9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (1) TMI 1866 - AT - Income TaxTP Adjustment - comparability - Considering R Systems International Ltd. as comparable - HELD THAT - As rightly pointed out by the ld. AR Rule 10(B)(4) does not exclude from consideration the data of an entity merely because its financial year is different from the financial year of the assessee. What the Rule requires is that the data to be used in analyzing the financial results of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. So long as the data relating to the financial year is available it matters not if the financial year followed is different. In the case before us the data relating to the relevant financial year of R.Systems International Limited is available. We are therefore entirely in agreement with the decision relied by ld. AR that if the data relating to the financial year in which the international transaction has been entered into is directly available from the annual accounts of that comparable then it cannot be held as not passing the test of sub-rule(4) of rule 10B and the same is the view taken by Hon ble Punjab Haryana High Court in the case of CIT Vs. Mercer Consulting (India) Pvt. Ltd. 2016 (8) TMI 1163 - PUNJAB AND HARYANA HIGH COURT . Being so in our opinion data relating to the assessee financial year to be interpolated and thereafter if required it should be considered as a comparable to the assessee s case. With this observation we remit this issue to the file of TPO for his fresh consideration. Exclusion of Accentia Technologies Limited as comparable - main contention of ld. AR is this Accentia Technologies Ltd. is functionally not comparable to assessee which is a BPO - The segmental data relevant to software services and product ITES are not available in the annual report. That company own intangibles. These facts were considered in the case of the coordinate bench in the case of Outsource Partners International Pvt. Ltd. 2017 (2) TMI 1410 - ITAT BENGALURU and held that it cannot be a comparable case as in the case of assessee. Being so we uphold the argument of ld. AR and direct the TPO to exclude the above comparable. Exclude Fortune Infotech Limited as comparable - As discussed in earlier year this comparable Fortune Infotech Ltd. was rejected as a comparable in the case of Outsource Partners International Pvt. Ltd. Vs. DCIT 2017 (2) TMI 1410 - ITAT BENGALURU and it was held that it cannot be a comparable. Accordingly we direct the AO/TPO to exclude the same. Exclusion of Jeevan Scientific Technology Limited - AR submitted that Jeevan Scientific Technology Ltd. cannot be considered as comparable to the assessee s case as it fails service income filter of 75% as applied by the TPO. It is also submitted that DRP has itself excluded ICRA Online Ltd. as comparable but the fact that 75% of export earning filter needs to be applied as against 25% of export earning filter applied by the TPO. Therefore in our opinion these facts required to be examined by the TPO and if it is so ICRA Online Ltd. was excluded as comparable this comparable is also to be excluded on the same basis. Accordingly this issue is remitted to TPO for fresh consideration with this observation.
Issues Involved:
1. Transfer Pricing Adjustments 2. Inclusion and Exclusion of Comparable Companies 3. Application of Filters for Comparability Analysis 4. Interest under Section 234B and 234D of the Income-tax Act Issue-wise Detailed Analysis: 1. Transfer Pricing Adjustments: The appeal was directed against the assessment order passed under section 143(3) read with section 144C of the Income-tax Act, 1961. The assessee contested the determination of an adjustment under section 92CA to the Arm's Length Price (ALP) of international transactions with Associated Enterprises (AEs) regarding Information Technology Enabled Services (ITeS). The Transfer Pricing Officer (TPO) had rejected the TP documentation maintained by the assessee, invoking sub-section (3) of section 92C, and conducted a fresh comparability analysis by introducing various filters. The final assessment order included a TP adjustment of INR 30,281,283. 2. Inclusion and Exclusion of Comparable Companies: - R Systems International Ltd.: The assessee argued that R Systems International Ltd. was functionally comparable and passed all filters applied in the TP documentation. However, the lower authorities rejected it due to a different accounting period. The Tribunal agreed with the assessee, referencing the Punjab & Haryana High Court's decision in CIT Vs. Mercer Consulting (India) Pvt. Ltd., stating that different accounting periods do not affect comparability if data relating to the financial year is available. The issue was remitted to the TPO for fresh consideration. - Accentia Technologies Limited: The assessee contended that Accentia Technologies Ltd. was not comparable due to its involvement in software product development and IT-enabled services, lack of segmental data, and possession of intangibles. The Tribunal upheld the assessee's argument and directed the TPO to exclude Accentia Technologies Ltd. from the comparables. - Fortune Infotech Limited: The assessee argued that Fortune Infotech Ltd. used unique technology and technical know-how, making it non-comparable. The Tribunal referenced a previous decision in Outsource Partners International Pvt. Ltd. Vs. DCIT and directed the TPO to exclude Fortune Infotech Ltd. from the comparables. - Jeevan Scientific Technology Limited: The assessee raised an additional ground, arguing that Jeevan Scientific Technology Ltd. failed the service income filter of 75% applied by the TPO. The Tribunal admitted this ground and remitted the issue to the TPO for fresh consideration, directing that if ICRA Online Ltd. was excluded on similar grounds, Jeevan Scientific Technology Ltd. should also be excluded. 3. Application of Filters for Comparability Analysis: The assessee contested various filters applied by the TPO, including the employee cost filter, export earning filter, and the use of different financial year ending filter. The Tribunal addressed these issues by remitting specific cases back to the TPO for fresh consideration, ensuring that the filters were applied consistently and appropriately. 4. Interest under Section 234B and 234D of the Income-tax Act: The assessee contested the levy of interest under section 234B and 234D, amounting to INR 4,726,839 and INR 165,275, respectively. The Tribunal noted that these interests are consequential and mandatory, to be computed accordingly. Conclusion: The appeal was partly allowed for statistical purposes, with several issues remitted to the TPO for fresh consideration. The Tribunal emphasized the importance of consistent application of filters and comparability criteria, ensuring that the data used for ALP determination is reliable and appropriate. The judgment was pronounced on January 31, 2019.
|
