TaxTMI 
TaxTMI 
2026 (5) TMI 1215
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....vides tele-servicing and transaction processing support. AEIPL is also engaged in booking travel and accommodation for corporate clients. It was acquired from American Express Bank Ltd. (India Branches) ("AEBL") as a part of the slump sale agreement in July 2007. FACTUAL CONTEXT 3. The assessee filed its return of income on 26.09.2009 declaring net income of Rs. 1,13,42,21,352/-. Thereafter, the assessee filed its revised income on 29.03.2011. The assessee's case was selected for scrutiny through CAS and a notice under Section 142(1) of the Act was issued on 11.10.2012. The company in response to the notice appeared through its authorised representatives. 4. During the year under consideration, the assessee had undertaken international transactions with its associated enterprises to the tune of Rs.15 crore. Therefore, the Revenue in accordance with the provisions of Section 92CA of the Act referred the matter to the Transfer Pricing Officer ("TPO") for determining Arms Length Price, with the prior approval of CIT, Delhi-1, New Delhi. 5. On 16.01.2013, the TPO under Section 92CA(3) of the Act passed an order wherein, he had made an adjustment of Rs. 6,26,71,930/- to the ....
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....nts' respective locations to AEIPL servers via data links. The raw data comprises unprocessed or semi processed accounting, financial and commercial information relating to the business of American Express locations worldwide. The various kinds of raw data received by AEIPL are as follows: * Card member Data: Data pertaining to transactions executed by American Express card members. * American Express Company Data: Data pertaining to day-to-day transactions undertaken within American Express companies which need to be recorded and reported to the respective American Express Companies ('customer country') in different reports and accounting formats. Various types of inputs received for processing and recording in electronic or physical form are as follows: - Invoices: - Vouchers: - Vendor Purchase Orders; and - Employees Travel Expense Vouchers. - Airlines/ SES/ Hotels Data: These pertain to transactions undertaken for American Express travel business and include data on: - Sale of air tickets to customers and payments to airlines: - Payment to service establishments for purchases m....
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....al submissions and en perusal of the relevant records, we find that this company has been rejected for inclusion on the ground it has low turnover, which is less than Rs.1 crore. So far as exclusion of this comparable on basis of turnover filter criteria of less than Rs. 1 crore, we find that, first of all, it was a comparable chosen by the assessee and at the time of selection process the assessee as stated that it had not applied any turnover filter for accepting or rejecting the comparables. Once the turnover filter has not been applied at the quantitative level then comparability has to be done on qualitative level based on FAR analysis. If on FAR analysis it is found that there are differences on account of either assets deployed, risk assumed materially affecting the cost or margin then only comparability analysis fails in such cases. Further, under the TNMM, the comparability of an international transaction with an uncontrolled transaction is to be seen with reference to functions performed after taking into assets employed and the risk assumed. While reckoning the comparability analysis under TNMM, the main emphasis is into net margin realized on the transactions undertaken....
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....e from the records. Ld. Counsel has drawn our attention to the annual report and pointed out that during the year all its revenues are from export only. Thus, the reason given by the TPO to reject this comparable is contrary to the facts and records; and accordingly, we deem it proper to direct the TPO to examine this aspect of export turnover and if the contention of the assessee is found to be correct then he must include this company as comparable." 8. The appellant is the Principal Commissioner of Income Tax-1, New Delhi and this appeal has been filed by the appellant raising the following as substantial questions of law:- "A. Whether in the facts and circumstance of the case the Ld. ITAT erred in giving direction to the TPO for inclusion of comparable namely M/s Cepha Imaging Pvt. Ltd. on account of export earning filter without considering the TPO finding of functional dissimilarity between the assessee and the said comparable? B. Whether in the facts and circumstances of the case the Ld. ITAT has erred in giving direction to the TPO for inclusion of comparable M/s R System International Ltd. without considering the Rule 10B(4) of the Income Tax Rules? ....
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....idiary of American Express International Inc., USA, and the functional profile of the respondent-assessee, as noted by the ITAT and TPO Order, are as follows:- a. It is engaged in data management, information analysis and control activities for export to American Express affiliates worldwide. These services are primarily delivered to AEIPL's customers through a telecom link, under which inputs are received in electronic form and subsequently processed; b. Tele-servicing and transaction processing support, and booking travel and accommodation for corporate clients; c. AEIPL also undertakes high-end functions, including the preparation of ready-to-use business reports; financial statements such as balance sheets, profit and loss accounts, and trial balances; bank account control reports; and a wide range of other analytical reports generated from raw data. The comparability with the uncontrolled transactions has to be on a FAR analysis. d. It is an export-oriented entity generating 100% revenue from export. Out of total revenue of Rs. 863 crores, its income from Global Business Processing & Support is Rs. 783,22,91,481/-which is 91% of the total re....
