TMI Blog2015 (6) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... aying that these two business models, namely, outsourcing services and providing in-house services, cannot be compared with each other because of their inherent differences. Accentia Technologies Ltd. directed to be excluded from the final list of comparables as a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers. It can be noticed from page 31 of the Annual report that during the year under consideration this company completed the acquisition of 96% of M/s Oak Technologies Inc., a healthcare back-office processing company engaged in medical billing, coding and transcription activities and having substantial global work force. Microland Ltd. company was not originally selecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., UK. It is engaged in rendering contracted software development services and also InformationTechnology-enabled services to Xchanging Group Companies. One of the international transactions reported by the assessee was the `Provision of ITES with transacted value of ₹ 43,64,55,419/-. The assessee applied the Transactional Net Margin Method (TNMM) as the most appropriate method to demonstrate that the international transaction of providing ITES was at ALP. The Profit Level Indicator (PLI) of Operating Profit to Total Cost (OP/TC) was used. In this way, the assessee showed its operating profit margin under this segment at 14.98%. 14 companies were chosen as comparable with their average of operating profit margin at 11.19%. That is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and perused the relevant material on record. The TPO has not disputed the application of TNMM as the most appropriate method for determining the ALP of the international transaction of the `Provision of ITES . Even the PLI of OP/TC has not been disputed. The assessee is aggrieved against the inclusion of Cosmic Global Ltd. and Accentia Technologies Ltd. Apart from that, the assessee seeks the inclusion of Microland Ltd. 6. Before considering the above three companies from the angle of their comparability, it is essential to note the nature of activity carried out by the assessee under this segment. It can be seen from the TPO s order as well as the Transfer pricing study that the assessee provided the following services t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above companies, one by one, from the angle of their comparability. Cosmic Global Ltd. 8. The TPO considered Cosmic Global Ltd. as comparable with the assessee company on entity level. We have examined the Annual report of this company for the year in question, which is available in the paper book. It can be noticed that its revenue from operations stands at ₹ 7,37,02,584/-, which consists of three amounts, namely, Medical transcription and consultancy service charges amounting to ₹ 9,90,737/-; Translation charges amounting to ₹ 6,99,35,756/-; and Accounts BPO charges amounting to ₹ 27,76,090/-. This company outsourced the activity of Translation. 57.31% of total operating expenses incurred by this company are ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved against the inclusion of this company in the final tally of comparables. 9.2. We have heard the rival submissions and perused the relevant material on record. We have also gone through the Annual report of this company for the year in question, which has been placed in the paper book. It can be noticed from page 31 of the Annual report that during the year under consideration this company completed the acquisition of 96% of M/s Oak Technologies Inc., a healthcare back-office processing company engaged in medical billing, coding and transcription activities and having substantial global work force. The Mumbai Bench of the Tribunal in Petro Araldite (P) Ltd. Vs. DCIT (2013) 154 TTJ (Mum) 176, has held that a company cannot be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the actual comparability of a company. Since the authorities below have not pondered over the comparability of this company, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set aside and the matter is restored to the file of AO/TPO for examining the comparability of this company. We order accordingly. 11. No other aspect of the transfer pricing adjustment has been assailed before us. We, therefore, set aside the impugned order to this extent and direct the AO/TPO to determine the ALP of the international transaction of `Provision of ITES afresh in consonance with our above directions. 12. In the result, the appeal is allowed for statistical purposes. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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