TaxTMI 
TaxTMI 
2022 (12) TMI 1431
X X X X Extracts X X X X
X X X X Extracts X X X X
....clerx Services Limited, as comparables ignoring the provisions contained in Rule 108(2) of I.T.Rules, 1962. 2. The Ld.CIT(Appeals) was not justified in excluding M/s. lnfosys BPO Ltd, and M/s. Eclerx Services Limited as comparables on account of diversified activities. 3. The Ld.CIT(Appeals) was not correct in excluding M/s. lnfosys BPO Ltd, on account of huge turnover without appreciating the fact that turnover does not affect profit margins in Service/software industry. 4. The Ld.CIT(Appeals) was not correct in law in directing the TPO to exclude the comparable M/s. e-Clerx Services Ltd, without making a comparability analysis for the year under consideration which is in violation of Indian Transfer Pricing regulations which prescribe that the data to be used for the purpose of comparability analysis should relate to the year in which the international transaction has taken place. 5. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in directing to include the companies M/s. Jindal lntellicom Private Limited, M/s. Informed Technologies Limited and M/s. Ace spa Services Private Limited without appreciating the fact t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P(P) Ltd (Pages 175 to 179), Hyundai Engineering India (P) Ltd (Pages 203 to 204 of PBII), Cadence Design Systems (I) (P) Ltd reported in 93 Taxmann.com, UL India (P) Ltd of ITAT Bangalore Bench (Pages 126 to 129) and also the decision in the case of BT e-Serv (India) Pvt. Ltd Vs. ITO (ITA No.6690/Del/2016 dt.19.06.2018). 4.2. We have heard the rival contentions of the parties and perused the material available on record. Admittedly, Infosys BPO had been deleted by the Co-ordinate Benches decision on which the ld.AR for the assessee had relied. We do not find any reason to take a contrary view and accordingly, we direct the Assessing Officer/TPO to exclude Infosys BPO Company from the list of comparable. Hence, this company is deleted from the set of comparables. M/s. Eclerx Services Ltd. 5. Learned Departmental Representative submitted that the CIT (Appeals) was not correct in excluding M/s. Eclerx Services Ltd as comparable company since it is a KPO and BPO company and employed skilled manpower/specialized services, therefore this company is comparable to the assessee company. It was submitted by the ld.DR that there was no linkage between the acquisition of the AGILYST ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Tribunal had noted that eClerx is engaged in data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management, revenue management. In addition, eClerx also offered financial services such as real-time capital markets, middle and back-office support, portfolio risk management services and various critical data management services. Clearly, the aforesaid services are not comparable with the services rendered by the Assessee. Further, the functions undertaken (i.e. the activities performed) are also not comparable with the Assessee. In our view, the Tribunal erred in holding that the functions performed by the Assessee were broadly similar to that of eClerx or Vishal. The operating margin of eClerx, thus, could not be included to arrive at an ALP of controlled transactions, which were materially different in its content and value. In Maersk Global Centers(India) (P.) Ltd. (supra), the Special Bench of the Tribunal had noted the same and had, thus, excluded eClerx as a comparable. It is further observed that the comparability of eClerx had also been examined by the Hyderabad Bench of the T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional and domestic market. In the international market, due to depressed market conditions and changes in regulatory policies the company saw decline in revenue in debt collection business stream. On the other hand, your company has started focusing on niche business like customer support, software development, etc. In domestic market, your company is now better positioned and expecting impressive growth potential. Hence, this company is not considered as comparable." M/s. Informed Technologies Limited: 6.2. The ld.DR had submitted that the TPO in his order mentioned that this company was rejected on account of insufficient financial information. However, the ld.CIT(A) had included this comparable after relying upon the decision of the Tribunal in the case of Infor India Pvt Ltd in ITA No.161 and 2307/Hyd/2018. M/s. Ace BPO Services Pvt. Ltd : 6.3. The ld.DR had submitted that that the TPO had recorded that the financial information of this company is not available in the public domain. However, the ld.CIT(A) had included this comparable after perusing the annual report of the company and also relying upon the decision of the Tribunal in the case of Infor India....