TaxTMI 
TaxTMI 
2015 (7) TMI 561
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....ard to the services to be provided. The range of services provided by the company varied from business information/ data gathering, transaction processing, library document services, data mining/ entry and general business information research support services. 2.1. During the relevant financial year 2008-09 the assessee undertook the following international transactions with its associated enterprises: S.No. Description of the transactions Amount In rupees 1. Provision of IT enabled back office support services 424,897,981 2.2. The benchmarking analysis in regard to these international transactions was done as under Particulars Provision of ITeS Most appropriate method Transactional Net margin method ("TNMM') PLI used Operating Profit ('OP')/ Total Cost ("TC") No. of comparables 14 Comparables' mean margin (working capital adjusted) 10.39% Data used Multiple years- FYs 2006-07, 2007-08 and 2008-09 Appellant's margin 17.01% Conclusion At arm's length 2.3. Ld. TPO disregarded the economic analysis carried out by the assessee on the basis of adopting multiple year data in ....
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....ys BPO Limited 15.83% Appellant's comparable 7. Microgenetic Systems Ltd. 10.00% New Comparable introduced by the TPO Arithmetic Mean 30.99% 2.7. He, accordingly, made an adjustment of Rs. 5,07,62,260/-. 2.8. Ld. TPO also issued a show cause notice dated 2-12-2012 pointing out that as per examination of the balance-sheet, receivables were taken which implied that the payment for the invoices raised by the assessee had not been received within the stipulated time as provided in service agreement with AE. Accordingly, assessee was required to furnish the time period for payment as per service agreement with AE. However, instead of charging penal interest, the delayed payments were being treated as unsecured loans/ advances to the AE and it was proposed to charge a normal rate of interest @ 16% for the period of delay in receipt of payment beyond the time stipulated in the service agreement. He also required the assessee to furnish a credit rating of all the AEs for AY 2008-09 with whom assessee had undertaken the aforementioned transactions. The format was also given in the show cause notice. The assessee objecte....
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.... that none of the conditions set out in section 92C(3) of the Act are satisfied in the present case; 2.2. ignoring the fact that the appellant is entitled to tax holiday under section 10A of the Act on its profits and therefore would not have any untoward motive of deriving a tax advantage by manipulating transfer prices of its international transactions 2.3. disregarding the Arm's Length Price ('ALP') as determined by the Appellant in the Transfer Pricing (,TP') documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('Rules'); and in particular modifying/ rejecting the filters applied by the Appellant; 2-4. disregarding multiple year/ prior years' data as used by the Appellant in the TP documentation and holding that current year (i.e. FY 2008-09) data for comparable companies should be used despite the fact that the same was not necessarily available to the Appellant at the time of preparing its TP documentation; 2.5. rejecting comparability analysis in the TP documentation based on application of the following additional revised filters in determining the A....
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....and not giving any opportunity to the Appellant to be heard or to explain, that the Appellant has relevant documents to clearly layout the terms of payment supported by the invoices and agreements in place (which clearly state the payment terms being 180 days), which have been accepted by the Ld. TPO for the Appellant in the succeeding AY 2010-11 ; 5. The Ld. AO erred in not verifying the factual errors in computation of the operating margins of the comparables and accordingly re-computing the Arm's Length Price (,ALP') accordingly while passing the order, pursuant to the directions of the Ld. DRP; 6. The Ld. DRP erred in confirming the Ld. TPO/AO's action in proposing to initiate penalty under section 271(1)(C) of the Act. 7. That the Ld. DRP has erred both on facts and in law in confirming the addition made by the Ld AO/ Ld TPO to the appellant's income by not considering the contentions/ submissions of the appellant properly. 3. At the time of hearing ld. counsel has advanced his arguments with reference to ground nos. 2.7, 3, 4 and 5. Ground no. 2.7: The assessee is primarily aggrieved by inclusion of following two comparables in th....
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....he cost of outsourcing appears to have been included in the other heads of the expenditure instead of wages- employee cost. Moreover, the intangibles will not materially affect the price of profit earning. By outsourcing the manpower, the VITL would have incurred more cost compared to the assessee company, thus resulting in lesser operating profit. But, having considering the findings of the TPO, we find that the intangibles or outsourcing the manpower will not materially affect the price or profit margin. In our considered opinion, no two comparable companies can be replicas of each other. The application of Rule 10B should be carried out and judged not with technical rigor, but on a broader prospective. In this view of the matter, we find no infirmity in the order of the CIT(A) in confirming the action of the TPO by selecting the VITL as comparable company." 7. We have considered the rival submissions and have perused the record of the case. The ITAT Delhi Bench in the case of Mercer Consulting (India) Pvt. Ltd. Vs. DCIT (ITA no. 966/Del/2014) the Tribunal vide its order dated 6-6-2014 has observed as under: 12.3. Reverting to the facts of the extant case, we find tha....
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....case of present assessee which is also rendering almost similar services. It is well settled law that in TP cases identical replica of the tested party cannot be found and one has to consider the broad similarities between the tested party and the comparables. The business model of assessee is not comparable to coral hub particularly on account of different models adopted by two companies for carrying out its functions. We, accordingly, direct the AO to exclude this comparable. II. Eclerk Services Ltd. 8. As regards Eclerk Services Ltd., the asesssee's contention was that there was functional dissimilarity with assessee's functions, as it was a knowledge process outsourcing company engaged in providing consulting services, process outsourcing; process re-engineering and automation services. The assessee also pointed out that as per the annual report/ website of the company, it provided sales and marketing services comprising online operation support, offline operations support, offline operations & data management and competitive pricing and catalogue analytics. Thus, the services were a mix of research, advice and operation management. The assessee further submitted that dur....
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....ld and is recognized as experts in chosen markets-financial services and retail and manufacturing. It is claimed to be providing complete business solutions by combining people, process improvement and automation. t is claimed to have employed over 1500 domain specialists working for the clients. It is claimed that eClerx is a different company with industry specialized services for meeting complex client needs, data analytics KPO service provider specializing in two business verticals - financial services and retail and manufacturing. It is claimed to be engaged in providing solutions that do not just reduce cost, but help the clients increase sales and reduce risk by enhancing efficiencies and by providing valuable insights that empower better decisions. M/s eClerx Services Pvt. Ltd. is also claimed to have a scalable delivery model and solutions offered that include data analytics, operations management, audits and reconciliation, metrics management and reporting services. It also provides tailored process outsourcing and management services along with a multitude of data aggregation, mining and maintenance services. It is claimed that the company has a team dedicated to develop....