordingly, any ALP adjustment cannot survive.
Dr. Reddy’s laboratories v ACIT [TS-463-ITAT-2018 (Hyd)] ITA. No.1739/Hyd/2017 and ITA 1729/Hyd/2017 dated 13.06.2018

770. The Tribunal ruled on corporate guarantee, interest on AE-receivables and advances in respect of an assessee engaged in the business of software development & IT enabled services. The assessee had contended that since assessee as well as its AE had incurred losses, no ALP-adjustment could be made for its international transactions, and relied on Apollo Health Street ruling, APP Labs Technologies and Global Vantedge Pvt Ltd ruling. However, the Tribunal distinguished the contention and held that in the above cases there was no decision as to correctness of the order of the DRP, and therefore it could not be said to have been decided on merits of the issue.
Further, The Tribunal relying on Dr Reddy’s Laboratories ruling accepted assessee’s contentions that the corporate guarantee was not an international transaction during AY 2012-13 since amendment of Sec 92B of the IT Act came w.e.f. AY 2013-14.
Further, the Tribunal with specific direction remitted back to the file of AO/TPO the transaction of advances given to AE, as nature and purpose of advance were not clear. The Tribunal relied on GSS Infotech ruling and stated that no interest should be levied if advances were in the nature of trade advance. However, if advances were to be treated as a loan, the Tribunal directed adoption of LIBOR+2% interest as ALP.
Further, with regards to interest on outstanding receivables, the Tribunal following GSS Infotech and Bartronics rulings noted that the amount was received back within a period of 1 year from the date of advance to AE and thus no interest was chargeable on the receivables.
Cura Technologies Ltd vs DCIT Circle 1(2)- TS-412-ITAT-2018(HYD)-TP-ITA No 301/Hyd/2017 dated 11.05.2018

Royalty / Management fees / Intra Group services / Reimbursements

771. The Tribunal rejected the TPO’s Nil determination of management fees noting that the Tribunal in the assessee’s own case for earlier year had held that the TPO’s nil determination was not under any legally permissible method of ascertaining ALP and the TPO had erroneously determined that the services did not have an intrinsic value without any cogent method and stated that the assessee could have performed them on its own inspite of clear documentation records maintained by the assessee. The Tribunal in the earlier year had restored the matter back to CIT(A) for correctness of ALP at entity level by aggregating the transactions including the management costs and adopting TNMM which had not been examined by the CIT(A). Thus, in line with the earlier year the Tribunalrestored the matter back to DRP (since the assessee had approached the DRP) with similar directions.
Adcock Ingram Limited vs DCIT [TS-999-ITAT-2018(Bang)-TP] IT(TP)A No.125/Bang/2017 dated 03.08.2018

772. The Tribunal had remanded back the ALP determination of royalty to TPO noting that in the earlier year, the Tribunal held that entire exercise of assigning separate consideration for royalty was academic as trading and manufacturing segments were to combined (since activities were interlinked and not distinct), and the adjustment on royalty stood merged with TP adjustment made to manufacturing segment by adopting TNMM. The Tribunal observed that in the subject year, while computing PLI of manufacturing segment (PLI of segments was calculated separately), the TPO had taken royalty as part of cost and hence contradicted itself (Nil determination of royalty). The Tribunal considered the argument of Revenue, that ALP of the royalty payments though not ‘nil’ had a value which required to be properly fixed, a fresh look by the TPO/AO was required. It directed the AO/TPO to see whether in a case where there is no ALP adjustment required for manufacturing/trading segment or combining both of them, a separate consideration of ‘Royalty’ for ALP adjustments was required and if so, what could be the ALP assigned for it and the result thereof. The Court dismissed assessee’s appeal against the Tribunal order which had remanded back the matter to the TPO to assign separate consideration for ALP adjustment of royalty instead of the ALP determination of combining the manufacturing and trading segment by following the coordinate bench decision in the assessee’s own case for earlier year. The assessee argued that the entire exercise of restoring the matter was an academic one as the findings of the Tribunal of the earlier year had been upheld by the Court. Noting that the exercise of TP Analysis on combined transaction approach needs to be undertaken, the Court held that the Tribunal was justified in remanding the case back to the AO/TPO for determining the ALP of the royalty payments made.
Toyota Kirloskar Motor (P.) Ltd. vs CIT and ACIT TS-1002-HC-2018(KAR)-TP) ITA No.58/2017 dated 06.08.2018

773. The assessee-company was engaged in manufacturing of high-quality automotive glass for Indian automobile industry. It made royalty payment to its AE since it took advantage of AE’s reputation to sell its products outside India. The TPO determined the ALP of royalty payment to be NIL on the ground that assessee was a mere contract manufacturer for its AE. The CIT(A) rejected TPO’s nil determination noting that there were negligible purchases/sales to AE vis-à-vis total turnover. The Tribunal dismissed Revenue’s appeal noting that inference of TPO was dehors the facts and thus, rejected TPO’s NIL determination of royalty.
ACIT. vs Asahi India Glass Ltd. [2018] 97 taxmann.com 106 (Delhi – Trib.) IT APPEAL NO. 1582 OF 2015 dated 03.08.2018

774. The TPO had determined the ALP of the management fees at “NIL” since the assessee had failed to demonstrate the need for services and benefits received.The Tribunal restored the TP adjustment on account of management services fees admitting the additional evidence by following the coordinate bench decision of the assessee in its earlier year wherein the Tribunal had admitted the additional evidence filed by the assessee and remitted the issue back to the file of AO to consider the documents submitted to substantiate the benefits derived by its AE.
Haworth (India) Private Limited vs DCIT [TS-975-ITAT-2018(PUN)-TP] ITA No.109/Pun/2016 dated 21.08.2018

775. The Tribunal restored the TP adjustment in respect ofpayment made by assessee to its AE business support services to the AO/TPO for ALP determination noting that prima facie the transaction did not appear to be bogus atleast to the extent of the evidence submitted by the assessee. It rejected the approach of TPO applying CUP as the MAM and determining the ALP of the transaction of eleven segments under business support services to be nil on the ground that there were no services received or duplicate services were received. Further, the TPO proposed adjustment of IT services segment (the twelfth segment) under the business support services stating that not more than 5 persons at Rs.80,000/- per month were required for rendering such services. It observed that the TPO had not brought any single comparable case while applying CUP and action of TPO/AO was contrary to the ratio laid down in the decision of Cushman and Wakefield since the TPO had invoked the benefit test which was not within its domain.It was responsible for only determining the ALP adjustment and further, the AO mechanically made the addition proposed by the TPO without examining the deductibility of the expense under section 37 of the Act.
Exxon Mobil Lubricants Pvt Ltd vs. ACIT [TS-974-ITAT-2018(DEL)-TP] ITA No.1153/Del/2015 dated 21.08.2018

776. The Tribunal passed an ex-parte order upholding the CIT(A)’s order confirming the TP adjustment on professional services availed by the assessee and accepting the TPO’s nil determination of the ALP on the ground that the CIT(A) had passed a detailed order while adjudicating the issue.
Faurecia Automotive Seating India Pvt Ltd vs ACIT [TS-928-ITAT-2018(Bang)-TP] IT(TP) A No.812/Bang/2017 dated 21.08.2018

777. The Tribunal upheld CIT(A)’s order deleting TP adjustment on account of royalty payment made by the assessee to its AE for technical knowhow and personnel training of employees by its AE and rejected TPO’s nil determination. It noted that that it was not for the TPO to determine the commercial expediency of availing technical knowhow andhis domain was restricted to determining the ALP. Also in absence of the method applied by the TPO which was later during the course of hearing claimedto be CUP (as no other company would pay for the services)the stand of the TPOwas rejected on the ground that it was not legally sustainable relying on the decision in AWB India Pvt. Ltd. It also observed that the CIT(A) had passed a well-reasoned order wherein the TP adjustment on royalty payment was deleted since the Appellant benefitted through the technical know-how and processes which included all information and knowledge possessed in relation to passenger handling ,cargo handling ,dangerous goods handling and operation and ramp equipment which was critical for the smooth functioning of the business and hence the TPO’s allegation that no independent company would pay for such services couldnotbe sustained.
DCIT vs. Globe Ground India Pvt. Ltd [TS-896-ITAT-2018(DEL)-TP] ITA No.2785 /Del/2014 dated 23.08.2018

778. The TPO applied CUP method and determined the value of the receipt of management services at NIL observing that the services did not result into any benefit to the assessee and there was no evidence of receipt of the services. The CIT(A) followed his order of the earlier year restricted the disallowance to 30% noting that 20% of Management Services were in the nature of share-holder services and 10% of it was in the nature of duplication of services/ incidental services. The Tribunal restored the issue following the coordinate bench ruling in its own case for earlier year noting that facts and circumstances were identical. The Tribunal had restored it in the earlier year noting that CIT(A) had sustained the adjustment on estimated basis without considering the cost allocation methodology report and directed the CIT(A) to quantify the adjustment after examining the said report and assessee’s explanations
BSI Group India Pvt. Ltd. & ANR vs. ITO TS-1195-ITAT-2018(Kol)-TP] DelTrib ITA No. 152/Del/2015 dated 20.08.2018

779. The TPO made an upward adjustment on account of payment of royalty made by assessee to its associate concerns noting that the assessee was making a payment at the rate of3.75% to the AE as against the royalty at the rate of 3% by other group entities. The CIT(A) deleted the addition stating that an identical issue with respect to payment of royalty was decided in favour of the assessee by the CIT(A)in the earlier year. The Tribunal dismissed Revenue’s appeal following the coordinate bench ruling in assessee’s own case for earlier year wherein it was held that CIT(A) had rightly noted that effective rate of royalty had to be considered and if the amount of royalty paid by the assessee was considered with ex-factory sale value, deducting various expenses, such as dealer commission, special commission, warranty etc., the effective rate worked out to 2.3% on sale, as against 3% paid by the other group entities. It observed that the Revenue could not controvert the finding of fact given by CIT(A).
DCIT vs Hitachi Home & Life Solutions (India) Ltd [TS-1176-ITAT-2018(Ahd)-TP] ITA No.2119/Ahd/2011 dated 29.08.2018

780. The TPO rejected the aggregation of business support services and technical supportservices and benchmarked the transactions at Nil observing that assessee had not furnished contemporaneous documentary evidences to support that services had been received by it and relied on OECD guidelines to state that essential information should be available with respect to receipt of intra group services, the economic and commercial benefits derived by the recipient and the cost identification of those services on basis of which it could be determined whether an independent enterprise would have paid for such services. The sum and substance of the observation was that the assessee was not able to prove the need for such services andthat assessee hadinfact received such services. The Tribunal relying on the ratio laid down in Del HC in Cushman and Wakefield rejected the NIL determination done bythe TPO and held that the TPO should have verified and examined the aspect of benefit and need on the basis of commercial wisdom of the assessee while benchmarking the international transaction and noted that aggregation approach adopted by the assessee had been accepted in subsequent years. It observed that the assessee had submitted documentary evidences ie. copies of invoices pertaining to these two services and certain email communications and also submitted a chart demonstrating need for the services and also the benefit translated therefrom. Thus, it restored the matter back to TPO for determination of ALP of business support and technical supportservices.
The TPO while adopting the transaction by transaction approach also restricted the payment of royalty on comparison with comparables and made an upward adjustment. The Tribunal remitted the issue back to the AO and directed the assessee to show how payment of royalty was inextricably linked with the manufacturing activities and why it ought to be aggregated and benchmarked together with other international transactions under TNMM. Further, it also observed that the TPO had considered the comparable without showing that whether in case of the comparables there was any payment of royalty and what was the basis as the assessee had contested that out of the six comparables, three comparables were not paying royalty.
Borgwarner Emissions Systems India Pvt Ltd vs ACIT [TS-1029-ITAT-2018(DEL)-TP] ITA No.6840/Del/2017 dated 04.09.2018

781. The Tribunal deleted the TP adjustment made on royalty payment made by assessee (engaged in manufacture of explosives) to its AE for use of trademark for sale made to third parties by following the coordinate bench decision in assessee’s own case for earlier year wherein a similar adjustment made was deleted noting that two tests of benefits and commercial expediency could not be invoked by the TPO as per the settled legal position in Del HC ruling of EKL Appliances wherein it was held that the TPO could not sit in judgement on a taxpayers business expediency so as to conclude its ALP of international transactions as unreasonable and that it was wholly irrelevant that there are no corresponding benefit since the real question in transfer pricing regime is as to what would be the price to be paid by an independent enterprise vis-à-vis the one shown by the concerned tax payer. Furtherit also observed that one of the other reasons by TPO for adopting nil price for royalty payment was that the assessee had not made aforesaid payment for use of trademark in the past and TPO had admittedly applied CUP thus, it held that TPO erred in treating assesee itself having paid Nil amount in the past to the AE, as a valid comparable (transaction not an uncontrolled one).
Indian Explosives Private Ltd vs Dy.CIT [TS-1055-ITAT-2018(Kol)-TP] ITA No.1957/Kol/2017 dated 07.09.2018

782. For AY 2010-11andAY 2011-12 the Tribunal restored the TP adjustment made vis-à-vis payment made for intragroup services to the TPO for factual verification of the unilateral APA placed on record. It noted that the assessee had placed APA for five years commencing from 15.04.2015 and ending on 31.03.2020 and also application form “Rollback on APA” of same international transactions for a period of 4 years from 01.04.2011 to 31.03.2015 on record.
Linde India Ltd (formerly BOC India Ltd) vs DCIT, JCIT [TS-1053-ITAT-2018(Kol)-TP] ITA No.543/Kol/2015, ITA No.381/Kol/2017, ITA No.224/Kol/2016 dated 19.09.2018, DCIT vs Linde India Ltd (formerly BOC India Ltd) [TS-1053-ITAT-2018(Kol)-TP] ITA No.105/Kol/2016 dated 19.09.2018

783. For AY 2012-13, the TPO was of the view that the assessee had failed to demonstrate that the payment made towards corporate service charges had resulted in any tangible benefit to the assessee and accordingly he applied CUP to determine the ALP of servicesat Rs.51,00,000 on man hour rate basis. The DRP upheld the TPO’s order relying on its own order for AY 2011-12. The Tribunal remitted the determination of ALP of corporate service charges noting that the Tribunal in assessee’s own case for AY 2011-12 had remanded the issue to DRP in view of the earlier year’s decision wherein DRP(for AY 2009-10) had not passed a speaking order/ given reasoned finding while upholding TPO’s order.Further,for AY 2009-10, the DRPhad not mentioned regarding the document submitted by assessee as additional evidence while it did point out about failure of assessee to submit single evidence to prove it had received services from its AE in lieu of which payment was made.
Huntsman International (India) P. Limited vs ACIT [TS-1215-ITAT-2018(Mum)-TP] ITA No.1099/Mum/2017 dated 12.09.2018

784. The assessee-company, engaged in the business of manufacturing and supply of wind turbine generators, made a payment of royalty to its AE in Cyprusand the TPO made an adjustment with respect to itby relying on FEMA provisions (8% on export sales). The DRP following its own decision in previous years adjudicated the issue against the assessee and disregarded the coordinate bench decision in assessee’s own casewherein the issue had been restored back and in the remand proceedings, the TPO while giving effect to Tribunal’s order recalculated the royalty adjustment and further revised it by accepting assessee’s claim for downward adjustment. Subsequently, the DRP filed a suo moto application for rectification of its own order/ direction for assessment year 2013-14 to state that the facts for the earlier years were different and passed a rectification without disposing off the application for rectification of the said order filed by assessee contending that the same had to be rectified considering the Tribunal’s order for assessment year 2011-12. The assessee filed a writ petition against the rectification order passed by DRP since it had not disposed the application filedby the assessee. The Court held that in, all fairness, the DRP ought to have considered the assesssee’s application alongwith its suo moto application for rectification and it was not proper to pass an order on the application filed by one party alone leaving the other application either unheard or not disposed of and accordingly set aside DRP order.
Regen Powertech Private Limited v. DRP & Anr. [TS-1076-HC-2018(MAD)-TP] – TS-1076-HC-2018(MAD) – W.P.No.27334 of 2017; W.M.P.No.29226 of 2017 dated 24.09.2018

785. The assessee was providing business support services toother companiesincluding sales support, marketing, advertisement and IT supportto its group company. The AO noting that that the group company was running its operations with no employees and the income received by the assessee from group company had not been correctly recorded invoked provisions of section 145 and held that assessee should have earned markup of 15% (reduced to 12.82% by DRP) on cost and accordingly proposed an adjustment. The Tribunal restored the adjustment in respect of service fee received by assessee (shown under ‘other income’) from domestic related party enterprises noting that if the agreement between two resident companies did not provide for any such markup on the total cost then such addition could not be sustained. However, it observed that it was not possible to decipher whether DRP considered assessee’s submission that AO did not give it any opportunity to explain the said transaction or whether DRP considered assessee’s objection whether AO could make such adjustment to the domestic transaction between two parties. Further, noting that details of ‘other income’ were not provided nor was it shown what were the relevant documents by which assessee had shown such income & estimation thereof, it set aside the issue to be examined by AO afresh in the interest of justice
Verizon India Pvt Ltd vs ACIT [TS-1084-ITAT-2018(DEL)-TP] ITA No.6053/Del/2012 dated 10.09.2018

786. The assessee-company engaged in the manufacture of passanger cars had paid royalty (for payment of know how tradename and trademark) to its AE viz. SMC Japan. The TPO noted that that assessee had paid a substantial amount of royalty and at the same time it had also incurred substantial expenditure for research and development and marketing/brand promotion. In view of assessee not bifurcating the payment of royalty for use of brand name and technology, he allocated the royalty paid by the assessee in the ratio of R&D and AMP expenses incurred by the associated enterprise and held that 48% was towards the use of Suzuki logo. He determined the ALP of royalty payment made towards the use of brand to be nil on the ground that the royalty for Suzuki brand was paid to SMC, Japan, when assessee itself was promoting the brand of Suzuki which was a lesser known brand. That since the Suzuki brand was undoubtedly lesser known brand in India and had piggybacked the brand name Maruti which was an established brand in India there was no case for the assessee to have paid any brand royalty to SMC Japan. The Tribunal deleted the TP adjustment on royalty payment by following the coordinate bench ruling in assessee’s own case for earlier year wherein it a) accepted assessee’s contention that the decision to use Suzuki name/brand was taken by the assessee in order to advance its own commercial interest and Suzuki brand is an international renowned global brand. b) if expenditure had been incurred wholly and exclusively for the purpose of business of the assessee whether or not such expenditure actually benefits the assessee was an irrelevant consideration for the purpose of determination of ALP. Thus, there was no merit in TPO’s allegation that payment made for such use was unwarranted
Maruti Suzuki Ltd vs Addl.CIT [TS-1180-ITAT-2018(DEL)-TP] ITA No.467 /Del/2014 dated 17.10.2018

787. The Tribunal restored the issue of ALP adjustment pertaining to the assessee’s international transactions of sale/resale of manufactured goods in export, payments of sales margins, services rendered etc. to itsAE to TPO noting that coordinate bench in assessee’s own case for AYs 2011 to 2013 admitted additional evidence furnished by assessee in support of the revised transaction-by-transaction approach and directed TPO to consider these while determining arm’s length nature of the transactions. Though the assessee sought to distinguish the coordinate bench ruling in assessee’s own case for earlier year stating that additional evidence had been submitted which was not the case in the instant year, the Tribunal rejected the reasoning of assessee and opined that consequential adjudication would indeed have an impact in the impugned assessment year as well, thus adopted judicial consistency to restore the impugned ALP adjustment issue back to the TPO for his simultaneous adjudication with the preceding assessment years.
Epcos India Pvt Ltd vs Dy.CIT [TS-1158-ITAT-2018(Kol)-TP] ITA No.2528/Kol/2017 dated 28.10.2018

788. The TPO had clubbed the management service fee (which was separately benchmarked by assessee by applying TNMM as MAM) with other transactions under TNMM undertaken by assessee in manufacturing segment. The Tribunal held that TPO erred in clubbing the transaction pertaining to management service fee. It followed the coordinate bench decision in assessee’s own case for earlier year wherein it was held that management service fee could be considered as a separate transaction as it had been accepted by DRP in subsequent years and also on remand by DRP, the TPO had not offered any adverse comments with respect to economic analysis carried out by assessee for said transaction.
Landis +Gyr Ltd vs DCIT [TS-1222-ITAT-2018(Kol)-TP] ITA No.524/Kol/2017 dated 17.10.2018

789. The TPO determined the ALP ofroyalty and technical knowhow fees paid by assessee as NIL on the basis that the assessee was a contract manufacturer and had no exclusive right to sell without the permission of its AE under the agreement.The Tribunal restored the ALP determination of royalty and technical knowhow fees by following the coordinate bench decision inassessee’scase for earlier year wherein it accepted assessee’s contention that it was a licensed manufacturer noting that basic premise on which disallowances of royalty and technical knowhow expenses were made would fail and also the TPO had not adopted any method to determine thesaid payment to be NIL. It considered the assessee’s submission that the main reason for restriction imposed by AE was with the objective of ensuring smooth business operations, it was not getting a fixed amount of profit and it had exported goods to even non-AE’s and thus it was a licensed manufacturer.Accordingly, it remitted the matter back for fresh examination.

