MANPOWERGROUP SERVICES INDIA PRIVATE LIMITED,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, DELHI , JHANDEWALAN EXTENSION, NEW DELHI

PER NAVEEN CHANDRA, A.M:-

This appeal by the assessee is directed against the order dated
30.07.2024 framed u/s 143(3) r.w.s 144C(13) of the Income-tax Act,
1961 [hereinafter referred to as 'the Act'] pertaining to A.Y 2020-21. ITA No. 3585/DEL/2024 [A.Y. 2020-21]
Grounds raised by the assessee read as under:
1. That on the facts and in the circumstances of the case and in law, the AO and Dispute Resolution Panel ('DRP') have erred in not allowing the deduction of Rs. 24,16,27,837 claimed u/s 80JJAA of the Act by arbitrarily challenging the employer-employee relationship between the assessee and its employees, without appreciating the fact that all the eligibility tests laid down for claim of deduction u/s 80JJAA of the Act is satisfied by the assessee.
1.1. The AO and DRP have arbitrarily disregarded the existence of employer-employee relationship existing between the assessee and its employees without providing any reasonable basis or logical reasoning and thus, this ad-hoc disallowance warrants vacation.
1.2. The AO and DRP have disregarded the fact that the assessee satisfies all the eligibility criteria prescribed under the provisions of Section 80JJAA of the Act and accordingly is eligible for the claim of deduction.
2. That on the facts and in the circumstances of the case and in law, the AO and DRP have erred in not allowing the deduction claimed u/s 80JJAA of the Act on a technical ground that filing of Form 10DA was delayed by I day, without appreciating the fact that the reason of marginal delay was bonafide and due to the ITA No. 3585/DEL/2024 [A.Y. 2020-21]
of 1 day should not be the basis for disallowance u/s 80JJAA of the Act.
3. That on the facts and in the circumstances of the case and in law, the AO and DRP have erred in denying the entire claim of deduction u/s 80JJAA of the Act without appreciating the fact that the claim is a consolidated claim of 3 consecutive years, hence the claim pertaining to the preceding years (i.e., AY 2018-19 and AY 2019-20) and now carried forward to AY 2020-21 cannot be denied in the instant year.
4. That on the facts and in the circumstances of the case and subject to allowance of Ground No. 1 to 3 above, the Assessee prays for consequential relief of deduction u/s 80JJAA of the Act to the extent of assessed Gross Total income.
5 .
That on the facts and in the circumstances of the case and in law, the AO, Transfer Pricing Officer ('TPO') and DRP erred in enhancing the income of the Assessee by Rs. 97,97,336 on account of Transfer Pricing ("TP") adjustment u/s 92CA(3) of the Act by holding that the international transaction pertaining to provision of Information Technology ("IT") services and Information Technology enabled services ("ITeS") to its associated enterprise ("AE") are in the nature of Knowledge Process Outsourcing ("KPO") services and do not satisfy the arm's length principle envisaged under the Act.
In doing so, the DRP/AO/TPO have grossly erred in:
5.1. Misconstruing the business profile of the Assessee engaged in providing IT and ITeS services and thereby comparing the services

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
Assessee;
5.2. Rejecting the functional, asset and risk ("FAR") analysis and economic analysis as undertaken in the TP documentation maintained by the Assessee in terms of section 92D of the Act read with Rule
10D of the Income-tax Rules, 1962 ("the Rules") on the basis of alleged distinguished functions performed by the employees of the Assessee engaged in rendering services under the IT segment and ITeS segment;
5.3. Violating the principles of natural justice by not sharing the search strategy adopted in this regard with the Assessee and thereby selecting comparable companies with dissimilar functional profile and having diversified activities along with lacking segmental information;
5.4. Conducting a fresh comparability analysis and cherry picking a set of high margin companies engaged in diverse activities unrelated to the functions performed by the Assessee viz. IT and ITeS services;
5.5. Not considering the functionally comparable companies selected by the Assessee in its TP documentation which are engaged in similar functional profile with some of the comparables proposed by the TPO;

