TaxTMI 
TaxTMI 
2023 (12) TMI 862
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....etails as called for. The Ld.AO observed that assessee had entered into international transactions exceeding Rs. 15 crores. Accordingly, the case was referred to the transfer pricing officer. 2.2 On reference received by the Ld.TPO under 92CA, the Ld.TPO called upon assessee to furnish the economic details of the international transaction in form 3CEB. From the details filed, the Ld.TPO observed that following the international transaction entered into by assessee. International Transactions Amount Received/Receivable Amount Paid/Payable (Amount in INR) (Amount in INR) Revenue from software development services 5,657,964,967 - Revenue from Information Technology Enabled services 697,031,622 - Revenue from marketing support services 231,306,502 Reimbursement of employee's contribution to employee stock purchase plan 39,666,429 Reimbursement of expat salary expense 46,881,257 Interest on ECB - 138,295,505 Reimbursement of share based compensation expense 1,171,140,369 2.3 The Ld.TPO observed that, the assessee reported international transactions in respect of Software D....
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....ch Ltd. 20.78 19.21 23.98 21.14 2 Mindtree Ltd. 20.12 26.11 27.51 24.17 3 Persistent Systems Ltd. 25.05 23.95 30.39 26.17 4 Tata Elxsi Ltd. 24.90 29.13 24.45 26.19 5 Infosys Ltd. 38.79 38.30 41.40 39.50 -3% 23.60 Mean 27.43 +3% 31.25 2.4.6 He thus proposed adjustment of Rs. 87,88,95,344/- under the software development segment. While computing the margin, the Ld.TPO did not grant Working Capital adjustment and rejected risk adjustment by following various decisions of Coordinate Bench of this Tribunal. 2.5 ITeS segment: 2.5.1 The Ld.TPO noted that assessee selected a set of six (6) comparables with a median of 10.35%, the details of which are as under: Sl. No Name of the Company Weighted Average (%) 1 Informed Technologies India Ltd -13.42% 2 Cosmic Global Ltd 5.84% 3 Allsec Technologies Ltd 8.08% 4 R Systems International Ltd (segmental) 12.63% 5 Microland Ltd (seg) 16.51% 6 One Touch Solutions ....
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....ement Consulting Services Ltd. 5.32% 5 Hansa Research Group Pvt. Ltd 8.35% 6 Technicom-Chemie (India) Ltd. 12.04% 7 Killick Agencies & Marketing Ltd 15.01% 8 Kestone Integrated Mktg. Services Pvt. Ltd. 15.46% 9 Majestic Research Services & Solutions Ltd 38.47% Median 8.35% 2.6.2 As the assessee's margin under the marketing segment was computed at 10%, the transaction was held to be at arms length. 2.6.3 Dissatisfied with the filters applied by the assessee, the Ld.TPO finalised the following set of 5 comparables with a mean of 17.02% as under: 2.6.4 He thus proposed adjustment of Rs. 2,45,32,002/- under the MSS segment. While computing the margin, the Ld.TPO did not grant the Working Capital Adjustment also rejected risk adjustment by following various decisions of Coordinate Bench of this Tribunal. 2.7 Free of cost asset:- 2.7.1 The Ld.TPO observed that assessee has received free of cost asset amounting to Rs. 52,77,34,000/- from the AEs, the details of which are as under: 2.7.2 The Ld.TPO noted that assessee had aggregated the transaction relating to the free of cost asset received from its AE's under ....