Sulzer Management AG (AE of assessee) had entered into a contract with Microsoft and allocated charges to group entities. The DRPupheld the TPO’s order determining the ALP of the annual charges towards Microsoft licencing fee as Nil on account of the fact that assessee had not received any benefit/service for the payment made to M/s Sulzer Management AG. The Tribunal restored the matter back to TPO following the coordinate bench decision of assessee for earlier year wherein the issue had been restored back noting that TPO had not benchmarked the transaction under any of the prescribed methods.

The DRP upheld the TPO’s order disallowing the management fees observing that assessee had failed to prove the receipt of any service from AE commensurate with the cost allocation and also stated that the assessee should have separately benchmarked the transaction. The Tribunal restored the matter back to the TPO for examining the evidence which proved the receipt of services and to consider the explanation of assessee and also opined that the assessee was justified in aggregating the transactions in light of services being inextricably linked to manufacturing costs.
Sulzer Pumps India Pvt Ltd vs Dy.CIT [TS-1157-ITAT-2018(Mum)-TP] ITA No.1453/Mum/2014 dated 31.10.2018

790. The TPO determined the ALP of the localization expenses paid to AE (for support services provided to assessee for localization of imported products having regard to customer’s requirements) to be NIL by applying CUP and TPO was of the view that assessee had already entered into royalty agreement with AE and was paying royalty, therefore, there was no need to pay such localisation expenses and such expenses amounted to duplication of expenditure. The Tribunal set aside the TP adjustment made on localization expenses by relying on the ratio laid down in Delhi HC ruling of Cushman and Wakefield and rejected the benefit test applied by TPO noting that it was a settled legal position that a businessman has prerogative to organise his affairs in the manner best suited to its functioning, commercial or business expediency and Revenue could not step into their shoes.It directed TPO to determine ALP of transaction unconnected with fact of any benefit accrued to assessee.
Mitsubishi Electric Automotive [I] Pvt Ltd vs Dy.CIT [TS-1147-ITAT-2018(DEL)-TP] ITA No.312/Del/2015 dated 29.10.2018

791. The TPO charged a markup of 10% on cost recovered from the AE by the assessee as he was of the view that marketing and promotion expenses incurred carried a service element and assessee had rendered services to its AE. The CIT(A) confirmed the action of TPO observing that it was clear from the facts that the assessee initially actedas an agent of the AEs through which the services rendered by the third parties were delivered the AEs. It was assessee’s contention that the amount represented reimbursement ofactual expenditure and also the method adopted for computing ALP was not as per provisions of the Act. The Tribunal directed deletion of markup and held that the TPO had not determined the ALP of transaction by any of the prescribed method u/s. 92 by relying on the Bombay HC decision in Kodak India.
Wartsila India Limited vs ACIT [TS-1166-ITAT-2018(Mum)-TP] ITA No.5002/Mum/2013 dated 04.10.2018

792. The Tribunal remitted the determination of ALP of intragroup service payment made by assessee (manufacturer of air filteration) and it rejected TPO’s Nil ALP-determination of intra-group service payment made to AE noting that TPO in earlier years and subsequent year(s) had accepted the said payment to be at ALP (thus principle of consistency ought to be followed) and the assessee had continued making payment under the agreement entered into in 2004 (hence there was no change in business model). The Tribunal took cognizance of the evidence submitted by the assessee that administrative coordination services and market research were provided by AE from which it derived substantial benefit and held that assessee was able to substantiate benefits derived from rendering of services by the AE. It observed that TPO could not sit on the armchair of a businessman to decide as to what services were beneficial in view of TPO; stating that services appeared to be very generic in nature and were in the nature of shareholder services. The TPO’s reasoning that payment of intra-group services was increasing every year and thus, there was shifting of profit would also not hold good when turnover had increased five times and further, TPO had accepted services to be at ALP in subsequent years.
Donaldson India Filter Systems Private Limited vs DCIT [TS-1113-ITAT-2018(Del)-TP] ITA No.3218/Del/2015 dated 03.10.2018

793. The TPO separately benchmarked royalty transaction (which was aggregated with manufacturing activity) and applied CUP as the MAM as against TNMM applied by assessee. Therate of royalty paid by assessee (5% on value addition) was compared to 3% royalty payment made by Maruti Udyog Ltd. to Suzuki Motors Corporation (which was a controlled transaction) and an upward adjustment was made. The CIT(A) deleted the addition observing that TP adjustment determined by benchmarking controlled transaction with another controlled transaction could not be at ALP. The Tribunal dismissed Revenue’s appeal and following the coordinate bench ruling in assessee’s own case held that royalty had to be aggregated with manufacturing activities since it was linked with production and sales activity in absence of production of sales and sale of products, there would be no question of payment of royalty. Further, upheld CIT(A)’s order as regards the non-applicability of comparing with a controlled transaction under CUP.
ACIT vs Mercedes-Benz India Pvt Ltd (formerly known as Daimler Chrysler India Pvt. Ltd.) [TS-1164-ITAT-2018(PUN)-TP] ITA NO.1110/Pun/2013 dated 25.10.2018

794. The assessee was engaged in the manufacture of headliners, door panels, parcel trays, etc. and also had technical centre for providing design and drawing services. The assessee in its TPSR had applied TNMM and computed its PLI after excluding abnormal cost for wastage and worked out PLI at 7.31%. The TPO had recomputed the assessee’s margin at -11.56%by including abnormal costs and compared it with mean margin of comparables at 6.39%.TPO noted that majority transaction in manufacturing segment was only of advisory services and other transaction were on capital account and held the advisory services (for which payments were made to AE) had not resulted in any benefit to the assessee. Accordingly, the TPO determined the ALP of the same to be NIL and disallowed the entire payment / expenditure. The DRP upheld TPO’s order observing that the TPO had clearly demonstrated that the assessee had not received any benefit through advisory services as it had earned negative margin of (-) 11.56% of manufacturing segment, whereas comparables had earned 6.39% positive margins. The Tribunal noted that a) TPO had failed to come to a finding in this regard as to whether advisory services had been availed by the assessee or not but had gone to take the value of same at Nil b) TPO could not determine ALP to be nil without going into merits of rendition of services c)There was no merit in the stand of TPO thatas unadjusted margin was -11.56%, the advisory services were not at ALP when after allowing the adjustment for extraordinary cost the assessee’s margin stood at 7.13%. Thus, the Tribunal deleted the adjustment.
Grupo Antolin India Pvt. Ltd (Erstwhile known as Grupo Antolin Pune Pvt. Ltd vs Dy.CIT) [TS-1128-ITAT-2018(PUN)-TP] ITA No.299/Pun/2013 dated 17.10.2018

795. The Tribunal deleted the TP adjustment on payment of IT services and technical support services by assessee to its AE following the coordinate bench ruling in assessee’s own case for earlier year wherein similar adjustment was deleted in view of principle of consistency noting that TPO in respect of international transactions involving payments made by the assessee under theCost Contribution Agreement (CCA) for receiving purchase services, orderhandling services and sales services for last three assessment years had not made similar adjustments and the TPO erred in making the adjustment for subject year despite there being no change in facts. Further, TPO had not applied any of the prescribed method under sec 92 to arrive at the aforesaid adjustment and thus, the adjustment could not besustained.
AT&S India Private Limited vs DCIT [TS-1179-ITAT-2018(KOl)-TP] ITA No.69/Kol/2018 dated 10.10.2018

796. The Tribunal rejected TPO’s NIL determination of intra group services in case of assessee who had entered into an agreement with its AE for operational services, marketing services and administrative services. The TPO had characterized the aforesaid services as stewardship services while arriving at the ALP to be NIL. The Tribunal held that such services were not stewardship noting that the TPO had not categorized such services to be stewardship in preceding years and sought to determine the ALP of these services. Further, it observed that the assessee was entirely dependent on the services (including IT services) which were essential for the running of its business. The DRP had given a finding that services had benefitted the assessee however it had confirmed TPO’s NIL determination wrongly on the basis that proportion of benefit could not be allocated between assessee and AE. It accepted assessee’s contention that the TPO had not used any of the prescribed methods u/s.92C(3) to determine the ALP of transaction. Accordingly, it restored the matter to TPO to determine the ALP of the intragroup services.
Sika India Private Limitedvs DCIT [TS-1178-ITAT-2018(KOl)-TP] ITA No.393/Kol/2014 dated 10.10.2018

797. The assessee is one of the leading developers and suppliers of dentification and decorative solutions for businesses and consumers worldwide and had three business segments namely, (i) Pressure Sensitive Materials [PSM] (ii) Retail Branding and Information Solutions [RBIS] and (iii) other Speciality Converting Businesses. The assessee had benchmarked the intragroup services availed from its AE with other transactions of purchase, sale of raw materials and purchase, sale of finished goods with its AE. The TPO was of the view that transaction relating to the receipt of intra-group services in the two business segments, namely, PSM and RBIS were not at ALP. In reply to the SCN issued by the TPO to furnish details regarding the intragroup services, the assessee submitted the specified services received under each of the segments i.e. PSM (Marketing support services, Operations, Logistics and Technical Service, Labor Law and Employee Relations, Finance, Accounting, Administration and MIS Services, Corporate Support Centre [CSC), ITSSC) and RBIS (Ticketing HUB, GVP Services, VIPFS Services and CSC services). The TPO took a view that assessee had also not been able to demonstrate that any tangible gains were achieved from said services. However, he accepted the ALP ascertained by the assessee with regard to two intra-group services received by the assessee i.e., ticketing hub and VIPFS but determined the ALP of balance intragroup services to be NIL by applying CUP. The Tribunal deleted the said adjustment noting that issue had been decided in favour of assessee by coordinate bench decision in assessee’s own case wherein it was held that all services received by the assessee were part of composite contract/agreements which could not be unbundled and concluded by holding that the agreement is an intrinsic one and it was wrong to split the same and hold that the same services are at Arm’s Length and some services are not. Further, it also observed that there was no merit in TPO/DRP rejecting the evidence in form of e-mails/correspondences filed by assessee for receipt of services stating that it was too general. The TPO could not question the commercial prudence while determining the ALP of transaction. Accordingly, it deleted the adjustment.
Avery Dennison [India] Pvt Ltd vs ACIT [TS-1219-ITAT-2018(Del)-TP] ITA No.504/Del/2018 dated 29.10.2018

798. The assessee (engaged in the business of manufacturing and trading of construction and industrial chemicals and adhesives) made payment of royalty for exclusive rights for manufacturing, making available present and future knowhow necessary for manufacture and for exclusive rights to use the trade mark, in relation to the products of Sika Group of Companies. It had aggregated the payment of royalty with other transactions and applied TNMM. The TPO was of the view that it was a separate transaction and had to benchmarked separately and applied CUP. However, the DRP held that ALP determination made by the assessee aggregating with the other transactions stands. The Tribunal followed the coordinate bench decision in assessee’s own case for earlier year wherein it was held that TNMM at entity level is not the MAM as all the international transactions are not of the same category or nature.
DCIT v Sika India Private Limited [TS-1178-ITAT-2018(KOl)-TP] ITA No.393 & 402/Kol/2014 dated 10.10.2018

799. The assessee had entered into a shared service agreement with its AE and in terms of the agreement, it received corporate support services from AE. It benchmarked the aforesaid transaction by aggregating with manufacturing and trading segment and applied TNMM. The TPO determined the ALP of the aforesaid services to be nil by applying the benefit test. Tribunal deleted the TP adjustment on corporate support services received by assessee from its AE following the coordinate bench decision in assessee’s own case for earlier year wherein TPO’s nil determination of services was rejected by holding that TPO could not sit in the judgement of business module of assessee and its intention to avail or not avail any services. The role of TPO was to determine ALP of international transactions undertaken by assessee. Further, the IT enabled corporate support services related to the business carried out by the assessee and had to be aggregated with other transactions being intrinsically linked to other transactions undertaken by assessee.
Eaton Fluid Power Limitedvs DCIT [TS-1217-ITAT-2018(Pun)-TP] ITA No.506/Pun/2015 and ITA No.476/Pun/2016 dated 15.10.2018

800. The assessee along with HCL Technologies Ltd (HCL) had bid for a project to be undertaken by National Insurance Company Ltd. (NICL) for which it had incurred costs in terms of manpower, expertise and costs. A tripartite agreement was entered into between the parties. With respect to the execution of the project, the assessee had purchased software from its foreign parent company for Rs.3.2 crores which was sold by it at the same price to HCL. The AO made an addition of 10% as markup on sale of software which was confirmed by CIT(A) observing that the assessee had failed to provide details to substantiate that it was directed by the foreign parent company to simply deliver the software to HCL Technology on cost-to-cost basis and it was acting on behalf of the AE (parent company). The Tribunal restored the issue to TPO directing the assessee to demonstrate and prove its activities were governed by doctrine of commercial expediency and there was no shifting of income outside Indian tax jurisdiction. It rejected the assessee’s stand that Revenue could not interfere in the manner in which the assessee was conducting its business noting that the foreign company was not a party to the agreement entered into and further, the ultimate user of software was NICL. After analyzing the factual background, it opined that there was a possibility of shifting of income outside Indian tax jurisdiction since the assessee had incurred costs in Indian tax jurisdiction while bidding for RFP and the revenue was being booked on cost to cost basis. Thus, a doubt arose that profits were being shifted to foreign jurisdiction and it directed Revenue to examine the true colours of transaction entered into by assessee. In this context, it directed Revenue to analyze the costs booked by assessee while bidding for RFP vis-a-vis costs which were booked by it for other contracts/tender and manner in which revenue was recognized from these contracts to ensure there was no costs being loaded in India and income shifted outside Indian tax jurisdiction.
eBaotech India Pvt. Ltd. vs DCIT [TS-1125-ITAT-2018 (Mum)-TP] ITA No.549/Mum/2016 dated 22.10.2018

801. The Tribunal deleted the TP adjustment madewith respect to payment to AE for intra-group services on account of Oracle base provided by Eaton UK which was used by assessee (engaged in engineering design and software development, back office support and business development services to its AEs) under APSSC segment for providing back office services to group entities. Noting that both the TPO and CIT(A) had not disturbed the benchmarking of international transactions of APSSC segment (where the oracle implementation charges were included as part of operating costs), however the lower authorities had made TP adjustment in respect of payment made to AE for Oracle implementation charges on account of assessee failing to establish services had been received from its AE. It opined that once the margins have been accepted, then cost incurred could not be disturbed and further, observed that the transaction was closely and intrinsically linked to the business operations carried on by the assessee, then the same could not be segregated and ALP of said transaction could not be determined to be Nil. It also relied on coordinate bench decision in case of assessee’s group concern i.e.Eaton Industries Manufacturing GmbH wherein it deleted the disallowance of cost incurred on receipt of support services from its AE by holding that assessee had placed on record the evidence of support services being received from the AEs which were in the nature of back office accounting services and IT support services that enabledit to run its business.
Eaton Technologies Pvt Ltd vs ACIT [TS-1297-ITAT-2018(Pun)-TP] (ITA No.1650/Pun /2013) dated 31.10.2018

802. The Tribunal restored TP adjustment on account of payment of management fee and communication fees (in pursuance of cost allocation agreement with its AEs) by following coordinate bench decision in assessee’s own case for earlier year(s) wherein it was noted that TPO/DRP had failed to note assessee’s contention that these costs had been recovered on markup from AE’s and there was no merit in adopting the same at “Nil”. The TPO had determined the ALP of said fees at NIL on ground that the assessee had not furnished evidence to prove services and benefit derived from such services with supporting evidences.
MSC Software Corporation of India Pvt Ltd vs Asst.CIT [TS-1370-ITAT-2018(Pun)-TP] (ITA No.592 /Pune /2018 dated 24.10.2018

803. Where the TPO denied the royalty payment made on trademark on basis that as per the terms of earlier agreement approved by the Government, the assessee could pay royalty for technical knowhow at the maximum rate of 2% of net sales, whereas, the assessee had paid royalty both for technical knowhow (1.25%) and trademark (1%) aggregating to 2.25% of net sales, the Tribunal deleted the TP adjustment on royalty payment made on trademark by assessee to its AE by relying on coordinate bench decision in assessee’s own case for earlier year wherein it was held that royalty for trademark at 1% of sales was allowable and the assessee was in fact paying a lesser amount for its brand Cadbury vis-à-vis other group companies in other parts of the world. Further, the Tribunal had also observed that payment of royalty for trademark at 1% over and above the royalty at 1.25% for technical knowhow was approved by RBI.
Mondelez India Foods Pvt. Ltd. vs Addl.CIT [TS-1288-ITAT-2018(Mum)-TP] ITA No.1512/Mum/2013 dated 28.11.2018

