TaxTMI 
TaxTMI 
2017 (11) TMI 1592
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....not in accordance with the law and is contrary to the facts and circumstances of the present case. Transfer Pricing Adjustment 2. The Honourable Dispute Resolution Panel ("DRP") has erred in law and on facts in upholding the adjustment to the arm's length price made by the learned AO to the income of the assessee, based on the order, purportedly under section 92CA of the Act, passed by Additional Director of Income-tax, Transfer Pricing Officer - II (1) ("TPO"). 3. Rejection of the transfer pricing documentation of the Appellant 3.1 The Honourable DRP and the learned TPO has erred in law and on facts in rejecting the Transfer Pricing ('TP") documentation which has been prepared by the Appellant in the manner as contemplated under the relevant provisions of the Act and the Income-tax Rules,1962 ("the Rules"). 3.2 The Honourable DRP and learned TPO has erred in law and on facts in determining an adjustment of Rs. 848,162 to the income of NCS India, without first establishing that any of the conditions specified in clauses (a) to (d) to section 92C(3) of the Act were attracted. 3.3 The Honourable DRP has erred in law and on....
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....d on facts, in not including the following 5 comparable companies proposed to the learned TPO without considering the detailed submission of the appellant: - Allsec Technologies Limited - CG VAK Software and Exports Limited - Informed Technologies Limited - Microgenetics Systems Limited 5.5 The learned AO has erred in law and on facts by upholding the adjustment to the income of NCS India proposed by the TP officer consequent to incorrectly computing the ALP in respect of the international transactions undertaken by NCS India with its associated enterprises. 6. Risk Adjustment and working capital adjustment 6.1. The Honourable DRP and the learned AO/ TPO have erred in not appreciating that the appellant, being a captive service provider operated at lower risk levels as compared to comparable companies, which carry higher risks and accordingly erred in not granting appropriate risk adjustments to the margins of the comparables. 6.2. The Honourable DRP has erred in upholding the TPO's/AO's conclusion that there exists a single customer and political risk and that such a risk nullifies any risk adjustment ....
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....ed by NCS India on behalf of Edexcel CUP 929,172 5. The taxpayer in its TP study report shown to have engaged in providing collection, coordination and technical support to its AE earning a margin of 15% on cost. The taxpayer in order to benchmark this transaction chosen 15 comparables having margin of 11.72% by using multiple year data and have found its international transactions at arm's length. Pursuant to the showcause notice issued by ld. TPO, the taxpayer filed various submissions, from which TPO proceeded to conclude that the assessee has not given any bifurcation of cost of various services as it was providing ITES business support and technical support services to its AE. TPO also noticed that the taxpayer has only selected ITES and software companies to benchmark its international transactions. 6. After applying various filters and during the TP proceedings, a fresh search was conducted on the basis of filters applied by TPO and the taxpayer has selected 8 comparables. The ld. TPO after discussing all the objections raised by the taxpayer selected 9 companies as comparables for benchmarking the international transactions qua ITES segment having average margin....
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....l transactions. ACCENTIA TECHNOLOGIES LTD. (ACCENTIA) 14. The ld. AR for the taxpayer challenged the suitability of Accentia as comparable to the taxpayer on two grounds : (i) it is functionally different; and (ii) that it has undergone extra ordinary events during the relevant year and drew our attention towards pages 33, 36 & 32 of the paper book containing its annual report. 15. As far as functional dissimilarity of Accentia vis-à-vis the taxpayer is concerned, perusal of the annual report at page 33 categorically supports the contention of the ld. AR for the taxpayer that it is functionally dissimilar because Accentia services and solutions are focused in two main area : (i) Healthcare Receivables Cycle Management (HRCM) and (ii) software products for Business Processing Outsourcing (BPO). 16. So far as question of extra ordinary events during the year under consideration is concerned, it is apparent from page 32 of the financials of Accentia that Accentia acquires 10% stakes in Trans Services Inc., USA leading to abnormal growth in sale (57%) due to restructuring activities. Furthermore the ld. AR for the taxpayer contended that complete segmental data is no....
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....ions. Hence, we order to exclude Accentia from the final set of comparables. COSMIC GLOBAL LIMITED (COSMIS) 23. This is taxpayer's own comparable. However, the taxpayer cannot be estopped to sought its exclusion before any of the judicial or quasi-judicial authority. Assessee sought its exclusion from the final set of comparables on ground of functional dissimilarity, different business model; earning super-normal profit, abnormal growth in sales and insufficient segmental data. Ld. AR for the taxpayer relied on the decision of Macquarie Global Services (P.) Ltd. vs. DCIT (supra). 24. Ld. DR contended that transcription and translation services are basically ITES and does not make Cosmic functionally different. However, this contention is not tenable because Cosmic outsourced its activities and outsourcing expenses constitute 57% of the total expenses and this company cannot be chosen as a comparable on entity level. 25. Perusal of the annual report of Cosmic, available at page 104 of the paper book, in Schedule 13 i.e. Notes Forming part of Financial Accounts ending March 31, 2009 contains the revenue recognition as under :- "1.2 Revenue recognition: ....
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....ficant intangibles; that it has incurred Rs. 26.65 crores towards contract for service which amounts to outsourcing its services and that it is having different set of skilled employees. 29. Despite the fact that it is taxpayer's comparable but it cannot be debarred form seeking exclusion of this comparable if wrongly chosen in its TP study as has been held in Quark Systems (P) Ltd. vs. DCIT - (2010) 38 sot 307 (CHD)(SB). 30. Undisputedly, the taxpayer is a low end BPO rendering services as a captive service provider. Comparability of Eclerx has been examined by the coordinate Bench of the Tribunal in Macquarie Global Services (P.) Ltd. vs. DCIT (supra) for AY 2009-10- wherein it was ordered to be excluded as a comparable to the companies providing BPO / low end services / ITES having supernormal profit. Coordinate Bench of the Tribunal in Macquarie Global Services (P.) Ltd. vs. DCIT (supra) ordered to exclude Eclerx by returning following findings :- "24. We have perused the Annual report of this company, a copy of which s available on pages 494 onward of the paper book, It can be seen that it is a Knowledge Process Outsourcing (KPO) company providing data analytics....