ACIT, CIRCLE-2(2), HYD, HYDERABAD vs. GD RESEARCH CENTRE PVT. LTD., (FORMERLY KNOWN AS M/S. DMV BUSINESS AND MARKET RESEARCH P. LTD.), HYD, HYDERABAD

Brief facts of the case are that Global Data Ltd. (Associated Enterprise of Assessee) is a premium business information publication and marketing company based in UK. It provides premium business information (databases and reports) output in UK and globally. Assessee provides contract Information Technology enabled Services (ITeS) to its Associated Enterprises (AEs), which includes business support services, data creation, content development in relation to content search and analysis provided by the AE to the various business units within the group, under an agreement for provision of ITeS was entered into between the assessee and its AE.

3. During the previous year relevant to the assessment year 2011-12, the international transactions that took place between the assessee and its AE was the provision of ITeS services, which the assessee benchmarked by adopting Transactional Net Margin Method (TNMM) as the Most

Challenging the exclusion of comparables, Revenue preferred this appeal, whereas the assessee filed the Cross Objections, challenging the exclusion of Cosmic Globla Ltd., Informed Technologies India Ltd., Microgenetic Systems Ltd., e4e Healthcare Ltd., and Mastiff Tech Pvt Ltd., and inclusion of Accentia Technologies Ltd., and Cross Domain Ltd.

In respect of the exclusion of comparables by the learned DRP on the basis of functional difference and also on the basis of high turnover and brand value, learned DR submitted that the assessee company operates in the area of ITeS; that from the information available on the website of the assessee, it can be clearly seen that the assessee is into services like market intelligence and caters to diversified segments through its AE; that the nature of activities of the assessee are also described by the learned TPO in FAR analysis in his order and such functions include building data models, forecasts and analytical tools; that the services rendered by the assessee are also described in schedule 2 of the agreement for services with AE; that these include market research, analysis and projections relating to all types of business information, collating and analyzing information regarding financial operations, collating and analyzing data etc., that all these are high end ITeS services which are classified as KPO services vide CBDT Notification No. 73/2013 as they fall under the category of business analytics, financial analytics and market research. Learned DR further argued that the learned DRP did not examine the services of the assessee in detail vis-a-vis other comparables and excluded five comparables on functional difference.

Per contra, learned AR submitted that apart from the reasons recorded by the learned DRP, the functions of the assessee were assessed with reference to the functions of these four entities in assessee’s own case for the earlier assessment years and on an analysis thereof, a Co- ordinate Bench of the Tribunal recorded that these four entities are not good comparables with the assessee and have to be excluded.

With reference to the findings of a Co-ordinate Bench of the Tribunal, in assessee’s own case for the assessment years 2009-10 and 2010-11, in and 411/Hyd/2015, learned AR submitted that E-clerx Services Ltd., is not a good comparable in view of a CO No. 15/Hyd/2016 different functional profile of excellence data and the assessee is rendering comparatively low and ITeS services. With reference to the order for the assessment year 2010-11, he submitted that TCS EServe Ltd. is not comparable in view of the fact that apart from huge turnover, TCS EServe Ltd. owns and possesses brand value and intangibles as compared to the assessee, which does not own any such assets. He invited our attention to the order for the assessment year 2009-10 to submit that Infosys BPO Ltd. and Acropetal Technologies Ltd. were found not comparable because of un-comparable size of operations and huge turnover in case of Infosys BPO Ltd. and majority of the work done by the Acropetal Technologies Ltd. was by third party sub-contractors, low employee cost etc.

He also filed data relating to the employee cost to show that in all 792 employees are working with the assessee out of whom, 726 employees are drawing a salary of an average of Rs. 29,817/- only and this fact clinchingly establishes that such services cannot be categorized as expert services to be compared with the services rendered by the employees of the above four comparable companies. He also placed reliance on the decisions rendered by the Co-ordinate Benched of the Tribunal in the cases of Cadence Design Systems (I) P. Ltd., vs. ACIT [2018] 93 taxmann.com 227 (Delhi - Trib.) and JCIT vs. Steria India Pvt. Ltd., in & 511/Del/2016, dated 17/11/2020 for the assessment years 2011-12. In the case of Cadence Design Systems (I) P. Ltd., (supra) all these four comparables were considered and found to be unsuitable for comparison with an entity performing the functions as those of the assessee, whereas in the case of Steria India Pvt. Ltd., (supra), E-clerx Services Ltd., and TCS EServe Ltd. were considered.

