TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 1793
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....ces provided are in the field of data processing services pertaining to support to data management services with minimum application of knowledge and limited to nil analytical and technical skills. The return of income for the assessment year 2012-13 was filed on 28/11/2012 disclosing total income of Rs. 1,65,93,100/- under normal provisions. The said return of income was picked up for scrutiny assessment. During the course of scrutiny proceedings, the Assessing Officer (AO) noticed the appellant had international transaction of providing support to data analysis services to its AE of Rs. 30,36,02,320/-. Therefore, AO referred the matter to the Transfer Pricing Officer (TPO) for the purpose of bench marking the above international transaction u/s 92CA(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. 3. The appellant submitted transfer pricing study report classifying its activities as ITeS and software services segment and the appellant had adopted TNMM as the most appropriate method for the purpose of bench marking the above international transaction. The appellant also adopted operating profit to total cost as a profit level indicator. How....
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....out at 28.11%. The TPO computed ALP as under: IT ENABLED SERVICES Arm's Length Mean Margin on cost 28.11% Less: Working capital adjustment (as per Annex.C) -0.06% Adjusted margin 28.17% Operating Cost 28,23,33,670 Arm's Length Price (ALP) 36,18,67,065 128.17% of Operating Cost 30,36,02,320 Price Received 30,36,02,320 Shortfall being adjustment u/s 92CA 5,82,64,745 5% of price received 1,51,80,116 Since the shortfall is exceeding 5% of the International Transaction, adjustment is made Accordingly, TPO suggested upward transfer adjustment of Rs. 5,82,64,745/- u/s 92CA of the Act vide order dated 25/01/2016. 6. AO, after receipt of TPO order, had ....
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....ore us in the present appeal. It is contended before us that M/s.Universal Print Systems Ltd., cannot be selected as comparable as it is functionally different as it is engaged in rendering services in printing industry and also fails employee cost filter. Reliance in this regard was placed on the following decisions: i. M/s XL Health Corporation India Pvt. Ltd. V. ACIT IT(TP)A No. 231 1/Bang/2016 ii. CGI Information Systems and Management Consultants Private Ltd.-ITAT-2018(Bang)-TP iii. First Advantage Offshore Services Pvt. Ltd. v DCIT [IT(TP)A No. 1086/Bang/2011] 11.3 On the other hand, ld.CIT(DR) opposed its exclusion. The findings of the TPO are based on information contained in the Annual Report and the TPO had considered only relevant segmental details. 11.4 We heard rival submissions and perused the material on record. The issue of comparability of M/s.Universal Print Systems Ltd. with that of the assessee-company has been duly considered by TPO after referring to information contained in Annual Report. The relevant findings of the TPO had not been countenanced by learned AR of the assessee. However, the issue of comparability of M/s.Universal Print Systems Ltd. has....
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....employees cost incurred by the company must be more than 25% of its revenue. 48. The TPO at page-20 of his order has dealt with the above objections by observing as follows: (a) Pre-Press BPO unit provides back office support services. (b) This company has four major segments viz., Repro, Label Printing, Offset Printing and pre-press BPO. The employee cost of pre-press BPO was more than 25% of the revenue from pre-press BPO and therefore the employee cost filter is satisfied in the case of this company. (c) On the service revenue filter viz., the requirement that a comparable company must have revenue from rendering services of more than 75% of its total revenue, the TPO again held that the pre-press BPO segment's entire income is from services and therefore this objection is not to be accepted. 49. On objections by the Assessee before the DRP, the DRP confirmed the action of the TPO. One of the objection before the DRP was that this company did not figure in the list of companies engaged in ITES. On this objection the DRP held that though this company did not figure in the list of companies in ITES in the main search of capital line and prowess database but on a segm....
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....; (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction. (2) For the purposes of sub-rule (1), the comparability of an international transaction with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether die markets are wholesale ....
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....ed services performed by die pre-press BPO segment of this company and the break-up of the revenue from such allied services have been dealt with specifically by the TPO or DRP. Since the comparability of this company is being remanded to be TPO for consideration of adjustments as mentioned above, the objection with regard to functional comparability should also be looked into by the TPO in the remand proceedings on the basis of materials which he may gather u/s. 133(6) of the Act, The Assessee should be given opportunity of being heard by the TPO before the issue is decided by the TPO." Respectfully following the decision, we remand this comparable to the file of the TPO/AO for fresh adjudication on the above lines. 12. 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 ....
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....d to meet clients' needs. A detailed Business Continuity Plan has also been put in place to ensure the services are provided to the customers without any disruptions." Thus, this company is also stated to be a Knowledge Process Outsourcing and therefore for the reasons stated by us while dealing with this issue of comparability of the company Infosys BPO Ltd. shall equally hold good and therefore we direct the AO/TPO to exclude this company from the list of comparables." Since the appellant company is into low end BPO, it cannot be compared with KPO service provider. 12.4 Respectfully following the decision of the co-ordinate bench of Tribunal, we direct for exclusion of this company from the list of comparable. 13. BNR Udyog Ltd: This company was selected by the TPO and objected by the assessee on the ground that it fails to pass through RPT filter. Even before the Hon'ble DRP, the same contention was urged. Hon'ble DRP confirmed the finding of the TPO that segmental data pertaining to BPO concern was considered and there are no RPT transactions and hence, confirmed its inclusion. 13.1 Being aggrieved, the assessee is before us in the present appeal. The issue o....
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....es and also fails employee cost i.e. 13.24%. Even before the Hon'ble DRP, it was urged that the company has diminishing revenue in BPO segment including peculiar economic circumstances and also fails employee cost. However, Hon'ble DRP had confirmed the findings of the TPO by holding as under: "vi. Excel Infoways Ltd.: This company was objected to on the ground of failure in employee cost filter of 25%. The TPO has taken the segmental data of the company for ITES/BPO services segment. There is no dispute by the assessee as to the amount of Rs. 202.15 lakhs being employee cost for this segment. But the assessee claims that attributing the whole amount as employee cost elating to ITES segment is unreasonable. However, the TPO has obtained information from the company u/s 13396), which has been shared with the assessee, and has worked out employee cost at 26%. Though the assessee has challenged the reliability of information collected u/s 133(6), the same cannot be accepted and has been dealt with separately in this order. Hence, the objection of the assessee is rejected." 14.1 Being aggrieved, the assessee is before us in the present appeal. Even before us, learned AR of t....