2015 (12) TMI 1560 - AT - Income Tax

TPA - selection of comparables - Held that:- Kitco Limited transactions are primarily with government owned enterprises.Applying the preposition laid down in the case of M/s ThyssenKrupp Industries India Private Limited (2013 (11) TMI 930 - ITAT MUMBAI), we hold that Kitco Ltd., cannot be accepted as a comparable company. Hence the same is directed to be eleminated.

TCE Consulting Engineers Ltd.- the Comparable Company is involved in activities beyond engineering design. It is engaged in activities that extend from concept to commissioning. Whereas the assessee provides services as a captive unit to its overseas AEs. The diversified functions of this comparable company include pre-project activities, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision. Further, there is no segmental accounting in the annual report of the Company which provides profitability, for the engineering design segment. Hence the same cannot be accepted as a comparable.

IBI Chematur Ltd. company undertakes substantial R&D activities (R&D expense 5.41% of turnover) which is not a function performed by the assessee. Hence this company cannot be accepted as a comparable.

Accuspeed Engineering Services India Limited and Development Consultants Private Limited - DRP has not given any reasons for rejecting these comparables. On examination of the papers on record, we are in agreement with the submissions of the ld. AR. Hence we direct the A.O to include this company as a comparable.

M N Dastur & Co. Private Limited - It is relevant to note that the Ld. TPO/DRP has accepted M N Dastur & Co. Pvt. Ltd., as a comparable in the assessee’s own case for assessment year 2009-10. Under such circumstances, we direct the A.O to include this company as a comparable.

Mott Macdonald Private Limited - this comparable company is involved in the provision of multi-disciplinary management and engineering consultancy services like business advice for development planning to engineering design to project management. It is engaged in planning, developing and delivering projects across many sectors such as energy, industry, water and environment to transport, buildings, urban infrastructure and social development. We observe that the Ld.DRP has not given any reasons for rejecting this comparable. We observe that the functions of this comparable company are diversified in nature. As we have rejected company like TEC on similar ground, this company also cannot be accepted as a comparable. Hence we direct the A.O not to include this company as a comparable

TCS E-Serve International Limited & TCS E-serve Limited - This company undertakes, customer service, transaction processes, collections, risk management, and analytics, and has created a lot of applications which are in the nature of intellectual property in terms of reconciliation software, fund transfers, etc. The company also undertakes software testing and validation activities. Possession of intellectual property rights has to be factored if such a company is to be taken as comparable. This cannot be done unless there is appropriate data. Further, from the TP study we observe that, this company is a wholly owned subsidiary of TCS E serve International Ltd. During the year under consideration, this company has made payments towards use of Tata brand. Consequentially use of the TCS brand has substantially increased the operating profits post acquisition. Hence we are of the opinion that this company cannot be taken as a comparable. We therefore direct to exclude this comparable.

Accentia Technologies Limited is into development of software products for healthcare. It is submitted by the ld.AR that Accentia Technologies Ltd is also engaged into diversified activities such as Knowledge Process outsourcing(KPO), Legal process outsourcing(LPO), Data process Outsourcing(DTO), high end software services. It is also submitted by the ld.AR that segmental information in respect of this company is not available. It has been further brought to our notice that this company has been rejected by the Ld.TPO in the earlier year. The company has also had business restructuring during the year under consideration thereby giving rise to extraordinary circumstances. For all these reasons we direct the Assessing Officer to exclude this company as a comparable.

E4e Healthcare Business Services Private Limited - . Functionally the company is into health care outsourcing services and in addition it also renders software development services. It is also observed that segmental information in respect of this company is not available. The company is also a 100% EOU, under STPI guidelines. We are therefore inclined to accept the contention of the assessee that this company should be excluded as a comparable. Hence we direct the Assessing Officer to do so.

Omega Healthcare Management Services Pvt. Ltd. - the financial data of the company is available on the database. The ld. TPO however did not give proper opportunity to the assessee to substantiate the inclusion of this company as a comparable. The issue was carried further before the Ld.DRP, and the Ld.DRP also did not comment upon the economic analysis of the company. We therefore set aside this issue of selecting this company, to be considered by the TPO as a comparable, and to include the same in the event it satisfies all the filters applied by the ld.TPO.

Techprocess Solutions Ltd. (Processing Services segment) - TPO has rejected the company on the ground that financial statement of the company was not available. The issue was carried further before the Ld.DRP, and the Ld.DRP also did not comment upon the economic analysis of the company. We therefore set aside this issue of selecting this company be considered by the TPO as a comparable, and to include the same in the event it satisfies all the filters applied by the ld.TPO.

Adjustment on account of Receivables - Held that:- It is brought to our notice that the assessee is a debt free company. In such circumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE’s. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments.

In lieu of the discussions and the ratio laid down in the case of Kusum Healthcare Pvt. Ltd. [2015 (4) TMI 180 - ITAT DELHI ], we direct that no separate adjustment for interest on receivables are warranted in the hands of the assessee. Ground no. 3 of the assessee’s appeal is there by allowed. The assessee’s appeal stands disposed off accordingly.