TaxTMI 
TaxTMI 
2019 (9) TMI 1486
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....is Holding Co. Ltd. British Virgin Islands which is a wholly subsidiary of Acusis LLC, USA and the company registered as a private company engaged in medical transcription services to Acusis LLC and is remunerated on cost + 15% mark up. The assessee filed Return of Income for the Assessment Year 2011-12 with income at NIL after claiming deduction under Section 10A of the Act of Rs. 88,25,084. Subsequently, the case was selected for scrutiny and a Notice under Section 143(2) and 142(1) were issued. The Assessing Officer on perusal of the financial statements found that the assessee has claimed deduction under Section 10A whereas the Assessing Officer found that the claim is excessive and restricted the claim of Rs. 3,81,78,684. Since the assessee company has international transactions, the matter was referred to the Transfer Pricing Officer (TPO) with prior approval of the Commissioner of Income Tax and the TPO dealt on the financial profile of the assessee with operating profit on operating cost at para 3 as under : Operating Revenues 25,93,15,082/- Operating Expenses 22,23,59,708/- Operating (Profit) / Loss 3,69,55,374/- Op. Profit on cost % 16.61% The a....
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....he rival contentions and perused the material on record. On the first disputed issue on the exclusion of two comparables, the learned Authorised Representative filed chart. We find - (i) Accentia Technologies Ltd. turn over is Rs. 106.90 Crores and the functioning of the company is engaged in packaging its services into software productions that are developed in-house with no bifurcations. The company also invested in the development of EMR Software and SaaS Model, and marketed inUSA retaining of the workforce across all its delivery centres. The company in the previous year expansion by acquiring stake in Strategic Tangent Corporation and Alpine Technologies Inc having expertise in software development and Remodel Business Plan with the adoption of EMR based clinical practice and has opened up avenues for an integrated end-to-end SaaS model and also involved in product development of a wide range like Insta Kare, Insta PMS, Insta EMR, etc further software with host of other BPO services provides a competitive edge solely on medical transcription services and Segment Information of the company is reported only on one segment namely "Healthcare receivable Management", but w....
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....ding accessible practice management system, providing EMR systems including EMR coding, billing, bill payment management system, adhoc reporting etc., As per the Ld.AR, said company catered to the health care industry and their products were customised and not similar to what assessee was doing. As per the Ld. AR the work done by Accentia Technologies Ltd, required skilled knowledge and advanced analytics. Ld. AR submitted that during the relevant previous year, the said company had invested in another company which had an expertise in EMR Software and Saas. In any case, as per the Ld. AR, segmental results of Accentia was not available in between various segments like MT billing collection and coding. When segmental results were not available, as per the Ld. AR it was not proper to consider Accentia Technologies Ltd, as a good comparable. Reliance was also placed on decision of Delhi Bench of the Tribunal in the case of Equant Solutions India P. Ltd v. DCIT [ITA.1202/Del/2015, dt.21.01.2016] and that of coordinate bench in the case of Amba Research (India) P. Ltd, v. DCIT [IT(TP)A.286/Bang/2015, dt.09.03.2016]. As per the Ld. AR though the above decisions were for A. Y. 2010-11, A....
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....ted end to end software services and remodelling its own business is clear from page 25 of its annual report which is reproduced hereunder : 13. Type of work done by the said company has been explained in detail at pages 24 and 25 of annual report. This is reproduced hereunder : 17. Thus the functions which were done by Accentia Technologies Ltd, and the functions which were rendered by the assessee were entirely different. We cannot say that the type of services done by the assessee was of a level as sophisticated as the one which was being provided by Accentia Technologies Ltd. In the case of Rampgreen Solutions P. Ltd (supra), Hon'ble Delhi High Court mentioned as under at para 31 of its order, which reads as under : 31. In the present case, the Tribunal noted that Vishal and eClerx were both engaged in rendering ITeS. The Tribunal held that, "once a service falls under the category of ITeS, then there is no sub-classification of segment". Thus, according to the Tribunal, no differentiation could be made between the entities rendering ITeS. We find it difficult to accept this view as it is contrary to the ftc1amentat rationale of determining ALP by....
