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TMI Blog2022 (3) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... or each of the segments as is evident from the aforesaid table. In any case, we find the main grievance of the ld. DRP seems to be that AE revenue is only ₹ 19 Crores and Non-AE revenue is ₹ 176 Crores and salary cost of back office income unit seems to be more by 24% and requires allocation to non-AE unit. If this observation is to be accepted then, the same would only be beneficial to the assessee as the same would result in increase of margins for the AE BPO segment. This fact itself proves that the ld. DRP had not applied its mind at all on the basis of allocation of expenses between the AE units and the non-AE units. In view of the above, the other grounds raised by the assessee on inclusion and exclusion of the comparables need not be gone into at all and they are left open. Going by the segmental data of back office services income which is evident from the table above, the assessee had earned a margin of 20.45% and even assuming if all the comparables chosen by the ld. TPO are to be accepted, the arithmetical mean margin of comparables is only 20.52%. Hence, the transactions of the assessee would be at arm's length requiring no TP adjustment. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y owned subsidiary Snow Holding Company Ltd. The assessee had provided a corporate guarantee to a bank, on the strength of which, the bank has provided funds to the wholly owned subsidiary. The assessee in its TP report had taken a view that the provision of corporate guarantee to a bank on behalf of its associated enterprises (AEs) is not considered as an international transaction. The assessee in the TP report also adduced reasons for not charging guarantee commission from its AE. 3.1.1. Intelenet UK has entered into a contract with a third party customer ATOC Ltd., for provision of services in relation to National Rail Enquiry service. Further, Intelenet UK has entered into sub-contracting agreement with assessee for the aforesaid provision of services. The provision of this guarantee does not deter the case as of which entity would be providing the end services in the event of breach of contract or otherwise. In any case, IGSPL (assessee) performs the service and even in case of breach of contract by the Intelenet UK, IGSPL would continue doing so. Thus, the provision of performance guarantee is clearly for business development, the benefit of which shall solely extend to IG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We find that this Tribunal in assessee's own case for A.Y. 2013-14 in ITA No. 7309/Mum/2017 dated 06/04/2021 had addressed the very same issue as under:- 5. Provision of Corporate and performance guarantee 5.1. The assessee acquired a company through its wholly owned subsidiary namely Snow Holding Company Limited. The assessee provided corporate guarantee to a bank that provided funds to wholly owned subsidiary for the said purpose. The assessee also provided guarantee to Railway Pension Trustee Corporation Ltd., on behalf of its AE for punctual performance of all obligations as mentioned in the agreement. Similar performance guarantee has been given to third party customer (ATCO Limited) of UK AE. The assessee submitted that the guarantee transactions were not to be considered as international transactions for variety of reasons as enumerated in the order of Ld. TPO. However, Ld. TPO, in terms of various decisions including the decision of Mumbai Tribunal in Everest Kanto (ITA No. 542/Mum/2012 dated 23/11/2012) applied ALP rate of 1.5% on outstanding guarantee of ₹ 138.64 Lacs and arrived at TP adjustment of ₹ 2.07 lacs. The action of Ld. TPO, upon conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.5% of guarantee value and as regards the determination of ALP for provision of performance guarantee, the same is restored to the file of the ld. TPO for fresh adjudication in the light of above mentioned directions given by this Tribunal. Accordingly, the ground Nos. 1-1.5 raised by the assessee are allowed for statistical purposes. 4. The ground Nos. 2.1 - 2.4 raised by the assessee are with regard to TP adjustment made in the sum of ₹ 55,29,690/- in respect of provision of back office services. 