Decided on August 26,2014

Toluna India Pvt. Ltd. Appellant
ACIT Respondents


R.S.Syal, Member (A) - (1.) THIS appeal by the assessee is directed against the order passed by the Assessing Officer on 24.10.2011 u/s. 143(3) read with section 144C of the Income -tax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 2007 -08.
(2.) THE assessee is aggrieved only against the inclusion of certain companies in the list of comparables, which, in his opinion, are functionally incomparable and also because of differences in the assets employed and risks assumed. Briefly stated, the facts of the case are that the assessee was incorporated in India in the year 2003 as a wholly owned subsidiary of Greenfield Online Inc., USA (Greenfield US), the ultimate parent entity of the Greenfield Group. The assessee is in the business of software development and providing related services to the Greenfield Group. Certain international transactions were reported in the requisite Form. The assessee is compensated on a time cost or fixed price basis for the projects assigned. Greenfield US is providing end to end information technology services which include the provision of consulting and systems integration services to managing IT and business functions on behalf of its customers. The dispute raised in the present appeal is in relation to the international transactions of receipt of revenue amounting to Rs. 17,81,69,412/ - from Greenfield US, stated to be towards the provision of contract IT services. The assessee benchmarked its international transactions by using Transactional Net Margin Method (TNMM) with the profit level indicator (PLI) of Operating profit/Operating cost. The assessee was compensated by its AE at a mark -up of 15% on costs incurred by it. The assessee claimed that it did not own any intangibles, conducted no research and development activities and, hence, did not carry out any risk related activities. Certain comparables were chosen by the assessee with their financial results for the period ending between 1.4.2004 to 15.02.2007. On the basis of certain filters adopted by the assessee, it was claimed that its international transactions were at arm's length price (ALP). The Transfer Pricing Officer (TPO) considered each and every comparable adopted by the assessee and finally came to the conclusion that out of 13 comparables chosen by the assessee, only two viz., SIP Technologies and Exports Ltd. and Bodh Tree Consulting Ltd., were of suitable comparison. The TPO also rejected the assessee's adoption of multiple year data. He opined that only the data for the relevant financial year, being 1.4.2006 to 31.3.2007, was required to be considered. A fresh search was undertaken by the TPO. After due notice to the assessee on all such chosen comparable companies and seeking comments of the assessee on their inclusion, the TPO short listed the following 26 companies as comparable: - 1. Accel Transmatic Limited (Software services segment) 2. Avani Cimcon Technologies Limited 3. Celestial Labs Limited
(3.) DATAMATICS Limited;

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