804. The assessee had entered into an agreement for trademark license agreement relating to HALLS with its AE to whom it used to make a payment of royalty at 2.7% of sales. The TPO was of the view that in the instant case there was no transfer of technology or knowhow and payment of royalty was being made for only use of trademark thus, under automatic route royalty is payable to the extent of 1% of the domestic net sales and 2% of the export net sales whereas in case of manufacturing i.e in case of manufacturing / technology royalty, the upper limit was fixed at 5% of domestic net sales and 8% of export net sales and accordingly he allowed payment of royalty for trademark at 1% and made an adjustment. The Tribunal deleted the TP adjustment made on royalty noting that on reading of the original and amended agreement it becomes clear the assessee shall manufacture licensed product using any technology of the AE provided to the assessee in accordance with the specifications and instructions. Further, it observed that it could not be said that assessee was manufacturing “HALLS” brand product without obtaining the required technical knowhow. Accordingly, it held that the payment of royalty was made at ALP
Mondelez India Foods Pvt. Ltd. vs Addl.CIT [TS-1288-ITAT-2018(Mum)-TP] ITA No.1512/Mum/2013 dated 28.11.2018

805. The TPO rejected use of TNMM as MAM to benchmark royalty paid (at 3% of value added) and product development fee to its AE for grant to use trademarks and to manufacture product under Intellectual copyright (IPR), applied CUP to determine ALP at nil on ground that no independent entity under such circumstances would pay any such royalty. The Tribunal restored the issue of TP adjustment on royalty noting that year after year, TPO had accepted TNMM applied by assessee but abruptly in the subject year applied CUP without assigning any reason. It noted that royalty and product development fee was intrinsically connected to production and sales and thus, could only be decided under TNMM. It relied on ratio laid down in Delhi HC in EKL Appliances wherein it was held that TPO could not sit in the armchair of businessman and applying benefit test was impermissible. Further, it also noted that the assessee had also brought supplementary analysis on record that the royalty charged between third party licensor and licensee generated an average royalty of 7.20% of the sales which had to be examined in detail.
Nissan Brake India Pvt Ltd. vs DCIT [TS-1252-ITAT-2018(Del)-TP] ITA No.6366/Del/2017 dated 16.11.2018

806. The Tribunal restored the TP adjustment on services availed by assessee from its AE i.e. CSAPL noting that TPO could not determine the ALP of said services as NIL by applying benefit test if in the subsequent AY the TPO himself had allowed a part of service charges paid by assessee to CSAPL and accepted the fact that assessee had availed services under the agreement, thus there was no reason to dispute assessee’s claim of availing services. Further, it also noted that additional evidence in form of affidavit was submitted by assessee during the course of hearing that services were availed at cost plus markup which was not available before the TPO. Thus, it restored the issue to allow an opportunity to the AO to consider additional evidence and decide the issue. It opined that evidences brought on record deserved to be examined on merit before deciding the issue.
Mondelez India Foods Pvt. Ltd. vs Addl.CIT [TS-1288-ITAT-2018(Mum)-TP] ITA No.1512/Mum/2013 dated 28.11.2018

807. The Tribunal remitted the intra-group services (administrative and managerial services) availed by assessee from its AE noting that facts of subject AY were similar to the assessment years covered in the APA. It directed the AO/TPO to examine the facts closely and relevant terms of agreement between CBDT and assessee and also to conclude on the argument of the assessee vis-à-vis issue of applicability of APA to the assessee’s case for the year under consideration in principle.
Honeywell Automation India Ltd. vs ACIT [TS-1207-ITAT-2018(PUN)-TP] (ITA No.359/PUN/2013) dated 02.11.2018

808. The assessee made payment of Rs.11,50,31,934 to its AE for availing Software Services which was claimed to be at ALP (as the AE has allocated the cost of the ERP software to all group companies in 40 countries as per the cost allocation mechanism provided in the agreement).The TPO relied on previous year’s order for AY 2012-13 and addition of Rs.9,88,26,934 was made by computing ALP of the said transaction at Rs.1,62,05,000 by stating that the employees had rendered service of 2 man hours per days, he arrived at 730 man hours for the year (2 x 365 days) and estimated the ALP of service availed by applying a man hour rate of Rs.8,500 per hour to the said man days, which the TPO claimed to be as CUP. The DRP upheld the estimation made by the TPO as reasonable. The Tribunal deleted the TP adjustment made on payment for availing information services following the coordinate bench ruling in assessee’s own case for earlier year wherein the similar adjustment was deleted noting that though the TPO had stated he had applied CUP for determining ALP, no comparable instance was brought on record and his estimation of charge on services was without any supporting evidence. Thus, it concluded that the TPO had not adopted any of the method u/s.92C r.w R 10B.Further, noting the cost was allocated to 40 group companies across globe who were using the software and related services, the Tribunal held that there was no reason for not accepting the payment made to the AE to be at arm’s length in the absence of any contrary evidence brought on record.
Firmenich Aromatics Production (India) Pvt. Ltd. vs ITO [TS-1214-ITAT-2018(MUM)-TP] (ITA No.7145/Mum/2017) dated 13.11.2018

809. The Tribunal deleted TP adjustment made on corporate management services availed by assessee from its AE noting that assesseehad furnished detailed description of intra group services rendered by the AE, copy of ledger account of corporate management charges, month-wise chart of corporate management charges and allocation chart. It further relied on Delhi High Court in case of EKL Appliances wherein it was held that TPO could not judge on the commercial expediency of the transaction, his role was limited to determining the ALP of the transaction to delete the said adjustment.
Terex Equipment Pvt Ltd (Formerly known as Terex Vectra Equipment Pvt. Ltd.) vs ACIT [TS-1225-ITAT-2018(DEL)-TP] (ITA No.1882/Del/2014) dated 14.11.2018

810. The Tribunal restored the issue of TP adjustment made on management and business support services received by the assessee and directed TPO to determine if services were availed or not during subject year i.e. AY 2013-14 noting that TPO had not made any such addition in AY 2014-15 on reference being made to it u/s.92C. It further discarded the argument of assessee that payments in connection with said services written back in AY 2013-14 and AY 2014-15 were offered to tax u/s. 41(1) in AY 2015-16 and thus, addition ought to be deleted by stating that it would have no relevance.
Carrier Midea India P. Ltd vs Dy.CIT [TS-1256-ITAT-2018(DEL)-TP] (ITA No.7675/Del/2017) dated 22.11.2018

811. The assessee had paid cost allocation charges of Rs.34.63 crores pertaining to intra group services received from its AEs. During assessment proceedings, based on request of TPO details about nature of services provided by AE, cost allocation methodology adopted as well as evidence of receipt of services by assessee were submitted to TPO .However, TPO rejected ALP of cost allocated to assessee by stating that assessee failed to produce supporting documents/evidence to substantiate that services were rendered by AE and charge reflected value/benefit of service received .Further, TPO applied CUP method to benchmark said transaction and made addition of Rs.33.36 crores. He determined the ALP of Rs.1,27,50,000 by considering the total amount of man hours of services rendered by AE at 1500 hrs and applying man hour rate of Rs.8500 per hour. The Tribunal deleted the adjustment noting that that necessary evidence had been brought on record by assessee which had not been examined by authorities .It was found assessee’s allocation of expenses was based upon a global agreement between AEs in this regard and various allocation keys, i.e., asset, revenue, number of employee, depending upon nature had been used and methodology adopted had mandate of guidelines of OECD. Further, allocation was supported by a CPA certificate which had been duly authenticated. Thus, the action of lower authorities below in rejecting CPA certificate was not sustainable and DRP’s order was set aside.
Jabil Circuit India Pvt Ltd vs Asst.CIT [TS-1274-ITAT-2018(MUM)-TP] (ITA No.2200/Mum/2017 and 867/Mum/2018) dated 19.11.2018

812. The Tribunal dismissed Revenue’s appeal as withdrawn subject to verification of fact whether amount paid for availing management services was Rs.8,22,38,141/- or Rs.8,22,46,172/- (mentioned in a certain para of TPO order) noting that APA covered the subject year stating that if the payment for provision of management services made to AE did not exceed Rs.8,22,38,141/- , it was to be at ALP.
ACIT vs Gia India Laboratory Pvt Ltd [TS-1245-ITAT-2018(MUM)-TP] (IT(TP)A No.) dated 19.11.2018

813. The Tribunal deleted the TP adjustment on royalty paid by assessee ( engaged in business of manufacture and sale of propeller shafts and light axles in the automotive industry segment ) for use of licensed technology in the manufacture pursuant to renewal of licensing agreement by following coordinate bench decision in assessee’s own case for earlier year wherein a similar adjustment was deleted relying on ratio laid down by Bombay HC in SGS India Pvt Ltd and Dow Agrosciences India Pvt Ltd wherein it was held that where the Royalties were paid in terms of approval granted by SIA / RBI, then the same were to be considered at arm’s length rate. In the instant case, royalty paid was approved by Secretariat of Industrial Approval (SIA), Ministry of Industry, Government of India and RBI. Further, the Tribunal in the earlier year also held that it was beyond the scope of TPO while benchmarking the transaction to hold that assessee had not derived any benefit.
Spicer India Pvt Ltd vs Asst CIT [TS-1278-ITAT-2018-(Pune)-TP] ITA No.2498/Pun/2016 dated 11.12.2018

814. TPO determined the ALP of management service unit charges paid by assessee to its AE to “NIL” on ground that services were duplicative in nature and assessee had already paid for support services and there was no need for management support services. The Tribunal rejected TPO’s nil determination noting that assessee brought on record agreement entered into with AE which clearly indicated that payment of aforesaid services was distinct and huge sales volume could not be achieved without the aid of support staff provided by AE. Accordingly, it deleted the TP adjustment on management service charges.
B.G. India Energy Solutions (P.) Ltd vs. Dy.CIT (2019) 101 taxmann.com 360 (Del Trib) )/(TS-1443-ITAT-2018(DEL)-TP ITA No. 1980(delhi) of 2015 dated 31.12.2018

815. The Tribunal deleted the TP adjustment on reimbursement made by assessee of salaries of employees of AE by (provided various types of consultancy services and assistance to entities in India in connection with development, operation and management of wholesale business, retail business and related operations) by following coordinate bench decision in assessee’s own case in its earlier year wherein it was held that TPO had erred in concluding that no independent person would have made separate payment for similar kind of services as it was not his prerogative to see whether assessee benefits or not. It was wisdom of the assessee to hire employees of its AE having significant expertise in commencement and implementation of operation in retail and cash and credit stores and it was also not necessary for AO to see whether any legitimate expenditure had been incurred by assessee out of necessity. The Tribunal had set aside the matter to TPO to decide issue afresh after analyzing the assessee’s submission that the salary earned by expats had been offered to tax in India and that there was no loss to Revenue on account of tax neutral transaction and proposed adjustment would lead to double taxation i.e. to be taxed in the hands of expat employees and additionally in the hands of assessee bearing the cost of salary merely owing to reimbursement by the AE. While giving effect to the order of Tribunal, the TPO had deleted the TP adjustment in light of the aforesaid observations.
WM India Technical and Consulting Pvt Ltd vs DY. CIT [TS-1289-ITAT-2018-(Del)-TP] ITA No.755/Del/2016 dated 17.12.2018

816. Where TPO had determined the ALP of administrative and regional support services received by assessee from its AE to be nil by applying CUP on ground that no uncontrolled enterprise would have made payment for services, the Tribunal restored the issue of TP adjustment on administrative and regional support services (including liaison and support services, legal, finance, human resource, IT and reasonable support services) from its AE following the coordinate bench decision in assessee’s own case for AY 2009-10 (agreement had been entered into from AY 2009-10) wherein the issue was remitted back for detailed verification of facts as it was Revenue’s contention that assessee had not conducted FAR analysis with respect to intragroup services and failed to justify functions performed by AE for payments made and further, directed TPO to follow the reasoned conclusion in Delhi HC in Cushman and Wakefield wherein it was held that TPO could not judge the commercial expediency of transaction and his role was restricted to that of determining the ALP of said transaction.
Avaya India Pvt Ltd vs ACIT [TS-1290-ITAT-2018-(Del)-TP] ITA No.1904 /Del/2015 dated 03.12.2018

817. The Tribunal restored the issue of benchmarking management support services to the TPO to consider the detailed submissions made by the assessee vis-à-vis technical services utilized by it from the AEs which were not appreciated by the lower authorities. The TPO determined the ALP of the said services to be NIL by applying CUP and observing that assessee had not been able to demonstrate tangible benefit derived from such services.
Comverse Network Systems [India] Pvt Ltd. vs. ACIT [TS-1012-ITAT-2018(Del)-TP] ITA No.6704/Del/2015 and ITA No.7328/Del/2017 dated 31.07.2018

818. The Tribunal deleted disallowance of royalty noting that on examination of agreement, royalty of 0.5% of turnover of manufactured and traded had to be paid in addition to reimbursement of expenses.The AO had erred in disallowing the royalty amount by holding that AE had charged more to assessee towards expenses reimbursement than what was contemplated in the agreement. The Tribunal observed that such payments were towards royalty which was in compliance with the terms of the agreement and not excess reimbursements.
Piramal Enterprises Ltd vs Addl. CIT [TS-808-ITAT-2018(Mum)-TP] ITA No.5471/Mum/2017 and ITA No.5583/Mum/2017 dated 30.07.2018

819. The Tribunal deleted the TP adjustment on royalty payment at 10% of sales made by the assessee[ manufacturer of fragrances] for availing technical knowhow from its AE to be utilized in manufacturer of fragrances noting that the TPO did not have power under the statute to determine the ALP of international transaction on estimate basis by weighing in the business expediency factor and had to adopt a method to determine the ALP of transaction. Further, the DRP had concurred with the TPO’s view without examining it in the proper perspective. It also observed that as regards the TPO’s alternative benchmarking of the transaction by applying external CUP and determining the ALP of the transaction at 1% of the net sales, the assessee had replied in the showcause notice that the comparables could not be taken in view of different geographical location and all the agreements considered were with respect to asset purchase which was not controverted by the TPO. It also noted that TPO had accepted the payment of royalty from AY 2006-07 onwards and in the subsequent years for AY 2010-11 and 2011-12 also.
Firmenich Aromatics India P Ltd vs Dy.CIT [TS-758-ITAT-2018(Mum)-TP] ITA No.2590/Mum/2017 dated 23.07.2018

820. The Tribunal upheld CIT(A)’s order restricting the royalty payment at 4.05% of sales made by the assessee for technical knowhow as against the TPO’s determination of royalty at 4.5% following the decision of coordinate bench of the assessee’s own case for the earlier year wherein it was held that the DRP had rightly considered three companies as comparable whose average rate of royalty came upto 4.5% and was discounted with 10% for fixed term license and the resultant rate of 4.05% was the ALP of the transaction. It also noted that the Revenue had not brought anything on record contrary to the decision of the earlier year.
LG Electronics India (P) Ltd vs ACIT [TS-738-ITAT-2018(DEL)-TP] ITA Nos.3612 and 3613/Del/2017 dated 18.07.2018

821. The Tribunal upheld CIT(A)’s order confirming TP adjustment in respect of payment of export commission by assessee to its AE for promoting CTVs abroad, following co-ordinate bench ruling in assessee’s own case in AY 2007-08 wherein it was held that commission could not be accepted as a genuine business expenditure as provision of services by LG Electronics Korea could not be demonstrated by the assessee.
LG Electronics India (P) Ltd vs ACIT [TS-738-ITAT-2018(DEL)-TP] ITA Nos.3612 and 3613/Del/2017 dated 18.07.2018

822. The Tribunal deleted the TP adjustment on payment of royalty by the assessee to its AE following the coordinate bench decision in assessee’s case for earlier year wherein relying on the decision of EKL Appliances, it was held that it was not open to the TPO to question the commercial expediency/ judgement of the assessee as to how it should conduct its business and further, rejected the TPO’s nil determination of ALP arrived at by applying CUP.
Indian Explosives P Ltd vs Dy.CIT [TS-735-ITAT-2018(Kol)-TP] ITA No.2336/Kol/2016 dated 13.07.2018

823. The Apex Court dismissed Revenue’s SLP against Rajasthan HC judgment confirming deletion of TP adjustment of Rs. 1.03 Cr on payment of royalty relying on HC ruling in assessee’s own case for earlier year. The Tribunal had rejected TPO’s CUP and upheld TNMM applied by the assessee held the assessee’s margin of 5.18% to be at ALP.
CIT vs SAKATA INX INDIA LIMITED [TS-504-SC-2018-TP] SLP 18868/2018 dated 02.07.2018

824. The assessee made payment to its AE for availing Software Services which was claimed to be at ALP (as the AE has allocated the cost of the ERP software to all group companies in 40 countries as per the cost allocation mechanism provided in the agreement). Though the TPO agreed that AE had provided software services, in absence of specific details towards services rendered to the assessee, he quantified the value of the services rendered by the AE on basis of man hour estimate. Accordingly, stating that the employees had rendered service of 2-man hours per days, he arrived at 730-man hours for the year (2 x 365 days) and estimated the ALP of service availed by applying a man hour rate of Rs.8,500 per hour to the said man days, which the TPO claimed to be as CUP. The DRP upheld the estimation made by the TPO as reasonable. The Tribunal deleted the TP adjustment made on payment for availing information services noting that though the TPO had stated he had applied CUP for determining ALP, no comparable instance was brought on record and his estimation of charge on services was without any supporting evidence. Thus, the TPO had not adopted any of the method u/s.92C r.w R 10B. It also observed that documentary evidence in form of copy of the agreement, invoices raised, certificate from independent Chartered Accountant Firm, KPMG, details of users were also furnished before the TPO and thus, the TPO’s allegation that documents were not furnished could not be sustained and the determination of ALP was on adhoc basis. It noted that TPO had given contradictory findings wherein on one hand he had agreed that the AE had provided software and certain services and on the other hand he observed that assessee had failed all the three tests inter alia including whether services have been provided so as to ultimately disbelieve the quantum of payment. Further, noting the cost was allocated to 40 group companies across globe who were using the software and related services, the Tribunal held that there was no reason for not accepting the payment made to the AE to be at arm’s length in the absence of any contrary evidence brought on record and by simply applying the benefit test.
Firmenich Aromatics India P Ltd vs Dy.CIT [TS-758-ITAT-2018(Mum)-TP] ITA No.2590/Mum/2017 dated 23.07.2018

825. The Tribunal deleted the TP adjustment in respect of provision of support services and market information provided by the assessee to its AE by following the coordinate bench decision in assessee’s own case for earlier year wherein it was held that under the provisions of s 92C of the Act, adhoc disallowance being 0.5% of the turnover could not be made and one of the prescribed methods had to be adopted for making the adjustment. [ The assessee’s own case for earlier year had relied on the Bom HC judgement of Kodak India Pvt. Ltd.]
Safilo India Pvt Ltd vs DCIT [TS-756-ITAT-2018(Mum)-TP] ITA No.7561/Mum/2016 dated 05.07.2018

826. The assessee had sold software to its AE and the sale consideration, which was based on the valuation report of an independent valuer, was claimed to be at ALP. While determining the value / ALP, the Valuer had made his projections on basis of estimated life period of 8, 10 and 15 years under three different scenarios (RFR method, Historical cost and weighted average method). The TPO rejected the valuation report of the independent valuer and thereafter computed the ALP of sale consideration by taking the average of three values worked out by the valuer using three different methods (Relief from royalty, Historical cost and Weighted Average) for estimated life of the asset as 8 years. The DRP upheld the TPO’s order and held that the TPO had adopted the right method considering the valuer’s projections based on the estimated life of the asset which was expected to be atleast 8 years. The Tribunal restored the transaction of sale of software noting that from the facts of the case, the Revenue and assessee had not adopted any of the methods prescribed U/s.92C(i) of the Act for determining the ALP. It accepted Revenue’s contention that there were various other comparables available to compare with the transaction made by the assessee and hence the provisions of Section 92C(i) of the Act could be complied with.
Siemens Limited (Successor in interest to Siemens Building Technologies Pvt. Ltd.,) vs DCIT [TS-755-ITAT-2018(CHNY)-TP] ITA No.796/Chny/2016 dated 17.07.2018

