TaxTMI 
TaxTMI 
2016 (9) TMI 403
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.... from that of the appellant. b) The Honourable DRP and the learned AO have erred in rejecting CUP data on the grounds that the employee cost to sales ratio of the third party service providers differ from that of the appellant. c) The Honourable DRP and the learned AO have failed to appreciate the fact that for the applicability of CUP method the nature of services and the price of the transactions should be compared and not the margins earned by the parties. d) The Honourable DRP and the learned AO have failed to appreciate that for the applicability of CUP the cost/business models of the parties are not relevant and the same should not be a criterion for rejecting CUP. e) The Honourable DRP and the learned AO have made adjustments to the international transactions entered into by the appellant in the Call Centre services segment without any reasonable basis and without considering the supporting CUP data submitted by the appellant. f) The Honourable DRP and the learned AO grossly erred in not appreciating the fact that the services rendered by the appellant and the third party service providers are identical. g) The Honourable DRP and the learned AO have erred i....
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.... years and at 37% during the financial year 2005-06. c) The Honourable DRP and the learned AO have failed to recognise that the appellant is a contract service provider who is insulated from all major risks in the business to even attain the average industry growth rate. 2. Companies with wide fluctuation in profits have to be eliminated and arbitrary selection of comparables should not be undertaken (Contradictory statements in the Transfer Pricing Order). a) The Honourable DRP and the learned AO have erred in upholding TPO's contention of accepting the following companies with fluctuating profits. • Cosmis Global Ltd. • Asit C Mehta Financial Services Ltd • Goldstone Infratech Ltd • Ace Software Exports 3. The powers bestowed under Section 133(6) should be employed judiciously and in compliance with the principles of natural justice a) The Honourable DRP and the learned AO ought to have appreciated that the powers conferred under Section 133 (6) of the Act, ought to be employed in such a manner so as to comply with the provisions of judiciousness as well as with the principles of natural justice. b) The Hon....
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....at the RPT filter could be relaxed in the event there are not sufficient comparable companies for comparability purposes. f) The Honourable DRP and the learned AO have erred in not rejecting the following comparables proposed by the learned TPO If 0 percent is chosen as the threshold limit for RPT filter as provided in the Philips case: No. Company Name RPT % 1 Aditya Birla Minacs Worldwide Ltd 1.83% 2 Allsec Technologies Ltd 6.99% 3 Ace Software Exports Ltd 2.82% 4 Spanco Systems Ltd 6.51% 5 R Systems International Ltd 15.39% 6 Flextronics 8.28% 7 Goldstone Infratech Ltd 1.31% 8 Asit C Mehta Financial Services Ltd 10.08% If 10 percent is chosen as the threshold limit for RPT filter as provided in the Sony case: No. Company Name RPT % 1 R Systems International Ltd 15.39% 2 Asit C Mehta Financial Services Ltd 10.08% If 15 percent is chosen as the threshold limit for RPT filter as provided in the Sony case: No. Company Name RPT % 1 R Systems International Ltd 15.39% 5. Use of contemporaneous data a) The Honourabl....
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....ment was not retrospective in nature. c) The Honorable DRP and the learned AO have erred in not considering that if at all any adjustment is made, the same should be made only to the lower limit of the 5% range set out u/s 92C(2). 8. Anti Avoidance a) The Honorable DRP and the learned AO ought to have appreciated that Transfer Pricing provisions are in the form of an anti-avoidance legislation and that such provisions are required to be interpreted on the rules of strict interpretation. 9. The employee cost filter of 25% of revenue needs to be applied by the TPO b) The learned DRP as well as the learned AO failed to appreciate the fact that the logic of application of this filter to the IT segment should have been extended to the ITES segment as well as even in the ITES segment, employees constitute the predominant asset. c) The Honorable DRP and the learned AU have erred in not eliminating the following comparables: * Cosmic Global Ltd * Vishal Information Technologies Ltd * Asit C Mehta Financial Services Ltd * Goldstone Infratech Ltd * Spanco Ltd * Ace Software Exports Ltd a) Companies eliminated erroneously citing inadequate information sh....