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....me as per return of income filed by the assessee. 2.9 Aggrieved by the final assessment order passed, assessee filed present appeal before this Tribunal. 3. The Ld.AR at the outset has submitted that Ground nos. 1-8 are not pressed. 3.1 He further endorsed that Ground no. 10.1 wherein 3 comparables under software development service segment is challenged for failure of turnover filter being Larsen & Toubro Infotech Ltd., Mindtree Ltd. and Infosys Ltd. is also not pressed by assessee. 3.2 Further, the comparables mentioned in Ground nos. 11.1.1 to 11.1.4 being Mindtree Ltd., Tata Elxsi Ltd., Nihilent Ltd. and Infosys Ltd. are also not pressed for failure of onsite filter. The Ld.AR submitted that Infosys BPM Services Pvt. Ltd. 3.3 Under ITeS service segment it is submitted that Ground no. 11.1.5 is also not pressed by assessee. 3.4 Further, the Ld.AR submitted that in Ground no. 16.1, assessee do not wish to press the functional dissimilarity of Tech Mahindra Business Services Ltd., Infosys BPM Services Pvt. Ltd., Vitae International Accounting Services Pvt. Ltd. and SPI Technologies India Pvt. Ltd. (seg) under ITeS segment are also not pressed. 3.5 The Ld.AR th....
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....signed - renders services only to SanDisk group - SanDisk India Employees provide oversight to work that is sub contracted to Integration partners. Following are the technical domains of IT in which work is being outsourced to Integration partners: √ Procurement Planning (PP) and Material Management (MM) Applications √ Order to Cash (OTC) and Global Trade Services(GTS) Applications √ Applications related to Supply Chain and inventory planning √ Infrastructure services that run mission critical ERP √ Customer Relationship Management (CRM) and Finance & Cost accounting (FICO) Applications √ Business Intelligence Applications √ Microsoft Collaborative technologies (SharePoint) MSS Assets The following sections provide an overview of the significant capitalized and non-capitalized assets employed by the AEs in the transaction group provision of software development services, ITES Services and Marketing Support services. A total overview about the capitalized assets is presented in the financial statement of the related parties. For the purposes of the anal....
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.... the margin computation. This panel is hereby directing the assessing officer to verify the margin computation and if any error is found, the same may be rectified/considered as per law. The assessee submitted that there is error in the margin computation of the various companies. It has not specifically pointed out the error in the TPO's computation except stating that the TPO has not adopted the figures as per the annual report. We consider it appropriate to direct the TPO to verify and adopt the figures as per the annual report of these companies and accordingly their PLI margin may be computed. Having considered the submission of the assessee, we note that the assessee has not given any detailed note in respect of the working of segregation of revenues and costs between software development services and staff augmentation. We consider it appropriate to direct the assessee to furnish the detailed notes on the working of segregation of revenues and costs before AOrfP0. AO/TPO is directed to examine the working of the assessee and decide the issue accordingly." In the interest of justice, we remand this issue to the Ld.AO to verify the margin of the assessee as per....
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....uters, testing equipments etc which were used by the assessee in rendering its services to its AEs. Admittedly these assets are received by the assessee on the capital account however there is no evidence that these equipments would be returned back by the assessee to the AE upon the rendition of services. 6.7 There is no doubt that the equipments received by the assessee are custom made which are used for the business of the assessee and are not available in the open market for purchase for commercial purposes. The AEs provided these equipments to the assessee in respect of the projects undertaken by assessee on their behalf. On a query being raised by the bench to the Ld.AR regarding the return policy of these assets, the Ld.AR very fairly admitted that the assets or goods or equipments received by it has never been returned in the past assessment years. Under such circumstances, it definitely amounts to enduring benefit in the hands of the assessee. In our view, the asset received free of cost has been rightly capitalised in the hands of the assessee. 6.8 It was also the correct approach by the Ld.TPO by granting depreciation in respect of the same. However, the double dis....
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....onally similar with that of the assessee as has been observed by Coordinate Bench of this Tribunal in following cases: • Mindteck (India) Ltd. vs. DCIT in IT(TP)A No. 211/Bang/2022 by order dated 30.11.2022 for A.Y. 2017-18 • QuEST Global Engineering Services Pvt. Ltd. vs. ACIT in IT(TP)A No. 279/Bang/2022 by order dated 13.03.2023 for A.Y. 2017-18 In view of the above, the ld AR for the assessee requested that the aforesaid companies are to be excluded from the list of comparable companies as they fail the higher turnover filter of Rs. 200 crores. 7.2 On the contrary, the Ld.DR placed reliance on orders passed by authorities below. 7.3 We have perused the submissions advanced by both sides in the light of records placed before us. In the present facts, the assessee has turnover of 56.67 crores approximately, as against the turnover of the two comparables as under: S. No. Name of the comparables Turnover (In crores) 1. Tech Mahindra Business Services Ltd. 24,324 2. Infosys BPM Services Pvt. Ltd. 62,893 7.4 In our opinion, this issue is covered by the decision of Coordinate Bench of this Tribunal in case of Mindt....
