TaxTMI 
TaxTMI 
2017 (9) TMI 1800
X X X X Extracts X X X X
X X X X Extracts X X X X
....,99,38,623/- to the value of international transactions entered into by the Appellant with its associated enterprise ("AE") with respect to export of transaction processing services. 2. Erroneous selection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and circumstances of the case in confirming the following companies as the comparable companies: 2.1 Infosys BPO Ltd 2.2 Accentia Technologies Ltd 2.3 Jeevan Softech Ltd (Segmental) 3. Erroneous rejection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in rejecting Allsec Technologies Ltd. as the comparable company. 4. Erroneous calculation of the operating margins of certain comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred on the facts and in circumstances of the case in not complying with the binding directions of the Hon'ble DRP (para 3.3 to 3.6 on page nos. 5 and 6) in computing the operating margin of certain ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the case in not granting the benefit of +/- 5 percent as per proviso to section 92C(2) of the Act. 12. Disallowance of contribution to provident fund The learned DCIT erred in not granting a deduction for contribution to provident fund amounting to Rs. 3,668,560 paid during the year. 13. Non-granting of credit of Minimum Alternate Tax The learned DCIT has erred in not granting credit of Minimum Alternate Tax to the tune of Rs. 8,176,909 in accordance with the provisions of section 115JAA of the Act, without any reasons whatsoever. 14. Intimation of penalty proceedings The learned DCIT, erred on the facts and in law in proposing to initiate penalty proceedings section 271(1) (c) of the Act, without considering the facts of the case. 15. Levying of interest 15.1 The learned DCIT, has erred on the facts and in law by levying interest under sections 234B and 234C of the Act. 15.2 The Appellant pleads that the shortfall in advance tax and excess refund has resulted in view of the transfer pricing adjustment which have been objected in the ground above. 16. Each of the above grounds of appeal is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidered ERP segment revenue which was classified in the audited financial statement of the said concern. In respect of E-clerx Ltd., it was pointed out by the learned Authorized Representative for the assessee that the said concern was KPO company and was not functionally comparable to the assessee. The case of assessee before us was that once the above concerns are excluded from the list of comparables and the margins of Jeevan Scientific Technology Ltd. are correctly applied, then average mean of margins of comparables worked out to 19.22% and after applying the second proviso to section 92C(2) of the Act, the margins shown by the assessee would be within range of +/- 5% of operating revenue and no adjustment is warranted in the hands of assessee. By way of ground of appeal No. 5, the assessee has raised the issue of allowing working capital adjustment. In respect of grounds of appeal No. 6 to 10, the learned Authorized Representative for the assessee fairly admitted that the said issue would become academic in nature, since no adjustment is to be made in the hands of assessee. The issue in ground of appeal No. 11 raised by the assessee was claimed to be against the assessee. F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a subsidiary of Bank of New York Mellon Corporation, USA (the ultimate holding company). The assessee renders services in the areas of asset servicing, finance & accounts, private wealth management, cash management and investment and asset management solutions (collective as BPO services), exclusively to the Bank of New York Mellon, USA and the Bank of New York Mellon, SA/NV, Brussels. The assessee claimed that the services rendered to its associated enterprises were priced on cost plus basis. The assessee had used TNMM method in its transfer pricing report, as most appropriate method to benchmark international transactions relating to provision of BPO services. The operating profits earned by the comparables were computed on operating cost. The assessee had identified certain comparable companies on the basis of FAR analysis. The TPO applied modified filters and out of the concerns rejected by the assessee, made further selection and 11 concerns, which were found to be functionally comparable to the assessee. The said concerns are as under:- Sr. No. Name of company PLI (after working capital adjustment) 1 BNR Udyog Ltd (segmental)23.77% 2 Infosys BPO Ltd. 35.13% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oncern Infosys BPO Ltd. The assessee claimed that the said concern was not comparable because of its huge brand value and higher turnover. Further, during instant year, there was extraordinary event, wherein Infosys BPO Ltd. had acquired McCamish Systems LLC and hence, the margins of said concern could not be applied for benchmarking international transactions of the assessee. We find that different Benches of Tribunal relating to assessment year 2010-11 has held so. Following the same parity of reasoning, we hold that because of brand value and high turnover associated with Infosys BPO Ltd. and the extraordinary financial events during the year, Infosys BPO Ltd. is to be excluded from final list of