TaxTMI 
TaxTMI 
2018 (12) TMI 1664
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....g Officer referred the matter to the TPO u/s 92CA(3) of the IT Act, 1961 to determine the ALP of the international transaction carried out by it. 3. During the course of TP assessment proceedings, the TPO observed that the assessee is in the business of rendering medical transcription services and is a wholly owned subsidiary of Spryance Inc. The medical transcription work is outsourced to either independent service providers identified by Spryance Inc. or to independent Home Based Medical Transcriptionists (HMTs) identified by Spryance India as per guidelines laid down by Spryance Inc. He observed that during the impugned assessment year, the assessee company has undertaken quality check in relation to medical transcription work performed by independent suppliers and coordination and quality control activities in relation to the work outsourced to it by Spryance Inc. which Spryance India passes on to third party HMTs for execution as per guidelines laid down by Spryance Inc. He observed that the assessee during impugned assessment year has undertaken the following international transaction:- S.No. Description of transaction Method Value (in Rs.) 1. Medical Transcrip....
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....ing to exclude M/s Accentia Technologies Ltd. as a comparable ignoring the functional similarity of the comparable. The Medical transcription services forms the foremost segment and is an integral part of the entire gamut of services." "2. The Ld. CIT(A) has erred in law and on facts admitting the additional evidences in case of Accentia Technologies Ltd. regarding acquisition etc., without giving any opportunity to the TPO which is in violation of Rule 46A of the Income Tax Rule, 1962." 3. The Ld. CIT(A) has erred in law and on facts in directing to exclude M/s Cat Technologies Ltd. as a comparable ignoring the functional similarity of the comparable. The training and Medical Transcription Service was a major part of the income of Cat Technologies Ltd. in the A.Yrs. 2006-07, 2007-08 & 2008-09. "The appellant craves, leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of appeal." 8. The assessee has taken the following grounds in the CO filed by it:- 1. That on the facts and circumstances of the case and in law, the CIT(A) erred in partially upholding the order of the Assessing Officer ....
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...., alter, vary, omit, substitute or amend the above grounds of appeal at any time before or at the time of hearing of the appeal." 9. The assessee has also raised the following additional ground in the Cross Objection:- 1. That on the facts and circumstances of the case and in law, the CIT(A)/AO/TPO erred in not granting working comparability adjustment to the operating margins of the comparable companies to account for difference in working capital of Assessee vis-a-vis the comparable companies." 10. Referring to the decision of the Hon'ble Supreme Court in the case of NTPC Ltd. vs. CIT, 229 ITR 383 (SC) and CIT vs. Nelliappan (S), 66 ITR, 722 (SC), he submitted that the additional ground raised by the assessee in the CO should be admitted. After hearing both the sides, the additional ground raised by the assessee in the CO is admitted for adjudication. 11. So far as the appeal filed by the Revenue is concerned, the ld. DR strongly supported the order of the TPO. He submitted that ld.CIT(A), without properly appreciating the facts, has directed the Assessing Officer to exclude Accentia Technologies Ltd. and Cat Technologies Ltd. from the list of comparables. He submitt....
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.... & 36.1 of the order. (v) Orange Business Services India Solutions Pvt. Ltd. vs. DCIT, ITA No. 869/Del/2016 (Delhi-Trib.) for A.Y. 2011-12 at paras 4.1 & 4.3 of the order. (vi) NTT Data Global Delivery Services vs. ITO, ITA No.5339/Del/2011 (Delhi-Trib.) 13. So far as the Cat Technologies Ltd. is concerned, the ld. counsel for the assessee drew the attention of the Bench to the copy of the audited accounts, copy of which is placed at page 220-244 of the paper book. Referring to page 235 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to Schedule-9 i.e., 'Income from operations' and submitted that the assessee has derived income from three sources, namely, training income Rs. 12.14 lakhs, software development and consulting services Rs. 339.90 lakhs and medical transcription receipts Rs. 53.58 lakhs. Referring to clause (7) of the notes forming part of accounts placed at page 239 of the paper book, ld. counsel of the assessee drew the attention of the Bench to the following:- "7. SEGMENT REPORTING The Company's exclusive business is Medical Transcription, Training Software Development and Consulting Services as such this is the only ....
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....any with effect from April 1, 2006. 16. We, therefore, find merit in the submission of the ld. counsel for the assessee that due to non-availability of segmental information and extraordinary events occurred during the year, this company cannot be considered as comparable. The various decisions relied on by the ld. counsel for the assessee also supports his case. Under these circumstances, we do not find any infirmity in the order of the CIT(A) in directing to exclude this company from the list of comparables. Accordingly, the same is upheld. 17. So far as Cat Technologies Ltd. is concerned, here also we find from the annual report of this company that it has revenue from three sources, namely, medical transcription; software development and consultancy services; and training income. However, we find no segmental details are available. A perusal of the audited accounts shows that this company is having majority of its revenue from software development since, as against the total income from operations at Rs. 4,05,61,280/-, the revenue from software development and consulting services is Rs. 3,39,89,551/-, training income is only Rs. 12,14,225/- and medical transcription receipt....