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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 ..... h section 144C(13) of the Act, is not in accordance with the law and is contrary to the facts and circumstances of the present case. Transfer Pricing Adjustment 2.1. The Honorable DRP have erred, in law and on facts in making an adjustment of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in business of software development and related technical support services. It filed its return of income for year under consideration on 27/11/2012 declaring total income of ₹ 2,07,61,010/-. The case was selected for scrutiny and notice under section 143 (2) of the act was issued in response 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 ₹ 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnologies Ltd. 6.08 3 lnfosys BPO Ltd 36.30 4 Microgenetics Systems Ltd. TCS 6.38 5 TCS E-serve 63.69 6 B N R Udyog Ltd., 41.58 7 e4e Healthcare Service Pvt. Ltd., 19.85 Mean margin 26.52 3.2. DRP also directed Ld.TPO to recompute operating margin in case of e-4-E Healthcare Business Services Pvt.Ltd., and to rectify errors in computing working capital adjustment. 4. On receipt of DRP directions, Ld.AO passed impugned order making transfer pricing addition in the hands of assessee at ₹ 13,89,455/- to ITES segment. Aggrieved by order of Ld.AO, assessee is in appeal before us now. 5. At the outset, Ld.AR submitted that, assessee wish to argue only 2 comparables in Ground 5.3 on exclusion, being Infosys BPO Ltd and TCS e-serve Ltd., for having high turnover. He placed reliance on decision following decisions of this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rables alleged for exclusion and argued before us. 7. Ld.AR submitted that, two comparables alleged by assessee for exclusion have been considered by Coordinate bench of this Tribunal in case of VWR Lab Products Pvt.Ltd vs ACIT, reported in (2020) 116 taxmann.com 244. He submitted that, assessee therein, has also been characterised to be rendering contract software development services to its AE. It has also been stated that, functional profile of assessee in present appeal and that of assessee in decision cited by Ld.AR are same, and following were relevant observations therein: 8. (b) Infosys BPO Ltd. Assessee objected for inclusion of this comparable primarily on the basis of functional incompatibility and presence of intangibles. It has been submitted that this company owns huge brand and not a fit comparables for company like assessee, who provide captive service to its AE's by observing as under: '5. We have heard the rival submissions on the comparability of Infosys BPO as a comparable company. The Delhi ITAT in the case of Baxter India Pvt. Ltd. v. ACIT ITA No.6158/Del/2016 for AY 2012-13 in the case of a company rendering ITES such as the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rage margin. 2. It was also brought to our notice that the Hon'ble Delhi High Court in ITA No.260/2018 in the appeal filed by the Revenue against the aforesaid order dismissed the appeal at the admission stage observing that rationale given by the ITAT for exclusion was correct. In view of the aforesaid decision, we direct exclusion of Infosys BPO from the list of comparable companies chosen by the TPO. From above, it is clear that this company is functionally not comparable with captive service provider. Respectfully following the same we direct this company to be excluded from the list of comparables. 9. (c) TCS e-Serve Ltd. Ld. AR submitted that this company has been objected by assessee for its functional dissimilarity as it renders both BPO and KPO services without segmental reporting. It is submitted that this company owns huge brand of TATA group and has also incurred brand related expenses and therefore cannot be accepted to be compared with a captive service provider like assessee. Ld.CIT DR on the contrary opposed its exclusion and placed reliance upon orders passed by authorities below. We have perused submissions advanced by both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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