TaxTMI 
TaxTMI 
2017 (9) TMI 1340
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.... so, the ld.DRP failed to substantiate the basis of considering only the segment level results as against the entity level results of the comparable. 4. The ld. A.O/TPO/DRP has erred by not including Microland Limited as comparable to that of the appellant company. 5. The ld. DRP has erred in law and on facts by rejecting: a. Cosmic Global Limited, b. Informed Technologies Limited and c. Microgenetics Systems Limited as comparable to that of the appellant company while the same have been considered as comparable by the ld. TPO earlier. 6. The ld DRP has erred by considering a markup of 5% on reimbursement of expenses. 7. For these and such other grounds that may be advanced at the time of hearing, the appellant prays that: a. Accentia Technologies Limited be rejected as a comparable; b. Consider the following as comparable: i. ICRA Online Limited at entity level; ii. Microland Ltd iii.Cosmic Global Ltd iv. Informed Technologies Ltd & v. Microgenetics Systems Ltd c. Relief to be granted in respect of mark-up on reimbursement of expenses". 2. At the time of hearing, the learned Counsel for the assessee submitted that the assessee is not ....
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.... the assessee are also similar to the Accentia Technologies Ltd. He observed that Accentia Technologies Ltd is earning income from medical transcription, billing & collection and coding, all of which activities also fall under the category of ITES. He observed that the assessee is in the business of providing ITES in the areas of technical data management, storage and retrieval primarily to its AEs and that this includes software services in CAD/GIS applications, drawing, MAP conversion and digitalization services, enterprise software services, engineering consultancy & services in the areas of project designing. Therefore, according to the TPO, both the assessee as well as the comparables are into similar type of services and hence the assessee's objection was rejected. 5. Before the DRP also, the assessee had objected to Accentia Technologies Ltd, being considered as a comparable. It was also submitted that Accentia Technologies Ltd was having a different model of execution of project along with high end software delivery and that from the fixed asset schedule it is seen that it has intangible brands/IPRs. It was also submitted that the Company's value of brand and IPR for the y....
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....companies and therefore, is an important factor to be considered while selecting comparables. In view of the same, we deem it fit and proper to remit the issue of the ownership of Brands/IPRs by Accentia Technologies Ltd as compared to none owned by the assessee and if it is found that the Accentia Technologies owns the intangibles as stated by the assessee and if the assessee does not own any intangible asset at all, then clearly the company cannot be taken as a comparable to the assessee. With this limited direction, we remit the issue to the file of the TPO. 9. As regards Ground No.5, though the assessee has sought inclusion of 3 companies as comparable, the learned Counsel for the assessee submitted that the assessee is now seeking inclusion of only 'Microgenetics Systems Ltd' as comparable to the assessee. According to the learned Counsel for the assessee, the TPO, himself has taken this company as a comparable in his TP study but the DRP has directed its exclusion on the ground that in the case of Microgenetics Systems Ltd which is engaged in the activity of Medical Transcription, the expenses to the extent of 23% have been incurred on outsourcing of medical transcription ac....
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....ce @ 25.73% and arrived at the figure of Rs. 19,82,175 and suggested the adjustment of Rs. 4,05,644. When the objection was raised before the DRP, the DRP reduced the mark-up of 25% to 5%. Against the relief given by the DRP, the Revenue is in appeal before us, while the assessee is in appeal against the 5% mark-up. The DRP relied upon the decision of the ITAT in the case of Kirby Building Systems India Ltd in ITA No.1759/Hyd/2012 and ITA No.262/Hyd/2014 for the A.Ys 2008- 09 and 2009-10 for upholding the mark-up of 5%. 13. The learned Counsel for the assessee submitted that the facts in the case of Kirby Building Systems India Ltd are distinguishable and that no profit making is involved in the case of the assessee. The learned DR supported the orders of the AO. 14. Having regard to the rival contentions and the material on record, we find that the assessee's case is that the costs are reimbursed without any mark-up as the expenses are towards travel and visa processing and translation. It was submitted that there is no unreasonable credit facility extended to the AEs in incurring the expenses of travel and visa processing and therefore, it cannot be said to be unreasonable in n....
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....urged at the time of hearing". 17. From the above grounds, it is seen that the Revenue is aggrieved by the direction of the DRP to exclude Infosys BPO Ltd, Eclerx Services Ltd, TCS Eserve Ltd and Cosmic Global Ltd from the final list of comparables selected by the TPO. We find that the DRP has directed exclusion of these companies on the following grounds: i) Infosys BPO Ltd: This company is not comparable to the assessee not only because its size but also because of its brand value, diversified activity and other functional dissimilarities; ii) Eclerx Services Ltd: This Company has extreme margin during the relevant A.Y. Further, the DRP also observed that in the assessee's own case for the earlier A.Y, the Income Tax Appellate Tribunal has directed to exclude the said company from comparables. iii) TCS E-serve Ltd: This Company provides technology services involving software testing, verification and validation of software at the time of implementation and data centre management which makes the company functionally not comparable. iv) Cosmic Global: This Company has a different working model as the expenses to the extent of 41% are on sub-contracting and has a significa....