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2015 (8) TMI 607
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....4e also provides solutions in the areas of customer care operations including help desk, technical support, network management systems and security management and technology services including enterprise application implementation and software engineering services for software development. 3. Financial results of ISPE for the financial year 2006-07 Description Amount (Rs.) Operating revenue 64,87,05,072 Operating expenses (*) 56,04,33,299 Operating profit 8,82,71,773 Operating profit to expenses 15.75% (*) excluding The associated enterprise, non-associated enterprise financial result of the company (as per the transfer pricing report) is as under : Particulars With AE With non-AE Total Operating income (*) 54,64,40,687 10,22,64,385 64,87,05,072 Operating expenses 46,55,99,540 9,48,33,759 56,04,33,299 Operating profits 8,08,41,147 74,30,626 8,82,71,773 Profit margin = operating profit/cost 17.36% 7.84% 15.75% The above segmental details are considered for transfer pricing analysis. 4. During the financial year 2006-07, the taxpayer entered into international ....
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....alls based on certain pre-arranged rule) to be redirected to ISPL. Once the calls arrive in India, they will be handled by a dedicated set of agents who will answer the call and resolve the customer's queries. 8. Final set of comparable companies considered by the Transfer Pricing Officer and the operating profit to total cost per cent. Sl. No. Name of the company OP/TC % (1) (2) (3) 1 Accentia Technologies Ltd. (Seg.) 30.61 2 Aditya Birla Minacs Worldwise Ltd. (Earlier known as Transworks Information Services Ltd.) 11.98 3 Allsec Technologies Ltd. 27.31 4 Apex Knowledge Solutions Pvt. Ltd. 12.83 5 Appollo Health Street Ltd. -13.55 6 Asit C Mehta Financial Services Ltd. (Seg.) 24.21 7 Bodhtree Consulting Ltd. (Seg.) 29.58 8 Caliber Point Business Solutions Ltd. 21.26 9 Cosmic Global Ltd. 12.40 10 Datamatics Financial Services Ltd. (Seg.) 5.07 11 Eclerx Services Ltd. 89.33 12 Flextronics Software Systems Ltd. (Seg.) 8.62 13 Genesys International Corporation Ltd. 13.35 14 HCL Comnet Systems and Services Ltd. (Seg.) 44.99 15 ICRA ....
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....The above shortfall of Rs. 8,98,89,972 is treated as transfer pricing adjustment under section 92CA" 9. Against the said adjustment proposed by the Transfer Pricing Officer which was incorporated in the draft assessment order by the Assessing Officer, the assessee filed objections before the Dispute Resolution Panel. The Dispute Resolution Panel rejected those objections and confirmed the transfer pricing adjustment suggested by the Transfer Pricing Officer. The adjustment confirmed by the Dispute Resolution Panel was added to the total income of the assessee by the Assessing Officer in the fair order of assessment. Against the said order of the Assessing Officer, the assessee has preferred the present appeal before the Tribunal. 10. We have heard the submissions of learned counsel for the assessee and the learned Departmental representative. The assessee filed a chart showing how some of the comparable companies chosen by the Transfer Pricing Officer are not comparable in the light of the decisions rendered by various Benches of the Tribunal in the case of similar information technology enabled services companies. The learned Departmental representative relied on the order o....
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.... facie, as per the material, Datamatics does not appear to be comparable. Even if the taxpayer or its counsel had taken Datamatics as comparable in its transfer pricing audit, the taxpayer is entitled to point out to the Tribunal that above enterprise has wrongly been taken as comparable. In fact there are vast differences between tested party and the Datamatics. The case of Datamatics is like that of Imercius Technologies representing extreme positions. If Imercius Technologies has suffered heavy losses and, therefore, it is not treated as comparable by the tax authorities, they also have to consider that the Datamatics has earned extraordinary profit and has a huge turnover. Besides differences in assets and other characteristics. The Tribunal is a fact-finding body and, therefore, has to take into account all the relevant material and determine the question as per the statutory regulations. Taxpayer is not estopped from pointing out a mistake in the assessment though such mistake is the result of evidence adduced by the taxpayer. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. For the....
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....ingly. 14. With regard to company at Sl. Nos. 19 and 23 of the list of comparable companies chosen by the Transfer Pricing Officer, viz., M/s. Maple E Solutions Ltd., and Triton Corporation Ltd., the Hyderabad Bench of the Tribunal in the case of Stream International Services P. Ltd. v. Asst. CIT (Supra) in para 13(iii) at page-14 of the order held that the promoters of these two companies were involved in fraud for earlier years and hence the financial results of these companies are distorted and cannot be relied upon and in this regard relied on several decisions rendered by the various Benches of the Income-tax Appellate Tribunal. Respectfully following the same, we direct the aforesaid two companies be excluded from the list of comparable companies chosen by the Transfer Pricing Officer. 15. The assessee next seeks exclusion of the following four companies from the list of comparable companies by applying the employee cost to sales filter, viz., Asit C. Mehta Financial Services Ltd., (previously known as Nucleus Netsoft and GIS Ltd.), Informed Technologies Ltd., Vishal Information Technologies Ltd. (now known as Coral Hub Ltd.) and Accentia Technologies Ltd. The employee ....
