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TMI Blog2023 (2) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... has also adopted a filter whereby he has chosen companies having service income of 75% or more in each of the segments. We also notice that it has not been demonstrated as to how owning intangibles will render this company out of the ambit of comparability. In the given circumstances of the case, we are of the view that Concentrix was rightly included as a comparable company by the TPO. Tricom India Ltd. ( Tricom ) - In the case of 24/7 Customer.com (P) Ltd. [ 2013 (1) TMI 45 - ITAT BANGALORE ] for AY 2004-05, the assessee was engaged in back-office support BPO services and Tricom was chosen as a comparable company by the TPO. The Tribunal held in paragraph 15.3.3 of its order that Tricom had a unique software developed in house which renders specialized services in it area of specialization given the company a competitive edge. Since this company had unique intangible, it was regarded as not comparable with a normal back-office service provider. Following the view taken in the aforesaid decision by a co-ordinate Bench, we are of the view that Tricom ought to be excluded from the final list of comparables. We hold and direct accordingly. TPO is directed to compute ALP of the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack-office support services and SWD services. 5. Consequently, a draft assessment order dated 17.02.2020 came to be passed in which the aforesaid TP adjustment was incorporated. Aggrieved, the Appellant filed its objections before the Dispute Resolution Panel ("DRP"), which vide order dated 18.03.2021 granted partial relief to the Appellant in terms of which the SWD segment was held to be at arm's length. However, the DRP upheld the adjustment made towards the back-office support services segment. 6. Thereafter, the AO passed the final assessment order dated 26.04.2021 in line with the DRP's directions. Aggrieved by the final assessment order, the Appellant has preferred the present appeal before this Tribunal. 7. Therefore, in this appeal, we are required to consider the determination of ALP of the back-office support services rendered by the assessee for which the assessee received payments from its AE. In so far as the international transactions of rendering back-office support services is concerned, the assessee as well as the TPO chose Transaction Net Margin Method (TNMM) as the most appropriate method for determining the ALP. The Profit Level Indicator (PLI) chosen for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment activities which resulted in a substantial increase in its profit margin. It was submitted that Concentrix own significant intangibles amounting to around 2.08% of total assets, which is 8.01% of total sales. Further, during the year under consideration, the company entered into a share purchase agreement with the IBM group, which is an extraordinary activity having a significant impact on its financial performance. It is also submitted that the company recorded an abnormal growth of 93.91% of its revenue between financials years 2002-03 and 2003-04 which translated into an abnormal growth of 75.48% in profits before taxes. Further, it was submitted that the TPO has himself agreed that Concentrix is engaged in BPO, KPO, ITEs and transcription services and therefore, in principle accepting that the company is not functionally comparable to the Appellant. Submissions in this regard are placed at pages 118 -120 and 287-290 of the appeal set. Annual report of the company is available at pages 162-215 of the Paper Book. In view of the above, it is submitted that Concentrix ought to be excluded from the final list of comparables. 11. We have carefully considered the submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch software could be indigenously developed or purchased. Therefore, the presence of software is an essential requirement to function and not an unusual asset. As regards the presence of extra ordinary event, the TPO has pointed out that from the notes to the accounts in the Annual Report. schedule 19 point no 10 it is noticed as under: "Subsequent to the year-end the company and its shareholders have entered into a share purchase agreement with IBM World trade corporation (IBM). Under the agreement, IBM would acquire all the shares of the company from its existing shareholders. This share purchase is subject to closures on happening of certain events and acquiring all requisite approvals". The AO has opined that the so called extra ordinary event took place after the relevant previous year and has no impact on profit margin percentage 13. In its reply to the remand report, the assessee pointed out that in principle the TPO/AO has accepted that Concentrix is engaged in BPO, KPO, ITeS, transcription, etc. Thereby, in principle agreeing that it is not functionally comparable to the assessee which is into low end BPO services. It was also highlighted that functionally d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is embarking on new initiatives like "digitization" to create a strong foundation and investing in building business leadership in US and Europe to accelerate customer acquisition." Research & Development (R&D) In today's world, technologies are changing very rapidly and hence it is very important to invest in research and development. R & D is also very critical in ensuring the success of Company's product strategy. During the period under review, your Company has analyzed and identified the areas so as to undertake the specific R & D activities for the overall benefits of the Company" 16. The learned DR has however pointed out that the facts as brought out in the submissions of the learned Counsel for the assessee are not reflected in the ultimate final results of the assessee. It was submitted that unless the assessee is able to compute and bring on record material to show as to how the features pointed out by the learned Counsel for the assessee really had an impact on the functional profile of Concentrix not being in the nature of rendering back-office support services as has not been demonstrated. It was therefore submitted by him that the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the financial year 2003-04, the company hived off its finance and investment division into a separate company, which has resulted in an abnormal growth in its revenue by 63.80% between financials years 2002-03 and 2003-04 which translated into an abnormal growth of 33.06% in profits before taxes. The company also acquired Tricom Document Management Inc. USA for expansion of its business in the overseas market, thereby indicating a significant change in the business model and economic performance of the company. Further, the company has substantial related party transaction of 58.03% for the year under consideration. Submissions in this regard are placed at 120 to 122 and 292-294 of the appeal set. Annual report of the company is available at pages 198-242 of the Paper Book. Reliance was placed on the decision of this Tribunal dated in the case of 24/7 Customer.com (P.) Ltd. v. DCIT (reported in [2012] 28 taxmann.com 258 (Bangalore). Further reliance was placed on the decision of the Mumbai Bench of the Tribunal in the case of Exxon Mobile Company India Pvt. Ltd. (order dated 27.10.2017 passed in ITA No. 8798/Mum/2011) and the decision of this Tribunal in the case of Transworld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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