TMI Blog2021 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... tment is required in the case of the assessee as comparable to the compared companies. Therefore, we do not see any reason to direct the AO/TPO to grant working capital adjustment to the assessee. Thus, ground is accordingly rejected. Interest on outstanding receivables - Case of the assessee that the interest on receivables is not an international transaction as notional interest cannot be brought to tax - HELD THAT:- We find that the A.Y before us is 2014-15 and hence, the interest on receivables is an international transaction as it is subsequent to the amendment to section 92B of the I.T. Act - We are inclined to accept the alternate argument of the assessee that since the receivables are in foreign currency, the rate of interest to be applied is at LIBOR + and nor SBIPLR rate. AO/TPO is directed accordingly. - ITA No.2233/Hyd/2018 - - - Dated:- 18-12-2020 - Smt. P. Madhavi Devi, Judicial Member AND Shri D.S. Sunder Singh, Accountant Member For the Assessee : Sri H. Srinivasulu For the Revenue : Sri Srinivas Reddy, DR ORDER PER SMT. P. MADHAVI DEVI, J.M. This is assessee s appeal for the A.Y 2014-15 against the final assessment order passed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO in accepting the following companies engaged in software development services as comparables, without appreciating that the said companies were functionally dissimilar to the Appellant, have high economies of scale, fail the peculiar economic circumstances filter, have presence of brand and intangibles, abnormal profits, undertake research and development activities, have onsite expenses and do not have segmental data: E-lnfochips Limited Thirdware Solutions Limited Infobeans Technologies Limited Infosys Limited Persistent Systems Limited Larsen Toubro lnfotech Limited Tata Elxsi Limited Mindtree Limited ~ R S Software (India) Limited 3. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO in accepting the following companies engaged in information technology enabled services as comparables, without appreciating that the said companies were functionally dissimilar to the Appellant, have high economies of scale, fail the peculiar economic circumstances filter, have onsite expenses, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P further erred in upholding / confirming the action of the Ld. TPO in considering provision for bad and doubtful debts as a nonoperating expenditure while computing the PLI. 9. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in not allowing Working Capital Adjustment in accordance with the provisions of Rule 10B of the Income-tax Rules, 1962 to account for differences between the international transactions undertaken by the Appellant, being a captive unit, and those undertaken by the alleged. 10. On the facts and in the circumstances of the case and in law, the Ld. AO erred in not considering the fact that the working capital adjustment evaluates the outstanding receivable in a controlled scenario vis-a-vis uncontrolled scenario and that differential impact of working capital of the Appellant vis-a-vis its comparables has already been factored in the pricing/ profitability of the Appellant. And hence, levying interest on receivables amounts to double adjustment. 11. The Appellant craves leave to add, alter, vary, omit, substitute or amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,64,09,33,805 36,51,44,689 22.25 2 Tata Exisi Ltd (Seg) 6,82,70,22,000 5,58,25,94,000 1,24,44,28,000 22.29 3 Mindtree Ltd 30,43,40,00,000 25,01,90,00,000 5,41,50,00,000 21.64 4 RS Software (India) Ltd 3,51,88,20,000 2,83,71,11,000 68,17,09,000 24.03 5 Tech Mahindra Ltd (Seg.) 1,70,13,90,00,000 1,37,39,35,00,000 32,74,55,00,000 23.83 6 e-Infochips Ltd 2,05,61,12,437 1,13,59,89,199 92,01,23,238 81.00 7 Larsen Toubro Infotech Ltd 45,48,03,71,882 36,66,51,02,339 8,81,52,69,543 24.04 8 Cigniti Technologies Ltd 55,62,98,162 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions to the DRP. The DRP directed exclusion of 3 Companies i.e. SQS India BFSI Ltd, Tech Mahindra Ltd, Cigniti Technologies Ltd from the final list of comparables. As regards the additional companies proposed by the assessee as comparable to the assessee, the DRP accepted only one company i.e. CG-VAK Software Software Exports Ltd as comparable to the assessee. It however, directed the TPO to examine whether Sagar Soft India Ltd, satisfied the filters other than functional similarity adopted by him. Thus, the DRP has granted partial relief to the assessee. 