INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Computation of ALP - Selection of comparables - Functional dissimilarity

Assessee carried out the business for software development. AO referred the matter for consideration to TPO under section 144C. TPO inter alia held that data of three comparable companies, i.e., Persistent Systems Ltd., Zylog Systems Ltd. and Wipro Technology Services had to be included. Tribunal excluded its companies holding that the inclusion of Persistent Systems Ltd. and Wipro Technology Services (WTS) was unwarranted. It, however, remitted the issue with respect to Zylog Systems Ltd. to ascertain the audited segmental data for ultimately deciding the comparable component in issue. Held: Persistent Systems Ltd. was involved in software development, software products and marketing. Furthermore and perhaps more importantly, published segmental data was not available. In these circumstances, having regard to specificity of the Transfer Pricing rules under rule 10(b) to 10(e) of the Income Tax Rules, data of the said firm, i.e., Persistent Systems Ltd. could not have been included. As regards to Wipro Technology Services goes, it was part of the Citi Group and was acquired by Wipro Ltd. as a subsidiary. As a part of the arrangement, existing contracts pertaining to the work of the Citi Group continued to be with newly created entity, i.e., Wipro Technology Services. In these circumstances, findings of ITAT were purely factual and could not be gone into as no substantial question of law arose for consideration

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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