TMI Blog2023 (12) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... services in relation to financial markets. Thus, in our view, the company is similar to the assessee, as the assessee is also involved in research services. As regards the other contentions of the assessee that forex filter of 75% should be applied and as far as lack of information regarding nature of foreign exchange earnings is concerned, we do not find merit in them. Accordingly, we uphold the selection of this comparable. Eclerx Services Pvt. Ltd. - We are convinced that it is engaged in high end KPO services, hence, under no circumstances, can be comparable to the assessee. Having noticed material difference in the functional profile, the Tribunal in assessee s own case in assessment year 2007-08 [ 2017 (12) TMI 1731 - ITAT DELHI] , has held that it cannot be a comparable to the assessee. There being no difference in the factual position involved in the current assessment year, we hold that this company cannot be treated as comparable to the assessee. Accordingly, we direct the Assessing Office to exclude it. Genesys International Corporation Ltd. is functionally different from the assessee as the nature of services provided are distinct and highly specialized. Consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Technical Services (FTS)? - HELD THAT:- As decided in own case [ 2022 (10) TMI 159 - ITAT DELHI] the services received by the assessees are general managerial services, hence, do not qualify the test of technical/consultancy services to satisfy the definition of FIS under Article 12(4) of the Tax Treaty. Thus, while considering the nature and taxability of corresponding receipts at the hands of the payee, the Tribunal has held that the amount is not taxable in India, in our considered opinion, there is no legal obligation on the assessee to withhold tax at source under Section 195 of the Act while remitting the management fee to the AE. This is so, because, section 195 itself is quite explicit in its language while providing withholding of tax in respect of any payment, which is chargeable to tax in India. Since, the management fee paid by assessee is not chargeable to tax in India in terms with Article 12(4) of India-USA DTAA, as held by the Co-ordinate Bench in case of the payee, the assessee was not required to deduct tax at source while making such payment - disallowance made under Section 40(a)(i) unsustainable - Decided in favour of assessee. - Shri Saktijit Dey, Vice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, in sum and substance, the assessee is a captive service provider. For rendering such services to the Associated Enterprises (AEs), the assessee is remunerated at cost plus 15%. 6. In the year under consideration, the assessee has entered into international transactions with its AE and provided ITES. For providing such services, the assessee earned revenue of Rs. 5,66,09,811/-. The assessee benchmarked such transaction by adopting Transaction Net Margin Method (TNMM) as the most appropriate method with Operating Profit (OP)/Operating Cost (OC) as the Profit Level Indicator (PLI). Assessee selected nine comparables stated to be functionally similar for economic analysis. Since the average margin of the selected comparables worked out to 13.52% as against the margin shown by the assessee at 15%, the transaction with AE was claimed to be at arm s length. 7. After verifying the Transfer Pricing Study Report (TPSR) of the assessee, the Assessing Officer was of the view that certain comparables selected by the assessee are not at all comparables on application of various filters. Thus, out of the nine comparables selected by the assessee, he rejected five and retained four com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and promotion expenses as a percentage of sale, which is indicative of the fact that it is engaged in the business of development of software. She submitted, though, learned Commissioner (appeals) has directed to consider Information Technology segment for comparability purpose, however, that segment cannot be a comparable, as, the assessee is rendering low end ITES. In support of such contention, she relied upon the following decisions: 1. Rampgren Solutions (P) Ltd. Vs. CIT [2015] 279 CTR 441 (Delhi HC) 2. Open Solutions Software Services (P.) Ltd. [2020] 116 taxmann.com 708 (Delhi HC) 3. NTT Data Global Delivery Services Ltd. Vs. ITO [2020] 117 taxmann.com 92 (Delhi Trib.) 4. MD Everywhere India (P) Ltd. Vs. DCIT [2022] 139 taxmann.com 577 (Delhi Trib.) 5. Jr. CIT Vs. Steria India (P) Ltd. [2021] 123 taxmann.com 264 (Delhi Trib.) 6. SBI Business Process Management Services (P.) Ltd. [2021] 127 taxmann.com 374 (Delhi Trib.) 7. Smart Analyst India Pvt. Ltd. Vs. ACIT [2021] 123 taxmann.com 223 (Delhi Trib.) 8. Transcend MT Services (P.) Ltd. Vs. DCIT [2021] 126 taxmann.com 295 (Delhi Trib.) 9. Timex Group India Ltd. Vs. DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in view the factual position, as discussed above, we are of the opinion that this company, being functionally different from the assessee, is not comparable. The decisions relied upon by learned counsel for the assessee support our view. Accordingly, we direct the Assessing Officer to exclude this company. (II) Infinity.com Financial Securities Ltd. 17. Objecting to the selection of this company, learned counsel submitted, it is functionally dissimilar to the assessee as it is a stock broking company, which operates in equity, cash and derivative market in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). She submitted, the company services to institutional and retail clients and provides Research Services, Portfolio Management Services and Trading Services to clients. She submitted, though, the first appellate authority was convinced with the submission of the assessee, however, he has directed the TPO to take Professional Fee segment as comparable to assessee. She submitted, Professional Fee segment, being a high end Knowledge Process Outsourcing (KPO), cannot be compared with the low end BPO services provided by the assessee. 