TaxTMI 
TaxTMI 
2018 (3) TMI 1640
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....t Rs. 63,28,954/-. 3. That the reference made by the AO to the TPO suffers from jurisdictional error as the AO has not recorded any reasons in the draft assessment order/assessment order based on which he reached to the conclusion that it was 'necessary or expedient' to refer the matter to the TPO for computation of the arm's length price (ALP), as is required under Section 92CA(1) of the Act. 4. That the TPO/AO/CIT(A) have erred, in law and on facts and circumstances of the case, in making an adjustment of Rs. 6,59,17,396/- to the total income of the Appellant in respect of international transaction pertaining to provision of services to its Associated Enterprises ("AEs") and have erred by not accepting the economic analysis undertaken by the Appellant which is in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("Rules"). 5. That, on the facts and in circumstances of the case and in law, the AO/TPO/CIT(A) erred in not appreciating the Appellant's business model and functional and risk profile. 6. That, the TPO/ AO/CIT(A) have erred, in law and on facts and circumstances of the case, by rejecting certain filters as applied by t....
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....inciples as laid down Rule 1OB of the Rules . 14. That, the TPO/AO/DRP erred in not rejecting Accentia Technologies Ltd., Eclerx Ltd., Infosys BPO Ltd. and TCS e-serve Ltd., without appreciating that the said companies are not comparable to the Appellant. 15. That the TPO/AO/CIT(A) have erred in not appreciating that there are certain computational errors as the calculation of OP/OC of the Appellant is not in accordance with law. 16. That the TPO/AO/CIT(A) have erred in not appreciating that there are certain computational errors as the calculation of OP/OC of the comparable companies is not in accordance with law. 17. That the TPO/AO/CIT(A) erred in not granting the working capital adjustment to the Appellant. 18. That the CIT(A) erred in not appreciating that the functional profile of the Appellant and the TP Study stood accepted by the TPO/AO. 19. That, in view of the facts and circumstance of the case, the CIT(A) has erred on facts and in law in holding that the Appellant performs KPO services. 20. That the CIT(A) also erred in arbitrarily accepting/rejecting the comparable companies and adopting an inconsistent view. 21. That, without prejudice 2 KPOs are not a....
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....porated in India on 17/12/07 and was 100% export oriented unit set up under SEZ guidelines. It was observed that assessee carried out research driven by business information, market research and intellectual property research. Ld.TPO recorded that the client executives (based in Bermuda, US, Europe and Asia-Pacific) was operating from overseas, formed interface between client and assessee and the deliverable was typically in the form of research report that is forwarded directly to the client under the supervision and post a quality assurance by the AE's. It is also observed by Ld. TPO that the reports and research studies prepared by assessee are owned by the clients only and the operations of EVS SEZ India comprises of the following segments: * Marketing and After sales; * Strategic Policies; * Finance, Accounting and IT; * Human Resource Management. Assessee had categorised international transaction as under: Sl. No. International transaction Amount in Rs. 1. Provision of services-back office operations (research services) 56,61,90,975 2. Cost reimbursementreceived/receivable 1,13,82,904 2.4. Ld.TPO observed that the TP report submitted by assessee described t....
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....echnologies Ltd. 29.18% 2. Aeropetal Technologies Ltd. (segment) 14.36% 3. e4e Healthcare Business Services P Ltd. 9.77% 4. Eclerx Services Ltd. 56.82% 5. ICRA Techno Analytics Ltd. (segment) 25.54% 6. Infosys BPO Ltd. 17.86% 7. Jindal Intellicom Ltd. 13.70% 8. TCS E-Serve Ltd. 69.31% Average 29.57% Ld.TPO thus made an adjustment of Rs. 6,59,17,396/- 3. Aggrieved by adjustment made, assessee preferred appeal before Ld. CIT (A). During the first appellate proceedings Ld. CIT (A) rejected the comparable, ICRA Techno Analytics Ltd., but accepted other comparables that was finally selected by Ld. TPO. 4. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us now. 4.1. The only issue that has been agitated by assessee is in respect of wrong selection of comparables by ld.TPO and rejection of two comparables being R Systems and Omega Healthcare. 4.2. Before dealing with comparables it is sine qua non to deal with the functions performed by assessee for the year under consideration. 4.3. From TP report placed at page 696 of the paper book, it is observed that assessee is 100% wholly owned Subsid....
