TMI Blog2016 (8) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarity, diverse portfolio and lack of segmental data. Also it has abnormal profits and extraordinary events and unreliable data. TCS e- Serve International Ltd. - no segmental information available for the said company and it has extra-ordinary events during the year and presence of brand value is also there. Turnover of the assessee company for this assessment year is around ₹ 50 crores as against the turnover of TCS e-Serve Limited of ₹ 1405.10 crores. Therefore, following the turnover filter as well as taking note of the fact that it owns and possesses brand value and intangibles as compared to the assessee which does not own such assets, we direct that this company be excluded from the list of final comparables Deduction u/s 10A computation - DRP reducing the entire communication expenses of ₹ 52,44,300/- from the export turnover for the purpose of computing deduction where as the actual leased line internet charges incurred by the assessee was ₹ 15,81,279/- - HELD THAT:- We remit this issue to the file of the AO/TPO to verify and decide the issue in accordance with law after providing reasonable opportunity of hearing to the assessee. These g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86,13,172 2.2 The taxpayer has carried out the economic analysis and has summarized it as under: Nature of international transaction Amount MAM PLI Margin of taxpayer Margin of comparables Provision of ITES 42,86,13,172 TNMM OP/ OC 16.4 14.27 2.3 The taxpayer has carried out the economic analysis for comparables at pages 21 to 26 of the TP documentation. The taxpayer has used Prowess and Capitaline Plus data base in search for comparable companies. After applying certain filters, the taxpayer has short-listed 15 comparables for arriving at ALP of IT enabled services with arithmetic mean PLI (OP/OC) was computed at 14.27% as against the PLI of the taxpayer at 16.40%. Accordingly, it is stated that the international transactions are at arm s length. 2.4 Financial results for the AY 2010-11 are as under: Description Amount (Rs.) Operating Revenue 42,86,13,172 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiple year data to select the comparables. It had selected 15 comparables. Though, TPO has accepted the TNMM as the most appropriate method, he rejected the TP study of assessee and has made fresh TP study with data for the FY 2010-11. TPO had selected the above 11 comparables. 2.9 After comparing the average margins of the comparables to the financials of the assessee, the TPO computed the adjusted arm s length margin as under: Description Amount Arm s Length Margin 27.90% Less: WCA 1.20% Adjusted Arm s Length Margin 26.70% Operation Cost (OC) 37,40,19,725 Adjusted Arm s Length Margin (%) (AALM) 26.70% Arm s Length Price = (100+AALM)*OC 47,38,82,992 Price Received (OR) 42,86,13,172 Adjustment u/s 92CA 4,52,69,820 2.10 Accordingly, the TPO who passed an order u/s 92CA(3) of the Act on 31/10/2013, recomme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of uncomparable companies 5. That on the facts and circumstances of the case and in law, the AO IDRP erred in accepting following as comparable companies as selected by the TPO: a) Accentia Technologies Ltd; b) E-clerx Services Ltd; c) TCS e-Serve International Limited; d) Cosmic Global Ltd; and e) Crossdomain Solutions Limited. Error in computation of margin of the comparable companies 6. That the AO I DRP erred in confirming the TPO's stand of treating the provision for doubtful debts and bad debts as non- operating expenses for the purpose of margin computation of comparable companies as selected by TPO. Rejection of comparable companies 7. That on the facts and circumstances of the case and in law, the AO IDRP erred in confirming the rejection of the following comparable companies, as rejected by the TPO: (i) Ace SPO Services Limited; (ii) R Systems International Limited; (iii) ICRA Techno Analytics Limited; (iv) AOK In House SPO Services Ltd; (v) Cameo Corporate Services Ltd; (vi) Delta Services India Pvt. Ltd; (vii) Informed Technologies India Ltd; (viii) Optimus Global Services Ltd; (ix) Sparsh SPO Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,81,279 are to be reduced from the export turnover and total turnover for the purpose of computing deduction under section 10A of the Act. 15.1 The AO erred in charging interest under section 234A of the Act. 15.2 The AO ought to have appreciated that the return of income was filed by the Appellant within the due date and interest under section 234A of the Act is not applicable. 16. The AO erred in not granting credit for tax deducted at source of ₹ 11,000 as claimed in the return of income. 17. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal. 5. Ground Nos. 1, 2, 3, and 17 are general in nature, hence, need no adjudication. 5.1 Ground Nos. 6, 7, 8, 9, and 11 have not been pressed by the ld. AR of the assessee at the time of hearing before us, therefore, the same are dismissed as not pressed. 6. As regards ground No. 4 pertaining to error in computation of net margin of the assessee, the ld. AR submitted that the foreign exchange loss should be treated as non-operating in nature. Without prejudice to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dware and band width infrastructure required for the same, deployment of man power and service delivery in all these areas. It is also seen that it is engaged in legal process outsourcing. From Schedule-IV showing the fixed assets of the assessee, it is also seen that the said company owns goodwill/brand/IPRs (Intellectual Property Rights). From the notes to the accounts, it is also seen that a subsidiary of the company Asscent Infoserve Pvt. Ltd., has been amalgamated with the company consequent to which, assets and liabilities of the erstwhile company were transferred and vested in the company w.e.f. 1st April, 2008 and the scheme has been given effect to in the accounts of the year. Therefore, it is clear that there is an extraordinary event in the case of Accentia Technologies Ltd., during the relevant financial year particularly since the approval for amalgamation has been given by the Hon ble High Court of Mumbai vide orders dated 21st August, 2009 and by the Hon ble Karnataka High Court vide orders dated 6th February, 2010. This event would definitely have an effect on the profit margins of the said company and therefore, has to 22 be excluded from the list of comparables as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts during the year and presence of brand value is also there. He submitted that the coordinate bench of this Tribunal rejected the said company in the case of Hyundai Motors India Engg. P. Ltd., (supra) wherein the coordinate bench has held as under: 11.2.2. We find that the assessee s contentions about the presence of brand value and owning of intangibles is supported by the evidence on record. However, as regards the extraordinary event or exceptional circumstance there is no material placed before us by the Ld. Counsel for the assessee. Therefore, merely because the TPO in another case has held that there is an extraordinary event for which this company has to be excluded from the list of comparables, it cannot be excluded. Such claim has to be supported by evidence on record. As regards the functional dissimilarity and huge turnover and brand value is concerned, we find that this Tribunal in assessee s own case for A.Y. 2009-10 while considering the comparability of the assessee with Infosys BPO Ltd., has taken note of the possession of the brand value and intangibles which influenced the financial results of this company. The Hon ble Delhi High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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