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2023 (9) TMI 389 - HC - Income TaxTP Adjustment - comparable selection - whether the services offered by the three (3) entities were comparable to those of the respondent/assessee? - HELD THAT:- TPO has accepted the fact that the assessee is into providing ITES and so-called BPO services, which are related to phone activation and local number portability, both to its clients and its parent company. The extract from the impugned order would demonstrate that, insofar as the three (3) comparables are concerned, they were providing services which were different from the respondent/assessee. Acropetal was rendering Knowledge Process Outsourcing (KPO) services. The Tribunal has said that it was engaged in medical transcription services, which compendiously has been given the name Electronic Medical Record.Likewise, insofar as the BNR was concerned, the Tribunal once again returned the finding of fact that it was engaged in providing medical transcription services. Similarly, insofar as Informed Technologies was concerned, the Tribunal notes that it provides financial research and data management services. More particularly, insofar as Informed Technologies is concerned, the Tribunal notes that it is a leading player in KPO services, which extend from financial content to financial industry. We are in agreement with the submissions of the counsel for the respondent/assessee that Rule 10(B)(2)(a) required that, when carrying out a comparability analysis of international transactions, with an uncontrolled transaction, the reference point should be, inter alia, the services provided by the entities which are being compared. Tribunal has, in our view, carried out that exercise. We may note that Mr Sharma, is perhaps, right to the extent that the Tribunal did not consider the analysis of operating margin vis-a-vis BNR, which the TPO had carried out. The difference in operating margins clearly arose because the respondent/assessee has included revenue and expenses from medical transcription services, which the TPO excluded, and thereby caused the difference between the operating margins in the period in issue and the average margin which BNR had registered. In our view, fluctuation in margin was not the only reason that the Tribunal provided in excluding BNR as a comparable. The fact that BNR offered a service which was different from that the respondent/assessee offered was the principal reason why the Tribunal concluded that BNR had been wrongly included in the comparables.
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