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TMI Blog2017 (11) TMI 1724X X X X Extracts X X X X X X X X Extracts X X X X ..... ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER For the Appellant : Shri Neeraj Jain, Adv., Ms. Deepika Agarwal, CA For the Respondent : Shri Amrendra Kumar, CIT(DR) ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 22.01.2016 passed u/s 144C(13) r.w.s. 143(3) of the I.T. Act, 1961 for the assessment year 2011-12. 2. Facts of the case, in brief, are that the assessee is a company incorporated on 19.03.2004 and is wholly owned subsidiary of Omniglobe International LLC, USA, which is engaged in the provision of BPO/Data Processing Services to its AE. It also provides IT Enabled services relating to phone activation and local number portability to various clients for and on behalf of its parent company. It filed its return of income on 20.09.2011 declaring Nil income. The Assessing Officer referred the matter to the TPO for determination of arm's length price of the international transactions entered into by the assessee company. The TPO observed that the assessee has entered into the following international transactions during the year :- Nature of international transaction Method selected Amount (In INR) Data Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Limited Retained 71.99% 8. Professional Management Consultants Included 4.29% Average 26.24% 6. Accordingly, the Assessing Officer determined the arm's length price of the international transactions related to the provision of IT Enabled Services at ₹ 39,26,22,701/- as against ₹ 33,98,09,045/- determined by the assessee and made an upward adjustment of ₹ 5,28,13,656/-. Since the DRP had directed that the adjustment cannot exceed the margin retained by the AE which is ₹ 90,63,995/-, the Assessing Officer, therefore, restricted the proposed adjustment to ₹ 90,63,995/-. 7. Aggrieved with such order of the Assessing Officer, the assessee is in appeal before the Tribunal by raising the following grounds :- "1. That the assessing officer erred on facts and in law in completing assessment under section 144C read with section 143(3) of the Income-tax Act, 1961 ('the Act') at an income of ₹ 3,43,34,318 as against income of ₹ 2,52,70,318 returned by the appellant. 2. That the assessing officer erred on facts and in law in making an adjustment of ₹ 90,63,995 allegedly on account of difference in the arm's length price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on facts and in law in levying interest under Section 2348 and Section 234C of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal." 8. Ground no.1 and 2 being general in nature are dismissed. 9. Ld. counsel for the assessee did not press ground no.2.1 and 2.2 for which the ld. DR has no objection. Accordingly the same are dismissed. 10. So far as the remaining grounds are concerned, they relate to selection of certain comparables which according to the assessee are not comparable companies. Although, the assessee has challenged the selection of number of comparables, however, his argument was restricted to three comparables namely, Accentia Technologies Limited, TCS E-Serve Ltd. and Infosys BPO Limited, since the DRP has already directed to exclude Eclerx Services Limited, Acropetal Technologies Ltd.. 11. So far as Accentia Technologies Limited is concerned, the ld. counsel for the assessee submitted that no segmental details are available in case of Accentia Technologies Limited. For this proposition, he referred to the decision of the Tribunal in the case of Equant Solutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffered 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. There is no bifurcation available in respect of the revenues of this company from Transaction processing and Technical services. In the absence of the availability of any such segregation of the total revenue of this company, it is not possible to separately consider its profitability from rendering of 'Transaction processing services'. He submitted that this company exploits the brand 'TATA' and therefore, enjoys the goodwill and recognition associated with the said brand leading to higher volume of business and/or premium pricing. Companies owning/exploiting intangibles such as brand etc. cannot be compared with a routine captive service provider such as the assessee. Further, TCS E-Serve Ltd. was excluded by the DRP in assessment year 2012-13 on account of functional dissimilarity and having significant intangibles. 13. Referring to various decisions as given in the Paper Book, he submitted that this company was excluded due to absence of segmental data and holding of si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of Goodwill. The Co-ordinate Benches of the Tribunal are taking the consistent view that in absence of non-availability of segmental data Accentia Technologies Ltd. cannot be considered as a good comparable. Further, the Co-ordinate Benches of the Tribunal have also rejected this company from the list of comparables on account of functional dissimilarity, since this company provides service to healthcare industry in the nature of medical transcription, medical coding, billing and receivable management etc. and the company is also engaged in the business of providing KPO services. Further, this company also owns proprietary software products such as instacare, instascribe, instaweb etc.. We, therefore, find merit in the submissions of the ld. counsel for the assessee that this company should be excluded from the list of comparables. We accordingly direct the Assessing Officer/TPO to exclude this company from the list of comparables. 19. So far as the TCS E-Serve Limited is concerned, we find the DRP in assessee's own case for assessment year 2012-13 has excluded this company from the list of comparables on account of functional dissimilarity and having significant inta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (supra) has directed the exclusion of Infosys BPO Ltd. on the ground that it is engaged in high end integrated services and, therefore, it is functionally dissimilar. It is further held that Infosys brand undisputedly is a huge brand and definitely result of this brand goes to this comparable. Therefore, the brand of Infosys definitely results in earning higher profits. It was accordingly directed to be excluded from the list of comparables. We further find the Co-ordinate Benches of the Tribunal have also directed to exclude Infosys BPO Ltd. from the list of comparables on account of significant intangibles on brand value and functional dissimilarity. Such decisions are given by the assessee in the Paper Book to support his case. We, therefore, direct the Assessing Officer/TPO to exclude Infosys BPO Ltd. from the list of comparables. 22. The ld. counsel for the assessee submitted that if these three comparables are excluded from the list of comparables, the average margin of the OP/OC of the comparables comes to 11.60% as against 8.63% margin declared by the assessee and the assessee falls within +/-5%. The TPO is accordingly directed to verify the same and pass appropriate o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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