TMI Blog2020 (9) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal, based on ratio laid down in these decisions, observed that, ratio of such expired inventory to sale was only 0.12% on sales and 0.18% on cost of goods sold. Further it has not been disputed that, goods of assessee nearing expiry date have to be written off. We therefore, direct assessee to file requisite details in order to ascertain percentage of expired inventory on sales and on cost of goods sold. Ld.AO is directed to verify the same and allow the claim of assessee is signed in accordance with the observations of this Tribunal in assessee s own case for immediately preceding assessment years. Stock issued for Genesis production as consumables - We note that DRP while allowing claim of assessee, held that the substance and spirit of transaction is more important than the form and as income from production has been booked the cost of consumables also needs to be allowed to assessee. In the present facts also the DRP accepted assessee s contentions without verifying the same - Accordingly, respectfully following the view taken by this Tribunal in assessee s own case for preceding assessment years, we direct Ld.AO to verify contentions of assessee and if found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations made by Hon ble Delhi tribunal (supra). Exclusion and not considering depreciation as an operating expense for computing margin in case of comparables under R D segment - TPO selected 12 comparables for manufacturing segment is by applying the same filters adopted by assessee with certain modifications. Now at this stage before this Tribunal in assessee is alleging that companies with export income less than 25% needs to be excluded. Further we note from the records placed before us that assessee manufactures its products for its group entities on need basis. No ground has been raised before DRP in respect of this issue. Assessee has raised additional ground in respect of not applying export filter in manufacturing segment. As we note that this issue has not been dealt with by authorities below, in the interest of Justice we remand this issue back to Ld. AO/TPO in respect of comparables alleged by assessee here in. The Ld. AO/TPO shall verify applicability this filter and then consider alleged comparables accordingly. Considering depreciation as operating expense - We note that assessee had considered manufacturing and R D segment as composite unit, which was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether ITES or software development company. In the event it is found to be having ITES segment, the same may be considered for purpose of comparability with assessee. Not allowing MAT Credit - AR submitted that details of MAT credit has been placed AND MAT credit in computing tax liability was claimed in its return dated 29/09/2009, however, Ld.AO while computing tax liability for year under consideration was not taken into account - Also submitted that MAT credit paid by it during earlier u/s.115JB is allowable to assessee, as it was assessed under normal provisions of the Act for year under consideration - HELD THAT:- AO is directed to verify and allow the claim in accordance with law. - IT(TP)A No. 203/Bang/2014 And IT(TP)A No.155/Bang/2014 - - - Dated:- 15-9-2020 - Shri. B. R. Baskaran, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri Chythanya K.K, Advocate. For the Respondent : Shri Muzaffar Hussain, CIT (DR). ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present cross appeals has been filed by assessee as well as revenue against final assessment order dated 21/01/2014 passed by Ld.DCIT Circle 12 (3) under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer pricing of the international transactions entered by the Appellant with its AEs and thereby not appreciating the principles laid down in the Organization for Economic Cooperation and Development guidelines ('OECD Guidelines'). 6.3. The Hon'ble DRP/ learned AO/ learned TPO erred in rejecting the adjustments made on account of underutilized capacity for manufacturing operations (including the custom synthesis / research services), disregarding the fact that unlike the comparables, the manufacturing business of the Appellant was in a start-up stage, and also disregarding the information submitted by the Appellant to enable the computation of such an adjustment and while doing so grossly erred in: 6.3.1. Stating that except the higher depreciation, there is hardly any variation in the costs incurred by the Appellant and the comparable selected; 6.3.2. Stating that the Appellant has not demonstrated that an accurate adjustment has been made in the instant case for the impact of the variation in the capacity utilized. 6.4. The Hon'ble DRP / learned AO/ learned TPO erred in not appreciating the fact that the Appellant operates as entrepreneuri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant by invoking provisions of sub- section (3) of 92C of the Act contending that the information or data used in the computation of the arm's length price is not reliable or correct and while doing so erred in: 7.1.1. Rejecting the comparability analysis carried in the TP documentation and in conducting a fresh comparability analysis by introducing various filters in determining the arm's length price. 