TaxTMI 
TaxTMI 
2019 (10) TMI 737
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....osys BPO Limited b. TCS e-Serve Ltd c. Accentia Technologies Ltd d. e4e Healthcare Services Pvt Ltd 2. The learned TPO and the Hon'ble DRP have grossly erred by considering BNR Udyog Ltd as comparable even though it fails the RPT criteria as applied by the learned TPO himself. 3. The learned TPO and the Hon'ble DRP have grossly erred by comparing the appellant with companies which have an entirely different functional and risk profile. The following comparables are sought to be rejected under this ground: a. Infosys BPO Limited (this also fails on upper limit of turnover filter) b. TCS E Serve Ltd (this also fails on upper limit of turnover filter) c. BNR Udyog Ltd (this also fails on RPT filter) The learned Assessing Officer has erred in initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act mechanically and without recording any adequate satisfaction for such 2. The assessee is a company. It is engaged in the business of Trading in fabric, support services, local sales, manufacturing and sale of garments and providing information technology enabled services (ITES) to its Associated Enterprises (AE). The only issue that needs to be ....
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....ined after the order of the DRP viz., Infosys BPO Ltd., TCS E-Service Ltd., and BNR Udyog Ltd. As far as Infosys BPO Ltd., is concerned, the learned Counsel for the assessee brought to our notice a decision of the ITAT, Bangalore Bench, in the case of Zyme Solutions Pvt. Ltd., Vs. ACIT in IT(TP)A No.1661/Bang/2016 dated 16.11.2018 and another order in the same case dated 28.06.2019. In the aforesaid order dated 28.06.2019, the Tribunal considered exclusion of Infosys BPO Limited in the case of assessee who is also engaged in rendering ITES such as the assessee. The Tribunal held that the aforesaid 2 companies should be excluded from the list of comparable companies as they were not functionally comparable with ITES. The following were the relevant observations of the Tribunal:- "5. We have heard the rival submissions on the comparability of Infosys BPO as a comparable company. The Delhi ITAT in the case of Baxter India Pvt. Ltd. Vs. ALIT ITA No.6158/Del/2016 for AY 2012-13 in the case of a company rendering ITES such as the Assessee, vide order dated 24.8.2017 Paragraph 23 held that Infosys BPO is not comparable with a company rendering ITES for the following reasons:- "23. In ....
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.... Udyog Ltd. In original order passed by the Tribunal this company was retained as a comparable company. In the M.P. filed by the Assessee it was pointed out that the chart filed at the time of hearing before the Tribunal, the assessee company sought to exclude this company on the ground that the turnover of this company was only 1.7 cores and it cannot be compared with turnover of assessee which was 30.6 crores. It was also submitted on behalf of the assessee that this company has related party transaction (RPT) over and above the threshold limit of 15% and is also functionally different. The assessee in this regard at the time of hearing placed reliance on the decision of ITAT Bangalore Bench in the case of Indegne Pvt. Ltd., Vs. ACDIT in IT(TP)A No.591/Bang2017 for asst. year 2012-13 order dated 2/8/2017 wherein at page 10 of this order in para 10.3.2 the Tribunal remanded the matter of comparability of this company with ITES company. Decision in the case of M/s e4e Business Solution India Pvt. Ltd., Vs. ITO in IT(TP)TP No.451/Bang/2017 was also filed in support of assessee's claim for remand on functional comparability. The Tribunal in the impugned order however in paragraph....
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....y was considered by this Tribunal in the case of Zyme Solutions Ltd., in its order dated 16.11.2018 as follows:- "11. TCS E Service Ltd.: This company was selected by the TPO and objected by the assessee for inclusion in the list of comparables on the ground that it is functionally different as it is engaged in the business of BPO, banking, finance, insurance domain. This contention was rejected by the TPO by holding that it is engaged in BPO, business of banking, finance, insurance domain, which are purely in the nature of ITES. Even the Hon'ble DRP confirmed the findings of the TPO. 11.1 Being aggrieved, the assessee is before us contending that this company is functionally different as it is engaged in diversified business activities of BPO such as banking, finance, insurance. Learned AR of the assessee has also drawn our attention to the Annual Report placed at pages 563 to 563 of the paper book and reliance in this regard was placed on the following decisions: Turnover Filter: i. McAfee Software (India) Pvt Ltd US-136-ITAT-2016(Bang)-TP] ii. Swiss Re Global Business Solutions India (P.) Ltd. FS-307-ITAT- 2017(Bang) Functionally different filter: i. XL Health ....