TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 297
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....ing Officer" or the "learned AO"), dated 28 December 2018 for the Assessment Year ("AY") 2007-08, under section 143(3) read with section 254 of the Income Tax Act, 1961 (the Act") pursuant to the directions issued by Dispute Resolution Panel (hereinafter referred to as the "Hon'ble DRP"), Bangalore dated 20 December 2018 under section 144C(5) read with section 254 of the Act ('impugned order") inter-alia on the following grounds which are without prejudice to each other: That on the facts and circumstances of the case and in law: 1. The impugned order of the learned AO pursuant to the directions of the Hon'ble DRP, erred in assessing the total income at INR 2,27,63,060 as against the returned income of INR 2,12,644; 2. The learned AO/DRP/Transfer Pricing Officer ('TPO") have erred in making addition of INR 2,25,50,416 to total income of Appellant on pretext that price charged was lower than arm's length price determined for IT enabled services transactions rendered by Appellant to its AE(s); 3. The learned AO/DRP/TPO have erred, in law and in facts, by not accepting economic analysis undertaken by Appellant in accordance with the provisions of the Act read....
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.... 9. The learned AO/DRP/TPO erred in by selecting the following companies which are functionally dissimilar by using unreasonable comparability criteria- * Bodhtree Consulting * Maple eSolutions Ltd., * Triton Corp Ltd., * Vishal Information Technologies Ltd., * Asit C Mehta Financial Services Ltd., * Spanco Ltd., * Accurate Data Converters Pvt. Ltd., * Iservices India Pvt. Ltd. 10. The learned AO/DRP/ITPO have erred in computing the working capital adjustment of the Appellant y not considering advances received from customer; 11. The learned AO/DRP/TPO erred in not making suitable adjustments on account of differences in the risk profile of the Appellant vis-à-vis the comparables, while conducting comparability analysis; 12. The learned AO/DRP/TPO erred in computing the arms length price without giving benefit of +1-5 percent under the proviso to section 92C of the Act; General grounds: 13. The learned AO has erred in levying interest of INR 107,45,187 under section 234B of the Act; 14. The learned AO has erred, in laws and in facts, in initiating penalty proceedings u/s. 271(1)(c) of the Act; The Appellant submits that each of above grounds is ....
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....ring and trading sales more than 25 percent were eliminated; 3 Companies with advertisement expense of more than 5 percent were excluded; and 4 Companies undertaking significantly different functions compared to the Assessee was rejected; 5. The Ld. TPO dissatisfied with the comparables selected applied following filters and selected set of following 28 comparables having average mean of 30.55%. Filters used by the Ld. TPO: Step Description 1 Companies whose financial data was not available for FY 2006-07 were excluded. 2 Companies whose ITeS income < Rs. 1 Crore were excluded; 3 Companies whose ITeS revenue was < 75% of the total operating revenues were excluded; 4 Companies who have more than 25% related party transactions (sales as well as expenditure combined) of the sales were excluded; 5 Companies who have less than 25% of the revenue as export sales were excluded. 6 Companies having diminishing revenue/ persistent losses for the previous three years were rejected; 7 Companies having different financial year ending were excluded; and 8 Companies undertaking significantly different functions compared to the ....
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....ed in the final list: SI. No Company name TPO's order 1. Aditya Birla Minacs Worldwide Limited 11.98% 2. Allsec Technologies Limited 27.31% 3. Apex Knowledge Solutions Limited 12.83% 4. Apollo Healthstreet Limited -13.55% 5. Asit C Mehta Financial Services Limited 24.21% 6. Bodhtree Consulting Limited 29.58% 7. Caliber Point Business Solutions Limited 21.26% 8. Cosmic Global Limited 12.40% 9. Datamatics Financial Services Limited 5.07% 0. Flextronics Software Systems Limited 8.62% 1. Genesys International Corporation Limited 13.35% 2. ICRA Techno Analytics Limited (seg) 12.24% 3. Iservices India Private Limited 49.47% 4. Maple eSolutions Limited 34.05% 5. R systems International Limited 20.18% 6. Spanco Telesystems and Solutions Limited 25.81% 7. Triton Corp Limited 34.93% 8. Vishal Information Technologies Limited 51.19% 9. Nittany Outsourcing Services Private Limited 11.50% 10. Accurate Data Converters Private Limited 50.68% 11. Apex Advanced Technologies Limited 39.89% Arithmetic mean 23.00% Less: Working Capital Adjustment 3.18% Adjusted Arithmetic mean 19.82% 10. The Ld. AO accordingly while passing t....
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....e-Business Operations Pvt. Ltd. vs. DCIT) in (IT(TP)A No. 1092/B/2011 for assessment year 2007-08) the Ld. AR submitted that this company had peculiar circumstances during the year under consideration. He submitted that the company has hived of certain businesses without hiving of the revenue stream. It has also been submitted that there is an absence of segmental results and the company operates only in one segment being software development. 19. On the contrary Ld. CIT DR relied on orders passed by authorities below. 20. We have perused submissions advanced by both sides in light of records placed before us. 21. From the annual report placed at page 1608, we note that this company has incurred trademark expenses thereby indicating that it holds intangible assets. Further we note that there is no segmental details in terms of ITES services rendered by this comparable and the entire revenue is generated from software development services. This itself makes this company to be a software development company and cannot be compared with an ITES service provider. Accordingly we direct this comparable to be excluded from the final list. Maple Esolutions Ltd.& Triton Corp Ltd.: 22. ....
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....been brought on record by revenue. Ld. DR do not have any objection in exclusion of this comparable. Respectfully following the same, we therefore direct Ld. TPO to exclude these comparables from final list." Respectfully following the above stated view, we direct these comparables to be excluded from the finalist. Vishal Information Technologies Ltd. 23. The Ld. AR submitted that this company fails the RPT filter of less than 25% of the operating revenues. It is also been submitted by him that this comparable is functionally not similar with that of assessee. He submitted that this comparable is mainly into KPO and therefore not comparable with the BPO service provider like that of assessee. 24. On the other hand Ld. Sr.DR relied on the orders passed by authorities below. 25. We have perused submissions advanced by both sides in light of records placed before us. 26. The objection of the Ld. AR to inclusion of this comparable is on the reason that the company is functionally different, also does not satisfy the RPT filter. From the annual reports placed at page 1739 of paper book it is clear that this comparable has an RPT filter of 82.92% which is abnormally high and also....
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....The Ld. AR also placed reliance on Global E Business Operations Pvt. Ltd. in ITA (TP) A No. 1092/B/2011 for assessment year 2007-08 by order dated 16/01/2017. 29. On the other hand, the Ld. DR placed reliance on orders passed by authorities below. 30. We have perused submissions advanced by both sides in light of records placed before us. 31. On perusal of order passed by the Ld. TPO we note that employee cost filter and outsourcing cost filter has not been applied for the purpose of selecting comparables. However we note that this company has RPT during the year. We note that segmental details are also available at page 1785 of the annual reports. Therefore in the interest of Justice we remand this comparable to Ld. AO/TPO to verify the RPT percentage and to consider this comparable in accordance with law. In the event it is found that the RPT is more than 25% the same may be excluded from the finalist. Accordingly this comparable is remanded to learnt AO/TPO for verification. Spanco Ltd. (Seg.) 32. Assessee sought to exclude this comparable on the basis of failure of revenue filter earned from ITES segment. It has been submitted that this comparable earns only 8.21% from IT....