TaxTMI 
TaxTMI 
2023 (8) TMI 368
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....uding warehouse services. The assessee is also one of the leading providers of third party logistics in India and has declared revenue from operations at Rs. 163,88,36,866/-, other income at Rs. 9,08,36,504/- and had calculated net profit at Rs. 2,76,47,361/- in its profit and loss account. The assessee e-filed its return of income dated 30.11.2012, declaring total income of Rs. 19,59,88,910/- and the return was processed u/s. 143(1) of the Act. 3. The assessee's case was selected for scrutiny and the assessment order dated 31.01.2019 was passed by the Assessing Officer (A.O. for short) u/s. 143(3) r.w.s. 144C(13) of the Act. It is observed that the assessee had entered into International Transaction with its Associated Enterprises and the A.O. had referred the transactions in Form 3CEB to the Transfer Pricing Officer (TPO for short) for the purpose of computing arms length price (ALP for short) of the impugned transaction as per the provision of section 92CA(1) of the Act. The TPO made an upward adjustment to the ALP pertaining to the impugned international transaction and determined the ALP at Rs. 3,38,12,201/-, pursuant to the direction given by the ld.DRP after disposing of ....
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....the reason that the turnover is less than Rs. 5 crores. The assessee has challenged the exclusion of the above mentioned comparables before us. It is observed that the assessee's turnover was Rs. 163.88 crores whereas the comparables selected by the assessee had a turnover lesser than Rs. 5 crores. The assessee has specified the following international transactions which are tabulated as under: Sr. No. Name of the AE Nature of Transaction Amount (Rs.) Method adopted 1 Datamatics Global Services GmbH. Technical Services Rendered 1,31,67,274 Transaction net margin method 2 Datamatics Global Services Inc. Technical Services Rendered 27,82,90,760 Transaction net margin method 3 Datamatics Global Services Pty. Ltd. Technical Services Rendered 26,61,689 Transaction net margin method 4 Datamatics Global Technologies GmbH Technical Services Rendered 8,23,156 Transaction net margin method 5 Datamatics Global Technologies Ltd. Technical Services availed 19,12,496 Transaction net margin method 6 Datamatics Infotech Ltd. Technical Services Rendered Technical Services Availed 1,26,53,208 ....
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....hich was bench marked was merely Rs. 30.77 crores, as against the turnover of Rs. 163.88 crores and that the assessee was justified in applying the turnover filter of Rs. 1 crore was to be considered and also reiterated that the bench marking has to be only with regard to the international transaction and should not be on entity vide basis. The ld. AR relied on the decision of the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisory India Ltd. vs. DCIT (in ITA No. 417/Del/2014) and the decision of the co-ordinate bench in the case of Cadence Design Systems India (Pvt.) Ltd. vs. TS 955 ITAT 2018 (Del) - TP for the said proposition. 11. The learned Departmental Representative (ld. DR for short) for the Revenue, on the other hand, controverted this fact and stated that the ld.DRP and Transfer Pricing Officer (TPO for short) had rejected the said comparables on the filters of turnover less than Rs. 5 crores. 12. We have heard the rival submissions and perused the materials available on record. It is evident that the ld. DRP / TPO had rejected the said comparables selected by the assessee by applying the filter of the turnover less than Rs. 5 crores. The as....
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....el cost to turnover of 12.97 % as compared to 58.29% of the assessee. The assessee further stated that the said comparable has diversified its business into construction and real estate and has also considered to close it's IT and BPO related services. The assessee laid emphasis on the employee cost to revenue ratio which was below 13% whereas the assessee's employee cost to revenue ratio amounted to 58% and that the employee cost being a vital factor in such business, the said comparable has to be rejected on low employee cost ratio. The assessee placed its reliance in case of Baxter India (P.) Ltd. vs. ACIT [2017] 85 taxman.com 285 (Delhi) and M/s. Willis Processing Services (India) Limited (in ITA No. 2152/Mum/2014 vide order dated 10.10.2014). 15. The ld. DRP rejected the contention of the assessee and held that segmental results of BPO segments were available for the said comparables and that the real estate segments pertains only to purchase and sale transaction and the personnel cost incurred by the company was primarily for BPO segment. Further, if the same was considered then the percentage of the turnover of the BPO segment exceeds 25% and further held that diversifica....
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....e TPO we find he has obtained the employee cost and the sale for the ITES segment by exercise of his powers u/s. 133(6), wherein the said company has allocated entire employee cost to IT - BPO segment with no allocation to Infra Activity segment which accounts to 49% of Excel's total revenue. In our opinion, it is highly impractical that no employee has been hired by Excel for Infra Activity segment. We, therefore, find merit in the argument of the ld. Counsel for the assessee that the information provided as per section 133(6) by Excel Infoways Ltd. is unreliable and should not be used to compute employee cost for ITES segment. The Delhi Bench of the Tribunal in the case of Motorola Solutions India Private Limited vide ITA No. 5637/Del/2011 has held that a company should be rejected as comparable in case there is contradiction in the facts or data sourced from annual report and as per the information gathered u/s. 133(6). In view of above discussion, we hold that Excel Infoways Ltd. cannot be considered as comparable and should be excluded from the list of comparables. We hold and direct accordingly. 17. From the above observation, we are of the considered view that the TPO'....
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....nificant impact on the overall profitability of the company with regard to the brand value of the comparable. The assessee also had a good reputation which is evident from the fact that the non AE business is more than four times its AE business. The TPO upheld the inclusion of the said comparable. 19. Having heard the rival submissions and perused the material on record. It is observed that Infosys BPO Limited is a subsidiary of Infosys which is backed by Infosys Ltd. to offer integrated IT-BPO delivery model where it processes a brand value which will definitely have an impact on the market position, business operation and pricing policy. The assessee has relied on the decision of the Hon'ble Jurisdictional High Court in the case of Principal Global Services Pvt. Ltd. [2018] 95 taxmann.com 315 (Bom), wherein it was held that the huge turnover difference between the comparable company namely M/s. Infoys Technology Ltd. with the assessee along with the fact that the assessee was only providing services to its AE unlike the comparable company Infosys Technology does not entitle the same to be a good comparable. The said decision also relied on the decision of the Hon'ble ....