For all these reasons, he submitted that since the functions of the assessee vis-à-vis the functions of these four entities were thoroughly considered by the Co-ordinate Bench of the Tribunal in assessee’s own case, it is not open now for the Revenue to contend that the learned DRP did not consider the functions of the assessee properly.

We have gone through the record in the light of the submissions made on either side. It could be seen from the record that the assessee was formerly known as M/s. DMV Business & Market Research Pvt. Ltd. Vide schedule-2 to the agreement dated 01/01/2007, the assessee agreed to render the following services to its AE:

IT and systems services 3.1. Designing, developing, producing, reproducing, supporting, maintaining and advising on computer software, systems and databases. 3.2. Managing and developing computer network services to facilitate electronic data interchange.

Administrative and other support services 4.1. Rendering and providing financial and related services of all kinds and description, billing services, processing services, business support services, data-base services, data entry business-marketing services, training and consultancy services. 4.2. Administering of client's sales ledgers. 4.3. Any other services as may be directed by the Overseas Company from time to time as may be permitted under Indian laws.

Data distribution services The following data distribution services on further terms specific to such distribution services as are agreed between the parties from time to time, but for the avoidance of doubt no such services shall be provided until such further terms are agreed: 5.1. Marketing services relating to the products and services of the parties. 5.2. Distributing, selling, publishing, disseminating and providing access to information regarding financial operations and management, business and commercial operations and projections, financial status, credit-worthiness, consumer responses and management of businesses of all kinds and descriptions by whatever name this may be called. 5.3. Distributing, selling, publishing, disseminating and otherwise providing access to data including but not limited to market data, information and other inputs in relation to the financial services, financial money markets, investment services and other related activities.”

Learned TPO, in his order, however, captured the functions of the assessee as under:

It is not the case of the Revenue that there is any change in the business model of the assessee for the last few years. The record does not bear any material to show that the Revenue disputed the functions performed by the assessee as captured by the Co-ordinate Bench of the Tribunal in the earlier assessment years.

Basing on the above functional profile, a Co-ordinate Bench of the Tribunal in the earlier assessment years 2009-10 and 2010-11, decided the issue of comparability of the entities, namely, E-clerx Services Ltd., Acropetal Technologies Ltd., Infosys BPO Ltd. and TCS EServe Ltd., and held that the assessee is not at all comparable to those entities in view of the CO No. 15/Hyd/2016 functional dissimilarity. It is not the case of the Revenue that there is any change in the functional profile of those four entities from the earlier assessment years as discussed in the orders for the earlier assessment years, or that the Revenue challenged such factual finding of the Tribunal before any higher forum.

On a thorough discussion on these aspects, the Co-ordinate Benches of the Tribunal reached a factual conclusion about the non- comparability of the assessee with these four comparables. When the functions of the assessee and the comparable entities remain the same over all these years, we find it difficult to hold that what was non- comparable under identical circumstances would become comparable in this year. Such an exercise, we are afraid, would amount to sitting in appeal over the factual findings of the Co-ordinate Bench of the Tribunal which is impermissible for us to exercise. The identical nature of the functions over a period of time would lead to the inference that the comparability factor also remains the same.

For this reason, we are of the considered opinion that factual consistency demands respect for the view taken by a Co-ordinate Bench of the Tribunal for the earlier assessment years in assessee’s own case and, therefore, while respectfully following the same, we direct the learned Assessing Officer/learned TPO to exclude E-clerx Services Ltd., Acropetal Technologies Ltd., Infosys BPO Ltd. and TCS EServe Ltd., from the list of comparables. Accordingly, the Grounds of appeal of Revenue are dismissed.

To sum-up, appeal of the Revenue and Cross Objections of the assessee are dismissed.