AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 610
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....tion of the Transfer Pricing Officer (TPO) in making a Transfer Pricing (TP) adjustment of Rs. 98,28,555 and Rs. 3,54,249 in respect of provision of IT support and group audit services respectively provided to its Associated Enterprise. 2 On the facts and circumstances of the case, the AO erred in retaining the comparables Caliber Point Business Solutions Ltd - BPO segment and HCL Comnet Systems &Services Ltd -ITeS segment even though they ought to have been rejected on account of they having high related party transactions, as per the directions of the Dispute Resolution Panel ('DRP') 3 On the facts and circumstances of the case, the AO erred in retaining the comparables Mold-Tek Technologies Ltd and Eclerx Services Ltd. even though they ought to have been rejected on account of they earning supernormal profits, as per the directions of the DRP. 4 On the facts and circumstances of the case, the AO erred in not granting a working capital and risk adjustment to the Appellant to account for differences in the working capital and risk profile of the comparables vis-a-vis the Appellant. 5 On the facts and circumstances of the case, the Appell....
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.... services and IT support. The appellant has benchmarked this transaction using TNMM as the most appropriate method and operating profit to total cost as the appropriate profit level indicator. The appellant made a search on 'Prowess' and 'Capitaline' database and identified 14 comparables using data for financial year (FY) 2005-06, 2006-07 and 2007-08. However, the TPO made a fresh search and arrived at the following final list of comparables and margins using data for FY 2007-08 : S No. Name of the Comparable OP/TC 1. Accentia Technologies Ltd. (Seg.) 41.76% 2. Acropetal Technologies Ltd. (Seg.) 35.30% 3. Aditya Birla Minacs Worldwide Ltd. 2.20% 4. Asit C Mehta Financial Services Ltd. (Seg.) 9.42% 5. Caliber Point Business Solutions Ltd. 10.97% 6. Coral Hubs Ltd. (formerly Vishal Information Technologies Ltd.) 50.68% 7. Cosmic Global Ltd. 23.30% 8. Crossdomain Solutions Ltd. 26.96% 9. Datamatics Financial Services Ltd. (Seg.) 34.87% 10. e4e Healthcare Business Services Ltd. 16.72% 11. Eclerx Services Ltd. 65.88% 12. Genesys International Corporation Ltd. 47.40% 1....
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....ld. DR that this may be a mere classification issue regarding expenses leading to incorrect calculation of employee cost ratio and cannot be interpreted as different business model being adopted by the company. Referring to the 'Depreciation Schedule' it is stated that the company owns assets and thus it could not be said that it was outsourcing its business. In respect of Accentia Technologies Ltd., the ld. DR submits that extra ordinary events do not have any impact on margins earned by company and thus, it should not have been excluded on account of extraordinary events. 9. We have heard the rival submissions and perused the relevant materials on record. The reasons are recorded given below: We find that the DRP vide order dated 30.07.2012 have directed at para 12 (ii): "Mold tek has earned super normal profits of 96.66%. Such profit is not representative of the industry. Similar is the case with Eclerx with a reported margin of 65.88%. These two companies, we agree, should be eliminated from the final list to make the comparison realistic." We find merit in the above directions given by the DRP and direct the AO to eliminate Mold-Tek Technologies Ltd. and E....
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....PTC Software India Pvt. Ltd. which also excluded M/s. Coral Hub Ltd. (formerly known as 'Vishal Information Technologies Ltd.')Mr. Suresh Kumar the learned counsel for the Revenue very fairly states that being aggrieved by the above order an appeal was filed to this Court being Income Tax Appeal No. 732 of 2014 (CIT v. PTC Software). This appeal was dismissed upholding the finding of the fact of the Tribunal that M/s. Coral Hub (formerly known as 'Vishal Information Technologies Ltd.') was a company not only engaged in IT enabled services but also in providing agency services by way of outsourcing to third party vendors. In this case also, the impugned order of the Tribunal has come to a finding of the fact that the services rendered by the Respondent to its AE is different from the activities/services provided by M/s. Coral Hub Ltd. Therefore, they would not be comparable only on the ground that both of them broadly fall under the category ITES providers. (d) The finding reached by the Tribunal is one of finding of fact which is not shown to be perverse. Thus, there is no reason to interfere with the finding of fact recorded by the Tribunal." 9.2.1 Thus....
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....r amalgmation would have no impact on the profitability of M/s. Accentia Technologies Ltd. Therefore, it was urged to be an appropriate comparable as both are rendering ITES services. (c) We find that the impugned order of the Tribunal has after rendering a finding of fact that the activities of the tested party and comparable are functionally different, also records finding of fact that extraordinary events such as merger/amalgmation would have an impact/effect on the profitability of M/s. Accentia Technologies Ltd. Therefore, on both the above grounds, it was held to be not a comparable to the transaction of the Respondent with its AE. (d) In fact on the issue of merger/amalgmation the Tribunal holds that it affected the profitability of M/s. Accentia Technologies Ltd. Reliance for the above was placed on the decisions of its coordinate benches in Hyderabad and Bangalore, i.e., Capital IQ Information Systems (India) Private Ltd. v. DCIT (2013) 32 Taxmann.com 21 (Hyderabad) and Symphony Marketing Solutions India Pvt. Ltd. v. ITO (2013) 38 Taxmann.com 55 (Bangalore). The Revenue has not attempted to show either before the Tribunal or even before us that the merger....
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....to the Appellant, if eligible. 3 On the facts and circumstances of the case, the AO and DRP have erred in not granting the credit of taxes withheld of Rs. 58,103 which was claimed by the Appellant in its return of income. 4 On the facts and circumstances of the case and in law, the AO and DRP have erred in not allowing brought forward losses including depreciation as per its return of income. 5 On the facts and circumstances of the case and in law, the AO and DRP have erred in levying interest of Rs. 47,85,038 undersection 234B of the Act. 6 On the facts and circumstances of the case and in law the AO and DRP have erred in initiating penalty proceedings under section 271(1)(c) of the Act. 12. The additional ground filed by the assessee on 06.03.2019 are produced below: 7. On the facts and circumstances of the case, the AO / TPO/ DRP has erred in rejecting certain companies selected by the appellant as comparables in its transfer pricing documentation. 8. On the facts and circumstances of the case, the AO/TPO/DRP has erred in including certain companies as comparables which are functionally not comparable to the appellant. ....