827. The TPO made an adjustment to the reimbursements received by assessee for payments made by it on behalf of its AE opining that the reimbursements being international transaction in terms of section 92B were closely linked to assessee’s main transactions of providing ITeS to its AE and by making payments on behalf of its AE, the assessee had performed a service to the AE by using its financial and other services. The DRP held that reimbursements were received as part of the core transaction and, thus, upheld the mark-up / adjustment. The Tribunal restored the issue to the AO/TPO to verify if reimbursements were on actuals (after allowing the assessee to file requisite bills raised on AE along with vouchers/bills) and also directed the AO/TPO to not make any adjustment if it was so.
INDUCTIS INDIA PVT. LTD. vs. Dy CIT (2018) 53 CCH 0329 DelTrib ITA No. 1438/Del/2016 dated 13.07.2018

828. The Tribunal deleted the TP adjustment of markup on cost reimbursement received from the AE following the coordinate bench decision of the assessee’s own case for AY 2005-06 wherein it was held that the transaction of cost recharge for supply of telecom equipment is a mere pass through cost reimbursed to the assessee by AE and could not entail markup. It also noted that the Revenue failed to bring any change in FAR analysis and functions performed by the assessee in subject year and hence there was no difference in factual circumstances from the earlier year.
Ericsson India Pvt Ltd vs DCIT [TS-752-ITAT-2018(DEL)-TP] ITA No.3891/Del/2010 dated 12.07.2018

829. The Tribunal restored the TP adjustment on price charged to AE towards services rendered under Intellectual property service agreement by the assessee noting that content development or animation and website services were within the ambit of ITES and accordingly directed the TPO to benchmark the transaction by aggregating with other ITES transactions and determine the ALP by applying the average margin of the comparables selected under the ITES segment. The TPO had benchmarked the aforesaid service separately and the DRP had also failed to rectify the error committed by the TPO.
Accenture Services Pvt Ltd vs ACIT [TS-737-ITAT-2018(Mum)-TP] IT(TP)A No.7686/Mum/2012 dated 20.07.2018

830. The TPO had considered professional charges paid to Motilal Oswal for advisory and professional charges for acquiring an AE which was subsequently recovered from the AE itself as marketing support services by the assessee to the AE and charged a markup of 15% (i.e. charged @ 12.5% for lending rate and 2.5% entrepreneurial efforts). The DRP deleted the addition of 2.5% made on account of entrepreneurial efforts. The assessee argued that the expenses were charged on actual basis and no income could arise from these transactions as it was not in the line of providing acquisition services. The Tribunal restored the TP adjustment of markup on reimbursement received from its AE to DRP to obtain the required details of acquisition by the assessee and verify the details of expenditure incurred by assessee.
Punjab Chemicals & Crop Protection Ltd vs. Addl.CIT [TS-965-ITAT-2018(CHANDI)-TP] ITA No.60/Chd/2013 and ITA No.100/Chd/2014 dated 23.07.2018

831. The TPO had imputed markup of 5% on the support services expenses and the DRP concurred with the view of the TPO that the assessee rendered services to its AE and held that the markup was inevitable. The Tribunal deleted the TP adjustment of markup on support services provided for employees deputed to AE noting that recovery of expenses from AE such as travel and telephone expenses were third party costs and therefore, no markup was needed as per TP provisions and further, with respect to salary cost for employees and adhoc support staff, there was a markup of more than 5% charged by assessee.
CPS Cash Processing Solutions Private Ltd vs DCIT [TS-511-ITAT-2018(DEL)-TP] ITA No.5017/Del/2012 and ITA No.2671/Del/2013 dated 03.07.2018

832. The assessee, resident of Singapore, deputed one of its Director/employee to India to an associate concern (MSAS) engaged in providing information technology enabled services and software development to overseas Morgan Stanley entities. The assessee, as per the terms of contract, agreed to continue paying salary of the employee in Singapore and cross charged the same to MSAS, the said salary was offered to tax in India by the employee. The AO held that the amount received by the assessee was to be treated as FTS and charged a markup of 23.3 per cent on the reimbursement received by the assessee. The CIT(A) confirmed the action of the AO by treating the reimbursement and mark up there on as FTS. Noting that there was a contractual agreement between MSAS and assessee, which clearly provided that salary was being paid by assessee on behalf of MSAS and the same was recharged by assessee to MSAS, the Tribunal held that the amount received/receivable by assessee (being in the nature of reimbursement of salary deputed to deputed employee) could not be brought within the definition of FTS as defined in explanation to section 9(1)(vii). Explanation 2 clearly excludes consideration which would be income of the recipient chargeable under the head “salaries”. It relied on coordinate bench ruling in case of Mark and Spencer India (P) Ltd wherein it was held that expatriation of employee under secondment agreement without transfer of technology would not fall under the term ‘make available’ and would not be taxable under the treaty. Thus, it held that the payment in question being reimbursement of salary was not fee for technical services in the light of relevant provisions of the Act and India-Singapore DTAA. Further, there was no dispute that the assessee has made payment towards the reimbursement of salary expenditure, which clearly showed that there was no element of profit in the said payment and also the salary was subject to tax in India Accordingly, it held that the reimbursement of salary received by could not be taxed in the hands of assessee and consequently the TP adjustment with respect to markup of reimbursement of salary received could not be sustained.
Morgan Stanley Asia (Singapore) Pte. Vs DDIT [TS-623-ITAT-2018(Mum)-TP] ITA No.8595/Mum/2010 and ITA No.4365/Mum/2012 dated 06.07.2018

833. The Tribunal, following the order of the co-ordinate bench in the assessee’s own case for earlier year deleted the TP-adjustment of Rs. 9.48 Cr on royalty payments made by the assessee. The assessee who was making royalty payment since period prior to acquisition of AE status by payee, benchmarked the royalty transaction under the external CUP method where it selected the royalty payment by Maruti Suzuki. The TPO considered the ALP of the transaction at Nil by rejecting the assessee’s benchmarking and contended that since external CUP required strict standard of comparability and since Maruti was paying royalty for obtaining license for manufacturing a finished product i.e. Automobile whereas the assessee had obtained a license for manufacturing automobile lighting equipment and accessories, the two were not comparable. The TPO further alleged that the assessee had not provided any evidence to show how the rate of royalty was fixed and also did not provide a cost benefit analysis. Noting that the assessee was making royalty payment since periods prior to acquisition of AE status by payee, the Tribunal held that the benchmarking adopted by the assessee by considering the royalty paid by Maruti as comparable was rightly considered CUP. It further observed that the co-ordinate bench in assessee’s own case in AY 2008-09 accepted assessee’s royalty payment at 3-5% at ALP and jurisdictional HC had refused to admit Revenue’s appeal against the said tribunal order. Considering that the facts of the case under consideration were identifical to facts of earlier year, it deleted the adjustment.
Lumax Industries Ltd v JCIT – TS-1094-ITAT-2017(DEL)-TP – ITA No.6961/Del/2014 dated 05.12.2017

834. The Tribunal deleted TP-adjustment stemming from TPO’s reduction of arm’s length royalty rate from 3% to 2% of assessee’s net sales and held that the TPO was unjustified in reducing the royalty rate from 3% to 2% without substantiating it with an appropriate alternate TP analysis. Noting that TPO did not examine alternative comparables to justify reduction in royalty rate after rejecting assessee’s comparables on the ground that they were US based while assessee’s AE was based out of UAE, it held that the TPO’s approach was an arbitrary and unbridled exercise of power.
RAK Ceramics India Private Limited vs. DCIT – TS-1054-ITAT-2017(HYD)-TP – ITA No.193/Hyd/2017 dated 29.11.2017

835. Where the assessee benchmarked the payment of royalty to its associated enterprise under TNMM (margin of the assessee was higher than that of its comparable), the Tribunal, relying on the order of the High Court in the assessee’s own case for earlier years, upheld CIT(A)’s deletion of TP-adjustment on account payment of royalty to AE and held that the TPO erred in determining the ALP of the said payment at Nil under the CUP method when there were no changes in the facts under review vis-à-vis the facts prevalent during the earlier years.
ACIT vs. Sakata Inx (India) Ltd – TS-71-ITAT-2018(JPR)-TP – ITA. No. 828/JP/2017 – dated 29/01/2018

836. The Apex Court dismissed Revenue’s SLP challenging Delhi HC order confirming ITAT’s deletion of TP adjustment on royalty payment to AE. The High Court had rejected Revenue’s ground that ITAT erred in holding that assessee was justified in claiming royalty as expense since only the subsidiaries/enterprises in 10 countries of the 120 locations wherein AEs had presence in were required to make royalty payments and that the ITAT had erred in relying on Delhi HC’s EKL Appliances ruling to arrive at the conclusion that TPO had erred in judging commercial and business expediency of expenditure while determining ALP for royalty at Nil.
CIT vs. Frigoglass India Pvt. Ltd vs. DCIT – TS-31-SC-2018-TP – SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 41702/2017 dated 19-01-2018

837. The Tribunal confirmed CIT(A)’s order holding assessee’s royalty payment (for granting license to use AE’s technology & know-how for carrying on business of manufacturing of automotive components in India) at 3.15% of net sales to be at ALP and held that the TPO had erroneously held that royalty should be taken at Nil on the allegation that no economic benefit had been provided to the assessee as the assessee had incurred loss at entity level without carrying out any analysis. It held that such an observation or reasoning could not be upheld at all once there was a valid agreement for transfer of non-exclusive right for use of license to use technology including knowhow of AE from which assessee has earned substantial revenue receipts which evidenced that such a use of technology and knowhow was directly linked with manufacturing and resultantly sales. It further held that that incurring of loss could not be the parameter to hold that the technological knowhow or license was of no benefit hence there was no requirement to pay the royalty.
DCIT vs. Bestexx MM India Pvt. Ltd. – TS-113-ITAT-2018(DEL)-TP – I.T.A. No.544/DEL/2015 dated 15.02.2018

838. The Tribunal deleted the TP adjustment on the assessee’s royalty payment to AE and rejected TPO/ DRP’s contention that the assessee had not been able to prove any real tangible benefit that had passed to it by technology received from its AE. It noted that where the AE granted the assessee exclusive nontransferable and non-divisible license to use the technical information for manufacture and for marketing activities in India for which the assessee paid royalty it was not the prerogative of the TPO to decide if any tangible benefit had been transferred to the assessee. It held that the payment of royalty was a business decision of the assessee and that the TPO could not interfere with the decision making of the assessee.
India Yamaha Motor Private Ltd vs. ACIT – TS-126-ITAT-2018(DEL)-TP – ITA No.297/Del./2015 dated 12.02.2018
839. The Tribunal dismissed Revenue’s appeal and upheld the deletion of TP adjustment on royalty payment to AE observing that the Tribunal in the earlier years had found royalty payment to be at ALP noting that it was approved by RBI/SIA.
Spicer India Private Limited (Formerly known as Spicer India Limited) vs. ACIT – TS-150-ITAT-2018(PUN)-TP – ITA No. 376/PUN/2016 dated 09.02.2018

840. The Tribunal upheld CIT(A)’s deletion of TP-adjustment on account of royalty payment by assessee (engaged in manufacturing of toughened glass, laminated glass and float glass) to AE accepting assessee’s contentions that maintenance of quality and increase in sales were possible due to AEs licensed technology and that since it was a public limited company (with only 22.21% shareholding by its AE, Indian promoters holding 33.03% and the general public holding 44.76%), the AEs were not in a position to wield significant influence over assessee’s business as its performance and commercial expediency were subject to intense scrutiny by shareholders. Further, relying on EKL Appliances ruling, it held that it was not open to the TPO to question the judgment of the assessee as to how it should conduct its business and regarding the necessity or otherwise of incurring the expenditure in the interest of its business. Thus, finding no infirmity in the CIT(A)’s order, it dismissed Revenue’s appeal.
Asahi India Glass Limited vs. DCIT – TS-123-ITAT-2018(DEL)-TP – ITA No.1637/Del/2014 dated 26-02-2018

841. The Tribunal rejected TPO’s ALP-determination for technology acquisition cost at Nil and remitted ALP-determination to AO/TPO. It observed that the assessee’s (engaged in manufacturing of auto-components) royalty payment was for designs, engineering data, manufacturing and process data, lay-outs etc. for contract products, but it was required to pay acquisition cost separately for modifications or new design which was to be customized for a particular customer in India. Since no royalty payment was required to be made in case of such new product, it held that the TPO as well as the DRP erred in concluding that the payment of application cost was in addition to royalty and therefore held that the benchmarking was incorrectly done.
Separately, in respect of intra-group service fee, it rejected TPO’s Nil ALP-determination on the ground that no services were received or there was duplication of services. On perusal of the emails submitted by assessee, it held that the assessee’s transaction were genuine and clarified that the TPO’s role was restricted to ALP-determination while allowability or otherwise of such payment was to be determined by AO. Accordingly, it remitted the issue back to AO/TPO to follow ratio of Delhi HC ruling in Cushman & Wakefield case.
Denso India Limited vs. DCIT – TS-145-ITAT-2018(DEL)-TP – ITA No.1857/Del/2014 dated 07.03.2018

842. The Tribunal rejected assessee’s aggregated approach for benchmarking royalty payment to UK based AE under TNMM and upheld external CUP as most appropriate method. Noting that royalty payment arose from a separate agreement and was payable irrespective of any services or goods received, it held that it was a separate transaction irrespective of the fact that the relevant payment was utilized for manufacture of final product. Further it held that the rates given by the RBI could not reckoned as an external CUP for the purpose of benchmarking. Accordingly, it remitted the matter to the TPO for fresh adjudication as he had incorrectly determined ALP of the Royalty at Nil contending that the assessee did not receive any benefit.
Johnson Matthey India Private Ltd vs. DCIT – TS-173-ITAT-2018(DEL)-TP] – ITA Nos.:-1817/Del 2014; 2493/Del/2014; & 3755/Del/2015 dated 16/03/2018

843. The Tribunal rejected TPO’s Nil-ALP determination in respect of assessee’s royalty payment to AEs for use of brand names ‘Vodafone’ and ‘Essar’ and remitted the ALP-determination to AO/TPO. It held that the assessee’s royalty payment was a bona fide transaction as the assessee actually used the brand names ‘Vodafone’ & ‘Essar’ and held that the TPO erred in determining ALP at Nil merely because the assessee did not pay royalty in the past. It held that simply because no royalty was paid in the past could be no reason to treat the ALP of royalty at Nil in later years. However, the Tribunal rejected assessee’s adoption of foreign comparable (royalty payment by Motorola Inc to Forward Industries Inc) for benchmarking royalty payment and held that the transaction between 2 foreign parties could not be considered for comparing international transaction with Indian assessee as tested party. Accordingly, it remitted the matter to the AO / TPO for fresh consideration.
DCIT vs. Vodafone Essar Digilink Ltd – TS-166-ITAT-2018(DEL)-TP – ITA No. 1950/Del/2014 dated 14.03.2018

844. The TPO determined the ALP of the royalty payment and management services at “Nil” on the ground that the assessee failed to explain the cost benefit analysis for such payments made to its AE. It was assessee’s contention that the receipts from the assessee were considered to be at ALP by the tax authorities during the assessment of its AEs. The Tribunal remanded the matter back to the TPO noting that TPO needed to examine whether the payment is at ALP with the benefit received by the assessee and such an exercise had not been carried out and it rejected the assessee’s contention by observing that provisions of sec 92CA(4) and sec 92(3) had to be interpreted harmoniously, in respect of the same transaction the Revenue could opt to determine total income on basis of ALP determination in accordance with s 92(1) in hands of one party of the said transaction where the tax base of the country would erode and the Revenue could desist from doing so in the hands of the other party, wherever there would be no tax base erosion.
Filtrex Technologies (P.) Ltd vs ACIT [TS-265-ITAT-2018(Bang)-TP] IT(TP)A No.469 of 2017 dated 11.04.2018

845. The Tribunal deleted the TP addition made on account of royalty by relying on the decision of the High Court in its own case TS-671-HC-2015(DEL)-TP wherein it was held that since TPO found that no adjustment was called for under the external TNMM method adopted by the assessee, no adjustment could have been made by separately benchmarking the transaction. It observed that the assessee received full technical assistance from its AE for which the royalty payment was made and therefore deleted the addition.
Lumax Industries Ltd v ACIT – TS-454-ITAT-2018(DEL)-TP – ITA No. 1441/DEL/2016 dated 04.05.2018

846. Regarding disallowance of royalty paid to AE @ 40% of the revenue from software trading, the Tribunal remitted the matter back for de-novo adjudication after considering assessee’s submission that payment was made pursuant to a revenue sharing agreement and was nomenclatured as royalty. The Tribunal distinguished co-ordinate bench ruling in assessee’s own case for previous AY wherein relief was granted on benefit test and royalty benchmarking done based on CUP-method (which was undisputed in captioned years). The Tribunal thus directed TPO to benchmark the subject mentioned payment vis a vis the comparables afresh, in order to determine the ALP of the said international transaction
M/s. Labvantage Solutions Pvt Ltd vs ACIT Circle 2(1)- TS-405-ITAT-2018(Mum)-TP- ITA No 927 & 2400/Kol/2017 dated 11.05.2018

847. The Court set aside Tribunal order and remanded the matter back to the Tribunal for fresh consideration, wherein the Tribunal had confirmed royalty adjustment in case of assessee manufacturing magnetic based electronic coils, transformers and inductors. It accepted assessee’s contention that the Tribunal had upheld royalty adjustment [although royalty payment formed part of operating cost under entity level TNMM] without discussing the applicability of Delhi HC ruling in Sony Ericsson Mobile or Tribunal ruling in Siemens VTO Automotive. In the said cases it was held that when royalty payment formed part of operating cost it need not be separately benchmarked. The Court held that the Tribunal erred in not following decisions of the co-ordinate bench of the same jurisdiction.
Kaypee Electronics vs DCIT Circle 4(1)(1)- TS-414-HC-2018(Kar)-TP-ITA No 65/2018 dated 29.05.2018

848. The Tribunal remitted the ALP determination of royalty paid back to AO/TPO. The Tribunal accepted the assessee’s request to admit additional evidence in the form of Addendum to intangible and proprietary property and licensing agreement [which set out the understanding between the parties and the actual conduct of business] and opined that the Addendum to the agreement went to the very root of the matter and that it would suitably assist the lower authorities to reach a logical conclusion on the issue.
C.R.M. Services India Pvt. Ltd vs. DCIT [TS-343-ITAT-2018(DEL)-TP] ITA No.5930/Del/2012 and 1630/Del/2014 dated 14.05.2018

