TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 261
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.... AO, and the Ld. TPO, to the extent they are prejudicial to the Appellant for AY 2016-17, are arbitrary, contrary to the facts on record, and violative of the provisions of the Act. The said orders are, therefore, liable to be quashed. 2. Legal Grounds 2.1. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has grossly erred, both in law and on facts, in failing to adjudicate all the grounds of appeal raised by the Appellant and in not passing a reasoned and speaking order as mandated by law. The impugned order is, therefore, vitiated and liable to be quashed. 2.2. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in misinterpreting the Appellant's letter dated 27 June 2023 regarding the withdrawal of grounds of appeal to the extent of transactions covered under the Bilateral Advance Pricing Agreement ('BAPA') dated 24 March 2023, entered into with the Central Board of Direct Taxes ('CBDT'). Consequently, the Hon'ble CIT(A) has failed to adjudicate the grounds of appeal pertaining to international transactions not covered under the BAPA, i.e., transactio....
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....onal transactions, and consequently holding that the Appellant's international transactions are not at arm's length. 3.2.5.Erred in including the following companies as comparables, which do not satisfy the test of comparability for the ITeS provided by the Appellant: a. eClerx Services Limited b. Infosys B P M Limited (Infosys BPO Limited) c. MPS Limited d. S P I Technologies India Private Limited 3.2.6.Erred in excluding the following companies from the final set of comparables, despite their functional similarity to the ITeS provided by the Appellant: a. Ace BPO Services Private Limited b. Suprawin Technologies Limited c. Microgenetic Systems Limited d. R Systems International Limited (Segment - BPO services) 3.2.7.Erred in the computation of operating mark-up on cost of the comparable companies by considering provision for bad and doubtful debts as operating in nature only where such expenses were incurred consistently for the last three years by the comparable companies. 3.2.8.Erred in not allowing working capital adjustments while determining the mark-up of comp....
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....submitted a no objection letter and requested for passing of the final assessment order. Accordingly, the Ld. AO passed the final assessment order under section 143(3) of the Act on 09.01.2020, determining the total income of the assessee at Rs. 73,63,08,663/-. 4. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee submitted that it had entered into a Bilateral Advance Pricing Agreement ("BAPA") with the Central Board of Direct Taxes and that the Assessment Year 2016-17 was also covered under the said BAPA. It was submitted that approximately 95.75% of the revenue of the assessee was from US-based AEs which were covered under the BAPA, and only about 4.25% of the revenue was from non-US based AEs which were not covered under the BAPA. The assessee further submitted that the transactions with non-US based AEs constituted a very small portion of the total turnover and that the Ld. TPO had also not applied separate benchmarking for such transactions. Accordingly, the assessee relied upon the decisions of the coordinate benches of the Tribunal and requested that the margin agreed under the BAPA be a....
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....e assessee. In this regard, we have also gone through the para nos. 26 to 30 of the order of the coordinate bench of the Tribunal in the case of Texas Instruments (India) Pvt. Ltd. v. ACIT (Supra), which is to the following effect: 26. In so far as ground (a) & (b) with regard to Transfer Pricing Adjustment in the Software Development Services segment (SWD Segment) is concerned, the facts are that the assessee rendered SWD services to its AE Texas Instrument Inc. (TI US) and Natsem Malaysia. The volume of international transaction with the aforesaid two AE was as follows: Sl. No. Name of the AE Value of the transaction in INR Value of the transaction in % terms Remarks 1 TI US 10,23,83,42,951 98.43% Covered by BAPA, wherein the ALP has been determined at 17.50% 2 Natsem Malaysia 16,37,75,973 1.57% Total 10,40,21,18,924 100.00% 27. With regard to the international transaction with TI US, the assessee entered into a Bilateral Advance Price Agreement (BAPA) accepting profit margin of 17.50%. The assessee made a prayer before CIT(A) that the same percentage of profit margin as....
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....e list of comparable companies viz., Infosys Ltd., Persistent Systems Ltd., Larsen & Toubro Infotech Ltd. And Genesys International Corporation Ltd. The revenue has not challenged the action of the CIT(A) in this regard and if such exclusion is accepted the price charged by the assessee in the SWD segment would be at Arm's length. Be that as it may. As far as the grounds raised by the Revenue before the Tribunal is concerned, the grievance of the revenue as projected in the grounds of appeal before the Tribunal and the argument of the learned DR was that the Functions performed, Assets employed and risks assumed in the transactions between the assessee and TI Us and that with Natsem Malaysia were different. The other submission was that the BAPA is binding only on the parties to the agreement but on Natsem Malaysia which is not a party to the BAPA. The learned counsel for the assessee reiterated submissions made before CIT(A) and highlighted as to how the TPO did not distinguish the services rendered by TI US and Natsem Malaysia as different and adopted results of both the companies for the purpose of comparison. 29. We have carefully considered the rival submissions. Iden....
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..... v. DCIT ([2016] 70 taxmann.com 228 (Mumbai - Trib.)) wherein, the same margin as the US transactions was directed to be applied for the NonUS transactions. The learned Counsel for the assessee also pointed out that the Commissioner of Income-tax (Appeals) in its own case for the AYs 2005-06, 2007-08 and 2008-09, adopted the arm's length price determined in the MAP resolution for the international transactions entered into with the Non-US AEs. The learned DR could not point out any infirmity in the submissions on the additional ground of appeal made by the learned Counsel for assessee. 43. We have considered the rival submissions and find merit in the same. As pointed out by the learned Counsel for assessee, the assessee or TPO have not made any distinction between US and Non-US AE transactions. In such circumstances, the margin accepted in MAP in respect of US AE transaction has to be regarded as Arm's Length mark-up cost for the Non-US AE transaction in the ITES segment. We hold and direct accordingly. In view of the above conclusion, the other grounds raised by the Revenue and assessee in their appeals on determination of ALP in the ITES segment become infructuous and ....