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....nal Services India (P) Ltd. Vs. DCIT (2018) 89 Taxmann.com 44 (Bang-Trib) order dated 13.10.2017, took note of the decision of the ITAT Bangalore Bench in the case of Sysarris Software Pvt. Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT Vs. Pentair Water India Pvt. Ltd., Tax Appeal No.18 of 2015 dated 16.9.2015 wherein it was held that high turnover is a ground to exclude a company from the list of comparable companies in determining ALP, held that there were contrary views on the issue and hence the view favourable to the assessee laid down in the case of Pentair Water (supra) should be adopted. The following were the conclusions of the Tribunal in the case of Dell International (supra): "41. We have given a very careful consideration to the rival submissions. ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010, relying on Dun and Bradstreet's analysis, held grouping of companies having turnover of Rs. 1 crore to Rs. 200 crores as compa....
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....he Assessee and therefore following the said view, the action of the CIT(A) excluding companies with turnover of above Rs. 200 crores from the list of comparable companies is held to correct and such action does not call for any interference." 13. The Tribunal in the case of Autodesk India Pvt.Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Banglore- Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. The following were the relevant observations: 17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Cou....
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....SI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra). 14. In view of the aforesaid decision, we hold that 7 companies listed in grd. No.4 of the concise grounds whose turnover ....
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....lecting following comparables that are alleged to be functionally not similar with that of assessee. The Ld.AR submitted that those 7 comparables has been sought for exclusion on functional dissimilarity. Assessee is pressing only following three comparables being; a) Datamatics Business Solutions Ltd. b) Manipal Digital Systems Pvt. Ltd. c) Inteq BPO Services Pvt. Ltd. 10.1 Datamatics Business Solutions Ltd. The Ld.AR submitted that this comparable is functionally not similar with that of assessee as it is providing BPM services under ITeS segment. It is submitted that this comparable renders research and analytical activities for its clients which are considered to be KPO services and therefore are not akin to the backoffice services rendered by assessee to its AEs. He submitted that the Ld.TPO has relied on the website extracts to determine the functionality and to consider this comparable in the list of ITeS segment. He relied on the following decisions wherein this comparable has been remitted back by Coordinate Bench of this Tribunal in following cases: • Global E-Business Operations Pvt. Ltd. for A.Y. 2017-18 • Mindt....
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....submissions and perused the materials available on record. We have carefully gone through the paper book submitted by the assessee in pages 1331 & 1332 wherein annual report of the above company has been shown, which is as follows: 26.8 Further, the assessee has made significant investment which can be seen from the paper book at page Nos.1336 & 1359 and the assessee is engaged in diversified range of activities. In our opinion, these are to be relooked into by the AO/TPO while examining the functionality of the comparable. Accordingly, this issue is remitted to the file of AO/TPO for fresh consideration." As nothing contrary to the above has been brought on record by the revenue before us, respectfully following the above, we remit this comparable to the Ld.AO for necessary verification as above. 10.2 Manipal Digital Systems Pvt. Ltd.: The Ld.AR submitted that this comparable is functionally not comparable with that of assessee as it is engaged in providing IT Enabled Services i.e., pre-press activities and also engaged in pre-media work and e-book distribution services. The Ld.TPO relied on website extracts to determine functionality. He relied on the following ....
