AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 1525
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.... the appeal filed by the Revenue. 2. Before we set out the various grounds of appeal raised by the Assessee, we need to explain the profile of the Assessee. The Assessee is a company who is a subsidiary of UL Incorporation, USA. The Assessee renders testing and software services to the UL Group. Besides the above, the Assessee also provides Information Technology enabled Services (ITeS) to its group companies. The two transactions of rendering testing and safety certification to UL Group, an Associate Enterprise (AE) and the transaction of rendering of ITeS to UL Group an AE, were international transactions and were subject matter of determination of Arm's Length Price (ALP) by the AO under the provisions of section 92 of the Act. Apart from the corporate tax issue, the two issues that needs to be adjudicated in these appeals, are with regard to determination of ALP in respect of international transaction of rendering testing and safety certification services to the AE and rendering of ITeS to AE. 3. The grounds of appeal raised by the Assessee and the Revenue in its appeal and the grounds raised by the Assessee in its CO are as follows: Grounds raised by Assessee in IT(TP....
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....DRP have erred in selecting companies having significant related party transactions in the testing services segment. C. IT and Management Fees: 9. The learned AO / learned TPO and the Honourable DRP have erred in not taking cognizance of the facts submitted by the Appellant with regard to the payment of IT and management fees and disallowed the same stating that the arm's length price paid on the same is NIL. 10. The learned AO / learned TPO and the Honourable DRP have erred in selecting Comparable Uncontrolled Price Method ("CUP") as the most appropriate method while computing the arm's length price of the payment of IT and management fees to the AE. 11. The learned AO / learned TPO and the Honourable DRP have erred in not appreciating the fact that the IT and management support services received from the AE are integral to the primary business of rendering testing and ITeS services to the AE and the cost pertaining to the same has been included as a part of the operating cost and recovered from the AE. 12. The learned AO / learned TPO and the Honourable DRP have erred in concluding that the Appellant has not received any IT and....
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....based on application of additional filters in determining the arm's length price for the ITeS segment. 23. The learned AO / learned TPO have erred in rejecting Jindal Intellicom Private Limited as a comparable company for the only reason that the financial statements of this company is for 15 months. 24. The learned AO/ learned TPO and the Honorable DRP have erred in applying the filter of different financial year ending to reject the companies that are otherwise functionally comparable. 25. The learned AO / learned TPO and the Honourable DRP have erred in not considering provision for doubtful debts as operating in nature. 26. The learned AO / learned TPO and the Honorable DRP have erred in restricting the working capital adjustment to the average cost of capital of the comparable companies selected in determination of arm's length price for the ITeS segment. 27. The learned AO / learned TPO have erred in incorrectly computing the working capital adjustments in the ITeS segment. 28. The Honorable DRP has erred in not providing an appropriate adjustment towards the risk differential between the Appellant and the entrepre....
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....eived. 2. The learned AO ought to have placed reliance on various judicial precedents wherein it is held that credit for TDS has to be provided to the assessee irrespective of the year to which the income relates. 3. Notwithstanding the above, the learned AO ought not to have disallowed the TDS credit in respect of the entire advances considering that some portion of the advances were forming part of unbilled revenue and hence offered to tax. C. Denial of set-off of loss and unabsorbed deoresiation brought forward from AY 2009-10 4. The learned AO has erred in denying set off of brought forward business loss and unabsorbed depreciation as claimed in the income tax return filed. D. Interest levied under section 234B 40. The learned AO has erred in levying interest under section 234B which is consequential in nature. Grounds raised in Revenue's appeal in IT(TP)A No.378/Bang/2015: 1) The order of the DRP is opposed to law and the facts and circumstances of the case. 2) Whether the Id, DRP is justified in directing the TPO to grant risk adjustment witl out advising any reasonable accurate method. ....