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....es use of a right of research tools including the Web databases and publications apart from analytics and forecasting. The industry covered include financial services (banking and insurance), high-tech, software, electronics, engineering, nanotechnology, networking, biomedical engineering), telecom equipment and operators, pharmaceutical and biotech chemicals, energy and consumer products. 4.6. In terms of assets it does not own any non-routine intangibles and does not own trade secrets or undertake research and development activities on its account that would lead to the development of non-routine tangibles. 4.7. In terms of risk assessee has been characterised as a high-level risk exposed in India which includes foreign exchange risk, entrepreneurs risk, price risk, manpower risk. 5. After the above FAR analysis, we shall now proceed with the comparability in respect of the comparables disputed by assessee as well as the comparables that has been proposed to be included by assessee in the final list. The comparables that has been submitted by assessee to be excluded are as under: * Accentia technologies Ltd; * Infosys BPO Ltd * TCS E-Serve Ltd * Eclerx services ....
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....Igate global solutions td.(pg. 838-42- Vol. 3-mnual veport) 1. Exceptional year of operations (amalgamation) (pg. 888k hence fails TPO's own filter of peculiar economic circumstances 1) Delhi High Court- PCIT vs. Ameriprise India P. Ltd.- ITA No. 461/16- pg. 79A- 79B CLC 2) Functionally different and Insufficient segmental information (IT and ITES services) (pg. 888 and 893, 904, 910) 2) United HealthGroup Informat ion Services P. Ltd. (ITA No. 1038/D/15) (pg. 204-205 Of CLC) 3) High turnover (Rs. 932.18 crores) (pg. 879) (assessee's turnover is about 50 croresturnover is about 18 times more than that of the assesse). 3) Techbooks International Pvt. Ltd. (ITA No. 240/Del/2015 for AY 2010-11) (pg. 28- 29 of CLC). 4) Ameriprise India Pvt Ltd. (ITA No. 7014/Del/2014)(pg. 62-63 of CLC). 5) Sun Life India Service Centre P. Ltd. (ITA No. 750/2015) 4. ICRA Techno Analytics Ltd. (pg. 1209- 1234-Vol. 4- Annual Report) 1. Functionally dissimilar- it is engaged in business intelligence and analytics (pg. 1210, 1226, 1232). 2. No segmental details 1) DCIT vs. Ikanos Communication India (P.) Ltd (Bang- ITAT-for A Y2010-11)[2015] 64 taxmc 436 (Bangalore -Trib.) 2) IDCIT....
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....of CLC) 5) Techbooks International Pvt. Ltd. (ITA No. 240/Del/2015 for AY 2010- 11) (pg. 19-24 of CLC) 6) Sun Life India Service Centre P. Ltd. (ITA No. 750/2015) 7. TCS E-Serve 1103-1144- Vol -4 Annual Report 01. Functional dissimilarity (pg. 1122) 02. No segmental details are available (pg. 1134) 03. Owns significant intangibles 04. Uses the TATA brand royalty is paid (pg 1131) 05. High turnover-27 times more than that of the assessee 1. United Health Group Information Services P. Ltd. (ITA No. 1038/D/15) (pg. 208-210 of CLC) 2. Equant solutions India Pvt Ltd (ITA No. 202/Del/2015 (pg 184-187 of CLC) 3. Ameriprise India Pvt Ltd (ITA No. 7014/Del/2014 (pg 66-69 of CLC 4. Bechtel India Pvt Ltd (ITA No. 1478/Del/2015) Pg 95 of CLC 5. Sun Life India Service Centre P ltd (ITA No. 750/2015 S No. Name of the comparable Reasons for acceptance Case laws relied upon by the appellant 1 R Systems (page 1285- 1374 Vo4 of annual report 1. different financial year ending cannot be the sole basis for excluding a comparable 1. Techbooks international pvt. Ltd (ITA No. 240/Del/2015) pg 30-33 of CLC) 2. United Healthcare ....
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....ssimilarities and that segmental data were unavailable. Again the findings of the ITAT are reasonable and based on record. The third comparable that the AO/TPO excluded is TCS Esserve. The ITAT observed that though there is a close functional similarity between that entity and the assessee, however, there is a close connection between TCS E-serve and TATA Consultancy Service Ltd. which was high brand value; that distinguished it and marked it out for exclusion. The ITAT recorded that the brand value associated with TCS Consultancy reflected impacted TCS E-serve profitability in a very positive manner. This inference too in the opinion of Court, cannot be termed as unreasonable. The rationale for exclusion is therefore upheld. The assessee was aggrieved by the inclusion of Accentia a Software Development Company. The Revenue is aggrieved by the exclusion of Accentia from the TP analysis. The DRP had directed its deletion. We observe that the ITAT has noticed the unavailability of the segmental data so far as these comparables are concerned. Furthermore, the functionality of this entity was concerned, it is different from that of the assessee; Accentia was engaged in KPO services in ....
