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2021 (12) TMI 508 - AT - Income TaxTP Adjustment - Comparable selection - Functional dissimilarity - considering Info Edge (India) Ltd. as a comparable company - HELD THAT - We find that CIT(A) after considering the nature of services provided by the M/s. Info Edge (India) Ltd. has given a finding that its primarily in the business of internet services where anyone on payment basis can have access to their websites as against the activities of assessee which is stated to be engaged in providing the administrative/facilitation assistance, providing product support and training to dealers and customers; assistance in relation to marketing/new business developments; communicating new business opportunity to AE; and providing assistance in negotiating the price of the products/terms of the contract with the customers. CIT(A) after considering the nature of activities had thus given a finding that nature of activities carried between the assessee and M/s. Info Edge (India) Ltd. are completely different services and the two cannot be considered to be a comparables and he therefore directed its exclusion. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) for directing its exclusion. Thus the ground of Revenue is dismissed. Excluding CDSL Ventures Ltd. as a comparable - CIT(A) after considering the business profile and the details, has given a finding that it belongs to ITES segment, more than 80% of its income is by way of on-line data charges and therefore, it cannot be considered as comparable companies to that of assessee. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and therefore upheld the order of CIT(A) for its exclusion as a comparable company. Thus the ground of Revenue is dismissed.
Issues:
- Appeal against order of Commissioner of Income Tax, (Appeals) - 19, New Delhi for Assessment Year 2011-12. - Exclusion of comparable companies for calculating Arm's Length Price of International Transactions. - Grounds raised by Revenue against CIT(A)'s order. - Arguments regarding the inclusion of M/s. Info Edge (India) Ltd. and CDSL Ventures Ltd. as comparable companies. - Decision on the appeal filed by Revenue. Analysis: 1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax, (Appeals) - 19, New Delhi for Assessment Year 2011-12. The case involved the determination of 'Arm's Length Price' (ALP) for International Transactions entered into by the assessee with its Associate Enterprises (AE). The Transfer Pricing Officer (TPO) proposed adjustments on International Transactions, leading to a final assessment order determining the total income of the assessee. The CIT(A) granted substantial relief to the assessee, leading to the appeal by the Revenue. 2. The Revenue raised multiple grounds of appeal, challenging the CIT(A)'s decision on the exclusion of comparable companies for calculating the Arm's Length Price. The grounds specifically mentioned various companies like M/s. Concept Communication Ltd, Crystal Hues Ltd, Cameo Corporate Services Ltd, Info Edge (India) Ltd, M M T V Ltd, TSR Darashaw Limited, Quippo Valuers and Auctioneers Private Ltd, Axis Integrated Systems Ltd, and C D S SL Ventures Ltd. The Revenue contended that the CIT(A) erred in not considering these comparable transactions. 3. The focus of the analysis was on the exclusion of M/s. Info Edge (India) Ltd. and CDSL Ventures Ltd. as comparable companies. The TPO had included Info Edge (India) Ltd. as a comparable company, but the CIT(A) disagreed, citing differences in the nature of activities between the assessee and Info Edge (India) Ltd. The CIT(A) found a complete mismatch in the services provided by both entities, leading to the exclusion of Info Edge (India) Ltd. as a comparable company. The Revenue supported the TPO's decision, but the Tribunal upheld the CIT(A)'s order based on the disparity in services. 4. Similarly, CDSL Ventures Ltd. was considered a comparable company by the TPO, but the CIT(A) directed its exclusion based on its business profile and income sources. The CIT(A) found that CDSL Ventures belonged to the ITES segment and derived a significant portion of its income from online data charges, making it incomparable to the assessee. The Tribunal upheld the CIT(A)'s decision to exclude CDSL Ventures Ltd. as a comparable company. 5. The Tribunal dismissed the Revenue's appeal, as the issues regarding the exclusion of Info Edge (India) Ltd. and CDSL Ventures Ltd. were decided in favor of the assessee. The Tribunal did not address the other grounds raised by the Revenue, as they were rendered academic. Therefore, the appeal of the Revenue was dismissed based on the Tribunal's findings regarding the exclusion of the comparable companies.
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