| The Tax Publishers2020 TaxPub(DT) 3602 (Del-Trib) INCOME TAX ACT, 1961
Section 92C
Where exclusion of both the concerns i.e. TCS e-Serve and Infosys from final list of comparables on the ground of the said concerns having both brand value and high turnover, where the said comparables had high brand value then it cannot be selected as comparable with a concern whose brand value was less and therefore, in view of this, no other grounds of appeal needed to be adjudicated as the margins shown by assessee would be within +5% in the comparables, accordingly appeal was allowed.
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Transfer pricing - Computation of arm's length price - Selection of comparables - Margin showed by assessee
Assessee was engaged in business of providing back office services to its AE and entered into international transaction with its AE. AO made reference under section 92CA(i) to determine ALP of the international transaction undertaken by the assessee. Assessee had shown its margin at 17.11%. Assessee had selected six companies as comparables in its TP Study Report, whose mean margin worked out to 13.63%. The said computation of margins was on multiple year average. However, during the TP proceedings, assessee re-computed the mean margins of the comparables using current year data, which worked to 17.4%. TPO issued show cause notice to the assessee and in the final analysis selected 10 comparables for benchmarking the international transaction of assessee. Assessee filed objections before the DRP which, in turn, upheld the TPO's decision. Assessee pointed out that in case two concerns which were finally selected by TPO were excluded from the list of comparables, then mean margins of comparables would be within + 5% of margin shown by assessee. Held: Assessee provides ITES and was mainly engaged in research support for a broad array of business challenges, including competitive intelligence, customer experience and branding customer analytics, investment and due diligence, market entry and product launch. Exclusion of both the concerns from the final list of comparables on the ground of the said concern having both brand value and high turnover, where the said comparables had high brand value then it cannot be selected as comparable with a concern whose brand value is less. No merit in the stand of the Revenue in this regard. In view of excluding the two concerns from the final list of comparables and as per the submissions of the assessee, no other grounds of appeal needed to be adjudicated as the margins shown by the assessee would be within +5% in the comparables. Therefore, appeal of assessee was allowed, thus, other grounds of appeal raised by the assessee are not taken up for adjudication.
Followed:Integreon India Pvt. Ltd. v. Dy. C.I.T. [ITA No. 1173/DEL/2016, dt. 2-4-2019], BC Management Services Pvt. Ltd. v. Dy. CIT (2017) 83 Taxmann.com 346 (Del) : 2017 TaxPub(DT) 2027 (Del-Trib)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2012-13
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