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TMI Blog2020 (3) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DRP - in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer/TPO. AO/TPO is directed to examine the reconciliation statement mentioned elsewhere and when found correct, no addition is called for. TP Adjustment - comparable selection - HELD THAT:- Assessee is into ITES services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowance of the expenses on car lease rentals u/s 40(a)(ia) - HELD THAT:- There is no dispute that the assessee has paid car lease rentals amounting to 7,55,58,782/- and on such payments, provisions of section 40a(ia) of the squarely apply. However, the second proviso inserted to section 40a(ia) of the Act has been held to be declaratory and curative and have been given a retrospective effect from 1.4.2005 as held in the case of Ansal Land Mark Township [P] Ltd [ 2015 (9) TMI 79 - DELHI HIGH COURT] However, it is incumbent upon the assessee to furnish necessary evidences to demonstrate that the payees have shown receipts as their income - Restore this issue to the file of the Assessing Officer/TPO. The assessee is directed to furnish necessary evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Delhi High Court in the case of Bechtel India (ITA 379/2016). 19.2 On the other hand, the learned DR relied on the order of the lower authorities. 19.3 We have heard the rival submissions and perused the relevant material on record. On perusal of financial statements of the assessee placed on page 1 to 27 of the paper book, we find that assessee has not borrowed any money. We find that the Hon'ble Delhi High Court in the case of Bechtel India (supra) has observed that where the appellant is a debt free company, the question of receiving any interest in receivable did not arise. The relevant finding of the Hon'ble High Court is reproduced as under: "4. As far as question (B) concerning the adjustment for interest no receivables, the Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial question of law arises for consideration as far as this issue is concerned." ITA No.7290/Del/2018 19.4 Respectfully following above decision of the Hon'ble jurisdictional High Court, no adjustment on account of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur report on the same latest by 14.06.2019. 12. Pursuant to the directions of the DRP, the Assessing Officer replied as under: "In this regard, it is submitted that this office had written a letter F.No. AddI. R-1/Avaya/Remand Rep/2019-20/46/ dated 31.05.2019 to assessee to provide information. Further, the information u/s 133(6) of the I.T. Act, 1961 was called from M/s Bharti Hexacom Limited for the F.Y. 2014-15 in the case of M/s Avaya India Pvt. Ltd, vide letter F.No. Addl. CIT/Spl R- 1/133(6)/2019-20/55 dated 06.06.2019 to corroborate the claim of the assessee with respect to additional evidence. 3. However, M/s Bharti Hexacom Limited has not submitted any information yet in this regards. Therefore the claim of the assessee w.r.t. submission of additional evidences cannot bo verified. Hence the proposed addition in the draft assessment order is correct. Total receipts of the assessee appearing in the 26AS which was also confirmed by the M/s Bharti Hexacom Limited through their mail dated 19.12.2018 has not been negated. Thus, the additional evidence cannot be accepted for as it has not been reconciled or confirmed by the M/s Bharti Hexacom Limited. 4. It is further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re would remain no difference in the income returned by the assessee vis a vis Form No. 26AS. 17. Per contra, ld. DR stated that this reconciliation may be sent to the Assessing Officer for examination. 18. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we have to state that invoking of provisions of section 68 of the Act on the alleged difference in the revenue recognised by the assessee and Form 26AS statement is bad in law in as much as section 68 is not at all applicable on such difference. Secondly, we find that the DRP has given categorical finding that only the difference, if any, should have been added but we find that without going into the reconciliation statement, the Assessing Officer has made addition thereby disobeying the directions of the DRP. However, in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer/TPO. The Assessing Officer/TPO is directed to examine the reconciliation statement mentioned elsewhere and when found correct, no addition is called for. With these directions, Ground No. 4 with all its sub grounds is allowed. 19. Ground No. 5 relates to short gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urgaon) Private Limited in ITA 241 of 2018. In view of the above, the Ld. ITA No.1904/Del/2015 counsel requested to exclude the company from the final set of the comparables. 