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....) There are extra-ordinary events of amalgamation/acquisition in E-Clerx during the relevant assessment year 4. The Hon'ble DRP has erred in not adjudicating on the following grounds raised by the Assessee during the DRP proceedings for the exclusion of Fortune Infotech Limited ("Fortune"): e) Fortune is functionally dissimilar to the Assessee; and f) Fortune uses intangibles, technology and technical knowhow for the provision of BPO services. 5. The Hon'ble DRP has erred in not adjudicating on the other grounds raised by the Assessee during the DRP proceedings for the exclusion of ICRA Online Limited ("ICRA") wherein the Assessee argued that ICRA is functionally not comparable to the Assessee. The respondent craves leave to add, alter, amend and/or delete any of the ground mentioned above. 4. Apart from the original grounds, the Assessee has raised certain additional grounds in its appeal which reads thus: Additional ground in continuation of the existing grounds of appeal and be read as Ground No. 6; Ground No. 8(i) in continuation to Ground No 8; Ground No 21(i), Ground No. 21(ii), Ground No. 21(iii), Ground No. 21....
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....tended that the learned TPO/AO has erred in rejecting certain comparable companies which has been selected in the TP Documentation. The Appellant specifically submits that that the learned TPO/A0 has erred in rejecting Datamatics as a comparable company on the ground that it fails the export filter. 7.Ground No. 22(i ) : Accentia Technologies Ltd. ("Accentia") should be rejected as a comparable The Appellant in ground no 22 has contended that the learned TPO/AO has erred in selecting certain comparable companies, which are not comparable to the Appellant. The Appellant specifically submits that that the learned TPO/AO has erred in accepting Accentia as the company is functionally dissimilar. 8. Ground No. 22(ii): Acropetal Technologies Ltd. t"Acrooetal") should be rejected as a comparable The Appellant in ground no 22 has contended that the learned TPO/A0 has erred in selecting certain comparable companies which are not comparable to the Appellant. The Appellant specifically submits that that the learned TPO/AO has erred in accepting Acropetal as the company is functionally dissimilar. 9.Ground No. 22(iin: Fortune Infotech Ltd. ("Fortune....
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....essary to be adjudicated to decide the correct tax liability of the Assessee by application of law on the facts already available on record. 6. Grounds 1 raised by the Assessee was not pressed and is dismissed as not pressed. Grounds 2 to 4 are conceptual grounds which are not required to be adjudicated specifically. Grd.No.5 to 8 & Addl.Grd.8(i) raised by the Assessee are grounds raised by the Assessee challenging the determination of ALP in respect of the international transaction of rendering testing and safety certification services by the Assessee. As far as the international transaction of certification services is concerned, the Assessee rendered certification services to AE as well as non-AEs. For the purpose of determining the ALP, the method adopted was Transaction Net Margin Method (TNMM). The assessee had chosen comparable companies rendering certification services and compared their profit margins with that of the Assessee. The arithmetic mean of the profit margin of these comparable companies chosen by the Assessee was comparable with the profit margins of the Assessee. It is not in dispute that the Profit Level Indicator (PLI) of the Assessee i.e., Operating Profi....
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....f the Act only in respect of international transaction and not in respect of transactions with Non-AE. In this regard, the ld. counsel pointed out that out of the total revenue from certification services in respect of transactions with AE should alone be the subject matter of determination of ALP and not the entire transaction. Lastly, it was submitted that economic adjustment like working capital adjustment, capacity utilization adjustment and other adjustments ought to be allowed while determining the margins of Assessee and comparable companies as mandated under Rule 10B(2) of the Rules. The ld. DR relied on the order of the DRP. 10. At the time of hearing of this appeal, it was brought to our notice that the issue raised in this appeal for Assessment Year 2014-15 is identical to the issues raised by the Assessee in Assessment Year 2010-11 which was subject matter of decision by this Tribunal in IT(TP)A No.291/Bang/2014 for Assessment Year 2009-10 vide order dated 20.9.2019. The learned Counsel for the Assessee submitted that similar directions as was given by the Tribunal in the aforesaid order for Assessment Year 2009-10 may be followed as the facts and circumstances are i....
