TaxTMI 
TaxTMI 
2020 (12) TMI 766
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....this Tribunal vide Ground No.iv. Ld. AR further submitted that if this ground is decided in favour of the assessee by accepting to the order of the ld. DRP in respect of exclusion of Excel Infoways Ltd., the margins of the assessee would be at arm's length warranting no adjustment thereon. He has also filed a chart in this regard in e-mail before this Tribunal. Hence, with the consent of both the parties, we proceed to adjudicate the issue as to whether the ld. DRP was justified in excluding M/s. Excel Infoways Ltd., from the list of comparables in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. We find that assessee is engaged in providing Information Technology Enabled back office Services (ITES) such as post sales customer care services like technical support, information, queries, issues with new products, technical trouble shooting through e-mail and voice platforms to its associated enterprises. We find that assessee had benchmarked its international transactions using Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) to determine the Arm's Length Price (ALP....
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....umstances held that Excel Infoways Ltd is to be excluded from the list of comparables. The relevant operative portion of the said order is reproduced herein for the sake of convenience:- "3.1. At the time of hearing, both the parties before us mutually agreed and stated that if one of the comparables namely Excel Infoways Ltd., which has been directed to be excluded by the ld. DRP from the list of total comparables chosen by the ld. TPO is held in assessee's favour, then the adjudication of the other comparables would become academic in nature as the assessee would fall within +/-5% range. Accordingly, as decided by both the parties before us the bench decided to adjudicate the exclusion of comparable i.e. M/s. Excel Infoways Ltd., The margin of this comparable for the year under consideration was 243.69%. The crux of the arguments of the ld. AR with regard to the exclusion of this comparable are as under:- i) This comparable has got employee cost of 8.82% whereas the employee cost of assessee works out to 54.55%. Since the employee cost of the comparable is less than 25% of the total cost, the same is to be excluded from the list of comparables.....
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....lication Credit Inspection of underwriting & Funding Out Collections Inbound Sales Outbound Sales Exhibition Enquiries Inspections Trips After Sales Customer Support Third Party Collection Early Out Collection Primary Collection Secondary and Later Stage Collection Prelegal Collection Skip Tracing Financial Brief News Recording Transcripted in literature in TAT Q & A Sessions Excel Infoways is a leading company in providing collections & customer relations service to various clients since 2003. v) Based on this, the ld. AR argued that the aforesaid services are not IT services and hence, the same are not functionally comparable with that of the assessee. vi) The ld. AR argued that the ld. TPO himself has removed M/s. Excel Infoways Ltd., from the list of comparables as functionally not comparable in the A.Y.2010-11. vii) The said comparable has got fluctuating margins. 3.2. In response, the ld. DR argued that the said comparable having high em....
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....mpany. Reply of EIL: Kindly note that our revenue was from BPO/1TES enabled services only, did not have any other income. iii. Please provide detailed break-up of all the activities included under BPO/1TES of your company. Reply of E1L: Kindly note that we were providing Telecom fulfillment solution services as well as financial services to our clients. iv. Please provide the details whether your company is engaged in activities which require outsourcing. Reply of EIL: Kindly note we had our own employees, we were providing BPO/ITES enabled services to our clients outside India only." 4.2. We find that the ld. TPO in his final remarks in the remand report had stated that M/s. Excel Infoways Ltd. and the assessee company are engaged in the business of providing BPO/IT enabled services and hence are functionally comparable. The ld. TPO also remarked that M/s. Excel Infoways Ltd. has received Rs. 18,60,40,738/- and Rs. 23,09,11,000/- from BPO / IT enabled services for F.Ys 2008-09 and 2007-08 respectively. We find that these figures are nothing but the total revenue from operations of M/s. ....
