TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1292
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....rovider. For the year under consideration, the assessee filed its return of income on 30th October 2005, declaring total income of Rs. 2,25,59,240. During the assessment proceedings, the Assessing Officer noticing that assessee has earned income from international transaction entered into with its overseas A.E. made a reference to the Transfer Pricing Officer for determination of arm's length price. In the course of proceedings before him, the Transfer Pricing Officer called for various documentary evidences from the assessee and after examining the transfer pricing study report as well as other documents submitted before him found that the service provided by the assessee is broadly coming within the category of business process out sourcing (BPO service). He noted, during the year the assessee has earned revenue of Rs. 23,51,47,000 from back office supply services provided to its A.E. For bench marking the price charged, assessee had adopted TNMM as the most appropriate method with net cost plus mark-up as the PLI. Conducting a search in the data bases, assessee had selected 12 comparables with average margin of 9.33%. Further, in the course of proceedings, assessee also prov....
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.... engaged in software development service, therefore, this company being functionally different cannot be a comparable. In this context, learned Authorised Representative drew the attention of the Bench to the annual report of the company for financial year 2005-06 as submitted in the paper book. The learned Authorised Representative submitted, for this reason the company has been rejected as a comparable to ITES (BPO service provider) in a number of decisions including the decision of the Tribunal, Mumbai Bench, in ACIT v/s Maersk Global Service Centre (India) Pvt. Ltd., [2012] 14 ITR (Trib.) 541 (Mum.). He also referred to the decision of the Tribunal, Mumbai Bench, in ACIT v/s Hapag Lloyd Global Service Pvt. Ltd., [2013] 34 Taxmann.com 241 (Mum.). Thus, he submitted that the company should be rejected as a comparable. 5. Learned Departmental Representative, however, justifying the selection of this company referred to the annual report of this company as submitted in the paper book to contend that it is also engaged in the provisions of ITES. Learned Departmental Representative in this context also relied upon the observations of the first appellate authority. 6. We have consid....
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....le on record. As could be seen from the Profit & Loss account of this company a copy of which is at Page-355 of the paper book, it has paid substantial amount towards translation charges to entities outside the country. The aforesaid fact signifies that the company has out sourced part of their business activities to others whereas, the assessee has carried out the entire activities itself. Thus, there is functional dissimilarity between the two companies. For this reason, it was not considered as a comparable in case of Maersk Global Service Centre (India) Pvt. Ltd. (supra) for the very same assessment year 2005-06. As the facts are identical in case of the present assessee also, agreeing with the view expressed by the Tribunal, Mumbai Bench referred to above, we exclude this company as a comparable. VISHAL INFORMATION TECHNOLOGIES LTD. (Now known as Coral Hub Ltd.) 10. Objecting to this company, learned Authorised Representative submitted that it outsources major portion of its activities to other entities which is evident from the low employee cost of Rs. 19,70,458, as against the total cost of Rs. 14,44,57,298, which works out to only 1.36%. Referring to Schedule-15 of the P....
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.... to the assessee. In fact, considering the aforesaid aspect, different benches of the Tribunal have excluded this company as a comparable. Moreover, we have noted in assessee's own case, the DRP in assessment year 2006-07 and 2008-09 has rejected this company as a comparable on the ground of low employee cost. In the aforesaid view of the matter, we exclude this company as comparable. WIPRO BPO SOLUTIONS LTD. 14. Objecting to this company, learned Authorised Representative submitted, this company is serving the entire industry with total end- to-end solutions to sectors like banking and financial, insurance, health, life science, telecom and travel and transportation. Learned Authorised Representative submitted, for the aforesaid reasons assets, functions, risk and remuneration of this company cannot be compared to the assessee which serves only one industry, that too, only some part of the work and not end-to-end work. Besides the aforesaid reason, it was also submitted by the assessee, during the financial year 2005-06, Wipro BPO Solutions Ltd. had turnover of Rs. 647.71 crore which is 27.55 times of assessee's turnover of Rs. 23.51 crore. Learned Authorised Representative subm....
