Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (8) TMI 607 - AT - Income TaxTransfer pricing adjustment - Computation of the arm's length price - selection of comparables - Held that:- As far as comparables list at Sl. Nos. 17 and 25 of the list of comparables chosen by the Transfer Pricing Officer is concerned, viz., Infosys BPO Ltd. and Wipro Ltd., the turnover of these companies are admitted beyond ₹ 200 crores. It has been held by this Tribunal in several decisions like Trilogy E-Business Software India P. Ltd. v. Deputy CIT [2013 (1) TMI 672 - ITAT BANGALORE ] that companies having turnover above ₹ 200 crores cannot be considered as comparable with companies having turnover of less than ₹ 200 crores. Thus we are of the view that the aforesaid two companies cannot be regarded as comparable. With regard to company at Sl. Nos. 19 and 23 of the list of comparable companies chosen by the Transfer Pricing Officer, viz., M/s. Maple E Solutions Ltd., and Triton Corporation Ltd., the Hyderabad Bench of the Tribunal in the case of Stream International Services P. Ltd. v. Asst. CIT (2014 (10) TMI 393 - ITAT MUMBAI ) in para 13(iii) at page-14 of the order held that the promoters of these two companies were involved in fraud for earlier years and hence the financial results of these companies are distorted and cannot be relied upon and in this regard relied on several decisions rendered by the various Benches of the Income-tax Appellate Tribunal. Respectfully following the same, we direct the aforesaid two companies be excluded from the list of comparable companies chosen by the Transfer Pricing Officer. Exclusion of the following four companies from the list of comparable companies by applying the employee cost to sales filter, viz., Asit C. Mehta Financial Services Ltd., (previously known as Nucleus Netsoft and GIS Ltd.), Informed Technologies Ltd., Vishal Information Technologies Ltd. (now known as Coral Hub Ltd.) and Accentia Technologies Ltd. - Held that:- In respect of the percentage of employee cost to turnover there is dispute in the case of Asit C. Mehta about the percentage of the employee cost to turnover. In respect of Asit C. Mehta the learned Departmental representative submitted that the data processing charges mentioned in Schedule 12 of the profit and loss account should also be considered as employee cost and the percentage worked out accordingly. In respect of Accentia technologies Ltd., also the issue should be remanded as the employee cost to turnover issue was not raised before the Dispute Resolution Panel/Transfer Pricing Officer by the assessee and the figures given by the assessee before the Tribunal needs verification. We are of the view that the plea put forth by the learned Departmental representative is acceptable and in respect of these two companies the employee cost to sales should be examined afresh by the Assessing Officer/Transfer Pricing Officer after due opportunity to the assessee. In respect of the other two companies there is no dispute that the employee cost to sales is less than 25 per cent. and therefore these two companies are directed to be excluded from the list of comparable companies. comparable company at Sl. Nos. 5, 14 and 16 of the chart of comparable companies chosen by the Transfer Pricing Officer viz., Appollo Health Street Ltd., M/s. HCL Comnet and M/s. Informed Technologies India Ltd., are concerned, it is not in dispute before us that the related party transaction in the case of companies exceeds 15 per cent. (17.77 per cent. in the case of Appollo Health Street Ltd., 21.52 per cent. in the case of HCL Comnet and 15.93 per cent. in the case of Informed Technologies India Ltd.) and in view of the decision of the Tribunal in the case of 24/7 Customer.Com.Pvt. Ltd. v. Deputy CIT [2013 (1) TMI 45 - ITAT BANGALORE] wherein it was held that where the related party transaction exceeds 15 per cent., such companies should not be taken as comparable companies. With regard to (1) Eclerx Services Ltd. ; (2) Mold-Tek Technologies Ltd. (Seg.) at Sl. Nos. 11 and 20 of the list of comparable companies chosen by the Transfer Pricing Officer, being chosen as comparable companies, the Income-tax Appellate Tribunal, Bangalore Bench in the case of Symphony Marketing Solutions India P. Ltd. v. ITO [2014 (2) TMI 83 - ITAT BANGALORE] these companies were held to be not comparable with companies in information technology enabled services sector Bodhtree Consulting Ltd. (Seg). was into software development and not a pure information technology enabled services company. In our view the objections and the reasons given by the Transfer Pricing Officer for considering this company as a comparable are different and the objections raised by the assessee before the Transfer Pricing Officer were also different. On the facts as it transpired before the Transfer Pricing Officer and the arguments of the assessee before the Transfer Pricing Officer/Dispute Resolution Panel, we are of the view that this company was rightly regarded as comparable. Accurate Data Converters Ltd. - he request made by the assessee has to be accepted in view of the lack of opportunity provided by the Transfer Pricing Officer/Dispute Resolution Panel. Accordingly, the Transfer Pricing Officer/Assessing Officer is directed to furnish a copy of the annual report of this company to the assessee. The assessee will thereafter furnish his explanation as to whether this company can be considered as a comparable company or not. The Transfer Pricing Officer will thereafter decide the comparability of this company after affording an opportunity of being heard to this company. IServices India Ltd. - The Transfer Pricing Officer/Assessing Officer will obtain the annual report of the company for the financial year 2006-07 and also furnish the assessee copies of the same together with the information obtained by the Transfer Pricing Officer pursuant to issue of notice under section 133(6) of the Act. The assessee will thereafter furnish its reply as to why this company should not be considered as a comparable company. The Transfer Pricing Officer/ Assessing Officer will thereafter decide the question of considering this company as a comparable company after affording opportunity of being heard to the assessee. Excluding telecommunication charges while computing deduction under section 10A - Held that:- king into consideration the decision rendered by the hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude telecommunication charges incurred be excluded both from export turnover and total turnover, as has been prayed for by the assessee in the alternative. - Decided partly in favour of assessee.
|