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TMI Blog2023 (4) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... artered Bank, UK for documentation support services. To determine the Arms length price of international transactions, the assessee followed TNMM method as most appropriate method and Operating profit by Operating cost (OP/OC) as the Profit level Indicator. The assessee was getting revenue at cost plus margin of 14% from its Associated Enterprise (AE). 4. The Learned AR submitted that the Transfer Pricing Officer (TPO) selected 13 comparable companies whose average margin was 24%. Accordingly the TPO made transfer pricing adjustment of Rs.3.57 crores. The Learned AR further submitted that learned Dispute Resolution Panel (DRP) excluded 2 comparable companies and affirmed the balance 11 comparable companies selected by learned TPO. After the order passed by learned DRP, the transfer pricing adjustment came to be reduced to Rs.2.45 crores. Int he chart filed by the assessee, the 11 companies affirmed by learned DRP are stated as under : S.No. Name of the comparable company 1 Ace Software Exports Ltd. 2 Transworks Information Services Ltd. 3 Allsec Technologies Ltd. 4 Flextronics Software Systems Ltd. (Seg.) 5 R System International Ltd. (Seg.) 6 Cosmic Global Ltd. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age of revenue from export of goods as against the total revenue receipts in the case of the aforesaid company viz. M/s Goldstone Teleservices Ltd. selected as a comparable by the TPO worked out only to the extent of 0.14%. The ld. A.R on the basis of his aforesaid contention submitted that from a perusal of the aforesaid facts it could safely be concluded that the export sales of the said company was substantially less than 25% of its total sales. It was further submitted by the ld. A.R that even if it was to be assumed that the export of goods pertained to the BPO segment only, even then as the revenue of Rs.4,24,540/- generated from export of goods as against the total revenue of the BPO segment amounting to Rs.5,02,71,000/- would hardly work out to 0.84%. In the backdrop of his aforesaid contentions it was submitted by the ld. A.R that the said company was liable to be excluded from the list of comparables considering the export filter applied by the TPO. Per contra, the ld. D.R relied on the orders of the AO/TPO. It was submitted by him that the aforementioned company viz. M/s Goldstone Infratech Ltd. having been found to be functionally comparable was thus rightly selected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctionally incomparable, hence on the said count itself the TPO in the assesses own case for A.Y 2008-09 had rejected the same as a comparable, vide his order passed under Sec. 92CA(3). It was further submitted by the ld. A.R that the aforesaid company was also excluded by the CIT(A) from the list of the comparables while disposing off the appeal of the assessee for A.Y 2007-08. The ld. A.R submitted that as the director of the aforementioned company Ms. Sheetal Rastogi had allegedly played a major role in the 'London fraud' and had fled the country a month before RBG resources company was raided, thus it would be unsafe to take the results of the said company for comparison of the profitability of the assessee. The ld. A.R in order to substantiate his aforesaid contention drew our attention to the extract of the news article published in "The Guardian", dated 06.06.2008 (Page 1380-1383 of APB). On a perusal of the aforesaid extract of the news article it emerges that Ms. Sheetal Rastogi who is the director of the aforesaid company viz. Maple eSolutions Limited is alleged to have played a major role in the 'London fraud' and was on the run. The ld. A.R further submitted that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in its aforesaid order while adjudicating on the selection of the aforesaid company viz. M/s Safron Global Ltd. as a comparable by the TPO, had therein observed that as the directors of the said company were found to be involved in fraudulent activity, hence, its financial results not being reliable due to fraud committed by the directors, thus could not be considered for comparability analysis. We find that as in the case before us it remains as a matter of fact that the director of the aforesaid company viz. Ms. Sheetal Rastogi is allegedly stated to be involved in a fraudulent activity, thus the veracity of the financial results of the said company would not inspire any confidence. We thus, finding ourselves to be in agreement with the view taken by the Tribunal in the assesses own case for A.Y 2005-06 that where financial results of a company are not reliable due to fraud committed by the directors, it should not be considered for comparability analysis, thus are of the considered view that it would not be proper to include the said company in the final list of comparables for benchmarking the international transactions of the assessee with its AEs. In the backdrop of our af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the comparables which were selected by the assessee in its TPSR had applied the RPT filter and excluded the companies where there were significant related party transactions. We are of the considered view that as observed by the Tribunal while disposing off the appeal in the case of Stream International Services Pvt. Ltd (supra) for A.Y 2006-07 that the related party transactions in the case of the aforesaid company viz. M/s Datamatics Financial Services Limited is found to be in excess of 25%, hence we are of the considered view that the said company could not have been selected as a comparable for benchmarking the international transactions of the assessee with its AEs. We thus, in terms of our aforesaid observations direct the AO/TPO to exclude the comparable viz. M/s Datamatics Financial Services Limited from the final list of comparables." Since facts are identical between both the cases, following the above said order of co-ordinate bench, we direct exclusion of Maple e-Solutions Ltd., Datamatics Financial Services Ltd. (Seg.) and Goldstone Infratech Ltd.(Seg.) 9. The next issue relates to the disallowance made under section 14A of the Act. During the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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