YOUR LIFESTYLE P. LTD,MUMBAI vs. DCIT 14(3)(1), MUMBAI

The captioned appeal by assessee for Assessment Year [A.Y] 2011-12 contest the final assessment order passed by Ld. Deputy Commissioner of Income Tax-Circle-14(3)(1), Mumbai [AO] u/s 143(3) read with section 144C(13) of the Income Tax Act, 1961 pursuant to the ITA.No.314/Mum/2016 Your Lifestyle Private Limited Assessment Year 2011-12 directions of Ld. Dispute Resolution Panel [DRP]. The effective Grounds of Appeal as raised in the appeal reads as under:-

It is noted that the name of erstwhile assessee namely Sanda Wellbeing Private Limited has been changed to Your Lifestyle Private Limited with effect from 10/02/2014 vide fresh certificate of incorporation, SRN No. B94353224 issued by Ministry of Corporate Affairs, a copy of which has been placed on record. The Appeal before us has been filed in the name of new entity and the same is in order. In this backdrop, we proceed to dispose-off the aforesaid appeal. 3.1 Facts in brief are that the assessee being resident corporate assessee was engaged in the business of domestic sales of health care products and rendering Business Process Outsourcing [BPO] services. Its BPO division was mainly engaged in rendering call center services in the nature of tele-services and tele-marketing services to customers situated in UK for its Associated Enterprises [AE] namely Sanda ITA.No.314/Mum/2016 Your Lifestyle Private Limited Assessment Year 2011-12 Wellbeing Ltd (UK). BPO call centre business was being operated from two places viz. Mumbai and Goa. 3.2 The international transaction, being consideration received by assessee from its AE against BPO services aggregating to Rs.27.64 crores, as reported in Form No. 3CEB was referred u/s 92CA(1) for computation of Arm Length Price [ALP] to Ld. Transfer Pricing Officer [TPO] on 16/01/2014. In terms of the agreement with its AE, the said consideration was arrived at on the basis of Seat cost per employee @300GBP, Cost of Salary/incentive of permanent employee with mark- up of 12% and reimbursement of all direct expenses. 3.3 The assessee in his Transfer Pricing [TP] Study adopted Cost Plus Method [CPM] as the most appropriate method to benchmark the aforesaid international transactions. The Profit Level Indicator [PLI] selected for the comparables was the Berry Ratio i.e. OP / VAE, OP being operating profit & VAE being Value Adding expenses. After applying turnover filter, it selected one comparable namely Jindal Intellicom Ltd. with PLI of 13.91% as against 14.06% being reflected by the assessee from BPO [UK] division and hence, submitted that no adjustment qua ALP was required. The Ld. TPO while rejecting pricing mechanism computed entity level PLI of -3.33% as reflected by assessee as against mean PLI of 25.45% reflected by six comparables. The Ld. TPO rejected the segmental working submitted by the assessee for want of adequate details & justification for allocation of common expenditure. Finally, ALP of the transactions was worked out at Rs.35.73 crores as against Rs.27.64 crores being reflected by the assessee and accordingly, a net TP adjustment of Rs.8.08 crores was proposed by Ld.

The Ld. Authorized Representative for Assessee [AR] while drawing our attention to the documents placed in the paper-book submitted that Ld. TPO erred in rejecting audited segmental results submitted by the assessee and entity level adjustment was not justified on factual matrix. Our attention is drawn to the fact that complete segmental details were available on record which has completely been ignored by Ld. TPO as well as by Ld. DRP. The orders for succeeding years have also been placed on record to submit that the methodology as adopted by the assessee in the impugned AY has been accepted in succeeding years and therefore, the rejection of the same was not justified. The Ld. AR further submitted that Berry Ratio was well accepted PLI in terms of various judicial pronouncements and the same would result into similar results as arrived at by Ld. TPO. Our attention is drawn to several judicial pronouncements to support the submissions. Per Contra, Ld. DR submitted that segmental cost allocation was skewed in assessee’s favour and reasonableness / justification of allocation ITA.No.314/Mum/2016 Your Lifestyle Private Limited Assessment Year 2011-12 basis could not be demonstrated by the assessee. At the same time, Ld. DR submitted that factual matrix may be re-appreciated by the lower authorities.

Upon careful consideration and perusal of material on record, we find strength in the argument of Ld. AR that segmental results / details were available on record and the assessee had also given the basis of allocation of expenses. Prima facie, it is noted that the methodology adopted by the assessee in the impugned AY has been accepted by the revenue in succeeding years. We are of the opinion that the details submitted by the assessee have not been fully appreciated by the lower authorities. Hence, in the interest of justice and on factual matrix, we deem it fit to restore the matter back to the file of Ld. AO / TPO for reconsideration of segmental results reflected by the assessee and re- adjudicate the same as per law. The assessee, in turn, is directed to substantiate his stand in this regard.

Resultantly, the assessee’s appeal stands allowed for statistical purposes. Order pronounced in the open court on 13th April, 2018 Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 13.04.2018 Sr.PS:-Thirumalesh ITA.No.314/Mum/2016 Your Lifestyle Private Limited Assessment Year 2011-12 आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. 3. आयकरआयु�(अपील) / The CIT(A) आयकरआयु�/ CIT– concerned 4. 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 6. गाड�फाईल / Guard File