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2016 (11) TMI 1509
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....ted 13 comparable companies for determination of Arm's Length Price ('ALP') as under : Thus the TPO has worked out the adjusted Arithmetic Mean ('AM') of comparable prices at 22.48% in comparison to 9.43% of assessee. The TPO has accordingly proposed an adjustment under Section 92CA of Rs. 2,27,83,360. The assessee has challenged the action of the TPO before the DRP but could not succeed. Sl. No. Particulars Margin (%) 1 Ace Software Exports Ltd. 7.72% 2 Allsec Technologies Ltd. 28.51% 3 Nucleus Netsoft & Gis Ltd. (Asit C Mehta) 34.52% 4 Spanco Telesystems and Solutions 20.86% 5 Transworks Information Services Limited 19.56% 6 Vishal Information Technologies Ltd. 48.03% 7 Maple eSolutions Limited 32.66% 8 Datamatics Financial Services Ltd 24.99% 9 Cosmic Global Ltd 16.03% 10 Goldstone Infratech Ltd 29.01% 11 Apex Knowledge Solutions Private Ltd 20.48% 12 R Systems International Ltd 15.11% 13 Flextronics Software Systems Ltd 14.54% Arithmetic Mean 24.00% Less: Working capital and risk adjustment (1.52) Adjusted ari....
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....e the medical transcription services related income of the Indian operations constituted more than 75 percent of the consolidated company-wide/ segmental revenues; b) the learned AO/TPO has erred by rejecting certain comparable companies identified by the Appellant using turnover < Rs. 1 Crore as a comparability criterion; c) the learned AO/TPO has erred by rejecting certain comparable companies identified by the Appellant as having economic performance contrary to the industry behavior (e.g. companies which showed a diminishing revenue trend); and d) the learned AO/TPO erred in rejecting certain comparables considered by the Appellant in the comparability analysis on the ground that the comparables were having different accounting year (other than March 31 or companies whose financial statements were for a period other than 12 months); 8. the learned AO/TPO erred in by accepting certain companies using unreasonable comparability criteria; 9. the learned TPO erred in obtaining information which was not available in public domain by exercising powers u/s 133(6) of the Act and relying on the information for comparability analysis; 10. the learned A....
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....ee has submitted that the functional comparability Vishal Information Technologies Ltd. and Maple eSolutions Ltd. has been considered by the co-ordinate bench of this Tribunal in assessee's own case for the Assessment Year 2007-08 and therefore when this company was found not comparable then the assessee can raise this issue before this Tribunal. It was pointed out that Maple E-Solution Ltd. selected by the TPO and it is not selected by the assessee. As regards the Asit C Mehta Financial Services, the learned Authorised Representative has submitted that the co-ordinate bench of this Tribunal in the case of HSBC Electronic Data Processing India Ltd. Vs. Addl. CIT (ITA No.1624/Hyd/2010 Dt.28.6.2013) as well as ITO Vs. CRM Services India Pvt. Ltd. (ITA No.4068(Del)/2009 Dt. 30.06.2011)has examined the functional comparability of this company and found that this company is not comparable with the ITES company because this company is having diversified business activity and segmental details are not available. He has also relied upon the decision of Hon'ble Supreme Court I the case of NTPC Ltd. Vs. CIT 229 ITR 383 as well as decision of Special Bench of Chandigarh in the case of....
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....ered as functionally comparable. He has also referred to the information provided by this company in response to Notice under Section 133(6) wherein it is stated that this company has carried out electronic services and the GIS which include data convergent, data entry, electronic convergent, imaging, page composing, etc. in support of his contention, he has relied upon the decision of Bombay Benches of this Tribunal in the case of Willis Processing Services (I) Pvt. Ltd. Vs. DCIT 57 SOT 339. 9.2 On the other hand, the ld. DR has submitted that in reply to Notice under Section 133(6) this company has clearly stated that this company is engaged in the business of providing ITES and therefore this company is functionally comparable. 9.3 We have considered the rival submissions as well as the relevant material on record. We find from in the Annual Report of this company, that this company has reported revenue from export of software and ITES whereas the segmental details have not been given. An identical issue has been considered by the Mumbai Bench of this Tribunal in the case of Willis Processing Services (I) Pvt. Ltd. Vs. DCIT in ITA No. 4547 & 4429/Mum/2012 Dt.1.3.2013 in pa....