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....iven at page 45 of the annual report where it is lucidly stated that "the main business of the company is to provide information technology enabled services that means pre-press activities mainly to overseas as well as domestic customers". Therefore, the ld. CIT(A), NFAC observed that the pleas raised based on information said to be available in the website are liable to be rejected is in limine in view of the information given in the annual report on the functional aspect. 8.2 Further, the ld. CIT(A) observed that this company operates under a single primary segment. The profit margins of various comparables will be averaged and a variation of 3% is also permitted. These aspects take care of some differences which are bound to be there between various comparables. In view of the above, ITeS services cannot be further classified as BPO and KPO services for the purpose of comparability analysis. Under the TNMM, functional similarity is more relevant than product similarity. It is a fact that this company falls in the category of IteS. Hence, the objection on the functional dissimilarity of the company was rejected by the ld. CIT(A). 8.3 As regards lack of segmental....
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....4/Bang/2022 dated 16.11.2022 for the AY 2017-18 in the case of M/s. Global E-Business Operations Pvt. Ltd. wherein it was held as under: 12.1.8 We have heard the rival submissions and perused the materials available on record. As per the annual report of the company, it is also in end-to-end content services across the value chain. From the website and annual report, it is clearly evident that the company is also engaged in web development, mobile application development. The company also provides publishing editorial & composition services, which includes creating layout & artwork for advertisements and brochures, typesetting services and proof reading. As per revenue from operations, it includes "Revenue from web development and other services" (INR 2.18 Cr) and "income from e-book Distribution" (INR 69 lakhs), without providing the segmental revenue and profitability with respect to ITES segment. Advertising and sales promotion expenses at 6.50%, 7.19% & 8.78% of total expenditure in FY 2016-17, FY 2015-16 & FY 2014-15 respectively. 12.1.9 Further, the Tribunal in the case of Iron Mountain Services Ltd. in IT(TP)A No.307/Bang/2022 dated 20.9.2022 has held as un....
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.... further, since the audited financial statements do not provide detailed description of operations/products in which the company deals, the website can be referred to for the analysis of functions performed by the company. The Ld. DRP vide Para (c) of Page No.67 to 70 of its order and as per reasoning therein, had upheld the findings of the TPO and included Manipal Digital Systems Private Limited in the final set of comparables companies. That again the prime observation of the Ld. DRP in this regard was that more than 90% of the total revenue of the operation of the company comes from ITes. 11. At the time of hearing, the Ld. Counsel for the assessee took us through the annual report of the company at Volume -II, Page 1279 onwards, Page 1302 having notes of accounts. The Ld. Counsel vehemently submitted that on perusal of the annual report, notes of accounts, nothing can be stated whether at all this company i.e. Manipal Digital Systems Private Limited is engaged in the business of call center or not. The realm of ITes involves various activities and on general principle the Revenue cannot say that since majority of the earning of the said company comes from ITes, it is c....
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....(IT) [2013] 32 taxmann.com 21 and Lloyds TSB Global Services Pvt. Ltd. v. DCIT, (ITA No. 5928/Mum/2012 dated 21^th November 2012), the Hyderabad and Mumbai Bench of the Tribunal respectively accepted the view that a BPO service provider could not be compared with a KPO service provider. 33. The Special Bench of the Tribunal in Maersk Global Centers (India) Pvt. Ltd. (supra) struck a different cord. The Special Bench of the Tribunal held that even though there appears to be a difference between BPO and KPO Services, the line of difference is very thin. The Tribunal was of the view that there could be a significant overlap in their activities and it may be difficult to classify services strictly as falling under the category of either a BPO or a KPO. The Tribunal also observed that one of the key success factors of the BPO Industry is its ability to move up the value chain through KPO service offering. For the aforesaid reasons, the Special Bench of the Tribunal held that ITeS Services could not be bifurcated as BPO and KPO Services for the purpose of comparability analysis in the first instance. The Tribunal proceeded to hold that a relatively equal degree of comparability ....