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....as a comparable in the very same assessment year. Thus, accepting the contention of the assessee, we exclude Wipro BPO Solution as a comparable. TRICOM INDIA LTD. 17. Objecting to this company, learned Authorised Representative submitted, as per the annual report for financial year 2004-05, this company has substantial related party transactions with its subsidiary which works out to 56.30%. Learned Authorised Representative submitted, the Transfer Pricing Officer himself applying more than 25% RPT filter rejected Northgate BPO Service Ltd., as a comparable is 34% of its expenditure were paid to related parties. He submitted, applying the same criteria this company cannot be treated as a comparable. In support of his contention, learned Authorised Representative relied upon the following decisions:- i) ACIT v/s Maersk Global Centre India Pvt. Ltd., [2012] 14 ITR (Trib.) 541; ii) ITO v/s CRM Services Pvt. Ltd., [2011] 14 Taxmann.com 96 (Del.) 18. Learned Departmental Representative vehemently objecting to exclusion of this company submitted, the Transfer Pricing Officer after considering all aspects have found this company to be functionally similar, hence, selected it as a c....
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....is company was found to be not suitable to be treated as comparable by the Tribunal in the case of ITO v/s CRM Service India Pvt. Ltd., [2011] 14 Taxmann.com 96. He also referred to the decision of the Tribunal, Hyderabad Bench, in Capital IQ Information Systems India Pvt. Ltd., ITA no.1961/Hyd./2011. 22. Learned Departmental Representative justifying the selection of this company submitted, the alleged fraud committed by the director does not pertain to impugned assessment year but subsequent assessment year, hence, it has no bearing in this year. 23. We have considered the submissions of the parties and perused the material available on record. The ground on which assessee has sought exclusion of this company is, the directors are found to be involved in fraudulent activity. However, it is the contention of the Department that there is no such fraud in the impugned assessment year. We have noted that in case of ITO v/s CRM Service India Pvt. Ltd., this company was excluded from being treated as comparable as it was found that the business reputation of the Restogi Group Owning Maple E-Solutions and Tricom Corporation is under serious indictment as the directors of the company w....
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....fficer/Transfer Pricing Officer for considering afresh after providing due opportunity of being heard to the assessee. C.S. SOFTWARE ENTERPRISE LTD. 28. The Transfer Pricing Officer rejected this company as a comparable on the ground that segmental information is not available in the annual report. The learned Authorised Representative submitted, the company is predominantly engaged in rendering ITES which is evident from the annual report of the company. The learned Authorised Representative submitted, since the company is engaged in only one segment, there is no reason to furnish segmental details. In this context, he referred to the annual report of the company at Page- 376 of the paper book to demonstrate that it has only one segment viz. ITES BPO. 29. Learned Departmental Representative, however, relied upon the observations of the Transfer Pricing Officer/DRP. 30. We have considered the submissions of the parties and perused the material available on record. On a perusal of the annual report of the company, extract of which has been submitted in the paper book, it appears that the company is into ITES/BPO service. However, the functional profile of the company along with ....
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....r by relying upon the decision of the Tribunal, Mumbai Bench, in Symentec Software Solutions Pvt. Ltd., ITA no.7894/Mum./2010. 36. Learned Authorised Representative contesting the disallowance of risk adjustment submitted, assessee is a captive service provider, hence, to certain extent, risk mitigated but it bears some risk like single customer risk. He submitted, considering the aforesaid aspect, the Tribunal in some cases have allowed risk adjustment of 1% to the net margin of the comparables for bringing them on par with assessee. In this context, he relied upon the following decisions:- i) DCIT v/s Hell Soft India Pvt. Ltd., ITA no.645/Hyd./2009 dated 15th January 2013; ii) Intelenet Technologies India Pvt. Ltd. v/s ITO, [2012] 22 Taxmann.com 28; and iii) D.E. Shaw India Pvt. Ltd. v/s ACIT, [2014] 42 Taxmann.com 74. 37. Learned Departmental Representative, however submitted, as the Transfer Pricing Officer and the learned Commissioner (Appeals) have decided the issue after considering all objections of the assessee, there is no need to interfere in the same. 38. We have considered the submissions of the parties and perused the material available on record. We have not....