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2017 (4) TMI 1541
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.... the assessee's own case in ITA No.185,186 and 187/Bang/2010 for the assessment year 2002-03, 2003-04 and 2004-05, wherein it was held that if freight expenses are not included in export turnover and total turnover, then they cannot be reduced while computing the deduction u/s 10B of the Act. In our view this issue is no more res integra and it is covered by the decision of Hon'ble Jurisdictional High Court in 349 ITR 98. Therefore, the grounds raised are required to be allowed and accordingly we allow the grounds of the assessee on the similar lines as held by the coordinate bench in the assessee's own case. Accordingly, ground Nos.2 to 2.4 of the assessee's appeal is allowed. 7. Ground Nos.3 to 3.3 is with regard to disallowance u/s 14A of the Act, ground Nos.3.1 and 3.2 are as under: 3.1. Ground 3.1: That the Ld. AO/DRP erred in disallowing the expenditure of INR 9,70,000 under Section 14A read with Rule 8D of Income-tax Rules, 1962 ("Rules") holding that expenditure is attributable to earning of exempt income (dividend) 3.2. Ground 3.2: That the Ld. AO/DRP erred in proposing to apply the provisions of Rule 8D of the Rules for the year under consideration. 8. The ld ....
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....ard the rival contention and perused the record. The Bombay High in the case of Godrej and Boyce Mfg. Co. Ltd., Vs. DCIT [2010] 194 Taxman 203 has held that Rule 8D is prospective in nature and is not retrospective in nature and is only applicable from asst. year 2008-09 onwards. Therefore, in our view, Rule 8D cannot be invoked by the AO for calculating disallowance u/s 14A. In the case of Godrej and Boyce Mfg. Co. Ltd., (Supra) at para 67 it is held as under:- 67. Even in the absence of sub-sections (2) and (3) of section 14A and of rule 8D, the Assessing Officer was not precluded from making apportionment. Such an apportionment would have to be made in order to give effect to the substantive provisions of sub-section (1) of section 14A which provide that no deduction would be allowed in respect of expenditure incurred in relation to income which does not form part of the total income under the Act. Consequently, de hors the provisions of sub-sections (2) and (3) of section 14A and rule 8D, the Assessing Officer was entitled to determine by the application of a reasonable method what quantum of the expenditure incurred by the assessee would have to be disallowed on the ground ....
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....sions before the TPO on 12th July 2010 and 8th September 2010. 31.3 The TPO passed an order dated 27 October 2010 under Section 92CA of the Act making an adjustment of INR 152,450,673 to the international transaction of ITES entered by the Appellant with the AEs. 13.4 The international transaction of the Appellant with its AE during the captioned AY is as under: S. No. Nature of International Transaction Amount in INR 1. Provision of customer support service (ITES) 158,08,98,347 2. Provision of software services 275,63,51,266 3. Provision of personnel sourcing services 25,289,189 4. Purchase of fixed assets 7,072,770 5. Recovery of expenses 1,241,646 6. Purchase of components 135,527 7. Export of finished goods 3,483,883 8. Reimbursement of expenses 137,879,045 13.5 The TPO selected the following companies as comparable: ---- space left blank intentionally ---- Sl. No. Company name Net margin as per TP order 1 Accentia Technologies Limited (seg) 30.61% 2 Bodhtree Consulting Limited (seg) 29.58% 3 Eclerx Services Limited  ....
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....P. 13.8 Accordingly, being aggrieved by the Order, the assessee is before us on the above stated TP grounds . 13.9 The Appellant has filed the following modified grounds of appeal to plead rejection of specific companies which are considered as comparable by the TPO and upheld by DRP. "8. The learned TPO / AO has failed to appreciate the fact that the following companies are not functionally comparable to the Appellant, therefore has erred in law and facts in considering them as comparable companies: a) Mold-Tek Technologies Limited; b) eClerx Services Limited; c) Vishal Information Technologies Limited; d) Infosys BPO Limited; e) Accentia Technologies Limited; f) Bodhtree Consulting Limited; e) Accurate Data Converters Private Limited; f) iServices India Private Limited 9. Without prejudice to the transfer pricing documentation maintained by the Appellant, the learned TPO / AO has failed to appreciate the fact that Wipro Limited is not functionally comparable to the Appellant, therefore has erred in law and facts in considering it as a comparable company." 13.10 However during the course of argument the appellant has restricted his argument i....