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
5.6. Without prejudice to the above grounds, the DRP/TPO disregarded the fresh benchmarking analysis undertaken by the Assessee and comparables proposed functioning as KPO service provider;
6. That on the facts and in the circumstances of the case, the assessee is eligible for Set off of brought forward MAT Credit entitlement u/s 115JAA of the Act which should have been allowed while cell computing the net tax payable.
7. That on the facts and in the circumstances of the case, where the above-mentioned grounds are decided in favor of the assessee, it is eligible for consequential relief from interest u/s 234D.
8. That on the facts and in the circumstances of the case and in law, the AO has erred in initiating penalty proceedings u/s 270A(9)(a), 271B and 271AA read with section 274 of the Act.
9. The Assessee prays for leave to add, alter, amend and/ or'
modify any of the grounds of appeal at or before the hearing of the appeal.”

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
for supervising, co-ordination and to meet other client needs.
6. The assessee filed its return u/s 139(1) on 15.02.2021 declaring nil income. The assessee filed a revised return on 31.03.2021 declaring nil income. In the assessment year 2020-21, the assessee in the return of income claimed following deduction u/s 80JJAA, being 30% of salary paid to new additional employees in the respective assessment years:
AY
Year of claim
Dedn u/s 80JJAA in (Rs.)
2018-19
3rd Year
30,36,38,164
2019-20
2nd Year
64,81,198
2020-21
1st Year
5,27,13,485
Total
36,28,32,847
Dedn restricted to gross total income
24,16,27,837

Amount (Rs.)

1
80JJAA

Disallowance of deduction u/s 80JJAA

24,16,27,837

2

36(1)(va)

Addition for delay in deposit of employees contribution to provident fund
57,44,035

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
higher margin of 21.19% applied.

97,97,336

Total

25,71,69,208

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
80JJAA of the Act and is eligible for deduction of 30% of additional salary of the new employees hired, for a period of three years. The assessee placed copies of evidence to demonstrate that the employees, hired on fixed term contract, are the employees of the assessee. The employees satisfy the test of employer-employee relationship as the assessee undertakes decisions related to employment relationship. The assessee also deducts TDS from salary, and deposits social security of the employees. The Ld AR contended that the assessee charges service fees including GST from its customer for providing its personnel.
11. The ld AR of the assessee stressed the fact that the provisions of section 80JJAA has been amended w.e.f 01.04.2016 which has expanded the scope of deduction u/s 80JJAA. The ld AR submitted that the AO had issued 133(6) to the customers of the assessee who confirmed that no deduction u/s 80JJAA was claimed by them against the employees of the assessee. The ld AR submitted that the deduction u/s 80JJAA was allowed by the AO in the preceding AY 2019-20. The ld AR further submitted the following evidences in support of its claim for the deduction:

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
• Service agreement with its customers for deputing its employees from page no. 118 to 306 of PB volume I which have similar terms and conditions.
• Fixed term employment contract with the employees on sample basis from page no. 309 to 368 of PB volume I.

• Sample copies of salary slips issued to employees from page no. 369 to 389 of PB volume I.

• Extracts of TDS return on salaries (Form 24Q) filed by the assessee from page no. 397 to 427 of PB volume I.
• Sample copies of Form 16 issued by the assessee to the employees from page no. 428 to 477 of PB volume I.
• Extracts of Provident Fund remittances of employees made by assessee from page no. 478 to 488 of PB volume I.
• Extracts of ESIC remittances of employees made by the assessee from page no. 489 to 501 of PB volume I
• Sample copy of time sheet shared by the customers of the assessee from page no. 502 to 508 of PB volume I.
• E-mail declaration by a customer of assessee acknowledging that deputed staff are employees of the assessee from no.
509 to 511 of PB volume I. compensating the actual loss suffered by them on account of such acts."

