TaxTMI 
TaxTMI 
2019 (3) TMI 1815
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.... provider. During the year under consideration, the assessee received a sum of Rs. 2330.04 Lakhs from its Associated Enterprises (AE) for providing the said services. It was submitted that the assessee was raising invoice on its Associated Enterprise (AE) at cost+15% mark up. The assessee benchmarked his transactions under Transactional Net Margin Method (TNMM) by selecting 10 comparable companies. The average net margin of comparable companies was 8.24%. Accordingly, the assessee submitted that its international transactions were at arm's length. However, the Transfer Pricing Officer (TPO) selected three companies, whose OP/OC was 23.95%, while the assessee's margin was 15% only. Accordingly, the TPO made TP adjustment of Rs. 181.33 Lakhs. Ld. DRP upheld the order of TPO. 3. The assessee is aggrieved by the decision of tax authorities in including M/s. Excel Infoways Ltd., and excluding M/s R System International Ltd. 4. We shall first deal with the comparable company, M/s Excel Infoways Ltd. The contention of the assessee is that M/s. Excel Infoways Ltd., is engaged in the business of providing customer care services and handling clients business relations through voice based s....
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....of M/s. Ocwen Financial Solutions Private Limited Vs. ACIT in ITA No. 2669/PUN/2016, dt. 21-01-2019. For the sake of convenience, we extract below the relevant discussions made by the Pune Bench of the Tribunal in the above said case: "12. With regard to Excel Infoways Limited, we find that the Co-ordinate Bench of the Tribunal in the case of Emerson Climate Technologies (India) Pvt. Ltd. Vs. DCIT (supra.) has decided whether Excel Infoways Limited can be comparable company or not by observing as under: "18. We have heard rival contentions and perused the record. The limited issue which arises is against benchmarking of ALP of the international transactions on account of provisions of Oracle Support Services (JT-enables services) by assessee to its associated enterprise and for benchmarking of ALP of the international transactions to the said concern ie. Excel Infoways Ltd. which has been finally selected by the DRP, is to be excluded since it is showing fluctuating margins. It is further observed that the operating margin of the company had shown drastic fluctuations ranging from 247.74% in F.Y. 2008-09 to 2% in FY 2014-15. The assessee has pointed out the margins shown by the....
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....wherein the companies with losses/ diminishing revenue for the last three years upto and including the financial year 2010-11 were rejected as comparables. The department has excluded such companies with consistent losses/ diminishing revenue in an environment where Indian economy is growing at consistent rate. Having held so, the Assessing Officer included Excel Infoways Ltd. as a comparable without considering the fact that the said company does not pass the diminishing ITA No.6158/Del/2016 revenue filter. From the submissions of the assessee before the TPO (at page 232 of Volume -1 of the Paper Book) we find the details of the operating margin of the company from financial years 2009-10 to 201-15 are as under:- Particulars Financial Year 2009-10 (INR'000) 2010-11 (INR'000) 2011-12 (INR'000) 2012-13 (INR'000) 2013-14 (INR'000) 2014-15 (INR'000) Revenue 204,161.34 203,526. 39 76,096.9 5 76,098. 54 53, 792. 12 22,994. 38 Operating, cost 43986.99 50,751.2 4 55,991.5 7 47,539. 99 41,355. 78 22,895. 57 Operating Profit 160,174, 35 152,775. 14 23,105.3 8 28,558. 55 11,436. 34 98.81 OP/OC(%) 364.14% 301.30%....
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....4 is, thus, allowed". 7. We notice that M/s Excel Infoways Ltd was not considered as a comparable company for the reason that the profits of the company was declining and it was having super normal profits. The year-wise profit percentage would show that the same was consistently declining from 364.14% in FY 2009-10 to 0.43% in FY 2014-15. In view of the fluctuating profit, i.e., diminishing profit, the above said company was not taken as a comparable. Even though the Ld D.R contended that the decision in the case of Emerson Climate Technologies (India) Pvt. Ltd, which was followed by the Pune bench of Tribunal in the case of Ocwen Financial Solutions P Ltd (supra) was related to different assessment year and further the functions of M/s Emerson Climate Technologies (India) Pvt. Ltd. were different, yet we are of the view that the principle laid down in the above said case with regard to diminishing revenue and fluctuating profit can be adopted in the instant case. Further the Ld A.R has pointed out that there is difference in the functions performed between the assessee company and M/s Excel Infoways Ltd. In view of the above, we agree with the contentions of the assessee that M/....