TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1439
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.... data creation, content development in relation to content search and analysis to the various business units within the group. It also assists in building and developing software tools and systems to facilitate delivery of group companies report and database subscription services and to provide data processing and automatic support to populate the group's subscription databases. The taxpayer is wholly owned subsidiary of Global Data Ltd., U.K. 2.1 During the relevant PY, as per the 3CEB report/TP document, the international transactions of the assessee reflected as under: A.E. Nature of transaction Amount (Rs.) Global Data Ltd. Provision of ITES 42,86,13,172 42,86,13,172 2.2 The taxpayer has carried out the economic analysis and has summarized it as under: Nature of international transaction Amount MAM PLI Margin of taxpayer Margin of comparables Provision of ITES 42,86,13,172 TNMM OP/ OC 16.4 14.27 2.3 The taxpayer has carried out the economic analysis for comparables at pages 21 to 26 of the TP documentation. The taxpayer has used Prowess and Capitaline Plus data base in search for comparable companies. After applying cert....
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.... Operation Cost (OC) 37,40,19,725 Adjusted Arm's Length Margin (%) (AALM) 26.70% Arm's Length Price = (100+AALM)*OC 47,38,82,992 Price Received (OR) 42,86,13,172 Adjustment u/s 92CA 4,52,69,820 2.10 Accordingly, the TPO who passed an order u/s 92CA(3) of the Act on 31/10/2013, recommended adjustment of Rs. 4,52,69,820/-. The same was incorporated by the AO in the draft assessment order. Assessee preferred a petition before the Dispute Resolution Panel (DR) raising various objections. 3. DRP has given partial relief to the assessee as under: 3.1 The DRP has eliminated the companies M/s Infosys BPO Ltd. and M/s TCS e-Service Ltd. as comparables, after considering the submissions of the assessee that these two companies should not be included in view of their brand value and high turnover as well as relying on the decision of the ITAT to exclude these companies. 3.2 Considering the above findings of DRP, the AO has reduced the adjustment u/s 92CA to Rs. 2,69,05,451/-. 4. Aggrieved with the above order, assessee is in appeal before us raising the following grounds of appeal: 1. That on the facts and circumstances of the case, the final assessment order ....
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....Analytics Limited; (iv) AOK In House SPO Services Ltd; (v) Cameo Corporate Services Ltd; (vi) Delta Services India Pvt. Ltd; (vii) Informed Technologies India Ltd; (viii) Optimus Global Services Ltd; (ix) Sparsh SPO Services Ltd; (x) In-House Production Ltd; and (xi) Timex Group India Ltd. Use of filters 8. That on the facts and circumstances of the case and in law, the AO IDRP erred in upholding the use of the following additional filters in undertaking the comparative analysis: (i) Related party transactions filter (should be restricted to 10% _ 15%); (ii) Export Sales filter; (iii) Different financial year-end filter; (iv) Persistent loss filter; (v) Diminishing revenue filter; and (vi) Companies having extreme profit margin. Rejection of use of multiple year data 9. That on the facts and circumstances of the case and in law, the AO IDRP erred in rejecting the use of multiple year data and using data for the FY 2009-10 only. Error in computation of Working capital Adjustment 10. That on the facts and circumstances of the case and in law, the AO ITPO erred in adopting incorrect SSI Prime Lending Rate at 10.25% instead of 1225% relevant to the FY 2009-10 ....
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.... of the assessee, the ld. AR submitted that the foreign exchange loss should be treated as non-operating in nature. Without prejudice to the above, he submitted that foreign exchange loss to the extent of reinstatement should be considered as non-operating in nature. The revised operating margin of the assessee, after excluding the foreign exchange losses, works out to be 15.09%. 7. Considered the submissions of both the counsels and perused the material facts on record. We observe that various decisions of this Bench as well as other benches of the Tribunal have treated the foreign exchange losses as operating in nature. Hence such items of expenditure or gain are to be considered as operational in nature in case of comparables also. We rely on the following decisions: 1. Indigra Exports (P) Ltd. Vs. DCIT [2016] 70 Taxmann.com 273 (Bang. Tribunal) 2. Kenexa Technologies (P) Ltd. Vs. DCIT [2014] 51 Taxmann.com 282 (Hyd. Trib.) 8. As regards Ground No. 5 pertaining to selection of uncomparable companies, the ld. AR submitted that the AO/DRP erred in accepting following as comparable companies as selected by the TPO: a) Accentia Technologies Ltd., b) E-clerx Services Ltd. c....
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.... on the profit margins of the said company and therefore, has to 22 be excluded from the list of comparables as rightly done by the DRP. Therefore, we do not see any reason to interfere with the order of the DRP on this company also. Accordingly, ground No.3 of the Revenue is dismissed." ii) The ld. DR on the other hand relied on the orders of revenue authorities. iii) Considered the submissions of both the parties and perused the relevant material on record. Following the said decision of the coordinate bench, we direct the AO/TPO to exclude the said company as comparable from the list of comparables. b) E-clerx Services Ltd. i) Objecting to the aforesaid company as comparable, the AR of the assessee submitted the said company is rejected by the coordinate bench of this Tribunal in assessee's own case for AY 2009-10 for functional dissimilarity, diverse portfolio and lack of segmental data. Also it has abnormal profits and extraordinary events and unreliable data. He submitted that the coordinate bench of this Tribunal rejected the said company in the case of Hyundai Motors India Engg. P. Ltd., (supra) wherein the coordinate bench has held as under: 17. Ld. D.R. has not been....
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....nced the financial results of this company. The Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P. Ltd., (2013) 219 Taxman 26 (Del.), held that huge turnover companies like Infosys and Wipro cannot be considered as comparable to smaller companies like assessee therein. In the case before the Hon'ble High 16 Court (supra), the turnover of the assessee was about Rs. 15.79 crores as against the turnover of Rs. 1016 crores of the Infosys. Considering these facts, the Hon'ble High Court had directed for exclusion of Infosys BPO because of its brand value and also on the grounds of functional dissimilarity and huge turnover. Though, the company before us is TCS e-Service Ltd., and not Infosys BPO, we find that the turnover of the assessee company for this assessment year is around Rs. 50 crores as against the turnover of TCS e-Serve Limited of Rs. 1405.10 crores. Therefore, following the turnover filter as well as taking note of the fact that it owns and possesses brand value and intangibles as compared to the assessee which does not own such assets, we direct that this company be excluded from the list of final comparables." ii) Ld. DR relied on the orders of ....