TaxTMI 
TaxTMI 
2021 (10) TMI 1391
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.... orders are bad in law and void ab-initio. 2. That on facts and circumstances of the case and in law, the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO did not record any reasons in the draft assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. TPO for computation of the arm's length price, as is required under section 92CA(1) of the Act. 3. The Ld. DRP/Ld. AO/Ld. TPO erred in facts and circumstances of the case and in law by rejecting the Assessee's claim of being a low end IP support service provider (ITES) and recharacterizing it as a core software developer without providing sufficient opportunity to the Assessee and by selectively and narrowly interpreting the facts of the case. 4. The Ld. DRP/Ld. AO/Ld. TPO erred in facts and circumstances of the case and in law by making an addition of INR. 10,36,01,764/- to the returned income of the Appellant by recomputing the arm's length price of the international transactions under section 92 of the Act by: 4.1 Inappropriately applying the filters to arrive at a cherrypicked result; 4.2 R....
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....on the facts and circumstances of the case and in law, the Ld. DRP/Ld. AO/Ld. TPO erred in ignoring the fact that working capital adjustment already takes into account the impact of outstanding receivables on profitability and therefore, no further imputation of interest is warranted. 3. That on the facts and circumstances of the case and in law, the Ld. DRP/Ld. AO/Ld. TPO erred in ignoring the fact that even if the notional interest on delayed receivables is being charged, the same should be netted off against outstanding payables. 4. That on the facts and circumstances of the case and in law, the Ld. DRP/Ld. AO/Ld. TPO erred in not including the notional interest on delayed receivables as an operating item for computing operating margin of the Appellant. It is further submitted that the aforesaid additional ground of appeal does not involve any fresh investigation into facts of the case. The Appellant by way of this application, craves leave of the Hon'ble Bench to raise the aforesaid additional ground. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT: 229 ITR 383 as also the dec....
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....usiness is less than Rs. 5 crore. Rejected. 4 Caliber Point Business Solutions Ltd. FY December ending. Rejected. 5 Cepha Imaging Pvt. Ltd. Functionally not comparables.Rejected 6 Cosmic Global Ltd. Fails export Sales filter Rejected. 7 Coral Hub Ltd. (Vishal Info. Tech. Ltd.) Functionally not comparables. Rejected 8 Fortune infotech Ltd. RPT, Rejected 9 Informed Technologies India Ltd. Sales less than Rs. 5 crore. Rejected. 10 Infosys BPO Ltd. Accepted 11 jeevan Softech Ltd. (Seg.) Sales less than Rs. 5 crore. Rejected. 12 Jindal intellicom Pvt. Ltd. Accepted 13 Microgenetics Systems Ltd. Income from BPO business is less than Rs, 5 crore. Rejected. 14 R systems International Ltd. (Seg.) FY December ending. Rejected. 8. The TPO, in addition to the three comparables accepted from the assessee's chart selected further 5 comparables as under: S. No. Company Name 1 Acropetal technologies Limited(Seg) 2 ICRA Techno Analytics Limited 3 e4e Healthcare Business Services Pvt Ltd 4 Eclerx Services Ltd. 5 TCS E-Serve Ltd 9. Adopting average of 29.53%, th....
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.... the Company to a client base of global corporation in travel and hospitality industry and strengthened the Company's presence in Western Europe. eClerx equity shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. As on March 31, 2012 the market capitalization of the Company was Rs. 21,338 million. What We Do The Company supports critical processes for more than 50 clients that include global leaders in Financial Services, Manufacturing, Retail, Media, Travel and Hospitality. About 97% of our revenues come from Fortune 500 or Financial Times 500 clients." 15. Functional profile of Eclerx shows that it is a Knowledge Process Outsourcing (KPO) company and is providing domain specific reengineering expertise in partnership with financial services firms to increase control and execute ongoing functions. It is also providing consulting, business analysis and solution testing services which provides a broad suite of services that allows its clients to operate on day-to-day basis including trade processing, reference data, accounting & finance and expense management activities. Similarly, under sales and marketing services segment, as has be....
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.... provider on cost plus mark-up model with minimal risk. 19. Ld. AR for the taxpayer also contended that financial data of Eclerx in the public domain is not reliable one because turnover appearing in consolidated financial statements is not merely a sum of turnover of Eclerx (as per standalone financials) and its subsidiaries. Rather it includes the turnover of subsidiary companies and drew our attention to pages 821, 849 and 872 of the paper book which is tabulated as under :- xxxxx 20. So, the financials of Eclerx available in the public domain, referred to above, are not reliable rather include turnover of its subsidiary companies. 21. Eclerx has been found to be not suitable comparable vis-à- vis captive service provider by the coordinate Bench of the Tribunal in Ariba India Pvt. Ltd. vs. DCIT ITA No.5201/Del/2012. 22. So, in view of what has been discussed above, we are of the considered view that Eclerx is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded. 23. The taxpayer south exclusion of TCS E-Serve on grounds of functional dissimilarity; providing services predominantly to Ci....