7.1.2. Rejecting companies that comparable to the Appellant while performing the comparability analysis. Specifically, the following companies should have been included as comparables: - Lee Nee Software (Exports) Limited - Caliber Point Business Solutions Limited - R Systems International Limited 7.1.3. Including companies that do not satisfy the test of comparability. Specifically, the following companies selected comparable should have been rejected; - Infosys BPO Limited; - Accentia Technologies Limited; - Cosmic Global Limited. - Eclerx Services Limited 7.1.4. Computing the operating margin for Ailsec Technologies Limited wherein the provision for bad and doubtful debts has erroneously been considered as non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;) credit of Rs.1,310,861 12.1. The Hon'ble DRP / learned AO ought to have allowed the claim of Minimum Alternate Tax ('MAT') credit amounting to Rs. 1,310,861 under section 11 5JAA in computing tax liability in the final assessment order 12.2. The Hon'ble DRP / learned AO ought to have appreciated that the Appellant is entitled to claim the credit for taxes paid under section 1 15JB in the earlier years against the tax liability for AY 2009-10 computed under the normal provisions of the Act. 13. The Hon'ble DRP/ learned AO have erred in levying interest under section 234B of the Act. 14. The Hon'ble DRP / learned AO) has erred in levying interest under section 234C of the Act without appreciating the fact that interest under section 234C can be levied only on returned income. The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing, of this appeal. IT(TP)A No.155/Bang/2014 (revenue s appeal) 1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as key components in pharmaceutical and other high-technology manufacturing. It also imports finished products from its associated enterprises situated abroad for distribution in India and a game export. 3. For year under consideration assessee filed its return of income on 24/09/2009 declaring total income of Rs.6,62,75,366/-. Book profits computed by assessee was at Rs.4,56,82,699/-. The return was processed under section 143(1) of the Act and was selected for scrutiny. Notice under section 143(2) was issued to assessee in response to which representative of assessee appeared before Ld.AO and filed requisite details as called for. 4. Ld.AO observed that, assessee entered into international transaction exceeding Rs.15Crores, with its associated enterprises, and accordingly reference was made under section 92CA of the Act, to transfer pricing officer for computing arm s length price of the international transactions. 5. On receipt of reference under section 92CA, Ld.TPO called upon assessee to file economic details of international transactions in form 3 CEB. 6. Ld.TPO observed that, assessee had following international transaction for year under consideration: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfosys B P 0 Ltd. 24.41% 2 Aditya Birla Minacs Worldwide Ltd. 23.86% 3 Microland Ltd.(both segments) 1.53 % 4 Allsec Technologies Ltd. -16.63% 5 Accentia Technologies Ltd. 46.40% 6 Informed Technologies India Ltd. 22.61% 7 Cosmic Global Ltd. 40.61% 8 Eclerx Services Ltd. 57.46% AVERAGE PLI 25.03% 11. Ld.TPO granted working capital adjustment however rejected the risk adjustment. He thus proposed an adjustment of Rs.29,39,563/- being shortfall. Manufacturing segment-EOU unit: 12. Ld.TPO noted that assessee has treated itself as engaged in distribution and manufacture of chemicals in India. Assessee used TNMM as most appropriate method and OP/TC as PLI. Assessee computed its margin at (-) 52.20% on cost and (-) 109.20% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Vimta Labs Ltd. 10.98% 2 Clinigene International 18.97% 2 Research Support Intl. Pvt. 5.85% 4 Cyber Media Research Ltd. 10.78% 5 Max Neeman Medical Intl. Ltd. 5.67% ARITHMETIC MEAN MARGIN 10.45% He thus proposed adjustment of Rs.5,32,74,095/-. 16. Ld.TPO thus proposed total adjustment of Rs.21,46,80,201/- to the arms length price. 17. Ld.AO while passing the draft assessment order observed that assessee has disclosed total turnover of Rs.20236,00,99,176/- and has shown net profit of Rs.4,46,00,706/- and gross profit of Rs.68,37,07,135/-. Ld.AO, thus worked out GP rate at 28.97%. And the net profit at 1.89%. Ld.AO noted that, in immediately preceding assessment year net profit declared by assessee was at 8.97% and that there was a fall in the net profit rate for the current year. Ld.AO, thereafter on examination of profit and loss account observed that, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost between assessee and the comparable companies, DRP agreed to the submissions of assessee that being the 2nd year of operation in contradistinction to the comparables resulting in higher impact of depreciation on profitability. DRP acknowledged that in order to offset