2018 (10) TMI 1601 - AT - Income Tax

TPA - Comparable selection - exclusion of Accentia Technology Limited - Held that - Accentia Technology is engaged in providing varied services in the nature of medical transcription services, medical billing, practice management consulting services, medical coding, claims processing and software development including SAAS and implementation services. Accentia it is evident has a large portfolio of products such as instaKare a EMR software developed by Accentia that enables providers using it receive EMR incentives from federal and state agencies, Insta PMS a web based practice management solution, Insta EMR, Insta WEB, instaBill, InstaDRT, Insta Scribe Insta View - making it a product company more than a services company even though it is reporting only one segment i.e. ITes. Though TPO has stated that more than 84.76% receipt is from healthcare receivables and only 15.24% Sale of software, the offering of software as a service (SaaS) makes it functionally different from the taxpayer. Segmental information is also not available since taxpayer is reporting only one ITES segment. DR has argued vehemently against the directions of the DRP for exclusion of Accentia Technology Limited, he was unable to point out any infirmity in the directions of the Ld. DRP. He could also not point out any judicial precedent wherein Accentia Technology Limited was retained as a comparable in case of a service company. - Decided against revenue.

Summary

Issues:
Transfer Pricing Adjustment by Excluding Comparable of M/s Accentia Technology Limited.

Analysis:
The appeal was filed by the Revenue against the final assessment order for the assessment year 2011-12, following the directions of the Ld. Dispute Resolution Panel (DRP) -1, New Delhi. The case involved international transactions for IT enabled services and reimbursement of expenses. The Transfer Pricing Officer (TPO) rejected the assessee's Transfer Pricing documentation and proposed adjustments totaling &8377; 2,90,95,332. The Assessing Officer passed the draft assessment order incorporating these adjustments. The Ld. DRP disposed of the assessee's objections, resulting in final transfer pricing adjustments of &8377; 2,33,48,693. The ITAT partly allowed the appeal against the directions of the Ld. DRP. The Hon'ble Delhi High Court upheld the ITAT's decision. Subsequently, the TPO recomputed the transfer pricing adjustments, leading to a nil adjustment for receivables. The department's appeal challenged the exclusion of M/s Accentia Technology Limited from comparables by the Ld. DRP.

The department contended that Accentia Technology Limited should not have been excluded as it was functionally similar to the assessee. The Ld. AR argued that Accentia was engaged in varied services and product-based activities, making it functionally different from the assessee. The Ld. AR also highlighted that even if Accentia was included, the margin comparison would not necessitate an adjustment.

The Tribunal examined the arguments and the Ld. DRP's detailed findings. The Ld. DRP had excluded Accentia due to its product-based nature and distinct asset and risk profile. The Tribunal found no infirmity in the Ld. DRP's directions and dismissed the department's grounds for appeal. The Tribunal upheld the exclusion of Accentia Technology Limited from comparables, concluding that it was not functionally similar to the assessee.

In conclusion, the Tribunal dismissed the department's appeal against the direction of the Ld. DRP to recompute transfer pricing adjustments by excluding M/s Accentia Technology Limited from comparables. The Tribunal found no reason to interfere with the Ld. DRP's decision, upholding the exclusion based on the functional dissimilarity between Accentia and the assessee.