9911796707
TMI Blog2021 (4) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... wledge Services (India) Private Limited (hereinafter referred to as Acuity India or the Company or the Appellant ), respectfully craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income Tax, Circle - 4(1)(2) (hereinafter referred to as learned Assessing Officer or the learned AO ), dated 28 December 2018 for the Assessment Year ( AY ) 2007-08, under section 143(3) read with section 254 of the Income Tax Act, 1961 (the Act ) pursuant to the directions issued by Dispute Resolution Panel (hereinafter referred to as the Hon'ble DRP ), Bangalore dated 20 December 2018 under section 144C(5) read with section 254 of the Act ('impugned order ) inter-alia on the following grounds which are without prejudice to each other: That on the facts and circumstances of the case and in law: 1. The impugned order of the learned AO pursuant to the directions of the Hon'ble DRP, erred in assessing the total income at INR 2,27,63,060 as against the returned income of INR 2,12,644; 2. The learned AO/DRP/Transfer Pricing Officer ('TPO ) have erred in making addition of INR 2,25,50,416 to total income of Appellant on pretext that price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Technologies Ltd.; Asit C Mehta Financial Services Ltd.; Spanco Ltd. learned AO/DRP/TPO erred in law and in facts by selecting following companies as comparable he here the financials of such companies were subject to fraud and subject to indictment for FY 2006-07:- Maple eSolutions Ltd.: Trinton Corp Ltd. 9. The learned AO/DRP/TPO erred in by selecting the following companies which are functionally dissimilar by using unreasonable comparability criteria- Bodhtree Consulting Maple eSolutions Ltd., Triton Corp Ltd., Vishal Information Technologies Ltd., Asit C Mehta Financial Services Ltd., Spanco Ltd., Accurate Data Converters Pvt. Ltd., Iservices India Pvt. Ltd. 10. The learned AO/DRP/ITPO have erred in computing the working capital adjustment of the Appellant y not considering advances received from customer; 11. The learned AO/DRP/TPO erred in not making suitable adjustments on account of differences in the risk profile of the Appellant vis- -vis the comparables, while conducting comparability analysis; 12. The learned AO/DRP/TPO erred in computing the arms length p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the most appropriate method. The Ld. TPO noted that assessee used following 4 comparables having an average margin of 10.51%: SI. No. Name of the company Weighted Average (%) 1 ICRA Techno Analytics Limited 8.68 2 Goldstone Technologies Limited 12.59 3 Lanco Global Systems Limited 8.53 4 Ace Software Exports Limited 12.22 Arithmetical Mean 10.51% 4. In order to select the above comparables assessee used following filters: Step Description 1 Companies for non-availability of sales were excluded; 2 Companies having manufacturing and trading sales more than 25 percent were eliminated; 3 Companies with advertisement expense of more than 5 percent were excluded; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Point Business Solutions Limited 21.26% 9. Cosmic Global Limited 12.40% 10. Datamatics Financial Services Limited 5.07% 11. Eclerx Services Limited 89.33% 12. Flextronics Software Systems Limited 8.62% 13. Genesys International Corporation Limited 13.35% 14. HCL Comnet Systems Services Limited (seg) 44.99% 15. ICRA Techno Analytics Limited (seg) 12.24% 16. Informed Technologies India Limited 35.56% 17. Infosys BPO Limited 28.78% 18. Iservices India Private Limited 49.47% 19. Maple eSolutions Limited 34.05% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edge Solutions Limited 12.83% 4. Apollo Healthstreet Limited -13.55% 5. Asit C Mehta Financial Services Limited 24.21% 6. Bodhtree Consulting Limited 29.58% 7. Caliber Point Business Solutions Limited 21.26% 8. Cosmic Global Limited 12.40% 9. Datamatics Financial Services Limited 5.07% 0. Flextronics Software Systems Limited 8.62% 1. Genesys International Corporation Limited 13.35% 2. ICRA Techno Analytics Limited (seg) 12.24% 3. Iservices India Private Limited 49.47% 4. Maple eSolutions Limited 34.05% 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO noted that assets employed for the year under consideration include computers and servers, office equipment furniture's and fixtures etc., which are used to carry out the business activities in India. Ld. TPO also noted that assessee owns intangible assets in the form of software amounting to ₹ 7,13,093/- Risk: 17. The transfer