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TMI Blog2019 (10) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... AR that the company satisfies more than 25% revenue earned from export filter applied by TPO. As neither TPO nor DRP have examined the aforesaid aspects while rejecting the aforesaid company as comparable, we think it appropriate to restore the issue of comparability of this company to AO/TPO for considering afresh. Working capital adjustment - We are of the considered opinion that the capital employed on the assessee, including working capital, is one of the relevant factors for the purpose of determining the arm s length price. Therefore, the capital employed by the assessee, including the working capital, and that of comparable companies needs to be taken into consideration. Without comparing the working capital employed by the comparable companies and that of the assessee, this Tribunal is of the considered opinion that there cannot be any transfer pricing adjustment. Therefore, we restore this issue to the AO/TPO for considering it afresh after due opportunity of being heard to assessee. Disallowance of claim U/s. 80JJAA - assessee is engaged in export documentation services, e-commerce and data management services, web-based support services and software services wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proach of the TPO. Consequently, the AO passed the order U/s. 143(3) r.w.s. 144C 92CA incorporating the directions of the ld.DRP. Aggrieved against that order, the assessee filed this appeal. 3. Though the assessee filed various grounds of appeal, the ld.AR argued on the issues viz the exclusion of Infosys BPO Ltd from the comparable list, to consider the segmental margins for Microland Ltd, the exclusion of Informed Technologies India Ltd, for the consideration of working capital adjustment margins of the comparable companies and on the issue of disallowance of claim U/s. 80JJAA alone, as under. 4.1 On the issue of Infosys BPO Ltd. to be excluded from the comparable list, the ld.AR submitted that there is significantly difference in turnover, Infosys turnover for the subject assessment year is INR 2323 Crores as against the assessee s turnover of INR 64.81 Crores, significant brand value in the market, difference in nature of services, varied nature of services across diversified industries and significant asset base i.e., Infosys BPO's fixed asset is INR 217 Crores as against assessee s fixed asset of INR 16.56 Crores and hence he pleaded that Infosys should be excluded from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the financials are placed particularly the Segmentation in financial statements and submitted that the financial statements has provided for segmental accounts bifurcating ITES (comparable service) and Infrastructure management services (non-comparable services). Therefore, it was pleaded that ITES segment should be considered as comparable to the assessee s business. In support of his claim, the ld.AR relied on the following judicial judgments:- CGI Information Systems and Management Consultants Private Limited (IT(TP)A Nos. 586/Bang/2015 183/Bang/2017) Infor Global Solutions India Private Limited (ITA No. 520/Mum/2012) M/s. Infinera India Pvt. Ltd. (IT(TP)A No. 1096/Bang/2011). 4.2.1 Per contra, the ld DR supported the orders of the lower authorities. 4.2.2 We heard the rival submissions and gone through relevant material. We find merit in the assessee s above submission. Therefore, we deem it appropriate to restore this to the AO/TPO for considering the ITEs segmentals alone afresh and rework the adjustments in accordance with law after due opportunity of being heard to the assessee. 4.3 On the issue of inclusion of comparable companies M/s. Informed Technologies India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the submissions of ld. AR that the company satisfies more than 25% revenue earned from export filter applied by TPO. As neither TPO nor DRP have examined the aforesaid aspects while rejecting the aforesaid company as comparable, we think it appropriate to restore the issue of comparability of this company to AO/TPO for considering afresh after due opportunity of being heard to assessee. We make it clear, if on examining the information available on record TPO finds that this company satisfies all the filters applied by him, then, he may consider this company as a comparable. 4.3.1 Per contra, the ld DR supported the orders of the lower authorities. 4.3.2 We heard the rival submissions and gone through relevant material. We find merit in the assessee s above submission. Following the above decision, we deem it appropriate to restore the issue of comparability of this company to the AO/TPO for considering afresh after due opportunity of being heard to assessee, on the same lines, supra. 4.4 On the issue of working capital adjustment, the ld.AR submitted that Rule 10B(2)(d) and Rule 10B(3) of the Rules provide that if the comparability gets materially affected due to differences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ength price. Therefore, the capital employed by the assessee, including the working capital, and that of comparable companies needs to be taken into consideration. Without comparing the working capital employed by the comparable companies and that of the assessee, this Tribunal is of the considered opinion that there cannot be any transfer pricing adjustment. Therefore, we restore this issue to the AO/TPO for considering it afresh after due opportunity of being heard to assessee, on the same lines, supra. 4.5 On the issue of disallowance of claim U/s. 80JJAA, the ld.AR submitted that the assessee is engaged in export documentation services, e-commerce and data management services, web-based support services and software services wherein the raw data received are converted into a distinct processed data. Section 80JJAA is applicable to an industrial undertaking engaged in the manufacture or production of article or thing. The term production is a wider than the term manufacture as held by the Supreme Court in the case of CIT v Sesa Goa Ltd [2004] (271 ITR 331) and CIT v N.C. Budharaja Co. [1993] (204 ITR 412). The ld.AR also submitted that this issue is pending before the ld. CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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