2023 (11) TMI 806 - AT - Income Tax

TP Adjustment - comparable selection - rejecting M/s. Accentia Technologies Limited M/s. Eclerx Services Ltd., and M/s. TCS E-Serve as comparables - HELD THAT - Accentia being KPO as held in Rampgreen Solutions (P.) Ltd. vs. CIT 2015 (8) TMI 931 - DELHI HIGH COURT and quite different from the BPO profile of the assessee, we see no error in the conclusion drawn by the CIT(A) for rejecting this comparable. Eclerx Services Limited - As business model of the assessee is quite different from Eclerx which provides data analytics and processing solutions to some of the largest brands in the world and is recognized as experts in chosen markets financial services, retail and manufacturing and is a KPO. In view of different functioned profile, we thus see no justification in the action of the Revenue to introduce such company in the final set of comparables as rightly held by the CIT(A). We thus decline to interfere. TCS E Serve Ltd is mainly involved in transaction processing and technology services. It carries on business of providing technology services such as software testing, verification and validation. TCS has also develop a software such as Transport Management Software and therefore, functionally this company is dissimilar to assessee company. Besides, TCS also owns huge intangible and use of Tata brand which definitely benefited this comparable and is in a different league. Furthermore, relevant segmental data not being available, such comparable cannot be used for determination of ALP. Appeal of Revenue is dismissed.

Summary

Issues:
The judgment involves the rejection of comparables by the Revenue for determining the Arm's Length Price (ALP) under the Income Tax Act, 1961 for Assessment Year 2011-12.

Summary:

Issue 1: Rejection of Accentia Technologies Limited as Comparable
The assessee, an Information Technology enabled Services (ITeS) company, challenged the inclusion of Accentia Technologies Limited as a comparable for ALP determination. The CIT(A) directed the AO/TPO to exclude Accentia based on functional differences and previous tribunal decisions. The Tribunal upheld the CIT(A)'s decision citing the functional dissimilarities between the companies and previous case law.

Issue 2: Exclusion of Eclerx Services Limited as Comparable
The Revenue introduced Eclerx Services Limited as a comparable for ALP determination, which was contested by the assessee. The CIT(A) excluded Eclerx based on functional differences and previous tribunal rulings. The Tribunal agreed with the CIT(A), emphasizing the distinct business models of the companies and declined to interfere.

Issue 3: Dispute regarding TCS E Serve Ltd as Comparable
The Revenue objected to the exclusion of TCS E Serve Ltd as a comparable for ALP determination. The Tribunal noted the functional dissimilarities between the companies, lack of segmental data, and the unique factors benefiting TCS. Citing previous tribunal decisions, the Tribunal upheld the CIT(A)'s decision to exclude TCS E Serve Ltd as a comparable.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions to reject Accentia Technologies Limited, Eclerx Services Limited, and TCS E Serve Ltd as comparables for ALP determination. The judgment was pronounced on 20.11.2023.