TaxTMI 
TaxTMI 
2018 (3) TMI 1920
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....onfirmed by the Hon'ble Dispute Resolution Panel ("DRP"). Each of the ground is referred to separately, which may kindly be considered independent of each other. On facts and circumstances of the case, an in law: Ground No. 1 The learned TPO / AO / DRP have erred in making an adjustment of INR 30,690,359 to the total income of the Appellant in respect of international transactions pertaining to provision of back office support services and advisory support services by the Appellant to its associated enterprises ("AEs") (hereinafter referred to as "impugned transactions"). Ground No. 2 The learned AO / TPO / DRP have erred in not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ("the Rules"), and modifying the same for the determination of the Arm's Length Price ("ALP") of the impugned transactions to hold that the same are not at arm's length. Ground No. 3 The learned AO / TPO / DRP have erred in: (a) Not accepting the use of multiple year data, as adopted by the Appellant in TP documentation; and (b) ....
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....alty proceedings under section 271(1)(c) of the Act." 3. The assessee is a company engaged in providing software development and maintenance support service to its associated enterprise for assistance in their projects. The assessee is engaged in rendering ITES including back office processing for group companies. It filed its return of income on 29.11.2012 for AY 2012-13 at Rs. 187939230/-. It was revised on 29.03.2014 at Rs. 179039040/-. As the assessee is providing services to its associated enterprises the international transaction entered into by the assessee were referred to the ACIT, Transfer Pricing Officer (3)(2), New Delhi on 31.12.2014 for determining Arm's Length Price (ALP). The ld TPO passed an order u/s 92CA(3) on 27.01.2016 proposing an adjustment of Rs. 147136588/- on account of arm's length price of international transaction. Order u/s 154 was passed by the ld Transfer Pricing Officer on 24.05.2016 wherein, certain mistakes pointed out by the assessee were rectified and the adjustment was revised in software development services to Rs. 26784804/-, in ITES segment to Rs. 69100573/- and in advisory segment Rs. 18390371/-. Consequently, draft assessment order prop....
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....med by the assessee which are also covered at page NO. 5 to 14 of the order of the ld Transfer Pricing Officer. He submitted that there is no dispute about the functions performed by the assessee company. Therefore, he submitted that based on those functions the assessee in the back office support services segment is objecting about the inclusion of Infosys BPO Ltd and TCS E-service Ltd. He submitted that both the above comparable companies have been considered by the coordinate bench in assessee's own case for AY 2010-11 and the ld TPO has been directed to exclude the same. Therefore, he submitted that issue with respect to these two companies is squarely covered in favour of the assessee. 11. The ld Departmental Representative supported the order of the lower authorities. 12. We have carefully considered the rival contentions and also perused the order of the coordinate bench in assessee's own case for Assessment Year 2010-11 in ITA No. 750/Del/2015 wherein, vide para No. 10.19 in the business support segment of the assessee the coordinate bench has directed the ld Transfer Pricing Officer for exclusion of this company from the comparability analysis as under:- "In....
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.... are of the view that this case is required to be excluded." 10.23 Since there is no similarity in the functional profile of this company and assessee respectfully following the ratio laid down in Agnity India Technologies (supra), we direct the TPO/AO for removal of this company from the list of comparables." 13. Similarly, in case of TCS E-serve Ltd the coordinate bench has directed for exclusion vide para No. 10.31 and 10.32 of that order as under:- "TCS E-Serve Ltd 10.31. The ld.TPO had included this company as a comparable despite objections by the assessee. The assessee objected the inclusion of this company as it provided financial information processing and customer contact services with high-level of foreign expenditure and abnormal profits. 10.31. Ld.DR, however, refer to the extracts made by the ld.TPO in the order to submit that TCS E serve Ltd. is a comparable company with that of assessee. The ld.DR relied upon the extract of the decision of Hon'ble Delhi High Court in the case of Chris Capital Investment vs DCIT (supra), which has been reproduced hereinabove. 10.32. After considering the rival submissions and p....
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....ng that in absence of any reliable data this company cannot be included as it follows different financial year. 17. We have carefully considered the rival contentions and also perused the orders of the lower authorities as well as the order of the coordinate bench in assessee's own case for AY 2010-11 wherein, at para NO. 10.38 and 10.40 the above comparable company was directed to be included in the final list of comparable as under:- "R Systems International Ltd 10.38. The ld.TPO has rejected the company on account of different financial year ending vis-a-vis the assessee. The ld.AR submitted that companies whose financial data was available for the relevant period, were considered in view of rule 10 D (4), which provides that information to be used must be contemporaneous. The ld. AR further submitted that though the Company has different financial year ending, were operating during the same period of time as the assessee, and were also facing similar business cycles, market and economic conditions as faced by assessee having financial year from April to March. He thus submitted that in absence of evidence available to the contrary that there has been a signi....
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....lable, if the data can be reasonably extrapolated. Hon'ble tribunal further observed that rule 10 B (4) cannot be interpreted in such a rigid manner so as to defeat the basic objective of the rule. The relevant extract of the ruling are reproduced below: " 23. ..... However, in our considered opinion, if a comparable is functionally same as that of the tested party then the same cannot be rejected merely on the ground that data for entire financial year is not available. If from the available data on record the results were financial year can be reasonably extrapolated, then the comparable cannot be excluded solely on this ground. The learn ADR as referred to rule 10 B (4) which only mandates that the data which is to be utilised for analysing the comparability of uncontrolled transactions with an international transaction, has to be financial year only in which the international transaction has been entered into. This rule is based on matching principle but this role cannot be interpreted in such a rigid manner so as to defeat the basic object of rule viz., selection of the comparable for determination of arms length price of an international transaction" (emphasis su....
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....nal /similarity differences as well as insufficient data/information available on the public domain. It is also noted that the ld.TPO has to take reasonable approach while selecting/rejecting any of the comparables. The ld.TPO should not select any comparable on the basis of hypothetical approach. Merely because the accounting year ending is not similar, should not be a reason for rejecting a particular comparable without having any functional dissimilarity between the comparable with that of an assessee. The ld.TPO must consider a particular comparable company bit different any financial year ending if the data can be reasonably extrapolated. The ld.TPO must demonstrate with documentary evidence/research materials placed on record to the contrary to suggest otherwise. In the event the contemporary comparative analysis undertaken ease in accordance with the rule 10 B (2) and also in line with globally accepted practices, the use of different accounting year is appropriate, as long as the international transaction pertain to the same accounting year. 11.1 Ground No. 1, 2, 5 to 7 stands disposed off accordingly." 21. Respectfully following the decision of the coordinate b....
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....dered the rival contentions. It is admitted fact that the comparable selected by the ld Transfer Pricing Officer is engaged in twin activities Investment banking and merchant banking services along with investment advisory services. Further, no segmental information with respect to the advisory services is made available. Further, the ld TPO himself has excluded the investment banking activity from the comparability analysis we do not find any reason to keep this comparable incomparability analysis in absence of segmental information available. Hence, the TPO is directed to exclude this company. 30. The assessee is also seeking exclusion of Inmacs Management Services Ltd, a comparable selected by the ld Transfer Pricing Officer having 42.66% of the PLI. 31. The ld Authorised Representative submitted that this company is engaged in investment banking, BPO, arbitration and dispute resolution services and does not have segmental analysis of the financials of various verticals. 32. The ld DR relied upon the order of the ld TPO. 33. We have carefully considered the rival contentions. The comparable company undisputedly is providing advisory services coupled with investment b....