DCIT 1(1)(2), MUMBAI V. HSBC PROFESSIONAL SERVICES P.LTD, MUMBAI

ITA 251/MUM/2017

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9796 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-11-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 143(2); 153

Judgement Text

P a g e | 1 ITA No.251/Mum/2017 Dy. CIT-1(1)(2) Vs. M/s HSBC Professional Services Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.251/Mum/2017 (A.Y. 2010-11) Dy. Commissioner of Income-tax-1(1)(2) 579, Aayakar Bhawan, M.K. Road, Mumbai – 400 020 Vs. M/s HSBC Professional Services Pvt. Ltd. 6th Floor, Shiv Building CTS No. 139 & 140B, Sahar Road, Vile Parle (E) Mumbai – 57 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCH0705R Appellant .. Respondent [ Appellant by : Madanappa Raghuveer Respondent by : Niraj Sheth Date of Hearing 14.11.2023 Date of Pronouncement 29.11.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the revenue is directed against the order passed by the ld. CIT(A)-56, Mumbai, dated 29.09.2016 for A.Y. 2010-11. The revenue has raised the following grounds before us: “1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in directing to exclude two companies viz. M/s. Eclerx Services Ltd. and M/s. Vishal Information Technologies Ltd. from the set of comparables for benchmarking assessee's international transaction of provision of back office support services even though these two companies are functionally comparable to the back office support services provided by the assessee?" 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in directing to include M/s. R. System International Ltd. in the set of comparables for benchmarking assessee's P a g e | 2 ITA No.251/Mum/2017 Dy. CIT-1(1)(2) Vs. M/s HSBC Professional Services Pvt. Ltd. international transaction of provision of back office support services without considering the fact that its financials were prepared for the year ending on Dec. 31, 2009 whereas that of the assessee were prepared for the year ending on March, 31, 2010 ignoring the fact that filter viz. Companies having different accounting year from that of the assesse, for exclusion of companies as comparables, has been used by the TPO and upheld by the Ld. CIT(A).” 2. Fact in brief is that return of income declaring total income of Rs.1,89,43,161/- was filed on 07.10.2010. The return was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 24.08.2011. The assessing officer has referred the case u/s 92CA(1) of the Act to the Transfer Pricing Officer for the determination of Arm’s length Price in respect of the assesse’s international transaction with its associated enterprises. The TOP vide order u/s 92CA(3) dated 27.01.2014 has suggested an adjustment of Rs.3,11,29,645/- in the arm’s length price of its international transaction in respect of provision of professional services. Thereafter, the assessing officer has passed the order u/s 143(3) r.w.s 144C(3) of the Act on 28,03.2014 and total income was assessed at Rs.5,00,75,398/-. Further facts of the case are discussed while adjudicating the ground of appeal filed by the revenue. Ground No. 1: Excluding two comparable companies M/s Exclerx Services Ltd. and M/s Vishal Information Technologies Ltd. from the set of comparables for benchmarking assessee’s international transaction of provision of back office support services: 3. The TPO has included Coral Hub limited formerly known as Vishal Information Technologies Ltd. & Eclerx Services Ltd. in the list of comparables applied to benchmarking the office support services provided by the assesse to its associated enterprises. The assesse objected for including Vishal Information Technology Limited as comparable on the ground that the said company was engaged in area of operations which were different from the assessee companies P a g e | 3 ITA No.251/Mum/2017 Dy. CIT-1(1)(2) Vs. M/s HSBC Professional Services Pvt. Ltd. services. Similarly, assessee has also objected for including Eclerx Services Limited as one of the comparable on the ground that company was engaged in KPO services which were different from the assessee’s company office support services. However, the TPO has not accepted the contention of the assessee and included both the conmpanies as comparable. 4. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has excluded both companies from the set of comparables. 5. Heard both the sides and perused the material on record. The assessee has contented that Vishal Information Technology Ltd. provides vide range of services which were different from the assessee company and that company also outsourced significant portion i.e 88.34% of its business whereas the assessee company carried out its operation entirely itself which demonstrate that there was functional difference between the assessee company and the comparable selected by the TPO. In respect of other comparable Eclerx Services Limited, the assessee company submitted that company was engaged in data analytics knowledge process outsourcing. The assessee further submitted that KPO function performed by that company was different from the services rendered by the assesse company. 6. During the course of appellate proceedings before us the ld. Counsel has also referred decision of Hon’ble Punjab and Haryana in the case of CIT, Faridabad Vs. Mercer Consulting (India) P. Ltd. (2016) 76 taxman.com 153 (P & H) wherein held that since assessee conducted its business activities itself without outsourcing any part of it then a company which outsourced substantial portion of its work, could not be accepted as comparable. The ITAT, Mumbai in the case of the assessee HSBC Professional Service (I) P. Ltd. Vs. DCIT, Range 8(2) vide 1658 & 1425/Mum/2012 dated 12.05.2023 for AY 2007 – 08 held that P a g e | 4 ITA No.251/Mum/2017 Dy. CIT-1(1)(2) Vs. M/s HSBC Professional Services Pvt. Ltd. Eclerx Services Ltd. is not comparable with the assessee company for many reasons. After considering the fact and findings we observe that Vishal Information Ld. Outsourced significant portion of its business whereas assessee company entirely carried out its business without outsourcing therefore we justify the decision of ld. CIT(A) in excluding this company from the list of comparable. In respect of Eclerx Service Ltd. following the decision of the ITAT as referred supra we find that the function of that company was not similar to the assessee company therefore we do not find any merit in the ground of appeal of the Revenue. In view of these facts and finding we don’t find any infirmity in the decision of ld. CIT(A). Accordingly, ground no. 1 of the appeal of the revenue is dismissed. Ground No. 2: Including of M/s R System International Ltd. in the set of comparables for benchmarking assessee’s international transaction of provision of back office support services: 7. The TPO has rejected R System International Ltd. from the list of comparable submitted by the assessee company on the ground that this company was not engaged in the field of ITES services. 8. However, in the appeal the ld. CIT(A) has accepted the contention of the assessee company and included the R System International Ltd. in the list of comparable for determining arm’s price of the international transaction of the professional services provided by the assesse company to its associated enterprises. 9. Heard both the sides and perused the material on record. The assessee company submitted that R. System International Ltd. was also engaged in the BPO services and this company was functionally comparable and the same has also been accepted as a comparable in assessment year 2006-2007, assessment year 2007-08 and AY. 2009-10 by the TPO and the CIT(A) (DRP). Considering the fact that said P a g e | 5 ITA No.251/Mum/2017 Dy. CIT-1(1)(2) Vs. M/s HSBC Professional Services Pvt. Ltd. company was functionally comparable with the assessee company and consistently accepted as a comparable for the earlier years by the lower authorities, we don’t find any reason to interfere in the decision of ld. CIT(A) for including this company in the set of comparable. Therefore this ground of appeal of the revenue is dismissed. 10. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 29.11.2023 Sd/- Sd/- (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 29.11.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.