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TMI Blog2019 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... icer himself. Accordingly, we direct the Assessing Officer to factually verify this aspect and excluded this company as a comparable. Maple E Solutions Ltd - the material on record clearly reveal that the directors/promoters of this company were involved in serious fraud earlier. Therefore, different Benches of the Tribunal as well as different High Courts including the Hon'ble Jurisdictional High Court have held that this company cannot be treated as comparable due to unreliability of its financials. Asit C. Mehta. - the company has various segments and the ITeS segment does not provide ITeS alone. It appears from the annual report, the ITeS segment also includes income from software development services. However, segmental details relating to the aforesaid services are not available. Even otherwise also, the nature of services provided by this company is relating to GIS which is considered to be KPO services. Therefore, the company is functionally different from the assessee. It is also noticed from the judicial precedents cited before us that the company has been rejected as a comparable due to various other factors such as extra ordinary business activity due to merge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparables with arithmetic mean of 8.40% as against the margin shown by the assessee @ 10.60%. Thus, it was claimed by the assessee that the transaction with the AE is at arm's length. After perusing the transfer pricing study report as well as other material on record, the Transfer Pricing Officer, though, accepted TNMM as the most appropriate method, however, he did not accept the comparables selected by the assessee as well as certain adjustments made. Out of the ten comparables selected by the assessee, the Transfer Pricing Officer rejected eight comparables. Additionally, he introduced ten fresh comparables. Thus, the Transfer Pricing Officer finally selected twelve comparables with average margin of 22.77% and after working capital adjustment the margin stood reduced to 21.29%. Applying the aforesaid adjusted margin of the comparables to the operating cost, the Transfer Pricing Officer determined the arm s length price of the international transaction at ₹ 50,69,87,072, as against the price charged by the assessee at ₹ 46,23,23,545. The resultant shortfall of ₹ 4,46,63,527, was treated as adjustment to the arm s length price. On the basis of adjustment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2016 (P H); v) CIT v/s PTC Software India Pvt. Ltd., ITA no.732/2014, dated 26.09.2016; vi) Tata Consultancy Services Ltd. v/s ACIT, ITA no.6648/ Mum./2012, etc., dated 18.10.2017; vii) Maersk Global India Pvt. Ltd., ITA no.2594/Mum./2014, dated 16.01.2015 viii) HSBC Electronic Data Processing India Ltd. v/s ACIT, ITA no.1624/Hyd./2010, dated 28.06.2013; ix) Cognizant Technology Services Pvt. Ltd. v/s ACIT, 37 CCH 115; x) Zavata India Pvt. Ltd. v/s DCIT, ITA no.1781/Hyd./2011, dated 07.06.2013; xi) M/s. Exxonmobil Co. India Pvt. Ltd. v/s ACIT, ITA no.2/ Pnj./2013; and xii) M/s. Pentair Water India Pvt. Ltd. v/s ACIT, ITA no.2/ Pnj./2013. 8. The learned Counsel for the assessee further submitted, in assessee s own case for the assessment years 2005 06 and 2008 09, the company has been rejected as a comparable for the very same reason. Thus, he submitted, the company cannot be treated as comparable to the assessee. 9. Shri S.K. Singh, the learned Departmental Representative, strongly relying upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was not brought to the notice of the Tribunal. Thus, in view of the relevant facts and the ratio laid down in the decisions cited before us, we hold that Vishal Information Technologies Ltd., cannot be treated as a comparable to the assessee. 11. The next comparable disputed by the assessee is Datamatics Financial Services Ltd. 12. Objecting to the selection of this company, the learned Counsel for the assessee submitted, the only reason the Transfer Pricing Officer selected this company as a comparable is, it was accepted as a comparable in assessment year 2007 08. The learned Counsel submitted, the annual report of the company reveals that it is engaged in processing and printing as well as ITeS. Whereas, the segmental break up is only available in respect of revenue and no segmental break up of expenses incurred or profits earned is available. He submitted, while the company has earned revenue from processing and printing amounting to ₹ 5.93 crore, revenue earned from export of ITeS is ₹ 2.31 crore and other income is of ₹ 2 crore. Therefore, income from ITeS constitutes only 22% of the total income of the company. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific contention of the learned Counsel for the assessee that total revenue from ITeS works out to 22% only. Further, it is the contention of the learned Counsel for the assessee that the related party transaction as a percentage of the sales of the company works out to 49%. Thus, according to the assessee, the company fails the aforesaid two filters applied by the Transfer Pricing Officer himself. It is relevant to observe, due to substantial related party transaction this company has been excluded as a comparable in case of various other assessees concerning the very same assessment year. In this context, we may refer to the following decision of the Tribunal, Mumbai Bench: i) M/s. Stream International Services Pvt. Ltd. v/s ADIT, ITA no. 8997/Mum./2010, dated 11.01.2013; ii) Deutsche Networking Services Pvt. Ltd. v/s DCIT, ITA no. 8972/Mum./2010, dated 14.09.2018; and iii) Goldman Sachs Services Pvt. Ltd. v/s DCIT, IT(TP)A no.1423/Bang./2010, dated 07.09.2015. 15. The other decisions cited by the learned Counsel for the assessee also support the aforesaid view. Thus, prima facie, we are of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) CRM Services India Pvt. Ltd. v/s CIT, ITA no.618/2012, dated 29.08.2014; vi) Franklin Templeton International Services India Pvt. Ltd. v/s DCIT, ITA no.7472/Mum./2010; dated 10.01.2018; vii) Cummins Turbo Technologies Ltd. v/s DCIT, ITA no.269/Pn./ 2013, dated 29.09.2014; viii) Deutsche Networking Services Pvt. Ltd. v/s DCIT, ITA no. 8972/Mum./2010, dated 14.09.2018; ix) Flextronics Technologics India Pvt. Ltd. v/s DCIT, ITA no.1219/Bang./2011, dated 23.11.2015; x) U.T. Starcom Inc., ITA no.5848/Del./2011; and xi) Capital IQ India Pvt. Ltd. v/s DCIT ITA no.1961/Hyd./2011. 18. The learned Counsel for the assessee submitted, for the purpose of specifically bringing this issue before the Tribunal, the assessee has raised the additional ground. 19. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and learned DRP. 20. We have considered rival submissions and perused the material on record. At the outset, we must observe, in the main ground itself, the assessee has objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the year under consideration, the company has also acquired another company i.e., Nucleus Netsoft and GIS India Ltd. Therefore, due to such extra ordinary event happening during the year, the company cannot be treated as comparable. The learned Counsel submitted, learned DRP was not justified in upholding selection of this company as a comparable simply relying upon the decision of the Tribunal in assessment year 2007 08. In support of his contention, he relied upon the following decisions: i) M/s. Pentair Water India Pvt. Ltd. v/s ACIT, ITA no.2/ Pnj./2013; ii) M/s. Akamai Technologies India Pvt. Ltd. v/s DCIT, IT(TP)A no.1227/Bang./2010, dated 11.08.2016; iii) HSBC Electronics Data Processing India Ltd. v/s ACIT, ITA no.1624/Hyd./2010; iv) Stream International Services, ITA no.1624/Hyd./2010; v) Goldman Sachs Services Pvt. Ltd. v/s DCIT, ITA no.1423/ Bang./2010, dated 07.09.2015; and vi) M/s. Deutsche Networking Services Pvt. Ltd. v/sDCIT, ITA no.8972/Mum./2010, dated 14.09.2018. 23. We have considered rival submissions and perused material ..... X X X X Extracts X X X X X X X X Extracts X X X X
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