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TMI Blog2021 (10) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Nikhil Pathak For the Respondents : Shekhar L. Gajbhiye ORDER Partha Sarathi Chaudhury, Member (J) 1. This appeal preferred by the assessee emanates from the directions of the Ld. Dispute Resolution Panel (DRP)-3, Mumbai dated 26.08.2019 passed u/s. 144C(5) of the Income Tax Act, 1961 for the assessment year 2015-16 as per the following grounds of appeal: 1. Based on the facts and circumstances of the case and in law, the learned Assessing Officer ( Ld. AO ) and Hon'ble Dispute Resolution Panel (Hon'ble DRP) erred in making/upholding the transfer pricing adjustment of INR 2,08,94,594/- to the taxable income of the appellant. 2. Rejection of transfer pricing documentation ( TP study ) maintained by the appellant and conducting fresh search on incorrect basis Based on the facts and circumstances of the case and in law, the Hon'ble DRP and Ld. Transfer Pricing Officer (Ld. TPO) erred in rejecting the transfer pricing documentation maintained by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ( Rules ) Consequently, the Hon'ble DRP and the Ld. TPO also erred in conducting fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rejecting Allsec Technologies Ltd. on the basis of it being persistent loss making company even though it is not persistent loss making company. Rejecting Microland Limited (Seg.) on the basis of insufficient ITes segment even though adequate ITes segment data is available from Annual Report. Rejecting R. Systems Intl Ltd. merely on the basis of company having different financial year despite this company being functionally comparable. Selection of functionally dissimilar companies as comparable viz. Infosys BPO Ltd., Tech Mahindra BSPL, AGS Health Private Limited and E-Care India Pvt. Ltd. without conducting proper quantitative analysis and without rebutting the Appellant's submission explaining functional dissimilarity of these companies. Considering Cross Domain Solutions Pvt. Ltd., Excel Infoways Limited (Segment), SPI Technologies India Pvt. Ltd. and ICRA Techno Analytics Ltd. in final set of comparable companies in the TP order even though these companies are not appearing in the search (population) undertaken by the Ld. TPO for fresh search of comparables. Thus, the Hon'ble DRP/Ld. TPO erred by adopting cherry picking approach to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITes segment in respect of the assessee. That out of these 11 companies, the assessee is disputing four companies as comparables which are (A) SPI Technologies India Pvt. Ltd., (B) AGS Health Pvt. Ltd., (C) Infosys BPO Ltd. and (D) Tech Mahindra BSPL 4. Giving a brief background to the case, the Ld. Counsel for the assessee submitted that the assessee is doing business of ITes segment wherein major work is of analytical support and functions with software services as only incidental to and not independent of such analytical functions. It was also clarified by the Ld. Counsel that Master Technical Service Agreement dated 8th December, 2004 between ECMi LLC and ECMi Software Private Limited provides for software services, that however, from 2013 onwards, there has been a drastic amendment as to the Master Services Agreement and for the year under consideration i.e. financial year 2014-15 relevant to assessment year 2015-16, the services of the assessee are to provide after-market analytical services and only related software support. Meaning thereby, what the assessee was doing in 2004, was essentially providing software services which got amended from April, 2013 for the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Pvt. Ltd. in the relevant assessment year, there has been an amalgamation of this company and due to the extraordinary events this company is to be rejected. Demonstrating these facts, the Ld. Counsel for the assessee took us through the Annual Report of SPI Technologies India Pvt. Ltd. at Page 1331 wherein, there is a disclosure by the Board of Directors that amalgamation has taken place between Laserwords Private Limited, a wholly owned subsidiary of SPi Technologies India Private Limited (the Amalgamating Company) with SPI Technologies India Private Limited (the Amalgamated Company) pursuant to Section 391 to 394 of the Companies Act, 1956 with appointed date as April 1, 2014 i.e. financial year 2014-15 relevant to assessment year 2015-16. This scheme was sanctioned by the Hon'ble High Court of Judicature at Madras vide order dated 22.08.2014 which was filed with the Registrar of Companies, Chennai on 4th October, 2014 being the effective date. This fact of amalgamation taking place in respect of SPI Technologies India Pvt. Ltd. during relevant assessment year was also brought to the notice of the Ld. DRP at the time of objections raised before it by the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Aptara Technology (P.) Ltd. (supra) and PTC Software (I)(P.) Ltd.'s case (supra) and it is being followed. (V) In view of the above, as the proposed question is covered by the decision of this Court, no substantial question of law arises. Thus, not entertained. 