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2015 (1) TMI 300 - AT - Income TaxTransfer pricing adjustment - Information Technology Enabled Services - Rejection of comparables - Genpact India ltd. - Held that:- The TPO has included this comparable on the ground that the company is engaged in similar activity - the ratio of related party transaction to operating income for the year is 98.96% and does not satisfy the TPO’s own filter of rejecting companies having more than 25% RPT - the turnover of Genpact India is ₹ 2683.82 crores as against assessee’s turnover of ₹ 80.4 crores - the services rendered by Genpact india are high end services and even the turnover filter do not match with that of the assessee – there was no error in the directions of the DRP to reject the company from the final list of comparables. Excel Infoways ltd. – Super normal profit - Held that:- This company has a super normal profit and showing margin of 203.80% - the TPO in its order u/s. 92CA(3) has himself removed this company from the final list of comparables giving reasons “extreme outlier” - Considering the super normal profit and also the rejection by the TPO in A.Y. 2010-11, there was no error in rejection of this company - the ratio of employee cost to turnover is only 10.02% as against assessee’s employee cost of 62.83%. M/s. Crossdomain Solutions Ltd. – Held that:- This company has been rejected by the DRP on the ground that it is indulged in high skill IT services which are not comparable to the routine I.T. Enabled services – in M/s. Market Tools Research Pvt. Ltd. Versus Dy. Commissioner of Income-tax [2014 (9) TMI 43 - ITAT HYDERABAD] it has been held that this company is providing services which are in the nature of KPO - the company is engaged in providing Niche services as well as developed its own brand ‘Exdion’ to target the insurance industry in US - the directions made by the DRP is upheld for the rejection of this company from the final list of comparable - Decided against revenue. Nature of foreign exchange gain/loss – Operating revenue or not – Held that:- While computing the operating margin of the assessee, the TPO included the foreign exchange loss of ₹ 2.48 crores as part of operating cost but has not considered the foreign exchange gain of ₹ 1.09 crores as part of the operating revenue - This amounts to inconsistent approach of the TPO – thus, the TPO is directed to consider foreign exchange gain as part of the operating revenue while determining the operating margin of the assessee – Decided partly in favour of revenue.
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