TaxTMI 
TaxTMI 
2023 (3) TMI 1392
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....omparable M/s. Infosys BPO Limited for the ITeS Segment, on the ground of high turnover, brand value, diversified activities, etc., without bringing out as to how have such differences have materially affected the price or cost charged or paid in, or the profit arising from, such transactions in the open market ? (b) Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in excluding the comparable M/s. Infosys BOP Limited on the ground of huge turnover and brand value without appreciating the fact that the turnover does not affect the margins in IT-BPO industry ? (ii) (a) Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in rejecting M/s.Eclerx Services Limited, as comparable on the ground of functional difference when the tax payer has not considered the verticals and horizontals of the ITES sector while selecting comparables and TPO merely followed the same ? (b) Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in excluding M/s. Eclerx Services Limited disregarding the fact that the services cannot be further bifurcated or classified for comparability analys....
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....y and notices u/s. 143(2) and 142(1) dt.31.08.2015 were issued to the assessee. Subsequently, notice u/s 142(1) dt.01.07.2016 along with questionnaire was issued to the assessee. In response, the assessee filed the information and after going through the information furnished and after a detailed discussion in the assessment order, the Assessing Officer completed the assessment by passing order u/s 92CA(3) of the Act dt.30.10.2017 determining the shortfall of Rs.13,39,90,083/- in respect of provision for ITES and Rs.2,26,76,464/- being interest on receivables, totaling to Rs.15,66,66,537/- as transfer pricing adjustment. 4. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who partly allowed the appeal of the assessee. 5. Feeling aggrieved with the order of ld.CIT(A), the Revenue is now in appeal before us, and simultaneously, the assessee also appealed before us by filing it's Cross - Objections. 6. It is the contention of the learned DR that the Revenue had challenged the exclusion of M/s. Infosys BPO, M/s. Eclerx Services Ltd, M/s. MPS Ltd, ACE BPO Services Pvt. Ltd, Jindal Intellicom (P) Ltd and M/s. Datamatics Fin....
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.... 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 INC with the profit earned by the said company. 5.1. On the other hand, the ld.AR had submitted that this company is functionally different as it is into KPO whereas the assessee is a BPO company. It was submitted that M/s. Eclerx Services Ltd has not been considered as comparable by the Assessing Officer / TPO for the A.Y. 201213 and 2010-11 in the set aside pro....
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....ent 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 Tribunal in Capital IQ Information Systems (India) (P.) Ltd. (supra), wherein, the Tribunal directed the exclusion of eClerx as a comparable for the reason that it was engaged in providing KPO Services and further that it had also returned supernormal profits." 5.2. The learned Authorised Representative submitted that M/s. Eclerx Services Ltd. is not comparabl....
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....ter positioned and expecting impressive growth potential. Hence, this company is not considered as comparable." M/s. Informed Technologies Limited 6.1. 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 6.2. 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 Pvt Ltd in ITA No.161 and 2307/Hyd/2018. 6.3. The learned Authorised Representative submitted that these three companies namely M/s. Jindal Intellicom Pvt. Ltd., M/s. Informed Technologies Limited and M/s. Ace BPO Services Pvt. Ltd. are functionally not different and comparable with the assessee in RPT, 100% Revenue from medical....
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.... 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. 6.6 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 law. 8. In rebuttal, the ld.DR had submitted that each year is a separate and distinct assessment year and therefore, the finding of the Tribunal in assessee's own case for the earlier year is not binding and the facts of the present case are required to be re-examined. 9. We have heard the rival arguments mad....
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.... 58.9% of the total revenue. Lastly, it was submitted that this company is not fulfilling the filters as applied by the TPO, which is clear from page 7 of the order of TPO. On the basis of the above, it was submitted that as this company is failing on the filter applied by the TPO namely, the Revenue from ITES is less than 75% of the total operation revenue, therefore, this company has rightly been excluded by the TPO. 14 The learned AR in this regard drew the attention of the Bench to the TPO order where the finding of the TPO has been given on the basis of which it has been held that these two companies are functionally comparable with the assessee company. For the above proposition, the learned AR drew the attention of the Bench to the profile of the assessee and also all these comparables. On the basis of the above, it was submitted that both these comparables fall within the broader of ITeS services and therefore, the TPO has rightly included. He further submitted that in fact, the assessee in its TP study has taken MPS Ltd as suitable comparable and thereafter filing the objection, he has raised the objection. Similarly, submissions were made by the learned DR for the Data....
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....business' and hence non-charging or under-charging of interest on the excess period of credit allowed to the AE for the realization of invoices would amount to an international transaction. It was so held by the ITAT Delhi Bench in the case of Bechtel India (P.) Ltd (supra). It is important to note that the Bench while arriving at the said conclusion distinguished its earlier order in the case of Kusum Healthcare (P.) Ltd v. Asstt. CIT [2015] 62 taxmann.com 79 (Delhi-Trib) and rejected the contention that interest gets subsumed in the working capital adjustment. The Hon`ble Bombay High court in the case of CIT v. Patni Computer Systems Ltd, [2013] 33 taxmann.com 3/215 Taxman 108 dealt, inter alia, with the following question of law :- "(c) Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses o....
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....ccordance with law. Though, the ld.AR cited the decision in the case of OSI System Pvt. Ltd. Vs. CIT in ITA No.221/Hyd/2015. In our view, the said decision is not applicable to the facts of the case as the Tribunal in the said case had held applicability of LIBOR +200 basis points to be applied on the trade receivables (Para 6.6). Similarly, the Tribunal without assigning any reason has held that 120 days credit period is reasonable period. In our view, no documentary evidence has been brought on record before us so that we can infer that 120 days credit period is a reasonable period. " 17. We have heard the rival contentions of the parties and perused the material available on record. Admittedly, the ld.CIT(A) in Para 9.4.3.(iii) have directed the TPO to exclude this comparable. However, the order passed by the ld.CIT(A) is lacking in reasoning and basis for arriving at the above said finding. In our view, the objection raised by the Revenue, needs to be allowed and the exclusion of M/s. MPS Ltd. is required to be sent back to the file of the ld.CIT(A) with a direction to pass afresh order considering the rival contentions of the parties. M/s. Datamatics Financial Services L....
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....ur view, the ld.CIT(A) after relying upon the decision of OSI Systems (supra) for the reasons best known to him, had arbitrarily reduced the credit period from 120 days to 60 days. In our view, the approach of ld.CIT(A) is without any basis. Hence, we direct the TPO / Assessing Officer to charge interest at LIBOR + 200 points. Further, we direct Assessing Officer / TPO to allow the credit period and charge interest over and above the outstanding period of 120 days. 22. We have heard the rival contentions of the parties and perused the material available on record. Admittedly, the above said directions were issued in the case of the assessee. However, the Tribunal vide its Corrigendum dt.24.02.2023 had corrected some typographical mistakes suo moto in its order in ITA No.6/Hyd/2022 passed on 26.12.2022. After correcting the said typographical mistakes, the order of the Tribunal reads as under : "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 th....