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TMI Blog2020 (2) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter called the Act ) in relation to the assessment year 2011-12. 2. The only issue raised in this appeal is against the transfer pricing addition of ₹ 56,09,376/- made in the international transaction of `Provision of Carpet designing, planning and estimation services . 3. Briefly stated, the facts of the case are that the assessee is a domestic company engaged in the business of manufacturing and sale of machine made Axminster Woven carpets and spun yarn. A return of income was filed declaring total income of ₹ 7,46,72,803/-. Certain international transactions were reported in Form no. 3CEB. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining the arm s length price (ALP) of the international transactions. The only international transaction in dispute before the Tribunal through this appeal is Provision of Carpeting, designing, planning and estimation services with transacted value of ₹ 5,53,40,229/-. The factual panorama qua this transaction is that the assessee rendered carpet designing services to its Associated Enterprises (AEs). The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Study report of the assessee, which throws some light on the nature of activity carried out by the assessee under this transaction. Relevant discussion has been made at page 70 of the TP study report. Under the main head, Service Centre Division , the assessee has reported that its Service Centre Division provides planning and estimation services (during pre-production stage), designing services (during pre as well as post production stage), project management and customer support services to BLK. It has been provided that BLK maintains Client Relationship Management (CRM) database wherein all the requisitions for any planning and estimation work, designing work, request for Project Management and Customer Support are logged on by various Brinton group entities. The CRM Manager forwards the above requisitions to the assessee for feasibility analysis. Under the head Functions performed by assessee, it has been mentioned that on receipt of instructions from BLK via CRM database as regards the projects to be executed, the team at the assessee s office commences work on the project which involves Planning, Estimation and Designing services. Planning and Estimation services are carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with receipt of input from its UK based AE about the requirements of its customers who intend to purchase carpets from it; making preliminary designs as per requirements of the customers to its UK based AE; finalizing the design after discussions with the customer and/or its AE; and handing it over to the Manufacturing segment for the purposes of carrying out the manufacturing activity in accordance with the design finalized under this segment. With the above understanding of the functional profile of the assessee, now we proceed to examine the comparability or otherwise of the three companies under consideration. i. Infosys BPO Ltd. : 6. The TPO selected this company as comparable. The assessee objected to the same by submitting that it was functionally different and also a big brand. The TPO rejected the assessee s contentions and included the same in the final list of comparables. The assessee remained unsuccessful before the DRP as well. 7. Having head both the sides and gone through the relevant material on record, we find from the Annual report of Infosys BPO Ltd., a copy of which has been placed on record, that its total revenue stands at whopping ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation between two companies on the basis of BPO and KPO was not fully correct in as much as KPO could not be said to be different from BPO. No relief was allowed by the DRP. 9. Having head both the sides and gone through the relevant material on record, it is seen that the TPO included Eclerx Services Ltd. in the list of comparables by noticing it to be engaged in rendering KPO services but observing that there was not much difference between a company providing KPO and another providing BPO services in as much as the BPO services are part of KPO services. In our humble opinion, simply because BPO is included in the list of KPO services in the said Notification does not per se make every BPO company comparable to a KPO company. What is relevant to note for examining the comparability is the nature of services provided. Even under the KPO services, as per the CBDT Notification No.890 (E), as taken note of by the TPO, call centre, data processing, engineering and design, geographic information system services, human resource services, medical transcription, support centres etc. have also been classified under one category of KPO. It does not mean that a company rendering call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development, high end services KPO acquisition during the year and intellectual property rights. For holding that there was no distinction between KPO and BPO services, the TPO reiterated his reasoning as given for including Eclerx services Ltd. in the list of comparables. 12. Having heard both the sides and gone through the relevant material on record, we find from the Annual report of this company, whose copy is available at page 169 onwards of the paper book, that it is engaged in rendering KPO services. The Managing Director of this company has said in his message to the shareholders on page 6 of the Annual report that the company decided to develop its own EMR (Electronic Medical Records) software rather than depending on third party offering and market the same all over the US. It has further been mentioned that due to these developments, the company invested large amount of funds in the development of EMR software and SaaS model marketing of the same in the US. It has still further been mentioned that this company supported a Product Division under the name of Iridium and with a focused approach. The product team was able to come up with end-to-end global work fl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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