TaxTMI 
TaxTMI 
2018 (3) TMI 2013
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....894/- returned by the Appellant, after making transfer pricing adjustment of Rs. 20,288,060/- and reducing expenditure amounting to Rs. 2,091,983/- from 'export turnover' for the purposes of computing deduction under section 10A of the Act. For Transfer Pricing Matters: 2. That on facts and circumstances of the case and in law, the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO did not record any reasons in the assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. Transfer Pricing Officer ("TPO") for computation of the arm's length price, as is required under section 92CA(1) of the Act. 3. That on the facts and circumstances of the case and in law, the Ld. AO erred in determining the arm's length price ("ALP") of the Appellant's international transactions at Rs. 161,838,198/- as against Rs. 141,550,138/- determined by the Appellant and recommending an addition of Rs. 20,288,060/- on that account to the Appellant's income by: 3.1 modifying the comparability analysis conducted in the transfer pricing documentation of the Ap....
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....e not been incurred in providing technical services outside India. The same relates only to the input services used by the Assessee during the course of its normal operations in India. 5.1 Without prejudice to the above, based on the facts and circumstances of the case, the Ld. AO has erred in law as well as on the facts of the case by excluding the foreign currency expenditure towards database fees amounting to Rs. 19,07,772/- from 'export turnover' without reducing the same from the 'total turnover' for the purpose of computing deduction under section 10A of the Act. 6. That on the facts and circumstances of the case and in law the Ld. AO/Ld. TPO erred in not examining the validity of initiation of penalty proceedings u/s. 271(1)(c) of the Act. 7. That on the facts and circumstances of the case and in law, the Ld. AO erred in charging and computing interest under section 234B, 234C and 234D of the Act." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : M/s. H & S Software Development and Knowledge Management Centre Pvt. Ltd. (H&S KMC), the taxpayer performs back office functions relating to creati....
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....xpayer as well as Revenue have come up before the Tribunal by way of filing cross appeals. However, the cross appeal filed by the Revenue has already been dismissed vide ITA No. 6662/Del/2014 order dated 04.01.2018 by the coordinate Bench of the Tribunal. 6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO. 1 7. Ground No. 1 is general in nature, hence does not require any specific adjudication. GROUNDS NO. 2 & 3 8. The ld. TPO after applying various filters chosen 1 comparable from 7 comparables selected by the taxpayer and introduced his own 11 comparables. The final list of comparables selected by the TPO for benchmarking the international transactions after directions issued by the ld. DRP by allowing working capital adjustment to the taxpayer is as under:- Sl. No. Name of the comparable company Adjusted Average margin (2010) 1 Accentia Technology Ltd. 39.29% 2 Cosmic Global 15.78% 3 e4e Healthcare Ltd. 20.02% 4 Fortune Infotech Ltd. 2....
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....ffering the entire gamut of services under Healthcare Receivables Cycle management viz., Medical Transcription, Medical Coding and Billing and Receivables Management services, to different clients; in some cases separately and in some case, all the three different service are offered to the same client. The delivery of these services is using third party software in most cases and in some cases, using proprietary software. Same is the case with hardware infrastructure too. Furthermore, perusal of page 29 of the convenience paper book, which is schedule forming part of the consolidated balance sheet, shows that due to acquisition, there has been huge addition to the fixed assets by way of recognition of goodwill amounting to Rs. 19,06,51,057/-. So, during the year under assessment, Accentia has acquired IG Group of companies consisting of three companies viz. Tactiq Ltd., Centric Ltd. and Neologiq Ltd., which are engaged in Full Product Development Lifecycle involving Electronic Design and development etc. 14. When we examine pages 30 & 31 of the Schedule forming part of the profit and loss account of Accentia, it becomes apparently clear that apart from the income of the Accenti....
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....s paid royalty to the tune of Rs. 42907 thousands to Tata Sons Limited. Moreover, TCS Eserve is having highly fluctuating margins which is tabulated by the taxpayer in its synopsis and reproduced as under for ready reference:- Particulars FY 2010-11 FY 2009-10 FY 2008-09 FY 2007-08 Operating revenue 15,045,559 14,051,005 12,247,385 9,967,959 Growth (Y-o-Y) 7% 15% 23% NA Operating Cost 8,508,785 8,384,788 11,129,169 7,564,985 Growth (Y-o-Y) 1% -25% 47% NA Operating Profit 6,536,774 5,666,217 1,118,216 2,402,974 Growth (Y-o-Y) 15% 407% -53% NA OP/OC 76.82% 67.58% 10.05% 31.76% 19. Furthermore, when we compare the sales turnover of TCS Eserve which is Rs. 1359.41 crores vis-à-vis. Rs. 14.15 crores of the taxpayer during the year under assessment, as is evident from page 47 of the convenience paper book, no doubt, apparently high turnover is not a ground to reject any comparable but when we examine it in the light of the fact that TCS Eserve is a big brand working as a full-fledged risk bearing entrepreneur, it certainly impacts its profitability. 2....
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....hat it is providing services predominantly to the CITI Group; that the company's revenue and profitability has increased by 174% and 286% in FY 2008-09 and 2009-10 respectively as compared to preceding years; that it has huge brand value; that it has acquired CITI Group and relied upon the decisions of the coordinate Bench of the Tribunal in Ameriprise India Pvt. Ltd. (supra) and Equant Solutions India Pvt. Ltd. (supra). 23. When we examine profile of the TCS Eserve International from page 39 of the convenience paper book, its operations broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving the processing, collections, customer care and payroll relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve testing, verification and validation of software at the time of implementation of data centre management. 24. Furthermore, when we examine notes forming part of the financial statement, available at page 41 of the convenience paper book, no segmental information is available qua ITES services and technical services. From the Director'....
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.... providing IT enabled services/BPO services primarily to Citigroup entities globally. The operations of this company : 'broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving processing, collections, customer care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities.' It is manifest that this company is engaged in rendering BPO services to the banking and financial services industry (BFSI) and Travel, Tourism and Hospitality (TTH). It is providing services to BFSI and TTH and such services include 'Transaction processing' and 'Technical services'. In other words, the remuneration of this company from the above referred two segments includes compensation for rendering 'Technical services' and 'Transaction processing'. Insofar as the 'Transaction processing' services are concerned, these are ITES, which are broadly similar to those rendered by the assessee....