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TMI Blog2017 (7) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... :- "(i) Whether on the facts and circumstances of the case and in law, the Hon'ble DRP erred in directing the TPO to treat the assessee-company as market research company and not IT enabled services company without appreciating the fact that the substantial chunk of assessee's work consisted of data processing with the help of computers and the activity of the assessee-company is the covered under the ambit of CBDT Circular No. SO 890(E) Dated 26/09/2000. (ii) Whether on the facts and circumstances of the case and in law, the Hon'ble DPR erred in not appreciating the fact that in AY 2008-09 the assessee-company was treated as ITes company by the TPO and this action was upheld by the DRP. 2. The appellant prays that the order of the DRP on the above grounds be set aside and that of the A.O be restored." 4. The relevant facts and background which is necessary to understand the dispute can be summarized as follows. The assessee is a company incorporated under the provisions of Companies Act, 1956 and is engaged in rendering market research services for its customers. Almost entire shareholding of the assessee-company is held by M/s. Synovate (Holding) Ltd., which in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arm's length price to the Transfer Pricing Officer (TPO) who vide his order u/s 92CA(3) of the Act dated 28.1.2013 held that Transfer Pricing Study report undertaken by the assessee was not appropriate. The primary area of difference between the assessee and the TPO was in characterizing the transactions undertaken by the assessee with its associated enterprises. In fact, to put it appropriately, the activities undertaken by the assessee has been considered by the TPO as Information Technology Enabled Services (ITES), whereas the stand of assessee is that the activities undertaken by it are simply in the nature of market research services which are clearly distinct and are clearly in contrast to an ITE service provider. The Dispute Resolution Panel (DRP) has appreciated the stand of assessee, not only on the basis of what was already on record during the transfer pricing proceedings before the TPO, but also on the basis of certain documents furnished as additional evidence before the DRP. It is emerging from the order of DRP that such additional evidences were sent to the TPO for his response and after considering the response thereof, the DRP held that benchmarking analysis undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. It is quite well understood that market research service provider would mean a person which is engaged in conducting market research in any manner, either in relation to any product, service or any utility and including all allied research services which would be customised to a particular situation. In common parlance, market research is understood as referring to collecting, collating and analysing of information or data consisting of a particular subject which may be a product, service, geographical area, industry, etc. The DRP has succinctly brought out the various stages that are involved in the market research process, namely, problem definition, development of an approach to the problem, research design formulation, field work or data collection, data preparation & analysis and report preparation & presentation, etc. In contrast, ITE services are primarily understood as an activity whereby certain processes are outsourced, which are enabled with the help of information technology. In fact, the CBDT in its Circular no. SO 890(E) dated 26.9.2000 enumerates the Information Technology enabled products or services as Back office operations; Call centres; Content development o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it as an ITE service provider. 9. In this view of the matter, we find no merit in the Ground of appeal raised by the Revenue and as a consequence, appeal of Revenue for Assessment Year 2009-10 is dismissed. ITA NO. 6572/MUM/2012 (A.Y - 2008-09) 10. Insofar as appeal of assessee for Assessment Year 2008-09 is concerned, the same is directed against the order passed by Assessing Officer, Mumbai dated 27.8.2012 u/s 143(3) of Income Tax Act, 1961 (in short 'the Act') as per the directions of the Dispute Resolution Panel-II, Mumbai dated 30.7.2012. 11. In this appeal, assessee has raised the following Grounds of appeal :- "1. The AO/TPO/DRP erred in making an addition of Rs. 7,69,88,134/- under Chapter X of the Income-tax Act, 1961. 2. The AO/TPO/DRP erred in law and facts in holding Accentia Technologies Ltd. (Seg.) which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 3. The AO/TPO/DRP erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 9. The AO/TPO/DRP erred in law and facts in holding Crossdomain Solutions Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 10. The AO/TPO/DRP erred in law and facts in holding Datamatics Financial Services Ltd (Seg.) which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 11. The AO/TPO/DRP erred in law and facts in holding e4e Healthcare Solutions Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 18. The AO/TPO/DRP erred in law and facts in holding Mold-Tek Technologies Ltd which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 19. The AO/TPO/DRP erred in law and facts in holding R Systems International (Seg.) which is an ITES company having an Information Technology or Computer driven product as a comparable company which is completely different from the appellant's customised research product and further erred in taking this company as a comparable as the Functions, Assets & Risks (FAR) are substantially different from the appellant. 20. The AO/TPO/DRP erred in law and facts in holding Spanco Ltd (Seg.) which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to transfer pricing adjustment of Rs. 7,69,88,134/- carried out in determining arm's length price of the 'international transactions' with associated enterprises. It was pointed out that the primary dispute arises from stand of the TPO in holding that assessee was to be classified as an ITE service provider and not as a market research company for the purpose of benchmarking 'international transactions' carried out with its associated enterprises. It was a common point between the parties that the aforesaid controversy is pari materia to the dispute adjudicated by us in the appeal for Assessment Year 2009-10 in the earlier paragraphs. Consequently, our decision on this issue is ITA No. 1544/Mum/2014 for Assessment Year 2009-10 shall apply mutatis mutandis in ITA No. 6572/Mum/2012 for Assessment Year 2008-09 also. 13. Consequent to our aforesaid decision, in the present year, the matter of determination of arm's length price of 'international transactions' of rendering market research services is restored back to the file of TPO/Assessing Officer in order to enable the Assessing Officer to verify the computation of arm's length price determined by the assessee in the same manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/Mum/2010 dated 5.6.2015, the said addition deserves to be deleted. We hold so. Thus, on this Ground, assessee succeeds. 17. So far as Ground of appeal no. 26 is concerned, same relates to denial of deduction u/s 80G of the Act of Rs. 2,70,375/-. In this context, the learned representative for the assessee pointed out that the claim for deduction u/s 80G of the Act has been unfairly denied by the Assessing Officer merely because same was not made in the return of income. It has been explained that after receipt of draft assessment order, assessee filed objections before the DRP and raised the issue of deduction u/s 80G of the Act and the DRP directed the Assessing Officer to verify the claim and allow as per the Act. However, the Assessing Officer denied the claim of deduction u/s 80G of the Act. It was pointed out that at pg. 609 of the Paper Book is placed a copy of donation receipt evidencing payment of donation of Rs. 5,40,750/- to an entity which was recognized u/s 80G of the Act. Therefore, according to assessee, the claim of deduction u/s 80G of the Act to the extent of Rs. 2,70,375/- was quite justified. 18. The ld. DR appearing for the Revenue has not contested the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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