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2023 (10) TMI 1132 - AT - Income TaxTP Adjustment - exclusion of Eclerx Services Limited from the set of comparable companies while determining Arm s Length Price (ALP) - HELD THAT - Assessee is rendering back office support service to its AE. There is no change in the services performed by the assessee right from the AY 2007-08 onwards. We find that this Tribunal in assessee s own case for AY 2007-08 2017 (1) TMI 1546 - ITAT DELHI had excluded Eclerx from the list of comparable companies as functionally not comparable with the assessee. Hence, we direct the Ld. AO to exclude Eclerx Service Limited from the final list of comparables while determining the ALP of International Transactions of the assessee. Accordingly, Ground raised by the assessee is allowed.
Issues involved:
The issues involved in this judgment include the exclusion of Eclerx Services Limited from the set of comparable companies while determining Arm's Length Price (ALP) u/s 143(3) r.w.s.144C (13) of the Income Tax Act, 1961 for Asst. Year 2010-11. Summary: Issue 1: Exclusion of Eclerx Services Limited from the list of comparable companies The appeal was filed by the Assessee against the final assessment order, seeking exclusion of Eclerx Services Limited from the set of comparable companies for the assessment year 2010-11. The Tribunal recalled the order for the limited purpose of adjudicating ground No.3.5 raised by the assessee in seeking exclusion of Eclerx Services Limited. The Tribunal found that the assessee provides back-office support services to its Associated Enterprises (AE), which are limited to supporting intangible creation and maintenance activities. The Tribunal noted that in a previous case for AY 2007-08, Eclerx had been excluded from the list of comparable companies due to functional dis-similarity with the assessee. The Tribunal observed that Eclerx is engaged in providing high-end services involving specialized knowledge and domain expertise, while the assessee is engaged in providing low-end services. Based on the functional dis-similarity, the Tribunal directed the Ld. AO to exclude Eclerx Service Limited from the final list of comparables for determining the ALP of International Transactions of the assessee. Issue 2: Direction to exclude Eclerx Services Limited from final list of comparables The Tribunal directed the Ld. AO to exclude Eclerx Services Limited from the final list of comparables while determining the ALP of International Transactions of the assessee for the assessment year 2010-11. This decision was in line with previous rulings in the assessee's own case for AYs 2007-08, 2008-09, 2009-10, and 2011-12. The Tribunal allowed Ground No.3.5 raised by the assessee, thereby granting the appeal in respect of the exclusion of Eclerx Services Limited. Conclusion: The Tribunal allowed the appeal of the assessee in respect of the exclusion of Eclerx Services Limited from the final list of comparables while determining the ALP of International Transactions for the assessment year 2010-11. This decision was based on the functional dis-similarity between Eclerx and the assessee, with Eclerx being engaged in providing high-end specialized services, while the assessee provides low-end support services.
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