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2018 (4) TMI 1002 - HC - Income TaxTPA - comparable selection - Held that - The assessee was engaged in ITES segment thus companies functionally dissimilar with that of assessee need to be deselected from final list. Appeal admitted on the substantial question of law at (b)- Whether on the facts and in the circumstance of the case and in law the Tribunal was justified in ignoring the comparable company on the ground that the assessee company is functionally not comparable has accepted Bodhtree Consulting Ltd. as comparable company and also that the said company was selected as a comparable by the assessee itself for the A. Y. 2008-09?
Issues involved:
1. Exclusion of KALs Information Solutions Ltd. from comparables list 2. Acceptance of Bodhtree Consulting Ltd. as comparable 3. Exclusion of Vishal Information Technology Ltd. and Cosmic Global Ltd. from comparables list 4. Exclusion of Accentia Technologies Ltd. from comparables list 5. Exclusion of Eclerx Services Ltd. from comparables list Analysis: 1. Exclusion of KALs Information Solutions Ltd.: The Tribunal excluded KALs Information Solutions Ltd. from the comparables list for determining Arms Length Price (ALP) based on previous years' documentations of the assessee without verifying the functions performed by comparables in the relevant year. The High Court upheld this decision, citing a previous order dismissing a similar appeal for a different assessment year, as no distinguishing features were shown for the current year. 2. Exclusion of Vishal Information Technology Ltd. and Cosmic Global Ltd.: Vishal Information Technology Ltd. was excluded as it outsourced services while the assessee did not, leading to functional incomparability. The High Court rejected the appeal, referencing previous dismissals for the same issue in different assessment years. Similarly, Cosmic Global Ltd. was deemed not functionally comparable due to outsourcing, with the High Court finding no grounds to entertain the appeal. 3. Exclusion of Accentia Technologies Ltd.: The Tribunal excluded Accentia Technologies Ltd. from comparables, noting differences in activities and high profit margins due to past amalgamation. The High Court supported this decision, citing a previous judgment upholding a similar exclusion based on extraordinary events affecting profitability. The functional disparity between the companies was a key factor in this decision. 4. Exclusion of Eclerx Services Ltd.: Eclerx Services Ltd. was excluded as it provided KPO services, unlike the BPO services offered by the assessee. The Tribunal relied on a Special Bench decision and highlighted the distinction in services provided. The High Court upheld this exclusion, emphasizing the need to examine the nature of services beyond the broad category of ITES to determine comparability. 5. Acceptance of Bodhtree Consulting Ltd.: The Tribunal accepted Bodhtree Consulting Ltd. as a comparable despite the assessee's functional differences, leading to a substantial question of law. The High Court admitted the appeal on this issue for further consideration. The High Court directed the Registry to inform the Tribunal to keep relevant papers available for future proceedings. The Respondent's counsel waived service, indicating cooperation in the legal process.
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