TMI Blog2020 (8) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... anded the matter back to the Assessing Officer by issuing similar direction as issued in the said order - HELD THAT:- The argument of the Revenue is that the direction is devoid of reasons. We do not agree with the said submission because the Tribunal had referred to the decision of R R Donnelley India Outsource Private Limited Vs. DCIT (supra). All the directions contained thereunder were issued and the position of law as applied by the Tribunal merits acceptance. Our views/conclusion is strengthened by the decision of the High Court of Delhi in PCIT Vs. Baxter India Pvt. Ltd [ 2018 (9) TMI 1894 - DELHI HIGH COURT ] . It is also a case arising out of an assessment for the year 2012-13, wherein the Court took note of the decision in the case of CIT-II Vs. Mckinsey Knowledge Centre Pvt. Ltd. [ 2015 (3) TMI 1226 - DELHI HIGH COURT] wherein it was held that if from the available data, the results for financial year can reasonably be extrapolated then the comparable cannot be excluded. No error in the order passed by the Tribunal on this issue Remove the Cosmic Global Limited from the list of comparables - Tribunal followed the assessee's own case in [ 2017 (2) TMI 1208 - ITAT C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is entirely factual. Accordingly, the finding of the Tribunal on this issue does not call for any interference. Disallowance u/s 14A read with Rule 8D - HELD THAT:- This Court in the case of Commissioner of Income Tax, Central Board, Chennai Vs. Chettinad Logistics Private Limited [ 2017 (4) TMI 298 - MADRAS HIGH COURT] wherein it was held that Section 14A cannot be invoked. We note that the exempt income was earned by the assessee in the relevant assessment year. The Special Leave Petition filed by the Revenue as against this decision was dismissed by the Hon'ble Supreme Court on the ground of delay as well as on merits in the judgment reported in CIT, Chennai Vs. Chettinad Logistics Pvt. Ltd. [ 2018 (7) TMI 567 - SC ORDER] . Therefore the Substantial question of law has to be answered against the Revenue. - T.C.A.No.414 of 2018 - - - Dated:- 19-8-2020 - Honourable Mr. Justice T.S. Sivagnanam And Honourable Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa Venkatesan, Junior Standing Counsel For the Respondent : Mr.Nishant Thakkar assisted by Ms.Jasmine Amalsadwala, Mr.R.Venkatanaraya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his operating profit / operating cost. The assessee stated that its standalone ITS profit margin is 11.89% as against the comparables weighted average margin of 10.33% after seeking adjustment for working capital and risk (before adjustment the margin of the comparables margin stood at 10.85%). The Department issued show cause notice dated 11.09.2015 and ultimately, the margin was reworked at 10.06% vide letter dated 29.09.2015, to which the assessee filed their objections. The objections were regarding the process adopted for undertaking fresh search was not mentioned; use of single year data is not appropriate; working capital adjustment was not considered and risk adjustment was not considered. The assessee was provided with names of 10 comparables with their margin in percentage. They objected to the inclusion of M/s.Capgemini Business Services, HGS International and TCS e-serve international on the ground that these companies had related party transaction exceeding 25%. These objections found favour with the Department and they were dropped from the final list of comparables. The assessee objected to inclusion of Infosys BPO Ltd on account of large turnover of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of R R Donnelley India Outsource Private Limited Vs. DCIT (2016) 75 taxmann.com 306 (Chennai Trib) and remitted the matter back to the Assessing Officer by directing to furnish data for the financial year 2009-10 (1st April and 31st March) to the TPO, who after verification shall consider the same as comparable to the assessee's case so as to determine the ALP. 2.4. While issuing such a direction, the Tribunal referred five other decisions of the Tribunals, with regard to retaining Cosmic Global Limited as a comparable. The Tribunal took note of its decision in the assessee's own case in I.T.A.NO.2340/mds/2012 dated 10.12.2017 and directed the Assessing Officer to exclude M/s.Cosmic Global Ltd from the list of comparables. With regard to the adjustments which were sought for by the assessee, to account for differences in the working capital position of the assessee vis-a-vis the comparables, the Tribunal took note of the assessee's own case in I.T.A.No.2340/mds/2012 and remitted the matter back to the Assessing Officer to rework the working capital adjustment, necessary after considering the value of advances and deposits recoverable in cash or kind or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing exclusion of Infosys BPO Limited from the list of comparables and in this regard, drew our attention to the memorandum of grounds of appeal in T.C.A.No.137/2018, wherein five Substantial Questions of Law were raised by the Revenue, but, only four Substantial Questions of Law were admitted and this issue is not of a Substantial Question of Law which has been entertained in this appeal. 