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....y into ITEs segment. eClerx Services Limited ("eClerx") 13.13 The assessee has submitted that this company is not comparable with the assessee company as the profile of the company is different. In the written submissions filed by the assessee it is mentioned as under: 6.1.6 Based on the review of the Annual Report of eClerx, the Assessee would like to submit that this company is engaged in providing data process and analytics services which are in the nature of KPO. For the relevant FY, eClerx has employed over 1500 domain specialists working for its clients. eClerx offers industry specialized services for meeting complex client needs, data analytics KPO services in two business verticals - financial services and retail and manufacturing. eClerx offers solutions that do not just reduce cost, but also help their clients increase sales and reduce risk by enhancing efficiencies and by providing valuable insights that empower better decisions. eClerx provides tailored process outsourcing and management services along with data aggregation, mining and maintenance services. 6.1.7 The relevant extract from the Annual Report of the company for FY 2007-08 is provided below; ....
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.... detail in the agreements. The kind of services each persons are rendering to the organization shows the scope and profile of the Assessee . In our view, the assessee is providing highly skilled services which is technical in nature with inputs engineering and architect applications, therefore, in our view, the assessee cannot be said to be merely BPO and, therefore, the TPO and DRP were right in treating the Mold-Tek and Eclerx Services Ltd. as functionally comparable with that of the assessee's profile. 16. The judgment relied upon by the ld AR for the assessee was rendered in the case of Societe Generale Global Solution in ITA No.1188 of 2011 dated 22/4/2016 was rendered in the facts of said case and in the said judgment the exclusion of Mold-Tek and Eclerx Services was considered on the basis of the assumption that the assessee before this Tribunal was not into KPO services and whereas Mold-Tek and Eclerx Services are into KPO services and the Tribunal relied upon the judgment of Hon'ble Delhi High Court in the matter of Rampgreen Solutions Ltd., has held that the KPO company cannot be compared with BPO, hence Mold-Tek and Eclerx Services are not required to be treated....
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....on its website, we are of the view that the said company is mainly involved in providing high-end services to its clients involving higher special knowledge and domain expertise in the field and the same cannot be taken as comparable to the assessee company which is mainly involved in providing low-end services. It may be pertinent to note here that the financial year 2007-08 was a unique year for Mold-Tek Technologies Ltd. as the scheme of arrangement involving amalgamation between Tekmen Tool Pvt. Ltd. and Mold-Tek Technologies Ltd. and de-merger between Mold-Tek Technologies Ltd. simultaneously was sanctioned by the Hon'ble AP High Court by 15th July, 2008 with the appointed date for amalgamation and de-merger being 1st October, 2007 and 1st April, 2007 respectively. It is also pertinent to note that while working out the operating margin of the said company, provision for derivative loss of Rs. 6.43 crores made by Mold- Tek technologies Ltd. was excluded by the A.O. treating the same as non-operating expenses whereas in the case of Rushabh Diamonds (supra), it was held by the Division Bench of this Tribunal that the gain or loss arising from the forward contract entered int....
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....he assessee company for its AEs are compared with the functional profile of M/s eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AO/TPO as per the direction of the DRP. 18. The co-ordinate Bench in the matter of Tesco Hindustan Service Centre Pvt. Ltd., in ITA No.1285/Bang/2011 dated 9.12.2016 has examined the above comparables Eclerx and Mold-Tek in paragraph 39-40 and 57 and has held that on account of abnormal profits on these two companies and on account of the Mold-Tek failing0 employee cost filter, these 2 comparables cannot be comparable with comparable. The coordinate bench held as under 39. Having carefully examined the orders of lower authorities in the light of Tribunal's finding in the case of Stream International Services (P) Ltd. (supra), we find that the profile of this company was examined by the Tribunal in this case....
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....e list of comparables. He also placed reliance upon the order of the Tribunal in the case of Stream International Services (P) Ltd. (supra) in which the Tribunal following the order of the Mumbai Special Bench in the case of Maersk Global Centres (India) (P.) Ltd. (supra), directed the exclusion of this company. The relevant observations of the Tribunal have already been recorded in the foregoing paragraphs while dealing with the comparable Eclerx Services Ltd. Therefore, we find no justification to reproduce the same again. We, therefore, following the order of the Tribunal, direct the AO/TPO to exclude this comparable from the list of final comparables. 19 In view thereof respectfully following the judgment of co-ordinate bench in the matter of Tesco Hindustan Service Centre Pvt. Ltd., (Supra), we hold that these 2 companies are not a good comparable and we direct the AO/TPO to exclude it from the list of comparables. Vishal Information Technologies Ltd. And Infosys BPO, 20. The assessee has submitted that these companies are not comparable with the assessee as the profile of the company is different. In the written submissions filed by the assessee, it is mentioned as u....