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
procedural, the assessee is not eligible for deduction u/s 80JJAA. The ld
DR relied on the hon’ble Supreme Court in the case of Wipro Ltd and the case of Dilip Singh.
13. We have heard the rival submissions and have perused the relevant material on record. A Co-joint reading of the terms of service agreements between the assessee and its customer and the fixed term employment contract between the assessee and its employees shows that the assessee, in its capacity of the employer of its employees, has the authority to deploy/assign employees for provision of services at its customer's premises. Post assignment, the customer of the assessee, has the authority restricted only to supervise and instruct the work of the deployed employee. The customer cannot take any disciplinary action against the erring employee and can only seek replacement of such employees from the assessee. As per Service Contract, the supervision and control of the employees lies with the assessee company. Upon completion of the task at the customer's premise or under any other circumstances, the employees return to the assessee, who may then reassign them to a different location or customer premise.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
supervision and control required to meet the test of employer-employee relationship.
The assessee controls assignment of roles and responsibilities, deputation, relocation, imposition of disciplinary sanction, remuneration or termination of its employees. Accordingly, the assessee is the employer qua the employees employed by it and there is an established relationship of employer-employee between them which should not be intertwined with the service arrangement which only provides a mechanical and temporary right to the customer to supervise the work performed by the employees of the assessee.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
(2) No deduction under sub-section (1) shall be allowed,—
(a) if the business is formed by splitting up, or the reconstruction, of an existing business:
Provided that nothing contained in this clause shall apply in respect of a business which is formed as a result of re-establishment, reconstruction or revival by the assessee of the business in the circumstances and within the period specified in section 33B;
(b) if the business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation;
(c) unless the assessee furnishes alongwith the return of income the report of the accountant, as defined in the Explanation to section 288 giving such particulars in the report as may be prescribed.
Explanation.—For the purposes of this section,—
(i) "additional employee cost" means the total emoluments paid or payable to additional employees employed during the previous year:
Provided that in the case of an existing business, the additional employee cost shall be nil, if—
(a) there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year;
(b) emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account:
Provided further that in the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost;
(ii) "additional employee" means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include—
(a) an employee whose total emoluments are more than twenty-five thousand rupees per month; or (b) an employee for whom the entire contribution is paid by the Government under the Employees' Pension Scheme notified in accordance with the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or ITA No. 3585/DEL/2024 [A.Y. 2020-21]
during the previous year; or (d) an employee who does not participate in the recognised provident fund:
34[Provided that in the case of an assessee who is engaged in the business of manufacturing of apparel, the provisions of sub-clause () shall have effect as if for the words "two hundred and forty days", the words "one hundred and fifty days" had been substituted;]
(iii) "emoluments" means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include—
(a) any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee under any law for the time being in force; and (b) any lump-sum payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and the like.
(3) The provisions of this section, as they stood immediately prior to their amendment by the Finance Act, 2016, shall apply to an assessee eligible to claim any deduction for any assessment year commencing on or before the 1st day of April, 2016.]

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
business; b.
The words 'additional wages' and 'new regular workman' has been replaced by 'additional employee cost' and 'additional employee'; c.
The earlier requirement of new workman in excess of 50
workmen is dispensed with. After the amendment, the deduction is allowable in respect of additional employee cost i.e., total emoluments paid to additional employees.
d.
The section before amendment specifically provided that a regular workman does not include:
i. A casual workman or ii. A workman employed through contract labor or iii. Workman employed for a period of less than 300 days.
e.
After the amendment the term additional employees mean an employee employed during the previous year but does not include:
(i) An employee employed for a period of less than 240 days,
(ii) An employee who does not participate in the recognized

Provident Fund.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the appellant in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

Explanation. For the purposes of this section, the expressions, i "additional wages" means the wages paid to the new regular workmen in excess of fifty workmen employed during the previous year ii.
"regular workman", does not include- a) a casual workman; or b) a workman employed through contract labour; or c) any other workman employed for a period of less than three hundred days during the previous year; ✓

ii. "ade emp emp of er of th iii. "workman" shall have the meaning assigned to it in clause (s) of section 211
of the Industrial Disputes Act, 1947 (14
of 1947); a) b)
80JJAA. (1) Where the gross total income of an appellant to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

Explanation For the purposes of this section,- i "additional employee cost" means total emoluments paid or payable to additional employees employed during the previous year:
Provided that in the case of an existing business, the additional employee cost shall be nil, if a) there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year; b) emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account:

ii. "additional employee" means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include,)

