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TMI Blog2015 (1) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... outlier” - Considering the super normal profit and also the rejection by the TPO in A.Y. 2010-11, there was no error in rejection of this company - the ratio of employee cost to turnover is only 10.02% as against assessee’s employee cost of 62.83%. M/s. Crossdomain Solutions Ltd. – Held that:- This company has been rejected by the DRP on the ground that it is indulged in high skill IT services which are not comparable to the routine I.T. Enabled services – in M/s. Market Tools Research Pvt. Ltd. Versus Dy. Commissioner of Income-tax [2014 (9) TMI 43 - ITAT HYDERABAD] it has been held that this company is providing services which are in the nature of KPO - the company is engaged in providing Niche services as well as developed its own brand ‘Exdion’ to target the insurance industry in US - the directions made by the DRP is upheld for the rejection of this company from the final list of comparable - Decided against revenue. Nature of foreign exchange gain/loss – Operating revenue or not – Held that:- While computing the operating margin of the assessee, the TPO included the foreign exchange loss of ₹ 2.48 crores as part of operating cost but has not considered the foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provision of processing services 77,98,29,919 Transaction Net Margin Method (TNMM) Receipt of technical services 4,67,15,623 Purchase of office chairs 4,93,391 Comparable Uncontrolled Price Method (CUP) Purchase of audio/video conference equipment 6,11,103 CUP Reimbursement of expenses 53,87,353 Not applicable Recovery of expenses 17,68,335 Not applicable. 3.1. The TPO has made adjustment to two international transactions of the assessee which are provision of processing services and purchase of office chairs and accepted the other international transactions to be at arm s length. i) Provision of processing services and receipt of technical services As per FAR analysis, the assessee is categorized as a risk mitigated captive service provider and selected as the tested party. Transactional Net margin Method (TNMM) was considered as the most appropriate method to determine the ALP. The assessee adopted the operating profit/operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,23,904/-. 4. The assessee carried the matter before the Dispute Resolution Panel raising objections. 5. After considering the facts and the submissions and the objections of the assessee, the DRP rejected 4 out of 12 additional comparable introduced by the TPO which are Accentia Technologies Ltd., Crossdomain Solutions Ltd, Excel Infoways Ltd., and Genpact India ltd. However, the DRP did not accept assessee s contention as regards the inclusion of 4 comparables selected by the assessee which are namely: 1. Aditya Birla Minacs Worldwide ltd. 2. Allsec Technologies Ltd., 3. Maple Esolutions Ltd. 4. R Systems International Ltd. 5.1. The DRP also rejected the contentions against inclusion of 3 additional comparables out of 12 comparables namely Coral Hub Ltd, Eclerx Services Ltd., and Infosys BPO Ltd which were introduced by the TPO. The DRP further rejected the claim of rectification of operating margin of the assessee which is 17.65% instead of 13.86%. Further, benefit of working capital adjustment to accounts for differences between assessee vis-a-vis the comparables was denied. The benefit of risk adjustment was also denied. In so far as purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f comparables giving reasons extreme outlier . Considering the super normal profit and also the rejection by the TPO in A.Y. 2010-11, we do not find any error in rejection of this company. Another reason for rejecting this company is that the ratio of employee cost to turnover is only 10.02% as against assessee s employee cost of 62.83%. 3. M/s. Crossdomain Solutions Ltd This company has been rejected by the DRP on the ground that it is indulged in high skill IT services which are not comparable to the routine I.T. Enabled services. The Tribunal Hyderabad Bench in the case of M/s. Market Tools Research Pvt. Ltd in ITA No. 1811/Hyd/12 has held that this company is providing services which are in the nature of KPO. Further, the company is engaged in providing Niche services as well as developed its own brand Exdion to target the insurance industry in US. The Tribunal followed the findings of the Bangalore Bench in the case of M/s. Symphony Marketing Solutions India Pvt. Ltd. in ITA No. 1316/Bang/2012 while rejecting the issue of this company in the final set of comparables. Respectfully following the findings of the co ordinate bench, we uphold the directions of the DRP for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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