TaxTMI 
TaxTMI 
2016 (12) TMI 1585
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of ITES (received or receivable) Bank of America National Association 472,46,87,363 TNMM Bank of America Securities LLC 44,97,95,840 TNMM Payment towards professional services Bank of America N.A. (Foreign branch) 1,18,44,421 TNMM Payment towards support cost Bank of America N.A. (Foreign branch) 53,93,280 TNMM Reimbursement of IT services cost Bank of America National Association 24,77,238 TNMM Payment towards services Bank of America National Association 1,45,78,949 TNMM Payment for employee compensation and other costs Bank of America Management Corporation 16,45,53,731 TNMM Interest payment on loan Bank of America Management Corporation 28,36,293 CUP Method 4. Assessee also maintained the relevant transfer pricing (TP) documentation as required u/s 92D of the Act r/w Rule 10D of the Income-tax Rules, 1962 (Rules). In the TP documentation maintained by the Company, Transactional Net Margin Method (TNMM) was selected as the most appropriate method for determining the arm's length price (ALP) for the international transactions with AEs pertaining to provision of services with respect to ITES, Payment towards professional services, Payment tow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stems & Services Limited 388.73 32.97 10 Datamatrics Financial Services Limited (Seg) 6.19 34.87 11 Cosmic Global Limited 5.87 24.30 12 Crossdomain Solutions Private Limited 26.59 26.96 13 I-services India Private Limited 13.39 9.73 14 R Systems International Limited (Seg) 21.33 4.30 15 ICRA Online Limited (Seg) 8.23 11.22 16 Spanco Limited (Seg) 41.70 8.94 17 E4e (earlier known as Nitanny) 25.82 16.87 18 Aditya Birla Minacs Worldwide Limited 183.08 -0.55 19 Asit C Mehta Financial Services Limited 4.24 9.42 20 Caliber Point Business Solutions Limited 53.14 10.97 29.16 Subsequently, AO has passed the draft assessment order dated 26 December 2011 by incorporating the TP adjustment proposed by TPO. Assessee has communicated to the AO to exercise the option of filing an appeal before Ld.CIT(A). Thus the AO has passed a final assessment order dated 31 January 2012 confirming the TP adjustment as per the draft assessment order. 7. Aggrieved by the order of AO, assessee filed an appeal before the Ld. CIT(A). Subsequently in the order dated 24 March 2014, the Ld. CIT(A) has upheld the conclusions of the TPO and dismis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yee cost calculation of Accentia was given below to substantiate the contention: Particulars Amount (Rs) Reference Total operating cost as per TPO's order (A) 34,93,32,496 As per TPO's order Employee Cost: Salary and Allowances to Staff 5,48,44,678 AR Pg. 58 Contribution to ESI 38,507 AR pg. 58 Contribution to PF 5,76,925 AR pg. 58 Staff Welfare Expenses 17,08,901 AR pg. 58 Total employee cost (B) 5,71,69,011 Employee cost % 16.37% 10.1. The TPO did not agree to the contentions of assessee with regard to extraordinary business operations. Assessee did not raise its contentions with regard to employee cost filter before the TPO. Ld. CIT(A) has rejected the contention of assessee with regard to Accentia's extraordinary situation. With regard to employee cost, Ld. CIT(A) has rejected the contention of assessee as it was not raised before the TPO. 10.2. Assessee has placed reliance on the following Judicial precedents for rejection of Accentia as a comparable company: * Symphony Marketing Solutions India Pvt. Ltd. - IT(TP)A No. 1316/Bang/2012; * Vodafone India Services Private Ltd. [Formerly Known as 3 Global Services ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f amalgamation in the company. In this regard, the assessee has relied upon the order of the DRP for the assessment year 2008-09 in assessee's own case. It is seen that the DRP while considering similar objection placed by the assessee in the case of another company, viz. Mold Tek Technologies Ltd., in the proceedings relating to the assessment year 2008-09, has observed in the following manner- "17.5. In addition to the above, the Director's Report of the company for the FY 2007-08 revealed the merger and the demerger. A company known as Techmen Tools Pvt. Ltd. had amalgamated with Mold-tek Technologies Ltd. with effect form 1st October, 2006. There was a de- merger of Plastic Division of the company and the resulting company is known as Moldtek Plastics Limited. The de-merger from the Moldtek Technologies took place with effect from 1st April, 2007. The merger and the de- merger needed the approval of the Hon'ble High Court of Andhra Pradesh and also the approval of the shareholders. The shareholders of the company gave approval for the merger and the de-merger on 25.01.2008 and the Hon'ble High Court of Andhra Pradesh had approved the merger and de-merger on 25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irect the AO/TPO to exclude Accentia Technologies Limited from the list of comparables. II. Coral Hub Limited ('Coral') Formerly known as Vishal Information Technologies Limited: 11. It was submitted that Coral Hub Limited (formerly known as Vishal Information Technologies Limited) is functionally different and operates on a different business model. It primarily outsources its work to the vendor's vis-a-vis the Assessee which carries out the entire work on its own. The relevant details are tabulated below: Computation of outsourcing cost to total cost of Coral: Particulars Amount (Rs) Reference Salary Cost 21,68,01,923 AR pg. 84 Total Cost 25,07,83,662 As per TPO's order pg. 100 11.1. Even though Assessee did not raise objections on Coral before TPO, it has raised ground on Coral before Ld. CIT(A). However, Ld. CIT(A) has rejected the contentions of assessee as it was not raised before the TPO. 11.2. Assessee placed reliance on the following Judicial precedents for rejection of Coral: * United Health Group Information Services Pvt. Ltd. [ITA No.6312/Del/2012/AY 2008-09]; * Techbooks International Pvt. Ltd. [ITA No.722/Del/2014/AY 2009-10]; * BNY....