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
iv. "factory" shall have the same meaning as assigned to it in clause (m) of section 2 of the Factories Act, 1948
(63 of 1948).
a) an employee whose total emoluments are more than twenty-five thousand rupees per month; or b) an employee for whom the entire contribution is paid by the Government under the Employees'
Pension Scheme notified in accordance with the provisions of the Employees'
Provident Funds and Miscellaneous
Provisions Act, 1952 (19 of 1952); or c) an employee employed for a period of less than two hundred and forty days during the previous year; or d) an employee who does not participate in the recognized provident fund:

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
We also find that the Assessing Officer view that the employer- employee relationship does not exist between the assessee and the employees hired by the assessee is without any foundation. The AO has not correctly appreciated the terms of Service agreements with the customers, fixed term employment contract with the employees, and the amended provisions of Section 80JJAA of the Act applicable to this assessment year.
20. It is important to note that the provisions of Income Tax Act do not define the term 'Employer' or 'Employee' or 'Employer-employee relationship'. Therefore, meaning of the term 'Employer-employee relationship' needs to be derived from its general context and prevalent judicial precedents. We find substantial force in the reliance placed by the ld. counsel for the assessee on the following judicial precedents to evaluate existence of Employer-Employee relationship:
• Hon'ble Supreme Court of India in Balwant Rai Saluja v. Air
India Ltd (AIR 2015 SC 375), on similar question of law i.e., whether workmen engaged in statutory canteens, through a contractor, can be treated as employees of the establishment
(Air India) in which such canteen is situated, held that the mere fact that Air India had a certain degree of control over the ITA No. 3585/DEL/2024 [A.Y. 2020-21]
employees does not mean that the employees were Air India's employees. It was held that the control exercised by Air India was in the nature of supervision, in which Air India was entitled to have an opinion or say in ensuring effective utilization of resources, monetary or otherwise. The said supervision is merely to ensure due maintenance of standards and quality in the said canteen. Thus, it was held that contractor's workmen could not be said to be under effective and absolute control of Air India, as Air India merely had the control of supervision over the working of the contractor's employee.
• Hon'ble Supreme Court also referred to its earlier decision in the case of Haldia Refinery Canteen Emps. Union & others - vs.- M/s. Indian Oil Corporation Ltd. 2005 (5) SCC 51 wherein under similar circumstances it was held that the control exercised by the respondent management is to ensure that the canteen is run in an efficient manner, however, this does not mean that the employees working in the canteen have become the employees of the management. Relevant extracts of the order of Hon'ble Supreme Court are produced as under:
"14. no doubt, the respondent management does exercise effective control over the contractor on certain matters in ITA No. 3585/DEL/2024 [A.Y. 2020-21]
employees/workers with regard to their level of skills, knowledge, proficiency, capability etc. so as to ensure that the employees/workers are competent and qualified and suitable for efficient performance of the work covered under the contract. This control has been kept by the management to keep a check over the quality of service provided to its employees. It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employee of the management. Such supervisory control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering the proper service to the employees of the management"
21. The ld AR has further drawn reference to the Hon'ble Supreme
Court from its earlier decision in the case of International Airport
Authority of India -vs.- International Air Cargo Workers 2009 (13)

