TaxTMI 
TaxTMI 
2024 (5) TMI 792
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..../6/2023 for admission of additional legal ground challenging validity of the assessment order based on the decision rendered by the Hon'ble Madras High Court in the case of CIT. v. Roca Bathroom Products P. Ltd. Writ Appeal Nos. 1517 & 1519 of 2021. 3. The learned counsel submits that in ground No. 2 to 11 of appeal, the assessee has assailed Transfer Pricing adjustment. By way of aforesaid grounds the assessee is primarily seeking removal of some comparable companies selected by the Transfer Pricing Officer (TPO) in proceedings u/s 92CA(3) of the Act. Narrating the facts of case, he submitted that the assessee is engaged in providing I.T enabled services (ITES) to its group concerns. The assessee is a captive call centre. Earlier the call centre business was carried out by the Vodafone India Services Pvt. Limited. Vodafone India Services Pvt. Ltd. in pursuance to slump sale business agreement with the assessee transferred the entire business as going concern to the assessee from December, 2007. The nature of business carried out by the assessee is identical in every respect to the business earlier carried out by Vodafone India Services Pvt. Limited. 4. The learned Counsel su....
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....le to be excluded from the list of comparables on account of extra ordinary event. Infosys BPO Ltd. acquired McCamish Systems LLC, USA to provide end to end solutions. This extra ordinary event has impact on the financial results of the comparable. He further asserted that the said company is not good comparable due to substantial difference in turnover. The turnover of the assessee is Rs. 560 crores as against the turnover of Infosys BPO Ltd. at Rs. 1126 crores for the Financial Year 2009-10. Hence, Infosys BPO Ltd. should be excluded from the final set of comparables. In support of his submissions, he placed reliance on the decision in the case of Travelex India Private Limited Vs. ACIT in ITA No. 1214/Mum/2015 decided on 7.11.2022. He further cited substantial Brand value and high-risk profile of Infosys BPO Ltd. as reasons for excluding the said company from the list of comparables. 5.1. In respect of Wipro Ltd., learned counsel pointed that in Financial Year 2009-10 there was amalgamation of Wipro Networks Pte Ltd. Singapore and WMNETSERV Ltd., Cyprus into the assessee and the same was approved by Hon'ble Karnataka High Court. This extra ordinary event of amalgamatio....
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....e, now argument that there is a substantial difference in turnover should not be accepted. On exclusion of Informed Technologies India Ltd., learned DR placed heavy reliance on the findings of DRP. Decision: 7. We have heard the submissions made by rival sides and have examined the orders of the authorities below. We have also considered the decisions on which reliance has been placed in support of respective submissions. In so far as the nature of activities/functions carried out by the assessee, they are not in dispute. The primary grievance of the assessee qua Transfer Pricing adjustment is inclusion of following companies in the list of comparables by the TPO and upheld by the Dispute Resolution Panel (DRP): i) Eclerx Services Ltd. ii) Genesys International Corporation Ltd. iii) Infosys BPO Ltd. iv) Wipro Ltd. v) Informed Technologies India Ltd. The assessee is seeking exclusion of aforesaid companies from the final list of comparable companies. Eclerx Services Ltd.: 8. We find that in the assessment year 2008-09, 2009-10 & A.Y. 2011-12, the Tribunal in appeal by the assessee i.e. ITA No. 7520/Mum/2012 decided on 23.9.....
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....advanced by both the parties. We have already held that high end services in ITES sector could not be the basis for exclusion of comparables. Similarly, we have also not found the arguments based on high margin convincing for the reason given earlier. The argument of the learned AR based on brand value and high marketing /selling expenses had been examined in detail by the Tribunal in case of Actis Advisors (P) Ltd. (Supra). The Tribunal noted that high marketing expenses did create marketing intangibles such as brand. But it was not necessary that it always resulted into high margin. The Tribunal in that case noted the finding of TPO that 95% of the revenue of Infosys came from repeat business which showed that marketing intangibles did not help Infosys to get any better business. The Tribunal also accepted the finding of TPO that marketing intangibles may be helpful in getting better business but the same may not be applicable in the case of service industries like ITES. The department in that case had placed on record some instances in which companies with much lower marketing expenses had shown much higher margin. The Tribunal therefore, concluded that marketing intangibles suc....
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....ument of extra ordinary event, the assessee placed on record Annual Report of Infosys for Financial Year 2009-10. A perusal of same reveals that Infosys has acquired McCamish Systems LLC, USA for a total consideration of Rs. 173 crores and further contingent consideration of Rs. 67 crores. Thus, from the above it is evident that there was financial impact on the funds of the company in Financial Year 2009-10 on account of acquisition of another entity. The Hon'ble Bombay High Court in the case of PCIT vs. JP Morgan India (P) Ltd. 261 Taxman 404 has held that events like merger, amalgamation etc., in life span of a company is not a normal event, hence, such company cannot be considered as comparable. Thus, on account of extra-ordinary event of amalgamation during the relevant year, Infosys BPO Ltd. is directed to be excluded from the list of comparables. Wipro Ltd.: 12. We find that the TPO has selected Wipro Ltd. as comparable on the basis of segmental data. The assessee is seeking exclusion of Wirpro Ltd. from the list of comparables on account of difference in functionality, difference in turnover, brand size and extra ordinary event of amalgamation of Wipro Networks Pte. L....
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....ternational Services Pvt Ltd vs The ADIT (supra) and AOL Online India Private Limited vs DCIT (supra), which are for the very same assessment year, the Tribunal has rejected this company as a comparable on the ground of low employee cost, abnormal growth and considerable business promotion expenses. Respectfully following the aforesaid decisions of the co- ordinate bench, we direct the assessing officer to exclude this company from the list of comparables". 14. We find that the activities carried by DBOI Global Services (P) Ltd. are in the nature of providing data process and back office support services to its AEs. Thus the said company is also captive service provider. In the light of similar facts, we follow the decision of the Coordinate bench and direct the Assessing Officer to exclude Informed Technologies India Ltd. from the list of comparables. 15. Thus, in the light of our above findings ground No. 5, 6 & 7 of appeal are allowed. 16. The learned counsel for the assessee stated at Bar that he is not pressing ground of appeal No. 8 to 10. In view of the statement made by the Counsel for the assessee, ground of appeal No. 8 to 10 are dismissed as not pressed. 17. ....
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....The assessee has placed reliance on the decisions of Tribunal in the case of AMD India P. Ltd vs. ITO, 114 taxmann.com 703 (Bang.) and Capstone Securities Analysis P. Ltd. vs. DCIT 105 taxmann.com 62 (Pune) to contend that service tax refund is operating revenue. The assessee has also furnished a table indicating that even if service tax refund is ignored the variation between the ALP and value of international transaction is less than 5%, hence, the international transaction would be within tolerance limit. We find that the Tribunal in the cases afore-mentioned has held service tax refund/service tax written back as operating revenue while computing profit level indicator. Considering above decisions of the Tribunal, we see no merit in ground no.2 of appeal, hence dismissed. 25. In ground No. 3 of the appeal, the Revenue has assailed the direction of DRP in allowing benefit of deduction under section 10A in respect of interest earned on various fixed deposits. We find that this issue is recurring. In assessment year 2009-10 & 2011-12, the assessee had claimed deduction under section 10A on interest income. The Assessing Officer disallowed the same. The matter travelled to th....