higher cost on account of depreciation, it would be in the interest of Justice if PLI is charged from PBIT on cost, as against, adopted by Ld.TPO to PBDT. DRP thus directed Ld.TPO to compare margins by adopting the PLI to PBDT. 24. Assessee had also challenged exclusion of certain comparales, amongst which DRP rejected. R D segment: 25. DRP noted that, Ld.TPO did not provide any adjustment for underutilisation of capacity and depreciation adjustment. DRP observed that assessee transfers both the process as well as intangible developed by it to the person for whom work is done. It was therefore of the opinion that the transfer should include all cost incurred by assessee. And that, assessee did not separately benchmark R D function, though admittedly, it could perform independently of manufacturing activity. For R D segment DRP rejected capacity underutilisation and depreciation adjustment. Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of quality rejects, breakage leakage etc, expired inventory, stock of Genosys, stock difference in error. Ld.AR submitted that, all these disallowances have been considered by coordinate bench this Tribunal in assessee s own case for assessment year 2005-06 to 2008-09 by order dated 27/07/2015. He placed reliance on copy of order placed at page 1421 of paper book volume 3. 34. On the contrary, Ld.CIT DR placed reliance on observations of Ld.TPO. 35. We note that Ld. AO has rejected the entire claim of assessee under the head quality rejects, breakage leakage and damage, stock to Genosys physical differences in error in receipt of stock. 36. In respect of expired inventory Ld. AO noted that assessee debited a sum of Rs.80,75,287/- as shelflife expiry, due to oxidation, chemical break down, drying or moistening, microbial growth etc. Ld.AO was of the opinion that, assessee manufactured chemicals on need basis and on demand and it is not possible that company will manufacture more than that is required thereby leading to transpiration loss. Ld.AO accordingly, on assumption basis, disallowed 50% of the claim and added back to the income of assessee. 37. We note that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verify the assessee s contentions and if it is found to be correct, then no disallowance shall be made. This ground of appeal is accordingly treated as allowed for statistical purposes. 43. We note that DRP while allowing claim of assessee, held that the substance and spirit of transaction is more important than the form and as income from production has been booked the cost of consumables also needs to be allowed to assessee. In the present facts also the DRP accepted assessee s contentions without verifying the same. 44. Accordingly, respectfully following the view taken by this Tribunal in assessee s own case for preceding assessment years, we direct Ld.AO to verify contentions of assessee and if found correct no disallowance shall be made. Quality rejects: 45. We note that, Ld.AO denied claim on assumption that, as assessee is in the business of high-quality organic and inorganic chemicals for a long time it should be meeting the quality standards which are usually known beforehand and also the process goes through different levels of checks before entering the market. 46. We note that in preceding years assessee had filed charged highlighting the rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect has been considered by DRP wherein assessee has established the comparison in respect of depreciation to sales for year under consideration between assessee and the comparables. It was based upon these Tata that DRP allowed the claim of assessee. 53. Further, Ld.AR placed before us decision of Hon ble High Court of Hydrabad, wherein, view taken by Hon ble Hydrabad Tribunal, in case of BA Continuum India (P.) Ltd vs ACIT (supra) stands upheld in ITTA No.440/2014 by order dated 16/07/2014. Further Ld.AR submitted that, for assessment year 2011-12, assessing officer accepted depreciation to be and operating expense for purpose of computing margin. 54. We do not find any in infirmity in such observations of DRP as it is in consonance with the Transfer Pricing regulations for computing arm s length margin of international transaction. Accordingly these grounds raised by revenue stands dismissed. 55. Ground No.6-7 are in respect of exclusion of 2 comparables by DRP. 56. The outset Ld. CIT DR placed reliance on orders passed by learnt TPO. 57. Ld.AR submitted that assessee challenged exclusion of certain comparables, under R D segment, amongst which DRP directed Ld.AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the year was only 20%. It was submitted that DRP when agreed for exclusion of depreciation for computation of margin, under capacity utilisation cannot be denied to assessee as they are interlinked with each other. This being the initial year of manufacturing, assessee was not in a position to fully utilise the equipments purchased because of which an adjustment is warranted. He placed reliance on decision of coordinate bench of this Tribunal in case of M/s SKF Technologies India Pvt.Ltd vs DCIT in IT(TP)A No.341/Bang/2014 for assessment year 2004-05 by order dated 15/02/2019 in support of his contention. 68. On the contrary Ld. CIT DR placed reliance on the observations of DRP. She submitted that assessee transfers entire process as well as intangible developed by it under R D segment, shows that the cost price should include price of such facilities created. And therefore there is no requirement to provide capacity utilisation to assessee. 69. We have perused submissions advanced by both sides in light of records placed before us 70. During the year under consideration, assessee has entered into international transaction with its AE in manufacturing segment and R D seg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the comparables was initially raised to 100%. The TPO partly accepted the claim of the assessee. He considered VST Tractors and Tillers and Punjab Tractors Ltd. (Seg.) for the purposes of allowing capacity adjustment with an average capacity utilization taken at 54%. Thereafter, he restricted the reduction in operating costs of the assessee due to capacity utilization, to some Administrative costs and other expenses. As against the assessee's actual deduction of Rs. 6,65,79,916 for such selective items of administrative and other expenses, the TPO adjusted such costs to Rs. 6,30,30,739 by applying the factor of 29/54 (29%, being, the assessee's capacity utilization and 54%, being, the average capacity utilization of comparables chosen by him). Similarly, he reduced the amount of Depreciation claimed by the assessee at Rs. 1,19,60,921 to Rs. 64,23,458 by applying the same factor of 29/54. After allowing this capacity utilization adjustment, he determined OP/TC of the assessee at a loss of (-) 7.78%. Total cost of the assessee was taken at Rs. 36.88 crore. By applying the arithmetic mean of the profit rate of comparable companies chosen by him at 11.92%, he proposed a tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with law? In order to find answer to this question, we need to refer to the manner of computation of the arm's length price under TNMM, which has been set out in Rule 10B(1)(e) as under: (e) transactional net margin method, by which, (i) the net profit margin realised by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base ; (ii) the net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base ; (ii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, form where between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market ; (iv) the net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies becomes a benchmark. However, in case there are some differences between the comparables and the assessee, then the effect of such differences should be ironed out by making suitable adjustment to the operating profit margin of comparables. That is the way for bringing both the transactions, namely, the international transaction and the comparable uncontrolled transactions, on the same platform for making a meaningful and effective comparison. The above analysis overtly transpires that the law provides for adjusting the profit margin of comparables on account of the material differences between the international transaction of the assessee and comparable uncontrolled transactions. It is not the other way around to adjust the profit margin of the assessee. In other words, the net operating profit margin realized by the assessee from its international transaction is to be computed as such, without adjusting it on account of differences with the comparable uncontrolled transactions. The adjustment, if any, is required to be made only in the profit margins of the comparables. 9.4 Reverting to the facts of the instant case, we find that the authorities below have adjusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the percentage of capacity utilization by the assessee and such comparable. It can be illustrated with the help of a simple example. Suppose the fixed costs incurred by a comparable (say, A) are Rs. 100 and it has capacity utilization of 50% as against the capacity utilization of 25% by the assessee. The above percentages show that the assessee has incurred full fixed costs with 25% of the utilization of its capacity, as against A incurring full fixed costs with 50% of its capacity utilization. This divulges that the assessee has incurred relatively more fixed costs and A has incurred lower costs. In order to make an effective comparison, there arises a need to obliterate the effect of this difference in capacity utilizations. It can be done by proportionately scaling up the fixed costs incurred by A so as to make it fully comparable with the assessee. This we can do by increasing the fixed costs of A to Rs. 200 (Rs. 100 into 50/25) as against the actually incurred fixed costs by it at Rs. 100. When we compute operating profit of A by substituting the fixed costs at Rs. 200 with the actually incurred at Rs. 100, it would mean that the fixed costs incurred by the assessee and A are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anics Ltd It is submitted that, above comparables have high export earning as compared to assessee. 