TaxTMI 
TaxTMI 
2019 (1) TMI 1548
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....r as it is prejudicial to the Appellant. Transfer Pricing General 2. That on the facts and circumstances of the case and in law, the TPO/AO/DRP erred in confirming the transfer pricing adjustment of Rs. 1,97,72,254 on account of provision of Information Technology enabled Services (ITeS) by the Appellant to its associated enterprises (AE's). 3. That on the facts and circumstances of the case and in law, the TPO/AO/DRP erred in rejecting transfer pricing documentation maintained by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules 1952 ('Rules') and undertaking a fresh economic analysis during the course 0" assessment proceedings and thereby making an adjustment to the international transactions. Selection of un-comparable companies 45. That on the facts and the circumstances of the case and in law, the TPO/AO/DRP erred in considering the following companies as comparable a) Capgemini Business services (India) Limited and b) Hartron Communications Limited. 5. That ....
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.... Rejection of use of multiple year data 12. That on facts and circumstances of the case and in law, the AO/DRP erred in rejecting the use of multiple year data and using data for FY 2012-13 only. Working capital adjustment 13. That on the facts and circumstances of the case or in law, AO/DRP has erred in making negative working capital adjustment in the Appellant's case who is mainly a captive service provider, without taking into account the jurisdictional judicial precedents on the issue. 14. Without prejudice to above, the AO/TPO/DRP has erred in considering the incorrect numbers while calculating average receivables/payables of the comparable selected in the TP order while computing the working capital adjustment. Adjustment for risk differences 15. That on the facts and circumstances of the case and in law, the AO/DRP erred in disregarding the risk profile of the Appellant vis-a-vis alleged comparable companies selected by the TPO and not allowing risk adjustment as per the provisions of Rule 10B(1)(e) of the Rules.  ....
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.... assessee receives its compensation on cost plus 15% basis towards the services rendered as per the agreement entered with the AEs. He observed that the assessee has entered into the following international transactions: A.E Nature of transaction Amount (in Rs.) Harsco Group Corpn. USA Provision of IT enabled services 160901715 Reimbursement of expenses 581282 Receivables 29298909 Payables 651027 Harsco Metal Group Ltd, UK Provision of IT enabled services 126795426 Receivables 23361391 Harsco Infrastructure Services Ltd, UK Provision of IT enabled services 56315780 Receivables 9291542 Harsco Metals Lexequip, Luxumburg Provision of IT enabled services 4604995 Receivables 802838 Harsco Metal LTDA, Brazil Provision of IT enabled services 2320434 Receivables 170974 Harsco Metals South Africa PTY Ltd Provision of IT enabled services 2197198 Receivables 747974 Harso Infrastructure Services GmbH, Germany Payables 473775 AL Quebeieisi LLC, SA Payables 106476 6. The TPO also observed that the assessee has carried out the economic analysis and has....
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....fore, the decision taken in the case of Hyundai Motor India Engineering (P) Ltd would also apply to the assessee before us. The relevant portion of the Tribunal's order as regards comparability of Capgemini Business services (India) Limited and Hartron Communications Limited is as under: "8. Capgemini Business Services (India) Ltd. The learned Counsel for the assessee submitted that this company is functionally dissimilar as it is involved in BPO services, Cloud Business Information Management Services and other I.T related services as against the support services provided by the assessee which have been categorized as ITeS. On perusal of the Annual Reports of the said company at pages 863 and 865 of the Paper Book filed by the assessee, we find that the Company Capgemini Business Services (India) Ltd is not only to ITeS in Financing & Accounting but has also widened the scope of services in Supply Chain, Procurement, Technical Publication Services and has shown the intention to diversify the portfolios. We find that it is also providing services in relation to the operational control system and for compliance with the provisions of the Sarbanes Oxley Act....
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....ell as Website information of the said company to submit as above and pleaded that no segmental information is available. However, the DRP has summarily rejected the assessee's contention and has confirmed the assessment order. Since the facts mentioned by the assessee about Hartron Communications need to be verified, we deem it fit and proper to remit this issue to the file of the AO for verification of the assessee's contentions and if it is found to be in diversified activities and no segmental information is available, then we direct that this company cannot be taken as a comparable. Thus, grounds of appeal Nos. 3 to 5 are partly allowed for statistical purposes". 11. Respectfully following the same, we direct the AO to exclude these two companies from the final list of comparables. 12. As regards Grounds 8 to 10 seeking inclusion of certain companies is concerned, we find that in the case of Hyundai Motor India Engineering (P) Ltd, we have considered similar contentions of the assessee therein and at Paras 12 to 14 and 16 to 20, the Tribunal has held as under: "12. As regards Grounds 8 to 11 are concerned, it is for inclusion of certain companies ....
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....d as a comparable. Further, the TPO has not mentioned about the filter of operating revenue being more than 75%. Therefore, the DRP is clearly in error in considering the same. The TPO is directed to consider this company as a comparable after verifying the details furnished by the assessee. 18. As regards Jindal Intellicom Ltd is concerned, the TPO had rejected the same on the ground that it is not functionally comparable and the DRP has confirmed the same. The assessee has submitted that this company was taken as a comparable and accepted by the TPO in the assessee's own case for the A.Ys 2012- 13 and 2011-12. Upon considering the rival contentions, we deem it fit and proper to remit the issue of comparability of this company to the file of the TPO and if it is found that the said company was accepted to be a comparable company in the earlier A.Ys, then the AO/TPO shall consider the same as comparable for the relevant A.Y, unless there is a difference in the services rendered by both the companies in the relevant A.Ys before us. 19. As regards Crystal Voxx Ltd is concerned, the TPO has rejected this company on the ground that it did appear in the search anal....
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.... incident of a business operation which is carried everywhere in accounts to have true picture of profits of the relevant period. Having regard to statutory provisions, it cannot be said that provisions or writing back of liability is not part of operating profit or would not be taken into consideration for computing the same. We can therefore make a general observation that all business enterprises are making and writing back liabilities as a normal incident of operating business. Therefore on facts we do not see any justification for excluding provisions written back in the profit and loss account as not forming part of the operating profit of the taxpayer. Accordingly claim of the taxpayer is accepted. 107. The next item relates to balances written back. In our considered opinion, finding given in respect of provisions written back is equally applicable to balances written back more particularly when ld. CIT(A) has not given any separate finding and the Transfer Pricing Officer has said nothing specifically on this item. The balances written back should also be treated as part of operating profit. We direct accordingly." 42. We are of the view....
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....on record copies of orders of DRP. In that DRP considered the issue and directed the TPO as under : "14. Ground No.11 : Negative Working Capital adjustment - Making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks. On this issue, the assessee submitted as under : "The learned TPO determined the ALP for the international transactions with A.Es by making a negative working capital adjustment for the differences in working capital between the assessee and the companies considered as comparables. The assessee does not agree with the learned TPO as : * The company does not bear any working capital risk since it is been fully funded by it's A.E. from its inception and has no working capital contingencies. * The company has never taken any loans till date from the date of incorporation nor has incurred any expense for meeting the working capital requirement." We have gone through the submissions and the order of the TPO. The assessee pleaded that the DRP has acceded such a plea in some other case. On examination, we find that the DRP, Hyderabad in the case of Cordys....