Tribunal excludes TCS E-serve Ltd. as comparable, remands others for further review.

The Tribunal partly allowed the appeal, directing the exclusion of TCS E-serve Ltd. as a comparable due to functional dissimilarity. The issues regarding the inclusion of IServices India Pvt. Ltd., Savi Infoservice (India) Pvt. Ltd., and Microgenetics Systems Ltd. were remanded back to the TPO for further examination and a speaking order. Other grounds of appeal were dismissed as not pressed.

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Issues Involved:
1. Exclusion of TCS E-serve Ltd. as a comparable.
2. Inclusion of IServices India Pvt. Ltd. as a comparable.
3. Inclusion of Savi Infoservice (India) Pvt. Ltd. as a comparable.
4. Inclusion of Microgenetics Systems Ltd. as a comparable.

Issue-wise Detailed Analysis:

1. Exclusion of TCS E-serve Ltd. as a Comparable:
The assessee argued for the exclusion of TCS E-serve Ltd. on the grounds that it is functionally dissimilar. TCS E-serve Ltd. is involved in a broad spectrum of activities including transaction processing, technical services, collections, customer care, and payments related to services offered by Citigroup. The technical services involve software testing, verification, and validation, which are beyond the scope of the low-end BPO services provided by the assessee to its UK-based AE. The Tribunal agreed with the assessee, noting that TCS E-serve Ltd. is functionally dissimilar and has a significant brand value and turnover. The Tribunal cited the Hon’ble Delhi High Court’s judgment in Actis Global Services Pvt. Ltd. to support the exclusion of TCS E-serve Ltd. from the final set of comparables.

2. Inclusion of IServices India Pvt. Ltd. as a Comparable:
The assessee sought the inclusion of IServices India Pvt. Ltd., arguing it was functionally similar. The Dispute Resolution Panel (DRP) had directed its inclusion if it passed the necessary filters applied by the Transfer Pricing Officer (TPO). However, the TPO excluded this company without providing any reason. The Tribunal restored this issue to the TPO with instructions to implement the DRP's directions and pass a speaking order on this comparable.

3. Inclusion of Savi Infoservice (India) Pvt. Ltd. as a Comparable:
Similarly, the assessee requested the inclusion of Savi Infoservice (India) Pvt. Ltd., which the DRP had also directed to be included if it passed the TPO's filters. The TPO again excluded this company without assigning any reason. The Tribunal directed the TPO/Assessing Officer to follow the DRP's directions and decide on the inclusion/exclusion of this comparable by passing a speaking order.

4. Inclusion of Microgenetics Systems Ltd. as a Comparable:
The assessee argued for the inclusion of Microgenetics Systems Ltd., stating it was functionally similar and had passed all the filters. The TPO excluded this company on the grounds that the related party transaction filter was not met, although the assessee contended that relevant data was provided. The Tribunal restored this issue to the TPO, directing a re-examination of the inclusion of this comparable after considering the related party transactions data.

Conclusion:
The Tribunal partly allowed the appeal, directing the exclusion of TCS E-serve Ltd. and remanding the issues regarding the inclusion of IServices India Pvt. Ltd., Savi Infoservice (India) Pvt. Ltd., and Microgenetics Systems Ltd. back to the TPO for further examination and a speaking order. Other grounds of appeal were dismissed as not pressed. The order was pronounced in the open court on 20th June 2019.

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