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2017 (7) TMI 656 - AT - Income TaxCharacterization of functions/activities undertaken by the assessee while rendering services to its associated enterprises - market research company OR IT enabled services company - Held that:- It is quite clear that the ITE services involve a predominant use of technology to achieve the desired output. The illustrative list of activities brought out by CBDT clearly show that ITE services involve routine human tasks which are carried out more and more by use of technology on the part of human resources. In contrast, if we were to compare such like services with the activities of a market research service provider, it would be evident that in market research, output is the product of collecting, collating and analysing of information/data, which may involve use of technology, whereas in the case of ITE services, rendering of services is primarily driven by use of technology on the part of human resources. In our considered opinion, the DRP was quite justified in coming to conclude that market research services undertaken by assessee cannot be compared with ITE services. In fact, in para 9 of the order of DRP, distinction between market research agency and an IT-enabled service provider under the Service Tax Rules has also been tabulated which clearly shows that the two are incomparable. Therefore, under these circumstances, the TPO was clearly in error in benchmarking the ‘international transactions’ entered by the assessee on account of market research services with the concerns which were engaged in providing ITE services, since the two activities were incomparable. A concern involved in rendering of ITE services cannot be compared with a concern which is rendering market research services, as is the case of the assessee. Therefore, insofar as the issue relating to characterisation of assessee’s functions are concerned, we find no error on the part of DRP in upholding the stand of assessee that the TPO erroneously considered it as an ITE service provider. Disallowance of proportionate interest - Held that:- As in the past years, namely, Assessment Years 2004-05 and 2005-06, in a consolidated order passed by the Tribunal stand of assessee has been upheld that no addition can be made on account of notional interest in the valuation of closing work-in-progress. Thus, on this Ground, assessee succeeds. Denial of deduction u/s 80G - Held that:- It would be in the fitness of things that the Assessing Officer verifies and allows the claim of assessee for deduction u/s 80G of the Act, having regard to the donation receipt, a copy of which has also been placed in the Paper Book at pg. 609. Thus, on this aspect, assessee succeeds for statistical purposes.
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