TMI Blog2014 (1) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ile applying arithmetic mean, profit level indicator for adjustment - In the absence of any additional information on this issue, the Commissioner of Income-tax (Appeals)'s order is upheld – Decided partly in favour of Assessee. - ITA.No.1846/Hyd/2012 - - - Dated:- 25-4-2013 - SHRI CHANDRA POOJARI AND SMT. ASHA VIJAYARAGHAVAN, JJ. For the Appellant : Shri A.V. Raghuram For the Respondent: Shri Y.V.S.T. Sai ORDER Smt. Asha Vijayaraghavan (Judicial Member). This appeal filed by the assessee against the order of the Dispute Resolution Panel, Hyderabad dated September 28, 2012 for the assessment year 2008-09. 2. Brief facts of the case are that the assessee-company is engaged in the business of software development services to its customers. The assessee also provides services to the associated enterprise "AE" namely Patni Telecom, U. S. and Patni Telecom, U. K. The assessee filed return of income for the assessment year 2008-09 admitting total income of Rs. 87,850 under the normal provisions of the Income-tax Act, 1961 and book profit of Rs. 14,75,22,331 under section 115JB of the Act. The Assessing Officer passed draft assessment order under section 143(3) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,76,99,840 88,34,70,767 Arm's length margin 23.33 % Arm's length price (ALP) at 123.33. per cent. of operating cost 1,08,95,84,496 The price charged by the tax payer to its associated enterprises iscompared to the arm's length price as under : (Rs.) Arm's length price (ALP) @ 123.33 % of operating cost 1,08,95,84,496 Less : Sales with non-associated enterprise 49,17,64,426 ALP of sales with associated enterprise 59,78,20,070 Price received with reimbursements 54,05,38,598 Shortfall being adjustment under section 92CA 5,72,81,472 The above shortfall of Rs. 5,72,81,472 is treated as transfer pricing adjustment under section 92CA. The total income of the assessee isenhanced by the above amount of adjustment. 4. Subject to the above discussion, total income of the assessee and tax payable thereon are computed as under : A. Computation of tax under normal provisions (Rs.) Income returned 87,850 Add : Difference transfer pricing value 5,72, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logies Ltd. and Wipro Ltd. Learned counsel pointed out that the segmental turnover of Infosys was at Rs. 1,56,48,00,00,000 and that of Wipro is at Rs. 1,12,58,490,000. Learned counsel relied on the decision of the Delhi, Income-tax Appellate Tribunal Bench in the case of Agnity India Technologies ITA. No.3856/D/2010 for the assessment year 2006-07 and submitted that the assessee is not comparable with Infosys and Wipro Ltd. as can be seen from the financial data etc., mentioned with respect to the two companies. 9. Before us, the learned Departmental representative relied on the decision of Capgemini India Pvt. Ltd. v. Asst. CIT vide ITA No. 7861/Mum/ 2011 assessment year 2007-08 for the proposition of the assessee that Infosys and Wipro which are cases of extremely high turnover should be excluded. The relevant portion of Capgemini India Pvt. Ltd. is extracted below : "5.3.5 The various reasons given for applying the turnover filter for comparison of margins are economy of scale, greater bargaining power, more skilled employees and higher risk taking capabilities in cases of high turnover companies, which increase the margin with rise in turnover. However, in the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany's turnover is 20 times more than the assessee-company. Hence, the assessee-company is not comparable with Wipro BPO, the reasoning being that the later is a giant company having 20 times more turnover than the assessee-company. In view of this, based on the facts and the circumstances of the case, and following the decision of the Delhi Bench of Income-tax Appellate Tribunal in the aforesaid case, we are of the view that Wipro BPO should be excluded from the list of comparable companies. Hence, the ground raised by the assessee on this issue is allowed." 11. Relying on the decision of the co-ordinate Bench of the Tribunal we exclude the giant companies namely Wipro and Infosys which are taken as comparables as turnovers of these companies are multiple number of times higher compared to that of the assessee, we hold that the Dispute Resolution Panel erred in considering their profit level indicator to arrive at the arithmetic mean. Ground Nos. 4 and 5 have become infructuous since we have decided ground No. 3. 13. Ground No. 6 is against including the amount received as reimburse ment of Rs. 1,76,99,840. Before the Dispute Resolution Panel it was stated that assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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