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....ation of ALP of the international transaction of rendering of certification services by the Assessee to its AE to the TPO/AO for determination of ALP, after affording the Assessee opportunity of being heard and in the light of the directions given by the Tribunal in Assessment Year 2009-10. The relevant grounds of appeal in this regard are treated as allowed for statistical purposes. 13. As far as Grounds 9 to 15 raised by the Assessee are concerned, the same relates to determination of ALP in the IT and Management Fees segment. As far as determination of ALP in the aforesaid segment is concerned, the TPO held that the Assessee has not established the receipt of services in the nature of IT and management fees and hence determined the price at Nil and thereby treated the entire fees paid of Rs.4,75,42,575/- as an addition on account of determination of ALP. The DRP confirmed the order of the TPO. 14. Before the Tribunal, the Assessee has filed evidence in proof of receipt of services from the AE for which it made payment for IT and Management fees. It is the plea of the Assessee in the application for admission of additional evidence that it filed basic documents like agreeme....
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.... in accordance with law after affording the Assessee opportunity of being heard. 18. As far as grounds No. 19 to 24 and grounds No.21 (i) 21(iv) and 22 (i) to 22 (iv) are concerned, the same relates to determination of ALP in the Information Technology Enabled Services (ITeS) segment. As far as the provision of ITeS segment is concerned, the Assessee filed a Transfer Pricing Study (TP Study) to justify the price paid in the international Transaction as at ALP by adopting the Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) of determining ALP. The Assessee selected Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator (PLI) for the purpose of comparison of the Assessee's profit margin with that of the comparable companies. The Assessee chose companies who are engaged in providing similar services such as the assessee. The Assessee identified companies whose average arithmetic mean of profit margin was comparable with the Operating margin of the Assessee. The Assessee therefore claimed that the price it charged in the international transaction should be considered as at Arm's Length. 19. The Transfer Pricing Officer (TPO) to whom the det....
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....following companies: i) Accentia Technologies Ltd (Gr. 1.17 before DRP) ii) Acropetal Technologies Ltd (Gr. 1.18 before DRP) iii) Eclerx Services Ltd (Gr. 1.19 before DRP) iv) Fortune Infotech Ltd (Gr. 1.20 before DRP) v) ICRA Online Ltd (Gr. 1.21 before DRP) vi) Infosys BPO (Gr. 1.22 before DRP) vii) Jeevan Scientific Tech Ltd (Gr. 1.23 before DRP) Inclusion of following companies i) Nittany Outsourcing services Pvt Ltd ii) Datamatics Financial Services Ltd iii) R Systems International iv) Caliber Point Business Solutions v) Ultramarine Pigments vi) Jindal Intellicom Pvt Ltd. The DRP gave a direction to exclude companies on the following issues: i) Applying upper turnover filter of Rs 200 Crores by applying upper turnover filter ( Para 10.7 at Page 9 of DRP order) - by applying this filter, two companies, viz., Eclerx services & Infosys BPO gets excluded. ii) Applying RPT filter at 0 % ( Para 10.12 at Page 10 of DRP order) - It is not clear which of the companies have been excluded by the TPO by applying the RPT filter @ 0 %. It would a....
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....s available in the public domain. In this regard, it is submitted that the Annual Report and Financial Statements are available in public domain and were submitted to the DRP (Page No. 214 to 251 of Paper Book). However, the DRP failed to consider the same. 23. The learned DR relied on the order of the DRP. 24. We shall first take up for consideration grounds No.22(i) to (iv) regarding exclusion of comparable companies. In the case of Arctern Consulting Pvt. Ltd. (supra) IT(TP)A No.195/Bang/2015 & 302/Bang/2015 Order dated 11.08.2017 for AY 2010-11, exclusion of all these companies was considered by this Tribunal and excluded. With regard to exclusion of Acropetal technologies, we find that the expenses incurred on on-site provision of ITeS by the Assessee was 64% of the total expenses and therefore the company was to be regarded as one providing onsite ITeS and cannot be compared with a company providing offshore ITeS such as the Assessee. Secondly the employee cost is less than 25% of the total cost of the company. ITeS services essentially involve and predominantly dependent on employees and therefore wherever the employee cost is less than 25% of the total cost, ....