849. The Tribunal deleted the TP-adjustment on royalty and technical service fee made by the TPO determining ALP at Nil for AY 2013-14 and held that that TPO/DRP could not put themselves in the shoes of assessee to decide which expense should be incurred by assessee for its business. The Tribunal observed that both TPO and DRP had gone into the need for expenses incurred by assessee vis-à-vis benefit for which disallowance can be made under separate provisions of the Act. Further, the Tribunal refused to remit the matter to the AO by relying on the Gujarat HC ruling in Rajesh Babubhai Damania as it would amount to giving second innings to the AO when sufficient material was available before him on record which was impermissible. It rejected Revenue’s contention that double deduction of royalty had been claimed and royalty was part of the cost of purchase of raw materials by observing that raw materials were purchased from one AE and royalty was paid to another AE. The Tribunal also observed that lower authorities erred in proceeding to make adjustment without discarding the benchmarking methodology followed by assessee i.e. TNMM in the instant case, by relying on Delhi HC ruling in Li & Fung case.
COIM India Pvt. Ltd v ACIT [TS-344-ITAT-2018(DEL)-TP] ITA No.7260/Del/2014 dated 07.05.2018

850. The Tribunal following the order of the coordinate bench in the assessee’s own case for earlier year deleted the TP adjustment of Rs.172.08 crores in respect of payment of model fees and Rs.3.53 crores on royalty payments made by the assessee. The assessee had benchmarked the international transaction for payment of model fees and royalty under TNMM and concluded that since the operating profit ratio was higher than the average operating profit ratio of the comparables, the transaction was at arm’s length. However, the TPO determined the ALP of the transaction to be “nil” on the ground that the assessee was partly responsible for the technology upgradation which happened in India and the assessee was paying both the model fees and royalty for same set of services. The TPO also held the ALP of the royalty transaction to be nil and further alleged that the assessee being a contract manufacturer, no royalty payment was to be made to the AEs. The aforesaid adjustment was confirmed by DRP. It noted that the co-ordinate bench in assessee’s own case for AY 2006-07, 2007-08 and 2008-09 deleted the adjustment made by the Revenue and accepted the ALP determined by the assessee in respect of the transactions. It further observed that for the year under consideration, the payment of royalty was made by the assessee in respect of sales to independent enterprises.
Hero Moto Corp Ltd. v DCIT [T-801-ITAT-2018(Del)-TP] ITA No.1616/Del/2017 dated 13.06.2018

851. The Court remitted the issue of TP adjustment with respect to royalty payment back to the Tribunal for fresh adjudication, noting that the Tribunal’s observation that benchmarking of royalty payment could not be done by using comparables with transactions entered into between two foreign parties was not premised on any reasons. The Court held that the Tribunal’s above observation was unwarranted and should not be treated as conclusive
Vodafone Mobile Services Ltd [TS-419-HC-2018(DEL)-TP] ITA 660/2018 dated 01.06.2018

852. The Tribunal set aside the DRP order and remitted the issue vis-à-vis ALP adjustment of the royalty payment to its AE. The Tribunal noted that identical issue was remitted by ITAT to AO/TPO for fresh consideration for AY 2006-07 to AY 2009-10. Thus, following the said ruling, ITAT remitted the issue to AO/TPO and directed the assessee to file a fresh TP documentation and comparable companies so as to arrive at ALP.
DCIT vs JCB India Ltd [TS-199-ITAT-2015(DEL)-TP] ITA No.1119/Del/2015 dated 25.06.2018

853. The Tribunal restored the benchmarking of royalty, fees for technical services & design/drawing fee paid by assessee to its AE. It noted that TPO determined ALP of these transactions at Nil on the basis that no tangible benefit had been derived by the assessee. The Tribunal relied on co-ordinate bench ruling in assessee’s own case for AY 2009-10 wherein the Tribunal had observed in the ruling that appeal preferred by the Revenue against the said issue for AYs 2002-03 and 2004-05 had been dismissed by the High Court. Further, it was also noted by the Tribunal that co-ordinate bench in assessee’s own case had remitted the matter for fresh decision by following earlier year’s orders since the AO did not have the benefit of the High Court order at the time when he passed the order.
Munjal Showa Ltd vs. DCIT Ltd [TS-729-ITAT-2018(DEL)-TP] ITA No.1579/Del/2015 dated 27.06.2018

854. The TPO had restricted the ALP of royalty payment by the assessee to its AE at 1% of net sales under CUP method, rejecting assessee’s approach of aggregating the said payment under the manufacturing operations and applying TNMM. The Tribunal remitted the said issue of ALP determination for the year under appeal i.e. AY 2010-11 by relying on the Tribunals’ order in assessee’s own case for AY 2007-08, AY 2008-09 and AY 2009-10 wherein the Tribunal had rejected the assessee’s aggregation approach holding that the royalty payment was a separate transaction which required to be benchmarked under CUP method and had remitted the matter back to the file of the AO/ TPO for de novo determination of ALP. Further, it was also noted that in one of the years, under the remand proceedings directed by the Tribunal, the TPO had held the royalty payment made by the assessee at 4% to be within the ALP computed at 4.10%.
Praxair India Private Limited V ACIT [TS-524-ITAT-2018(Bang)] IT(TP)A No.361/Bang/2015 and IT(TP)A No.409 /Bang/2015 dated 04.06.2018

855. The Tribunal deleted the TP adjustment towards payment of royalty on traded finished goods made by the assessee to Johnson & Johnson USA following the coordinate bench ruling in assessee’s own case wherein the Tribunal had noted RBI approval was obtained and had observed that TPO could not sit in judgment on whether the royalty had to be paid or not and also found that there was no force in the findings of the TPO that royalty was deemed to be included in the brand royalty.
Further, the Tribunal also allowed the technical know-how royalty payment @ 2% / 4% as per the agreement as against the TPO’s approach of restricting royalty @ 1% and followed the assessee’s own order for the earlier year.
The Tribunal dismissed Revenue’s appeal and relied on the co-ordinate bench ruling in assessee’s own case to allow the tax and R&D cess paid on technical know-how royalty. The Tribunal in assessee’s own case had noted that royalty payments were approved by RBI and further payments had been made in line with the agreement with Johnson and Johnson US and hence no question of disallowance of tax and R&D cess arose.
ACIT vs Johnson & Johnson Ltd [TS-537-ITAT-2018(Mum)-TP] ITA Nos.1776 & 1777/M/2017 and CO No.242/M/2017 dated 18.06.2018

856. The Tribunal, following the order of the co-ordinate bench in the assessee’s own case for the earlier AY, deleted TP-adjustment on management support services received from AE and rejected TPO’s ALP-determination at Nil observing that the assessee had actually received services and demonstrated benefit. It noted that the said services could not be categorized as stewardship services and that the Revenue had accepted similar claim of assessee for other AYs. Further, it rejected the TP-adjustment on international transaction relating to receipt of IT services made by the TPO by determining its ALP at Nil and noted that the DRP had deleted similar addition made in the earlier and subsequent years. Since the assessee had been claiming the IT expenses for the last several years and the same had not been denied, in view of the principle of consistency, it held that the TPO was unjustified in making TP addition.
DCIT vs. Philips India Ltd – TS-1088-ITAT-2017(Kol)-TP – ITA No.863 & 539/Kol/2016 dated 15-12-2017

857. The Tribunal dismissed Revenue’s appeal against CIT(A)’s deletion of TP-adjustment on account of disallowance of part of professional service fees paid by assessee to its AE. The service rendered by AE was to enable assessee’s fulfilment of management services contract with an independent third party viz. Hazira LNG for plant construction. Accordingly, accepting the contention of the assessee that the services received by the assessee from its AE was independent of the income received by it from Hazira LNG, the Tribunal held that the TPO erred in concluding that the expenditure related to professional services received by the assessee from its AE was to be allowed only in the next AY since income from Hazira LNG was recognized in that year. It upheld the CIT(A)’s view that income receivable from Hazira LNG would not have altered assessee’s liability in respect of its payment to AE and further held that the TPO exceeded his jurisdiction by taking over the role of the AO and disallowing an expenditure based on assessee’s adoption of a project completion model for accounting. It held that the TPO was neither supposed to take decision about accounting policy to be followed by the assessee nor comment upon as how to compute income if an assessee follows a particular method of accounting.
DCIT vs Hazaria Cryogenic Engineering and Construction Management Pvt. Ltd – TS-4-ITAT-2018(Mum)-TP – /I.T.A./2124/Mum/2007 dated 03/01/2018

858. The Tribunal deleted TP-adjustment on payment of fees for advisory and other services rendered by AE observing that the analysis done by TPO as to nature of services and benefit to assessee was beyond the scope of TP provisions. It observed that the assessee had filed contemporaneous and highly-technical documentary evidences to demonstrate benefits of services such as support for new product, marketing material, training material and technical support, etc and held that once such a business decision had been taken and the payment had been backed by substantial evidence of services received by it from its associated enterprises, then the TPO could not question the same by commenting upon the nature of services provided. It held that the examination of qualification of AEs to provide services and costs incurred by AE was outside the domain of TPO and further observed that the AEs had provided similar services to other group entities and relevant details as to basis of charge, calculations along with proof that similar arrangements with other related entities which were certified. Accordingly, it accepted assessee’s adoption of TNMM and consideration of AEs as tested-party and discarded the Nil ALP determination on the basis of examination of needs and benefits of services instead of benchmarking using uncontrolled transactions and held that such a metholodolgy under the garb of CUP was not permissible in law.
Emerson Climate Technologies (India) Limited. vs. DCIT – TS-1065-ITAT-2017(PUN)-TP – ITA No.2182/PUN/2013 dated 29.12.2017

859. Where the assessee incurred consultancy fee during the year (for setting up its manufacturing activity which it capitalized as well as other consultancy fee), vis-à-vis the consultancy fee capitalized, the Tribunal held that since the ALP-determination was neither directed by DRP nor carried out by AO/TPO, it could not enlarge the controversy by directing the authorities to determine the ALP of the amount to be capitalized. Vis-à-vis TP-adjustment on payment of balance consultancy fees to AE, it rejected assessee’s approach of aggregating the transaction with manufacturing activity absent close connection between two transactions, further also noted that the assessee had not undertaken any manufacturing activity during the first year under consideration and thus, there was no reason for aggregation. However, noting that TPO determined ALP at Nil holding that no benefit was received by assessee which was accordingly disallowed by AO, it held that the AO/TPO’s action was contrary to ratio of Delhi HC ruling in Cushman & Wakefield India P Ltd and accordingly remitted the matter to AO/TPO to follow directions in Cushman & Wakefield ruling after giving reasonable opportunity of being heard to assessee.
Daikin Airconditioning India Pvt. Ltd. v DCIT – TS-176-ITAT-2018(DEL)-TP – ITA Nos.2536/Del/2014

860. The Tribunal deleted the TP adjustment in respect of management support services fees paid provided by the assessee following the coordinate bench decision of assessee’s own case for earlier year wherein it was held that the TPO could not question the commercial expediency and how the assessee benefitted from such services relying on the on ratio laid down in the Delhi High Court ruling in Cushman and Wakefield. It had also observed that the DRP had treated the receipts from assessee as FTS in the hands of the AE which by itself means that services were being rendered and further, the TPO in the earlier years had made no such adjustment. Thus, it deleted the said adjustment made by the TPO on the basis that services rendered by AE to assessee amounted to shareholder activities.
Philips India Ltd. vs ACIT (2018) 52 CCH 0320 KolTrib ITA No.2498/Kol/2017 dated 04.04.2018

861. The Tribunal set aside the CIT(A)’s order upholding the TP addition of Rs 97 lakhs on payment of management fees. It upheld the TPO and CIT(A)’s segregated benchmarking of the of payment of management fees from the TNMM analysis but held that the CIT(A) erred in questioning the commercial expediency behind incurring the said expenditure as it was in excess of his powers while determining the ALP of the payment. Relying on the order of the Tribunal for the earlier years on the similar issue, it remanded the matter back to the TPO for a fresh examination in light of the substantiating evidence filed by the assessee proving the receipt of services.
DMG Mori Seiki India Machines And Services Pvt. Ltd vs DCIT – TS-535-ITAT-2018(Bang)-TP – IT(TP)A 1617/Bang/2012 dated 02-05-2018

862. The Tribunal deleted TP adjustment made on account of payment for management service cross charge made by assessee (an Indian branch office) to various group entities and laid down 4 aspects to be examined while benchmarking intra-group services – “1. Whether the assessee received intra-group services? 2. What are the economic and commercial benefits derived by the recipient of intra-group services 3. In order to identify the charges relating to services, there should be a mechanism in place which can identity (i) the cost incurred by the AE in providing the intra-group services and (ii) the basis of allocation of cost to various AEs. 4. Whether a comparable independent enterprise would have paid for the services in comparable circumstances?”. Relying on Delhi HC ruling in EKL Appliances, it held that the lower authorities were not justified in examining commercial soundness of the decision and whether any profit had actually been realized pursuant to such payment. Further, it rejected Revenue’s argument that assessee did not provide logical cost allocation basis for management support services and observed that the break-up of costs and evidence was duly submitted by the assessee and that the cost allocation of a senior personnel from the regional head office on the basis of time spent was logical and backed by email evidence.
A.T. Kearney Ltd vs A.D.I.T – TS-528-ITAT-2018(DEL)-TP – ITA No. 6249/DEL/2012 dated 21.05.2018

863. The Tribunal deleted the TP adjustment on management service fees paid by the assessee by relying on the coordinate bench decision of Siemens Aktiongessellschaft wherein it was held that benefit test could not be the basis to justify arm’s length price. It rejected TPO’s Nil determination of ALP of the said services by applying the benefit test by holding that the same was contrary to the provisions of Rule 10B where any of the methods had to be adopted for determining the ALP of the transaction.
US Technology Resources (P.) Ltd. vs Dy.CIT [2018] 97 taxmann.com 490 (Cochin-Trib) IT(TP) No.134 and 475 of 2016 dated 23.05.2018

864. The Tribunal deleted TP-adjustment in respect of management and professional consultancy services and SAP consultancy charges paid pursuant to remand back by Punjab & Haryana HC. It relied upon the co-ordinate bench ruling for AY 2008-09 wherein it was observed that assessee had achieved an increase in export turnover as well as gross margin and thus benefited from the services rendered by AE. Further it noted that in the earlier year, the Tribunal had upheld assessee’s TNMM as TPO failed to bring anything on record to substantiate ALP determination at Nil under CUP. Relying on Tribunal’s order for AY 2008-09, it held that since the facts of the present case were identical TNMM was the most appropriate method and that the Assessing Officer/ TPO/DRP were not justified in making any adjustment in the ALP of the international transactions entered into by the assessee on account of professional consultancy, management fee for support service and SAP consultancy charges.
Knorr-Bremse India Pvt. Ltd v ACIT – TS-527-ITAT-2018(DEL)-TP – ITA No.5097/Del/2011 dated 31/05/2018

865. The TPO determined the ALP of the of management/business support services to be Nil by applying CUP on ground that these services did not result in any benefit to assessee and there was no evidence of receipt of these services. The CIT(A) granted relief to the extent of 70% of disallowance but sustained 30% adjustment on the ground that services included element of shareholder services and duplicative services. The Tribunal remanded the matter back to CIT(A) noting that CIT(A) had sustained the adjustment on estimated basis without considering the cost allocation methodology report and directed the CIT(A) to quantify the adjustment after examining the said report and assessee’s explanations.
BSI Group India Pvt. Ltd. & ANR vs. ACIT (2018) 53 CCH 0091 DelTrib ITA No. 104/Del/2014 dated 31.05.2018

866. The Tribunal remitted the ALP determination of payment of management group cost back to AO/TPO for deciding afresh by applying the CUP method for AYs 2008-09,2009-10 and 2012-13. The Tribunal noted that the TPO rejected assessee’s aggregation of sub-transactions of “management group cost” and “R&D assistance cost” as one international transaction of “cost sharing expenses” using TNMM, segregated the payment of “management group cost” and applied CUP as MAM and determined ALP as nil. The Tribunal rejected the TPO’s Nil-ALP determination of management group cost on the ground of non-receipt of services/duplication of services and application of benefit test. The TPO had invoked the CUP method and conducted a “cost benefit analysis” test and eventually arrived at the conclusion that services received were duplicative in nature and in some cases, the assessee did not avail any services. The Tribunal took note of the assessee’s submission of list of services received under the management cost services and certain other details of technical materials received from the AEs, and followed Knorr-Bremse High court ruling to hold that the assessee did receive some services and the applicability of `benefit test’ could not be countenanced.
Further noting that (i) the coordinate bench in assessee’s own case for AY 2011-12 had restored the matter back to TPO to examine whether the payment of “management group cost” was a case of cost sharing arrangement or intra-group services after perusal of various agreements and (ii) since the relevant agreements were the same in that year as well as the present year, the Tribunal restored the matter for present year also to the file of the AO.
Atotech India Pvt Ltd vs. ACIT [TS-340-ITAT-2018(DEL)-TP] ITA Nos.3419&6571/Del/2016 &1112/Del/2014 dated 11.05.2018

867. The Tribunal remitted the TP-adjustment on sales support services rendered by assessee to its AE for re-adjudication noting that the main dispute was around cost allocation between trading and sales support services and assessee had made several submissions which were not considered by lower authorities. It noted that the TPO had made adjustment on reimbursement of project expenses which consisted of travel expenses of engineers, salary, insurance, logistics for importing the material related to the project, etc., for want of documentation while DRP enhanced it holding it to be shareholder activity without giving any plausible reasoning in support of its claim that project expenditure was shareholder activity and would benefit only AE. It noted that the assessee had consistently submitted that expenditure was towards setting up of its Ranjangaon Project and accordingly held that the TPO ought to have determined ALP in light of provisions of Rule 10B. Further, it held that the Revenue could not sit into the armchair of businessman to adjudge necessity of expenditure unless it was shown that the expenditure was not at all required to be incurred for the benefit of the assessee and the assessee, in normal circumstances, would not be willing to pay the same to independent third parties. It also observed that the expenditure was capitalized and disclosed under ‘work in progress’ in the Balance Sheet and not debited to profit and loss account, thus held that approach of Revenue to add back amount as income was clearly fallacious. Thus it set aside Nil ALP determination and restored the matter back to TPO for de novo consideration.
Jotun India P Ltd v ITO – TS-447-ITAT-2018(Mum)-TP – I.T.A. No.1126/Mum/2013 dated 04 /05/2018

868. The Tribunal relying on the order of the coordinate bench in assessee’s own case rejected TPO’s determination of ALP of the management fees at nil and quoted the observations of the bench wherein they had questioned the authority of the TPO to determine the necessity and expediency of the management fees. The TPO had to only ascertain the arm’s length price. Further, the Tribunal also noted that the management fees was held to be in the nature of both capital and revenue expenditure and to be allocated in 60:40 ratio because the person to whom the fees were paid was involved in the day to day activities of the assessee and also assisted in the expansion and increase in the installed capacity.
Tudor India Private Limited (formerly known as Tudor India Limited) [TS-458-ITAT-2018(Ahd)-TP] ITA No.2585/Ahd/2014 dated 06.06.2018