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....Centers (India) Pvt. Ltd. (supra), there may be cases where an entity may be rendering a mix of services some of which may be functionally comparable to a KPO while other services may not. In such cases a classification of BPO and KPO may not be feasible. Clearly, no straitjacket formula can be applied. In cases where the categorization of services rendered cannot be defined with certainty, it would be apposite to employ the broad functionality test and then exclude uncontrolled entities, which are found to be materially dissimilar in aspects and features that have a bearing on the profitability of those entities. However, where the controlled transactions are clearly in the nature of lower-end ITeS such as Call Centers etc. for rendering data processing not involving domain knowledge, inclusion of any KPO service provider as a comparable would not be warranted and the transfer pricing study must take that into account at the threshold. 36. As pointed out earlier, the transfer pricing analysis must serve the broad object of benchmarking an international transaction for determining an ALP. The methodology necessitates that the comparables must be similar in material aspects....
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.... opine that as per Indian Council for Advertising, the online advertising has to be published on true and honest disclosure basis and therefore, when proper documentation of activities are not physically available, in such scenario, referring the website for information is correct option and the information therein cannot be doubted. These are all multi-national companies and certain amount of honesty has to be attributed to them since all are functioning as per relevant rules and laws. With these observations and respectfully, following the judgment of the Hon'ble Delhi High Court (supra.) we direct the AO/TPO to exclude this company i.e. Manipal Digital Systems Private Limited from the final set of comparables with that of the assessee company." 17. Learned DR submitted that the aforesaid decision was in relation to Assessment Year 2016-17 whereas the case of the assessee in this appeal is in reference to Assessment Year 2017-18. Learned Counsel for the assessee submitted that the functional profile of the comparable company as well as the assessee remains the same for both Assessment Years 2016-17 and 2017-18 and therefore the decisions cited above are applicable to Ass....
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....n Vee Technologies (P.) Ltd. v PCIT [(2022) 139 taxmann.com 229 (Bang-Trib) - Page 1751-1752 of Case law compilation], following the decision of its co-ordinate bench in EMC Software and Services (P.) Ltd v JCIT (2020) 115 taxmann.com 293, held that a company involved in business process management services cannot be considered comparable to a company providing ITeS such as the assessee. 27.3 In view of the above, the assessee requested for exclusion of Inteq BPO from the final set of comparable companies. 27.4 The Ld. D.R. submitted that the ld DRP in his reported observed that the services offered by Inteq BPO are in Revenue Cycle Management, Claims Processing services and Document & Data Processing. The principal business activity of the company at page 5 of the annual report is business process outsourcing (BPO). However, the assessee stated that business activities of the comparable company are more in the nature of business process management in the form of revenue cycle management, claims processing. It cannot be compared to Assessee Company which is rendering IT enabled services. In this regard, the contention and understanding of the assessee on the funct....
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.... Cosmic Global Ltd. and Allsec Technologies Ltd. was excluded by the Ld.TPO as it failed export income filter. It is the submission of the Ld.AR that the above observation by the Ld.TPO in respect of these comparables are not true as from the annual report it is verifiable that these companies passes all the relevant filters applied by the Ld.TPO. He thus prayed for these comparables to be remanded for considering afresh. The Ld.DR did not object for the comparables to be remanded for verification based on the annual reports. 11.2 We have perused the submissions advanced by both sides in the light of records placed before us. We note that the annual reports of the above comparables are to be verified before excluding them. The assessee is directed to furnish the annual reports before the Ld.TPO which shall be verified and the filters applied by the Ld.TPO shall be considered for its exclusion / inclusion as there is no dispute by the Ld.TPO regarding the functional dissimilarities the filters applied by the Ld.TPO are directed to be verified from the annual reports. All necessary data for such verification shall be provided by the assessee. Accordingly, ground nos. 16.3 an....
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....d by this company has been shown as advertising services which is not akin to marketing support services rendered by the assessee before us. 12.2. On the contrary, the Ld. DR relied on the observations of the DRP. 12.3. We have perused the submissions advanced by both the sides in the light of records placed before us. From the Director's report at page 4045 of PB, we note that the business over view of this company is shown to be advertising, public relation, design and digital. As there is no segmental details available, it is difficult to analyse the revenue generated by this company from the advertising segment. Therefore, in our view, cannot be considered to be functionally comparable with that of assessee. " 12.2 Scarecrow Communications Ltd. The Ld.AR submitted that this comparable is not functionally comparable with that of assessee as it is engaged in the business of advertising, communication, and public relations and lacks segmental information. The Coordinate Bench of this Tribunal in case of M/s. Arm Embedded Technologies Pvt. Ltd. vs. DCIT (supra) held as under: "(A) Scarecrow Communications Ltd. ('Scarecrow'): Functionally di....
