TaxTMI 
TaxTMI 
2025 (3) TMI 1420
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....onvenience and brevity. ITA No. 2374/DEL/2012 [A.Y. 2010-11] 3. The assessee has raised the following grounds of appeal: "1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("Ld. AO")/ Ld. CIT(A) is bad in law and void ab-initio. 2. That the reference made by the Ld. AO suffers from Jurisdictional error as the Ld. AO has not recorded 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). 3. The Ld. AO/ Ld. TPO/ Ld. CIT(A) erred on facts and circumstances of the case in determining the arm's length adjustment to the Assessee's international transactions from Associated Enterprises ("AES") and thereby resulting in the enhancement of returned income of the Assessee by INR 19,838,830. 4. The Ld. AO/ Ld. TPO/ Ld. CIT(A) erred on facts and in law in the assessment of the arm's length price of the Assessee's international transactions from associated enterprises ....
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....ct, 1956 and enjoying the tax holiday benefits conferred under the tax holiday benefits as per the Software Technology Park of India (herein after referred to as "STPI") Scheme. 10. That the Ld. AO/ Ld. CIT(A) erred in facts and in law in charging interest under section 234A, 234B and 234C of the Act 11. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act, for disallowances made under section 92CA(3) without recording any adequate reason for such initiation. That the above grounds are independent and without prejudice to each other. 4. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 5. Briefly stated, the facts of the case are that the assessee is an Indian company incorporated on February 16, 2006 at New Delhi and during the F.Y.2007-08 itself registered as a unit ....
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....NR 1,87,72,030/-. 9. Aggrieved by this action of the TPO, the assessee filed an appeal against the assessment order before the ld. CIT(A) who after consideration of the facts and submissions, directed the TPO to exclude M/s. TCS E-serve International Ltd and include Motif India Infotech Private Limited, Axis IT & T Limited, ICRA Online Ltd in the final set of comparable companies selected by the TPO and to examine Omega Healthcare Management Services Pvt Ltd and include it after verification. Further CTT(A) directed the ΤΡΟ to re-compute the margins of Interglobe Technologies Pvt Ltd. The ld. CIT(A) also directed the TPO to exclude recovery of expenses while computing the operating margin. The CIT(A) provided working capital adjustment to the assessee and directed the TPO to re-compute the margins of the comparable companies. 10. The assessee is now in appeal before us against the inclusion of Cosmic Global Ltd., Eclerx Services Lad. and TCS e-Serve Ltd. and exclusion of Omega Healthcare management services Pvt Lad, and treatment of forex gain as non-operating item by the TPO/CIT(A). 11. At the outset, the ld AR submitted that the Ground Nos. 1, 3and 4.1 ar....
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....ein the ITAT has rejected Cosmic Global. 3. M/s. Schlumberger Global Support Centre Limited v. DCIT (Int. Tax - II) [2015] 64 taxmann.com 322 (Pune Trib.) 4. M/s. Parexel International (India) Private Limited, Hyderabad v. ACIT [2014] 51 taxmann.com 238 (Hyderabad Trib.) 5. PTC Software (India) Pvt. Ltd. v. DCIT [2014] 52 taxmann.com 351 (Pune - Trib.)-affirmed by Hon'ble Bombay High Court in [2019] 101 taxmann.com 117 (Bombay) 6. Ms. Excellence Data Research Pvt. Ltd., Hyderabad (ITA. No. 159/Hyd/2014] dated 31.7.2014 7. Mercer Consulting (India) Pst Ltd v. DCIT (2014) 47 taxmann.com 84 (Delhi Trib.) 15.3. The assessee had selected Cosmic Global in its own TP documentation. However, the assessee submitted that Cosmic Global should be excluded from the list of comparables on the ground mentioned above. The assessee submitted that an assessee cannot be precluded from seeking exclusion of a company selected by it in its TP study, when the company is otherwise not comparable to the assessee. This has been upheld by Special bench of ITAT, Chandigarh in DCIT v. Quark Systems P. Ltd. (2010) 38 SOT 307 (Chandigarh Trik) which has been af....
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..... 18.4. The ld AR further pointed out that Exclerx has been rejected by CIT(A) in FY 2008-09 wherein it was held by CIT(A) that Eclerx is functionally not comparable to the Appellant since it is engaged in high end KPO services and cannot be classified as a normal BPO service provider and this finding of CIT(A) was not challenged by the Revenue before the ITAT. 18.5 The ld AR relied on the following decisions, Eclerx as a comparable has been excluded: 1. H&S Software Development and Knowledge Management Centre (P.) Ltd. v. ITO [2023] 155 taxmann.com 79 (Delhi-Trib.) 2. Rampgreen Solutions (P.) Ltd. v. DCTT [2023] 154 taxmann.com 541 (Delhi- Trib.) 3. Dunnhumby IT Services India Pvt Ltd [TS-189-ITAT-2021(DEL)-TP) dated 26.04.21 [AY 2010-11] 4. PTC Software (India) Pvt. Ltd. v. DCIT [2014] 52 taxmann.com 351 (Pune - Trib.) 5. Ms. Maersk Global Service Centres (India) PM. Lat. v. DCIT [2015] 56 taxmann.com 129 (Mumbai-Trib.) 6. M/s. Excellence Data Research Pvt. Ltd., Hyderabad [ITA No. 159/Hyd/2014] [AY 2009-10] dated 31.7.2014 19. We find force in the arguments of the ld AR of the assessee. In view of the above discussio....
