TaxTMI 
TaxTMI 
2020 (6) TMI 761
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....net networks to perform its functions. The return of income was filed declaring a total income of Rs. 16,62,49,964/-. The same was processed u/s 143(1) of the Income tax Act, 1961 (hereinafter called 'the Act') and subsequently, the case was selected for scrutiny. 2.1 The international transaction(s) under taken by the assessee during the year under consideration was for the provision of support services as per the following chart: Sr. No. Name of address of the associated enterprise with whom the international transaction has been entered into Description of services provided to the associated enterprises Amount received/receivable for the services provided Method used for determining the arm's length [See section 92C (1)] As per books of account As computed by the assessee having regard to the arms's length price (Rs.) (Rs.) Clause 10(a) Clause 10(b) Clause 10(c) Clause 10(d) 1 Linus Services Limited 1st Floor, HSBC Centre, 18 Cybercity, Ebene, Mauritius Provision of IT Enabled Services 512,185,530 512,185,530 Transactional Net Margin Method (Refer to Note and a below) ....
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....the adjustment, who partly allowed the assessee's appeal and the average margin of the four comparables in the final set was recomputed at 26.86% thereby reducing the adjustment to 5.32 Crores. 2.5 Now, the assessee is before this Tribunal challenging order of the Ld. CIT (A) by raising the following grounds of appeal. "1. On the facts and in law, the Hon'ble Commissioner of Income Tax (Appeals)- 44 ("Ld. CIT(A)") erred in partially confirming the addition made by the Learned Transfer Pricing Officer (hereinafter referred to as ''Ld. TPO") and the Learned Assessing Officer (hereinafter referred to as "Ld. AO") under section 92CA of the Income Tax Act, 1961 ("the Act") 2. On the facts and in law, the Ld. CIT(A)/ Ld. AO/ Ld. TPO erred in violating the provisions of Rule 10B(2) of the Income Tax Rules, 1962 ('the Rules') in rejecting Caliber Point Business Solutions Ltd. 3. On the facts and in law, the Ld. CIT(A)/ Ld. AO/ Ld. TPO erred in violating the provisions of Rule 10B(2) of the Rules in rejecting Datamatics Financial Services Ltd. 4. On the facts and in law, the Ld. CIT(A)/ Ld. AO/ Ld. TPO erred in violating the provisions of....
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.... Ld. Authorized Representative fairly admitted that this was assessee's comparable in the transfer pricing study but the assessee had the right to pray for its exclusion as it was inadvertently included by it in its Transfer Pricing Study. The Ld. Authorized Representative submitted that it was settled law that a tax payer is allowed to revisit its position taken in the transfer pricing documentation if the same is found to be incorrect. It was also argued that the purpose of Income Tax Assessment is to determine the correct income of the assessee and although the Revenue cannot allow an assessee to depress its income, in the same manner, it is not permissible for the Revenue to take advantage of the mistake of the assessee in offering more than due income to tax. The Ld. AR submitted that Infosys Ltd. could not be included in the final list of comparables as it is a 'giant' as compared to the assessee company and having a turnover of more than 12 times the turn over the assessee. It was submitted that Infosys BPO Ltd. was among the top 10 third-party BPO Companies in India, whereas the assessee did not stand anywhere close to the size of this company. The assessee also pointed out....
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..... CIT (A). The Ld. Authorized Representative highlighted the fact that there was no disclosure of any extraordinary/exceptional items requiring a separate disclosure in the statement of profit and loss of the said company. The Ld. AR also argued that this company was functionally similar to the assessee company and that the functional similarity of this company with the assessee company had not been disputed either by the TPO or by the Ld. CIT (A). (iv) The Ld. AR submitted that as per the appeal memo, the company Datamatics Financial Services Ltd. was being challenged for non inclusion in ground No.3 but the same was not been pressed in view of the fact that the same had became academic in nature. (v) The Ld. Authorized Representative further argued that in Ground No. 6, the assessee was challenging the incorrect computation of operating margin of e4e Health Care Business Services Pvt. Ltd. at 31.03% instead of 19.52%. The Ld. AR submitted that at the TPO in the case of this company treated provision for bad debts as non-operating in nature and the Ld. CIT (A) had affirmed the action of the TPO. It was submitted that the lower authorities had placed reliance on R....
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....al results of the company. (iii) With respect to Caliber Point Business Solutions Ltd., the Ld. Sr. DR submitted that although no extraordinary event has been specifically pointed out, fall in profitability from 21.16% to 11.04% indicated a sufficient extraordinary event. (iv) With respect to assessee's claim of incorrect computation of margins in the case of ICRA Techno Analytics Ltd., and e4e Health Care Business Services Pvt. Ltd., the Sr. DR placed reliance on the findings of the Ld. CIT (A). 5.0 We have heard the rival submissions and also perused the material on record. We have also gone through the relevant portions of the paper books filed by the assessee. We now take up grounds one by one for adjudication: (i) Ground No.1 is general in nature, not requiring any separate adjudication. (ii) Ground No.2 challenges the rejection of the comparable Caliber Point Business Solutions Ltd. In this regard, it is seen that this comparable, selected by the assesee company, was rejected by the TPO on the ground that this company followed a different accounting year. The Ld. CIT (A) has upheld the rejection by noting that although companies with different accou....
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....ounting year. The Ld. CIT (A), however, accepted the assessee's contention that companies with a different accounting year may be accepted but he raised concerns on the authenticity of the audited financial results of the company. The Ld. CIT (A), however, has not pointed out has to how the authenticity of the financial results of this company was being doubted. Thus, the rejection of the comparable by the Ld. CIT (A) is more on some kind of suspicion rather than being supported by any cogent data. As we have already mentioned in the preceding paragraphs, a comparable cannot be rejected merely because of a different financial year ending and now there are numerous orders of the Tribunal in this regard. We again refer to order of the ITAT Delhi Bench in the case of Xchanging Technology Services India Private Limited vs. DCIT (ITA No.1222/Del/2015) wherein this company was directed to be included. Since, the Ld. CIT (A) has not indicated any basis for suspecting the reliability of the financial results for this company, we direct that this company be included in the final set off comparables subject to the verification that the relevant data can be easily compiled from the audited st....
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....cting Infosys BPO Ltd. as a comparable on the ground of being a 'giant' company. In this case, the Tribunal, while ordering exclusion of this company, had relied on decision of the Hon'ble Delhi High Court in Agnity India Technologies Pvt. Ltd. The Hon'ble Delhi High Court noted that Infosys BPO Ltd. was a giant corporation. Similar observations were made by the Hon'ble Delhi High Court in the case of Avaya India Pvt. Ltd. (ITA No.532/2019 for Asst. Year 2010-11) wherein M/s TCS E-Serve Limited and M/s TCS E-Serve International Limited were held to be having high brand value and operating on a huge economic upscale and were, therefore, able to command and generate better profits making them functionally dissimilar to the assesee. The Hon'ble Delhi High Court noted that Infosys BPO Ltd. had been excluded by the ITAT for the very same reason. Similarly, ITAT Delhi Bench in the case of Cengage Learing India Pvt. Ltd. vs. DCIT (ITA No.6484/Del/2012) held that Infosys BPO Ltd. had huge turnovers, owns IPR and brand value on products and provides services to vast clientele. Under such circumstances this company cannot be accepted to be a fit comparable in case of assessee who is a captiv....