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TMI Blog2015 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... p the issue relating to admission of additional grounds. Such additional grounds are reproduced hereunder: "29. The transfer pricing adjustment calculated by the Learned Transfer Pricing Officer ("TPO") was based on factually incorrect profit and loss account segmentation of the of the Appellant, which was discovered during the assessment proceedings for Assessment Year 2008-09 and also accepted by the Ld. TPO for the relevant previous year. The error was on account of non-allocation of Head Office expenses such as bank charges, Professional Charges, Audit Fees, Rent, Electricity, Telephone, Internet, Conveyance; and Shared Service costs like HR & Admin, IT, Finance & Management to the packaging segment earlier. The mark-up on total cost for Software and Information Technology enabled services segments, based on corrected profit and loss account segmentation is 22.62% each for the financial year 2006-07. 30. The learned A.O be directed to recomputed the allowance of claim u/s. 10A of the appellant having regard to the revised and correct segmental margins of the appellant." 4. In so far as the additional ground no. 29 is concerned, it is not disputed by the Revenue that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The taxpayers AR Sri Supratim Mukherjee, appeared on behalf of the taxpayer on 26.8.2013 and was heard. In this case, the TPO had in the TP order dated 18.01.2013, considered the segmental results furnished in the TP documentation, and not the revised segmental results furnished by the taxpayer later, as it was seen that no basis/evidences in support of the allocation of expenses the revised segmental financials, were furnished by the taxpayer". 11. We are therefore, of the opinion that the directions of the DRP has not been properly considered by the lower authorities. If the assessee's claim for revised segmental results are found to be acceptable, there is every possibility that pricing of its international transactions would come within +/- 5% of the PLI worked out by the TPO himself. Then the issue regarding exclusion and/or inclusion of comparables may not arise at all. We therefore, set aside the orders of the authorities below and remit the issue back to the file of the AO/TPO for consideration afresh in accordance with law. Right of the assessee to challenge all other aspects of the assessment and conditions are kept open. In the result, ground no. 1 of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in assessee's own case for A.Y. 2009-10, had directed the TPO to consider the revised segmental results, after verification. Accordingly, for impugned year also, we direct the AO/TPO to redo the analysis considering the segments, including the allocated HO expenditure between various segments, and proceed in accordance with law. 11. Vis-à-vis the ITES segment, Ld. AR submitted that though allocation of HO expenditure would have a bearing on the PLI of the assessee, the comparables considered by the TPO. were inappropriate. According to him, out of the 28 comparables considered by the TPO M/s. Eclerx Services Ltd, Mold-Tek Technologies Ltd. (Seg), and Vishal Information Technologies Ltd, were required to be excluded by virtue of the decision of Hyderabad Bench of this Tribunal in the case of Capital IQ Information Systems (India) (P.) Ltd. v. Dy. CIT (ITA No.1961/Hyd/2011, Dated:- 23-11-2012). 12. Per contra Ld. DR submitted that out of the above three companies for which the assessee was seeking exclusion, Mold-Tek Technologies Ltd (seg) and Vishal Information Technologies Ltd, were in assessee's list and hence could not be considered for exclusion now. 13. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om raising a claim just because it had included a comparable by error of understanding of facts, would in our opinion be unfair. 15. For seeking exclusion of these three companies mentioned above, assessee has placed reliance on the decision of Hyderabad Bench of this Tribunal in Capital IQ Information Systems India (P.) Ltd's case (supra ), which was also for the very same assessment year. The said company was also providing ITES service and while considering the said segment, this Tribunal had held as under at paras 14 and 15 of its order dt 23.11.2012 : "Eclerx Services Ltd: 14. The assessee has objected for this company being taken as comparable mainly on the ground that it was having a supernormal profit of 89%, and as such it cannot be taken as a comparable in view of the decision of the Mumbai Bench for the tribunal in the case M/s. Teva India Ltd. (supra ). That apart, relying upon the annual report of the company, the learned Authorised Representative for the assessee has contended that the concerned company is engaged in providing knowledge Process Outsourcing (KPO) Services. 15. On considering the objections of the assessee in relation to this company, we accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DCIT - 2011-TII-28-ITAT-MUM-TP. 13. On careful consideration of the submissions of the assessee we find that the DRP, as already stated earlier, in the proceedings for the assessment year 2008-09 has accepted the assessee's contention that this company cannot be treated as comparable because of exceptional financial result due to merger/de-merger. In view of the aforesaid, we accept the assessee's contention that this company cannot be treated as comparable. That apart, it is also a fact that this company has shown super normal profit working out to 113%. The Income-tax Appellate Tribunal, Mumbai Bench in the case of Teva India Pvt. Ltd. (supra ) has observed that companies showing supernormal profit cannot be treated as comparable. The relevant observations of the Tribunal in that case are extracted hereunder for convenience- 32. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that although a detail submission was made on behalf of the assessee before the learned CIT(A) on the basis of FAR analysis to show that the selection of M/s. Vimta Labs as comparable is not justified, the learned CIT(A) has not accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for the assessment year 2008- 09 in assessee's own case, after taking note of the composition of the vendor payments of Coral Hub for the last three years, and the fact that it has also commenced a new line of business of Printing on Demand(POD), wherein it prints upon clients request, concluded as follows- "18.4. In view of this major difference in functionality and the business model, this Panel is of the view that 'Coral Hub' is not a suitable comparable to the taxpayer and hence needs to be dropped form the final list of comparables." In case of ACIT v. M/s. Maersk Global Service Centre (supra ), the ITAT Mumbai Bench has also directed for exclusion of the aforesaid company, by observing in the following manner- "Insofar as the cases of Tulsyan Technologies Limited and Vishal Information Technologies Limited are concerned, it is noticed from their annual accounts that these companies outsourced a considerable portion of their business. As the assessee carried out entire operations by itself, in our considered opinion, these two cases were rightly excluded." In view of the observations made by the DRP as well as the decision of the ITAT Mumbai in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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