TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 1546
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....ased on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. Transfer Pricing Officer ("TPO") for computation of the arm's length price, as is required under section 92CA( 1) of the Act. 3. That on facts and circumstances of the case and in law, the Ld. CIT(A) erred in determining the arm's length price of the Appellant's international transaction at Rs. 15,51,19,800 (as against Rs. 13,85,96,691 determined by the Appellant) in the following manner:- a. The Ld. CIT (A) erred in upholding rejection of the Appellant's TP documentation, comparable companies and analysis thereof. b. The Ld. CIT (A) erred in permitting the use of unaudited data requisitioned by taking recourse to the provisions of Section 133(6) of the Act. c. The Ld. CIT (A) erred in confirming companies, selected by Ld. TPO/ AO, which were not functionally comparable to the Appellant and in rejecting comparable companies selected by the Appellant. d. The Ld. CIT (A) erred in confirming the incorrect computation margins of comparable companies selected by the Ld. TPO. e. The Ld. CIT (A) erred in confirming the selection of current year (i.e. financial....
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....11 comparables with three years weighted average margin at 6.88% vis-à-vis assessee's margin at 12.20% and found its international transaction at arm's length. 6. TPO accepted the TNMM with OP/OC as PLI as applied by the assessee company, but rejected seven comparable companies selected by the assessee company and identified 21 companies by making independent search on the basis of functions, assets and risks of the assessee company and finally chosen 25 comparable companies. TPO also used current year data as against three years data used by the assessee company. As per TPO study, arithmetic mean of PLI came to 29.05% and thereby made adjustment of Rs. 2,08,34,850/- to make the international transactions of the assessee company at arms length. 7. Assessee company carried the matter before the ld. CIT (A) who has upheld the order passed by TPO except excluding Mold- Tek Technologies Limited as a comparable, out of which margin of the margin companies came down to 25.40% and thereby determined the ALP of assessee company's international transaction at Rs. 15,51,19,800. Feeling aggrieved, assessee company has come up before the Tribunal by way of filing the present appeal. ....
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....that this company has only one segment of health care receivables management and chosen the same as a comparable. 16. Assessee company sought to exclude this company as comparables due to extra ordinary events in the form of amalgamation during the FY 2006-07 and relied upon decision rendered by ITAT, Delhi Bench in COWI India P. Ltd. (ITA No.5709/Del/2011) (available at pages 699 to 715 of the Paper Book-III) and ITAT, Hyderabad Bench in case of Capital IQ Information System India Pvt. Ltd. (ITA No.1961/Hyd/2011) (available at pages 812 to 839 of the paper book). 17. Coordinate Bench of ITAT, Delhi as well as Hyderabad in the cases of COWI India P. Ltd. and Capital IQ Information System India Pvt. Ltd. (supra) respectively ordered to exclude this company as a valid comparable due to extra ordinary circumstances, such as, merger and demerger which has certainly effected the financial results as the amalgamation took place in FY 2006-07 relevant to AY 2007-08. 18. More so, we are inclined to order the exclusion of this company for the reason that the annual report of this company is not available for FY 2006-07 and in these circumstances, it is not feasible to rely upon the mater....
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...., information available in the annual report has over-weighted the information received u/s 133 (6), which leads to the functional dis-similarity between the assessee company and Bodhtree sufficient to order its exclusion. Identical issue as to giving precedence to the annual report as against information obtained u/s 133(6) of the Act was discussed by the ITAT, Delhi Bench in Motorola Solutions India Private Limited (supra) and was decided in favour of the assessee company that annual report is to be relied upon as against information u/s 133 (6) of the Act. So, in these circumstances, we hereby order to exclude Bodhtree from the list of comparables. ECLERX SERVICES LTD. (ECLERX) 23. TPO used this company as a comparable on the basis of information obtained u/s 133 (6) and annual report for FY 2006-07. Assessee raised objection for the inclusion of this company in the list of final comparables on ground of functional dis-similarity and relied upon order passed by ITAT, Delhi Bench in the case of Copal Research India Pvt. Ltd. (ITA No.1713/Del.2014) (available at pages 741 to 757 of the Paper Book-III). Assessee also raised objection that this company is a Knowledge Processing Ou....
