Appeal details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 5037 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-11-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I1
Assessment Year
2012-2013
Appeal Filed On
20-03-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1934/DEL./2018 (ASSESSMENT YEAR : 2012-13) M/S. CONVERGYS INDIA SERVICES VS. DCIT, CIRCLE 6 ( 2), PVT. LTD., NEW DELHI. GROUND FLOOR, BESTECH BUSINESS TOWERS, SOHNA ROAD, SECTOR 48, GURGAON 122 001. (PAN : AABCC5056G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.M. GUPTA, ADVOCATE MS. SHRUTI KHIMTA, AR REVENUE BY : SHRI SANJAY I. BARA, CIT DR DATE OF HEARING : 17.10.2019 DATE OF ORDER : 22.11.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER THE APPELLANT, M/S. CONVERGYS INDIA SERVICES PVT. LTD. (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 13.11.2017 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- 12, NEW DELHI IN AN APPEAL CHALLENGING THE ORDERS PASSED BY THE LD. TPO/AO QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUN DS INTER ALIA THAT :- ITA NO.1934/DEL./2018 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-12, ['LD. CIT(A),] ERRED IN DETERMINING THE ARM'S LENGTH MARGIN AT 21. 79% FOR PROVISION OF INFORMATION TECHNOLOGY ENABLED CUSTOME R CARE BACK OFFICE SUPPORT SERVICES TO ITS ASSOCIATED ENTE RPRISE ('AE') THEREBY MAKING AN ADDITION OF INR 446,145,228/-. 2. WHILE DOING SO, THE LD. CIT(A), LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 6(2), ('AO') A ND LD. DEPUTY COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICER - 1(2)(2) ('LD. TPO') HAS GROSSLY ERRED IN: 2.1 REJECTING THE TRANSFER PRICING ('TP') DOCUMENT ATION WHICH WAS MAINTAINED IN GOOD FAITH WITH DUE DILIGEN CE AND THUS DISREGARDING THE CONDITIONS SET OUT IN SECTION 92C( 3) OF THE INCOME-TAX ACT, 1961 ('THE ACT'); 2.2 REJECTING THE COMPARABLES SELECTED BY THE APPE LLANT ON ARBITRARY/ FRIVOLOUS/INCONSISTENT GROUNDS EVEN THOU GH THEY ARE COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS P ERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; 2.3 RETAINING COMPARABLES WITH DISSIMILAR FUNCTION S, ASSETS AND RISKS NAMELY, EXCEL INFOWAYS LIMITED (SEG.), IN FOSYS BPO LIMITED, TCS E-SERVE LIMITED; 2.4 ACCEPTING THE SEGMENTAL RESULTS OF EXCEL INFOW AYS LIMITED OBTAINED UNDER SECTION 133(6) OF THE ACT WHICH IS I NCONSISTENT WITH THE ANNUAL REPORT; 2.5 DISREGARDING JUDICIAL PRONOUNCEMENTS IN INDIA IN UNDERTAKING THE TP ADJUSTMENT. 3. THE LD. AO/CIT(A) ERRED IN COMMITTING NUMBER OF FACTUAL ERRORS IN RESPECT OF COMPUTATION OF THE PRO FIT LEVEL INDICATOR (VIZ. NET COST PLUS MARK-UP) OF CERTAIN C OMPARABLE COMPANIES AS PROPOSED BY LD. TPO AND ALSO IGNORING THE APPLICABILITY OF NECESSARY ECONOMIC ADJUSTMENTS IN THE COMPUTATION OF ARM'S LENGTH PRICE. 