2021 (1) TMI 1075

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....ion segment. Ground No.9 relate to direction given by Ld. DRP to compute deduction u/s 10A of the Act after set off of loss/unabsorbed depreciation relating to non10A units. 4. The assessee is engaged in the business of Trading & Distribution of laboratory products & chemicals, strategic sourcing, information technology enabled services (offshore accounting & data management), marketing support services, research identification, improvement evaluation, selection, testing of any mechanical, electrical, electronic, chemical, plastic, telecom & information technology products. 5. We shall take up the issue relating to transfer pricing adjustment made in respect of back office support services (ITES services). The assessee adopted TNMM method and OP/OC (Operating profit by Operating cost) as profit level indicator. The assessee declared margin of 19%. The turnover of the assessee from this segment was Rs. 20.27 crores. The assessee had selected 15 comparable companies. The T.P.O. rejected the transfer pricing study of the assessee and accordingly selected following 10 sets of comparables: Sl.No. Name PLI 1. Accentia Technologies Ltd. 43.06% 2. Acropetal Technologies Ltd.....

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....d in the provision of high end consultancy services which cannot be compared to the assessee who is into provision of low end IT enabled services which are routine in nature. Further, the safe harbour rules clearly distinguish between an ITE service provider and a KPO service provider. The DRP has not considered any of the above objections. 18. Before the Tribunal, the Assessee has brought to our notice that this Tribunal has held that a KPO service provider cannot be compared to an ITE service provider. Reliance in this regard is placed on the decision in the case of Arctern Consulting Pvt. Ltd. (supra) IT(TP)A No.195/Bang/2015 & 302/Bang/2015 Order dated 11.08.2017 for AY 2010- 11, & in the case of Outsource Partners International (P) Ltd. I.T(TP).A No.337/Bang/2015 Order dated 6.2.2017 for AY 2010-11, wherein on identical circumstances, the exclusion of this company came to be upheld/the company was directed to be excluded. The learned DR reiterated the stand of the revenue as reflected the grounds of appeal of the revenue. 19. We have carefully considered the rival submissions. In the case of Outsources Partners International (P) Ltd.,(supra), this Tribunal has adjudicated ....

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....as it is a KPO engaged in providing data analytics and data process solutions. It provides end-to-end support through the trade lifecycle, including trade confirmation, settlements, transaction maintenance, risk analytics and reporting. The data analytics services being provided by Eclerx is significantly different from the routine ITE services provided by the Assessee. Reliance in this regard was placed on the decisions in the cases of Arctern Consulting Pvt. Ltd. (supra) and Tesco Hindustan Service Centre (P.) Ltd. (supra), where in identical circumstances, the exclusion of the company came to be upheld/the company was directed to be excluded. The learned DR reiterated the stand of the revenue as is reflected in the grounds of appeal raised by the revenue. 23. We have carefully considered the rival submissions. In the case of Tesco Hindustan Service Centre (P) Ltd. (supra), this company was excluded from the list of comparable companies in the case of a company rendering ITeS similar to the services rendered by the Assessee in this appeal, observing as follows: "37. Eclerx Services Ltd. : In this regard, the ld. counsel for the assessee has contended that this company's f....

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....with its AEs. Facts being identical, respectfully following the observations of the Special Bench (supra), we direct that these two entities be excluded from the list of final comparables." 40. Since the Tribunal has examined this issue under similar set of facts, we find no reason to take a contrary view. Accordingly following the order of the Tribunal in the case of Stream International Services (P) Ltd. (supra), we hold that this company is not a good comparable and direct the AO/TPO to exclude it from the list of comparables." Respectfully following the aforesaid decision, we uphold the order DRP excluding the aforesaid company from the list of comparable companies. 24. Thus Gr.No.4 & 5 raised by the revenue is without any merit." Both the parties agreed that there is parity of facts between the instant case and the case decided by the co-ordinate bench. Accordingly, respectfully following the above said decision, we direct exclusion of M/s. E-Clerx Services Ltd., ICRA online Ltd. and Infosys BPO Ltd. The ALP of the international transactions shall be computed afresh accordingly. 9. The next issue relates to transfer pricing adjustment made in respect of distribution s....

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....cted by the assessee is not an appropriate method in the facts and circumstances of the case, before discarding it. Since the TPO had misdirected himself, there was no occasion for him to examine the Resale price method adopted by the assessee. In this view of the matter, we are of the opinion that the entire issue relating to Transfer pricing adjustment made in respect of Distribution Segment needs to be examined afresh by duly considering the Transfer Pricing study conducted by the assessee. Accordingly, we set aside the order passed by the AO on this issue and restore the same to the file of AO/TPO for examining it afresh. 15. The last issue relates to the computation of deduction u/s 10A of the Act. The assessee was having a unit in Coimbatore, which is eligible for deduction u/s 10A. It was also having other business units located in Mumbai, Bangalore and Hyderabad. The assessee made profit from its Coimbatore unit and made losses from other units. It claimed deduction u/s 10A of the Act without adjusting loss from other units. The AO, however, adjusted business losses of other units against the profits of Coimbatore unit and accordingly allowed deduction u/s 10A of the Ac....