76. Ld.AR submitted that Tanfac Industries Ltd, Amines Plasticizers Ltd., and Vinati Organics Ltd., have been selected by learnt TPO/DRP in respect of manufacturing segment without applying export earning filter of less than 25% that was adopted to ITES and R D segment. The Ld.AR submitted that, these companies do not have export sales as compared to assessee and that they primarily cater only to domestic market. 77. Ld. CIT DR submitted that this aspect has not been examined by the authorities below as assessee primarily did not adopt this filter. He also referred to the order passed under 92CA for assessment year 2010-11, wherein assessee is not adopting export filter for manufacturing segment. 78. We have perused submissions advanced by both sides in light of records placed before us. 79. We note that, Ld.TPO selected 12 comparables for manufacturing segment is by applying the same filters adopted by assessee with certain modifications. Now at this stage before this Tribunal in assessee is alleging that companies with export income less than 25% needs to be exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Labs should be excluded from R D segment due to high turnover as compared to assessee. It is also been submitted that this comparable is a contract research service provider and its research activities not as same as that of assessee. 85. On perusal of orders passed by authorities below, we note that this aspect has not been verified by DRP/AO/TPO. 86. Accordingly we remand this comparable to Ld. AO/TPO to verify contentions alleged by assessee in respect of this comparable. In the event the claim alleged by assessee is found to be correct, this comparable deserves to be excluded. Accordingly this ground raised by assessee stands allowed for statistical purposes. 87. Ground 7 is in respect of ITES segment wherein assessee seeks exclusion of certain comparables alleged in ground 7.13. It has been submitted that, in respect of other grounds assessee do not press the issues raised. 88. Gr.7.1.3: Assessee seeking exclusion of following for comparables for having functional dissimilarities: Infosys BPO Ltd Accentia technologies Ltd Cosmic Global Ltd e-Eclerx services Ltd 89. It has been submitted by the Ld.AR that, all these comparables have been consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee against this company. Therefore, this company is a good comparable for determination of the ALP in respect of international transactions of the assessee. (ii) We have considered the rival submissions as well as relevant material on record. The first objection has been raised by the learned AR of the assessee on account of extraordinary event of acquisition/purchase of business by Accentia Technologies Ltd., whereby M/s. Oak Technologies Inc, USA has been acquired by this company during the year under consideration. Though the extraordinary event of merger or acquisition, if influenced the business as well as the revenue of a company then said company is not considered as a good comparable for the purpose of determination of the ALP however, in this case, it is not clear from the Annual Report whether the business of M/s. Oak Technologies Inc has been acquired and merged with the said company during the year under consideration. It appears that Accentia Technologies Ltd., has purchased up to 96% of the share holding of M/s. Oak Technologies. If it is only a transaction of purchase of shares of the said company then it may be a case of purchase of ongoing business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess re- engineering and automation apart from middle office and back office support to capital market. Therefore, keeping in the diversified high-end services, this company cannot be considered as functionally comparable with the assessee. In support of his contention, he has relied upon the decision of the Special Bench of the Mumbai Tribunal in the case of Maersk Global Centres (India) (P.) Ltd. v. Asstt. CIT [2014] 43 taxmann.com 100/147 ITD 83. (i) On the other hand, learned Departmental Representative has submitted that this company is undisputedly in the business of ITeS and therefore, the nomenclature that of KPO will not make it functionally different from the assessee. He has relied upon the orders of the authorities below. (ii) We have considered the rival submissions as well as relevant material on record. We find that the company Eclerx Services Ltd. is engaged in diversified activity of providing services including analytic services and data process solutions to its global clients. The service provided by Eclerx Services Ltd., is in various areas including capital market and therefore, the services are in the nature of consultancy and end to end support thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keeping in view the nature of services rendered by M/s eClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns. 83. For the reasons given above, we are of the view that if the functions actually performed by the assessee company for its AEs are compared with the functional profile of M/s eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AO/TPO as per the direction of the DRP. Thus it is clear that the Special Bench found that this company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly, we dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .15 of the Annual Report of this company, it has been reported that there was amalgamation w.e.f 1/4/2008. The relevant part of the information provided in the Annual Report reads as under: Amalgamation of PAN Financial Services India Private Limited The Board of Directors in their meeting held on October 6. 