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TMI Blog2017 (7) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. In fact, in para 9 of the order of DRP, distinction between market research agency and an IT-enabled service provider under the Service Tax Rules has also been tabulated which clearly shows that the two are incomparable. Therefore, under these circumstances, the TPO was clearly in error in benchmarking the ‘international transactions’ entered by the assessee on account of market research services with the concerns which were engaged in providing ITE services, since the two activities were incomparable. A concern involved in rendering of ITE services cannot be compared with a concern which is rendering market research services, as is the case of the assessee. Therefore, insofar as the issue relating to characterisation of assessee’s functions are concerned, we find no error on the part of DRP in upholding the stand of assessee that the TPO erroneously considered it as an ITE service provider. Disallowance of proportionate interest - Held that:- As in the past years, namely, Assessment Years 2004-05 and 2005-06, in a consolidated order passed by the Tribunal stand of assessee has been upheld that no addition can be made on account of notional interest in the valuation of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand the dispute can be summarized as follows. The assessee is a company incorporated under the provisions of Companies Act, 1956 and is engaged in rendering market research services for its customers. Almost entire shareholding of the assessee-company is held by M/s. Synovate (Holding) Ltd., which in-turn, is a subsidiary of Aegis Group Plc., UK. Aegis Group Plc., UK has two divisions, namely, Aegis Media, which is in the field of independent media communications network and the second division is M/s. Synovate, which is globally in the field of market research. During the assessment year under consideration, assessee rendered market research services both to its associated enterprises as well as to non-associated enterprises. Notably, assessee had also availed of market research services from its associated enterprises. As assessee had carried out international transactions with its associated enterprises within the meaning of Sec. 92B of the Act, the income arising from such international transactions was required to be computed having regard to their arm s length price as per the mandate of Sec. 92(1) of the Act. In its Transfer Pricing Study report, assessee-company benchm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the TPO, but also on the basis of certain documents furnished as additional evidence before the DRP. It is emerging from the order of DRP that such additional evidences were sent to the TPO for his response and after considering the response thereof, the DRP held that benchmarking analysis undertaken by the TPO characterising the assessee-company as an ITE service provider was erroneous. Instead, the DRP upheld the stand of assessee that its activities are required to be characterised as a market research service provider. After upholding the stand of assessee on the issue of characterisation of its activities, the benchmarking analysis carried out by the assessee by using internal TNMM comparable was also found acceptable by the DRP and in this manner it was directed that no addition was required to be made to the stated value of international transactions in order to arrive at its arm s length price. 5. Before us, Revenue has assailed the aforesaid stand of DRP on the basis of the abovestated Grounds of appeal. A perusal of the Grounds filed by the Revenue reveal that the essential grievance of Revenue is that a substantial chunk of work carried out by the assessee inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an activity whereby certain processes are outsourced, which are enabled with the help of information technology. In fact, the CBDT in its Circular no. SO 890(E) dated 26.9.2000 enumerates the Information Technology enabled products or services as Back office operations; Call centres; Content development or Animation; Data Processing; Engineering and Design; Geographical Information System services; Human Resources services; Insurance claim processing; Legal database; Medical transcription; Pay roll accounting; Support centres; Website services, etc. It is quite clear that the ITE services involve a predominant use of technology to achieve the desired output. The illustrative list of activities brought out by CBDT clearly show that ITE services involve routine human tasks which are carried out more and more by use of technology on the part of human resources. In contrast, if we were to compare such like services with the activities of a market research service provider, it would be evident that in market research, output is the product of collecting, collating and analysing of information/data, which may involve use of technology, whereas in the case of ITE services, rendering of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 3. The AO/TPO/DRP erred in law and facts in holding Acropetal Technologies (Seg.) which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 4. The AO/TPO/DRP erred in law and facts in holding Aditya Birla Minacs Worldwide which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 5. The AO/TPO/DRP erred in law and facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 11. The AO/TPO/DRP erred in law and facts in holding e4e Healthcare Solutions Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 12. The AO/TPO/DRP erred in law and facts in holding Eclerx Services Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 13. The AO/TPO/DRP erred in law and facts in holding Genesys International Corporation Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 20. The AO/TPO/DRP erred in law and facts in holding Spanco Ltd (Seg.) which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 21. The AO/TPO/DRP erred in law and facts in holding Triton Corp Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets Risks (FAR) are substantially different from the appellant. 22. The AO/TPO/DRP erred in law and facts in holding Wipro Ltd (Seg.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in ITA No. 6572/Mum/2012 for Assessment Year 2008-09 also. 13. Consequent to our aforesaid decision, in the present year, the matter of determination of arm s length price of international transactions of rendering market research services is restored back to the file of TPO/Assessing Officer in order to enable the Assessing Officer to verify the computation of arm s length price determined by the assessee in the same manner as was upheld by the DRP in Assessment Year 2009-10. Notably, in Assessment Year 2009-10, the DRP, after accepting the classification of assessee as a market research service provider, accepted the benchmark analysis carried out by assessee on the basis of internal TNM method. Notably, this aspect of the decision of DRP for Assessment Year 2009-10 has not been challenged by the Revenue in the Grounds of appeal for Assessment Year 2009-10, which is revealed from the earlier paras of this order. Therefore, in order to ensure uniformity in the approach of determination of arm s length price, the issue in this year is being restored back to the file of TPO/Assessing Officer to verify as to whether the computation of arm s length price by the assessee is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer denied the claim of deduction u/s 80G of the Act. It was pointed out that at pg. 609 of the Paper Book is placed a copy of donation receipt evidencing payment of donation of ₹ 5,40,750/- to an entity which was recognized u/s 80G of the Act. Therefore, according to assessee, the claim of deduction u/s 80G of the Act to the extent of ₹ 2,70,375/- was quite justified. 18. The ld. DR appearing for the Revenue has not contested the factual matrix brought out by the learned representative for the assessee. 19. In our considered opinion, it would be in the fitness of things that the Assessing Officer verifies and allows the claim of assessee for deduction u/s 80G of the Act, having regard to the donation receipt, a copy of which has also been placed in the Paper Book at pg. 609. Thus, on this aspect, assessee succeeds for statistical purposes. 20. Insofar as Ground of appeal no. 27 is concerned, same is consequential in nature and does not require any specific adjudication. 21. The last ground relates to initiation of penalty u/s 271(1)(c) of the Act, which is premature and is dismissed. 22. Resultantly, whereas appeal of Revenue for Assessment Year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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