M/S. OCEANS CONNECT INDIA PVT.LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX,,

We proceed assessment year wise for the sake of convenience and brevity. Coming to the assessee’s first and foremost appeal in AY 2010-11, it emerges at the outset that it’s endeavour before us is to seek exclusion of five entities M/s Accentia Technologies Ltd., BNR Udyog Ltd., Caliber Business Point, Cosmic Global Ltd. and Informed Technologies Ltd., from the array of comparables taken by the learned lower authorities whilst making arms length price “ALP” adjustment in Information Technology Enabled Services “ITeS”, leading to transfer pricing adjustment of Rs.2,06,90,628/- in issue. It is made clear that the assessee’s volume of transactions with its overseas associate enterprise “AE” M/s.Ocean Connect UK Ltd. amounted to Rs.16,73,55,893/- declared at cost + 12% mark-up after adopting the transactional net margin method ‘TNMM’. We, keep in mind the fact that our instant adjudication as per assessee’s pleadings is restricted to admissibility of the foregoing five entities as valid comparables, we refrain ourselves from touching upon all the remaining aspects for the sake of convenience and brevity.

We next note that M/s.Accentia Technologies Ltd. is not only involved in medical transcriptions & software sales as against the assessee’s segment of “ITES” but also it had undergone an extraordinary event of amalgamation involving M/s.Accentia Info Serve Ltd. w.e.f 01.04.2008 as held in the tribunals co-ordinate benches order in M/s GE India Business Services Private Ltd., involving [A.Y. 2010-11]. That being the case, we hold that this first and foremost entity M/s.Accentia Technologies Ltd., is not a valid comparable since having undergone amalgamation as an extraordinary event. The same is directed to be excluded.

The very course of action follows for the next three comparable entities M/s. BNR Udyog Ltd., Caliber Business Point and Cosmic Global Ltd. since engaged in medical transcription [first and last] and healthcare(second case) thereby deriving revenue of Rs.1.09/-, 71/- and 5.72/- [in crores], respectively as against the assessee’s “ITeS” segment on captive basis only. This tribunals co- ordinate bench’s decisions in M/s.Venntura (Inida) Pvt. Ltd. in (Pune) and GE India Business Services Pvt. Ltd., (supra) hold that such medical transcription and healthcare services performing entities do not form valid comparables in ITeS ITA No’s.162 & 1721/PUN/2017 (A) Oceans Connect India Pvt. Ltd., segment. We accordingly direct exclusion of all three entities since not satisfying “FAR” analysis.

Lastly comes the fifth entity M/s.Informed Technologies Ltd., which is found to be engaged in knowledge processing outsourcing “KPO” business as held in Capital Net Pvt Ltd. Vs. DCIT dated 15.01.2019. Hon’ble delhi high court’s decision in Rampgreen Solutions Pvt. Ltd., Vs. CIT in ITA 102/2015 dated 10.08.2015 has settled the instant issue that such a KPO does not form a valid comparable in the instant segment. We thus direct the learned AO/TPO to exclude M/s.Informed Technologies Ltd. as well as from the array of comparables. Necessary computation shall follow as per law.

This assessee first and foremost appeal is accepted in above terms.

We now advert to the assessee’s latter appeal for A.Y. 2011-12. Both the learned representatives are ad-idem during the course of hearing that the assessee only seeks to exclude four entities from the array of comparables i.e. M/s.Accentia Technologies Ltd., Caliber Business Point, Informed Technologies Ltd., and E4E Healthcare Business ITA No’s.162 & 1721/PUN/2017 (A) Oceans Connect India Pvt. Ltd., Solution out of which the former three already stand adjudicated against the department in A.Y. 2010-11 hereinabove(supra). The very factual position continues for the last entity M/s.E4E Healthcare Business Solutions stated to be engaged in healthcare services. We make it clear that the very segment of healthcare services stands excluded in A.Y. 2010-11 (supra). Coupled with this, the Revenue could hardly dispute that it has derived income from healthcare services only to the tune of Rs.61 crores falling in a different segment than ITeS before us. We thus follow preceding reasoning herein as well to exclude this last entity M/s.E4E Healthcare Business Solutions. We further deem it appropriate before parting that all the foregoing functionally dissimilar entities’ financials also do not support the Revenue’s arguments. The assessee’s instant latter appeal in ITA No.1721/PUN/2017 is also allowed to the extent indicated hereinabove.