TaxTMI 
TaxTMI 
2018 (2) TMI 1147
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....al for the reason that, grounds of appeal relating to transfer pricing adjustment resulting from the transactions entered into by the assessee with its associated enterprises (AEs) based at USA, both for the Software Development Services (IT Segment) and Information Technology Services (ITeS segment) have been adjudicated and settled under the "Mutual Agreement Procedure" (MAP) in terms of Rule 44H of the Income Tax Rules. Now the issue which remains for adjudication is on account of transfer pricing adjustment on account of these two segments related to non-USA AEs. The revised grounds of appeal as raised by the assessee now reads as under:- 1. "That the order of the Deputy Commissioner of Income Tax, Circle 11(1), New Delhi ('Assessing Officer' or 'AO') to the extent prejudicial to the Appellant, is bad in law, contrary to facts and circumstances of the case and liable to the quashed. 2. That the AO and the Dispute Resolution Panel ('Panel') erred in upholding the rejection of the Appellant's Transfer Pricing (TP) documentation by the Addl Commissioner of Income-tax (Transfer Pricing)-1 (2), New Delhi ("Transfer Pricing Officer" or "TPO") 3. That the AO....
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.... 8. That the AO erred in not granting the credit for tax deducted at source of Rs. 1,70,80,955, advance tax of Rs. 83,00,000 and self assessment tax of Rs. 53,36,223 in the assessment order 9. That the AO erred in levying interest of Rs. 18,87,61,258 under section 234B of the Act." 3. The only effective ground is ground No. 3, which relates to transfer pricing adjustments on the provisions of services relating to 'Software Development Services' rendered to Fidelity Investments Management (HK) Ltd., Hong Kong and KVH Systems Solutions Ltd., Bermuda; and 'Information Technology Services' provided to same AEs. The assessee company, i.e., M/s. Fidelity Business Services India Private Limited is a subsidiary of FID Holding (Mauritius) Limited which is part of the Fidelity Group. The assessee provides services to both FMR group of companies and the FIL, group of companies mainly providing IT services (software development) and ITeS services. The functions performed under the segment of IT enabled services have been highlighted in the TP study report in the following manner:- "4.3.27 The software development activity is undertaken for FIL group of companies' g....
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....ns - IT enabled Services 4.3.36 The business operations of FIL Group are spread in UK and India. The Indian unit undertakes to provide services for European Retail and the Indian Asset Management Company based in Mumbai. The Indian entity is catering to the retail side (Le. individual investors) of Fidelity Group business. The back-office operations are segregated into onshore and offshore activity. Various functional owners of specific processes are spread globally. However, functions like UK Service Centre are undertaken in UK. 4.3.37 India Service Centre: It provides customer support services vide phones wherein it resolves issues and concerns of customers in terms of their individual portfolio of investments. Further, it also provides support to various individual investors whose funds are being managed by Fidelity, brokers, financial advisors etc. resolving various queries and issues on specific funds. The teams may provide e-mail support in certain cases to queries raised by customers. 4.3.38 Fidelity has own funds (Le. customers who have invested into Fidelity's own mutual funds) and customer funds (Le. customers having investments in non-Fidel....
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....unit reconciliation of unit between the fund network, asset Management Company and the customer, cash flow reconciliation of client accounts and settlement accounts. It also involves match of cash i.e. allocation of money received from bank account to a particular deal or client's account. A team also undertakes regular quality checks in terms of whether the processes are being correctly followed and also undertakes to study and implement for process improvements. 4.3.42 Central Finance: The operations include UK account payable, account payable for the asset management companies, overall group controlling including account reconciliation, update bank data bases, inter-company accounting, balance sheet control and UK accounting - B shares (an investment management product for the Far East countries). The B-Share product undertakes control and revenue accounting, management accounting (various algorithms to split management accounting for cost and revenue). 4.3.43 The team in India is involved in inter-company settlements between the various FIL companies. The activities include group controlling that means whether controls are adequate in relation to settlemen....
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....the assessee in assessee's own case by the Tribunal for the assessment year 2010-11. Apart from that, on merits also he submitted that even independently also these comparables cannot be taken as comparables, like in the case of Information Technologies India Ltd., he submitted that, firstly, it is functional dissimilar and profits are mainly due to premium branding and IPRs, ownership of intangibles; and secondly, revenue from software products which in the case of assessee's absent. In support he relied upon various judgments of the Tribunal for which he has filed a separate chart. In the case of Persistent System Ltd., he submitted that there was a merger of a subsidiary into the company in this year and this factor alone is sufficient for not taking into as comparable company. For Wipro Ltd., he submitted that, firstly, it is functionally different; secondly, non availability of standalone financial data for financial year 2006-07; thirdly, it owns huge intangibles; and lastly, it is engaged in both software development and software product and development services for which no segmental bifurcation are available. In the case of other comparables also, he pointed out that first....
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....ness, it would be proper that the margins which have been accepted in MAP with US AEs same should be applied here also. 9. Ld. Counsel for the assessee Shri G.S. Srivastava submitted that to end the litigation and to attained finality for these years, assessee is ready to accept the adjustment based on the margins accepted in the MAP. 10. After considering the aforesaid submissions and on perusal of the material placed on record, we find that the total international transaction with all the AEs including those covered under the MAP settlement is as under:- 1. Software Development Services: Sl. No. Name of Associated Enterprise Value of international transaction (Rs.) Covered under MAP settlement 1. Fidelity Investment Institutional Services Company, USA 4,516,850,248 Yes 2. Fidelity Broadband Group, USA 87,810,554 Yes 3. Fidelity Investments Management (HK) Ltd., Hongkong 1,348,771,361 No 4. KVH Systems Solutions Ltd. Bermuda 14,449,348 No Total 5,967,881,511 2. IT enabled Services: S. No. Name of Associated Enterprise Value of International transaction (Rs.) Covered under ....