The Tax Publishers2020 TaxPub(DT) 5514 (Mum-Trib)

INCOME TAX ACT, 1961

Section 92C

In case of M/s. Acropetat Technologies Ltd. out of sales turnover of Rs. 89 Crores, a substantial amount of Rs. 42 Crores had been spent on onsite development charges. Further, this entity was engaged in development of computer software as well as dealing in software product. Accordingly, it was not comparable to pure ITES provider like assessee.

Transfer pricing - Determination of ALP - Selection of comparables - Functional dissimilarity and no reliable segmental data

Assessee rendered technical support services to its AE abroad. TPO considered M/s. Acropetat Technologies Ltd. as comparable to assesee's case. Held: In case of M/s. Acropetat Technologies Ltd. out of sales turnover of Rs. 89 Crores, a substantial amount of Rs. 42 Crores had been spent on onsite development charges. Further, this entity was engaged in development of computer software as well as dealing in software product. The same is evident from the fact that it had closing inventories of Rs. 1.86 Crores. So far as segmental results were concerned, it had earned revenue of Rs. 32 Crores from engineering design services, whereas balance Rs. 57.1 Crores had been earned from IT services. Expenditure under two segments had been allocated as approx. 58% of segmental revenue. Similar was the basis of allocation in immediately preceding year. Therefore, segmental results could not be relied upon. After due consideration of all these factors, it could be said that this entity was not purely in the field of rendering ITES services. Its segmental results could not be relied upon and therefore, it was not a good comparable for assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10


INCOME TAX ACT, 1961

Section 92C

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