TMI Blog2017 (6) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4 The following are the international transactions the tax payer has entered into with its associated enterprises during the year 2003-04 : i) Back Office Processing Rs.11,93,09,364 ii) Revenue Cycle Management Service Rs.1,46,08,788 iii) Reimbursement received towards travel and other expenses and cost of IPLC charges. Rs.1,71,07,476 The turnover of the assessee for the year under consideration was ₹ 13,57,25,409. To bench mark its international transactions, the assessee selected 10 comparables in its transfer pricing study having average PLI of 9.63% in comparison to the assessee's PLI of 11.85%. Accordingly, the assessee claimed its international transactions at arm s length. The TPO rejected the TP Study of the assessee and carried out a fresh search and selected 9 companies in the set of comparables as under :- The assessee challenged the action of the Assessing Officer before the CIT (Appeals). The CIT (Appeals) applied a filter of 0% RPT as well as rejected some companies on oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not demonstrating that the motive of the Appellant was to shift profits outside of India by manipulating the prices charged in its international transaction which is a pre-requisite condition to make any adjustment under the provision of Chapter X of the Act. 4 Determination of arm s length price by the TPO a) The AO/TPO grossly erred on facts and the CIT(A) further erred in confirming the benchmarking of IT enabled services transactions of the Appellant with companies operating as full-fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the Appellant vis- -vis comparable companies. b) The CIT(A) erred in facts in confirming the comparability analysis conducted by the TPO, without analysing the functional and risk profile of Appellant vis- -vis comparables selected in the Transfer Pricing Order. c) The AO/TPO erred on facts in rejecting most of the comparable companies arrived at in the Transfer Pricing Study. 5 Erroneous data used by the AO/TPO a) The AO/TPO has erred in law and the CIT(A) further erred in confirming the use of data, which was not contemporaneous and which was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee one by one. We will deal with the functional comparability of the companies sought to be excluded by the assessee as under : (i) Tricon India Limited (ii) Fortune Infoteh Limited (iii) Wipro BPO Solution Ltd. (iv) Vishal Information Technology Limited 4. The learned Authorised Representative of the assessee has submitted that in the case of Tricon India Limited , the CIT (Appeals) has accepted the objection of the assessee regarding low employee cost. Further this company renders specialized services like plant maintenance and electric data discovery. He has referred to the Annual Report of this company in support of his contention. He has further pointed out that this company is also having in-house R D process for upgrading software and training its professional to develop its own software to cater the need of the clients. This company also engaged in software product development and functionally not comparable. 5. As regards the Fortune Infotech Limited , the learned Authorised Representative has submitted that this company own intangibles being proprietary software like Fine Tran and Image Index . Therefore this company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies within the turnover range of ₹ 1 Crore to ₹ 200 Crores should be taken into consideration for the T.P. Study. We are of the considered view that the cited case squarely applies to the assessee's case as the turnover of the assessee being approximately ₹ 66 Crores falls within the range of ₹ 1 Crore to ₹ 200 Crores. Therefore, respectfully following the decision of the co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. ( supra ), we direct the Assessing Officer/TPO that only those companies having a turnover of ₹ 1 Crore to ₹ 200 Crores be taken as comparable companies and to consequently exclude Wipro BPO Ltd. which has a turnover of ₹ 322 Crores in the relevant period. 15. Comparables Companies Owning Intangiables 15.1 In Ground No. 1, the assessee has contended that the learned CIT (Appeals) erred in accepting comparable companies owning intangibles as proposed by the TPO. The learned counsel for the assessee submitted that the assessee is a captive service provider engaged in the business of providing call centre services and would fall under the IT Enabled ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, the learned Departmental Representative contended that the findings of the learned CIT (Appeals) be upheld. 15.3.1 We have heard both parties and have carefully perused and considered the submissions made, details filed and material on record. It is a well accepted principle that only those companies which are on similar standards need to be considered for comparability. In this context, a co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. ( supra ) has reiterated that all the comparables have to be compared on similar standards. Therefore, companies which possess their own unique software intangibles cannot be compared with the assessee, as the former would derive significant advantage from unique software compared with the assessee, which is performing call centre services for it's A.E. in the USA. 15.3.2 In the case of M/s. Wipro BPO Ltd., this comparable is under consideration for exclusion as a comparable, in this case for this Assessment Year 2004-05, on account of the application of the turnover filter of ₹ 1 Crore to ₹ 200 Crores. (refer para 14.3 supra) 15.3.3 In respect of M/s. Tric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company which has unique intangibles cannot be taken as a comparable for the assessee and accordingly direct the Assessing Officer/TPO to exclude it from the list of comparables in this case. 16 17 .. Wipro BPO Ltd. 17.4 As per the details on record, the turnover/Revenue of Wipro BPO Ltd. in the period relevant to Assessment Year 2004-05 is ₹ 322 Crores. Further, this company having the influence of Wipro brand may be seen as having its unique intangibles. Following the decision of the co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. ( supra ), we have already held that companies whose turnover is outside the range of ₹ 1 Crore to ₹ 200 Crores are to be excluded from the set of comparables and accordingly direct the Assessing Officer/TPO to exclude Wipro BPO Ltd from the list/set of comparable companies for the assessee's case in Assessment Year 2004-05. Following the earlier order of this Tribunal, we do not find any reason to interfere with the order of CIT (Appeals) qua this issue. ULTRAMARINE PIGMENTS LIMITED 10. The learned Authorised Representative of the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue growth from the service segment of this company has increased by 2,187 % during the year. The revenue from the operations has increased 30.38%. This company is mainly involved in Telecom Infrastructure Management Business accepted contracts for BSNL MTNL and therefore functionally not comparable with the assessee. In support of his contention, he has relied upon the decision of co-ordinate bench of this Tribunal in the case of Google India (P) Ltd Vs. DCIT 29 taxmann.com 412. 14. On the other hand, the learned Departmental Representative has submitted that the decision relied upon by the assessee is in respect of different assessment year i.e. 2006-07 and therefore without examination of these relevant facts for the year under consideration, the said decision cannot be applied in the case of the assessee. He has further contended that these objections regarding dissimilarity of functions were not raised before the TPO/A.O. therefore these aspects have not been examined by the TPO/A.O. 15. We have considered the rival submissions as well as the relevant material on record. As regards the objections of abnormal high margin, it is settled proposition that the inclusion an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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