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...., 2. Infosys BPO Ltd. The comparability of these company with a ITES company was considered by this Tribunal in the case of Paraxel International (India) Pvt. Ltd. (supra) and the Tribunal held as follows on the comparability of the aforesaid companies with a company providing ITES in the following manner:- "10. In grounds No.4 to 6, the assessee has challenged the comparables selected by the TPO for the purpose of TP analysis and as submitted by the learned counsel or the assessee, the assessee is objecting to the selection of only the following five comparables, out of the twelve companies selected as comparables - Sl. No. Company Name 1. Accentia Technologies Limited Technology 2. Cosmic Global Ltd. 3. Eclerx Services Ltd. 4. Genesys International Ltd. 5. Infosys B P O Ltd. 11. We have heard the arguments of both the sides on the issue of inclusion/exclusion of the above five companies as comparables and also perused the relevant material on record including the various decisions of the coordinate benches of the Tribunal cited by the learned counsel for the assessee. Accentia Technologies Limited 12. As rega....
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....arned Departmental Representative has sought to contend that the acquisition of a company by M/s. Accentia Technologies Ltd. took place at the fag end of the year under consideration, the learned counsel for the assessee has pointed out that the process of acquisition had started on 15.5.2008 itself, i.e. in the earlier part of the year under consideration. We, therefore, follow the decision of the coordinate bench of this Tribunal in the case of Excellence Data Research Services Pvt. Ltd. (supra) and direct the AO/TPO to exclude the Accentia Technologies Limited from the list of comparables. ........ Infosys BPO 20. As regards selection of Infosys BPO as a comparable company, the learned counsel for the assessee has contended that the said company cannot be taken as comparable because of its uncomparable size of operations. He has contended that the turnover of the said company was many times higher than that of the assessee during the year under consideration. Although the Learned Departmental Representative has contended that the size of operations does not matter as far as selection of comparables is concerned especially in the sector of IT Enabled se....
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....he Assessee in Assessee's own case for AY 2007-08 in IT (TP) A.No.973/Bang/2010. The learned DR submitted that the functional profile of this company and the Assessee was held to be same by the Tribunal in the aforesaid decision. IT(TP)A No.169/Bang/2016 31. We have given a careful consideration to the rival submission. It is true that the Tribunal found this company to be comparable with the Assessee in AY 2007-08. But the decision of the Tribunal referred to by the learned DR in the case of Swiss Re Shared Services (supra) relates to AY 2010-11. The tribunal has given elaborate reasons for exclusion of this company as a comparable company and concluded at Paragraph 17 of its order that this company was not comparable with a low end or mid end service provider in ITES as it was in high end service provider in ITES. In view of the above decision of the Tribunal, we are of the view that Accentia Technology Ltd., should be excluded from the final list of comparable companies. The AO is directed to compute the ALP after excluding Accentia Technology Ltd., from the list of comparables that remains after the order of the DRP." (ii) Icra Online Limited : Th....
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....TA No. 598/Bang/2015 & ITA No. 452/Bang/2015) dated 25 April 2018 [AY 2010-11] (ii) M/s Tesco Hindustan Service Centre Pvt. Ltd. v. DCIT(IT(TP)A No. 191/Bang/2015) dated 25 January 2017 [AY 2010-11] (iii) Outsource Partners International v. DCIT (IT(TP)A No. 337/Bang/2015) [AY 2010-11]. 5.3 On the other hand, the Ld. DR submits that ICRA is engaged in data processing and data mining and accordingly it is engaged in providing similar services (ITeS). Thus it is stated that the inclusion of the above company by the TPO/AO in the list of final comparables be confirmed. 5.4 We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The TPO has considered the operations of the 'Outsourced Services' segment of ICRA as comparable to the operations of the appellant. However, we find that the annual report of the company does not provide any description as to the nature of the services contained in this segment. As per page 532 of the P/B, a reference may be made to the annual report of ICRA Ltd., the holding company of ICRA from where it can be seen that the outsourced....
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....rvices Pvt. Ltd. turnover is Rs. 61.32 Crores and is engaged in providing healthcare outsourcing services. The TPO had retained the company as a comparable and the appellant has not raised any objections against the same before TPO or DRP. The DRP suo moto rejected this comparable due to inconsistency in accounting of Bad debts and provision for bad debts debited to the P&L and does not represent inconsistency in overall accounting policies. Further loss due to bad debts can only be reasonably estimated, however it could occur due to various unexpected factors leading to difference in quantum of write off/provisions. This is neither a qualitative filter nor a functional criterion in order to reject a comparable which is functionally comparable to the appellant and TPO has considered in assessee's own case for Asst. Year 2012-13 at Page 15 para 8.5 as under : (ii) Cosmic Global Limited is having turnover of Rs. 6.25 Crores and functionally comparable as the company earns revenue from medical transcription, translation and BPO services. The TPO had retained the company as a comparable and the assessee had not raised any objections against the same before TPO or DRP. But ....