GE BE PRIVATE LIMITED,BANGALORE vs. DCIT, BANGALORE

The assessee has raised the following grounds :

Ground No.1 to 4 are general in nature and do not require any specific adjudication.

Ground No.5 is regarding the Most Appropriate Method (‘MAM’) adopted by the Transfer Pricing Officer (‘TPO’) as Cost Plus Method (‘CPM’) instead of Transactional Net Margin Method (‘TNMM’) adopted by the assessee.

We have heard the learned Senior Counsel for the assessee as well as learned CIT, DR and considered the relevant material on record. At the outset we note that the TPO has adopted TNMM as Most Appropriate Method for the A.Y. 2010-11 as well as in the subsequent years. An identical issue has been considered by the co-ordinate bench of this Tribunal in assessee's own case for 4 IT(TP)A No.1291/Bang/2012 the Assessment Year 2006-07 vide order dt.4.11.2016 in IT(TP)A No.1222/Bang/2010 in para 9 as under :

“9. Regarding the TP issue raised by the assessee inboth years, we find that in A.Y. 2010-11, the TPO has adopted TNMM as most appropriate method. Similarly, in A.Y. 2012-13, the assessee had adopted TNMM as MAM and the TPO has approved the same because no TP adjustment has been proposed by him in the order passed by him on 29.01.2016. In the present two years, the TPO has considered CPM as MAM although, the assessee had claimed in both these years also that TNMM should be considered as MAM. Since in the succeeding years, the TPO has also accepted TNMM as MAM, we feel it proper that in these two years also, TNMM should be adopted as MAM and for this purpose, we restore the entire TP matter back to the file of the Assessing Officer/TPO for working out the ALP in both these years by adopting TNMM as MAM after providing adequate opportunity of being heard to the assessee.”

The next issue raised by the assessee is denial of working capital adjustment as raised in the Ground No.8 of the assessee's appeal.

We have heard the learned Senior Counsel for the assessee as well as learned CIT, DR and considered the relevant material on record. The ld. Senior Counsel has pointed out that the TPO has denied the benefit of working capital adjustment on the ground that since CPM has been adopted as MAM therefore no working capital adjustment is required to be allowed. He has further

On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below.

Having considered the rival submissions and relevant material on record, we find that when the issue of MAM has been decided in favour of the assessee then the issue of working capital adjustment is required to be reconsidered by the TPO/A.O. Accordingly, we direct the TPO/A.O. to consider the benefit of working capital adjustment.

The next effective ground No.10 is regarding comparability of various companies selected by the TPO. Though the assessee has raised the issue of comparability of five companies however at the time of hearing, the ld. Senior Counsel has stated that the assessee is pressing the exclusion of two companies viz. Infosys BPO Ltd. and Wipro Limited (BPO Divn.). Thus the ld. Senior Counsel has submitted that the assessee's turnover is only Rs.4 Crores in ITES segment whereas turnover of these two companies is 100 times more than the assessee's turnover. He has thus submitted that in view of the consistent finding of this Tribunal on this issue that the company having more than or less than 10 times of the assessee's turnover cannot be considered as a good

On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and submitted that the decision in the case of other assessee cannot be blindly followed in the other cases without doing the exercise of FAR Analysis independently.

Having considered the rival submissions and relevant material on record, at the outset we note that the functional comparability of these two companies has been examined by the co-ordinate bench in the case of Symphony Marketing Solutions India Pvt. Ltd. Vs. ITO (supra) for the same assessment year in paras 24 & 26 as under :

This company is listed at Sl.No.18 in the list of comparable companies chosen by the TPO. As far as this company is concerned, the discussion made while deciding Infosys BPO Ltd. as a comparable will equally apply to this company also. This company owns substantial intellectual property on software products. This company cannot therefore be regarded as a comparable. For the reasons given while disregarding Infosys BPO Ltd. as a comparable, this company is also directed to be excluded from the list of comparables.”

In view of the above facts and circumstances as well as the binding precedent, we direct the TPO/A.O. to exclude these two companies viz. Infosys BPO Limited and Wirpo Limited (BPO Divn.) from the set of comparables and 8 IT(TP)A No.1291/Bang/2012 then recomputed the ALP. Needless to say that the benefit of second proviso to Section 92CA(2) also be considered.

The learned Senior Counsel for the assessee has stated at Bar that the rest of the grounds in the assessee's appeal are consequential and in the nature of argument therefore the assessee do not press the same except the Ground No.9(c) regarding risk adjustment.

We have heard the learned Senior Counsel for the assessee as well as learned CIT, DR and considered the relevant material on record. The assessee has not furnished the computation and working of the risk adjustment by giving the details of the assessee's own data as well as comparables. Therefore in the absence of the requisite details level of risk and computation of quantification of risk adjustment, we do not find any merit or substance in the ground No.9(c) of the assessee’s appeal. The same is dismissed.

Rest of the grounds of the assessee's appeal are dismissed as not pressed.