TaxTMI 
TaxTMI 
2020 (8) TMI 129
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.... CIT(A) has erred in not accepting /veBPO Services Private Limited as a valid comparable to the Information Technology Enabled Services segment of the Appellant, even though the company passes all the quantitative filters applied by the Ld. TPO, and is functionally comparable to the Information Technology Enabled Services segment of the Appellant. 4. On the facts and in law, the Ld. TPO/AO has erred in selecting companies (viz. TCS E- Serve International Ltd., Infosys BPO Limited, Capgemini Business Services (India) Pvt. Ltd., Tech Mahindra Limited and Hartron Communications Limited), which are not comparable to the Information Technology Enabled Services segment of the Appellant, on account of various quantitative/ qualitative filters, acceptable to the Ld. TPO himself. Further, the Ld. CIT(A) has erred in not adjudicating on the action / approach of the Ld. TPO, w.r.t. selection of the aforesaid companies. 5. That the Ld. CIT(A) has erred in facts and in law, in confirming disallowance made by the Ld. AO amounting to INR 3,50,08,872/- incurred in relation to rebates / discounts paid to the holding company of the Appellant without appreciating the fact that these....
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....ed/receivable 4,80,31,644 6. The arm's length price of the international transactions representing software development provided to the Associated Enterprises (AE) is determined by applying transactional net margin method (TNMM), which is stated to be the most appropriate method in the facts and circumstances of the case. The operating profit to total cost (OP/TC) ratio is taken as the profit level indicator (PLI) in the TNMM analysis. The PLI of the company is arrived at 10% on cost whereas the average PLI of the comparables is arrived at 9.64% and hence, international transaction was taken to be at Arms Length Price [ALP. 7. During the course of transfer pricing assessment proceedings, the TPO questioned the selection matrix and pointed out that some of the filters used are inappropriate, as the economic analysis is inadequate and proposed his own filters, which are as under: i) companies whose date is not available for F.Y. 2012-13 are excluded; ii) companies whose software development service income is less than Rs. 1 crore are excluded; iii) companies whose revenue from services is less than 75% of the total operating revenues are exclud....
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....ine the arithmetical accuracy of computation of RPT and, if found correct, both these companies should be excluded from the final set of comparables. Otherwise, the Assessing Officer/TPO shall demonstrate how these two companies passed the RPT filter. 13. The next grievance in respect of TP adjustment relates to not accepting Ace BPO Services Pvt Ltd as a valid comparable to the ITES segment of the appellant. 14. Before us, the ld. counsel for the assessee vehemently stated that the TPO has rejected this company on the ground that it is functionally not comparable to the assessee company. It is the say of the ld. counsel for the assessee that this company is functionally comparable as it is engaged in rendering BPO services which is evident from the Annual Report of this company. The ld. counsel for the assessee further stated that the BPO services are akin to the ITES services rendered by the assessee. The ld. counsel for the assessee further stated that this company also passes all the filters applied by the TPO and, therefore, prayed for inclusion of this company. 15. The ld. counsel for the assessee drew our attention to the decision of the co-ordinate bench at Hyderab....
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....g company. 22. The underlying facts in issue are that during the year under consideration, the assessee provided testing services to various to various customers and raised invoices on such companies on which the assessee received service fee which is credited to the Profit and Loss Account of the assessee The assessee incurred an expenditure of Rs. 3,50,08,872/- towards rebate and discounts on sale of services rendered to various parties. Complete details of discount paid to its AEs vis a vis sales of services to various customers alongwith percentage of discount offered during the year were furnished. The Assessing Officer asked the assessee to justify the payment in light of fact that there was no nexus between the customer and holding company and, therefore, expenses so made are not allowable. The assessee filed detailed submissions vide letter dated 19.12.2016 which has been extracted by the Assessing Officer from pages 3 to 10 of assessment order. 23. After perusing the submissions of the assessee, the Assessing Officer was of the opinion that the assessee has not been in a position to justify the payment of discount to the holding company in place of repayment of the s....
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.... overseas entities have entered into a Memorandum of Understanding ('MOU') with the appellant company which provides that the appellant is required to render testing and inspection services to various affiliates / suppliers / agents of the overseas vendors in India. These MOUs are placed in the paper book. 29. We find that as per the agreement/MOUs, BV overseas entities entered into MSA with overseas customers for provision of testing and inspection services. Simultaneously, BV overseas entities enter into a MOU with the appellant, instructing them to provide testing and inspection services to the overseas customer /agents/ affiliates/ supplier. The assessee provides services as required, from time to time and BV overseas entities computes the global sale of services made to the overseas customers and accordingly computed the volume discount payable to them. Such discount percentage is allocated amongst the affiliates of BV overseas entities which also included the assessee company based upon their proportionate sales vis-à-vis global sale and such discounts are recovered from its affiliates which also included the assessee company and finally, rebate is passed up....