869. The Tribunal deleted TP-adjustment on payment made for management and professional consultancy services by following the co-ordinate bench ruling for AY 2008-09 (which had been relied upon subsequently by AY 2007-08 to decide the issue in favour of the assessee),wherein it was observed that assessee had achieved an increase in export turnover as well as gross margin from 2007-2009 and thus benefited from the services rendered by AE . Noting that the AE had charged only the cost and other related expenses for the employee and not a markup which was paid to the employees who are third parties , it observed that transfer pricing provisions can be inferred only if there is a related party payment, but the expenses incurred were paid to the third party employees although those employees were the employees of the AE.It rejected TPO’s Nil determination of ALP under CUP method as nothing was brought on record to substantiate that the AE provided similar services to independent enterprises in the assessee’s market and accepted assessee’s adoption of TNMM as the MAM . It dissented with coordinate bench decisions relied on by the Revenue namely Crane Software and Gemplus India Pvt. Ltd ( wherein the TP adjustment on management charges had been made due to difference in factuals ) as it was not the allegation of TPO that services were not rendered by the AE and Bombardier Transportation India Pvt. Ltd. as the assessee in the instant case had filed detailed evidence and explained specific services provided by the AEs
Knorr-Bremse India Pvt. Ltd v ACIT – TS-526-ITAT-2018(DEL)-TP – ITA No.5097/Del/2011 dated 28.06.2018

870. The Tribunal dismissed Revenue’s appeal and confirmed the deletion of TP-adjustment on foreign component of seconded employees’ salary disbursed by AE in Australia. The TPO had determined ALP of reimbursement to AE towards expat employees’ salary at Nil while Indian component of the salary was allowed as deduction. The Tribunal noted that the TPO had accepted business support services income and project management fees earned by assessee through the employment of such expat employeesand therefore held that the action of the TPO in denying deduction of the foreign component of the salary was not justified when it accepted the salary paid to such employees in India moreso when the same set of expats engaged in providing business support services the income from which has been offered for tax and accepted by the TPO.
ACIT V Blue Scope Steel India (P) Ltd – [TS-143-ITAT-2018(DEL)-TP] – I.T.A .No. 5535/DEL/2012 dated 01.03.2018

871. The Court upheld the Tribunal’s order deleting TPO’s disallowance of overheads allocated by JV partners to assessee (an AOP with 5 members formed for executing contract for Delhi Metro Rail Corporation). As per the JV agreement, the members were permitted to allocate their head office (HO) expenses to the extent of 8.5% of turnover of the assessee in their profit sharing ratio, however TPO disallowed the same on the ground that other direct expenses of the JV partners were debited in assessee’s books. The Court noted the Tribunal’s observation that the TPO had failed to identify comparables to justify that overhead allocation in case of assessee was in excess of comparable transactions and that both the CIT(A) and ITAT took note of certificates from JVs’ auditors confirming overhead charging rate and its apportionment to the assessee’s operations and thus, rejected TPO’s finding that assessee had not furnished details in support of its claim. Accordingly, the Court held that the issue urged by Revenue was essentially of finding of facts, which were not shown to be perverse and accordingly held that no substantial question of law arose.
Pr. CIT vs. International Metro Civil Contractors – INCOME TAX APPEAL NO. 559 OF 2015 dated 07.03.2018

872. The Tribunal deleted the TP-adjustment (TPO determined ALP as Nil) on information technology (IT) services availed by assessee (engaged in manufacture and distribution of fluid power equipment) and held that the factum of availing services as well as basis of charge was proved by assessee based on a certificate received from AE which had also certified that similar charge was made to other group entities and other documents like debit notes, JV vouchers, etc. It rejected TPO’s segregation of transaction of availing IT services from other international transactions and held that the IT services were related to the business of the assessee and therefore ought to be aggregated.
Eaton Fluid Power Limited vs. ACIT – TS-178-ITAT-2018(PUN)-TP – ITA No.45/PUN/2013 dated 12.03.2018

873. The Tribunal rejected TPO’s Nil ALP-determination under CUP-method in respect of payment of license and management fees by assessee (JV engaged in manufacture of pharmaceutical formulations) to AE and upheld assessee’s approach of benchmarking under the aggregation approach. It held that while the benefit test was a necessary part of determining ALP of any intra-group service, it cannot have qualifications such as “substantial”, “direct” and “tangible” as these qualifications were not given u/s 92(2) and also observed that there were several non-monetary terms other than profitability required to be seen while judging the benefit test. Observing that the license was required for long term manufacturing of drugs and formulation with know-how of the AE, the Tribunal held that the TPO lost sight of various non-monetary benefits which in the absence of the payment for the use of license would not flow to the assessee. Since the assessee’s comparability analysis by aggregation of transactions after adopting TNMM as MAM had not been examined by either of the authorities below who merely concentrated on the issue of aggregation/segregation of transactions, it remitted issue back to CIT(A).
DCIT vs. Adcock Ingram Ltd – TS-57-ITAT-2018(Bang)-TP – I.T(TP).A No.1039 & 1078/Bang/2015 dated 31.01.2018
874. The Tribunal remitted the TP-adjustment on payment for intra-group services to AE noting that the TPO after rejecting assessee’s combined transaction approach of adoption of TNMM and applying CUP, had determined ALP of intra-group services at Nil without appreciating i) the assessee’s arguments on appropriateness of combined benchmarking approach considering that 5 transactions benchmarked together were closely linked and inappropriate adoption of CUP ii) TPO’s failure to consider voluminous documentation submitted by assessee and iii) TPO’s incorrect approach in questioning commercial expediency of transaction. Considering the totality of the facts of the case, it held that the matter required fresh adjudication at the level of the Assessing Officer/TPO in the light of the various evidences produced before them and in the light of the decisions relied on by assessee.
Bright Point India Pvt. Ltd. v ACIT – [TS-1083-ITAT-2017(DEL)-TP – ITA No.123/Del/2017 dated 04-12-2017

875. In case of an assessee engaged in manufacturing and marketing of paints, speciality chemicals and starch, the Tribunal deleted TP Adjustment in respect of payments made for intra group services received from its AE. The Tribunal relied on assessee’s earlier year’s order which stated that services provided by AE in the arena of human resources, marketing support, and IT, were not in the nature of stewardship services and the assessee had proved the benefit received from such services. Further, the Tribunal also remitted issue of ALP determination to TPO, after noting that ALP determination activity was not carried out by TPO, as the TPO had cited assessee’s failure to provide agreement as reason for non-determination of the ALP and the DRP regarded the transaction as stewardship services. Thus, the Tribunal directed TPO to pass speaking order after hearing the assessee.
DCIT Circle 10(1) vs Akzo Nobel India Ltd.-TS-342-ITAT-2018(KOL)-TP- ITA No 229/Kol/2015 dated 14.04.2018

876. The Tribunal remitted back issue of ALP determination of international transactions for assessee acting as a sourcing support service provider for it’s group companies and relied on co-ordinate bench ruling in assessee’s own case for earlier AYs, which in turn had relied on Li & Fung HC-ruling, and had remitted the issue back to TPO considering that the assessee was not into buy and sell, but a facilitator/service provider and its compensation model would be cost plus remuneration and not a commission based remuneration. Thus, the Tribunal remitted the matter to the file of AO/TPO for a fresh examination on the lines of co-ordinate bench judgment to find out proper comparables and determine the ALP of the international transaction afresh.
GAP International Sourcing (I) Pvt Ltd vs DCIT Circle 10(1)- TS-481-ITAT-2018(Del)-TP- ITA No 6340/Del/2017 dated 11.04.2018

877. The Court upheld Tribunal’s decision of deleting TP-adjustment in case of an assessee rendering support services by following co-ordinate bench ruling in ‘Li and Fung India Pvt. Ltd. The Court rejected Revenue’s submission that there were significant differences in assessee’s international transactions as opposed to those carried out by Li and Fung India and stated that Tribunal’s findings with respect to the functional similarity and identity between Li and Fung India and assessee were clear. The Court observed that like Li and Fung India the assessee did not assume any risk and were dependent entirely for reimbursement of its expenses by the AEs and were thus entitled to the annual and identical markup of 5% over the annual expenditure.
PCIT-4 vs GAP International Sourcing India P Ltd- TS-259-HC-2018(Del)-TP- ITA No 1033/2017 dated 10.04.2018

878. The Tribunal deleted the disallowance in respect of sales commission paid by assessee to its sister concern (AE), noting that similar commission was allowed in preceding AYs 2010-11 to 2012-13 and Revenue had not been able to bring any new fact, which had led to change the present stand for the purpose of disallowing sales commission.
Bonfigioli Transmissions Private Limited vs. DCIT – TS-388-ITAT-2018(CHNY)-TP – /I.T.A.No.2977/CHNY/2017 dated 14-05-2018

879. The Tribunal rejected Revenue’s contention that rate of commission received by assessee ought to be 4% instead of 1% and deleted the TP adjustment made on commission. The Tribunal noted that Revenue had raised the issue for the first time in the AY 2013-14 and observed that the TPO has compared the rate of commission charged by the assessee with the rate of commission charged by the assessee to its other AEs which was clearly barred by the provisions of section 92F(ii) r.w.s. 92. Accordingly, it deleted the TP-adjustment on commission observing that ALP was to be determined based on price charged in uncontrolled transaction and accepted the benchmarking done by assessee as correct
COIM India Pvt. Ltd v ACIT [TS-344-ITAT-2018(DEL)-TP] ITA No.7260/Del/2014 dated 07.05.2018

880. The TPO disallowed the entire commission payment made by the assessee (engaed in manufacturing business) to its AE for AY 2008-09 by using the ‘benefit test’ and determined ALP at Nil on the basis that no services were received. The CIT(A) arbitrarily held that 75% commission should be allowed as a deduction. The Tribunal rejected TPO’s use of ‘benefit test’ to determine Nil ALP, relying on Knorr Bremse HC ruling and held that in the instant case it was established beyond doubt that three employees were specifically deployed by the AE for the business operations of the assessee, which deciphered that the international transaction entered into by the assessee with its AE was genuine and bona fide. The Tribunal thus set aside the CIT(A)’s order and remitted the matter to the file of AO/ TPO for deciding the same in accordance with ratio laid down in Cushman & Wakefield jurisdictional HC ruling wherein it was held that the authority of the TPO was limited to conducting transfer pricing analysis for determining the ALP of an international transaction and not to decide if such service or benefit accrued to the assessee.
Further, the Tribunal also rejected the TPO’s benchmarking of the payment of commission by applying the CUP method, noting that he had not brought on record even a single comparable to facilitate a comparison between the price for the services by the assessee vis-à-vis that paid by other comparable. It also rejected the assessee’s benchmarking under PSM since the assessee was not able to substantiate the ALP under the said method.
DCIT (LTU) vs. Caparo Engineering India Pvt. Ltd [TS-325-ITAT-2018(DEL)-TP] ITA No.444/Del/2015 dated 02.05.2018

881. The Tribunal deleted the adjustment/ disallowance made by the TPO in respect of payment made by the assessee for intragroup services. It relied on the coordinate bench ruling in assessee’s own case for earlier year wherein the TP adjustment in respect of intragroup services was deleted by holding that the assessee actually received the services and benefited from them. The Tribunal noted that TPO made the adjustment by observing that services rendered were of stewardship nature and were for maintenance of overall control of the group. However, in the assessee’s own case, it was held by the Tribunal that that assessee had clearly demonstrated that services resulted in effective cost savings by way of an effective purchase function, technical assistance in relation to certain products provided by AE and other ancillary functions like IT management for which the assessee did not have requisite staff to perform functions. The Tribunal noted that there were no change of facts from the earlier year and the Revenue had not been able to bring anything on record to controvert it.
Chryso India Private Limited (formerly known as ‘The structural Waterproofing Company Private Limited’) v ACIT [TS-329-ITAT-2018(Kol)-TP] ITA No.112/Kol/2017 dated 04.05.2018

882. The Tribunal remitted the benchmarking of intra-group services to TPO. It relied upon the earlier year order wherein ITAT had observed that TPO is required to assess (a) need test, (b) benefit test, (c) rendition test, (d) duplication test and (e) shareholder activity test while determining ALP of intra-group services. The Tribunal in the assessee’s earlier year had remanded the matter by holding that assessee had not produced proper evidence for substantiating actual rendering of various services and that determination of the same would be a year-specific exercise.
Avery Dennison (I) Pvt Ltd vs ACIT [TS-611-ITAT-2018(DEL)-TP] ITA No.7183/Del/2017 dated 27.06.2018

883. The Court kept open the substantial question of law raised in appeal against the order of the Tribunal i.e. whether addition u/s 40(a)(ia) can be made with respect to expenditure incurred for intragroup service, irrespective of any addition being made u/s 92CA [i.e. TP adjustment] with respect to the said expenditure. It was noted that the Tribunal had remanded back the issue to the file of the AO. The Court thus held that the issue would now depend on the AO’s findings under the remand proceedings after considering the assessee’s contention in this regard. Accordingly, the appeal was disposed of.
SKF Technologies India P Ltd v DCIT [TS-610-HC-2018(KAR)-TP] ITA No.83/2017 dated 19.06.2018

884. The Tribunal dismissed Revenue’s appeal and upheld DRP’s order deleting the TP adjustment in respect of intragroup services noting the fact that the DRP had recorded that the assessee had provided substantial evidence in form of e-mails, correspondence with the AE etc. so as reach a conclusion that the AE was rendering services which were beneficial for the assessee in conducting its business and though some benefits might have accrued to the overall group but the primary beneficiary was the assessee. It concluded that services were not in nature of stewardship activity. It observed that the Revenue could not point out any factual or legal error in the directions of the DRP and thus, upheld the DRP’s order.
ACIT vs Humboldt Wedag India Pvt. Ltd- (2018) 53 CCH 0135 Del Trib ITA No.5097/Del/2011 dated 28.06.2018

885. The Tribunal following the order of the co-ordinate bench in assessee’s own case for earlier year remitted the issue vis-à-vis charge of markup on reimbursements from AE for the limited purpose of verification whether the transactions were routed through books. The Tribunal observed that AE’s employee was transferred to assessee’s company payroll as a whole time director with responsibility for scientific business and infrastructure operations of certain sister concerns/ affiliates, accordingly, assessee recharged the apportioned salary and other direct expenses incurred to respective affiliates on a cost-to-cost basis. The Tribunal noted that TPO suggested that a markup of 10% should be charged which was upheld by CIT(A) and had also observed that the transaction was not routed through the books.
United States Pharmacopeia India Pvt Ltd [TS-451-ITAT-2018(HYD)-TP] ITA No. 1582/Hyd/2017 and CO. No.37/Hyd/2017 dated 01.06.2018

886. The Tribunal followed the order of the co-ordinate bench in assessee’s AE and held that payments made to the AE were in nature of reimbursement without any mark-up and were duly supported by third-party invoices and hence the TPO could not make TP-adjustment on reimbursements by determining ALP at Nil It rejected the stand of the DRP that that reimbursement represented intra-group services.
Spencer Staurt (India) Private Limited vs ACIT [TS-751-ITAT-2018(Mum)-TP] ITA No.1832/Mum/2016 dated 06.06.2018

Share transactions

887. The assessee-company had entered into a ‘Stock Purchase Agreement’ with Japanese company and, under this agreement, assessee was to sell shares of its subsidiary on basis of its ‘Net Asset Value’, i.e. NAV,Rs.224 per share.However, sale finally took place at US $ 35,08,000, and value of shares worked out to be Rs. 206.88 per share as against the said NAV value of Rs. 224 per share. The TPO adopted the NAV price (Rs.224 per share) and concluded that ALP for transfer of shares was US $ 37,98,298.50, transaction value and proceeded to compute capital gains accordingly. The Tribunal held that it was not open to the TPO to go beyond role of determining the ALP and intrude in the exclusive domain of the Assessing Officer to determine the income taxable in the hands of the assessee. The Tribunal also dealt with aspect of which method was to be adopted for determining the ALP of shares sold by referring to the residuary clause of sec 92C (any other method prescribed by the Board which took into account the price charged for similar transaction between non-AE). It held that guidance for determining ALP of the sale of unquoted shares could be taken from the decision of Apex Court in Kusumben D Mahadevia wherein it was held that in case of private company which was not winding up, the profit earning method could be applied for arriving at valuation of shares. In the present case, the company in which shares were transferred was not in the winding up nor was there any reasonable prospect of its going into liquidation. In these circumstances, the adoption of Net Asset Value or book value was not really warranted. Given the fact that it was treated as a going concern, the valuation on the basis of future earnings was quite justified.The Tribunal held that since TPO had not examined that aspect of matter at all and simply proceeded on basis of net asset value, it would be fit and proper to remit matter back to TPO.
Topcon Singapore Positioning Pte Ltd vs DCIT [TS-897-ITAT-2018(DEL)-TP] ITA Nos.2 and 5030/Del/2017 dated 23.08.2018

888. The Tribunal dismissed Revenue’s appeal and upheld DRP’s order accepting that no interest was needed to be charged on share application money pending with its foreign subsidiaries. It held that since the transaction of share application payment did not have direct bearing on the profits, income, losses or assets of the enterprise, the same did not fall within the purview of ‘international transaction’ u/s. 92B by relying on co-ordinate bench ruling in Bharti Airtel wherein it was held that no ALP adjustment could be made on issuance of corporate guarantee involving no costs to the assessee which did not fall within the ambit of international transaction on account of not having any direct bearing on the profits, income, losses or assets of the enterprise.
ACIT vs Moserbaer India Ltd [TS-1139-ITAT-2018(DEL)-TP] ITA No.1200/Del/2014 dated 03.10.2018

889. The TPO was of the view that assessee was showing higher profit margins in case of its homegrown segment (leasing income) as against its domestic segment on account of not allocating the expenses. The TPO rejected the TP study of the assessee and proceeded to reallocate expenses between homebase segment and other segments by holding that assessee had failed to allocate some of the expenses. He determined the ALP of assets purchased (in the nature of spare parts, air craft components, etc., from its AE and the aircrafts purchased which were leased to independent parties) at Rs.20,11,52,152/- (as against the purchase of fixed assets of Rs.98,35,34,236/-) and reduced depreciation of Rs.3,71,63,149/- corresponding to reduction in fixed assets of Rs.78,23,82,084/- in case of the leasing business segment (homebase segment) of assessee. The Tribunal deleted the adjustment made noting that TPO proceeded on the false premise that the assessee has not allocated any expenditure on the homebase segment and thus the findings were erroneous. It was clear that the assessee had allocated routine expenses the details whereof were available with the lower authorities and moreover, the TPO could not question the audited accounts regularly maintained in the course of business unless there were compelling reasons that it was unreliable. Further, the lease price of asset was commensurate with the purchase price of asset clearly shown from the lease agreement.Accordingly, deleted the TP adjustment made.
Lufthansa Technik Services India Pvt Ltd vs Dy.CIT [TS-1133-ITAT-2018(DEL)-TP] ITA No.5451/Del/2012 dated 15.10.2018

890. It was assessee’s contention that TPO erred in making a separate adjustment for marketing and allied charges (which formed a part of operating expenses for sale of software to AE for which TNMM was applied), ignoring that once TNMM was applied, for an item of expense forming part of operating expenses no separate adjustment was called for. Further, the assessee also contended that TPO erred in applying separate methods i.e. CUP and TNMM for two transactions of import of raw materials from AE and export of finished product to AE when they were closely interlinked and interdependent.The Tribunal restored the entire issue to the file of TPO noting that DRP/TPO had not given any finding on the objections raised by assessee which were supported by various coordinate bench ruling.
Subex Ltd. vs Dy.CIT [TS-1200-ITAT-2018(Bang)-TP] IT(TP)A No.190/Bang/2018 dated 05.10.2018