7. On perusal of the memorandum of grounds of appeal as well as the order of the Hon'ble Division Bench dated 03.04.2018, we find that this issue has not been agitated by the Revenue, insofar as the assessee's own case for the assessment year 2008-09. Therefore we confirm the finding of the Tribunal directing the exclusion of Infosys BPO Limited from the list of comparables. The conclusion arrived at by us is duly supported by the decision of the Hon'ble Division Bench of the Karnataka High Court in PCIT Vs. Swiss Re Global Business Solutions India P. Ltd. (2018) 96 taxmann.com 643 (kar.HC). The order impugned in the said appeal passed by the Tribunal noted that the Turnover of Infosys BPO Limited is ₹ 649.56 Crores while the Turnover of the assessee Company therein was S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s.Pentair Water India Pvt. Ltd (supra), affirmed the order passed by the Tribunal. The above decisions will come to the aid and assistance of the assessee squarely to hold that the order passed by the Tribunal on the said issue is proper. 10. On the next issue with regard to rejection of comparable selected by the assessee having different financial year as pointed out, the Tribunal followed the decision in R R Donnelley India Outsource Private Limited Vs. DCIT (cited supra) and remanded the matter back to the Assessing Officer by issuing similar direction as issued in the said order. 11. The argument of the Revenue is that the direction is devoid of reasons. We do not agree with the said submission because the Tribunal had referred to the decision of R R Donnelley India Outsource Private Limited Vs. DCIT (supra). All the directions contained thereunder were issued and the position of law as applied by the Tribunal merits acceptance. Our views/conclusion is strengthened by the decision of the High Court of Delhi in PCIT Vs. Baxter India Pvt. Ltd (ITA No.260 of 2018) dated 26.07.2018. It is also a case arising out of an assessment for the year 2012-13, wherein the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is not interfered as no substantial question of law arises for consideration on the said issue. 14. The next issue is with regard to the order granting risk adjustment at 2% before the TPO. The assessee stated that risk adjustment can be computed based on ' Sharpe Ratio' which appears to be the operating profit margin earned by the comparable Companies over and above the risk free interest rate with risk assumed by the comparable Companies and computes the additional return earned on account of risk adjustments. The additional operating profit margin earned by the Company on account of risk adjustment, multiplied with the capital employed to arrive at additional operating profit. 15. The TPO had denied adjustments on the ground that the information is not readily available in the public domain to fine tune the margins of the comparables on the basis of standard benchmarks to adjust for the differential functional profile of the entities. The TPO relied on the decision of the Chennai Tribunal in Mobis India Ltd in ITA 2112/mds/2011 dated 14.08.2013 and held that the adjustments cannot be a matter of routine while computing operating margins of the comparables an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. We find that no substantial question of law flows from this issue as it is entirely factual. Accordingly, the finding of the Tribunal on this issue does not call for any interference. 17. The next issue is with regard to applicability of provision of Section 14(A) read with Rule 8D of the Act. This issue has been decided by the Hon'ble Division Bench of this Court in the case of Commissioner of Income Tax, Central Board, Chennai Vs. Chettinad Logistics Private Limited (2017) 80 taxmann.com 221 (madras) , wherein it was held that Section 14A cannot be invoked. We note that the exempt income was earned by the assessee in the relevant assessment year. The Special Leave Petition filed by the Revenue as against this decision was dismissed by the Hon'ble Supreme Court on the ground of delay as well as on merits in the judgment reported in CIT, Chennai Vs. Chettinad Logistics Pvt. Ltd., (2018) 95 taxmann.com 250 (SC) . Therefore the Substantial question of law no.5 has to be answered against the Revenue. 18. In the result, the appeal filed by the Revenue is dismissed and the Substantial Questions of Law nos.(i), (iii), (iv) and (v) are answered against the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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