TaxTMI 
TaxTMI 
2017 (11) TMI 1724
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....ion of arm's length price of the international transactions entered into by the assessee company. The TPO observed that the assessee has entered into the following international transactions during the year :- Nature of international transaction Method selected Amount (In INR) Data Processing Services TNNM 33,98,09,045/- 3. The TPO observed that the major international transaction of the assessee is the provision of BPO services to its AE, for which the assessee has chosen TNMM as the most appropriate method and OP/TC as the PLI. He noted that the assessee in its TP report has arrived at comparables with an average margin of 7.56%. The assessee has worked out its margin to be 8%. Based on this analysis, the assessee has concluded that its transactions are at arm's length. The TPO issued a show cause notice to the assessee to justify its TP study report. After considering the various arguments advanced by the assessee, the TPO rejected some of the comparables selected by the assessee and added few more comparables and finally selected the following comparables whose working capital adjusted OP/OC was 32.84% :- Sl. No. Name of the company Wor....
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....ribunal by raising the following grounds :- "1. That the assessing officer erred on facts and in law in completing assessment under section 144C read with section 143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs. 3,43,34,318 as against income of Rs. 2,52,70,318 returned by the appellant. 2. That the assessing officer erred on facts and in law in making an adjustment of Rs. 90,63,995 allegedly on account of difference in the arm's length price of the 'international transaction' of provision of BPO/Data Processing Services on the basis of the order passed under section 92CA(3) of the Act by the TPO. 2.1 That the DRP/AO erred on facts and in law in upholding the additional filter of export sales less than 75% of the total income applied by the TPO, without appreciating that selection of comparable companies on the basis of such quantitative filters alone, defies the purpose of the benchmarking analysis. 2.2 That the DRP/AO erred on facts and in law in rejecting Professional Management Consultants Pvt. Ltd. despite the directions of the DRP that the said company is required to be retained in the list of comparables. ....
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....e assessee has challenged the selection of number of comparables, however, his argument was restricted to three comparables namely, Accentia Technologies Limited, TCS E-Serve Ltd. and Infosys BPO Limited, since the DRP has already directed to exclude Eclerx Services Limited, Acropetal Technologies Ltd.. 11. So far as Accentia Technologies Limited is concerned, the ld. counsel for the assessee submitted that no segmental details are available in case of Accentia Technologies Limited. For this proposition, he referred to the decision of the Tribunal in the case of Equant Solutions India P. Ltd. vs. DCIT in ITA No.1202/Del/2015 order dated 21.01.2016 for assessment year 2010-11. He submitted that Accentia Technologies Limited is also not a good comparable since it is functionally not comparable. It provides services to healthcare industry in the nature of medical transcription, medical coding, billing and receivable management etc.. The company is also engaged in the business of providing KPO services. The company owns proprietary software products such as instacare, instascribe, instaweb etc.. Further, the company is engaged in two business segments i.e. medical transcription and ....
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....refore, enjoys the goodwill and recognition associated with the said brand leading to higher volume of business and/or premium pricing. Companies owning/exploiting intangibles such as brand etc. cannot be compared with a routine captive service provider such as the assessee. Further, TCS E-Serve Ltd. was excluded by the DRP in assessment year 2012-13 on account of functional dissimilarity and having significant intangibles. 13. Referring to various decisions as given in the Paper Book, he submitted that this company was excluded due to absence of segmental data and holding of significant intangibles. He accordingly submitted that the TCS E-Serve Ltd. should be excluded from the list of comparables. 14. So far as Infosys BPO Ltd. is concerned, the ld. counsel for the assessee submitted that the said company is functionally different and ownership of intangibles and synergy benefits of Infosys Brand. It is a part of Infosys group, a giant in the field of IT services. The company, as a result of being a part of the Infosys group, enjoys the benefits such as use of brand 'Infosys', availability of skilled manpower and technical knowhow etc.. The company holds a brand name in the ....
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....r, this company also owns proprietary software products such as instacare, instascribe, instaweb etc.. We, therefore, find merit in the submissions of the ld. counsel for the assessee that this company should be excluded from the list of comparables. We accordingly direct the Assessing Officer/TPO to exclude this company from the list of comparables. 19. So far as the TCS E-Serve Limited is concerned, we find the DRP in assessee's own case for assessment year 2012-13 has excluded this company from the list of comparables on account of functional dissimilarity and having significant intangibles. We further find the Delhi Bench of the Tribunal in the case of Exevo India Pvt. Ltd. vs. ITO in ITA no.907/Del/2016 order dated 25.07.2016 has rejected this company by observing as under :- "6.10. After considering the rival submissions and pursuing the relevant material on record, we find that the financial results of this company shows that this company is into financial services to help its customers achieve their business objectives by providing innovative best in class services. During the year under consideration, this company has made payments towards use of Tata brand. Co....