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rmed Technologies Ltd. 48. At the time of hearing, the learned Counsel for the assessee submitted that the assessee is not pressing for inclusion of Allsec Technologies Ltd and Jindal Intellecom Ltd. Therefore, grounds relating to these two companies are rejected as not pressed. 49. As regards the other companies which are sought to be included, we find that the comparability of these companies have been considered by us in the earlier A.Y 2013-14 in the above paragraphs and for the detailed reasons given therein, these companies are directed to be considered by the TPO afresh. Therefore, the grounds relating to these companies are treated as allowed for statistical purposes. 6.7. In our considered opinion, the ld.CIT(A) had misread the decision of the Tribunal in the case of Infor India Ltd (supra). In the said case, the Tribunal had remanded back the matter to the file of TPO / Assessing Officer for fresh consideration. In the light of the above, we also remit the issue of comparability in respect of these three companies i.e. M/s. Jindal Intellicom Pvt. Ltd., M/s. Informed Technologies Limited and M/s. Ace BPO Services Pvt. Ltd. to examine and decide as per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 basis points, and as the basis of this direction is not known and it should be restricted to LIBOR rate only. Further for the purpose of calculation of interest, the Ld CIT(A) ought to have allowed 120 days credit period instead of 60 days. 13. The assessee craves for alteration, modification or inclusion, of any ground with the. permission of the Hon'ble Bench." 9. At the time of hearing, the ld.AR had only restricted the interest rate charged on the trade receivable by lower authorities. The ld.AR had submitted that the Tribunal had allowed the credit period of 120 days as held in OSI Systems Pvt Ltd, Hyderabad (ITA No: 2228/Hyd/2017.) and further, it was the submission that the trade payables are required to be setoff against the trade receivables and the interest should be restricted to LIBOR plus 100. He had relied upon the following decisions in support of its case : 1. Netcracker ITA l746/Hyd/2017. 2. Dhanush lnfotech (P) Ltd - ITA 2082/Hyd/2017. 10. Before us, ld. DR submitted relied upon the decision of the ld.CIT(A) wherein the ld.CIT(A) had elaborately dealt with the issue in the following manner : "16.3 I have considered b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... we hold that 120 days is reasonable period in this case, hence, we direct the AO/TPO to allow 120 days credit period and charge interest over and above the outstanding period of 120 days." 17. Respectfully following he above. order, I direct the AO/TPO to charge interest at LIBOR+200 basis points allowing a credit period of 60 days." 11. We have heard the rival submissions and perused the material on record. Admittedly, the law has been fairly settled with respect to whether the trade receivables would constitute an international transaction or not within the meaning of Chapter X of Income Tax Act. For the ready reference, we are reproducing below the decision rendered by the Co-ordinate Bench of the Tribunal in the case of Altisource Business Solutions (P.) Ltd. Vs. Income-tax Officer reported in [2022] 141 taxmann.com 77 (Bangalore - Trib.), wherein it was held as under : "15. The amendment is to the effect that "international transaction" would specifically include within its ambit. 'deferred payment or receivable or any other debt arising during the course of business' and hence non-charging or under-charging of interest on the excess period of cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., if the agreement does not specify the term of the payment, even then assessee must be given benefit of credit period which is accepted business practice in the trade. The ITAT confirmed 30 days as the normal credit period adopted by the TPO. 17. The foregoing discussion discloses that non-charging or undercharging of interest on the excess period of credit allowed to the AE, for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined. In view of the above observations. the reliance placed by the ld. counsel for the assessee on earlier decisions cannot be accepted. Similarly, Considering the above discussion, it is held that deferred trade receivable constitutes international transaction." 12. In our considered opinion, the view taken by the ld.CIT(A) is resonant with the view taken by the Bangalore Tribunal. Further, we found that the ld.CIT(A) has restricted the charging of interest at LIBOR +200 basis points allowing the credit period of 60 days. This view of the ld.CIT(A) is in accordance with law. Though, the ld.AR cited the decision in the case of OSI System Pvt. Ltd. Vs. CI....