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....ng the financial year 2015- 16. The company acts as an intermediary in providing its services which is contrary to the activity undertaken by the assessee as a marketing support service provider. The company having operated without a single employee shows that the company is not rendering any services on its own and is therefore not comparable to the assessee. Further the revenue earned is in respect of different types of services which are not comparable to the assessee. Further, there are no segmental details available as regards the services. It is submitted that this company was directed to be excluded by the DRP in the assessee's own case for the assessment years 2013-14 and 2014-15 on the ground that it is not functionally comparable to the assessee. The relevant extracts of the DRP's directions are produced on page 188 of the appeal set. We have perused the submissions of both sides in light of records placed before us. This comparable has been excluded by the revenue itself in the preceding assessment years for being functionally different. We therefore direct exclusion of this company from the final list." 7.1 In the present case also it has been....
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....llowed Ground no. 17.1, Ground no. 17.2 becomes academic. 13. Ground no. 18 - Interest on delayed receivables It is submitted that the amounts outstanding have been settled by the AE on an on-going basis in the normal course of business having regard to economic and commercial factors. Since the outstanding receivables related to the primary services rendered, the assessee submits that, the determination of ALP of the outstanding receivables is not warranted as the same is subsumed in the ALP of the principal transaction. 13.1 The Assessee also contends the outstanding receivables could not be made subject matter of TP adjustment as the same is not covered under the provisions of Section 92B of the Act. Also, it is submitted that the Assessee is a debt free company and does not bear any working capital risk since it is fully funded by its AEs. The Assessee has not incurred any interest expenses for its working capital requirement. Hence, the Assessee does not have any interest cost in the funds blocked on deferred receivables from AEs as it is entirely funded by its AEs for its working capital requirements. 13.2. The Ld.DR relied on the orders passed by authorities belo....
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....d remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down by Hon'ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt. Ltd., reported in (2015) 276 CTR 445 by considering a credit of 90 days. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Accordingly, this ground raised by assessee stands partly allowed for statistical purposes. 14. Ground no. 21 is in respect of disallowance of salaries paid and reimbursement of expenses made towards seconded employees. 14.1 The Ld.AR submitted that TDS has been deducted on the entire salary paid by assessee to the seconded employees and what is reimbursed is the payment which has been partly made by the AE to the families of such seconded employees. The Ld.AR ....
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....ted that assessee may be provided an opportunity to substantiate the claim. We accordingly remand this issue to the Ld.AO to verify the evidences if any filed by the assessee and to consider the alternate claim of deprecation in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly this ground raised by assessee stands allowed for statistical purposes. 16. Ground no. 23 - The Ld.AR submitted that the Ld.AO in the final assessment order has considered the total income incorrectly in the computation. The same is directed to be verified and necessary corrections may be made in respect of the same. 17. Ground nos. 24 to 26 are consequential in nature and therefore do not require any adjudication. 18. Ground no. 27 is general in nature. In the result, the appeal filed by the assessee stands partly allowed in terms of the grounds argued by the Ld.AR. Order pronounced in the open court on 13^th October, 2023. ============= Document 1 The grounds stated hereunder are independent of and without prejudice to one another. The Appellant submits as under: 1. Directions of the Hon'ble Dispute Resolutio....
