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2020 (9) TMI 1281 - AT - Income TaxTP Adjustment - comparable selection - characterisation of the assessee as a KPO/high-end ITeS service provider - HELD THAT - We hold that the authorities were not correct in re characterisation of the assessee as KPO/high-end ITeS service provider instead of provider of nonbinding investment advisory services and related support services. We also hold that following comparables should be included for the analysis - Almondz Global Securities Ltd., Crisil Risk Infrastructure Solutions Ltd., ICRA Management Consulting Services Ltd. We also hold that Eclerx Services Ltd. comparable should be excluded. The assessing officer/transfer pricing officer is directed to make the necessary competition in light of directions as above. In the result this appeal by the assessee is partly allowed.
Issues Involved:
1. Characterization of the assessee as a KPO instead of a provider of non-binding investment advisory and related support services. 2. Inclusion of certain comparables in the Transfer Pricing (TP) analysis. 3. Exclusion of certain comparables in the TP analysis. Detailed Analysis: 1. Characterization of the Assessee: The primary issue was whether the assessee should be characterized as a Knowledge Process Outsourcing (KPO) entity or as a provider of non-binding investment advisory and related support services. The Tribunal referred to its previous rulings in the assessee's own case for assessment years 2012-13 and 2013-14, where it was held that the lower authority was incorrect in re-characterizing the assessee as a KPO. The Tribunal reiterated that the assessee is engaged in providing non-binding investment advisory and related support services, and thus, the lower authority's re-characterization was not justified. 2. Inclusion of Comparables in the TP Analysis: The Tribunal examined the inclusion of three companies as comparables in the TP analysis: - Almondz Global Securities Ltd.: The Tribunal noted that this company was engaged in research-based investment advisory services during the relevant period and should be included as a comparable. - Crisil Risk & Infrastructure Solutions Ltd.: The Tribunal found that this company provided advisory services comparable to the investment advisory services of the assessee. The Tribunal also noted that the application of the export filter by the lower authorities was inconsistent, and thus, Crisil should be included. - ICRA Management Consulting Services Ltd.: The Tribunal held that management consultancy functions are comparable to investment advisory services, and therefore, ICRA should be included as a comparable. 3. Exclusion of Comparables in the TP Analysis: The Tribunal addressed the exclusion of certain companies: - Eclerx Services Ltd.: The Tribunal upheld its previous decision that Eclerx Services Ltd. was not comparable to the assessee due to functional dissimilarities. - Cheers Interactive (India) Private Ltd. and Cross Domain Solutions Private Ltd.: The Tribunal noted that these companies were not adjudicated in the earlier years, but the learned departmental representative agreed that excluding Eclerx and including the three other companies would resolve the issue in favor of the assessee. Conclusion: The Tribunal concluded that the lower authorities were incorrect in re-characterizing the assessee as a KPO. It directed the inclusion of Almondz Global Securities Ltd., Crisil Risk & Infrastructure Solutions Ltd., and ICRA Management Consulting Services Ltd. as comparables. It also directed the exclusion of Eclerx Services Ltd. from the TP analysis. The Tribunal remitted the matter back to the Assessing Officer/Transfer Pricing Officer for fresh computation in light of these directions. Stay Application: The Stay Application No. 28/mum/2020 became infructuous as the demand arising no longer survived due to the partial allowance of the assessee's appeal and the matter being remitted back for fresh computation. Order Pronouncement: The order was pronounced under ITAT rules 34(4) on 04.09.2020 by placing the result on the notice board.
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