9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (12) TMI 636 - AT - Income TaxTP Adjustment - selection/rejection of certain comparables - assessee has to be treated as low end BPO service provider - HELD THAT - Acropetal Technology Ltd. - As per the information available in the annual report, the foreign exchange earning activity involves export in software services. Further, in the Note to Accounts it is stated that the company is engaged in the development of computer software. The segmental break-up at page 109 of the paper-book, though, mentions three segments, however, there is no ITES segment. Thus, keeping in view the factual position, as discussed above, we are of the opinion that this company, being functionally different from the assessee, is not comparable. The decisions relied upon by learned counsel for the assessee support our view. Accordingly, we direct the Assessing Officer to exclude this company. Infinity.com Financial Securities Ltd. - Undisputedly, in the fee income segment, the company has earned revenue from research services in relation to financial markets. Thus, in our view, the company is similar to the assessee, as the assessee is also involved in research services. As regards the other contentions of the assessee that forex filter of 75% should be applied and as far as lack of information regarding nature of foreign exchange earnings is concerned, we do not find merit in them. Accordingly, we uphold the selection of this comparable. Eclerx Services Pvt. Ltd. - We are convinced that it is engaged in high end KPO services, hence, under no circumstances, can be comparable to the assessee. Having noticed material difference in the functional profile, the Tribunal in assessee s own case in assessment year 2007-08 2017 (12) TMI 1731 - ITAT DELHI , has held that it cannot be a comparable to the assessee. There being no difference in the factual position involved in the current assessment year, we hold that this company cannot be treated as comparable to the assessee. Accordingly, we direct the Assessing Office to exclude it. Genesys International Corporation Ltd. is functionally different from the assessee as the nature of services provided are distinct and highly specialized. Considering this aspect, the Tribunal in assessee s own case in assessment year 2008-09 passed in 2018 (6) TMI 1844 - ITAT DELHI has excluded it as comparable. ICRA Techno Analytics Ltd. - On going through the annual report of the company placed in the paper-book, we have observed that it provides wide spectrum of services including software development services and engineering design services. However, revenue has been reported without providing any segmental break-up. Thus, in our view, complete information relating to the service segment of the company is not available. That being the factual position on record, the company cannot be treated as a comparable. In this regard, we are supported by the decisions relied upon by learned counsel for the assessee. Accordingly, we direct the Assessing Officer to exclude this company. R Systems International Ltd. (BPO Segment) - Departmental authorities have rejected this company primarily for the reasons that sufficient data relating to the company is not available in public domain and it is a loss making company. However, before us, the assessee has submitted that the annual report of the company for the assessment year under dispute is available in public domain and it has not incurred loss in the current year and in the previous two assessment years, hence, it cannot be considered to be a persistent loss making company. In our considered opinion, the aforesaid contention of learned counsel for the assessee requires factual verification. Accordingly, we restore the issue to the Assessing officer for examining assessee s claim and decide it after providing reasonable opportunity of being heard to the assessee. Working capital adjustment - assessee has submitted that in assessment years 2007-08, 2008-09, 2009-10 and 2012- 13, the TPO himself has allowed working capital adjustment - HELD THAT - We direct the Assessing Officer to examine assessee s claim, and in case, it is found that similar adjustment was allowed in assessment years 2007-08, 2008-09, 2009-10 and 2012-13, the same may be allowed to the assessee after examining the relevant facts. Needless to say, the assessee must be provided an opportunity of being heard before deciding the issue. TDS u/s 195 - Disallowance u/s 40(a)(i) - assessee has paid the amount to its AE towards management fee - whether payments made, being in the nature of Fees for Technical Services (FTS)? - HELD THAT - As decided in own case 2022 (10) TMI 159 - ITAT DELHI the services received by the assessees are general managerial services, hence, do not qualify the test of technical/consultancy services to satisfy the definition of FIS under Article 12(4) of the Tax Treaty. Thus, while considering the nature and taxability of corresponding receipts at the hands of the payee, the Tribunal has held that the amount is not taxable in India, in our considered opinion, there is no legal obligation on the assessee to withhold tax at source under Section 195 of the Act while remitting the management fee to the AE. This is so, because, section 195 itself is quite explicit in its language while providing withholding of tax in respect of any payment, which is chargeable to tax in India. Since, the management fee paid by assessee is not chargeable to tax in India in terms with Article 12(4) of India-USA DTAA, as held by the Co-ordinate Bench in case of the payee, the assessee was not required to deduct tax at source while making such payment - disallowance made under Section 40(a)(i) unsustainable - Decided in favour of assessee.
Issues Involved:
1. Selection/Rejection of Comparables 2. Working Capital Adjustment 3. Disallowance under Section 40(a)(i) of the Income Tax Act Summary: 1. Selection/Rejection of Comparables: (I) Acropetal Technology Ltd.: The assessee objected to the selection of Acropetal Technology Ltd., arguing that it is engaged in engineering design services, IT services, and healthcare software, which are not comparable to the assessee's low-end ITES. The Tribunal found the company functionally different and directed its exclusion. (II) Infinity.com Financial Securities Ltd.: The assessee contended that this company is functionally dissimilar as it is a stock broking company. The Tribunal upheld the selection of this comparable, noting that the fee income segment, which involves research services similar to those provided by the assessee, is comparable. (III) Eclerx Services Pvt. Ltd.: The assessee argued that Eclerx Services Pvt. Ltd. provides high-end KPO services, which are not comparable to the low-end BPO services provided by the assessee. The Tribunal, agreeing with the assessee, directed the exclusion of this company. (IV) Genesys International Corporation Ltd.: The assessee objected to the selection of Genesys International Corporation Ltd., citing its engagement in specialized geospatial consulting services. The Tribunal found the company functionally different and directed its exclusion. (V) ICRA Techno Analytics Ltd.: The assessee argued that ICRA Techno Analytics Ltd. provides a wide variety of services without segmental break-up. The Tribunal, agreeing with the assessee, directed the exclusion of this company. Inclusion of R Systems International Ltd. (BPO Segment): The Tribunal restored the issue to the Assessing Officer for re-examination, as the assessee contended that sufficient data was available and it was not a persistent loss-making company. 2. Working Capital Adjustment: The assessee sought working capital adjustment, which had been allowed in previous years. The Tribunal directed the Assessing Officer to examine the claim and allow the adjustment if it was granted in previous assessment years. 3. Disallowance under Section 40(a)(i) of the Income Tax Act: The assessee challenged the disallowance of Rs. 70,59,836/- paid to its AE towards management fee, arguing that it was not liable to deduct tax at source. The Tribunal, following its decision in the assessee's own case for previous years, held that the management fee was not taxable in India under the India-USA DTAA, and thus, the assessee was not required to deduct tax at source. Consequently, the disallowance was deleted. Conclusion: The appeal was partly allowed, with directions for exclusion of certain comparables, re-examination of the inclusion of R Systems International Ltd., and deletion of the disallowance under Section 40(a)(i). The Tribunal also directed the Assessing Officer to examine and allow the working capital adjustment if it was granted in previous years.
|
