AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 1085
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.... erred in misconstruing the functional and risk profile of the Appellant; 2. Ld. CIT(A) erred in terms of approving the Transfer Pricing Officer's ('TPO') approach of summarily rejecting the comparables selected by the Appellant, selecting erroneous filters and functionally dissimilar companies while applying Transactional Net Margin Method; 3. CIT(A) erred in arbitrarily rejecting the comparable company, viz. R Systems international Limited on the ground that audited data on quarterly basis from where profit-level indicator (PLI) can be re-casted on a financial year (running April 01, 2009 to March 31, 2010) basis had not been provided; 4. Ld. CIT(A) erred in arbitrarily approving the TPO's approach of selecting the companies, viz. TCS E-Serve International Limited and TCS E-Serve Limited by misquoting assessee's functional profile; 5. Ld. CIT(A) erred in upholding the TPO's approach of computing net cost plus margin ('NCPM') of selected companies and that of Appellant by incorrectly classifying gain/ loss from foreign exchange variation and provision for doubtful debts as a non-operating in nature; 6. Ld....
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....onal transaction entered into by the assessee during the Financial Year 2009-10. The Transfer Pricing Officer passed order dated 23/01/2014 directing the Assessing Officer to made an addition of Rs. 5,34,52,006/-. During the relevant Assessment Year, following international transactions were entered by the assessee: AE Nature of International Transaction Amount (In INR) Method Dunnhumby Ltd. U.K Provision of data analytics Services 355532164 TNMM Reimbursement of expenses 37330267 Recovery of expenses 9416059 The Assessing Officer passed assessment order dated 24/04/2014 thereby assessing total income at Rs. 7,74,13,770/- making the adjustment as suggested by the TPO amounting to Rs. 5,34,52,006/-. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. In the present Assessment Year, the assessee as well as the Revenue are contesting certain comparable and other issues. Therefore, we are taking first assessee's appeal. 6. The Ld. AR submitted that the assessee company is a domestic company engaged in the business of providing routine back-office....
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....s also dismissed in limine. 7. As regards to the Revenue's appeal, the Ld. AR submitted that the Revenue is challenging the exclusion of the following 4 companies from the list of comparables. Ground ' Revenue's appeal Company's name Ground No. i) Accentia Technology Pvt. Ltd. Ground No. ii) Eclerx Services Ltd. Ground No. iii) 1 Gate Global Services Ground No. iv) Infosys BPO Ltd. In addition to the CIT(A)'s findings, the Ld. AR relied upon the decision of the Tribunal in case of Midland Credit (supra) for exclusion of Accentia Technology Pvt. Ltd. and Infosys BPO Ltd. which are contested by the Revenue in Ground No. i) and (iv). As regard exclusion of Eclerx Services Ltd. and I Gate Global Services which are contested in Ground No. ii) and iii) of Revenue's appeal, the Ld. AR in addition to the CIT(A)'s findings, relied upon the jurisdictional Delhi High Court/ITAT decisions directing rejection of these companies from list of potential comparables in a case where the assessee is a captive-entity providing routine back-office ITES to group companies: i) Rampgreen Solutions Pvt. Ltd. Vs. CIT(A) (ITA No. 102/2015) (Delhi H.C. ....
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....inclusion of these two comparables by the TPO. On the issue of inclusion of these two comparables, the Ld. DR relied upon the decision of Tribunal, Delhi in following two cases: (i) Xchanging Technology Services India Pvt. Ltd, AY 2010-11, ITA No.1222/Del/2015, order dt.08.09.2015. Relevant findings & decision of Hon'ble ITAT, Delhi is recorded in para-23 to 26 at P/28-33 of the order wherein both TCS e-Serve International Ltd and TCS e-Serve Ltd have been retained as comparables. (ii) Smart Cube India Pvt. Ltd, AY 2010-11, ITA No. 1103/Del/2015, order V A dt.27.04.2018. Relevant findings & decision of Hon'ble ITAT, Delhi is recorded in para-8 &9 at P/20-24 of the order wherein both TCS e-Serve International Ltd and TCS e-Serve Ltd have been retained as comparables. The Ld. DR also pointed out the discussion on comparable with super normal profit / abnormal profit in para 4.7 at page 34-39 of the order of TPO. For the purpose of comparability under TNMM, the Ld. DR relied upon following case laws:- * ST Microelectronics Ltd, ITAT Del, 2011-TII-ITAT-DEL-TP * CRM Services, ITAT Del, 2011-TII-86-ITAT-DEL-TP * Deloitte Consulting India Pv....
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....k rate as per RBI norms. The Ld. DR submitted that the TPO applied the interest rate of 14.88% to work out the adjustment for delayed realization of outstanding from AE considering various crucial factors such as the currency in which the loan has originated, the assessee is an Indian entity, the opportunity cost, the expected rate of return on investments made in India if the funds are realized in time. Since the assessee did not provide the detail of invoice- wise delayed realization of receivables from AE corresponding to the outstanding as on 01.04.2009, the TPO benchmarked in respect of the entire outstanding of Rs. 2,36,28,467 for the year at the aforesaid interest rate. On assessee's appeal, the CIT(A) has upheld the action of the TPO and has given his findings holding the outstanding receivables as international transactions. The elaborate discussions of the CIT(A) are recorded at page 23-26 of his order. The CIT(A) has upheld the findings of the TPO/AO except modifying the interest rate. The CIT(A) has discussed the clause (c) to explanation (i) of Sec.92B and has held that the explanation is clarificatory in nature & the amendment has retrospective effect. The CIT(....
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....ly excluded following the turnover filter of Rs. 5 crores. This filter whether strictly followed by the TPO or not in other comparables is also not emerging from the order of the TPO. Thus, it will be appropriate to direct the TPO/AO for taking cognizance of this comparable after applying all the filters as well as the functional profile of the comparable into account and thereafter if all the parameters are proper, then select this comparable. Thus, Ground No. 2 of the assessee's appeal is partly allowed for statistical purpose. As regards to Ground No. 3 of the Assessee's appeal relating to rejection of R-Systems International Ltd., from the perusal of the annual reports, it can be seen that audited financial data for the relevant previous year (April, 2009 to March, 2010) is available in the public domain relating to four quarters. Merely having different financial year cannot discard this comparable from the list of comparables. Thus, we direct the TPO/AO to consider this comparable after applying all the filters as well as the functional profile of the comparable into account and thereafter if all the para-meters are proper, then select this comparable. Thus, Ground No. 3 of t....