TaxTMI 
TaxTMI 
2016 (7) TMI 1359
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....ssee is in the business of export of customised electronic data including remote data processing and IT enabled back office service, in the field of insurance. Assessee has been registered as a STP unit. Services are provided by assessee to its AE in Korea and Switzerland named as Swiss Re Korea and Swiss Re Zurich. Such services were non-life insurance administration, providing technical accounting services in the field of property, casualty, life and health re-insurance. Swiss Reinsurance Co, Zurich is the holding company of the assessee and a global reinsurer. Assessee had classified its operation as falling into: Operation 1: Business Application Support ('BAS'), Claims Processing Support, L&H Underwriting support, Economic research, Life Experience Analysis, Corporate Actuarial, CAT-Perils India, Actuarial Services Special Line, RLM Global Support. Operation 2: Technical Accounting for P&C reinsurance, Technical Accounting for L&H reinsurance, Finance Coc. 04. Assessee had computed its PLI as under : Particulars Amt Operating Income 69,25,36,455 Operating Expenses 61,40,69,668 Operating Profit 7,84,66,787 OP/OC 12.78% ....
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....17.89% 8 Jindal Intellicom (capitaline) 390,358,799 35,12,69,641 11.13% 9 Mindtree Ltd (seg) 5,653,000,000 5,10,39,05,999 10.76% 10 iGate Global solutions Ltd 11,845,540,000 9,47,11,65,000 25.07% Average Margin 24.77% 06. Thereafter the TPO allowed an adjustment of 1.47% for working capital. Final adjustment recommended by the TPO u/s. 92 CA, read as under: Arm's Length Mean Margin on cost 24.77% Less: Working Capital Adjustment 0.75% [As per Annex. C) Adjusted margin 24.02% Operating Cost 6140,69,668 Arms Length Price(ALP) 7615,69,202 124.02% of Operating Cost] Price Received 6925,36,455 Shortfall being adjustment u/s 92CA: 690,32,747 When a proposal on the above lines was put to the assessee by the AO, assessee chose to move the DRP. 07. Before the DRP assessee pleaded for application of turnover filter and also made submissions with regard to functional differences of some of the companies selected by the TPO. However only adjustment granted by the DRP was with regard to application of turnover filter and in the process of Infosys BPO Ltd,....
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....sted in another company which had an expertise in EMR Software and Saas. In any case, as per the Ld. AR, segmental results of Accentia was not available in between various segments like MT billing collection and coding. When segmental results were not available, as per the Ld. AR it was not proper to consider Accentia Technologies Ltd, as a good comparable. Reliance was also placed on decision of Delhi Bench of the Tribunal in the case of Equant Solutions India P. Ltd v. DCIT [ITA.1202/Del/2015, dt.21.01.2016] and that of coordinate bench in the case of Amba Research (India) P. Ltd, v. DCIT [IT(TP)A.286/Bang/2015, dt.09.03.2016]. As per the Ld. AR though the above decisions were for A. Y. 2010-11, Accentia Technologies Ltd, was doing the very same activities during the relevant previous year also. Hence according to him these decisions could be taken as a precedence for excluding the said company from the list of comparables. 10. Per contra, Ld. DR submitted that 80% of the revenue of Accentia Technologies Ltd, were from medical transcription, which fell within ITES only. As per the Ld. DR, actual activities of the assessee compared favourable with Accentia Technologies Ltd. Whe....
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.... Billing and Collections 219,088,563 Income From Coding 162,823920 Interest on FD 13,182,314 Income from Exchange Fluctuation 918,215 Total 1,083,127,053 Not only was the medical transcription work done by it of a high-end variety, it also had substantial income from coding coming to about 16% gross receipts. No segmental results were also available. Its audited financial statements at para 7 of the notes to accounts mentioned as under : (7) The Company is operating in a single business segment that is providing back office support to its group companies and its affiliates on cost plus basis and as such all business activities revolve around this segment, hence there is no separate primary reportable segment as required by Accounting Standard-17 on "Segment Reporting" notified under section 211 (3C) of the Companies Act, 1956. 15. As against the above, Assessee was providing back office support to its group companies and affiliates, in the field of reinsurance, which its affiliates were engaged in. Work done by the assessee has been captured by us at para three above. This in our opinion was entirely different from the type of activities ....
