M/s Fulcrum Fund Services India Pvt Ltd , Bangalore V. Income TAx officer Ward-11(1), Bangalore

ITA 2519/BANG/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5649 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N SIDDAPPAPJI
• Assessee Lawyers: VAIDHEHI G
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2519/BANG/2017 ASSESSMENT YEAR: 2010-11 M/S FULCRUM FUND SERVICES (INDIA) PVT. LTD., FLAT 102, ARADHANA APARTMENTS, SRINIVAGILU, 2 ND MAIN ROAD, ST BED LAYOUT, KORAMANGALA, BENGALURU-560 047. PAN AABCF 1230 B VS. THE INCOME-TAX OFFICER, WARD-11(1), BENGALURU. APPELL ANT RESPONDENT APPELLANT BY : SMT. VAIDHEHI G, C.A RESPONDENT BY : SHRI R.N SIDDAPPAPJI, ADDL. CIT (DR) DATE OF HEARING : 09.07.2019 DATE OF PRONOUNCEMENT : 01.10.2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 28-09-2017 PASSED BY LD CIT(A)-3, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2010-11. 2. THOUGH THE ASSESSEE HAS RAISED MANY GROUNDS AN D ADDITIONAL GROUND, THE LD A.R RESTRICTED HER ARGUMENTS WITH GR OUND NO.10 RELATING TO EXCLUSION OF TWO COMPARABLE COMPANIES, VIZ., INFOSYS BPO LTD AND E-CLERX SERVICES LTD. ACCORDINGLY WE D ISMISS ALL OTHER GROUNDS AND RESTRICT OUR ORDER ON THE ABOVE SAID IS SUE ALONE. ITA NO.2519/BANG/2017 PAGE 2 OF 5 3. THE ASSESSEE IS A SUBSIDIARY OF M/S FULCRUM GROUP LTD AND IT PROVIDES BACK OFFICE SUPPORT SERVICES IN THE FINANC IAL SERVICES INDUSTRY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED A SUM OF RS.29.73 CRORES FROM ITS AE FOR B ACK OFFICE SUPPORT SERVICES. IN THE TRANSFER PRICING STUDY, I T USED TNMM AS MOST APPROPRIATE METHOD. THE TPO REJECTED THE T.P STUDY CONDUCTED BY THE ASSESSEE AND HE FINALLY SELECTED 1 0 COMPARABLE COMPANIES WITH AVERAGE MARGIN OF 26.86%. AFTER ALL OWING DEDUCTION OF 0.21% TOWARDS WORKING CAPITAL ADJUSTME NT, THE ADJUSTED MARGIN WAS ARRIVED AT BY THE TPO AT 26.65% AND ACCORDINGLY MADE TRANSFER PRICING ADJUSTMENT OF RS. 2.04 CRORES. THE ASSESSEE COULD NOT GET ANY FAVOUR FROM LD CIT(A ). 4. BEFORE US, THE LD A.R SUBMITTED THAT THE FOLL OWING COMPANIES MAY BE EXCLUDED ON TURNOVER FILTER. NAME OF COMPANY TURNOVER (A) E-CLERX SERVICES LTD - 257.02 CRORES (B) INFOSYS BPO LTD. - 1,126.60 CRORES IN SUPPORT OF HER PLEA, THE LD A.R PLACED HER RELIA NCE ON THE DECISION RENDERED BY CO-ORDINATE BENCH IN THE CASE OF M/S NEILSEN SPORTS INDIA P LTD (IT(TP)A NO.196/BANG/2017 DATED 28-06-2019. 5. WE HEARD LD D.R AND PERUSED THE RECORD. IN T HE CASE OF NEILSEN SPORTS INDIA P LTD (SUPRA), THE CO-ORDINATE BENCH HAS APPLIED TURNOVER FILTER BY FOLLOWING THE DECISION R ENDERED BY ANOTHER CO-ORDINATE BENCH IN THE CASE OF GENISYS INTEGRATIN G SYSTEMS LTD (IT(TP)A NO.1231/BANG/2010) WITH THE FOLLOWING OBSE RVATIONS:- ITA NO.2519/BANG/2017 PAGE 3 OF 5 10. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS IS SUE AND PERUSED THE RECORD. ADMITTEDLY THE TURNOVER OF THE ASSESSEE COMPANY IS 20.43 CRORES FOR THE YEAR UNDER CONSIDERATION. THE TURNOVER OF INFOSYS BPO LTD., FOR THE YEAR UNDER CONSIDERATION WAS 1312.41 CRORES AND THE TURNOVER OF TCS-E-SERVE LTD., WAS 1578.40 CRORES. THE CO-ORDINATE BENCH IN THE CASE OF NORTHERN OPERATING SERVICES (SUPRA) HAS HELD THAT T HE DECISION RENDERED IN THE CASE OF GENISYS INTEGRATIN G SYSTEMS IN IT(TP)A NO.1231/BANG/2010 IS GOOD LAW. IN THE CASE OF GENISYS INTEGRATING SYSTEMS (SUPRA) A GUIDELINE IN THE MATTER OF TURNOVER FILTER WAS SUGGESTED AND THE CATEGORIZATION OF SOFTWARE COMPANIES IN THE DUN AND BRAD STREET STUDY TO BE ADOPTED AS THE METHOD OF CLASSIFICATION BY SIZE. ACCORDING TO THIS STUDY, 3 CATEGORIES OF FIRMS ARE IDENTIFIED I.E SMALL WITH TURNOVER LESS THAN 200 CO RES, MEDIUM WITH TURNOVER OF 200 TO 2000 CRORES AND LARG E WITH TURNOVER GREATER THAN 2000 CRORES. ACCORDINGL Y IT WAS HELD THAT SMALL COMPANIES CANNOT BE COMPARED WITH LARGE COMPANIES. ACCORDINGLY, THE ASSESSEE HEREIN BEING A SMALL COMPANY CANNOT BE COMPARED WITH LARGE COMPANIES. ACCORDINGLY WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE AND DIRECT THE AO T O EXCLUDE BOTH THE COMPANIES ON THE BASIS OF TURNOVER CRITERIA. 6. IN THE INSTANT CASE, THE TURNOVER OF THE ASS ESSEE IS 29.73 CRORES, WHERE AS THE TURNOVER OF THE ABOVE SAID TWO COMPARABLE COMPANIES ARE ABOVE RS.200 CRORES. ACCORDINGLY, FO LLOWING THE ABOVE SAID DECISION, WE DIRECT THE AO TO EXCLUDE TH E ABOVE SAID TWO COMPANIES AND RE-WORK THE MARGIN ACCORDINGLY. ITA NO.2519/BANG/2017 PAGE 4 OF 5 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST OCTOBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 1 ST OCTOBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.2519/BANG/2017 PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER .