Home › Tax Laws › Dy. CIT v. Microsoft India (R&D) (P) Ltd. (2018) 171 DTR 121 / 196 TTJ 137 (Delhi)(Trib.)

Dy. CIT v. Microsoft India (R&D) (P) Ltd. (2018) 171 DTR 121 / 196 TTJ 137 (Delhi)(Trib.)

S. 92C : Transfer pricing – Arm’s length price – comparables- Segmental information is not provided by company in respect of software services, same could not be included as a good comparable-Functionally indifferent companies cannot be selected as good comparable- Fact that a company had a high or low turnover could be no reason to justify its exclusion if it was otherwise functionally comparable.

The Tribunal held the following in case of assessee engaged in providing software development services and information technology enabled services (ITES):

  • In absence of any segmental information provided by company in respect of software services, same could not be included as a good comparable. Accordingly, the Tribunal removed the following companies from the list of comparables :
  • E-Infochips Bangalore Limited
  • Infosys Technology Ltd.
  • Persistent Systems Ltd.
  • Wipro Technology Services Ltd.:

 

  • The following companies were held as functionally indifferent and therefore not a good comparable
  • Accentia Technologies Ltd as it was engaged in KPO services.
  • ICRA Techno Analytics as it was engaged in software products apart from developing software and ITES
  • E-Clerx being engaged in KPO, could not be compared with a company providing BPO services.
  • As Microland Ltd. (Seg.) was persistently in losses, the same cannot be considered as comparable.

 

The Tribunal further held that a company otherwise found to be functionally comparable cannot be excluded either on the ground of higher or lower profit rate or higher or lower turnover. The exclusion of companies on such a rationale would run contrary to the express provisions of the Act and therefore, directed to include Micro Genetics Systems Ltd. and CG- Vak Software and Exports Ltd. in the list of comparables. (AY. 2011-12)