A company providing exclusive software related services or both software related services and software development services jointly cannot be compared to assessee providing simple software development services. Thus, software related services shall not be compared for TP with Software Development services.    Case:  Deputy Commissioner of Income Tax vs. Textron Global Technology Centre (P.) Ltd. Facts: The assessee is a wholly owned subsidiary company of Textron Group. It is engaged to undertake design and development, to provide engineering services and innovation technology solutions to the business units of Textron Group. The assessee reported a payment of Rs. 12,20,32,357 to its Associated Enterprises (AEs) towards provision of software development and support services. For this transaction, the TPO passed an order on the basis of the profit margins of new comparable companies and made TP adjustment. On appeal, the Commissioner (Appeals) excluded 12 companies out of the 17 companies chosen by the TPO, for the reason that these companies had related party transaction. Thus, additions made were very negligible. On this, the revenue appealed to the Tribunal. Held: The Tribunal noticed each reason of exclusion and thereafter, gave the following ruling:

1. The revenue argued that the CIT (A) excluded 12 companies for the reason that these companies had related party transaction. The Tribunal viewed that comparables having RPT of up to 15 per cent of total revenues can be considered. Thus, tribunal held that comparable companies having RPT up to 15 per cent of the total revenues alone can be included.
2. CIT (A) excluded companies owing to amalgamation of the companies during the relevant period; reasons of high turnover and high risk profile; non-reliability of financial data as it was involved in financial scam.

The Tribunal upheld the exclusions made by CIT (A).

3. CIT (A) excluded Sankhya Infotech Ltd. for the reason that the company was also engaged in the business of software development. The Tribunal agreed with the exclusion.
4. A company engaged in product development and owns products and in sale of software license and related services shall not be comparables.
5. A specialized embedded software development service provider is not functionally comparable with a software development service provider.

In the view of the above, appeal was partly allowed. ____________________________________________________________________________________________________