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TMI Blog2023 (3) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. - We find that this entity has been excluded by Tribunal in AY 2009- 10 for the reason that this entity had brand value, high turnover, huge asset base and accordingly, not comparable. In AY 2011-12, this entity has been excluded by Ld. DRP by relying upon the decision of Tribunal in AY 2009-10. The same was upheld by Tribunal. TCS eServe Ltd - This entity is functionally different. This entity has presence of brand, having huge turnover, extreme profit margins and huge employee base. We find that this entity has been excluded by Tribunal in AY 2010- 11. In AY 2011-12, this entity has been excluded by Ld. DRP which has been confirmed by Tribunal. Therefore, considering the same, we direct Ld. AO / TPO to exclude this entity. Crossdomain Solutions Pvt. Ltd. - Before us, the Ld. AR has submitted that this entity is functionally different and this entity does not appear in the search carried out by Ld. TPO. For the said reason as well as following consistent stand of Tribunal in AYs 2009-10 to 2011-12, we direct Ld. AO / TPO to exclude this entity. Crystal Voxx Limited - Since this entity has failed service income filter at entity level and it is a persistent loss-makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds raised by the assessee read as under: 1. That on the facts and circumstances of the case, the final assessment order dated 23 December 2016 (and received by the Appellant on 13 January 2017) passed by the Assistant Commissioner of Income-tax, Circle -17(1), Hyderabad under section 143(3) read with section 92CA(3) read with section 144C(5) of the Income-tax Act, 1961 ('Act'), pursuant to the directions dated 31 October 2016 by Dispute Resolution Panel, Bangalore ('DRP') under section 144C(5) of the Act is bad in law and void ab-initio. Transfer Pricing General 2. That on the facts and circumstances of the case and in law, the AO /DRP erred in confirming transfer pricing adjustment of Rs.3,95,28,604 comprising of: a. Rs. 2,94,23,050 on account of margin adjustment for Information Technology enabled Services ('ITeS') by the Appellant to its Associated Enterprises ('AEs'); and b. Rs. 1,01,05,554 for notional interest on outstanding receivables from its AEs. 3. That on the facts and circumstances of the case and in law, the AO/DRP erred in rejecting transfer pricing documentation maintained by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k differences 12. That on the facts and circumstances of the case and in law, the AO/DRP erred in disregarding the risk profile of the Appellant vis-a-vis alleged comparable companies selected by the TPO and not allowing risk adjustment as per the provisions of Rule 10B(1)(e) of the Rules. Arm's length range of 5% 13. That the AO / TPO be directed to re-work the profit margins of the Appellant vis-a-vis the resultant comparable companies and to allow the benefit of + /- 5% range as provided in proviso to Section 92C(2) of the Act. Notional Interest on receivables from AE 14. That on the facts and circumstances of the case and in law, the AO /DRP erred in confirming transfer pricing adjustment of Rs.1,01,05,554 on account of notional interest on receivables from its AEs. 15. That on the facts and circumstances of the case and in law, the AO/DRP erred in charging notional interest on outstanding receivables from its AEs, disregarding the fact that such outstanding receivables had arisen out of the service transaction and not a separate international transaction. Hence, outstanding receivables cannot be equated to 'capital financing' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity. Regarding interest on overdue receivables, it was submitted that there was substantial outstanding and considerable delay in realization of the same which was nothing but capital financing transaction. Having heard rival submissions, our adjudication would be as under. 3. The assessee being resident corporate assessee is stated to be engaged in providing back-office IT support services. The assessee group is leading provider of specialist information and services for the academic, scientific, professional and commercial business communities. The assessee is wholly owned subsidiary of Datamonitor Ltd., UK which is ultimately owned by Informa Pic., UK. For the purpose of benchmarking, the assessee has been classified as ITeS provider. 4. Proceedings before Ld. TPO and DRP 4.1 The assessee carried out various international transactions with its AEs which are in the nature of payment of royalty, provision for ITeS services, receivables, payables etc. The assessee benchmarked the same on aggregate basis using Transactional Net Margin Method (TNMM). The Ld. TPO, applying certain filters, disturbed the comparability matrix. After meeting assessee s arguments on compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, aggregate adjustment of Rs.395.28 Lacs was made in the final assessment order. Aggrieved, the assessee is in further appeal before us. 5. Our findings and Adjudication The Ld. AR has advanced arguments with respect to comparable entities which are dealt with as under: - (i) Accentia Technologies Ltd. Before Ld. TPO, the assessee sought exclusion of this entity on the ground that it was functionally different since it was providing highend software services which could not be compared to the functions of the assessee. The Ld. TPO rejected this plea and selected this entity. The Ld. DRP confirmed the same. Before us, the Ld. AR has submitted that this entity is not only functionally different but it is not comparable due to peculiar economic conditions, inorganic growth, presence of intangibles, occurrence of extraordinary events and also for the reason that its segmental information was not available. We find that for all these reasons, this entity has been excluded by Tribunal in assessee s own case for AY 2009-10 (ITA No.159/Hyd/2014 dated 31.07.2014) as well as in AY 2010-11 (ITA No.310/Hyd/2015 dated 12.09.2016). In AY 2011-12, this entity was exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been excluded by Ld. DRP by relying upon the decision of Tribunal in AY 2009-10. The same was upheld by Tribunal. Accordingly, respectfully following the consistent stand of Tribunal in earlier years, we direct Ld. AO / TPO to exclude this entity. (iv) TCS eServe Ltd. The assessee raised similar objections and submitted that it was engaged into KPO activities. The segmental information was not available and it had brand value and possessed intangibles. The entity had super normal profits and high turnover. However, rejecting the same, Ld. TPO included this entity. The Ld. DRP confirmed the same. Before us, the Ld. AR has submitted that this entity is functionally different. This entity has presence of brand, having huge turnover, extreme profit margins and huge employee base. We find that this entity has been excluded by Tribunal in AY 2010- 11. In AY 2011-12, this entity has been excluded by Ld. DRP which has been confirmed by Tribunal. Therefore, considering the same, we direct Ld. AO / TPO to exclude this entity. (v) Crossdomain Solutions Pvt. Ltd. The assessee sought exclusion of this entity on the ground that it was providing back-office support se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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