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2015 (8) TMI 263 - AT - Income TaxTransfer pricing adjustment - selection of comparable - Infosys BPO Ltd. Held that:- The assessee is a captive unit providing back office support services to its AE alone, which are basically in the nature of processing of insurance claims and the data entry, it can have no valid comparison with Infosys Ltd., as the latter is a full-fledged risk taking entrepreneur with diversified business including software product, consulting application, design development, re-engineering and maintenance etc. Infosys Ltd. has developed/owns proprietary products like Finacle, whereas the assessee, being a captive unit, does not own any such proprietary product. Unlike Infosys, the assessee does not have any substantial intangible assets . Thus we direct the exclusion of this company from the list of comparables. Wipro Ltd. (Seg.)is also a giant entity in comparison with the assessee company with marked differences as regards risk profile, nature of services, ownership of IP rights, expenditure on R & D etc, thus be excluded from the list of comparables. HCL Comnet Systems & Services Ltd. (Seg.) cannot be excluded from the list of comparable as in view of the fact that the assessee has admitted the functional comparability of the relevant segment of this company and the only difference pointed out is about its higher turnover and a potentially comparable case cannot be excluded for the reason of high or low turnover or high or low profit margin Eclerx Service Ltd. company is a Knowledge Process Outsourcing (KPO) company providing data analytics and data processing solution to its clients. It is a recognized expert in Financial services and Retail and Manufacture. It provides consulting services and also process outsourcing. The above details have been pointed out by the ld. AR from the Annual accounts of this company for the Financial year 2007-08. Nothing has been brought on record by the ld. DR to show that the functions performed by this company in the relevant year were any different. When we consider the nature of assessee’s business, which is primarily that of processing insurance claim and data entry, it becomes vivid that Eclerx Service Ltd. cannot be considered as functionally comparable with the assessee company. Maple Esolutions Ltd. and Triton Corp. Ltd. companies are owned by Rastogi Group and the reputation of the Directors of these companies was having question-mark in earlier years. Both these companies are inter-related entities. During the year under consideration, there was acquisition of 100% shares of Maple Esolutions Ltd. by Triton Corp. Ltd. and thus, Maple Esolutions Ltd. became a wholly owned subsidiary of Triton Corp. Ltd. w.e.f 01.01.2007. It can be seen that this merger/acquisition has taken place during the year under consideration, thereby shattering their comparability. Thus we direct the exclusion of these two companies from the list of comparables.
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