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TMI Blog2016 (10) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... ber And Shri Ramit Kochar, Accountant Member Assessee by: Shri Yogesh Thar Revenue by: Shri N.K. Chand ORDER Saktijit Dey, Aforesaid appeal at the instance of the assessee is directed against the assessment order dated 28-11-2014 passed for the assessment year 2010 11 in pursuance to the directions of the Dispute Resolution Panel (DRP). 2. Briefly the facts are, assessee an Indian company is a wholly owned subsidiary of ABM BPO, UK. The assessee is basically engaged in providing back office support services to its AE mainly in the field of accounting services. During the relevant previous year assessee had entered into international transactions with its associated enterprise (A.E) earning revenue of ₹ 24.09 crore. For benchmarking the arm s length price (ALP) assessee had undertaken a Transfer pricing adjustment by adopting transactional net margin method (TNMM) as the most appropriate method by considering itself as the tested party with operating profit to operating cost (OP/OC) as the profit level indicator (PLI). Assessee had selected eight companies as comparables with average margin of 11.52%. As the assessee s margin at 9.01% is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of comparables argued before us. Acropetal Technologies Ltd. 5. The learned authorised representative objecting to selection of this company submitted, assessee provides low end BPO services, whereas, this company renders high end K PO services, therefore, the company is functionally dissimilar. To demonstrate that the comparable is into high-end services he referred to the annual report of the comparable to show the business profile of the company. He submitted, this comparable is into diversified activities such as healthcare, energy and environment solutions, et cetera. Referring to schedule 9 of profit and loss account he submitted that company has incurred on-site development expenditure and as well as selling and marketing expenses which indicates that it is into software development. In this context he also referred to notes on accounts. He submitted, accounts of the company indicate unallocable expenses which require allocation for arriving at a comparable margin. He therefore submitted, it cannot be considered as a comparable. In support of such contention he relied upon the following decisions:- 1. Rampgreen Solutions Pvt. Ltd. v/s CIT, 52 taxmann.com 492 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s alone excluded it from the list of comparables. The ld. authorised representative submitted, there cannot be any doubt about the functional similarity of comparable with the assessee as in the assessment year 2009 10 this company was taken as a comparable. He submitted, only because of different financial year the company cannot be rejected, if otherwise it is functionally similar to the assessee. In this context ld. authorised representative relied upon the following decisions. i) CIT v/s Mckinsey Knowledge Centre India P. Ltd., ITA no.217/2014, dated 27.3.2015; ii) Mercer Consulting (I) Pvt. Ltd. v/s DCIT, 47 taxmann.com 84; iii) Ameriprise India P. Ltd. v/s ACIT, 62 taxmann.com 237; iv) Techbooks International Pvt. Ltd. v/s DCIT, 63 taxmann.com 114; v) Macquarie Global Services P. Ltd. v/s DCIT, 55 taxmann.com 259. 9. The learned departmental representative objecting to the inclusion of this company submitted that the assessee before the DRP has not objected to exclusion of this company. Referring to paragraph 7.3 of TP order learned departmental representative submitted, the TPO applied certain filters consistently followed from earlier assessment years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, we do not accept departments contention that assessee should not be permitted to raise this issue other than by way of an additional ground. Having held so, it is necessary now to examine whether the company can be included as a comparable. Undisputedly, the accounting year of this comparable is calendar year, whereas ,the accounting year of the assessee is financial year. Therefore, both are having different financial years. A reading of rule 10B(4) would suggest that data relating to relevant financial year of the assessee as well as comparable has to be considered for comparability analysis. Therefore, to that extent a company having a different financial year cannot be treated as comparable. From a reading of the decisions relied upon by the ld. authorised representative we have noted that ITAT Delhi Bench in some of the decisions have held that only for the reason that a comparable is having a different financial year it cannot be excluded if otherwise it is functionally similar to the assessee. However, subsequently it has come to our notice that the Hon ble jurisdictional High Court in case of CIT vs. PTC Software Private limited, Income tax Appeal No. 732 of 2014 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Nokia India Private Limited private limited (153 ITD 508). 14. The learned departmental representative submitted, for computing RPT the transaction of the company as a whole should be taken and it cannot be restricted to international transaction only. 15. Having considered the submissions of the parties and perused the materials on record in the light of decision relied upon. We are of the considered opinion assessee s contention in relation to application of RPT filter to these two comparables needs to be looked into fresh keeping in view the observations of the ITAT in case of Nokia India (P) Ltd. v/s DCIT (supra). We, therefore, remit the issue of comparability of the aforesaid two comparables to the Assessing Officer / Transfer Pricing Officer for deciding afresh after due opportunity of being heard to the assessee. 16. In view of the aforesaid, we direct the AO/TPO to determine the arm s length price afresh in the light of the observations made hereinabove. All other grounds which were not specifically argued before us by ld.AR, are deemed as not pressed, hence, dismissed. 17. In the result, appeal is partly allowed. Order pronounced in the open Court on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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