TaxTMI 
TaxTMI 
2017 (4) TMI 1422
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....income" and the charging or computation provision relating to income under the head "Profits & Gains of Business or Profession" do not refer to or include the amounts computed under Chapter X and therefore addition under Chapter X is bad in law. 5. passing the order without demonstrating that the Appellant had motive of tax evasion. 6. Re-computing the TP adjustment at Rs. 4,03,93,455/- in the final assessment order pursuant to the directions of the Honourable DRP, without giving basis of computation in the final Assessment Order. 7. The honourable DRP has made enhancement to the TP adjustment and therefore total income, without giving notice of enhancement. Grounds related to computation of ALP Since computation of TP adjustment pursuant to DRP directions is not given in the final Assessment Order, the Appellant is raising all the following grounds: 8. The lower authorities have erred in:- a. rejecting the transfer pricing analysis undertaken by the Appellant on unjustifiable grounds; b. conducting a fresh transfer pricing analysis despite absence of any defects in the transfer pricing analysis submitted by th....
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.... management services with minimal application of knowledge and limited to nil analytical and technical skills. Associated enterprise receives sales data from the channel distributors of its customers who are based across the world. This data needs cleansing and formatting before it can be sent to the customers. The assessee undertakes the data processing activity, keeps a record of the data received and follows up with distributors. The cleansed data is then loaded to the customers' data warehouse by the end of the week. This process is repeated on a weekly basis. 4. In spite of the parent company having incurred operating losses, the assessee has consistently declared income on the basis of cost plus margin. During the year under consideration, a return of income was filed by the assessee on 30.11.2011 declaring loss of Rs. 32,36,750/- under normal computation and Rs. 1.05.60.849/- as book-profits u/s 11 5J of the Act. The assessee, under the normal computation claimed deduction of Rs. 1,52,31,416/- under section 10A of the Act. Tax under MAT provisions being higher was paid. 5. The return was processed under section 143(1) of the Act. The return of income was selected f....
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....s length price, the transactions in respect of data processing services provided to the AE were considered to be at arm's length. 9. The assessee has selected the following comparable in its TP study: 1. Acropetal Technologies Ltd., 2. Cosmic Global Ltd. 3. Infosys BPO Ltd., 4. Ultramarine & Pigments Ltd., 10. A reference was made u/s 92CA of the Act to the TPO and the TPO vide notice dated 19/2/2014 asked the assessee to submit the financial statements, tax audit report, TP documents mentioned in sec. 92D of the Act. Thereafter the TPO had given show cause notice on 24/11/2014 and vide this notice, the TPO asked the assessee to furnish his reply in respect of the comparable selected by the TPO. The TPO had also proposed three different TP analyses as BPO, KPO software services. The assessee filed the detailed reply on 5/12/2014 and has submitted various objections. The TPO finally passed the order rejecting one of the comparable selected by the assessee and thereafter selected total 10 companies including three companies selected by the assessee and thereafter has concluded the average net profit margin to the margin cost of 10 compara....
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....or the purpose of arriving at margins for comparison 11. Based on the net margin, the TPO has determined ITES services rendered at 283,099,037/- and accordingly determined TP adjustment for data processing services at Rs. 35,956,382/-. 12. Feeling aggrieved by the order passed by the TPO, the assessee filed the proceeding before the DRP. However, before the DRP, the assessee was not successful and the DRP has upheld the finding of the TPO. 13. Though various ground were raised before us, but during the course of argument, but the assessee has only restricted its prayer for the adjudication of the ground with respect to transfer pricing only. 14. Before us, no specific ground with respect to exclusion of any of the comparable has been placed. However, the ld AR has submitted that the assessee has no objection for retention / inclusion of Cosmic Global Ltd., e4e Healthcare Business Services Pvt. Ltd. and Jindal Intellicom Ltd..Further for the remaining seven comparables, the assessee has raised the objections and submitted arguments for exclusion of the said seven comparables. 15 Now we deal with the submissions of the assessee with respect to remaining seven companies....
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....alysis services) (with minimal application of knowledge and limited to nil analytical and technical skills) to its parent company (associated enterprises) in USA. In spite of the parent company having incurred operating losses, the assessee company has consistently declared income on cost plus margin." 19. As noted by us herein above, the coordinate bench in paragraph 15 has reproduced work profile of the company from the service agreement entered by the assessee with its AE. We noticed that in the entire paper book , functions performed by the assessee while discharging contractual obligation with assessee are not available and, therefore, in the absence of any document showing the kind of service being rendered by the assessee to its AE, it is difficult to compare the functions/profile of the assessee company with that of the profile of the M/s Swizz Re Shared Services India Pvt. Ltd., (Supra). In view thereof, we deem it appropriate to remand the matter with respect of Accentia Technologies Ltd. to the file of TPO/DRP for the purpose of comparing the profile of the assessee with that of the Accentia Technologies Ltd./ M/s Swizz Re Shared Services India Pvt. Ltd., (Supra). We ....
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....e quality and nature of the content of services. Rule 10B(2)(a) of the Income Tax Rules, 1962 mandates that the comparability of controlled and uncontrolled transactions be judged with reference to service/ product characteristics. This factor cannot be undermined by using a broad classification of ITeS which takes within its fold various types of services with completely different content and value. Thus, where the tested party is not a KPO service provider, an entity rendering KPO services cannot be considered as a comparable for the purposes of Transfer Pricing analysis. The perception that a BP0 service provider may have the ability to move up the value chain by offering KPO services cannot be a ground for assessing the transactions relating to services rendered by the BP0 service provider by benchmarking it with the transactions of KPO services providers. The object is to ascertain the ALP of the service rendered and not of a service (higher in value chain) that may possibly be rendered subsequently. 35. As pointed out by the Special Bench of the Tribunal in Maersk Global Centers (India) Pvt. Ltd. (supra), there may be cases where an entity may be rendering a mix of s....
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....oid of merit and is, therefore, rejected. ICRA Online Ltd. (seg) 23. The assessee has submitted that this company is functionally different since it is engaged in providing information services, software services and KPO services and the company has substantial RPT at 24.77%. The assessee has also drawn our attention to the orders passed by the coordinate bench in the case of 24/7 Customer.com Pvt. Ltd., in ITA No.227/Bang/2010 and Logica Pvt. Ltd., in IT(TP)A No.1129/Bang/2011. The assessee has also submitted that this company fails on export turnover filter of 75%. 24. On the other hand, if we look into the reply given by assessee in response to show cause notice, we notice that the basic objection of the assessee was ICRA Online Ltd. is providing information services and Technology Solution and caters to the financial service sector. It was also mentioned that outsourcing service segment is mainly engaged in providing KPO services and hence rejected in functional analysis. The outsourcing service segment was KPO activity in nature and it is not what the assessee is into. 25. On the other hand, the TPO controverted the said study and information at 24/7 Cutomer.com....