2013 (9) TMI 485
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....e paper-book for the assessment year 2005-06, in the course of arguments, the assessee filed revised paper-books common for the assessment years 2004-05 to 2006-07, which were heard together with these appeals on 15.5.2013, containing papers in two parts. 3. Briefly stated, assessee is wholly owned subsidiary of HSBC Holdings Plc (HSBC group) one of the leading banking and financial services organisation in the world. The assessee provides a range of back office services including contact centre and data entry and data processing and related services, together referred to as BPO services, to its croup companies/Associated Enterprises (AE) across the globe. The company's service centres are registered as a 100% export oriented unit under the STPI scheme. The assessee has also established a branch in UK to facilitate the identification and effective migration of work to India from AEs. The assessee renders services as a captive service provider and remunerated on a full time equivalent/cost budgeted plus mark-up basis ensuring a mark-up on the cost incurred for providing the services to its AEs. 4. The assessee filed return of income for the assessment year 2005-06 on 29.10.2005 di....
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....g four companies- (a) Vishal Information Technologies Ltd. (b) Maple E Solutions Ltd. (c) Nucleus Netsoft and GIS(India) Ltd. (d) Wipro BPO Solutions Ltd. 8. Out of the above four comparables, we have already considered the assessee's objections with reference to the first three companies, viz. Vishal Information Technologies Ltd., Maple E Solutions Ltd. and Nucleus Netsoft and GIS(India) Ltd., vide our separate order of even date for the assessment year 2006-07 in ITA No.1624/Hyd/2010. For the detailed reasons discussed in that order for the assessment year 2006-07, we direct the TPO to exclude those three companies. 9. With reference to Wipro BPO Solutions, it was submitted that the functions of that company are different and the risks undertaken are more and it is an industrial giant, having high turnover, as compared to that of the assessee. The assessee relied on the decision of the coordinate Bench of the Tribunal in the case of Capital IQ Information Systems India Pvt. Ltd. in ITA No.961/Hyd/2011. 10. After considering the rival submissions, we are of the opinion that there is no basis for considering the assessee's submissions. In the coordinate bench decision relied....
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....turnover of over Rs.200 crores as against the assessee's turnover of only Rs.60 crores, and therefore, it would be fair enough to exclude those companies also. In the case of Agnity India Technologies P. Ltd. (supra), the Delhi Bench of the Tribunal, while considering the comparability with companies which are market leaders in their field, and having substantially high turnover, observed as follows- "5.2. Various arguments, as stated earlier, were taken before the DRP which inter-alia included rejection of comparable cases; application of arbitrary filter of wage to sales ratio; ignoring that the assessee is a limited risk company; inclusion of Infosys Technologies ltd.; and inclusion of Satyam Computers Services Ltd. in spite of the fact that its data is not reliable as publicly known. On the basis of these arguments, the DRP excluded the case of Satyam Computers Services Ltd., thereby reducing the arm's length margin to 25.6%. It is argued that the case of the assessee is not comparable with Infosys Technologies Ltd., the reason being that the later is giant in the area of development of software and it assumes all risks, leading to higher profit. On the other hand, the assesse....
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....deration for the purpose of making TP study." In view of the aforesaid consistent decisions of the Tribunal, we accept the contention of the learned Authorised Representative for the assessee that the aforesaid three companies cannot be treated as comparable, considering their substantially high turnover as compared to that of the assessee. We also agree that the turnover filter of Rs.1 crore to Rs.200 crore as applied by the ITAT Bangalore Bench in the aforesaid decision, should also apply to the facts of the present case, considering the assessee's turnover of mere Rs.60 crores. We therefor4e, hold that companies having turnover of Rs.1 crore to Rs.200 crore alone can be considered as comparable, in the case of the assessee. 11. As can be seen from the above, main reason for excluding Wipro BPO is on the basis of higher turnover claimed by that BPO when compared to the assessee in that case. However, in the case before us, assessee's turnover is not small. In fact, assessee's total turnover is Rs.334.54 crores, which cannot be considered as small given the facts of the case. Except relying on the turnover filter as considered in the coordinate bench decision, assessee did not p....
