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2016 (1) TMI 1259
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....T enabled back office services provided to AE in pre and post-acquisition period ; 2. On the facts and in the circumstances of the case and in law, the Ld. TPO and the Ld. Panel erred in: i. Aggregating the Appellant's international transactions pertaining to pre-acquisition and post-acquisition ii. Disregarding the segmented financials adopted by the Appellant in respect of pre and post-acquisition period; iii. Rejecting the economic analysis conducted by the Appellant pertaining to the preacquisition and post-acquisition period. iv. In rejecting the selection of the Associated Enterprise(s) as the 'tested party' as selected by the Appellant in the TP documentation in respect of the post-acquisition period; v. Rejecting multiple year data; vi. Rejecting the search process followed by the Appellant in respect of pre-acquisition and post-acquisition period; vii. Including certain companies even though they are not comparable to the appellant in terms of functions performed, assets employed and risks assumed; viii. Excluding certain companies on arbitrary/ frivolous grounds even though they a....
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....904 respectively. 9. The Appellant prays that appropriate relief be granted. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal." 2. At the time of hearing, the Ld. Counsel for the assessee, submitted that assessee is not pressing Ground No.3 in view of alternate ground raised by the assessee in ground No.4. We find that the alternate ground of the assessee is covered in favour of the assessee by the decision of Hon'ble Karnataka High Court in the case of CIT & Another vs. Tata Elxsi Ltd., and others reported in (2012) 349 ITR 98 wherein it has been held that if any expenditure or the income is to be excluded from the export turnover, then the same has to be reduced from the total turnover as well. Therefore, ground No.4 of the assessee is allowed and ground No.3 of the assessee is rejected as not pressed. 3. As regards ground No.5, it was submitted by the Ld. Counsel for the assessee that the quantum taken by the A.O. towards travel and conveyance expenses is incorrect as stated in the ground of appeal. He has submitted that the A.....
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....Accentia Technologies Ltd., (2) TCS E-Serve International Ltd., (3) Eclerx Services Ltd., and (4) Cosmic Global Ltd. 7.1. Assessee has also given details of the decisions on which assessee is placing reliance upon for exclusion of these companies from the final list of comparables. 8. The Ld. D.R., on the other hand, argued on the basis of the written submissions filed by her and taking both the assessee's chart as well as Revenue's written submissions, we decide the ground as under. 9. The assessee company is in the business of providing I.T. Enabled Services ("ITES") to its Associated Enterprise ("AE"). The assessee had entered into international transactions with it's A.Es and therefore, the A.O. referred the determination of the ALP of the international transactions to the TPO under section 92CA of the Act. During the T.P. proceedings. The TPO observed that the erstwhile company UBS Service Centre India P. Ltd., was acquired by M/s. Cognizant Technology Solutions India P. Ltd., on 30th December, 2009, and that subsequent thereto, the company was renamed as Cognizant Technology Services P. Limited. He observed that due to this reason, the asse....
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.... its business. The TPO, however, holding that assessee itself has adopted this company as a comparable in its T.P. study, did not consider assessee's contentions. Thereafter, the TPO arrived at the average margin of the comparables at 26.23% after making working capital adjustment and proposed the adjustment towards the short-fall of the arms length price at Rs. 36,71,13,790. In consonance with the same, the A.O. passed the draft assessment order, against which, assessee preferred its objections before the DRP. After considering assessee's contentions, the DRP directed exclusion of Infosys BPO Ltd., and TCS E-Serve Limited. The Revenue is not in appeal against the exclusion of these two companies. The Assessee is in appeal against the inclusion of (1) Accentia Technologies Limited (2) TCS E-Serve International Limited (3) Eclerx Services Limited and (4) Cosmic Global Limited. 10. As regards the Accentia Technologies Ltd., is concerned, the Ld. Counsel for the assessee, submitted that this company is to be rejected as there is an extraordinary event i.e., amalgamation of Asscent Infoserve Pvt. Ltd., with the company and further that the company is into a diversified knowledge pro....