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....s International (P) Ltd. I.T(TP).A No.337/Bang/2015 Order dated 6.2.2017 for AY 201011. Hence, we direct exclusion of the company Accentia Technologies Ltd., from the list of comparable companies. 27. As far as Fortune Infotech Ltd., is concerned in the case of Outsource Partners International Pvt. Ltd. (supra) this company was held to be Functionally not comparable being a Product development company with Presence of Intellectual Property rights (Approx.57% of the net fixed assets) and with related party transactions ( RPT) of more than 25%. Hence, we direct exclusion of this company from the list of comparable companies. 28. We now take up for consideration grounds No.21(i) to (iii) for inclusion of certain comparable companies. (Grd.No.21(iv) was not pressed). As far as the plea for inclusion of R. Systems International Ltd., is concerned, the exclusion of this company by the TPO was on the basis that this company had a different financial year ending. It is the plea of the Assessee that though this company has a different financial year, the results of this company for the relevant financial year as that of the Assessee can be carved out and in such an event this company ....
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....Act and the IT Rules is also evident from the OECD Guidelines. Further, there was no basis for the TPO to restrict the adjustment and the Revenue's contention to that extent is ill-conceived. In any event, the restriction is patently not on the basis of the average working capital cost of the companies. Reliance in this regard was placed on the decision of this Hon'ble Tribunal in the case of ARM Embedded Technologies P. Ltd v. DCIT reported in [2015] 64 taxmann.com 445 (Bangalore - Trib.) wherein this Hon'ble Tribunal directed grant of the adjustment without putting any restrictions. The learned DR reiterated the stand of the revenue as reflected in the grounds of appeal of the revenue. 32. We have given a very careful consideration to the rival submissions. Similar issue had come for consideration before this Tribunal in the case of ARM Embedded Technologies P. Ltd. (supra) and this Tribunal held that working capital adjustment has to be allowed on actual basis without any restriction. The following were the relevant observations: "24. Now coming to the issue of working capital adjustment, findings of the TPO in this regard as it appears at para 3.7, reads as under....
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....ught to have adopted the same instead of restricting it to 1.71 %. In view of the same, we deem it proper to remand this issue to the file of the AO/TPO for working out the ALP after giving adjustment of working capital as per the calculation of the AO in annexure D annexed to the transfer pricing order. This ground of appeal is accordingly allowed." 25. Accordingly we direct the AO/TPO to correctly work out the PLI of the final comparables after giving due adjustment for the working capital on actual basis. Related ground of the assessee is therefore allowed." Respectfully following the aforesaid decision, we hold that the working capital adjustment has to be given on the basis of actual without any restriction. 33. No arguments were advanced on Grounds 41 to 43 of additional grounds sought to be raised by the Assessee in Assessee's appeal nor even a prayer was made for its admission and hence these grounds are dismissed. 34. As far as the appeal of the revenue is concerned, the same is with reference to the determination of ALP in the ITeS segment and therefore, we deem it convenient to deal with those grounds at this stage itself. Grounds No.1, 7 and 8 are gene....
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....a analytics and data process solutions. It provides end-to-end support through the trade lifecycle, including trade confirmation, settlements, transaction maintenance, risk analytics and reporting. The data analytics services being provided by Eclerx is significantly different from the routine ITE services provided by the Assessee. Reliance in this regard was placed on the decisions in the cases of Arctern Consulting Pvt. Ltd. (supra) and Tesco Hindustan Service Centre (P.) Ltd. (supra), where in identical circumstances, the exclusion of the company came to be upheld/the company was directed to be excluded. The learned DR reiterated the stand of the revenue as is reflected in the grounds of appeal raised by the revenue. 37. We have carefully considered the rival submissions. In the case of Tesco Hindustan Service Centre (P) Ltd. (supra), this company was excluded from the list of comparable companies in the case of a company rendering ITeS similar to the services rendered by the Assessee in this appeal, observing as follows: "37. Eclerx Services Ltd. : In this regard, the ld. counsel for the assessee has contended that this company's function is dissimilar with the ....
