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2014 (9) TMI 123 - AT - Income TaxTransfer pricing adjustment – selection of comaparables - Infosys BPO Ltd. – Huge difference in turnover – Held that:- The contention of the assessee is accepted that the comparability on turnover ratio of assessee with this company on the ground that assessee’s turnover is about ₹ 15.79 crores, as against turnover of ₹ 1016 crores of the Infosys - Infosys BPO stands on its own as an exclusive BPO of the Infosys Technologies and in earlier years, generally Infosys BPO is excluded in many of the cases - even though the profits of the Infosys BPO Ltd. is reasonable and no super profits are earned, because of its big brand value this company has to be excluded on the grounds of functional dissimilarity on FAR Analysis – the AO is directed to exclude the company – Decided in favour of Assessee. Genesys International Ltd. - Functionally different unit - Held that:- Following the decision in M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] - assessee is basically providing various services to the customers of its AEs in relation to human resources which are more or less centered around the employees of the prospective clients - the mere fact that two services are placed under this category do not become automatically comparable - If a case providing one category of services under ITES is claimed as comparable with another in the category of service under ITES as per this circular, then it must be shown ex facie that it is broadly similar - the services rendered by Genesys fall under clause (vi) with the heading ‘Geographical Information Systems Services’, whereas those rendered by the assessee fall partly under clause (vii) with the heading ‘Human Resources Services’ and partly under clause (xi) with the heading ‘Payroll’ - there is a vast difference which make one quite distinct from the other - there is vast difference between the functions of the above company and that of assessee - This company cannot be treated as comparable on FAR analysis – the AO was directed to AO to exclude this company. Cosmic Global Ltd. – Outsourcing of main activity - Held that:- Following the decision in M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] - 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. Acropetal Technologies Ltd. – Held that:- Following the decision in M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] - the major source of income for the company is from providing Engineering Design Service and Information Technology Services - 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 - The performance of Engineering Design Services is regarded as providing high end services among the BPO which requires high skill whereas the services performed by the Assessee are routine low end ITES functions – the 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 company is functionally similar at segment level - the issue of adopting the segmental results in analyzing the profit and PLI is restored to TPO/AO for fresh examination. Accentia Technologies Limited. – Different business strategies - Held that:- This company operates in a different business strategy of acquiring companies for inorganic growth as its strategy - considering the profit margins of the company and insufficient segmental data, this company cannot be selected as a comparable – the AO is directed to exclude the company as comparable. Crossdomain solutions P. Ltd. – Functionally similar - Held that:- The company is functionally similar to the activities of the assessee company which is in the ITES field - this company cannot be excluded on the basis of functional dissimilarity, as contended by the assessee - The AO /TPO is directed to work out the PLI after giving proper opportunity to the assessee and considering the objections of the assessee – Decided partly in favour of assessee.
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