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
fully integrated into the employer's concern or remained independent of it. Thus, where the contractor had the power to select, dismiss, pay remuneration, deduct insurance contributions, organize the work, and the establishment merely had the 'control to supervise' and not complete control, it was held that the contractor was the employer of the employees and not the establishment.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
all the relevant criteria to establish the employer-employee relationship such as the right to appoint, pay remuneration, work schedule regulation, relocation, reassignment, disciplinary actions and termination is undertaken by the assessee. The assessee also fulfills obligations related to statutory withholdings, and social security contributions. Further, the administrative control over such employees is exercised by the assessee and it is merely the supervision and instruction, which is exercised by the customers in order to ensure that the work assigned is given effect to in an efficient manner. In fact, the assessee appoints a coordinator to facilitate supervision and instruction at the customer's premises which further supports the assessee's control over its deputed employees even in the customer's premises.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
which in clause 7.3 and 7.5 of the agreement, provides that “The personnel deployed by the Resource Provider (MSPL) will work under the sole supervision and control of the Resource Provider, including the manner and method of carrying out the services. Similarly, the service agreement with DLF Ltd provides for at clause 1.1 as follows:
“The MPG will provide the services at the premises, by deputing /
deploying at the premises, a reasonable number of qualified and experienced concierge…….. under its direct employment, control and supervision along with such items/apparatus/vehicles etc., as required and are necessary according to the assessment and in the judgement of the MPG." Likewise with E.I.Dupont India Pvt Ltd in clause
1.2 provides "ManpowerGroup Services India Pvt. Ltd. shall deploy its own employee / personnel, or performing the services as per Statement of Work who shall be supervised and controlled by ManpowerGroup
Services India Private Limited.”
25. In view of the above discussion, we are of the considered view that the assessee is the employer qua the employees employed by it and there is an established relationship of employer-employee between them. The fact is established from the declaration by customer acknowledging deputed personnel as employees of assessee. The ITA No. 3585/DEL/2024 [A.Y. 2020-21]
withholding u/s 192 of the Income Tax Act, 1961 and TDS certificate in Form 16 is issued by the assessee to its employees on an annual basis.
Not only salary, the accompanied obligations of employees towards
Provident Fund and Employee State Insurance are discharged by the assessee. We also note that the Department accepted the claim of deduction u/s 80JJAA in the immediately preceding AY 2019-20 after due enquiry u/s 143(3). We therefore hold that the assessee satisfies all the eligibility criteria under amended section 80JJAA of the Act and the AO is directed to allow the deduction u/s 80JJAA. Ground 1 is allowed.
26. Regarding technical Ground No. 2 the Assessing Officer found that the assessee has not filed Form No.10DA before the due date of filing of the return of income and there is delay of one day. The ld. counsel for the assessee submitted that A.Y 2020-21 was an exceptional year as it was plagued with Covid, hence the delay of only one day and, therefore, could not comply with the provisions of Section 80 JJAA of the Act.
27. We have heard the rival submissions and have perused the relevant material on record. The statutory extended due date of filing of return of income was 15 February 2021. Accordingly, as per the amended
Section 80JJAA, filing of Form 10DA r.w. Rule 19AB of the Income Tax
Rules, 1962 for AY 2020-21, was due to be filed by 15 January 2021.The ITA No. 3585/DEL/2024 [A.Y. 2020-21]
appellant filed Form 10DA claiming deduction u/s 80JJAA on 16 January
2021 with a minor delay of 1 day. The reasons for this inadvertent delay is the Revision in timelines for filing of Form 10DA effective AY 2020-21
and the Global pandemic of Covid-19. The ld AR has relied on the Hon'ble
Delhi Tribunal in the case of Shivalik Prints Ltd. (ITA No.
2296/Del/2017) which allowed admission of similar deduction u/s 80JJAA as an additional claim raised for the first time before the 1"
appellate authority (even though there was a delay of 4 years in filing such claim) with a direction to the assessing officer that correctness of the claim may kindly be verified as per Section 80JJAA of the Act and if the Ld. AO finds the claim as correct then the same would be allowed to the assessee. The assessee also relied on the Hon'ble Delhi Tribunal while adjudicating similar case of Sai Computers Ltd. (2023) 155
taxmann.com 607 (Delhi-Trib.) also ruled that belated filing of prescribed Form 10DA is not fatal in the sense that the requirement of Rule 19AB and Rule 12(2) are not mandatory per se but are essentially directory in nature. Similarly, reliance was also placed on the decision of Hon'ble Madras High Court in Svasti Microfinance (P.) Ltd. (2024)
164 taxmann.com 229 (Madras) wherein Hon'ble HC dealing with an identical case of delay of 38 days in filing Form 10DA considered the genuine hardship caused to the assessee company and condoned the ITA No. 3585/DEL/2024 [A.Y. 2020-21]
The ground no 3 raises the issue of allowance of 30% of additional employee cost as deduction for three consecutive years under Section 80JJAA. The assessee during AY 2020-21, the assessee has claimed deduction u/s 80JJAA of Rs. 36,28,32,847 which has been restricted to the Gross Total Income of Rs. 24,16,27,837. Details of deduction claimed u/s 80JJAA is as under:
AY
Year of claim
Dedn u/s 80JJAA in (Rs.)
2018-19
3rd Year
30,36,38,164
2019-20
2nd Year
64,81,198
2020-21
1st Year
5,27,13,485
Total
36,28,32,847
Dedn restricted to gross total income
24,16,27,837