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....s AEs. Facts being identical, respectfully following the observations of the Special Bench (supra), we direct that these two entities be excluded from the list of final comparables." 40. Since the Tribunal has examined this issue under similar set of facts, we find no reason to take a contrary view. Accordingly following the order of the Tribunal in the case of Stream International Services (P) Ltd. (supra), we hold that this company is not a good comparable and direct the AO/TPO to exclude it from the list of comparables." Respectfully following the aforesaid decision, we uphold the order DRP excluding the aforesaid company from the list of comparable companies. 38. As far as Ground No.4 is concerned, the law by now is well settled and turnover is a relevant criterion for choosing comparable companies. 39. As far as Ground No.5 and 6 are concerned, the law by now is well settled that the threshold limit for applying RPT filter is 15% or 25% depending upon the availability of comparable companies. If more companies are available in the data set, then the threshold limit has to be 15% and 25% if the data set available is less. We hold and direct accordingly. The ap....
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..... IT(TP) A.No.655/Bang/2016 is an appeal by the Assessee against the final order of assessment dated 28.1.2016 of DCIT, Circle-7(1)(1), Bangalore, passed u/s.143(3) read with Sec.144C(13) of the Act, in relation to AY 2011-12. 46. The grounds of appeal raised by the Assessee in IT(TP)A No.655/Bang/2916 reads as follows: I. Transfer Pricing The grounds mentioned hereinafter are without prejudice to one another. 1. The learned Assessing Officer ("learned AO"), learned Transfer Pricing Officer ("learned TPO") and the Honourable Dispute Resolution Panel ("Hon'ble DRP") have grossly erred in adjusting the transfer price by INR 2,74,49,522/- to the Appellant's international transactions with its Associated Enterprises ("AEs") with respect to Certification Services & IT Enabled Services ("ITES") rendered. 2. The learned AO, learned TPO and the Hon'ble DRP have erred in rejecting the Transfer Pricing ("TP") documentation maintained by the Appellant by invoking provisions of sub-section (3) of 92C of the Act. 3. The learned AO, learned TPO and Hon'ble DRO have erred in rejecting the economic analysis carried out by the Appellant in the TP documentation an....
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....n to the working capital adjustment without giving any cogent reason; and b. considering the wrong SBI PLR while computing the working capital adjustment. CERTIFICATION SEGMENT 13. The learned AO, learned TPO and Hon'ble DRP have erred in disregarding the adjustments made by the Appellant to the net operating margin on account of extraordinary and non-recurring expenses incurred during the financial year 2010-11. 14. The learned AO, learned TPO and Hon'ble DRP have erred in concluding that the adjustments made by the Appellant for the extraordinary and nonrecurring expenses incurred during the FY. 2010-11 amounts to "capacity utilization adjustments". 15. The learned AO, learned TPO and Hon'ble DRP have erred in the computation of mark-up of Central Mine Planning & Design Institute Ltd. 16. The learned AO, learned TPO and Hon'ble DRP have erred in rejecting Ashco Niulab Industries Ltd. on the ground of functional dissimilarity. 17. The learned AO, learned TPO and Hon'ble DRP have erred in not providing appropriate adjustments towards the difference in working capital employed by the comparable companies' vis-à-vi....
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.... have placed reliance on various judicial precedents wherein it is held that credit for TDS has to be provided to the Appellant irrespective of the year to which the income relates. 4. Notwithstanding the above, the learned AO has erred in not following his assessment orders for previous years and thereby erred in not granting credit for TDS of Rs.13,735,965 which was denied in AY 2010-11. 5. Notwithstanding the above, the learned AO ought not to have disallowed the TDS credit in respect of the entire advances considering that some portion of the advances were forming part of unbilled revenue and hence offered to tax. C. Deduction under Section 10A of the Act 1. The learned AO has erred in reducing telecommunication expenses from export turnover as Rs.191,089 instead of Rs.119,665, resulting in an addition of Rs.16,353. D. Non-grant of depreciation on foreign exchange loss disallowed as capital expenses in AY 2009-10 1. The learned AO and Hon'ble DRP has erred in not granting consequential depreciation of Rs.205,984 on foreign exchange loss disallowed and capitalized in the assessment order for AY 2009-10. E. Interest l....
