EXL SERVICE. COM (INDIA) PVT. LTD. Vs. ASSTT. CIT
INCOME TAX APPELLATE TRIBUNAL
Exl Service. Com (India) Pvt. Ltd.
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R.S.Syal, Member (A) -
(1.) THESE cross -appeals, one by the assessee and the other by the Revenue, arise out of the order passed by the Commissioner of Income Tax (Appeals) on 20.03.2008 in relation to the Assessment year 2003 -04.
(2.) BRIEFLY stated the facts of the case are that the assessee is an I.T. Enabled Company providing Transaction processing services and Voice based customer care services to the customers of its Associated Enterprises (AEs). The assessee, inter alia, reported an international transaction of "Transaction processing and internet and voice based customer care services" worth Rs. 9,78,563,935/ -. To demonstrate that this international transaction was at Arm's Length Price (ALP), the assessee selected Transactional Net Margin Method (TNMM) as the most appropriate method with the Profit Level Indicator (PLI) of Operating Profit to Total cost (OP/TC). As against its PLI at 5.62%, the assessee showed weighted PLI of seven comparable companies at 9.18%. The Transfer Pricing Officer (TPO) did not treat two companies as comparable, namely, Mapro Industries Ltd. and Nucleus Netsoft and GIS India Ltd., for the reasons given in his order. He worked out OP/TC of the remaining five companies at 18.46%, which resulted into eventual addition on account of Transfer pricing adjustment amounting to Rs. 13,40,26,353/ -. The assessee challenged the said addition of Rs. 13.40 crore before the ld. CIT(A). After considering various objections raised by the assessee, the ld. CIT(A) held that the only current year's data was to be used; the two companies excluded by the TPO were liable to be included in the list of comparables; one company, namely, Giltedge Infotech Services Ltd., was not comparable; arithmetic mean of the operating profit margin, after adjustment of working capital differences, was to be computed and considered; and the assessee was entitled to + 5% adjustment in terms of the proviso to section 92C of the Act. Both the sides are in appeal opposing the impugned order to the extent indicated in their respective appeals.
(3.) WE have heard the rival submissions in the light of material placed before us and decisions relied upon. The assessee has challenged some of facets of the addition made towards transfer pricing adjustment, which we will deal with one by one.
I. ADJUSTMENT FOR DIFFERENCE IN DEPRECIATION RATES;
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