, ` '
INCOME TAX APPELLATE TRIBUNAL,MUMBAI "K" BENCH
. . , , ,
Before S/Sh. A D Jain ,Judicial Member & Rajendra,Accountant Member
/.ITA No.8974/Mum/2010, /Assessment Year-2006-07
Infor Global Solutions (I) Pvt. Ltd., DCIT-8(2)
A-301/302, Citipoint, Andheri-Kurla Vs Mumbai.
Road, J.B. Nagar, Andheri (E),
Mumbai-400 059.
PAN: AAACB 6197 Q
( /Appellant) ( / Respondent)
/Assessee by: Karishma R. Phatarphekar
and Ms. Keerthiga R. Sharma
/ Revenue by: Shri N.K. Chand-CIT and
Shri Jitendra Yadav
/ Date of Hearing :29 -07-2015
/ Date of Pronouncement :29 -07-2015
,1961 254(1)
Order u/s.254(1)of the Income-tax Act,1961(Act)
PER RAJENDRA, AM-
Challenging the directions of Dispute Resolution Panel-II, Mumbai, dated 17.8.2010 and the
order of the Assessing Officer(AO)dated 16.9.2010,completed u/s.144C (13) r.w.s. 143(3) of
the Act,the assessee has raised the following grounds of appeal:
"1. The grounds stated here under are independent of, and without prejudice to one another:
1. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer
('TPO') and the learned Assessing Officer (' AO') under directions issued by the Hon'ble Dispute
Resolution Panel ('ORP'), erred in making an addition of Rs. 4,26,00,000 to the Appellant's total
income based on the provisions of Chapter X of the Income-tax Act, 1961 ('the Act').
2. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
Hon'ble DRP further erred in selecting companies which have a different functional, asset or risk
profile as compared to that of the Appellant, or do not satisfy the filter / criteria applied by the TPO
himself.
3. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
Hon'ble DRP further erred in upholding /confirming the action of the TPO in arbitrarily rejecting
companies by applying filters having turnover above Rs. 1 crores without considering an upper
ceiling for the range.
4. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
HonP'ble DRP further erred in incorrectly computing the operating margins of companies while
making adjustment to the international transaction of the Appellant.
5. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
Hon'ble DRP further erred in not allowing risk adjustment in accordance with the provisions of Rule
10B of the Rules to account for difference between international transactions and the alleged
comparable uncontrolled transactions selected by the learned TPO
8974/M/10 IGSIPL
6. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
Hori'ble DRP further erred in not allowing the variation/reduction of 5 percent from the arithmetic
mean while determining the arm's length price as envisaged under the proviso to Section 92C(2) of
the Act
7. On the facts and in the circumstances of the case and in law, the learned TPO erred and the
Hon'ble DRP further erred in failing to appreciate that the Appellant was claiming tax exemption
under Section 10A of the Act and accordingly had no intention to shift profits outside India by
manipulating the prices charged in its international transactions which is a pre-requisite condition to
make any adjustment under the provision of Chapter X of the Act.
The Appellant craves leave to add or alter by deletion, substitution, modification or otherwise, the
above grounds of appeal either before or during the hearing of the appeal."
Assessee-company,engaged in the business of research, development and export of computed
software filed its return of income on 30.11.2006,declaring an income of Rs.2.41 crores.The
AO completed assessment u/s.144C (13) r.w.s. 143(3) of the Act,determining its income at
Rs.6.67 crores.
2.During the assessment proceedings the AO found that the assessee had transactions with the
Associated Enterprises(AE)exceeding Rs.15 crores.Therefore,he made a reference to the
Transfer Pricing Officer(TPO) to ascertain the Arms length Price (ALP).Vide order,dated 26.
10.2009,the TPO proposed adjustment of Rs.4.85 crores on account of ALP in respect of
international transactions.The assessee filed its objection against the draft assessment order
prepared by the AO before the DRP-II.
3.Before the DRP,the assessee contended that the international transactions pertained to the
provisions of software development and support services, that the assessee had valued the
international transactions following the CUP method, that the TPO followed TNMM method
and proposed and adjustment of Rs.4.85 crores, that the TPO had erred in rejecting the study
conducted by the assessee and by taking new set of 14 comparable entities.It was further
argued that there was functional difference in case of SSA Global and the job done by the
assessee,that the TPO had used the data available as in December 2008.The assessee
specifically objected to the inclusion of Infosys Limited and Flextronics Software System
Limited.
After considering the submission of the assessee,the DRP held that the inclusion of Infosys
Ltd appeared to be inconsistent with the nature of business turnover and volumes, that the
data of other 13 comparable companies were correctly applied by the TPO, that the search
process of the TPO was in accordance with the TP Regulations,that the exclusion of Infosys
Limited would make the set of comparables rational and reasonable.The DRP directed the
AO to exclude Infosys Ltd.from the set of comparables and to compute the ALP.
4.During the course of hearing before us,Authorised Representative(AR)stated that the
assessee had not carried out TP study for the year under consideration, that TPO had selected
14 comparables, that the assessee was against inclusion of six comparable, that the DRP had
excluded one comparable i.e. Infosys Ltd. When the order of the DRP was brought to the
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8974/M/10 IGSIPL
notice of the Departmental Representative (DR) by the Bench,he admitted that it did not
contain detailed discussion. He left the issue to the discretion of the Bench.
5.After perusing the material on record,we are of the opinion that the DRP has not passed a
speaking and reasoned order. The assessee had specifically objected inclusion of Infosys
Limited and Flextronics Software System Limited. But,the DRP in its one paragraph order
had made some general observations. As a First Appellate Forum,it was the duty of the DRP
to discuss the inclusion/exclusion of the comparable in a detailed manner. It is a fact that the
assessee had not furnished the TP study report.Therefore, it was necessary on part of the DRP
to deliberate upon the comparables and the methodology of selecting the comparables.In
short,the order of the DRP does not fall under the category of a speaking order.Therefore, in
the interest of justice,we are remitting back the issue to the DRP,who would pass a detailed
and reasoned order after affording a reasonable opportunity of hearing to the assessee .
As a result appeal filed by the assessee stands partly allowed.
.
Order pronounced in the open court on 29th,July,2015.
29 ,2015
Sd/- Sd/-
(.. /A.D. JAIN) ( / RAJENDRA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai, /Date:29.07.2015
. ..Jv.Sr.PS.
/Copy of the Order forwarded to :
1.Appellant / 2. Respondent /
3.The concerned CIT(A)/ , 4.The concerned CIT /
5.DR A Bench, ITAT, Mumbai / , ,.. .
6.Guard File/
//True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai.
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