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2020 (10) TMI 1148 - AT - Income TaxTP Adjustment - comparable selection - application of turn-over filter - HELD THAT:- In absence of vital information of the margins of the various segments, the company could not be considered a good comparable because of the difficulty in bench marking the correct profit margin. In B.C. MANAGEMENT SERVICES PVT. LTD. [2017 (12) TMI 255 - DELHI HIGH COURT] noted that the presence of high brand value of the Tata brand also made TCS e- Serve Ltd. not a good comparable. TCS e-Serve cannot be held to be a good comparable for the purposes of bench marking the assessee’s PLI. Consedering foreign exchange gain/loss as non-operational - HELD THAT:- As decided in own case foreign exchange fluctuation cannot be seen as independent of the operating income. Respectfully following the same, on identical set of facts, without the Department having pointed out any distinguishing factor on the facts, we direct that the foreign exchange/fluctuation (loss or gain) we treated as being operational in nature and PLI should be computed accordingly after giving effect to the treatment of foreign exchange/loss as operational. Comparable selection - Inclusion of Accentia Technologies Ltd. as a comparable company - As functional profile of the assessee being different from the functional profile of Accentia Technologies Pvt. Ltd., this company cannot be considered a good comparable. Accordingly, we direct the exclusion of this company from the final set of comparables. Inclusion of the company Mastif Tech Pvt. Ltd. - Referring to submission of the assessee that this company is functionally dissimilar to the assessee company - objections of the assessee against inclusion of this company in the final set of comparables has not been dealt with either by the TPO or by the Ld. CIT (A). In such a situation, it is our considered view that in the interest of substantial justice, the TPO should consider the objections of the assessee against the inclusion of this company and thereafter pass a speaking order . Exclusion of the comparable Caliber Point Business Solution Ltd. on the ground that it had a different financial year ending - Respectfully following the order of CIT vs. Mckinsey Knowledge Centre India Pvt. Ltd. [2015 (3) TMI 1226 - DELHI HIGH COURT] we direct the TPO to reconsider the inclusion of this comparable after duly considering as to whether the data for the financial year ending can be easily compiled and after duly considering and verifying whether Caliber Point Business Solution Ltd. can be considered functionally similar to the assessee company - assessee’s appeal stands allowed for statistical purposes. Exclusion of Cosmic Global Ltd - Exclusion as it fails the export turnover filter of 75% although the TPO has not raised any objection regarding functional similarity - TPO has not specified any reason for applying the export turnover filter of 75% as compared to export turn over filter of 25% applied in Assessment Year 2009-10. Therefore, it is our considered view that this comparable needs to be examined afresh by the TPO and the TPO is directed to do so after considering the arguments of the assessee with respect to the functional similarity of this company as well as after duly considering the objections of the assessee against the application of export turn over filter and also the fact that the ITAT had found the turnover filter of even 25% as inappropriate in assessee’s own case in assessment year 2009-10. Exclusion of company Informed Technologies India Ltd. - turnover filter of ₹ 5 Crores cannot be applied in the case of the assessee. What only remains to be seen is whether the company Informed Technologies India Limited is functionally comparable to the assessee or not. Accordingly, this comparable is restored to the file of the TPO for examining the assessee’s claim of functional similarity with the company Informed Technologies India Ltd. Department is contesting the direction of the Ld. CIT (A) for including the company Acropetal Technologies Ltd. as a comparable with only the financials of ‘healthcare segment’ - CIT (A) was correct in directing that only the ITeS Segment of this company be included for the purposes of comparability analysis and that the engineering design services segment to be excluded. Exclusion of eClerx as a comparable for the reason that it was engaged in providing KPO Services and further that it had also returned supernormal profits. ICRA Techno Analytics Ltd. - As no segmental information and bifurcation between ITeS and Software Development Segments. For this reason, this company was directed to be excluded from the final set of comparables. Infosys BPO Ltd. excluded on the ground that it was a giant in the area of software development.
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