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....ed in schedule 2 of its agreement which is reproduced hereunder : * Market Intelligence for the reviewed units portfolio * Analysis for costing accuracy * Overview of prior review/audit Issues * Overview of guidelines and business intelligence relevant for reviewed, units portfolio * Input and maintenance for e-tool * Reporting and Reporting Analytics * Continuous improvement projects: Other projects as assigned, 17. Thus the functions which were done by Accentia Technologies Ltd, and the functions which were rendered by the assessee were entirely different. We cannot say that the type of services done by the assessee was of a level as sophisticated as the one which was being provided by Accentia Technologies Ltd. In the case of Rampgreen Solutions P. Ltd (supra), Hon'ble Delhi High Court mentioned as under at para 31 of its order, which reads as under : 31. In the present case, the Tribunal noted that Vishal and eClerx were both engaged in rendering ITeS. The Tribunal held that, "once a service falls under the category of ITeS, then there is no sub-classification of segment". Thus, according to the Tribunal....
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.... under at paras 31 and 32 of the order dt.30.07.2015 : 31. We deal with the comparable companies which the Assessee seeks exclusion. 1. Accentia Technology Ltd., 2. Infosys BPO Ltd. The comparability of these company with a ITES company was considered by this Tribunal in the case of Paraxel International (India) Pvt. Ltd. (supra) and the Tribunal held as follows on the comparability of the aforesaid companies with a company providing ITES in the following manner:- "10. In grounds No.4 to 6, the assessee has challenged the comparables selected by the TPO for the purpose of TP analysis and as submitted by the learned counsel or the assessee, the assessee is objecting to the selection of only the following five comparables, out of the twelve companies selected as comparables- Sl. No. Company Name 1. Accentia Technologies Limited 2. Cosmic Global Ltd. 3. Eclerx Services Ltd. 4. Genesys International Ltd. 5. Infosys BPO Ltd. 11. We have heard the arguments of both the sides on the issue of inclusion/exclusion of the above five companies as comparables and also perused the relevant material on record including the various dec....
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....nt which occurred in the relevant year as rightly held by the Tribunal inter alia in the case of Excellence Data Research P. Ltd. (supra). Although the learned Departmental Representative has sought to contend that the acquisition of a company by M/s. Accentia Technologies Ltd. took place at the fag end of the year under consideration, the learned counsel for the assessee has pointed out that the process of acquisition had started on 15.5.2008 itself, i.e. in the earlier part of the year under consideration. We, therefore, follow the decision of the coordinate bench of this Tribunal in the case of Excellence Data Research Services Pvt. Ltd. (supra) and direct the AO/TPO to exclude the Accentia Technologies Limited from the list of comparables. ........ Infosys BPO 20. As regards selection of Infosys BPO as a comparable company, the learned counsel for the assessee has contended that the said company cannot be taken as comparable because of its uncomparable size of operations. He has contended that the turnover of the said company was many times higher than that of the assessee during the year under consideration. Although the Learned Departmental Represen....
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....d that Acropetal Technologies Ltd, was rendering service in the field of engineering design for health-care enterprise solutions and IT infrastructure solutions. As per the Ld. AR, AO took the engineering design services done by Acropetal Technologies Ltd, as a comparable segment with ITES services of the assessee. Ld. AR pointed out that engineering design services rendered by M/s. Acropetal was entirely different from the type of services done by the assessee. Further according to him Hyderabad bench of the Tribunal in the case of Excellence Data Research P. Ltd v. ITO [ITA.159/Hyd/2014, dt.31.07.2014 had held that Acropetal Technologies Ltd, was not a good comparable in the BPO segment. As per the Ld. AR M/s. Excellence Data Research P. Ltd, was rendering back office data creation, content development and support services which were not comparable to what assessee was doing. Though the decision of the Hyderabad Bench was for A. Y. 2009-10, as per the Ld. AR, M/s. Acropetal Technologies Ltd, was doing the very same business during the relevant previous year also and therefore it could be considered as a good precedent. 22. Per contra, Ld. DR submitted that TPO had considered t....
