9911796707
Advanced Search 
TMI Blog2017 (6) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 Rs. 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 other criteria. Accordingly, the CIT (Appeals) rejected five companies out of 9 companies selected by the TPO. Thus the CIT (Appeals) has retained 4 companies as under : (i) Nucleus Netsoft & GIS India Limited (ii) Tricom India Limited (iii) Fortune Infotech Limited (iv) Vishal Information Technology Limited Thus both the revenue as well as assessee are aggrieved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions 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-à-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-à-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 not available in the public domain at the time of conducting the transfer pricing study by the Appellant. b) The AO/TPO erred in law and the CIT(A) further erred in not applying multipleyear data while computing the margin of alleged comparable companies. 6 Non-allowance of appropriate adjustments to the comparable companies, by the AO/TPO The AO/TPO erred in law and on facts and the CIT(A) further erred in not allowing appropriate adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not comparable with the assessee. 6. As regards Wipro BPO Solution Ltd., the learned Authorised Representative has submitted that the turnover of this company is Rs. 430.31 Crores which breaches the turnover tolerance range of 10 times of the assessee. Further this company owns significant intangibles and also having advantage of its brand value and name. Therefore this company cannot be considered as functionally comparable to the assessee. He has further submitted that the functional comparability of all these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those companies having a turnover of Rs. 1 Crore to Rs. 200 Crores be taken as comparable companies and to consequently exclude Wipro BPO Ltd. which has a turnover of Rs. 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 service sector. It is argued that while the assessee does not own brand intangibles some of the comparables chosen by the TPO have their own, software products and hence own intangibles. It is submitted that such companies, having the ability to deliver services, penetrate the market and provide faster delivery, ought not to have been taken as comparable companies as has been done in the case of Wipro BPO Ltd., Tricom India Ltd. and Fortune Infotech Ltd. It is urged that these companies ought to be excluded from the list of comparables. The learned counsel for the assessee argued that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards. 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 Rs. 1 Crore to Rs. 200 Crores. (refer para 14.3 supra) 15.3.3 In respect of M/s. Tricom India Ltd., the learned counsel for the assessee contended that it has registered an abnormal growth of 33% increase in PAT in the relevant period due to the fact that it has developed its unique software to provide BPO services to its customers. The learned counsel for the assessee referred to the Annual Report of this comparable, wherein it is mentioned that it does specialized services such as Title Plant maintenance and Electronic Data discovery which gives it an edge over other Indian Company competition thereby enabling it to generate higher revenues and margins. It was also submitted by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already held that companies whose turnover is outside the range of Rs. 1 Crore to Rs. 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 has submitted that the revenue recognition policy of this company states the sale of goods segment and not explicit regarding ITES segment. There is abnormal growth of revenue during the year of 123%. This company is primarily engaged in the manufacturing of laundry based products and ITES revenue account for only 18% of the total revenue. Further this company also fails employee cost filter as it is only 11.78%. The learned Authorised Representative has submitted that the functional comparability of this company has been considered by the co-ordinate bench of this Tribunal dt.21.8.2014 in the case of Mindteck (India) Ltd. Vs. DCIT in IT(TP)A No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 and exclusion of the companies in the set of comparables cannot be solely on the basis of high profit margin or loss. However if the high profit margin or loss has occurred as a result of some abnormal event occurred during the year then the said fact / event can be considered as a relevant criteria for selection of comparability of the company. Thus the high profit margin alone cannot be criteria or parameter for selection of the company in the list of comparables. Further, the learned Authorised Representative has submitted that this company is also functionally different as it is mainly in the business of Telecom Infrastructure Management and executed contracts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
