CAPGEMINI TECHNOLOGY SEVICES INDIA LTD(AS SUCCESSOR-IN INTEREST OF ERSTWHILE ARICENT TECHNOLOGIES PVT LTD SINCE AMALGAMATED,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX-1(1), PUNE, PUNE

The assessee approached the Dispute Resolution Panel (DRP) who vide order dated 18.06.2024 gave part relief to the assessee.

Aggrieved with such order of the Assessing Officer / TPO / DRP, the assessee is in appeal before the Tribunal by raising the following grounds:

The learned Assessing Officer ("AO") erred in passing the final assessment order dated 23 July 2023 under Section 143(3) read with Section 144C(13) of the Income Tax Act 1961 (the Act) beyond the time limit prescribed under Section 153 of the Act making the proceedings bad in law and liable to be quashed.

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by not accepting the economic analysis undertaken by the assessee in accordance with the provisions of the Act read with the Income Tax Rules, 1962 (the Rules"), and modifying the same

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by applying export income (as a % of sales) filter of greater than 75 percent as a comparability criterion while identifying comparable companies for subject transactions.

The learned DRP/TPO/AO have erred in inadvertently applying the service income filter which neither the assessee had applied in the transfer pricing documentation nor the learned TPO/AO had considered while selection of comparable companies in the show cause notice ("SCN") dated 17 June 2023

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by wrongfully rejecting certain similar companies and adding certain dissimilar companies to the final set of comparable companies for benchmarking the subject transactions on an ad-hoc basis, thereby resorting to cherry picking of comparables for benchmarking the subject transactions. However, a relief was granted by the Hon'ble DRP to exclude 4 comparable companies selected by the Ld. TPO namely Wipro. L & T Technologies Services Ltd., Motif India Infotech Pvt. Ltd. and Sagarsoft (India) Ltd. from the list of final comparables of the TPO.

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, in considering 'Nihilent Limited' and 'Inteq software Pvt Limited as a comparable to the Appellant disregarding the facts that these companies are functionally different to the Appellant with respect to the subject international transaction

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by wrongfully rejecting certain similar companies selected by the Appellant in its Transfer Pricing Study Report namely 'Batchmaster Software Private Limited, TVS Infotech Limited, Infomile Technologies Limited, Evoke Technologies Private Limited and Issumation Technologies Private Limited without appreciating that these companies are also engaged in rendering similar software development services and hence, are functionally comparable to the activities undertaken by the Appellant with respect to the subject international transaction.

The learned DRP/TPO/AO passed an order under Section 92CA(3) of the Act which suffers from several computational errors in margins of the companies considered comparable by the learned TPO, for determination of arm's length margin, and consequently, erred in computing the amount of adjustment to be made in respect of the subject transactions of the Appellant. Further, the Ld. DRP has erred in not adjudicating the 4 rectification application filed by the Appellant dated 13 Oct 2023 under section 154 of the Act.

The DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by falling to make appropriate adjustments to account for differences in working capital employed by the appellant vis-a-vis comparable companies in respect of the subject transactions.

The learned DRP/TPO/AO have erred, in law and on facts and circumstances of the case, by not making suitable adjustments to account for differences in the risk profile of the appellant vis-a-vis the comparable companies.

The learned DRP/TPO AD grossly erred, in law and on facts and circumstances of the case, in charging interest on delayed realisation of receivables from the AEs, by:

Without prejudice to the above, the learned DRP/TPO/AO grossly erred, in law and on facts and circumstances of the case, in applying the rate of interest on the gross outstanding receivables instead of net outstanding receivables for determination of ALP.

The learned AO grossly erred, both on facts and circumstances of the case and in law. in proposing to initiate penalty proceedings under section 270A of the Act.

The assessee has also raised the following additional ground: 1] The appellant company submits that the order passed by the learned TPO u/s. 92CA(3) dated 23.07.2023 is bad in law since the same has been passed in the name of Aricent Technologies Pvt. Ltd. which has been amalgamated with Aricent Technologies (Holdings) Ltd. which in turn has been amalgamated into Capgemini Technology Services India Ltd. and accordingly, as the said order has been passed in the name of non existent entity, the order passed by the learned TPO and the consequential final assessment order be declared null and void.

Referring to the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688, the Ld. Counsel for the assessee submitted that the said additional ground raised is purely legal in nature which goes to the root of the matter and all necessary facts are already available on record and no new facts are required to be investigated. Therefore, the additional ground raised by the assessee should be admitted.

After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute