TaxTMI 
TaxTMI 
2016 (6) TMI 1358
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....d., M/s Eclerx Services Ltd., M/s Infosys BP0 Ltd., M/s Jindal Intellicom Pvt. Ltd., M/s Mold-tek Technologies Pvt. Ltd.. M/s Wipro Ltd. (seg) and M/s Allsec Technologies Pvt. Ltd. in ITES segment as comparables. 3. On the facts and in the circumstances of the case the learned CIT(A) has erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 4. On the facts and in the circumstances of the case the learned CIT(A) failed to appreciate that the different year ending, filter applied by the TPO is necessary to exclude companies which do not have the same or comparable financial cycle as the tested party. 5. On the facts and in the circumstances of the case the learned CIT(A) has erred in holding that M/s Accentia Technologies Ltd_ cannot be taken as comparable and rejecting the TPO's finding that there is no evidence on record to prove that events in the company had any bearing on the margins earned by the company. 6. On the facts and in the circumstances of the case the learned CIT(A) has erred in holding that M/s Genesys International Corporation Ltd. beim', funct....
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....lying on the same for comparability analysis. 4. The learned CIT(A) has erred, in law and facts by accepting certain comparables considered by the AO! TPO in the comparability analysis using unreasonable comparability criteria. 5. The learned CIT(A) has erred, in law and facts, by not making suitable adjustments to account for differences in the risk profile of the Respondent vis-à-vis the comparables. 6. The learned CIT(A) has erred, in law and facts by computing the arm's length price without giving benefit of +/- 5 percent under the proviso to section 92C of the Act. 7. The learned CIT(A) has erred, in law and facts in confirming interest of Rs. 226,506 computed by the AO u/s 234D of the Act and in not directing recomputation of such interest, which is consequential in nature." 4. Briefly, facts of the case are that the assessee is a company duly incorporated under the provisions of the Companies Act, 1956. The assessee-company is a wholly owned subsidiary of M/s.Novo Investments Pte.Ltd., Singapore, which, in turn, is a wholly owned subsidiary of M/s.Novo Nordisk A/S, Denmark. The assessee-company is engaged in (a) providing the....
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....passed u/s 92CA of the IT Act, 1961 computed the transfer pricing adjustment at Rs. 56,66,602/- in respect of ITeS segment. However, the TPO accepted the contention of the assessee-company that the transaction in respect of trading, marketing support services and reimbursement of expenses are at arm's length. The TPO accepted TNMM adopted by the assessee-company as well as cost + margin as a profit level indicator but rejected the transfer pricing study report. The TPO proceeded to identify a different set of comparable entities for the purpose of determining the ALP. While doing so, the ld. TPO had applied the following filters in ITeS segment: • Use of current year data only; • Turnover filter i.e. excluding companies having income from ITeS less than INR 1 crore. • foreign exchange earnings less than 75% of total revenue in respect of ITeS segment. Appling the above filters, the TPO had proposed the following additional comparables: Sl. No. Comparable 1. Accentia Technologies 2. Acropetal Technologies Ltd. 3. Caliber Point Business Solutions Ltd.(Business Process Outsourcing Segment) 4. Coral Hub Ltd. 5. ....
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....xtraordinary events like acquisition of new companies and merger taken place during the year under consideration. The company M/s.Genesys International Corporation Ltd., was held to be incomparable on account of functional dissimilarity, and abnormal growth in the revenue of the company. As regards M/s.Acropetal Technologies Ltd, M/s.Caliber Point Business Solutions Ltd., M/s.Cosmic Global Ltd., M/s.Crossdomain Solutions Pvt. Ltd. M/s.Datamatics Finaicial Services Ltd., and M/s.R Systems International Ltd., inclusion of these companies by the TPO in the list of comparables was upheld. 8.2 The ld.CIT(A) also denied the benefit of deduction under the proviso to sec.92C on the ground that the proviso to section 92C came into operation only from the assessment year 2009-10. 9. Being aggrieved by that part of the order of the ld.CIT(A), the revenue is in appeal and the assessee is also in cross objections aggrieved by that part of the order of the ld.CIT(A) 10. We shall first take up the revenue appeal. Before us, learned Departmental Representative argued that the ld.CIT(A) ought not to have applied the turnover filter and excluded the companies M/s.Aditya Birla Minacs Worldwi....
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....eS services. Respectfully following the decision of the co-ordinate benches, in the cases cited supra and also the Hon'ble Delhi High Court decision, we direct the AO/TPO to exclude this company from the list of comparables. 12.1 M/s.Eclerx Services Ltd., was held to be incomparable by on the ground of functional dissimilarity by the co-ordinate bench in the case of Symphony Marketing Solutions India Pvt. Ltd. vs. ITO [IT(TP)A.1316/Bang/2012 dated 14/08/2013] wherein it was held as follows: "20............It is the stand of the assessee that this company offers solutions that include data analytics, operations management, audits and reconciliation and therefore has to be classified as high end KPO. In support of the stand of the assessee, extracts from the annual report of this company have been pointed out. It has further been submitted that extra ordinary events and peculiar circumstances prevail in the case of the assessee in as much as this company acquired a UK based company which has significantly contributed to the increase in the customer and revenue base of the company. This Tribunal in the case of Capital IQ Information Systems India Pvt. Ltd. (supra) had an o....
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....osys BPO, being a subsidiary of Infosys, has an element of brand value associated with it. This is also clear from the presence of brand related expenses incurred by this company. Presence of a brand commands premium price and the customers would be willing to pay, for the services/products of the company. Infosys BPO is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. The presence of the aforesaid factors will take this company out of the list of comaparables. We therefore accept the contention of the assessee that this company cannot be regarded as a comparable. " Respectfully following the decision of the co-ordinate benches, in the cases cited supra we direct the AO/TPO to exclude this company from the list of comparables. 12.3 M/s.Wipro Ltd., was held to be incomparable by on the ground of functional dissimilarity by the co-ordinate bench in the case of Symphony Marketing Solutions India Pvt. Ltd. vs. ITO [IT(TP)A.1316/Bang/2012 dated 14/08/2013] wherein it was held as follows: 26. .........As far as this company is concerned, th....
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....e company. In this regard, the assessee has relied upon the order of the DRP for the assessment year 2008-09 in assessee's own case. It is seen that the DRP while considering similar objection placed by the assessee in the case of another company, viz. Mold Tek Technologies Ltd., in the proceedings relating to the assessment year 2008-09, has observed in the following manner- "17.5. In addition to the above, the Director's Report of the company for the FY 2007-08 revealed the merger and the demerger. A company known as Techmen Tools Pvt. Ltd. had amalgamated with Mold-tek Technologies Ltd. with effect form 1st October, 2006. There was a de-merger of Plastic Division of the company and the resulting company is known as Moldtek Plastics Limited. The de-merger from the Moldtek Technologies took place with effect from 1st April, 2007. The merger and the demerger needed the approval of the Hon'ble High Court of Andhra Pradesh and also the approval of the shareholders. The shareholders of the company gave approval for the merger and the de-merger on 25.01.2008 and the Hon'ble High Court of Andhra Pradesh had approved the merger and de-merger on 25th July, 2008. S....
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....of comparable companies chosen by the TPO. As far as this company is concerned, the stand of the assessee has been that this company is functionally not comparable and that it has a different employee skill set and that this company performs R&D services and also owns intangibles. This company is a geospatial services content provider specialising in land based technologies. From the notes to accounts of this company, it is seen that this company is engaged in providing geographical information services comprising of photogrammetry, remote sensing cartography, data conversion related computed based services and other related services. Further the business of this company requires skilled manpower and scientists, civil engineers, etc. The assessee is a routine ITES provider who does not require such highly skilled employees. Besides the above, this company also carries out R&D services and own intangibles. The aforesaid facts, in our view, will take this company out of the list of comparables. We may also point out that the objection of the assessee in this regard has been disregarded by the TPO by mere observation that it cannot be rejected on the basis that it is into different fu....
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....nnot be compared with each other and have to be excluded from the list of comparables." 23. It is thus clear from the aforesaid decision of the Tribunal that among the ITES companies there is a hierarchy in terms of skill required to provide services. It ranges from providing routine services where no skills and required and providing services where highly professionalized skills are required. Depending on the skills required to perform ITES the comparability has to be done. In view of the above, we are of the view that this company cannot be regarded as a comparable and deserves to be excluded from the list of comparables." Respectfully following the decision of the co-ordinate bench in the case supra, we uphold the action of the ld.CIT(A) in excluding this company from the list of comparables. Hence, the grounds of appeal raised by the revenue are dismissed. 16. Ground No.8 is general in nature and does not require adjudication. 17. In the result, the revenue appeal is partly allowed. 18. Now let us take up the cross objections by the assessee company. In the cross objections filed, the only objection pressed by the learned counsel for assessee is that the ld....