QUISLEX LEGAL SERVICES PRIVATE LIMITED, HYDERABAD,HYDERABAD vs. ACIT, CIRCLE-16(1), HYDERABAD, HYDERABAD

The assessee has raised several grounds in both the appeals however, at the time of hearing the Ld. AR submitted that the Bench on the earlier occasion had directed the ld. AO to furnish a remand report in order to determine the correct nature of activities carried out by the assessee with respect to its clients which goes to the root of the matter as to whether the assessee functions in the nature of Knowledge Process Outsourcing (KPO) or Business Process Outsourcing (BPO) as stated in the Act so that the appropriate comparable entities can be appreciated for arriving at the Arm’s Length Price for the international transactions entered between the assessee company and it’s Associate Enterprises (AE). The Ld. AR further submitted that the assessee had demonstrated its activities with respect to two of its clients before the Tribunal on the earlier occasion and the same was also presented before the Ld. Revenue Authorities in the remand proceedings. The Ld. AR further argued by stating that the Ld. Revenue Authorities without considering the factual details submitted and the explanations tendered by the assessee and further without providing proper opportunity, arrived at the conclusion that the assessee carries out its activities with respect to it’s AEs which is in the nature of KPO and not BPO as demonstrated by the Ld. AR. The Ld. AR therefore pleaded that one more opportunity may be provided to the assessee to present its case before the Ld. Revenue Authorities. The Ld. DR though objected to the submission of the Ld. AR finally conceded to the request of the Ld. AR.

After hearing both the parties and keeping in view of the facts and circumstances of both the cases, We are of the considered view that a categoric finding is required to be made in the case of the assessee as to whether the activities of the assessee with respect to its AEs fall under the category of KPO or BPO based on which only the appropriate comparable entities can be identified for computing the ALP with respect to the transactions made by the assessee with its AEs. Further, it is also pertinent to mention that the assessee has employed only skilled labour such as qualified law graduates for performing the work assigned by the associate companies to the assessee company. Hence, a minute analysis on the nature of work carried by the assessee for its AEs is required to be analysed for holding whether the assessee Company falls in the nature as KPO or BPO. Therefore, in the interest of justice, We hereby remit back the entire matter in both the appeals to the file of the Ld. AO for de novo consideration. We also make it clear that the Ld. Revenue Authorities are at liberty to direct the assessee to furnish the details of the activities carried out by the assessee Company for any of its AE’s as they deem fit in order to arrive at the conclusion whether the activities carried out by the assessee with its AEs falls under the category of KPO or BPO. It is ordered accordingly.

In the result, both the appeals of the assessee are allowed for statistical purposes as indicated hereinabove.