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....milar services such as the Assessee from the Prowess and Capitaline Plus Data Base. The Assessee identified 10 companies whose average arithmetic mean of profit margin was comparable with the profit margin of the Assessee and hence the Assessee claimed that the price it charged in the international transaction should be considered as at Arm's Length. 49. The Transfer Pricing Officer (TPO) to whom the determination of ALP was referred to by the AO, accepted TNMM as the MAM and also used the same PLI for comparison i.e., OP/TC. The TPO selected a set of 10 comparable companies. Some of the companies so chosen were comparable companies which the Assessee had chosen in its Transfer Pricing Study and worked out the average arithmetic mean of their profit margins and adjustment to ALP as follows:- Transfer Pricing adjustment proposed by the TPO: Computation of Arm's Length Price Particulars Amount INR Arm's Length Mean Margin on Cost 24.77% Less: Working capital adjustment 1.47% Adjusted Margin 23.30% Price Received vis-à-vis the Arm's Length Price Particulars Amount INR Operating Cost 3,10,93,812 Arm's Length Price @ 123.30% of o....
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....the orders are placed in the case law compendium for A.Y 2010-11 - Page 138 of case law compendium. iii) Caliber Point Business Solutions This company was excluded by the TPO only because this company has a different financial year ending (Page No. 23 of TP order). In this regard, reliance is placed on the decision in the case of Mercer Consulting Co (Del HC) and Business Process Outsourcing India Ltd (Bangalore Tribunal) in case of R Systems International - the principles apply to this company also. Detailed submissions made before DRP was not considered. iv) Omega Healthcare Management Services This company was excluded by the TPO only because no data for RPT transactions are available. Detailed submissions made before DRP was not considered. 53. The learned DR relied on the order of the DRP. 54. As far as the plea of the Assessee for exclusion of Acropetal Technologies Ltd., Accentia Technologies Ltd., ICRA Online Ltd., and Jeevan Scientific Tech Ltd., are concerned, we find that Acropetal Technologies Ltd., is engaged in the business of software development and services, contract centre service and IT enabled services and the same are r....
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....e annual report of the company the sale of the company in respect of the BPO segment amounts to only 79 lakhs, and therefore it fails the TPO's filter. 56. As far as exclusion of Accentia Technologies Ltd., is concerned, we find that this company was excluded by the DRP for the reason that the details regarding its diverse functions were reported under one segment, without segmental details regarding the same being made available. In the absence of segmental details being made available, the comparability of the company with that of the Assessee cannot be determined. In any event, Accentia is engaged in providing high end services in the nature of Knowledge Process Outsourcing ('KPO') which is evident from its annual report, whereas, the Assessee is engaged in rendering routine low end information technology enabled services. Further, the said company not only does medical transcriptions, but has also ventured into healthcare receivables cycle management and high-end consultancy to start-ups requiring field experts. As can be seen from the annual report, coding income is contributing 15% of the total income which activities are akin to software development activity while the Ass....
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....o be compared, than a company cannot be regarded as not comparable. The following are the relevant observations of the Tribunal:- "3. At the time of hearing, assessee not pressed ground nos. 1, 2, 3, 3(a), 4, 5, 6, 7, 8, 9, 10,11 & 12. The ld. AR pressed only ground related to the comparables in 3(b) with reference to R Systems International Limited. Other five comparables viz., Nittany Outsourcing Services Pvt. Ltd., Datamatics Financial Services Ltd., Caliber Point Business Solutions Ltd., Ultramarine & Pigments Ltd. and Jindal Intellicom Ltd. are not pressed. 4. The first ground for consideration in this appeal is with regard to considering R Systems International Ltd. as comparable. 5. The assessee has selected in the transfer pricing documentation R Systems International Ltd. as a comparable company since it is functionally comparable and passing all the filters applied by the assessee in the TP documentation. However the lower authorities rejected that company on the basis that it has different year ending. Against this assessee is in appeal before us. The ld. AR submitted that R Systems International Ltd. accounting period is January to December an....
