TMI Blog2022 (1) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... Comparable selection - E- Clerx Services Ltd - Functions performed by E-Clerx Services Ltd. takes the nature of high end analytical and research services which require manpower of specific qualifications, skill sets and domain knowledge in contrast to the Assessee rendering back office support services. E-Clerx Services Ltd. works on outsourcing model and outsources substantial amount of work. In the subject year, 22.07% of the total cost of the company that has been paid to the outside vendors for availing of IT enabled services. As such it cannot be compared to the Assessee which provides in-house back office services to AEs. Infosys BPO Ltd - This comparable company is a giant engaged in providing high-end integrated services by assisting its clients in improving their competitive positioning by managing their business processes in addition to providing increased value, whereas the Assessee engaged in providing IT Enabled services. Infosys BPO has high value of goodwill. Infosys BPO owns significant intangibles. Infosys BPO acquired Portland Group Pty. Limited during the FY 2011-12. The acquisition has enhanced the presence of Infosys BPO in high end sourcing and procureme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 253(1) of the Income-tax Act, 1961 ( the Act ) against the order dated August 31, 2016 (received on September 1, 2016) passed under section 143(3) of the Act read with 144C of the-Act by the Assistant Commissioner of Income Tax, Circle 9 (2), Delhi ( AO ) for the assessment year 2012-13, pursuant to the directions of Dispute Resolution Panel ( DRP ) under section 144C(5) of the Act GROUNDS OF APPEAL 1. That on the facts and circumstances of the case and in law, the assessment order dated August 31, 2016 under section 143(3) of the Act, pursuant to the directions of the DRP, assessing the total income of the Appellant at ₹ 34,84,50,690, as against returned income of ₹ 23,32,06,570, is bad in law. 2. That on the facts and circumstances of the case and in law, the AO/ Transfer Pricing Officer ( TPO )/ DRP erred in making an upward transfer pricing adjustment of ₹ 11,52,44,123 in respect of the international transaction pertaining to provision of Information Technology enabled Support Services ( ITeS ), alleging the same to be not at arm s length in terms of the provisions of Sections 92C(1) and 92C(2) of the Act read with Rule 10D of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons with relation to primary activity of its Associated Enterprises ( AEs ) which is trading in derivatives in Europe and US exchanges. The support functions are provided as per specified guidelines, training and rules laid down by the AEs. Summary of International Transaction and benchmarking approach adopted by the assessee is as follows: Sr. No. Nature of Transaction AE Amount (INR) Method 1 Provision of IT enabled Services Indus Derivatives Ltd Mauritius 142,84,37,885/- TNMM The assessee company filed its return of income on 10.09.2012 declaring total income at ₹ 23,32,06,570/-. During the year under consideration, the assessee company has made the international transaction with the associated enterprises and a reference in this regard was made to the Transfer Pricing Officer vide letter dated 12.01.2015 u/s 92CA(3) of the Income Tax Act, 1961 in respect of international transaction entered into by the assessee during A.Y. 2012-13. The TPO passed order dated 29.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that Rule 10B(2) categorically provides that comparability shall be judged, inter alia, with reference to specific characteristics of the services provided. Therefore, where the services provided by the assessee and that of comparables, are materially different, the comparable has to be ignored. The Ld. AR further submitted that the reliance on Safe Harbour rules by the DRP/TPO is misplaced. In fact, the DRP has itself admitted that Safe Harbour Rules are not applicable for the subject assessment year, yet reliance has been placed to justify assessee s classification as KPO. The Ld. AR relied upon the decision of Delval Flow Controls Private Limited v DCIT in ITA 640/PUN/2017, order dated 20.01.2021 and Dana India Private Limited v. DCIT in ITA No. 473/PUN/2018. 6. The Ld. DR relied upon the Assessment Order, order of the TPO and the directions of the DRP. 7. We have heard both the parties and perused the material available on record. It is pertinent to note that the Revenue at no point of time disputed the functions of the assessee company. The assessee company provides back office support services to AEs with the help of tools, infrastructure and training p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the comparable company is engaged in rendering wide variety of services including KPO, sales and marketing functions but no segmental data is available. As per annual report of the company, the company operates under a single segment viz. Data Analytics and Process Outsourcing Services . The Ld. AR relied upon the following decisions: Rampgreen Solutions Pvt. Ltd v. CIT (ITA 102/2015 (Delhi High Court) Agilent Technologies (International) Pvt. Ltd. v. ITO (ITA No. 1620/Del/2015, 477 642O/DEL/2016) PCIT v. B.C. Management Services Pvt. Ltd., (ITA No. 1064 1083/2017 (Delhi High Court) BC Management Services Pvt. Ltd. vs. DCIT ITA 6134/Del/2015, 5829/Del/2015 ITA No. 6572/Del/20l6) Copal Research India Pvt. Ltd. v. ITO (ITA No. 1713/Del/2014) PCIT v. Actis Global Services Pvt. Ltd. (ITA 417/2016 (Delhi High Court)) Actis Global Services Pvt. Ltd. v. ITO (ITA No. 30/Del/2015) DCIT v. DBOI Global Services Pvt. Ltd. (ITA No. 2136/Mum/2012) 8.2 The Ld. DR relied upon the order of the TPO. 8.3 We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Pvt. Ltd. v. ITO (ITA No. 30/Del/2015) * DCIT v. DBOl Global Sendees Pvt. Ltd. (ITA No. 2136/Mum/2012) * PCIT v. Sanvith Info Group Pvt. Ltd. (ITA 420/2019 (Delhi High Court)) * Agilent Technologies (International) Pvt. Ltd. vs. ITO (ITA No. 1620/Del/2015, 477 6420/DEL/2016) * Smart Analyst India Private Limited Vs ACIT (ITA No.3779 3989 Del 2017) 8.5 The Ld. DR relied upon the assessment order and the order of the TPO. 8.6 We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that this comparable company is a giant engaged in providing high-end integrated services by assisting its clients in improving their competitive positioning by managing their business processes in addition to providing increased value, whereas the Assessee engaged in providing IT Enabled services. Infosys BPO has high value of goodwill. Infosys BPO owns significant intangibles. Infosys BPO acquired Portland Group Pty. Limited during the FY 2011-12. The acquisition has enhanced the presence of Infosys BPO in high end sourcing and procurement space in Asia Pacific Region. Thus, this comparable company has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2010-11. Hence, we direct the TPO/AO to include this comparable company in final set of comparable. 9.4 Jindal Intellicom Ltd.: The Ld. AR submitted that the assessee is not a high-end KPO, as alleged by the DRP. Jindal Intellicom Ltd. passes all the filters applied by the TPO and is functionally comparable to the assessee. It was selected by the TPO/DRP in the preceding year as well i.e. F.Y 2011-12. Given there has been no change in functional profile of Jindal Intellicom or the assessee, following the principle of consistency, this comparable ought to have been retained. Detailed submissions were filed by the assessee before lower authorities. The Ld. AR relied upon the following decisions: * Radhasoami Saisang vs. CIT (1992) 193 1TR 321 (SC) * CIT vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC) 9.5 The Ld. DR relied upon the assessment order and the order of the CIT(A). 9.6 We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that as we have observed hereinabove in respect of Ground No. 4, the assessee is not a high-end KPO. Jindal Intellicom Ltd. passes all the filters applied by the TP ..... 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