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TMI Blog2023 (3) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... g in reasoning and basis for arriving at the above said finding. In our view, the objection raised by the Revenue, needs to be allowed and the exclusion of M/s. MPS Ltd. is required to be sent back to the file of the ld.CIT(A) with a direction to pass afresh order considering the rival contentions of the parties. M/s. Datamatics Financial Services Ltd - Contention of the ld.DR that the order passed by the ld.CIT(A) was a cryptic and non-speaking order, and therefore, the issue of inclusion of Datamatics is required to be reconsidered by the ld.CIT(A) after giving the opportunity to the Assessing Officer / TPO acceptable. Interest on outstanding trade receivables - whether assessee has not furnished any inter company agreement to prove the credit period is 90 days and the Ld.CIT(A) erred in adjudicating credit period without remanding to the file of TPO? - HELD THAT:- As no documentary evidence has been brought on record before us so that we can infer that 120 days credit period is a reasonable period. In our view, the approach of ld.CIT(A) cannot be faulted with. Hence, we direct the TPO / Assessing Officer to charge interest at LIBOR + 200 points. Further, we direct the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law the Ld.CIT(A) is justified in rejecting M/s.MPS Limited, as comparable on the ground of bearing substantial risks concerns, functionally different and established as a premier technology solution provider without bringing out as to how have such differences have materially affected the price or cost charged or paid in, or the profit arising from, such transactions in the open market ? 2.0 Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in directing to include the company M/s. Ace BPO Services Pvt. Ltd., without appreciating the fact that the TPO has rejected the comparable on account of non-availability of financials of the company and the Ld.CIT(A) erred in adjudicating the inclusion of comparable without remanding to the file of TPO ? (ii) Whether on the facts and circumstances of the case, the Ld.CIT(A) justified in is adjudicating the inclusion of Financial Services comparable M/s. Datamatics Limited, without remanding to the file of TPO? (iii) Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in directing to include the company M/s. Jindal Intellicon Private Limited, without appreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 10B(2) of the I.T. Rules, 1962. 7. At the outset, the learned AR for the assessee submitted that some of the comparables challenged by the Revenue have been decided by the Tribunal in assessee s own case for A.Y 2013-14. He drew the attention of the Bench to the order passed by the Tribunal in the case of the assessee for the earlier year. The Tribunal had dealt with the issue of exclusion of M/s. Infosys BPO Ltd, M/s. Eclerx Services Ltd and M/s. MPS Ltd. The relevant paragraphs of the Tribunal in the case of the assessee for the earlier year read as under : M/s. Infosys BPO Ltd 4. Before us, Learned Departmental Representative submitted that the CIT (Appeals) was not correct in excluding M/s. Infosys BPO Ltd as comparable company. It was the contention of ld.DR that this company is functionally comparable with the assessee and the turnover of this company will not affect the profitability of the comparable. It was also the contention that the selling and marketing expenses are intrinsically connected with the core activities of the assessee. 4.1. On the other hand, the learned Authorised Representative submitted that M/s. Infosys BPO Ltd. is not comparable sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n.com 355 (Delhi) 35. As pointed out by the Special Bench of the Tribunal in Maersk Global Centers (India) (P.) Ltd. (supra), there may be cases where an entity may be rendering a mix of services some of which may be functionally comparable to a KPO while other services may not. In such cases a classification of BPO and KPO may not be feasible. Clearly, no straitjacket formula can be applied. In cases where the categorization of services rendered cannot be defined with certainty, it would be apposite to employ the broad functionality test and then exclude uncontrolled entities, which are found to be materially dissimilar in aspects and features that have a bearing on the profitability of those entities. However, where the controlled transactions are clearly in the nature of lower-end ITeS such as Call Centers etc. for rendering data processing not involving domain knowledge, inclusion of any KPO service provider as a comparable would not be warranted and the transfer pricing study must take that into account at the threshold. 36. As pointed out earlier, the transfer pricing analysis must serve the broad object of benchmarking an international transaction for determining an A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that the CIT (Appeals) is justified in excluding this company as comparable. 5.3. In rebuttal, the ld.DR for Revenue had submitted that the decision in the case of Rampgreen Solutions (supra) was for A.Y. 2008-09 and further, the Hon ble Supreme Court had admitted the SLP against the decision of Hon ble Delhi High Court. 5.4. We have heard the rival contentions of the parties and perused the material available on record. Admittedly, the functions of the assessee as well as e-Clerx have not change for the last two years i.e., from 2010-11 and 2012-13. Further, the Assessing Officer in these two years had not considered e-Clerx as a comparable. In view of the above, we do not find any reason to grant any relief to the Revenue. Accordingly, we uphold the order passed by the ld.CIT(A) excluding the e-Clerx from the list of comparable. M/s. Jindal Intellicom Pvt. Ltd., M/s. Informed Technologies Limited and M/s. Ace BPO Services Pvt. Ltd. M/s. Jindal Intellicom Pvt. Ltd 6. The learned Departmental Representative submitted that the CIT (Appeals) has directed the TPO/A.O. to include the companies M/s. Jindal Intellicom Pvt. Ltd., M/s. Informed Techno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contentions of the parties and perused the material available on record. The ld.CIT(A) had directed to include these comparables in the list of comparable after relying upon the decision in the case of Infor India Pvt Ltd in ITA No.161 and 2307/Hyd/2018. We have the occasion to go through the decision of Infor India (supra) in Paras 30 to 32 of the said decision, it was held by the Tribunal as under : 30 As regards inclusion of Ace BPO Services Ltd is concerned, it is the case of the assessee that this company satisfies all the filters applied by the TPO and therefore, is functionally comparable to the assessee company. He pointed out that the TPO and the DRP have rejected this company on the ground that no information as to the RPT filter has been reported in its Annual Report and therefore, complete information is not available. The learned Counsel for the assessee has drawn our attention to page 507 and 508 of the paper book wherein details of the RPT transactions are given. 