2019 (5) TMI 1211 - HC - Income Tax

TP Adjustment - Comparable selection - Excluding Infosys BPO Limited - whether comparable ought not to be excluded only on the basis of high turnover ? - HELD THAT - The comparable discussed in Agnity India Technologies Pvt. Ltd. . 2013 (7) TMI 696 - DELHI HIGH COURT which was sought to be excluded was an Infosys Group Company which undoubtedly was a giant corporation . On the other hand, in Chrys Capital Investment Advisors India (P.) Ltd. 2015 (4) TMI 949 - DELHI HIGH COURT the three comparables included were Brescon Corporate Advisors Limited, Keynote Corporate Services Limited and Khandwala Securities Limited and the rejected comparables were IDFC Investment Advisors Ltd., Sumedha Fiscal Services Limited and Future Capital Holdings Limited. Clearly therefore none of the comparables involved was a giant corporation like Infosys. Consequently, this Court is not persuaded that the ITAT erred in the present case in excluding Infosys BPO Limited relying on the decision of this Court in Agnity India Technologies Pvt. Ltd. (supra). The Court has with the help of the chart produced by Mr. Hossain examined the facts in relation to each of the nine other comparables including TCS E-Serve International Limited. This Court is not persuaded to hold that the ITAT erred in law in excluding them from the list of comparables for the purposes of determining the ALP of the Assessee s international transactions. No substantial question of law arises

Summary

Issues:
- Appeal against order of Income Tax Appellate Tribunal excluding comparables for Transfer Pricing Analysis
- Exclusion of comparables based on turnover and profit criteria
- Comparison of decisions in Agnity India Technologies Pvt. Ltd. and Chrys Capital Investment Advisors India (P.) Ltd.
- Examination of each comparable and determination of ALP for international transactions

Analysis:
1. The appeal was filed by the Revenue against the Income Tax Appellate Tribunal's order excluding ten comparables for Transfer Pricing Analysis in relation to the international transactions of the Assessee for the Assessment Year 2010-2011. The Tribunal had described the Assessee as primarily engaged in data processing and call center services for overseas affiliated and unrelated entities. The Revenue challenged the exclusion of comparables, particularly Infosys BPO Limited, based on turnover and profit criteria.

2. The Court noted that a previous appeal by the Revenue for the Assessment Year 2009-2010, where many comparables were excluded, was dismissed by the Court. The Revenue argued that Infosys BPO Limited should not have been excluded solely based on the earlier order, citing a subsequent decision in Chrys Capital Investment Advisors India (P.) Ltd. v. Deputy Commissioner of Income-tax. The Court emphasized that high turnover or profit should not automatically lead to exclusion and differences should be examined to determine comparability.

3. The Court compared the decisions in Agnity India Technologies Pvt. Ltd. and Chrys Capital Investment Advisors India (P.) Ltd. In Agnity, Infosys Group Company was excluded as a giant corporation with significant risks and profits, whereas in Chrys Capital, comparables were different and not giant corporations. The Court upheld the exclusion of Infosys BPO Limited based on the reasoning in Agnity.

4. Each of the nine other comparables, including TCS E-Serve International Limited, was examined by the Court. It was concluded that the ITAT did not err in excluding them from the list of comparables for determining the Arm's Length Price (ALP) of the Assessee's international transactions. The Court found no substantial question of law and dismissed the appeal.

In conclusion, the judgment focused on the exclusion of comparables for Transfer Pricing Analysis, the criteria for exclusion based on turnover and profit, the comparison of decisions in different cases, and the detailed examination of each comparable for determining the ALP of the Assessee's international transactions.