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....dustry specialized services for meeting complex client needs, data analytics KPO service provider specializing in two business verticals - financial services and retail and manufacturing. It is claimed to be engaged in providing solutions that do not just reduce cost, but help the clients increase sales and reduce risk by enhancing efficiencies and by providing valuable insights that empower better decisions. M/s eClerx Services Pvt. Ltd. is also claimed to have a scalable delivery model and solutions offered that include data analytics, operations management, audits and reconciliation, metrics management and reporting services. It also provides tailored process outsourcing and management services along with a multitude of data aggregation, mining and maintenance services. It is claimed that the company has a team dedicated to developing automation tools to support service delivery. These software automation tools increase productivity, allowing customers to benefit from further cost saving and output gains with better control over quality. Keeping in view the nature of services rendered by M/s eClerx Services Pvt. Ltd. and its functional profile, we are of the view that this compa....
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....se, undisputedly, 25 comparables have been chosen by the assessee having RPT filter of 15%, out of which the TPO can get sufficient number of comparables for benchmarking international transactions. So far as ground of high turnover as raised by the assessee for exclusion of this comparable is concerned, the same has not been pressed during the course of argument. 30. Moreover, information supplied by HCL u/s 133(6) is inconsistent with the annual report as to adopting a different financial year beginning from July 1 to June 30 which does not pass the TPO's filter of comparable companies having different financial years. So, we direct to exclude HCL from the list of comparables. INFORMED TECHNOLOGIES INDIA LTD. (INFORMED) 31. TPO chosen this company as comparable on the ground that it qualifies all the filters. However, assessee opposed the exclusion of this company as comparable on the grounds that it fails employee cost filter as percentage of employees cost of Informed Technologies for FY 2006-07 is 21.77% as against assessee's cost/sales ratio of 48.93%. The ld. DR opposed the contention on the ground that this company does not qualify the assessee's own filters as the asses....
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....n'ble Delhi High Court in CIT vs. Agnity India Technologies Pvt. Ltd. - (2013) 219 Taxman 26 (Delhi), directed the exclusion of INFOSYS BPO from the list of comparables on the ground that assessee does not have any substantial intangible assets; INFOSYS BPO has large and substantial research development centre whereas the assessee is not undertaking such activity. Moreover, the assessee is a minimal risk taking company whereas INFOSYS BPO is a full-fledged risk taking company having diversifying business. In other words, INFOSYS BPO is a giant company and cannot be a valid comparable with the assessee company. So, we hereby order to exclude this company from this list of comparables. MAPLE SOLUTIONS LIMITED & TRITON CORP LTD. 35. Though the assessee has initially sought to exclude both these companies as comparables on ground of extra ordinary events i.e. Maple has become 100% subsidiary of Triton and both the companies belong to Rastogi Group of companies and the directors of both the companies were found to have engaged in financial irregularities but, during the course of argument, the ld. AR for the assessee has not pressed for their exclusion. Ld. DR also opposed exclusion o....
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....ed and the transfer pricing study would be impacted at the threshold. Hon'ble High Court ordered to exclude the VISHAL as a comparable for ALP determination of Rampgreen Solutions Pvt. Ltd. (supra) engaged in ITES business by making following observations :- "38. In our view, even Vishal could not be considered as a comparable, as admittedly, its business model was completely different. Admittedly, Vishal's expenditure on employment cost during the relevant period was a small fraction of the proportionate cost incurred by the Assessee, apparently, for 'the reason that most of its work was outsourced to other vendors/service providers. The DRP and the Tribunal erred in brushing aside this vital difference by observing that outsourcing was common in ITeS industry and the same would not have a bearing on profitability. Plainly, a business model where services are rendered by employing own employees and using one's own infrastructure would have a' different cost structure as compared to a business model where services are outsourced. There was no material for the Tribunal to conclude that the outsourcing of services by Vishal would have no bearing on the profitability ....