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TMI Blog2016 (9) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... or which exclusions were sought, were remitted to the lower authorities by the Tribunal. Accordingly, here also we are of the opinion that whether M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. could be considered as good comparables have to be looked afresh by the Assessing Officer/TPO. We, therefore, set aside the orders of the authorities below and remit the issue regarding the comparability of M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. back to the file of the Assessing Officer/TPO for consideration afresh in accordance with law. Assessee is free to raise all its objections against inclusion of the above companies before the Assessing Officer/TPO and these have to be considered by the Assessing Officer/TPO while passing the orders. Computation of the PLI of the comparable companies selected was not properly done - Profit level indicator considering the margins prior to depreciation would give better results in the comparable analysis and benchmarking of the transactions of the assessee in the given facts and circumstances. We direct the Assessing Officer/TPO to rework the PLI of the comparables after excluding the depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line plus database. Assessee had worked out its net margin at 14.5% and thus, as per the assessee, there was no requirement for any adjustment on the pricing of its international transactions with the AEs. 6. When the matter was referred to the TPO, for various reasons mentioned in the TPO's order, he rejected ten companies considered by the assessee. The TPO reached a final set of comparables of four and arrived at the arithmetical mean of the PLI of such comparables as under: Sr. No. Name of the company OP/TC)% 1 Cosmic Global Ltd 48.10 2 E4E-Health Solutions Ltd [formerly known as Nittany Outsourcing Services Pvt. Ltd] 33.31 3 R Systems International Ltd.(seg) 14.09 4 Informed Technologies India Ltd 23.29 Arithmetic mean 29.69 7. Applying the PLI of 29.69%, TPO recommended an upward adjustment of ₹ 3,37,17,672/-. 8. When a draft order on the above lines was issued to the assessee it chose to move the DRP. The DRP, however, rejected the contentions of the assessee and held that the ALP done by the TPO was absolutely in order. Thereafter, assessment was completed by making an addition of ₹ 3,37,17,672/- as recommended by the TPO. 9. Now before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so on ITE segment. In support of his ground for exclusion of M/s E4E Healthcare Business Services Pvt. Ltd. the ld. AR placed reliance on the decision of Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd vs DCIT in I.T.A.No. 1478/Del/2015 dated 21.12.2015. 12. Per contra, the ld. DR submitted that assessee having selected the two companies by itself in its TP study should not be allowed to turn down and argue that these were functionally different. Further, according to him, the reasons mentioned by the assessee for exclusion of these companies were never addressed by the authorities below. 13. We have considered the rival contentions and perused the orders of the authorities below. It is not disputed that both M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. appeared in the list of comparables selected by the assessee in its TP study for benchmarking the value of international transactions with its AEs. Assessee however, had objected to the inclusion of the above two companies before the TPO and DRP. DRP as well as TPO had not considered the merits of the claim of the assessee seeking exclusion of these comparables for the sole reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Ld. AR submitted that assessee was charging depreciation at a rate much higher than what was prescribed by Schedule XIV of the Companies Act, 1956. As per the ld. AR, out of the four comparables considered by the TPO, M/s Cosmic Global Ltd, M/s Informed Technologies India Ltd and M/s R Systems International Ltd. had charged depreciation as per Schedule XIV rates. Reliance was placed on pages 175, 185 and 202 of the paper book. As against this, ld. AR submitted that assessee had a higher rate of depreciation than what was stipulated in Schedule XIV. Relying on Revised Edition of Guidance Note on Report u/s 92E of the Act (Transfer Pricing) issued by the Institute of Chartered Accountants of India, ld. AR submitted comparative margin to operating profits when considered as PLI should be one before depreciation, when different depreciation rates have been adopted by the selected comparables. Reliance was placed on the decision of Panaji Bench of the Tribunal in the case of M/s Pentair Water India P. Ltd in I.T.A.No.03/PNJ/2013 and 06/PNJ/2013 dated 23.5.2014. 16. Per contra, the ld. DR supported the orders of the authorities below. 17. We have considered the rival contentions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing profit, in our opinion, will be to compute the profit before depreciation in respect of each of the company. This will take out the inconformity or the variation in the profit level of the comparables arising due to adoption of different method of charging depreciation. We have gone through the order of the Bombay Bench of this Tribunal in the case of DCIT vs. Reuters India 24 ITR (Trib) 231 (Mum) as has been relied on by the ld. AR. We noted that the Tribunal in this case has adopted the cash profit/operating cost as the correct profit level indicator under the TNMM method." 19. We are, therefore, of the opinion that the profit level indicator considering the margins prior to depreciation would give better results in the comparable analysis and benchmarking of the transactions of the assessee in the given facts and circumstances. We direct the Assessing Officer/TPO to rework the PLI of the comparables after excluding the depreciation cost and benchmark the PLI of the assessee also excluding the depreciation cost. Ordered accordingly. Ground Nos. 6 and 7 of the assessee are allowed for statistical purposes. 20. In the result, the appeal of the assessee is partly allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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