9. In grounds of appeal No.2 and 4, the assessee is seeking exclusion and inclusion of some comparable companies. At the time of hearing, the learned Counsel for the assessee submitted that though the assessee has raised its objections against 9 companies, the assessee is not objecting to Mindtree Ltd and RS Software (India) Ltd as being comparable to the assessee. Therefore, their comparability is not being considered at this stage. The objection of the assessee to the following companies are dealt with as under: 10) E-Infochips Ltd Assessee s objections: a) This company is engaged in IT, ITES and prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/4/2013 to 31/03/2014 1/4/2012 to 31/03/2013 1/4/2013 to 31/3/2014 1/4/2-12 to 31/03/2013 Additional information on profit and loss A/c Details of raw materials, spare parts and components consumed (Abstract) Details of raw materials, spare parts and components consumed (Line Items) Value consumed 1,78,21,068 5,06,44,253 15,99,348 8,65,362 Percentage of consumption 91.76% 98.32% 8.24% 1.68% Value of imports of raw materials 3,35,87,489 4,31,64,414 d) This company has revenue from information consultancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. With regard to arm's length computation of software services, we find that the assessee had sought exclusion of E- 1nfochips Ltd from the list of final camparables for which Ground No. 3 A. is raised by the assessee. We find that during the Asst Year 2012- I 3, the company amalgamated one of its wholly owned subsidiary, namely E-lnfochips Bangalore Ltd w.e.f. 1.4.2011 which is evident from the fact reported in their annual report for the financial year 20 I I _ I 2 enclosed in page 1 054 of the paper book. Pursuant to the said amalgamation, E-lnfochips Bangalore Ltd's functions, assets as well as risks too got merged with that of E-lnfochips Ltd w.e.f. 1.4.2011. We find from the nature of business mentioned in the business profile of the said cam parable enclosed in page 1118 of the paper book, that the said comparable 's engaged in IT, 1TES and sale of products for which segmental information is not available. The assessee herein does not have ITES. Hence no comparison could be made for want of segmental data. We also find [hat the co-ordinate bench decision of Delhi Tribunal in the case of Alcatel Lucent India Ltd. v. Dy. CIT .2016] 74 taxmann.com 105 (Delhi-T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact about non-availability of segmental data with respect to the various activities undertaken by it, we are of the view that margins of E-Infochips Limited cannot be applied to benchmark the international transactions undertaken by the assessee with it's A.Es. We further fmd that in case of DCIT Vs. M/s. Philips India Limited (supra) and Ness Technologies (India) Private Linited (supra), which were also engaged in the activities similar to assessee (i.e., providing software services to its group concerns based on the specifications provided) in A.Y. 2011-12, the Coordinate Bench of the Tribunal, while deciding those appeals directed the exclusion of E-Infochips Limited as a comparable company. In view of the aforesaid facts, we are of the view that EInfochips Limited cannot be considered as comparable to arrive at Arms Length Price and therefore we direct its exclusion from comparables. Before us, it is assessee's contention that if EInfochips Limited is excluded from the final set of corn parables, the margin of the assessee would fall within 2: 5% range vis-a-vis margin of the residual comparables and thus in view of proviso to Sec.92C(2) of the Act, no addition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f total revenue and at the same qualified to be eligible for comparison. The DRP did not allow any relief. 10.2 After considering the rival submissions and perusing the relevant material on record, we find that the Annual report of this company is available in the paper book with its Profit and loss account at page 1025. Schedule of Income indicates its operating revenue from software development, hardware maintenance, information technology, consultancy etc. Revenue from hardware maintenance stands at ₹ 3.92 crore, which has been considered by the Transfer Pricing Officer himself as sale of products. Such sale of products constitutes 15% of total revenue. There is no segmental information available as regards the revenue from sale of products and revenue from software development segment. As the assessee is simply engaged in rendering software development services and there is no sale of any software products, this company, in our considered opinion, ceases to be comparable. It is obvious that from the common pool of income from both the streams of software products and software services, one cannot deduce the revenue from software services and no one knows the impact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessments where the methodology adopted in their domestic jurisdiction will differ . The TNMM method depends on accurate data with respect to all the three elements - wherever they apply. In the Comparable Uncontrolled Price (CUP) method - which is premised upon the elements in Rule 10B(1)(a), the methodology adopted is the price charged or paid for property transfer or services provided in the Comparable Uncontrolled transaction. Therefore, the nature of the transaction and the appropriate filter determines the elements that are to be considered in TNMM. Therefore, the costs, sales and assets employed wherever relevant are to be applied. From this perspective, the revenue's contention that segmental data was available, cannot be accepted. The mere