TaxTMI 
TaxTMI 
2013 (3) TMI 172
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....ts associated enterprise, a reference u/s 92CA of the Act was made to the TPO for determining the arms length price of the said international transaction. The TPO vide order dated 28.10.2009 u/s 92CA of the Act, proposed adjustments towards software development services and IT enabled services. The AO taking due note of the adjustments proposed by the TPO, forwarded a draft assessment order to the assessee. The assessee raised objections to the draft assessment order before the DRP and after considering the same, the DRP confirmed the proposal of the assessing authority and assessment order was accordingly passed. Aggrieved, the assessee is in appeal before us. The DRP confirmed the order of the assessing authority as far as the adjustment to the ALP towards IT enabled services is concerned but recommended that no adjustments are required to be done in respect of the international transactions relating to software development services segment. 4. Aggrieved by the adjustment made under the ITES segment, the assessee is in appeal before us. Though the assessee has raised as many as 19 grounds of appeal, the main grievance is against the transfer pricing adjustment and the comparabl....
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....s, according to him, these companies have to be excluded from the list of comparables as they are abnormally higher margin companies. In support of its contention that the abnormally higher margin companies are to be excluded from the list of comparables for the purpose of TP study, the learned counsel for the assessee has placed reliance upon the following decisions : (1) Adobe Systems India (P.) Ltd. v. Addl. CIT [2011] 44 SOT 49 (Delhi)(URO) (2) SAP Labs India (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 156 (3) Teva India (P.) Ltd. v. Dy. CIT [2011] 44 SOT 105 (Mum.) (URO) (4) ITO v. Saunay Jewels (P.) Ltd. [2010] 42 SOT 4 (Mum.) (URO) (5) Sapient Corporation (P.) Ltd. v. Dy. CIT [2011] 46 SOT 56 (Delhi) (URO) (6) Genisys Integrating Systems (I) (P.) Ltd. [IT Appeal No.5263 (Delhi) of 2010] 9. The next comparable, the assessee has objected to is (3) Vishal Information Technology Ltd. The objection of the assessee is that the employee cost of this company is less than 25%. The learned counsel for the assessee submitted that the IT enabled services are basically dependent upon the human resources and, therefore, any company with employee cost l....
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....Mentor Graphics (Noida) (P.) Ltd. v. Dy. CIT [2007] 109 ITD 101/18 SOT 76 (Delhi) (6) E-gain Communication (P.) Ltd. v. ITO [2009] 118 ITD 243/[2008] 23 SOT 385 (Pune) 11-12 The Fifth comparable company which the assessee objects to is (5) Datamatics Financial Services Ltd. The objection of the assessee is that the company does not qualify the revenue filter considered by the learned TPO himself, according to which the company not deriving 75% or more of its revenue from ITES activity is to be rejected from comparables. As regards last comparable which the assessee seeks to be excluded is (6) Allsec Technologies Ltd. According to the learned counsel for the assessee, Allec Technologies Ltd., has been experiencing extra ordinary events. During the financial year 2005-06, Allsec had gone for a IPO during the relevant previous year and also the company had entered into a share purchase agreement with shareholder of B2K Corporation Pvt. Ltd., which is engaged in the business of inbound and outbound voice, email chat services and information technology services. Therefore, due to these extra ordinary events, the profits of the said company are not ascertainable and, therefore, t....
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.... comparable to any other ITES service provider rendering the services entirely on its own. In such circumstances, the net margins of the two comparables cannot be on the same basis. The decisions relied upon by the learned counsel for the assessee also held that the employee cost filter is important filter to be adopted for the purpose of computing ALP. In the case of Maersk Global Service Centre (India) (P.) Ltd. (supra), the Tribunal at Mumbai has held that Vishal Information Technologies Ltd. has to be excluded from the list of comparables of ITES company as it has outsourced its services. In view of the same, we direct the AO to exclude this company also from the list of comparables. 16. As far as (4) Apex Knowledge Solutions Pvt. Ltd., is concerned, we find that the assessee had taken objections before the TPO that it is functionally different, as it is provides services such as E-publishing knowledge based services etc. But TPO has rejected the objection on the ground the assessee has not considered the verticals or functional lines during the search process conducted by it and, therefore, it is not proper to make any objection on this basis now. We are not able to agree wit....