TaxTMI 
TaxTMI 
2023 (11) TMI 1097
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.... in comparing the appellant company's low end back office support functions (risk free service provider) with the entrepreneurial companies and the Hon'ble Commissioner of Income Tax - Appeals [Herein after referred as The Hon'ble CIT(A)' or 'CITA)'] further erred in: 1.2 Confirming the action of the learned AO /TP0 and making an adjustment to the appellant company's total income based on the provisions of Chapter X of the Income-tax Act, 1961 ("the Act'). 2 Ground 1: Hon'ble CIT(A) and the learned AO / TPO erred in understanding the appellant company's low end back office support services 2.1 On the facts and in the circumstances of the case and in law, the learned AO / TPO erred and the Hon'ble CIT(A) further erred in understanding the low end back office support services (risk free service provider) provided by the appellant to its associated enterprise. 3 Ground 2: Learned AO TPO erred in non-considering the fact that there is no shifting of profit outside India 3.1 The learned AO TPO erred in ignoring the fact that IMS US undertakes all the entrepreneurial risks and has also incurred loss ....
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....6.1 The learned AO/ TPO and the Hon'ble CIT(A) failed to appreciate the business model of the appellant company (risk free service provider) and as a consequence erroneously compared the appellant company's margins with the following high end entrepreneurial companies: Sr. No. Name of the Company 1 Caliber Point Business Solutions Limited (Seg) 2 Eclerx Services Limited 3 HCL Comnet Systems (Seg) 4 Informed Technologies India Limited 5 Mold-Tek Technologies Limited (Seg) 6.2 The learned AO / TPO and the Hon'ble CIT(A) erred in ignoring the fact that more than 85 per cent employees of the appellant company's were graduates and below. Thus, by no stretch the appellant company is engaged in providing high end services. 7 Ground 6: Hon'ble CIT(A) erred in confirming the action of learned AO TPO in disregarding the multiple year data 7.1 On the facts and in the circumstances of the case and in law, the learned AO /TP0 erred and the Hon'ble CIT(A) further erred in upholding / confirming the action of the learned Assessing Officer ('A.O.' for short) /TPO in rejecting the contention of the appell....
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....eon Managed Solutions Inc., USA Reimbursement for capital purchases 321,615 - Provision of documentation and presentation services - 35,14,02,015 Employee Incentive - 441394 5. The Assessing Officer ('A.O.' for short) made a reference to the Transfer Pricing Officer ('TPO' for short) u/s. 92CA(1) who vide order dated 27.10.2010 passed u/s. 92CA(3) of the Act proposed an adjustment of Rs. 4,56,50,117/-. The A.O. then passed the draft assessment order dated 06.12.2010 u/s. 143(3) r.w.s. 144C of the Act after duly considering the submission of the assessee and made an adjustment of Rs. 4,56,50,117/-. The assessee made a submission to the A.O. that it had opted to exercise its option to appeal to the ld. CIT(A) against the impugned addition and not processed before the learned Dispute Resolution Panel ('ld. DRP' for short). Therefore, final assessment order was passed on 22.02.2011. 6. The assessee was in appeal before the ld. CIT(A). 7. The ld. CIT(A) has partly allowed the appeal filed by the assessee for which both the Revenue and the assessee are in appeal before us, challenging the ....
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....e assessment order is challenged as void-ab-initio. It is observed that the assessee was engaged in providing IT enabled and support services in the nature of documentation and presentation services, business support services and legal support services to its AEs. The assessee had bench marked its international transaction by applying transactional net margin method (TNMM) which method was also adopted by the ld. TPO for determining the ALP. The ld. A.O./TPO determined the total income by making transfer pricing adjustment of Rs. 4,56,50,117/- by rejecting the comparable companies considered by the assessee and had considered the other comparable companies for bench marking the said transaction for determining the ALP. The assessee had challenged the selection of comparable companies made by the TPO namely Eclerx Services Ltd. and Mold Tek Technologies Ltd. which according to the assessee has been decided in favour of the assessee by various decisions of the Tribunal and the Hon'ble High Courts. The Revenue, on the other hand, had challenged the order of the ld. CIT(A) in rejecting some of the comparables selected by the ld. TPO. On this background, the assessee vide submission....
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....essee shall within 30 days of the receipt of the draft order either file his acceptances or objection for the variation proposed to the A.O. The A.O. thereafter should complete the assessment on the basis of the draft order, after the A.O. receives the acceptance of the assessee or when no objections are received within a specified period from the assessee. As per the provisions of the Act, the draft assessment order in no way culminates to arriving at the demand and also the levy of penalty. It can be inferred from the act of the A.O. in issuing the demand notice along with the draft assessment order that the demand got crystalised on passing of the draft assessment order thereby converting the draft assessment order to be the final assessment order passed by the A.O. The intention of the legislature is clear where it has proposed a draft assessment order for the purpose to show cause the assessee whether he accepts or objects to the proposed addition. The assessee has placed reliance on the decision of the Tribunal in the case of Aker Powergas P. Ltd. (supra), wherein the Tribunal by placing reliance on the decision of the Pune Bench of the Tribunal in the case of Atlas Copco Ind....
