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TMI Blog2019 (11) TMI 1714X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as comparable to the assessee and rejected the balance four companies. Thereafter, arrived at the following set of comparables:- 1. Accentia Technologies Ltd. 2. Datamatics Global Services Ltd. 3. Eclerx Services Ltd. 4. e4e Health Care 5. Informed Technologies India Ltd. 6. Infosys BPO Ltd. 7. Jindal Intellicom ltd. 8. Microgenetic Systems Ltd. 9. TCS E-Serve Ltd. [Merged] 10. Cross Domain Solutions Pvt. Ltd. The Assessee submitted its obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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 Technologies Limited as a comparable without appreciating that it carried out Medical Transcription, Billings and collections as well as Coding services without any segmental break-up and therefore the same was not functionally comparable to the Appellant. 2.4 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 that on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately 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 comparable. 6.2. 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 lnfosys BPO Limited as a comparable, without appreciating that the said company provided high end integrated services, had a high brand value and turnover in excess of 60 times that of the Appellant, undertook a- extra-ordinary event (acquisition of Portland Pty Limited) and possessed a substantial portion of intangible assets, and therefore, the same was not func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 further erred in upholding / confirming the action of the Ld. TPO in not considering the correct margin of Cross Domain Solutions Limited. Incorrect rejection of com-parables 10. Jeevan Scientific Technologies Limited 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 rejecting Jeevan Scientific Technologies Limited as a comparable, without appreciating that the said company was functionally comparable to the Appellant and that on the same facts the said company had been ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby 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 companies having a different Financial Year ended without appreciating that the results for the relevant financial year could be reasonably extrapolated from the Financials of the impugned companies, available in public domain viii. Rejected the multiple year data adopted by the Appellant Incorrect computation of Profit Level Indicator ('PLI') 16. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the V Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in considering provision for bad and doubtful debts as a non-operating expenditure while computing the PLI. Risk Adjustment 17. On the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 in the earlier and subsequent assessment years and the Tribunal, after considering the issue at length, has passed the orders and therefore, the issues involved herein are covered in favour of the assessee. The copies of the orders of the Tribunal are also filed before us. 4. The Ld. DR, though, admitted that the issues which have arisen during the relevant assessment years are similar to the issues which have arisen in the assessee's own case for the A.Ys 2011-12, 2013-14 and 2014-15 respectively, however, relied upon the orders of the authorities below. 5. Having regard to the rival contentions and material on record and taking the assessee's submissions into consideration that the ground Nos. 10 to 12 seeking inclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 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 Pvt. Ltd. Vs. ITO (IT (TP) A No. 1316/Bang/2012) has directed to exclude the above company on the very same ground, DRP denied its exclusion. It is also clear that the major income of this company is from providing engineering 5 design services and information technology services which are not comparable to ITES / BPO functions performed by the assesse, (3) Eclerx Services Limited:- This company is engaged in proviiding KPO services and the comparability of company to ITES companies has been considered by various Benches of ITAT i. e., Hyderabad and Bangalore, wherein, on similar set of facts, this company was directed to be excluded. The Hon'ble Delhi High Court in the case of Rampgreen Solutions Put Ltd (ITA No. 102/2015) has also directed for exclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Counsel for the assessee are as under: 1. Pr. CIT Vs. BC Management Services (P) Ltd., [2018] 403 ITR 45 (Del HC) 2. Pr. CIT Vs. Inductis (India) Pvt. Ltd., 144 of 2019 (Delhi HC) 3. Pr. CIT Vs. Torus Business Solution Pvt. Ltd., 207 of 2019 (Delhi HC) We find that the Hon'ble Delhi High Court in the above cases has held that TCS E-Serve Ltd. has the benefit of brand value of Tata Consultancy Services Ltd. and, therefore, it is not comparable to ITES companies and has to be excluded. Therefore, it cannot be compared to other comparable companies which do not have the said brand value. Respectfully following the same also, we direct exclusion of TCS E-Serve ltd. from the final list of comparables for this reason as well. 7.3 The next company is Datamatics Global Services Pvt. Ltd. : The ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes. 7.6 As regards Cross Domain Solutions Pvt. Ltd., the ITAT in assessee's own case for the subsequent AYs 2013-14 and 2014-15 at paras 57 & 58 of its order has held this company to be a KPO. The relevant paras are reproduced hereunder: "57. As regards Cross Domain Solutions Ltd is concerned, the case of the assessee is that it is functionally dissimilar as it renders KPO services. The learned DR, however, supported the orders of the TPO & DRP. 58. As regards the services rendered by this company, we find that at Page 172 of the Paper Book which is the Website printout, it is shown as a "knowledge center". The learned DR had submitted that if the contents of a Website given by a company is taken into consideration, then even the assessee would be falling in the same category i.e. Knowledge Process Outsourcing. The learned DR, except for relying upon his argument that the assessee is also into high-end BPO services, has not been able to point out that Cross Domain Solutions Ltd is not a BPO. Therefore, we direct exclusion of this company also from the final list of comparables." As the ld. DR has not been able to bring any decision contrary to the above decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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