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.... as a merged entity under the name "Nucleus Netsoft & Gis India (Merged)" and is to be rejected on the basis of lack of data availability. • Trend analysis of the revenue depicts an abnormal/supernormal growth for the financial year ended 31st March 2006 vis-à-vis 31st March 2005 and 31st March 2004. • Percentage of employee cost to revenue is 12.22%, which is below the qualifying percentage of 25% 14. Goldstone Infratech Limited (Goldstone) should be Rejected The Honourable DRP and the learned AO have erred in upholding the learned TPO's contention that Goldstone Infratech Limited is a comparable company on account of the following reasons: • Recourse to the provisions of Section 133 (6) of the Act and such data was not available in public domain. • The BPO segment comprises of only 16% of the total operating revenue and hence is less than the limit specified by the learned TPO. • The company further has forex earnings of 0.12%, which is less than the limit of 25% adopted by the Transfer Pricing Officer. • The revenues the company are depicting abnormal fluctuations on a year-on-year bas....
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....(6) to the this company. 18. Cameo Corporate Services Limited (Cameo) should be accepted as a comparable: a) The Honourable DRP and the learned AO grossly erred in accepting the contention of the learned TPO that the annual report of this company was not available in the public domain. b) The Honourable DRP also erred in calculating the percentage of export revenues to operating revenue. II. Corporate Tax 1. Computation of deduction under section 10A of the Act The Honourable DRP and the learned AO have erred in re-computing the deduction under section 1OA of the Act after reducing the telecommunication expenses of Rs. 28,67,83,400/- from Export Turnover. The Honourable DRP and the learned AO erred in considering the entire telecommunication charges as attributable to the delivery of computer software outside India although it was submitted that no part of the expenditure relating to telecommunication was incurred in delivery of computer software outside India and the provision of technical services outside India. The Honourable DRP and the learned AO have erred in not considering the contention of the appellant that the telecommunication charges are incurre....
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..... ITO (22 SOT 26) - Hyderabad Tribunal; • Nous Infosystems (P) Ltd v. ITO ITA No. 1042/Bang/07 (AY 2003-04) - Bangalore Tribunal; • ANZ operations & Technology Private Limited v. CIT - ITA No. 30/Bang/2008 - Bangalore Tribunal; • KPIT Cummins Infosystems (Bangalore)(P) Ltd. V. ACIT - 26 SOT 529 - Bangalore tribunal; • ACIT v. Honeywell Technology Solutions Lab. Pvt. Ltd (ITA No. 344 & 345 Bang./2009) - Bangalore Tribunal; • i2 Technologies India Private Limited v. ACIT - ITA No. 277 / Bang / 2009 - Bangalore Tribunal The appellant craves leave to add, alter and modify the above grounds during the course of the appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that the order of the learned AO be set aside." 3. Briefly, facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is 100% subsidiary of Dell International Inc. USA. It is engaged in the business of rendering IT enabled services (ITES) and software development services to its Associated Enterprises (AE) abroad. The assessee-company filed retu....
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....ate bench (Mumbai) in the case of J.P.Morgan Services P.Ltd. vs. DCIT in ITA No.8987/Mum/2010 & 7822/Mum/2011 dated 30/11/2015 wherein the co-ordinate bench held as follows: "3.4. Before us, the main argument of the Ld. Counsel was that since the mark-up MAP has concluded the Arm's Length mark-up at 14.38% for 96% of the total transactions done with the AE's, then without prejudice to the other submissions, for remaining transactions of 4% also same treatment should be given, same bench marking should be done, and ALP mark-up of 14.38% should be applied, more particularly, because of the fact that the AO or DRP have not made any distinction between the 'US' entities and 'non-US' entities. It was further submitted that although the assessee can very well contest these additions, but this concession has come from the assessee's side with a view to bury the litigation, notwithstanding the facts that no addition should have been made as the case of the assessee falls within +/- 5% range. It was also submitted that the assessee reserves its right to contest the levy of any kind of penalty, as and when initiated, if any. Our attention has been drawn to the ....
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....29 ITR 383)(SC); and iii. CIT vs. Pruthvi Brokers & Shareholders (2012) 349 ITR 336)(Bom) 9. We heard rival submissions and perused the material on record. The issue in appeal is whether the price determined under MAP mechanism can be adopted even in respect of non- MAP transactions. It is the submission of the assessee-company that the same price fixed under MAP in respect of US AEs can be adopted even in respect of non-US AEs. We are of the considered opinion that this issue can be decided only by the TPO after undertaking FAR analysis of non-US transactions with a view to find out whether there is any distinction in the factors influencing the price between US and non-US transactions. Even in the decision relied on by the learned counsel for the assessee, the Hon'ble Tribunal had rendered a categorical finding that there is no such distinction. We, therefore, direct the TPO to adopt the same price. In the present case, no attempt has been made by the learned counsel for the assessee to bring out the similarities of the factors that influenced the price between US and non-US transactions. In the absence of this analysis, comparability may not be in terms of the provisions o....