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gentica Travel Solutions Limited on July 27,2007. The integration process was on track as of March 2008. This fact was evident as per Page Nos. 14, 18 & 19 of annual report of Eclerx. The TPO did not agree to the contention of assessee that Eclerx is functionally different and involved in high end KPO services. However, assessee has not raised contention on extraordinary situation before TPO. Ld. CIT(A) rejected the contentions of assessee on functional difference, however has not commented on contention of assessee with regard to extraordinary situation of Eclerx. 12.1. Assessee placed reliance on the following Judicial precedents for rejection of Eclerx as a comparable company: * Maersk Global Centres (India) Private Limited vs. ACIT, Mumbai (I.T.A. No.7466/Mum/2012/AY 2008-09); * United Health Group Information Services Pvt. Ltd. [ITA No.6312/Del/2012/AY 2008-09]; * Calibrated Healthcare Systems India Pvt. Ltd. [ITA No.5271/De1/2012/AY 2007-08]; * Hyundai Motors India Engineering P. Ltd. [ITA No. 1850/Hyd/2012/AY 2008-09] Accordingly, assessee requests to exclude Eclerx Services Limited as a comparable. 12.2. We have considered the rival contentions and perused the or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(p) Ltd (supra) by the Bangalore Bench. 12.3. Respectfully following the decision of the Co-ordinate Bench, we direct the AO/TPO to exclude Eclerx Services Limited from the list of comparables. IV. Mold-tek Technologies Limited ('Moldtek'): 13. It was submitted that this company is functionally different as it is engaged in providing engineering design services for construction of buildings by using design tools like CADI CAM, Stadd Pro by employing highly skilled software engineers for the purpose. These services are in nature of KPO and sharp contrast to the nature of work undertaken by assessee. Further, Teck-men Tools Pvt. Ltd. Was amalgamated with the Moldtek with effect from 01 October, 2006. There was a de-merger of Plastic Division of Mold-Tek which has been named as Mold Tek Plastics Limited after de-merger. This de-merger from the Mold Tek took place with effect from 01 April. 2007. As per page nos. 9, 10,41 & 42 of the annual report shows that there were mergers and demergers during the year under consideration. 13.1. The TPO did not agree to the contentions of assessee that Moldtek functionally different and involved in high end KPO services. However, assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vided by the IT division of the company cannot be classified as falling with the scope and ambit of ITES services. On the contrary, the said services would fall under the category of engineering services. Excerpts from the Annual Report of the company Page 10 of the Annual Report for the FY 2007-08 contains the following observation regarding the KPO division of the Company: 'The Company has achieved about 56.49% growth in 2007-08 to register a turnover of Rs. 17.86 crore. The company having established its credentials in structural engineering services to US clients is devising aggressive marketing strategy to achieve rapid growth." This company is also engaged in providing a host of engineering services like civil and structural engineering services, mechanical product design, plant engineering, IT services and GIS services. As we have already seen, this company is to be classified as KPO and cannot be compared with the assessee. The decision of the Bangalore Bench of the ITAT in the case of First Advantage Offshore Services Ltd. (supra) which we have referred to in the earlier part of this order will clearly apply to this company. We therefore direct this company to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibles. This company is a geospatial services content provider specialising in land based technologies. From the notes to accounts of this company, it is seen that this company is engaged in providing geographical information services comprising of photogrammetry, remote sensing cartography, data conversion related computed based services and other related services. Further the business of this company requires skilled manpower and scientists, civil engineers, etc. Besides the above, this company also carries out R&D services and own intangibles. The aforesaid facts, in our view, will take this company out of the list of comparables. Similar view was also taken in the case of Symphony Marketing Solutions India(p) Ltd (supra) by the Bangalore Bench. In view of the above, we are of the view that this company cannot be regarded as a comparable and deserves to be excluded from the list of comparables". 14.3. Respectfully following the decision of the Co-ordinate Bench, we direct the AO/TPO to exclude Genesys International Corporation Ltd., from the list of comparables. 14.4. The ground is considered allowed. 15. Working Capital Adjustments : Ground no. 4: On the facts and circumstan....