2016 (3) TMI 1353 - AT - Income Tax

TP Adjustment - selection of comparable - HELD THAT - As relying on M/S. MAERSK GLOBAL SERVICE CENTRES (INDIA) PVT. LTD. VERSUS DCIT CIRCLE- 6(3), MUMBAI 2015 (1) TMI 917 - ITAT MUMBAI Vishal has been held to be not a good a comparable, inter alia, on the ground that it has outsourced its ITES work. Vishal has, thus, acted more like an intermediary than a ITES service provider in its own right. Respectfully following the views of the coordinate benches, therefore, we direct the Assessing Officer to exclude Vishal from the final list of comparables. As for the plea raised by the revenue, we find that the issue is covered in favour of the assessee, and, no interference in the well reasoned findings of the CIT(A) is thus called for. It is not even in dispute that CG Vak Software has made profits in the subsequent year, and that is the reason the DRP has held it to be includible in the list of comparables. We approve the stand of the DRP on this point, and decline to interfere in the matter. We, however, make it clear that our aforesaid decision for this year shall act to the prejudice of the assessee to raise other grievances on the comparables, which are, according to the assessee, wrongly included in the final list of comparables, or the comparables, which have not been included in the final list of comparables but which, according to the assessee, should have been included in the list of comparables.

Summary

Issues Involved:
1. Appeal against directions issued by the Dispute Resolution Panel-II Mumbai for assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2009-10.
2. Upward adjustment of international transaction for provision of information technology enabled services (ITeS).
3. Inclusion/exclusion of specific companies as comparables in transfer pricing study.
4. Exclusion of Vishal Information Technology Ltd from the list of comparables.

Issue 1:
The cross appeals were directed against the directions issued by the Dispute Resolution Panel-II Mumbai for assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2009-10. The grievances raised by the parties included various grounds related to the adjustments made to the international transaction for provision of information technology enabled services (ITeS).

Issue 2:
The primary issue revolved around the upward adjustment of the international transaction for provision of ITeS by the appellant. The appellant contested the adjustment on various grounds, including the rejection of functional analysis, search process, and documentation, as well as the inclusion of additional companies not comparable to the appellant. Disagreements also arose regarding the use of non-contemporaneous data, rejection of multiple year data, and failure to grant working capital adjustment.

Issue 3:
The inclusion/exclusion of specific companies as comparables in the transfer pricing study was a significant point of contention. The TPO had recommended excluding certain companies and adding new comparables based on updated profit level indicators. Disagreements arose regarding the exclusion of CG-VAK Software and the inclusion of new comparables like Datamatics Financial Services Ltd and Accentia Technologies Limited. The DRP's decision on these matters was challenged by both the Assessing Officer and the appellant.

Issue 4:
A specific issue related to the exclusion of Vishal Information Technology Ltd from the list of comparables was raised during the proceedings. The appellant sought exclusion based on Vishal's unique business model, which involved outsourcing work rather than performing it internally. The appellant relied on previous decisions by coordinate benches to support their argument for excluding Vishal from the final list of comparables. The Tribunal ultimately accepted the appellant's plea and directed the Assessing Officer to exclude Vishal from the list of comparables, while also dismissing the appeal filed by the Assessing Officer.

In conclusion, the judgment addressed various complex issues related to transfer pricing adjustments, inclusion/exclusion of comparables, and specific challenges to adjustments made by the authorities. The Tribunal's decision provided detailed reasoning for each issue and resolved the disputes in favor of the appellant on certain grounds while dismissing the Assessing Officer's appeal.