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....the Assessee's entire segmental revenue is a mere 24 crores. As observed by this Court in its decision dated 5th August 2016 in ITA 417/2016(PCIT v. Actis Global Services Private Limited) "Size and Scale of TCS‟s operation makes it an inapposite comparable vis-a- vis the Petitioner." As already pointed out earlier there is a closer comparison of TCS E-Serve Limited with Infosys BPO Limited with each of them employing 13,342 and 17,934 employees respectively and making Rs.37 crores and Rs.19 crores as contribution towards brand equity. When Rule 10(B) (2) is applied i.e. the FAR analysis, namely, functions performed, assets owned and risks assumed is deployed then brand and high economic upscale would fall within the domain of "assets" and this also would make both these companies as unsuitable comparables. 28. The Director's report of TCS E-Serve Limited bears out the contention of the Assessee that both entities have been leveraging TCSs scale and large client base to increase their business in a significant way. The submission that the two comparables offer an illustration of "an identical transaction being conducted in an uncontrolled manner" overlooks the effect ....
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....ere is no difference in FAR analysis of the assessee during the year under consideration and in the subsequent Assessment Year i.e. 2012-13. 14. As mentioned hereinabove, this Tribunal has excluded E-clerx Services Ltd and TCS E-Serve Ltd. from the final set of comparables. Respectfully following the decision of this Tribunal, we direct the Assessing Officer/TPO to exclude E-clerx Services Ltd and TCS E-Serve Ltd. from the final set of comparables. Ground No. 4 with its sub grounds is, accordingly, allowed. 15. Ground No. 6 alongwith Ground Nos. 2, 3 and 4 from additional grounds relate to addition on account of alleged interest on delay in collection of receivables from the AEs. 16. The TPO found that there was a delay in recovering debts from AEs. The TPO was of the opinion that since it was agreed that the debts should be repaid within 45 days and hence there is a delay in recovering debts. The TPO was of the opinion that interest rate of 11.69% would be arm's length of level of interest that needs to be charged for deemed loans advanced for the period of receivables outstanding beyond the period stipulated in the service agreement/invoice and proposed an adjustment of ....
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....wing in the judgment: "Para 20 - The only other ALP adjustment in appeal before us is with respect to what the authorities below have treated as, excess credit period allowed to Micro USA. This adjustment must be deleted for the short reason that it was part of the arrangement that specified credit period was allowed and thus the cost of funds blocked in the credit period was inbuilt in the sale price. "" 23. We have been told that in the subsequent year, no addition has been made on this account and in earlier Assessment Year small additions were made which were not contested on the smallness of the amount. In light of the aforementioned observations of the Hon'ble High Court of Delhi, we are of the considered view that the figure of receivables mentioned elsewhere do not reflect a pattern and, as held by the Hon'ble High Court [supra], the assessee has already fettered the impact of receivable on the working capital which has been accepted by the DRP. 24. Considering the facts in totality in light of the decision of the Hon'ble High Court of Delhi in the case of Kusum Health Care [supra] we direct the Assessing Officer/TPO to delete the addition of Rs. ....
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....4 10 1,341,280 19-Jan-11 141 96 41,239 1,358,962 19-lan-11 111 66 28,726 1,358,330 19-lan-11 80 35 15.226 1,376,799 19-lan-11 10 So"1 5 2,205 31-Dec-10 31-lan-11 28-Feb-U 1,361,347 3-Oct-11 90 45 19,620 1,377,807 3-Oct-11 59 14 6,178 1,368,388 3-Oct-11 31 0 Australia CPA Global Software Services 31-Mar-11 582.234 3-Oct-11 0 0 Austell CPA Global Software Services 31-Mar-11 124,481 3-Oct-11 0 0 Total 144,754 Fransa CPA Global Software Services CPA Global Software Services Reangs CPA Global Software Services CPA Global Software Services CPA Globa! Software Services CPA Global Software Services Reana CPA Global Software Services CPA Global Software Services Fransa CPA Global Software Services CPA Global Software Services CPA Global Software Services Beasa CPA Global Software Services CPA Global Software Services 30-Apr-10 31-May- 30-Jun-10 31-Jul-10 31-Aug- 30-Sep-1G 31-Oct-10 BO-Nov- 31-Dec-10 31-lan-11 31-ian-11 28-Feb-11 31-Mar-11 2.124,259 2.139,565 14-Aug-10 21-Jun-10 52 7 75 30 4,762 20.557 Øمد 2,058,356 14-Aug-10 2,046.567 31-Auk-10 45 0 31 0 2,285.110 23-Feb-11 176....