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2019 (12) TMI 150

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..... 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 section 92CA (3) of the .....

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..... 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. d) AOK In-House BPO Services Ltd. e) Cameo Corporate Services Ltd. 2.3 That the DRP/TPO erred on facts and in law in rejecting Eureka Outsourcing Solutions Pvt. Ltd. on the ground that it was a persistent loss making company and not appreciating that the company is functionall .....

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..... earing. 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 of DRP observing that it had not passed speaking order on the issue. The DRP issued directions under section 144(C) (5) to the TPO to recalculate arm s length price of international transaction. Consequent thereto vide report dated 23.12.2011, the TPO determined the transfer pricing adjustment at ₹ 2.66 Crores. Thereafter the AO passed order under section 254 / 143(3) of the Act on 30.12.2011 determining the assessed income at ₹ 2.66 Crores. The assessee preferred an appeal before the Tribunal .....

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..... lace 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 additional evidence were 09 and the average PLI was 12.18%, as against the margin of the assessee at 9.90%. Out of this list of 09, one Allsec Technologies Ltd. was accepted. The AO further observed that where the assessee was engaged in export of 100% of its software / data processing; therefore, the comparables should have its income out of export activity, if not full, then at least to the extent of 75%. This was the proposition of DRP and he applied filter of 75% and as a result, 05 concerns were rejected, as not fulfilling t .....

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..... 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 S. P. Kochar vs. ITO (145 ITR 255). He stressed that the DRP in the second round cannot apply a new filter in the set aside proceedings. The learned AR for the assessee also fairly pointed out that the TPO may look into the functionality of the 05 concerns which were rejected by the DRP by modifying the turnover filter. The DRP in the second round had also rejected the assessee s contentions of working capital adjustment. 6. Coming to the inclusion of Eureka Outsourcing Solutions Pvt. Ltd., the learned AR for the assessee pointed that the only basis on which the said concern was rejected by th .....

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..... oncerns 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 1.01 3.06% 2. E-Nxt Financials Ltd. 200603 5.56 2.54% 3. Cosmic Global Ltd. 200603 3.11 16.48% 4. AOK in-House BPO Services Ltd. 200603 5.22 8.03% 5. Cameo Corporate Services Ltd. 200603 8.28 8.64% 6. Maple Esolutions Ltd. 200603 7.43 35.15% 7. Allsec Technologies Ltd. 200603 92.26 28.85% 8. Eureka Outsourcing Solutions Pvt. Ltd. 200603 9.00 0.25% 9. Informed Tehcnologies India Ltd. 200603 2.12 6.64% Average PLI 12.18% OP/TC% of Omniglobe India 9.90% 10. 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. 11. Now coming to the concern i.e. at Sr. 8 i.e. Eureka Ou .....

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