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.... seen from the Annual Report, this company is involved in engineering design services and has products also, which makes it functionally not comparable. Even at the segmental level, it provides engineering design services, which was considered as high end, by the coordinate bench of the Tribunal in the case of Hyundai Motors India Engineering(supra) in earlier year. Therefore, we are of the opinion that this company cannot be selected as a comparable. We accordingly direct the Assessing Officer/TPO to exclude this company. 24. Considering all these, we are constrained to take a view that engineering design services segment of M/s. Acropetal Technologies Ltd, (seg), cannot be considered as a proper comparable for the TP study of the assessee. 25. Seeking exclusion of ICRA Online Ltd, Ld. AR submitted that the said company had three lines of business namely, outsourcing services, information service and software product services. As per the Ld. AR, TPO had taken the outsourcing service for comparing the assessee. Relying on the annual report of the said company, placed at paper book pages 645 to 667, Ld. AR submitted that ICRA Online Ltd, was providing knowledge process outsour....
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.... Validation and Analysis Accounting and Finance, Research, Report Preparation and Modelling. The Division has attained ISO 27001 certification through rigorous adherence to data security policies and practices. 28. Type of work being done by the assessee captured by us at para three above would show that assessing was also doing analysis of results, testing and calibration etc., It had to use market intelligence, maintain e-tools and provide reporting analytics. In our opinion the level of expertise being used by the assessee in its technology enabled services and that being used by ICRA Online Ltd, were comparable, though they were in different streams of operation. Here we are one with the argument of Ld. DR that exact fitting in the mould of comparables is not necessary in a TNMM study. However, once the level of knowledge that is being used for the outsourcing is on a reasonably comparable pedestal, the type of service industry to which the concerns cater may not matter much. In the case of Rampgreen Solutions P. Ltd, (supra), their Lordship had observed that there could be different level of skill sets used within the very same ITES services and a comparison can be attempte....
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....y from its BPO operations is less than Rs. 1 crore it has to be excluded from the list of comparables. 32. In the result, we direct exclusion of Accentia Technologies Ltd, Acropetal Technologies Ltd, (seg) from the list of comparables, whereas we uphold the inclusion of ICRA Online Ltd, (seg) in the list of comparables. However, viz., Jeevan Scientific Technologies Ltd, (seg), we are remitting the issue of its fitness for comparison back to the AO/TPO for considering the turnover of the BPO segment of the said company. Ordered accordingly. 33. The only other ground pressed by the Ld. AR concerns inclusion of foreign exchange gains/losses as operating in nature. Directions of the DRP in this regard as it appears at page.10 of its order is reproduced hereunder : The assessee has submitted that it has not undertaken any forward contracts during FY 10-11. In relation to objection regarding treating foreign exchange gain/loss as non-operating in nature by the TPO, the decision of Bangalore Bench of 1TAT in the case of SAPLab India Pvt. Ltd (2010-TH-44-ITAT-BANG-TP) is applicable. Following the same, objection of the assessee is accepted and Assessing officer/TPO is direct....
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....templates or even dictating. InstaKare allows physicians to follow their own method of maintaining records. These templates are customized to their existing report structure. Physicians don't need to change their ways. We'll adapt to theirs. And if they like they can create new templates. DRT, is Discrete Reportable Transcription which allows physicans to did tate areas of their report they want to dictate and leave the remaining t the EMR or their templates. With DRT, physician can active informatio that is not captured on the EMR. The service is incredibly flexible. Now the Instakare EMR really transforms physician's medical record man agement system. No more searching through files and notes that are properly saved, but still difficult to locate. Even physicians note taking software can become a nightmare if physicians don't know what they are looking for. Physicians can access all patient information, history, and medical complaints. These records are available at their fingertips and they can search and review images, scans, reports, and more Insurance Verification InstaKare PMS provides physicians with inbuilt insurance ve....