6.1 The Ld. DR, on the other hand, relied on the order of the Ld. TPO and submitted that the assessee is engaged in vide range of verticals and thus it is difficult to categorise the assessee as a low-end BPO service provider. 6.2 We have heard the rival submissions of the parties on the issue of exclusion of the company from final set of comparables. We note that the Tribunal in ITA No. 146/Del/2013 for assessment year 2008-09 has examined the issue of functional dissimilarity of the assessee with M/s. E Clarx service Ltd. The Tribunal (supra) held that company cannot be compared with a low-end service provider like the assessee. The relevant finding of the Tribunal is reproduced as under: "As regards the aforesaid two comparables [mentioned at sl.nos.(vii) & (viii)], The ld. AR at the outset itself pointed out that Eclerx and Vishal are into KPO services. According to him, although KPO services were ITES but the nature of these services were materially different than the services rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. Further, the functions undertaken (i.e. the activities performed) are also not comparable with the Assessee. In our view, the Tribunal erred in holding that the functions performed by the Assessee were broadly similar to that of eClerx or Vishal. The operating margin of eClerx, thus, could not be included to arrive at an ALP of controlled transactions, which were materially different in its content and value. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted the same and had, thus, excluded eClerx as a comparable. It is further observed that the comparability of eClerx had also been examined by the Hyderabad Bench of the Tribunal in M/sCapital Iq Information Systems(India) (P.) Ltd. v. Additional Commissioner of Incometax (supra), wherein, the Tribunal directed the exclusion of eClerx as a comparable for the reason that it was engaged in providing KPO Services and further that it had also returned supernormal profits. 38. In our view, even Vishal could not be considered as a comparable, as admittedly, its business model was completely different. Admittedly, Vishal's expenditure on employment cost during the relevant period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourcing, financial accounting, knowledge services, human resource outsourcing etc and thus it is functionally dissimilar to the assessee. The Ld. counsel also reiterated the reasons submitted before the Ld. TPO for excluding the above company. 7.1 The Ld. counsel in support of the contention that Infosys BPO Limited, an entity having high brand value were able to command greater profits, relied on the decision of the Hon'ble Delhi High Court in ITA 241/2018 the case of EVALUESERVE SEZ (Gurgaon) Private Limited. The Ld. counsel also relied on the decision of the Hon'ble High Court of the Bombay in the case of CIT Vs. Pentair water India Private Limited for assessment year 2010-11 reported in (2016) 69 taxmann.com 180 (Bombay), wherein it is held that Infosys BPO Limited having turnover of ₹ 649.56 crores cannot be compared with the company having turnover of ₹ 11 crore. 7.2 On the contrary the Ld. DR relied on the finding of the lower authorities and submitted that there is no advantages to the company of the brand value of Infosys and no expenditure has been incurred by the company for brand value. On the issue of turnover, the Ld. DR submitted that turnover o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y positive manner. This inference too in the opinion of Court, cannot be termed as unreasonable. The rationale for exclusion is therefore upheld. The assessee was aggrieved by the inclusion of Accentia from a Software Development Company. The Revenue is ITA No.1904/Del/2015 aggrieved by the exclusion of Accentia from the TP analysis. The DRP had directed its deletion. We observe that the VIA T has noticed the unavailability of the segmental data so far as these comparables are concerned. Furthermore, the functionality of this entity was concerned, it is different from that of the assessee; Accentia was engaged in KPO services in the healthcare sector. 14. In view of the above findings, this Court is of the opinion that no substantial question of law arises. The appeals are dismissed." 7.5 Similarly, the Infosys BPO Limited has been rejected in view of the high turnover by the Hon'ble Bombay High Court in the case of CIT versus Pentair water India Private Limited (supra). 7.6 In the instant case also the assessee has sought to exclude the Infosys BPO Ltd on the basis of the high brand value and high turnover of the company. Respectfully, following the above decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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