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TMI Blog2022 (12) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Act for making an upward transfer pricing adjustment. 2. The first issue raised by the Assessee is as regards to the order of the Assessing Officer / Transfer Pricing Officer in pursuance to the directions issued by the Dispute Resolution Panel resulting in the adjustment to the value of international transaction of the Information Technology Enabled Services (ITeS) provided to its Associated Enterprises (AEs) which is contrary to the facts and circumstances and in law. For this, the Assessee has raised various grounds numbering from 2 to 2.6 where various facets of arguments are narrated which need not be reproduced. 3. The learned Counsel for the Assessee at the start of the hearing had made only one submission that the Bench can hear in respect of the exclusion of two comparables; i.e., Cosmic Global Limited and Infosys BPO Limited. The learned Counsel for the Assessee took us through the TPO's order and the order of the Dispute Resolution Panel [DRP] and stated the facts in regard to the Cosmic Global Limited and as to how this comparable cannot be compared with the Assessee and that it should be rejected. 3.1 The learned Counsel for the Assessee stated that Cosmic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Dispute Resolution Panel [DRP] which reads as under: "3.2 The Panel has already held that the functions of the Assessee are fairly complex and diverse. Making MIS, a complex presentation, etc., for the AE is fairly complex in nature. These are jobs requiring highest levels of skills. Accordingly, the Panel holds that the functions of the Assessee are complex and need very high degree of skill sets. The Assessee has not given any correlation between the outsourcing and the operating margin. Translation charges do not mean that work is being outsourced which is not indicated otherwise in the report. It is also seen that under TNMM only broad functional comparability to be considered and not precise matching. In addition to this it was Assessee's own comparable. The panel holds the Cosmic Global Limited is a valid comparable and the objections are rejected." 5. In view of the above, the learned Counsel for the Assessee stated that the comparable included by the Revenue on Cosmic Global Limited is to be rejected. 6. On the other hand, the learned CIT-DR, Mr. M. Murali relied on the order of the Transfer Pricing Officer and that of the Dispute Resolution Panel for inclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order giving appeal effect to the Tribunal's order for the Assessment Year 2010 - 2011 vide order No. ITBA/TPO/F/92CA3/2019-20/1019437506(1); dated 25.10.19; wherein the Assessing Officer has excluded M/s. Cosmic Global Limited from the comparables vide paragraph no.3, as under: "3. The Hon'ble Tribunal, in its order ITA No.973/Chny/2015; dated 03.04.2018 has remitted the matter to the file of the TPO for the verification of the following comparable companies: a. M/s. Cosmic Global Limited b. M/s. Fortune Infotech Limited c. M/s. Jeevan Scientific Technology Limited d. M/s. Caliber Point Business Solutions Limited & e. R Systems International Limited The contention of the Assessee to exclude M/s. Cosmic Global Limited and M/s. Fortune Infotech Limited from the list of comparable company is accepted." We noted that this year there is no difference on facts as is observed from the TPO's order as well as the DRPs order and the facts being exactly identical, we direct the Assessing Officer to exclude this comparable while benchmarking the transaction. 9. The next comparable argued by the learned Counsel for the Assessee is as regards to the exclusion of Infosy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking, Financial Services, Manufacturing and Telecom, whereas the Assessee is rendering only routine and simple Information Technology Enabled Services (ITeS). According to the learned Counsel for the Assessee, the Infosys BPO Limited possesses high brand value which will have significant influence in its business operation and pricing policy; whereas the Assessee is a very unknown company. He also stated that the Infosys BPO Limited had incurred huge expenditures for selling and marketing, i.e., Assessee transacts with its Associated Enterprise and does not incur such expenses. The turnover filter also fails as upper turnover more than eight times. 11. On the other hand, the learned CIT-DR heavily relied on the order of the Transfer Pricing Officer [TPO] as well as the Dispute Resolution Panel [DRP]. 12. We have heard the rival contentions and had gone through the facts and circumstances of the case. We noted that this issue is squarely covered by the decision of the Bangalore Bench of the Tribunal in the case of VWR Lab Products (P.) Limited Vs. Assistant Commissioner of Income Tax, Circle - 7(1)(2) reported in I.T.(TP)A. No.779 (Bang.) of 2017 / [2020] 116 Taxmann.com 244 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintain its brand has not been controverted by them. Further, Infosys BPO Ltd. being a subsidiary of Infosys has an element of brand value associated with it. This be further confirmed by the presence of brand related expenses incurred by Infosys BPO Ltd. Further, Infosys BPO Ltd. has acquired Australian based company M/s Portland Group Pty Ltd. during financial year 2011-12. They provide sourcing and category management services in Sydney, Australia. Therefore, this company also failed the TPO's own filter of rejecting companies with peculiar circumstances. view of the above i.e. functionally not comparable, presence of brand and extraordinary event that taken place during the year on account of acquisition of Australian based company, we are of considered opinion that Infosys BPO Ltd. should not be included in the list of comparables. accordingly direct the Assessing Officer/TPO to exclude Infosys BPO Ltd. from the list of comparables for the purpose of computing the average margin." 2. It was also brought to our notice that the Hon'ble Delhi High Court in ITA No.260/2018 in the appeal filed by the Revenue against the aforesaid order dismissed the appeal at the admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this aspect, the Department's stand on this issue is very clear that exchange losses are to be recognized only in the year of actual payment / termination. The claim of 'Marked to Market Losses' be it for hedging for speculation, is notional and disallowable as per CBDT Instruction No.03 of 2010 dated 23.03.2010. As seen from the CBDT Instruction No.03 of 2010, 'Marked to Market losses' are 'notional' and 'contingent' despite the claim of 'Marked to Market' statement being a transparent accounting practice. In terms of this Instruction even actual losses i.e. hedge loss are allowable as non-speculative only if the transaction quality under Clause (d) of the proviso to Section 43(5). "Marked to Market" losses claimed as notional losses prior to settlement has to be treated as speculative loss in terms of Section 43(5). The action of Assessing Officer is as per law and objections under normal provisions of the Act as well as under 115JB are rejected." Aggrieved, the Assessee is in appeal before the Tribunal. 15. We have heard the rival contentions and had gone through the facts and circumstances of the case. The learned Counsel for the Assessee stated the facts that during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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