9911796707
TMI Blog2019 (2) TMI 1957X X X X Extracts X X X X X X X X Extracts X X X X ..... has challenged the exclusion of Jeevan from the list of comparables to the assessee by the DRP on grounds of application of service income filter of 75%; which was infact a filter applied by the TPO. Apart from raising this ground (supra), Revenue has not placed on record any factual material evidence to controvert the DRP s finding that this company Jeevan had passed the 75% revenue filter applied by the TPO. Even otherwise, the DRP has, inter alia, excluded Jeevan on grounds of its huge fluctuating margins over the last few years which has not been challenged by Revenue. In this factual matrix of the case, as discussed above, we uphold the action of the DRP of excluding this company Jeevan Scientific Technology Ltd., from the list of comparables for failing the 75% revenue filter applied by the TPO and on account of its hugely fluctuating margins over the last few years which indicate that there were certain peculiar circumstances influencing the profit margins of the company. - IT(TP)A No.475/Bang/2016 - - - Dated:- 6-2-2019 - SHRI N. V. VASUDEVAN AND SHRI JASON P. BOAZ, JJ. Revenue by : Shri. C. H. Sundar Rao, CIT-DR-I Assessee by : None ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cropetal Technologies Ltd. cannot be taken as comparable, when it satisfies all the qualitative and quantitative filters adopted by the TPO. ii) The Hon'ble DRP erred in applying onsite revenue filter without appreciating the fact that the function carried out is Software Development irrespective of whether onsite or offshore. iii) The Hon'ble DRP erred in excluding M/s Acropetal Technologies on the ground that they have significant onsite revenue without appreciating the fact that onsite development of software entails more cost and thereby results in lower profit margins. iv) The Hon'ble DRP erred in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies. 2. M/s. Jeevan Scientific Technology Limited. a) The Hon'ble DRP erred in facts and law in excluding the company as a comparable, on the ground of failing the service income filter, when only the segmental results have been considered for comparability b) The Hon'ble DRP erred in appreciating the fact that when segmental results are avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submission of the learned counsel for assessee, on perusal of note no.15 of notes to accounts, which gives segmental revenue of this company , it is clear that the major source of the income for this company is from providing engineering design services and information technology services. The function performed by the engineering design services of the company cannot be considered as comparable to the ITES/BPO function performed by the assessee. The performance of the engineering design services is regarded as providing high end services amongst the BPO which require high skill whereas the services performed by the assessee are routing low end ITES function. We therefore hold that this company could not have been selected as comparable, especially when it performs engineering design services which only a knowledge processing outsourcing (KPO) would do and not a business processing outsourcing (BPO).' Similar View was taken by Hon'ble Bangalore ITAT in the case of - Symphony Marketing Solutions India Pvt. Ltd. vs. ITO (IT (TP) A No. 1316/Bang/2012), held that Acropetal cannot be considered as comparable as it performs engineering design services accordingly we direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue ratio even if the BPO segment is considered. It is submitted that this company Jeevan has also been excluded by DRP on account of (i) huge fluctuation in the profit margins of the company in the last few years and (ii) for failure on the 75% revenue earning filter applied by the TPO which have not been challenged by Revenue and therefore this company, Jeevan has to remain excluded from the list of comparables to the assessee. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find that the DRP has dealt with the comparability of the company Jeevan at pages 7 and 8 of its order and excluded it from the list of comparables to the assessee, by holding as under: Jeevan Scientific Technology Ltd: The objection against the wrong PLI becomes academic in nature in view of our findings in the subsequent para wherein this company has been rejected on functional analysis. 2.6 Ground of Objection 7: The Learned Transfer Pricing Officer and in turn the Assessing Officer erred in its functional analysis of Jeevan Scientific technologies Ltd, and went on to wrongly consider the same as a comparable company. Having con ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
