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2020 (6) TMI 761 - AT - Income TaxTP Adjustment - Comparable selection - comparable Caliber Point Business Solutions Ltd. - HELD THAT:- No such disclosure is apparent in the annual report of the company and, therefore, we are of the considered opinion that this company cannot be excluded only on an inference that some extraordinary event might have occurred. We also note that the functional comparability of this company has not been disputed either by the TPO or by the CIT (A). As now settled law that a company cannot be excluded as a comparable solely for the reason that its financial year is different without considering whether the data for the financial year adopted by the assessee can be compiled from the audited statements of such company. The ITAT Delhi Bench in the case of Xchanging Technology Services India Pvt. Ltd. [2015 (10) TMI 1005 - ITAT DELHI] directed that this company be included as a comparable wherein it had been rejected only on the ground of having different financial year any. Accordingly, this company is directed to be included in the final set of comparables after verifying that the margin can be recomputed to work out the proportionate working margins if the financial data are duly audited and are available in the public domain, of course with the rider that during that period there were no other factors affecting the operating margin, thus, ground No.2 stands allowed for statistical purposes. Rejection of the comparable R-System International Ltd. - As rejection of the comparable by the Ld. CIT (A) is more on some kind of suspicion rather than being supported by any cogent data. As we have already mentioned in the preceding paragraphs, a comparable cannot be rejected merely because of a different financial year ending and now there are numerous orders of the Tribunal in this regard. We again refer to order of the ITAT Delhi Bench in the case of Xchanging Technology Services India Private Limited [2015 (10) TMI 1005 - ITAT DELHI] wherein this company was directed to be included. Since, the Ld. CIT (A) has not indicated any basis for suspecting the reliability of the financial results for this company, we direct that this company be included in the final set off comparables subject to the verification that the relevant data can be easily compiled from the audited statements of the company, of course with the rider that during that period there are no other factors affecting the operating margin. Accordingly, Ground No.4 stands allowed for statistical purposes. Exclusion of Infosys BPO as a comparable - Similarly, ITAT Delhi Bench in the case of Cengage Learing India Pvt. Ltd. [2018 (7) TMI 1549 - ITAT DELHI] held that Infosys BPO Ltd. had huge turnovers, owns IPR and brand value on products and provides services to vast clientele. Under such circumstances this company cannot be accepted to be a fit comparable in case of assessee who is a captive service provider providing services only to its group concerns. The Judicial precedents where Infosys BPO Ltd. has been excluded for the reason of being a giant company, having huge turnover, brand value, ownership of IPRs etc. can be multiplied. Therefore, in over all view of the matter, considering the size and service being rendered by the assessee company as compared to Infosys BPO Ltd., we hold that this company is not a good comparable. Accordingly, we direct the exclusion of this company from the final set of comparables. Thus Ground No.5 stands allowed. Incorrect computation of operating profit margin of e4e Healthcare Business Services Pvt. Ltd. - We note that the Delhi Bench of the ITAT in the case of Sony India Pvt. Ltd. [2008 (9) TMI 420 - ITAT DELHI-H] has held that provision for doubtful debts is part of normal operating activity of the business and, similarly, any write back of provision is also to be treated as operating in nature. Similar views have been taken by the Bengalure Bench of ITAT in the case of Outsource Partners International (P.) Ltd. [2017 (2) TMI 1410 - ITAT BENGALURU] and Hyderabad Bench of the Tribunal in the case of Sum Total Systems India Pvt. Ltd. [2016 (9) TMI 1514 - ITAT HYDERABAD] Accordingly, we direct that the provision for bad and doubtful debts of this company be treated as a part of the operating expenses and the margins of this company be recomputed after giving proper opportunity to the assessee to present its case. Thus, Ground No.6 stands allowed for statistical purposes. Operating profit margin of ICRA Techno Analytics Limited has been incorrectly computed at 28.66% instead of the correct operating profit margin of 24.96% - It is the assessee contention that this computational error occurred because the foreign exchange fluctuation loss was deducted twice by the TPO. In this regard a chart has also been submitted. In our considered opinion this claim of the assessee needs to be re-examined by the TPO after giving proper opportunity to the assessee. Accordingly, Ground No.7 is restored to the file of TPO for verification of the assessee’s claim and pass order in accordance with law after giving due opportunity to the assessee. Ground No.7, thus stands allowed for statistical purposes.
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