TaxTMI 
TaxTMI 
2018 (1) TMI 1383
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.... of Rs. 1,90,45,982 based on the provisions of Chapter X of Income-tax Act, 1961 ("the Act"). 2 On the facts and circumstances of the case, and in law, the learned AO erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of disregarding the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('the Rules') and thereby rejecting the transfer pricing documentation maintained by the Appellant. 3 On the facts and circumstances of the case, and in law, the learned AO erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of not providing any reasons to show that the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were satisfied before making an adjustment to the income of the Appellant. 4 On the facts and circumstances of the case, and in law, the learned AO erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of wrongly modifying the turnover filt....
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....etween the level of risk borne by the comparables and the appellant as well as other factors as mandated by the provisions of Rule 10B(1)(e)(iii) of the Income-tax Rules, 1962. 12 On the facts and in the circumstances of the case, and in law, the Ld. AO has erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of considering non-contemporaneous single year data for the margin computation of the comparables which was not available at the time of conducting the TP study; and disregarding contemporaneous multiple year data which was considered by the appellant in accordance with the provisions of Rule 10B (4) of the Income-tax Rules, 1962 ('the Rules'). 13 On the facts and circumstances of the case, and in law, the learned AO erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of not allowing the appellant the benefit of 5% variation envisaged in the proviso to Section 92C(2) of the Act. 14 On the facts and circumstances of the case, and in law, the learned AO erred in and the Honourable DRP has further erred in confirming the action of the Ld. AO of initiating penalty proceeding....
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....ich are enlisted at pages 8 and 9 of the draft assessment order and the mean margins of said comparables worked out to 26.35%. The Assessing Officer in the assessment proceedings thus, show caused the assessee as to why the adjustment should not be made on account of difference between the margins shown by the assessee and average margins of comparables selected by the Assessing Officer. The assessee objected to the proposal made by the Assessing Officer. However, after discussing margins of various concerns and the additional companies which were identified by the Assessing Officer, final set of comparables was selected by the Assessing Officer, which is tabulated under para 15 at page 28 of the draft assessment order. The mean margin of comparables worked out to 26.35% and the PLI after working capital adjustment was 23.87%. Accordingly, the Assessing Officer made an adjustment of Rs. 1,90,45,982/- in respect of international transactions with its associated enterprises. The Assessing Officer passed the draft assessment order proposing total income of assessee accordingly, on 28.03.2013. The Assessing Officer proposed to complete the assessment under section 143(3) of the Act. ....
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....9. The learned Authorized Representative for the assessee further made reference to the CBDT's Instruction, copy of which is placed at pages 2 to 4 of the Paper Book. He further relied on the ratio laid down by the Hon'ble High Court of Delhi in Sony India Pvt. Ltd. Vs. CBDT (2006) 288 ITR 52 (Del), wherein the constitutional validity of Instruction No.3 dated 20.05.2003 was challenged. He further placed emphasis on the ratio laid down by the Mumbai Bench of Tribunal in the case of M/s. SG Asia Holdings India Pvt. Ltd. Vs. ACIT in ITA No.2399/Mum/2009, relating to assessment year 2005-06, order dated 22.04.2015, wherein it was held that where the Assessing Officer breaches the mandatory instruction issued by the CBDT, his order was bad in law to the extent of breach. The learned Authorized Representative for the assessee fairly admitted that no such issue was raised before the DRP. He referred to the draft assessment order and the final assessment order and pointed out that total international transactions on account of engineering and back office and web based services was to the tune of Rs. 9.71 crores. He further referred to the exclusion of comparables finally selected by the A....
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....echnical support services i.e. engineering back office services to various group companies outside India. As per the transfer pricing document furnished for the year under consideration, the assessee had entered into international transactions with its associated enterprises totaling Rs. 9,71,79,160/-. The additional revenue recognized as prior period items totaled to Rs. 70,97,513/-, hence the total transactions undertaken by the assessee for the year under consideration were Rs. 10,42,76,673/-. The first jurisdictional issue raised by way of additional ground of appeal is challenging the jurisdiction of the Assessing Officer in making transfer pricing adjustment, wherein the said adjustment was made by the Assessing Officer without any reference to the TPO. The additional ground of appeal raised by the assessee is purely legal and does not involve any investigation of facts, hence the same is admitted for adjudication. The case of assessee before us is that as per Instruction No.3 of 2003 issued by CBDT on 20.05.2003, the Assessing Officer was to make reference to the TPO in cases where the value of international transactions exceeded Rs. 5 crores. However, in the present case, s....
