TaxTMI 
TaxTMI 
2018 (2) TMI 1151
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....that Orange S.A. is a French multinational telecommunication Corporation. The group has more than 225 million customers in nearly 35 countries. Orange S.A. is a leading European wireless operator and broadband service provider with nearly 175 million mobile customers and more than 15 million broadband subscribers. Orange S.A. is a recognized leader in global, integrated and customized communication infrastructure solutions which enable key business processes of its customers. The Orange S.A. network consists of switches, routers, hosted servers and nods, leased and owned capacity to link switches and network intelligence and control to provide full resilience of each route. The assessee in question, an Indian entity and a part of the Orange group, is a subsidiary of EGN BV, Netherlands. It is engaged in providing Information Technology (IT) enabled network management/technical support and other back office support services to its group companies. It also undertakes Software development services for developing software applications which are used within the Orange group. The IT enabled network management/technical support and other back office support services performed by the asses....
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....no verifiable quantum of revenue in respect of these segments. In this backdrop of the facts, the TPO vide para 9 of his order, proposed to consider the total amount of revenue as pertaining to ITES segment and benchmarked the transaction considering the comparables of such business segment. The TPO, in the ultimate analysis, selected 12 companies as comparables which have been listed on page 58 of his order. Average margin of these companies was computed at 23.94% as against the assessee's margin at 17.30%. He worked out the amount of transfer pricing adjustment at Rs. 13,67,86,810/-. The assessee approached the Dispute Resolution Panel (DRP). After giving effect to the DRP's order by the TPO, the Assessing Officer, in the final assessment order, made an addition of Rs. 16.91 crore from the international transaction designated by him as 'Provision of ITeS Services'. The assessee is aggrieved against this addition. 5. We have heard the rival submissions and perused the relevant material on record. The primary issue raised before us is against the aggregation of both the SDS and ITES and, thereafter, treating the assessee as an ITES provider for the purposes of choosing comparabl....
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....ices set out in the Agreement that the assessee agreed to provide IT enabled services of network management and other related back office support services as well as contract software development services consisting of design, coding and unit testing, system testing and ongoing maintenance of applications. A copy of the assessee's Transfer pricing study report is available on page 875 onwards of the paper book. Page 901 shows the functions performed by the assessee under ITES segment and page 904 of the paper book shows the functions performed by the assessee under the SDS. When we consider the Agreement in juxtaposition to the Transfer pricing study report, whose correctness has not been controverted by the Department, it becomes vivid that the assessee rendered both the ITES and SDS. 10. Now, the question arises about the aggregation of these two services. Whereas the assessee supplied separate figures for SDS and ITES, the TPO did not accept the same for the reasons discussed above and hence proceeded to determine the ALP by aggregating them. Under such circumstances, it becomes imperative to find out if the assessee had separate authenticated data in respect of ITES and SDS.....
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....DS segments for the purpose of benchmarking. 11. The next issue is selection of the comparables. The TPO, after rejecting the assessee's contention for aggregation of ITES and SDS: 'proposed to consider the total amount of revenue pertaining to the ITES segment and benchmarked the transactions considering the comparables of that business segment.' This manifests that the process of determination of the ALP, as has been accepted by both the sides as well, has been undertaken by the TPO by considering the comparables rendering ITES services alone. We have held above that the assessee is rendering both ITES and SDS as one unit. In such circumstances, selecting companies rendering only ITES renders the comparison incompatible due to the basic functional difference, thereby vitiating the entire exercise of benchmarking. What is required to be done is to select companies rendering both ITES and SDS. As this exercise can be properly done at the end of the TPO, we set aside the impugned order on this score and remit the matter to the file of TPO/Assessing Officer for determining the ALP of the assessee's combined international transaction of 'Provision of ITES and SDS' afresh by conside....
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....) of clause (i) of this Explanation provides that (i) the expression "international transaction" shall include-...... (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;....' . He accentuated that the expression 'debt arising during the course of business' refers to trading debt arising from the sale of goods or services rendered in the course of carrying on the business. Once any debt arising during the course of business is an international transaction, he submitted that any delay in the realization of such debt is liable to be visited with the transfer pricing adjustment on account of interest income short charged or uncharged. It was argued that insertion of the Explanation with retrospective effect covers the assessment year under consideration and hence under/nonpayment of interest on the debt arising during the course of business also becomes international transactions, requiring the determination of its ALP. He referred to the decision of the Delhi Tribunal date....
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....o Rs. 49,18,007/-. It is further discernible from the Agreement that no credit period has been prescribed for realization of invoices. On a specific query, it was admitted that there were no trade transactions with non AEs. In such a scenario, it is difficult to make any comparative analysis of the time allowed for realization by the assessee to AEs vis-à-vis non-AEs. 16. No direct decision of the Hon'ble jurisdictional High Court has been brought to our notice by the ld. DR. The Hon'ble Delhi High Court in Pr. CIT VS. Kusum Health Care Pvt. Ltd. (supra) found that the entire focus of the AO was on just one assessment year and the figure of receivables in relation to that assessment year could hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond particular number of days constituted an international transaction by itself. It observed that there may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It we....