2022 (4) TMI 1521 - AT - Income Tax

TP Adjustment - comparable selection - HELD THAT - Infosys BPO Ltd. is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. The presence of the aforesaid factors will take this company out of the list of comparables, thus it is to be excluded as a comparable. TCS E-serve Ltd. is also stated to be a Knowledge Process Outsourcing and therefore for the reasons stated by us while dealing with this issue of comparability of the company Infosys BPO Ltd. shall equally hold good and therefore we direct the AO/TPO to exclude this company from the list of comparables.

Summary

Issues:
1. Exclusion of comparables TCS E-serve Ltd. and Infosys BPO Ltd. in the ITES segment from the final list by the Tribunal.

Analysis:
The Appellate Tribunal, in a judgment delivered by Judicial Member Smt. Beena Pillai, addressed a miscellaneous petition filed by the assessee seeking rectification in an order dated 01.11.2021. The Ld.AR contended that two comparables, TCS E-serve Ltd. and Infosys BPO Ltd., were inadvertently not adjudicated in the impugned order. The Tribunal acknowledged the oversight and noted that these comparables were excluded by the Coordinate Bench of the Tribunal under similar circumstances, citing specific cases as precedents. In the case of Infosys BPO Ltd., the Tribunal referred to a previous decision where it was excluded from the final list due to factors such as brand value and premium pricing, leading to a direction to exclude it. Similarly, in the case of TCS E-serve Ltd., the Tribunal relied on precedents and excluded it from the final list based on functional differences and engagement in diversified business activities, following the decision of a Coordinate Bench. Consequently, the Tribunal directed the Assessing Officer/Transfer Pricing Officer to exclude both TCS E-serve Ltd. and Infosys BPO Ltd. from the final list of comparables.

This detailed analysis of the judgment highlights the issues related to the exclusion of specific comparables in the ITES segment, providing a comprehensive understanding of the Tribunal's decision-making process and the legal reasoning behind the exclusion of TCS E-serve Ltd. and Infosys BPO Ltd.