TaxTMI 
TaxTMI 
2023 (2) TMI 1188
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....not exist, or having not been complied with and consequently the assessment order of the AO is bad in law for want of requisite jurisdiction. Transfer pricing adjustment relating to Information Technology Enabled Services: 3. That on the facts and circumstances of the case and in law, the AO / DRP / Transfer Pricing Officer ('TPO') have erred in making a transfer pricing adjustment of INR 7,58,31,575, in respect of information technology enabled services ("ITeS"), alleging that the services were not rendered at arms length in terms of the provisions of sections 92C(1) and 92C(2) of the Act, read with Rule 10 of the Income-tax Rules, 1962 ("the Rules"). 4. That on facts and circumstances of the case and in law, the AO / DRP / TPO have erred in arbitrarily rejecting the transfer pricing study of the Appellant and used arbitrary filters for benchmarking the international transaction pertaining to ITeS. 4.1 That on facts and circumstances of the case and in law, the AO/DRP/TPC have erred in applying the turnover filter by selecting the lower limit of turnover of Rs. 1 crore and not restricting the upper limit of turnover at Rs. 200 crores. 5. That on the facts and c....
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....hat the outstanding trade receivable is a separate international transaction within the meaning of section 92B of the Act and failing to appreciate the fact that it is a routine business transaction and not per se a loan transaction. 8. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in charging notional interest on outstanding balance of debtors without appreciating that there was no delay in receipt of any of the invoices raised during the impugned financial year. 9. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not appreciating that Appellant is a debt free company and therefore no transfer pricing adjustment on account of notional interest is warranted since a debt free company is neither paying any interest nor receiving any interest. 10. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not appreciating that once working capital adjustment is granted no separate adjustment on account of outstanding receivable is maintainable. 11. That on the facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not appreciating ....
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....the United States. The company has operations in 5 cities in India from offices which are registered with the STPI. The financial results worked out by the TPO as under:- 3. The documents maintained under 92D of the Act was called for and it was noted that the assessee has applied TNMM method as most appropriate method for calculation of operating profit to operating cost . Further the TPO noted that as per provision of sec. 92C(3)(c) r.w.s 92CA of the Act, in the opinion of the TPO the information or data used in computation of arms length price was not reliable or correct therefore, the TPO proceeded to determine the arms length price in relation to the international transactions in accordance with sec.92C(1) and (2) of the Act and rejected the Transfer Pricing study report filed by the assessee. The following filters were applied by the TPO after fresh search. 1) Use of current year data were available 2) Companies having different financial year end [i.e not March 31st 2016] or data of the company which does not fall within 12 months period it means 01/04/2015 to 31/03/2016 were rejected. 3) Companies whose income was less than 1 crore were excluded. 4) Companies whose....
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....ia Pvt. Ltd. 4. Eclerx Services Ltd. 7.1 The ld. DRP has upheld for inclusion b AO of above four companies in para No. 5.1 to 5.1.4.3 of order. The assessee also requested for inclusion of Supravin Technologies Ltd which were accepted by the TPO but in final set of comparables it was excluded, the ld. DR accepted the plea of the assessee. The E-Zest Solutions Ltd were also contested but the ld. DRP did not accept, the interest on outstanding receivables was also challenged but it was not accepted and passed the order on 25/03/2021after giving partial relief. Accordingly, the adjustment towards international transactions with its AEs was restricted to Rs.7,58,31,575/- and interest on receivable was calculated at Rs.1,23,961/- and AO completed final assessment order and assessed total income at Rs. 36,60,34,274/-. 8. Aggrieved from the above order, the assessee filed appeal before the Income Tax Appellate Tribunal. 9. The ld.AR reiterated submissions made before the lower authorities and he has filed a chart which is placed on record. Before us, the assessee contested the following companies for exclusion from comparable companies on the basis of high turnover as under:- ....
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....Solutions Pvt. Ltd. v. ITO in IT(TP)A No. 310/Bang/2021 order dated 25.10.2021 has considered a host of rulings on this issue including that of Hon'ble High Courts wherein divergent views were taken with respect to the application of different filters. It was held by the Tribunal that the application of the turnover filter is justified on the basis of the classification of companies as per the report of Dun and Bradstreet. Since the assessee, in the present case, has disclosed an operating revenue of Rs. 171.38/- Crores, companies reporting turnover above a threshold are considered not comparable. We also noted that in assessee's own case the co- ordinate bench of the Tribunal has also considered on this point regarding high turnover in the above noted appeal of the assessee. Accordingly, by following the orders of the Tribunal, we direct the AO / TPO to apply the appropriate upper turnover filter and exclude the above four companies as contested by the ld. AR noted supra inparagraph No. 9. Accordingly the grounds raised by the assessee on these issues are allowed. 12. Further the ld.AR wanted to include the following three companies:- 1. Sundram Business Services Ltd., 2. ACE....
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....7 31.03.2015 66254075 62389254 3864821 31.03.2016 87619659 75945864 11673795 3. Harton Communication Ltd. 31.03.2014 220974587 171787190 49187397 31.03.2015 352341551 329362733 22978818 31.03.2016 301490347 238750480 62739867 16. Since in this case the TPO has not accepted these companies only on the basis of persistent loss company, the assessee has provided functional results for 3 companies i.e 31/03/2014, 2015 & 2016 as above and in which we observe that in case of Sundram Business Service Ltd. , the assessee has shown profit of Rs.69,000/-. Further in case ACE Software Ltd., the assessee has shown profit continuously. In case of Hurton Communication Ltd., the assessee has calculated profit for three consequent financial years but while the filter applied, the TPO has observed it as persistent loss company. However, form the order of the TPO/DRP, we did not find any where that the assessee raised any specific objection . Since the assessee raised this issue before us, and these were included as comparables by the assessee and filed financial statements also, therefore, considering the totality of facts, the issue is remitted back to the AO/TPO/DRP for a fr....