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....wherein the Ld. TPO erred in law while interpreting the provisions of Rule 10B(5) and Rule 10CA of the Income-tax Rules, 1962 (the Rules') and proceeding to conduct a fresh benchmarking analysis. vice Design NP Ajoyed 2647les Document 2 4.3. The Hon'ble Panel erred in upholding the order of the Ld. TPO/ NFAC, wherein the Learned TPO conducted a fresh comparability/ benchmarking analysis using "non-contemporaneous" data and substituted the Appellant's analysis with the fresh benchmarking analysis on his own conjectures and surmises. Therefore, the Appellant prays that the fresh benchmarking analysis conducted by the Ld. TPO is liable to be quashed. 4.4. The Hon'ble Panel erred in upholding the order of the Ld. TPO/ NFAC wherein the Ld. TPO disregarded the fact of non-availability of contemporaneous data in public domain at the time of preparation of transfer pricing study by the Appellant. Further, the Ld. TPO also disregarded the comparable companies arrived at in the Transfer Pricing Study without considering the functional and risk analysis of the Appellant. 5. Error in computation of segmental margin of the Appellant 5.1....
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.... Infosys BPM Services Private Limited Onsite filter To T-o 11.1. The Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC in rejecting the Appellant's arguments on application of onsite filter to exclude the following companies in the Document 3 software development services segment, which have significant onsite operations unlike the Appellant, which is an offshore service provider: Software Development Services segment 11.1.1. Mindtree Limited; 11.1.2. Tata Elxsi Limited; NP རིà½à¼‹à¼¼ gt; ཨི་ སི་ à½à¾±à½£à¼‹ 2617/23 11.1.3. Nihilent Limited; 11.1.4. Infosys Limited 11.1.5. Infosys BPM Services Private Limited Information Technology enabled Services segment 12. Working Capital adjustment acacom 12.1. The Hon'ble Panel erred in upholding the action of the Learned TPO/ NFAC in not allowing appropriate working capital adjustment considering the functional and operational profile of the Appellant vis-à -vis the comparable companies. 13. Risk adjustment 13.1. The Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC in no....
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....that it is not functionally comparable to the Appellant: 15.5. The Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC in excluding Intense Technologies Limited; 16. Information Technology Enabled Services segment 16.1. Without prejudice to ground no.1, the Hon'ble Panel erred in accepting the following companies as functionally comparable to the Appellant. 16.1.1. Tech Mahindra Business Services Limited; 16.1.2. Datamatics Business Solutions Limited; 16.1.3. Infosys BPM Services Private Limited; 16.1.4. Vitae International Accounting Services Private Limited 16.1.5. Manipal Digital Systems Private Limited; 16.1.6. SPI Technologies India Private Limited (segmental); and 16.1.7. Inteq BPO Services Private Limited 16.2. Without prejudice to the above, the Ld. TPO/ NFAC erred in not rectifying the margin of Sundaram Business Services Limited, Jindal Intellicom Limited, Fuzen Software Private Limited, Datamatics Business Solutions Limited, Vitae International Accounting Services Private Limited and Manipal Digital Systems Private Limited while passing the final assessment order. 16.3. The Hon'ble Panel erred in upholdin....
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....Panel erred in upholding the action of the Ld. TPO/ NFAC in not appreciating that creation of trade receivables was a secondary transaction arising out of international transactions with Associated Enterprises, which has already been benchmarked as part of the international transactions relating to rendering of software development services, information technology enabled services and marketing support services. 18.3. The Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC wherein the Ld. TPO/ NFAC have not appreciated that the underlying agreements do not have a clause for interest on outstanding balance and hence no such interest is payable by the AEs. 18.4. Without prejudice to the above, the Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC and failed to appreciate that interest on trade receivables, to the extent prudently applicable, has been implicitly factored by the Appellant in pricing its transactions with its AEs and could be verified using a working capital adjustment. 18.5. Without prejudice to the above contentions, the Hon'ble Panel erred in upholding the action of the Ld. TPO/ NFAC in making a curre....