4. THE LD. AO ERRED ON FACTS AND IN LAW IN CHARGING INTEREST U/S 234B AND 234C OF THE ACT. 5. THE LD. AO HAS GROSSLY ERRED IN INITIATING PENAL TY UNDER SECTION 271(1)(C) OF THE ACT MECHANICALLY AND WITHO UT RECORDING ANY SATISFACTION FOR ITS INITIATION. ITA NO.1934/DEL./2018 3 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. CONVERGYS INDIA SERV ICES PVT. LTD., THE TAXPAYER IS A 99.99% SUBSIDIARY OF CONVERGYS CU STOMER MANAGEMENT GROUP INC. (CMG), USA, INCORPORATED IN I NDIA IN JANUARY 2001 TO PROVIDE CUSTOMER CARE SUPPORT SERVI CES TO CMG. THE TAXPAYER OPERATES REMOTE CUSTOMER INTERACTION C ALL CENTERS FOR PROVIDING CUSTOMER CARE SERVICES TO CMG. DURING TH E YEAR UNDER ASSESSMENT, THE TAXPAYER HAS ENTERED INTO INTERNATI ONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE) AS REPORTED IN FORM 3CEB AS UNDER :- DESCRIPTION OF THE TRANSACTIONS AMOUNT (RS.) PROVISION OF SERVICES 6,330,546,049 SALARY REIMBURSEMENT 3,239,539 PAYMENT OF SERVICE FEE AND TRAINING EXPENSES 10,131,501 REIMBURSEMENT OF IPL COST 32,880,280 REIMBURSEMENT OF EXPENSES PAID TO GROUP COMPANIES 52,00,856 ESPP RECHARGE 2,059,650 COST RECHARGES RECEIVED FROM GROUP COMPANIES 3,479,970 PURCHASE OF FIXED ASSETS (INTANGIBLE ASSETS) 3,472,887 3. LD. TRANSFER PRICING OFFICER (TPO) ACCEPTED ALL THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE TAXP AYER WITH ITS AE AT ARMS LENGTH EXCEPT A TRANSACTION QUA PROVISION OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) FOR RS.6,33,05,4 6,049/-, THE TAXPAYER IN ITS TP ANALYSIS CALCULATED ITS MARGIN D URING THE YEAR ITA NO.1934/DEL./2018 4 UNDER ASSESSMENT AT 15.06%, APPLIED TRANSACTIONAL N ET MARGIN METHOD (TNMM) WITH OPERATING PROFIT/TOTAL COST (OP/ TC) AS PROFIT LEVEL INDICATOR (PLI) AS MOST APPROPRIATE ME THOD (MAM) IN ORDER TO BENCHMARK ITS INTERNATIONAL TRANSACTION S QUA INFORMATION TECHNOLOGY ENABLED SERVICES (ITES), CHO SEN 8 COMPARABLES AND COMPUTED THEIR MEAN MARGIN AT 14.60 % AND FOUND ITS INTERNATIONAL TRANSACTIONS QUA PROVISION FOR ITES AT ARMS LENGTH. 4. LD. TPO, HOWEVER, REJECTED THE TP ANALYSIS MADE BY THE TAXPAYER, HOWEVER, ACCEPTED TNMM WITH OP/OC AS PLI AS MAM APPLIED BY THE TAXPAYER, APPLIED VARIOUS FILTERS AN D PROPOSED AN ADJUSTMENT OF RS.53,86,94,824/- QUA PROVISION OF IT ES. 5. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. C IT (A) BY WAY OF AN APPEAL WHO HAS PARTLY ALLOWED THE SAME. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. UNDISPUTEDLY, LD. TPO HAS ACCEPTED THE TNMM WITH OP/TC AS PLI AS THE MOST APPROPRIATE METHOD (MAM) APPLIED BY THE ITA NO.1934/DEL./2018 5 TAXPAYER. LD. TPO AS WELL AS LD. CIT (A) HAVE ALSO ACCEPTED THE PROFILE OF THE TAXPAYER. AFTER GIVING APPEAL EFFEC T, LD. TPO COMPUTED THE AVERAGE OF COMPARABLES AT 21.79% AS AG AINST 14.06% OF THE TAXPAYER. FINAL SET OF COMPARABLES WITH COM PUTATION OF MARGIN AFTER GIVING APPEAL EFFECT OF THE ORDER PASS ED BY THE LD. CIT (A) IS AS UNDER :- S.NO. COMPANY NAME OP/OC (AS PER TPO ORDER) OP/OC (AS PER CIT (A) DIRECTIONS) 1 ACCENTIA TECHNOLOGIES LTD. 11.95 EXCLUDED 2 ECLERX SERVICES LTD. 58.4 EXCLUDED 3 INFORMED TECHNOLOGIES INDIA LTD. 19.11 19.11 4 JINDAL INTELLICOM LTD. 0.25 0.25 5 INFOSYS BPO LTD. 36.75 36.75 6 ACROPTAL TECHNOLOGIES 18.3 EXCLUDED 7 E4E HEALTHCARE SOLUTIONS LTD. 19.85 19.85 8 CALIBER POINT BUSINESS SOLUTIONS 9.06 9.06 9 R SYSTEM INTERNATIONAL LTD. -0.46 -0.46 10 MICROGENETIC SYSTEMS LTD. 6.38 6.38 11 EXCEL INFOWAYS LTD. 41.48 41.48 12 TCS E SERVE 63.69 63.69 AVERAGE 21.79 8. CONSEQUENTLY, LD. TPO REDUCED THE PROPOSED ADJUS TMENT FROM RS.55,81,27,648/- TO RS.44,61,45,228/-. 9. LD. AR FOR THE TAXPAYER CHALLENGING THE PROPOSED ADJUSTMENT QUA BENCHMARKING THE INTERNATIONAL TRANSACTIONS PER TAINING TO PROVISION OF ITES MADE BY THE LD. TPO/CIT (A) SOUGH T TO EXCLUDE THREE COMPARABLES VIZ. EXCEL INFOWAYS LTD. (SEGMENT), TCS ITA NO.1934/DEL./2018 6 ESERVE LTD. AND INFOSYS BPO LTD. . NOW, WE WOULD EXAMINE THE SUITABILITY OF ALL THE AFORESAID THREE COMPARABLES ONE BY ONE. EXCEL INFOWAYS LTD. (SEGMENT) (EXCEL) 10. THE TAXPAYER SOUGHT EXCLUSION OF EXCEL FROM THE FINAL LIST OF COMPARABLES ON THE GROUNDS INTER ALIA THAT EXCEL FA ILS THE SERVICE REVENUE FROM EXPORTS/ITES FILTER OF 75% APPLIED BY THE TPO; THAT EXCEL FAILS EMPLOYEE COST FILTER APPLIED BY THE TPO ; THAT EXCEL FAILS DIMINISHING REVENUE FILTERS; AND RELIED UPON THE DE CISIONS OF BAXTER INDIA PVT. LTD. VS. ACIT (2017) 85 TAXMANN.COM 285 (DELHI- TRIB.), BT E-SERV (INDIA) (P.) LTD. VS. ITO (2019) 101 TAXMANN.COM 275 (DELHI-TRIB.) AND SOCIETE GENERALE GLOBAL SOLUTION GLOBAL CENTRE PVT. LTD. VS. DCIT IT (TP)A.NO.2297/BANG./2016 . 11. LD. DR FOR THE REVENUE, ON THE OTHER HAND, RELI ED ON THE ORDERS OF THE LOWER AUTHORITIES BELOW. 12. WHEN WE EXAMINE VARIOUS FILTERS APPLIED BY THE LD. TPO IN ORDER TO SELECT THE COMPARABLE COMPANIES FOR BENCHM ARKING THE INTERNATIONAL TRANSACTIONS QUA ITES, IT IS APPARENT ON RECORD THAT THE LD. TPO HAS APPLIED THE FILTER THAT, COMPANIES HAVING EXPORT SERVICE INCOME LESS THAN 75% OF THE SALES WERE TO B E EXCLUDED. 13. SIMILARLY, COMPANIES HAVING EMPLOYEE COST LESS THAN 25% OF THE TURNOVER ARE ALSO TO BE EXCLUDED AND COMPANIES AFFECTED BY THE ITA NO.1934/DEL./2018 7 PERSISTENT LOSSES IN THEIR NET-WORTH, CONSISTENTLY DECLINING SALES, ETC. ARE ALSO TO BE EXCLUDED. 