TMI Blog2016 (7) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical service there is no requirement of deduction of tax at source, hence, disallowance made under section 40(a)(i) is not sustainable. TP Adjustment - comparable selection - HELD THAT:- Vishal Information Technologies Ltd - It is evident from the material placed before us that personnel cost of Vishal Information Technologies Ltd. as a percentage of its turnover is only 0.95% as against the employee cost of 47.86% of the assessee. The aforesaid fact signifies that the company does not carry out the ITES activities on its own but out sources it to third party vendors. For the very same reason in various decisions of the Tribunal as well as High Court, this company has been rejected as a comparable to ITES services provider. For the aforesaid reasons, we do not find any infirmity in the order of the learned Commissioner (Appeals) in excluding this company. Cepha Imaging Pvt. Ltd. - It is seen from the order of the learned Commissioner (Appeals), he has excluded this company as it is involved in software development and production of spares. He also noted that company is engaged in document scanning and conversion, content conversion, content indexing and extended metadata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted to the assessee, no further adjustment is required to be made to the price charged by theassessee, this issue has become academic, hence, we do not intend to adjudicate the same. However, it is open for the assessee to raise such issue in an appropriate case in future. - ITA No. 1832/Mum/2011 - - - Dated:- 29-7-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI NABIN KUMAR PRADHAN, ACCOUNTANT MEMBER For the Appellant : Shri Vikram Batra For the Respondent : Shri Rajan R. Vora a/w Shri Nikhil Tiwari ORDER PER SAKTIJIT DEY, J.M. Aforesaid appeal of the Department is directed against order dated 20th December 2010, passed by the learned Commissioner (Appeals) 15, Mumbai, for assessment year 2005 06. Department has raised following grounds: On the facts and in the circumstances of the ease and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. The order of CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that amount of ₹ 15.43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves data via computers and sends back the same after processing through internet for which it pays fees to Videsh Sanchar Nigam Ltd. and to Equant Network Services Ltd. for international lease line circuit charges. It was submitted, as these payments are made towards internet connectivity / international lease line charges, they are not in the nature of either royalty or fees for technical services , hence, there was no requirement of deduction of tax at source. The Assessing Officer, however, did not agree with the contention of the assessee as according to him, the payment made to Equant Network Services Ltd. is in the nature of royalty. As the assessee did not deduct tax at source on such payments, he disallowed amount of ₹ 15,45,058. Being aggrieved of such disallowance preferred appeal before the learned Commissioner (Appeals). 5. The learned Commissioner (Appeals) noticing that similar issue was decided in favour of the assessee in assessment year 2006 07 by his predecessor in office followed the same and deleted the addition made by the Assessing Officer. 6. Learned Departmental Representative supporting the view expressed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing adjustment. 10. The first issue relates to exclusion of two comparables by learned Commissioner (Appeals) viz. Vishal Technologies Ltd. and Cepha Imaging Pvt. Ltd. Vishal Information Technologies Ltd. 11. Supporting the view of the Assessing Officer, learned Departmental Representative sought inclusion of this company. 12. Learned Authorised Representative on the other hand submitted, Vishal Information Technologies Ltd. cannot be considered as a comparable to the assessee as it is functionally different from the assessee in the sense it does not undertake ITES on its own but out sources it to third parties which is evident from the low employee cost of 0.95%. He, therefore, submitted the company has been rightly rejected by the learned Commissioner (Appeals). 13. We have considered the submissions of the parties and perused the material available on record. It is evident from the material placed before us that personnel cost of Vishal Information Technologies Ltd. as a percentage of its turnover is only 0.95% as against the employee cost of 47.86% of the assessee. The aforesaid fact signifies that the company does not carry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in document scanning and conversion, content conversion, content indexing and extended metadata text encoding. He also noted that company bears collection risk and incurs selling and administration expenses. We have also noted that for this very reason, the Tribunal in the decisions cited by the learned Authorised Representative has found this company to be functionally different from ITES service provider, hence, excluded it as a comparable. As these decisions relied upon by the learned Authorised Representative are for the very same assessment year, respectfully following the same, we uphold the exclusion of the company as a comparable. 17. The next issue raised by the Department is in relation to relief granted by the learned Commissioner (Appeals) on account of payment made by the assessee to its A.E. for availing technical services. 18. Brief facts are, while computing the arm's length price of the international transaction, the Transfer Pricing Officer noticed that the assessee has paid ₹ 1,11,18,275 towards availabing of technical service from the A.E. Alleging that the assessee has failed to submit adequate document to justify the arm' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the parties in the light of the decisions of the Hon'ble Jurisdictional High Court in Skol Breweries Ltd. v/s ACIT, Income Tax Appeal no.34 of 2009, dated 9th February 2009, and the decision of the Tribunal, Hyderabad Bench in ACIT v/s Late Allam Adavaiah, ITA no.1336/Hyd./2012 and Ors. dated 10th July 2015, we admit the application made under rule 27 and propose to deal with the grounds raised therein by the assessee. 24. The first issue raised by the assessee relates to rejection of certain comparables which are Airline Financial Support Services India Ltd. and Saffron Global Ltd. Objecting to selection of Airline Financial Support Services India Ltd., the learned Authorised Representative submitted that the related party transactions (RPT) of this company is 31.75% which is more than 25% RPT filter applied by the Transfer Pricing Officer. He, therefore, submitted, this company cannot be treated as comparable. In support of such contention, learned Authorised Representative relied upon the decision of the Tribunal, Mumbai Bench, in ACIT v/s Maersk Global Service Centre (I) Pvt. Ltd., [2012] 66 DTR (Mum.) (Trib.) 90 and ITAT, Delhi Bench, in ITO v/s NT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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