TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1582
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....tion Technology Enabled Services (ITES) to its Associated Enterprises (AE). The assessee herein has got three business centers located in Mumbai, Pune and Bangalore. 4. The first issue relates to the addition made by the AO on account of transfer pricing adjustment. The assessee had entered into international transactions with its AE in the form of provision of ITES. It had received revenue of Rs. 345.73 crores during the year under consideration. In its transfer pricing study, the assessee followed TNM method as most appropriate method and Operating Profit to Operating Cost (OP/OC) as Profit level indicator. The PLI of the assessee was 14.75%. The Ld A.R submitted that the assessee is being compensated by its AEs under Cost plus 15% mark-up method. In its transfer pricing study, the assessee selected 14 comparable companies. The 35th Percentile of the margin declared by the above said companies was 6.07% and 65th Percentile was 17.87%. The median was 8.03%. Since the PLI was 14.75%, the assessee claimed that its international transactions have been entered at arm's length. 5. The TPO rejected the transfer pricing study of the assessee. He selected following comparable companies:....
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.... selected on the basis of the availability, coverage and reliability of data necessary for application of method. 7.3 We heard the parties and perused the record. With regard to the application of filter of different accounting year, the Hon'ble Delhi High Court in the above said case has expressed the following view:- "14. The Revenue is in appeal before this Court questioning the admissibility of the above mentioned comparables while computing Arm's Length Price regarding the IT Support services after the TPO and AO rejected the above mentioned companies but was later allowed by the CIT (A) and ITAT. While the AO had confirmed the findings of the TPO, the Ld. CIT(A) after considering the Assessee's submissions accepted all the four companies rejected by the TPO. The revenue submits that Fortune Infotech Ltd. was correctly rejected by TPO because the company had different financial year ending on December, 2006, whereas Assessee's financial year ended on March, 2006. There is nothing shown to the court that supports the revenue's argument that the ITAT fell into error in holding that if a comparable is following different financial year then the same cannot be included in t....
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....than the turnover of Rs. 347 crores achieved by the assessee. He submitted that this company is a group company of M/s Infosys group, which is an industrial giant and it derives benefits significantly from the brand value, viz., brand name of "Infosys". The presence of brand commands premium price and the customers would be willing to pay any price for the services offered by such companies. Further, this company possesses significant intangible assets in the form of goodwill. It has also incurred huge selling and marketing expenses to the tune of Rs. 156 crores, where as the assessee herein is a captive service provider. This company is also heavily investing in implementing "Robotics Process Automation. Accordingly, he submitted that this company cannot be considered as a comparable company with the assessee. The Ld A.R also took support of various decisions, wherein it has been held that M/s Infosys BPO cannot be taken as a comparable company for a captive low end service provider. 8.2 The ld D.R submitted that the TPO has found this company as functionally comparable one. He submitted that the TPO has not applied "Brand value" filter while selecting comparable companies. He fu....
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....high brand value in the market and also bears all related risk and cannot be compared to the assessee which is a captive service provider. Further, since it commands a very high brand value it enjoys premium pricing. The aforesaid company is therefore directed to be excluded from the list of comparable companies." 8.4 Though the above said decision has been rendered by Bangalore bench of Tribunal for AY 2013-14, yet the facts relating to the above said company remain the same. We have noticed that the turnover of M/s Infosys BPO was Rs. 2940 crores during the year under consideration, while the turnover of the assessee was Rs. 347 crores only. The Ld A.R has pointed out the nature of services rendered by M/s Infosys BPO, which has been referred to by us in the preceding paragraph. The Ld A.R submitted that the services rendered by M/s Infosys BPO are specialized services, which cannot be compared with the low end back officer support services provided by the assessee as captive service provider. The existence of brand value for M/s Infosys BPO would definitely get premium price for the services provided by it. Accordingly, we are also of the view that M/s Infosys BPO Ltd cannot be....
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....ous expenses" which goes to prove that it has got a different business model. From the various functions performed by MPS Ltd., we find that the said comparable is predominantly in the business of digital publishing which cannot be treated at par with ITeS which is the case of the assessee in ITeS segment. In this regard, we find that the reliance placed by the ld. AR on the Co-ordinate Bench decision of Bangalore Tribunal in the case of Google (India) (P). Ltd., v. Dy DCIT [2013] 29 taxmann.com 412/55 SOT 489 is well founded wherein it was held as under:- "16. As far as (4) Apex Knowledge Solutions Pvt. Ltd., is concerned, we find that the assessee had taken objections before the TPO that it is functionally different, as it is provides services such as E-publishing knowledge based services etc. But TPO has rejected the objection on the ground the assessee has not considered the verticals or functional lines during the search process conducted by it and, therefore, it is not proper to make any objection on this basis now. We are not able to agree with the finding of the TPO as confirmed by the DRP on this issue. Merely because, the assessee itself has not considered the said filt....
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....ce made u/s 14A of the Act. During the year under consideration, the assessee has earned exempt dividend income of Rs. 1,53,67,756/- and it disallowed a sum of Rs. 4,29,529/- u/s 14A of the Act. The AO took the view that the assessee is required to compute disallowance as per Rule 8D of I T Rules. Accordingly, he sought explanations from the assessee in this regard. The AO was not satisfied with the workings given by the assessee and accordingly computed disallowance under rule 8D at Rs. 1,15,77,966/-. After giving set off of the amount of Rs. 4,29,529/- made by the assessee, the AO disallowed the difference amount of Rs. 1,11,48,437/-. The Ld DRP also confirmed the same. 12.1 We heard the parties on this issue and perused the record. We notice that the assessee has made investments in a group company named M/s Ventura (India) P Ltd and also in three schemes of mutual funds. The break up details of investments as on 31.3.2017 is given below:- Ventura (India) Private Limited 1,48,05,12,852 HDFC Liquid fund daily dividend 6,15,10,546 IDFC Cash fund daily dividend 6,12,88,263 IDFC Money Manager fund daily dividend 60,483 1,60,33,72,144 The assessee has received divi....