14. WHEN WE EXAMINE PAGE 40 OF THE ANNUAL REPORT COMPENDIUM (ARC), REVENUE FROM ITES IS MERELY 51.06 %, THUS FAILS SERVICE REVENUE FILTER FROM EXPORT/ITES OF 75 %. COMPUTATION OF REVENUE OF EXCEL FROM ITES IS AS UNDER :- PARTICULARS AMOUNT (IN RS.) IT/BPO RELATED SERVICES (SALE OF SERVICES) 7,99,55, 260 LESS : SERVICE TAX 8,58,310 INCOME FROM SALES OF ITES (A) 7,90,96,950 TOTAL REVENUE FROM OPERATIONS (B) 15,49,21,030 % REVENUE FROM ITES (A/B) 51.06% 15. FURTHERMORE, WHEN WE EXAMINE PAGES 31 & 41 OF T HE ARC, EXCELS RATIO OF EMPLOYEE COST TO SALES IS MERELY 1 3.05% AS AGAINST FILTER OF 25% APPLIED BY THE LD. TPO. THE TAXPAYER HAS GIVEN COMPUTATION OF EMPLOYEE COST TO SALES WHICH MATCHES WITH ANNUAL REPORT, AVAILABLE AT PAGES 31 & 41 OF THE ARC, IS A S UNDER :- PARTICULARS AMOUNT (IN RS.) SALARIES, WAGES & OTHER EXPENSES 1,96,38,010 CONTRIBUTION TO PF & OTHER FUNDS 1,85,720 STAFF WELFARE EXPENSES 3,91,570 TOTAL EMPLOYEE BENEFITS EXPENSE (A) 2,02,15,300 TOTAL REVENUE FROM OPERATIONS (B) 154,921,030 EMPLOYEE COST / REVENUE (A/B) 13.05% 16. LD. AR FOR THE TAXPAYER ALSO SOUGHT EXCLUSION O F EXCEL ON THE GROUND THAT IT FAILS DIMINISHING REVENUE FILTER AS ITS REVENUE IS CONSISTENTLY DIMINISHING SINCE 2009-10 AND THE TAXP AYER HAS GIVEN ITA NO.1934/DEL./2018 8 THE DECLINING REVENUE STATUS OF TAXPAYER FORM FY 20 09-10 TO 2014- 15 AS UNDER :- FINANCIAL YEAR 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 REVENUE (INR000) 204,161.34 203,526.39 79,096.95 76,098.95 52,7982.1 2 22,994.38 OPERATING COST (INR000) 42,105.89 48,794.55 55,991.57 44,541.01 41,355.78 2 2,896 OPERATING PROFIT 162,055.45 154,731.84 23,105.38 31,558.53 11,436.34 99 OP/TC 384.88% 317.11% 41.27% 70.85% 27.65% 0.43% 17. SO, IN VIEW OF THE AFORESAID FACTS, WE ARE OF T HE CONSIDERED VIEW THAT SINCE EXCEL DOES NOT QUALIFY THE FILTERS APPLIED BY THE LD. TPO HIMSELF, IT CANNOT BE A SUITABLE COMPARABLE VIS --VIS THE TAXPAYER. 18. IN BAXTER INDIA PVT. LTD. (SUPRA), COORDINATE BENCH OF THE TRIBUNAL EXCLUDED EXCEL AS A COMPARABLE VIS--VIS I TES PROVIDER ON GROUND OF FAILING DIMINISHING REVENUE FILTER ADO PTED BY THE LD. TPO HIMSELF FROM FY 2009-10 TO 2011-12. SO, IN VIE W OF THE MATTER, WE ORDER TO EXCLUDE EXCEL FROM THE FINAL SE T OF COMPARABLES FORM BENCHMARKING THE INTERNATIONAL TRANSACTIONS QU A ITES. TCS E-SERVE LIMITED (TCS E-SERVE) 19. THE TAXPAYER SOUGHT EXCLUSION OF TCS E-SERVE ON THE GROUNDS INTER ALIA THAT IT IS FUNCTIONALLY DISSIMIL AR; THAT TCS E- SERVE IS MAKING PAYMENT OF BRAND TATA; THAT SEGMENT AL INFORMATION TO BIFURCATE REVENUE FROM ITES AND IT A ND ITA NO.1934/DEL./2018 9 CONSULTANCY SERVICES IS NOT AVAILABLE; THAT THERE I S A DIFFERENCE IN THE RISK PROFILE OF THE TATA VIS--VIS THE TAXPAYER ; THAT TCS E- SERVE HAS BEEN EXCLUDED BY THE REVENUE ITSELF IN SU BSEQUENT YEARS IN TAXPAYERS OWN CASE AND RELIED UPON THE DECISION S OF AVAYA INDIA LTD. VS. ACIT ITA 532/2019, PCIT VS. ACTIS GL OBAL SERVICES PVT. LTD. ITA 94/2017, PCIT VS. BC MANAGEMENT SERVI CES PVT. LTD. ITA 1064/2017 AND PCIT VS. E-VALUESERVE SEZ P. LTD. ITA 948/2018 . 