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....rival contentions and the material on record, we find that the Coordinate Bench of this Tribunal in the case of ACIT vs. Hyundai Motors India Engineering P. Ltd., (cited supra), (to which one of us i.e., J.M. is the signatory) has considered the comparability of these companies to the assessee therein and has directed the exclusion of these companies on similar ground as raised by the assessee in this appeal before us. We find that Hyundai Motors India Engineering P. Ltd., (supra) was also engaged in the business of rendering ITES services and had adopted TNMM as the most appropriate method. The Tribunal at para-10.3 of its order has considered the comparability of Cosmic Global Limited and has held as under : "10.3. Having regard to the rival contentions and the material on record, we find that the assessee had raised objections against this company in the earlier A.Y. 2009-10 on a similar ground i.e., the income from translation services which is outsourced is much higher and therefore, should not be considered as a comparable. The Tribunal, by relying on the decision of the Tribunal at Delhi in the case of Mercer Consulting (India) P. Ltd., ITA.No.966/Del/2014 dated 06.....
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....t take recourse to the figures which are relevant for segments other than accounts BPO. Thus it is held that this case cannot be excluded on the strength of outsourcing activity, which is alien to the relevant segment. 13.3. However, we find this case to be incomparable on the alternative argument advanced by the ld. AR to the effect that total revenue of the Accounts BPO segment of Cosmic Global Limited is very low at Rs. 27.76 lacs. We have discussed this aspect above in the context of CG-VAK's case and held that a captive unit cannot be compared with a giant case and thus excluded CG-VAK with turnover from Accounts BPO segment at Rs. 86.10 lacs. As the segmental revenue of BPO segment of Cosmic Global Limited at Rs. 27.76 lac is still on much lower side, the reasons given above would fully apply to hold Cosmic Global Limited as incomparable. This case is, therefore, directed to be excluded from the list of comparables." In view of the detailed analysis of the coordinate Bench of the Tribunal in the above referred case, in this case also we accept the contentions of assessee and direct the Assessing Officer/TPO to exclude this comparable for the same reasons." ....
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.... find that the assessee's contentions about the presence of 'brand value' and owning of 'intangibles' is supported by the evidence on record. However, as regards the extraordinary event or exceptional circumstance there is no material placed before us by the Ld. Counsel for the assessee. Therefore, merely because the TPO in another case has held that there is an extraordinary event for which this company has to be excluded from the list of comparables, it cannot be excluded. Such claim has to be supported by evidence on record. As regards the functional dissimilarity and huge turnover and brand value is concerned, we find that this Tribunal in assessee's own case for A.Y. 2009-10 while considering the comparability of the assessee with Infosys BPO Ltd., has taken note of the possession of the brand value and intangibles which influenced the financial results of this company. The Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P. Ltd., (2013) 219 Taxman 26 (Del.), held that huge turnover companies like Infosys and Wipro cannot be considered as comparable to smaller companies like assessee therein. In the case before the Hon'ble High Court (supra), the turno....
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....e, it is also seen that the said company owns goodwill/brand/IPRs (Intellectual Property Rights). From the notes to the accounts, it is also seen that a subsidiary of the company Asscent Infoserve Pvt. Ltd., has been amalgamated with the company consequent to which, assets and liabilities of the erstwhile company were transferred and vested in the company w.e.f. 1st April, 2008 and the scheme has been given effect to in the accounts of the year. Therefore, it is clear that there is an extraordinary event in the case of Accentia Technologies Ltd., during the relevant financial year particularly since the approval for amalgamation has been given by the Hon'ble High Court of Mumbai vide orders dated 21st August, 2009 and by the Hon'ble Karnataka High Court vide orders dated 6th February, 2010. This event would definitely have an effect on the profit margins of the said company and therefore, has to be excluded from the list of comparables as rightly done by the DRP. Therefore, we do not see any reason to interfere with the order of the DRP on this company also. Accordingly, ground No.3 of the Revenue is dismissed." 12.3. As regards the Eclerx Services Limited is concerned, the Hon'....