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....mnet and 15.93 per cent. in the case of Informed Technologies India Ltd.) and in view of the decision of the Tribunal in the case of 24/7 Customer.Com.Pvt. Ltd. v. Deputy CIT in I. T. A. No. 227/Bang/2010, followed by this Tribunal in the case of Logica Private Ltd. (supra) wherein it was held that where the related party transaction exceeds 15 per cent., such companies should not be taken as comparable companies. Following the said decision, we hold that companies at Sl. Nos. 5, 14 and 16 referred to above of the list of the comparable companies chosen by the Transfer Pricing Officer be excluded from the list of comparable companies while working out the arm's length price. In respect of comparable company Caliber Point, which is at Sl. No. 9 of the list of comparables chosen by the Transfer Pricing Officer, the related party transaction shown by the Transfer Pricing Officer is 13.70 per cent. The assessee has filed a chart before us showing related party transaction at 15.44 per cent. The same is given as annexure-III to this order. We therefore remand for fresh consideration by the Transfer Pricing Officer the related party transaction in the case of this company after affor....
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.... outsourcing (KPO) services. 15. On considering the objections of the assessee in relation to this company, we accept the contention of the assessee that this company cannot be taken as a comparable both for the reasons that it was having supernormal profit and it is engaged in providing knowledge process outsourcing services, which is distinct from the nature of services provided by the assessee.' 21. We are of the view that in the light of the decision of the Hyderabad Bench referred to above, this company cannot be regarded as a comparable for the reason that it was functionally different . (8) Moldtek Technologies Ltd. 25. This company is listed at Sl. No.16 of the list of comparable companies chosen by the Transfer Pricing Officer. As far as this company is concerned, the submission of the assessee before us is that it is in the business of knowledge process outsourcing and cannot be considered as a comparable. The functional profile of this company is as follows : 'As per the annual report for the financial year 2007-08, the company primarily operates in two business segments : Plastic division : The plastic division is ....
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....owledge process outsourcing (KPO) company and business process outsourcing (BPO) company. The Special Bench of the Income-tax Appellate Tribunal, Mumbai Bench in the case of Maersk Global Centres (India) P. Ltd. v. Asst. CIT in I. T. A. No. 7466/Mum/2012 order dated March 7, 2014 considered the question whether there can be any distinction in the matter of comparison between a knowledge process outsourcing and a business process outsourcing. The Special Bench held that there cannot be any such distinction and even knowledge process outsourcing companies can be considered as comparable. The Special Bench however went into the comparability of the aforesaid two companies in information technology enabled services sector rendering shared service centre, transaction processing, data entry reconciliation of statements, audit of shipping documents and other similar support services and concluded at para 83 of its order that the aforesaid two companies are not comparables. As to whether the nature of services rendered by the assessee in the present case is similar to the one rendered by M/s. Maersk Global Centres (India) Pvt. Ltd., is an aspect which in our view will have to be looked int....
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....ons as were made before the Transfer Pricing Officer/Dispute Resolution Panel. 24. The learned Departmental representative brought to our notice the decision of the Income-tax Appellate Tribunal, Mumbai Bench in the case of Willis Processing Services (I.) P. Ltd. v. Deputy CIT [2014] 30 ITR (Trib) 39 (Mum) wherein the Tribunal in para 30 of its order held that this company was into information technology enabled services. 25. We have considered the rival submissions. From the facts as narrated in the order of the Transfer Pricing Officer it is clear that Bodhtree Consulting Ltd., had four distinct sources of revenue viz., (i) software development- offshore ; (ii) data cleansing ; (iii) e-paper Ads ; (iv) e-paper processing. The revenue from these activities are given in the Transfer Pricing Officer's order. The nature of services performed by Bodhtrees in its division of data cleansing was confirmed by it as in the nature of information technology enabled services. The assessee did not dispute this fact before the Transfer Pricing Officer. The assessee took a plea of extraordinary profit due to hiving off of e-paper activity. The Transfer Pricing Officer however has demon....
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....fically pointed out that the Transfer Pricing Officer did not afford any opportunity to the assessee for analysing the business and performance of the company before including it as a comparable. The assessee also pointed out that the annual report of this company was not available in the public domain and was also not provided by the assessee to the Transfer Pricing Officer. 27. The Dispute Resolution Panel however did not consider these submissions of the assessee and merely observed that the Transfer Pricing Officer has given valid reasons for choosing companies as comparables. 28. Before us the limited prayer of learned counsel for the assessee was that the assessee should be given a copy of the annual report of this company and afforded an opportunity of explaining as to how this company is not comparable. We are of the view that the request made by the assessee has to be accepted in view of the lack of opportunity provided by the Transfer Pricing Officer/Dispute Resolution Panel. Accordingly, the Transfer Pricing Officer/Assessing Officer is directed to furnish a copy of the annual report of this company to the assessee. The assessee will thereafter furnish his explanat....
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....essee has submitted that the Transfer Pricing Officer did not furnish the information obtained from this company in exercise of his powers under section 133(6) of the Act. It was further pointed out that even as per the Transfer Pricing Officer, the annual report of this company for the financial year 2006-07 was not available. The Transfer Pricing Officer has gone by the data available on Capitaline data base. Learned counsel for the assessee therefore made a prayer that the question of considering the aforesaid company as a comparable should be remanded back to the Transfer Pricing Officer/Assessing Officer for fresh consideration and the issue decided in the light of the published annual report for the financial year 2006-07 and also on the basis of the information furnished by this company to the Assessing Officer in response to notice under section 133(6) of the Act. We have considered the submissions and are of the view that the same deserves to be accepted. The Transfer Pricing Officer/Assessing Officer will obtain the annual report of the company for the financial year 2006-07 and also furnish the assessee copies of the same together with the information obtained by the Tra....