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TMI Blog2024 (1) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... national transactions with its Associated Enterprises (AEs) the assessee applied Transactional Net Margin Method(TNMM) as the most appropriate method. The same was accepted by the Transfer Pricing Officer (TPO). The Profit Level Indicator OP/OC 14.70% was also accepted by the TPO. However, the TPO did not accept the list of comparables selected by the assessee in Transfer Pricing (TP) study to benchmark its transactions. The TPO rejected all but one company from the list of comparables selected by the assessee and introduced eight new companies as comparable. Thus, the final list of comparables has nine companies having average margin of 22.68%. The assessee in ground No.2.8 of appeal is seeking exclusion of four companies selected by the TPO as comparable i.e.: (i) Domex E-data Pvt. Ltd. (in short "Domex") - The ld. Counsel for the assessee contended that Domex is functionally different. The said company is engaged in providing knowledge processing services such as patent analysis, technical editing, deep indexing of scientific research papers, etc. The company is also providing assistance to the publishers and pharmaceutical companies to maximize the value of their information a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stems, a global leader in e-learning industry. Referring to the Annual Report he argued that these acquisitions have helped the company to provide its customers the wider array of capabilities, which directly contributed to the business operations and growth of company. The ld.Counsel for the assessee placed reliance on the following decisions to contend that MPS cannot be considered comparables to an ITES service provider" (i) Emersion Elelctric Co.(India) (P) Ltd. Vs. ACIT, ITA No. 6098/Mum/2018 & ITA No.531/Mum/2018. (ii) Symantec Software India (P) Ltd. Vs. DCIT, ITA No.1824/PUN/2018 (iii) Maersk Global Service Centres India Pvt. Ltd. Vs. ACIT, ITA No.6394/Mum/2017 The ld.Counsel for the assessee submits that it is a well settled proposition that extraordinary events like acquisition/merger have the potential to impact margins of acquiring company and thus, would be even more relevant where the company has more than one acquisition in a short span of time. Therefore, such companies are not good comparables. To support this proposition he placed reliance on various decisions including: (i) Optiva India Technologies (P) Ltd. vs. ACIT, 141 taxmann.com 560 (Pune-Trib) (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial data is available in the public domain. The TPO himself in Assessment Year 2017-18 and Assessment Year 2020-21 accepted R. Systems International as comparable. The ld.Counsel for the assessee furnished copy of audited quarterly financial results of R. Systems International in the financial year ended March, 2018. To further augment his submissions he placed reliance on the following decisions to contend that the company can be accepted as comparable even though the said company was having different financial year: CIT vs. Mc Kinsey Knowledge Centre India Pvt. Ltd. decided by Hon'ble Delhi High Court in ITA No.217/2014 decided on 27/03/2015; and ACIT vs. Axis Risk Consultant Services Pvt. Ltd., 115 taxmann.com 696 (Del-Trib). 4.1 The ld.Counsel for the assessee submitted that Sundaram Business Services is engaged in the business of processing and ITES in the areas of accounting, insurance, banking, human resources, etc. The company was accepted as comparable by TPO in Assessment Year 2017-18 and 2020-21. There has been no change in the business activities of the company. Once the TPO accepted the company as comparable, without there being any change in the business act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt. Ltd. is not functionally comparable to assessee and hence, is directed to be excluded from the list of comparables. 7.2 MPS- A perusal of Annual Report (at page 133 of the paper book) would show that the company provides platforms and services for content creation, full-service production and distribution to the world's leading publishers , leading companies, corporate institutions, libraries and content aggregators. A perusal of Annual Report of the company reveals that during the relevant period the company acquired "Think Subscription" and "Tata Interactive Systems". Acquisition/amalgamation/mergers are extraordinary events in the life circle of company which substantially impact the margins of the acquiring company in the relevant financial years. The Tribunal has been consistently holding that where there is an extraordinary event in a relevant year, the company should not be accepted as comparable. Thus, in the facts of the case, we find merit in argument of the assessee to exclude MPS Ltd. from the list of comparable. We direct accordingly. 7.3 Vitae - The assessee is seeking exclusion of Vitae on the ground of functional disparity. The said company is engaged in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by TPO in A.Y.2017-18 dated 20/01/2021 and in A.Y.2020-21 dated 11/03/2022 are placed on record at page 207 and 260 of the paper book, respectively. Once the TPO has accepted the company as comparable in the preceding and succeeding assessment years, without there being any change in the facts in the impugned assessment year the TPO cannot reject the company as comparable. It is not the case of Revenue that the company is in any manner functionally different from that of the assessee or the said company does not fall within any of the parameters of filters applied. The Hon'ble Delhi High Court in the case of CIT vs. Mc Kinsey Knowledge Centre India Pvt. Ltd (supra) has held that, if from the available data on record the results for financial year can reasonably be extrapolated then the comparable cannot be excluded solely on the ground that the comparables have different financial year endings. Thus, in light of our above observations we hold R-Systems to be a valid and good comparable and direct the A.O to include R-Systems in the list of comparables. Sundaram Business Services- The TPO rejected the said company on the ground of functional disparity. The ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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