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TMI Blog2019 (4) TMI 1517X X X X Extracts X X X X X X X X Extracts X X X X ..... ny from the final list of comparables. Hartron Communications Ltd - income from BPO services is ₹ 17,99,52,212 which has been booked on the basis of Indian currency realized. At note 17, the revenue from operations is reported, we find that the export income has been reported at ₹ 17,99,52,211/-. Further, from the data published by the assessee, this year is an exceptional year of operation. The financial results of Hartron Communications Ltd cannot be considered for the preceding and succeeding financial years It can be seen that this year has been an exceptional year for the said company. Therefore, we are of the opinion that Hartron Communication Ltd cannot be considered as a comparable company to the assessee. In this view of the matter, without commenting on the other objections of the assessee, against this company, we direct the AO/TPO to exclude this company from the final list of comparables only for the ground of exceptional performance during the relevant year. Though the assessee has sought inclusion of Informed Technologies India Ltd, Jindal Intelicom Ltd, we find that by exclusion of the two companies in the above paragraphs, the assessee s marg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions under the TNMM. He observed that the assessee has selected 10 companies as comparables. The TPO accepted only 3 companies i.e.e4e Healthcare Business Services Private Ltd, Infosys BPO Ltd and Microgenetics Systems Ltd as comparable to the assessee. Thereafter, the TPO adopted 7 companies as comparable to the assessee including the 3 companies taken by the assessee and accepted by the TPO. Thereafter, he arrived at the average margin of the comparable companies at 22.30% and after giving the negative working capital adjustment of (-)1.10%, he arrived at the TP adjustment u/s 92CA of the Act at ₹ 25,98,03,681/- towards ITES services rendered by the assessee. In accordance with the TP order, a draft assessment order was proposed against which the assessee preferred its objections before the DRP and the DRP granted partial relief by directing the exclusion of two companies i.e. Acropetal Technologies Ltd and Infosys BPO Ltd from the final list of comparables. In consonance with the DRP order, the final assessment order was passed resulting in the adjustment of ₹ 25,10,61,407/- against which the assessee is in appeal before us by ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned transaction. 6. The learned AO/TPO/DRP has erred, in law and on facts and circumstances of the case, by wrongly rejecting certain companies from and adding certain companies to the final set of comparables for the impugned transactions on an adhoc basis, thereby resorting to cherry-picking of comparable for benchmarking the impugned transactions. 6.1 The learned AO/TPO/DRP has erred, in law and on facts and circumstances of the case, in excluding certain companies listed below from the final set of comparables even though these companies are comparable to the assessee Informed Technologies Limited Jindal Intellicom Private Limited ACE BPa Services Limited R Systems Intenational Limited (Seg.) Allsec Technologies Limited Datamatics Financial Services Limited Caliber Point Business Solutions Limited 6.2 The learned AO/TPO/DRP has erred, in law and on facts and circumstances of the case, in including certain companies listed below to the final set of comparables even though these companies are non-comparable to the assessee. Hartron Commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, it is submitted that Capgemeni Business Services (India) Ltd is a well known brand, which is used by the said company without any payment of royalty and therefore, the presence of intangible is a factor which has to be considered for excluding this company from the final list of comparables. He referred to the relevant observations of TPO and DRP wherein the relevant objections were raised by the assessee, but were not dealt with by the TPO and by the DRP in detail but were summarily rejected. He has also led us to the relevant papers in the relevant annual reports of the company to buttress his argument that this company is engaged in providing high end KPO services. According to him, Capgemenini is also providing Engineering and Design Services, which are KPO services even as per Rule IOTA. 6. The learned DR, on the other hand, submitted that the assessee is relying upon the recitals in the Website of the company wherein in order to advertise, lot of technical terminologies were used but the fact is that Capgemeni Business Services (India) Ltd is an I.T. enabled service provider and has been treated as such by the Department. He submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Ready2Series Digital Services - Secure Your Assets The aforesaid activities cannot be considered comparable to the assessee which is engaged in providing low end IT enabled services and is a risk mitigated entity. Further, a news article in Business Wire India, dated 25 October 2012, categorically mentions that Capgemini provides a wide variety of services such as Finance Accounting, Management Assurance, Engineering Services, Content Management, Research Advisory, Supply Chain Management, Procurement Services and Human Resources outsourcing etc. However quite many of these services such as engineering services, research and advisory are high-end KPO services which cannot be compared with the routine IT enabled services . As regards exploitation of brand value, we are in agreement with the contentions of the learned DR that both the companies used brands of their holding companies and therefore, are on par with each other. However, due to functional dissimilarity, we direct the AO to exclude this company from the final list of comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from accrual basis, except for processing charges (export income), interest on calls arrears, listing fee and leave encashment which are accounted for on cash basis. At Para 12 of the said report, it is stated that the income from BPO services is ₹ 17,99,52,212 which has been booked on the basis of Indian currency realized. At note 17, the revenue from operations is reported, we find that the export income has been reported at ₹ 17,99,52,211/-. Further, from the data published by the assessee, this year is an exceptional year of operation. The financial results of Hartron Communications Ltd cannot be considered for the preceding and succeeding financial years is as under: F.Y 2009-10 (-) 22.07% F.Y 2010-11 (-) 97.56% F.Y 2011-12 (-) 37.15% F.Y 2012-13 25.05% F.Y 2013-14 (-) 2.52% F.Y 2014-15 (-) 26.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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