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....) A. No.1053/Bang/2011] (page 1627) * M/s Ariba Technologies India Pvt. Ltd. Vs ITO, [IT(TP)A No.441/Bang/2012] (page 1583 to 1588) 6.1.16. In light of the above, the Assessee submits that Infosys BPO should not be considered as comparable 21. The ld DR relied upon the order passed by the authorities below. 22. We have gone through the order passed by the coordinate bench in the matter of Pole to Win India Pvt. Ltd., and other judgment. In our view, the comparability of these companies have been examined by this Tribunal and it was found that Vishal Information Technologies Ltd., was into outsourcing, therefore, it cannot be comparable with that of the assessee. Moreover, the business model of the comparable company viz., Vishal Information Technologies Ltd. is different from the assessee as it is getting its work done through outsourcing. Similarly, Tribunal has excluded the Infosys BPO Ltd. from the list of comparables after examining the comparability and size of the Infosys BPO in the judgment refereed herein above. Therefore, respectfully following the decision of the coordinate Bench cited herein above, we direct the AO/TPO to exclude these two companies i.e. V....
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....O/DRP erred in confirming the action of the learned TPO in ignoring the fact that since the Appellant is availing tax holiday under section 10A of the Act, there is no intention to shift the profit base out of India. That the Ld. AO/DRP erred both in facts and law in confirming the action of the learned TPO of making an adjustment to the transfer price of the Appellant in respect of its Consumer Finance Division by Rs. 152,450,673 holding that the international transactions do not satisfy the arm's length principle envisaged under the Act and in doing so grossly erred in: 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. Upholding the act of the learned TPO in including companies in the comparability analysis which do not satisfy the test of comparability. Upholding the act of the learned TPO in rejecting companies similar to the Appellant while performing the comparability analysis. Upholding the act of the learned TPO of collecting information of the companies by exercising power granted to him under section 133(6) of the Act. Disregarding application of prior year data as used by the Appellant in the TP documentation and holding that curre....
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.... us to the assessee on this count. Document 3 Segmentwise/productwise performance The Company's business segments are Plastics & IT (KPO) Divisions. Further, plastics can be segmented to the lube & oils, paints, pet products, consumer products etc. areas. The sales performance during the year is: Document 4 4. Description of Business activities At Mold-Tek Technologies Limited we use software tools which are used to produce structural engineering outputs and these are delivered to our clients serving construction Industry segment. Our clients mainly located in Canada, USA, Europe, Dubai and Australia outsource Structural Design and Detailing work to us. Some of the target clients are engineering firms, Steel and Precast Fabricators, Detailing companies, etc. Our activities include producing Design drawings, detailed structural engineering drawings for our clients using 3D and 2D software. Document 5 eClerx is a very different company, with industry specialized services for meeting complex client needs. We are sometimes compared to a BPO or an IT offshoring company, which we are not. We are a data analytics KPO service provider spec....
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.... . Accountable for successful implementation of the IM programs in line with business CTQs Own and manage large IM program deliverables, project teams & budgets independently Secure necessary IT resources, funding, and business buy in Identify and mitigate risks in timely manner, escalating to appropriate level when necessary. Set up communication rhythms across program 3) Project Manager Own, develop, manage and drive project plan âš« Owns technical project documentation, technical specifications, implementation & support specifications Manage technical teams to implement technical design and development solutions Drive IT change management and work with the business to ensure that the technical solution meets functional specifications Be responsible for project life cycle from development through QA, production and support Ensure standard processes and tools are followed in the project Develop, maintain, and manage IM project budgets 4) Enterprise Architect/ Application Architect/ Design Architect âš« Direct overall strategies and standards relating to application, collaboration, infrastructure, and data âš« D....
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....t, component, integration and system tests for which responsible Perform analysis of test failures to appropriate level of detall for defect submission Assist in prioritisation of reported defects and works with Development to facilitate timely closure Own domain knowledge 8) Technical Author/Senior Technical Author Provide finished technology transfer material (complete printed and online product documentation, context-sensitive help and training material) for products that is high quality, complete and technically accurate Responsible for writing, structuring, compiling, generating and testing online documentation and help Preparation and testing of online documentation and help, including generation of HTML, HTML Help and PDF files with inputs from development team 9) Team Lead (Development) ° ° " Own specific piece of product (e.g. a module or even an entire product) for New feature addition, Enhancement and bug fixes Analyse, design and develop (coding, unit testing, debugging) of software products Coordinate amongst project teams - work allocation, status tracking etc. Communicate Project status, issues, ....