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TMI Blog2014 (11) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issue is that:- (1) The Ld.CIT (A) had erred in directing the AO to recompute the deduction U/s. 10A by excluding freight, telecommunication charges etc., incurred in foreign currency both from the export turnover and from the total turnover for arriving at the deduction U/s. 10A of the Act. (2) The Ld. CIT (A) had erred in deleting the addition made by the TPO on account of adjustment to the Arm's Length Price (ALP) by excluding M/s.Eclerx Services Ltd., on the basis of abnormal profits." 3. The assessee company is engaged in the business of providing customer supporting services in the form of email support, voice support & chatting and financial information support for customers indentified by the associate enterprises. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 10A by excluding telecommunication charges of Rs. 31,91,406/- from both export turnover in the numerator and total turnover from the denominator while applying the relevant formula, by following the decision of the cases cited herein below:- (i) ITO v. Sak Soft Ltd. [ITA Nos. 691 & 1953/Mds./2007, dated 6-3-2009] (ii) CIT Vs. Sitel Operating corporation India Lt d. (Kar.)(Mag) 204 Taxman 56 (2012) (iii) CIT Vs. Flowserve Microfinish Valves (P.) L td. 17 Taxmann.com 167 (iv) CIT Vs.Himatsingka Seide & Co. Ltd. (Kar.)(Mag) 204 Taxman 153 (2012) (v) CIT Vs. Khoday India Ltd. (Kar.)(Mag) 204 Tax man 153 (2012) (vi) CIT Vs. Samsung Electronics Co. Ltd. (Kar.)(Mag) 204 Taxman 166 (2012) 4.1 Before us, the Ld. A.R. argued by stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.Eclerx Services Ltd." has to be excluded because of the following reasons:- (i) The share holding pattern of M/s.Eclerx Services Ltd., is widely different from that of the assessee company. (ii) 20% of the shares of M/s.Eclerx Services Ltd., held by foreign enterprises and 80% by local business magnets of Great renown due to which the company enjoys a decisive edge over the other companies. (iii) The turnover of the assessee company is one third (1/3rd) turnover of M/s.Eclerx Services Ltd., (iv) M/s.Eclerx Services Ltd., has several regular contracts both local as well as abroad and is a premium and branded company, while as the assessee company has a single customer. (v) M/s.Eclerx Services Ltd., import huge capital assets and deri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts could not be ascertained with precision". Having number of transaction like import capital asset does not have impact on the operating profit-ratio of a company. iv. The appellant has stated that the pricing pattern of the comparable companies has enabled it to have better margin unlike the appellant company's case. Unlike the appellant company the comparable do not have any AE sale to be influenced on account of the relationship. No outside party shall pay for more than required in lieu of the service provided so the pricing model of a company would never be a factor for higher return. Therefore, the appellant 's submission that because of pricing Model Company is making better margin is not acceptable." 6. On appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Solutions Pvt Ltd -2.36 3 ICRA Online Ltd. 32.15 4 Infosys BPO Ltd 28.80 5 Infowavz Interntional Pvt Ltd. 19.00 6 Maple Esolutions Ltd 34.32 7 Tricorn Infotech Solutions Ltd. -9.44 8 Tritorn corp Ltd. 32.36 9 Mphasis Ltd. 15.66 Total 137.36 Arithmetic Mean 15.26 Performance of Brigade Corporation (as worked by TPO) Operating Cost of the assessee company As adopted by you 274703547 Income returned by the company 46276273 Percentage of income on cost 16.85% In view of the above, no adjustment was considered necessary to the ALP reported by the appellant and AO is directed to delete the addition of Rs. 2,01,34,947/- made in this regard. Accordingly, the ground of appeal is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, it is a known fact that when a business entity is totally depended on a single client, the bargaining power of the company will be very limited to secure higher rates for services rendered. The capital infrastructure of the company will also influence the profitability of the company. Higher the capital infrastructure, higher will be the profitability. These factors are simply brushed aside by the Ld. TPO, which if duly considered would result in excluding M/s.Eclerx Services Ltd., for determining the comparable companies. The Ld. CIT (A) after analyzing these issues has rightly arrived at the decision which is extracted herein above. Considering these facts and circumstances of the case, we are of the view that the Ld. CIT (A) is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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