TaxTMI 
TaxTMI 
2019 (1) TMI 1689
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....of law : "Whether in the facts and circumstances of the case and in law the hon'ble Income-tax Appellate Tribunal was correct in excluding M/s. Accentia Technologies Limited, M/s. Coral Hub (previously known as Vishal Information Technologies) and M/s. Eclerx Services Ltd. used as comparables for determining the arm's length price in the case of the assessee-company when the assessee-company and comparable company are providing similar nature of services ?" 3. A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee was engaged in providing data collection, web services, information research and related support services to its associated enterprises. It filed its return of income on September 29, 2008 for the assessment year 2008-09 declaring income of Rs. 21,306. The said case was selected for scrutiny and notice under section 143(2) of the Act was issued. The Assessing Officer noticed that the assessee had entered into international transactions with its associated enterprises and, therefore, a reference was made to the Transfer Pricing Officer (in short "the TPO") to determine the arm's length price (ALP). Th....
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.... (iv) Rampgreen Solutions (P.) Ltd. v. CIT [2015] 377 ITR 533 (Delhi) ; (v) Pr. CIT v. B. C. Management Services P. Ltd. [2018] 403 ITR 45 (Delhi) ; [2018] 253 Taxman 138 (Delhi). 6. After hearing learned counsel for the parties, we do not find any merit in the appeals. 7. The issue in these appeals is whether the cases of (i) M/s. Accentia Technologies Limited, (ii) M/s. Coral Hub (previously known as Vishal Information Technologies) and (iii) M/s. Eclerx Services Ltd. can be taken as comparables for determining the arm's length price in the case of the assessee-company. 8. The assessee-company (CEB-India) was incorporated in India on March 4, 2004 as a wholly owned subsidiary of CEB US based in Washington-DC, USA. The assessee-company is engaged in providing data collection, web services, information research and related support services to its associated enterprise (AE). On reference to the Transfer Pricing Officer under section 92CA(1) of the Act for determination of arm's length price in respect of International Transaction entered into by the assessee during the financial year relevant to the assessment year in question, the Transfer Pricing Offic....
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....t acceptable as neither the Transfer Pricing Officer nor the taxpayer considered functional lines within the information technology enabled services (ITES). Thus, the company was considered as a comparable as the Transfer Pricing Officer as well as the taxpayer did not go into horizontals or functional lines within the information technology enabled services industry. The company was issued notice under section 133(6) to clarify the nature of expenses under the head "Data entry and vendor payments" and also to clarify whether these payments were made to third parties or made to persons engaged in the premises of the company. It was noticed that as per the reply, the data conversion services rendered by the taxpayer involves 9-10 steps of this process, stages 1 to 5 were performed by manpower vendors' personnel in the office premises of the company and stages 6 to 9 were performed by the employees of the company. The expenses incurred for vendors' personnel were debited to data entry charges, vendor payment etc. Thus, the expenses under the head "Data entry and vendor payments" were towards personnel of vendors' working from the premises of the company. The findings read....
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.... after elaborately analysing the record and appreciating the factual matrix excluded the said company from the set of comparables by observing that the company is engaged in different verticals and work through outsourcing models, thus, being functionally different, cannot be considered as comparable to the assessee-company. The relevant conclusion in this regard is as under : "8.10. In view of the above discussion and the finding of the Tri bunal (supra), we are of the opinion that M/s. Coral Hub is engaged in different verticals and work through outsourcing models, thus being functionally different, cannot be considered as comparable to the assessee-company and accordingly we direct to exclude the said company from the set of comparables." 13. Adverting to M/s. Eclerx Services Ltd. to be a comparable for determining the arm's length price, the Transfer Pricing Officer while passing the order under section 92CA of the Act had held that the taxpayer cannot take the plea that the data analytic services being provided by Eclerx was more value added and high end in nature than the routine outsources service functions being performed by the taxpayer. Under the head "Ver....
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....as unable to demonstrate that the order of the Tribunal suffers from any illegality or perversity as it had failed to consider or appreciate any relevant circumstance for excluding these three comparables, namely, M/s. Accentia Technologies Limited, M/s. Coral Hub (previously known as Vishal Information Technologies) and M/s. Eclerx Services Ltd. for determining the arm's length price. 16. In addition to the factual matrix noticed by the Tribunal for excluding these comparables, it was urged by the learned counsel for the assessee that various High Courts in respect of these very comparables in the same line of industry have already held them to be not valid comparables. Reference was made to the Bombay High Court judgment in Aptara Technologies (P.) Ltd's case (supra), wherein it was held that the Accentia Technologies Ltd. and Coral Hub Ltd. are not comparables. Further, this court in Mercer Consulting (India) Pvt. Ltd.'s case (supra) had held that Coral Hub Limited cannot be included in the list of comparables. This court had observed as under (page 628 of 390 ITR) : "The next question is whether Coral Hub Limited ought to be included in the list of compa....
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....14] 31 ITR (Trib) 1 (Mumbai) [SB], the Special Bench of the Tribunal had noted that eClerx is engaged in data analytics, data processing services, pricing analytics, bundling optimisation, content operation, sales and marketing sup port, product data management, revenue management. In addition, eClerx also offered financial services such as real-time capital mar kets, middle and back-office support, portfolio risk management ser vices and various critical data management services. Clearly, the aforesaid services are not comparable with the services rendered by the assessee. Further, the functions undertaken (i.e., the activities per formed) are also not comparable with the assessee. In our view, the Tribunal erred in holding that the functions performed by the asses see were broadly similar to that of eClerx or Vishal. The operating margin of eClerx, thus, could not be included to arrive at an arm's length price of controlled transactions, which were materially differ ent in its content and value. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted the same and had, thus, excluded eClerx as a comparable. It is further observed that th....