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TMI Blog2024 (7) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 also, the assessee has challenged two comparables on functionality being Lycatel BPO Pvt. Ltd. and Cheers Interactive (India) Pvt. Ltd. which did not form part of the original ground of appeal. It is an admitted position that the assessee did not file application for admission of these comparables at the time of hearing. Accordingly, the two comparables are dismissed as not pressed. Brief facts of the case are as under: 3. Assessee, a private limited company, having its registered office in Bangalore, was incorporated on 25th February 2014. WPO India is a wholly owned subsidiary of M/s Workplace Options Finance S.A.R.L. 3.1 The assessee is an independent provider of integrated employee wellbeing solutions to Workplace Benefits LLC (hereinafter referred to as "Associated Enterprise"). It is submitted that the assessee carries on business as service provider to help employees balance their work, family and personal life, to participate in the affiliation, accreditation, examination and certification, create and enhance web based applications to bring new solutions to human resource departments of clients and work with global consultants, sector associations as well as experts fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services To be rejected for High turnover 18.52 6 Infosys B P M Services Pvt. Ltd. To be rejected for High turnover; Fails RPT Filter; Fails FAR Analysis 20.95 7 CES Ltd (Seg.) Accepted 21.77 8 Manipal Digital Systems Pvt. Ltd. Fails FAR Analysis; Fails FAR Analysis 23.54 9 Domex E Data Pvt Ltd Accepted 26.34 10 Vitae International Accounting Services Pvt Ltd Fails FAR Analysis 27.35 11 A G S Health Pvt. Ltd. To be rejected for High turnover; Fails FAR Analysis 27.64 12 Access Healthcare Services Pvt. Ltd To be rejected for High turnover; Fails FAR Analysis 39.03 13 Inteq B P 0 Services Pvt. Ltd. Accepted 39.15 14 Motif India Infotech Pvt. Ltd. To be rejected for High turnover 45.72 15 Eclerx Services Limited To be rejected for High turnover; Fails RPT Filter; Fails FAR Analysis 46.85 16 MPS Ltd To be rejected for High turnover; Fails FAR Analysis 61.83 35th Percentile 20.95 Median 24.94 65th Percentile 27.64 In the remand proceedings by the DRP, the Ld.TPO after considering the segmental details reduced the adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndency of an assessment order in certain cases could not have been created for various reasons as the case may be, and therefore, said case was transferred by DCIT in charge of NFAC which is as per the procedure specified in letter no. F.No. 225/97/2021/ITA-II dated 06.09.2021 (supra). 4.1.7 We have perused the above submissions of both sides. Apparently there was technical glitches faced by the revenue to which the transfer by PCIT to the jurisdictional Assessing Officer could not have been reflected on the ITBA portal. It is categorically clear from the circular dated 06.09.2021 reproduced hereinabove. We further note that in the letter dated 01.08.2023 issued by the DCIT, Circle - 7(1)(1) reproduced hereinabove, in para 4, the order sheet entry transferring the case to the jurisdictional Assessing Officer has been recorded which was with the approval of CBDT. We therefore do not find any merit in Ground no. 2 raised by the assessee and the same is dismissed. 5. Ground no. 3 raised by the assessee is alleging following comparables for having turnover more than 200 crores, as against the assessee having a turnover of only Rs. 14.53 crores under the ITeS segment. 5.1 Before we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT Vs. Pentair Water India Pvt.Ltd., Tax Appeal No.18 of 2015 dated 16.9.2015 wherein it was held that high turnover is a ground to exclude a company from the list of comparable companies in determining ALP, held that there were contrary views on the issue and hence the view favourable to the Assessee laid down in the case of Pentair Water (supra) should be adopted. The following were the conclusions of the Tribunal in the case of Dell International (supra): "41. We have given a very careful consideration to the rival submissions. ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010, relying on Dun and Bradstreet's analysis, held grouping of companies having turnover of Rs. 1 crore to Rs.200 crores as comparable with each other was held to be proper. The following relevant observations were brought to our notice:- "9. Having heard both the parties and having considered the rival contentions and also the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any interference." 19. The Tribunal in the case of Autodesk India Pvt. Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. The following were the relevant observations: "17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non- jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)." 20. In view of the aforesaid decision, we hold that companies listed in Ground No.10.5.1 of the original grounds of appeal whose turnover in the current year is admittedly more than Rs.200 Crores should be excluded from the list of comparable companies." 5.8 In view of the above discussions, we hold that the companies alleged by assessee in ground no. 3 deserves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rejected this comparable as there are no segmental details available in respect of the various services rendered. Nothing contrary has been filed by the Ld.DR. Respectfully following the above view, we also direct the Ld.AO/TPO to exclude this comparable from the final list. Accordingly, ground no. 4 raised by assessee stands partly allowed. 7. Ground no. 5 raised by assessee is seeking inclusion of following comparables. a) Digicall Global Pvt. Ltd. b) I G T Solutions Pvt. Ltd. c) Sundaram Business Services Ltd. d) Suprawin Technologies Ltd. e) Unicita Consulting Pvt. Ltd. 7.1 It is submitted that the DRP has not considered this comparable even though the objections were raised and various judicial precedence were relied seeking inclusion. In the interest of justice, we remand these comparables back to the Ld.AO/TPO to carry out necessary verification in accordance with the principles of transfer pricing provisions. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, ground no. 5 raised by assessee stands allowed for statistical purposes. 8. Ground no. 7 is on working capital adjustment 8.1 After hearing the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer pricing exercise would therefore fail. Therefore, in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the assessee should be allowed. We hold and direct accordingly. 19. In the result, the appeal of the assessee is allowed." 8.2 In view of the above order of the Tribunal, we inclined to remit the issue to the file of AO/TPO to determine the correct working capital adjustment. Accordingly, this ground raised by assessee stands allowed for statistical purposes. 9. Ground no. 8 is in respect of non-granting of set off of the brought forward losses against the final adjustment. The Ld.AR submitted that the assessee filed its return of income declaring its total income to be Rs. Nil after set off of brought losses of Rs. 1,28,06,188/- and carrying forward remaining loss of Rs. 2,81,46,111/- (including unabsorbed depreciation). The Ld. TPO in his initial order u/s 92CA (3) of the Act had proposed an adjustment of Rs. 3,35,05,814. 9.1 The Ld. AO accordingly in his draft assessment order, made an adjustment of the said amount and after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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