The assessing officer has denied the entire claim made u/s 80JJAA and the assessee’s grievance is that the AO has done that without appreciating the fact that total claim represents a consolidated sum of 3 consecutive years.
29. We have examined the issue and find that the assessee is eligible for deduction u/s 80JJAA. As per assessee, the carry forward of deduction claims u/s 80JJAA for AY 2018-19 and 2019-20 has not been allowed. We are of the considered view that the assessee, being eligible

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
for deduction u/s 80JJAA, the AO needs to verify the claim as per the requirements of the provisions of section 80JJAA with regard to the 3rd and 2nd year of claim u/s 80JJAA and allow the same upon verification.
The ground 3 is allowed for statistical purpose.
30. The next grievance of the assessee vide Ground No. 5 is the enhancing the income of the assessee by Rs. 97,97,336/- on account of Transfer Pricing adjustment u/s 92CA(3) of the Act.
31. Brief facts relating to this ground are that the Assessing Officer in his final order enhanced the income of the assessee by Rs 97,97,336/- on account of Transfer Pricing adjustment u/s 92CA(3) of the Act by holding that the international transaction pertaining to provision of Information Technology ("IT") services and Information Technology enabled services ("ITeS") to its associated enterprise ("AE") are in the nature of Knowledge Process Outsourcing ("KPO") services and do not satisfy the arm's length principle envisaged under the Act.
32. When the assessee went in appeal before the DRP, the DRP confirmed the action of the Assessing Officer.
33. Now the assessee is in appeal before us and submitted that the Assessing Officer and the DRP misconstrued the business profile of the assessee as being engaged in providing IT and ITeS services and thereby

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
the functional, asset and risk ("FAR") analysis and economic analysis as undertaken in the TP documentation maintained by the assessee in terms of section 92D of the Act read with Rule 10D of the Income-tax
Rules, 1962 on the basis of functions performed by the employees of the assessee engaged in rendering services under the IT segment and ITeS segment.
34. The ld counsel of the assessee continued by saying that the authorities below violated the principles of natural justice by not sharing the search strategy adopted in this regard with the assessee and thereby selecting comparable companies with dissimilar functional profile and having diversified activities along with lacking segmental information.
The ld. counsel for the assessee contended that conducting a fresh comparability analysis and cherry picking a set of high margin companies engaged in diverse activities unrelated to the functions performed by the assessee viz. IT and ITes services is not justified. The authorities below did not consider the functionally comparable companies selected by the assessee in its TP documentation which are engaged in similar

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
It is the further say of the ld. counsel for the assessee that the DRP /TPO disregarded the fresh benchmarking analysis undertaken by the assessee and comparables proposed functioning as KPO service provider.
35. Per contra, the ld DR submitted that the functions of the assessee and functions performed by the assessee for their AE is that of a KPO. It is submitted that the personnel are getting fees which is at par with fees given to highly technical services and highly qualified personnel. The ld
DR relied on the decision of the hon’ble Delhi High Court in the case of Rampgreen Solutions P Ltd (2015) 60 taxmann.com 355(Del) for the proposition that KPO are only ITeS where the service providers have to employ advanced level of skills and knowledge. The ld DR emphasized that the assessee is making value addition and the dominant service provided is that of KPO.
36. We have heard the rival submissions and perused the materials on record. We find that the assessee main grievance is that the assessee be considered as ITeS and not KPO. The assessee however, without prejudice, contends that the comparables identified by the AO which are KPO service provider and are also undertaking functions of IT and ITeS services, be compared with companies with similar functions

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
of comparables including assessee’s TP study comparables as follows:
List 1:

