Tribunal remits ALP calculation, includes/excludes specific companies, appeal allowed.

The Tribunal set aside the impugned order and remitted the matter to the AO/TPO for recalculating the ALP of the international transaction afresh, considering the directions for inclusion and exclusion of specific companies. The appeal was allowed for statistical purposes.

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Issues Involved:
1. Selection of comparables for Transfer Pricing Adjustment.

Detailed Analysis:

1. Selection of Comparables for Transfer Pricing Adjustment:

Cosmic Global Ltd.:
The TPO included Cosmic Global Ltd. as a comparable, but the assessee objected, arguing functional dissimilarity. The Annual accounts revealed that this company's revenue was significantly derived from Translation charges, with 57% of expenses outsourced. The Tribunal noted that the nature of services provided by the assessee was similar to Mercer Consulting (India) Pvt. Ltd., where Cosmic Global Ltd. was excluded due to outsourcing. Hence, it was ordered to exclude Cosmic Global Ltd. from the list of comparables.

Genesys International:
Initially included by the assessee, Genesys International was later argued to be functionally different. The TPO included it based on the assessee's initial selection. However, the Tribunal emphasized evaluating comparability on merits rather than initial inclusion. Genesys International, engaged in geospatial services, was found to be functionally different from the assessee's back-office operations and accounting services. Following the precedent in Mercer Consulting (India) Pvt. Ltd., the Tribunal ordered its exclusion.

Vishal Information Technologies (Coral Hub):
The TPO included Vishal Information Technologies despite the assessee's objections. The Tribunal noted that 90% of its operating cost was outsourcing charges, making its business model different from the assessee's. Citing similar decisions in Mercer Consulting (India) Pvt. Ltd. and other cases, the Tribunal ordered its exclusion from the comparables.

Accentia Technologies:
The TPO included Accentia Technologies, but the assessee argued for its exclusion due to involvement in software products and acquisitions during the year. The Tribunal found that Accentia engaged in both ITES and software products, with no segmental figures available, making it incomparable. Additionally, the acquisition of Oak Technologies Inc. was considered an extraordinary event. Citing precedents, the Tribunal ordered its exclusion.

Eclerx Services Pvt. Ltd.:
The TPO included Eclerx Services Pvt. Ltd., which the assessee objected to, arguing functional dissimilarity. The Tribunal found Eclerx to be a KPO with significant intangibles, unlike the assessee's captive ITES operations. Hence, Eclerx Services Pvt. Ltd. was ordered to be excluded.

Allsec Technologies Ltd.:
The TPO excluded Allsec Technologies based on extraordinary business activities, diminishing revenue, and failing the export filter. The Tribunal found the exclusion on the export filter (74.45% vs. 75%) nominal and not justifiable. However, the consistent losses and extraordinary events (acquisition and dissolution) justified its exclusion. The Tribunal upheld the exclusion of Allsec Technologies.

R. Systems International Ltd.:
The TPO excluded R. Systems International Ltd. due to a different accounting year ending. The Tribunal noted that audited data for the relevant quarters was available, making it possible to align the financial year with the assessee's. The Tribunal directed the inclusion of R. Systems International Ltd. if correct figures could be deduced.

Conclusion:
The Tribunal set aside the impugned order and remitted the matter to the AO/TPO for recalculating the ALP of the international transaction afresh, considering the directions for inclusion and exclusion of specific companies. The appeal was allowed for statistical purposes.

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