TMI Blog2022 (5) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ist of comparables while determining the ALP in segment. Exclusion of ICRA Online Limited from the list of comparables - As relying on Lam Research India (P) Ltd [ 2021 (9) TMI 1379 - ITAT BANGALORE] we direct the AO/TPO to exclude ICRA Online Ltd. from the list of comparables while determining ALP of the international transactions. Seeking correct computation of operating margin of Mindtree Limited - As D.R. put no objection on this issue. Accordingly, we direct the AO/TPO to consider the correct operating margin of Mindtree Limited after giving opportunity to the assessee. Negative working capital adjustment - HELD THAT:- As decided in e4e Business Solutions India Pvt. Ltd.[ 2020 (12) TMI 1255 - ITAT BANGALORE] we are of the opinion that the assessee having no working capital risk no negative working capital adjustment is called for. Accordingly, this ground of the assessee is allowed Comparability - Companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowance of deduction under Section 10A - Exclusion of telecommunication expenses both from export sales and total turnover - HELD THAT:- After hearing both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The learned Transfer Pricing Officer ( TPO ) has erred, in law as well as on facts while making the following adjustments in the order passed under section 92CA and holding that transactions between the Appellant and its associated enterprise ( AE ) were not at arm's length. 5. The learned AO/TPO has erred, in law as well as on facts while incorrectly following the directions of the Hon'ble DRP and incorrectly computing an adjustment of INR 13,80,12,433 in the final assessment order. 6. The learned AO/DRP/TPO has erred, in law and on facts by not appreciating that the Appellant is a captive service provider, carrying out limited functions and assuming limited risks and therefore needs to be compared with appropriate comparable set. 7. The learned AO/DRP/TPO have erred in law and on facts by not appreciating the Transfer Pricing documentation prepared by the Appellant in the manner as required under the provisions of the Act and Income-tax Rules, 1962 ( the Rules ). 8. The learned AO/DRP/TPO have erred in law by conducting a fresh-search for comparable companies and by rejecting the search process carried out by the Appellant, without giving adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els between the Appellant and the potential comparable for both Software support and BPO support services segments. 19. The learned AO/DRP/TPO-has erred in by failing to appreciate the fact that transfer pricing is an anti-avoidance mechanism and since the Appellant is registered as an entity registered under the STPI and has claimed tax benefits under section 10A of the Act, the TP adjustment was not required to be made in view of the order passed by the Bangalore ITAT in the case of Philips Software Centre (P) Limited. 20. The learned AO/DRP/TPO erred in law and on the facts of the case by not correctly implementing the formula prescribed by the Organization for Economic Co-operation and Development ( OCED ) to carry out working capital adjustment to the operating profit margins of the comparable companies. 21. The learned AO/DRP/TPO has failed to appreciate the appellant's commercial judgment about the application of arm's length principle which is tied to the business realities. 22. The learned AO/DRP/TPO has erred in law and on facts of the case, in making several observations and findings which are based on incorrect interpretation of law and contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on October 15, 2020), which is detailed herein below. 29. The learned AO/TPO/DRP erred In facts and In law, by excluding following comparables from-the-final list of comparables: (a) Microgenetics Systems Limited (b) Informed Technologies India Limited (c) Cosmic Global limited (d) Mindtree Limited (e) e4e Healthcare Business Services Private Limited. 30. The learned AO/TPO/DRP erred in facts and In law, by Including ICRA Online Limited in the final list of comparables. 31. Without prejudice to other grounds of appeal, in the facts and in the circumstances of the case and In law, the learned AO/TPO has erred in computation of operating margin of following companies: (a) ICRA Online Limited (b) Mindtree Limited 32. The learned AO/TPO/DRP have erred, in law and in facts, by making negative working capital adjustment in relation to the services provided by the Appellant without appreciating the fact that the Appellant is a captive service provider and does not bear any working capital risk. 3. The assessee filed petition for admission of additional grounds stating that inadvertently these additional grounds were not rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) which are not pressed, accordingly dismissed as not pressed. 