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9.4 We have heard the rival submissions and perused the material on record. In view of the above orders of the ITAT, Delhi and ITAT, Bangalore cited supra, we direct the AO/TPO to exclude this company from the list of comparables on the same reason given by the co-ordinate Bench of Bangalore.

10. Persistent Systems Ltd. The TPO obtained information u/s. 133(6) based on which it was concluded that the comparable is predominantly engaged in the business of rendering software development to various customers worldwide. The TPO observed that the company is engaged in developing products which have been outsourced by clients and the company does not own IP to these products and the product development is nothing but software development services. With respect to the intangibles of the comparable company, it was found that overseas subsidiary companies have acquired certain IP products and that the comparable is predominantly engaged in the software development services. Further, the intangibles with the comparable are in the nature of software license acquired for use in the operation of the company and they are not the software products generating revenue. The disclosure in the annual report regarding the acquisition of the products relate to the group as a whole and not to the stand alone as entity whose financials are compared. The R&D expenditure of the comparable relates to cross improvements and not to innovate on new products or earning additional revenue. Hence, the R&D is not affecting the margin of the company. The TPO had applied related party filter of greater than 25% and clearly this company passed the filters. Hence, the TPO rejected the contentions of the assessee and held the company as comparable. The DRP held that the company is functionally similar to the assessee. 10.1 Against this, the assessee is in appeal before us. The Ld. AR submitted that it was not functionally comparable as it was engaged in significant product development. The Ld. AR relied on the order of the ITAT, Chennai in the case of Symantec Software & Services India (P) Ltd. vs. DCIT 79 taxmann.com (Chennai

"71. M/s. Indium India Ltd., a comparable considered by the Assessee in the TP study was rejected by the TPO as not comparable on the ground that the said company was rendering testing services. It is the plea of the assessee that software testing is an integral part of software development cycle. It is further pointed out that the TPO in his analysis has selected Ishir Infotech Ltd., which renders software testing activities as comparable. This contention of the Assessee is not correct. At page 98 of the TPO's order, the objection of the Assessee for selecting Ishir infotech Ltd. as comparable is for the reason that this company was outsourcing software development and that the company does not satisfy 25% employee cost filter. Both these objections have been found to be not sustainable by the TPO. The question therefore would be as to whether software testing services would be equivalent to software development services. Software testing is only part of software development life cycle. It cannot be equated with software development services. The TPO in our view rightly excluded this company for comparability purposes."

13.2 Further, the Ld. AR relied on the order of ITAT, Pune in the case of John Deere India Pvt. Ltd. in ITA No.518/Pun/2015 dated 25/04/12019 wherein it was held as follows:

"We have heard the rival submissions and gone through the relevant material on record. The Annual Report of this company is available at page 415 onwards of the paper book. Profit and Loss account of this company shows 'Sales'' of Rs.67,56,06,505/-. Break-up of such sale has been given in Schedule 12, which records ''Export from SEZ units'- Rs.47,58,40,447/-; 'Export from STPI units' - Rs.11,20,90.633; ''Revenue from subscription' - Rs.1,53,13,736/-; 'Sale of licence' - Rs.1,51,38,618/- and 'Software Services' - Rs.5,72,23,072/-. This company has segments only on geographical basis and not on functional level. As such, there is no bifurcation of operating profit from Software Services and others including Sale of licence and Revenue from subscription etc. Even the first two major items of 'Exports from SEZ units' and 'Export from STPI units' do not show as to whether these were exports of Software products or Software Services. In the absence of the availability of any concrete information in respect of Software Services, we fail to comprehend as to how this company, also having software products in its portfolio, can be construed as comparable. The same is accordingly directed to be excluded."
16.2 Before us, the assessee objected to the inclusion of this company as a comparable that apart from software development services, it is in the business of product development, trading in software, giving licenses for use of software and that segmental details are not available. It was also submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) in its order for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables for providers of software development services.