TaxTMI 
TaxTMI 
2022 (3) TMI 252
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.... are against the final assessment order dated 29.01.2015, passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 ("the Act") by the Assessing Officer for the assessment year 2010-11. ITA no.1711/Mum./2015 Revenue's Appeal - A.Y. 2010-11 2. The Revenue has raised following grounds in its appeal:- "1. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel erred in deleting the addition of Rs. 7,78,15,295/- by reinstating comparable namely M/s C G Vak Software & Exports Ltd. on the ground that it was not a loss making company for the past three consecutive years although the TPO has given factual finding in the order that it was a loss making company since F.Y. 2....
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.... the assessee used Transactional Net Margin Method ('TNMM') as the most appropriate method with Profit Level Indicator ('PLI') of Operating Profit to Operating Cost ('OP/OC'). The assessee computed its own PLI at 14.21% as against that of comparables at 10.68% and claimed that the international transaction of 'Provision of ITeS Services' was at arm's length price ('ALP'). Further, in respect of 'Provision of Research Support Services', the assessee similarly adopted TNMM as most appropriate method with OP/OC as PLI. The assessee computed its own PLI at 26.17% as against that of comparables at 23.21% and claimed that the international transaction of 'Provision of ITeS Services' was at ALP. 6. The Assessing Officer made reference to Transf....
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....e Resolution Panel ('DRP'), vide direction dated 13.11.2014 issued under section 144C(5) of the Act, inter-alia, accepting the objections filed by the assessee directed inclusion of M/s CG VAK Software & Exports Ltd. (segmental) as a comparable for the purpose of benchmarking the international transactions pertaining to 'Provision of ITeS Services' and 'Provision of Research Support Services'. Accordingly, the DRP directed deletion of total transfer pricing adjustment of Rs. 7,78,15,295 proposed by the TPO. 9. Being aggrieved by the directions issued by DRP, the revenue is in appeal before us. During the course of hearing, Smt. Vatsalya Jha, learned Departmental Representative ("learned DR"), appearing for the Revenue, vehemently relied ....
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...., we find that the company had earned profit of 3.81% in financial year 2008-09 and profit of 0.29% in financial year 2009-10 in the BPO segment. Thus, M/s CG VAK Software & Exports Ltd. (segmental) does not satisfy the criteria of being a persistent loss making company, as in 2 out of 3 past consecutive financial years the company was earning profit. Accordingly, we are of the view that the DRP has rightly directed inclusion of M/s CG VAK Software & Exports Ltd. (segmental) as a comparable for benchmarking the international transactions pertaining to 'Provision of ITeS Services' and 'Provision of Research Support Services'. As a result, ground no. 1 raised in Revenue's appeal is dismissed. 11. Ground No. 2 and 3 raised by the Revenue ar....
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....urnover. From the entire order passed by the TPO, it is evident that the functional similarity of relevant segment of M/s CG VAK Software & Exports Ltd. with the assessee has not been doubted. The Revenue now seeks exclusion of the comparable on quantitative basis. While reckoning the comparability analysis under TNMM, the main emphasis is on net margin realized on the transactions undertaken and not the price of the product or services. The transfer pricing rules under Rule 10B and Rule 10C also contemplate for eliminating the material effects and to make reasonably accurate adjustment for eliminating the differences on account of such material effects. Mere circumstance of a company, which otherwise confirm to the comparability analysis i....