TaxTMI 
TaxTMI 
2017 (12) TMI 650
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....essee. 2.1 Ld. TPO issued notice calling for various details from assessee. Assessee accordingly filed documentation prescribed under Rule 10 D of the Income Tax Rules and other details sought by the ld.TPO. The ld.TPO observed from the details provided information technology enabled services to its AE, which is as under: Nature of Transaction Amount (INR) Method Selected MAM PLI Provision of information Technology Enabled Services RS.23,39,89,655/- TNMM OP/OC 2.2 The assessee adopted transactional net margin method (TNMM) as the most appropriate method (MAM) to benchmark the international transaction. The assessee used operating profits to operating cost (OP/OC) as the profit level indicator (PLI) to determine the margin of the comparables. 2.3 The Ld.TPO has not objected MAM and PLI calculated by assessee. The only issue disputed by ld.TPO is in respect of selection of comparables. Following are the set of comparables selected by the assessee for ITES segment. S.No. Name of the company Weighted Average 1 Caliber Point Business Solutions Ltd. 19.06 2 Cosmic Global Ltd. 17.04 3 E4e Health Care Business Services Pv....
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....r Pricing Officer - 1(2)(1), New Delhi ("Learned TPO")/ Hon'ble Dispute Resolution Panel ("Hon'ble DRP"), making an addition of INR 22,416,042 to the total income of the Appellant on account of adjustment in the arm's length price is bad in law. 2. That on facts and in law, the Ld. DRP/TPO/AO have erred in computing the total income of the Appellant at INR 62,188,683/- as against the returned income of INR 39,772,641 by making an upward adjustment of INR 22,416,042/- with respect to Arm's Length Price of the international transaction. 3. That on facts and in law, the Ld. DRP/TPO/AO have erred, in law and in facts, by not accepting the economic analysis undertaken by the Assessee in accordance with the provisions of the Act read with the Rules and conducting a fresh economic analysis for the determination of the ALP of the international transactions pertaining to IT enabled services provided to associated enterprises and holding that the Assessee's international transactions are not at arm's length. 4. That on facts of the case and in law, the Ld DRP/TPO/AO have erred by: a) Not accepting the use of multiple year data, as adopted by the Assessee i....
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....ugned transaction without considering the detailed margin computation of companies. 14. That on the facts of the case and in law, the Ld DRP/TPO/AO have erred by not making suitable adjustments to account for differences in the risk profile of the Assessee vis-a-vis the comparable companies. 15. That on the facts of the case and in law, the Ld DRP/TPO/AO have vitiated the principles of natural justice by a) not giving due cognizance to the detailed analysis and technical arguments submitted by the appellant in response to the show cause issued by the Learned TPO; b) issuing the final TP order after relying on completely new facts without giving the assessee any opportunity of being heard; c) Following inconsistent/perverse approach in the selection of comparable companies 16. That on the facts and in the circumstances of the case, the Ld DRP/AO have erred, by initiating penalty proceedings under Section 271 (1)( c) of Act without recording any adequate reasons for initiation. 17. That on the facts and in the circumstances of the case, the Ld AO have erred in charging interest under Section 234B and Section 234C of the A....
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....ws; d) combination of these 2. The survey programming 3. Data processing and data analysis services; 4. Coding services; 5. Business research services; 6. Voice quality audits; and 7. Data quality services. 5.1 Assessee is thus engaged in provision of information technology (IT) enabled services in the nature of survey programming, data collection, data analysis and business research. On perusal of the transfer pricing study report placed at page 65-145 in paper book volume 1, it is observed that assessee is a captive contract service provider rendering IT enabled services to its associated enterprise. 5.2 During the financial year 2012-13, assessee has rendered IT enabled services to Copal Market Research Ltd. Mauritius. Assessee is reimbursed on all its costs incurred along with a markup of 18% as per the agreement between assessee and the AE. Costs for the year under consideration refers to all the operating direct and indirect expenses incurred by assessee in rendering the specified IT enabled service to AE, as per the agreement entered into between them. 5.3 Assessee is not exposed to market risk as it ren....
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.... pursuing the financial statements placed in the paper book, we find that this company generates revenue from data analytics services and process solution comprising of both times/unit price and fixed fee-based service contracts. Further it has been observed that the revenue from time/unit price-based contracts is recognised on completion of the related services and is billed in accordance with the contractual terms specified in the respective customer contracts. It is observed that this company enables supports to critical processes for more than 50 clients and include global leaders and financial services, manufacturing, retail, media, travel and hospitality. It is also observed that it powers operations of the sales and marketing divisions of some of the largest Fortune/financial Times/Internet retailer 500 scale companies globally augmenting brand with to drive greater quality and control to their digital operations, data management and analytics needs. 6.4. On going through the functions performed and the services rendered by this company, it can be easily categorised as high-end KPO. We find that Ld.TPO had adopted this company as a comparable as he was of the view that se....