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....o-ordinate bench of this Tribunal in the case of HSBC Electronic Data Processing India Ltd. Vs. ACIT vide order dt.28.6.2013 in IT(TP)A No.1624/Hyd/2010 has considered this issue in para 10 as under : 10. The assessee's objection for inclusion of this comparable is on the basis of the filter on foreign exchange earnings, diminishing revenue filter and functionality, being run on lease basis. It was submitted that this company was rejected in the case of Stream International Services Pvt. Ltd. v. ADIT (International Taxation) by the Mumbai Bench of the Tribunal, vide its order dated 11.1.2013 in ITA No. 8997/Mum/2010 for assessment year 2006-07. 10.1 After considering the rival contentions, we are of the opinion that the business model of the above company is different from that of the assessee. In this case, the foreign exchange revenue is less than 1% of the total turnover. Therefore, it fails the filter provided by the Assessing Officer, on the basis of the foreign exchange earnings. Further, the Revenue from BPO is failing over a period of three years. This issue was considered by the coordinate Bench (Mumbai Bench) of the Tribunal in the case of Stream International S....
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....itted that this comparable company was part of the assessee's TP Analysis then the TPO was not having an opportunity to examine the objection raised by the assessee at this stage. The ld. DR has further submitted that the main objection of the assessee is unreliable financial statement whereas the allegation against the Directors of this company relates to a period in long past and also not relating to the business of this company. 12.3 Having considered the rival submissions as well the relevant material on record, we find that the decisions relied upon by the assessee regarding non-reliability of financial statements is not based on any evidence to show that the allegation on the Directors involving any fraud has any connection with the business of this company. Further the said allegations were levied in the past and does not pertain to the business of this company. We find that in the case of Willis Processing Services (I) Pvt. Ltd. Vs. DCIT (supra), an identical issue was examined by this Tribunal in para 51 as under : " 51 We have considered the rival submissions and relevant material on record. The first objection raised by the assessee is the involvement of the di....
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....he comparables. However, if the merger of the two functionally similar companies took place then the event of merger itself cannot be taken a factor for exclusion of the said comparable.. Accordingly, we direct the AO/TPO to verify this fact and accordingly decide the comparability of this company namely Accentia Technologies Ltd." The Tribunal has given a finding after considering the fact that the allegations were made during the period 1980 to 1990 and further there is nothing on record to show that the allegations were regarding any business activity of this company rather the allegation of the fraud against the Director was regarding some Bicycle business. Therefore in view of the facts and circumstances as well as the decision of the coordinate bench, we are of the opinion that this company cannot be excluded from the set of comparables on the basis of mere allegation which has no connection with the business activity or affairs of this company. (v) Asit C Mehta Financial Services Ltd. 13.1 The learned Authorised Representative has submitted that this company has failed employee cost filter as it is less than 23.35% as well as RPT is more than 15%. He has relied upon....
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....s company cannot be selected as a comparable not only on the reason of failing employee cost filter, but also due to amalgamation during the year, which has changed the business model of the company. 14. In view of the foregoing discussion, we agree with the assessee's objection that the above five comparables should be excluded." In view of the above facts and circumstances as well as the decision of the co-ordinate bench, we direct the Assessing Officer/TPO to exclude this company from the set of comparables. 14. The assessee has also sought inclusion of two companies selected by the assessee in the TP Study analysis as under : (i) Geneysis International Corporation Ltd. (ii) Mercury Outsourcing Management Ltd. (i) Geneysis International Corporation Ltd. 15.1 The learned Authorised Representative of the assessee has submitted that the TPO has rejected this company on the ground that it has diminishing revenue whereas the Tribunal in the case of DCIT Vs. Netapp (India) Pvt. Ltd. (IT(TP)A No.881/Bang/2013 Dt.22.7.2016) has held that applying diminishing revenue filter is not appropriate while considering the comparability of the company. 15.2 On the othe....
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....349 ITR 98 (Kar) had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. The relevant finding of the Hon'ble jurisdictional High Court reads as follows:- "...........Section 10A is enacted as an incentive to exporters to enable their products to be competitive in the global market and consequently earn precious foreign exchange for the country. This aspect has to be borne in mind. While computing the consideration received from such export turnover, the expenses incurred towards freight, telecommunication charges, or insurance attributable to the delivery of the articles or things or computer software outside India, or expenses if any incurred in foreign exchange, in providing the technical services outside India should not be included. However, the word total turnover is not defined for the purpose of this section. It is because of this omission to define 'total turnover', the word 'total turnover' falls for interpretation by this Court; ........In section 10A, not only the word 'total turnover' is not defined....