9911796707
Advanced Search 
TMI Blog2015 (7) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of services provided by the company varied from business information/ data gathering, transaction processing, library document services, data mining/ entry and general business information research support services. 2.1. During the relevant financial year 2008-09 the assessee undertook the following international transactions with its associated enterprises: S.No. Description of the transactions Amount In rupees 1. Provision of IT enabled back office support services 424,897,981 2.2. The benchmarking analysis in regard to these international transactions was done as under Particulars Provision of ITeS Most appropriate method Transactional Net margin method ("TNMM') PLI used Operating Profit ('OP')/ Total Cost ("TC") No. of comparables 14 Comparables' mean margin (working capital adjusted) 10.39% Data used Multiple years- FYs 2006-07, 2007-08 and 2008-09 Appellant's margin 17.01% Conclusion At arm's length 2.3. Ld. TPO disregarded the economic analysis carried out by the assessee on the basis of adopting multiple year data in respect of comparables and directed the assessee to submit updated current year data for the comparable compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r examination of the balance-sheet, receivables were taken which implied that the payment for the invoices raised by the assessee had not been received within the stipulated time as provided in service agreement with AE. Accordingly, assessee was required to furnish the time period for payment as per service agreement with AE. However, instead of charging penal interest, the delayed payments were being treated as unsecured loans/ advances to the AE and it was proposed to charge a normal rate of interest @ 16% for the period of delay in receipt of payment beyond the time stipulated in the service agreement. He also required the assessee to furnish a credit rating of all the AEs for AY 2008-09 with whom assessee had undertaken the aforementioned transactions. The format was also given in the show cause notice. The assessee objected to benchmarking of receivables, inter alia, on the ground that receivables was not an international transaction which warranted benchmarking and further objected to imputing the interest rate of 16% for the delay in receipt of payment. However, ld. TPO did not accept and after detailed discussion imputed the interest @ 15.77% and made an adjustment of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant in the Transfer Pricing (,TP') documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('Rules'); and in particular modifying/ rejecting the filters applied by the Appellant; 2-4. disregarding multiple year/ prior years' data as used by the Appellant in the TP documentation and holding that current year (i.e. FY 2008-09) data for comparable companies should be used despite the fact that the same was not necessarily available to the Appellant at the time of preparing its TP documentation; 2.5. rejecting comparability analysis in the TP documentation based on application of the following additional revised filters in determining the ALP: 2.5.1. exclusion of companies having different financial year ending (i.e. not March 31, 2009); 2.5.2. exclusion of companies with export sales that are less than 25% of their total revenue; 2.5.3. exclusion of companies with diminishing revenues/ persistent losses for last three years up to and including FY 2008-09; 2.5.4. exclusion of companies with related party transactions greater than 25% of their sales; and rejecting, in particular the following filt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order, pursuant to the directions of the Ld. DRP; 6. The Ld. DRP erred in confirming the Ld. TPO/AO's action in proposing to initiate penalty under section 271(1)(C) of the Act. 7. That the Ld. DRP has erred both on facts and in law in confirming the addition made by the Ld AO/ Ld TPO to the appellant's income by not considering the contentions/ submissions of the appellant properly. 3. At the time of hearing ld. counsel has advanced his arguments with reference to ground nos. 2.7, 3, 4 and 5. Ground no. 2.7: The assessee is primarily aggrieved by inclusion of following two comparables in the final set of comparables. I. Coral Hub Limited: 4. The main contention of assessee is that this comparable is functionally different as the company has its own IPRs and Know-how and abnormally high/ volatile profit margin. 5. Ld. counsel pointed out that this company is primarily out sourcing from its AEs and outsource parties constitute 90% of the total operating cost. He pointed out that the employees cost is only 2-3% of the total operating expenses whereas in asessee's case the employees cost is more than 55% as is evident from PB 73 wherein the personnel expenses have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, but on a broader prospective. In this view of the matter, we find no infirmity in the order of the CIT(A) in confirming the action of the TPO by selecting the VITL as comparable company." 7. We have considered the rival submissions and have perused the record of the case. The ITAT Delhi Bench in the case of Mercer Consulting (India) Pvt. Ltd. Vs. DCIT (ITA no. 966/Del/2014) the Tribunal vide its order dated 6-6-2014 has observed as under: 12.3. Reverting to the facts of the extant case, we find that the position as obtaining in the present case is rather simple inasmuch as the assessee, having originally included this case in the list of comparables, made a categorical claim before the TPO for excluding it because of non-comparability. As no reason has been given by the TPO for accepting or rejecting the assessee's request, it would be worthwhile to take up the reasons now given by the assessee for consideration and decision. The Id. AR has pointed out that Vishal Information Technologies Ltd., now known as Coral Hub Ltd., outsources significant portion of its work from outside vendors. We find from the material on record suggests that outsourcing charges constitute 90% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in providing consulting services, process outsourcing; process re-engineering and automation services. The assessee also pointed out that as per the annual report/ website of the company, it provided sales and marketing services comprising online operation support, offline operations support, offline operations & data management and competitive pricing and catalogue analytics. Thus, the services were a mix of research, advice and operation management. The assessee further submitted that during FY 2008-09 the company had high growth of 62% in its revenue as compared to the previous year. Further, there had been a rise of 50% in the intangibles in the nature of computer software from FY 2007-08 to FY 2008-09 and the amount of intangible as a percentage of total fixed assets was 10%, whereas the assessee company did not own any interest in the intangibles (technical or marketing). 8.1. Ld. TPO did not accept the assessere's contention and relied on CBDT Circular SO 890(E) dated 26-9-2000, which had given a detailed list that could be claimed under ITES for the purposes of sections 10A and 10B. He further pointed out that final comparables considered by the tax payer as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empower better decisions. M/s eClerx Services Pvt. Ltd. is also claimed to have a scalable delivery model and solutions offered that include data analytics, operations management, audits and reconciliation, metrics management and reporting services. It also provides tailored process outsourcing and management services along with a multitude of data aggregation, mining and maintenance services. It is claimed that the company has a team dedicated to developing automation tools to support service delivery. These software automation tools increase productivity, allowing customers to benefit from further cost saving and output gains with better control over quality. Keeping in view the nature of services rendered by M/s eClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns." 11.1. We find that the assessee also cannot be said to have relatable degree of comparability because primarily assessee was e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
