2024 (9) TMI 1372 - AT - Income Tax

TP Adjustment - comparable selection - claim raised before ITAT for the first time - HELD THAT - Infosys BPO Limited, Eclerx Services Limited, Crossdomain Solutions Pvt. Ltd. excluded on the grounds of functional dissimilarity as in assessee s own case in earlier assessment years. Exclude MPS Limited from the list of comparable - There is no dispute about the facts that no objection was raised by the assessee before the revenue authorities regarding the exclusion of MPS Limited from the list of comparable. The claim has been raised before us for the first time. Respectfully relying on the decision of Quark Systems (P) Ltd. 2009 (10) TMI 591 - ITAT, CHANDIGARH we hold that taxpayer is not estopped from pointing out that MPS Limited had wrongly been taken as comparable. While admitting the fresh claim of the assessee to include MPS Limited included in the comparable, we make no comments on merit except observing that assessee from record has shown its prima facie case. Further the claim may be examined by the Ld. AO. Therefore, we deem it fit and proper to remit the matter to the file of the Ld. AO for consideration ACE BPO Services Private Limited rejected by the revenue authority due the reason that, sufficient financial information to verify related party transaction( RPT ) were not available - AR submitted that, the annual report of ACE BPO Services Limited is now available on the public domain and contended that ACE BPO Services Limited should be considered as the comparable company as it is engaged in ITeS and passes all the filter applied by the Ld. TPO - Thus if the comparable is functionally same as that of tested party then same cannot be rejected. Hence we direct the Ld. AO to verify the RPT from the available data and to permit the assessee to demonstrate the RPT from the available data and consider the same as a good comparable. Inclusion of Informed Technologies Limited as rejected by the revenue authority as functionally different and had high non current investment - As relying on Infor (India) Pvt. Ltd. 2019 (9) TMI 973 - ITAT HYDERABAD we direct the Ld. AO to verify afresh and consider Informed Technologies Limited as a good comparable after providing an opportunity of being heard to the assessee. Interest on outstanding receivables - In the case of PCIT vs. Tecnimont (P.) Ltd. 2018 (7) TMI 490 - BOMBAY HIGH COURT held that interest chargeable on delayed recovery of export receivables from AEs should be taken at LIBOR rates for determining ALP of notional interest on delayed recovery. Respectfully following the same, we are of the considered opinion that the ends of justice would be met by accepting the interest rate at LIBOR 200 points. We direct the Ld. AO to adopt the same. Therefore this ground of the assessee is allowed in part.

Summary

Issues: Transfer Pricing Adjustments, Inclusion/Exclusion of Comparables, Interest on Outstanding Receivables.

Transfer Pricing Adjustments:
The appeal was filed against the final assessment order for the A.Y. 2014-15, where the Transfer Pricing Officer suggested upward adjustments in relation to information technology enabled services provided to Associated Enterprises. The Assessing Officer finalized the assessment based on the directions of the Dispute Resolution Panel, determining the Arm's Length Price for the transactions. The appellant disputed the inclusion of certain comparables and challenged the computation of interest on outstanding receivables.

Inclusion/Exclusion of Comparables:
The appellant contested the inclusion of four comparables, citing functional dissimilarity, and requested the exclusion of these entities. Additionally, the appellant sought the inclusion of two comparables that were previously excluded by the Revenue authorities. The Tribunal examined the history of exclusion of certain comparables in earlier assessment years and decided to exclude three comparables for the current year. Regarding the inclusion of MPS Limited, the Tribunal allowed the appellant to challenge its comparability, remitting the matter back to the Assessing Officer for further consideration.

Interest on Outstanding Receivables:
The appellant argued that no Transfer Pricing adjustment could be made on outstanding receivables prior to 2013-14. Citing a precedent, the appellant proposed an interest rate at LIBOR+200 points for determining the Arm's Length Price of notional interest on delayed recovery. The Tribunal agreed with the appellant's position and directed the Assessing Officer to adopt the suggested interest rate. Consequently, the Tribunal partly allowed this ground of appeal.

The Tribunal's decision addressed the issues of Transfer Pricing adjustments, inclusion/exclusion of comparables based on functional dissimilarity, and the computation of interest on outstanding receivables. The Tribunal relied on past decisions and legal precedents to support its findings and directed the Assessing Officer to reconsider certain aspects of the assessment, providing the appellant with an opportunity to present their case. Ultimately, the Tribunal partially allowed the appeal, emphasizing the importance of ensuring a fair and accurate determination of the Arm's Length Price in international transactions.