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....gement service provider based in Sydney, Australia. We have also perused the decision of this Tribunal in assessee's own case for previous assessment year wherein this comparable has been excluded from the list. This Tribunal has dealt with it as under: "6.6. After considering the rival submissions and perused in the relevant material on record, we find that for the year under consideration this company has had extraordinary financial events. It is noted that the company is providing high end integrated service by assisting its clients in improving their competitive positioning by managing their business process in addition to providing increased value. On the other hand, assessee is engaged in providing routine support services in the nature of data collection and analysis which is low end in nature bearing minimal risks. 6.6. Ld. A.R. has rightly placed his reliance upon the decision of Agnity India Technologies Pvt. Ltd. passed by Hon'ble Delhi High Court in I.T.A.No. 3856/2010 wherein, it has been held that this comparable must be rejected on account of difference in risk levels assumed, huge revenues derived and the fact that they are market leaders. Hon'....
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....s and perusing the relevant material on record, we find that the financial results of this company shows that this company is into financial services to help its customers achieve their business objectives by providing innovative best in class services. The Ld. AR submitted that the DRP had excluded this company in the immediately preceding previous year. It is observed at page 159 of paper book volume 2 that this company's operations include delivering core business processing services, analytics and insights (KPO) and support services for both data and voice process. It has also been categorised as an integral part of the Tata Consultancy Services (TCS) strategy to build on its fullservice offerings that offer global customers and integrated portfolio of services ranging from IT services to BPO services. It provides its services from various processing facilities, backed by a robust and scalable infrastructure network tailored to meet clients' needs. 6.13. The above function performed by this company differentiates it with the functions performed by assessee before us for the year under consideration. Hence following the rule of consistency, we are of the opinion that this com....
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....above directions. BNR Udyog Ltd. 8. Ld. TPO has included this company as a comparable despite there is objections raised by assessee. Ld. Counsel submitted that this company has RPT/net sales of 48.82% and has exhorbitant growth in its revenue. Ld. CIT DR submitted that the related parties to whom this company has entered into transaction are key management personal and enterprise is having common key management personal or their relatives. He further brought our notice to the observations made by DRP at page 56 of the order passed by DRP that assessee itself has chosen companies in medical transcription as valid comparable. He thus suggested that this company may be retained in the list of comparables. We have perused the submissions advanced by both the sides and records placed before us. It has been observed that assessee has also disclosed related party transaction during the year with its fellow subsidiary as well as key management personnel. In the case of the comparable company on the related party transaction is related only with key management personal and enterprise is having common key management personal or their relatives. The details have been listed at 55....
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....er dated 25/07/16 in ITA No.907/del/2016 for assessment year 2011-12 considered this comparable as under: " 7.6. After considering the rival submissions and pursuing the relevant material on record we find that the ld. TPO has not pointed out exact difference, the change of accounting year has made to the financial results of the comparable. The ld.TPO has further not pointed out whether it would not be possible to restate those financial results for a different accounting period without significant change in net profit margins or any other parameters considered relevant. Multinational companies generally operate in different geographical regions and different countries follow different accounting or financial years, functionally similar or even identical companies, cannot be held to be incomparable, only owing to differences in the date of ending of the financial year. As most of the business enterprises operate on the going concern concept, which is so fundamental to present the accounts. The concept used in accounting is just an artificial means to reckon the operating results of business operation at a given point in time and nothing would turn up on changing the end o....
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....t of comparable." 8.6. On the other hand Ld.Counsel placed reliance upon the orders of authorities below. 8.7. We have perused the submissions advanced in the light of the records placed before us. 8.8. Ld.Counsel submitted that there is no change in the functions of assessee as well as this comparable for the year under consideration. Also that Ld. DR has brought no distinguishing feature either in the facts/profile of the assessee or in the case of this comparable company for the year under consideration vis-a-vis assessment year 2011-12. Under such circumstances, we do not find any reason to differ with the view taken by this Tribunal in respect of this comparable, on identical facts for preceding assessment year in assessee's own case. Respectfully following the decision of this Tribunal in assessee's own case for assessment year 2011-12, we direct ld.TPO to consider this company as a comparable in final list. Accordingly Ground number 7-11 stands disposed off. Ground No. 14 9. The ld. Counsel submitted that Ld.AO has not granted working capital adjustment. It is submitted by Ld. Counsel that assessee before us is not subjected to much risk and allowability....