20. WHEN WE EXAMINE PAGE 143 OF THE ARC IT IS PROVE D ON RECORD THAT TCS E-SERVE HAS MADE PAYMENT FOR BRAND TATA TO THE TUNE OF 3.67% DURING THE YEAR UNDER ASSESSMENT. WH EN WE EXAMINE THE FUNCTIONAL PROFILE OF TCS E-SERVE AT PA GES 131 & 145 OF THE ARC IT HAS COME ON RECORD THAT TCS E-SERVE I S OPERATING IN INTER ALIA DELIVERING CORE BUSINESS PROCESSING SERV ICE, ANALYTICS/ INSIGHTS AND SUPPORT SERVICES FOR BOTH DATA AND VOI CE PROCESSES IN THE NAME OF KPO SERVICES, WHEREAS THE TAXPAYER IS R ENDERING ROUTINE CALL CENTER SERVICES TO ITS GROUP COMPANIES . 21. WHEN WE EXAMINE PROFIT & LOSS ACCOUNT OF TCS E- SERVE, AVAILABLE AT PAGE 128 OF THE PAPER BOOK, IT HAS SHO WN REVENUE FROM OPERATION OF RS.1578.44 CRORES WITH NO SEGMENTATION OF REVENUE BETWEEN ITES, IT AND CONSULTANCY SERVICES. FURTHER MORE, PERUSAL OF PAGES 84 & 85 OF THE ARC, TCS E-SERVE IS BEARING SIGNIFICANT ITA NO.1934/DEL./2018 10 RISKS, SUCH AS, MICRO ECONOMIC RISK, REGULATORY RIS K, FINANCIAL RISK, ETC., WHEREAS THE TAXPAYER IS A LOW RISK CAPTIVE PR OVIDER TO ITS GROUP COMPANIES REMUNERATED AT COST PLUS BASIS. 22. HONBLE DELHI HIGH COURT IN THE CASE OF AVAYA INDIA LTD. (SUPRA), AVAILABLE AT PAGES 32 TO 52 OF THE CASE LA WS COMPENDIUM, RELEVANT PAGES 50 & 51, EXCLUDED TCS E-SERVE VIS-- VIS ROUTINE ITES PROVIDER ON THE GROUND INTER ALIA THAT SIZE AN D SCALE OF TCS E-SERVE OPERATION MAKES IT UNSUITABLE COMPARABLE; T HAT WHEN RULE 10B(2) IS APPLIED I.E. THE FAR ANALYSIS, NAMELY, FU NCTIONS PERFORMED, ASSETS OWNED AND RISKS ASSUMED IS DEPLOY ED THEN BRAND AND HIGH ECONOMIC UPSCALE WOULD FALL WITHIN THE DOM AIN OF ASSETS AND THIS ALSO WOULD MAKE BOTH THESE COMPAN IES AS UNSUITABLE COMPARABLES. 23. HONBLE DELHI HIGH COURT IN CASE OF ACTIS GLOBAL SERVICES PVT. LTD. (SUPRA) ALSO EXCLUDED TCS E-SERVE ON GROUND OF NON - AVAILABILITY OF SEGMENTAL TURNOVER DATA. 24. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT TCS E-SERVE IS NOT A SUITABL E COMPARABLE VIS--VIS THE TAXPAYER ON THE GROUNDS INTER ALIA TH AT TCS E-SERVE IS MAKING PAYMENT OF TATA BRAND EQUITY; THAT IT IS FUN CTIONALLY DISSIMILAR AND ITS SEGMENTAL FINANCIALS BIFURCATING REVENUE FROM ITES, IT AND CONSULTANCY SERVICES IS NOT AVAILABLE AND THAT IT IS A ITA NO.1934/DEL./2018 11 RISK BEARING COMPANY WHEREAS THE TAXPAYER IS LOW RI SK BEARING CAPTIVE SERVICE PROVIDER BEING REMUNERATED ON COST PLUS BASIS. MOREOVER, TCS E-SERVE HAS BEEN EXCLUDED BY THE REVE NUE ITSELF IN TAXPAYERS CASE FOR SUBSEQUENT YEARS AS A COMPARABL E FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. SO, W E ORDER TO EXCLUDE TCS E-SERVE AS A SUITABLE COMPARABLE VIS-- VIS THE TAXPAYER TO BENCHMARK