31. The learned DR was also heard who relied upon the orders of the authorities below. 32. Having regard to the fact that the details with regard to the RPT transaction of the company have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclude M/s. Infosys BPO and M/s. Eclerx Services Ltd from the list of comparables. The TPO is directed to pass the order giving effect in accordance with the law. 10. With respect to the inclusion of ACE BPO Services Pvt. Ltd, and Jindal Intellicom (P) Ltd, the Tribunal had issued the following directions in the case of the assessee for the earlier year which read as under : 6.7. In our considered opinion, the ld.CIT(A) had misread the decision of the Tribunal in the case of Infor India Ltd (supra). In the said case, the Tribunal had remanded back the matter to the file of TPO / Assessing Officer for fresh consideration. In the light of the above, we also remit the issue of comparability in respect of these three companies i.e. M/s. Jindal Intellicom Pvt. Ltd., M/s. Informed Technologies Limited and M/s. Ace BPO Services Pvt. Ltd. to examine and decide as per law. 11. Respectfully following our decision in the case of assessee for the assessment year 2013-14, we also remand back the inclusion of these two comparables to the file of the learned TPO to pass appropriate order after considering the directions issued by us and also after affording the opportunity to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Tribunal while deciding the M.A in the case of ADAP. 16. Further, he has drawn our attention to the order passed by the learned CIT (A) dealing with the above said contention. 11. We have heard the rival arguments made by both the sides, perused the material available on record. The TPO has brought on record the functional similarities between the assessee and these two companies. However, the learned CIT (A) had deleted these two companies by passing a cryptic and non-speaking order. Since the order passed by the learned CIT (A) is not a speaking order, therefore, in our view, the interest of justice shall be done that these two companies be again sent back to the file of the TPO for fresh adjudication after affording opportunities of hearing to the assessee. 12. With respect to the receivables in Ground No.3 and 3.1, the learned DR drew the attention of the Bench in the case of the Tribunal during the previous year where the Tribunal had decided the issue of outstanding receivables by holding that the LIBOR+ shall be applied for the outstanding after the credit period of 30 days. The learned AR relied upon the other decision and submitted that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al for fresh decision in the light of the legislative amendment. In the case of BT e Serv (India) (P.) Ltd. v. ITO [2017] 87 taxmann.com 251 the ITAT Delhi Bench held that undoubtedly the receivable or any other debt arising during the course of the business is included in the definition of 'capital financing' as an 'international transaction' as per explanation 2 to section 92B of the Act w.e.f. 1-4-2002 inserted by the Finance Act 2012. Therefore, even the outstanding receivable partake the character of capital financing and consequently, overdue outstanding is an international transaction . The natural corollary would be of imputing interest on such capital financing if same is not charged at arm's length. The ITAT concluded that if outstanding receivables are within the terms of agreement, then it may be argued that interest on such outstanding is already covered in the sale price of the goods. However, if the agreement does not specify the term of the payment, even then assessee must be given benefit of credit period which is accepted business practice in the trade. The ITAT confirmed 30 days as the normal credit period adopted by the TPO. 17. The for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Datamatics is required to be reconsidered by the ld.CIT(A) after giving the opportunity to the Assessing Officer / TPO. 19. On the other hand, ld.AR raised no objection for remanding this issue of inclusion to the file of lower authorities. However, it was submitted that the argument of the assessee taken in the case of M/s. MPS Ltd, may also be considered for the inclusion of present comparable. 20. We have heard the rival contentions of the parties and perused the material available on record. As the order passed by the ld.CIT(A) is cryptic, non-speaking order and lacking the material particulars which are required to be discussed and decided by the ld.CIT(A), we deem it appropriate to remand the issue of inclusion of this company to the file of ld.CIT(A) with a direction to decided afresh after affording opportunity to the parties. Receivables: 21. In this regard, the parties have drawn our attention to the order passed by the Tribunal in the case of the assessee for the A.Y. 2013-14 wherein the following directions were issued. It was submitted that similar directions were issued by the Tribunal. 12. In our considered opinion, the view taken by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal without assigning any reason has held that 120 days credit period is reasonable period. In our view, no documentary evidence has been brought on record before us so that we can infer that 120 days credit period is a reasonable period. In our view, the approach of ld.CIT(A) cannot be faulted with. Hence, we direct the TPO / Assessing Officer to charge interest at LIBOR + 200 points. Further, we direct the Assessing Officer / TPO to allow the credit period and charge interest over and above the outstanding period of 60 days. 23. In view of the above, we direct the TPO / Assessing Officer to decide the issue afresh after considering our directions reproduced hereinabove at para 9.1. for the current assessment year as well. 24. In the result, appeal of the Revenue is allowed for statistical purposes. 25. The C.O filed by the assessee in support of seeking inclusion of one company. At the outset the learned AR has not pressed the C.O and accordingly the same is treated as dismissed. 26. In the result. C.O filed by the assessee is dismissed. 27. To sum up, the C.O filed by the assessee is dismissed and the appeal of the Revenue is allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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