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TMI Blog2015 (12) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, we order for the omission of this company from the list of comparables. Kirloskar Computer Services Limited (Seg.) and Mercury Outsourcing Management Ltd. - TPO is directed to include the operating profit/operating costs of the ITES segment of these companies in the final set of comparables, after due verification of the necessary figures for determination of their operating profit margin etc. benefit of deduction u/s 10A - Held that:- In the absence of any distinguishing feature having been brought to our notice by the ld. DR, respectfully following the precedent, we grant the benefit of deduction u/s 10A in respect of profits of AEGSC unit. Treating interest on short-term deposits as ‘Income from other sources’ and thereby denying the benefit of deduction u/s 10A/10B - Held that:- Tribunal has decided this issue in the assessee’s favour in earlier years by holding such interest on short-term deposits to be in the nature of `Business income’ and thereby eligible for the benefit of deduction u/s 10A/10B. - ITA No.3532/Del/2014 - - - Dated:- 15-10-2015 - SHRI R.S. SYAL, AM AND SHRI KULDIP SINGH, JM For The Assessee : Shri Nageshwar Rao, Advocate, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TNMM 5,95,75,184 5. Relocation of expenses TNMM 1,04,05,294 6. Reimbursement of expenses TNMM 1,55,552 4. The assessee follows Cost Plus business model, i.e., it charges the associated enterprises (AE) for the services on the cost plus certain mark-up. This mark-up is charged on overall total costs including all direct and indirect costs. During the year, the assessee charged mark-up of 15% for rendering the above services. The assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method to benchmark international transactions of Category-1 by choosing Profit Level Indicator (PLI) of Operating profit/Operating cost (OP/OC). Initially, it chose 13 comparable companies with their weighted average margin, calculated on the basis of multiple year data, at 15.20%. The assessee computed its own margin at 17.43% and claimed that these international transactions were at arm s length price (ALP). The AO made a reference to the TPO for determining the ALP of the international transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of functions performed by the assessee under Category-1 of the international transaction in dispute. First transaction is `Export of data processing and back office support , whose nature has been discussed in the Transfer Pricing Study Report as undertaking data management, information analysis and control management activities and providing tele-servicing and transaction processing report for export to American Express Group. The assessee receives inputs in the form of data, mainly in electronic form to undertake business processing. It exports its output to the concerned group companies worldwide. These services are primarily in the nature of I.T. enabled services. The second international transaction is Charges for CDN/CPU with the transacted value of ₹ 28.73 crore. The nature of this transaction has been given in the TP study report to mean utilization of World Wide Information Processing Telecommunication Centre at Phoenix in the USA maintained by another AE. The utilization of Consolidated Data Network (CDN) and Central Processing Unit (CPU) and Technology services is for rendering I.T. enabled services to its AEs. The next international transaction under Categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides that: The Scheme of Amalgamation ( the Scheme ) of erstwhile Nucleus and GIS (India) Ltd., the Transferor Company, with your Company was sanctioned by Hon ble High Court of Judicature of Bombay on 22nd February, 2006. On complying with the requisite formalities, the Scheme became effective and operative retrospectively from the appointed date of 1 April 2005 as per the Scheme. In the accompanying financial statements, results of the transferor company have been incorporated and the figures given herein and elsewhere in this Annual Report are not strictly comparable with those of previous year. It is clear from the above extraction that the amalgamation took place in the year in question and the financial results of this company include those of the amalgamating company as well. In our considered opinion, the factor of amalgamation or merger or acquisitions, etc., has its own implications on the financial results of a company as these are abnormal financial characteristics which distort the normal profitability. The Mumbai Bench of the Tribunal in Petro Araldite (P) Ltd. Vs. DCIT (2013) 154 TTJ (Mum) 176, has held that a company cannot be considered as comparable because o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (now known as Coral Hub Ltd.) vis- -vis the assessee, we order for the omission of this company from the list of comparables. (iii) Kirloskar Computer Services Limited (Seg.) and Mercury Outsourcing Management Ltd. 9.1. These two companies were originally included by the assessee in its list of comparables, which were eliminated by the TPO on the ground of failing turnover filter of ₹ 1 crore. The assessee is aggrieved against the exclusion of these companies. 9.2. We have heard the rival submissions and perused the relevant material on record. We find that the TPO has accepted the functional comparability of these companies on segmental level. The ld. DR was also fair enough to candidly accept the functional similarity of the relevant segment of these companies. In such circumstances, the question arises as to whether the relevant segment of these companies can be excluded from the list of comparables merely on the ground that the revenue from this segment is very limited? In our considered opinion, the quantum of turnover can be no reason for the exclusion of a company, which is otherwise comparable. The Hon ble jurisdictional High Court in the case of Chr ..... 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