TaxTMI 
TaxTMI 
2022 (1) TMI 1083
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....on 143(3) of the Act, pursuant to the directions of the DRP, assessing the total income of the Appellant at Rs. 34,84,50,690, as against returned income of Rs. 23,32,06,570, is bad in law. 2. That on the facts and circumstances of the case and in law, the AO/ Transfer Pricing Officer ("TPO")/ DRP erred in making an upward transfer pricing adjustment of Rs. 11,52,44,123 in respect of the international transaction pertaining to provision of Information Technology enabled Support Services ("ITeS"), alleging the same to be not at arm's length in terms of the provisions of Sections 92C(1) and 92C(2) of the Act read with Rule 10D of the Income-tax Rules, 1962 ("the Rules"). 3. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in arbitrarily modifying/rejecting the economic analysis and quantitative/qualitative search filters, which has resulted in selection of final comparables, which are not comparable with the Appellant, having regard to its functional, asset and risk profile, for the purpose of benchmarking its international transaction of provision of ITeS. 4. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have err....
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....s. 23,32,06,570/-. During the year under consideration, the assessee company has made the international transaction with the associated enterprises and a reference in this regard was made to the Transfer Pricing Officer vide letter dated 12.01.2015 u/s 92CA(3) of the Income Tax Act, 1961 in respect of international transaction entered into by the assessee during A.Y. 2012-13. The TPO passed order dated 29.01.2016 thereby determining arm's length price of the international transaction adjustment at Rs. 152,29,92,122/-. Accordingly draft assessment order was passed on 29.02.2016. Being aggrieved by the draft assessment order, the assessee filed objections before the DRP and the DRP vide directions/order dated 30.06.2016 directed the TPO to recomputed the Arm's Length Price adjustment. The Assessing Officer passed the assessment order dated 31.08.2016, thereby making addition of Rs. 11,52,44,123/- and assessed the income at Rs. 34,84,50,690/-. 4. Being aggrieved by the assessment order, the assessee filed present appeal before us. 5. The Ld. AR submitted that Ground No. 1 to 3 are general in nature. As regards Ground No. 4, relating to erroneous classification of the assessee as a K....
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.... upon the Assessment Order, order of the TPO and the directions of the DRP. 7. We have heard both the parties and perused the material available on record. It is pertinent to note that the Revenue at no point of time disputed the functions of the assessee company. The assessee company provides back office support services to AEs with the help of tools, infrastructure and training provided by the AEs which is different than the functions of the KPO. Besides this, the DRP has admitted that the Safe Harbour Rule will not be applicable in assessee company's case. Thus, classification of the assessee as a KPO by applying safe harbor Rules is totally out of context and does not get any support from the evidences before us. Therefore, the directions of the DRP as well as the observations made by the TPO and thereafter comparing the assessee company with that of high end KPO for benchmarking ALP determination of the comparables is not correct. Hence, Ground No. 4 is allowed. 8. As regards Ground No. 5, relating to incorrect inclusion of comparables by the TPO/DRP, the Ld. AR submitted that the inclusion of following comparables by the TPO/DRP is being challenged by the assessee in the in....
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....TA 417/2016 (Delhi High Court)) * Actis Global Services Pvt. Ltd. v. ITO (ITA No. 30/Del/2015) * DCIT v. DBOI Global Services Pvt. Ltd. (ITA No. 2136/Mum/2012) 8.2 The Ld. DR relied upon the order of the TPO. 8.3 We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the functions of the comparable company E-Clerx Services Ltd. is totally different than that of assessee company. In fact, the functions performed by E-Clerx Services Ltd. takes the nature of high end analytical and research services which require manpower of specific qualifications, skill sets and domain knowledge in contrast to the Assessee rendering back office support services. E-Clerx Services Ltd. works on outsourcing model and outsources substantial amount of work. In the subject year, 22.07% of the total cost of the company that has been paid to the outside vendors for availing of IT enabled services. As such it cannot be compared to the Assessee which provides in-house back office services to AEs. The Tribunal in AY 2009-10 in assessee's own case rejected E- Clerx Services Ltd. as a comparable and the functions of this comparable has not cha....
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....nfosys BPO has high value of goodwill. Infosys BPO owns significant intangibles. Infosys BPO acquired Portland Group Pty. Limited during the FY 2011-12. The acquisition has enhanced the presence of Infosys BPO in high end sourcing and procurement space in Asia Pacific Region. Thus, this comparable company has to be excluded from the set of final comparables. We direct the TPO/AO accordingly. 9. As regards Ground No. 6 relating to incorrect exclusion to certain comparables by the TPO/DRP, the Ld. AR submitted that the exclusion of following comparables by TPO/DRP is being challenged by the assessee in the present appeal. 9.1 Caliber Point Business Solutions Ltd.: The Ld. AR submitted that this comparable company cannot be rejected only on the ground of different financial year ending. Company is functionally comparable, this fact has not been disputed by the TPO or DRP. Caliber Point Business Solutions Ltd. is a provider of IT solutions and Business Process Outsourcing (BPO) services. This comparable company meets all quantitative filters applied by the TPO. It is settled law that a comparable, otherwise functionally comparable, cannot be rejected merely because it follows a diffe....
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....heard both the parties and perused all the relevant material available on record. It is pertinent to note that as we have observed hereinabove in respect of Ground No. 4, the assessee is not a high-end KPO. Jindal Intellicom Ltd. passes all the filters applied by the TPO and it is functionally comparable to the assessee. In fact, in preceding year 2011-12, the said comparable company was accepted by the TPO/DRP and the functions remain same. No distinguishing facts were brought on record by the Ld. DR. Hence, we direct the TPO/AO to include this comparable company in final set of comparable. 10. Thus, Ground No. 6 is allowed. 11. As related to Ground No.7 relating to erroneous treatment of foreign exchange gain/loss as non-operating by applying Safe Harbour Rules, the Ld. AR submitted that foreign exchange fluctuation is inextricably linked with the assessee's business operation. The foreign exchange gain was on account of the following reason: (a) Difference in the exchange rate prevailing at the time of invoicing & payment for the inter-company billing; (b) Difference in exchange rates prevailing at the time of transaction and as on 31.3.2012 for the amount outstanding at t....