TaxTMI 
TaxTMI 
2022 (5) TMI 97
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.... A. Order being bad in law 1. That on the facts and in the circumstances of the case and in law, the order passed by the Learned Deputy Commissioner of Income-tax, Circle 1(1)(1), Bangalore ("the AO") under section 143(3) read with section 144(C)(13) of the Act is erroneous and bad in law. 2. That on the facts and in circumstances of the case and in law, the Learned AO erred in assessing the returned income of INR 1,54,99,871 at INR 15,35,12,304. 3. The learned collegium of Commissioners comprising the DRP erred in law and on facts, by not adhering to the procedure laid down in section 144C(6) and 144C(7) of the Act. B. Transfer Pricing issues 4. The learned Transfer Pricing Officer ("TPO") has erred, in law as well as on facts while making the following adjustments in the order passed under section 92CA and holding that transactions between the Appellant and its associated enterprise ("AE") were not at arm's length. 5. The learned AO/TPO has erred, in law as well as on facts while incorrectly following the directions of the Hon'ble DRP and incorrectly computing an adjustment of INR 13,80,12,433 in the final asse....
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.... 16. The learned AO/DRP/TPO erred in law and on the facts of the case by using only the current year data for computation of arm's length price and ignoring the provisions of Rule 10B(3) of the Rules, international commentaries and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the purpose of determination of the arm's length price. 17. The learned AO/DRP/TPO erred in law and on facts by not taking into consideration foreign exchange fluctuation gain/loss and other income while computing the operating margin of the comparable companies. 18. The learned AO/DRP/TPO erred in law and on facts of the case by not providing a relief on account of differences in risk profile levels between the Appellant and the potential comparable for both Software support and BPO support services segments. 19. The learned AO/DRP/TPO-has erred in by failing to appreciate the fact that transfer pricing is an anti-avoidance mechanism and since the Appellant is registered as an entity registered under the STPI and has claimed tax benefits under section 10A of the Act, the TP adjustment was not required to be made in view o....
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....ost enhancing the income during the assessment proceedings. 27. The Learned AO erred in facts and in law, in initiating penalty proceedings u/s. 271(1)(c) of the Act in the absence of any concealment or furnishing of inaccurate particulars. 28. The assessee craves leaves to add/alter any of the grounds of appeal before or at the time of hearing." Assessee has raised the following additional grounds:- "Based on the facts and circumstances of the case and In law, Conduent Business Services India LLP (Erstwhile Xerox Business Services India Private limited) (hereinafter referred to as the 'Appellant'), respectfully craves leave to file additional grounds of appeal, In addition to the grounds of appeal filed previously by the Appellant on March 4,2016 (revised Form 36 filed on October 15, 2020), which is detailed herein below. 29. The learned AO/TPO/DRP erred In facts and In law, by excluding following comparables from-the-final list of comparables: (a) Microgenetics Systems Limited (b) Informed Technologies India Limited (c) Cosmic Global limited (d) Mindtree Limited (e) e4e Healthcare Business....
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....est of justice, we remit this issue to the file of the AO to consider the aggregate amount of provision for disallowance on leave encashment and AO has to decide the issue after giving opportunity of hearing to the assessee. 8. Ground No. 26 is with regard to non-granting of deduction under Section 10A of the Act on the enhanced assessed income. This ground is academic only. Accordingly, this ground does not require any adjudication as we have remitted Ground No. 25 to 25.2 to AO for fresh consideration. However, this ground is kept open to argue in appropriate stage if so warranted. 9. Ground No. 27 is with regard to initiating penalty proceedings under Section 271(1)(c) of the Act, which does not require adjudication at this stage. 10. Further, Ground No. 28 is only consequential. 11. With regard to ITES segment (Ground 29(a)(b) & (c) which are not pressed, accordingly dismissed as not pressed. 12. Ground No. 29 and additional ground with regard to ITES segment in ground No. 29(d) and 29(e), assessee wanted inclusion of the following comparables:- i) Mindtree Limited ii) e4e Healthcare Business Services Pvt. Ltd. 12.1. It is noted that the Depa....
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.... the ALP artificially. The contrary view expressed in decision cited by the learned DR takes the view that Working capital adjustment is required in all cases as any credit extended to customers will result in cash "locked up and will result in the assessee borrowing money from the banks and incur additional cost towards interest on these borrowings which cost will have effect on the price charged. It is the reasoning in these decisions that under TNM method that every ingredient of profit margins of comparable companies are analysed, whether it is positive or negative. The decision proceeds on the basis of effect on price owing to working capital requirement. We are of the view that working capital adjustment itself is computed on the basis of outstanding current assets and liabilities at the year end. It means that other things being equal, an entity having higher working capital will incur more interest cost which will reduce profitability. Hence no importance shall be given to pricing aspect. Since the assessee does not have any working capital risk, the question of negative working does not arise." 15.1. Respectfully following the above order of the Tribunal we are of the o....
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.... held as under: "The company is engaged in the business of software development services, contract centre service and IT enabled services and the same are reported together as one segment. In the absence of segmental details made available, the company could not be treated as a comparable. The TPO, while choosing the company as a comparable, has selected its Engineering Design Segment (EDS) which is in the nature of high end IT enabled services which are in the nature of Knowledge Process Outsourcing (KPO). The high end services provided by the company cannot be compared with the routine services provided by the assessee. This company is therefor to be excluded from the list of comparable companies." In view of the above order of the Tribunal, the above said company is to be excluded from the list of comparables. iii) e4-e Healthcare Business Services Pvt. Ltd. and Mindtree Ltd.: As discussed in the earlier part of this order vide para 15, these companies are excluded while deciding the assessee's appeal. Accordingly, these companies are excluded from the list of comparables. iv) Infosis BPO Ltd.: After hearing both the partis this company is excluded in the c....
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.... effect. This company is therefore excluded as comparable company." In view of the above order of the Tribunal, the above said company is to be excluded from the list of comparables. vi) Igate Global Solutions: This has been excluded in similar circumstances in the case of TRX Technologies India Pvt. Ltd. in IT(TP(A) No. 487/Bang/2916 for AY 2011-12 dated 25.09.2020 wherein it is held as under:- "As far as iGate Global Solutions Ltd., is concerned, DRP rejected this company as comparable company for the reason that the details regarding its diverse functions are reported under one segment without segmental details regarding the same being made available. Therefore, the comparability of the company cannot be determined. It is seen that iGate is engaged in provision of varied services and no segmental breakup of the same is available in its Annual Report. Further, the company's' software services segment is clubbed with its ITES segment and there is no breakup between the revenues generated from the two segments. During the year under consideration, the company has acquired majority equity interest in Patni Computer Systems Ltd. rendering it incomparable due to....