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TMI Blog2019 (2) TMI 1976X X X X Extracts X X X X X X X X Extracts X X X X ..... O. No. 85/Bang/2018 in ITA No. 1223/Bang/2018 - - - Dated:- 28-2-2019 - Arun Kumar Garodia, Member (A) and Laliet Kumar, Member (J) For the Appellant : Vikas K. Suryavanshi, Addl. CIT, DR. For the Respondents : K.R. Vasudevan, Advocate. ORDER Arun Kumar Garodia, Member (A) 1. This appeal is filed by the revenue and the C.O. is filed by the assessee and these are directed against the order of ld. CIT(A)-1, Bangalore dated 12.12.2017 for Assessment Year 2009-10. 2. The grounds raised by the revenue in its appeal are as under. 1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. In the facts and circumstances of the case, the CIT(A) has erred in holding that the M/s. Infosys BPO Ltd, M/s. Accentia Technologies Limited, M/s. Cosmic Global Ltd, M/s. Eclerx Services Limited and M/s. Microland Limited cannot be taken as comparable, being functionally different when the companies satisfy all the qualitative and quantitative filters adopted by the TPO. 3. The Ld. CIT (A) erred in fact and in law in not acknowledging that determination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this Tribunal order is for the same Assessment Year i.e. Assessment Year 2009-10. We also find that in para 6 of this Tribunal order, it is noted by the Tribunal that this assessee is engaged in the business of end to end BPO Services. In the present case, as per the functional profile noted by the TPO in his order in para 3.1 that the assessee is engaged in Business Process Outsourcing Services. No difference in facts could be pointed out by the learned DR of the revenue. Hence in our considered opinion, this Tribunal order is applicable in the present case. 7. We find that in para 11 of this Tribunal order, it is stated by the Tribunal that only four same comparables are to be excluded as per assessee's request being 1) Accentia Technologies 2) Cosmic Global Ltd. 3) Eclerx Services Ltd. 4) Infosys BPO Ltd. Hence, we reproduce para nos. 11 to 11.4 of this Tribunal order. These are as under. 11. Now, we will take up the objections raised by the assessee against various companies selected by the TPO and included in the set of comparables. At the time of hearing, learned AR of the assessee has submitted that the assessee will confine its arguments only wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO and the DRP and submitted that the DRP has rejected the objections raised by the assessee against this company. Therefore, this company is a good comparable for determination of the ALP in respect of international transactions of the assessee. (ii) We have considered the rival submissions as well as relevant material on record. The first objection has been raised by the learned AR of the assessee on account of extraordinary event of acquisition/purchase of business by Accentia Technologies Ltd., whereby M/s. Oak Technologies Inc, USA has been acquired by this company during the year under consideration. Though the extraordinary event of merger or acquisition, if influenced the business as well as the revenue of a company then said company is not considered as a good comparable for the purpose of determination of the ALP however, in this case, it is not clear from the Annual Report whether the business of M/s. Oak Technologies Inc has been acquired and merged with the said company during the year under consideration. It appears that Accentia Technologies Ltd., has purchased up to 96% of the share holding of M/s. Oak Technologies. If it is only a transaction of purchase of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices and process outsourcing as well as in the activity of process re-engineering and automation apart from middle office and back office support to capital market. Therefore, keeping in the diversified high-end services, this company cannot be considered as functionally comparable with the assessee. In support of his contention, he has relied upon the decision of the Special Bench of the Mumbai Tribunal in the case of Maersk Global Centres (India) (P.) Ltd. v. Asstt. CIT [2014] 43 taxmann.com 100/147 ITD 83. (i) On the other hand, learned Departmental Representative has submitted that this company is undisputedly in the business of ITeS and therefore, the nomenclature that of KPO will not make it functionally different from the assessee. He has relied upon the orders of the authorities below. (ii) We have considered the rival submissions as well as relevant material on record. We find that the company Eclerx Services Ltd. is engaged in diversified activity of providing services including analytic services and data process solutions to its global clients. The service provided by Eclerx Services Ltd., is in various areas including capital market and therefore, the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saving and output gains with better control over quality. Keeping in view the nature of services rendered by M/s. eClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns. 83. For the reasons given above, we are of the view that if the functions actually performed by the assessee company for its AEs are compared with the functional profile of M/s. eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AO/TPO as per the direction of the DRP. Thus it is clear that the Special Bench found that this company is not comparable with BPO company which are engaged only in low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial on record. We note that in para 16.2.15 of the Annual Report of this company, it has been reported that there was amalgamation w.e.f. 1/4/2008. The relevant part of the information provided in the Annual Report reads as under: Amalgamation of PAN Financial Services India Private Limited The Board of Directors in their meeting held on October 6, 2008. approved, subject to the approval of the Honorable High Courts of Karnataka and Chennai, a Scheme of amalgamation ( the Scheme ) to amalgamate PAN Financial Services India Private Limited ( PAN Financial ), a wholly owned subsidiary of the Company engaged in providing business process management of services, with the Company with effect from April 1, 2008 ( effective date ). The approval of the High Court was received on April 6, 2009 and filed with the respective Registrar of Companies of Karnataka and Tamilnadu on April 6, 2009 and March 10, 2009 respectively. Accordingly on the scheme becoming effective, the financial statement of PAN Financial has been merged with the company. It is clear that there was extraordinary event of amalgamation during the year under consideration. Therefore, in view of the extraordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the profit and loss account of this company that an amount of ₹ 3,00,25,326/- has been paid on account of translation charges. Thus, learned AR of the assessee has submitted that this company cannot be considered as functionally comparable with the assessee for the purpose of determining the ALP. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal in the case of Lam Research (India) (P.) Ltd. v. Dy. CIT in ITA No. 1437/Bang/2014 dated 30/4/2015. (i) On the other hand, learned Departmental Representative has submitted that the comparability of this company has been examined by the TPO as well as by the DRP. The TPO has rejected the objections raised by the assessee in respect of this company by holding that the translation service are in the nature of ITeS and therefore, it qualifies all the filters applied by the TPO. He has relied upon the orders of the authorities below. (ii) We have considered the rival submissions as well as the relevant material on record. There is no dispute that this company is in the business of providing service of medical transcription and consultancy services, translations services and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Global Limited, a copy of which has been placed on record, we find that its total revenue from operations are at ₹ 7.37 crore divided into three segments, namely, Medical transcription and consultancy services at ₹ 9.90 lacs, Translation charges at ₹ 6.99 crore and Accounts BPO at ₹ 27.76 lac. The Ld. AR has made out a case that outsourcing activity carried out by this company constitutes 57% of total expenses. The reason for which we are not agreeable with the Ld. AR is that we have to examine the revenue of this case only from Accounts BPO segment and not on the entity level, being also from Medical transcription and Translation charges. When we are examining the results of this company from the Accounts BPO segment alone, there is no need to examine the position under other segments. The entire outsourcing is confined to Translation charges paid at ₹ 3.00 crore, which is strictly in the realm of the Translation segment, revenues from which are to the tune of ₹ 6.99 crore. If this segment of Translation is not under consideration for deciding as to whether this case is comparable or not, we cannot take recourse to the figures which are releva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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