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....sessment year 2006-07, which was also heard together with this appeal, and disposed of by separate order of even date, there is no such company selected as comparable for that year. Therefore, assessee's objection in this behalf cannot be accepted. 16. As for Gold Stone Technologies Ltd., it is submitted that this company should be selected as comparable on the basis of the response of the said company under S.133(6). However, this company was considered and rejected in assessment year 2006-07 on functionality basis and we have upheld the view taken by the Revenue authorities in that behalf for that year vide our separate order of even date in the appeal for that year noted above. Accordingly, we are of the opinion that this company cannot be selected as comparable for this year as well. 17. As for R.Systems International Ltd., it was submitted that this company was selected as comparable by the TPO for all other years, and the assessee has not objected to the same. It was submitted that this company also should be selected as a comparable in this assessment year as well. On seeing the record of assessment year 2006-07, we find that R.Systems International Ltd. is one of the comp....
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....ased line charges of Rs.5,17,489,370 incurred by the assessee as attributable to the delivery of computer software outside India. The issue involved in this ground is similar to the one in assessee's own case for the assessment year 2006-07, and decided the same vide our order even date in ITA No.1624/Hyd/2010. Facts and circumstances of the case for the assessment year 2005-06 being similar, consistent with the view taken as above for the assessment year 2006-07, we hold, in principle, that data link charges considered as attributable to delivery of computer software outside India should be excluded from export turnover as well as total turnover, while computing the deduction under S.10A. Further, out of the data link charges spent by the assessee, how much is for intra and inter office services and how much is for delivery of services has not been examined by the Assessing Officer. Therefore, in the interests of justice, we restore the issue for quantification of the communication charges to the file of the Assessing Officer, to decide it on factual basis, and accordingly decide whether the communication charges should be excluded or not. In case any amounts are to be excluded as....
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....so been taxed in India. In our considered view, assessee is entitled to relief under Article 24 of the DTAA between India and U.K. to the extent of proportionate taxes paid. Since there is no discussion on this issue also, and whether the income was chargeable to tax or exempt from Indian Income-tax, this issue requires examination by the Assessing Officer. Therefore, this matter is restored to the file of the Assessing Officer to examine the same afresh and allow necessary credit, as per the provisions of the DTAA between India and the U.K. This ground is accordingly considered as allowed for statistical purposes. 24. Ground No.17 is with reference to interest under S.234B and 234D. This ground is academic in nature, being consequential, and as such it is rejected. Revenue's Appeal : ITA No. 6177/Hyd/2010 25. Grounds No.1, 2 and 5 of the Revenue in this appeal are general and do not call for separate adjudication. Other grounds read as follows- "3. The learned CIT(A) ought not to have held that the communication charges shall also be excluded from total turnover if excluded form export turnover. 4. The learned CIT(A) ought not to have directed to adopt Arm Length Price at Rs.....
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....nsidered the reimbursement of expenditure and accordingly vide para 15 arrived at the resultant addition. Further vide para 17 also, he modified the amount to be worked out and the cumulative figures of these things resulted in the difference as pointed by the revenue in this ground. These are only arithmetic adjustments, with which we do not find any mistake. However, this computation itself is subject to reconsideration by the Assessing Officer, as in assessee's appeal, some of the comparables were also directed to be excluded and various directions were given on other issues. Therefore, there is no need to adjudicate on this contention of the Revenue, as it has become academic in nature. Accordingly, the same is rejected. Cross Objection of the Assessee : CO No.17/Hyd/11: 29. In this cross-objection, the assessee has raised the following grounds, which are not raised in the main appeal of the assessee- "On the facts and circumstances of the case and in law, the learned CIT(A) erred in the following: 1. Including the reimbursements of Rs.13,66,07,145 by the Associated Enterprises being travel costs reimbursed in the operating cost for the purpose of determining the ALP of int....