TMI Blog2015 (12) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the processing of insurance claims/premium processing, accounting support services and other related processing services to the Willis Group entities. With the return of income, the assessee also filed an Accountant s Report in Form no.3CEB, in accordance with section 92C of the Act, reporting the particulars of its international transactions with its AEs. In the TP study report, as per FAR analysis, the assessee company was categorised as a risks mitigated back office service provider and was selected as the tested party. The TNMM (i.e. Transaction Net Margin Method) was determined as the most appropriate method ( MAM ) to determine the ALP for comparability purposes. The assessee had selected comparable companies with a functional profile similar to that of the assessee company and identified the comparable companies using certain filters. The assessee used operating profit/operating cost as the Profit Level Indicator(PLI) and arithmetic mean PLI of the comparable companies using 3 years weighted average worked out to 12.33%, whereas the PLI of the assessee s for A.Y. 2010-11 worked out to 16.95%. Since the assessee s PLI was higher than the average PLI of comparable com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Delhi Bench of the Tribunal in the case of MERCER CONSULTING (INDIA) PVT. LTD. ITA No.966/Del/2014, in which margin recomputed on the basis of calendar year results available in the public domain were considered. It was further argued that aforesaid decision was also upheld by the Mumbai Bench of the Tribunal in the case of AEGIS LTD,( for A.Y. 2009-10) in ITA No.1213/M/2014. It has been further submitted that the said company is functionally comparable with the assessee company. Our attention has been drawn to the annual report of the said company, showing that it is engaged in software services as well as BPO services and separate segmental information in respect of the same is available. Accordingly, the assessee has taken only the BPO services segment for the comparability analysis. This is evident from various disclosures in the annual report. On page 100 of the Annual Report, under the head segmental information in the notes to accounts, it is clearly stated that the company operates under two segments viz software development and customization. It was submitted that this company should be considered as a comparable. 7.1. On the other Ld. CIT-DR opposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said company was functionally different from the assessee company. Following submissions have been made by the Ld. Counsel in support of his argument that the said company could not have been included as comparable: The company provides high end data analytics and customized process solutions and is a leading Indian provider of KPO services. This is evident from various parts of the annual report of the company. Willis India is engaged in provision of routine BPO services viz- Processing of insurance claims and insurance premiums. Insurance accounting support services and Data processing service for which Willis India employed ordinary graduates and hence cannot be compared to a company such providing KPO services, such as Eclerx. Further, this company has been rejected by the Special Bench in case of Maersk Global on the basis that the company is engaged in high end KPO services and cannot be compared to a company pre-dominantly engaged in routine BPO services (insurance claim processing services). Also, the Delhi High Court, in the case of Rampgreen Solutions Pvt Ltd has upheld the action of the Tribunal and rejected Eclerx by stating that the company is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the assessee company since assessee company was engaged in providing BPO services. Few other judgments have been relied upon before us by the Ld. Counsel in support of its claim. 9.4. Undisputed facts are that the assessee company is engaged in insurance claim service process i.e. BPO services. Thus, respectfully the judgment of Delhi High Court in the case of Rampgreen Solutions Pvt. Ltd. as well as order of the Tribunal in assessee s own case for A.Y. 2009-10, we direct that the said company (i.e. Eclerx Services Limited) is not comparable with the assessee company and therefore should be excluded from the list of comparables. 10. (ii) Infosys BPO Limited: This company has been introduced as a comparable by the TPO on the ground that it was engaged in the similar activity and DRP upheld TPO s action without dealing with the contentions raised by the assessee. 10.1. During the course of hearing before us, it has been submitted by the Ld. Counsel that this company was having huge turnover of ₹ 1,126.63 crores during the year under consideration. He submitted that the said company cannot be considered as comparable due to the following reasons: [1)The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT-DR has supported the order of lower authorities, and submitted that the assessee company is also having turnover of ₹ 95.19 crores which is in similar turnover bracket, and that higher profit and lower profits are part of the Industry and that does not make a comparable company as non-comparable. 10.4. We have gone through the facts of the case as well as submissions made by both the sides, and also judgments relied before us, it is noted that the said company has been rejected by the DRP itself in assessee s own case for A.Y. 200809 on the ground that it was involved in the area of software development. It is further noted that Hon ble Delhi High Court in the case of Agnity India Technical Pvt. (supra) has also excluded the said company, by upholding the order of the Tribunal. We have also gone through the several of the judgments which have been submitted before us by the Ld. Counsel, names of which have been given above. It is noted that this company was held to be non-comparable on account of many reasons. Ld. Counsel has also demonstrated in his submissions that the said company is functionally different from the assessee company and also the turnover of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions would not strictly qualify as uncontrolled transactions and hence should not be considered for the purpose of determining the arm's length price. 2) The company is functionally different: In addition to the transaction processing services (i.e. BPO services), the company also provides technical services like software testing, verification and validation of software etc. This fact is evident from the disclosure under para 1 of Notes to Accounts- Schedule N, Page 31 of the annual report. The relevant extract has been reproduced below: 'Technical services involve software testing, verification and validation of software at the lime of implementation and data centre management activities. Hence, it is clear from the above, that the company also renders software development which are not comparable to Willis India s BPO services, and no segmental details are available for the same. Accordingly this company should be rejected on the basis of functional dissimilarity. In this regard, reliance has been placed on the recent Tribunal ruling in the case of Techbooks International Pvt Ltd (ITA240/Del/2015) wherein the Tribunal has held that this company is also engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controlled company, in the given facts and circumstances. It is further noted by us that there is functional distinction also between the two. The assessee company has been categorised as providing BPO service, whereas the said company provides various types of the services like software development, software testing, and any other technical services. Ld. CIT-DR was not able to negate these factual points. Further we refer to the judgment of the Tribunal in the case of Techbooks International Pvt. Ltd. (supra), wherein it was held by the Tribunal that this company was also engaged in the software development services and in absence segmental breakup, it cannot be held to be comparable to a pure BPO service provider. In view of the detailed discussion made by the Hon ble Tribunal, which we find to be squarely applicable on the facts of the case before us, we direct the AO to exclude this company from the list of comparables. 12. Ground Nos. 9, 12, 16, 17, 18 19: Nothing specific has been submitted by the Ld. Counsel with respect to these grounds and therefore, these are dismissed. 13. Ground Nos. 20 21: These grounds are consequential, and therefore, dismissed. 14. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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