2024 (1) TMI 365 - HC - Income Tax

TP Adjustment - comparable selection - HELD THAT - Insofar as each of the comparables are concerned, the Tribunal has indeed reached a conclusion, albeit on facts, that there is functional dissimilarity between the respondent/assessee and the comparables. Accentia as encountered an extraordinary circumstance in the form of amalgamation during the Financial Year (FY) 2006-07 (AY 2007- 08), Eclerx and Mold-Tek were in the business of Knowledge Process Outsourcing (KPO) and in particular, were providing services concerning data analytics, data process solutions, and other high end services. It was found that these entities had a dedicated team that developed automation tools and thus, were not comparable with companies providing low end services, like that of the assessee and TSR merged with Tata Share Registry. Evidently, TSR was operating in the Business Process Outsourcing (BPO)/ KPO sector with an emphasis on financial services. Furthermore, in the period in issue, TSR had registered unusually high margins. The main source of revenue for TSR was the software it developed for payroll processing. No substantial question of law.

Summary

Issues involved: Appeal concerning Assessment Year (AY) 2007-08, challenging exclusion of comparables Accentia Technologies Ltd., Eclerx Services Ltd., Mold-Tek Technologies Limited, and TSR Darashaw Ltd.

Summary:
Assessment Year 2007-08:
The appellant/revenue contested the exclusion of four comparables in the appeal against the order of the Income Tax Appellate Tribunal. The respondent/assessee provided back-office support services and Corporate Service Segment (CSS) to its Associated Enterprises (AEs). The Transfer Pricing Officer (TPO) made upward adjustments in the ITES Segment and CSS. The Commissioner of Income Tax (Appeals) directed the exclusion of comparables, leading to the deletion of the TPO's adjustments. The Tribunal upheld the CIT(A)'s order, emphasizing functional dissimilarities between the companies benchmarked and the respondent/assessee.

Comparables Exclusion:
The Tribunal found functional dissimilarities between the respondent/assessee and the comparables. Accentia faced an amalgamation, Eclerx and Mold-Tek provided high-end KPO services unlike the respondent, and TSR merged with Tata Share Registry, operating in BPO/KPO with high margins from software development for payroll processing. The Tribunal's factual findings on dissimilarities were detailed in the order.

Conclusion:
No substantial question of law was proposed by the appellant/revenue challenging the Tribunal's findings. The Court declined to interfere with the impugned order, closing the appeal as no legal issue merited consideration. Parties were directed to act based on the digitally signed copy of the order.