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TMI Blog2020 (9) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an adjustment of Rs. 1,389,455 with respect to information technology enabled services ("ITES") rendered to the AEs, to the taxable income of the Appellant and erred in upholding the approach of the learned AO and TPO in holding that the international transactions of ITES rendered by the Appellant to its AE5 was not at arm's length as defined under section 92F(ii) of the Act. 3. Rejection of the TP documentation of the Appellant 3.1. The Honorable DRP have erred in law and on facts by upholding the approach of the learned AO and TPO in rejecting the TP documentation prepared by the Appellant with respect to ITES, in the manner contemplated under Section 92D of the Act read with Rule 10D of the Rules stating that the data used in computation of the ALP is "not reliable or correct", under section 92C(3)(c) of the Act. 4. Use of multiple year data 4.1. The Honorable DRP have erred in law and on facts by upholding the approach of the learned IPO by ignoring the provisions of Rule 1013(4) of the Rules, international commentaries and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the purpose of determination of the ALP. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to which representative of assessee appeared before Ld.AO and filed requisite details as called for. 2.2. Ld.AO observed that, assessee had international transaction exceeding Rs. 15 crores with its associated enterprises. Accordingly, case was referred to Transfer Pricing officer to determined arm's length price of international transactions. 2.3. Upon receipt of reference under section 92CA, Ld.TPO called on assessee to file economic details of international transactions in Form 3CEB. Ld.TPO observed that, assessee had entered into following international transaction during the year under consideration: Particulars Amount (Rs. in lakhs) SWD 752.77 ITES 206.76 MSS 99.61 Reimbursements (cost to cost) 4.77 2.4. Ld.TPO noted that, transaction under software development segment was within +/-5% of adjusted operating margin of comparable companies and hence no adverse inference was drawn. 2.5. However, in respect of IT enabled service segment, it was noted by Ld.AO that, assessee earned margin of 18%. Assessee while conducting the benchmarking analysis adopted 5 comparables with average margin of 16.29%. Assessee thus concluded the transaction to be at arms length. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% and no adjustment would required to be made in the hands of assessee. Accordingly, all other comparables mentioned in this ground along with other grounds stands dismissed as not argued. Assessee is however granted liberty to contest these grounds/comparables in appropriate years. 6. Be that as it may, before getting into comparability of these 2 comparables with assessee, it is sine qua non to understand functions performed by assessee under this segment. 6.1. Functions: Ld.TPO analysed functional profile of assessee as under: "Interwoven Software Services India Pvt.Ltd is engaged in the business of contract software development and related technical support services on a dedicated basis for Interwoven Inc. Of U.S. The tax payer is also rendering certain presales and marketing support services for interwoven Inc. Hence the 3 segments are software development service (SWD), technical support service which is basically classified in the functional analysis as I T enabled services (ITES) and marketing support services (MSS)" 6.2. In transfer pricing study also, assessee has been held to be carrying out with developing initial structure of the product based on the decided p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areas, unlike the assessee. Further it was also submitted that the Infosys BPQ Ltd. comprises bLd. CIT DR opposed the exclusion and placed reliance upon orders passed by authorities below. We have perused submissions advanced by both sides in the light of the records placed before us. Assessee placed reliance upon decision of this Tribunal in case of Zyme Solutions (P.) Ltd. v. Asstt. CIT [2019] 108 taxmann.com 495 (Bang. - Trib.), wherein this comparable has been exclrand value which will tend to influence its business operation and the pricing policy thereby directly impacting the margins earned by the Infosys BPO Ltd.. We find the submissions of the ld. counsel for the assessee before TPO/DRP that in order to maintain the brand image of Infosys BPQ Ltd. in the market, the company incurs substantial selling and marketing expenditure whereas the assessee being a contract service provider does not incur such expenses to maintain its brand has not been controverted by them. Further, Infosys BPO Ltd. being a subsidiary of Infosys has an element of brand value associated with it. This can be further confirmed by the presence of brand related expenses incurred by Infosys BPO Ltd. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of this Tribunal in case of Zyme Solutions (P.) Ltd. (supra), by observing as under: "11.3 We have heard rival submissions and perused material on record. The issue of comparability of this company was considered by the co-ordinate bench of Tribunal in the case of XLHealth Corpn. India (P.) Ltd. (supra). The relevant findings of the Tribunal are as under: '. . . . We have heard the rival submissions and perused the material on record. From the perusal of the Annual Report of this entity placed at page Nos. 583 to 678 of paper book, at page No. 604 it is stated as under. "2. COMPANY OVERVIEW Your Company, along with its subsidiary companies - TCS e-Serve International Limited and TCS e-Serve America Inc., is primarily engaged in the business of providing Business Process Services (BPO) for its customers in Banking, Financial Services and Insurance domain. The Company's operations include delivering core business processing services, analytics & insights (KPO) and support services for both data and voice processes. Your Company is an integral part of the Tata Consultancy Services' (TCS) strategy to build on its 'Full Services Offerings' that of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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