TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1437
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....essee are in the nature of Information Technology Enabled Services (ITES) or commonly known as business process out sourcing (BPO) service relating to transaction processing, data entry, re-conciliation of statements and other similar support services. As per the terms of agreement, for the service provided by the assessee to its A.E., it is remunerated on a cost plus mark-up basis. For the assessment year under consideration, assessee filed its return of income on 12th October 2010, declaring total income of Rs. 2,20,660 under the normal provisions and book profit of Rs. 14,67,13,912 under section 115JB. During the assessment proceedings, the Assessing Officer noticed that the assessee has entered into international transactions with its A.E. and, therefore, made a reference to the Transfer Pricing Officer for determining the arm's length price. The Transfer Pricing Officer after verifying the audit report in form no.3CEB and other documents submitted before him found that during the relevant previous year assessee has provided ITES to its A.E. for Rs. 1,51,39,34,000. After perusing the transfer pricing analysis made by the assessee, he noted that the assessee has selected com....
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....aliber Point Business Solutions Limited). c) To allow the working capital adjustment. 4. Learned Sr. Counsel submitted, the DRP after considering the objections of the assessee on the issue of comparability of certain companies had directed exclusion of some companies selected by the Transfer Pricing Officer and also directed him to include some companies proposed by the assessee. He further submitted, the DRP had also directed for allowance of working capital adjustment. However, the Assessing Officer in the final assessment order has completely ignored these directions of the DRP which is contrary to the statutory provisions. In this context, learned Authorised Representative drew our attention to the specific findings of the DRP. 5. Learned Departmental Representative on the other hand submitted, this is an inadvertent mistake committed by the Assessing Officer which could have been rectified if the assessee would have moved an application under section 154 of the Act. 6. We have considered the submissions of the parties and perused the material available on record. On a perusal of the order dated 27th October 2014 of the DRP, we have noticed that upholding the objection of....
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....also goodwill, brand name and IPRs. He submitted, the margin of medical coding is on higher side when compared to medical transcription. Medical coding constitutes 15% of operating revenue. He submitted, the information contained in the website of the company reveals that most of the key persons are engineer and highly qualified people whereas assessee's work force consists of mostly graduates with no special skills / training. Learned Authorised Representative submitted, for the reason that this company has diversified activity and is into high end KPO services, it was rejected as a comparable in assessee's own case for assessment year 2009-10. He submitted, relying upon the aforesaid decision of the Tribunal, the DRP also rejected this company as a comparable to assessee in assessment year 2011-12 and the Transfer Pricing Officer himself relying upon the decision of the Tribunal and direction of DRP rejected Accentia Technologies Ltd. as comparable in assessment year 2012-13. He also submitted, in various Benches of the Tribunal also holding that Accentia Technologies Ltd., being a KPO service provider, has rejected it as comparable in case of routine BPO service provider. 10. L....
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....the comparability of Accentia Technologies Ltd. to the assessee in assessment year 2009-10 in ITA no.2594/Mum./2014 and Anr., dated 16th January 2015, has held as under:- "12. Now coming to the Accentia Technologies Ltd., as pointed out by the Ld. Counsel, it is seen form the annual report of the said company, it is a parent company providing high end management solutions in health care. It is mainly medical transcription company doing medical coding, medical billing and receivables management services. The BPO services has not been started in this year that is in the F.Y. 2008-09. The TPO has included this company mainly on the ground that it is a KPO and is providing high end ITES related services in the field of health care. Once it is evident from the annual report for the A.Y. 2008-09 that it has not started its data processing outsourcing or KPO services, it cannot be held to be a good comparable for bench marking the assessee's margin for the F.Y. 2008-09, that is, for A.Y. 2009-10. Moreover this company has substantial goodwill being a parent company and therefore, cannot be held to be comparable with the company which is mainly a captive service provider. Therefore, we ar....
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.... High Court held while the KPO is on the higher end of the spectrum involving employment of advanced skills and knowledge for providing service, BPO does not necessarily involve advanced skill and knowledge. Therefore, BPO service provider cannot be functionally comparable to a KPO. Reverting back to the facts of the present case, there is no discernible difference in the functional profile of the assessee and Accentia Technologies Ltd. in the impugned assessment year compared to the earlier assessment years. Therefore, applying the ratio laid down by the Hon'ble Delhi High Court in the above referred decision as well as different benches of the Tribunal including the Tribunal, Mumbai Bench, in assessee's own case for assessment year 2009-10 and also considering the fact that the DRP as well as Transfer Pricing Officer following the aforesaid decision of the Tribunal in assessee's own case have excluded Accentia Technologies Ltd. in assessment year 2011-12 and 2012-13, we hold that this company cannot be a comparable to the assessee. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to exclude it from the stage of comparables. Infosys BPO Limited 13. Ob....
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....subsequent assessment year. Therefore, applying the rule of consistency this company should be excluded from the list of comparables. 14. Learned Departmental Representative submitted, Transfer Pricing Officer while selecting comparables has not applied any high turnover filter. He submitted, if companies having turnover of more than ten times are to be excluded, as pleaded by the assessee, then applying the same logic companies having turnover ten times lesser than the assessee should also be excluded. Learned Departmental Representative submitted, high turnover has no impact on profitability. Therefore, only because a company has high turnover for that reason alone, it cannot be rejected if functions of the company are similar. As far as brand value is concerned, learned Departmental Representative submitted, there is no discussion on the issue by the DRP. Learned Departmental Representative submitted, the company being functionally similar to assessee should be treated as comparable. 15. We have considered the submissions of the parties and perused the material available on record in the light of relevant case laws cited by the assessee. Undisputedly, this company belongs to I....
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....see as low end BPO hence, accepted R. Systems International Ltd. as a comparable. Learned Authorised Representative submitted, the DRP again in assessment year 2011-12 has accepted R. Systems International Ltd. as comparable. In this context, he referred to the order of the DRP for assessment year 2011-12 a copy of which is placed at Page-143 of case law compilation. Learned Authorised Representative also relied upon the decision of the Hon'ble Delhi High Court in CIT v/s Mckinsey Knowledge Centre India Pvt. Ltd., ITA no. 217/2014 dated 24th March 2015. 18. Learned Departmental Representative on the other hand supporting the reasoning of the Transfer Pricing Officer / DRP justified rejection of this company as a comparable. Learned Departmental Representative relying upon a decision of the Tribunal, Pune Bench in Honeywell Automation India Pvt. Ltd. v/s DCIT, ITA no.4/Pn./2008 dated 10th February 2009, submitted that since the company and the assessee have different financial year / accounting period cannot be considered as comparable. 19. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. ....