AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 1870
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....sequently the order of the assessing officer is bad in law for want of requisite jurisdiction. b) The assessing officer erred in not providing the copy of the approval granted by the Commissioner which is in violation of the settled principles of natural justice and thus the order of assessment needs to be set aside. 4. The addition of Rs. 64,16,427/- being adjustment under section 92CA of the Act made by the assessing officer is bad in law and thus the addition made needs to be deleted on the facts and circumstances of the case. 5. The TPO, DRP and the AO erred in rejecting the comparables selected by the appellant without giving any cogent reasons. 6. The TPO, DRP and the Assessing Officer erred in - a) Rejecting the TP study of the appellant. b) Rejecting the use of multiple year data while arriving at appropriate comparables. c) Rejecting companies having different financial year ending. d) Rejecting companies that have export sales less than 75% of the sales e) Rejecting companies that have sales from ITES less than 75% of the total operating revenue. f) Not applying reasonable employee cost filters. g) Applying related party filter at 25% of sales. 7. ....
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....sk'. b) The TPO, DRP and the AO further erred in not appreciating that the appellant renders services only to their parent company and thus suitable risk adjustment needs to be made in case of the appellant under the facts and circumstances of the case. 15. The TPO, DRP and the AO failed to understand the spirit and intent of Rule 10B(1)(e)(ii) as per which even if one of the comparables selected by the appellant satisfies the computation mechanism for determination of the ALP, the determination of ALP by using arithmetic mean of different comparables is not warranted under the facts and circumstances of the case. 16. The TPO, DRP and the Assessing Officer erred in not granting the benefit of the proviso to section 92C(2) of the Act which is mandatory under the scheme of the Act. 17. The appellant denies itself liable to be levied to interest under sections 234B and 234C of the Act and further the computation of interest under sections 234B and 234C was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. 18. The appellant craves leave to 'add, alter, delete, and modify any....
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....ted 10-07-2018 stands allowed. 4. Brief facts of the case are as under: Assessee is a company engaged in business of software development, IT enabled and BPO service providers. Return of income for year under consideration was filed on 29/09/12 declaring total income of Rs.4,92,53,040/-. Return was processed under section 143(1), subsequently case was selected for scrutiny and notice under section 143(2) was issued to assessee. In response to statutory notices, assessee appeared before Ld. AO and filed requisite details as called for. Ld.AO observed that assessee entered into international transaction during year under consideration with associated enterprises and therefore case was referred to transfer pricing officer. Ld.TPO upon receipt of reference under section 90 2C of the Act, issued notice to assessee calling upon to file economic details of international transaction in Form 3CEB. Ld.TPO from transfer pricing report observed that assessee renders IT enabled services to Inspinity and Software Development Services to SPI LLC. It was observed that assessee was providing backend customer care and administrative services to U.S.-based clients from healthcare and financial se....
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....Aggrieved by order passed by Ld. AO, assessee is in appeal before us now. It has been submitted that Ground No. 1,4 & 18-19 are general in nature and therefore do not require any adjudication. 7 Ground No. 5-16 along with Additional Ground 1-2 are in respect of comparables alleged to be excluded/included by assessee. Assessee placed before us chart, wherein following comparables are sought to be exclude/include Comparables sought to be excluded: * Universal Print Systems Ltd (segmental) (BPO) * Infosys BPO Ltd * TCS E-Serve Ltd * BNR Udyog Ltd (segment) (medical transcription) * Excel Infoways Ltd (segmental) (IT) (BPO) Comparables sought for inclusion * Informed Technologies India Ltd Before we undertake comparability analysis, it is sine qua non to understand functions performed, assets owned and risk assumed by assessee under the segment: Functions In the TP study, it is observed that assessee is categorised under broad head of medical transcription. It has been submitted therein that assessee serves various industries like medical, legal, business, education. Medical transcription services has been further streamlined into to further division called medi....
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.... its AE's. It is also observed that this comparable is basically providing BPO services from its Prepress units. In written submission filed, assessee placed reliance upon decision of this Tribunal in case of Zyme Solutions Pvt Ltd., vs ACIT reported in (2019) 101 taxman.com 292, wherein this comparable has been excluded by observing as under: 10.4 We heard rival submissions and perused the material on record. The issue of comparability of universal Print Systems Ltd. with that of the assessee-company has been duly considered by TPO after referring to information contained in Annual Report. The relevant findings of the TPO had not been countenanced by learned AR of the assessee. However, the issue of comparability of Universal Print Systems Ltd. has also been considered by the co-ordinate bench of this Tribunal in the case of CGI Information Systems & Management Consultants Pvt. Ltd. (supra) wherein it was held as follows: "47. The next submission of the learned counsel for the Assessee was with regard to exclusion of 2 comparable companies from the list of 7 comparable companies that remain after the order of the DRP. The first comparable company sought to be excluded is Unive....
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.... company. (c) On the service revenue filter viz., the requirement that a comparable company must have revenue from rendering services of more than 75% of its total revenue, the TPO again held that the pre-press BPO segment's entire income is from services and therefore this objection is not to be accepted. 49. On objections by the Assessee before the DRP, the DRP confirmed the action of the TPO. One of the objection before the DRP was that this company did not figure in the list of companies engaged in ITES. On this objection the DRP held that though this company did not figure in the list of companies in 1TES in the main search of capital line and prowess database but on a segmental search these two companies satisfied the requirement of being considered as companies engaged in providing ITES. Aggrieved by the directions of the DRP, the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee reiterated submissions that were made before the TPO/DRP. In particular it was submitted that the service revenue filter was applied by the TPO himself at the entity level and on such search this company was not regarded as engaged in providing ITES. At this s....
