TaxTMI 
TaxTMI 
2020 (2) TMI 930
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....ns of Chapter X of the Income-tax Act,1961 ('the Act') Functional Profile of the Appellant 2. On the facts and in circumstances of the case and in law, the learned AO / TPO erred and the Hon'ble DRP further erred in not appreciating that the Appellant is mainly a low- end back office support service provider, i.e. a low-end Business Process Outsourcing ('BPO') service provider thereby ignoring the findings of Hon'ble Income Tax Appellate Tribunal ('Tribunal') - Special Bench (I.T.A. No.7466/Mum/2012) in Appellant's own case. 3. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in not considering the observations of the Hon'ble Tribunal-Special Bench (I.T.A. No.7466/Mum/2012) in Appellant's own case wherein it had stated that the principal functions performed by the Appellant should be identified and the same should be compared with the principal functions performed by the comparable companies selected to find out the relatively equal degree of comparability in accordance with Rule 10B(3) of the Income-tax Rules, 1962 ('the Rules'). Incorrect selection of com....
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....erred in applying additional filter of rejecting companies with less than 75 percent earnings from exports, which is unwarranted in the comparability analysis. 8. On the facts and in the circumstances of the case and in law, the learned AO / TPO erred and the Hon'ble DRP further erred in not accepting the Appellant's filter of rejecting companies having turnover of less than INR 1 crore and applying additional lower turnover filter of 1/10th times of the Turnover of the Assessee and higher turnover filter of 10 times the turnover of the Assessee, which is unwarranted in the comparability analysis. 9. On the facts and in the circumstances of the case and in law, the learned AO /TPO erred and the Hon'ble DRP further erred in rejecting companies with losses / diminishing revenue, which is unwarranted in the comparability analysis. The learned AO / TPO erred and the Hon'ble DRP further erred in not following the principles laid down by the jurisdictional Mumbai Tribunal in Appellant's own case for AY 2009-10 (I.T.A. No. 2594/Mum/2014), wherein it is principally held that further investigation should be made to ascertain whether losses refl....
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....orted international transaction with its AE for providing IT-enabled services / date processing services and business processing outsourcing of Rs. 5210803840/-. Consequent upon reporting international transaction the assessing officer made a reference to transfer pricing officer (TPO) for computation of arms lengths Price of the said international transaction. The assessee selected Transaction Net Margin Method (TNMM) as most appropriate method to bench mark provision of IT enabled services/data processing/business processing services. The profit level indicator (PLI) selected was operating profit/ total cost (OP/TC). The assessee has shown its margin at 14.52%. The assessee selected itself as tested party. The assessee bench marked its ALP under Transaction Net Margin Method (TNMM),the assessee selected 12 company as comparable and computed the margin in the following manner: Sr.No. Name of the comparable company 1 Allsec Technologies Limited 2 Caliber Point Business Solutions Limited 3 Cameo Corporate Services Ltd. 4 Cosmic Global Limited 5 Datamatics Financial Services Limited 6 E4e Healthcare Business Services Private Ltd. 7 I....
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.... appeal before the Tribunal. 7. We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that he has very limited submission. The ld. AR submits that if Caliber Point Solutions Ltd. (Caliber Point) is included in final set of comparable and MPS Limited is excluded, the assessee's margin would be within tolerance range and that the assessee would not pressed any other grounds of appeal. The ld. AR further submits that Caliber Point is functionally comparable with assessee. This fact has been accepted by ld. DRP in its direction for A.Y. 2013-14 and 2012-13 as well as by Tribunal for A.Y. 2012-13. The ld. AR of the assessee furnished the copy of direction of DRP for A.Y. 2012-13 & 2013-14 and copy of decision of Tribunal in assessee's own case for A.Y. 2009-10, 2010-11 & 2012-13. The ld. AR further submits that the Hon'ble Bombay High Court in PTC Software (395 ITR 176 Bom.) held that a different year ending cannot be a mere rejection of comparable, which is otherwise functionally comparable. 8. For exclusion of M....
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....seen from the observations of the DRP, the fact that the company is otherwise functionally similar to the assessee has been accepted by the DRP. However, the DRP has upheld the rejection of the company on the ground of different accounting period on the reasoning that when substantial comparables having same accounting period as the assessee are available there is no need to consider a comparable having different accounting period. We do not find substance in the aforesaid reasoning of the DRP. As could be seen from the material on record as well as while considering similar issue arising in respect of comparability of R. System International Ltd., this company was treated as comparable to the assessee in assessment years 2009- 10, 2010-11 and 2011-12 by the Tribunal in the orders referred to above notwithstanding the fact that it has a different accounting period. That being the case, following the consistent view of the Tribunal, we direct the Assessing Officer to treat this company as a comparable." 11. Considering the decision of Co-ordinate bench, wherein no variation of fact for this year is brought to our notice, therefore, respectfully following the same, we dir....
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....providing publishing solution and data digitization. Providing variety of services including data coding, conversion, indexing, editorial services and software development. This comparable is in a different model of business and cannot be compared with assessee company. We have further noted that coordinate bench of Mumbai Tribunal in Emersion Electric Company Vs ACIT (ITA No. 531 & 6098/MUM/2018) DATED 14.06.2019, while examining the comparability of MPS Limited, with that assessee which provides IT services including database administration and help desk support to various members of the Emerson group, excluded this comparable holding as under; "9.1 Exclusion of MPS Limited We find from the annual report of MPS Ltd., for the year ending 31/03/2014, the said comparable provides end to end print and digital publishing solutions to its partners across the entire value chain from contained provision, enhancement and transformation to delivery and customer support, making it a trusted partner to the biggest publishers in the world. The Director's report under the heading "Management Discussion and Analysis" reflect that MPS Ltd., has developed end to end cloud ba....
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....five year history to become one of the most experienced and dominant players in the publishing services outsourcing space. " 9.2 We find that the ld. TPO however did not appreciate the contentions of the assessee and held that this comparable is functionally comparable with that of the assessee in ITeS segment. The ld. DRP on perusal of the annual report of the MPS observed that the said comparable operates in only one segment of providing publishing solutions and it does not sell any software based services to its customers. The ld. DRP further observed that software forms part of its intangible assets and it is more of a tool to offer ITeS to customers. 9.3 From the perusal of the annual report for the year ended 31/03/2014 of the said comparable, we find from page 707 of the paper book that the said comparable had incurred outsourcing cost of Rs. 1078.76 Crores which is included under the head "miscellaneous expenses" which goes to prove that it has got a different business model. From the various functions performed by MPS Ltd., we find that the said comparable is predominantly in the business of digital publishing which cannot be treated at par with ITeS whic....