AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1712
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....the assessee company selected Cost Plus Method (CPM) as the most appropriate method u/s 92C of the Income Tax Act, 1961 (hereinafter called as 'the Act'). 2.1 The return for the year under consideration was filed declaring a loss of Rs. 47,42,898/-. The case was selected for scrutiny and a reference was also made to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price (ALP), u/s 92CA(3) in respect of international transactions entered into by the Assessee company. Apart from the benchmarking the international transactions under the Cost Plus Method, the assessee company also carried out secondary benchmarking under TNMM. The average profit margin of the company was 6.57% as compared to the average margin of 7.31% which was derived by selecting 4 comparables companies. However, the TPO rejected the Transfer Pricing (TP) approach of the assessee company and applied TNMM and after selecting 10 companies as comparables arrived at an average margin of 31.73%. Thereafter, the TPO proposed Transfer Pricing Adjustment of Rs. 3,27,13,144/-. 2.2 Aggrieved, the assessee filed objections before the Ld. Disputes Resolution Panel (DRP) which allowed only partial relief to the....
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....nclusion of misc. income as non- operating income, which is being disputed. 1.9 The appellant craves leave to add to, alter, modify, substantiate, delete and / or to rescind all or any of the grounds of objection on or before the final hearing, if necessity so arises. For Domestic Transactions issue: 2.1 That on the facts and circumstances of the case and law on the point, the Ld. Assessing Officer has erred in making addition of Rs. 3,68,759/- u/s 14A of the Income Tax Act, 1961 2.2 That on the facts and circumstances of the case and law on the point, the Ld. Assessing Officer has erred in erred in making disallowance u/s 14A of the Act without giving clear finding of incurring of expenditure in relation to exempt income and Hon'ble DRP has erred in confirming such rejection. 2.3 That on the facts and circumstances of the case and law on the point, the Ld. Assessing Officer has erred in calculating the disallowance of Rs. 3,68,759/- by applying the provisions of Rule 8D of the Income Tax Rules, 1962 incorrectly and Hon'ble DRP has erred in confirming such calculation." 3.0 The Ld. Authorised Representative (AR) submitted that the assessee was seeking exclusion of 10 com....
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.... activity during the year it would not be justifiable to take it as a comparable for the determination of the arm's length price. It was also submitted that the turnover of Fortune Infotech Ltd. is abnormally low and, hence, not a suitable comparable company. (iii) I-Gate Global: The Ld. AR submitted that this company was functionally dissimilar to the assessee company as the assessee company is providing data processing services and is having low paid employees and is categorized under Business Process Outsourcing (BPO) sector whereas iGATE provides customized global sourcing solutions to a diverse group of clients. It was further submitted that in addition to a broad range of horizontal services including IT Helpdesk, Finance & Accounting, HR Services, Enterprise- wide Service Desk and Product Support, this company also provides a comprehensive suite of CIS & BPO services for the Insurance, Financial Services, Telecom, Life Sciences vertical markets. It was also submitted that this company also offers offshore services pertaining to Benefits Administration Lifecycle and, thus, there are significant functional differences between the two companies. (iv) Jindal Intellicom Ltd: ....
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....avel, Tourism and Hospitality (TTH), which are considered as industry segment. It was further submitted that the geographic segments of this company are America, Europe and others. The Ld. AR also submitted that the company is 100% Subsidiary of TCS E- Serve Ltd. With reference to the Annual Report of the company, it was submitted that this company provides similar services as TCS E-Serve Ltd. and is not comparable to the appellant company for the reason of Different Business Model and High Supernormal Profit. (vii) TCS E-Serve Ltd: The Ld. AR submitted that this company is mainly engaged in providing Business Process Outsourcing services to the Banking & Financial service Industry and, therefore, it was functionally dissimilar to the assessee company. It was further submitted that the turnover of this company is Rs. 1359.41 crore for the year under consideration which is 79.14 times the turnover of assessee company. It was further submitted that this company is managed by the Tata Group and during the year under consideration, this company has made payments towards the use of the Tata brand. Consequentially, the use of the TCS brand has substantially increased the operating prof....
