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TMI Blog2021 (8) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... s Limited (earlier, Vishal Information Technologies Limited) and Crossdomain Solutions Limited from the list of comparables. After completing the aforesaid exercise, he must compute the ALP of the international transactions. - I.T.A. No.6522/Mum/2014 - - - Dated:- 12-8-2021 - Shri Saktijit Dey (Judicial Member) And Shri Manish Borad (Accountant Member) For the Appellant : Shri Sunil M Lala, (AR) For the Respondent : Shri Manpreet Duggal (DR) ORDER PER SAKTIJIT DEY (JM) Captioned appeal by the assessee arises out of order dated 29-08-2014 of learned Commissioner of Income Tax (Appeals)-11, Mumbai for the assessment year 2008-09. 2. The grounds raised by the assessee are in respect of a common issue relating to addition made on account of transfer pricing adjustment. 3. Briefly the facts are, the assessee, a resident company, is a part of Morgan Stanley group and as a captive service provider, provides back office support services to group entities, worldwide. Thus, the services provided by the assessee are in the nature of information technology enabled services (ITES). In the year under consideration, the assessee had entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before learned Commissioner (Appeals). After considering the submissions of the assessee, learned Commissioner (Appeals) excluded three comparables, viz. Accropetal Technologies Limited (Segmental), Mold-Tek Technologies Limited, and Triton Corp Limited, out of the comparables selected by the TPO while retaining the balance three. Being aggrieved, the assessee is before us. 5. Though, the assessee has raised multiple grounds on various aspects of the TP adjustment; however, at the time of hearing, learned counsel for the assessee restricted his argument to selection/rejection of certain comparables. 6. He submitted, the first appellate authority has accepted assessee s contention that it is not providing KPO services. Therefore, he submitted, the companies which have been finally retained, being KPO companies, cannot be treated as comparable. He submitted, the benchmarking done by the assessee in the preceding three assessment years by characterizing it as an ITES/BPO company was accepted by the TPO. Therefore, there is no justifiable reason to treat the assessee as a KPO company. He submitted, before the merger with the present assessee, the merged company, Morgan Stanl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier, the dispute before us is confined to selection/rejection of certain comparables. Before, we proceed to deal with the acceptability or otherwise of the comparables disputed before us, it is necessary to observe, the assessee, undoubtedly, provides back office support services to its group entities. The assessee has claimed itself to be a routine ITES/BPO service provider, whereas, the TPO has re-characterized the assessee as a KPO company and accordingly, has selected similar nature of companies. However, learned Commissioner (Appeals) has accepted assessee s contention that it is not a KPO service provider. Admittedly, the department has not challenged the aforesaid decision of the first appellate authority. Thus, keeping in perspective the aforesaid factual position, we have to examine whether certain companies are comparables to the assessee or not. 11. At the outset, we will deal with the companies selected by the TPO, viz. eClerx Services Ltd, Coral Hubs Limited (Vishal Information Technologies Limited) and Crossdomain Solutions Limited. As far as eClerx Services Ltd and Crossdomain Solutions Limited are concerned, now it is fairly well settled that these tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble or not. In the aforesaid factual positions, we do not find any strong reason to uphold the decision of the departmental authorities in excluding the aforesaid three companies selected by the assessee. 13. Pertinently, while framing the order under section 92CA(3) of the Act in case of the successor company (the present assessee) with whom the erstwhile company merged, the transfer pricing officer had passed an identical order selecting/rejecting the very same comparables by re-characterizing the successor company as a KPO service provider. In an identical order learned Commissioner (Appeals), though, held that the successor company is not a KPO service provider; however, he retained some of the companies selected by the TPO while upholding the rejection of companies selected by the concerned assessee. While deciding the appeal filed by the concerned assessee in Morgan Stanley Advantage Services (P) Ltd vs DCIT (2020) 118 taxmann.com 112 (Mum Trib), the Tribunal has held, as under:- 10. We have carefully considered the submissions and perused the records. The assessee in the present case is a subsidiary of Morgan Stanley International Holdings Incorporated USA. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lerx Services Ltd. and Vishal Information Technologies Ltd. (earlier Coral Hub Ltd.) has been held to be not comparable to the assessee by the ITAT for the assessment year 2007-08. In this regard, we find that ITAT in the aforesaid order has observed as under: 32. As noted earlier the Id. AR for the assessee submitted that the assessee submits that Eclerx Services Ltd. has not considered as a comparable in earlier years. Eclerx Services Ltd. is a Knowledge Process Outsourcing (KPO) Service provider which is not comparable to assessee; assessee is engaged in providing back office support services. In support of his submission, the Id. AR of the assessee relied upon the decision of Delhi High Court in Rawpgreen Solution (P.) Ltd. v. (77 (20 151 377 ITR 533 (Delhi). The TPO included this comparable by taking his view that this company is in date process and analytical services. The Id. CIT(A) confirmed the action of the TPO by taking his view that this comparable company is into the health care receivable management and therefore renders ITeS services. The Hon'ble Delhi Court in Rampgrecn Solution (P.) Ltd. (supra} held entities rendering voice call center services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore the same cannot be accepted as a comparable and hence is directed to be excluded from the list ./of comparables. 14. Accordingly, following the aforesaid decision of the tribunal, we holding that the Eclerx Services Ltd. and Vishal Information Technologies Ltd. (earlier Coral Hub Ltd.) are liable to be rejected as invalid comparable. As regards the other comparables namely Crossdomain Solutions and Datamatics Financial Services, we find ' that the Transfer Pricing officer and the Id. CIT(A) have found their functions to be similar to that of KPO I and that of Eclerx and Vishal technologies. Since, the ITAT has duly upheld the rejection of the aforesaid /. companies, i.e., these two companies are also liable to be rejected. Furthermore, Datamatics Financial// Services also fails the export filter of 75% which has been adopted by the transfer pricing officer. Hence, inl ' the background of aforesaid, we hold that following comparable are to be rejected: * Eclerx Services Ltd. * Vishal Information Technologies Ltd. * Crossdomain Solutions * Datamatics Financial Services. 15. Now we deal with the following comparables which were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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