Dy. CIT v. Sunquest Information Systems (India) (P.) Ltd.

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The Tax Publishers2016 TaxPub(DT) 3062 (Bang-Trib) : (2016) 160 ITD 0049 Dy. CIT v. Sunquest Information Systems (India) (P.) Ltd. INCOME TAX ACT, 1961 --Transfer pricing--Computation of ALPSelection of comparables--Companies having ten times more turnover than that of assessee--Where the turnover(s) of comparables, selected by TPO, was clearly showing that those were much more than that of assessee, taking all that comparables out of realm of comparability, exclusion of such companies from list of comparables was directed.--Assessee was rendering software development services to its AE. In order to justify its profit on cost, assessee had selected 21 comparables and contended that arithmetic mean of the above 21 comparables fell within the range of + /- 5 per cent of its own profit rate, therefore, there was no requirement of any adjustment for the transfer pricing of the international transactions with its AE. The TPO rejected some comparables selected by assessee and selected some new comparables and made certain addition to the assessee's ALP. *Held:* The turnover(s) of comparables, selected by TPO, would clearly show that those companies were functionally no comparable as their turnovers of assessee. Taking all that more than that out comparable of realm of comparability, therefore, exclusion of such companies from list of comparables was directed. Income Tax Act, 1961, Section 92C *Followed:*Dy. CIT v Quark Systems (P.) Ltd. (2010) 38 SOT 307 (Chd-Trib) (SB) and Lam Research (India) (P.) Ltd. v. Dy. CIT [ITA Nos. 1437 & 1385 (Bang.) of 2014, dt. 30-4-2015]. *REFERRED :* Genisys Integrating Systems India (P.) Ltd. v. Dy. CIT (2012) 53 SOT 159 (Bang-Trib), Yodlee Infotech (P.) Ltd. v. ITO [IT(TP) Appeal No. 108 (Bang.) of 2014, dt. 12-12-2014], CIT v. Tata Elxsi Ltd. (2012) 349 ITR 98 (Karn), Trilogy E Business Software India (P.) Ltd. v. Dy. CIT (2013) 140 ITD 540 (Bang-Trib) and SAP Labs India (P) Ltd. v. Asstt. CIT (2011) 44 SOT 156 (Bang-Trib). FAVOUR : In assessee's favour A.Y. : 2009-10 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 3062 (Bang-Trib) : (2016) 160 ITD 0049

Dy. CIT v. Sunquest Information Systems (India) (P.) Ltd.

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALPSelection of comparables--Companies having ten times more turnover than that of assessee--Where the turnover(s) of comparables, selected by TPO, was clearly showing that those were much more than that of assessee, taking all that comparables out of realm of comparability, exclusion of such companies from list of comparables was directed.--Assessee was rendering software development services to its AE. In order to justify its profit on cost, assessee had selected 21 comparables and contended that arithmetic mean of the above 21 comparables fell within the range of + /- 5 per cent of its own profit rate, therefore, there was no requirement of any adjustment for the transfer pricing of the international transactions with its AE. The TPO rejected some comparables selected by assessee and selected some new comparables and made certain addition to the assessee's ALP. Held: The turnover(s) of comparables, selected by TPO, would clearly show that those companies were functionally no comparable as their turnovers of assessee. Taking all that more than that out comparable of realm of comparability, therefore, exclusion of such companies from list of comparables was directed.

Income Tax Act, 1961, Section 92C

Followed:Dy. CIT v Quark Systems (P.) Ltd. (2010) 38 SOT 307 (Chd-Trib) (SB) and Lam Research (India) (P.) Ltd. v. Dy. CIT [ITA Nos. 1437 & 1385 (Bang.) of 2014, dt. 30-4-2015].

REFERRED : Genisys Integrating Systems India (P.) Ltd. v. Dy. CIT (2012) 53 SOT 159 (Bang-Trib), Yodlee Infotech (P.) Ltd. v. ITO [IT(TP) Appeal No. 108 (Bang.) of 2014, dt. 12-12-2014], CIT v. Tata Elxsi Ltd. (2012) 349 ITR 98 (Karn), Trilogy E Business Software India (P.) Ltd. v. Dy. CIT (2013) 140 ITD 540 (Bang-Trib) and SAP Labs India (P) Ltd. v. Asstt. CIT (2011) 44 SOT 156 (Bang-Trib).

FAVOUR : In assessee's favour

A.Y. : 2009-10