TMI Blog2019 (9) TMI 1486X X X X Extracts X X X X X X X X Extracts X X X X ..... No.169/Bang/2016 - - - Dated:- 6-9-2019 - Shri A.K. Garodia, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member Assessee By: Shri Chavali Narayan, C.A. Revenue By: Dr. P. V. Pradeep Kumar, CIT(D.R) ORDER Shri Pavan Kumar Gadale, The assessee has filed an appeal against the order passed under Section 143(3) r.w.s. 144C(13) of Income Tax Act, 1961 in pursuance to the Directions of Dispute Resolution Panel (DRP) Order Dt.13.11.2015. 2. The learned Authorised Representative at the time of hearing filed revised and modified grounds of appeal and submitted that Ground Nos.1 2 are general in nature and is not pressing Ground Nos.3, 7, 8 9 and made endorsement. Whereas the Ground No.12 is consequential and the effective grounds of appeal are Ground Nos.4, 5, 6, 10 11 which are mentioned hereunder :- 3. The Brief facts of the case are that the assessee is engaged in the business of medical transcription and is a subsidiary of Acusis Holding Co. Ltd. British Virgin Islands which is a wholly subsidiary of Acusis LLC, USA and the company registered as a private company engaged in medical transcription services to Acusis LLC and is remunerated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e comparables i.e. Accentia Technologies Ltd. and ICRA Online Ltd., since the DRP has confirmed the action of the TPO. The ld. AR submitted that 6 comparables are to be included and relied on the judicial decisions of EMC Software and Sitel India Pvt. Ltd. and Finastra Software Solutions for the same Assessment Year 2011-12. Similarly, the learned Authorised Representative prayed for inclusion of comparables of E4E Healthcare Business Services Pvt. Ltd., Cosmic Global Limited, Informed Technologies India Limited, Microgenetic Systems Ltd., Calibre Point Business Solutions Limited and R. Systems International Limited. The contention of ld. AR on the issue of inclusion of comparables covered in assessee's own case where 6 comparables are included for the Assessment Years 2009-10, 2010-11 and 2012-13 and supported with the decision of Hon'ble Delhi High Court. On the other issues with respect to Working Capital Adjustment and Foreign Exchange fluctuation, the assessee could not able to submit the details and prayed for restoring to the file of TPO and ld. DR supported the orders of lower authorities. 5. We heard the rival contentions and perused the material on record. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, this company is also stated to have income from coding which is substantial. The ld counsel for the assessee placed reliance on the decision of the ITAT Bangalore Bench in the case of M/s Swiss Re Shared Services India Pvt. Ltd., Vs. ACIT in IT(TP)A No.380/Bang/2016 order dated 8/7/2016 for assessment year 2011-12. Our attention was drawn to the order of the paras 9 to 20 of the order of the Tribunal, wherein the Tribunal has considered comparability of this company in the ITES segment and has held as follows:- 09. Adverting to Accentia Technologies Ltd, Ld. AR submitted that the said company had inorganic growth during the relevant previous year due to creation of a US based localised front-end company. As per the Ld. AR, Accentia Technologies Ltd, was doing outsourcing work as well as coding. Coding work fell within the realm of software development only. According to the Ld. AR, medical transcription earnings of Accentia Technologies Ltd, comprised of preparation of customised notes of patients, record keeping of patients, insurance verification of patients, appointment scheduling of patients, providing accessible practice management system, providing EMR systems including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt.10.08.2015], Ld. AR submitted that there could be high-end and low-end services which may not be comparable. As per Ld. AR in the case of assessee, it was doing low-end BPO services in the field of insurance and could not be compared with a high-end service provider in the medical field. 12. We have perused the orders and heard the rival contentions. Twentieth annual report of Acentia Technologies Ltd, for financial year 2010-11 has been filed at paper book page 491 to 568. In the part captioned 'Management discussion and Analysis', the company mentioned its medical transcription business being moved from a low-end category to a high-end category. Management of the said company had decided to acquire necessary skills inorganically so that it could do medical coding and provide end to end services in HRCM. In what is called by the said company as EMR method, it captured and stored all demographic and clinical data in data base format rather than keeping physical reports as done in orthodox medical transcription methods. That M/s. Accentia Technologies Ltd, was providing integrated end to end software services and remodelling its own business is clear from page 25 of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will not be correct to compare the results of two companies. 19. In the case of Amba Research India P. Ltd (supra), this Tribunal had directed exclusion of Accentia Technologies Ltd, for comparison purposes. Assessee in the said case was providing ITES services to its holding company at British Virgin Islands. Observation of the Tribunal at para 8 of the order dt.09.03.2016, is reproduced hereunder : 08. We have perused the orders and heard the rival contentions. No doubt Accentia Technologies Ltd, formed a part of the list of comparables considered by the assessee in its TP study. However assessee had objected to its inclusion citing functional dissimilarity before the AO as well as the DRP. Question regarding comparability of Accentia Technologies in the ITE segment for A. Y. 2010-11 had come up before this Tribunal in the case of Novo Nordisk India P. Ltd (supra). It was held as under at paras 31 and 32 of the order dt.30.07.2015 : 31. We deal with the comparable companies which the Assessee seeks exclusion. 