TMI Blog2016 (9) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Panel (DRP) under section 144C(5), vide order dated 19.11.2015 for the assessment year 2011-12. The common issues involved in both the appeals relates to Transfer Pricing adjustment in respect of provision of Information Technology Enabled Services (ITES) which mainly revolves around inclusion and exclusion of certain comparables. In assessee s appeal, amongst various grounds, the assessee has mainly challenged the Transfer Pricing Adjustment of ₹ 36,54,65,763/- out of total adjustment of ₹ 50,60,63,848/- made by the TPO. The grounds of appeal raised by the assessee reads as under:- I. Ground No. 1 1.1 On the facts and circumstances of the case, the learned Assistant Commissioner of Income Tax, Range -9(2)(1) ( the AO ) erred in framing the assessment under Section 143(3) read with Section 144C of the Income Tax Act, 1961 (the Act ) by upholding the action of the Transfer Pricing Officer ( TPO ) / Dispute Resolution Panel ( DRP ) in making a Transfer Pricing ( TP ) adjustment of ₹ 36,54,65,763/- in respect of provision of Information Technologies enabled Services ( ITeS ). 1.2 On the facts and circumstances of the case and in aw, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llicom Pvt. Ltd as comparable without considering the fact that this is not a company of equal size ? 3. Brief facts and the background of the case are that, the assessee, i.e., Capita India Private Limited is part of Capita Group Plc which is a United Kingdom based company mainly into BPO and professional services. In India, the assessee is engaged in providing full spectrum of Information Technology Enabled Services (ITES) to Capita Group covering both voiced and non-voiced based segments. During the year under consideration, the assessee had entered into following international transactions, which was reported in Form no. 3 CEB:- S.No. Description of the transactions Amount (Rs.) 1 Provision of IT enabled services 388,05,26,377 2 Reimbursement of salaries of expatriate Employees 2,54,42,383 4. The Functions performed for ITES were stated to include:- * data entry and validation, indexation of documents, payment/ form processing and transcription services, * HR and payroll administration, regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and gave 11 additional comparables to the assessee and show caused the assessee as to why these comparables should not be taken into comparability list. After dealing with the assessee s objections on various comparables and also justifying some of his set of comparables, finally, the TPO shortlisted 5 comparable companies with average arithmetic mean of 30.01%. Out of the said five comparable companies, two were from the assessee s own comparables and three from his own comparables. The lists of comparables finally adopted by the TPO were as under:- S.No. Name of the comparable Margins (%)OP/TC Comparable As per 1 Infosys BPO Ltd. 17.86% Assessee 2 e4e Healthcare Business Services Pvt. Ltd. 9.77% Assessee 3 Accentia Technologies Ltd. 29.18% TPO 4 Acropetal Technologies Ltd (Segmental) 23.95% TPO 5 TCS eServe Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 2010-11. On this decision he submitted that, in this case, there were two comparable companies, namely, TCS e-Serve International Ltd; and TCS e-Serve Ltd. In the case of TCS e-Serve International Ltd, though this company was providing ITES services, however, due to lack of segmental information regarding providing of software services and also segregation of total revenue, the Tribunal had rejected this comparable. However, with regard to the M/s TCS e-Serve, same was held to be comparable without noting the fact that, for this company also no segmental results were available. He further pointed out that, in fact, Delhi Tribunal in subsequent three decisions has taken note of this decision of ITAT (Techbook International Pvt. Ltd (supra)) and held that TCS e-Serve cannot be compared with the company providing ITES services due to lack of segmental details. The list of three decisions of Delhi ITAT where this company has been held to be non-comparable with ITES companies as filed before is as under:- Sr No Case Laws Citations 1 Ameriprise India Pvt Ltd vs DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that, Accentia Technologies Ltd is into Health Care BPO including medical transcription products being especially developed and marketed independently, therefore, it cannot be reckoned as KPO but as ITES Company. Regarding TCS e-Serve, she pointed out that, it is leading ITES service company, and functionally very similar to the assessee company, therefore, under the TNMM, where only broad comparability is to be seen this company can be held to be a comparable company with any other ITES company. 9. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The sole dispute which has been argued before us in the assessee s appeal is with regard to two comparable companies, namely M/s TCS e-Serve and M/s Accentia Technologies Ltd. As discussed above, the assessee is providing full spectrum of ITES services to its AE which includes various functions as has been illustrated in the foregoing paragraphs. So far as the assets employed are concerned it is seen that no significant intangibles are owned by the assessee which are mostly owned by the AE; and as far as tangible/fixed assets are concerned they are mainly certain facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has been distinguished and explained by the subsequent three decisions of the Delhi Bench of the ITAT, wherein, the Tribunal has categorically held that, in absence of any segmental details and segregation of the total revenue this comparable company cannot held to be comparable. The relevant observation of the Tribunal in the case of Ameriprise India Pvt. Ltd (supra) reads as under:- 12.5 We have gone through the annual report of Company and have carefully considered the reasoning given by the coordinate Bench in the case of Techbook International P Ltd (supra). On perusal of Schedule O Notes to Accounts of the Standalone financials of the Company, it is clear that the Company is engaged in transaction processing and technical services activities. No separate segmental details are available. On a careful reading of the decision of coordinate Bench in Techbook International P td (supra) it is clear that Schedule O Notes to Accounts in respect to carried out by Company and relevant segmental details were never brought to the attention of the Bench. We find that in the absence of availability of any such segregation of the total revenue of this company, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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