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....arger than that of the Appellant. TCS e-Serve's turnover of 1359.41 cr is 69 times more than that of the assessee whose turnover is 19.62 crores. A comparison of employee base shows the difference in the scale of operations between the assessee and TCS. TCS has employed 13,342 employees whereas employee strength of assessee was 315 at 31 March 2010. The assessee cannot be compared to TCS whose employee base is 42 times that of the assessee. Therefore, TCS is not a suitable comparable to the assessee as the assessee company is pigmy compared to giant TCS. 21.4. The ld. counsel for the assessee relied on the following decisions where TCS e-Serve as a comparable has been excluded: 1. M/s Actis Global Services Private Limited [TS-417-HC-2017(DEL)-TP] 2. M/s B.C Management Services Pvt. Ltd. [2018] 89 taxmann.com 68(Delhi) 3. E-Valueserve SEZ (Gurgaon) Pvt. Ltd. [TS-125-HC-2018(DEL)-TP] 4. BT e-Serv India Pvt. Ltd. [2019] 101 taxmann.com 275 (Delhi - Trib.) 5. M/s Kronos Solutions India Pvt. Ltd. [2017] 88 taxmann.com 310 (Delhi Trib.) 22. Per contra, the ld. DR relied upon the orders of the authorities below. 23. We have heard t....
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....the export proceeds in convertible foreign exchange and had direct nexus with the exports of the assessee. Thus, the foreign exchange gain must be considered as operating income for the purpose of computing the margins, being inextricably linked with the core business operations. i.e., provision of business support services to Cvent Inc. USA. 28. The ld. counsel for the assessee contended that the TPO/CIT(A) placed heavy reliance on safe harbor rules brought into force vide notification no. 73/2013 dated September 18, 2013 wherein forex gain/loss arising out of forex fluctuation has been treated as nonoperating in nature. The TPO/CIT(A) did not appreciate that safe harbour rules are optional and the assessee did not apply these rules during the relevant year. 29. The ld AR further submitted that the TPO/CIT(A) also did not appreciate that these rules are applicable from AY 2013-14 onwards and hence are not applicable for the year under consideration. Reliance was placed on the decision by Delhi ITAT in the case of PCIT v. M//s Cashedge India Pvt. Ltd. [ITA 279/2016], wherein forex gain was treated as operating income. 30. Reliance was also placed on the following decisions....
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.... stated that the AO while giving effect to the appeal order, considered the working capital adjusted margin of Interglobe at 8.21%. The ld. counsel for the assessee further contended that correct working capital adjusted margin of Interglobe is 0.76% and therefore, prayed for appropriate directions for correction of the margins. 33. After considering the facts and submissions, we find that the CIT(A) even directed TPO to consider the correct working capital adjusted margins but this was not done by the TPO in the appeal effect order. We accordingly, direct the Assessing Officer/TPO to examine and consider the correct margins of Interglobe in the case of the assessee. Ground No. 6 is allowed for statistical purposes. 34. Ground No. 7 to 9 have not been pressed. The same are dismissed as not pressed. Ground no 10 and 11 are consequential in nature. 35. In the result, the appeal of the assessee is partly allowed for statistical purposes. ITA No. 187/DEL/2016 [A.Y. 2011-12](Assessee appeal) 36. Fact of this A.Y are mutatis mutandis identical to those discussed and disposed in A.Y 2010-11 by us hereinabove. Respectfully following the same, we order accordingly. ITA No.....
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....TCS International and it has recorded enormous all-round growth in volumes of business and profitability in the year. 39.2 The ld AR further pointed out that moreover, Schedule N (Operation and other expenses) to the P&L Account of the company indicates that it is distinguishable from the Appellant due to the presence of brand and its associated value. TCS e- Serve is paying TATA Sons Limited, ultimate holding company, a contribution for using its brand name, TATA (refer page 386 and 393 of the AR compilation) whereas the Appellant has no similar contributions and an associated brand name to augment its operational margins. The ld AR relied on the following decisions for exclusion of TCS E-serve International as comparable: I. Avaya India (P.) Ltd. v. ACIT [2019] 108 taxmann.com (Delhi) (refer para 23, 24 and 29 of the order) 2. GE India Business Services Pvt. Ltd v. DCIT [2018] 94 taxmann.com 387 (Delhi - Trib.) - affirmed by Hon'ble High Court in [2023] 152 taxmann.com 517 (Delhi) (refer para 11 of the order) 3. M/s. Vertex Customer Services India Private Limited, [2017] 88 taxmann.com 286 (Delhi - Trib.) (refer para 43 of the order) 40. For o....