TaxTMI 
TaxTMI 
2019 (11) TMI 1714
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....ions was referred to the TPO u/s 92CA of the Act. The Ld. TPO, observed that the assessee has benchmarked the transactions under three segments, namely, (i) software distribution, (ii) software development and related IT services; and (iii) Shared services. He observed that the first two segments are at ALP and therefore did not propose any adjustment. However, with regard to shared services, he observed that the assessee's PLI was 10.13% and that the assessee has short listed six comparable companies whose PLI was 13.24%. He analysed the transaction and found the TP document of the assessee to be defective and therefore rejected the same and conducted fresh search by adopting TNMM as the most appropriate method. He accepted only two companies selected by the assessee as comparable to the assessee and rejected the balance four companies. Thereafter, arrived at the following set of comparables:- 1. Accentia Technologies Ltd. 2. Datamatics Global Services Ltd. 3. Eclerx Services Ltd. 4. e4e Health Care 5. Informed Technologies India Ltd. 6. Infosys BPO Ltd. 7. Jindal Intellicom ltd. 8. Microgenetic Systems Ltd. ....
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....tion of the Ld. TPO in selecting Accentia Technologies Limited as a comparable. 2.2 On the facts and in the circumstances of the case and in law, the Ld. TPO, erred in and the Hon'ble ORP further erred in upholding/ confirming the action of the Ld. TPO in selecting Accentia Technologies Limited as a comparable, without appreciating the said company provided high end KPO Services, employed significant intangible assets, possessed brand value, had high onsite expenditure and abnormal growth patterns and had undergone a change in business model and therefore the same was not functionally comparable to the Appellant. 2.3 On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble ORP further erred in upholding/ confirming the action of the Ld. TPO in selecting Accentia Technologies Limited as a comparable without appreciating that it carried out Medical Transcription, Billings and collections as well as Coding services without any segmental break-up and therefore the same was not functionally comparable to the Appellant. 2.4 On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and th....
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....pholding / confirming the action of the Ld. TPO in selecting Eclerx Services Limited as a comparable without appreciating that on the same facts the said company had been rejected as comparable by the Hon'ble DRP in the immediately preceding Assessment Year in the Appellant's own case. 5. E4e Healthcare Business Services Private Limited 5.1. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in not considering the correct margin ofE4e Healthcare Business Services Private Limited. 6. Infosys BPO Limited 6.1. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in selecting Infosys BPO Limited as a comparable. 6.2. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/ confirming the action of the Ld. TPO in selecting lnfosys BPO Limited as a comparable, without appreciating that the said company provided high end int....
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....on'ble DRP in the immediately preceding Assessment Year. 9. Cross Domain Solutions Private Limited 9.1. On the facts and in the circumstances of the case and in law, 'he Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting Cross Domain Solutions Private Limited as a comparable. 9.2. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in selecting Cross Domain Solutions Private Limited as a comparable, without appreciating that the said company provided business excellence services, market research and data analytics, and therefore, the same was not functionally comparable to the Appellant. 9.3. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in not considering the correct margin of Cross Domain Solutions Limited. Incorrect rejection of com-parables 10. Jeevan Scientific Technologies Limited On the facts a....
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....lant or the TPO) ought to have been rejected. 15. On the facts and in the circumstances of the case and in law, Ld. TPO erred in and the" <u' Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in conducting f a fresh benchmarking which was erroneous and liable to be rejected since the Ld. TPO: i. Used lower turnover filter without the application of an upper turnover filter, thereby disregarding the importance of turnover in the benchmarking of comparables ii. Selected certain companies wherein peculiar economic circumstances / extra-ordinary events had occurred during the relevant year iii. Selected companies which were not comparable to the Appellant iv. Selected companies earning abnormal profits v. Used Related Party transaction filter of25 percent as against 10-15 percent vi. Used arbitrary filter of export sales applying a threshold limit of25 percent vii. Rejected of companies having a different Financial Year ended without appreciating that the results for the relevant financial year could be reasonably extrapolated from the Financials of the impugned companies, availa....