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....cant intangibles and abnormally high profit margin. For this proposition the ld AR relied upon several judicial precedents. The ld DRP rejected all the above contention of the assessee with respect to this comparable at page No. 23 to 26 of its order. 10. The ld DR reiterated the same facts as stated by lower authorities. 11. We have carefully considered the rival contentions as well as perused the annual accounts of the comparables. At page No. 1172, we have perused schedule 10 of the notes on account wherein it has mentioned that w.e.f. 01.04.2008 a company which was engaged in the business of medical transcription and coding has been amalgamated with the comparable. It is further stated figures for this year are related to amalgamating company also. The profit and loss account of the comparable shows that sales and services of the company are according to Schedule No. 8. There is no change in the income segment of the assessee after amalgamation as amalgamating company was also having the same business, hence, there is no impact of amalgamation on the company with respect to functions performed. Therefore, merely there is a an amalgamation during the year it cannot be exclud....
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....nnual report under management discussion and analysis. It provides that eClerx supports its clients through its two business units- Capital markets and sales and marketing support. Across both these units, the company supports and improves processes that are core of its customers day to day business operations. The company continues to focus on engagements where it can tap the largest percentage of client spend by leveraging its domain expertise and by bringing together consulting, project management and solution based service delivery. In the capital markets division, the company today provides end-to-end financial transaction support services such as trade booking, trade confirmation, asset servicing cash settlements, client servicing risk management and reference data integrity across all asset classes, and its services span both sell side ( the large banks) and buy side ( the funds and assets managers) Furthermore, the company provides strategic and process consulting services helping clients devise solutions to improve efficiency, reduce risk and meet regulatory and market demands. Similarly in the sales and marketing support division, the company today supports clients in all....
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....business intelligence and analytics space. It is also engaged in software development and consultancy, engineering services, web development and hosting services. It is also noted that it has two income segments of services and sales and it does not have the complete segmental information with respect to both the segments of services and sales as fixed assets and services are used inter-changeability. In view of this we find that this company is functionally not comparable as well as it does not have complete segmental information with respect to the sales and service segments. In the result we direct the Transfer Pricing Officer to exclude the above comparable. 19. The assessee has challenged the inclusion of Infosys BPO Ltd. the main reason seeking its exclusion was high brand value, intangibles, benefit of Infosys branch and large scale operation. 20. The ld DR objected to this and relied upon the order of the ld Transfer Pricing Officer submitting that all these arguments of the assessee has been considered by the ld TPO. 21. We have carefully considered the rival contentions and also verified the annual accounts of Infosys BPO Ltd from page No. 943 to 1026, undoubtedly t....
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....e order of the ld Transfer Pricing Officer and ld DRP. 27. We have carefully considered the rival contentions and also perused the annual report of the company for year ended 31.03.2010. The company is mainly engaged in IT enabled services and business process outsourcing. It is also providing technical services which involve software testing, verification and validation. It also contributes similarly to Tata Brand Equity and for this year the contribution was Rs. 42 crores. Therefore, following the same reasoning given by us for exclusion of TCS eserve International Ltd we also direct the ld TPO to exclude this comparable. 28. The next comparable contested by the assessee is e4e Healthcare Ltd contesting that it is engaged in software development services and owns its own intangibles. The ld Departmental Representative contested relying upon the order of the ld TPO and DRP and submitted that this comparable is assessee's own comparable. 29. We have carefully considered the rival contentions and perused the annual report of the company placed at Page No. 1185 to 1082. However, before analyzing the balance sheet it is very important to note that above comparable was selected b....
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.... period. Therefore, the ld Transfer Pricing Officer did not consider the same. It is held in several decisions that if the assessee can demonstrate with publicly available authentic information for the remaining period and exclusionary period and further produces the tabulated data for the similar accounting year as followed by the assessee then if the FAR analysis of that company is comparable, it may be included. Therefore, it is now the duty of the assessee to satisfy the Assessing Officer/TPO with such information. Hence, we direct the ld Transfer Pricing Officer to verify the information with respect to this comparable in accordance with the law and then decide inclusion or exclusion. 31. The next comparable is Omega Healthcare Ltd, which were selected by the assessee but rejected by the ld Transfer Pricing Officer and ld DRP for the reason that the annual report of the relevant year is not available in the public domain. The ld AR stated that same is available in public domain and further same is also produced before us at page No. 1269 to 1284 of the paper Book. In view of this we direct the ld TPO to verify the annual report and decide the issue about inclusion of this co....