891. The Tribunal restored the issue of depreciation claimed by assessee u/s.32 on trademark noting that disallowance of depreciation was not sustainable when coordinate bench decision in assessee’s own case for earlier year had held that the TPO was not to decide the business expediency of any intangible assets purchased by the assessee by sitting on the armchair of a businessman thus, rejected TPO’s nil determination of trademark observing that under the guise of analyzing the transaction in CUP method, TPO had not brought any comparable instance. Accordingly, restored the determination of ALP of purchase of trademark to file of TPO. Thus, the Tribunal restored the issue of claim of depreciation on trademark.
Fabindia Overseas Pvt Ltd. vs DCIT [TS-1116-ITAT-2018(Del)-TP] ITA No.5316/Del/2015 dated 08.10.2018

892. The Tribunal upheld the deletion of TP-adjustment in respect of buyback of shares by wholly owned subsidiary-AE from assessee at a lower rate (0.8 pound per share) than the per share investment (1 pound per share) made by assessee during the AE’s incorporation. It held that the TPO erred in charging notional interest based on the assumption that it was a loan transaction in the garb of share investment and observed that buying back of shares at par or at higher or lower rate than the purchase price was common practice in the business world and hence it should be accepted until it was proved that such a transaction was not based on a scientific basis or was against the provisions of exchange manual/regulation. It upheld the order of the first appellate authority wherein it was observed that the TPO had not doubted the valuation of the transaction which was arrived at by professionals and accordingly held that the TPO was unjustified in imputing notional interest @ 5.07% p.a. for the 101 day-period between the date of investment and the date of buyback.
ACIT vs. Wockhardt Ltd. – TS-39-ITAT-2018(Mum)-TP – I.T.A./4156/Mum/2012 & I.T.A. 5557/Mum /2012 dated 05/01/2018

893. The Tribunal deleted TP-adjustment on assessee’s sale of shares of group company (FAPL) to another AE based in Singapore and rejected price determined by DRP/TPO at Rs. 12,285.92 per share (using perpetual growth rate (PGR) of 7% which was based on a consultancy firm’s Report predicting the long term nominal growth for Indian economy at 7.5% ) as against Rs. 8,158 as adopted by assessee. Noting that the consultancy firm’s Report relied on by Revenue was a generic report and not specific to business carried on by the assessee and that the Report did not relate to year under consideration it held that the basis adopted by the Revenue was unjustified. Further, it noted both TPO and DRP failed to address assessee’s objection that CAGR of earning/free cash flow for FAPL was (-) 16% and similar companies had shown CAGR of (-) 8%, thus held that it was not reasonable to assume that such a company would suddenly grow at the estimated growth rate of the economy in perpetuity. It also observed that the assessee had produced 4 reports in support of its valuation and relying on the Bombay HC ruling in Titan Time Products Limited held that valuation reports of experts could not be rejected by the Revenue unless the assumption considered in the report were proved to be grossly erroneous or another expert opinion contradicting the earlier report was obtained. The Tribunal further observed that the subsequent buy back of FAPL shares from the Singapore entity at the same price was accepted to be at ALP by TPO and therefore held that there was no basis for not treating the original transaction to be at ALP. Accordingly, it held that the valuation of shares of FAPL was at Arm’s length and deleted the TP adjustment.
First Advantage Quest Research Limited vs. DCIT – TS-5-ITAT-2018(Mum)-TP – I.T.A./1546/Mum/2017 dated 05/01/2018

894. The AAR upheld Revenue’s contention and held that transaction of sale of shares in an Indian company by the Applicant to its Singapore based AE was required to be benchmarked as per the transfer pricing provisions contained in Chapter X of the Act. Relying on its decision in Castleton Investments Limited it held that as opposed to the provisions of Section 195 of the Act, the applicability of Section 92 does not depend on the chargeability under the Act i.e. there is no such requirement in section 92 that the transaction should result in income chargeable to tax under the Act.
AB Mauritius – TS-1099-AAR-2017-TP – A.A.R. No 1128 of 2011 dated 08.11.2017

895. The Tribunal deleted TP-addition on account of remittances made by assessee to its wholly owned subsidiary (‘WOS’ / ‘AE’) in Ivory Coast of South Africa towards share application money to the extent of shares allotted but however it sustained addition in respect of balance amount which was refunded by the WOS adopting interest rate of 6 months LIBOR plus 150 basis points as the refunded amount represented an interest free loan.
DCIT v Taurian Iron & Steel Co.Pvt.Ltd. – TS-467-ITAT-2018(Mum)-TP I.T.A./1284/Mum/2015 dated 11/05/2018

896. The Tribunal deleted the TP-addition made on account of interest free advances granted by assessee to its AEs and subsequently converted into equity for AYs 2008-09 to 2011-12. The Tribunal noted that assessee had raised funds by way of zero coupon bonds only for investing in its subsidiaries as ultimately share were allotted. It relied on co-ordinate bench ruling in assessee’s own case for AY 2012-13 and held that the transaction was not an international transaction. It observed that Explanation(1)(c) to sec 92B(1) was introduced vide Finance Act 2012 which clarified that capital financing also qualified as an “international transaction” retrospectively. The Tribunal stated that at the point of time when the transaction was entered into and equity shares were allotted, capital financing was outside the purview of international transaction. The Tribunal further added that as assessee did not incur any interest liability, there was no need for receiving any interest and the transaction had no ‘bearing on the profits, income, losses or assets of such enterprises’. Accordingly, the said transaction was not an international transaction and hence liability could not be attached.
Bartronics India Ltd vs. DCIT [TS-322-ITAT-2018(HYD)-TP] ITA Nos.1732/Hyd/2012 and ITA Nos. 520,383 and 521/Hyd/2016

897. The Tribunal deleted the TP adjustment made in respect of payment for services under the cost contribution agreement and rejected the TPO/DRP’s determination of nil ALP. The Tribunal observed that for previous AYs 2009-10 to 2011-12, TPO had consistently accepted assessee’s TP-documentation without making any adjustments. It relied on Radhasoami Satsang SC ruling for the principle of consistency and opined that unless there was a change of facts or law, Revenue could not blow hot and cold at will. The Tribunal rejected the view of the TPO that assessee had not satisfied the benefit test and opined that the authority of the TPO would be to conduct a transfer pricing analysis to determine the arm’s length price and not to determine whether there was a service or not from which the assessee benefits.
AT & S India (P) Ltd v/s. DCIT [TS-336-ITAT-2018(Kol)-TP] ITA No.77/Kol/2017 dated 11.05.2018
Others

898. The Tribunal held that losses incurred by assessee on derivative contract entered with a third party (ICICI Bank Mumbai) to cover forex fluctuation with respect to interest payments made to the foreign bank on loan borrowed for purpose of further advancing to AE, was not an international transaction between assessee and AE as the said loss was incurred under a contract between assessee and third party and thereby, not liable to TP adjustment.
Aries Agro Limited vs Dy.CIT [TS-1326-ITAT-2018(Mum)-TP] ITA No.1452 /Mum/2017 dated 28.11.2018

899. The Tribunal deleted the TP adjustment of notional interest made on recharacterizing share application money as loan noting that no income had accrued from share application money and thus, said transaction could not be subject to transfer pricing provisions. It relied on HC decision in Shell India Markets India Pvt Ltd. wherein after noting that the amounts received on issue of shares was a capital account transaction not separately brought within the definition of ‘income’ as per the provisions of section 2(24) as well as sections 4 & 5 of the Act, it was held that provisions of Chapter X of Act would only be applicable only if there was income chargeable to tax under normal provisions of the Act and it did not operate by itself as a charging section. It observed that the AE could not convert the share application money into share capital by issuing shares to the assessee as the permission from the free trade zone authorities with whom the AE was registered was pending and this was the only sole reason for delay in issuing the shares in favour of the assessee.
Aries Agro Limited vs Dy.CIT [TS-1326-ITAT-2018(Mum)-TP] ITA No.1452 /Mum/2017 dated 28.11.2018

900. The assessee had released money in favour of the AE with a specific purpose of acquisition of distributorship of the films from Citi Gate (with whom AE had entered into a contract with) and CitiGate refunded the same to assessee through AE once the deal failed to materialize. The Court dismissed Revenue’s appeal on treating it as an international transaction noting that the instant case was a simple one where the money was routed through the AE by the assessee for the purpose of acquisition of distributorship. This was not a case of either financing or lending or advancing of any moneys as per Explanation to s 92B. The aforesaid transaction did not result into diversion of income of the assessee to its AE and thus, it opined that Tribunal committed no error.
Pr. CIT-3 vs KSS Limited [TS-1379-HC -2018(BOM)-TP] IT No.476 of 2016 dated 26.11.2018

901. The assessee had raised funds from its AE in Cyprus and issued two series of CCDs (0% interest and 14% interest). The TPO was of the view that CCDs were equity in nature and the amount of Rs.23,51,564/- was held to be not in the nature of interest, therefore the ALP of the interest on CCDs was held to be NIL and consequently the entire amount of interest was treated as an adjustment. The CIT(A) upheld the contention of assessee that they are debt however directed TPO to adopt LIBOR rate for payment of interest instead of interest at 14%. The Tribunal opined that CIT(A) ought to have first examined the currency in which the borrowings had been denominated, by examining the agreement entered into by the assessee and the AE and then decided the issue. It relied on the coordinate bench decision in Adama India (P.) Ltd. wherein it was held that since the CCDs were issued in Indian Rupeers, the TPO wrongly treated it as loan by taking it as ECB and in such a case, there was no justification in considering the LIBOR as benchmark rate and set aside the addition. Accordingly, it remitted the matter back to CIT(A) for fresh adjudication after considering the facts of the case and affording the assessee a reasonable opportunity of being heard.
S.L. Plotted Development Projects Pvt Ltd vs Dy.CIT [TS-1376-ITAT -2018(Bang)-TP] IT(TP)A No.1497/Bang/2014 dated 05.11.2018

902. The assessee with support of its AEs undertook customized software solution to several clients across globe and there were two revenue sharing models (Model-1 was when the agreement was executed between the assessee and the overseas customers and assessee retained 75% of the revenue and paid 25% of the revenue to its subsidiaries while Model-2 was when AE’s raised invoice on the customer and assessee would raise a back to back invoice for 75% of revenue on AE’s) The TPO made adjustments in relation to payments on account of accounting management fee charged by assessee to its subsidiaries in case of Model-1 (TPO fixed remuneration sharing model of 15 per cent in cases where customers entered into contracts directly with assessee). The Tribunal upheld CIT(A)’s deleting the TP adjustment made following the coordinate bench decision in assessee’s own case (affirmed by HC) noting that subsidiaries companies were engaged in marketing of IT service capabilities of assessee in their respective countries to win contract for providing IT services. It was also undisputed that once customer was won, subsidiaries downloaded non-administrative services to assessee, Thus, in view of services rendered by AEs in respect of contracts entered into by assessee with independent customers, payment of fee equal to 25 per cent of revenue derived under contract to those AEs was justified.
ITO vs ITC Infotech India Ltd [TS-1314-ITAT-2018-(Kol)-TP] ITA No.550/Kol/2014 dated 05.12.2018

903. The assessee benchmarked the transaction of purchase of fixed asset by aggregating it with transactions pertaining to provisions of software development, ITes and Management support services and applied TNMM as MAM. The TPO rejected benchmarking methodology followed by the assessee and considered the transaction of purchase of fixed asset as separate transaction and determined ALP of aforesaid transaction to be nil. It was assessee’s contention that that depreciation charged on the purchase of the fixed asset is subsumed in the cost base of the assessee and cost pertaining to aforesaid segments had been charged with markup to the AEs (markup had been offered to tax) and further, the transaction of purchase of fixed asset was a tax neutral exercise because if the amount of depreciation is taken at nil then amount of income to the extent would also be at nil. It relied on coordinate bench decision in BC Management services which in turn relied on coordinate bench decision in Ciena India (P) Ltd wherein it was held that in case of purchase of fixed assets from AE, it is amount of depreciation on such purchase to be considered for making the addition and where depreciation allowance on fixed assets was also compensated with markup as in aforesaid circumstances, both transaction had to be seen jointly and therefore, no further addition could be made on account of TP adjustment due to one sided consideration of depreciation at NIL. Accordingly, the Tribunal deleted adjustment.
Avaya India Pvt Ltd vs ACIT [TS-1290-ITAT-2018-(Del)-TP] ITA No.1904 /Del/2015 dated 03.12.2018

904. The assessee, part of the Vodafone group, pursuant to a Framework Agreement held options to purchase 100 percent of the shares an Indian company viz. SMMS (which in turn indirectly held 3.15 percent in Vodafone India) from IDFC Investors for which it had paid a cost of Rs. 2 crore plus applicable interest @ 17.5 percent (which was a small fraction of the market value of the shares of Vodafone India i.e. the investee of SMMS). During the year under review, it terminated its option for which it paid IDFC Group a sum of Rs. 21.25 crore and disallowed the expenditure in its computation of income. The TPO sought to benchmark the transaction holding it to be a deemed international transaction and contended that instead of making a payment of Rs.21.25 crore, the assessee ought to have received a sum of Rs.1588.85 crore as the assessee had terminated extremely advantageous call options. The TPO noted that during the earlier assessment year, in another transaction IDFC had charged a sum of Rs.62.23 crore on relinquishment of right to purchase 0.1234 percent of Vodafone India and considering the assessee had relinquished the right to purchase 3.15 percent, arrived at a proportionate ALP of Rs. 1588.85 crore. The Tribunal held that it would be myopic to examine the termination of the Framework agreement without considering the Framework agreement and other connected arrangements / agreements. It noted that the assessee was granted the aforesaid option pursuant to an agreement wherein another company viz. HTIL had nominated SMMS to purchase the shares of two Indian companies for which SMMS was to be funded by the ultimate parent company of the Vodafone Group i.e. CGP Cayman Island by way of purchase of shares of SMMS by IDFC. The assessee entered into this agreement to ensure that the SMMS remained in control of the entire group (as it held shares in Vodafone India) by subscribing to options to purchase the shares of SMMS. Further, the Tribunal noted that the termination of options of the assessee was done so as to enable TTI another group company to obtain the shares in SMS. Further, it noted that the overseas Group companies were signatories to all the agreements. Accordingly, it concluded that the transaction between the assessee and IDFC was in effect a deemed international transaction. The Tribunal dismissed the assessee’s contention that absent explicit legal rights of the overseas AEs in the instant transaction, it could not be considered as a deemed international transaction and held that Section 92F(v) provided that irrespective of whether an arrangement, understanding or action in concert is intended to be enforceable by legal proceedings or not, it would be includible within the definition of “international transaction”. Further, it held that the term acting in concert suggested two or more persons acting in co-ordination for a common goal and therefore held that the Foreign AEs were undisputedly acting in concert in the current transaction.
Further, it dismissed the contention of the assessee that TP would not apply considering that no income arose from the transaction as the entire expense was disallowed in the computation of income. It held that it was only when a transaction was inherently incapable of producing an income that the transfer pricing provisions would not apply and held that merely because an income is not reported or not taken into account in the computation of income of taxable income it would not get out of the ambit of international transaction. It noted that as per the option available to the assessee, the assessee was supposed to pay only 2 crore plus interest (amounting to Rs.4.13 crore) but the assessee had paid Rs. 21.25 crore which evidenced the fact that there were other commercial consideration in the transaction. Accordingly, it held that the instant transaction would lead to income from capital gains considering the amended definitions of Section 2(47) and 2(14). It held that options would clearly fall under the definition of capital asset / property and that the termination of options would fall under disposing / parting with an asset / interest in any asset as contained in Explanation 2 to Section 2(47). Upholding the ALP determination of the TPO it proceeded to determine the cost of acquisition of the shares and noted that over and above the Rs.21.25 crore paid in the instant transaction the assessee had also paid 62.24 crore towards assignment of right to purchase shares in Vodafone India in the earlier year. Further, it dismissed the contention of the assessee that the capital gains provisions would not apply as there was no consideration and held that under transfer pricing provisions, the capital gains were to be computed on the basis of the ALP consideration. Accordingly, it upheld the TP addition made.
Vodafone India Services P Ltd v DCIT – TS -37-ITAT-2018 (Ahd) – TP – ITA No 565 / Ahd / 2017 dated 23.01.2018

905. The Tribunal held that writing off of obsolete stock worth Rs. 6.48 crore by the assessee was an extraordinary event and not an international transaction whose fair market value had to be assessed under the TP-provisions. It noted that similar write-offs were made in earlier years which had not attracted TP-adjustments by TPO and that there were no new facts warranting addition in the current year. Further, examining the transaction against the distribution agreement between AE and assessee, it concluded that the AE was not involved in any manner in the writing off of the obsolete stock since the agreement was limited to replacement/guarantee for goods with manufacturing defects and not for those which were obsolete or out-of-fashion (like the written-off goods). Accordingly, it deleted the TP-adjustment.
Safilo India Private Limited vs. DCIT – TS-12-ITAT-2018(Mum)-TP – I.T.A./588/Mum/2015 dated 12.01.2018

906. The Tribunal remitted the benchmarking of assessee’s international transaction relating to Forward Foreign Exchange Contract (FFEC) for fresh adjudication after considering additional evidences filed before CIT(A). It noted that the TPO held that the international transaction relating to FFEC’s (entered into 2000 and cancelled in 2007) were not at ALP as assessee was unable to submit any data from its AE regarding CUP for the transaction. The CIT(A) did not accept the additional evidences filed by assessee (data of Bloomberg Future rate for five years) as the documents were not produced before AO/TPO and assessee had not filed any application under Rule 46A. The CIT(A) thus upheld the TP-adjustment. Further observing that the TPO accepted the five years data of Bloomberg and made no adjustment in the succeeding AY, the Tribunal held that the matter should be restored back to the file of TPO/AO for fresh adjudication to consider additional evidences filed by assessee before the CIT(A).
ACIT vs. Citibank Overseas Investment Corporation – TS-6-ITAT-2018(Mum)-TP – I.T.A./7032/Mum/2013 dated 05.01.2018

907. The Tribunal deleted TP-adjustment on account of interest paid by the assessee to its AE on Fully Compulsory Convertible Debentures (FCCDs) issued by assessee to its AEs. The TPO recharacterized the FCCDs as foreign loan and benchmarked the interest paid on such FCCDs by adopting LIBOR as the ALP and accordingly made TP adjustment. The Tribunal relying on the coordinate bench’s finding in Adama India Pvt Limited [TS-16-ITAT-2017(HYD)-TP], (wherein it was held that considering the fact that the policy of Govt. of India and the RBI indicate that the issuance of CCD was part of FDI being quasi-equity in nature), held that the TPO erred considering the same as a loan. As regards the benchmarking the interest paid on CCDs, the Tribunal noted that the CCD’s were issued in Indian Rupees and therefore relying on the decision of Adama India (supra) held that the assessee was justified in benchmarking the interest based on the SBI PLR prevalent and accordingly held that the TPO erred in adopting LIBOR as ALP.
Hyderabad Infratech Private Electronics Limited v DCIT – TS-54-ITAT-2018(HYD)-TP – ITA No.1781/Hyd/2017 dated 25.01.2018

