2020 (6) TMI 268 - AT - Income Tax

Tribunal grants appeal, allows new evidence, excludes comparables, directs interest income deduction under section 10A

M/s Linde Global Support Services Private Limited, Kolkata Versus DCIT, Circle-12 (1), Kolkata

M/s Linde Global Support Services Private Limited, Kolkata Versus DCIT, Circle-12 (1), Kolkata - TMI Issues Involved:1. Admission of additional evidence for working capital adjustments.2. Exclusion of specific comparable companies (eClerx Services Limited and TCS eServe International Limited) in Transfer Pricing analysis.3. Claim of exemption of interest under section 10A of the Income Tax Act.Issue-wise Detailed Analysis:1. Admission of Additional Evidence for Working Capital Adjustments:The assessee argued that the necessary data for working capital adjustments was not available during the Dispute Resolution Panel (DRP) proceedings, resulting in incorrect determination of the arm's length price. The assessee sought to admit additional evidence to rectify this. The Tribunal referenced Rule 29 and Rule 30 of the Income Tax Appellate Tribunal Rules, which allow for the admission of additional evidence if it is necessary for proper adjudication. The Tribunal also cited the Delhi High Court's judgment in Text Hundred India (P) Limited, emphasizing that justice should not be compromised due to procedural errors. Consequently, the Tribunal admitted the additional evidence and remitted the issue back to the Transfer Pricing Officer (TPO) for re-evaluation.2. Exclusion of Specific Comparable Companies:a. eClerx Services Limited:The assessee contended that eClerx is functionally different as it provides high-end data analytics and process outsourcing services, unlike the assessee's IT-enabled services. The Tribunal noted that eClerx operates in a single primary segment and has significant fluctuations in revenue and profits. Various precedents, including decisions from the Delhi High Court and ITAT, supported the exclusion of eClerx due to functional dissimilarity and absence of segmental data. The Tribunal directed the TPO to exclude eClerx from the list of comparables.b. TCS eServe International Limited:The assessee argued that TCS eServe is functionally different as it provides services in the banking, financial services, and insurance domains, and benefits from the Tata brand, influencing its pricing and profitability. The Tribunal observed that TCS eServe has high brand value and operates on an economic upscale, making it incomparable to the assessee. Precedents from the Delhi High Court and ITAT supported the exclusion of TCS eServe due to its functional dissimilarity and high brand value. The Tribunal directed the TPO to exclude TCS eServe from the list of comparables.3. Claim of Exemption of Interest Under Section 10A:The assessee claimed exemption for interest income from fixed deposits under section 10A, which was denied by the AO/DRP. The Tribunal referenced the Calcutta High Court's judgment in Hindustan Gum & Chemicals Ltd, which held that the entire business income, including interest income, should be considered for deduction under section 10B. The Tribunal found this judgment applicable to section 10A and directed the AO/TPO to allow the deduction for the interest income.Conclusion:The Tribunal allowed the appeal to the extent indicated, admitting additional evidence for working capital adjustments, excluding eClerx Services Limited and TCS eServe International Limited from the list of comparables, and directing the AO/TPO to allow the deduction for interest income under section 10A. The decision was pronounced considering the extraordinary situation due to the Covid-19 pandemic.