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TMI Blog2015 (12) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... t issue raised in this appeal is against the addition amounting to Rs. 28,30,09,294/- on account of transfer pricing adjustment. The facts apropos this issue are that the assessee is a wholly owned subsidiary of American Express International Inc., USA. It is engaged in providing services to its group companies in the nature of data management, information analysis and control activities. The assessee also provides tele-servicing and transaction processing support to American Express group entities. The assessee reported 11 international transactions which have been mentioned on page 2 of the Transfer Pricing Officer (TPO)'s order. These transactions were divided by the assessee in two categories, namely, Category-1 covering transactions from Sl. No. 1-6 and Category-2 covering transactions from Sl. No. 7-11. In the instant appeal, we are concerned only with international transactions of Category-1 which are as under :- Sl.No. International Transaction Method Value (in Rs.) 1. Export of data processing and back office support TNMM 478,99,69,898 2. Charges for CDN/CPU TNMM 28,73,83,112 3. Charges for Global Max Software TNMM 31,92,769 4. Secondment of personn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee is aggrieved against this addition. To be more precise, the grievance of the assessee is restricted in seeking exclusion of two companies, namely, Nucleus Netsoft and GIS (India) Ltd. (Seg.) and Vishal Information Technology Ltd.; and inclusion of Kirloskar Computer Services Limited and Mercury Outsourcing Management Ltd. We will deal with these companies in seriatim. 6. Before arriving at a conclusion about the comparability or otherwise of the above referred four companies, it is pertinent to observe the nature of functions performed by the assessee under Category-1 of the international transaction in dispute. First transaction is `Export of data processing and back office support', whose nature has been discussed in the Transfer Pricing Study Report as undertaking data management, information analysis and control management activities and providing tele-servicing and transaction processing report for export to American Express Group. The assessee receives inputs in the form of data, mainly in electronic form to undertake business processing. It exports its output to the concerned group companies worldwide. These services are primarily in the nature of I.T. enable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusion. The DRP affixed its seal of approval on the inclusion of this company. 7.2. We have heard the rival submissions and perused the relevant material on record. The assessee has not disputed the functional dissimilarity of this company. The only reason taken by the assessee in seeking its exclusion is the amalgamation of another company with it during the year. This fact is borne out from the Annual report of this company, a copy of which has been placed on record. The Annual report of this company provides that: The Scheme of Amalgamation ("the Scheme") of erstwhile Nucleus and GIS (India) Ltd., the Transferor Company, with your Company was sanctioned by Hon'ble High Court of Judicature of Bombay on 22nd February, 2006. On complying with the requisite formalities, the Scheme became effective and operative retrospectively from the appointed date of 1 April 2005 as per the Scheme. In the accompanying financial statements, results of the transferor company have been incorporated and the figures given herein and elsewhere in this Annual Report are not strictly comparable with those of previous year." It is clear from the above extraction that the amalgamation took place in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng cost is roughly 8%. This is an important factor which has its impact on the overall profitability of a company. Several Benches of the Tribunal across the board have unanimously held this factor to be a relevant one in deciding the question of exclusion of a particular company from the list of comparables. Copies of some of such orders expunging companies on this score have been placed by the ld. AR on record. In view of this different business model adopted by Vishal Information Technology Ltd. (now known as Coral Hub Ltd.) vis-à-vis the assessee, we order for the omission of this company from the list of comparables. (iii) Kirloskar Computer Services Limited (Seg.) and Mercury Outsourcing Management Ltd. 9.1. These two companies were originally included by the assessee in its list of comparables, which were eliminated by the TPO on the ground of failing turnover filter of Rs. 1 crore. The assessee is aggrieved against the exclusion of these companies. 9.2. We have heard the rival submissions and perused the relevant material on record. We find that the TPO has accepted the functional comparability of these companies on segmental level. The ld. DR was also fair enoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect has been discussed on page 21 of the order. After following the view taken by the Tribunal in the assessee's own case for the A.Y. 2002-03, the Tribunal has granted the benefit of deduction u/s 10A in respect of profits of newly set up AEGSC unit. In the absence of any distinguishing feature having been brought to our notice by the ld. DR, respectfully following the precedent, we grant the benefit of deduction u/s 10A in respect of profits of AEGSC unit. This ground is allowed.
13. The only other ground which survives for consideration is against treating interest on short-term deposits amounting to Rs. 4,54,09,340/- as 'Income from other sources' and thereby denying the benefit of deduction u/s 10A/10B. Here again, it is an admitted position that the Tribunal has decided this issue in the assessee's favour in earlier years by holding such interest on short-term deposits to be in the nature of `Business income' and thereby eligible for the benefit of deduction u/s 10A/10B. Respectfully following the precedent, we allow this ground of appeal.
14. In the result, the appeal is partly allowed.
The order pronounced in the open court on 15.10.2015. X X X X Extracts X X X X X X X X Extracts X X X X
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