Tribunal upholds exclusion of MPS Ltd. as comparable company & dismisses Revenue's appeal.

The Tribunal upheld the decision to exclude MPS Ltd. as a comparable company, ruling against the appellant. Additionally, the Tribunal supported the direction to recalculate margins for M/s. Jindal Intellicom Ltd., disagreeing with the Revenue's arguments. The appeal filed by the Revenue was dismissed, and the order was pronounced on 29.07.2022.

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Issues:
1. Exclusion of MPS Ltd. as a comparable company.
2. Challenge to the direction given by Ld. CIT(A) to TPO to recalculate margins of M/s. Jindal Intellicom Ltd.

Analysis:

Issue 1: Exclusion of MPS Ltd. as a comparable company
The appellant, ACIT, Mumbai, filed an appeal to set aside the order passed by the Assessing Officer (AO) regarding the assessment year 2015-16. The main contention was the exclusion of MPS Ltd. as a comparable company. The Revenue argued that MPS Ltd. is functionally similar to the assessee, being a BPO company. However, the assessee contended that MPS Ltd. is a KPO company and a product company, making it functionally dissimilar. The Tribunal analyzed the functional profile of MPS Ltd., which highlighted its high-end services and product-oriented nature, contrasting with the routine ITES services provided by the assessee. The Tribunal agreed with the Ld. CIT(A) that MPS Ltd. was not a valid comparable, considering its services and risk profile. The Tribunal upheld the exclusion of MPS Ltd. as a comparable, ruling against the assessee on this ground.

Issue 2: Challenge to the direction to recalculate margins of M/s. Jindal Intellicom Ltd.
The second ground of appeal challenged the direction given by Ld. CIT(A) to the Transfer Pricing Officer (TPO) to recalculate the margins of M/s. Jindal Intellicom Ltd. The Revenue argued that the Ld. TPO had no power to set aside the order under section 251 of the Act. However, the Ld. CIT(A) directed the TPO to adopt the correct margin after providing an opportunity to the assessee. The Tribunal found that the Ld. CIT(A) issued the direction due to a clear irregularity by the TPO in not computing the correct margin for M/s. Jindal Intellicom Ltd. The Tribunal upheld the direction given by the Ld. CIT(A) as it was necessary to verify the correct margin, especially when the company passed the export filter for the relevant year. Consequently, the Tribunal ruled against the Revenue on this ground as well.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decisions regarding the exclusion of MPS Ltd. as a comparable company and the direction to recalculate margins for M/s. Jindal Intellicom Ltd. The order was pronounced on 29.07.2022.

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