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TMI Blog2016 (8) TMI 1466X X X X Extracts X X X X X X X X Extracts X X X X ..... le DRP. 3. Erroneous Comparability Analysis: The learned TPO,/AO and the Hon'ble DRP have erred, in law and in facts by not accepting the economic analysis conducted by the Appellant in accordance with the provisions of the Income tax Act, 1961 (the Act) read with Income tax Rules. 1962 (the Rules) for determination of arm's length price of the international transaction pertaining to the provision of information technology enabled services (ITeS) to its AE. The Learned TPO also conducted a fresh economic analysis for selection of comparable companies without providing any cogent reasons for undertaking the same. 4. Application of Invalid Fitters: The Learned TPO/AO and the Hon'ble DRP have erred in law and in facts by applying certain arbitrary quantitative and qualitative filters for the purpose of selection of comparables in the ITeS segment. 5. Adoption of functionally dis-similar comparables : The Learned TPO/AO and the Hon'ble DRP have erred in inclusion of functionally dis-similar companies for the purpose of determination of ALP under section 92C of the Act. 6. Non-inclusion of valid comparables: The Learned TPO/AO and the Hon'ble DRP have erred in facts by not inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely, as against the profit margins of 11.33% and 7.37% shown by the assessee. Hence, the TPO required the assessee to show cause as to why upward adjustments should not be made to the ALPs of the international transactions. The assessee filed its objections before the TPO. After considering the various objections raised by the assessee, the TPO re-determined the arithmetic mean of the comparables of the SDS segment at 18.63% and ITES segment at 21.37%. Thus, the arithmetic means of the profit level indicators of the comparables under SDS and ITES segments are 9.03% (18.63% - 9.60%) and 7.93% (21.37% - 13.42%) higher than the profit margins shown by the assessee. Hence, the TPO proposed upward adjustments of Rs. 14,83,73,071/- (being the additional profit margin computed at additional 9.03% of the total operating cost of Rs. 164,31,12,638/-) under SDS segment; and Rs. 2,82,84,751/- (being the additional profit margin computed at additional 7.95% of the total operating cost of Rs. 35,57,83,034/-) under ITES segment, totaling to total upwards adjustments of Rs. 17,66,57,822/-. 4.1 The TPO considered the following comparables : Particulars under SDS segment under ITES segment 1.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encryption solutions for digital content, iPhone and iPad applications, customized software for publishers and biometric security solutions for net work. 6. We find force in the argument of the ld. AR, more so, the Delhi High Court in the case of Rampgreen Solutions Pvt. Ltd. In ITA 102/2015 vide judgment dated 10.8.2015 held as under : "36. As pointed out earlier, the transfer pricing analysis must serve the broad object of benchmarking an international transaction for determining an ALP. The methodology necessitates that the comparables must be in material aspects. The comparability must be judged on factors such as product/service characteristics, functions undertaken, assets used, risks assumed. This is essential to ensure the efficacy of the exercise. There is sufficient flexibility available within the statutory framework to ensure a fair ALP. 37. Applying the aforesaid principles to facts of the present case, it is once again clear that both Vishal and eClerx could not be taken as comparables for determining the ALP. Vishal and eClerx, both are into KPO Services. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted that eClerx i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid entity." In view of the above, in our opinion, Coral Hub Ltd. cannot be considered as comparable to the assessee's case. 7. Next comparable is with regard to Jeevan Scientific Technologies Ltd. The ld. AR submitted that this is a medical prescription company which is dedicated to providing reliable, cost-effective and technology-driven clinical research services and solutions to clients globally. The assessee's service portfolio enables to provide integrated solution for the management of clinical research data right from inception to completion. The assessee's world-class team of highly-qualified and experienced scientists, clinicians and multidisciplinary staff are committed to providing quality solutions across a wide range of therapeutic areas. The assessee's commitment to quality and customer-focused approach, bundled with outstanding expertise distinguishes us from others. The assessee manages the projects based on the clients' requirements and provide customized solutions. The assessee is having immense talent pool to reliably meet the needs of clients and deliver well within timelines. The services at Jeevan Scientific Technologies Ltd. include Medical Writing, Clinica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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