2019 (1) TMI 202 - AT - Income Tax

TPA - selection / rejection of certain comparables - Held that - Assessee is a captive service provider and is engaged in providing back office support services and information technology (I.T) support services to its overseas Associated Enterprise (A.E) thus companies being functionally dissimilar to the assessee, cannot be treated as a comparable. Company cannot be rejected as a comparable merely because it has accounting period ending in December.

Summary

Issues Involved:
1. Transfer Pricing (TP) Adjustment
2. Selection/Rejection of Comparables
3. Corporate/Other Issues
4. Levy of Interest under Section 234B and 234C
5. Short Credit/Grant of TDS and Advance Tax

Issue-wise Detailed Analysis:

1. Transfer Pricing (TP) Adjustment:
The assessee, an Indian company and a wholly owned subsidiary of Maersk GSC Holdings A/S (Denmark), filed its return of income for the assessment year 2012-13. The Transfer Pricing Officer (TPO) noticed international transactions with the Associated Enterprise (A.E.) and determined the arm's length price (ALP) using the Transactional Net Margin Method (TNMM). The TPO rejected the assessee's transfer pricing study and selected comparables independently, proposing an upward adjustment of ?47,14,84,235. The Dispute Resolution Panel (DRP) upheld this adjustment, leading to the final assessment order under challenge.

2. Selection/Rejection of Comparables:
- Infosys BPO Limited:
The assessee argued that Infosys BPO Limited is functionally dissimilar and should not be treated as a comparable. The Tribunal had previously excluded this company in the assessee's own cases for assessment years 2010-11 and 2011-12. The Tribunal followed the consistent view and excluded Infosys BPO Limited as a comparable.

- Acropetal Technologies Ltd. (Healthcare Segment):
The assessee objected to this company due to its diversified activities. The Tribunal, following its decision in the previous assessment year, restored the issue to the Assessing Officer (AO)/TPO for fresh adjudication, considering the submissions and relevant decisions.

- R. System International Ltd. (Segment):
The TPO rejected this company due to a different accounting year. The Tribunal, following its consistent view in previous years, held that the company cannot be rejected solely for having a different accounting period. The issue was restored to the AO for verification of consistent loss-making status.

- Caliber Point Solutions Ltd.:
The TPO rejected this company due to a different accounting period. The Tribunal, following its consistent view, directed the AO to treat this company as a comparable.

3. Corporate/Other Issues:
- Ground no.13:
The Tribunal found this ground premature and did not adjudicate it.

4. Levy of Interest under Section 234B and 234C:
- Ground no.14:
The Tribunal noted these grounds are consequential and did not require adjudication at this stage.

5. Short Credit/Grant of TDS and Advance Tax:
- Grounds no.15 and 16:
The Tribunal directed the AO to verify the assessee's claim and grant credit for TDS and advance tax as per law.

Conclusion:
The assessee’s appeal was partly allowed, with specific directions for the AO/TPO to re-evaluate certain comparables and verify claims for TDS and advance tax credits.