TaxTMI 
TaxTMI 
2020 (11) TMI 869
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....e learned DRP) is made. 2. Assessee aggrieved with that order has preferred this appeal raising following grounds of appeal:- "1. The Learned Assessing Officer ('Ld. AC))/ Learned Transfer Pricing Officer ('Ld. TPO') (following the directions of the Hon'ble Dispute Resolution Panel ('Hon'ble DRP')) erred on facts and in law in enhancing the income of the Appellant by Rs. 7,52,07,938 without appreciating the factual positions/ submissions of the Appellant. 2. The Hon'ble DRP grossly erred on facts and in law in not following the specific directions of the Hon'ble Tribunal and in doing so exceeded its jurisdiction by giving the following directions; 2.1. Inclusion of Maple E-Solutions Ltd and Triton Corp Ltd - deviating from the directions of the Hon'ble Tribunal that companies whose directors were involved in fraud cannot be taken as comparable as their financials are not reliable; 2.2. Inclusion of Vishal Information Technologies Limited- deviating from the directions of the Hon'ble Tribunal that companies acting merely as intermediary having outsourced its activity cannot be taken as comparable; 2.3. Inclusion of Persistent Systems L....
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....g that current year (i.e. FY 2006-07) data for comparable companies should be used despite the fact that the same was not necessarily available to the Appellant at the time of preparing its TP documentation, and in doing so have grossly erred in; 4.5.1. interpreting the requirement of 'contemporaneous' data in the Rules to necessarily imply current/ single year (i.e. FY 2006-07) data; and 4.5.2. holding that at the time of creating/ maintaining the TP documentation, the Appellant could have procured current/ single year data (i.e. FY 2006-07 data) from sources other than the electronic databases, when in fact practically no such other sources were available in case of most companies; 4.6. collecting information of the companies by exercising power granted to him under section 133(6) of the Act that was not available to the Appellant in the public domain and relying on selective information for comparability purposes (and to the extent of completely ignoring reliable data available in public domain/ annual reports in numerous cases) and in doing so violating the fundamental principles of natural justice by relying on the information sourced under section 1....
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....nal comparables' set for benchmarking a low risk captive unit such as the Appellant (disregarding judicial pronouncements on the issue), thus demonstrating an intention to arrive at a pre-formulated opinion without complete and adequate application of mind with the single-minded intention of making an addition to the returned income of the Appellant; 4.10. including certain companies that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 4.11. resorting to arbitrary rejection of low-profit/ loss making companies based on erroneous and inconsistent reasons; 4.12. excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 4.13. ignoring the business/ commercial reality that since the Appellant (vis-a-vis both its ITES/ CSD services) is remunerated on an arm's length cost plus basis, i.e. it is compensated for all its operating costs plus a pre-agreed mark-up based on a benchmarking analysis, the Appellant undertakes minimal business risks as against comparable companies that are ....
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....method. The assessee aggregated both the transactions of software development services and IT enabled services. Assessee selected 18 comparables with an average profit margin at the rate of 13% on its cost and mark up on total cost to the taxpayer is arrived at 15% on cost and therefore it was stated in transfer pricing study report that the price charged by assessee is at arm's-length. 6. The learned transfer pricing officer agreed with the most appropriate method of the transactional net margin method however rejected the filter applied by the assessee. He also segregated the transactions of the software development services and IT enabled services. With respect to the IT enabled services he selected 26 comparable companies whose average Arithmetic mean of profit level indicator was 29.42% and after that he has granted working capital adjustment of 3.13% and therefore the adjusted Arithmetic mean of profit level indicator was 26.29%. He applied the above margin on the operating cost of Rs. 698,079,289 resulting into the arm's-length price of Rs. 881,604,314 whereas the price shown by the assessee was 80,60,91,154 and therefore proposed a shortfall/adjustment on account of ITeS....
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....nate bench on 29 June 2016. Consequently the final assessment order was passed by the learned assessing officer on 31st of August 2016 u/s 143 (3) read with Section 144C of the income tax act 1961 on 31st of August 2016 determining the total income of the assessee at Rs. 75,977,580/- against the returned income of the assessee of Rs. 7,69,004 642/-. 8. At the time of the hearing it was pointed out that there is a rectification order dated 2 June 2019 passed wherein the adjustment on account of information technology enabled services segment was revised to RS NIl. Therefore the assessee does not want to press upon the grounds related to that addition. Therefore the only addition remains is with respect to the software development services segment. Assessee objects to inclusion of Infosys technologies Ltd, Wipro Ltd, celestial labs Ltd, thirdware solutions Ltd and persistent Systems Ltd. 9. The learned authorised representative submitted a detailed chart along with the annual financial statements of the comparable companies and has raised several objections with respect to inclusion of the above comparable selected by the learned Transfer Pricing Officer and retained by the lea....