availability of proportion of the turnover allocable for software product sales per se cannot lead to an assumption that segmental data for relevant facts was available to determine the profitability of the concerned comparable . (6) ITAT Delhi Bench in the case of Cadence Design Systems (I) (P) Ltd vs. Asstt.,CIT (2018) 93 Taxmann.com 227 (Delhi). Para 38 . For similar reasons stated above, we are of the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extract from Page 400 of Paper Book Volume 2 is given below: (Revenue from sale of products: 20,675.74 13,225.84) b) Thirdware Solution is engaged in software development services, consultancy and software products, whereas the assessee renders only software development services. The relevant extract from Page 320 of Paper Book Volume 2 is given below: Details of material changes occurred during period affecting company s business operations. 1. Corporate Information Thirdware Solutions Ltd (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. This company is engaged in the business of Software Development and Consultancy Services. The company caters to both domestic and international markets . c) In the annual report, there are no segmental details between software services and software products and the relevant extract from page 382 of Paper Book Volume 2 is given below: The company s operation comprises of software development, implementation and support services. Primary segmental reporting is based on geographical areas, viz., domestic = India (product and services) and Institutional = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions on either side and examining the materials on record, we find that the issue relating to comparability of aforesaid companies objected by assessee are covered by various decisions of different benches of the Tribunal for the very same AY. In case of Ness Innovative Business Pvt. Ltd. Vs. Dy.CIT In ITA No. 472 to 553 and 1175/Hydl2011, dated 18/06/14 Coordinate Bench rejected Bodh Tree Consulting Ltd. Exensys Software Solutions Ltd., Sankhya Infotech Ltd., Foursoft Ltd.. Thirdware solutions Ltd. Tata Elxsi Ltd. and Infosys Technologies Ltd. by observing as under: In view of the aforesaid, accepting the submissions of learned AR, we direct AO/TPO to exclude aforesaid companies from the list of comparables. This ground of assessee is allowed . Further, the learned Counsel for the Assessee relied on the following decisions in support of his contentions that this company has to be excluded: (i) Infor Global Solutions (India) Pvt. Ltd. (ii) CIT vs Intoto Software India (P) Ltd. (iii) CIT vs DE Shaw India Software (P) Ltd. (iv) PCIT vs T Erricson India (P) Ltd. (v) Intoto Sotware India (P) Ltd vs ITO (vi) Planet Online (P) Ltd. (vii) Dialogic Netw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid company by raising new grounds. He submitted, since the issue of development of product by this company and unavailability of segmental details, were not raised before the Transfer Pricing Officer, it requires verification. 38. We have considered rival submissions and perused materials on record. Though, it may be a fact that the assessee may not have objected to selection of this company before the Transfer Pricing Officer, however, the assessee raised objections against selection of Infor Global Solutions India Pvt. Ltd. this company before the DRP as well as before us. The grievance of the assessee is, the company being involved in development of products and since no segmental details are available in the annual report, it cannot be treated as comparable. The Co-ordinate Bench in Tech Mahindra Ltd. (supra) having found this company to be involved in development of software product and trading in software licenses has held that it cannot be a comparable to a software development service provider. Similar view has been expressed in the other decisions cited before us by the learned Authorised Representative. Since, many of these decisions relate to very same assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct company and a software development service provider. Having taken note of the difference between the two functions, the Assessing Officer ought not to have taken the companies which are into both the product development as well as software development service provider as comparables unless the segmental details are available. Even if he has adopted the filter of more than 75% of the revenue from the software services for selecting a comparable company, he ought to have taken the segmental results of the software services only. The percentage of expenditure towards the development of software products may differ from company to company and also it may not be proportionate to the sales from the sale of software products. Under section 133(6) of the I.T. Act, the TPO has the power to call for the necessary details from the comparable companies. It is seen that the Assessing Officer/TPO has exercised this power to call for details with regard to the various companies. As seen from the annual report of Foursoft Limited which is reproduced at page 7 of