comparables. Accordingly, we hold so and direct the Assessing Officer/TPO to exclude Infosys BPO Ltd. 12. The next concern against which the assessee has raised objections is Accentia Technologies Ltd. on the ground of extraordinary events during the year under consideration. The said concern had acquired IQ group of companies in the United Kingdom and there was amalgamation of Asscent Infoserve Pvt. Ltd. with the said concern and because of these extraordinary events, the margins of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... list of comparables. In particularly, it has been pointed out that for the very same assessment year, the Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions India Pvt. Ltd. v. ITO, (2013) 38 taxmann.com 55 (Bang.) has excluded the said concern from the list of comparables in a similar situation following the decision of the Hyderabad Bench of the Tribunal in the case of Capital IQ Information Systems (India) Private Limited v. DCIT, (2013) 32 taxmann.com 21 (Hyd.). 15. We have considered the submissions of the Ld. Representative for the assessee and also the stand of the Revenue as emerging from the order of the TPO. In our view, the ratio laid down by the Hyderabad Bench of the Tribunal in the case of Capital IQ Information Systems (India) Private Limited (supra) and by the Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions India Pvt. Ltd. (supra) is squarely applicable to the present case also. The aforesaid Benches of the Tribunal found that during the year under consideration there were extraordinary events that took place in the said concern which warranted exclusion of this company as a comparable. We therefore hold ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../income of Rs. 1,74,43,276/-. The margin of the said concern worked out to 8.04% as against 39.38% applied by the Assessing Officer in the order passed under section 154 of the Act. In this regard, the learned Authorized Representative for the assessee drew our attention to the segmental details of said concern which are placed at pages 838 to 846 of the Paper Book. With regard to working of the TPO, the learned Authorized Representative for the assessee referred to page 406 of the Paper Book. 27. The learned Departmental Representative for the Revenue fairly pointed out that the correction of margins is to be given in the hands of assessee while benchmarking its international transaction and by including Jeevan Softech Ltd. in the final list of comparables. 28. In the totality of the above said facts and circumstances of the case, we find merit in the claim of assessee and direct the Assessing Officer/TPO to work out the correct margins of said concern Jeevan Softech Ltd. and thereafter, determine the average margins of comparables. Accordingly, we direct the Assessing Officer/TPO to exclude three concerns i.e. (1) Accentia Technologies Ltd., (2) Cosmic Global Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty of reasoning, where Eclerx Services Ltd. is engaged in the business of KPO services, is not functionally comparable to the assessee. We further find that the High Court of Delhi in Rampgreen Solutions Pvt. Ltd. v. CIT (supra) has also noted the functionality of Eclerx Services Ltd. being of KPO services and the Hon'ble High Court of Delhi directed the same is to be excluded while benchmarking the international transactions of ITES provider. Following the same line of reasoning, we hold that Eclerx Services Ltd. is to be excluded from the final set of comparables." 35. Following the ratio laid down by the Hon'ble Delhi High Court in Rampgreen Solutions Pvt. Ltd. v. CIT (supra) as applied by Pune Bench of Tribunal in Cummins Turbo Technologies Ltd., UK v. DDIT (Int. Tax) (supra), we uphold the order of CIT (A) in excluding Eclerx Services Ltd. The grounds of appeal raised by the Revenue are thus, dismissed.' 19. Accordingly, we direct the Assessing Officer/TPO to re-work mean margins of said comparables by first excluding the margins of E-clerx Services Ltd., Infosys BPO Ltd. and Accentia Technologies Ltd. and reworking margins of Jeevan Softech Ltd. The le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eturn of income, the assessee disallowed the said sum of Rs. 36,68,560/- being provision for doubtful debts. In assessment year 2013-14, the appeal filed by the assessee against the said demand of PF was dismissed, against which the assessee had not filed any further appeal. Hence, the liability of Rs. 36,68,560/- was confirmed in the hands of assessee. In the said assessment year, the provision for doubtful advance was reversed. However, while filing the return of income, the assessee did not reduce the said amount while computing the income and offered to the tax during assessment year 2013-14. The assessee during the course of assessment proceedings filed a letter dated 20.09.2013 requesting the Assessing Officer to allow said claim of Rs. 38,68,560/- under section 43B(b) of the Act. The Assessing Officer did not adjudicate the same and issued draft assessment order. 26. The claim of assessee before us is that in view of decision of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders [2012] 349 ITR 336, wherein it has been held that the assessee is entitled to raise before appellate authorities any claim which was not claimed in the return of income and....