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.... in para 21 as follows:- "21. Now, coming to the concern Jindal Intellicom Pvt. Ltd. The case of assessee before us is that the said concern has different financial year than the one of assessee. The Assessing Officer had applied the current year data as contemporaneous data to be used for benchmarking the arm's length price of international transactions of assessee. The assessee had prepared its financial statements for the financial year starting from 1st April, 2009 to 31st March, 2010. The case of assessee before us is that Jindal Intellicom Pvt. Ltd. has prepared its financial statements for period of 15 months and the same is not to be selected in the final set of comparables. 22. We find that the Pune Bench of Tribunal in the case of BMC Software India Pvt. Ltd. Vs. DCIT in ITA No.1425/PN/2010, relating to assessment year 2006-07, order dated 16.03.2016 had rejected the concern having 15 months financials. 23. The Hon'ble Bombay High Court in the case of CIT Vs. PTC Software (I) Pvt. Ltd. in Income Tax Appeal No.732 of 2014 had also held that the comparable data should pertain to the same financial year. Accordingly, we hold that the margin....
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....reason given for excluding this company that segment details relating to the ITES segment are not available, is concerned, we find that this is not the reason assigned by the TPO for disregarding this company as comparable company. Secondly, the Assessee was not put on notice on this aspect by the DRP. Thirdly, the learned counsel brought to our notice page-97 of the Annual report of this company that the segmental results of the ITES segment is available. Therefore, we deem it fit and proper to direct the TPO to consider the comparability of this company afresh. 62. As far as comparability of the company Informed Technologies Ltd., is concerned, it is undisputed that the Assessee in Annexure 1.18 of its objections to the draft assessment order of the AO, objected to the exclusion of this company from the list of comparable companies, but this objection was not considered by the DRP at all. We are of the view that in the light of the objections by the Assessee before the DRP against exclusion of this company by the TPO, the TPO should reconsider his decision of excluding this company from the list of comparable companies and for this purpose, we remand this issue also for fresh ....
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....rking capital adjustment in the case of the assessee at 5.97%, but while giving effect to the working capital adjustment, has restricted the said adjustment to 1.71% in case of uncontrolled comparables selected by the TPO. The learned counsel for the assessee submitted that the TPO has not given any basis for such restriction of the working capital adjustment. He submitted that the CIT (A) also has not applied his mind to this issue but has summarily confirmed the order of the AO and therefore it has to be set aside. 14. On going through the TPO's order as well as annexure D referred to in the transfer pricing order on working capital adjustment, we find that the AO has not given any basis for restricting the adjustment to 1.71%. In all the cases relating to transfer pricing adjustment, this Tribunal has been directing to give working capital adjustment on actual basis and the TPO having arrived at 5.97% ought to have adopted the same instead of restricting it to 1.71 %. In view of the same, we deem it proper to remand this issue to the file of the AO/TPO for working out the ALP after giving adjustment of working capital as per the calculation of the AO in annexure D a....
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....tion services having been subcontracted to the AE and receipt of sub-contracting charges from the AE to the extent the same will have impact on the consideration received from the AE for rendering the certification services should also be examined by the TPO. (6) Errors, if any, in the computation of margins of comparables should be looked into by the TPO in the-set aside proceedings. (7) Threshold limit for applying RPT filter should be 15% or 25% of sales depending upon the availability of comparable companies after all exclusions as held by the Tribunal in the case of Auto Desk India Pvt. Ltd. Vs. DCIT [2018] 96 taxmann.com 263 (Bang.Trib.) [para 24 to 25]. 17. The above directions will be sufficient to take care of the grievances projected by the assessee in ground Nos. 5 & 6 and additional grounds No.6 (d), 26 & 27.The TPO will afford opportunity of being heard to the assessee before deciding the issue." 67. As the parties prayed for similar direction in the present AY also, respectfully following the aforesaid order of the Tribunal, we remit the issue of determination of ALP of the international transaction of rendering of certification services ....