TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1439
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....mpanies comparable to the Appellant. 3. On the facts and in circumstances of the case, the Learned AO and the Learned TPO under the directions of the Hon'ble DRP erred in computing the profit level indicator of Jindal Intellicon Limited. 4. On the facts and in circumstances of the case, the Learned AO and the Learned TPO under the directions of the Hon'ble DRP erred in rejecting the transfer pricing documentation of the Appellant and resorting to cherry picking of comparables in order to arrive at a set of companies comparable to the Appellant. 5. On the facts and in circumstances of the case, the Learned AO and the Learned TPO under the directions of the Hon'ble DRP erred in disregarding the multiple year data analysis undertaken by the Appellant in accordance with Rule 10B(4) of the Income Tax Rules, 1962 ('Rules') for computing the margins of comparable companies. 6. On the facts and in circumstances of the case, the Learned AD and the Learned TPO under the directions of the Hon'ble DRP erred in not providing appropriate adjustments to margins of the companies finally selected as comparable as required by Rule 10B(1)(e)(iii) of the Rules. 7. On ....
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....Ltd. 13.58 9.34 13 Melstar Information Technologies Ltd. (5.13) 2.36 14 Mindtree Ltd. 16.41 14.39 15 Omega Healthcare mgmnt services Pvt Ltd. 12.96 13.78 16 Persistent Systems and solution Ltd. 16.30 27.09 17 Proteans Software Solutions Pvt. Ltd. 1.90 NA 18 Savi Infoservices India Pvt. Ltd. 9.44 1.61 19 Sparsh B P O Services Ltd. 1.56 (26.66) 20 Synetairos Technologies Ltd. 15.13 17.53 21 Visesh Infotecnics Ltd. (seg.) 15.14 36.02 Arithmetic Mean 12.52 11.86 3. The margin on comparable based on average of was 12.52% and the assessee's margin for international transaction was 15.02%. Thus, the assessee claimed its transaction at the Arms Length. The Assessing Officer made a reference to Transfer Pricing officer (TPO) under section 92CA for computation of Arms Length Price (ALP). During the proceedings before TOP, the TPO accepted 4 comparable and further added 4 additional comparable. The TPO carried out its own research and included the said 4 comparable: 4. The TPO after including 4 comparable worked out Arithmetic mean of Profit Level Indicator (PLI) of 8 comparable company and arrived at margin of 23.27 % agains....
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.... Value and high turnover of Rs. 1312.41 crore and extraordinary events during the year under consideration as its acquiring an Australian based company namely Portland Group Pty. Ltd. Function undertaken, asset employed and risk assumed (FAR) of Infosys BPO Ltd. is different from the assessee, who operates on minimum risk. Infosys BPO Ltd. provides end to end outsourcing services and enterprise-wise services to clients across various industry segments like banking, manufacturing, rental and energy sector. It also provides Legal Process outsourcing Services (LPO) which is different from assessee. It also provides Knowledge Processing Outsource (KPO) Activities like analytics, financial planning and analysis. It has diversified activity and owns intellectual property. It enjoys brand value being a part of Infosys Group, which make its not comparable. In support of his submission relied upon the following decision: a. Cases wherein Tribunal rejected Infosys BPO Ltd. for A.Y. 2012-13. i. Maersk Global Service Centre India Pvt. Ltd. vs. ACIT [ITA No. 653/Mum/2017], ii. International Specialty Products (India) Pvt. Ld. vs. ACIT [ITA No. 1279/Mum/2017]. iii. Indegene (P.) Ltd. vs.....
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....f this company has shown drastic fluctuation ranging from 247.74% in F.Y. 2008-09 to 2% in A.Y. 2014-15. The ld. AR furnished the fluctuating margin of this comparable from F.Y. 2008-09 to 2014-15. In support of her submission, the ld. AR relied on the following decisions: a. Cases wherein Tribunal excluded Excel Infosys Ltd. for A.Y. 2012-13. i. Clear Info Analytics Private Limited vs. ACIT [IT(TP)A No. 2299/Mum/2017]. ii. GTS E-Services Private Ltd. v. ITO [ITA No. 1231/Mum/2017. iii. Emerson Comate Technologies (India) Pvt. Ltd. vs. DCIT [ITA No. 359 & 2847/PUN/2016]. iv. Ocwen Financial Solutions Private Limited vs. ACIT [ITA No. 2669/PUN/2016] v. Cummins Turbo Technologies Limited vs. DCIT [ITA No. 388/PUN/2017] vi. BT e-Serv (India) (P.) Ltd. vs. ITO [2019] 101 taxmann.com 275 (Delhi-Trib.). vii. International Specialty Products (India) Pvt. Ltd. vs. ACIT [ITA No. 6335/Mum/2018] and viii. DCIT vs. Swiss Re-services India (P.) Ltd. [2018] 98 taxmann.com 180 (Mumbai-Trib.). 10.On the other hand, the ld. DR for the revenue relied upon the order of TPO/DRP. 11.We have considered the rival submission of the parties and have gone through the orders of lower auth....
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.... services. It is relevant to observe, the Transfer Pricing Officer while examining the functional profile as well as skill set employed by the assessee has observed that 97% of the employees are simple graduates. Whereas, only three per cent are professionals. Thus, from the aforesaid fact, it appears that the assessee is providing simple voice and data services to its A.Es. Whereas, the same cannot be said about Infosys BPO Ltd. which apart from its brand value being part of Infosys Group, is not comparable to the assessee in various other aspects also. Notably, while considering the issue relating to acceptability of Infosys BPO ltd. as a comparable in assessee's own case for assessment year 2010-11, the Tribunal in ITA no.1082/ Mum./2015, dated 29th July 2016, has held that this company cannot be treated as comparable to the assessee and accordingly, excluded it from the list of comparables. The same view was again expressed by the Tribunal while deciding assessee's appeal for assessment year 2011-12, in ITA no.944/Mum./2016, dated 19th April 2018. It is very much clear, the Transfer Pricing Officer has included this company as comparable simply relying upon his decision in asse....
