9911796707
TMI Blog2023 (12) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... the reality that there cannot be an exact comparable in a given situation without any difference without appreciating that such astringency will defeat the purpose of flexibility provided in comparability analysis for determination of ALP? C. Whether Hon'ble ITAT was correct in excluding comparable none of the pre-conditions mentioned in Rule 10(B)(2) of the Income Tax Rules is satisfied by ITAT? D. The Hon'ble ITAT has erred in law and on facts in directing the TPO to exclude M/s Infosys BPO Ltd as comparable ignoring the fact that Organization of Economic Cooperation and Development (OECD) Guidelines advocate use of TNMM Method as it allows comparability of the functions rather than strictly focusing on product/service comparability? E. Whether the Hon'ble ITAT has erred in law and on facts in directing the TPO to exclude M/s Infosys BPO Ltd, Acropetal Technologies Ltd. and e-Clerx Ltd as comparable ignoring the fact the organization of economic cooperation and development (OPEC) guidelines advocate use of TNMM Method as it allows capability of the functions rather than strictly focusing on products/service comparability? F. Whether the Hon'ble ITAT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,290/-. 2.6 The respondent/assessee challenged the Assessment Order by way of appeal before the Commissioner, Income Tax (Appeals). Vide order dated 18.11.2016, the CIT(A) partly allowed the appeal of the respondent/assessee, thereby directing the AO/TPO to re-compute the average PLI with final set of comparables, verify the disallowance related to rent expenses; and the addition pertaining to Section 40A(2)(b) of the Act was deleted by CIT(A). 2.7 Both sides preferred appeal before the Tribunal. By way of the order dated 10.05.2021 impugned in the present appeal, the Tribunal dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee. The Tribunal deleted the additions made by the Assessing Officer on account of rent expenditure as well as disallowance of payment made to persons covered under Section 40A(2)(b) of the Act and upheld the exclusion of the comparables, namely Infosys BPO, Acropetal Technologies Limited and e-Clerx Services Limited. 2.8 Hence the present appeal. 3. During final arguments, both sides confined themselves largely to the exclusion of e-Clerx Services Limited as a comparable. 3.1 On behalf of the appellant/revenue, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of this court by way of rejecting Infosys BPO Ltd. as comparable for the reason of it being a giant corporation in comparison with the litigating assessees of those cases. 4. Admittedly the respondent/assessee is engaged in providing ITeS to its AE through the use of information technology infrastructure including online software, live information services and research on international database. It is also not disputed that in the present case, the most appropriate method for determination of Arms Length Price would be TNMM. As reflected from record, the TPO carried out his own search and zeroed down on nine comparables, out of whom three remain the subject matter of the present appeal. The present appeal seeks to claim that those three comparables namely Infosys BPO Ltd., Actopetal Technologies Ltd. and e-Clerx Services Ltd. were wrongly rejected as comparables by the Tribunal by way of the impugned order. We have examined the challenge to the functional similarity of each of the said comparables with the respondent/assessee. 5. In Transfer Pricing Study Report, work profile of the respondent/assessee is described as follows. "Futures First was incorporated to utilize the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he enters buy-sell details within specified limits. * IT support tools: Futures First has a small support team involved in provision of technical support. These tools help employees in provision of stated support function. * Other related functions: Finance, Accounting, Treasury and Legal Function: The management of Futures First is responsible for managing the finance, treasury, accounting and legal functions relating to Future First operations. In certain areas wherever necessary. Futures First is guided by the AEs. Futures First is also responsible for all local statutory compliance. Human Resource Management Function: The HR function at Futures First is coordinated by its local management, which has primary responsibility for recruitment, development and training of the personnel including the emolument structure. In this respect, where appropriate, it is guided by AE policies. Marketing of Trading Services: Futures First does not perform any marketing activity as its role is limited to providing services to its AE. As trading support function is the primary function of Futures First and research and IT support activities are performed primarily to facilitate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO. Therefore, we find no error in the decision of the Tribunal in rejecting Acropetal Technologies Ltd. as a comparable. 8. Lastly in the list of the rejected comparables, comes e-Clerx Services Ltd. This company, as per record, is a leading Knowledge Process Outsourcing (KPO) company, founded in the year 2000, providing data analytics and data process solutions to some of the largest brands in the world. Over the years, e-Clerx consistently achieved profitable growth and by the year 2008-09, it reached employee strength of about 2000. The eClerx has made an inherent niche high-end, KPO data analytics business, scalable - by combining people, process re-engineering and automation in a potent mix to build proprietary, platform based services. The e-Clerx focuses on automation and process re-engineering in order to eliminate wasteful steps, and to automate repetitive ones, so as to minimize the need for human intervention and present their clients costs savings, which exceed those from simple wage arbitrage, which in turn reduces the need for costly, high skilled resources and gives it ability to scale solutions quickly, both for existing clients and also for new ones. In con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered and not of a service (higher in value chain) that may possibly be rendered subsequently."
Therefore, as regards rejection of e-Clerx as comparable in the present case, we find no error in the decision of the Tribunal.
9. As regards the proposed ground related to Section 40A(ia) of the Act, as mentioned above, no arguments were advanced. Perhaps that was for the reason that regarding this issue the CIT(A) had given direction to the Assessing Officer to verify whether the copies of deduction of tax at lower rate were filed before the Assessing Officer before passing of the assessment order and if that be so, then no disallowance could be made. Before the Tribunal the counsel for revenue stated that the Assessing Officer would give effect to the order of the CIT(A). Accordingly, this ground was treated as infructuous by the Tribunal. This question thus does not arise for our consideration.
10. The findings as regards rejection of the above-mentioned three comparables being findings of fact and there being no proposed question alleging any perversity, we do not find any substantial question of law to be answered by us. Therefore, the appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
|
