TaxTMI 
TaxTMI 
2017 (1) TMI 1490
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.... and circumstances of the case, the Hon'ble DRP had erred in directing the AO to Include M/s Eforce India Pvt. Ltd. as a comparable while benchmarking the software consultancy services transaction ignoring the fact that the company had an operating loss of 55.27% during the AY 2010-11 which depicted an extremely unusual state of affairs of the company, and therefore ought to have been excluded from being considered as a comparable. 3. In the facts and circumstances of the case, the Hon'ble DRP had erred in directing the AO to not consider Infosys while benchmarking the software consultancy services transaction by ignoring to appreciate the fact that the profitability trend of Infosys Ltd. over the years from the time when it was a small company the margin has almost remained constant over the years even when the turnover has increased substantially. 4. In the facts and circumstances of the case, the Hon'ble DRP had erred in directing the AO to not consider Infosys & Wipro on turnover grounds while benchmarking the software consultancy services transaction by failing to take cognizance of the decision of the Hon'ble M um bai ITAT in the case of Capgemini India Limi....
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.... various grounds of appeal have been raised but the learned Authorized Representative for the assessee pointed out that in case the order of DRP is upheld on exclusion of the concerns having high turnover in Segment-1, then no adjustment would be required to be made since the margins would be within +/- 5%. In respect of BPO Segment i.e. Segment-2, wherein the total turnover is about Rs. 1 crore. The learned Authorized Representative for the assessee pointed out that the two concerns i.e. Accentia Technologies Ltd., which was engaged in KP O Segment and Acropetal Technologies Ltd. which was engaged in design engineering activities, then in case both these concerns are excluded, then the margins of BPO are within +/- 5% and no further adjustment needs to be made. 4. The learned Departmental Representative for the Revenue fairly agreed to the proposition raised by the learned Authorized Representative for the assessee and we proceed to decide the present appeal after hearing both the learned Authorized Representatives. 5. Briefly, in the facts of the case, the assessee was engaged in the business of providing software consultancy services in the field of Enterprise Resource Pla....
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....of the assessee. In respect of Infosys Technology, the assessee pleaded Infosys was a giant turnover of Rs. 21,140 crores as opposed to the assessee's turnover of Rs. 64 crores. In respect of M/s. Wipro Technologies Ltd., similar plea was raised. The DRP directed exclusion of all the five concerns being not comparable. 7. The Revenue has raised several grounds of appeal but the plea of assessee before us is that in case the order of DRP is upheld on exclusion of three concerns i.e. Infosys Technologies Ltd., M/s. Wipro Technologies Ltd. and Persistent Systems Ltd., which have very high turnover as against total turnover of the assessee at Rs. 81 crores, then the margins of assessee are within +/- 5% and no addition is warranted in the hands of assessee. 8. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 9. We have heard the rival contentions and perused the record. While benchmarking the international transactions, turnover filer is important criteria in choosing comparables. The Pune Bench of Tribunal in ITO Vs. Avalara Technologies (P) Ltd. (2016) 69 taxmann.com 453 (Pune - Trib.), had held that where the tur....
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....om the final list of comparables. The learned Authorized Representative for the assessee pointed out that the said concern was picked up as comparable by the TPO in the preceding years in the case of assessee itself and the Tribunal vide its orders dated 02.02.2015 and 29.04.2015 respectively had held that the said concern Accentia Technologies Ltd. was not comparable for those years due to extraordinary events. In respect of extraordinary events taken place during the year under consideration, the learned Authorized Representative for the assessee pointed out that there was acquisition of IQ group of companies in the United Kingdom and in this regard, our attention was drawn to the Directors Report of the said concern, copy of which is placed at page 467 of the Paper Book. Further, there was amalgamation of Asscent Infoserve Pvt. Ltd. with the company as per notings on page 472 of Paper Book. Hence, there was the case of amalgamation and acquisition, which constituted extraordinary events taken place for the year under consideration. The learned Authorized Representative for the assessee pointed out that for the year under consideration i.e. assessment year 2010-11, the Tribunal i....
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.... the said concern was engaged in functionally different activities. It was pointed out that the said concern is engaged in providing medical transaction, billing and coding services, application development & customization (segmental data not available). Moreover, it was contended that the sales/turnover of the said concern was more than Rs. 50 crores for the year under consideration which did not meet with turnover filter applied by the assessee. On this point, it was pointed out that the assessee had selected sales/turnover filter of 1-50 crores i.e. any concerns having a turnover exceeding Rs. 50 crores were excluded. Thirdly, it was pointed out that the activities of the said concern were not comparable to the activities of the assessee. 14. The TPO has noted the aforesaid objections of the assessee in para 18.1 of his order and has rejected the same by merely noticing that 75% of the revenue/income of the said concern is from ITES and therefore it is to be considered as a comparable. Before us, the Ld. Representative for the assessee has reiterated the submissions put-forth before the TPO in order to justify exclusion of the said concern from the list of comparables. ....
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....48 (Pune - Trib.), had held that the said concern is not comparable to BPO services provided by the assessee. The Tribunal vide para 26 had held as under:- "26. So far as Acropetal Technologies Ltd. is concerned it is the submission of the Ld. Counsel for the assessee that the TPO has considered overall entity level operating margin in respect of comparable segmental margin. He submitted that Acropetal Technologies Ltd. generates revenue from Engineering Design Services and Information Technology Consultancy. Therefore, only segmental profitability of Engineering Design Services needs to be considered for the comparison. The DRP held that the IT based services segment is also similar to the segment of the Engineering Design Services and accordingly rejected the ground raised by the assessee. He submitted that the operating profit/operating cost of the relevant segment of the said comparable company for the year under consideration is 32.92% before considering the working capital adjustment. He submitted that the Engineering Design Services cannot be equated with IT services, therefore, Acropetal Technologies Ltd. should not be considered as comparable company." 15. The ....