TaxTMI 
TaxTMI 
2014 (1) TMI 72
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....mers. The assessee also provides services to the associated enterprise "AE" namely Patni Telecom, U. S. and Patni Telecom, U. K. The assessee filed return of income for the assessment year 2008-09 admitting total income of Rs. 87,850 under the normal provisions of the Income-tax Act, 1961 and book profit of Rs. 14,75,22,331 under section 115JB of the Act. The Assessing Officer passed draft assessment order under section 143(3) read with section 144C of the Act on December 26, 2011 determining the total income under the normal provisions of the Act at Rs. 9,90,69,143 after making addition of Rs. 9,89,87,293 to the returned income representing reference in transfer pricing value under section 92CA of the Act. The addition of Rs.9,89,81,293 wa....
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....e arm's length margin (please see annexure-B for details of computation of profit level indicator of the comparables). Based on this, the arm's length price of the IT enabled services rendered by the tax payer to its associated enterprises is computed as under : Arithmetic mean PLI 21.25 % Less : Working capital adjustment (annexure-C) -2.08 % Adj. Arithmetic mean PLI 23.33% (Rs.) Operating cost 86,57,70,927 Operating cost when aggregated with reimbursement received at Rs. 1,76,99,840 88,34,70,767 Arm's length margin 23.33 % Arm's length price (ALP) at 123.33. per cent. of operating cost 1,08,95,84,496 The price charged by the tax payer to its ....
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....nd Kais Information whose turnovers are miniscule compared to that of the appellant and thereby erred in considering their profit level indicator to arrive at arithmetic mean. 3. The Dispute Resolution Panel erred in rejecting the objections against comparables, viz., Infosys Ltd. and Wipro Ltd. whose turnovers are multiple number of times higher compared to that of the appellant and thereby erred in considering their profit level indicator to arrive at arithmetic mean. 4. The Dispute Resolution Panel ought to have appreciated the fact that these companies are not comparables and are to be excluded while arriving at the arithmetic mean, and further ought to have appreciated the fact that the arithmetic mean arrived at by excluding the....
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....ata etc., mentioned with respect to the two companies. 9. Before us, the learned Departmental representative relied on the decision of Capgemini India Pvt. Ltd. v. Asst. CIT vide ITA No. 7861/Mum/ 2011 assessment year 2007-08 for the proposition of the assessee that Infosys and Wipro which are cases of extremely high turnover should be excluded. The relevant portion of Capgemini India Pvt. Ltd. is extracted below : "5.3.5 The various reasons given for applying the turnover filter for comparison of margins are economy of scale, greater bargaining power, more skilled employees and higher risk taking capabilities in cases of high turnover companies, which increase the margin wi....
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....ibunal mentioned earlier, who have applied the turnover filter. Therefore, in view of the fresh material, in our view, the decisions of the Tribunal cannot be followed." 10. We find that the co-ordinate Bench of the Tribunal in the case of Deloitte Consulting India Pvt. Ltd. [2012] 15 ITR (Trib) 573 (Hyd), vide ITA. Nos. 1082 and 1084/Hyd/2010 has dealt with the issue as to whether the Transfer Pricing Officer was correct in selecting Wipro BPO having turnover multiple number of times more than the assessee-company as comparable or not. The relevant para of the Tribunal's order is reproduced as under: "37. We find that this issue is covered in favour of the assessee by the d....
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....ents amounting to Rs. 1,76,99,840 which did not result in any profit or gain or income to it. It was requested that the same cannot be treated as consideration. The assessee relied on Abbey Business Services India Pvt. Ltd. v. Deputy CIT. The Dispute Resolution Panel noticed that the tax payer objected to the application of margin on reimbursement of expenses to its associate enterprise. The Dispute Resolution Panel observed that during the year the assessee had reimbursed a sum of Rs. 1,76,99,840 to the associate enterprise in respect of salary and other costs of the assessee paid by the associate enterprise. The Dispute Resolution Panel further observed that the tax payer cost was paid by its associate enterprise and subsequently, the tax....