908. The Tribunal held that the TPO was unjustified in benchmarking the commission earned by the assesse from its AE on sale of machinery (5 percent) with the commission rate earned by it from its AEs from the sale of spares (18 percent). Following the order of the co-ordinate bench for the earlier year, it held that the benchmark adopted by the TPO was invalid being a controlled transaction in itself. Accordingly, it dismissed Revenue’s appeal and deleted the adjustment.
DCIT vs. Bobst India Pvt. Ltd – TS-79-ITAT-2018(PUN)-TP – ITA No. 277/PUN/2016 dated 29.01.2018

909. The Tribunal upheld CIT(A)’s deletion of TP-adjustment on account of assessee’s purchase of old / used machines along with its accessories from UK-AE. It noted that the assessee adopted FMV as certified by a Chartered Engineer as CUP for ascertaining ALP which was rejected by TPO who adopted a unique approach for benchmarking by considering life of the machinery given by Chartered Engineer at India along with year of manufacturing given by the Chartered Engineer at UK for working out the market value of the machinery during the transaction year. It upheld assessee’s ALP determination stating that valuation by an independent qualified expert for determining the fair market price or the FMV of the machinery has to be treated as the arm’s length price for the value of such products/services, which could be reckoned as the price paid by any independent party in the open market for such product/goods. Further, it held that for used machinery, ostensibly the purchase price of a new product could not be taken as CUP since the cost of used/old machinery depends upon number of various factors like usage maintenance, obsolescence etc. Accordingly, it held that the TPO failed to take note of such factors and also failed to carry out any independent exercise for the value of the machinery by any approved valuer /Chartered Engineer. Further, considering the fact that for AY 2008-09 TPO himself had accepted the same value as per the valuation report given by the Chartered Engineer for similar transaction, the Tribunal upheld the order of the CIT(A).
ACIT vs. Caparo Engineering India Pvt Ltd – TS-109-ITAT-2018(DEL)-TP – I.T.A. No.6838/DEL/2014 dated 22.02.2018

910. The Tribunal deleted the TP-adjustment on purchase of fixed assets from AE relying upon the co-ordiante bench ruling in assessee’s own case for earlier years wherein the Tribunal held that since assessee was receiving compensation from AE on ‘cost plus mark up’ basis with depreciation as one of the cost components, transaction of fixed assets purchase was ‘closely linked’ with transaction of services to AE and no separate benchmarking was required. Further, it placed reliance on judicial precedents wherein it was held that since depreciation cost was also recovered from AE along with mark-up, the transaction was ‘tax neutral’ and therefore deleted the adjustment.
BT India P Ltd v DCIT – TS-130-ITAT-2018(DEL)-TP – I.T.A .No. 566/DEL/2015 dated 26.02.2018

911. The assessee had acquired trademark from its AE, the ALP of which was determined at Nil by the TPO on the ground that the acquisition of trademark was not expected to result in any benefit to the assessee. Noting that the assessee produced certain additional evidences before the DRP which was not admitted, and that the assessee was not given adequate opportunity of being heard, the Tribunal remitted the matter back to the AO / TPO for fresh examination after passing of a speaking order.
Magic Woods Exports Private Limited vs. DCIT – [TS-152-ITAT-2018(CHNY)-TP – .I.T.A. No. 871/Mds/2017 dated 06.02.2018

912. The Tribunal remitted issue of adjustment made in respect of sale of assessee’s BPO business division by AE to an Indian domestic party noting non-adjudication of assessee’s ground by DRP. The assessee’s AE gave a contract (global agreement) to a third party towards business process outsourcing of its various products and, as part of the deal, agreed to hive off assessee’s BPO division to the Indian AE of the said third party for certain consideration. Pursuant to the above contract, the assessee entered into an agreement with the Indian AE of the said third party, which provided that a part of the consideration for transfer of business division was to be received by the assessee’s AE and balance by the assessee. TPO [despite non-reference of the said transaction by AO] made a TP-adjustment on sale of assessee’s business division and on the same issue, AO passed an alternate order making addition of same amount u/s 50B by treating the transaction as a slump sale. DRP observed that the assessee did not have any say in the global agreement (pursuant to which the division was transfered) and thus held that practically it was a case of assessee’s AE taking over the business division from assessee at the price received by the assessee and subsequently selling the same to the third party at the value of total consideration of transfer. Thus, it held the above transaction to be an international transaction and upheld the TP adjustment made by the TPO. DRP, however, did not adjudicate the issue of taxability u/s 50B.
The Tribunal noted assessee’s acceptance that subsequent to IT Act amendment, TPO is empowered to go into the issue of the international transaction himself without the matter being referred by AO, however, observing that DRP had not adjudicated issue of Sec 50B addition despite AO making such addition in the draft order, ITAT refrained from adjudicating TP-adjustment issue relying on Madras HC ruling in Ramdas Pharmacy and directed DRP to complete its order by adjudicating upon the ground relating to the addition made by AO by treating the transaction as slump sale
Prudential Process Management Services India Pvt Ltd vs DCIT Range 10(3)- TS-285-ITAT-2018(MUM)-TP- ITA No 1274/Mum/2014 dated 13.04.2018

913. The Tribunal deleted TP-adjustment on transaction of purchase of DSP Software and IP rights from assessee’s Malaysian AE. The TPO had relied on the statement of one of assessee’s employees and held that entire software was developed in India and thus, determined ALP of the transaction at Nil. The Tribunal rejected TPO’s stand of merely relying on employee’s statement without following any of the prescribed methods of ALP-determination and further noted that Malaysian AE had compensated assessee for part of development work carried out by assessee which was found to be at ALP by TPOs in earlier years.
Further, regarding price paid for IP rights, the Tribunal relied upon Delhi HC decision in EKL Appliances and co-ordinate bench decision in IWM Constructions (P.) Ltd to hold that Revenue cannot question business decision of the assessee and decide ALP.
Separately, the Tribunal upheld DRP’s direction to exclude depreciation from PLI while determining ALP of software development services to AEs by relying upon co-ordinate bench ruling in Market Tools Research Pvt. Ltd and Schefenacker Motherson Ltd and noted that depreciation claims for partnership firms and for companies were different.
DCIT Circle 8(1) vs M/s. Value Labs LLP-TS-409-ITAT-2018 (HYD) TP-ITA Nos. 305 & 405/HYD/15- dated 27.04.2018

914. The Tribunal deleted TP-adjustment in respect of provision of manning services by assessee [engaged in the business of sourcing, screening and selecting seafarers and also providing assistance in completing their free joining formalities, etc.] to its AE. The Tribunal observed that, co-ordinate bench in assessee’s own case for previous AY had deleted similar TP-adjustment on the basis that after taking into consideration the amount of expenses reimbursed by the associated enterprise over and above the fixed rate of payment (which was not factored in the benchmarking analysis by the TPO), rate charged by assessee could be compared favourably with the rate adopted by TPO. Thus, there being no material difference in facts, it deleted the addition made on account of transfer pricing adjustment of manning services in the present year also.
Wilhemsen Ship Management India P Ltd. Vs ITO- TS-391-ITAT-2018(Mum)-TP-ITA no. 2404/Mum/2012 dated 27.04.2018

915. The Tribunal rejected TPO’s re-characterization of assessee’s distribution transaction as a service transaction requiring markup and after perusal of the agreement between assessee and its AE [for distribution of AE’s product in India], the Tribunal held that the intention of the parties was clear that the assessee was a distributor of AE’s products in India and was not required to make the payments to the AE till the assessee made profit from the transactions. The Tribunal followed the HC ruling in case of Sony Ericsson Mobile Communications and held that there was no difference between the form and substance of the transaction of distribution to recharacterize the transaction as a service agreement. And eventually remitted issue to AO/TPO to conduct fresh TP analysis by treating the assessee’s transaction as a distribution agreement.
M/s. Comm Vault Systems (India) Pvt Ltd vs DCIT Circle 1(2)- TS-245-ITAT-2018(Hyd)-TP- ITA No. 343/Hyd/2016 dated 11.04.2018

916. The Tribunal deleted the TP-adjustment made in respect of BMW India’s payments on account of market survey report to its AE, BMW AG, for AY 2007-08. BMW AG arranged for market survey report [conducted by third party] for BMW India and charged the costs incurred to BMW India without any margin/markup, however TPO proposed an adjustment holding that the said report was for the benefit of BMW group and not for the benefit of the assessee. The Tribunal referred to the OECD Guidelines, various debit notes and written confirmations from BMW AG and noted that the market survey report was a country specific report and was different from shareholders’ activity. The Tribunal held that that the expenses incurred by BMW AG were for the benefit of BMW India only.
BMW India Pvt Ltd v/s. ACIT [TS-401-ITAT-2018(DEL)-TP] ITA No.6160/Del/2014 dated 14.05.2018

917. The Tribunal deleted interest adjustment on fully and Compulsory Convertible Debentures (FCCDs) issued by assesse [engaged in the business of manufacture and sale of electrical automobile components] pursuant to search proceedings absent incriminating material relating to FCCDs found during search. It noted that the assessee had filed original return of income on September 30, 2009 which was processed u/s 143(1) on September 05, 2010 and the time period to issue the notice u/s 143(2) of the Act had already expired before the search took place on October 29, 2013. Further, it observed that during the course of search, though no incriminating material was found relating to the FCCDs which were already shown by the assessee in its regular books of accounts, AO/TPO made the TP-addition on account of differential interest on FCCDs undertaken with assessee’s AE stating that though assessment was not framed u/s 143(3), for the purpose of Sec 153A r.w.s. 153C, an intimation u/s 143(1) was also an order of assessment. The Tribunal held that no such adjustment could have been made to the income which was already assessed prior to the date of search and even on merits it held that the difference between assessee’s interest rate (16%) and TPO’s rate (12.25%) was less than 5% which was within the permissible tolerance range as per Sec 92C(2) second proviso and accordingly held that no addition on account of arm’s length price could have been made by the AO/TPO.
Granite Gate Properties Pvt. Ltd vs. ACIT – TS-450-ITAT-2018(DEL)-TP – ITA No. 7022/Del/2017 dated 29.05.2018

f. Miscellaneous
Appeal

918. The Tribunal dismissed Revenue’s miscellaneous petition against the Tribunal order wherein the assessment order was held to be null and void-ab-initio as it was passed on an amalgamated entity and the AO had been informed about the change in name. The Revenue had relied on a subsequent Tribunal order in assessee’s case where the assessment order was not set aside since the AO was not informed about the factum of amalgamation to contend that there was an error apparent on record. Noting that subsequent order based on erroneous application of facts could not give rise to a mistake apparent in the Tribunal’s order, as in the instant order the Tribunal had adjudicated that the AO was informed about the factum of amalgamation.
Dy.CIT vs GE Medical Systems (India) Pvt Ltd (since merged with Wipro GE Healthcare Pvt. Ltd.) [TS-1030-ITAT-2018(Bang)-TP] MP No.285/Bang/2017 dated 17.08.2018

919. The Court dismissed assessee’s appeal as withdrawn noting that assessee had filed a memo seeking withdrawal of appeal which was not objected to by Revenue.
Hewlett Packard (India) Software Operation Pvt. Ltd vs ACIT & CIT [TS-1009-HC-2018(KAR)-TP] ITA No.410/2016 dated 01.08.2018

920. The Tribunal dismissed the assessee’s appeal as withdrawn in light of the TPO passing a rectification order deleting the TP adjustment as the ALP of the international transaction was within 5% tolerance range.
Futures First Info Services Pvt Ltd vs ACIT [TS-959-ITAT-2018(DEL)-TP] ITA No.6083/Del/2015 dated 16.08.2018

921. The Tribunal dismissed assessee’s miscellaneous petition against the Tribunal order and held that CG Vak Software and Product Ltd. was rightly included as a comparable noting that the Tribunal for the subject year had given a finding that it was not a product company and accordingly, conclusion of TPO in the preceding year that it is a product company was irrelevant on basis of which the assessee was urging the mistake on record. In case of inclusion of Persistent System Ltd., the assessee was contending that the Tribunal had erroneously not considered the comparable to be a product company a fact evident from the perusal of the financials. It noted that the profit and loss account have no income from software products and the case laws relied on by the assessee were for a different assessment year. As regards the contention of the assessee. that rendering of software testing services being part of software development services for inclusion of Cigniti Technologies Ltd as a comparable, it held that the assessee under the garb of Miscellaneous petition was seeking a review of the order of the Tribunal which is not permissible u/s.254(2) of the Act.
Advice America Software Development Center Pvt. Ltd., vs ITO [TS-969-ITAT-2018(Bang)-TP] MP.No.171/Bang/2018 dated 24.08.2018

922. The CIT(A) had directed the AO to verify value of percentage of RPT transactions and exclude comparables with RPT transactions exceeding 35% RPT in case of an assessee engaged in software development services. The Tribunal dismissed Revenue’s appeal and held that the order of CIT(A) directing the AO to verify certain factual aspects and recompute the disallowance which resulted in the deletion of TP adjustment by AO giving effect to the appeal order did not suffer from any infirmity. It rejected Revenue’s contention that the CIT(A)’s order was contrary to provisions of section 251(a) and observed that the CIT(A) was not prohibited in directing the AO to verify certain factual aspects.
As regards, assessee’s appeal the Tribunal dismissed the assessee’s appeal challenging the TP adjustment made by the AO noting that total TP-adjustment was deleted by AO after verification on direction of the CIT(A) and thus, the ground ceased to survive.
Motorola India Pvt Ltd vs ACIT [TS-1130-ITAT-2018(DEL)-TP] ITA No.2941/Del/2011 &b45811/Del/2011 dated 24.08.2018

923. The Tribunal had remitted the issues back to the Dispute Resolution Panel to pass a speaking order. Consequently, the Dispute Resolution Panel issued fresh directions and the AO through the impugned proceedings passed order giving effect to the DRP directions. The assessee filed a writ of prohibition, prohibiting the AO from passing order fresh assessment order, as the time period fixed for passing an assessment order under section 144C(13) had already elapsed. It was Revenue’s contention that the Tribunal had not set aside the original order of assessment dated 21.01.2016 and on the other hand, it had only remitted the issues back to the DRP for passing a speaking order on the disputed issues and therefore, the original assessment order stood as it was and therefore in view of the subsequent order passed by the Dispute Resolution Panel on 28-12-2017, giving certain directions, the AO was justified in passing the present impugned order giving effect to directions of DRP. The Court observed that the Tribunal’s order could be interpreted in both ways as stated supra, with regard to status of the order of assessment dated 21-01-2016. The Court while granting the assessee statutory right to appeal from the order giving effect to the DRP directions to the Tribunal , opined that it was for the assessee to approach the Tribunal once again, by challenging the present impugned order, by raising all the contentions, so that the Tribunal would be in a position to clarify the effect of the earlier order passed, while considering the appeal to be filed against the present impugned order and any such clarification by the Tribunal, with regard to the status of the assessment order dated 21-01-2016, would certainly have a bearing on further proceedings including the present impugned order.
CET Power Solutions India Pvt Ltd vs Dy.CIT [TS-1083-HC-2018(MAD)-TP] WP Nos.4695 and 4696 of 2018 dated 11.09.2018

924. The assessee (engaged in software development services) was providing onsite software services to its overseas customers through its branch in UK and had an AE to perform distribution activities for the said services (identifying customers, establishing contacts, soliciting enquiries, customer relationship in UK). The TPO recharacterized the AE as a marketing support services provider and proceeded to select comparables and accordingly, made an upward adjustment to the ALP of payment made by assessee to its AE. The Tribunal deleted the adjustment noting that AE was functioning as a distributor. Further, a performance guarantee was given by assessee to a customer of its AE. The AO had adopted 2% of gross sales (rate on basis the financial guarantee given by various institutions) as ALP for guarantee fee since the performance risk was borne by the assessee. The Tribunal deleted the adjustment relying on MicroInk noting that guarantee transaction would not amount to an international transaction where no consideration was charged by holding company to its subsidiary company ( no bearing on income, losses of profit and loss account) and further, the amendment brought about by insertion of explanation to sec 92B was not retrospective hence would not be applicable to the year under appeal.The Court admitted Revenue’s appeal against the Tribunal’s order deleting TP-adjustment on international transactions relating to distribution of software services, provision of performance guarantee, provision of information technology enabled services and human resource management services. The Court also admitted the question of law as to whether guarantee would amount to an international transaction u/s 92B.
Pr.CIT vs MASTEK LIMITED [TS-1091-HC-2018(GUJ)-TP] TAX Appeal No.1182 of 2018 dated 25.09.2018

925. The Tribunal allowed the assessee to withdraw appeal in light of the fact that TPO had deleted TP-addition pursuant to disposal of assessee’s rectification application noting that the that assessee filed a rectification application u/s 154 submitting that it was entitled to +/- 5% benefit as per Sec 92C(2) proviso and thereafter, TPO passed an order deleting the TP-addition after giving such benefit. It accepted assessee’s plea for withdrawal of appeal since it was infructuous.
Accretive Health Services Private Limited vs DCIT [TS-1052-ITAT-2018(DEL)-TP] ITA No.1014/Del/2016 dated 17.09.2018

926. The Apex Court dismissed Revenue’s SLP challenging High Court order which confirmed deletion of penalty-imposed u/s 271G r.w.s 274. The Court had rejected Revenue’s plea that assessee had deliberately avoided the production of TP documentation as required u/s 92D and relied on co-ordinate bench ruling in assessee’s own case which had in turn relied on Bumi Highway HC ruling on identical issue wherein Sec 271G penalty order was held to be invalid as the assessee had complied with the TPO’s requirement of specific documents and details.
CIT vs Gillette India Ltd [TS-1155-SC-2018-TP] SLP No.11616/2018 dated 05.10.2018

927. The Tribunal allowed assessee’s miscellaneous petition and recalled its order to the extent it did not adjudicate on the ground raised by the assessee with respect to grant of working capital.

It directed the AO/TPO to include Cat Technologies Ltd as a comparable since it passed the export turnover filter of 75% of total filter on perusing the financials on standalone basis whereas the Tribunal, while adjudicating the issue had included the said comparable considering the financials on consolidated basis in its order. It remitted the issue of R Systems and Caliber Point Business Solutions Ltd. to TPO to consider the extrapolated results which were on record noting that the Tribunal in its order had not taken note of it.
Mercedes-Benz Research & Development India Pvt Ltd vs Dy.CIT [TS-1144-ITAT-2018(Bang)-TP] MP No.139/Bang/2018 dated 03.10.2018

928. The Tribunal allowed assessee’s miscellaneous petition and recalled its order noting that there was a reasonable cause for non-appearance of assessee’s counsel on the date fixed. It directed the registry to fix the hearing of appeal on 16.01.2019.
Faurecia Automotive seating India Pvt Ltd vs ACIT [TS-1161-ITAT-2018(Bang)-TP] MP No.310/B/2018 dated 12.10.2018

929. The Tribunal admitted assessee’s application under Rule 27 of ITAT Rules, 1963 which provides that ‘Respondent may support order on grounds decided against him’ accepting assessee’s contention that though the TP adjustment was deleted however CIT(A) had not passed a speaking order and the grounds we