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....ised TP order under Section 92CA(5) read with Section 154 of the Act on 26.02.2013, wherein the adjustment was enhanced from Rs. 6,26,71,930/-to Rs. 71,41,54,973/-. 14. Mr. Panda submitted that the respondent/assessee filed objections before the DRP, and its objections were disposed of vide Order dated 24.12.2013. In compliance with the DRP directions, the AO passed the Assessment Order dated 28.02.2014, wherein an additional Rs. 67,05,58,495/-was made on account of transfer pricing adjustment. Thereafter, the respondent/assessee and the Revenue challenged final assessment order under section 143(3) read with section 144C of the Act, dated 28.2.2014, passed by the AO in pursuance of directions given by the DRP, vide order dated 24.12.2013 for the AY 2009-10 before the ITAT. 15. The ITAT with regard to comparables, directed as follows: Inclusion Exclusion Cepha Imaging Pvt. Ltd. Eclerx Services Limited R Systems International Limited Coral Hub Limited (formerly known as Vishal Information Technologies Limited) Allsec Technologies Limited CG Vak Software & Exports Limited 16. According to Mr. Panda, the ITAT has erred in inclusions....
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....mpared. 18. With regard to Allsec Technologies Ltd., Mr. Panda while referring to paragraph 21 of the impugned order submitted that the TPO rejected the comparable on the grounds that it is a loss making entity and it failed export earning filter. He also submitted that the finding of the ITAT was merely on the basis that the revenue has increased in the financial year 2008-09 from that of the previous year and it had failed to note the finding of the DRP and the companies with negative trajectory not par to market trend is not an appropriate comparable as it is his submitted that the assessee generates 100% of its revenue from export and any deviation from export filter of 75% is unwarranted and unjustified. 19. Mr. Panda submitted that as far as CG Vak Software & Exports Limited is concerned, the assessee company engaged in export of data processing and office support services has a turnover of Rs. 782,63,63,57,677/- in its ITeS segment while the comparable CG Vak has a turnover of only Rs. 86,10,268/- from its ITeS segment out of its total turnover of Rs. 7,23,39,181/-. Therefore, a company with a turnover of Rs.782 crores cannot be considered comparable with that of a com....
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....International Taxation, New Delhi [ITA Nos. 6253/Del/2017 and ITA Nos. 6455/Del/2017], (iii) American Express Banking Corporation (India Branch) v. Assistant Director of Income Tax, Circle 1(1) International Taxation, New Delhi [ITA 5/2025], (iv) The Commissioner of Income Tax-II v. Mckinsey Knowledge Centre India Pvt Ltd, 2015 DHC:3029-DB, (v) Commissioner of Income Tax v. Mercer Consulting (India) P Ltd, (2017) 390 ITR 615, (vi) Rampgreen Solutions P Ltd v. Commissioner of Income Tax, (2015) 377 ITR 533, (vii) Chryscapital Investment Advisors (India) Pvt Limited v. Deputy Commissioner of Incometax, 2015 DHC:3776-DB, (viii) American Express Banking Corporation (India Branch) v. Assistant Director Of Income Tax, Circle 1(1), International Taxation, New Delhi, 2025:DHC:3545-DB (ix) CIT v. American Express India Pvt Ltd, ITA 691/2012 dated 15.01.2025. 24. He seeks the prayers made in the appeal. CASE OF THE RESPONDENT 25. Mr. Nageswar Rao, learned counsel appearing for the respondent would submit that that the request of appellant /Revenue that for Cepha Imaging Pvt. Ltd. the matter should be remanded back to TPO....
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....are segment to respondent / assessee's ITeS has no relevance. 29. He submitted that the Revenue in its submission has shown that Transfer Pricing Adjustment was made under two segments - ITeS and IGS. He submitted that the reliance placed by the appellant on American Express Banking Corp (India Branch) (supra) would show that the issues relating to ITeS were not in the appeal before this Court, because the TP additions issue relating to ITeS was resolved by the ITAT's order and that appellant in the said case, did not carry the findings of the ITAT on CG VAK Software and Export Limited in the appeal. 30. He submitted that the ITAT's order in American Express Banking Corp (India Branch) (supra) was decided on 07.08.2024, which is almost six years after the impugned order and it would render the Revenue's plea that the latter finding would further its case per inqurim. 31. During the course of the hearing, the Court vide order dated 15.01.2025 directed the parties to file an explanatory chart with respect to the comparables. Pursuant to the same, the respondent filed an explanatory chart of issues involved in the present appeal, as under:- 31.1. In Cepha Imaging Pvt. Ltd.....
