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TMI Blog2023 (7) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the instant appeal: 3. On 30.09.2010, the respondent/assessee filed its Return of Income (ROI), wherein it declared its taxable income as Rs. 12,16,81,262/-. 3.1 Initially, the ROI was processed under Section 143(1) of the Income Tax Act, 1961 [in short, "Act"]. However, the respondent/assessee's case was picked up for scrutiny, and accordingly, notice under Section 143(2) of the Act was served upon it. 4. It is during scrutiny that it came to light that the respondent/assessee had entered into international transactions, which involved providing Information Technology Enabled Services (ITES) to its AEs. 5. Since the value of the transactions during the relevant period was more than Rs. 15 crores, the AO referred the matter to the TPO, in terms of the provisions of Section 92CA of the Act, for determination of the Arm's Length Price (ALP) concerning the transactions in issue. 5.1 As required, the respondent/assessee had submitted a Transfer Pricing Study Report ("TP Study Report"), which adopted the Transactional Net Margin Method ("TNMM method") to arrive at the ALP concerning international transactions entered into by the respondent/assessee with its AEs, regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted You have rejected this company on the ground mentioned in Accept/Reject matrix that 'Significant difference in scale of operations. Assessee in its search itself has not applied High turnover Filter'. As per the functional profile of the company this is very much on ITES company and it passes all filters also. Hence, this is a suitable comparable in your case. 6. TCS E-Serve International Ltd. Y You have rejected these companies on the ground mentioned in Accept/Reject matrix that these company are having RPT in excess of 20%. However, the annual report of the companies has been perused and it is found to be less than 25% of Sales (12.09% and 2.70% respectively). Hence, these are suitable comparables in your case. 7. TCS E-Serve Ltd. 5.5 After noting the OP/TC of each of the seven comparables, the TPO worked out and pegged the average profit margin at 36.80% via his order dated 09.01.2014. The TPO treated the services rendered by the respondent/assessee as ITES/Business Processing Outsourcing (BPO) services, and applying the TNMM Method concluded, that an upward transfer pricing adjustment amounting to Rs. 4,80,19,591/- was required to be made. In reaching this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is engaged in providing voice-based customer care to the AE's clients. The Assessee renders Call Center services, which fall within the broad description of Information Technology Enables Services (hereafter 'ITeS'). The Assessee has two units registered under the Software Technology Park Scheme of the Government of India, which are located at [in] New Delhi and Pune. The Assessee is remunerated for the voice call services on [a] cost plus basis. The Assessee explained that the AE undertakes all activities such as marketing and enters into contracts with its customers seeking voice call services." [See judgment dated 10.08.2015 passed in ITA No. 102/2015 titled Rampgreen Solutions Pvt. Ltd. Vs. Commissioner of Income Tax]. As would be evident from the aforesaid observations, the functional profile of the respondent/assessee is not similar to Rampgreen. The respondent/assessee is a BPO, and has been set up as a captive service provider for provisioning outsourcing services to GE Group companies. It provides ITES and Financial Support Services [FSS]. Therefore, it cannot be held that Rampgreen has a functional profile which is similar to that of the respondent/assessee. (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before it, was sustained by a coordinate bench of this Court via judgment dated 27.05.2016 passed in ITA No. 340/2016 titled, Principal Commissioner of Income Tax-07 v. M/s Rampgreen Solutions Pvt. Ltd. Although a Special Leave Petition (SLP) has been filed against the said judgment of the coordinate bench, no final judgment has been rendered in the matter. What is noticeable though, by its absence, is that in the instant appeal, the appellant/revenue has not made an averment, that the facts and circumstances obtaining in Rampgreen Solutions Pvt. Ltd. do not apply to the present case. 13.5 None of the questions of law, as proposed, give rise to a substantial question of law, requiring this Court's intercession. ANALYSIS AND REASONS: 14. Having heard the learned counsel for the parties and perused the record, what has come to the fore is the following: (i) The respondent/assessee, in the TP Study Report had referred to eight comparables, which were not accepted by the TPO. The TPO, however, chose seven comparables, which are also mentioned in the TP Study Report but had been excluded on "qualitative grounds" being found unsuitable. (ii) After the matter travelled to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is as an extraordinary financial event and hence excluded it from the final set of comparables. 20. Insofar as TCS International is concerned, the Tribunal noted that it is in the business of rendering software development services [which, inter alia, includes maintenance and updation of software], as per the requirements of the users. In comparison, the respondent/assessee was providing non-development software services, which involved the purchase of software for provisioning services. 21. To our minds, the Tribunal was right in excluding ATPL, I-Gate and Infosys on the ground that an extraordinary financial event had occurred, rendering them unfit comparables to determine the ALP. 21.1 Likewise, quite clearly, the services offered by TCS International [not TCS E-Serve Ltd.] could not be used as a comparable, since the respondent/assessee was, admittedly, in the business of ITES/BPO/FSS. For each of these services that the respondent/assessee offered, it purchased, it appears, proprietary software and did not develop, maintain and update its own software for the use of its customers. 22. The issue at hand, in our view, turned on findings of fact. Mr Chandra's submission t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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