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TMI Blog2022 (6) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... Sharma, Adv And Ms. Shubhangi Arora, AR For the Respondent : Sh. Surender Pal, CIT (DR) ORDER PER YOGESH KUMAR U.S., JM This is an appeal filed by the Assessee for the Assessment Year 2017-18 against the final assessment order dated 11/01/2022 passed under Section 143(3) r/w Section 144C of Income tax Act, 1961, by DC/ACIT IT TP 2(1)(1), Delhi. 2. The assessee company GE India Business Services Pvt. Ltd.( GEIBSPL ) is set up as a captive service provider to provide offshore outsourcing services primarily to GE entities/ business worldwide. The primary activity in which Assessee Company specializes is to render IT Enabled Services ( ITES ) and financial support services to various overseas GE Group Companies. Assessee company has filed its Return of Income on 30.11.2017, electronically, declaring a total income of Rs. 13,64,66,410/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as: the Act).The case was selected under CASS and notice under section 143(2) of the Act was issued on 10.08.2018 and served on the assessee. Further notices under section 142(1) of the Act were issued along with questionnaire el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C/ Ld. DRP/ Ld. TPO failed to appreciate the submissions made/ contentions raised by the Appellant and further erred in making several allegations, observations, assertions and inferences in the order, which were both factually incorrect as well as legally untenable. 4. On the facts and circumstances of the case in law, the NaFAC and the Ld. TPO (while following the directions of the Ld. DRP) erred in enhancing the income of the Appellant by INR 6,59,84,528 holding that the international transactions of the Appellant pertaining to provision of Information Technology Enabled Services ( ITeS ) do not satisfy the arm s length principle ( ALP ) envisaged under the Act and in doing so, have grossly erred in: 4.1 disregarding the ALP as determined by the Appellant in the TP documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ( Rules ); 4.2 rejecting comparability analysis undertaken by the Appellant in the TP documentation and conducting a fresh comparability analysis based on application of additional/ revised filters, and disregarding Appellant s filters in determining the ALP for the international transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns within provisions of section 92B of the Act; 5.2 not considering that the average collection period of the Appellant works out to 37 days signifying that the Appellant has received the payments within a reasonable time period from the AE; 5.3 imputing interest on outstanding receivables, despite the fact that the Appellant had carried out working capital adjustment and hence, no further adjustment on account of interest on outstanding receivables was warranted; 5.4 disregarding supporting Transfer Pricing principles and recent judicial pronouncements in India in undertaking the said adjustment The above grounds are without prejudice to each other. 4. The Ld. Counsel for the Assessee submitted that the Assessee s Grounds of Appeal No. 1 to 4.7 and 4.9 to 4.11 will become academic in nature on considering the Assessee s Ground No.4.8. He further contended that if Infosys BPM Ltd. is excluded, the margin would be within 5% and in such event the Assessee s international transaction is at Arm s Length. Therefore, the additions will not sustain. 5. The Ld. Counsel for the assessee submitted that, Ld. TPO and DRP banking on the annual report, came to the conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) reimbursement of expenses received of Rs 3,081,754, (4) contribution Under employees sale purchase plan of ₹ 58,411 and (5) reversal of invoices raised in earlier years amounting to ₹ 1,828,687/-. 6. Assessee benchmarked these international transaction relating to IT enabled services using transactional net margin method (TNMM) as the most appropriate method adopting the profit level indicator of return on total cost (ROTC) . It selected 7 comparable companies and computed the comparable margins at 5.52%. It further computed the margin of the comparable companies after working capital adjustment at 3.42 percentage. It further submitted that return on total cost of the assessee for the year ended on 31st of March 2012 is 11.98% and therefore its international transactions are at arm'slength. 7. The learned transfer pricing officer passed an order u/s 92CA (3) of the act on 20 January 2016 wherein he proposed the upward adjustment of Rs. 4 67,76,784/- to the international transactions of the assessee. The assessee filed objection before the learned Dispute Resolution Panel which passed a direction to the TPO and based on these directions the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for this year. 10. The learned departmental representative payment please supported the orders of the lower authorities. He referred to page number 28 of the order of the learned transfer pricing officer where E clrex services Ltd was held to be comparable. He submitted that all the objections of the assesseehas been considered by the learned transfer pricing officer. Therefore same cannot be excluded. He further referred to page number 30 of the order of the learned transfer pricing officer where Infosys BPO Ltd is considered and found to be a suitable comparable. He also referred to page number 31 of the order wherein TCS E serve Ltd is also held to be comparable. He therefore submitted that detailed reasoning is have been given by the learned transfer pricing officer which is been upheld by the learned dispute resolution panel with respect to all three comparables. 11. With respect to the various orders of the coordinate benches in assessee's own case submitted by the learned authorized representative he referred to each of them and submitted that the coordinate bench has directed the learned transfer pricing officer to exclude all these three comparables for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the decision of the coordinate benches in assessee zone case for earlier years, we direct the learned transfer pricing officer/assessing officer to exclude (1) E Clrex Services Ltd, ( 2 ) Infosys BPO Limited and ( 3) TCS E Serve Limited and then work out the margins of the comparable. Accordingly, ground number 2 - 3 of the appeal of the assessee is allowed. 8. Respectfully following the decision of the coordinate bench of the Tribunal in assessee s own case, we hold that the Infosys BPM Ltd. is not comparable. Accordingly, we allow the Assessee s Grounds of appeal No.4.8. 9. In view of exclusion of the Infosys BPM Ltd, the Counsel for the assessee substantiated the adjustment of arms length price which is as under: Since the margin would be within plus or Minus 5%, the Assessee s international transaction is at Arm s Length, the said fact has not disputed by the Ld. D.R. Therefore, the addition made in the issue under consideration will not sustain. 10. The Grounds of appeal No. 5 to 5.4 are in respect of working capital adjustment. The Ld. AR submitted that allowing working capital adjustment which has been already allowed by the Hon ble DRP demonstrates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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