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....the Assessing Officer/the Dispute Resolution Panel/ the Transfer Pricing Officer in this regard is misconceived, erroneous and incorrect. 1.3 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the Assessing Officer / the Transfer Pricing Officer/ the Dispute Resolution Panel has erred in characterizing the low end back-office services which are in the nature of business process outsourcing' as high-end knowledge process outsourcing". 1.4 The Appellant submits that the Assessing Officer be directed to delete the upward adjustment of Rs. 5,56,38,789/- made by him to the Appellant's total income and to re-compute its total income and tax liability thereon accordingly. 2.0 General 2.1. The learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 17. The brief facts are that the assessee filed its return of income dated 14.10.2010, declaring total income at Rs. 2,03,428/-. The assessee's case was selected for scrutiny. The A.O. made reference to the TPO u/s. 92CA(1) of the Act for the following international transaction entered into by the assess....
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....other comparables for the reason that the current year data was not used, comparables selected by the assessee did not stand scrutiny of FAR anaylsis, the comparables was in the nature of performing different kinds of services and the selection of the companies was made with significant controlled transactions or related transactions. The TPO rejected the objections of the assessee and included the following comparables : Sr. No. Comparables Margins 1 Acropetal Technologies Ltd. (Seg) 9.84% 2 Eclerx Services Limited 55.94% 3 Accentia Technlogies Ltd. 43.07% 4 Cosmic Global Limited 16.59% 5 Nittany Outsourcing Services Pvt. Ltd. 19.52% Average 28.99% 21. The ld. TPO vide order dated 30.11.2013 passed u/s. 92CA(3) of the Act made an upward adjustment to the arms length price by Rs. 7,98,64,207/- in relation to the international transaction entered into by the assessee company with its AE. The ld. A.O. then passed a draft assessment order dated 28.01.2014 u/s. 144C(1) of the Act where the proposed addition of Rs. 7,98,64,207/- was made on account of adjustment in arms length price of the international transaction....
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....he reason that the co-ordinate bench in the case of Agilent Technologies (International) Private Limited v. ITO TS 165 IT 2013 (Del) has held that the said comparable was similar to that of the assessee and, hence, was rightly included as a comparable by the TPO. The assessee contended that the annual report of Eclerx Services Ltd. showed substantial work in the nature of outsourcing to various parties and that the business model of Eclerx Services Ltd. is different from that of the assessee and, hence, should not be taken as a comparable for bench marking the international transaction of the assessee. The assessee further stated that Eclerx Services Ltd. was also into financial services along with the sales and marketing services and has not given separate segmental information. The assessee has relied on the decision of B C Management Services P. Ltd. vs. DCIT [2017] 83 taxmann.com 346 (Del-Trib), which was upheld by the Hon'ble Delhi High Court and had also relied on the decision of the Delhi Tribunal in the case of Agilent Technologies (International) Private Limited (Supra) wherein it was held that the comparables with different business model and no segmental business availab....
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....jurisdictional High Court in the case of Pr.CIT v. Aptara Technology (P.) Ltd. reported in [(2018) the question raised before the Hon'ble High Court was as under:- "Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in excluding Accentia Technologies Ltd. and Coral Hubs Ltd. as comparable, ignoring the said companies are engaged in the business of providing IT enabled services?" 18. The Hon'ble High Court in the context of exclusion of one of the comparables, M/s.Coral Hubs Ltd. had observed as under:- "(a) The impugned order of the Tribunal has excluded M/s. Coral Hub Ltd. from the list of comparable after rendering a finding of fact that activities undertaken by Coral Hub Ltd. are not comparable to that engaged by the Respondent-Assessee. It was found as a fact by the Tribunal that M/s. Coral Hub Ltd. is engaged in ITES particularly selling and purchasing of products and goods whereas the Respondent-Assessee is engaged in e- learning and content development activity. Besides, the Tribunal has recorded finding of fact that business model adopted by M/s . Coral Hub Ltd. was different in-as-much as it outs....
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....nal for assessment years 2007-2008 and 2008-2009. We hold that the issue is now settled by the Hon'ble jurisdictional High Court (supra), wherein the outsourcing activity in one company which is done predominantly cannot be treated as a comparable with the company which is engaged in carrying out its activity in-house. These facts were duly brought as a specific objection by the assessee before the ld.TPO as well as ld.DRP as detailed elsewhere hereinabove in this order by way of written M/s.Integreon Managed Solutions (India) Pvt.Ltd. submissions. Hence, it cannot be said that the assessee had made this objection for the first time before this Tribunal. We also find that the objections made by the assessee with regard to this comparable namely Eclex Solutions Limited had not been disputed by the ld.TPO or by the ld.DRP by pointing out certain factual differences in the objections of the assessee, more particularly, with regard to the predominant activity carried on by the said comparable. 20. In view of the aforesaid factual observations and respectfully following the judicial pronouncements relied upon hereinabove, we hold that Eclerx Solutions Limited should not be ....