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2014 (11) TMI 840 - AT - Income TaxTransfer pricing adjustment - Selection of compables – Accentia Technologies Limited - different business strategies – Held that:- In M/s. Capital IQ Information Systems (India) Pvt. Ltd. Versus Addl. Commissioner of Income-tax [2014 (9) TMI 125 - ITAT HYDERABAD] - it was a case of mergers and acquisition, and the company was also found to be functionally different - exceptional events like merger/demerger does impact the profitability of a company - it is necessary to look into this aspect before selecting a particular company as comparable - the matter is remitted back to the AO who shall verify the fact whether in fact, the exceptional events like amalgamation and acquisition, which have taken place has any impact on the profitability of the company as claimed by the assessee. Acropetal Technologies Ltd. – Functionally different unit - Held that:- As decided in assessee’s own case for the earlier assessment year, the decision in M/s. Market Tools Research Pvt. Ltd. Versus Dy. Commissioner of Income-tax [2014 (9) TMI 43 - ITAT HYDERABAD] followed - the TPO has admitted that the aforesaid company has two segments, and only the IT Enabled Services Segment, relating to engineering design services was considered by the TPO for comparability analysis - the functions performed by the Engineering Design Services segment of the company cannot be considered as comparable to the ITES/BPO functions performed by the Assessee - this company could not have been selected as a comparable, especially when it performs engineering design services which only a Knowledge Process Outsourcing [KPO] would do and not a Business Process Outsourcing [BPO] – the AO/TPO is directed to exclude the company from the list of comparables. Cosmic Global Ltd. - Outsourcing of main activity - Held that:- Following the decision in M/s. Capital IQ Information Systems (India) Pvt. Ltd. Versus Addl. Commissioner of Income-tax [2014 (9) TMI 125 - ITAT HYDERABAD] - outsourcing charges constitute 57.31% of the total operating costs - The entire outsourcing is confined to Translation charges paid at ₹ 3.00 crore, which is strictly in the realm of the Translation segment, revenues from which are to the tune of ₹ 6.99 crore - If this segment of Translation is not under consideration for deciding as to whether this case is comparable or not, we cannot take recourse to the figures which are relevant for segments other than accounts BPO - this case cannot be excluded on the strength of outsourcing activity, which is alien to the relevant segment – the AO is directed to exclude this company. Eclerx Services Ltd. – Functionally different unit - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the TPO has accepted the assessee as a purely ITES provider – the company is engaged in providing KPO services held that this company cannot be treated as comparable to an assessee which is engaged in provision of IT enabled services in BPO sector - it cannot be said that the company is comparable to the assessee - the aforesaid company has been treated as not to be a comparable, as it is involved in providing KPO services as well as it is earning super-normal profits – thus, the AO/TPO is directed to exclude the company from the list of comparables. Genesys International Ltd. – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that after analysing the activities undertaken by the assessee company vis-à-vis the activities of the assessee before it, which is engaged only ITE services to its AE, had remitted the issue to the file of the TPO for considering afresh - applying the rule of consistency, the decision of the Tribunal is followed – Decided partly in favour of assessee.
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