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TMI Blog2020 (9) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 for the Assessment Year 2011-12. 2. In the Revenue's Appeal, i.e., ITA No. 1571/Del/2016, it has been admitted by both the parties that tax effect on the disputed amount challenged in the appeal is less than Rs. 50 lac. In support, following computation of tax effect has been given. Particulars Reference Amount (INR) Amount of Income against which appeal is filed by the tax department (refer page no.1 of the department's appeal) A 5,170,421/- Tax on above @ 30% B 1,551,126 Surcharge at 7.5% ( If income exceeds 1 crore) C Education Cess at 3% D 46,534 Tax effect (computed as per CBDT circular no.17/2019 r.w. circular no. 3/2018) enclosed herewith as Annexure A and Annexure B, respectively) [B+C+D] 1,59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is also engaged in providing back office business support services to LD commodities Asia Pvt. Ltd. During the relevant Financial Year the assessee has undertaken international transaction of back office support services of Rs. 7,49,33,645/-. The assessee has rendered back office support services for various agribased commodities to its AEs which include provision of logistic support execution along with man power services. These services primarily include related services, logistic support, trade support, travel support, international aid services and inspection services. In consideration thereof, the assessee company was remunerated on a cost plus basis with a markup of 10%. In TP study report, the assessee claimed that it is provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of turnover and large scale operations and also having huge brand equity. However, the ld. DRP has rejected the explanation on the ground that turnover cannot be the criteria for excluding the comparable and further the assessee has not shown how the Tata brand equity and ownership of tangible led to high profit. The assessee also gets leverage on the valuable IPR and another commercial intangible owned by the AEs which provide range of services. Thus, there is no fixed relation between brand and margins. 7. One of the key reason why the TCS-e-serve Ltd. cannot be held to be comparable with the assessee company which is providing back office support services, i.e., ITeS/BPO services, because TCS-e-Serve in addition to ITeS/BPO servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also TPO's own comparable which was challenged by the taxpayer before the TPO as well as DRP. The taxpayer challenged the inclusion of TCS E-Serve as a comparable on grounds of functional dissimilarity, non-availability of segmental information, difference in risk profile, ownership of intangibles, payment for Tata brand and incomparable scale of operations and relied upon the decision rendered by Hon'ble Delhi High Court in case of Avaya India Ltd. vs. ACIT in ITA 532/2019 order dated 24.07.2019. 16. However, on the other hand, Id. DR for the Revenue in order to repel the arguments addressed by the Id. AR for the taxpayer relied upon the order passed by the Id. DRP and contended that all these contentions now raised by the Id. AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise, TCS E-Serve is having significant ownership of intangibles and it is a brand in itself as it has made payment for Tata brand equity contribution of Rs. 3.67 crores during the year under assessment, as is evident from Notes to Financial Statement, available at page 81 of the annual report compilation. Furthermore, when we examine the scale of operation of TCS E-Serve at page 66 of the annual report compilation, its total revenue is Rs. 1733.34 crores as against revenue of the taxpayer at Rs. 8,90,95,280/-. 18. Exclusion of TCS E-Serve has been upheld by the Hon'ble Delhi High Court in Avaya India Ltd. (supra) on ground of large scale operation, huge brand value and lack of segmental by distinguishing Chryscapital Investment Advisors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical transaction being conducted in an uncontrolled manner" overlooks the effect of the Tata brand on the performance of the impugned comparables. The question was not merely whether the margins earned by the Tata group in providing captive service to the Citi entities were at arm's length. The question was whether they offered a reliable basis to re-calibrate the PLI of the Assessee whose scale of operations was of a much lower order than the two impugned comparables. The mere fact that the transactions were identical was not in terms of the law explained in the above decisions, either a sole or a reliable yardstick to determine the apposite choice of comparables. 29. For all of the aforementioned reasons, the Court finds merit in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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