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....nch in the case of Techbooks International Pvt. Ltd. Vs. DCIT reported in (2015) 7 TMI 473 - ITAT Delhi, wherein Micro Genetics Systems Ltd. was directed to be included as a comparable. (ii) Suntech Web Services P. Ltd: This comparable was rejected by the TPO on the ground of functional dissimilarity. The Ld. AR submitted that this comparable can neither be rejected on the ground of functional disparity nor by applying the turnover filter. It was submitted that the turnover of the company is Rs. 7,88,55,854/- which is more than Rs. 5 crores and, thus, it cannot be rejected on the basis of turnover. It was also submitted that it is functionally a good comparable and the same was not rebutted by the TPO. It was prayed that this comparable be included. (iii) BSI Financial Services: The Ld. AR submitted that the TPO had rejected this comparable on the ground that it was an internal comparable and also on the ground of it failing the turnover filter. It was submitted that it is well settled law that when internal comparables are available the same need to be preferred. The Ld. AR placed reliance on the following judicial precedents in support of his contention that internal comparab....
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....nally dissimilar as this company is mainly engaged in providing healthcare business services, receivables cycle management services and software development for healthcare industry whereas the assessee company is only providing data processing and data entry services. It has also been submitted that the Profit & Loss account of this company is not available in the data base. It has been pointed out that the TPO has taken figures from the Directors' Report and the profit figure disclosed in the Directors' Report is taken as the operating profit. We have gone through the Annual Report of e4e Healthcare and we note that the averment of the Ld. Authorised Representative is correct with respect to this company being functioning dissimilar. We note that e4e is providing high end services to their clients in the field of Healthcare business and are also in receivables cycle management. This company is also developing software for the Healthcare industry. We also note that this company was excluded by the ITAT Delhi Bench in the case of Bechtel India (P) Ltd. vs. DCIT reported in 2016 taxmann. com 6 (Del. Tribunal) in AY 10-11 wherein this company was found to be functionally dissimilar to....
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....clients as well as shared corporate services along with IT Helpdesk, Finance and Accounting, HR services, Enterprise wide Service Desk etc. whereas assessee company is providing only data processing services. We have gone through the annual report to the company I-Gate Global and we find that this company, apart from providing Customized Global Solutions and Shared Corporate services, is also providing CIS & BPO services for the Insurance, Financial Services, Telecom, Life Sciences. In addition, this company is also offering offshoring services of the entire Benefits Administration Lifecycle. Thus, it is very much evident that this company is not a good comparable for the assessee company. We also note that this company was excluded as comparable in assessment year 2010- 11 in the case of Ameriprise India (P) Ltd. vs. DCIT reported in 2016 taxmann.com 246 (Delhi Trib.) in the case of assessee providing IT enable services on the ground that an event of amalgamation had taken place and the financial results of the company had also included the results of amalgamating company and, therefore, in view of this extra ordinary financial event it was unfit for comparison with the assessee c....
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....a company providing engineering design and related services. On similar reasoning and duly noting the fact that the functional dissimilarity between the assesseecompany and Omega Healthcare is undisputedly established, we direct the TPO to exclude this company from the final list of comparables. (vi) TCS E-Serve International Limited : This company has been objected to as a comparable on the ground of having a different business model and having super normal profits. A perusal of the annual report shows that TCS E- Serve International Ltd. provides Information Technology enabled services/Business Processing Outsourcing services to the banking and financial industrial services industry, Travel, Tourism and Hospitality industry. It is also seen that the geographic segments of the company are Americas, Europe and others continents. On the other hand, the assessee company is only providing Data Processing and Data Entry Services and we have no hesitation in holding that TCS E-Serve International Ltd. is functionally dissimilar to the assessee company and the same cannot be taken as a comparable. We also note that this company was excluded by the ITAT Delhi bench from the final list o....
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....und of being functioning different. It is undisputed that the functional profile of the assessee as well as Cosmic Global Ltd. has remained unchanged. Therefore, in view of this company having been excluded by the ITAT assessee's own case for assessment year 2009-10, having due regard to the principle of consistency we direct exclusion of this company in the year under consideration also. (x) Infosys BPO Limited: It is seen that this comparable has been excluded by the ITAT Delhi Bench in assessee's own case for assessment year 2009-10 in ITA no. 481/Del/2014 on the ground of being functioning different. It is undisputed that the functional profile of the assessee as well as Infosys BPO Ltd. has remained unchanged. Therefore, in view of this company having been excluded by the ITAT assessee's own case for assessment year 2009-10, having due regard to the principle of consistency we direct exclusion of this company in the year under consideration also. 5.2 Now, we take up the companies which the assessee is praying for being included in the list of comparables - (i) Microgenetic Systems Limited: The Ld. Authorised Representative has argued at length that this company should be ....