TMI Blog2018 (3) TMI 1920X X X X Extracts X X X X X X X X Extracts X X X X ..... for the comparability analysis with respect to the advisory service segment of the assessee. Hence, we direct the ld TPO for their inclusion accordingly. Inclusion of Ladder Up Corporate Advisory Pvt. Ltd which has the PLI of 30.72% - It is admitted fact that the comparable selected by the ld Transfer Pricing Officer is engaged in twin activities Investment banking and merchant banking services along with investment advisory services. Further, no segmental information with respect to the advisory services is made available. Further, the ld TPO himself has excluded the investment banking activity from the comparability analysis we do not find any reason to keep this comparable incomparability analysis in absence of segmental information available. Hence, the TPO is directed to exclude this company Exclusion of Inmacs Management Services Ltd, a comparable selected by the ld Transfer Pricing Officer having 42.66% of the PLI - The comparable company undisputedly is providing advisory services coupled with investment banking services and dispute resolution services. The ld TPO has accepted that investment banking segment is not comparable with the advisory segment. Therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant at the time of complying with the Indian TP documentation requirements. Ground No. 4 The learned TPO / AO / DRP have erred, in rejecting certain comparable companies selected by the Appellant by applying inappropriate comparability criteria such as: a. Turnover less than INR 1 crore; b. Different accounting year; c. Employee cost less than 25 percent of total cost; and d. Export turnover less than 75 percent of operating revenues. Ground No. 5 The learned TPO/ AO/ DRP have erred in selecting certain companies (which are earning supernormal profits) as comparable to the Appellant to benchmark the impugned transactions. The learned TPO/ AO/ DRP have erred in wrongly rejecting certain companies from and icluding certain companies to the set of final comparables for the impugned transactions on an ad-hoc basis, thereby resorting to cherry picking of comparable for benchmarking the impugned transactions. Ground No. 7 The leaned DRP has erred in not adjudicating certain objections raised by the Appellant in respect of certain companies identified as comparable by the learned TPO, thereby not passing a speaking orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as passed determining total income of the assessee at ₹ 209729400/- against returned income of ₹ 179039040/-. Against this order the assessee has preferered this appeal. 4. Ground No. 1 and 2 of the appeal are general in nature and therefore, same are dismissed. 5. Ground No. 7, 8 and 9 of the appeal were not pressed before us and therefore, they are dismissed. 6. Ground No. 3, 4, 5 and 6 are related to transfer pricing adjustment in various segments and therefore, they are dealt with together. 7. The brief facts shows that assessee is a captive service provider and provides back office support services, advisory support services to its associated enterprises. For the year it entered into international transaction of back office support service of ₹ 463699081/- and advisory support services of ₹ 106511297/-. The appellant computed its margin of 14.86% and 15.83%. Margin of the comparable companies was taken at 8.17% and 9.17 % and therefore, same was stated to be at arm s length. The assessee also provides software development and maintenance services and there is no dispute with respect to international transaction in that services. The ld Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices in the nature of business platforms, customer service outsourcing, finance and accounting LPO, HR outsourcing, sourcing and procurement outsourcing etc. The company also has a high brand value of goodwill and has acquired a company or by the name McCsmish Systems LLC to provide end-to-end solutions. 10.20. Ld.DR, however, refer to the extracts made by the ld.TPO in the order to submit that Infosys BPO Ltd. is a comparable company with that of assessee. The ld.DR relied upon the extract of the decision of Hon'ble Delhi High Court in the case of Chris Capital Investment vs. DCIT (supra), which has been reproduced hereinabove. 10.21. After considering the rival submissions and pursuing the relevant material on record, we find that for the year under consideration, this company has had extraordinary financial events. It is noted that the company is providing high end integrated service by assisting its clients in improving their competitive positioning by managing their business process in addition to providing increased value. On the other hand, assessee is engaged in providing routine support services in the nature of data collection and analysis which is low en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve best in class services. During the year under consideration, this company has made payments towards use of Tata brand. Consequentially use of the TCS brand has substantially increased the operating profits post acquisition. It is observed from the order passed by ld.TPO for assessment year 2009-10 that the ld.TPO himself had not considered this company as a comparable. Without any proper reason or change in the functionality and financial data for the year under consideration, it cannot be held that this company can be considered as a comparable. The Ld. TPO has to bring some material on record to show that's why this comparable was a bad comparable, in the previous year and in the succeeding year it is a good comparable. Admittedly neither the TPO nor the Ld. DR has been able to demonstrate the difference in the functionality and financial data. Hence following the rule of consistency, we are of the opinion that this company cannot be considered as comparable for the year under consideration. We therefore direct to exclude this comparable. 14. The ld Departmental Representative could not point out any reason that why the above decision of the coordinate bench should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t R Systems International Ltd., should not be considered comparable with assessee. 10.39. After considering the rival submissions and pursuing the relevant material on record we find that the ld. TPO has not pointed out exact difference, the change of accounting year has made to the financial results of the comparable. The ld.TPO has further not pointed out whether it would not be possible to restate those financial results for a different accounting period without significant change in net profit margins or any other parameters considered relevant. Multinational companies generally operate in different geographical regions and different countries follow different accounting or financial years, functionally similar or even identical companies, cannot be held to be incomparable, only owing to differences in the date of ending of the financial year. As most of the business enterprises operate on the going concern concept, which is so fundamental to present the accounting, the PB at concept used in accounting is just an artificial means to reckon the operating results of business operation at a given point in time and nothing would turn up on changing the end of accounting period from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. The ld Departmental Representative could not show us any reason to deviate from the decision of the coordinate bench. In view of this we direct the ld Transfer Pricing Officer to include R System International Ltd as comparable company as the above company is found functionally comparable. Further, with respect to the mismatch of the FY the assessee is directed to provide audited, publicly available financial information with respect to quarterly results of the company to reconstruct the comparative financial year s financial data to the ld Transfer Pricing Officer. 19. With respect to CG Vak Software Ltd the contention of the ld DR is that it is functionally dissimilar and incurring persistent operating losses. To this the ld AR submitted that assessee has considered the segmental results which are placed at page NO. 539 of the compilation. It was further stated that it is not a persistent loss maker as that company earned profit in FY 2010- 11 on entity basis and in FY 2009-10 on segmental basis. It was further submitted that order of the coordinate bench for AY 2010- 11 same has been directed for inclusion. The ld Departmental Representative submitted that in the BPO serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t objection of the assessee is with respect to the advisory support segment wherein, it is pressing for inclusion of ICRA Management and Consulting Services Ltd as well as Cyber Media Research Ltd. 23. The ld AR submitted that the Transfer Pricing Officer has accepted these companies as comparable in AY 2009-10 whereas, for this year it is stated that they are functionally dissimilar. 24. The ld DR submitted that ICRA Service Spectrum is very wide compared to the assessee and further, with respect to the Cyber Media Research Ltd it is also engaged in very high end services. 25. We have carefully considered the rival contentions and find that ICRA is providing consulting and advisory services and Cyber Media Research Ltd is engaged in research and consulting services. Though both have different segment of advisory services however, the ld TPO has accepted ICRA as comparable company in AY 2009-10 as well as in AY 2011-12. He has further accepted Cyber Media as comparable in AY 2009-10. In view of these facts we do not find any reason that this companies should not be included for the comparability analysis with respect to the advisory service segment of the assessee. Hence, ..... 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