TaxTMI 
TaxTMI 
2018 (11) TMI 1169
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....e of i. inclusion of Foreign Exchange Fluctuation as Operating income while determining Profit Level Indicator (PLI); ii. grant of working capital adjustment and iii. Dispute with inclusion and exclusion of the comparables. 02 The Assessee is a company engaged in the business of rendering IT enabled services ( ITES) in the nature of data management services (i.e. data management services, data collection, organization, validation, analysis and filtering of accounts) and call center services to its overseas associated enterprise ( AE) . The return of income was filed on 15.10.2010 declaring income of Rs. 8,046/-. The AO noted that assessee has entered into the international transaction with its associated enterprises, therefore, reference was made to the Ld. TPO-II(7), New Delhi to determine the arms length price u/s. 92CA(3). The TPO recorded the functional profile of the assessee at Page no. 2 to 4 of his order and then characterized the functions of the assessee as ITE services. The functions of the assessee are undisputedly as under:- "3. Functional Analysis As per the TP documentation submitted by the assessee, the functions....
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....ision / approval of HFO Ireland for the settlement are communicated to the debtors. > On acceptance, the debtor directly pays the amount to the account of HFO Ireland outside India and no payments are received in the Indian accounts or by Validor India. > Post payment, Vatidor India updates its records for collection of the doubtful debt/non-performing asset. > Trace/Issues: Any issues relating to bankruptcy, medical urgency of the debtor is fed into the system to update the account records. c) Infrastructure services Validor India renders certain IT infrastructure support services to HFO Ireland. The functions performed by this division essentially entail the following. 1. Technical support services 2. Troubleshooting of application services 3. Infrastructure set up and maintenance 4. Disaster recovery set up 5. Maintenance of databases Characterization Based on the facts as presented in the above analysis of functions performed, risks borne and assets used, the assessee company has been characterized as an Information Technology ("IT") enabled service provider with limited risk a....
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.... Ld. AR submitted that this issue has now been covered in favor of the assessee by the decision of the Hon'ble Delhi High Court in the case of Assessee in Rampgreen Solutions Pvt. Ltd cs. CIT 234 Taxman 573 (Delhi). He further stated that in Pr. CIT vs. Ameriprise India (P) ltd in ITA No. 461/2016 vide order dated 19.10.2016 this issue is also decided in favour of the assessee. 07 The Ld. DR relied on Safe Harbour Rules and the orders of the lower authorities. 08 We have carefully considered the rival contentions and hold that foreign exchange gain by the assessee is on account of export of services. Therefore, the same is part of the operating income of the assessee. This issue has already been decided by the Hon'ble Delhi High Court in view of the decision cited by the Ld. AR which covers the issue in favour of the assessee. Further the safe harbor rules are like presumptive taxation and has been made applicable only from 18th September, 2013 and therefore, same are not applicable to the present assessment year. Even otherwise they are to be opted by the assessee and if not opted those are not binding on assessee. In view of this we allow ground no. 5 of the appeal of th....
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....cial year then the same may be considered for comparability anaylsis. 14 We have carefully considered the rival contentions and also find that if the R Systems International Ltd. is functionally comparable, it should not be excluded merely for the reasons of that company following different accounting period, if the reliable and authentic data is available with respect to missing quarters . In the present case if the assessee submits reliable and authentic data of the relevant quarters to reconstruct the results of that comparable for the financial year similar to the accounting year of the assessee, then the same should be considered for comparability analysis. Accordingly, this comparable is directed to be included provided assessee submits the above information. 15 The next comparable was Accentia Technologies Ltd. contested by the assessee. This comparable has been selected by the TPO on fresh search. Before the TPO the assessee objected that the comparable is engaged in different segment and functionally not comparable. The Ld. TPO rejected the contention of the assessee and held that Accentia Technologies Ltd. that the Company has one segment of Healthcare Management an....
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.... no impact of financial results during the year ( AY 2010-11 ) of any extraordinary events. Therefore, on this ground this company cannot be excluded as comparable. The functions of the assessee stated that page no. 195 of the PB as per Transfer Pricing Study Report are also the data collection, data organization, data validation and filtering of accounts. In view of this, it cannot be said that Accential Technologies Pvt. Ltd. is performing any function, which is dissimilar to the assessee company. We have also perused the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Ameriprise India (P) Ltd. the main reasons for dismissing the appeal of the Revenue is that the order of the Tribunal dealeing with 03 comparables was not found reasonable and further even if the comparables are to be accepted then the margin of the Respondent in that case fell within the Safe Harbour Rules. The Hon'ble Delhi High Court did not comment on the specific comparable of Accentia Technologies. Even otherwise, the one company if held not be comparable with another company, it cannot be said that the same is not at all comparable with the whole world. In view of this the action of th....
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....rvices along with ITES services and also providing technical services involving software testing, verification and validation of software for implementation and Data Centre Management activities. It also has Tata Brand and Software License of Rs. 24.30 Crores. It was further stated that there is no segmental accounting is available. 22 The Ld. DR supported the orders of the TPO and DRP. 23 We have carefully consider the rival contentions and also perused the balance sheet of TCS E-serve Ltd. Submitted at page no. 693 to 735 of the Paper Book for the year ended on 31.3.2010. The functions shown by the company are at Schedule-O which shows that the company is engaged in IT enable service and BPO services. It is also engaged in technical services of software testing verification and validation software. These functions itself shows that this comparable is not to be taken in comparability analysis of the assessee. Further, the gross revenue of the comparable company is Rs. 1359 Crores whereas the assessee's turnover is merely Rs. 15 crores. Further, the assessee was also contributing to the Tata Brand as per Schedule-N of the balance sheet. Further all the business of the comp....