TaxTMI 
TaxTMI 
2015 (11) TMI 1648
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansactions with its Associated Enterprise (in short "AE") the gross receipts of which exceeded Rs. 15 crores. He therefore, made a reference to the TPO under section 92CA of the I.T. Act for determination of the arms length price ("ALP") in respect of the international transactions reported by the assessee company after obtaining prior approval of the Ld. CIT, Hyderabad. The TPO passed the transfer pricing order dated 13.10.2013 under section 92CA(3) of the I.T. Act and proposed an adjustment of ALP of Rs. 10,38,23,246 under section 92CA of the I.T. Act. On receipt of the order of the TPO, the A.O. passed the draft assessment order and forwarded the same to the assessee on 29.01.2014. Assessee preferred its objections against the draft assessment order before the DRP and the DRP vide its order dated 11.09.2014 partly allowed relief to the assessee. In consonance with the directions of the DRP, the final assessment order dated 17.10.2014 was passed, against which, both the Assessee as well as the Revenue are in appeal before us. 3. Assessee has raised as many as 16 grounds in its appeal. However, at the time of hearing, the Ld. Counsel for the assessee submitted that only ground ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....below and submitted that the foreign exchange fluctuations gain or loss was part of the operating income/expenditure and has been taken into consideration to compute the margin of the assessee as well as the comparable companies. 6. Having regard to the rival contentions and the material available on record, it has been held by the various Benches of the Tribunal that the gain or loss on account of foreign exchange fluctuation is part of the operating income of the assessee. 1. M/s. Westfalia Separator India P. Ltd., (ITA.No.4446/Del/2007) 2. M/s. Lisco Systems Services B.E. India Brand vs. ADIT (ITA(T.P.) No.270/Bang/2014) 3. M/s. Four Soft Ltd., vs. DCIT (ITA.No.1495/Hyd/2010). 6.1. Respectfully following the above judgments, ground No.4 of the assessee is rejected. 7. In ground No.6, the assessee is aggrieved by the Order of the AO/DRP in accepting the following companies as comparable to the assessee as selected by the TPO. (a) TCS e-Serve International Ltd., (b) TCS e-Serve Ltd., (c) Cosmic Global Limited (d) Crossdomain Solutions P. Ltd., 8. At the time of hearing, the Ld. Counsel for the assessee submitted tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd proceeded to make independent analysis by aggregating all the transactions under TNMM. 9.3. The TPO conducted the FAR analysis and as regards the ITES services carried out by the assessee, he adopted the TNMM as the most appropriate method for determining the arms length price. Thereafter, he conducted fresh search on the databases 'Prowess' and 'Capitaline' and selected the following 11 companies as final comparables and arrived at the average margin of the comparables at 28.39%. Sl. No. Name of the Company OR OP/OC 1. Accentia Technologies Ltd. 93,12,44,808 49.02 2. Acropetal Technologies Ltd. (Seg.) 46,39,36,810 10.12 3. Axis-I.T. & T Ltd. 20,29,67,892 11.89 4. Cosmic Global Ltd., 5,86,37,419 16.59 5. Eclerx Services Ltd., 2,57,02,10,000 42.17 6. Infosys BPO Ltd., 11,30,05,01,306 31.63 7. TCS e-Serve International Ltd., 1,49,29,56,000 51.51 8. TCS e-Serve Ltd., 14,05,10,05,000 67.58 9. Jeevan Softech Ltd., (Seg.) 1,74,43,000 8.04 10. Microgenetics Systems Ltd., 2,40,42,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ranslation services. He also placed reliance on the order of the Coordinate Bench of this Tribunal in the assessee's own case for A.Y. 2009-10 for exclusion of this company from the final list of comparables. 10.2. Ld. D.R. however, supported the orders of the authorities below and submitted that the assessee should not be permitted to take different stands before different authorities. 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 06.07.2014 has held as under : "(4) Cosmic Global Ltd. 14. The main objection of assessee with reference to the inclusion of this company is with reference to outsourcing of its main activity. Even though this company was selected as comparable in assessee's TP study, it has raised objection before the TP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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." 10.4. We find that in the A.Y. 2010-2011 also as observed by us above, the facts are similar and the segmental revenue is on the lower side. Further, though the assessee had accepted this company as comparable before the TPO, it had raised detailed objection before the DRP and the DRP ought to have considered the obje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany from the final list of comparables. 11.2.1. As regards TCS e-Serve Limited is concerned, we find that it possesses brand value as is evident from the Schedule-N (Operation and Other expenses) to the P & L A/c of the annual report for the financial year 2009-10 of Rs. 46,065 thousands and also that it possesses intangibles in the form of software licenses which have not been taken note of by the authorities below while adopting its margin. It is also the case of the assessee that this company has a turnover of Rs. 1405.10 crores which is 25 times of the turnover of the assessee and hence, is not comparable to the assessee. The Ld. Counsel for the assessee had also placed reliance upon the TPO's order in the case of M/s. IGS Imaging Services India Ltd., to hold that there are exceptional circumstances during the relevant financial year due to which this company is not comparable to the assessee. The Ld. Counsel for the assessee also submitted that the segmental details of this company are not available and hence, has to be excluded on this count also. 11.2.2. We find that the assessee's contentions about the presence of 'brand value' and owning of 'intangibles' is support....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... whether it would be within + or - 5% of the margin of the assessee. Ld. Counsel for the assessee admitted that if the three companies challenged by the assessee are excluded, the margin of the assessee would be within + or - 5% of the average margin of the comparables. In view of our direction to exclude the above three companies from the list of final comparables and the resultant average margin of the comparables companies being within + or - 5% of the assessee's margin, we are of the opinion that the adjudication of ground No. 8(a) and 8(b) would be only academic in nature. Therefore, we are not inclined to adjudicate these grounds of appeal at this stage and accordingly, ground Nos. 8(a) and (b) are rejected. 13. As regards ground Nos. 13 and 14 are concerned, the grievance of the assessee is reflected in its grounds as under : "13. The A.O. erred in granting credit in respect of taxes deducted at source ('TDS') only to the extent of Rs. 10,550,734 as against Rs. 11,464,704 claimed in the return of income filed by the appellant for A.Y. 2010-11. 14. The A.O. erred in levying interest of Rs. 105,652 under section 234A of the Act on the ground that the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at length and directed the A.O. to exclude these companies from the final list of comparables. As far as Infosys BPO is concerned, the DRP has considered the decision of ITAT in assessee's own case for the A.Y. 2009-10 and directed it to be excluded. The Ld. D.R. has not been able to bring to our notice any distinguishing features and facts for the A.Y. 2010-11 from that of the A.Y. 2009-10 to take any other view. Therefore, we do not see any reason to interfere with the order of the DRP on this issue. 16. As regards M/s. Eclerx Services Ltd., is concerned, we find that this company was also directed to be excluded by following the decision of ITAT in assessee's own case for the A.Y. 2009-2010 on the ground that it is a KPO. The Ld. Counsel for the assessee has drawn our attention to the annual report of the said company to demonstrate that the facts and circumstances and the nature of the activities carried on by the said company in the A.Y. 2010-11 are also same. 17. Ld. D.R. has not been able to rebut this factual aspects of the said company with any evidence to the contrary. The only ground relied on by the Revenue is that in the case of Agilent Technologies Internationa....