TaxTMI 
TaxTMI 
2025 (3) TMI 1458
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....#39;Ld. DRP') are erroneous and bad in law. 2. On the facts and circumstances of the case & in law, the Ld. AO erred in' assessing the total income of the Appellant at INR 68,20,29,190 as against the returned income of INR 53,49,66,390. 3. On the fads and circumstances of the case & in law, the final assessment order under section 143(3) r.w.s. 144C(13) of the Act dated July 30, 2024 and Ld. DRP's directions under section 144C(S) of the Act dated June 26, 2024 are barred by limitation provided under section 153 of the Act and hence, deserves La be held as void-ab-initio, bad in 1m.V' and time-barred. 4. On the facts and circumstances of the case & in law, the Ld, Assessing Officer/ TPO/ DRP erred in making an adjustment of INR 14,64,48,168 pertaining to provision of CAD/ engineering design services, provision of software development services and provision of IT enabled services and in doing so have grossly erred in: 4.1 disregarding the TP documentation maintained by the Appellant in accordance with section 92D of the Act read with Rule l0D of the Income tax Rules, 1962 ('the Rules'); 4.2 not appreciating that non....
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....only Grounds No.4.3 & 4.4 relating to deletion of three comparables, namely, Wipro Limited, Infosys Ltd. and Tata Elexi Limited and he submitted that it is suffice to adjudicate these three comparables and other comparables are not pressed at this stage. The relevant facts of the case are, the assessee started its operations from 1st October 2006 as a global technology captive centre for Stryker Group in India and the assessee is engaged in rendering Computer Aided Designing ('CAD')/ engineering design, contract software development, and IT enabled back-office support services to the Stryker Group entities under the direction and supervision of the Associated Enterprises (AEs). During the year, the assessee was also engaged in trading of certain medical equipment purchased locally which is unrelated to its international transaction of provision of support services to AEs. The assessee undertook various international transactions with its AEs in the Financial Year (FY) 2019-20. The assessee has benchmarked its international transaction of Provision of CAD/ engineering design services, Provision of contract software development services and Provision of IT enabled services selecting ....
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....king the correct operating margins of the comparable companies from the annual reports. With regard to three comparables, he submitted as under :- (i) Tata Elxsi Ltd. 1. Functionally Dissimilar - Tata Elxsi addresses the complete product development lifecycle from R&D, new product development and testing to maintenance engineering for Broadcast, Consumer Electronics, and Communications. It's services include the below: (i) Embedded product design - Provides technology consulting, new product design, development, and testing services etc. (ii) Industrial Design and Visualization - Provides consumer research and strategy, branding and graphics, product design, service design, user experience design, transportation design, visualization, and manufacturing support. (refer page 1616 of ARC) As per company's website, it is engaged in premium engineering services right from advanced R&D in new technology and system architecture exploration to actual development, validation, and deployment. 2. Non-availability of segmental information (refer page 1721 of ARC) 3. Owns Brands/Intangibles - Tata Elxsi also makes use of its hig....
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....ign, development, re- engineering and maintenance, systems integration, package implementation, global infrastructure services, business process services, cloud, mobility and analytics services, research and development and hardware and software design. the Assessee submits that the said activity of Wipro is not comparable to the routine software development services rendered by the Assessee. Considering that the Assessee is a low-risk captive service provider. (refer Page 1769 of the ARC) 2. Non-availability of segmental information (refer page 1769 of ARC) 3. Owns IP - Wipro has a rich portfolio of 60+ enterprise-grade products, platforms and frameworks and has been actively investing in strengthening, enhancing and refreshing the portfolio (Virtual Desk, Wipro HOLMES). (refer Page No. 1793 and 1907 of the ARC) 4. High Turnover- INR 50,380 crores (page 1885 of ARC) 5. Tangible Assets- INR 5047 crores 6. Intangible Assets- INR 319 crores (page 1883 of ARC) 7. Incures marketing & brand building expenses - INR 222 crores (Page 1885 of ARC) It is submitted that the diversified activities performed by the comparable cannot....
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....unal for valid and good reasons has pointed out that Infosys Technologies Ltd. cannot be taken as a comparable in the present case. This leaves L&T Infotech Ltd. which gives us the figure of 11.11 %, which is less than the figure of 17% margin as declared by the respondent-assessee. This is the finding recorded by the tribunal. The tribunal in the impugned order has also observed that the assessee had furnished details of workables in respect of 23 companies and the mean of the comparables worked out to 10%, as against the margin of 17% shown by the assessee. Details of these companies are mentioned in para 5 of the impugned order. 9. In view of the aforesaid position, we do not think that any substantial question of law arises for consideration. The appeal is dismissed." "M/s. Avaya India Pvt. Ltd. "18. On the aspect of exclusion of comparables that have a high economic upscale viz., Infosys, TCS and Wipro, particular reference may be made to the decision of this Court in PCIT v. BC Management Services Pvt. Ltd. (supra) where a particular reference was made to TCS E-serve as under: "13. ...The third comparable that the AO/TPO excluded is TCS E-s....
