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Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the assessment order dated 16.4.2021 passed by the A.O. for assessment year 2016-17 u/s 143(3) r.w.s. 144C(13) of the Income-tax Act,1961 ['the Act' for short] in pursuance of directions issued by Ld. Dispute Resolution Panel (“Ld. DRP”).
The grounds of appeal urged by the assessee read as under:-
IT(TP)A No.306/Bang/2021 M/s. Capital One Services (India) Pvt. Ltd., Bangalore
Page 2 of 4 Ground No.1 The Ld. AO has erred in facts and law, by not giving effect to the directions of the Hon’ble DRP and has passed the final assessment order in direct contravention with the provisions of Sec. 144C(10) of the Income Tax Act, 1961. Ground No.2 The Ld. TPO and Hon’ble DRP has erred by rejecting the following comparable companies on the grounds that such companies are not available in the search conducted by the Ld. TPO, even though they were available in the search conducted by the Appellant and are functionally comparable: 1) Informed Technologies India Limited 2) Cheers Interactive (India) Pvt. Ltd. 3) Crystal Voxx Limited Ground No.3 The Ld. TPO and Hon’ble DRP erred on facts and law by comparing the Assessee with the following companies, which have an entirely different functional and risk profile: 1) Infosys BPM Limited 2) SPI Technologies India Pvt. Ltd. 3) Eclerx Services Limited The Appellant would hereby like to reserve the right to add, alter or omit any grounds in the course of these proceedings that it deems necessary in relation to any matter specified in this appeal. All the grounds raised herein or during the course of the proceedings are and shall remain independent and without prejudice to each other.”
At the time of hearing, the Ld. A.R. did not press ground Nos.2 & 3. Accordingly, those grounds are dismissed as not pressed. With regard to Ground No.1, the Ld. A.R. submitted that the assessee is seeking that the TPO may be directed to follow the direction given by Ld DRP to include M/s Microland Ltd (Seg.) as comparable company.
IT(TP)A No.306/Bang/2021 M/s. Capital One Services (India) Pvt. Ltd., Bangalore
Page 3 of 4 3. The Ld A.R submitted that the assessee is a wholly owned subsidiary of Capital One International Holdings Ltd. It is registered as a SEZ Unit at International Technology Park Ltd., SEZ, Bangalore. The Ld. A.R. submitted that the company is engaged in business support, operational support, credit card support and risk support to its Associated Enterprises. He submitted that all these activities have been classified as IT Enabled Services (ITeS).
The Ld A.R further submitted that the assessee adopted TNM method as most appropriate method and operating profit by operating cost as profit level indicator. The assessee declared a margin of 17%. The TPO rejected the TP study of the assessee and selected certain comparable companies. The average median margin of these companies was 23.44%. Accordingly, the TPO made adjustment of Rs.4,43,09,898/-
The Ld A.R submitted that the assessee, inter-alia, sought inclusion of a company named M/s. Micro Land Ltd. (Seg) as a comparable company before Ld DRP. After examining the submission of the assessee, the Ld. DRP held that M/s Microland Ltd (Seg.) is functionally comparable with the assessee company and accordingly upheld the same as a comparable company. The Ld. A.R. submitted that the TPO, while giving effect to the order of Ld. DRP, however, did not include above said company. Accordingly, he prayed that the TPO may be directed to include M/s. Micro Land Ltd. (Seg.) as a comparable company as per direction given by Ld. DRP.
We heard Ld. D.R. on this issue and perused the record. Since the Ld. DRP has already held M/s. Micro Land Ltd. (Seg) as IT(TP)A No.306/Bang/2021 M/s. Capital One Services (India) Pvt. Ltd., Bangalore
Page 4 of 4 functionally comparable with the assessee company and further, since the above said decision of Ld. DRP has not been disputed by the revenue, we are of the view that the TPO should have included M/s Microland Ltd (Seg.) as a comparable company while giving effect to the order of Ld DRP. Accordingly, we direct the AO/TPO to include M/s. Microland Ltd (Seg.) as a comparable company and determine the ALP of the transaction accordingly.
In the result, the appeal filed by the assessee is treated as partly allowed.
Order pronounced in the open court on 8th Feb, 2022.