the TPO's Order, the said company has derived income from software licence also and AMCs. 26. As far as Thirdware Softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... St.Ericsson India (P) Ltd vs. Addl. CIT THIRD WARE SOLUTIONS LIMITED 47. This is again TPO's own comparable and assessee sought to exclude this company from the list of comparables on the ground of non-comparable services i.e application implementation, management and development services. TPO rejected objections raised by the assessee by observing that software development, implementation and support services are various subsegments of software development services only and require employment of software engineers and retained this company as a comparable for benchmarking international transactions. 48. However, perusal of the annual report of this company, available at page 1735 to 1782 of the Paper Book Vol.IV, goes to prove that the substantial revenue of this company is from sales and operating sales of licence; software services, export from SEZ unit, export from STPI unit and revenue from subscription. It is also apparently clear that software services segment accounts for ₹ 8.91 crores out of the total sales of ₹ 77 crores whereas segmental results are not available. So, when this company's substantial revenue is from other various busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications Pvt. Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decision of the Pune Tribunal (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand. 10.7 The ld. DR has not brought any material to our notice to demonstrate that the aforesaid finding of the coordinate bench will not be applicable to AY under consideration. Therefore, following the view expressed by the ITAT Bangalore Bench, we exclude this company from the list of comparables . (7) ITA No.7280/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of the above facts and in view of the afore cited decision of the Tribunal (supra). this company ought to be omitted from the list of comparables. 15 2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and IT(TP)A.1550/Bang/2012 Page-29 subscription. However,the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of F -Gain Communications Pvt. Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern was not comparable and observed as under:- 29. We have considered the rival arguments made by both the sides. We find the Special Bench of the Tribunal in the case of Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT vide ITA No.7466/Mum/2012 has observed as under : Schedule: Sales As on 31.3.2019 As on 31.3.2018 Sale of Licence 22,237,588 3,916,427 Software Licence 89,177,023 76,724,371 Export from SEZ 478,572,420 263,971,033 Export from STPI 162,900,630 168,863,049 Revenue from sub. 16,433,714 9,293,874 770,321,376 522,768,754 99. The question No. 2 referred to this Special Bench is as to whether, in the facts and circumstances of the case, companies earning abnormally high profit margin should be included in the list of compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decisions relied on by the Ld. Counsel for the assessee we find Thirdware Solutions Ltd. has been rejected on the ground that it is functionally dissimilar. The Hyderabad Bench of the Tribunal in the case of Intoto Software India Pvt. Ltd. Vs. ACIT and Viceversa in consolidated order dated 24-05-2013 for A.Y. 2005-06 and 2007-08 at para 26 of the order has observed as under : 26. As far as Thirdware Software Solution Limited is concerned, we find from the information furnished by the said company that though the said company is also into product development, there are no softrware products that the company invoiced during the relevant financial 52 year and the financial results are in respect of services only. Thus, it is clear that there is no sale of software products during the year but the said company might have incurred expenditure towards the development of the software products. 29.2 In various other decisions also Thirdware Solutions Ltd. has been rejected as a comparable on the ground that it is functionally dissimilar. We therefore find force in the submission of the Ld. Counsel for the assessee that Thirdware Solutions Ltd. should not be included as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. On a perusal of the documents placed in the paper book it appears that this company is engaged in various activities including development of niche product and development services. Thus, the company is functionally different from the assessee. Considering the aforesaid aspect, the Co-ordinate Bench in case of Telcordia Technologies India (P.) Ltd. (supra), which is for the very same assessment year, has excluded this company as a comparable. Similar view has also been expressed in the other decisions cited by the learned Authorised Representative. Thus, keeping in view the decisions of the Tribunal referred to above, we hold that this company cannot be a comparable to the assessee. 