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TMI Blog2010 (2) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... objections to the proposed adjustments by the Ld. TPO, the appellant was provided with the computer print-out titled Transfer Pricing Revenue Financial Analysis of comparable ITEs companies . These statements were provided to its representative, Nilesh Dedania, C.A. from Bansi S. Mehta Co., when he attended personally on Dec. 19, 2006. After having examined the said statements, its representative visited the office of the Ld. TPO on Dec. 21,2006 when he was informed that the Ld. TPO has already passed the order and disposed of the matter. Appellant s representative was thus precluded from providing the response to the financial analysis of different companies handed over by the TPO on Dec. 19,2006. Pursuant to TPO s order u/s. 92CA(3), a show cause notice was issued by AO dt. 21.12.2006 asking the appellant to explain as to why an adjustment of ₹ 6.73 crores to the value of international transactions for providing IT Enabled services should not be done. In response to this, the appellant filed a letter dt. 22.12.2006 objecting the additions made by TPO. However, the AO passed an order by simply following the TPO s order and without considering the submissions made p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represent the arithmetic average of comparable uncontrolled rates. A member company provides billing rates on their website. These details are available on public domain. It is found that these rates are in the same range as NASSCOM rates regardless of the technological segment. Information on internal CUPs are available in some cases which also fall into the same range. Besides, and more importantly, the data on specific companies billing rates is also made available by the appellant as part of the report submitted by Batliwala Karani Securities (I) Pvt. Ltd in July, 2003. I have noted the fact that the data of specific companies which are engaged predominantly in the voice based service sector and which are large publicly known companies like Spectra mind, source show the billing rate in the range of US$ 10 to 13 per hour, the appellant s effective rate is US$ 13.09 per hour which is well within that range. I have also noted that this is the first year of operation of the appellant and I find force in the argument of the appellant that a call center which deals with third parties would normally not break even in the first year of operation whereas the appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by the service provider. This includes costs in relation in investment in certain assets, maintenance thereof and finance costs towards the advances provided to the appellant. The appellant has also quantified savings in its advertisement costs on account of the fact that it has assured business with its AERs. Based on these facts, the appellant submits that it is justified in charging low price to its AEs as compared to the price which one may charge in a third party situation. The appellant has provided detailed quantification of each of these costs/savings and has contended that the ratio of operating profits before depreciation, interest and tax to the total cost would be around 45.9% if these adjustments are taken into account and that the said ratio would be 18.54% without carrying out these adjustments. Based on these profitability ratios, I am of the considered view that even independent of the CUP method followed by the appellant the company has generated reasonable amount of profits. As a result of the above, this ground of appeal stands allowed and addition made of ₹ 6.73 crores by making adjustments u/s. 92 is deleted. 8. Aggrieved, revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The TPO has determined the arm s length price on the basis of TNMM after having unsustainably brushed aside the CUP method. Having done that, the appellant submits that the companies selected by the Ld. TPO are in a completely different set of ITES industry segment. The various information gathered by the appellant from the public domain suggests that these companies are not involved at all in the voice based services. These companies are engaged in activities like Animation Software, Image process, Photogrammetry, Remote Sensing, Mechanical CAD and animation services, Data Conversion services etc. Apart from this, the appellant found that one of these companies namely Mapro Industries Ltd. selected by the Ld. TPO has significant business in relation to Gas Division and the margins of the company adopted by the Ld. TPO are the margins of the ITES and the Gas division on a consolidated basis. The appellant reiterate that none of the companies selected by the Ld. TPO are from voice based BPO Sector at all and, therefore, the question of comparing the margins earned by them with the margins earned by us cannot arise on any rationale basis. The appellant submits that the indu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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