TaxTMI 
TaxTMI 
2020 (9) TMI 1051
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....t is functionally different from the appellant on the facts of the case. c) The authorities below erred in treating ICRA Online Ltd. as a comparable company though it is functionally different from the appellant on the facts of the case. d) The authorities below erred in treating Jeevan Scientific Technology Ltd. as a comparable company on the facts of the case. e) The authorities below further erred in not giving effect to the directions of the DRP with regard to the discrepancies that existed in the figures adopted for computing the margin of the comparable M/s. Jeevan Scientific Technologies Ltd. and thus the comparable needs to been rejected even on this ground. f) The learned DRP erred in not considering the submissions made by the appellant with regard to functionality of the comparables which is sine qua non for passing the order and thus the order passed needs to be set aside on the facts and circumstances of the case. 8. a) The TPO, DRP and the Assessing Officer erred in not reducing the working capital adjustment of 1.47% from the final ALP margin though the TPO had specifically provided for the same as per TP order. b) Without prejudice, the Working Capital A....
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.... Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. (supra), the additional grounds are admitted for adjudication. 4. The brief facts are as follows : The assessee is an Indian company engaged in the business of rendering back office and related services including invoicing, collection, administration, support services includes customer services, ticketing, contract loading etc. to its Associated Enterprises (AEs) i.e. ;TRX Inc, USA, TRX Europe Limited and TRX Germany GmbH, Germany (herein referred to as AEs). The services rendered by the assessee to its AEs is predominantly related to travel and tourism industry. The assessee is also engaged in providing software maintenance support to TRX portfolio of software products and solutions which is essential an ITES. For the Assessment Year 2011-12, the Return of Income was filed on 30.09.2011, declaring total income of Rs. 28,81,107, after claiming deduction under Section 10A of the Income Tax Act, 1961 ('the Act') amounting to Rs. 2,94,52,337. As per the 92CE Report, the assessee has entered into international transactions with its AEs amounting to Rs. 20,71,82,109 (both software support services and busine....
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....herein the Return of Income, computation statement, audited financial statements, copies of service agreements entered into by the assessee with its AEs, annual report of comparable companies, etc. The learned Authorised Representative submitted that though M/s. Acropetal Technologies Limited (Seg.), M/s. Accentia Technologies Limited and M/s. Mindtree Limited (Seg.) were selected by the assessee in its TP Study, the same needs to be excluded from the list of comparables. It was stated that M/s. Mindtree Limited needs to be excluded as it fails the turnover filter of Rs. 1 to 200 Crores as well as 10 times multiple ratio. As regards M/s. Acropetal Technologies Limited (Seg.) and M/s. Accentia Technologies Limited, it was submitted that the above companies are functionally different. It was further contented that in the case of Acropetal Technologies Limited, segmental information is not available. As far as Infosys BPO Limited, Mindtree Limited and Jeevan Scientific Technology Limited are concerned, it was submitted that the Assessing Officer in its final assessment order had not complied with the directions of the DRP and has included the above companies in list of comparables. Fu....
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....ted does not pass the turnover filter of Rs. 1 to 200 Crores as well as 10 times multiple. The assessee did not have the benefit of these decisions at the time of TP Study. Therefore in the light of the order of Special Bench of Tribunal in the case of DCIT Vs. Quark Systems Pvt. Ltd. (supra), we are of the view that the assessee can retract from its TP Study and contend that comparables selected by it are to be excluded on account of functional dissimilarity or other valid reason. A similar view was held by the Bangalore Bench of the Tribunal in the case of Nvidia Graphics (P) Ltd. Vs. CIT (supra), the relevant finding of the Tribunal reads as follows : " 10. All the aforesaid companies were chosen by the assessee in its TP analysis as a comparable company. Even before the CIT(A), the assessee had not chosen to challenge the aforesaid companies being considered as a comparable company. However the Special Bench, ITAT, Chandigarh, in the case of DCIT Vs. Quarks Systems Pvt. Ltd., 42 DTR 414 (Chandigarh-SB) has held that there cannot be estoppel against law and that non-comparable companies even if selected by the assessee in TP study can be sought to be excluded by the assessee b....
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....ftware development and services, contract centre service and IT enabled services and the same are reported together as one segment. In the absence of segmental details made available, the company could not be treated as a comparable. The TPO, while choosing the company as a comparable, has selected its Engineering Design Segment ('EDS' for short) which is in the nature of high end IT enabled services which are in the nature of Knowledge Process outsourcing ("KPO"). The high end services provided by the company cannot be compared with the routine services provided by the Assessee. This Is a settled position and reliance can be placed on the decision of this Hon'ble Tribunal's in the case of Symphony Marketing Solutions India Pvt. Ltd.(ITA No. 1316/Bang/2012) where it was held that Acropetal cannot be considered as a comparable to assessees performing routine low end IT enabled services function. As far as exclusion of company Jeevan Scientific Technology Ltd., we find that this company was rejected by the DRP for the reason that it was engaged in diverse functions and the same were reported under one segment without segmental details regarding the same being made available. The DRP ....
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....tal income which activities are akin to software development activity while the assessee is a mere provider of IT enabled services. The company has invested huge sums in the development of EMR software. Segmental details of its various activities are unavailable. The company further owns significant intangibles. This Tribunal in the case of Swiss Re Shared India Pvt. Ltd. v. ACIT [TS-598-ITAT-2016(Bang)-TP at paras 9-20 on pages 7-21] where, in similar circumstances and for the same assessment year, this Hon'ble Tribunal directed the exclusion of this company from the list of comparables. Accentia Technologies Ltd. is, therefore, not comparable to the Assessee and was rightly rejected as a comparable. As far as iGate Global Solutions Ltd., is concerned, DRP rejected this company as comparable company for the reason that the details regarding its diverse functions are reported under one segment without segmental details regarding the same being made available. Therefore, the comparability of the company cannot be determined. It is seen that iGate is engaged in provision of varied services and no segmental breakup of the same is available in its Annual Report. Further, the company'....