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....interesting feature in this regard is the draft assessment order filed by the assessee relating to assessment year 2009-10. The copy of the said draft assessment order was filed during the course of hearing. The perusal of the draft assessment order during dictation of the present order reflects that in the preceding year, the assessee had shown income from support services at Rs. 10,52,92,835/- and other income of Rs. 49,89,078/-. Vide para 5 of the order dated 30.12.2011, the Assessing Officer holds that international transactions were below Rs. 15 crores, therefore, case was not referred to the TPO. However, the Assessing Officer examined the transfer pricing angle itself and proposed an adjustment to the arm's length price. The assessee filed an appeal against the said transfer pricing adjustment before the Tribunal relating to assessment year 2009-10 in ITA No.86/PN/2013, vide order dated 30.10.2015, copy of which is placed at pages 31 to 61 of Paper Book. We find that the assessee has failed to raise any such issue of Assessing Officer having transgressed its jurisdiction in computing arm's length price of international transactions and making an upward adjustment. Ag....
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....he issue in favour of its inclusion in the final set of comparables. However, the assessee is aggrieved by inclusion of certain comparables, which as per the assessee should be excluded from final list of comparables. The Assessing Officer has drawn the final set of comparables, which read as under:- Sr. No. Name of the comparable company PLI % (OP/OC) PLI % (OP/OC) after working capital adjustment Remarks 1 Cosmic Global Ltd. 16.59% 17.73% as per assessee's working 2 Informed Technologies India Ltd. 24.96% 24.33% as per assessee's working 3 Microgenetics Systems Ltd. 6.49% 6.80% as per assessee's working 4 Jindal Intellicom Pvt. Ltd. 18.79% 18.60% as per assessee's working 5 Coral Hubs Ltd. (Vishal Information Technologies Ltd.) 41.66% 41.66% the assessee may provide working capital adjustment 6 Accentia Technologies Ltd. 43.62% 43.62% 7 E4E Healthcare Business Service Ltd. 32.37% 32.37% AVERAGE 26.35% 26.44% 17. First, we take up the issue of inclusion of CG-VAK Software and Exports Ltd. The learned Authorized Repres....
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.... and Exports Ltd. was that it was rejected in assessment year 2008-09. However, we find no merit in the order of Assessing Officer in this regard, where the Assessing Officer himself had selected CG-VAK Software and Exports Ltd. functionally comparable in assessment year 2009-10 i.e. immediately preceding year. 20. The Pune Bench of Tribunal in Brintons Carpets Asia Pvt. Ltd. Vs. DCIT in ITA No.1296/PN/2010, relating to assessment year 2006-07, order dated 15.06.2011 held that 'Rule of Consistency' is to be honoured by the Revenue in case there is no change in the facts of two years. The assessee has further pointed out that CG-VAK Software & Exports Ltd. was not selected in assessment year 2008-09 as it had failed upper turnover filter of Rs. 5 crores. However, in assessment year 2010-11, the Assessing Officer had not applied the said filter and hence, the said concern be included. Accordingly, we hold that CG-VAK Software & Exports Ltd. is to be included in the final list of comparables. 21. Now, coming to the concern Jindal Intellicom Pvt. Ltd. The case of assessee before us is that the said concern has different financial year than the one of assessee. The Assessing Offic....
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....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 of the said entity." 25. The Hon'ble High Court had also held as under:- "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." 26. The concern Coral Hub Ltd., which was earlier known as Vishal, is thus not to be included in the final list of comparables, in view of the ratio laid down by the Hon'ble High Court of Delhi in Rampgreen Solutions (P.) Ltd. Vs. CIT (supra). 27. The next concern is Cosmic Global Ltd. The said concern has been considered to be not comparable on the ground of its outsourcing model. The Pune Bench of Tribunal in Aptara Technologies (....
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....ologies Ltd. is not functionally comparable to the assessee. Accordingly, we direct the Assessing Officer to exclude the said concern from the final set of comparables. 32. The next and last concern which the assessee wants exclusion is E4e Healthcare Business Services Pvt. Ltd. on the ground that the same is not functionally comparable being engaged in providing healthcare outsourcing services. We find that the Tribunal in HOV Services Ltd. Vs. JCIT (2016) 73 taxmann.com 311 (Pune-Trib) had rejected E4e Healthcare Business Services Pvt. Ltd. holding as under:- "25. Since the above company is engaged in business of providing healthcare outsourcing services for the healthcare industries, the same in our opinion cannot be compared with the assessee which is engaged in providing ITES enabled services. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that the above company should be excluded from the list of comparables. Ground of appeal No.1 raised by the assessee is accordingly allowed.." 33. The Tribunal had decided the issue in assessment year 2009-10. However, the assessee pointed out that the functions of said concern were same in asse....