TaxTMI 
TaxTMI 
2018 (8) TMI 1712
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....rking the international transactions entered into with its Associated Enterprises, 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 ....
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....cting most appropriate method applied by Appellant Company. 1.8 That the Ld. TPO did not follow the directions fo the Hon'ble DRP relating to inclusion 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....
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....galore and further during the Financial Year 2009-10, the company sold one of its subsidiary situated in USA which affected the sales drastically. Since, the company has entered into an extraordinary 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 t....
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....adership position in providing Information Technology enabled Services (ITeS) or Business Process Outsourcing (BPO) (transaction processing) Services to the Banking & Financial Services Industry domain (BFSI) and Travel, 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 ma....
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....lter is adopted to avoid selection of high end companies (big companies) with that of 'minnows' in the similar line of business. How to adopt the filter depends on each case. Reliance was also placed on the order of ITAT Delhi Bench 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....
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.... is also seen that Cosmic Global Ltd., which was initially selected by the assessee as a comparable, is now being sought to be excluded. 5.1 We now take up the comparables being prayed for exclusion one by one as under: (i) e4e Healthcare: It has been submitted that this company is functionally 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 comp....
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....ding data entry and data processing services, we direct exclusion of Fortune Infotec Ltd. from the final list of comparables. (iii) I-Gate Global: It has been submitted that this company is also functionally dissimilar as I-Gate is providing customized global sourcing solutions to a diverse group of 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....
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....clusion of this company from the set of comparables on the ground that this company was involved in provision of off shoring Healthcare business services like medical coding, billing, accounts receivable management, claims processing, and healthcare revenue management etc. and was, thus, functioning dissimilar to 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 compan....
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.... year 2009-10 and having due regard to the principle of consistency we direct exclusion of this company in the year under consideration also. (ix) Cosmic Global Ltd: 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 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 ....