TaxTMI 
TaxTMI 
2018 (6) TMI 1822
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....its AE. The assessee was compensated at cost plus 15% mark up basis by its AE. The assessee adopted Transactional Net Margin Method (TNMM) to benchmark its transactions with AE by adopting PLI as "operating profit to operating cost, i.e., OP/OC". The PLI of the assessee worked out to 15.15% for the year under consideration. The assessee selected following comparables and arithmetic mean of PLI of these comparables worked out to 9.48%. Sr.No. Name of the company Weighted average 1 Future Capital Holdings Limited (2.23) 2 ICRA Management Consulting Services Ltd. 5.02 3 ICRA Techno Analystics Ltd. 8.56 4 IDC (India) Ltd. 15.66 5 Informed Technologies India Ltd. 20.39 Arithmetic mean 9.48 Accordingly the assessee submitted that its transaction of receipt of fees from AE was at arm's length. 3. The AO referred the matter of determination of Arms Length Price (ALP) of the transactions entered with AE to the Transfer Pricing Officer (TPO). The Learned TPO noticed that he had classified the assessee as Knowledge Process Outsourcing (KPO) company in AY 2008-09, i.e., in the immediately preceding year and....
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....ained detailed record of the methodological search process and it was done as per procedures outlined in the Transfer Pricing regulations and in good faith to comply with all the provisions of law and to provide a true and fair analysis that was undertaken with fair and prudent business intent. (ii) During the course of the hearing your good-self never pointed out any deficiency in the methodical search adopted by the company nor any deficiencies/anomalies in respect of the comparables arrived at by the Company. (iii) The assessee has neither been provided the search process followed to identify the companies provided above, nor provided it with the margin computation of any of these purported comparable companies. (iv) Out of the four above mentioned companies proposed to be used as comparables, the assessee is of the view that Cosmic Global Ltd., Eclerx Service Ltd. and Coral Hub Ltd. (formerly Vishal Information Technologies Ltd.) are not comparable to the assessee. 6. The TPO was not convinced with the contention of the assessee and accordingly rejected TP study done by the assessee with following observations:- 7.4.2 The following pertine....
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....er to include IDC (India) Ltd. as comparable. Further the Learned DRP upheld the rejection of following comparable selected by the assessee. i) Future Capital Holdings Ltd. ii) ICRA management Consulting Services Ltd. The Learned DRP also upheld the view taken by TPO that current year data must be used for TP analysis and accordingly rejected multiple years data adopted by the assessee. 10. The revenue is aggrieved by the decision of Ld DRP in directing the AO to include IDC (India) Ltd as a comparable. The assessee is aggrieved by the decision of Ld DRP in not accepting its contentions. 11. We shall first deal with certain common contentions. The TPO has considered the assessee as a KPO company. We notice that the TPO has mainly followed the decision taken by him in the immediately preceding year, i.e., in AY 2008-09 for treating the assessee company as KPO company. The assessment order passed for AY 2008-09 has been challenged before the Tribunal and the ITAT has already passed its order on 12-09-2017 and the same is reported in (2017)(86 taxmann.com 169). Before the Tribunal, the assessee has challenged the decision of the tax authorities to treat the ....
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....f the view that IDC (India) Ltd should be included as a comparable." Before us, the revenue could not furnish any material to contradict the findings so given by Ld DRP. Accordingly we are of the view that the Ld DRP was justified in including IDC (India) Ltd as a comparable. Accordingly we reject the ground urged by the revenue. 15. The Ld A.R submitted that the profit of M/s IDC (India) Ltd has been adopted incorrectly at 15.66% and the same needs to be rectified. In the earlier paragraphs, we have observed that the Current year data should be adopted for determining the ALP and hence the matter of determination of ALP of comparables needs to be set aside to the AO. At that stage, this matter may be taken up by the assessee before the AO/TPO. 16. We shall now take up the appeal filed by the assessee, wherein the assessee is contesting inclusion of certain comparable and also exclusion of certain comparables. The assessee is objecting inclusion of Coral Hubs Ltd as a comparable by Ld DRP/TPO. The ld A.R submitted that the Ld DRP has excluded this comparable in the preceding assessment year. He submitted that the functional profile of this company is different and further ....
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....rvices like medical transcription, translation and software development, there are no pertinent information relating to Research and Development, conservation of energy and technology absorption and innovation that could be furnished." Since the functions are different and the business model is also different, we are of the view that there is merit in the contentions of the assessee that the above said company cannot be considered to be a comparable. Accordingly we direct the AO/TPO to exclude Cosmic Global Ltd as comparable. 21. The Ld A.R submitted that ICRA Management consultancy P Ltd should be included as comparable. He submitted that the co-ordinate bench has included the same in AY 2008-09. We find merit in the said submissions. Accordingly we direct the AO/TPO to include ICRA Management consultancy P Ltd as comparable. 22. The Ld A.R submitted that the Ld DRP has accepted that the functions of M/s Future Capital Holdings Ltd is comparable with the assessee. However, the Ld DRP has rejected the same on the ground that the Related Party Transactions (RPT) was in excess of 25%. He submitted that the Ld DRP has computed the RPT by including the reimbursements. He submi....