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TMI Blog2018 (1) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act). 2. Following grounds have been raised in this appeal: "1. On the facts and in the circumstances of the case and in law, the assessment order passed by the Learned Assessing Officer ('Ld. AO') is bad in law. 2. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer ('Ld. TPO') erred in giving effect to the directions of the Hon'ble DRP ('Ld. DRP') on findings which are erroneous in law, contrary to the facts and based on mere conjectures and surmises. 3. On the facts and in the circumstances of the case and in law, the Ld. DRP, without giving any cogent reasons, erred in characterizing the provision of engineering design services ('EDS') by the Appellant as that of information technology enabled services ('ITeS') without appreciating the fact that the Appellant is a service provider involved in the provision of EDS. 4. Without prejudice to the above, the Ld. AO/Ld. TPO based on directions from the Hon'ble DRP erred in enhancing the income of the Appellant by INR 22,983,602 holding that the international transaction of the Appellant pertaining to provision of EDS does not satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss/ commercial reality by not allowing a risk adjustment to the Appellant; 4.12. The Id. AO/ Id. TPO erred in rejecting the additional comparables provided by the Appellant even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed. 5. On the facts and in the circumstances of the case and in law, the Ld. DRP erred in proposing to initiate penalty proceedings under section 271(l)(c) of the Act for concealment of particulars of income and for furnishing inaccurate particulars thereof. 6. The Ld. DRP has grossly erred on facts and in law by proposing to compute interest under sections 234A, 234B, and 234C of the Act mechanically and without recording any satisfactory reasons for the same. Further, the return of income has been filed duly on 29/11/2012; hence the interest under section 234A is not valid in law. The Appellant prays that appropriate relief be granted. The above grounds are mutually exclusive and are without prejudice to each other. The appellant craves leave to add, amend, alter, vary, omit, substitute, withdraw, modify or delete all or any of the Grounds of Appeal herein or submit such further objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The TPO rejected 3 comparables selected by the assessee and retained 4 in the final set of following 14 comparables: S. No. Company's Name Average OP/TC 1 Accentia Technologies Ltd. 11.95% 2 Acropetal Technologies Limited (Engineering Design Service) 18.30% 3 B N R Udyog Ltd. 40.62% 4 Cades Digitech Private Limited 1.52% 5 e4e Healthcare Services Private Limited 19.85% 6 Eclerx Services Ltd. 58.40% 7 Geometric Ltd. -0.02% 8 Informed Technologies India Ltd. 19.11% 9 Infosys BPO Ltd. 36.75% 10 Jindal Intellicom Ltd. 0.25% 11 Microgenetic Systems Ltd 6.38% 12 R Systems International Ltd -0.46% 13 T C S E- Serve Ltd. 63.69% 14 Tata Elxsi Limited 9.15% Average 20.39% 6. The TPO in determining the adjustment to the transfer price of the assessee denied necessity of appropriate working capital adjustment to the margins of the comparables on the ground that the assessee did not demonstrate any need for working capital adjustment when the interest part was considered as non-operative. He also denied the benefit of risk adjustment. Finally, the TPO considered the average mark-up on cost of 20.39% as compared to 11.37% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of engineering and design and related service" with certain directions. The relevant findings have been given in paras 9 to 19 of the aforesaid order dated 22.08.2017 which read as under: "9. We are disinclined to accept this contention advanced by the ld. DR for the obvious reason that the TPO himself declined to accept this contention and classified the assessee's services as IT enabled services. Once the TPO has treated the nature of services rendered by the assessee as 'I.T. enabled' and the assessee has not objected to the same in the appeal before the Tribunal, the ld. DR cannot be allowed to set up a new case contrary to what was done by the TPO by claiming that the nature of services should be altered at this stage for evaluation of comparable companies in dispute. We will, therefore, confine ourselves in considering the comparability or otherwise of the companies in challenge before us by treating the assessee as rendering 'I.T. enabled services', as was done by the TPO. 10. Now, we will take up four companies, one by one, to see whether or not these are comparable. At this juncture, it is relevant to mention that the nature of activity carried out by the assessee dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing year, we order for the exclusion of this company from the list of comparables. (ii) Eclerx Services Ltd. 12. The TPO included this company in the list of comparables on the same basis as was done for the preceding year. The Tribunal order for the immediately preceding assessment year has discussed the functional profile of this company. After discussion, the Tribunal has come to hold that this company is functionally different. 13. We have gone through the Annual report of this company, a copy of which has been placed on record. Profit & Loss Account of this company shows 'Income from operations' at ₹ 3419.11 million. The Director's report indicates that this company is rendering Financial as well as Sales & Marketing services. Income from both these services has been clubbed. Such services include Trade processing support, Reference data maintenance, Contract risk review, Reconciliation and controls, Margin and exposure management, Metrics and reporting, Expenses management, Accounting and finance, Consulting services, Online operations & Web analytics, CRM & business intelligence, Data management & Reporting, Competitor benchmarking & Pricing, Quality & complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal, in an appeal by the assessee, has directed to exclude this company in its order for the immediately preceding year. The principal activities of this company have been set out on page 25 of its Annual report for the year, which are as under:- "1. Background and principal activities TCS eserve International Limited is engaged in the business of providing Information Technology15 Enabled Services (ITES)/Business Process Outsourcing (BPO) services, primarily to Citigroup entities globally. The Company's operations broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving the processing, collections, customer care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities." 18. It can be seen that similar activities were done by this company in the preceding year as well. Since the nature of activities carried out by this company for both the years are similar and the Tribunal, for the immed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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