2018 (4) TMI 404 - HC - Income Tax

TPA - comparable selection criteria - Held that - Assessee is rendering Information Technology Enabled Services ( ITES ) to its Associated Enterprise (AE), thus companies functionally dissimilar with that of assessee need to be deselected from final list.

Summary

Issues:
1. Exclusion of Accentia Technologies Ltd. and Coral Hubs Ltd. as comparables.
2. Exclusion of Cosmic Global Ltd. and Crossdomain Solutions Ltd. without considering FAR analysis.
3. Inclusion of Pentamedia Graphics Ltd. without considering FAR analysis and the applicability of Res Judicata in Income Tax Proceedings.

Exclusion of Accentia Technologies Ltd. and Coral Hubs Ltd. as comparables:
The Tribunal excluded Accentia Technologies Ltd. as a comparable due to functional differences in services provided and the impact of merger/amalgamation on profitability. The Revenue argued that the merger should not affect comparability as both entities offer ITES. However, the Tribunal found the services and profitability impacted by merger, aligning with decisions from other benches. The exclusion was upheld as a possible view, considering functional differences and lack of challenge to findings. Similarly, Coral Hub Ltd. was excluded as its business model differed from the Respondent's, outsourcing work to subvendors. The Tribunal's findings were not shown to be perverse, leading to no interference with the exclusions.

Exclusion of Cosmic Global Ltd. and Crossdomain Solutions Ltd. without FAR analysis:
Cosmic Global Ltd. was excluded due to its outsourcing business model, differing from the Respondent's in-house model. The Tribunal's reliance on a previous decision supported this exclusion, with no challenge from the Revenue. Similarly, Crossdomain Solutions Ltd. was excluded for engaging in distinct activities not comparable to the Respondent's Elearning services. The lack of profit bifurcation and clear differences supported the Tribunal's decision, which was not shown to be perverse, warranting no interference.

Inclusion of Pentamedia Graphics Ltd. without FAR analysis and Res Judicata consideration:
Pentamedia Graphics Ltd. was included as a comparable based on consistent treatment in previous assessments. The Revenue failed to establish any change in circumstances to warrant exclusion, leading to the Tribunal's decision being upheld as a possible view. The question of law did not arise, and no substantial reason for exclusion was presented. Therefore, the inclusion of Pentamedia Graphics Ltd. was considered justified, and the question was not entertained.

In conclusion, the Appeal challenging the Tribunal's order was dismissed, with no costs awarded. The judgments on the exclusion and inclusion of comparables were upheld based on functional differences, business models, and lack of challenge to findings, with no substantial questions of law arising from the issues raised.