MERCER CONSULTING (INDIA) PVT. LTD. Vs. DCIT
INCOME TAX APPELLATE TRIBUNAL
Mercer Consulting (India) Pvt. Ltd.
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R.S.Syal, Member (A) -
(1.) THIS appeal by the assessee arises out of the order passed by the Assessing Officer (AO) on 07.01.2014 u/s. 144C(13) of the Income -tax Act, 1961 (hereinafter also called 'the Act') in relation to the Assessment year 2009 -10.
(2.) THE first issue agitated in this appeal is against the transfer pricing adjustment of Rs. 6,16,24,726/ - made by the AO on the same being proposed by the Transfer Pricing Officer (TPO) and as approved by the Dispute Resolution Panel (DRP). Briefly stated, the facts of the case are that the assessee is a wholly owned subsidiary of Mercer Mauritius Ltd., Mauritius. The assessee, incorporated under the provisions of the Companies Act, 1956, is engaged in rendering IT and IT enabled services to its Associated Enterprises (AEs). The assessee is providing services in the nature of Applicant development, Quality assurance, Application maintenance, Implementation services, Helpdesk services, Administrative processing, Contribution processing, Health and benefits processing and Pension plan valuation services to the clients of its AEs for and on their behalf for which it is compensated on cost plus basis. The assessee reported three types of international transactions in Audit Report in Form 3CEB. Whereas two international transactions were accepted by the TPO at arm's length price (ALP), the dispute in the present appeal is on the determination of ALP of the set of international transactions of rendering of IT enabled services to M/s. Mercer (US) Inc., for which the assessee was compensated with a sum of Rs. 59,19,89,199/ -. In so far as the international transactions under this category are concerned, the factual matrix is that the assessee's AEs undertook contracts and pricing negotiations with the end -customers. The prospective clients were made aware that the services will be provided through an offshore delivery centre in India, i.e., the assessee. The assessee used Transactional Net Margin Method (TNMM) to benchmark this category of international transactions. In the TP study, the assessee arrived at a set of seven comparables with their weighted average profit rate of 19.14% on the basis of multiple -year data. As against this, the assessee's profit margin was declared at 21.54%. In this backdrop of facts, the assessee claimed that its such international transactions were at ALP. The TPO called upon the assessee to submit the updated margins using only the current year's data. In response to the TPO's letter, the assessee filed a fresh list of nine comparables (seven original + two new in the form of Aditya Birla Minacs and Cepha Imaging Pvt. Ltd.) and also stated that three of the comparables originally selected by it (Coral Hub Ltd., Cosmic Global Ltd. and Genesys International Ltd.) were functionally different and hence should be eliminated from the list of comparables. The mean margin of the remaining six comparables was calculated at 5.57% to claim once again that its international transactions under this segment were at ALP. The transfer pricing Officer found certain defects in the TP analysis carried out by the assessee. After applying certain quantitative and qualitative tests based on certain filters, the TPO finally chose the following five comparables: -
(3.) THAT is how the TPO determined arm's length price (ALP) of this set of international transactions at a margin of 34.19% and proposed adjustment u/s. 92CA for a sum of Rs. 6,16,24,726/ -. The assessee was unsuccessful before the DRP who upheld the draft order passed by the AO on the strength of the order passed by the TPO. The assessee is aggrieved against this TP addition made by the AO in his final order.;
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