TaxTMI 
TaxTMI 
2019 (7) TMI 296
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Arm's Length Price under TNMM 2.2. The Learned AO/TPO based on the directions of DRP erred in adopting an inappropriate set of comparables for applying TNMM. 2.3. The Learned AO/TPO based on the directions of DRP erred in including four companies - Accentia Technologies Ltd, Universal Print Systems Ltd, BNR Udyog Ltd, and Excel Infoways Ltd. - as comparables for application of TNMM. 2.4. The Learned AO/TPO/DRP erred in not granting Working Capital Adjustment. 3. Plus/Minus 5% Tolerance Limit 3.1. The Learned AO/TPO erred in not allowing adjustment for the Plus/Minus 5 % Tolerance Limit. 4. Adding Transfer Pricing Adjustment to the Book Profit u/s 115JB 4.1. In computing the Total Income, the Learned AO has erred in adding Transfer Pricing Adjustment to the Book Profit u/s 115JB for purposes of MAT (This Ground is without prejudice to the grounds raised above.)." 2.1 The relevant facts are that the assessee being resident corporate assessee is stated to be engaged in the business of providing IT enabled services (ITeS) to Griffin Group entities in finance/accounts related services such as invoicing, refunds processing and other services such as ticketing, reservations....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... BNR Udyog Ltd. (Seg.)(Medical Transcription) 41.58 7. Excel Infoways Ltd. (Seg) (IT/BPO) 29.79 8. E4e Healthcare Services Pvt. Ltd. 19.85 Average PLI 22.63% 3. Although the assessee, inter-alia, contested the selection of comparable as made by Ld. TPO, the same could not find favor with Ld. DRP except the plea of the assessee to include an entity namely Acropetal Technologies Ltd. in the final list of comparable. The inclusion of this entity reduced the mean PLI to 21.33% which reduced the TP additions to Rs. 1.12 Crores in the final assessment order dated 27/01/2017. The income of the assessee was finally computed as Rs. 131.69 Lacs as against returned income of Rs. 19.17 Lacs filed by the assessee on 29/11/2012. The aforesaid TP adjustment was also added back while computing book profit u/s. 115JB. Aggrieved as aforesaid, the assessee is in further appeal before us. 4.1 The Ld. Authorized Representative for Assessee (AR), Shri Nilesh Patel, drew our attention to the functional profile of the assessee and submitted that the assessee was captive support service provider and bears minimal risk, do not deploy any intangible assets and employs ordinary non-p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could not be compared with services which are in the nature of medical transcription services, medical coding, medical billing etc. since these are services of specialized kind. This is further fortified by the fact that the assessee had engaged ordinary non-professional graduates. The Tribunal in the decision of Maersk Global Centers (India) Pvt. Ltd. V/s ACIT [ITA No. 1082/Mum/2015 order dated 29/07/2016] directed for exclusion of this entity for AY 2010-11 in case of assessee engaged in providing similar kind of ITeS services primarily on the ground that Ld. DRP for AY 2011-12 and Ld. TPO for AY 2012-13 rejected this entity on functional dissimilarity. Keeping in view the above factors, we direct for exclusion of this entity. (ii) Universal Print Solutions Ltd. The Ld. AR disputed the inclusion of this entity on similar ground of functional dissimilarity by drawing our attention to the fact that this entity was an integrated print solution provider and operates in the segment of Repro, Label Printing, Offset Printing and Pre-Press BPO. The Ld. TPO picked up the pre-press BPO segment for the purpose of comparison. In this segment, the entity provides services in the nature of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and other value-added services which could not be compared with assessee's low-end BPO support services. Another differentiating fact is that the ratio of employee cost of this entity is only 12.97% as against assessee's 59.20%. Further, the segmental results of the said entity would not be reliable as found in various decisions of the Tribunal. Upon careful consideration, we find that Delhi Tribunal in the case of Baxter India Pvt. Ltd. vs. ACIT [ITA No.6158/Del./2016 AY 2012-13 24/08/2017] has held that segmental results of this entity are not reliable and therefore, this entity is not suitable for comparison. Following the said decision, similar view has been expressed in BT e- Serv (India) (P) Ltd. vs. ITO [2019 101 taxmann.com 275 19/06/2018]. Respectfully following the same, we direct for exclusion of this entity. In the result, Ground No.2.2 & 2.3 stands allowed. 6. By way of Ground No. 2.4, the assessee seek working capital adjustment from PLI of comparable entity in terms of Rule 10B(3). The Ld. DRP has denied the same by observing that no working capital adjustment was made by the assessee in its TP study report and secondly, it was observed that fees for services i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t on account of transfer pricing addition to the amount of profit shown by the assessee in its profit and loss account, for the purpose of computing book profit u/s 115JB. The law in this regard is clear. Reference is made to the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs CIT 255 ITR 273. It is noted from the perusal of the assessment order that the AO has simply made addition by an amount of Rs. 1,30,72,762/- to the amount of net profit as per profit and loss account for the purpose of computation of income u/s 115JB without even mentioning that under what provisions this addition was being made. Such an approach is highly unfair and brings undue and avoidable hardship to the tax payers and we recommend that such a casual approach should be avoided by the revenue officers, as it may tarnish image of the income tax department, which may in turn discourage voluntarily compliance by the taxpayers. Thus, we delete the addition made by the AO. As a result, additional ground filed by the assessee is allowed. Similar is the decision of co-ordinate bench of Delhi Tribunal in Cash Edge (India) Pvt. Ltd. V/s ITO [supra], wherein the issue has been concluded in....