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....rticular filter. The TPO cannot suo moto apply the filter later on for selecting or rejecting the comparable of the assessee because that amounts to cheery picking. There is no dispute with regard to otherwise functional or FAR comparability with that of the assessee. The reason that difference in ceiling put by the TPO is 0.05% for exclusion of the said company cannot be upheld in view of the Mercer Consulting India Pvt. Ltd v. CIT in ITA No.966/Del/2014. 32. In support of the respondent's case, Mr. Rao relied upon CIT v. American Express India Pvt Ltd, ITA 691/2012 dated 15.01.2025 as well as CIT 1 v. American Express India Pvt Limited, ITA No.149/2013 dated 15.01.2025. 33. He has sought dismissal of the appeal. ANALYSIS AND CONCLUSION 34. Having heard the learned counsel for the parties and perused the records, at the outset, we may state that this appeal has been filed proposing substantial questions of law as reproduced above in paragraph no. 8. 35. Insofar as, the proposed substantial questions of law at B, C, D, E and G are concerned, it is the case of the appellant/Revenue that the said issues are covered against the Revenue in terms of the judgment as referr....
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....ious years is pending before the Hon'ble High Court? Covered in judgment dated 15.01.2025 of this Court in ITA 691/2012 titled CIT v/s American Express (India) Pvt. Ltd. 36. So, we admit the appeal on the proposed substantial questions of law (A) & (F), which are re-numbered as (1) and (2). We have already noted the submissions made by the counsel for the parties. The substantial questions of law are as under:- Question (1) "Whether in the facts and circumstance of the case the Ld. ITAT erred in giving direction to the TPO for inclusion of comparable namely M/s Cepha Imaging Pvt. Ltd. on account of export earning filter without considering the TPO finding of functional dissimilarity between the assessee and the said comparable?" Question (2) "Whether in the facts and circumstances of the case the Ld. IT AT has erred in giving directions to the TPO for inclusion of comparable M/s CG Vak Software & Exports Ltd. without considering the fact that this comparable failed the turnover filter applied by the TPO." Re. Question (1) 37. In so far as the substantial question of law (1), is concerned, the finding of the ITAT, can be seen fro....
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....) Call Centres ; (iii) Content Development or Animation ; (iv) Data Processing ; (v) Engineering and Design ; (vi) Geographic Information System Services ; (vii) Human Resources Services ; (viii) Insurance Claim Processing ; (ix) Legal Databases ; (x) Medical Transcription ; (xi) Payroll ; (xii) Remote Maintenance ; (xiii) Revenue Accounting ; (xiv) Support Centres, and ; (xv) Web-site Services. [Notification No. 11521/F.No. 142/49/2000-TPL]" 39. We note that the ITAT has by not accepting the reasons given by the TPO (who rejected the comparable) held that the reasons of the TPO are contrary to the facts and record. In other words, the ITAT held that, when the export turnover of the said company is stated to be 100% then the TPO could not have held that it fails export turnover filter. The ITAT also stated that, it is not known as to what was the source of information for the TPO to draw such a conclusion. 40. Mr. Panda submitted that the services of Cepha Imaging Pvt. Ltd. are e-publishing services, which is not covered under the CBDT notification. ....
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....d comparable in A.Y.s 2004-05, 2005-06 and 2006-07. By placing reliance upon the judgment of this Court in the case of Chrys Capital Investment Advisors India Pvt. Ltd (supra), the ITAT held that the company cannot be held incomparable simply on the ground of low turnover, unless it is demonstrated that the assets and risk are completely different and are incomparable and directed the TPO to include CG Vak Software and Exports Ltd. as a comparable company. 47. Mr. Rao on the other hand submitted that the decision of this Court in American Express Banking Corp. (India Branch) v. ADIT, ITA 5/2025, would show that issues relating to ITeS were not in appeal before this Court because the TP addition issue relating to ITeS got resolved by the order of the ITAT. The appellant in that case did not carry the findings of ITAT on C.G. VAK Software & Exports Pvt. Ltd. in appeal for that reason. The ITAT in its later decision in American Express Banking Corp. (India Branch) (supra), which the appellant seeks to rely upon to further its case is per incuriam and violates judicial propriety as it does not even discuss/ distinguish the earlier coordinate bench decision before coming to a contrar....