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2014 (9) TMI 201 - AT - Income TaxTransfer pricing adjustment - ITES Segment - Selection of comparables - Cosmic Global Ltd. – Held that:- The assessee is engaged in providing the ‘Manual claim processing services’ to its foreign A.E. and also providing services relating to analyzing data on health insurance, launching lucrative insurance products - the United Health Corp. group is, inter alia, engaged in health related insurance business - So the services provided by the assessee under this segment are mainly in the nature of processing on manual basis, the insurance claims lodged by its policy-holders - from the Annual Report of the company it is found that the financial results in the Balance sheet and Profit and loss account are available only on entity level - the major part is the income from Translation charges at ₹ 5.59 crore out of total revenues of ₹ 5.86 crore, which is totally dissimilar to that of the assessee - The assessee is not into any Translation business - Merely because the assessee inadvertently included the company in the list of comparable, can be no reason to bar the assessee from claiming that it was wrongly included - Cosmic Global Ltd. is incomparable to the assessee – the TPO is directed to exclude the company from the comparables – Decided in favour of assessee. Eclerx Services Ltd. – Functionally different company – Held that:- The company is engaged in providing data analytics and customized process solutions to a host of global clients – from a look at the functional profile of the company from its Annual report, it can be seen that it is nowhere close to the assessee’s instant segment of ‘manual claim processing services’ - the TPO is directed to exclude the company from the comparables – Decided in favour of assessee. Genesys International Corpn. Ltd. – Different nature of work - Operated in single business unit - Held that:- The company is engaged in rendering geospatial services catering to the needs of consumer mapping, navigation and internet portals - It is providing mapping technologies managing the earth’s resources and surfaces at a time - Talent eco system with this company includes urban planners, cartographers, remote sensing scientists etc. and even rocket scientists, giving its skills in all kinds of land base work - the nature of work done by the assessee under its ITES segment, which is simply that of processing insurance claims manually is different from the unit being compared - the TPO is directed to exclude the company from the comparables – Decided in favour of assessee. Vishal Informatics – Held that:- From the Annual report of the company that it is mainly engaged in e-publishing business - the working capital adjustment is required with reference to stock, trade receivable and trade payables - Since, the authorities below have denied working capital adjustment to the assessee on flimsy ground, thus, the grant of working capital adjustment, if otherwise available, cannot be jeopardized - the AO/TPO is directed to vet the correctness of the amount of working capital adjustment claimed by the assessee – thus, the matter is remitted back to the AO/TPO for a fresh computation of the ALP of the international transactions – Decided in favour of assessee. Software development services - Working capital adjustment - 3K Technologies Ltd. – Held that:- From the Annual report of this company that apart from Personnel cost of ₹ 1.15 crore, there are ‘Onsite expenses’ to the tune of ₹ 26.74 crore and also ‘Administrative and other expenses’ amounting to ₹ 3.50 crore, which also include personnel cost - the Directors’ remuneration is part of it, which is nothing but personnel cost - In so far as ‘Onsite expenses’ are concerned, it can be seen that the nature of business of the company is that of development of computer system and other related activities - when the company is rendering services to its customer at their doorstep, it will incur onsite expenses, which would predominantly include the personnel cost - as the business of this company has not been shown to be functionally different from that of the assessee and further it is an admitted position that even if a part of ‘Onsite expenses’ is included in the personnel cost, it would pass the filter of employee cost more than 25% of the total cost, the view taken by the TPO is upheld – Decided against assessee. Infosys Technologies Ltd. – Held that:- Infosys Technologies Ltd., which is otherwise a giant company in terms of risk profile, scale, nature of services, revenue ownership of branded/proprietary products, onsite and offshore services, etc., cannot be compared with the assessee – relying upon CIT vs. Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] - The parameters on which Infosys Technologies Ltd., was held to be not comparable with that assessee, are fully applicable here also – the TPO is directed to exclude the company from the list of comparables – Decided in favour of assessee. KALS Information System Ltd. – Held that:- The TPO adopted ‘Software development’ segment of this company - From the Annual report of this company it can be noticed that this segment also includes revenues from software products - the assessee is not engaged in selling any software products, the financials of the company under this segment cannot be compared with the assessee - The contribution by the sale of software products to the overall revenue of this segment cannot be precisely ascertained for determining the question of its comparability – Decided in favour of assessee.
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