Tribunal excludes Infosys BPO for NCP margin calculation in appeal against DRP order.

The Tribunal allowed the appeal against the order of the DRP for the assessment year 2013-14. The issue revolved around the selection of a comparable company for determining the NCP margin. The Tribunal agreed with the argument that M/s. Infosys BPO, with significantly higher turnover than the assessee, was incomparable. Relying on past decisions, the Tribunal directed the exclusion of M/s. Infosys BPO for NCP margin calculation, emphasizing the importance of turnover parity in such assessments.

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Issues:
1. Selection of comparable company for determining NCP margin.

Analysis:

Issue 1: Selection of comparable company for determining NCP margin
The appeal was against the order passed by the Ld. Members of the DRP regarding the assessment year 2013-14. The main contention raised by the assessee was the adoption of M/s. Infosys BPO as a comparable company, which had a turnover significantly higher than that of the assessee. The Ld.AR argued that the turnover difference was substantial, making M/s. Infosys BPO incomparable. The Ld.DR, however, contended that functionally, M/s. Infosys BPO was comparable to the assessee. After hearing both sides, the Tribunal agreed with the Ld.AR's submission. They observed that M/s. Infosys BPO was much larger than the assessee and other comparable companies. Referring to previous decisions, including H & S Software Development and Knowledge Management Centre Pvt Ltd, Visual Graphics Computing Services India Pvt. Ltd vs. ACIT, and Maersk Global Service Centers (India) P Limited, the Tribunal concluded that M/s. Infosys BPO's turnover being more than 10 times that of the assessee's made it incomparable. Therefore, the Tribunal directed the Ld.AO to exclude M/s. Infosys BPO as a comparable company for determining the NCP margin. The appeal was allowed based on this decision.

This judgment highlights the importance of selecting comparable companies for determining the NCP margin and the significance of turnover differences in making such comparisons. The Tribunal's reliance on previous decisions and established principles in reaching its conclusion adds weight to the decision.

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