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IT(TP)A Nos. 1041 & 1379 & 1106/Bang/2011 Cross appeals - IT(TP)A Nos. 1041 & 1106/Bang/2011

2. The assessee is a subsidiary of Exeter Educational Management Systems Inc. USA and provides software development services for the administration of higher education institutions worldwide. The Assessee is engaged in the business of providing software development (technical support) services to its overseas Associated Enterprises ('AE' for short). It is not in dispute that the transaction of rendering of software development services by the Assessee to its AE was an international transaction and in view of the provisions of sec. 92 of the Income Tax Act, 1961 (Act), income arising from such international transaction has to be determined having regard to Arm's Length Price (ALP). As regards the international transaction of provision of software development (SWD) services to its AEs, the Assessee received consideration of Rs.11,80,97,508/- for rendering Software Development Services from its AE. In support of its claim that the price charged by it in the international transaction is at Arm's Length, the Assessee filed a Transfer Pricing study (TP Study) in which the Assessee adopted Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) for determination of ALP. The profit level indicator (PLI) chosen for the purpose of comparison of profit margin of comparable companies was operating profit to operating cost (OP/OC). The price charged in the international transaction by the Assessee from its AE was Rs.11,80,97,508. The Operating cost of the Assessee was Rs.10,32,20,464/-. The operating profit was thus Rs.1,48,77,044/- OP/OC was 14.41%.

IT(TP)A Nos. 1041 & 1379 & 1106/Bang/2011 Comparables selected by the TPO and their arithmetic mean NCP Margins SI. as per TPO Comparables Selected by TPO Order (%) No. (WC- Unadj) 1 Bodhtree Consulting Ltd. 24.85 2 Lanco Global Systems Ltd. 13.65 3 Exensys Software Solutions Ltd. 70.68 4 Sankhya Infotech Ltd. 27.39 5 Sasken Network Systems Ltd. 16.64 6 Four Soft Ltd. 22.98 7 Thirdware Solution Ltd. 66.09 8 R S Software (India) Ltd. 8.07 9 Geometric Software Solutions 20.34 Company Ltd.

" Thirdware Solutions Pvt. Ltd.
9.1 There is no dispute that the high profit margin or loss cannot be a ground for exclusion or inclusion of a particular company in the list of comparables. The learned Authorised Representative of the assessee has submitted that this company is in the diversified activities and derive its income from sale of software license, software products apart from software development services. This company is engaged in the diversified activities of rendering application development, customer relationship management and ERP, software products. He has referred to the Annual Report of this company and submitted that this company is also engaged in the distribution of software products and providing trunky project which include a bundle of activities such as providing software product combined with implementation and customer services. In support of his contention, he has relied upon the following decisions :

7. On the other hand, the learned Departmental Representative has not disputed that certain mistakes have crept in the impugned order regarding wrong comparable companies were mentioned as well as irrelevant portion of the earlier order was reproduced.

IT(TP)A Nos. 1041 & 1379 & 1106/Bang/2011

8. Having considered the rival submissions and relevant material on record, we find that there is a mistake in paras 8.1 to 8.3 of the impugned order regarding name of the comparable company Exensys Software Solutions Ltd. which is at Sl.No.3 of TPO's set of comparables whereas in the finding of the Tribunal name of the company has wrongly mentioned as Accentia Software Solutions Ltd. Therefore there is an apparent mistake in the paras 8.1 to 8.3 of the order which requires to be rectified. Accordingly, the name mentioned in paras 8.1 to 8.3 as "Accentia Software Solutions Ltd." be read as "Exensys Software Solutions Ltd." We further note that in para 8.3 there is a mistake in reproduction of the earlier order in the case of Textron Global Technology Centre Pvt. Ltd. and instead of the relevant finding in para 14, the wrong part of the order in para 19 & 20 was reproduced. Thus there is a mistake in the order which requires to be rectified. In view of the above facts and circumstances, mistake in paras 8.1 to 8.3 are hereby rectified and the same may be read as under :