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....on a bundled manner and 100% functional similarity with that of the assessee company cannot be expected for the purpose of comparability. We are not inclined to accept to these arguments of the ld. DR for the simple reason that business auxiliary services are completely different form IT enabled services. From the various services rendered by M/s. Excel Infoways Ltd. since 2003 onwards as detailed hereinabove, it could be safely concluded that the said company was also predominantly rendering financial services which had been categorized by them as IT enabled services, whereas in the assessee's case, it is rendering routine IT enabled services which are listed in paragraph 2.1 of our order hereinabove. 4.5. We also find lot of force in the argument made by the ld. AR wherein he submitted that in the transfer pricing assessment proceedings for A.Y.2010-11, the very same comparable i.e. M/s. Excel Infoways Ltd. was sought to be included by the ld. TPO as a valid comparable. The assessee had there pleaded it is not functionally comparable apart from other differences. The ld TPO after examining the various details and evidences submitted by the assessee for exclus....
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....vices -3.52% -3.85% -3.52% 5 Proximus Knowledge & Technology Services Pvt Ltd 28.80% 28.80% 6 Sparsh BPO Services Ltd 3.98% 3.98% 3.98% 7 Triton Corp Ltd -22.17% Additional comparables introduced by the TPO 8 AOK In House BPO Services Ltd 12.48% 12.48% 12.48% 9 AXA Business Services Pvt Ltd 14.40% 14.40% 14.40% 10 Accentia Technologies Ltd 43.44% 43.44% 11 Aditya Birla Minacs Worldwide 23.88% 23.88% 23.88% 12 Coral Hub (Vishal Information Technologies Ltd) 36.90% 36.93% 36.93% Crossdomain Solutions Ltd 29.40% 29.40% 14 Datamatics Financial Services Ltd 3.07% 3.07% ....
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....lowed." 3.3. For the sake of convenience, the chart submitted by the assessee before this Tribunal through e-mail is also enclosed herewith:- Sr. No. Name of Comparable Company ALP as per TP Order set of comparables ALP as per DRP Directions/Final AO Order set of comparables Scenario - If Department appeal is dismissed only on exclusion of Excel Infoways (Gr.no. iv) Remarks [1] [2] [3] [4] [5] [6] 1. Sparsh BPO Services Ltd. 3.98 3.98 3.98 Not in dispute 2. A O K In-House BPO Services Ltd. 12.48 12.48 12.48 ----do---- 3. A X A Business Services Pvt. Ltd. 14.40 14.40 14.40 ----do---- 4. Aditya Birla Minacs Worldwide Ltd. 23.88 23.88 23.88 ----do---- 5. Cameo Corporate Services Ltd. 14.42 14.42 14.42 ----do---- 6. Datamatics Financial Services Ltd. 3.07 3.07 3.07 ----do---- 7 . Firstsource Solutions Ltd. 6.58 6.58 6.58 ----do---- 8. Karvy Data Management Services Ltd. 4.97 4.97 4.97 ----do---- ....
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....s, healthcare, outbound sale: and marketing, knowledge management, etc. Hence, it is functionally not comparable to the Respondent. (Refer Pg. 176-177 & 204 of PR) * The profit margin of this company is 243.69% (abnormal profit). It has an emplovee cost of 8.82% as against Respondent: employee cost of 60.22%. * In view of the above, the company deserves to be excluded from the final set of companies as has been rightly held by the Ld. DR? on Pg. 12 of the DRP Directions. * In support of the above contentions, the Respondent wishes to rely upon the following decisions - i) M/s. Zenta Pvt. Ltd. (ITA NO. 1623/Mum/2014 &ors.) (Mum. Trib.) (AY 2009-10) (Para 3.1-4-9, internal Pgs. 5-16) [Pgs. 5-16 of case law compilation (CLC)] 2) Goldman Sachs Services (P.P Ltd. vs. ITO [2015](56 taxmann.com 130) (Mum. Trib.) (AY 2009-10) (Para 7, Pgs. 4-5) [Pgs. 32-33 of CLC] 3) DCIT vs. Willis processing Services (India) P. Ltd. [2014] (51 taxmann.com 459) (Mum. 2009-10) (Para g, Pgs. 4-5) [Pgs 37-38 of CLC] 4) Swiss Re-services India P. Ltd. [2018] 98 taxmann.com 180 (Mum. Trib.) (AY 2009-10) (Para 8 (e), Pgs. 5-8) [Pgs. 44-47 of CLC....