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TMI Blog2023 (10) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and software support (Coding) services to an extent of Rs. 129,66,89,279/-. The assessee adopted TNMM. It was submitted that the assessee rendered its services to its AE and received charges for the same. Further, the assessee worked its PLI by taking OP/OC at 14.33%. The assessee arrived such PLI by taking the comparables which are at pages 5 and 6 of the TPO's order. The TPO rejected the comparables selected by the assessee i.e. Siligate Solutions Ltd., Digicall Global Pvt. Ltd., R Systems International Ltd., One Touch Solutions (India) Pvt. Ltd., Sundaram Business Services Ltd. and accepted only Datamatics Business Solutions Ltd. Further, by adding another 9 comparables arrived at PLI at 26.56% as against 14.33% by the assessee. Further, the assessee also requested the TPO to include Global Healthcare Billing Pvt. Ltd. and Microland Ltd. and accordingly adding the same. The AO finalized final set of comparables of 11 which are at pages 52 and 53 of the TPO's order. The ld. AR submits that the assessee objecting the inclusion of CES Ltd., Access Healthcare Services Pvt. Ltd., Domex E-Data Pvt. Ltd. and MPS Ltd. According to the ld. AR that the DRP by following the earlier orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . . . . . Similar other solutions are being developed at MPS Limited as R&D based on the market requirements." A copy of its Profit and loss account is available at page 135 of the paper book, which shows Revenue from Operations at Rs. 18,829.21 lakh. Note no. 2.7 of its Financial Statements with the caption `Revenue recognition' reads : "Revenue is recognized on delivery of projects or as per terms specified in contracts/purchase orders received from customers. Revenues for web-site design and development are recognized based on the percentage of completion of the project. Revenues from web-site housing are recognized ratably over the year for which the site is hosted." On going through the above, it is palpable that this company is engaged in software products as well, which fact gets further fortified from its balance sheet which shows the figure of inventory at Rs. 782.79 lakh. Segmental information of this company has been given under Note 29.1 reading: "The Company operates in one business segment of providing publishing solutions viz., typesetting and data digitalization services and is considered to constitute a single segment in the context of primary segment report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for the work done by the assessee in India, receives service income from AE. In the ITeS segment, the TPO had included comparables and the assessee before us has submitted that out of these comparables, if Domex e- Data Pvt. Ltd. is excluded, then the assessee would fall within the comparable range and there would be no transfer pricing adjustment and the other grounds would therefore become academic. We observe from the annual report of Katerra India which is the Katerra Technology Services LLP that it is engaged in the business of ITeS in the field of architectural and interior designing. We have also observed from the functional analysis of Katerra India, the detailed functions performed by Katerra India vis-à-vis the AE i.e. Katerra Inc, the US entity. The services rendered by Katerra India in the ITeS segment comprises of the outsources work provided to it by the US entity and Katerra India performs such drawings etc. regarding interior designs and sends the same work done to the AE and the service income is charged by the assessee in lieu of services rendered to the AE. It is therefore, predominantly ITeS functions. We observe from the annual report of Domex e-Data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal has taken the view that companies rendering KPO services cannot be as a comparable company with an ITeS company. Transperfect Solutions India Pvt. Ltd. v. ACIT [TS-497- ITAT2022 (PUN)-TP] AY 2016-17 Schlumberger India Technology Centre (P) Ltd. v. DCIT [TS-473- TAT-2022(PUN)-TP] AY 2016-17 Credence Resource Management (P.) Ltd. v. ACIT [2022] 138 taxmann.com 543 (Pune - Trib.) for AY 2016-17 35. In the light of the aforesaid decisions, we are of the view that Domex E-Data Pvt. Ltd., should be excluded from the list of comparable companies. In the aforesaid decision, the Tribunal has relied on another decision of Pune Bench in the case of Schlumberger India Technology Centre (P) Ltd. v. DCIT [2022] 142 taxmann.com 243 (Pune - Trib.) wherein again while benchmarking international transaction in the ITeS segment, Domex e-Data Pvt. Ltd. was excluded from the final set of comparables. In this decision, the Pune Tribunal relied on logical principle following from the decision in the case of M/s. Tasty Bite Eatables Ltd. v. ACIT in ITA No. 1823/PUN/2018, dated 03/06/2021 of the Hon'ble Delhi High Court, wherein it has been held that if two companies performing ITeS, oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore this Tribunal in the case of Transperfect Solutions India Pvt. Ltd. in ITA No. 331/PUN/2021 for A.Y. 2016-17 which is at page 188 of the paper book, considering another decision of this Tribunal in the case of Credence Resource Management Pvt. Ltd. in ITA No. 133/PUN/2021, held the said company is not comparable as it is involved both the BPO and KPO services. The relevant portion at paras 8.1 and 8.2 is reproduced as under for ready reference : "8.1 This comparable was also chosen by the TPO. The assessee's objection that this company was engaged in rendering KPO services as well was not approved by the TPO, who went with its inclusion. 8.2 The Annual report of this company shows that it is engaged in both the IT and IT enabled services. As the company has segmental accounts, the TPO has considered only IT enabled services segment for the purposes of comparability. However, what is important to note in the instant context is that the assessee is rendering only translation services etc., which fall within the overall domain of the BPO services. As against this, CES Limited is engaged in providing both BPO and KPO services as has been reported by it to the Registrar of comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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