38. We have considered rival submissions and perused materials on record. Though, it may be a fact that the assessee may not have objected to selection of this company before the Transfer Pricing Officer, however, the assessee raised objections against selection of this company before the DRP as well as before us. The grievance of the assessee is, the company being involved in development of products and since no segmental details are available in the annual report, it cannot be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of his contentions for the exclusion of Infobeans Technologies Ltd from the final list of comparables. i) Pubmatic India (P) Ltd, Pune, ITAT ITANo.655/PUN/207 ii)Kony India (P) Ltd ITA No.2305/Hyd/2018 20. The learned DR, however, submitted that the services rendered by Infobeans are also similar to the services rendered by the assessee and there is no separate income from sale of goods. According to him, the income from sale of services only is being depicted as income from sale of goods . Therefore, according to him, this company has to be retained as comparable to the assessee. As far as computation of the correct margin of Infobeans is concerned, he submitted that the issue may be remitted to the file of the TPO for adopting the correct margin of the Company. 21. Having regard to the rival contentions and the material on record, we find that the Coordinate Bench of the Tribunal in the following case has considered similar objections of the assessee therein to direct exclusion of this company from the final list of comparables. For the purpose of ready reference, the relevant paragraph is reproduced below: ITA No.655/PUN/207 dated 19-3-2018 in the case of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 cr.only. d) Infosys has revenue from sale of products for a sum of INR 1810 Cr. e) Infosys develops Intellectual Property Rights and spends a sum of INR 30 Cr f) Infosys incurs huge selling and marketing expenditure of INR2390 Cr whereas the assessee has no such expenditure. g) Infosys s business model is different and onsite revenue constitutes 51.1% whereas the entire revenue of the assessee is offshore . h) Infosys has incurred INR 77 Cr on brand building and no such expenditure incurred by the assessee. i) Infosys incurred a sum of INR 873 Cr on R D which is more than assessee s turnover. j) In assessee s own case the ITAT has not considered Infosys Ltd as a comparable from A.Y 2005-06 to A.Y 2007-08 along with Tata Elxsi. 24. The learned DR, on the other hand, supported the orders of the authorities below. 25. Having regard to the rival contentions and the material on record, we find that in a number of decisions including the assessee s own case, Infosys Ltd has been held to be not comparable with any other software development company such as the assessee due to its huge turnover and high profit margin and also as it is into software products an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not comparable to the software development company like the assessee before us. The relevant portions has been reproduced by us in the above paras. Respectfully following the same, these two companies are also directed to be excluded from the final list of comparables. Thus, assessee s ground of appeal No.2 is partly allowed. 30. As regards Ground No.4 seeking inclusion of the companies, the learned Counsel for the assessee submitted that he is not pressing for inclusion of E-Zest Solutions Ltd, Marveric Systems Ltd, I Summation Techologies (P) Ltd, Akshay Software Technologies Ltd, Goldstone Technologies Ltd and Sankhya Infotech Ltd. Thus, in effect, the assessee is seeking inclusion of only Evoke Technoloies (P) Ltd and Sagarsoft India Ltd., 31. As far as Evoke Technologies Ltd is concerned, the TPO has rejected the said company as a comparable on the ground that from the annual report of the said company, it is noticed that the stand alone financials reported from 2013-14 include revenue and net profit figures of one Branch outside India also. The learned Counsel for the assessee brought to our notice that in the case of Infor (India) (P) Ltd, the Coordinate Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is not challenging the comparabilities of three companies i.e. Cross Domain Solutions (P) Ltd, Microland and Micro Genetic Systems Ltd. Therefore, in effect, the assessee is challenging the comparability of only Infosys BPO Ltd, E-Clerex Services Ltd and NPS Ltd. 35. As regards Infosys BPO Ltd is concerned, the assessee s objections are as under: a) The assessee is a captive service provider to its AEs and it uses its brand for its business purposes and Infosys is a top global brand . b) This company is not functionally similar and is engaged in different activities which are not comparable to the assessee. c) This company incurred huge marketing and selling expenses of INR 103 crores which constitutes about 5% of the revenue. d) This comparable also incurred INR 5 crores on brand building exercise. e) He further submitted that in the assessee s own case for the A.Y 200-11, this Tribunal has held this company to be a non-comparable to the assessee. 