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....urnover of the comparable was to the tune of R.9028 Crores while the turnover of the Respondent-Assessee, as noted by the TPO was only Rs. 18 Crores. (iii) The impugned order further records that in view of the difference in turnover between M/s. Infosys BPO Ltd., and the Assessee, the two are not comparable. In fact, the impugned order placed reliance upon the decision of the Delhi High Court in CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289/219 Taxman 26 wherein, it was held that the huge turnover difference between the comparable in that case, M/s. Infosys Technologies Ltd., with the Assessee therein, coupled with the fact that the Assessee therein was providing only services to its AE while M/s. Infosys Technologies (P) Ltd., provided services to out siders, make it not comparable. These facts are identical to the present facts and would make Infosys BPO Ltd., not comparable. No difference is shown to us which would warrant a different view in the present facts. Moreover, this Court in CIT v. Pentair Water India (P.) Ltd. [2016] 69 taxmann.com 180/381 ITR 216 has taken a view that huge difference in turnover between the tested party and the comparab....
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....d that the fluctuating margin of this comparable in different Financial Year in the following manner: Financial Year OP/TC (%) Revenue (Rs.) 2008-09 247.74% 1,86,040.74 2009-10 267.31% 2,04,161.34 2010-11 238.71% 2,03,526.40 2011-12 41.48% 79,096.95 2012-13 75.70% 76,098.54 20013-14 30% 52,972.12 2014-15 2% 22,994.38 17. The ld. AR for the assessee strongly relied on the decision of co-ordinate bench in Clear Info Analytics Private Ltd. vs. ACIT (supra) wherein this comparable was held to be not comparable with captive service provider holding as under: "6. We have heard rival contentions and perused the record. We noticed that the Pune Bench of the Tribunal examined the comparable company, M/s. Excel Infoways Ltd., in the case of M/s. Ocwen Financial Solutions Private Limited Vs. ACIT in ITA No. 2669/PUN/2016, dt. 21-01-2019. For the sake of convenience, we extract below the relevant discussions made by the Pune Bench of the Tribunal in the above said case: "12. With regard to Excel Infoways Limited, we find that the Co-ordinate Bench of the Tribunal in the case of Emerson Climate Technologies (India) Pvt. Ltd. Vs. DCIT (supra.) has decided whether Ex....
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....s from the comparable set whereas, the revenue of Excel Infoways Limited also clearly demonstrated diminishing revenue trend. In such situation, we refer to the decision of Co-ordinate Bench of the Tribunal, Delhi in the case of Baxter India Pvt. Ltd. Vs. ACIT (supra.) where the Tribunal has held as follows: "24. So far as exclusion of Excel Infoways Ltd. is concerned, we also find merit in the submissions of the Id. counsel for the assessee that the above company should be excluded from the list of comparables. This company fails TPO's own filter of diminishing revenue and abnormal volatility in revenue and margins. We find from the order of the TPO at para 7.5 (page 24 - 25 of the TPO order) where the TPO has observed that the department has applied consistent diminishing revenue/ loss making filter wherein the companies with losses/ diminishing revenue for the last three years upto and including the financial year 2010-11 were rejected as comparables. The department has excluded such companies with consistent losses/ diminishing revenue in an environment where Indian economy is growing at consistent rate. Having held so, the Assessing Officer included Excel Infoways Ltd. as ....
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....u/s. 133(6). In view of above discussion, we hold that Excel Infoways Ltd. cannot be considered as comparable and should be excluded from the list of comparables. We hold and direct accordingly." Therefore, it is examined that both, Universal Print Systems Limited and Excel Infoways Limited cannot be considered as comparable companies with that of the assessee company. Hence, ground No. 4 is, thus, allowed". 7. We notice that M/s Excel Infoways Ltd was not considered as a comparable company for the reason that the profits of the company was declining and it was having super normal profits. The year-wise profit percentage would show IT(TP)A No. 2299/Mum/2017 that the same was consistently declining from 364.14% in FY 2009-10 to 0.43% in FY 2014-15. In view of the fluctuating profit, i.e., diminishing profit, the above said company was not taken as a comparable. Even though the Ld D.R contended that the decision in the case of Emerson Climate Technologies (India) Pvt. Ltd, which was followed by the Pune bench of Tribunal in the case of Ocwen Financial Solutions P Ltd (supra) was related to different assessment year and further the functions of M/s Emerson Climate Technologies (In....
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....Indian economy is growing at consistent rate. Having held so, the Assessing Officer included Excel Infoways Ltd. as a comparable without considering the fact that the said company does not pass the diminishing revenue filter. From the submissions of the assessee before the TPO (at page 232 of Volume - 1 of the Paper Book) we find the details of the operating margin of the company from financial years 2009-10 to 201-15 are as under :- ..................... ..................... 25. From the above, it is clear that above company does not pass the diminishing revenue filter as adopted by the TPO himself since its revenue has decreased consistently from financial years 2009-10 to 2011-12 i.e. including the year under consideration. Further, the above company has super normal profits. We further find the submissions of the assessee that Excel Infoways Ltd. has super normal profits during the current year has not been controverted by the Revenue. We find the Mumbai Bench of the Tribunal the case of Willis Processing Services (India) Pvt. Ltd. (supra) has upheld the order of the DRP rejecting Excel Infoways Ltd. as comparable company on the ground that the company has a super n....