9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (11) TMI 1592 - AT - Income TaxTransfer pricing adjustment - Comparability - Held that - eClerx Services Ltd. - company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly we direct the AO/TPO to exclude Eclerx Services Ltd. from the list of comparables for the purposes of determining ALP. HCL Comnet Systems Services Ltd.(seg.)company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly we direct the AO/TPO to exclude Eclerx Services Ltd. from the list of comparables for the purposes of determining ALP. Infosys BPO Ltd. company is engaged in a different nature of activity to that of the assessee provided to its AE. Accordingly we direct the AO/TPO to exclude this company from the list of comparables Maple eSolutions Ltd. excluded from the list of comparables. Mold-Tek Technologies Ltd. is not compared with the low end ITES service provider Co. we hold that this Co. is functionally not comparable with that of the assessee. Accordingly we direct the AO/TPO to exclude Mold Tek from the list of comparables. Triton Corp. Ltd. company has merged with Mold-Tek Technologies Ltd. during the year under consideration. In view of the findings in respect of Mold-Tek Technologies Ltd. we are of the opinion that this company cannot be considered as a good comparable company. Vishal Information Technologies Ltd.(Coral Hub Ltd.) Wipro Ltd. (seg.)excluded from the list of comparables. Accordingly we direct the AO/TPO to re-compute the ALP after exclusion of the above companies from the list of comparables. We direct the TPO to consider the claim of the assessee of granting the benefit of tolerance range /-5% as raised in ground of the concise grounds. Allowance of deduction u/s 10A without setting off the domestic losses.
Issues Involved:
1. Legality and validity of the assessment order. 2. Transfer Pricing adjustments. 3. Corporate tax issues related to setting off domestic losses and computation of relief under section 10A. 4. Levy of interest under section 234B. Detailed Analysis: 1. Legality and Validity of the Assessment Order: - General Grounds: The assessee contended that the assessment order dated September 30, 2011, passed by the AO/TPO pursuant to the DRP's directions was not in accordance with law, contrary to the facts, and violated principles of equity and natural justice. 2. Transfer Pricing Adjustments: - Grounds Not Pressed: The assessee did not press grounds 2.2, 2.3, 2.6 to 2.10, which were dismissed as not pressed. - Grounds 2.4 and 2.5: These grounds pertained to the comparability of companies selected by the TPO for determining the Arm's Length Price (ALP). Comparability Analysis: - eClerx Services Ltd: The Tribunal found that this company was engaged in high-end services and data analytics, making it a Knowledge Process Outsourcing (KPO) rather than a Business Process Outsourcing (BPO). It was not functionally comparable to the assessee, which provided low-end services. The Tribunal directed the AO/TPO to exclude eClerx Services Ltd. from the list of comparables. - HCL Comnet System & Services Ltd. (seg.): The Tribunal noted that this company followed a different accounting year, making its financial data non-contemporaneous. Following precedents, the Tribunal directed the AO/TPO to exclude this company from the list of comparables. - Infosys Technologies Ltd.: The Tribunal excluded this company due to extraordinary events of amalgamation during the year and its engagement in business process management services, which was different from the assessee's services. - Mapple eSolutions Ltd.: The Tribunal excluded this company due to involvement in financial fraud, following earlier decisions that doubted the reliability of its financial statements. - Mold-Tek Technologies Ltd.: The Tribunal excluded this company due to its involvement in structural engineering KPO services and extraordinary events of amalgamation and demerger during the year. - Tricom Corporation Ltd.: The Tribunal excluded this company due to its merger with Mold-Tek Technologies Ltd. and involvement in fraud. - Vishal Information Technologies Ltd. (Coral Hub Ltd.): The Tribunal excluded this company as it did not meet the employee cost filter of 25%, and it outsourced its activities, making it functionally different from the assessee. - Wipro Ltd. (seg.): The Tribunal excluded this company as it owned intellectual property and was involved in product development, making it functionally different from the assessee. Re-computation of ALP: The Tribunal directed the AO/TPO to re-compute the ALP after excluding the above companies and consider the assessee's claim for the benefit of the tolerance range of +/-5%. 3. Corporate Tax Issues: - Setting off Domestic Losses Against Export Income (Ground Nos. 4 to 6): - The Tribunal relied on the decision of the Hon'ble jurisdictional High Court in CIT vs. Yokogawa India Ltd. and others, which held that the income of a 10A unit should be excluded before arriving at the gross total income of the assessee. The Tribunal also referred to the decision in CIT vs. M/s. Aurigene Discovery Technologies Ltd. and the Tribunal's decision in CIT vs. M/s. Biocon Ltd. - The Tribunal directed the AO to allow deduction under section 10A without setting off the domestic losses, following the amended provisions applicable to the assessee. 4. Levy of Interest Under Section 234B: - Ground No.7: The Tribunal noted that the levy of interest under section 234B is mandatory and consequential. Conclusion: The appeal was partly allowed, with the Tribunal directing the AO/TPO to exclude certain companies from the list of comparables for transfer pricing adjustments and to allow deduction under section 10A without setting off domestic losses. The levy of interest under section 234B was upheld as mandatory and consequential.
|
