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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 ..... s returned by the Tribunal, as discussed above, are perverse. - HON'BLE MR. JUSTICE RAJIV SHAKDHER AND HON'BLE MS. JUSTICE TARA VITASTA GANJU For the Appellant Through: Mr Shlok Chandra, Jr. Standing Counsel. For the Respondent Through: Mr Sachit Jolly with Mr Rohit Garg and Ms Disha Jham, Advocates. RAJIV SHAKDHER, J.: PREFACE: 1. This is an appeal preferred by the appellant/revenue against the order dated 27.04.2018 passed by the Income Tax Appellate Tribunal [in short, Tribunal ] concerning Assessment Year (AY) 2010-11. 1.1 The appellant/revenue's principal grievance articulated before us is the exclusion of four out of five comparables selected by the Transfer Pricing Officer ( TPO ), for the purposes of benchmarking international transactions relating to offshore outsourcing services provided by the respondent/assessee to its Associated Enterprises (AEs). BACKGROUND: 2. Before we proceed further, it may be necessary to record the following broad facts, which have led to the institution of the instant appeal: 3. On 30.09.2010, the respondent/assessee filed its Return of Income (ROI), wherein it declared its taxable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Accentia Technology You have rejected this company on the ground mentioned in Accept/Reject matrix Dissimilar that Performs Functions . However, the annual report of the company has been perused. This is very much an ITES company and it passes all filters also. Hence, this is a robust comparable in your case. 2. Cosmic Global Limited 3. Fortune Infotech Limited You have rejected this company on the ground mentioned in Accept/Reject matrix that company is having RPT in excess of 20%. However, the annual report of the company has been perused. RPT of the comparable company has been computed and it found to be less than 25% of Sales (24.52%). Hence, this is a suitable comparable in your case. 4. Igate Global Solutions Limited You have rejected this company on the ground mentioned in Accept/Reject matrix that engaged in Consulting and BPO segment and proper segmental results are not given. However, the annual report of the company has been perused and it is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed [after making cumulative adjustments] to the total income of the respondent/assessee on account of the transfer pricing adjustment. 9. It is this which impelled the respondent/assessee to prefer an appeal with the Tribunal. 10. The Tribunal via the impugned order excluded the following four comparables from the list selected under the TNMM Method for arriving at the ALP concerning international transactions entered into by the respondent/assessee with its AEs. 1. ATPL 2. I-Gate 3. Infosys 4. TCS International 11. The exclusion of the aforementioned four comparables, as noticed at the very outset, has propelled the appellant/revenue to prefer the instant appeal. In support of the appeal, the arguments were advanced by Mr Shlok Chandra, learned senior standing counsel, while on behalf of the respondent/assessee, submissions were made by Mr Sachit Jolly. SUBMISSIONS ON BEHALF OF THE APPELLANT/REVENUE: 12. The submissions made by Mr Shlok Chandra, in support of the appeal, can be broadly paraphrased as follows: (i) The aforementioned four comparables were wrongly excluded by the Tribunal, on the assumption that the functional profile of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the Tribunal should have also borne in mind, the business environment; the nature and functions performed by the tested party and comparable entities; value addition in respect of products and services provided by the parties; the business model; and the assets and resources employed. [See Li Fung India Pvt. Ltd. Vs. CIT, 361 ITR 85 (Delhi )]. SUBMISSIONS ON BEHALF OF THE RESPONDENT/ASSESSEE: 13. Mr Sachit Jolly, on the other hand, resisted the admission of the appeal, based on the observations and findings returned by the Tribunal via the impugned order. 13.1 Mr Jolly contended that the respondent/assessee was, even according to the appellant/revenue, in the business of ITES/BPO services. 13.2 The Tribunal had excluded three out of the four comparables i.e., ATPL, I-Gate and Infosys, upon concluding that these entities had been subjected to an extraordinary event and therefore, did not fall in the category of fit comparables. 13.3 Insofar as the fourth comparable was concerned i.e., TCS International, the Tribunal has observed in paragraph 10 of the impugned order, that it was providing software development services and hence, was not funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on a cost-plus basis. This aspect is evident upon perusing the order dated 09.01.2014 passed by the TPO. (vi) The respondent/assessee had made a grievance before the Tribunal concerning five comparables, which included the aforementioned four entities. The fifth comparable was an entity going by the name TCS E-Serve Ltd. Via the impugned order, the Tribunal remitted the issue relating to the inclusion or exclusion of the said entity i.e., TCS E-Serve Ltd. to the AO/TPO, for fresh consideration, after taking into account the relevant aspects affecting the comparability analysis. 15. Given these factors, qua which there is no dispute, what falls for consideration is: whether the exclusion of the four comparables hereinabove by the Tribunal was merited? 16. The Tribunal, in the impugned order has noted that insofar as ATPL is concerned, it cannot be considered as a comparable, since, in the period under consideration, an entity going by the name Asscent Infoserve Ltd. amalgamated with ATPL. 17. Given the extraordinary event, the Tribunal did not consider ATPL as a comparable to determine the ALP. 18. A similar position obtained insofar as I-Gate was concerned. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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