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TMI Blog2021 (5) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... Y, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For the Assessee : Shri Sunil Lala For the Revenue : Shri A Mohan ORDER PER S. RIFAUR RAHMAN, A.M. The aforesaid appeal has been filed by the assessee challenging the impugned order dated 31st October 2013, passed under section 144C(5) r/w section 143(3) of the Income Tax Act, 1961 (for short "the Act") in pursuance to the directions of the Dispute Resolution Panel-1, Mumbai, ("the DRP") pertaining to the assessment year 2009-10. 2. The assessee has raised the following grounds of appeal:- "1. On the facts and circumstances of the case, the learned AO, based on the directions of the DRP, erred in making an upward adjustment of Rs 17,60,16,346 in determining the arm's length price (ALP) of the international transaction of Information Technology Enabled Services (hereinafter referred to as ITES) rendered by the Appellant. 2. On the facts and circumstances of the case, the learned AO, based on the directions of the DRP, erred on the following grounds: 2.1 In rejecting the transfer pricing (TP) analysis undertaken by the Appellant for computing the ALP in relation to the ITES provided by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove Grounds, the learned AO erred in not adopting the ALP after considering an ount varying by 5 percent of the arithmetic mean of the margins of identified comparable companies. 6. The learned AO erred in relying on material obtained by him without furnishing copies of the same to the appellant, and thus violating the principle of natural justice. 7. The learned AO erred in not granting the credit of taxes deducted at source claimed by the Appellant in its income to the extent of Rs 258,940." 2. The leaned Counsel for the assessee has also filed additional ground of appeal with a prayer to admit the additional ground and adjudicate the same on merit. The additional ground raised is reproduced below:- "On the facts and in the circumstances of the case and in law, Cosmic Global Limited engaged in the business of Medical Transcription and Translation services has wrongly been considered as a comparable to the appellant engaged in providing ITES Services and thus ought to excluded from the list of comparables. It is submitted that the Hon'ble Tribunal in appellant‟s own case for A.Y. 2007-08 has held that the said company is not comparable to the Appellant." 3. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de following submissions on the issue of "additional ground" raised by the assessee. "On 12.02.2021 assessee has filed a copy of "additional ground‟ filed before the bench. It was followed up by a written note on 15.02.2021. On the day of hearing I would like to present that the "additional ground‟ is not as such an additional ground (a ground has to be something fundamental). It is submitted that what is filed as "additional ground‟ is at best an "additional evidence‟, since assessee seeks to rely on a preexisting document, which would have been relevant for assessment. For consideration of additional evidence the assessee has to follow procedure prescribed. This is not followed by the assessee. 5. Considered rival submissions and perused the material on record. In view of the detailed submissions made by the leaned Counsel for the assessee on the issue of admitting the additional ground raised by the assessee, we hereby admit the same for adjudication on merit. 6. Insofar as the regular grounds of appeal raised by the assessee are concerned, during the course of hearing before us, the leaned Counsel for the assessee, at the outset, submitted that out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also relied upon the orders passed by the DRP / Transfer Pricing Officer. 9. Considered the rival submissions and perused the material on record. Insofar as the issue arose from ground no.2 is concerned, as it transpires from the record available before us, we notice that during the relevant assessment year 2009-10, the Transfer Pricing Officer has re-characterized the assessee as KPO as was done by him in the assessment year 2008-09 and consequently, the Transfer Pricing Officer rejected / excluded the comparables selected by the assessee (being non KPO) and further wrongly selected / included KPO companies as comparable to the assessee. Exclusion of four comparables namely E-clerx Services Ltd., Coral Hubs Ltd. (earlier known as Vishal Information Technologies Ltd.), Crossdomain Solution Ltd. and Cosmic Global Ltd. has been decided by the Tribunal in assessee's own case in DCIT v/s Morgan Stanley Advantage Services P. Ltd. reported in [2019] 109 taxmann.com 101 (Mum.) (Trib.), for the assessment year 2007-08 the relevant portion of the finding of the Tribunal is reproduced below for ready reference:- E-clerx Services Ltd. 32. As noted earlier the ld AR for the assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om a low end ITES service provider, while for the assessee was engaged in providing BPO services, viz-processing of insurance claims and insurance premiums and data processing service for which it employed ordinary graduates, therefore the aforesaid comparable, viz. Eclerx Services Limited was functionally different from the assessee company, and as such could not be selected as a comparable. We find that the DRP had vide its order dated 27.11.2015 passed in the case of assessee for AY 2011-12 had accepted the contention of the assessee and rejected the aforesaid comparable company, viz. Eclerx