TMI Blog2019 (1) TMI 1904X X X X Extracts X X X X X X X X Extracts X X X X ..... of written submissions. Hence, it cannot be said that the assessee had made this objection for the first time before this Tribunal. We also find that the objections made by the assessee with regard to this comparable namely Eclex Solutions Limited had not been disputed by the ld. TPO or by the ld. DRP by pointing out certain factual differences in the objections of the assessee, more particularly, with regard to the predominant activity carried on by the said comparable. We hold that Eclerx Solutions Limited should not be treated as a comparable as it is functionally different and we direct the ld. TPO to exclude the same from the list of comparables while benchmarking the international transactions for determination of Arm s Length Price, for this assessment year. We would like to make it clear that the grounds raised by the assessee with regard to other comparables are left open and no opinion is given by us in this order. Accordingly, the grounds raised by the assessee are allowed. - Shri C.N. Prasad, JM And Shri M. Balaganesh, AM For the Revenue : Shri Anand Mohan [CIT-DR]. For the Assessee : S/Shri Percy J. Pardiwala, Niraj Sheth Ms. Urvi Mehta. ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise Amount (in INR) Provision of ITES Services Integreon Managed Solutions Inc. 56,31,80,291 Integreon Managed Solutions Ltd., UK 4,98,30,637 Reimbursement of Expenses Integreon Managed Solutions Ltd., UK 27,574 Integreon Discovery Solutions (DC) Inc. 20,63,026 Grail Research, LLC 6,19,349 Integreon Managed Solutions (North Dakota) Inc. 5,99,979 Recovery of expenses IntegreonInc, BVI 45,000 Integreon Discovery Solutions (DC) Inc. 6,97,819 6. The segmental Net Cost Method (NCM) of the aforesaid transactions are tabulated below:- Particulars/Amount in Rs. Information technology support services. Operating revenues 61,68,50,976 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had specifically stated the following:- Eclerx provides a broad suite of services that allow clients to operate on a day to day basis including trade processing, reference data, accounting and finance, and expense management activities. The professional service practice includes consulting, business analytics and solution testing. The key sales and marketing functions eclerx supports include web content management merchandising execution, web analytics, social media moderation and analytics, search engine analytics and support, CRM platform support, lead generation, customer data management, supply chain and channel analytics, price catalogue competitive intelligence and broader data collection, cleansing, enriching and reporting. The relevant snapshot of the annual report is provided below for your good-self s reference: a. Income Income from operations The Company s income from operations consist of revenue from data analytics services and process solutions which comprises of both time / unit price and fixed fee based service contracts. Income from operations increased to ₹ 3,421.03 million in the year under review from ₹ 2,57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d solution testing. Our Key Differentiators As a leading offshore provider of end to end services to the sales and marketing universe eClerx has deep knowledge and process expertize that enable it to serve and adopt to the fast growing and evolving digital market place. We deploy skilled resources together with process redesign and automation to provide best inclass service delivery to industry leading firms. Our sales and marketing clients view us as trusted and expert partners and come to us for our business solutions and our ability to provide cost effective scaling to their operations. (Source Page 6 and 8 of the annual report 2010-11) Based on the above analysis, it can be said that the functions performed, assets used and risks undertaken between eclerx and the assessee is significantly different and not at all comparable. 10. It was also objected before the ld. TPO that the stand alone turnover of Eclerx Services Limited includes turnover of the subsidiary companies, which is evident from the financials of the said comparables. Since the stand alone financials of Eclerx Services Limited are not presented fairly, it was pleaded that the data cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers to benefit from further cost saving and output gains with better control over quality. Keeping in view the nature of services rendered by MIs eClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns. 83. For the reasonsgiven above, we are of the view that if the functions actually performed by the assessee company for its AEs are compared with the functional profile of MIs eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AOITPO as per the direction of the DRP.' Further, reliance is placed on the following judicial precedents wherein the said co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a comparable company. 14. We find that these objections were also raised by the assessee before the ld. DRP. The Revenue had not met any of these objections in its orders. The learned AR placed reliance on various judgments of the co-ordinate Bench and the Hon ble jurisdictional High Court on the ground that the company which is predominantly engaged in outsourcing activities could not be considered as a proper comparable while benchmarking the international transaction. 15. The learned DR, on the contrary, argued that after giving a finding that whether the assessee is KPO or BPO, then the case laws relied upon by the ld.AR could be looked into by this Tribunal. 16. We have heard the rival submissions. We find in the facts of the instant case and in the light of the arguments advanced by both the sides, we feel there is no need to address the preliminary issue as to whether the assessee is a BPO or KPO. We find that the ld.AR was very fair in stating that once the comparable Eclex is excluded from the list of comparables chosen by the ld. TPO, then its margin would be through, warranting no adjustment to ALP in respect of international transaction carried out by it. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -much as it outsources its work to sub-vendors as against the Respondent-Assessee carrying out its activities in-house. (Underlining provided by us ) (b) The grievance of the Revenue is that both the Coral Hub Ltd. as well as the Respondent-Assessee are in the field of Information Technology Enabled Services. Therefore, by virtue of above fact, they become comparable. (c) It is obvious that merely because the tested party and the comparable provide ITES, they do not become comparable. The content of the services rendered by virtue of IT is to be examined before holding it to be comparable. Besides, the two are not comparable as the business model in both are different i.e. outsourcing in one and in-house in the other. We further note that the impugned order of the Tribunal places reliance upon the decision of the Tribunal dated 30.10.2013 of its co-ordinate bench in the case of PTC Software India (P.) Ltd. which also excluded M/s. Coral Hub Ltd. (formerly known as 'Vishal Information Technologies Ltd.'). Mr. Suresh Kumar the learned counsel for the Revenue very fairly states that being aggrieved by the above order an appeal was filed to this Court being I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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