TMI Blog2017 (11) TMI 1724X X X X Extracts X X X X X X X X Extracts X X X X ..... UDICIAL MEMBER For the Appellant : Shri Neeraj Jain, Adv., Ms. Deepika Agarwal, CA For the Respondent : Shri Amrendra Kumar, CIT(DR) ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 22.01.2016 passed u/s 144C(13) r.w.s. 143(3) of the I.T. Act, 1961 for the assessment year 2011-12. 2. Facts of the case, in brief, are that the assessee is a company incorporated on 19.03.2004 and is wholly owned subsidiary of Omniglobe International LLC, USA, which is engaged in the provision of BPO/Data Processing Services to its AE. It also provides IT Enabled services relating to phone activation and local number portability to various clients for and on behalf of its parent company. It filed its return of income on 20.09.2011 declaring Nil income. The Assessing Officer referred the matter to the TPO for determination of arm s length price of the international transactions entered into by the assessee company. The TPO observed that the assessee has entered into the following international transactions during the year :- Nature of international transaction Method selected A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DRP, the TPO verified the margins of the comparables and computed the correct margins i.e. OP/OC, the details of which are as under :- Sl. No. Name of the company As per DRP direction Working capital Adjusted OP/OC (%) 1. Accentia Technologies Limited Retained 29.12% 2. Acropetal Technologies Limited (Seg) Excluded - 3. E4e Healthcare Business services Pvt. Limited Retained 13.74% 4. Eclerx Services Limited Excluded - 5. Infosys BPO Limited Retained 21.56% 6. Jindal Intellicom Limited Retained 16.76% 7. T C S E-serve Limited Retained 71.99% 8. Professional Management Consultants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Accentia Technologies Limited from the set of comparable companies, even while holding that the said company was engaged in software product development and medical transcription services. 2.5 That the DRP/AO erred on facts and in law in not rejecting Eclerx Services Limited and Acropetal Technologies Limited even while holding that the said companies were KPOs. 2.6 That the DRP/AO erred on facts and in law in not rejecting TCS EServe Limited from the set of comparable companies which is high turnover and functionally different company. 2.7 That the DRP/AO erred on facts and in law in not allowing appropriate risk adjustment to establish comparability on account of the appellant being a lowrisk- bearing captive service provider as opposed to the comparable companies who were independent ITES service provider. 2.8 That on the facts and in the circumstances of the case and in law, the DRP/AO erred in rejecting the contention of the appellant regarding risk adjustment, allegedly holding that the appellant failed to provide any evidence to demonstrate that whether any risk was actually undertaken by the comparable companies and such risks has affected their operating pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Equant Solutions India P. Ltd. (supra) has also directed to exclude Accentia Technologies Ltd. on account of functional dissimilarity. Referring to various other decisions given in the appeal set, he submitted that this company was directed to be excluded on account of functional dissimilarity. Referring to various other decisions, he submitted that this company was also directed to be deleted from the list of comparables on account of non-availability of segmental data. Referring to the recent decision of the Hon ble Delhi High Court in the case of Rampgreen Solutions Pvt. Ltd. vs. CIT reported in 377 ITR 533 he submitted that the Hon ble High Court in the said decision has observed that in terms of provision of Rule 10B(2)(a), comparability of controlled and uncontrolled transactions shall be judged with reference to specific service/product characteristics. 12. So far as TCS E-Serve Limited is concerned, ld. counsel for the assessee submitted that segmental data is not available. The operations of this company broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving processing; collecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the ground that the company owns/exploits intangibles such as brand etc. and, therefore, cannot be compared with a routine captive service provider. He submitted that if these three companies are excluded the average margin comes to 11.60% as against the margin of assessee at 8.63% which is within +/-5% and no TP adjustment is required. 16. The Ld. DR on the other hand supported the order of the TPO and various decisions. 17. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer/TPO and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. From the various details furnished by the assessee and the arguments advanced before us, the same relates to exclusion of three companies from the list of comparables namely Accentia Technologies Ltd., TCS E-Serve Ltd. and Infosys BPO Ltd.. 18. So far as Accentia Technologies Ltd. is concerned, we find from the Paper Book that this company is engaged in two business segments i.e. medical transcription and development of software products and segmental profitability is not available in the financial statements. Further, it al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration it should be included. Admittedly neither the TPO nor the Ld. DR has been able to demonstrate the difference in the functionality and/or financial data of the assessee for the year under consideration viz-a-viz previous assessment year. Hence following the rule of consistency, we are of the opinion that this company cannot be considered as comparable for the year under consideration. We therefore direct to exclude this comparable. 20. Further, the Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd. vs. DCIT in ITA No.1478/Del/2015 has directed to exclude TCS E-Serve Ltd. on the ground that this company owned significant intangibles and brand value. Admittedly, TCS E-Serve Ltd. was excluded by the DRP in assessee s own case in assessment year 2012-13 on account of functional dissimilarity and having significant intangibles. Therefore, we direct the Assessing Officer/TPO to exclude this company from the list of comparables. 21. So far as Infosys BPO Ltd. is concerned, we find this company was also excluded by the DRP in assessee s own case for assessment year 2012-13 on account of having significant intangibles on brand value. We further find the D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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