1. Accentia Technology Ltd., 2. Infosys BPO Ltd. The comparability of these company with a ITES company was considered by this Tribunal in the case of Paraxel Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies for inorganic growth as its strategy. In earlier years on the reason of acquisition of various companies, being an extraordinary event which had an impact on the profit, this company was excluded. As submitted by the learned counsel, this year also, the acquisition of some companies by that company may have impact on the profit. Considering the profit margins of the company and insufficient segmental data, we are of IT(TP)A No.146/Bang/2015 Page 42 of 52 the opinion that this company cannot be selected as a comparable. Moreover, this is also not a comparable in the case of M/s. Mercer Consulting (India) P. Ltd. (supra), which indicates that the TPO therein has excluded it at the outset. In view of this, we direct the Assessing Officer/TPO to exclude this comparable, from the list of comparables selected. 13. As pointed out by the learned counsel for the assessee, there was acquisition of a company by M/s. Accentia Technologies Limited during the relevant year, and the said company, therefore, cannot be considered as comparable due to this extraordinary event which occurred in the relevant year as rightly held by the Tribunal inter alia in the case of Excellence Data Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to above, we direct that the aforesaid 2 companies be excluded from the list of comparable companies for the purpose of computing arithmetic mean for comparability purpose. The TPO is directed to give effect accordingly. Even after exclusion of Accentia Technologies Ltd, along with the exclusion of four comparable companies directed by DRP, there will be four companies left in the list of comparables which, in our opinion, cannot be considered as too small a sample for an effective TP study. In the circumstances, we direct exclusion of Accentia Technologies Ltd also from the list of comparables. Ordered accordingly. 20. No doubt the said decision was for A. Y. 2010-11, but the conditions which prevailed in the said previous year more or less existed in the impugned assessment year also. Considering all these aspects, we are therefore of the opinion that Accentia Technologies Ltd, was not a good comparable for the purpose of ALP study of the assessee. 30. The learned DR brought to our notice the decision of the DRP at Para-25 of its order on the comparability of this company. He brought to our notice that this company was found comparable in ITES segment with the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices, (ii) Software Services and (iii) Outsource Services It is further stated that the TPO has considered the operations of the 'Outsourced Services' segment as comparable to the operations of the appellant. The Ld. counsels argue that the annual report of the company does not provide any description as to the nature of the services contained in the segment. However, a reference may be drawn to the annual report of ICRA Ltd., the holding company of ICRA from where it can be seen that the outsourced segment of the company relates to KPO and online software services. The Ld. counsels further submit that the ITAT in appellant's own case for AY 2010-11 has followed the Tribunal discussion in the case of Tesco Hindustan Service Centre Pvt. Ltd. v. DCIT (ITA No. 191/Bang/2015) to reject the company functionally not comparable to the appellant i.e. companies not engaged in providing ITeS (BPO Services). In this regard, reliance is placed by them on the following orders of the Tribunal : (i) M/s Sitel Operating Corporation India Pvt. Ltd. (since amalgamated with Sitel India Pvt. Ltd.) v. ITO (ITA No. 598/Bang/2015 ITA No. 452/Bang/2015) dated 25 April 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Centre Pvt. Ltd. (supra) to reject the companies functionally not comparable to the appellant i.e. companies not engaged in providing ITeS (BPO) service. In the case of Tesco Hindustan Service Centre Pvt. Ltd. (supra), ICRA has been held to be non- comparable to an ITeS service provider. Accordingly, following the decision of Tesco Hindustan Service Centre Pvt. Ltd. (supra) and the observations in the Tribunal decision in appellant's own case for AY 2010-11, we reject ICRA Online as a comparable. Considering the decision of EMC Software and Services (India) Pvt. Ltd. discussed the Accenture Technologies Ltd. cannot be considered as comparable with assessee company in ITES. We direct the TPO to exclude the comparable for determining ALP. Similarly ICRA Online Limited is directed to be excluded for determining ALP based on the decision of Tribunal in Sitel India Pvt. Ltd. Vs. DCIT (supra). 6. On the second issue of inclusion of comparables, the ld. AR submitted that 6 companies are to be included which are as under :- (i) E4E Healthcare Business Services Pvt. Ltd. turnover is ₹ 61.32 Crores and is engaged in providing healthcare outsourcing services. The TPO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and functionally comparable as the company is involved in the provision of Medical transcription charges. Whereas the TPO rejected the company due to non- availability of data in the public database and also the DRP rejected the company stating that expense to the extent of 23% of total cost has been incurred in outsourcing of the medical transcription activity. Further the company has significant employee costs. This indicates that the company is not purely in outsourcing model and operate primarily through its own employees. The TPO has not cited any instances of functional dissimilarity and the DRP has made assumptions regarding the total expenses, without giving regards to the assessee's contentions on functional comparability and was conducted by TPO as comparable to the Asst. Year 2012-13. TPO order for Asst. Year 2012-13 referred above. (iv) Caliber Point Business Solutions Limited is having turnover of ₹ 79.07 Crores and functionally comparable and is engaged in comparable services and has segmental information. The TPO and the DRP rejected this company on the basis of different financial year ending. Though the company had different financial year ending, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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