TMI Blog2022 (12) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... profit u/s.115JB of the Act, the appeal of the Assessee is partly allowed. - I.T.A No.:761/CHNY/2017 - - - Dated:- 20-7-2022 - SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER FOR THE APPELLANT BY: MR. S.P. CHIDAMBARAM, ADVOCATE FOR THE RESPONDENT: Shri. M. Murali, CIT ORDER PER MAHAVIR SINGH, VP: This appeal by the Assessee is arising out of the final Assessment Order passed by the Deputy Commissioner of Income Tax, Corporate Circle 4(1), Chennai u/s.143(3) r.w.s.144C(13) of the Income Tax Act, 1961 (hereinafter the Act), order dated 31.01.2017 for the Assessment Year 2012- 2013 in pursuance to the directions issued by the Dispute Resolution Panel-2, Bengaluru u/s. 144C(5) of the Act vide directions dated 22.11.2016. The draft assessment order was framed by the Assistant Commissioner of Income Tax, Corporate Circle-4(1), Chennai u/s.144C(1) of the Act vide order dated 30.03.2016 to give effect to the order of the Transfer Pricing Officer-2(2) [TPO], Chennai vide No.F.No.M- 502/TPO-2(2)/A.Y.2012-13; order dated 22.01.2016 u/s.92CA(3) of the Act for making an upward transfer pricing adjustment. 2. The first iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the TPO stated that the functional profile of the company, which is into translation business is entirely different, as the company is into pre-publishing business and therefore cannot be considered as a comparable. However, he stated that the learned TPO has accepted this company only on the ground that the same was originally included in the list of comparable in the Transfer Pricing Report. However, the learned TPO has highlighted that at the time of preparation of the Transfer Pricing Report, the Assessee did not have access to the financial statements of the company. The learned Counsel for the Assessee further stated that during the assessment proceedings, the financials of the company was available in the public domain and on perusal of the same, it was noted that the company was mainly into the business of translation services and that the business model is such that it outsourced its translation business which is different from that of the Assessee. 4. Further, the learned Counsel for the Assessee took us through the DRP s order and read out paragraph no.3.2 wherein adjudication is done by the Dispute Resolution Panel [DRP] which reads as under: 3.2 The P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .963/Chny/2015 for the Assessment Year 2010-2011 vide order dated 03.04.2018 has remitted the matter back to the file of the Assessing Officer. We noted that the Tribunal vide Page No.6 remitted the issue of Cosmic Global Limited which is discussed in paragraph no.3 and finally remitted the matter back vide paragraph no.6, as under: 6. We heard the rival submissions. Since, the Assessee has furnished the required particulars and relying on the decisions of the Tribunal / High Court, we remit the issues in connection with the above comparables to the TPO / AO for a fresh examination. In respect of the comparables, Caliber Point Business Solutions Limited R Systems International Limited, the Assessee shall furnish comparables data for the verification of the TPO. The TPO shall decide as to whether the above comparables are to be included or to be excluded, as the case may be, in accordance with law, after affording adequate opportunity to the Assessee. The Assessee s corresponding grounds are treated as allowed for statistical purposes. 8. The learned Counsel for the Assessee then took us through the TPO s order giving appeal effect to the Tribunal s order for the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lients and their services are spread across multiple industry segments. The learned Counsel for the Assessee reiterated that Infosys BPO is predominantly into the areas like Insurance, Banking, Financial Services, Manufacturing and Telecom which are the niche areas. 9.2 The learned Counsel for the Assessee then took us through the findings of the Dispute Resolution Panel [DRP] for inclusion of this comparable, i.e., Infosys BPO Limited which is noted at paragraph no.4.7.2, as under: 4.7.2 In view of the above and in absence of any evidence that the high or low turnover has influenced operating margin and also in absence of any direct relation between the turnover and the margin, the objections raised by the Assessee regarding the turnover and size and the consequent request for application of the turnover filter are non-acceptable and are hereby rejected. Hence, the Infosys BPO Limited was included as comparable. 10. The learned Counsel for the Assessee stated that functionally Infosys BPO Limited is incomparable to the Assessee, since it is a big / giant company. According to him, this company operates in various areas like Insurance, Banking, Financial Services, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the comparability of Infosys BPO as a comparable company. Delhi ITAT in the case of Baxter India Pvt. Ltd. v. ACIT ITA No.61 Del/2016 for AY 2012-13 in the case of a company rendering ITES such as the Assessee. Vide order dated 24.8.2017 Paragraph-23 held that Infosys BPO is not comparable with a company rendering ITES for the following reasons: 23. In so far as exclusion lnfosys BPO Ltd. is concerned, we find from the submissions made by assessee before the Assessing Officer/TPO/DRP is that Infosys BPO Ltd. is predominantly into areas Insurance, Banking, Financial Services, Manufacturing and Telecom which are in the niche areas, un the assessee. Further it was also submitted that the Infosys BPQ Ltd. comprises brand value which tend to influence its business operation and the pricing policy thereby directly impacting the margins earned by the Infosys BPO Ltd.. We find the submissions of the ld. counsel for the assessee before the TPO/DRP that in order to maintain the brand image of Infosys BPQ Ltd. in the market, the comp incurs substantial selling and marketing expenditure whereas the assessee being a contract service provider does not incur such expenses to maintain it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The brief facts are that the Assessee has claimed marked to market loss in the Profit and Loss [P L] Account of Rs.338.70 lakhs. The Assessing Officer simply relying on the CBDT Instruction No.3/2010 disallowed the marked to market loss as not allowable expenditure. The Assessing Officer noted that in view of the CBDT Instructions, the above loss is not an allowable expenditure even while computing the profit under regular assessment as well as while computing the book profit u/s.115 JB of the Act. The Dispute Resolution Panel [DRP] directed the Assessing Officer to verify the existence or absence of forward contract and further directed to allow the loss only on the basis of actual realization as termination of the contracts before the end of the financial year. The DRP s direction to the Assessing Officer recorded at paragraph no.9.1 of its order is as under: 9.1 Panel: The Assessing Officer is hereby directed to verify the existence or absence of forward contract. In case of forward contract being present, the Assessing Officer is hereby directed to allow the loss only on the basis of actual realization as termination of the contracts before the end of the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odward Governor India Private Limited reported in [2009] 312 ITR 254 (SC). The learned Counsel for the Assessee stated that the Assessee has been consistently following this approach and in fact, the very same amount is reversed and offered to tax in the Assessment Year 2013-2014. The Assessee enclosed the Cash-Flow Statement from the Annual Report, wherein it is apparently evident that the same amount is shown as negative figure as on 31.03.2013 and as a positive figure as on 31.03.2012. 16. On the other hand, the learned CIT-DR, Shri. M. Murali relied on the order of the TPO and that of the DRP. 17. We have heard the rival contentions and had gone through the facts and circumstances of the case. It is clear that the Assessee has reversed the loss claimed in the next year and offered to tax. On this very count, the addition cannot be made. Secondly, this issue is squarely covered by the decision of the Hon ble Supreme Court in the case of Commissioner of Income Tax Vs. Woodward Governor India Private Limited (supra); wherein it is held as under: For valuing the closing stock at the end of a particular year, the value prevailing on the last date is relevant. This is because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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