9. That even the Pune Bench of the Tribunal in the case of Brintons Carpets Asia (P) Ltd. Vs. Deputy Commissioner of Income Tax, ITA No. 1312 1349/PN/2015 dated 29th March, 2019 observed that the assessee before the Tribunal had first claimed that Accentia Technologies Ltd. cannot be selected in the final list of comparables as during the year under consideration, there was an extraordinary event of amalgamation. Thereafter, the Tribunal has analyzed how and what extraordinary event took place in that case and in such scenario, the company cannot be considered as comparable one and the relevant extracts in this regard are as follows: 13. ......................The learned Authorized Representative for the assessee has pointed out that though the CIT (A) says that there is no such amalgamation but his finding is totally incorrect. In this regard, reliance was placed on the ratio laid down by Pune B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available). Moreover, it was contended that the sales/turnover of the said concern was more than ₹ 50 crores for the year under consideration which did not meet with turnover filter applied by the assessee. On this point, it was pointed out that the assessee had selected sales/turnover filter of 1-50 crores i.e. any concerns having a turnover exceeding ₹ 50 crores were excluded. Thirdly, it was pointed out that the activities of the said concern were not comparable to the activities of the assessee. 14. The TPO has noted the aforesaid objections of the assessee in para 18.1 of his order and has rejected the same by merely noticing that 75% of the revenue/income of the said concern is from ITES and therefore it is to be considered as a comparable. Before us, the Ld. Representative for the assessee has reiterated the submissions put-forth before the TPO in order to justify exclusion of the said concern from the list of comparables. In particularly, it has been pointed out that for the very same assessment year, the Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions India Pvt. Ltd. v. ITO, (2013) 38 taxmann.com 55 (Bang.) has excluded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.:- 11. AGS Health Pvt. Ltd. is a revenue cycle management company which provides medical billing and medical transcription services to its customers. The assessee contended that this company is not comparable for two reasons viz. (i) functional comparability and (ii) insufficient information in public. 12. The Ld. Counsel for the assessee on this issue brought to our notice at Page 6 of the TPO's order wherein the TPO himself acknowledged that the companies which have transactions with related parties are greater than 25% are eliminated and it is an appropriate filter. Thereafter, the Ld. Counsel for the assessee took us through the notes on related party explanatory and therein in the Column transaction with related parties in respect of AGH Health Pvt. Ltd., sale of service as on 31.03.2015 for the assessment year 2015-16, it was at ₹ 133,26,47,750/-. 13. That it was also submitted before the Ld. DRP vide submissions dated 25th February, 2019 by the assessee that as per Annual Report of AGS Health Pvt. Ltd., it had earned 100% of its revenue from related party during financial year 2014-15. That it is very clear thus, AGS Health Private Limited is not clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 ITR 216 wherein the Hon'ble High Court observed that the findings of the Tribunal given in respect of HCL Comnet Systems and Services Ltd. as follows: We find force in the submission of the ld. AR that this company cannot be a comparable as the turnover of this company is 260.18 crores while in the case of the Assessee, the turnover is around ₹ 11 crores only. While making the selection of comparables, the turnover filter, in our opinion, has to be the basis for selection. A company having turnover of ₹ 11 crores cannot be compared with a company which is having turnover of ₹ 260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Assessee. We, accordingly, direct the AO to exclude this company out of the comparables. Thereafter, the Hon'ble High Court held the said findings of the Tribunal are on the basis of appreciation of evidences on record, hence, no infirmity found. In this decision, it was observed by the Hon'ble Jurisdictional High Court that while making the selection of comparables, the turnover filter, has to be the basis for selection. A company having tur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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