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TMI Blog2018 (11) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... Direction of The Learned Dipsute Resolution Panel for determining Arm s Length Price u/s. 92CA(3) of the Act by the Ld. Transfer Pricing Officer (TPO) vide order dated 29.1.2014 which became the subject matter of the directions before the Ld. Dispute Resolution Panel (DRP)-II, New Delhi vide order dated 14.11.2014. Consequently, the assessment was passed at ₹ 1,36,42,883/- against the returned income of ₹ 8,046/-. The assessee though has filed 07 grounds of appeal, however, has agitated the issue of i. inclusion of Foreign Exchange Fluctuation as Operating income while determining Profit Level Indicator (PLI); ii. grant of working capital adjustment and iii. Dispute with inclusion and exclusion of the comparables. 02 The Assessee is a company engaged in the business of rendering IT enabled services ( ITES) in the nature of data management services (i.e. data management services, data collection, organization, validation, analysis and filtering of accounts) and call center services to its overseas associated enterprise ( AE) . The return of income was filed on 15.10.2010 declaring income of ₹ 8,046/-. The AO noted that assessee has entered into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erforms the following function: The term and conditions for collection are pre-set by HFO Ireland and Validor India Communications such terms to the debtors. The feedback received from the debtors is communicated to HFO Ireland. HFO Ireland depending on the feedback received from the debtors and its internal terms and conditions for debt collection communicates its decision on the amount of settlement to Validor India. The decision / approval of HFO Ireland for the settlement are communicated to the debtors. On acceptance, the debtor directly pays the amount to the account of HFO Ireland outside India and no payments are received in the Indian accounts or by Validor India. Post payment, Vatidor India updates its records for collection of the doubtful debt/non-performing asset. Trace/Issues: Any issues relating to bankruptcy, medical urgency of the debtor is fed into the system to update the account records. c) Infrastructure services Validor India renders certain IT infrastructure support services to HFO Ireland. The functions performed by this division essentially entail the following. 1. Technical support services 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO is that it does not have any bearing upon the transactions which has already been undertaken. The main contention of the assessee before the Ld. DRP with respect to this aspect was also rejected vide para no. 16 of the order of the Ld. DRP. The Ld. DRP relying upon the Safe Habour Rules issued on 18.9.2013 where the foreign exchange gain or loss was not included as operating income upheld the action of the Ld. TPO. 06 The Ld. AR submitted that this issue has now been covered in favor of the assessee by the decision of the Hon ble Delhi High Court in the case of Assessee in Rampgreen Solutions Pvt. Ltd cs. CIT 234 Taxman 573 (Delhi). He further stated that in Pr. CIT vs. Ameriprise India (P) ltd in ITA No. 461/2016 vide order dated 19.10.2016 this issue is also decided in favour of the assessee. 07 The Ld. DR relied on Safe Harbour Rules and the orders of the lower authorities. 08 We have carefully considered the rival contentions and hold that foreign exchange gain by the assessee is on account of export of services. Therefore, the same is part of the operating income of the assessee. This issue has already been decided by the Hon ble Delhi High Court in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of the Coordinate Benches it has been held that if the assessee furnishes the quarterly published results of this company then the same may be included for the reason that it is functional similar to the assessee. Ld. DR also accepted the above proposition. And stated that if the assessee produces the authentic and reliable information with respect to the relevant quarters and if the result can be co-related for the financial year then the same may be considered for comparability anaylsis. 14 We have carefully considered the rival contentions and also find that if the R Systems International Ltd. is functionally comparable, it should not be excluded merely for the reasons of that company following different accounting period, if the reliable and authentic data is available with respect to missing quarters . In the present case if the assessee submits reliable and authentic data of the relevant quarters to reconstruct the results of that comparable for the financial year similar to the accounting year of the assessee, then the same should be considered for comparability analysis. Accordingly, this comparable is directed to be included provided assessee submits the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive from 1.4.2008 and therefore, FY 2010-11 is the second year of operation. Looking to the revenues stream also as per Schedule-8 of the Balance Sheet there is no change in the Revenues streams of the comparable company for in 31.3.2009 and 31.3.2010. Therefore, on reading of Note No. 10B placed at page no. 571 of the Paper Book as financial results of the company are impacted for FY 2008-09 relevant to AY 2009-10, but there is no impact of financial results during the year ( AY 2010-11 ) of any extraordinary events. Therefore, on this ground this company cannot be excluded as comparable. The functions of the assessee stated that page no. 195 of the PB as per Transfer Pricing Study Report are also the data collection, data organization, data validation and filtering of accounts. In view of this, it cannot be said that Accential Technologies Pvt. Ltd. is performing any function, which is dissimilar to the assessee company. We have also perused the decision of the Hon ble Delhi High Court in the case of Pr. CIT vs. Ameriprise India (P) Ltd. the main reasons for dismissing the appeal of the Revenue is that the order of the Tribunal dealeing with 03 comparables was not found reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee objected the inclusion stating that its functions are different. The Ld. DRP rejected the contention of the assessee and held that functional similarity are there and exceptional events are not relevant as it was taken over by TCS in the earlier year and not in this year. 21 The Ld. AR vehemently stated that TCS E Serve Ltd is not functionally comparable as it is engaged in providing of business process outsourcing services along with ITES services and also providing technical services involving software testing, verification and validation of software for implementation and Data Centre Management activities. It also has Tata Brand and Software License of ₹ 24.30 Crores. It was further stated that there is no segmental accounting is available. 22 The Ld. DR supported the orders of the TPO and DRP. 23 We have carefully consider the rival contentions and also perused the balance sheet of TCS E-serve Ltd. Submitted at page no. 693 to 735 of the Paper Book for the year ended on 31.3.2010. The functions shown by the company are at Schedule-O which shows that the company is engaged in IT enable service and BPO services. It is also engaged in technical services of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionally comparable but is now cannot be prayed for exclusion. 28 We have carefully considered the rivals contentions and also perused the balance sheet of the company at page no. 1 to 582 of the Paper Book. According to the Annual Accounts the company it provides the Business Process Management Services and further is wholly owned and controlled subsidiary of Infosys , which has a huge Brand. Therefore, it has a different asset basis. At page no. 607 the Segmental Analysis of the company is also perused. The segments of the company prepared on the basis of customers related to a particular industry and not according to the functions. On perusal of the fixed assets, it has a huge goodwill and further being the subsidiary of software Giant Infosys assets used were also different. The company derives its revenue from business process management services at page no. 593 of the Paper Book which are neither shown by the assessee nor by the Ld. TPO that what kind of services are provided by the comparable company. The same is also not coming out of the Annual Accounts of the company as well as the segmental accounts. Therefore, for the simple reason of not having proved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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