9911796707
TMI Blog2024 (8) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in assessing the income of the Appellant at INR 214,010,130 vide Final Assessment Order dated 30th May 2022, as against the returned income of INR 29,047,030 declared by the Appellant. 2. That on the facts and circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP')/Ld. TPO/ Ld. AO erred in making a transfer pricing adjustment of INR 62,100,644/- in relation to provision of software development services ('SDS segment') on the basis of invalid and cogent reasoning. Grounds against transfer pricing adjustment in SDS Segment 3. That on the facts and circumstances of the case and in law, the Ld. DRP/ Ld. TPO/ Ld. AO erred in re-computing Appellant after aggregating t of this Hon'ble ITAT's order dated April 11, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties and perused the material available on record. 4. The captioned matter is in the second round of litigation before this Income-tax Appellate Tribunal. 5. FIS Global Business Solutions India Private Limited (FIS GBS) (Formerly eFunds international India Private Limited or EFI) was incorporated in July 1997. During F.Y. 2004-05, FIS GBS was engaged in rendering following services to its Associated Enterprises ("AEs"): * Software development services ("SDS") * Business Process Outsourcing ("BPO")/IT-enabled services ("ITeS") 6. In provision of these services, the assessee utilizes routine assets and is remunerated on a cost- plus basis and hence, acts as a risk-free service provider. 7. During the first round of litigation, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 177 of Paper book) Assessee contentions Actual Operating Cost [A] 466,327,000 (both AE and non-AE transactions) 407,102,062 (only AE transactions) Only AE revenue and AE cost should be considered for computing the TP adjustment Arm's Length Margin (%) [B] 19.83% 19.55% Arm's Length Price [ALP=A*B] 92,472,644 79,603,647 Arm's Length Operating Income [C=A+ALP)] 558,799,644 486,705,709 Actual Operating Income [D] 496,699,000 (both AE and non-AE transactions) 467,616,099 (only AE transactions) Adjustment [E=C-D] 62,100,644 19,089,640 Tolerance Range [F=E/C] 4.08% On considering the AE transactions, the margins of FIS GBS for SDS segment fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The Ld. DR further submitted as relates to other aspect of Ground No. 2, the CIT(A) recomputed the margin of SDS Segment to 14.86% from 6.51% (as determined by the TPO) on the ground that the computation given by the TPO included domestic transactions as well. This issue was never raised by the assessee before the TPO and the CIT(A) re-computed the margin without providing any opportunity to the TPO especially considering the fact this was not raised by the assessee before TPO. Similarly, the CIT(A) recomputed the margin of ITeS Segment from 14.79% (as computed by the TPO) to 17.87% on the ground that the TPO erroneously included corporate allocation cost of Rs. 3,43,23,659/- pertaining to SDC Segment. This issue was never raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mented on the erroneous computation in the TP order. "4.3.3 In Ground number 4.2 the assessee has challenged the margin computation of the assessee for the respective segments being benchmarked. In this regard the assessee has submitted as under: "The assessee under its software development segment provided services both to related and unrelated parties. As per the provisions of the taw, the assessee only computed the margin of its transactions with related parties (i.e. AE segment) which is 14.96%. However, the TPO in contradiction to assessee's approach aggregated both related and unrelated party segment (AE segment and non AE segment) and worked out the margins to be at 6.51%. The TPO has incorrectly computed the margins of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the TP appeal effect order issued by the TPO wherein it was submitted that the TPO has made mistakes apparent from record by considering non-AE revenue and nonAE cost in the computation of TP adjustment. 18. We find that the TPO has not followed the directions of the ITAT and Ld. DRP in the second round of litigation and has erroneously considered non-AE revenue and non-AE cost for computation of TP adjustment. This is against the basic principles of transfer pricing regulations and Chapter X of the Act wherein addition on account of transfer pricing adjustment can be made only in respect of international transactions with the AEs and not the non-AEs. Hence, we direct the AO/TPO to consider transactions between the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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