AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 840
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.... under S.10A of the Act. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company has provided IT Enabled back office processing services to holding company, M/s. Capmark Finance Inc., USA and a total amount of Rs. 20,52,96,951 is charged for such services. In order to determine the Arm's Length Price(ALP) of three transactions of the assessee company with its Associated Enterprise(AE), a reference, therefore, was made by the Assessing Officer to the Transfer Pricing Officer (TPO) under S.92CA(1) of the Act. In the TP Study Report submitted by the assessee, TP analysis was done by applying Transactions Net Margin Method (TNMM), taking Operating Profit to Total Cost (OP/TC) as Price Level Indicator (PLI). In the said report, fourteen comparables were selected by the assessee by applying certain filters and since the Arithmetic Mean of OP/TC of the said fourteen comparables was 11.19%, as against the OP/TC of 14.62% of the assessee in relation to its international transactions with AE, the price charged to the AE in respect of three transactions was claimed by the assessee to be as at Arm's Length. 3. After going through the rele....
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....tions of the assessee in respect of comparability analysis carried out in the TP study report given by the TPO and the application of additional filters by the TPO, which according to the assessee, resulted in inclusion of certain companies in the comparability analysis which did not satisfy the test of comparability. The Dispute Resolution Panel did not find merit in the submissions made by the assessee on this issue and holding the action of the TPO to be proper, they declined to interfere with the same. The DRP also overruled substantially the other objections raised by the assessee. Accordingly, final assessment order was passed by the Assessing Officer on 31.10.2013 under S.143(3) as per the directions given by the DRP under S.144C(5), making therein the addition of Rs. 1,83,11,454 to the total income on account of TP Adjustment. 6. Aggrieved by the order of the Assessing Officer under S.143(3) read with S.144C(5) of the Act, assessee has filed this appeal before the Tribunal, taking the following grounds- "1 That the Learned AO and Hon'ble DRP have erred in determining the arm's length mark-up for provision of IT enabled back office services as 26.27% (after working capital....
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.... Section 92C of the Act while determining the book profits under Section 1165JB of the Act." 7. As submitted by the learned counsel for the assessee, grounds no.1 to 3 raised in the appeal of the assessee are general in nature seeking no decision thereon. 8. In grounds No.4 to 6, the assessee has challenged the comparables selected by the TPO for the purpose of TP analysis and as submitted by the learned counsel or the assessee, the assessee is objecting to the selection of only the following six comparables, out of the twelve companies selected as comparables. Sl. No. Company Name 1. Accentia Technologies Limited(seg) 2. Acropetal Technologies Ltd. (Seg.) 3. Cosmic Global Ltd. 4. Eclerx Services Ltd. 5. Genesys International Ltd. 6. Infosys B P O Ltd. 9. We have heard the arguments of both the sides on the issue of inclusion/exclusion of the above six companies as comparables, and also perused the relevant material on record including the various decisions of the coordinate benches of the Tribunal cited by both the sides. Accentia Technologies Limited(seg) 10. As regards the selection of Accentia Technologies Limited(Seg) as comparable, the learned couns....
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....t year 2008-09, and restore this issue to the file of the Assessing Officer/TPO for deciding the same afresh as per the same directions as given in assessment year 2008-09. We also direct the Assessing Officer/TPO to take into consideration, the decisions of the Tribunal rendered in the cases of Capital IQ Information Systems (India) Pvt. Ltd. (supra); Excellence Data Research Pvt. Ltd., Hyderabad (supra); and Hyundai Motors India Engineering P. Ltd., Hyderabad (supra), cited by the learned counsel for the assessee while deciding this issue. Acropetal Technologies Ltd. (Seg.) 11. As regards selection of Acropetal Technologies Ltd. (Seg.) as comparable, it is observed that the said company was excluded by the Tribunal from the list of comparables in assessment year 2008-09, after having found the same to be functionally different from that of the assessee-company. The relevant observations of the Tribunal as recorded in paragraph 25 of its order dated 11.4.2014 are reproduced hereunder- "25. We have heard the submissions of the parties and perused the materials on record. In case of Market Tools Research Private Limited (supra) the coordinate bench of this Tribunal held this comp....
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.... from assessment year 2008-09. We, therefore, respectfully follow the decision of the coordinate bench of this Tribunal for assessment year 2008-09 and direct the Assessing Officer/TPO to exclude Acropetal Technologies Ltd.(seg) from the list of comparables. Cosmic Global Ltd. 12. As regards the selection of Cosmic Global Ltd. as comparable, the learned counsel for the assessee has relied on the decisions of this Tribunal in the cases of Capital IQ Information Systems (India) Pvt. Ltd. (supra); Excellence Data Research Pvt. Ltd., Hyderabad (supra); and Hyundai Motors India Engineering P. Ltd., Hyderabad (supra), wherein M/s. Cosmic Global Ltd. was excluded by the Tribunal from the list of comparables on the ground that it was found to be functionally different. It is, however, observed that in assessee's own case for assessment year 2008-09 (ITA No.1812/Hyd/2012), the Tribunal vide its order dated 11.4.2014 has set aside the issue in relation to the selection of this comparable to the file of the Assessing Officer/TPO, vide para 19 of its order dated 11.4.2014 which reads as under- "19. We have heard submissions of the parties and perused the material on record. As can be seen, ....
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....is regard is extracted hereunder for convenience. "7.3 We have heard submissions of the parties and perused the materials on record. It is not disputed that the aforesaid company has shown very high profit of 66.91% during the year. The annual report of the company also mentions the activity of the company as a KPO service. In the circumstances, it cannot be said that the aforesaid company is comparable to the assessee. The Income-tax Appellate Tribunal Hyderabad Bench in the case of Capital IQ Information Systems India P. Ltd. (supra) has held the aforesaid company, to be not a comparable to a company providing purely ITE services, as it is engaged in providing purely KPO services. Following the aforesaid decision of the coordinate bench, the Income-tax Appellate Tribunal Hyderabad in assessee's own case for the assessment year 2007-08 (supra), has also directed the exclusion of the aforesaid company from the list of comparables. There are number of other decisions of different benches of the Tribunal including the decision of Bangalore Bench in the case of Symphony Marketing (IT(TP)A No.1316/Bang/2012 dated 14.8.2013), wherein the aforesaid company has been treated as not to be ....
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....ssessee before it, which is engaged only ITE services to its AE, had remitted the issue to the file of the TPO for considering afresh. Following the same, we also remit the issue with regard to comparability of the above company, to the file of the TPO to consider the issue afresh in the light of the direction given by the coordinate bench in that case, of course, after giving reasonable opportunity of hearing to the assessee." Applying the rule of consistency, we prefer to follow the decision of this Tribunal rendered in assessee's own case for the immediately preceding year, viz. assessment year 2008-09, and restore this issue to the file of the Assessing Officer/TPO for deciding the same afresh as per the same directions as given in assessment year 2008-09. We also direct the Assessing Officer/TPO to take into consideration, the decisions of the Tribunal rendered in the cases of Capital IQ Information Systems (India) Pvt. Ltd. (supra); Excellence Data Research Pvt. Ltd., Hyderabad (supra); and Hyundai Motors India Engineering P. Ltd., Hyderabad (supra), cited by the learned counsel for the assessee while deciding this issue. Infosys BPO 15. As regards selection of Infosys BPO....