36. The Objections of the assessee with regard to E-Clerx Services are as follows: a) This company is engaged in rendering of ITeS services. It has both voice and non-voice based services and predom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival contentions and the material on record, we find we find that the Coordinate Bench of this Tribunal in the assessee s own case not only for the A.Ys 2009-10 for the A.Y 2010-11 has also considered this issue at Paras 6 to 9 in ITA No.221/Hyd/2015 which reads as under: 6. The TPO has selected many comparables and among them M/s. Infosys BPO Ltd., TCS e-serve Ltd., and Eclerx Services Ltd., were objected to on the reason of high turnover and functionally different. With reference to Infosys BPO, the objection was that the said company renders vide array of services and has high brand value and turnover is also very high. With reference to TCS E-serve Ltd., there was exceptional event as the company was taken over by Tata Consultancy Services in the year 2008-09 and heavy turnover is due to its takeover. Further, it was submitted that the company was functionally different as it has three different services and segmental information was not arrived. As far as E-clerx Services Ltd., it was submitted that this company caters to high end KPO services and cannot be compared to routine BPO services provided by assessee. The DRP vide para 3.10 has accepted the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s company has to be excluded from the list of comparables, it cannot be excluded. Such claim has to be supported by evidence on record. As regards the functional dissimilarity and huge turnover and brand value is concerned, we find that this Tribunal in assessee's own case for A.Y.2009-10 while considering the comparability of the assessee with Infosys BPO Ltd., has taken note of the possession of the brand value and intangibles which influenced the financial results of this company. The Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P. Ltd., (2013) 219 Taxman 26 (Del.), held that huge turnover companies like Infosys and Wipro cannot be considered as comparable to smaller companies like assessee therein. In the case before the Hon'ble High Court (supra), the turnover of the assessee was about ₹ 15.79 crores as against the turnover of ₹ 1016 crores of the Infosys. Considering these facts, the Hon'ble High Court had directed for exclusion of Infosys BPO because of its brand value and also on the grounds of functional dissimilarity and huge turnover. Though, the company before us is TCS e-Service Ltd., and not Infosys BPO, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arables . 39. Respectfully following the same, we direct the exclusion of Infosys BPO Ltd as well as E-Clerx Services from the final list of comparables in respect of ITeS. 40. As regards Ground No.5, the assessee is seeking inclusion of only two companies i.e. Informed Technologies Ltd and Ace BPO Services (P) Ltd. As regards Informed Technologies Ltd, the TPO did not accept this company as a comparable on the ground that this company has high non-current investment of ₹ 6.05 crores and further that it is a KPO. According to the assessee, it is also not a KPO but is an ITeS company and that its total Revenue is from the Call Centre Services only. He therefore, prayed that this company may be included in the list of comparables. 41. Similarly, as regards Ace BPO Services Ltd, the contentions of the assessee are that this company is functionally comparable and that it satisfies all the filters of the TPO and also that there are no related party transactions or the (RPT) of this company are negligible. It is also submitted that the financials of this company are very much available in the public domain and therefore, the findings of the TPO that the financial of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vis comparable companies. Even before us, the assessee has not shown how the working capital adjustment is required in the case of the assessee as comparable to the compared companies. Therefore, we do not see any reason to direct the AO/TPO to grant working capital adjustment to the assessee. Thus, ground No.9 is accordingly rejected. 48. As regards Ground No.10 with regard to interest on outstanding receivables, it is the case of the assessee that the interest on receivables is not an international transaction as notional interest cannot be brought to tax. Further, he also submitted that after making working capital adjustment, a separate adjustment of receivables cannot be made. He further submitted that without prejudice to the above arguments, since the receivables are in foreign currency, the rate of interest should be at LIBOR + and not SBIPLR rate as applied by the TPO. 49. Having regard to the rival contentions and the material on record, we find that the A.Y before us is 2014-15 and hence, the interest on receivables is an international transaction as it is subsequent to the amendment to section 92B of the I.T. Act. However, we are inclined to accept the alterna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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