4.1. We have heard rival submissions and perused the materials available on record. The assessee has provided back office services to Serco UK Services Ltd., (Associated Enterprises-AE). Once the AE secures a project from a third party client for provision of back office services, it sub-contracts portion of the same to the assessee. The assessee has derived back office service income of ₹ 1,19,30,049/- during the year under consideration. The assessee benchmarked this transaction by using Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM). This method was accepted by the ld. TPO. The profit level indicator (PLI) adopted by the assessee was op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o respective AEs. For the sake of convenience, the said segmental P L account is reproduced hereunder:- Particulars Intelenet Inc Intelenet UK Intelenet (UK) Services Ltd., Other Non AE Grand Total (Matching with Audited P L) Comments Revenue 10,10,87,305 8,14,64,984 1,19,30,049 1,76,24,15,094 1,95,68,97,432 as per related parties schedule in audited financials Salary-direct 2,69,72,234 3,45,90,047 26,49,516 88,42,89,128 1,16,21,17,204 As per 12 months actual payroll Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenance -Buildings 85,526 83,010 23,003 70,42,805 72,34,345 on the basis of employees / seats Repairs and maintenance -Others 9,43,658 9,15,897 2,53,802 2,38,73,027 2,59,86,384 on the basis of employees / seats Insurance 5,23,889 5,50,263 1,21,886 4,50,12,477 4,62,08,515 on the basis of employees Rates and taxes (including wealth tax) 44,253 46,481 10,296 5,40,718 6,41,747 on the basis of employees Postage Telephone and Fax 8,48,205 6,83,358 1,00,103 1,30,74,776 1,47,06,642 allocated based on revenue Travelling and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted losses - - - 15,52,420 15,52,420 actual Depreciation 58,13,516 61,06,188 13,52,551 18,96,56,153 20,29,28,409 No. of employees Miscellaneo us Expenses 2,40,513 1,93,827 28,385 92,73,453 97,36,177 revenue 2,64,12,855 2,46,17,871 52,97,242 1,16,31,13,854 1,21,94,41,822 Profit before interest and Tax 3,09,83,198 84,14,285 20,25,484 (55,16,41,165) (51,02,18,197) Other income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee before the ld. TPO need not be statutorily audited. The audited segmental results are furnished to the ld. TPO by the assessee only to provide more authenticity to the data contained therein. Nothing prevents the ld. TPO to verify and examine the unaudited segmental results matching with the overall audited financial statements furnished before him. Hence, the action of the ld. TPO in rejecting the segmental results furnished by the assessee for the mere reason that the same are not audited, is hereby dismissed. Reliance in this regard is placed on the decision of this Mumbai Tribunal in the case of Tecnimont ICB Pvt. Ltd., in ITA No. 7098/Mum/2010 dated 25/02/2011. 4.5. We also find the reasons stated by the ld. DRP for rejecting the segmentals are factually wrong. In this regard, the relevant observations of the ld. DRP are reproduced hereunder:- 6.1.6 From the above accounts as furnished, it is seen that majority of expenses have been allocated on the basis of revenue and the some of the expenses have been allocated on the basis of number of employees. It is not explained why depreciation, provision for estimated losses, legal and professional expenses, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground Nos. 2.1 to 2.4 raised by the assessee are allowed. 5. The ground No. 3 raised by the assessee is with regard to rectification and error in computation of total income of the assessee. The ld. AR stated that the ground No. 3.1 to 3.5 raised by the assessee does not survive in view of section 154 order passed by the ld. AO on 11/11/2016 rectifying the returned income of the assessee to 16,80,98,430/- instead of ₹ 138,66,87,018/- pursuant to the approval of merger of Intelenet Global Services Pvt. Ltd., and Serco BPO Pvt. Ltd., by the Hon'ble Bombay High Court w.e.f. 06/07/2011. Since relief is already granted to the assessee in the section 154 order dated 11/11/2016, the ground Nos. 3.1 - 3.3 raised by the assessee does not survive. 6. The ground No. 3.4 raised by the assessee is seeking relief for MAT credit. 6.1. We have heard rival submissions and perused the materials available on record. We find that assessee had claimed MAT credit of ₹ 5,45,39,535/- in the return of income, pursuant to the income offered at ₹ 16,80,98,430/-. Pursuant to the TP addition made by the ld. TPO, the income of the assessee stood increased to ₹ 57,95,60 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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