12. Ground No. 29 and additional ground with regard to ITES segment in ground No. 29(d) and 29(e), assessee wanted inclusion of the following comparables:- i) Mindtree Limited ii) e4e Healthcare Business Services Pvt. Ltd. 12.1. It is noted that the Department also in appeal Ground No. 7 and 11 wanted inclusion of these two comparables in ITP segment. Accordingly, we direct the AO/TPO to include these 2 comparables in the list of comparables while determining the ALP in segment. These grounds of the assessee as well as the Revenue are allowed. 13. In Ground No. 30, the assessee wanted exclusion of ICRA Online Limited from the list of comparables. The learned A.R. submitted that this comparable has been considered in the case of Lam Research India (P) Ltd. IT(TP)A Nos. 405 406/Bang/2016 dated 17/09/2021 for AY 2011-12 wherein it has been held as under:- The company is functionally dissimilar for the reason that the outsourced services segment of the company was engaged in the provision of high end consultancy services which cannot be compared to the assessee who was into provision of low end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher working capital will incur more interest cost which will reduce profitability. Hence no importance shall be given to pricing aspect. Since the assessee does not have any working capital risk, the question of negative working does not arise. 15.1. Respectfully following the above order of the Tribunal we are of the opinion that the assessee having no working capital risk no negative working capital adjustment is called for. Accordingly, this ground of the assessee is allowed. The appeal of the assessee is allowed for statistical purposes. ITA No. 202/Bang/2016: AY 2011-12 (Revenue's Appeal) 16. Ground Nos. 1 to 4 of the appeal is infructuous in view of issue is settled by the MAP and this issue relates to Corporate Segment in assessee's appeal. Accordingly, these grounds are dismissed. IT Enabled Segment 17. With regard to Ground No. 5 the learned D.R. challenged the exclusion of the following comparables: i) Accentia Technologies Ltd.: We find that this company is not considered as comparable in the case of Lam Research India (P) Ltd. in ITA No. 468/Bang/2016 for AY 2011-12 vide order dated 17.09.2021 wherein it was held as under:- Details reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. and Mindtree Ltd.: As discussed in the earlier part of this order vide para 15, these companies are excluded while deciding the assessee's appeal. Accordingly, these companies are excluded from the list of comparables. iv) Infosis BPO Ltd.: After hearing both the partis this company is excluded in the case of Dell International Service India P. Ltd. in ITA No. 593/Bang/2016 for AY 2011-12 dated 01.09.2021 wherein it is held as under:- 25. The revenue is challenging exclusion of Infosys BPO Limited by Ld. DRP. Before us the Ld. A.R. placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of PCIT Vs. H S Software Development and Knowledge Management Centre Pvt. Ltd. (Order dated 3.1.2018 passed in ITA No. 912/2017). We notice that the Ld. DRP has followed the decisions rendered by the coordinate benches in the case of Symphony Marketing Solutions India Pvt. Ltd. (supra) and in the case of International Speciality Products Pvt. Ltd. (ITA No. 218/Hyd/2014), wherein it is observed that Infosys BPO Limited cannot at all be considered as comparable to the assessee not only because of its size but also due to its brand value, diversified a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company's' software services segment is clubbed with its ITES segment and there is no breakup between the revenues generated from the two segments. During the year under consideration, the company has acquired majority equity interest in Patni Computer Systems Ltd. rendering it incomparable due to it failing the TPO's own filter of having peculiar economic circumstances. In addition, the company owns significant intangibles in its name, which is evident from the balance sheet of the company for the Financial Year 2010-11. For the reasons above, the company is not comparable to the Assessee and the DRP's findings on exclusion of iGate is right in law. As far as the company ICRA Online Ltd., is ITA No. 2900/Bang/2018 Page 8 of 16 concerned, the DRP excluded this company for the reason that the details regarding its diverse functions are reported under one segment without segmental details regarding the same being made available. Therefore, the comparability of the company cannot be determined. In any event, this company is functionally dissimilar for the reason that the outsourced services segment of the company is engaged in the provision of high end consultancy ser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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