Tribunal allows appeal, changes comparables in transfer pricing case.

The Tribunal allowed the appeal filed by the assessee, directing the exclusion of Excel Infoways Ltd. and Infosys BPO Limited as comparables and including Infosys Technology Ltd. and ACE BPO Services as comparables. The remaining grounds were deemed general and required no separate adjudication.

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Issues Involved:
1. Transfer Pricing Adjustment
2. Rejection of Comparables
3. Inclusion of Certain Comparables by TPO

Summary:

1. Transfer Pricing Adjustment:
The appeal was filed by the assessee challenging a transfer pricing adjustment of Rs. 3,28,79,224/- for the Assessment Year (A.Y.) 2012-13. The adjustment was made following the directions of the Dispute Resolution Panel (DRP) and involved various grounds.

2. Rejection of Comparables:
The assessee used the Transaction Net Margin Method (TNMM) with Net Cost Plus (NCP) as the profit level indicator (PLI) and identified 9 comparative companies. The Transfer Pricing Officer (TPO) rejected the internal TNMM benchmarking analysis, computed the entity-level PLI at 13.35%, and proposed an adjustment of Rs. 3,54,31,368/-. The DRP upheld the TPO's order, leading to an adjustment of Rs. 3,28,79,224/-.

The lower authorities rejected the comparables Informed Technologies Ltd. and ACE BPO Services Pvt. Ltd. based on a turnover filter of less than Rs. 5 crores, while the assessee argued that the turnover filter of Rs. 1 crore was justified. The Tribunal held that the lower authorities erred in rejecting the comparables merely on the ground of low turnover without functional dissimilarity and allowed the inclusion of Infosys Technology Ltd. and ACE BPO Services as comparables.

3. Inclusion of Certain Comparables by TPO:
The TPO included Excel Infoways Ltd. and Infosys BPO Limited as comparables, which the assessee contested. The Tribunal found that Excel Infoways Ltd. should be rejected as a comparable due to its impractical allocation of employee costs and contradictions in data. Similarly, Infosys BPO Limited was excluded as a comparable due to its brand value, acquisition of an Australian company, and functional dissimilarity. The Tribunal directed the exclusion of both Excel Infoways Ltd. and Infosys BPO Limited as comparables.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, directing the exclusion of Excel Infoways Ltd. and Infosys BPO Limited as comparables and including Infosys Technology Ltd. and ACE BPO Services as comparables. The remaining grounds were deemed general and required no separate adjudication.

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