TMI Blog2016 (9) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... , here also we are of the opinion that whether M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. could be considered as good comparables have to be looked afresh by the Assessing Officer/TPO. We, therefore, set aside the orders of the authorities below and remit the issue regarding the comparability of M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. back to the file of the Assessing Officer/TPO for consideration afresh in accordance with law. Assessee is free to raise all its objections against inclusion of the above companies before the Assessing Officer/TPO and these have to be considered by the Assessing Officer/TPO while passing the orders. Computation of the PLI of the comparable companies selected was not properly done - Profit level indicator considering the margins prior to depreciation would give better results in the comparable analysis and benchmarking of the transactions of the assessee in the given facts and circumstances. We direct the Assessing Officer/TPO to rework the PLI of the comparables after excluding the depreciation cost and benchmark the PLI of the assessee also excluding the depreciation cost. Ordered ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... segment (ITES). Assessee had selected TNM method as the most appropriate method for bench marking such international transactions. 14 comparables were selected by the assessee and it calculated the weighted PLI of 10.6% for these 14 companies. The comparables selected by the assessee were from the prowess and capital line plus database. Assessee had worked out its net margin at 14.5% and thus, as per the assessee, there was no requirement for any adjustment on the pricing of its international transactions with the AEs. 6. When the matter was referred to the TPO, for various reasons mentioned in the TPO s order, he rejected ten companies considered by the assessee. The TPO reached a final set of comparables of four and arrived at the arithmetical mean of the PLI of such comparables as under: Sr. No. Name of the company OP/TC)% 1 Cosmic Global Ltd 48.10 2 E4E-Health Solutions Ltd [formerly known as Nittany Outsourcing Services Pvt. Ltd] 33.31 3 R Systems International Ltd.(seg) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt previous year for arriving at its PLI. This aspect, as per the ld. AR was brought to the specific notice of the DRP in its objection filed before the DRP. However, the DRP for the very same reason as it took for M/s Cosmic Global Ltd rejected the contention of the assessee. 11. In support of his pleading for exclusion of M/s Comic Global Ltd, reliance was placed by the ld. AR on the decision of Pune Bench of this Tribunal in the case of Schlumberger Global Support Centre Ltd vs Dy. DIT(Intl. Taxn-II) in I.T.A.No.86/PN/2013 dated 30.10.2015. Ld. AR submitted that the said decision was also for the very same assessment year(2009-10) and also on ITE segment. In support of his ground for exclusion of M/s E4E Healthcare Business Services Pvt. Ltd. the ld. AR placed reliance on the decision of Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd vs DCIT in I.T.A.No. 1478/Del/2015 dated 21.12.2015. 12. Per contra, the ld. DR submitted that assessee having selected the two companies by itself in its TP study should not be allowed to turn down and argue that these were functionally different. Further, according to him, the reasons mentioned by the assessee for exclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO. We, therefore, set aside the orders of the authorities below and remit the issue regarding the comparability of M/s Cosmic Global Ltd and M/s E4E Healthcare Business Services Pvt. Ltd. back to the file of the Assessing Officer/TPO for consideration afresh in accordance with law. Assessee is free to raise all its objections against inclusion of the above companies before the Assessing Officer/TPO and these have to be considered by the Assessing Officer/TPO while passing the orders. 14. Vide its Ground Nos. 6 7, grievance raised by the assessee is that computation of the PLI of the comparable companies selected was not properly done. 15. Ld. AR submitted that assessee was charging depreciation at a rate much higher than what was prescribed by Schedule XIV of the Companies Act, 1956. As per the ld. AR, out of the four comparables considered by the TPO, M/s Cosmic Global Ltd, M/s Informed Technologies India Ltd and M/s R Systems International Ltd. had charged depreciation as per Schedule XIV rates. Reliance was placed on pages 175, 185 and 202 of the paper book. As against this, ld. AR submitted that assessee had a higher rate of depreciation than what was stipulated in Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Loss account there are different prevalent recognized methods of depreciation. Some Assessee opt for Straight Line method, some opt for Written Down method and some opt for Sum of Digit method or even Replacement Cost method. Selection of each method will affect the rate and quantum of depreciation even if the nature of the asset is the same and ultimately, the net profit derived by the company will vary. For determining the fair and true profit, in our opinion, it is appropriate that the effect of the depreciation must be excluded out of the operating profit for determining the operating profit ratio. Therefore, the best way of computing the operating profit, in our opinion, will be to compute the profit before depreciation in respect of each of the company. This will take out the inconformity or the variation in the profit level of the comparables arising due to adoption of different method of charging depreciation. We have gone through the order of the Bombay Bench of this Tribunal in the case of DCIT vs. Reuters India 24 ITR (Trib) 231 (Mum) as has been relied on by the ld. AR. We noted that the Tribunal in this case has adopted the cash profit/operating cost as the correc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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