TaxTMI 
TaxTMI 
2022 (12) TMI 417
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....d the provision of Rule 10B(3) by Similarly treating foreign exchange fluctuation as non-operating cost/ revenue of the tested party as well as of the comparable to eliminate the difference, thereby leading to consistent and reliable basis for comparison ? 3. Whether the order of Ld. CIT(A) is perverse in rejecting the comparable M/s Infosys BPO Ltd. ignoring the fact that the company is a suitable comparable and engaged in the business of BPG service as that of the taxpayer'? 4. Whether the order of Ld. CIT (A) is perverse in rejecting the comparable M/s e4e Healthcare Services ignoring the fact that under TNMM exact comparable company is not required and broadly similar comparable is accepted for calculating the margin computation? 5. Whether the order of Ld. CIT (A) is perverse in rejecting the comparable M/s TCS E-Serve ignoring the fact that under TNMM exact comparable company is not required and broadly similar comparable is accepted for calculating the margin computation?" 3. The assessee has taken the following grounds in the cross objection:- "1. On the facts and in the circumstances of the case and in law, the Learned ("Ld.") Com....
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....ting Income (A) 550,704,635 Expenditure Personal Expenses 337,109,983 Admin and other expenses 133,778,613 Less : Bank charges (295923) Depreciation 687,088 Total Operating Expenditure (B) 471,279,761 Operating Profit C=A-B 79,424,874 Op. Profit/Op.Cost (%) 16.85% 5. TPO upon enquiry and in his own analysis computed the final set of comparables as under :- S.No. Name of Company OP/OC 1 Accentia Technologies Ltd. 11.95% 2 Eclerx Services Ltd. 58.4% 3 Informed Technologies India Ltd. 7.62% 4 Infosys B P O Ltd. 36.75% 5 Jindal Intellicom Ltd. -0.05% 6 T C S E-Serve Ltd. 63.69% 7 e4e Healthcare Services Pvt Limited 19.85% 8 Acropetal Technologies Ltd. (Segment) 18.32% Average 27.06% 6. Apart from the above, AO in his computation has also removed foreign exchange gain from the operating income. 7. The TPO vide his order dated 29.01.2016 has enhanced the income by making adjustment of Rs.8,10,68,752/- being the ALP international transactions relating to services provided by the assessee company to its AEs. 8. First issue ra....
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....the Safe Harbour Rules which were notified by the Revenue authority and came into force in 2013. In these circumstances, given that the present assessment period covers AY 2011-12, the treatment cannot be in accordance with those rules as held in 'Principal Commissioner of Income Tax Vs. M/s Cashedge India Pvt. Ltd., ITA 27912016', decided on 04.05.2016. Consequently, no question of law arises." 13. Thus, from the above, it is apparent that the issue is covered in favour of the assessee and the Safe Harbour Rule referred by the TPO are not applicable in the current assessment year. Hence we uphold the order of ld. CIT (A). 14. The next issue raised is that ld. CIT (A) has erred in rejecting the comparable, Infosys BPO Ltd.. The selection of Infosys BPO Ltd. was objected by the assessee before the ld. CIT (A) on the ground that the company is functionally different as it provides high end integrated services; that it has substantially high turnover; that it is an established player and market leader; that its revenue is 24 times that of the assessee; that it commanded premium prices by virtue of its brand; and submitted hence it is not comparable. For this proposition,....
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....ngaged in providing routine support services in the nature of data collection and analysis which is low end in nature bearing minimal risks. 6.6. Ld. A.R. has rightly placed his reliance upon the decision of Agnity India Technologies Pvt. Ltd. passed by Hon'ble Delhi High Court in I.TA.No. 3856/2010 wherein, it has been held that this comparable must be rejected on account of difference in risk levels assumed, huge revenues derived and the fact that they are market leaders. Hon'ble court held as under: "it is argued that the case of assessee is not comparable with Infosys Technologies Ltd., the reason being that the latter is giants in the area of development of software and it assumes all risks, leading to higher profit. On the other hand, the assessee is a captive unit of its parent company in the USA and it assumes only limited currency risk. Having considered these points, we are of the view that the case of aforesaid Infosys and the assessee are not comparable at all as seen from the financial data etc. of the two companies mentioned earlier in this order. Therefore, we are of the view that this case is required to be excluded. " 6.7. Since t....
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....services. It is also observed that segmental information in respect of this company is not available. The company is also a 100% EOU, under STPI guidelines. We are therefore inclined to accept the contention of the assessee that this company should be excluded as a comparable. Hence we direct the Assessing Officer to do so." 20. Finding the facts of the case similar to this case, ld. CIT (A) decided the issue in favour of the assessee. 21. Against this order, Revenue has filed appeal. We have heard both the parties and perused the records. 22. Ld. counsel of the assessee reiterated the submissions before the ld. CIT (A). No contrary decision has been cited before us. Hence, respectfully following the precedent as above, we uphold the order of ld. CIT (A). 23. The last issue in Revenue's appeal is that ld. CIT (A) has erred in excluding the TCS E-Serve. 24. The TPO has rejected this comparable. Before the ld. CIT (A), assessee submitted that this company is functionally different as it is engaged in providing high end ITES; that its operating revenue is 29 times that of the assessee; that it makes payment for the brand 'TATA'; that it owns intangibles in the form of s....