9911796707
TMI Blog2019 (11) TMI 1714X X X X Extracts X X X X X X X X Extracts X X X X ..... es and providing software development services and other related services to its AE, filed its return of income for the A.Y 2012-13 on 29.11.2012 admitting total income of ₹ 11,96,28,846/-During the assessment proceedings u/,s 143(3) of the Act, the A.O observed that the assessee has entered into international transactions with its AE, the determination of the arm's length price of the international transactions was referred to the TPO u/s 92CA of the Act. The Ld. TPO, observed that the assessee has benchmarked the transactions under three segments, namely, (i) software distribution, (ii) software development and related IT services; and (iii) Shared services. He observed that the first two segments are at ALP and therefore did not propose any adjustment. However, with regard to shared services, he observed that the assessee s PLI was 10.13% and that the assessee has short listed six comparable companies whose PLI was 13.24%. He analysed the transaction and found the TP document of the assessee to be defective and therefore rejected the same and conducted fresh search by adopting TNMM as the most appropriate method. He accepted only two companies selected by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Act) and the said additions being wholly unjustified are liable to be deleted. TRANSFER PRICING Incorrect selection of comparables 2. Accentia Technologies Limited 2.1 On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in selecting Accentia Technologies Limited as a comparable. 2.2 On the facts and in the circumstances of the case and in law, the Ld. TPO, erred in and the Hon'ble ORP further erred in upholding/ confirming the action of the Ld. TPO in selecting Accentia Technologies Limited as a comparable, without appreciating the said company provided high end KPO Services, employed significant intangible assets, possessed brand value, had high onsite expenditure and abnormal growth patterns and had undergone a change in business model and therefore the same was not functionally comparable to the Appellant. 2.3 On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble ORP further erred in upholding/ confirming the action of the Ld. TPO in selecting Accentia Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al portion of its work to third parties and had undertaken extra-ordinary events (acquisition of Agilyst Inc) and therefore, the same was not functionally comparable to the Appellant. 4.3 On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting Eclerx Services Limited as a comparable without appreciating that on the same facts the said company had been rejected as comparable by the Hon'ble DRP in the immediately preceding Assessment Year in the Appellant's own case. 5. E4e Healthcare Business Services Private Limited 5.1. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in not considering the correct margin ofE4e Healthcare Business Services Private Limited. 6. Infosys BPO Limited 6.1. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in selecting Infosys BPO Limited as a compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting TCS E-Serve Limited as a comparable without appreciating that on the same facts the said company had been rejected as comparable by the Hon'ble DRP in the immediately preceding Assessment Year. 9. Cross Domain Solutions Private Limited 9.1. On the facts and in the circumstances of the case and in law, 'he Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting Cross Domain Solutions Private Limited as a comparable. 9.2. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting Cross Domain Solutions Private Limited as a comparable, without appreciating that the said company provided business excellence services, market research and data analytics, and therefore, the same was not functionally comparable to the Appellant. 9.3. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant was a captive service provider, providing shared services (i. e. low end services) to its Associated Enterprises and consequently all KPO companies / companies providing high end services (whether selected by the Appellant or the TPO) ought to have been rejected. 15. On the facts and in the circumstances of the case and in law, Ld. TPO erred in and the u' Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in conducting f a fresh benchmarking which was erroneous and liable to be rejected since the Ld. TPO: i. Used lower turnover filter without the application of an upper turnover filter, thereby disregarding the importance of turnover in the benchmarking of comparables ii. Selected certain companies wherein peculiar economic circumstances / extra-ordinary events had occurred during the relevant year iii. Selected companies which were not comparable to the Appellant iv. Selected companies earning abnormal profits v. Used Related Party transaction filter of25 percent as against 10-15 percent vi. Used arbitrary filter of export sales applying a threshold limit of25 percent vii. Rejected of companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples of natural justice and in arriving at conclusions therein based on incorrect factual averments 1 allegations and therefore, the said impugned orders, being bad in law are liable to be quashed. LEVY OF INTEREST UNDER SECTION 234A, 234B 234C OF THE ACT 21. On the facts and in the circumstances of the case and in law, the Ld. AO erred in and the Hon'ble DRP further erred in upholding I confirming the action of the Ld. AO in levying interest uls 234A, 234B and 234C of the Act and the said levy of interest being wholly unjustified, ought to be deleted. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the Honorable Members to decide this appeal according to law . 3. At the time of hearing, the ld. Counsel for the assessee submitted that the TP adjustment and the comparables adopted for arriving at the ALP under similar facts had arisen in the assessee's own case for the A. Y 2011-12 and also the subsequent assessment years 2013-14 and 2014-15 respectively. He submitted that similar orders were passed by the TPO and DRP i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to be engaged in IT Enable Services (ITES) and has also adopted the companies which are only into ITES. He submitted that according to the TPO, the companies viz., Accentia, Acropetal, eClerx, Infosys and TCS are also into ITES segment, but, has not considered the functional dissimilarities in their services. He further submitted that the DRP has appreciated the functional dissimilarities and has, thus, rightly directed their exclusion. Having regard to the rival contentions and the material on record, we find that the DRP has directed the exclusion of the above companies on the following grounds:- (1) Accentia Technologies Limited:- This company is engaged in e-prescription and document management including coding, billing, bills payments management, account receivables management and ad-hoc reporting. This company is providing specified services as against the routine ITES services provided by the assessee. (2) Acropetal Technologies Limited:- On perusal of the annual report of this company which shows that the revenue is earned from engineering design services segment, and the ITAT, Bangalore Bench in the case of Symphony Marketing Solutions India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be retained as a comparable. 56. Having regard to the rival contentions and the material on record, we find that this company has been held to be a KPO service provider whereas the assessee has been categorised as a BPO by the TPO DRP. Having held so, the said company cannot be treated as a comparable to the assessee. Further, in the assessee's own case for the earlier A.Y (to which both of us are signatories), we have held that this company cannot be a comparable to the assessee. Since there is no change in the activities of the said company, we do not find any reason to take any other view and therefore, we direct the AO/TPO to exclude this company from the final list of comparables. Respectfully following the above decision, we direct the AO/TPO to exclude, 1) Accentia Technologies Ltd, 2) TCS E-Serve Ltd., and 3) Eclerx Services Ltd., from the final list of comparables. 7.2 Ld. Counsel for the assessee had also relied upon the decisions of various High courts to support his argument that TCS E-Serve Ltd. has also high brand value, due to which, the case of the assessee cannot be compared with TCS E-Serve Ltd. The decisions relied upon by the ld. Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since TPO/DRP have not brought on record any change in the case of Datamatics Global Services Pvt. Ltd. during the relevant AY from the subsequent AYs, we do not find any reason to take any other view than the view taken by the TPO in AYs 2013-14 and 2014-15 and therefore, the said company is directed to be excluded from the final list of comparables. 7.4 As regards E4e Healthcare Business Services Pvt. Ltd., the ld. Counsel for the assessee submitted that the assessee has no objection for considering the said company as comparable, provided the correct margin of the company is taken into consideration. In view of the above statement of the ld. Counsel for the assessee, we direct the AO/TPO to consider this company as comparable to the assessee by adopting correct margin of the said company. Therefore, the ground of assessee against adoption of this company is partly allowed for statistical purposes. 7.5 As regards Jindal Intellicom Ltd. also, ld. Counsel for the assessee is seeking adoption of correction margin of the said company, therefore, the AO/TPO is directed to adopt the correct margin of this company before arriving at the ALP of the transaction. Thus, the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id before the due date of filing the return u/s 139(1) of the Income-tax Act, 1961 (hereinafter called the Act), then no disallowance can be made. In view of the foregoing facts it is clear that the assessee deserves and is hereby allowed relief on this issue in the light of the above precedents. Respectfully following the same, we direct the AO to allow the deduction of employees contribution to PF provided assessee has remitted the same into Govt. a/c before the due date of furnishing the return of income u/s 139(1) of the Act. This ground is allowed. 9. As regards ground No. 20 regarding inadequate opportunity by the lower authorities, the ld. Counsel for the assessee has not pressed this ground, therefore, the same is dismissed as not pressed. 10. As regards ground No. 21 regarding levy of interest u/s 234A, 234B and 234C, charging of interest under these sections are consequential in nature, therefore, the AO/TPO is directed to compute the consequential relief, if any, to the assessee. This ground is partly allowed. 11. In the result, appeal of the assessee is partly allowed. Pronounced in the open Court on 26th November, 2019. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
