TaxTMI 
TaxTMI 
2020 (8) TMI 803
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the Return Of Income filed by the Appellant. 2. making a transfer pricing adjustment to the total income of the Appellant by holding that the international transactions entered into by the Appellant with its Associated Enterprises ('AEs') were not at arm's length; 3. erred by applying certain rejection criteria/ filters, in an arbitrary, subjective and erroneous manner for the purpose of selection of comparable companies; 4. erred in rejecting Caliber Point business Solutions Limited, Coral Hub Limited and R Systems International Limited as comparable companies on the ground that the companies follow a financial year other than April-March; 5. erred in including TCS e-Serve Ltd. Ltd being functionally not comparable in as much as the same is engaged in high end services by using specialized domain knowledge / Brand Value / Scale of Operation/ High Turnover whereas the Appellant company is engaged in providing low and back office support services of data processing; 6. erred in including Acropetal Technologies Limited and Accentia Technologies Ltd being functionally not comparable in as much as the Segmental results are not av....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epairs maintenance, communication, power & fuel charges, based on desk utilization ratio (AE: Non-AE 54:46). Further, the TPO allocated the same in ratio of employee cost (72.7:27.3) for AE to non-AE segment. Accordingly, additional indirect cost of Rs. 56,63,474/- was allocated to AE segment. Further, the TPO disregarded internal TNMM used by the assessee as the primary method to benchmark the international transaction and applied external TNMM. While applying external TNMM, the TPO rejected certain comparable companies and added certain companies. The final set of comparable companies considered by the TPO is as under : Sr. No. Comparable companies Single year margins (OP/OC) Reference 1. Informed Technologies India Limited 9.59% Appellant's comparables 2. Infosys BPO Limited 17.86% 3. Jindal Intellicom Private Limited 13.70% 4. Accentia Technologies Limited 29.18% TPO's comparables 5. Acropetal Technologies 23.95% 6. e-4e Healthcare Business Services Pvt. Ltd 9.77% 7. TCS e-serve Ltd. 69.31% Arithmetic mean 24.77% Based on the above, the TPO made an adjustment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lobal Services Pvt. Ltd. (TS-47-ITAT-2013(Mum)(TP) ITA No. 8499/Mum/2010 dated 28.02.2013, Ocwen Financial Solutions Pvt. Ltd. (TS- 350-ITAT-2018(PUN)-TP1 ITA No. 511/Pun/2016 and CO No. 01 and 14/Pun/2018 dated 14.05.2018 and XL Health Corporation India Pvt. Ltd. v. ACIT-TS-162-ITAT-2018(Bang)-TP-IT(TP)A No. 2311/Bang/2016 dated 09.02.2018. 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We discuss below the case laws relied on by both the sides. We begin with the decisions referred to by the Ld. counsel. In assessee's own case for AY 2010-11 (ITA No. 566/Mum/2015) the ITAT 'K' Bench Mumbai, keeping in mind the decision in PTC Software Pvt. Ltd (supra) has remitted the issue of comparability of this company to the AO/TPO for examining afresh in the light of the relevant judicial precedents. In Mckinsey Knowledge Centre India Pvt. Ltd. (supra), Hon'ble Delhi High Court held that : "The revenue submits that Fortune Infotech Ltd. was correctly rejected by TPO because the company had different financial year ending on December, 2006, whereas Assessee's financial year ended on March....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... months is without any basis. No such liberty is granted in terms of Rule 10B(4) of the Rules. (c) The findings of the Tribunal being on the basis of the unambiguous mandate of Rule 10B(4) of the Rules, question (iii) as proposed does not give rise to any substantial question of law. Thus, not entertained." Thus the Hon'ble Bombay High Court has held that data to be used for comparability analysis should be of the same financial year in which international transactions were entered into by tested party. In Principal Global Services Pvt. Ltd. (supra), the Hon'ble Bombay High Court has held that where data of comparable was for a financial year, that did not correspond to financial year of the assessee's transaction with AEs, said company was incomparable. In Tevapharma India (P.) Ltd. (supra), the Tribunal followed the decision in PTC Software (I) (P.) Ltd. (supra) that in view of provisions of Rule 10B(4) of IT Rules, the accounting period of comparable company should be same with that of the assessee-company. In Hapag Lloyd Global Services Pvt. Ltd. (supra), the Tribunal has held that it is mandatory for the purposes of comparing the data of an uncontrolled tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as rejected by the TPO as a comparable only for the reason that it has a financial year different from the assessee......... it is necessary now to examine whether the company can be included as a comparable. Undisputedly, the accounting year of this comparable is calendar year, whereas ,the accounting year of the assessee is financial year. Therefore, both are having different financial years. A reading of rule 10B(4) would suggest that data relating to relevant financial year of the assessee as well as comparable has to be considered for comparability analysis. Therefore, to that extent a company having a different financial year cannot be treated as comparable. From a reading of the decisions relied upon by the Id. authorised representative we have noted that ITAT Delhi Bench in some of the decisions have held that only for the reason that a comparable is having a different financial year it cannot be excluded if otherwise it is functionally similar to the assessee. However, subsequently it has come to our notice that the Hon'ble jurisdictional High Court in case of CIT vs. PTC Software Private limited, Income tax Appeal No. 732 of 2014 dated 26 September 2016 inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., which is a market leader, this would be the case of exceptional year of operations. Relying on the order of the Tribunal in the case of Goldman Sachs (India) Securities (P.) Ltd. v. ACIT (2017) 78 taxmann.com 142 (Mumbai-Trib.) and Capita India Pvt. Ltd. v. ACIT (ITA No. 356/Mum/2016) for the same assessment year i.e. AY 2011-12, the Ld. counsel submits that TCS e-Service cannot be considered a valid comparable in the instant case. 9. On the other hand, the Ld. DR submits that comparable cannot merely be rejected on applying turnover filter. In this regard, he relies on the order of the Ld. CIT(A). 10. We have heard the rival submissions and perused the relevant materials on record. We notice that in Goldman Sachs (India) Securities (P.) Ltd. (supra), the Tribunal observed that : "We have also considered the rival contention for exclusion of TCS e-service td. It is mainly involved in transaction processing and technology services. It carries on business of providing technology service such software testing, verification and validation. It also developed a software such as transport management software therefore functionally this company is dissimilar to the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l coding, receivable management, practice management consulting etc. Referring to the annual report of Accentia for AY 2010-11, it is stated by him that it is a diversified Knowledge Processing Outsourcing Company (KPO) and is also venturing into offering software as a service model in the healthcare outsourcing area. Relying on the order of the Tribunal in the case of Capital India Pvt. Ltd. (supra) and Maersk Global Services Centre (I) (P.) Ltd. (supra)for the same assessment year i.e. AY 2011-12, the Ld. counsel submits that Accentia be excluded. 12. On the other hand, the Ld. DR submits that as per the annual report of Acropetal Technologies Ltd. and Accentia Technologies Ltd., they are engaged in ITeS segment, which is a broad segment and which further cannot be classified into BPO and non-BPO. Thus relying on the order of the CIT(A), it is submitted by him that the above two companies are rightly included by the TPO/AO in the set of comparables. 13. We have heard the rival submissions and perused the relevant materials on record. For the immediate preceding assessment year i.e. AY 2010-11, the ITAT 'K' Bench Mumbai in assessee's own case in ITA No. 566/Mum/2015 vide ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the DRP and dismiss the appeal of the Revenue on this ground. Revenue fails on this ground. We order accordingly." Also in Capita India Pvt. Ltd. (supra) for AY 2011-12, the ITAT 'K' Bench, Mumbai vide order dated 19.09.2016 held in case of Accentia Technologies Ltd. the following : "From the perusal of the Annual report of this company, it is seen that it is mainly in to rendering of Knowledge processing, outsourcing (KPO) services in the field of Medical. Following services are being provided by this company:- • Medical Transcription • Discrete Medical Transcription • Medial Coding • Billing • Receivable • Practice Management Consultancy • Software as a Service (SaaS) The products developed by this company are mainly Instakare- EMR Software, which is into healthcare management systems for Doctors and web based application for the Doctors. Thus, this company is mainly into Medical Transcription and its revenue is from medical transcription, billing and collection and income from coding etc. This company has been found to be un-comparable from companies rendering ITE....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imit of Rs. 20,00,000/-. For this purchase, 'tax effect' means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of issues against which appeal is intended to be filed. Further, 'tax effect' shall be taxes including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty order, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. At para 13 of the said Circular, it has been mentioned that: "13. This Circular will apply to SLPs/appeals/cross objection/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above ....