2014 (9) TMI 125 - ITAT HYDERABAD

Transfer pricing adjustment – selection of comparables - Infosys B P O Ltd. – Held that:- The contentions cannot be accepted that the comparability on turnover ratio of assessee with this company on the ground that assessee’s turnover is about ₹ 129.8 crores, which as against turnover of ₹ 1016 crores of the Infosys - the brand value and brand building exercise, having huge asset base, can be considered to arrive at the conclusion that Infosys is functionally not similar to that of assessee - Infosys BPO stands on its own as an exclusive BPO of the Infosys Technologies and in earlier years, generally Infosys BPO is excluded in many of the cases - even though the profits of the Infosys BPO Ltd. is reasonable and no super profits are earned, just because of its big brand value, this company has to be excluded on the grounds of functional dissimilarity on FAR Analysis.

Genesys International Ltd. – Functionally different unit - Held that:- Following the decision in M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] - assessee is basically providing various services to the customers of its AEs in relation to human resources which are more or less centered around the employees of the prospective clients - the mere fact that two services are placed under this category do not become automatically comparable - If a case providing one category of services under ITES is claimed as comparable with another in the category of service under ITES as per this circular, then it must be shown ex facie that it is broadly similar - the services rendered by Genesys fall under clause (vi) with the heading ‘Geographical Information Systems Services’, whereas those rendered by the assessee fall partly under clause (vii) with the heading ‘Human Resources Services’ and partly under clause (xi) with the heading ‘Payroll’ - there is a vast difference which make one quite distinct from the other - there is vast difference between the functions of the above company and that of assessee - This company cannot be treated as comparable on FAR analysis – the AO was directed to exclude this company.

Cosmic Global Ltd. – Outsourcing of main activity - Held that:- Following the decision in M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] – Outsourcing charges constitute 57.31% of the total operating costs - The entire outsourcing is confined to Translation charges paid at ₹ 3.00 crore, which is strictly in the realm of the Translation segment, revenues from which are to the tune of ₹ 6.99 crore - If this segment of Translation is not under consideration for deciding as to whether this case is comparable or not, we cannot take recourse to the figures which are relevant for segments other than accounts BPO - this case cannot be excluded on the strength of outsourcing activity, which is alien to the relevant segment – the AO is directed to exclude this company.

Accentia Technologies Limited. – different business strategies – Held that:- This company operates in a different business strategy of acquiring companies for inorganic growth as its strategy - on the reason of acquisition of various companies, being an extraordinary event which had an impact on the profit, this company was excluded - the acquisition of some companies by that company may have impact on the profit – relying upon M/s. Mercer Consulting (India) Ltd. V/s DCIT [2014 (7) TMI 715 - ITAT DELHI] - the AO is directed to exclude this company.

Allsec Technologies Limited – Held that:- The exclusion has been done by increasing the limit in filter to 75% as against 25% applied by the assessee because the percentage was 74.45%. If the actual ratio in this case had been more than 75%, and the Revenue hell bent on excluding this case, then it would have resorted to increasing the ceiling in the filter to 80% or still more so as to ensure that it remains outside the limit set by it – it cannot be excluded for such a minuscule difference if it is otherwise comparable - this company should be included as a comparable.

Contribution to the Gratuity Fund maintained with LIC – Held that:- Following the decision in Commissioner of Income Tax, Coimbatore Versus M/s Textool Co. Ltd. [2009 (9) TMI 66 - SUPREME COURT] - the DRP has allowed the claim of the assessee, as the issue is crystallized in favour of the assessee – Decided against Revenue.