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....cale." 22. The Revenue's appeal against the same Assessee for AY 2011-2012 against another order of the ITAT excluding TCS EServe International Limited, Infosys BPO Limited from comparables met the same fate. In its decision dated 29th August, 2018 the Court referred to the earlier decision dated 26th February, 2018 which again pertained to AY 2010-2011. Reference was again made to the decision in BC Management Services Limited. 23. It appears therefore that this Court has consistently upheld decisions of the ITAT excluding both these very comparables. The ITAT itself appears to have taken a consistent view in a large number of cases excluding these two comparables and its decisions have been upheld by this Court. Illustratively reference may be made to the decision of the Tribunal in Vertex Customer Services India Private Limited v. DCIT (2017) 88 Taxmann.Com 286 (DelTri), Stryker Global Technology Centre Private Limited v. DCIT (2017) 87 Taxmann.com 43 (Del-Tri), Samsung Heavy Industries Private Limited v. DCIT (2017) 84 Taxmann.com 154 (Del-Tri) and Equant Solutions India Private Limited v. DCIT (2016) 66 Taxmann.com 192 (Delhi-Tribunal). 24. All of th....
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....TCS‟s operation makes it an inapposite comparable vis-avis the Petitioner." As already pointed out earlier there is a closer comparison of TCS E-Serve Limited with Infosys BPO Limited with each of them employing 13,342 and 17,934 employees respectively and making Rs. 37 crores and Rs. 19 crores as contribution towards brand equity. When Rule 10(B) (2) is applied i.e. the FAR analysis, namely, functions performed, assets owned and risks assumed is deployed then brand and high economic upscale would fall within the domain of "assets" and this also would make both these companies as unsuitable comparables. 28. The Director's report of TCS E-Serve Limited bears out the contention of the Assessee that both entities have been leveraging TCSs scale and large client base to increase their business in a significant way. The submission that the two comparables offer an illustration of "an identical transaction being conducted in an uncontrolled manner" overlooks the effect of the Tata brand on the performance of the impugned comparables. The question was not merely whether the margins earned by the Tata group in providing captive service to the Citi entities were at arm's leng....
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....itude. The essential requirement for a 'transaction' to be covered within the ambit of section 92B of the Act is that it should be between two or more 'associated enterprises', either of whom is a non-resident. 20. Thus, it can be concluded that there being no "income arising" from a receivable on a standalone basis, the same would not constitute an international transaction. This aspect has been clearly dealt in the ruling of the Bombay High Court in the case of Vodafone India Services Private Limited vs Union of India (WP No 871 of 2014). 21. Similarly, the Hon'ble Delhi ITAT in the ruling of Bharti Airtel Limited vs Additional Commissioner of Income Tax (ITA 5816/Del/2012) also held the same view of the Hon'ble Bombay High Court. 22. Thus, given the fact that the receivables per se do not fall within the ambit of the definition of "international transaction", the Appellant contends that there is no need to impute an interest on the overdue receivables and thus the entire adjustment has to be nullified. 23. In the current context, the Hon'ble Hyderabad ITAT in the case of Pegasystems Worldwide India Pvt. Ltd vs ACIT, [ITA No. 1758/Hyd/2....
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.... or advance, there is no need for making the impugned adjustment. 29. In view of the above, reliance is placed on the Hon'ble Delhi Tribunal ruling in the case of Bharti Airtel Limited vs ACTT (ITA No 5816/Del/2012), wherein it was held that transaction should be restructured/ re-characterized only in instance it is deemed to be a sham or bogus transaction or the substance of the transaction is not consistent with its form. Ld. TPO, while proposing to re-characterize the interest on receivables as loan, has not brought out any evidence or material on record vide the notice to substantiate the said claim. 30. In view of the aforesaid, Appellant humbly submitted that none of the above characteristics are present in the international transaction of the Appellant with its AEs and it may not be fair treating the international transaction relating to provision of services as loan transaction. Accordingly, computation of interest on the said transaction may not be appropriate. 14. Further he brought or our notice Ground No.5 of the grounds to submit that assessee is a debt free entity, therefore, no addition can be made relating to interest on outstanding receivab....