TMI Blog2023 (2) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... each of the segments. We also notice that it has not been demonstrated as to how owning intangibles will render this company out of the ambit of comparability. In the given circumstances of the case, we are of the view that Concentrix was rightly included as a comparable company by the TPO. Tricom India Ltd. ( Tricom ) - In the case of 24/7 Customer.com (P) Ltd. [ 2013 (1) TMI 45 - ITAT BANGALORE ] for AY 2004-05, the assessee was engaged in back-office support BPO services and Tricom was chosen as a comparable company by the TPO. The Tribunal held in paragraph 15.3.3 of its order that Tricom had a unique software developed in house which renders specialized services in it area of specialization given the company a competitive edge. Since this company had unique intangible, it was regarded as not comparable with a normal back-office service provider. Following the view taken in the aforesaid decision by a co-ordinate Bench, we are of the view that Tricom ought to be excluded from the final list of comparables. We hold and direct accordingly. TPO is directed to compute ALP of the international transaction as per the directions contained in this order after affording the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support services and SWD services. 5. Consequently, a draft assessment order dated 17.02.2020 came to be passed in which the aforesaid TP adjustment was incorporated. Aggrieved, the Appellant filed its objections before the Dispute Resolution Panel ( DRP ), which vide order dated 18.03.2021 granted partial relief to the Appellant in terms of which the SWD segment was held to be at arm s length. However, the DRP upheld the adjustment made towards the back-office support services segment. 6. Thereafter, the AO passed the final assessment order dated 26.04.2021 in line with the DRP s directions. Aggrieved by the final assessment order, the Appellant has preferred the present appeal before this Tribunal. 7. Therefore, in this appeal, we are required to consider the determination of ALP of the back-office support services rendered by the assessee for which the assessee received payments from its AE. In so far as the international transactions of rendering back-office support services is concerned, the assessee as well as the TPO chose Transaction Net Margin Method (TNMM) as the most appropriate method for determining the ALP. The Profit Level Indicator (PLI) chosen for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the grounds of appeal which are being pressed for adjudication/consideration are the grounds with regard to including Concentrix Daksh Services India Private Ltd. and Tricom India Ltd. (Ground No. 2.2.1.4). 10. In so far as exclusion of the comparable company, Concentrix Daksh Services India Private Ltd. ( Concentrix ), is concerned, the learned counsel for the assessee submitted that this company is engaged in wide range of services including BPOs, KPOs, ITeS and transcription, which is functionally dissimilar to the Assessee. It was submitted that Concentrix undertakes research and development activities which resulted in a substantial increase in its profit margin. It was submitted that Concentrix own significant intangibles amounting to around 2.08% of total assets, which is 8.01% of total sales. Further, during the year under consideration, the company entered into a share purchase agreement with the IBM group, which is an extraordinary activity having a significant impact on its financial performance. It is also submitted that the company recorded an abnormal growth of 93.91% of its revenue between financials years 2002-03 and 2003-04 which translated into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Concentrix by the IBM. The contention of the assessee before the DRP and the remand report of the AO was considered by the DRP and the DRP upheld the inclusion of Concentrix. The AO in the remand report before the DRP submitted that the assessee has not demonstrated that how the engagement in R D has impacted/identified as to how the engagement in R D has impacted the profit margin percentage. Also, the assessee has not come up reliable data in which involvement was made in R D results in substantial increase in the profit margin percentage. It is a fact that an ITES company uses software as a platform to deliver services. Such software could be indigenously developed or purchased. Therefore, the presence of software is an essential requirement to function and not an unusual asset. As regards the presence of extra ordinary event, the TPO has pointed out that from the notes to the accounts in the Annual Report. schedule 19 point no 10 it is noticed as under: Subsequent to the year-end the company and its shareholders have entered into a share purchase agreement with IBM World trade corporation (IBM). Under the agreement, IBM would acquire all the shares of the company fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nessed an overall growth in all its business segments with a focus on entire spectrum of eCRM services. During the year, Company launched new services like collections, telemarketing, technical support thereby broadening the CRM services portfolios. The company also made a successful foray in back office by building insurance claims processing capabilities. During the year under review, your company has also set up its service delivery center in Philippines In summary, new vertical markets, new lines of business and new geographies were developed successfully. .. Your company is embarking on new initiatives like digitization to create a strong foundation and investing in building business leadership in US and Europe to accelerate customer acquisition. Research Development (R D) In today's world, technologies are changing very rapidly and hence it is very important to invest in research and development. R D is also very critical in ensuring the success of Company's product strategy. During the period under review, your Company has analyzed and identified the areas so as to undertake the specific R D activities for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny by the TPO. 18. In so far as the plea of the assessee for exclusion of Tricom India Ltd. ( Tricom ), is concerned, it was submitted that this company is functionally dissimilar to the assessee and ought to be excluded from the list of comparables. Unlike the assessee, Tricom is significantly engaged in research and development activity with a dedicated team for software research and development. Accordingly, the company develops unique software in house and renders specialized services, which gives it a competitive edge in the market. Further, the company suffers from peculiar economic circumstances as during the financial year 2003-04, the company hived off its finance and investment division into a separate company, which has resulted in an abnormal growth in its revenue by 63.80% between financials years 2002-03 and 2003-04 which translated into an abnormal growth of 33.06% in profits before taxes. The company also acquired Tricom Document Management Inc. USA for expansion of its business in the overseas market, thereby indicating a significant change in the business model and economic performance of the company. Further, the company has substantial related party transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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