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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 ..... g the year under consideration, Intelenet Global Services Pvt. Ltd. was merged with Serco BPO Pvt. Ltd. from 06/07/2011. The order passed by the ld. TPO pertains to the period 01/04/2011 to 06/07/2011. The assessee is a leading Business Process Service provider in India. The assessee is led by the Intelenet Management team, backed by Blackstone, a leading Global Private Equity Player. Blackstone's support is testimony to the strength of the Intelenet brand, the management team and the potential of the global BPO industry and will provide Intelenet with the necessary thrust to help augment its growth trajectory and vision. The assessee company has various fully owned subsidiaries such as M/s. Intelenet America Inc, USA; M/s. Intelenet Inc, USA and M/s. Intelenet UK Ltd., UK etc. 3.1. On perusal of 3CEB report of the assessee, the ld. TPO observed that assessee has given guarantee to its AE. The assessee submitted that it acquired a company through its wholly 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. TPO observed that assessee should have charged guarantee fees of Rs. 59,31,924/- from its AE for providing corporate guarantee and performance guarantee as above. 3.4. We find that the ld. DRP had upheld the action of the ld. TPO by following its directions given in earlier years. 3.5. We find at the outset, both the parties mutually agreed that this issue is a recurring issue from A.Yrs. 2008-09 onwards and the same has been decided by this Tribunal in assessee's own case from A.Yrs. 2008-09 to 2011-12 and also in A.Y. 2013-14. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no finding of TPO on these facts. The TPO while making adjustment simply follows the adjustment made in earlier years. Similarly, this aspect is not considered by the learned DRP. Considering the aforesaid factual aspects this part of ground of appeal related with performance guarantee is restored to the file of assessing officer/TPO to examine the effect and pass the order a fresh in accordance with law." 3.6. Respectfully following the aforesaid decision, we hold that ALP of Corporate guarantee shall be computed @ 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 Rs. 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., (Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Salary-non- direct 1,37,24,999 1,10,60,803 16,19,787 18,72,10,689 allocated based on revenue Recruitment 6,69,924 8,59,132 65,807 2,59,77,509 2,75,72,373 allocated based on direct salary Training 1,04,686 1,34,253 10,283 46,89,749 49,38,971 allocated based on direct salary Connectivity 22,19,408 17,88,593 2,61,928 4,87,75,330 5,30,45,259 allocated based on revenue Direct Costs 4,36,91,251 4,84,32,828 46,07,323 1,15,09,42,405 1,24,76,73,807 Gross Margin 5,73,96,054 3,30,32,156 73,32,726 61,14,72,689 70,92,23,625 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;9,384 9,856 2,183 13,31,095 13,52,518 employees Provision for estimated losses on onerous com - - - 9,44,75,197 9,44,75,197 actual Provision for anticipated 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 14,34,05,662 Interest Expense 1,74,42,595 Profit before tax 3,09,83,198 84,14,285 20,25,484 (55,16,41,165) (38,42,55,130) 4.4. We find that the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, sale and marketing expenses have been allocated on the basis of number of employees and not on the basis of revenue. It may be mentioned the AE revenue during the year is only about 19 crores whereas non-AE revenue is balance 176 crores. However the AE salary cost as compared to non-AE salary cost is proportionately higher so much that about 24% of total salary is paid for AEs for just about 10% of AE revenue. Further the connectivity charges have been allocated on the basis of revenue but it is not explained why it should not be allocated on the basis of AE salary expenses. Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 Rs. 5,45,39,535/- in the return of income, pursuant to the income offered at Rs. 16,80,98,430/-. Pursuant to the TP addition made by the ld. TPO, the income of the assessee stood increased to Rs. 57,95,60,044/- and consequently the assessee's tax liability was determined at 5,82,58,256/-. Accordingly, the assessee is eligible to claim MAT credit of Rs. 5,82,58,256/- out of the brought forward MAT credit from earlier years of Rs. 76,79,68,086/-. However, the ld. AO restricted the MAT credit of assessee to Rs. 5,45,39,535/- as per return of income despite the fact that assessee had sufficient brought forward MAT credit. This matter requires factual verification and hence, the same is restored to the file of the ld. AO to re-compute the tax liability of the assessee in accordance with law. Accordingly, the ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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