pricing report states that assessee undertakes operational risks and obsolescence risk relating to hardware Based on the above we shall carry out the comparability analysis of the alleged comparables in Ground No. 8-9 referred to herein above: Bodhtree Consulting Ltd. (Seg.): 18. The Ld. AR referring to the annual report submitted that this company provides open to end web solutions, software consultancy, design and development of solutions which cannot be compared to a BPO company. It has been submitted that this company provides data cleansing services to those companies for which they have developed a software. Placing reliance on observations of this tribunal in case of Global e-Business Operations Pvt. Ltd. vs. DCIT) in (IT(TP)A No. 1092/B/2011 for assessment year 2007-08) the Ld. AR submitted that this company had pec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 of the list of comparable companies chosen by the TPO viz., M/s. Maple E solutions Ltd., and Triton Corporation Ltd., the Mumbai Bench of the Tribunal in the case of Stream International Services (P.) Ltd., (supra) in para 13(iii) at page-14 of the order held that the promoters of these two companies were involved in fraud for earlier years and hence the financial results of these companies are distorted and cannot be relied upon and in this regard relied on several decisions rendered by the various benches of ITAT. Respectfully following the same, we direct the aforesaid two companies be excluded from the list of comparable companies chosen by the TPO. Learned Standing Counsel has not brought anything controverting the findings of the Tribunal in the above case. Therefore, we have no reason to differ with the reasoning adopted by the co-ordinate bench in the case of e4e Business Solutions India (P.) Ltd. (supra). Therefore, we direct the AO/TPO to exclude these companies form the list of comparables Before us nothing contrary to the above findings has been brought on record by revenue. Ld. DR do not have any objection in exclusion of this comparable. Respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns performed by present assessee before us Respectfully following the above view, we direct this comparable to be excluded from the finalist. Asit C Mehta Financial Services Ltd. 28. The Ld. AR submitted that this company is functionally not comparable with the assessee, as it has outsourcing of significant portion of its business as the employee cost of this company is 31.372% of the total cost and outsourcing cost 24.75% of the total costs. It is submitted that this comparable provides services under three segments being ITES, software development, portfolio management services and investment activities. The Ld. AR submitted that there are no segmental details in respect of the revenue recognition is and therefore income earned by this comparable under ITES segment is unascertainable. He also submitted that, this comparable is functionally different, as it is engaged in portfolio management services which are not comparable to the functions of the assessee. In support of the submission he relied on Magma Design Automation India (P.) Ltd. v. Asstt. CIT ITA No. 1214/Bang/2011, dated 29-8-2016. The Ld. AR also placed reliance on Global E Business Operations Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that it is functionally with that of assessee and financial data are not available in the database. It is also been submitted that it this company fails employee cost filter applied by Ld. TPO. It has been submitted that this comparable has reported employee cost at 1.61% which shows a different business model. Ld. AR further submitted that this company outsources its business and provides software development services. 37. On the other hand the Ld. DR placed reliance upon orders of authorities below. 38. We have perused submissions advanced by both sides in the light of records placed before us. 39. The Ld. AR placed reliance upon decision of coordinate bench of this Tribunal in case of Siemens Information Processing Services (P.) Ltd. v. Dy. CIT (2016) 71 taxmann.com 281, wherein this company was considered for comparability analysis under ITeS segment. It has been observed by the Tribunal that employee cost is at 1.61% and this company also outsources its business to outside vendors. We are observant that Ld. TPO has not used employee cost filter in the present case before us. It is also been observed by the Tribunal therein that in information sought by Ld. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