Company Name
Weighted
Average
Selected by 1. Digical Global Private Limited
(10.39%)
Appellant
2. Rhea Software Limited
(5.08%)
Appellant
3. KALS Information Systems Limited
(1.58%)
Appellant
4. Cameo Corporate Services Limited
1.73%
Appellant
5. Yudiz Solutions Private Limited
2.60%
Appellant
6. Isummation Technologies Private Limited
3.83%
Appellant
7. Happiest Minds Technologies Private Limited
6.21%
Appellant
8. One Point One Solutions Limited
6.96%
Appellant
9. Infomile Technologies Limited
7.40%
Appellant
10. Microland Limited
8.41%
Appellant
11. Sundaram Business Services Limited
8.55%
Appellant
12
DKM Online Private Limited
8.83%
Appellant
13
CES Limited
10.98%
Appellant
14
R Systems International Limited -IT segment
11.38%
Appellant
15
Datamatics Business Solutions Limited
13.16%
TPO and Appellant
16
Athena BPO Private Limited
13.71%
Appellant
17
Bureau Veritas India Private Limited
14.24%
ΤΡΟ
18
R Systems International Limited -BPO Services segment
15.03%
Appellant
19
E-Zest Solutions Limited
15.06%
Appellant
20
Liquidhub Analytics Private Limited
15.86%
ΤΡΟ
21
Surevin BPO Services Limited
16.46%
Appellant
22
Tech Mahindra Business Services Limited
16.60%
Appellant
23
Reliable Data Services Limited
16.73%
Appellant
24
Allsec Technologies Limited
17.62%
Appellant
25
Sasken Technologies Limited
18.75%
Appellant
26
SagarSoft (India) Limited
19.86%
Appellant
27
Caliber Interconnect Solutions Private Limited
20.11%
ΤΡΟ
28
Ultramarine & Pigments Limited
21.51%
Appellant

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
ΤΡΟ
30
Syngene International Limited
24.74%
ΤΡΟ
31
InfoBeans Technologies Limited
24.89%
Appellant
32
Tata Elxsi Limited
28.19%
Appellant
33
Vitae International Accounting Services Private
Limited
31.90%
ΤΡΟ
34
Domex E-Data Private Limited
33.06%
ΤΡΟ
35
Inteq Software Private Limited
41.05%
Appellant
36
Jindal Intellicom Limited-BPO segment
54.13%
Appellant

Company Name
Weighted
Average
Selected by 1. Marvel Gospel Solutions Private Limited
4.10%
Appellant
2. Aabsys InformationTechnologies Pvt Limited
4.41%
Appellant
3. Cheers Interactive India Pvt Limited
6.42%
Appellant
4. Siligate Solutions Limited
7.54%
Appellant
5. Datamatic Business Solutions Limited
13.16%
TPO and Appellant
6. Bureau Veritas India Private Limited
14.24%
TPO
7. Suma Soft Private Limited
14.57%
Appellant
8. Cosmic Global Limited
15.37%
Appellant
9. Liquidhub Analytics Pvt Limited
15.86%
TPO

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
20.11%
TPO
11. Associated BuildingCo. Limited
22.27%
TPO
12
Syngene International Limited
24.74%
TPO
13
Vitae InternationalAccounting Services Pvt
Limited
31.90%
TPO
14
Domex E-Data Pvt Ltd
11.38%
TPO

We are therefore of the considered view that the issue of comparables be remitted back to the TPO for a fresh adjudication in the light of assessee’s proposed comparables who are engaged in the business of KPO and are into IT and ITeS services also. The TPO is directed to examine the comparables which are functionally similar and having segmental information, as proposed above, and arrive at a finding with regard to the Transfer Pricing adjustment to be made, if any, on this regard. The ground 5 is allowed for statistical purposes.
38. With respect to ground no 3, we direct that the assessee will get the consequential relief of deduction u/s 80JJAA to the extent of assessed total income. Ground no 6,7 and 9 are consequential in nature, hence needs no adjudication.
39. In the result, the appeal of the assessee in ITA No. 2578/DEL/2023
is partly allowed.

ITA No. 3585/DEL/2024 [A.Y. 2020-21]
SA No. 371/DEL/2024

[NAVEEN CHANDRA]
VICE PRESIDENT

ACCOUNTANT MEMBER

Dated: 25th September, 2025. VL/