TMI Blog2016 (9) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... sworks Information Services Ltd. (Transworks Ltd.) - the financial period during which the international transaction was entered into is different, M/s. Transwork Ltd. could not be treated as comparable and thus not includable as data to be used for comparability analysis should be of the same financial year in which the international transactions were entered into by the tested party. Services rendered by M/s. Vishal Ltd. of KPO and LPO are inherently different from the nature of services being rendered by the BPO i.e. by the respondent assessee. BPO operation by M/s. Galaxy Ltd. was similar to that rendered by the respondent assessee. In the above view, the Tribunal by the impugned order held that M/s. Galaxy Ltd. is a comparable and, therefore, includable in the list of comparable for comparability analysis. - Income Tax Appeal No. 732 of 2014 - - - Dated:- 26-9-2016 - M. S. Sanklecha And S. C. Gupte, JJ. Mr. Suresh Kumar a/w Ms. Samiksha Kanani for the appellant Mr. Percy Pardiwala, Senior Counsel a/w Mr. Madhur Agarwal, Mr Atul Jasani for the respondent ORDER P. C. 1. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act) challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an income of ₹ 11.25 crores. The respondent assessee is a wholly owned subsidiary of an American Company M/s. Para Metric Technology Corporation USA (holding Company). The respondent assessee is engaged in providing Information Technology (IT) services and IT enabled Services to its holding company. In the above view, Chapter X of the Act was applicable. Therefore, the respondent assessee determined the Arms Length Price (ALP) on Adoption of Transaction Net Margin Method (TNMM) in its transfer pricing study. It determined the Profit Level Indicator (PLI) in respect of the IT Services segment at 14.02% while the arithmetic mean of the PLI of comparable companies was 10.70%. Similarly, in respect of its IT enabled Services its PLI was determined at 14.23% while the arithmetic mean of the PLI of comparable cases was 10.51%. In the above view, as the PLI of the assessee was higher / favourable than that of the comparables, no transfer pricing adjustment was called for in terms of its transfer pricing study. Thus, the consideration of ₹ 95.49 crores as received from its holding Company in respect of IT Services and ₹ 5.75 crores received from its holding Company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucom Software Ltd. (M/s. Computcom Ltd.) to determine the ALP of the respondent assessee's transactions with its holding company. The submission of the respondent assessee before the Tribunal was that the TPO had in his Transfer Pricing Study applied the filter of 25% in respect of related party transaction (RPT) as against the 10% adopted by the respondent assessee in its transfer pricing study. The respondent assessee had no grievance in respect of the adoption of 25% filter in respect of RPT. However, the grievance was with the method applied in case of M/s. FCS Software Ltd. and M/s. Compucom Ltd. to compute 25% filter as under : RPT sales divided by (total sales + total expenses) multiplied by 100 i.e. ₹ 36.89 crores divided by (Rs.131.27 + ₹ 107.58) multiplied by 100. It was submitted that this resulted in skewed result of the percentage of RPT resulting in its RPTs being 15.40% i.e. less than 25% filter. (b) The impugned order of the Tribunal accepts the grievance of the respondent assessee. It records the fact that the denominator in the formula adopted by the TPO is incorrect as it also includes the total expenses when the TPO on facts has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual Report, it was noted that the KALS was engaged in selling of software products which is different from the activity undertaken by the respondent assessee, namely, rendering of software service to its holding company. Further, the impugned order also records that no attempt was even made by the Revenue before it to bring on record any change in the nature of activities carried out by KALS Ltd. and Helios Matheson Ltd. in the subject assessment year, making them functionally comparable to the respondent assessee. In the aforesaid facts, the Tribunal rendered a finding of fact that KALS Ltd. and Helios Matheson Ltd. are not comparable with the respondent assessee. (c) Even before us, no submissions were advanced justifying the order of the Assessing Officer that the services rendered by KALS Ltd. and Helios Matheson Ltd. are comparable for the subject assessment year with that of the respondent assessee. (d) In the above view, as the findings of the Tribunal being one of the fact which has not been shown to be perverse, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. 11. Re. Question (iii) : (a) The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut also in providing agency services by way of outsourcing services to third party vendors. Therefore, functionally its services were different from the services provided by the respondent assessee. (b) The impugned order of the Tribunal on the basis of factual data available before it rendered a finding of fact that the functional profile of Vishal was different from that of the respondent assessee. It also notes as a fact that Vishal had entered into RPT at 86% i.e. far in excess of 25% filter. Further, although the question as framed states that Vishal was excluded on the basis of RPT filter without considering the fact that the notes to the account were incomplete. This was not the submission which was made before the Tribunal. Even before us, no submission has been made with regard to percentage of RPT undergoing a change if the notes to accounts are considered in their entirety. (c) The finding of the Tribunal is in the realm of facts. Nothing has been shown to us to evidence that the finding of fact is perverse. (d) In the above view, question nos.(iv) and (v) do not give rise to any substantial question of law. Thus, not entertained. 13. Re. Questions (vi) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results, it held that M/s. Galaxy could not be considered as comparable. (b) The grievance of the respondent assessee before the Tribunal was that the principal business of M/s. Galaxy Ltd. was providing back office processing services similar to that provided by the respondent assessee. (c) The impugned order of the Tribunal notes that the income earned from transportation business is merely 7% while the income earned from BPO operations is 87% of the total revenue earned by M/s. Galaxy Ltd. This BPO operation by M/s. Galaxy Ltd. was similar to that rendered by the respondent assessee. In the above view, the Tribunal by the impugned order held that M/s. Galaxy Ltd. is a comparable and, therefore, includable in the list of comparable for comparability analysis. (d) From the above, it is clear that the impugned order of the Tribunal has essentially rendered a finding of fact on the available record that M/s. Galaxy Ltd. is engaged in the business similar to that of the respondent assessee so as to be a comparable. This is not shown to be perverse in any manner. Therefore, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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