2008. approved, subject to the approval of the Honorable High Courts of Karnataka and Chennai, a Scheme of amalgamation ( the Scheme ) to amalgamate PAN Financial Services India Private Limited ( PAN Financial ), a wholly owned subsidiary of the Company engaged in providing business process management of services, with the Company with effect from April 1. 2008 ( effective date ). The approval of the High Court was received on April 6, 2009 and filed with the respective Registrar of Companies of Karnataka and Tamilnadu on April 6, 2009 and March 10, 2009 respectively. Accordingly on the scheme becoming effective, the financial statement of PAN Financial has been merged with the company. It is clear that there was extraordinary event of amalgamation during the year under consideration. Therefore, in view of the extraordinary development of amalgamation of ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of this company that an amount of Rs. 3,00,25,326/- has been paid on account of translation charges. Thus, learned AR of the assessee has submitted that this company cannot be considered as functionally comparable with the assessee for the purpose of determining the ALP. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal in the case of Lam Research (India) (P.) Ltd. v. Dy. CIT in ITA No. 1437/Bang/2014 dated 30/4/2015. (i) On the other hand, learned Departmental Representative has submitted that the comparability of this company has been examined by the TPO as well as by the DRP. The TPO has rejected the objections raised by the assessee in respect of this company by holding that the translation service are in the nature of ITeS and therefore, it qualifies all the filters applied by the TPO. He has relied upon the orders of the authorities below. (ii) We have considered the rival submissions as well as the relevant material on record. There is no dispute that this company is in the business of providing service of medical transcription and consultancy services, translations services and accounts BPO. The segme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of which has been placed on record, we find that its total revenue from operations are at Rs. 7.37 crore divided into three segments, namely, Medical transcription and consultancy services at Rs. 9.90 lacs, Translation charges at Rs. 6.99 crore and Accounts BPO at Rs. 27.76 lac. The Id. AR has made out a case that outsourcing activity carried out by this company constitutes 57% of total expenses. The reason for which we are not agreeable with the Id. AR is that we have to examine the revenue of this case only from Accounts BPO segment and not on the entity level, being also from Medical transcription and Translation charges. When we are examining the results of this company from the Accounts BPO segment alone, there is no need to examine the position under other segments. The entire outsourcing is confined to Translation charges paid at Rs. 3.00 crore, which is strictly in the realm of the Translation segment, revenues from which are to the tune of Rs. 6.99 crore. If this segment of Translation is not under consideration for deciding as to whether this case is comparable or not, we cannot take recourse to the figures which are relevant for segments other than accounts BPO. Thus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be extrapolated, these comparables needs to be included. 95. We therefore remand these comparables back to Ld.AO/TPO to ascertain financial results by extrapolating from the annual accounts. Also in respect of Lee Nee Software, Ld.AO/TPO is directed to ascertain functions performed being whether ITES or software development company. In the event it is found to be having ITES segment, the same may be considered for purpose of comparability with assessee. Accordingly these grounds raised by assessee stands allowed for statistical purposes. 96. Insofar as ground No. 7.1.6 and 7.1.7 is concerned Ld. A.R. has not advanced any arguments and accordingly no finding has been recorded herein. Accordingly these grounds are dismissed. Accordingly Ground No.7 stands allowed as indicated hereinabove. 97. Ground No.9 is in respect of adjustment proposed by Ld.TPO/AO on entity level u/s.92.CA of the Act. 98. Referring to Form 3CEB, Ld.AR submitted that Ld.AO made addition u/s.92CA which includes non AE transaction. He submitted bifurcation of revenue earned as under: Particulars Amount in Rs. % ..... X X X X Extracts X X X X X X X X Extracts X X X X
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