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TMI Blog2018 (4) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said international transaction. The TPO, after going into the profile of the assessee, observed that the assessee is engaged in providing back office data creation, content development and support services in relation to analysis, content search and projection for all types of businesses. Thus, he observed that the assessee is providing ITES services to its group companies and that the assessee has adopted TNMM as the most appropriate method and has arrived at its margin at 15.09% as against the margin of the comparables at 14.38% and stated that the international transaction is at Arms' Length. The TPO was however, held that the method of search process adopted by the assessee suffers from defects resulting in selection of inappropriate comparables and rejection of companies that are appropriate comparables. He therefore, rejected the TP document of the assessee and made an independent analysis under TNMM and arrived at the Arms' Length margin of the comparable at 23.91% and proposed an adjustment of Rs. 1,37,90,982 u/s 92C(3) of the I.T. Act. The TPO adopted 13 companies as final comparables. In accordance with the TPO's order, the draft assessment order was proposed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iff Tech Pvt. Ltd. 5. That on the facts and circumstances of the case, the learned AO/DRP has erred in excluding the above companies without providing any show cause notice or a reasonable opportunity of being heard to the Respondent, completely disregarding the provisions of the Act and in utter disregard to the principles of natural justice. 6. That on the facts and circumstances of the case, the learned AO/DRP has erred in excluding the companies not objected, when the Transfer Pricing Officer ["TPO"] had already examined and decided the issues based on the facts and material available on record. 7. That on the facts and the circumstances of the case and in law, the AOIDRP erred in confirming the TPO's stand of treating the provision for bad and doubtful debts and bad debts written off as non-operating expenses for the purpose of margin computation of comparable companies as selected by TPO. Inclusion of comparable companies requested by the Appellant 8. That on the facts and circumstances of the case and in law, the AO/DRP erred in confirming the rejection of following comparable companies, as rejected by the TPO: (i) R Systems International Ltd; and (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xii) Microgenetic Systems Ltd xiii) TCS E-serve Ltd 7. From these companies, we find that both the TPO and the assessee has accepted the following companies as comparable to the assessee: i) Cosmic Global Ltd ii) Informed Technologies Ltd iii) Jeevan Scientific Technologies Ltd 8. As regards the following companies, both the assessee as well as the Revenue agree that they are comparable to the assessee: i) e4e Health Care ii) Mastiff Tech P Ltd iii) Microgenetic Systems Ltd 9. The assessee's only objection was that the correct margin of the two companies i.e. e4e Healthcare and Mastiff Tech Ltd is to be adopted for comparative analysis. 10. Since both the assessee as well as the Revenue agree that these companies are comparable to the assessee, but only an adjustment to the margins to be made, we direct the TPO to consider the same as comparable after making necessary adjustments to the margins of the respective companies. 11. As far as Microgenetic Systems Ltd is concerned, it is the case of both the parties that it is comparable to the assessee, we therefore, direct the TPO to include the same in the final list of comparables. 12. As regards the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is noticed by us that the assessing officer has considered the revenue from the engineering design segment. Hon'ble ITAT, Bangalore in IT(TP)/A/1678/Bang/2012 in the case of Global E Business Operations, directed to exclude the above :- 18 -: S&P Capital IQ (India) Pvt Ltd., company by observing that 'we have considered the submission of the learned counsel for the assessee, on perusal of note no.15 of notes to accounts, which gives segmental revenue of this company, it is clear that the major source of the income for this company is from providing engineering design services and information technology services. The function performed by the engineering design services of the company cannot be considered as comparable to the ITES /BPO function performed by the assessee. The performance of the engineering design services is regarded as providing high end services amongst the BPO which require high skill whereas the services performed by the assessee are routing low end ITES function. We therefore hold that this company could not have been selected as comparable, especially when it performs engineering design services which only a knowledge processing outsourcing- (KPO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retail clients. As per the annual report, the company also provide technical services involving software testing, verification and validation of software at the time of implementation and data centre management activities, which makes the company functionally incomparable with the assessee, accordingly, we direct the assessing officer to exclude the above company from comparables". Even though, Ld. DR has argued vehemently for inclusion, we do not see any reason to include as this company is functionally different and being excluded in many cases in earlier years as well being unique in the functionality". 17. Since the facts and circumstances in the case before us are similar and the learned DR has not brought out any distinguishable factor, respectfully following the decision above, we do not see any reason to interfere with the order of the DRP/AO on these comparables. 18. As regards Jeevan Scientific Technologies Ltd is concerned, the learned Counsel for the assessee submitted that it is functionally different and also fails the ITES revenue being more than 75% filter. 19. The learned DR, however, submitted that the TPO has taken only the segmental details of the said co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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