Tribunal Excludes Domex e-Data from Comparables Due to Functional Differences, Allows Assessee's Appeal on Transfer Pricing.

The Tribunal directed the AO/TPO to exclude Domex e-Data Pvt. Ltd. from the final set of comparables due to functional dissimilarities with the Assessee's ITeS functions. This exclusion brought the Assessee's margin within the acceptable range, rendering other transfer pricing issues moot. Consequently, the Assessee's appeal was allowed.

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Issues Involved:
1. Transfer Pricing adjustment on account of the international transaction relating to Information Technology enabled Services (ITeS).
2. Exclusion of Domex e-Data Pvt. Ltd. from the final list of comparables.

Summary:

Transfer Pricing Adjustment:
The appeal concerns the assessment of the total income of INR 1,71,54,680 against the returned income of INR 88,61,750 for A.Y. 2018-19. The primary issue is the transfer pricing adjustment of INR 82,92,925 related to ITeS transactions. The Assessee contended that the Ld. AO/TPO/DRP erred in upholding the transfer pricing addition, disregarding the economic analysis in the TP documentation, applying additional quantitative filters, and including/excluding certain companies in/from the final list of comparables. The Assessee also challenged the initiation of penalty proceedings u/s 270A and the computation of interest under sections 234B and 234C of the Act.

Exclusion of Domex e-Data Pvt. Ltd.:
The Assessee argued for the exclusion of Domex e-Data Pvt. Ltd. from the list of comparables, citing functional dissimilarities, lack of segmental details, and reservations in the auditor's report. The TPO and DRP retained Domex e-Data Pvt. Ltd. in the final list, considering its principal business of providing e-commerce services similar to ITeS. However, the Tribunal found that Domex e-Data Pvt. Ltd. is engaged in diversified activities, including software development, KPO, and BPO services, making it functionally dissimilar to the Assessee's ITeS functions. The Tribunal referenced previous decisions where Domex e-Data Pvt. Ltd. was excluded from the comparables for ITeS benchmarking.

Conclusion:
The Tribunal directed the AO/TPO to exclude Domex e-Data Pvt. Ltd. from the final set of comparables. With this exclusion, the Assessee's margin falls within the comparable range, rendering other transfer pricing grounds academic. Consequently, the appeal of the Assessee was allowed.

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