TMI Blog2019 (12) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... erns and concerns having high turnover and applying RPT filter of 25%, selected 09 comparables as additional evidence. The mean margins of the comparables was 12.8% as against the margin of the assessee at 9.90%. In the said list, the concern at serial no. 7, Allsec Technologies India Limited is selected by AO / DRP and there is no dispute. As far as the concern at Sr. 6, and 9, are concerned the learned AR for the assessee fairly admitted there is no dispute viz a viz its exclusion from the final list of comparables hence we uphold the same. Concern i.e. at Sr. 8 i.e. Eureka Outsourcing Solutions Pvt. Ltd., where the OP / TC of the concern was 0.25%, was rejected in the final assessment order and such a concern though having marginal profit cannot be said to be persistent loss making concern. Hence, we find no merit in the orders of authorities below and direct that the said concern be included in the final list of comparables. Balance list of 05 comparables which were rejected on the ground that the income from export activity of the said concern did not fulfill the filter of turnover to the extent of 75%. It may be pointed out that the TPO in the first order under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3)/ 144C read with section 254 of the Income-tax Act (the Act) at an income of ₹ 1,15,57,890 as against the returned income of ₹ 3,417. 2. That the assessing officer / TPO erred on facts and in law in making an addition of ₹ 1,15,57,886 allegedly on account of difference in the arm s length price of the international transactions' of provision of BPO / ITES services to the associated enterprise on the basis of the order passed under section 92CA(3) of the Act by the TPO. 2.1 That the DRP/TPO erred on facts and in law in adopting additional filter of export sales less than 75% of total income without appreciating that selection of comparable company shall be on FAR analysis and application of such quantitative filters selectively defies the purpose of the benchmarking analysis. 2.2 That the DRP/TPO erred on facts and in law in rejecting the following companies on the basis of export filter and not appreciating that they were functionally comparable to the appellant: a) Surevin internet Services Ltd. b) E-Nxt Financial Ltd. c) Cosmic Global Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be no motive to divert any part of its profit to the foreign enterprise 7. That the assessing officer erred on facts and in law in levying interest under Section 234B of the Act. 8. That the assessing officer erred on facts and in law in initiating penalty proceedings under Section 271(1)(c) of the Act. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal before or at the time of hearing. 3. Briefly in the facts of the case, the assessee had furnished the return of income declaring income of ₹ 3417/-. The case of the assessee was taken up for scrutiny and draft assessment order was passed on 17.12.2009 proposing an adjustment of ₹ 3.26 Crores. The assessee filed objections before the DRP which rejected the same and confirmed the proposed addition. The assessment was completed under section 143(3)/ 144C (13) of the Act at ₹ 3.26 Crores. The assessee filed an appeal against the final assessment order before the Tribunal, which in ITA No. 5265/Del/2010, vide order dated 18.02.2011 restored the issue of transfer pricing adjustment to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed filter of the export turnover to the extent of 75% and rejected the concerns which did not fulfill the said filter and gave directions to the AO in this regard. The AO in the final assessment order in turn relying on the directions of the DRP made the following observations. The AO notes vide para 6 at page 4 of the assessment order that the assessee had conducted fresh search for comparables as the said comparables did not figure in accept / reject matrix. The AO also notes that the search for comparables had taken place after the TPO had passed the order and only during the set aside proceedings before the DRP, the assessee had filed fresh set of comparables. The AO observed that the data was not contemporaneous data as envisaged under section 92F (iv) of the Act. Further Rule 10D(4) mandated that the data used for benchmarking the arm s length price should be contemporaneous and should exist latest by specified data referred to in Clause 4 of section 92F of the Act. The AO was of the view that the data was not contemporaneous but since the Tribunal had given directions and hence they were examined on merits. The total number of companies finally selected in the said additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first round itself. The learned AR for the assessee referred to the list of comparables which were finally selected by assessee adopting the same filters as applied by the TPO. However, the DRP in the third round applied new filter, wherein the filter of the concerns having less than 75% turnover were excluded. In this regard 05 concerns were rejected as not being comparable. The learned AR for the assessee also pointed out that the TPO held Eureka Outsourcing Solutions Pvt. Ltd., to be persistent loss making concern and did not apply the margin of the said concern. However in the list wherein the names of the comparables were mentioned, the said concern was shown as not persistent loss making concern. In respect of exclusion of Maple Esolutions Ltd. and Informed Technologies Pvt. Ltd., by the AO / DRP / TPO, learned AR for the assessee says that it had no objections. The learned AR for the assessee further submitted that it was an established position of law, that DRP cannot apply new filter in set aside proceedings. In this regard, he placed reliance in the cases of MCorp Global (P.) Ltd. vs. CIT (309 ITR 434, Paper Products Limited vs. CIT [(2007) SCC 352 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were held to be as not comparable. 9. The assessee was engaged in export of 100% of its software / data to its AE for year under consideration. The assessee had selected TNMM method as the most appropriate method and applied PLI of OP over OC. In the TP study report, the assessee had used weighted margins of the comparables; however the TPO applied only the margins of the contemporaneous period. As against 14 concerns selected by the assessee, the TPO applied updated margins and also additional filters and finally selected 04 concerns as comparables. The assessee applying the additional filters of the TPO i.e. not considering persistent loss making concerns and concerns having high turnover and applying RPT filter of 25%, selected 09 comparables as additional evidence. The list of 09 comparables reads as under:- S. No. Company Name Finance Year Sales OP/ TC 1. Surevin Internet Services Ltd. 200603 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Now coming to the concern i.e. at Sr. 8 i.e. Eureka Outsourcing Solutions Pvt. Ltd., where the OP / TC of the concern was 0.25%, was rejected in the final assessment order and such a concern though having marginal profit cannot be said to be persistent loss making concern. Hence, we find no merit in the orders of authorities below and direct that the said concern be included in the final list of comparables. 12. Now coming to the balance list of 05 comparables which were rejected on the ground that the income from export activity of the said concern did not fulfill the filter of turnover to the extent of 75%. It may be pointed out that the TPO in the first order under section 92CA (3) of the Act had accepted the filter applied by the assessee of the persons engaged in export and no filter of the extent of export was applied. These proceedings started from the order of the TPO and travel to the Tribunal in two rounds and have been set aside by the Tribunal, with specific directions to consider the additional evidence filed by the assessee and if the same is based on the filters applied by the TPO, then the concerns selected by the assessee may be con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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