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2018 (8) TMI 592 - HC - Income TaxTransfer pricing - knowledge management systems - international transactions/activities - services rendered to its associated enterprises, i.e. AE - assessee seeks to be identified as a BPO and not as a KPO - Adjustments with regard to notional interest attributed to the assessee - Exclusion of relative comparables which were held to be irrelevant for the purpose of ALP determination - controlled transactions Held that:- this court is unpersuaded by the assessee’s assertion that it is merely a BPO; the services rendered by it are specialized and require specific skill based analysis and research that is beyond the more rudimentary nature of services rendered by a BPO. Therefore it would be incorrect to slot the services provided by the Assessee into that of a BPO, when it is more akin to a KPO. As per the amended provisions of Section 92B, if there is any delay in the realization of a trading debt arising from the sale of goods or services rendered in the course of carrying on the business, it is liable to be visited with transfer pricing adjustment on account of interest income short charged/uncharged. - the assessee’s contention that the ITAT erred in concluding that charging of interest on delayed receipt of receivables is a separate international transaction which requires to be benchmarked independently, is incorrect. Selection of comparable - revenue urged that a stringent application of the comparability test was unnecessary - Held that:- even if due consideration is given to a certain level of dissimilarity between the Assessee and the comparable companies, it can be observed that the nature of services provided by the abovementioned comparable companies do not demonstrate even a degree of similarity with the services rendered by the Assessee that would be sufficient to qualify under rule 10B(2) of the Income Tax Rules, since, as established above, the Assessee’s services under its R&I segment are in the nature of services provided by a KPO and they are functionally dissimilar from the comparable companies, in terms of their services as well as their risk profiles. Decided partly in favor of assessee and partly in favor of revenue.
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