Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (9) TMI 50 - AT - Income TaxTransfer pricing adjustment - Comparable selection - functional similarity - HELD THAT:- Vishal Information Technologies Ltd. - On a perusal of the financial statements of this company, we have noticed that the employee/personnel cost of this company, as a percentage of the total cost and sales, is negligible compared to the personnel cost of the assessee as a percentage of total cost and sales turnover. The aforesaid facts do establish that the company does not undertake the provision of services itself but outsources major part of the work to third parties. In contrast, the assessee provided ITeS on its own without outsourcing. That being the case, the business model of this company is totally different from the assessee. Due to the distinct business model of outsourcing of work followed by this company, it has been rejected as a comparable in case of various other assessees. Datamatics Financial Services Ltd. - This company cannot be selected as a comparable since it does not satisfy certain filters applied by the Transfer Pricing Officer himself. Accordingly, we direct the Assessing Officer to factually verify this aspect and excluded this company as a comparable. Maple E–Solutions Ltd - the material on record clearly reveal that the directors/promoters of this company were involved in serious fraud earlier. Therefore, different Benches of the Tribunal as well as different High Courts including the Hon'ble Jurisdictional High Court have held that this company cannot be treated as comparable due to unreliability of its financials. Asit C. Mehta. - the company has various segments and the ITeS segment does not provide ITeS alone. It appears from the annual report, the ITeS segment also includes income from software development services. However, segmental details relating to the aforesaid services are not available. Even otherwise also, the nature of services provided by this company is relating to GIS which is considered to be KPO services. Therefore, the company is functionally different from the assessee. It is also noticed from the judicial precedents cited before us that the company has been rejected as a comparable due to various other factors such as extra ordinary business activity due to merger, low employee cost, etc. Therefore, keeping in view the judicial precedents cited before us which are for the very same assessment year, we hold that this company cannot be treated as comparable to the assessee.
|