INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Selection of comparables - Assessee pleading functional dissimilarity, extraordinary event, significant IPRs

Assessee rendered IT enabled services to its AE abroad. TPO considred Accentia Technologies Ltd. as comparable to assessee's case. Assessee challenged this on the ground that Accentia Technologies Ltd. was a knowledge process outsourcing company that rendered diverse nature of services and products in the healthcare sector. It offers an integrated model which function as a one-stop shop for a clinical provider that would manage all their healthcare needs, receivables management needs, performance tracking and reporting. Assessee referred to diverse nature of activities in which comparable company was engaged. Further, no segmental information was available and Accentia had significant amount of brands, IPR and goodwill. Assessee further referred to several judicial precedents wherein this company was rejected being functionally different, in absence of segmental information as well as on account of ownership of goodwill and extraordinary events that took place in the comparable company in case of assessment and appeals of other assesses. Held: Assessee stated that Accentia Technologies Ltd. was a knowledge process outsourcing company. However, looking at scheduled of income of said company, same comprised of sales and services in medical transcription, billing and collection and coding. Therefore, Accentia on standalone basis did not provide any knowledge process outsourcing services. Therefore it was functionally comparable. As regards availability of segmental information, looking at schedule 10(B)(7) the company's Annual Report it had only one segment of activity namely healthcare receivable management, therefore, segment reporting as defined as per AS-17 did not apply. With respect to claim of assessee that Accentia was having significant amount fo brand intellectual property rights and goodwill, goodwill was one of the assets which had been accounted for at the time of acquisition of other companies by Accentia. Further, such goodwill had not made any impact on profit earning capacity of said company. Further as per annual accounts produced, it had not shown any intellectual property rights or other brands other than goodwill. With respect to several judgments relied upon wherein this comparable was rejected on functionally being different and absence of any segmental data as well as occurring of any extraordinary events same did not happen in the case of concerned comparable for this year. Accordingly, Accentia Technologies was rightly taken as comparable to assessee's case.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 92C

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