TaxTMI 
TaxTMI 
2019 (7) TMI 664
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....ord including the judicial pronouncements that were relied upon before us by the Counsels of both the sides. At the outset, we find that the ld. AR submitted that from the final set of comparables taken by the ld. TPO pursuant to the directions of the ld. DRP, if one of the comparables i.e. TCS E-serve ltd is excluded which is having high margin of 69.31%, then the assessee would be through as the arithmetic mean margin of the rest of the comparables would be well within +/-5% tolerance limit / Safe Harbour limit. Hence, with the consent of both the parties, we proceeded to adjudicate the issue of exclusion of comparable, TCS E-serve ltd. 3.1. It would be pertinent to understand the basic services rendered by the assessee herein. We find that the ld. TPO has observed in his order that assessee had during the year provided the routine back office support services such as account payable services, nostro reconciliation, trade finance back office, data processing, accounting controls, financial reporting, performance management, capital market and client management operations, reconciliation of IT applications, reconciliation and access right management. The ld TPO observed that th....
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....tionally comparable with that of the assessee and had not given any finding with regard to the assets employed and risks assumed by the said comparable. Obviously due to their presence of huge intangibles in the form of 'Tata Brand', among others for TCS E-serve ltd, the assets employed therein shall be significantly less compared to that of the assessee. It is not in dispute that assessee herein does not possess any intangible. Moreover because of 'Tata Brand', the risk that could be assumed by TCS E-serve ltd would be significantly less compared to that of the assessee. These are crucial factors which have been ignored by the ld. DRP and the ld. TPO despite raising specific objections before them. The significant differences pointed out by the assessee with regard to exclusion of these comparables are as under:- (a) Presence of intangible with TCS E-serve ltd - i.e. the said comparable belongs to Tata Group of companies and has significant 'Tata Brand' which would enable it to secure big business together with lesser risks. It also goes to prove that the said company possesses significant intangibles in the form of 'Brand' which assessee herein does not process, there....
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....ices Ltd :- We find force in the submission of the ld. AR that this company cannot be a comparable as the turnover of this company is 260.18 crores while in the case of the Assessee, the turnover is around Rs. 11 crores only. While making the selection of comparables, the turnover filter, in our opinion, has to be the basis for selection. A company having turnover of Rs. 11 crores cannot be compared with a company which is having turnover of Rs. 260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Asseessee. We, accordingly, direct the AO to exclude this company out of the comparables. (ii) Infosys BPO Ltd. :- In this case also we noted the turnover in respect of this Company is Rs. 649.56 crores while the turnover of the Asseessee company is around Rs. 11 crores which is much more than 65 times of the Assessee's turnover. We, therefore, do not find any illegality or infirmity in the order of CIT(A) in excluding this Company out of the comparables. Accordingly, we confirm the order of the CIT(A). (iii) Wipro Ltd. :- After hearing the rival submissions, we noted that the CIT(A) applying ....
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....TPO to verify the said workings given by the ld. AR and if the contention of the ld. AR is found to be correct, then no adjustment to ALP need to be made in respect of ITES segment of the assessee. Since, we directed the ld. TPO to exclude TCS E-serve ltd from the list of comparables, the adjudication of other comparables, both inclusion / exclusion become academic in nature and no opinion is rendered by us herein. Accordingly, the ground No.2 read with ground No.4 raised by the assessee are allowed for statistical purposes. 4. The ground No.3 raised by the assessee is with regard to the arm's length adjustment made in the sum of Rs. 11,76,40,805/- relating to international transaction of software support services (IT segment). 4.1. We have heard rival submissions and perused the materials available on record including the judicial pronouncements that were relied upon before us by the Counsels of both the sides. With the consent of both the parties, we proceeded to adjudicate the exclusion of Infosys Ltd., and Wipro Technologies Ltd., from the list of comparables as either one or both are excluded, the ld. AR stated that the assessee would be through and no adjustment to ALP ....
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....use of its giant size and having different pricing models. We also find that the said comparable activities comprise software related support services, primarily information technology, software solutions / maintenance and technology infrastructure support services. We also find that the said company provides services like data analytics, applications, business processes, cloud computing, consulting, digital, eco energy, information management, infrastructure services, Internet Of Things, product engineering, mobility, etc., These services go to prove that the said comparable is engaged into diversified activities for which segmental data is also not available hence, we hold that the said comparable deserves to be excluded due to functional dissimilarities as well as for the absence of segmental data. Accordingly, we direct the ld. TPO to exclude the same from the list of comparables. 4.4. Exclusion of Infosys Limited:- The turnover of this comparable is Rs. 25,385 Crores. From para 52 of the order of the ld. TPO it is found that assessee is engaged into routine software support services which are only the basic works which are not capable of creating any intangibles. We hold....
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....use property income at Rs. 9,99,600/- which in his opinion, is against the provisions of the Act. In support of this, the ld. AR placed reliance on the Co-ordinate Bench decision of this Tribunal in Piramal Enterprises Ltd., vs. Additional CIT reported in 97 taxmann.com 352 dated 30/07/2018. We agree with the argument of the ld. AR, but both the parties before us were not able to give us the workings specifically as to whether this sum was included in the final computation adopted by the ld. AO both in draft assessment proceedings as well as in the final proceedings. Hence, with the consent of both the parties, we hereby direct the ld. AO to verify whether this sum of Rs. 9,99,600/- representing house property income was at all considered by him in the draft assessment order. If it is so considered, then, the ld. AO is justified in considering the same in final assessment order pursuant to direction of the ld. DRP. If from verification, it is proved otherwise, then the said addition requires to be deleted. With these observations, the ground No.5 raised by the assessee is disposed off. 6. The ground No.6 & 7 are to be dealt together as it involves disallowance made u/s.40(a)(....