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....'ble Panel erred in upholding the action of the NFAC in alleging that the Appellant is intentionally attempting to withhold information from the Department. 21.5. Without prejudice to the above grounds, the NFAC erred in not following the directions of the Hon'ble Panel to verify the claim of the Appellant with respect to the double disallowance and recomputing disallowance on account of salaries paid and reimbursement of expenses made towards seconded employees. 22. Disallowance of bonding and debonding charges 22.1. The Hon'ble Panel erred in upholding the action of the NFAC by stating that payment made towards bonding and debonding charges are capital in nature and disallowing such expense under section 37 of the Act. 22.2. The Hon'ble Panel, having held the charges to be capital in nature, erred in upholding the action of the NFAC in not granting appropriate depreciation as an allowance 23. Total income considered in computation sheet of final assessment order 23.1. The NFAC has erred in law and on facts in incorrectly considering the total income of the Appellant as INR 2,194,635,780 in the computation against INR 2,192,430,486 cons....
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....k India has entered into a service agreement with SanDisk Ireland for provision of marketing and related support services. The team does the following specific activities: BPL Retail merchandising Road Shows Distributors Specific activities ATL Media Agency The services of marketing team also includes coordination in promotion and advertisement for SanDisk products in India conducting market research activities providing technical information providing research and development information education and service programs to customers facilitation of customisation of the SanDisk products to meet the specific needs of the customers coordinate local purchase of supplies Also, SanDisk India communicates with potential users of SanDisk products in order to educate them (explain SanDisk products via presentations, brochures & pamphlets etc.). Once a possible user chooses to purchase a product, the third party distributors place order with SanDisk Group entities. All sales of SanDisk products in India are undertaken through third party distributors. Products under the enterprise category are not similar t....
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....r/ distributors. Document 12 62.0 Ground of objections no. 62: Assets received free of cost taxed under section 28(iv) of the Act 62.1 The National e-Assessment Centre ('the NeAC') erred in law and on facts in not considering the contentions of the Assessee that the Ld. TPO had already made an adjustment on free of cost assets received from its Associated Enterprises ('AES). The adjustment made by NeAC under section 28(iv) of the Act has led to double disallowance on the same transaction. 62.2 Without prejudice to the above contention of the Assessee, the NeAC erred in law and on facts in concluding that the assets received free of cost from its Associated Enterprises (AEs) constitutes a 'benefit arising from the business' of the Assessee and thus, chargeable to tax under section 28(iv) of the Act. 62.3 The NeAC erred on facts and in law in stating that if the assets were purchased, the same would be in the nature of royalty requiring tax to be deducted under section 195 of the Act. 62.4 The NeAC erred in alleging that the Assessee tactically received the assets free of cost from its AEs in order to avoid deduction of taxes under secti....
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....iation allowance on assets received free of cost Given that the Ld. TPO has added the notional depreciation on assets received free of cost to the operating cost base of the Assessee, the NeAC erred in not providing an allowance for depreciation on such assets 63.1 Panel: Having considered the submissions, and on perusal of the details filed, we note assessee has received certain assets at free of cost during the year. These assets include computers, testing equipment computer accessories and SD cards. The assessee failed to submit Y documentation to understand the terms and conditions of such receipt of assets. It was also imed that the assets were obtained for carrying out some tests and not for assessee's benefit. Document 14 The assessee also contended that it is not engaged in trading capital goods. Before the AO the assessee has also taken the stand that these assets are received on capital account. The contentions of the assessee are considered. With reference to the contention that these assets are not available in India it is not a ground to treat them tax free. If the assets are required for performing the functions, assessee could....
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....of the company shall be stated:- Sr. No. Name and Description of main products/services NIC Code of % to total turnover of the the Product/ company service IT Enabled Services, BPM Service Providers 631 87.20% III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES Sr. Name And Address Of The CIN/GLN No. Company Holding Subsidiary % of shares held Associate 1. Datamatics Business Solutions Subsidiary 100% UK Limited 2. Datamaties Business Solutions Subsidiary 100% Inc. 3. Datamatics Business Enablers 074300MH1995PTC085970 Associate 49% Private Limited Page 1331 Document 16 IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) 1. Category-wise Share Holding ity of olders No. of Shares held at the beginning of the year No. of Shares held at the end of the year Demal Phy Total % of Total Shares Decat Physica Total % of Total Shar omoter an vidual 461,306 461,306 20.50% 461.306 461,306 20.50% tral Govt Govt(s) ies Corp 1,743,694 1,743,694 7....