TaxTMI 
TaxTMI 
2018 (10) TMI 1601
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....m the orders of the lower authorities, the assessee is engaged in providing Information Technology Enables Services (ITeS) such as back office, financial and fund accounting services to its AE. The assessee further leverages on IPR and other commercial or granting intangibles owned by the group and therefore, it is characterized as routine IT enabled service provider which is exposed to less than normal risk in the business since it does not own any interest for the intangibles. 2.1 The assessee filed its return of income on 29.11.2011 showing an income of Rs. 23,19,782/- which was subsequently revised on 27.04.2012 to Rs. 24,72,931/-During the course of assessment proceedings, the Assessing Officer found that the assessee has entered in....
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....the interest rate of 10.84%, made an adjustment on account of receivables amounting to Rs. 18,61,066/-, making total adjustment of Rs. 2,90,95,332/-. The Transfer Pricing Officer (TPO) passed the order u/s 92CA(3) of the Act vide order dated 07.01.2015 proposing an adjustment on account of ITES amounting to Rs. 2,72,34,266/- and on account of receivables amounting to Rs. 18,61,066/- totaling to Rs. 2,90,95,332/-. Based on this, the Assessing Officer passed the draft assessment order on 02.02.2015 wherein in the normal computation of income, addition of Rs. 2,90,95,332/- was proposed and the taxable income was determined at Rs. 3,15,68,262/- and further, on the book profit declared by the assessee u/s 115JB of the Act, computed by the assess....
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....er dated 5.8.2016, the Hon'ble Delhi High Court dismissed the appeal of the revenue in ITA 417/2016. 2.5 Further, the assessee also filed a rectification application before the Ld. DRP on some issues in which there was apparently some mistake on the face of the record. 2.6 Subsequently, the TPO, vide order dated 5.1.2017 passed u/s 92CA(5) r/w section 254 of the Act, recomputed the transfer pricing adjustments as under:- i) IT Enabled services Rs. 14,163,639/- ii) Receivables NIL 2.7 The TPO also passed an order u/s 154 of the Act vide order dated 7.3.2017 wherein the TP adjustments, both in respect of ITES as well as receivables was recomputed at nil. The final list of comparables along with margins as calculated....
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....hat the activity of the said company is similar to the activity of assessee ." 3.0 The Ld. Sr. DR vehemently argued that the Ld. DRP had erred in directing the TPO to re-compute the addition on account of transfer pricing adjustment by excluding the comparable of M/s Accentia Technology Limited without appreciating the fact that there was functional similarity between the assessee and the said company. The Ld. Sr. DR referring, to the order of the Transfer Pricing Officer, submitted that this company had been improperly excluded by the Ld. DRP and the same should be directed to be included. 4.0 In response, the Ld. AR submitted that Accentia Technology was not functionally comparable to the assessee company because Accentia Technology....
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....ment consulting services, medical coding, claims processing and software development including SAAS and implementation services. Accentia it is evident has a large portfolio of products such as instaKare a EMR software developed by Accentia that enables providers using it receive EMR incentives from federal and state agencies, Insta PMS a web based practice management solution, Insta EMR, Insta WEB, instaBill, InstaDRT, InstaScribe InstaView,- making it a product company more than a services company even though it is reporting only one segment ie ITes. Though TPO has stated that more than 84.76% receipt is from healthcare receivables and only 15.24% Sale of software, the offering of software as a service (SaaS) makes it functionally differe....
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....ments in companies with expertise in software development (page 76-78 of Annexure A of the Paper book) during the FY to own EMR software rather than depend on third party offerings. Thus Accentia with a business model of providing both services and products while reporting only one segmental, is not functionally similar, and has a significantly different asset and risk profile (Goodwill Brands/IPR constitute 41.24% of its total fixed assets) during the FY 2010-11. Also this was not selected by TPO last year and during the year except a greater emphasis on products and SAAS, there is no change in FAR. The changes in business model only render it functionally more different from taxpayer and it cannot serve as a valid comparable for the ITeS ....