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.... in law are liable to be quashed. LEVY OF INTEREST UNDER SECTION 234A, 234B & 234C OF THE ACT 21. On the facts and in the circumstances of the case and in law, the Ld. AO erred in and the Hon'ble DRP further erred in upholding I confirming the action of the Ld. AO in levying interest uls 234A, 234B and 234C of the Act and the said levy of interest being wholly unjustified, ought to be deleted. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the Honorable Members to decide this appeal according to law". 3. At the time of hearing, the ld. Counsel for the assessee submitted that the TP adjustment and the comparables adopted for arriving at the ALP under similar facts had arisen in the assessee's own case for the A. Y 2011-12 and also the subsequent assessment years 2013-14 and 2014-15 respectively. He submitted that similar orders were passed by the TPO and DRP in the earlier and subsequent assessment years and the Tribunal, after considering the issue at length, has passed the orders and therefore, the issues involved....
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.... into ITES. He submitted that according to the TPO, the companies viz., Accentia, Acropetal, eClerx, Infosys and TCS are also into ITES segment, but, has not considered the functional dissimilarities in their services. He further submitted that the DRP has appreciated the functional dissimilarities and has, thus, rightly directed their exclusion. Having regard to the rival contentions and the material on record, we find that the DRP has directed the exclusion of the above companies on the following grounds:- (1) Accentia Technologies Limited:- This company is engaged in e-prescription and document management including coding, billing, bills payments management, account receivables management and ad-hoc reporting. This company is providing specified services as against the routine ITES services provided by the assessee. (2) Acropetal Technologies Limited:- On perusal of the annual report of this company which shows that the revenue is earned from engineering design services segment, and the ITAT, Bangalore Bench in the case of Symphony Marketing Solutions India Pvt. Ltd. Vs. ITO (IT (TP) A No. 1316/Bang/2012) has directed to exclude the above company on the very sa....
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....he material on record, we find that this company has been held to be a KPO service provider whereas the assessee has been categorised as a BPO by the TPO & DRP. Having held so, the said company cannot be treated as a comparable to the assessee. Further, in the assessee's own case for the earlier A.Y (to which both of us are signatories), we have held that this company cannot be a comparable to the assessee. Since there is no change in the activities of the said company, we do not find any reason to take any other view and therefore, we direct the AO/TPO to exclude this company from the final list of comparables. Respectfully following the above decision, we direct the AO/TPO to exclude, 1) Accentia Technologies Ltd, 2) TCS E-Serve Ltd., and 3) Eclerx Services Ltd., from the final list of comparables. 7.2 Ld. Counsel for the assessee had also relied upon the decisions of various High courts to support his argument that TCS E-Serve Ltd. has also high brand value, due to which, the case of the assessee cannot be compared with TCS E-Serve Ltd. The decisions relied upon by the ld. Counsel for the assessee are as under: 1. Pr. CIT Vs. BC Management Services (P) Ltd., [....
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.... objection for considering the said company as comparable, provided the correct margin of the company is taken into consideration. In view of the above statement of the ld. Counsel for the assessee, we direct the AO/TPO to consider this company as comparable to the assessee by adopting correct margin of the said company. Therefore, the ground of assessee against adoption of this company is partly allowed for statistical purposes. 7.5 As regards Jindal Intellicom Ltd. also, ld. Counsel for the assessee is seeking adoption of correction margin of the said company, therefore, the AO/TPO is directed to adopt the correct margin of this company before arriving at the ALP of the transaction. Thus, the ground of appeal against adoption of this company is also partly allowed for statistical purposes. 7.6 As regards Cross Domain Solutions Pvt. Ltd., the ITAT in assessee's own case for the subsequent AYs 2013-14 and 2014-15 at paras 57 & 58 of its order has held this company to be a KPO. The relevant paras are reproduced hereunder: "57. As regards Cross Domain Solutions Ltd is concerned, the case of the assessee is that it is functionally dissimilar as it renders KPO services. ....