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TMI Blog2017 (9) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... e, at a markup. Further, in the case of Kirby Building Systems India Ltd [2014 (11) TMI 728 - ITAT HYDERABAD], the issue was of cost sharing exercise in implementing ERP systems in the group and ITAT held that it involves services by the said company, but in the case of the assessee, it is pure reimbursement of expenses incurred by the assessee and no service element is involved. Thus, DRP’s reliance on the said decision is clearly misplaced. Assessee’s ground of appeal is allowed and the AO/TPO is directed to treat the transaction to be at ALP and adjustment to be made at Rs. Nil. - ITA No.238/Hyd/2016 And ITA No.257/Hyd/2016 - - - Dated:- 7-7-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For The Assessee : Shri Pradeep Kasthala For The Revenue : Smt. U. Mini Chandran, DR ORDER Per Smt. P. Madhavi Devi, J.M. Both are cross appeals for the A.Y for the A.Y 2011-12 filed by the assessee as well as the Revenue against the assessment order passed u/s 143(3) r.w.s. 144C(5) of the Act. Let us deal with assessee s appeal first. ITA No.238/Hyd/2016 The assessee has raised the following grounds of appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ALP was referred to the TPO u/s 92CA of the Act. The TPO passed an order u/s 92CA(3) of the Act on 13.09.2014 suggesting an adjustment of ₹ 5,74,92,775. In accordance with the same, the draft assessment order was passed against which the assessee preferred its objections before the DRP. The DRP granted partial relief to the assessee. Against the relief granted by the DRP, the Revenue is in appeal before us, while against the adjustment confirmed by the DRP, the assessee is in appeal before us. 4. In the assessee s appeal, Ground No.2 is against including Accentia Technologies Ltd as a comparable company. In its TP study, the assessee had reported provision of ITES and recovery of expenses as international transactions and determined the ALP under TNMM and CUP methods respectively. The TPO however, rejected the TP study of the assessee holding that its search process suffered from defects. He undertook an independent analysis by aggregating both the transactions under TNMM. The TPO selected 13 companies as comparable to the assessee and arrived at the arithmetic mean margin of 26.51%. On issuance of a show-cause notice, the assessee objected to the comparables selecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnologies Ltd before the DRP. In support of his contention that the said company, Accentia Technologies Ltd, should be excluded as it is a KPO service provider, the learned Counsel for the assessee placed reliance upon the decision of the ITAT Bangalore Bench in the case of Swiss Re Shared Services (India) (P.) Ltd.v. Assistant Commissioner of Income-tax, Circle-6 (1) (2), Bangalore reported in (2016) 76 Taxmann.com 22. 7. The learned DR, on the other hand, supported the orders of the authorities below and submitted that the assessee is also into high end KPO services and therefore, the TPO has rightly taken Accentia Technologies Ltd as a comparable to the assessee. 8. Having regard to the rival contentions and the material on record, we find that both the TPO as well as the DRP have held the assessee also to be a KPO and have not disputed that the Accentia Technologies Ltd is a KPO. However, as regards the intangible assets such as brands/IPRs owned by Accentia Technologies as against the assessee, which does not own any brands/IPRs, both the TPO as well as DRP have been silent. As regards the assessee s argument of not owning any intangible assets is concerned, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, and after going through the P L A/c of the comparable Microgenetics Systems Ltd and particularly Schedule-F thereof placed in Paper Book filed by the assessee relating to production expenses, we find that during the relevant previous year the assessee has incurred ₹ 22,03,823 towards medical transcription charges. Though, it is not 23% of the expenses incurred by the assessee as observed by the DRP, the payments were for outsourcing of the activity and hence is involved in a different functional model as compared to the assessee. In view of the same, we do not find any reason to interfere with the direction of the DRP. Thus, assessee s ground of appeal No.5 is rejected. 12. As regards Ground No.6, this issue relates to the international transaction of recovery of expenses to the tune of ₹ 15,76,541. The assessee submitted that the recoveries are at cost on the basis of actual payment to 3rd party service providers, such as hotel and travel agencies and that the third party service provider invoices can be a CUP and hence the book values of the said transactions have been taken as representation of the ALP. The TPO however, held that the receipt of reimbursement h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reimbursement of expenses are excessive and therefore, at a markup. Further, in the case of Kirby Building Systems India Ltd, the issue was of cost sharing exercise in implementing ERP systems in the group and ITAT held that it involves services by the said company, but in the case of the assessee, it is pure reimbursement of expenses incurred by the assessee and no service element is involved. Thus, DRP s reliance on the said decision is clearly misplaced. In view of the same, the assessee s ground of appeal No.6 is allowed and the AO/TPO is directed to treat the transaction to be at ALP and adjustment to be made at Rs. Nil. 15. In the result, assessee s appeal is partly allowed. ITA No.257/Hyd/2016-Revenue s Appeal 16. As regards Revenue s appeal, we find that the Revenue has raised the following grounds of appeal: 1. That the Ld. DRP erred in directing to exclude Infosys BPO Ltd from the list of comparables selected by the TPO without appreciating that Rule 10B(2) does not permit such exclusion. 2. That the Ld.DRP erred in directing to include ICRA online ltd in the list of comparables selected by the TPO on the ground that the TPO of Bangaluru has s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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