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....roperty transferred or services provide: either transaction; (d) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions (e) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or Implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions: d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and. capital in the markets, overall economic development and level of competition and whether the markets are wholesale retail (3) An uncontrolled transaction shall be comparable to an internatiorial (i) none of the differences, if any, between the transactions being compared or between the enterprises entering into such transactions are likely materially affect the price or cost charged or paid in, or the profit arising from such transactions in the open market; or (ii) reasonably accurate adjus....
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....ings on the basis of materials which he may gather u/s. 133(6) of the Act, The Assessee should be given opportunity of being heard by the TPO before the issue is decided by the TPO.' Respectfully following the decision, we remand this comparable to the file of the TPO/AO for fresh adjudication on the above lines. Respectfully following aforesaid decision, we remand this comparable to file of Ld.AO/TPO, for fresh adjudication, on the basis of directions reproduced hereinabove. Needless to say that proper opportunity shall be granted to assessee as per law. Accordingly we set aside this comparable back to Ld.TPO. 9. Infosys BPO Ltd. Assessee objected for inclusion of this comparable primarily on the basis of functional incompatibility and presence of intangibles. It has been submitted that this company owns huge brand and not a fit comparables for company like assessee, who provide captive service to its AE's. 10. Ld. CIT DR opposed the exclusion and placed reliance upon orders passed by authorities below. 11. We have perused submissions advanced by both sides in the light of the records placed before us. Assessee placed reliance upon decision of this Tribunal in case o....
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....rpose of computing the average margin." 2. It was also brought to our notice that the Hon'ble Delhi High Court in ITA No.260/2018 in the appeal filed by the Revenue against the aforesaid order dismissed the appeal at the admission stage observing that rationale given by the ITAT for exclusion was correct. In view of the aforesaid decision, we direct exclusion of Infosys BPO from the list of comparable companies chosen by the TPO. From above, it is clear that this company is functionally not comparable with captive service provider. Respectfully following the same we direct this company to be excluded from final list. 12. TCS e-Serve Ltd. Ld. AR submitted that this company has been objected by assessee for its functional dissimilarity as it renders both BPO and KPO services without segmental reporting. It is submitted that this company owns huge brand of TATA group and has also incurred brand related expenses and therefore cannot be accepted to be compared with a captive service provider like assessee. 13. Ld.CIT DR on the contrary opposed its exclusion and placed reliance upon orders passed by authorities below. 14. We have perused submissions advanced by both sides in li....
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....arables.' Since the appellant company is into low end BPO, it cannot be compared with KPO service provider. 11.4 Respectfully following the decision of the co-ordinate bench of Tribunal, we direct for exclusion this company from the list of comparable". It has been observed that this company is into high-end KPO services and an assessee rendering low end BPO services cannot be compared with it. Further, this company has been excluded due to absence of segmental information. Respectfully following aforesaid decision, we direct Ld.TPO to exclude this company from the list of comparables. 15. BNR Udyog Ltd. (segmental) 15.1 Ld.AR submitted that this company fails RPT filter and also fails export filter applied by Ld.TPO. It is submitted that this company is into medical transcription, coding, business support services and e-governance projects and therefore functionally not similar with that of assessee. 16. Ld. CIT DR however contended that this company is compared only for segment of medical transcription and therefore should not be excluded. She placed reliance upon decision of this Tribunal in case of Mobily Infotech India (P) Ltd vs DCIT reported in (2018) 97 taxman.....
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....atrix of the case on hand, as laid out above and following the decision of the coordinate Bench in the case of Indegene (P) Ltd. (Supra) which is also rendered on similar facts, we deem it appropriate to remand the matter of the comparability of this company, TCS E-serve Ltd. To the file of the TPO for fresh consideration in the light of out abov observations. Needless to add, the TPO shall afford the assessee adequate opportunity of being heard and to file details/submissions in this regard. It is also been observed that similar view has been taken by decision of this Tribunal in case of M/s Nielson Sports India Pvt.Ltd., Vs ACIT in IT(TP)A No.196(B))/2017 vide order dated 2806-2019. Respectfully following the same, we set aside this comparable back to Ld.TPO for considering it afresh. Needless to say that proper opportunity shall be granted to assessee as per law. Accordingly we set aside this comparable back to Ld.TPO 18. Excel Infoways Ltd. (segmental) This comparable elected by ld.TPO is alleged to be functionally not comparable with assessee, as it is handling business relations and managing customer relationships. It has been submitted by Ld.AR that this comparable fa....
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.... comparability and these aspects have not been considered by the Tribunal in its order. On the above objections in the MA, the Tribunal held as follows:- "8. We have examined the contents in the misc. petition and we find that there has been omission to consider the application of employee cost filter by the Tribunal though attention of the Bench was invited to relevant pages pointed out in the misc. petition. We do not however agree with the assessee that functional comparability of this company has not been examined by the Tribunal in paragraph 14.4. The Tribunal has come to the conclusion that this company is a ITeS company and that cannot be reviewed in the misc. application. However there has been omission to adjudicated exclusion of this company on account of extraordinary events. We therefore recall the order of the Tribunal to the limited extent of examining of the employee cost filter and the presence of extraordinary events on warranty exclusion of this company." 4. We have heard the rival submissions on the exclusion of this company on the basis of extraordinary events that occurred during the relevant previous year which had impact on the profit margin of this compa....