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TMI Blog2024 (10) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in PCIT v. Evalueserve Sez (Gurgaon) Pvt. Ltd [ 2018 (2) TMI 1750 - DELHI HIGH COURT] The appeal shall consequently stand allowed. The question as framed is answered in the affirmative and in favour of the appellant assessee. - HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE RAVINDER DUDEJA For the Appellant Through: Mr. Nageswar Rao Mr. Parth, Advs. For the Respondent Through: Mr. Siddhartha Sinha, SSC with Ms. Dacchita Shahi, Ms. Anuja Pethia, JSCs, Mr. Nring Chamwibo Zeliang Ms. Anu Priya Nisha Minz, Advs. ORDER PER YASHWANT VARMA, J. 1. Cadence Design Systems (India) Private Limited, the appellant herein, seeks to impugn the order of the Income Tax Appellate Tribunal [Tribunal] dated 05 January 2018. The appeal came to be admitted by us on 18 May 2018 on the following question of law:- Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the M/s TCS E-Serve International Ltd.; M/s TCS E-Serve Ltd. and M/s Infosys BPO Limited could be taken into account as comparables in regard to ALP determination and the assessee s international transaction reported during A.Y. 2010-11? 2. The principal issue which arises is whether the Tribunal fell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding a company from set of comparables on the basis of turnover or profit has already been rejected by us while examining the comparability of TCS e-serve International Ltd. The Ld. counsel further submitted that the company is functionally dissimilar with the assessee company. The Ld. counsel submitted that the company was engaged in providing technical services like software testing, verification and validation of software. This contention is identical to the contention raised in the case of TCS e-serve International Ltd. On perusal of the Annual Report of the company, we find that it has rendered services identical to the services rendered by TCS e-serve International Ltd. In Schedule '0' to the notes of account of the company, available on page 105 of the Annual Report, the principal activities of the company reported are as under: 1. Background and principal activities TCS e-Serve Limited is engaged in the business of providing Information Technology Enables Services (ITes)/Business Process Outsourcing (BPO) service, primarily to Citigroup entities globally. The company's operations broadly comprise of transaction processing and technical services. Transaction p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree with the contention of the Ld. CIT (OR) that the assessee has not brought on record any evidence that such expenditure has resulted into higher profit to the comparable company. Thus we reject the contention of the Ld. counsel of having impact of higher brand value expenses on the profitability of the company. 9.4 On the issue of large-scale operations of the company, we find that company was having turnover of Rs. 1,126.63 crores as against Revenue of Rs.42.70 crores reported by the assessee from provision of IT back office support services. The turnover of the companies 26.38 times the turnover of the assessee. In our opinion, turnover of the company cannot be a ground for rejecting a comparable until and unless, there is wide variation. Accordingly, this contention of the Ld. counsel of the assessee for excluding the company as comparable, is also rejected. xxxx xxxx xxxx 9.7 In view of the above discussion, we uphold the direction of the Ld. ORP to retain the 'Infosys BPO Ltd.' as a valid comparable for back office support service transaction. 6. Mr. Nageswar Rao, learned counsel appearing for the appellant, has taken us through the record in order to establish tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits; besides, they operated on economic upscale. This approach cannot be faulted having regard to the decision of this Court in Pr. Commissioner of Income Tax v. B.C. Management Services Pvt. Ltd. 2018 (89) Taxman.com 68 (Del), which reads as follows: 13. The exclusion of second comparable ICRA Techno Analytics Ltd. was on the basis that it had engaged itself in processing and providing software development and consultancy and engineering services/web development services. The reasons for execution were functional dissimilarities and that segmental data were unavailable. Again the findings of the ITAT are reasonable and based on record. The third comparable that the AO/TPO excluded is TCS E-serve. The ITAT observed that though there is a close functional similarity between that entity and the assessee, however, there is a close connection between TCS E-serve and TATA Consultancy Service Ltd. which was high brand value; that distinguished it and marked it out for exclusion. The ITAT recorded that the brand value associated with TCS Consultancy reflected impacted TCS E-serve profitability in a very positive manner. This inference too in the opinion of Court, cannot be termed as un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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