2026 (3) TMI 1691

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....ctionally similar comparables as that of the assessee and making the adjustment by the ld.TPO, based on the TNMM Method." 2. a) "Whether on the fact and circumstances of the case and in law, the ld. CIT(A) is erred by relying on the stand of the Hon'ble ITAT in assessee's own case in AY 2008-09 regarding the comparable company Acropetal Technologies Ltd, without appreciating the fact that each year's transfer pricing proceeding is distinct and based on the facts and circumstances on that year only." b) "Whether on the fact and circumstances of the case and in law, the ld. CITIA) has not erred by excluding the comparable M/s Acropetal Technologies Ltd based on application of "Employee cost filter-'a filter which neither has been used by the TPO for selection/rejection of comparables, nor has been applied to the assessee (tested party), while conducting transfer pricing analysis in the case?" 3. "Whether on the fact and circumstances of the case and in law, the ld. CIT(A) is erred in not appreciating the exclusion of comparables which are functionally dissimilar comparables to the assessee's comparables ie e4e Healthcare Business Service....

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.... if any, should be restricted to the service rendered to the AEs other than BPXA. 3. On the facts and in the circumstances of the case and in law, the final assessment order, dated 13 April 2015, having been passed beyond limitation period provided in terms of section 153 of the Act, is invalid, bad in law and therefore ought to be quashed. The assessee prays that assessment order should be quashed as the same is passed beyond the time limit of passing the assessment order. 4. On the facts and in the circumstances of the case an in law, the ld. AO erred in levying interest u/s 2344, 234B, 234C and 234D of the Act. The assessee prays that the ld. AO be directed to delete/appropriately reduce the interest u/s 234A. 234B, 234C and 234D of the Act. 5. On the facts and in the circumstances of the case and in law, the ld. AO erred in proposing to initiate penalty proceedings u/s. 271(1)(c) of the Act. The assessee prays that the ld. AO be directed to drop the penalty proceedings u/s. 271(1)(c) of the Act." 2.1. Grounds raised by the Revenue in its appeal essentially relates to exclusion and inclusion of comparable adopted by ld. Tr....

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....the assessee before the Tribunal is Acropetal Technologies Ltd. for its exclusion. Further, assessee also contended that even though the comparable e4e Healthcare Business Services Pvt. Ltd. was proposed by the ld. TPO in his show cause notice and accepted by the assessee, however the same was ultimately not considered as suitable comparable for the reason that this company operated in healthcare management cycle, hence its services provided are different from that of the assessee. Thus, assessee disputed non-inclusion of this comparable and requested for its inclusion. Ld. CIT(A) has considered the factual position and judicial precedents relied upon by the assessee to accept the contentions whereby Acropetal Technologies Ltd. was excluded and e4e Healthcare Business Services Comparable was directed to be included against which Revenue is in appeal before the Tribunal. 3.3. Assessee through its cross objection is defending the order of ld. CIT(A) whereby relief has been granted in respect of the two comparables for which Revenue is in appeal before the Tribunal. Ground No.3 in the cross objection is regarding jurisdictional issue on account of limitation in terms of section 153....

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....lve into the comparable Acropetal Technologies Limited (Acropetal) for consideration in terms of the ground raised by the Revenue. This is the comparable which formed part of the six shortlisted comparables by the ld. TPO after rejecting the eight comparables of the assessee. Assessee had gone before the ld. CIT(A) for its exclusion which was allowed and therefore, Revenue is in appeal before the tribunal for its restoration. We look at the basis on which ld. CIT(A) allowed the contention of the assessee for its exclusion, which are primarily on the following parameters: i. Low employee cost, ii. Already excluded by the Coordinate bench in assessee's own case for AY 2008-09. Also, on similar reasons, excluded by ld. TPO in assessment year 2010-11, iii. Inorganic growth strategy, functionally different on account of onsite development expenses and performance of research and development activities as well as provision of highly sophisticated and technological services. 5.1. On each of the above parameters, the observations are noted as under. i) Low employee cost: It is pointed out from the material on record that employee cost to total sal....

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....owth strategy by acquiring other companies in order to expand its client base. In the year under consideration, Acropetal made acquisition of certain US companies which were aimed at significant expansion of the company's addressable market and improve its growth potential. Accordingly, Acropetal follows an inorganic growth strategy and has acquisitions in the year under consideration which is an extraordinary event, rendering the same as not comparable to that of the assessee. v) It is also observed that Acropetal is functionally different on account of parameters listed above, first being on-site development expenses. Acropetal has incurred expenditure in relation to on-site development paid towards technical subcontractors. It outsources its business activities and does not perform operations on its own since the employee cost incurred by it is substantially low i.e., 9.91% of the total sales. On the other hand, assessee performs its own business activities and are not outsourced, fact of which is substantiated from the high employee cost incurred by the assessee which is at 44.74% of the total sales. Thus, Acropetal has a different business model than that of the a....

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....cropetal was excluded after examining its annual report for AY 2011-12, wherein employee cost was noted to be less than 25%. Further, foreign currency expenses were taken into account for the purpose of its exclusion. 5.3. By considering the overall factual matrix as discussed above on various parameters as well as judicial precedents, we do not find any reason to interfere with the finding arrived at by ld. CIT(A) for the exclusion of Acropetal as a comparable from the final list for the purpose of benchmarking. Accordingly, ground No. 2 raised by the Revenue is dismissed. 6. We now take up the comparable of e4e Healthcare Business Services Private Limited, which was excluded by ld. TPO from the final list of comparables, though he himself had shortlisted while issuing a show cause notice to the assessee. Assessee seeks its inclusion which has been upheld by ld. CIT(A) against which Revenue is in appeal before the Tribunal. In this regard, it is noted that this comparable has been accepted by the ld. TPO himself in the transfer pricing assessment for AY 2008-09 in assessee's own case. Relevant extract from the order of ld. TPO for AY 2008-09 is reproduced for ready refer....