18. Without prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expert strategic consulting, high end analytics and process improvement solutions. She submitted, in capital market division, it provides end to end financial transaction support, such as, trade booking, trade confirmation, asset servicing, cash settlements, client servicing, risk management and reference data integrity across all asset classes, and its services span both sellside (the large banks) and buy-side (the funds and asset managers). She submitted, the company provides strategic and process consulting services to help clients devise efficiency and reduce risk. She submitted, in sales and marketing support division, the company supports clients in all elements of product and services marketing and sales-with a focus on online support to include content development and management, search engine management, web operations, pricing and customer analytics, product database manage and catalog audits. Thus, she submitted, such high end services provided by the company cannot be compared to the low end BPO service provided by the assessee. She further submitted that in the year under consideration, the company is involved in merger and acquisitions, as it has acquired a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Whereas, the first appellate authority has excluded it in assessment year 2012-13. Thus, she submitted, the company should be excluded. 26. Learned Departmental Representative relied upon the observations of Assessing Officer and learned Commissioner (Appeals). 27. Having considered rival submissions and perused the materials on record, including annual report of the company, we find that it is functionally different from the assessee as the nature of services provided are distinct and highly specialized. Considering this aspect, the Tribunal in assessee s own case in assessment year 2008-09 passed in ITA No. 2562/Del/2013, dated 13.06.2018, has excluded it as comparable. Learned first appellate authority has also expressed similar view in assessment year 2012-13. Due to parity of facts in the impugned assessment year, we follow the view expressed by the Coordinate Bench in assessment year 2008-09 and exclude this company from the list of comparables. V ICRA Techno Analytics Ltd. 28. Learned counsel submitted that the TPO has considered the service segment of the company as comparable. Drawing our attention to the annual report of the company, she submitted, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company for two reasons; firstly, sufficient data relating to the company is not available and, secondly, it is a persistent loss making company. Learned first appellate authority has also agreed with the decision of the TPO. 32. However, before us, learned counsel for the assessee submitted that the annual report of the company is available in the public domain, both in the website of the company as well as in the website of the Ministry of Corporate Affairs. She further submitted that the company is not a persistent loss making company, as it has not reported loss in the current year as well as previous two assessment years. She submitted, the issue may be restored back to the Assessing Officer for re-examination. 33. Learned Departmental Representative agreed for restoration of the issue to the Assessing Officer. 34. Having considered rival submissions, we find, the departmental authorities have rejected this company primarily for the reasons that sufficient data relating to the company is not available in public domain and it is a loss making company. However, before us, the assessee has submitted that the annual report of the company for the assessment year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile deciding identical issue in assessee s own case in the aforesaid assessment years, the Tribunal in ITA No. 5965/Del/2016; 6238/Del/2018 and 4438/Del/2018 dated 20.09.2022 has held as under: 8. We have considered rival submissions and perused the material on record. 9. The core issue arising for consideration is, whether assessee was required to deduct tax at source under Section 195 of the Act while paying management fee to its overseas AE i.e. Everest Global Inc. It is observed, for availing certain services from the AE, assessee had entered into a Master Support Services Agreement with the A.E on 08.07.2010. The support services to be availed by assessee along with other group entities are as under: 1. Management Oversight a. Strategic direction b. Contract review c. Financial and legal guidance d. Client relationship management e. Insurance f. Peer review 2. Marketing a. Brand awareness b. Marketplace analysis c. Competitive analysis d. Webinars e. Leadership forums i. Speaking engagements 3. Finance and Accounting a. Payroll b. General ledger c. Employee time and expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
