TaxTMI 
TaxTMI 
2022 (6) TMI 340
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....of Rs. 13,64,66,410/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as: the Act).The case was selected under CASS and notice under section 143(2) of the Act was issued on 10.08.2018 and served on the assessee. Further notices under section 142(1) of the Act were issued along with questionnaire electronically. During scrutiny assessment proceedings, various information and details related to the assessee company were called for and verified. After verification of the information as available on record, the information filed by the assessee during the course of assessment proceedings. The order under section 92CA(3) of the Act was passed on 30.01.2021. An adjustment of Rs 7,16,92,181/- was made on account of international transactions to the income of the assessee. Draft order u/s. 144C of the Act was passed on 31/03/2021. After receiving the draft order u/s. 144C of the Act, the assessee filed objection in Form 35A before Dispute Resolution Panel. Ld. DRP vide order dated 10.11.2021 has called for inclusion / exclusion of certainfilters after verification and directed the adjustment u/s 92CA on account of international transactio....
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....t in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('Rules'); 4.2 rejecting comparability analysis undertaken by the Appellant in the TP documentation and conducting a fresh comparability analysis based on application of additional/ revised filters, and disregarding Appellant's filters in determining the ALP for the international transactions; 4.3 disregarding and ignoring the submissions/ rebuttals against the rejection reasons provided in the show cause notice on the comparables accepted by the Appellant in its TP documentation, based on its surmise and conjecture without adequate supporting or evidence; 4.4. including certain companies in the final set of comparables that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 4.5 considering the entity-wide return on total cost ('ROTC') of R Systems International Limited instead of considering the segment ROTC of the comparable segment i.e. business process outsourcing ('BPO') services segment; 4.6 rejecting Sundaram Business Services Ltd from the set of comparable companies on ground of it being a "pe....
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....l No. 1 to 4.7 and 4.9 to 4.11 will become academic in nature on considering the Assessee's Ground No.4.8. He further contended that if Infosys BPM Ltd. is excluded, the margin would be within 5% and in such event the Assessee's international transaction is at Arm's Length. Therefore, the additions will not sustain. 5. The Ld. Counsel for the assessee submitted that, Ld. TPO and DRP banking on the annual report, came to the conclusion that, Infosys BPM is engaged in IT enabled and BPO Services which are similar to the services provided by the assessee. Further contended that, the Infosys BPO cannot be considered as comparable to the assessee due to difference in the functional profiles, further the Infosys BPO has created a brand name itself in the market and made significant investment in creating such intangible. The assessee has revenue recognition policy based on total cost plus mark up basis, while Infosys BPO recognizes revenue on time material fixed price fixed time frame and united price basis. The Ld. AR relied on the decision of the Coordinate Bench of the Tribunal in Assessee's own case in G.E. India Services Pvt. Ltd. Vs ACIT in ITA No 5503/Del/2016 Assessment Year 2....
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.... 31st of March 2012 is 11.98% and therefore its international transactions are at arm'slength. 7. The learned transfer pricing officer passed an order u/s 92CA (3) of the act on 20 January 2016 wherein he proposed the upward adjustment of Rs. 4 67,76,784/- to the international transactions of the assessee. The assessee filed objection before the learned Dispute Resolution Panel which passed a direction to the TPO and based on these directions the learned transfer pricing officer as per order dated 17/8/2016 computed the arm's-length price of the international transaction wherein 9 comparable companies were retained having their profit level indicator of operating profit/operating cost (OP/OC) was determined at 25.65% further their adjusted margin was determined at 21.96%. Thereafter the operating cost incurred by the assessee of Rs. 327,343,333/- was used against the international transactions of Rs. 373,335,650/- and the final adjustment was made of Rs. 25,892,279/-. 8. In the final list of comparables, the learned transfer pricing officer included the E Clrex services Ltd having margin of 49.49%, Infosys BPO Ltd having margin of 34.39% and TCS E serve Lt....
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.... been given by the learned transfer pricing officer which is been upheld by the learned dispute resolution panel with respect to all three comparables. 11. With respect to the various orders of the coordinate benches in assessee's own case submitted by the learned authorized representative he referred to each of them and submitted that the coordinate bench has directed the learned transfer pricing officer to exclude all these three comparables for all the above years following comparability analysis in some other judicial precedent. He submitted that if in case of company X if comparable Y is excluded, there is no reason to exclude that comparable Y in every other case. He submitted that this is neither the essence of the comparability analysis nor it supports the logic. He submitted that for each of the comparable companies only the functions performed by the company, assets employed by the company and risks assumed by the company are required to be compared. He further submitted that judicial precedents cannot be used in such a blatant manner for exclusion of one comparable if excluded in case of one assessee to be always excluded for all other assesses. 12.....
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....ce which is as under: Since the margin would be within plus or Minus 5%, the Assessee's international transaction is at Arm's Length, the said fact has not disputed by the Ld. D.R. Therefore, the addition made in the issue under consideration will not sustain. 10. The Grounds of appeal No. 5 to 5.4 are in respect of working capital adjustment. The Ld. AR submitted that allowing working capital adjustment which has been already allowed by the Hon'ble DRP demonstrates that differential impact of working capital of the assessee vis-à-vis its comparable has already been factored in the price/profitability of assessee which is in line with Arm's Length principle when compared to comparable companies. Therefore, any further adjustment to the income of the assessee on the pretext of outstanding receivables is unwarranted to substantiate the contention. The Ld. AR has relied on the decision of Hon'ble High Court in the case of Kusum Healthcare Pvt. Ltd. in ITA No. 6814/Del/2014 wherein it is held as follows:- "11............ With the Appellant having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability v....