TMI Blog2019 (8) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... irections but did not direct to include Acropetal Technologies Ltd. in the list of comparables either suo motu or on the request of the assessee. Once the position was so, the exclusion of Acropetal Technologies Ltd. attained finality as the same did not figure in the draft order. The AO/TPO, while giving effect to the directions of the DRP, were devoid of any power to again include Acropetal Technologies Ltd. in the list of comparables for enhancing the amount of transfer pricing adjustment. Having himself excluded Acropetal Technologies Ltd. up to the stage of passing the draft order, the TPO ceased to exercise any jurisdiction to re-examine his earlier view and include it in the list of comparables at the time of giving effect to the direction of the DRP, when it was not a part of the direction. Under such circumstances, we direct to exclude Acropetal Technologies Ltd. from the list of comparables for benchmarking the international transaction of provision of design engineering services. Eclerx Services Ltd. - in the Annual report that this company rendered Financial services; Sales and marketing services; and Cable and telecommunication services. No separate segmental info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member For the Assessee : Shri M.P. Lohia And Shri Rajendra Agiwal For the Revenue : Shri O.A. Mao And Shri Nitin S.K. Patil ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the final assessment order dated 04-08-2017 passed by the Assessing Officer (AO) u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter called the Act ) in relation to the assessment year 2013-14. 2. The first issue raised in this appeal is against the inclusion of Acropetal Technologies Ltd. in the final set of comparables for determining the arm s length price (ALP) of the international transaction of `Provision of design engineering services . 3. Succinctly, the facts of the case are that the assessee, a wholly owned subsidiary of AMCC, USA, was established in India to carry on the business of computer software, manufacture/supply of hardware, electronic components and systems, networking and providing advice, consultation and software technology solutions inter alia in relation to embedded operating system etc. It filed a return declaring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Panel (DRP) on certain issues other than the exclusion of Acropetal Technologies Ltd. The DRP issued directions dated 31-05-2017 on the issues which were assailed before it. While giving effect to the directions given by the DRP, the TPO recalculated the amount of transfer pricing adjustment and in this process he included Acropetal Technologies Ltd. in the list of comparables. This resulted into an increase in the amount of transfer pricing adjustment to the tune of ₹ 4,37,46,728/-. The AO in the final impugned assessment order dated 04-08-2017, computed total income, inter alia , by making the transfer pricing addition of ₹ 4.37 crore in accordance with the revised figure sent by the TPO after giving effect to the directions given by the DRP. The assessee is aggrieved by the inclusion of Acropetal Technologies Ltd. in the final list of comparables by the TPO while giving effect to the direction of the DRP. 5. We have heard both the sides and gone through the relevant material on record. The TPO in his original order dated 19-08-2016 included Acropetal Technologies Ltd. Thereafter, he rectified his order on 15-11-2016, inter alia, exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .154. The assessee did not assail this issue before the DRP, which was also not tinkered by the DRP. However, while giving effect to the direction of the DRP, the TPO again included this company in the list of comparable despite no such direction from the Panel. The AO accordingly passed the final order revising upward the amount of transfer pricing addition by considering Acropetal Technologies Ltd. also as comparable. Under such circumstances, a question arises as to whether the action of the authorities below in considering Acropetal Technologies Ltd. as comparable is in accordance with law? 7. Section 144C of the Act has marginal note Reference to Dispute Resolution Panel . Sub-section (1) of section 144C provides that: The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Sub-section (2) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO/TPO can examine any issue from any angle. But after the passing of the draft order, there cannot be any suo motu addition to or subtraction from the draft order, whether the order is passed under sub-section (3) or sub-section (13) except in the latter sub-section, to the limited extent of giving effect to the direction given by the DRP. If the contrary is permitted, the assessee would lose the forum of the DRP for redressal of his grievance, which is statutorily impermissible. 8. Adverting to the facts of the instant case, it is observed that the TPO vide his rectification order excluded Acropetal Technologies Ltd. from the list of comparables. The AO passed the draft order accordingly. The assessee accepted the exclusion of Acropetal Technologies Ltd. but assailed the draft order before the DRP on certain other issues. The DRP gave certain directions but did not direct to include Acropetal Technologies Ltd. in the list of comparables either suo motu or on the request of the assessee. Once the position was so, the exclusion of Acropetal Technologies Ltd. attained finality as the same did not figure in the draft order. The AO/TPO, while giving effect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xteenth Amdt.) Rules, 2013 w.e.f. 18.9.2013. Rule 10TA is a definition clause, which, inter alia , defines `information technology enabled services under clause (e) to mean certain Business process outsourcing (BPO) services provided mainly with the assistance or use of information technology, such as, back office operations, call centre, data processing or insurance claim processing. Then there is a definition of Knowledge process outsourcing (KPO) in clause (g), to mean certain Business process outsourcing (BPO) services provided mainly with the assistance or use of information technology requiring application of knowledge and advanced analytical and technical skills, such as, geographic information system, human resource services, business analytics services, financial services or engineering design services. In this regard, it is observed that these definitions are simply meant to classify a particular service under the broader category of ITES or KPO service and nothing more than that. It does not mean that if an assessee is rendering a particular KPO service, such as, engineering and design service, then all the companies providing KPO services, such as, geographic inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... palpable that a company with extraordinary financial events occurring during the year because of acquisition and merger/demerger, cannot be considered as comparable. Since Eclerx Services Ltd. underwent such extraordinary financial events during the year due to merger of Agilyst, we hold that it cannot be considered as comparable. This company is, therefore, directed to be excluded from the list of comparables. 13. The ld. AR submitted that if the above two companies, namely, Acropetal Technologies Ltd. and Eclerx Services Ltd. are excluded from the list of comparables, then he will not press any other issue on this count. In view of our decision on the exclusion of the two companies from the final set of comparables, we do not propose to deal with other issues relevant to this international transaction. 14. In the ultimate analysis, we set aside the impugned order and remit the matter to the file of AO/TPO for reworking out the ALP of the international transaction of Provision of Design Engineering Services afresh in accordance with our above observations and directions. Needless to say, the assessee will be given an adequate opportunity of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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