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2015 (12) TMI 903 - AT - Income TaxTransfer pricing adjustment - whether the filter of export sales to total sales of 25% applied by ld. TPO and accepted by ld. DRP is justified or not? - Held that:- Rule 10B(2)(d) is relevant only for CUP method cannot be accepted. All these factors have bearing on the net margin to be determined in all methods including TNM method. We are in agreement with the submission of ld. Sr. DR, reproduced earlier, that those geographical markets in which parties entering into transactions operate is an important factor which influence the price of the transaction and that has to be factored into for identification of uncontrolled transactions. Various case laws relied upon by ld. DR also fortify the view taken by us. For the sake of brevity, we are not referring to those decisions which have been elaborately considered in the submi1ssions of ld. DR, reproduced earlier. We, accordingly, reject this contention of ld. counsel for the assessee. All the comparables had been excluded as they did not pass through export filter applied by ld. TPO. As we have already upheld the export filter applied by ld. TPO in earlier part of our order, we reject the assessee’s contention. There is no denying of the fact that Infosys BPO operates on a large scale and caters to wide variety of customers operating in different industries. Ld. counsel has filed before us extracts from the annual reports and white paper issued by Infosys in regard to ‘Process Progression Model ( “PPM”), a holistic model to transform business processes’.In view of above discussion, we direct ld. TPO to exclude Infosys BPO. eClerx Services Limited to be excluded from the list of comparables as this company is functionally different, which is evident from the business profile of eClerix, reproduced earlier from Annual Report. TPO had denied the risk adjustment claimed by assessee on the ground that assessee failed to show that the comparables had actually undertaken suck risk and failed to demonstrate how the same material affected from margins. He pointed out that unless it was shown that how the risk adjustment to fetch the result of each comparable and how the same would improve the comparability and unless adequate reasons are given for such adjustment, no adjustment can be allowed to the tax payer. Before ld. DRP also the assessee failed to furnish any data for quantification of risk. Unless the difference can be ascertained accurately and their import on the margin can be assessed with reasonable accuracy, the adjustment cannot be allowed. Under such circumstances, the matter also cannot be restored back to the file of ld. TPO. Denial of working capital adjustment - Held that:- The matter needs to be restored back to the ld. TPO to verify the assessee’s contention regarding all the invoices outstanding being for less than six months and, if, the same is found to be correct, then no addition is called for in view of the ITAT decision in the case of M/s Logix Micro Systems Ltd. (2010 (10) TMI 902 - ITAT BANGALORE). One of the plea of ld. counsel for the assessee was that the entire funds are received from parent company. However, this plea has been taken for the first time and was not taken before lower revenue authorities. Therefore, this aspect also needs to be considered by ld. TPO while deciding this issue de novo.
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