TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1507
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....x Act, 1961 (Act), in relation to Assessment Year 2013-14. 2. The only ground of appeal which was pressed for adjudication at the time of hearing of this appeal is the ground in so far as it relates to determination of Arm's Length Price (ALP) in the Information Technology Enabled Services (ITeS) segment as set out in the modified ground No. 8 which reads as follows: "Ground 8 - The learned AO/TPO has failed to appreciate the fact that the following companies are functionally not comparable to the Assessee and therefore, erred in law and in facts in considering them as comparable companies: ● Harton Communications Limited ● Capgemini Business Service (India) Limited ● Infosys BPO Limited The Appellant c....
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....% Arithmetic mean 20.64% Less: Working Capital Adjustment -0.04% Adjusted Arithmetic mean 20.68% 5. Against the draft order of the AO incorporating the directions of the TPO, assessee filed objections before the Dispute Resolution Panel (DRP). The DRP excluded certain comparable companies. The assessee is aggrieved by the non-exclusion of 3 comparable companies set out in ground No. 8 referred to above. 6. We have heard the rival submissions on the exclusion of the aforesaid comparable companies. As far as exclusion of Harton Communications Ltd., is concerned, we find the following factual position: The relevant financial year, it was an exceptional year of operation According to Director's report and Management Discussion ....
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....e Assessee, viz., (i) M/s ISG Novasoft Technologies Ltd. -AY 2013-14 [IT(TP)A No. 42/ Bang/2018] (ii) Infor (India) P Limited - AY 2013-14 & AY 2014-15 [ITA Nos. 161 and 2307/Hyd/2018] (iii) M/s S&P Capital 10 (India) Private Limited - AY 2013-14 [ITA No. 1878/Hyd/2017. The aforesaid company is therefore directed to be excluded from the list of comparable companies. 7. As far as the comparability of Capgemini India Ltd., is concerned, we find the factual position regarding this company is that as per information available in the annual report, the company earns revenue primarily from Business Process Management Services and Assurance and Compliance services. The same is also evident from the description of product or service....
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.... is a market leader. The company should be rejected as it an established player and also a market leader and operates as a full-fledged risk bearing entrepreneur. The company has a huge turnover of Rs. 1861 crores and hence not comparable to the assessee. It has significant selling, marketing and brand building expenses, brand value. Infosys BPO is an industry giant and commands a very 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. 9. In the light of the aforesaid discuss....
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.... expenses were to be re-allocated. there should be a corresponding revision in the revenue of such units of the Appellant taking into account the "cost plus mark-up billing model arrangement- of the Appellant. b. The learned AO has erred, in law and in facts, by not considering the Appellant's plea that as a consequence of the aforesaid revision in the revenue of the units. the Appellant would be eligible for additional deduction under section 10AA of the Act in respect of SEZ Unit - I of the Appellant: c. The learned AO has erred, in law and in facts. in denying additional deduction under section 10AA of the Act in respect of SEZ unit-1 of the Appellant, rely.:9g on Hon'ble Apex court's ruling in the case of M/s. Goetze (....
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....n a cost-plus mark-up arrangement where each unit's revenue is computed on a 'cost-plus' basis i.e.. the revenue of a unit (and the profit) increases as the cost base increases. It is imperative to mention here that even by charging the identified common expenses (namely key managerial remuneration, audit fee. bank charges etc.) to the STPI Unit alone. the assessee has not reduced its taxable income. In fact, the same has resulted in increasing the taxable income of the assessee, keeping in view the operating model of the assessee. 14. Had the assessee apportioned the identified common expenses among all the units. it would have reduced the cost base of the STPI unit, thereby, resulting in reduced mark up and taxable profits fo....