TaxTMI 
TaxTMI 
2023 (2) TMI 1104
X X X X Extracts X X X X
X X X X Extracts X X X X
....erprise (AE's) and therefore income from providing "Call Support Services", "Back-office Support Services" and "Offshore Development Support Services", had to be determined having regard to Arm's Length Price (ALP) as laid down in Sec.92 of the Act. 3. During the Assessment Year 2004-05, the Transfer Pricing Officer (TPO) vide order dated 15.12.2006 passed u/s.92CA of the Act, determined ALP of the aforesaid 3 international transactions and consequently additions were made to the total income by way of transfer pricing adjustment towards the call centre support services, back-office support services segments and SWD segments. Thereafter, an Assessment Order dated 27.12.2006 came to be passed incorporating the aforesaid TP adjustment. Aggrieved by the aforesaid assessment order, the assessee preferred an appeal before the CIT(A), who vide order dated 26.03.2009 upheld the TP adjustment. Aggrieved, the assessee preferred an appeal before the Tribunal. Upon hearing the parties, the Tribunal vide order dated 21.04.2017 in IT(TP)A No.699/Bang/2009 granted partial relief. However, the Tribunal remanded the matter to the file of the TPO for fresh de novo consideration with respect to det....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e - 117.72% of Operating Cost Rs.30,59,10,723/- Revenue Received Rs.27,12,46,000/- Shortfall being adjustment u/s. 92CA Rs. 3,46,64,723/- 8. The addition of Rs.3,46,64,723/- consequent to determination of ALP by the TPO was incorporated by the AO in the draft order of assessment. The assessee filed objections before the DRP against the said draft order of assessment but the DRP rejected the contentions of the assessee and upheld the order passed by the TPO. Pursuant to the directions of the DRP, the AO passed the final assessment order wherein, the TP adjustment was sustained. Against the final order of assessment passed by the AO, the assessee has preferred the present appeal before the Tribunal. 9. At the time of hearing of this appeal, the learned counsel for the assessee submitted that the grounds of appeal which are being pressed for adjudication/consideration are the grounds with regard to including Concentrix Daksh Services India Private Ltd. and Tricom India Ltd. (Ground No. 2.2.1.4). 10. In so far as exclusion of the comparable company, Concentrix Daksh Services India Private Ltd. ("Concentrix"), is concerned, the learned counsel for the assessee submitted that thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e up with reliable data which proves that the year in which no involvement was made in R&D, the assessee earned less percentage of profit margin and the year in which assessee made involvement in R&D then was substantial increase in the profit margin percentage of the assessee. It is a fact that an ITES company uses software as a platform to deliver services. Such software could either tip indigenously developed or purchased. Therefore, the presence of software is an essential requirement to function and not an unusual asset." 12. In the submissions made before the DRP, the assessee, apart from reiterating stand taken before the TPO also pointed out that certain extra ordinary events took place during the previous year in as much as there was a takeover of Concentrix by the IBM. The contention of the assessee before the DRP and the remand report of the AO was considered by the DRP and the DRP upheld the inclusion of Concentrix. The AO in the remand report before the DRP submitted that the assessee has not demonstrated that how the engagement in R&D has impacted/identified as to how the engagement in R & D has impacted the profit margin percentage. Also, the assessee has not come ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by Concentrix was in the nature of high-end services and in this regard our attention was drawn to the annual report of Concentrix wherein the annual report makes a reference to the following aspects: ".....During the year under review. your Company has made an entry into two new verticals. Insurance and Technical Support. Your company has now five business units focusing on key verticals with marquee customers in each of the verticals. In terms of customer wins, your Company has won 5 new customers during the year. One of these is being transitioned. Further, the Company is in advanced stages of discussions with various Fortune 500 and other companies for business outsourcing. Your Company is in the fourth year of operations and witnessed an overall growth in all its business segments with a focus on entire spectrum of eCRM services. During the year, Company launched new services like collections, telemarketing, technical support thereby broadening the CRM services portfolios. The company also made a successful foray in back office by building insurance claims processing capabilities. During the year under review, your company has also set up its service delivery cen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee itself has adopted a filter of choosing companies with income from a major line of activities ≥ 50% of the total revenue selected for performing similar functions such as the assessee. It has also applied a filter of comparing companies performing broadly comparable companies of rendering services with similar cost structure. The TPO on his part has also adopted a filter whereby he has chosen companies having service income of 75% or more in each of the segments. We also notice that it has not been demonstrated as to how owning intangibles will render this company out of the ambit of comparability. In the given circumstances of the case, we are of the view that Concentrix was rightly included as a comparable company by the TPO. 18. In so far as the plea of the assessee for exclusion of Tricom India Ltd. ("Tricom"), is concerned, it was submitted that this company is functionally dissimilar to the assessee and ought to be excluded from the list of comparables. Unlike the assessee, Tricom is significantly engaged in research and development activity with a dedicated team for software research and development. Accordingly, the company develops unique software in house ....