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TMI Blog2020 (4) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... 44C(13) of the Income Tax Act 1961 (the Act ). As common issues are involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience. ITA No. 7482/MUM/2012 (AY: 2008-09) 2. The grounds of appeal filed by the assessee read as under : 1 On the facts and circumstances of the case, the AO erred in framing the assessment under Section 143(3) r.w.s 144C of the Act by upholding the action of the Transfer Pricing Officer (TPO) in making a Transfer Pricing (TP) adjustment of ₹ 98,28,555 and ₹ 3,54,249 in respect of provision of IT support and group audit services respectively provided to its Associated Enterprise. 2 On the facts and circumstances of the case, the AO erred in retaining the comparables Caliber Point Business Solutions Ltd - BPO segment and HCL Comnet Systems Services Ltd -ITeS segment even though they ought to have been rejected on account of they having high related party transactions, as per the directions of the Dispute Resolution Panel ('DRP') 3 On the facts and circumstances of the case, the AO erred in retaining the comparables Mold-Tek Technologies Ltd and Eclerx Services Ltd. even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Group audit services, which include the performance of various internal audit functions. The AO granted relief to the appellant in respect of serial No. (ii) (iii) in the above. The dispute here is serial number (i) (iv) above. During the year under consideration, the appellant provided IT enabled services to its AE, which include application development, testing services and IT support. The appellant has benchmarked this transaction using TNMM as the most appropriate method and operating profit to total cost as the appropriate profit level indicator. The appellant made a search on Prowess and Capitaline database and identified 14 comparables using data for financial year (FY) 2005-06, 2006-07 and 2007-08. However, the TPO made a fresh search and arrived at the following final list of comparables and margins using data for FY 2007-08 : S No. Name of the Comparable OP/TC 1. Accentia Technologies Ltd. (Seg.) 41.76% 2. Acropetal Technologies Ltd. (Seg.) 35.30% 3. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Audit services 3,54,249/- Total 1,01,82,804/- It may be relevant to mention here that the appellant earned operating margin of 15.58% on cost Provision of IT enabled services and 19.87% on cost from Audit Services . 7. Before us, the ld. counsel for the assessee submits that vide the ground of appeal No. 1, 5 7 (additional) the entire transfer pricing adjustment of ₹ 1,01,82,804/- made by the TPO / AO is challenged. It is explained that (i) if the contention of the assessee in respect of exclusion of Coral Hubs Ltd. (formerly known as Vishal Information Technologies Ltd.) and Accentia Technologies Ltd. and (ii) the direction of the DRP for exclusion of eClerx Services Ltd. and Mold Tek Technologies Ltd. is accepted then the appellant s operating margin would fall within +/- 5% range of arithmetic mean of comparables. Thus it is stated that thereafter the issue of comparability of the remaining disputed comparables would be rendered academic. 8. On the other hand, the Learned Departmental Representative (DR) relies on the order of the TPO/AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (2018) 92 taxman.com 240 (Bombay), for the AY 2008-09, the Hon ble Bombay High Court held: II Coral Hub Ltd.: (a) The impugned order of the Tribunal has excluded M/s. Coral Hub Ltd. from the list of comparable after rendering a finding of fact that activities undertaken by Coral Hub Ltd. are not comparable to that engaged by the Respondent-Assessee. It was found as a fact by the Tribunal that M/s. Coral Hub Ltd. is engaged in ITES particularly selling and purchasing of products and goods whereas the Respondent-Assessee is engaged in e-learning and content development activity. Besides, the Tribunal has recorded finding of fact that business model adopted by M/s. Coral Hub Ltd. was different inasmuch as it outsources its work to sub-vendors as against the Respondent-Assessee carrying out its activities in-house. (b) The grievance of the Revenue is that both the Coral Hub Ltd. as well as the Respondent-Assessee are in the field of Information Technology Enabled Services. Therefore, by virtue of above fact, they become comparable. (c) It is obvious that merely because the tested party and the comparable provide ITES, they do not become comparable. The content of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 In respect of Accentia Technologies Ltd., it is found that the DRP rejected it in assessee s own case in AY 2010-11. Also the TPO excluded it in assessee s own case in AY 2009-10. Further we observe that the company has made various acquisitions / mergers during FY 2007-08 which are extra ordinary events and such economically different facts have impacted the margin of the company. We further notice that in the case of in the case of Accentia Technologies Ltd, the Hon ble Bombay High Court in Aptara Technology (P) Ltd. (supra) for AY 2008-09 has held: (I) Accentia Technologies Ltd. : (a) The impugned order of the Tribunal excluded Accentia Technologies Ltd. from the list of comparables by rendering a finding of the fact that the services rendered by Accentia Technologies Ltd. is different from that offered by the Respondent to its A.E. It found on facts that Accentia Technologies Ltd. was providing medical transaction, billing and coding services, application development and customization service in respect of which segmental data was also not available while the Respondent provides E-Learning service. Thus, the impugned order of the Tribunal found that M/s. Accentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case primarily provides foreign exchange services which include purchase and sale of foreign currency to individuals and corporate, in its capacity as a licensed full-fledged money changer. In addition the assessee company also provides certain IT support services to its AE. In view of the above factual scenario and the decision of the Hon ble Bombay High Court in Aptara Technology (P.) Ltd. (supra), we exclude Accentia Technologies Ltd., from the list of comparables. 9.4 In view of our decision excluding Coral Hubs Ltd.; Accentia Technologies Ltd.; eClerx Services Ltd. and Mold Tek Technologies, the issue of comparability of the remaining disputed comparables become academic in nature. Accordingly ground no 3 and 7-8 (additional) are allowed. Ground No. 4 6 (additional) become academic in nature. 10. In the result, the appeal for AY 2008-09 is allowed. ITA No. 1464/MUM/2014 (AY: 2009-10) 11. The grounds of appeal filed by the assessee read as under : 1 On the facts and circumstances of the case and in law, the DRP erred in confirming the action of the AO/TPO in determining the arm's length price of the international transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minacs Worldwide Ltd. 23.86% 2 Coral Hub Ltd. 35.48% 3 Cosmic Global Ltd. 40.61% 4 Infosys BPO Ltd. 24.28% 5 Maple Esolutions Ltd. 8.58% 6 Acropetal Technologies Ltd. (IT Service) 21.30% 7 HCL Comnet Systems Services Ltd. (ITeS) 39.24% 8 R Systems International Ltd. (BPO Services) 14.08% 9 Crossdomain solutions Ltd. 29.40% Arithmetic Mean 26.31% Accordingly the TPO made an adjustment of ₹ 93,41,234/-. 14. It is the contention of the learned counsel that if Coral Hubs Ltd. (formerly known as Vishal Information Technologies Ltd.) is excluded from the above list of comparables, the appellant s operating margin would fall within +/- 5% range of the arithmetic mean of the c ..... 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