TaxTMI 
TaxTMI 
2019 (4) TMI 1898
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....chnology Enabled Services (TTeS')/ back office support services provided by the Appellant to its AEs are not at an arm's length. 1.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the international transactions relating to provision of ITeS/ back office support services by the Appellant to its AEs were at an arm's length and hence no adjustment in respect thereof was called for and the stand taken by the AO/DRP/ TPO in this regard is misconceived, erroneous and incorrect. 1.3 On the facts and in the circumstances of the case and in law the AO/ TPO/ DRP erred in disregarding the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Income Tax Act, 1961 ('the Act') read with Rule lOD of the Income-tax Rules, 1962 ('the Rules') and thereby rejecting the transfer pricing documentation maintained by the Appellant. 1.4 On the facts and in the circumstances of the case and in law the AO/ TPO/ DRP erred in considering companies which are dissimilar/ not comparable to the Appellant. 1.5 O....
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....ble companies as per TPO order: Sr No Comparables Margins 1 Accentia Technologies Ltd 29.18% 2 Acropetal Technologies Ltd (seg) 14.36% 3 e4e Healthcare business services Pvt Ltd 9.77% 4 Eclerx Services Limited 56.82% 5 ICRA Techno Analytics Limited 25.24% 6 Infosys BPO Ltd. 17.86% 7 Jindal Intellicom Ltd. 13.70% 8 Microland Ltd. (ITES Segment) 8.50% 9 TCS E-serve Limited 69.31% Average 27.19% (C) Updated single year margin with working capital adjustment of the comparable companies considered in the final assessment order : Sr No Comparables Margins 1 Accentia Technologies Ltd 25.79% 2 Acropetal Technologies Ltd (seq) 9.31% 3 e4e Healthcare business services Pvt Ltd 10.41% 4 Eclerx Services Limited 55.24% 5 ICRA Techno Analytics Limited 22.42% 6 Infosys BPO Ltd. 15.08% 7 Jindal Intellicom Ltd. 14.08% 8 Microland Ltd. (ITES Segment) 2.17% 9 TCS E-serve Limited 79.78% Average 26.03% 8. The bone of contention is the inclusion of comparable TCS E- Serve Limited. 9. When TPO include this comparable, the assessee objected to it on the following grounds: (i) presence of brand; (ii) super normal profits; & ....
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.... e-serve operations broadly comprise of transaction processing and technical services primarily to Citigroup entities globally, which cannot be compared to the functions performed by the assessee. b. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities which are clearly not comparable to the ITeS. However, segmental bifurcation ITA Nos. 6134/Del/2015, 5829/Del/2015 & 6572/Del/2016 between transaction processing and technical services is not available in the public domain. c. TCS E-Serve, being earlier entrants in the industry, has developed domain expertise, process excellence; ability to leverage technology etc., whereas, this is the first year of operation, of the assessee, hence cannot be compared to the TCS E-Serve. d. Presence of brand- TCS E-serve being a subsidiary of TATA Consultancy Services Limited and is a part of the eminent TATA Group, which inherently has an element of huge brand value associated with it, which tends to influence the pricing policy and thereby directly impacting the margins earned by the company. Huge payment has been made by TCS E-Serve to TATA C....
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.... Limited', which is one of the leading and giant company in the world and has an inherent element of very high brand value associated with it. Such a high brand value definitely has an impact on the pricing policy, niche market, contractual terms, etc. and thereby affecting the profit margins. Annual report of this company reflects that huge payments have been made by TCS E-Serve to 'TCS Limited' for the use of the brand as a "royalty". This fact itself shows the effect of brand value in the pricing mechanism. On a further analysis it is seen that the employee cost base is more than 64 times than the assessee and even the turnover is also more than 67 times as compared to the assessee. This only goes to suggest that assets employed by 'TCS E-Serve" alongwith huge intangibles in the form of brand value definitely has a huge effect in PLI and vitiates the comparability under FAR analysis with a company like assessee which is a captive service provider without much intangibles and risks. Another important thing which has been pointed out by learned counsel is that, the operation of 'TCS E-Serve' broadly comprise of transaction processing and technical services ....
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....ning [India] Ltd 70 Taxmnann.com 395. The relevant findings of the Tribunal read as under: "4. During the course of hearing Ld. Counsel also drew our attention on the additional ground wherein the assessee has contested the action of AO in increasing the books profits for the purpose of section 115JB by the amount of transfer pricing adjustment of Rs. 1,30,32.762/-, while computing the total income of the assessee under the normal provisions of the Act. 4.1 The additional ground being purely legal and not requiring any investigation of fresh facts, the same was admitted in view of the judgment of Hon'ble Supreme Court in the case of NTPC v. CIT j 19981 229 ITR 383. It is noted that section 115JB is self contained code. Only those adjustments are permissible to the book profit as have been prescribed u/s I 15JB. The adjustment/additions made under the transfer pricing regulations are governed by altogether different sets of provision as contained in Chapter X of the Act. There is no such provision under the law that permits the AO to make adjustment on account of transfer pricing addition to the amount of profit shown by the assessee in its profit and loss account, for the p....