TMI Blog2021 (1) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee - entire issue relating to Transfer pricing adjustment made in respect of Distribution Segment needs to be examined afresh by duly considering the Transfer Pricing study conducted by the assessee. Computation of deduction u/s 10A - Assessee claimed deduction u/s 10A of the Act without adjusting loss from other units - AO adjusted business losses of other units against the profits of Coimbatore unit and accordingly allowed deduction u/s 10A - HELD THAT:- We set aside the order passed by the AO on this issue and direct him to compute the deduction u/s 10A without adjusting losses as held in M/S YOKOGAWA INDIA LTD. [ 2016 (12) TMI 881 - SUPREME COURT] . - IT(TP)A No.513/Bang/2015 - - - Dated:- 27-1-2021 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Shri Darpan Kriplani, A.R. For the Respondent : Ms. Neera Malhotra, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the assessment order dated 27.01.2015 passed by the A.O. for assessment year 2009-10 u/s 143(3) r.w.s. 144C(13) of the Income-tax Act,1961 ['the Act' for short] pursuant to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cosmic Global Ltd. 14.97% 9. Sundaram Business Services Ltd. -12.31% 10. Jeevan Scientific Technology Ltd. (seg) 21.05% AVERGE 26.86% The average margin of the comparable companies was 26.86%. After allowing working capital adjustment of 0.23%, the TPO computed the adjusted margin at 26.63%. Accordingly, he made transfer pricing adjustment of ₹ 1,30,63,508/-. The Ld. DRP confirmed the same. 6. The Ld. A.R. submitted that the assessee seeks exclusion of following 3 companies: a) E-Clerx Services Limited b) Infosys BPO Limited c) ICRA online Limited (seg) The Ld. A.R. submitted that the above said 3 companies have been excluded in an identical case rendered in the decision by the Bangalore bench of Tribunal in the case of M/s. Akamai Technologies India Private Limited in IT(TP)A No.307/Bang/2015 dated 29.7.2020. Accordingly, he prayed for exclusion of above said 3 companies. 7. On the contrary, the Ld. D.R. supported the order passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has adjudicated identical issue and held that this company was not functionally comparable to an ITeS company such as the Assessee and for the reason that this company fails the export earning filter. Respectfully following the said decision, we uphold exclusion of this company from the list of comparable companies for the reasons given in this paragraph. 20. As far as exclusion of Infosys BPO Ltd., is concerned, the said company was excluded on the ground that the company is engaged in providing high-end integrated services, and whereas, the Assessee is engaged in providing low level back-office support services. Further, the company has huge brand name and owns significant intangibles. It is submitted that the brand name that is associated with Infosys Technologies Ltd. has an impact on the business operations of Infosys BPO. Also, during the financial year 2009-10, the company acquired all the outstanding membership interests of McCamish Systems LLC which constitutes a peculiar economic circumstance for which no reasonable adjustment could be made to mitigate its effect on the company's margin. Also, the company has incurred huge selling and marketing expenses and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that this company's function is dissimilar with the assessee company as it provides industry specialised services like data analytics, operations management and audits reconciliation services which cannot be compared to a BPO or IT Offshoring company. It was further contended that this company has abnormal profits and sales for the year. The ld. counsel further contended that this company was examined by the Tribunal in the case of Stream International Services (P) Ltd. (supra)and the Tribunal has held that even the company's functions are different, therefore it cannot be considered as comparable, following the order of the Mumbai Special Bench of the Tribunal in the case of Maersk Global Centres (India) (P.) Ltd. v. Asstt. CIT [2014] 43 taxmann.com 100/147 ITD 83 (Mum.) (SB). Therefore, this company may be excluded from the list of comparables. 38. The ld. DR simply placed reliance upon the order of the AO. 39. Having carefully examined the orders of lower authorities in the light of Tribunal's finding in the case of Stream International Services (P) Ltd. (supra), we find that the profile of this company was examined by the Tribunal in this case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transfer pricing adjustment made in respect of distribution segment. 10. The Ld A.R submitted that the assessee is engaged in the business of distribution of pharmaceutical products without making any value addition. Accordingly, he submitted that the Resale Price Method is the most appropriate method to bench mark the international transactions under this segment. In support of this proposition, he relied upon the decision rendered by the co-ordinate bench in the case of M/s Element 14 India Pvt Ltd vs. DCIT (IT(TP)A No.351/Bang/2016 dated 16.09.2020). 11. On the contrary, the Ld D.R placed her reliance on the decision rendered by co-ordinate Bangalore bench of Tribunal in the case of Kohler India Corp (P) Ltd vs. DCIT (2016)(67 Taxmann.com 200) and submitted that it is imperative to make close analysis of items which were bought by the assessee from its AE so as to verify whether such items were comparable with the items sold by the comparable companies. Accordingly, the Ld DR prayed that the matter may be restored to the file of the TPO. 12. We heard the parties on this issue and perused the record. We notice from paragraph 13.1 of the TPO s order that the TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the profits of Coimbatore unit and accordingly allowed deduction u/s 10A of the Act. The Ld CIT(A) also confirmed the same. 16. We heard the parties on this issue and perused the record. This issue has since been settled by Hon ble Supreme Court in the case of CIT Ans. Vs. M/s Yokogawa India Ltd (Civil Appeal No. 8498 of 2013 dated 16-12-2016). The relevant observations made by Hon ble Supreme Court are extracted below:- 16. From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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