THE INTERNATIONAL TRANSACTION S QUA PROVISION OF ITES. INFOSYS BPO LTD. (INFOSYS BPO) 25. THE TAXPAYER SOUGHT EXCLUSION OF INFOSYS BPO ON THE GROUNDS INTER ALIA THAT IT HAS HUGE BRAND VALUE; TH AT INFOSYS BPO HAS UNDERGONE EXTRA ORDINARY EVENT; THAT IT IS FUNC TIONALLY DISSIMILAR AND THAT THERE IS A DIFFERENCE IN THE RI SK PROFILE OF INFOSYS BPO AND THE TAXPAYER AND IT IS HAVING NO SIGNIFICAN T INTANGIBLES AND RELIED UPON THE DECISIONS OF BAXTER INDIA, BT E-SERVE AND SOCIETE GENERALE (SUPRA). 26. WHEN WE EXAMINE THE FUNCTIONAL PROFILE OF INFOS YS BPO, AVAILABLE AT PAGE 217 OF THE ARC, IT HAS COME ON RE CORD THAT INFOSYS BPO IS PROVIDING HIGH END INTEGRATED SERVIC ES IN ORDER TO FACILITATE ITS CLIENTS TO IMPROVE THEIR COMPETITIVE POSITIONING BY MANAGING THEIR BUSINESS PROCESSES IN ADDITION TO PR OVIDING INCREASED VALUE. ON THE OTHER HAND, THE TAXPAYER I S PROVIDING LOW ITA NO.1934/DEL./2018 12 LEVEL BACK OFFICE SUPPORT SERVICES AS A CAPTIVE SER VICE PROVIDER REMUNERATED ON THE COST PLUS MARK-UP. IT IS ALSO C OME ON RECORD THAT INFOSYS BPO HAS ACQUIRED PORTLAND GROUP PTY LT D., AUSTRALIA DURING THE YEAR UNDER ASSESSMENT, AS IS EVIDENT FOR M PAGES 170, 175, 184, 191 OF ARC. FURTHERMORE, INFOSYS BPO IS A HUGE BRAND HAVING SIGNIFICANT INVESTMENT IN CREATING INTANGIBL ES. 27. HONBLE DELHI HIGH COURT EXAMINED A COMPARABLE HAVING HUGE BRAND VALUE VIS--VIS ROUTINE ITES SERVICE PRO VIDER IN THE CASE OF PCIT VS. ORACLE (OFSS) BPOL SERVICES PVT. LTD. ITA 124/2018 AND ORDERED TO EXCLUDE WIPRO LIMITED ON GROUND OF HUGE BRAND VALUE FOR THE REASON THAT BRAND VALUE OF AN E NTITY HAS A SIGNIFICANT ROLE IN ITS ABILITY TO GARNER PROFITS A ND NEGOTIATE CONTRACTS AND AS SUCH, BRAND PLAYS ITS OWN ROLE IN PRICE AND COST DETERMINATION. 28. COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SOCIETE GENERALE GLOBAL SOLUTION GLOBAL CENTRE PVT. LTD. (SUPRA) EXCLUDED INFOSYS BPO VIS--VIS ROUTINE ITES PROVIDE R ON GROUND OF HUGE TURNOVER, HAVING HUGE BRAND VALUE, HAVING N O BRAND INTANGIBLES AND HAVING INCURRED HUGE ADVERTISEMENT EXPENDITURE OF RS.5.54 CRORES AND MARKETING EXPENSES OF RS.1.54 CR ORES. 29. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT INFOSYS BPO IS NOT A SUITABL E COMPARABLE ITA NO.1934/DEL./2018 13 VIS--VIS THE TAXPAYER TO BENCHMARK THE INTERNATION AL TRANSACTIONS QUA PROVISION OF ITES SERVICES. 30. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, APPEA L FILED BY THE TAXPAYER IS ALLOWED AND AO/TPO IS DIRECTED TO R ECOMPUTE THE TP ADJUSTMENT ACCORDINGLY. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF NOVEMBER, 2019. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF NOVEMBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-19, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
