9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (12) TMI 766 - AT - Income TaxTP Adjustment - comparable selection - exclusion of Excel Infoways Ltd. - HELD THAT - As relying on M/S. ZENTA PVT. LTD., M/S. ACCENTURE SOLUTIONS PVT. LTD., (FORMERLY KNOWN AS ZENTA PVT. LTD.,) TMI 2019 (9) TMI 1472 - ITAT MUMBAI Excel Infoways Ltd., is to be excluded from the list of comparables and accordingly, no adjustment of arm s length price of the international transaction need to be made in the instant case as is evident from the chart submitted by the assessee hereinabove. Accordingly, part of the ground raised by the revenue with regard to exclusion of Excel Inforways Ltd., contested by the revenue is dismissed.
Issues Involved:
1. Exclusion of Excel Infoways Ltd. from the list of comparables for benchmarking international transactions. Issue-wise Detailed Analysis: 1. Exclusion of Excel Infoways Ltd. from the list of comparables: At the outset, the assessee argued that the Dispute Resolution Panel (DRP) had rightly excluded M/s. Excel Infoways Ltd. from the list of comparables while benchmarking international transactions. The assessee's contention was that if this exclusion is upheld, their margins would be at arm’s length, negating the need for any adjustment. The Transfer Pricing Officer (TPO) had included Excel Infoways Ltd., which resulted in an average margin of 29.55% for comparables, leading to an ALP adjustment of ?8,05,90,345/-. However, the DRP’s exclusion of Excel Infoways Ltd. reduced the average margin to 18.93%, making no adjustment necessary. The Tribunal examined whether the DRP was justified in excluding Excel Infoways Ltd. The assessee argued that Excel Infoways Ltd. had a significantly lower employee cost ratio (8.82%) compared to the assessee's 54.55%, and lacked segmental data for its revenue, which included diverse services not comparable to the assessee's IT-enabled services. The Tribunal noted that in similar cases, such as Zenta Pvt. Ltd. (ITA No.1623/Mum/2014), Excel Infoways Ltd. was excluded due to functional dissimilarities, including its engagement in business auxiliary services and financial services, which were not purely IT-enabled services. Upon remand, the TPO confirmed that Excel Infoways Ltd. provided a mix of services, including telecom fulfillment and financial services, without segmental data. The Tribunal found that the absence of segmental data and the nature of services rendered by Excel Infoways Ltd. justified its exclusion. The Tribunal also noted that in the subsequent year (A.Y. 2010-11), the TPO himself excluded Excel Infoways Ltd. for similar reasons. The Tribunal, following precedents and based on the detailed analysis, concluded that Excel Infoways Ltd. was functionally dissimilar and had supernormal profits (243.69%), warranting its exclusion from the list of comparables. Consequently, the Tribunal dismissed the revenue's appeal on this ground and allowed the assessee's cross objections, leading to no adjustment in the arm’s length price of the international transaction. Conclusion:The Tribunal upheld the exclusion of Excel Infoways Ltd. from the list of comparables, confirming that the assessee's international transactions were at arm's length. This decision rendered other grounds and cross objections academic, resulting in the dismissal of the revenue's appeal and the allowance of the assessee's cross objections. Order Pronounced:The appeal of the revenue is dismissed, and the cross objection of the assessee is allowed. Order pronounced on 29/07/2020 by way of proper mentioning in the notice board.
|
