TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 571
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.... the very outset, the ld. counsel for the assessee stated that an identical issue arose in assessee's own case in Assessment Year 2010-11 and the Tribunal decided the issue in favour of the assessee and against the revenue. A copy of the order of the Tribunal has been furnished on record. 4. Per contra, the ld. DR strongly supported the findings of the Assessing Officer/TPO and heavily relied upon the decision of the DRP. 5. We have given thoughtful consideration to the orders of the authorities below. We find force in the contentions of the ld. counsel for the assessee. A similar issue was considered by the co-ordinate bench ITA No. 7290/DEL/2018 for A.Y 2014-15 in favour of the assessee and against the Revenue. The relevant findings of the co-ordinate bench read as under: "19. In ground No. 4 to 4.6 of the appeal, the assessee has challenged transfer pricing adjustment in relation to notional interest on outstanding receivables of Rs. 3,81,58,172/-. 19.1 Before us, the Ld. counsel of the assessee submitted that assessee is a debt free entity and since it does not carry any interest cost on its funds, therefore, it is not necessarily required to charge an interest on delayed....
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....ent from M/s Bharti Hexacom Ltd based on accrual system of accounting regularly followed by the assessee and the said amount has been duly offered to tax in the return of income. As regards the difference of Rs. 10.79 crores, it was explained that M/s Bharti Hexacom Ltd had created excess provision and the same does not represent income of the assessee. 10. The Assessing Officer was not convinced and proposed the difference amounting to Rs. 1,07,76,96,802/- as income of the assessee. 11. The assessee raised objections before the DRP and the Panel directed the Assessing Officer as under: "In this case, hearing was held on 16.05.2019 before DRP-1 Panel. With regard to the addition on account of difference in receipts as per 26AS, the AR of the assessee has submitted his Statement contending that 'Bharti Hexacom' has created excess provision during the subject AY and the same does not represent income of the assessee for subject AY. I am directed by the DRP to direct you to verify transaction with 'Bharti Hexacom on similar lines as done in preceding AY and submit your report giving specific finding the submissions of the assessee [filed during the DRP hearing copy e....
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....urnished a reconciliation statement, which is as under: Particulars Amount (in INR) As per Form 16A/26AS (A) 177,358,800 Add: Invoice dated 16.04.2014 raised for the period of service 14.03.2014 to 13.04.2014 (Proportionate revenue booked for 13 days for FY 2014-15 and hence added back) (B) 2,277.3% Less: Excess provision booked by Bharti Hexacom (C) 110,255,683 Total (l))=(A)+(B)-( C) 69,380,572 Revenue offered by Avaya India in the financials/income tax return 69,380,572 Reconciliation of income offered to tax in the return of income vis-avis- amount appearing in the response submitted by Bharti Hexacom Limited Particulars Amount (in INR) As per Bharti Hexacom (A) 59,127,457 Add: Invoices issued by Avaya India in the subsequent year against the services rendered for FY 2014- 15 (Not accounted by Bharti Hexacom) (B) 13,406,434 Less: Reversal of proportionate revenue recognised by Avaya India in the preceding year i.e. FY 2012- 13 vide invoice dated 16.04.2014 as mentioned above ( C) 3,153,317 Total (D)=(A)+(B)-( C) 69,380,573 Revenue offered by Avaya India in the financials/lncome tax return 69,380,572 16. It is the say of the ld. counsel for....
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....sion in favour of the revenue. 27. We have given thoughtful consideration to the orders of the authorities below. We find force in the contention of the ld. counsel for the assessee. These two comparables were considered by the Tribunal in ITA No. 1904/DEL/2015 vide order dated 03.12.2018. The relevant findings of the coordinate bench read as under: "B. Eclerx limited: 6. The Ld. counsel referred to the Annual Report of the company and submitted that the company is engaged in providing data analytics, Data management and process solutions thus it is functionally dissimilar to the ITes segment of assessee. The Ld. counsel also submitted that during the year under consideration, the company has shown very high turnover and supernormal profits and the circumstances being exceptional, the company need to be excluded from the set of the comparables. The Ld. counsel further submitted that the Tribunal in the case of the assessee for assessment year 2008- 09 has directed to exclude the above company from final set of comparables on account of the functional dissimilarity. The Ld. counsel also submitted that the company has been found to be functionally dissimilar by the Hon'ble D....
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....rking an international transaction for determining an ALP. The methodology necessitates that the comparables must be similar in material aspects. The comparability must be judged on factors such as product/ service characteristics, functions undertaken, assets used, risks assumed. This is essential to ensure the efficacy of the exercise. There is sufficient flexibility available within the statutory framework to ensure a fair ALP. 37. Applying the aforesaid principles to the facts of the present case, it is once again clear that both Vishal and eClerx could not be taken as comparables for determining the ALP. Vishal and eClerx, both are into KPO Services. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted that eClerx is engaged in data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management, revenue management. In addition, eClerx also offered financial services such as real-time capital markets, middle and back-office support, portfolio risk management services and various critical data management services. Clearly, the aforesaid services ....
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....rvices (KPO) of E-clerx can be compared with the low-end BPO services of the assessee. Since the issue in dispute in the assessment year 2008-09, being identical to the present issue in same set of circumstances, respectfully following the finding of the Tribunal (supra), we direct the Ld. AO/TPO to exclude the above company from final set of the comparables. C. Infosys BPO Limited: 7. Before the Ld.TPO, the assessee requested to exclude the company in view of high turnover and profit and brand value of the Infosys. According to the assessee, the brand value has influenced the pricing policy of the company and directly impacted the margins earned by the company and thus, it cannot be compared with the assessee who is providing services to its Associated Enterprise. The Ld. TPO rejected the contention of the assessee and held that high turnover does not have any impact on the profitability. He also observed that brand value in a service industry, may derive its revenues but may not affect the probability because any brand comes with a ITA No.1904/Del/2015 cost i.e. high expenses are required to be incurred to build brand value. Before us the Ld. counsel of the assessee submitted....
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....of the circumstances that these entities had a high brand value and, therefore, were able to command greater profits; besides, they operated on economic upscale. This approach cannot be faulted having regard to the decision of this Court in Pr. Commissioner of Income Tax v. B.C. Management Services Pvt. Ltd. 2018 (89) Taxman.com 68 (Del), which reads as follows: "13. The exclusion of second comparable ICRA Techno Analytics Ltd. was on the basis that it had engaged itself in processing and providing software development and consultancy and engineering services/web development services. The reasons for execution were functional dissimilarities and that segmental data were unavailable. Again the findings of the ITAT are reasonable and based on record. The third comparable that the AO/TPO excluded is TCS E-serve. The ITAT observed that though there is a close functional similarity between that entity and the assessee, however, there is a close connection between TCS Eserve and TATA Consultancy Service Ltd. which was high brand value; that distinguished it and marked it out for exclusion. The ITAT recorded that the brand value associated with TCS Consultancy reflected impacted TCS E-s....