Services Limited on the basis that it was engaged in KPO service, and the department by accepting the said order of the 'DRP' for A.Y. 2011-12 by not carrying the matter in further appeal before the Tribunal, had thus allowed it to attain finality. We further find that in the assessee's own case for the immediately succeeding year, i.e A.Y 2009-10, the DRP as well as the Tribunal had held that companies engaged in KPO services cannot be compared to the routine BPO services provided by the assessee. That still further the Tribunal while disposing of the appeal of the assesses for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services to overseas markets and included in the list of comparable. The ld. CIT(A) confirmed the action of TPO holding that the TPO conducting benchmarking after calling information under section 133(6) and is benchmarking analysis are correct. We have noted that, though the ld. AR has relied upon a number of decisions of Tribunal/co-ordinate bench. We have noted that in a recent decision of Tribunal in Willis Processing Services (I) Pvt. Ltd. (supra) on comparability, the Tribunal held as under: We though in light of our aforesaid observations had partly disagreed with certain grounds as had been averred by the Ld. A.R to facilitate exclusion of the aforesaid comparable, however as observed by us hereinabove that the aforesaid comparable viz. Coral Hub Limited (earlier known as Vishal Information Technology Limited) had a business model where services are outsourced, as against the business model of the assessee where services are rendered by employing own employees and using one's own infrastructure, on the basis of which we are of the considered view that it can safely be concluded that the said comparable was functionally different, and as such was liable to be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, we direct the exclusion of Cosmic Global from the list of comparable. Similar view was taken by Pune Tribunal in BNY Mellon International Operations (India) Pvt. Ltd. (supra) holding that this comparable company had outsourced its vendor and was making high vendor payments as compared to sales and hence was not comparable. 42. Considering the decision of Tribunal, wherein this comparable was held as not comparable and particularly the TPO himself excluded it from the list of comparable in A.Y. 2008-09. Therefore, we direct for exclusion of this comparable. 10. With regard to Cross-Domain Solutions Ltd., we find that the Tribunal in assessee's own case in Morgan Stanley Advantage Services Pvt. Ltd. v/s DCIT, reported in [2021] 118 taxmann.com 112 (Mum.)(Trib.) for the assessment year 2008-09, has directed for exclusion of these comparables including E-clerx Services Ltd., Coral Hubs Ltd. along with Crossdomain Solution Ltd. E-clerx Services Ltd., Coral Hubs Ltd. and Crossdomain Solution Ltd. "13. As regards the rejection of four companies, it is the submission of learned counsel of the assessee that the functions of Eclerx Services Ltd. and Vishal Information Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of Tribunal/co-ordinate bench. We have noted that in a recent decision of Tribunal in Wills Processing Services (I) (P.) Ltd. (supra) on comparability, the Tribunal held as under: We though in light of our aforesaid observations had partly disagreed with certain grounds as had been averred by the Ld. AR to facilitate exclusion of the aforesaid comparable, however as observed by us hereinabove that the aforesaid comparable viz. Coral Hub Limited (earlier known as Vishal Information Technology Limited) had a business model where services are outsourced, as against the business model of the assessee where services are rendered by employing own employees and using one's own infrastructure, on the basis of which we are of the considered view that it can safely be concluded that the said comparable was functionally different, and as such was liable to be excluded from the final list of comparables. That our aforesaid view stands fortified by the aforesaid order passed by the Tribunal while disposing of the appeal of the assessees own appeal for A.Y. 2005-06, as well as the judgment of the Hon'ble High Court of Delhi in the case of Rampgreen Solutions (P.) Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered loss in the current assessment year the average of two years showed the robust positive figure. Hence, it cannot be said that these are persistently loss making company. Furthermore, we note that these comparables have been duly accepted as comparable in earlier assessment year by the officer himself. Hence, taking a contrary stand by the transfer pricing officer without giving a specific reasoning is not sustainable. Accordingly, we direct for inclusion of these comparables." 12. Even in this assessment year, the Transfer Pricing Officer has rejected the above companies holding that they are not fit to be considered in the category of KPO and treated it as ITES. Since the aforesaid issues are squarely covered by the decision of the Tribunal rendered in assessee's own case for the assessment year 2007-08 and 2008-08, as indicated above, consistent with the view taken therein, ground no.2 and additional ground are disposed off protanto and consequently, the other grounds of appeal became academic in nature, hence, left un-adjudicated. Therefore, ground no.2, and additional ground raised by the assessee are accordingly allowed. 13. In the result, appeal is partly allowed. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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