M/s Swiss Re Global Business Solutions India Private Limited , Bangalore V. The Deputy Commissioner of Income Tax Circle-5(1)(2), Bangalore

ITTPA 3181/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1378 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 21-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 28-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; International transaction; Retrospective amendment; Question of law; Working capital adjustments; Notional interest; Set aside
• Section: 271(1)(c); 143(3); 92B; 234B; 133(6); 144C; 143(2); 13; 22; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.3181/BANG/2018 ASSESSMENT YEAR : 2015 16 SWISS RE GLOBAL BUSINESS SOLUTIONS INDIA PVT. LTD., (FORMERLY KNOWN AS SWISS RE SHARED SERVICES INDIA PVT. LTD.,) 2 ND TO 5 TH FLOOR, FAIRWINDS BUILDING, EMBASSY GOLF LINKS BUSINESS PARK, CHALLAGHATTA VILLAGE, VARTHUR HOBLI, BENGALURU-560 071. PAN AAECS 8786 L VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 5(1)(2), BANGALORE. ASSESSEE RESPONDENT ASSESSEE BY : SHRI NAGESWAR RAO, ADVOCATE RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, C IT DR DATE OF HEARING : 16 - 0 3 - 2020 DATE OF PRONOUNCEMENT : 21 - 0 5 - 2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 30/08/2018 PASSED BY LD.DCIT CIRCLE 6 (1) (2), BANGALORE PAGE 2 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 FOR ASSESSMENT YEAR 2014-15 UNDER SECTION 143 (3) READ WITH 144C (1) OF THE ACT, ON FOLLOWING GROUNDS OF APPEAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, SWISS RE GLOBAL BUSINESS SOLUTIONS INDIA PRIVATE LIMITED [FORMERLY KNOWN AS 'SWISS RE SHARED SERVICES (INDIA) PRIVATE LIMITED'] (HEREINAFTER REFERRED TO AS - SWISS RE INDIA' OR THE 'COMPANY' OR THE 'APPELLANT'), RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 6(1)(2) (HEREINAFTER REFERRED LO AS LEARNED ASSESSING OFFICER' OR THE 'LEARNED AO'), DATED 30 AUGUST 2018 FOR THE ASSESSMENT YEAR (A 2014-15, UNDER SECTION 143(3) READ WITH SECTION 144C(1) OF THE INCOME TAX ACT, 1961 ('THE ACT') IN PURSUANCE OF THE DIRECTIONS ISSUED BY DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO AS THE 'HON'BLE '_I DRV). BANGALORE DATED 23 AUGUST 2018 UNDER SECTION 144C(5) OF THE ACT INTER-ALIA ON THE FOLLOWING GROUNDS CTA ARE WITHOUT PREJUDICE TO EACH OTHER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: 1. IMPUGNED ORDER OF LD.AO PURSUANT TO DIRECTIONS OF LD. DRP, ERRED IN ASSESSING THE TOTAL INCOME AT INR 32.6034,282, AS AGAINST RETURNED INCOME OF INR 15,70,57,200; 2 LD.AO DRP AND TPO ERRED IN MAKING ADDITION OF INR 16,89,77,082 TO TOTAL INCOME OF APPELLANT ON PRETEXT THAT PRICE CHARGED WAS LOWER THAN ARM'S LENGTH PRICE DETERMINED FOR INFORMATION TECHNOLOGY ENABLED SERVICES ('ITES') RENDERED BY APPELLANT TO ITS AE(S), 3 IMPUGNED FINAL ASSESSMENT ORDER PASSED BY LD.AO IS INVALID BEING NOT IN CONFORMITY WITH SECTION 144C (13) OF THE ACT 4 L.D.AO DRP AND TPO ERRED, IN LAW AND IN FACTS, BY NOT ACCEPTING ECONOMIC ANALYSIS UNDERTAKEN BY APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES, AND IN CONDUCTING A FRESH ECONOMIC ANALYSIS FOR THE DETERMINATION OF THE ALP IN CONNECTION WITH THE IMPUGNED INTERNATIONAL TRANSACTION AND HOLDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTION IS NOT AT ARM'S LENGTH; 5 LD.AO DRIP AND TPO ERRED, IN LAW AND IN FACTS, BY DETERMINING ARM'S LENGTH MARGIN/ PRICE USING ONLY FY 2013-14 DATA THOUGH SAME WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH TRANSFER PR.ONG DOCUMENTATION REQUIREMENTS; 6. LD.AO DRP AND TPO ERRED IN REJECTING CERTAIN COMPARABLE COMPANIES BY APPLYING THE FOLLOWING QUANTITATIVE AND QUALITATIVE FILTERS: A) FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E. COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS); B) USING EMPLOYEE COST GREATER THAN 25% OF THE TOTAL REVENUES AS A COMPARABILITY CRITERION; C) WITH EXPORT SALES LESS THAN 75% OF TOTAL SALES; D) APPLYING ONLY THE LOWER TURNOVER FILTER OF LESS THAN INR 1 CRORE AS A COMPARABILITY CRITERION AND NOT APPLYING A HIGHER THRESHOLD LIMIT FOR TURNOVER FILTER; PAGE 3 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 7. LD.AO, DRP AND TPO ERRED, IN LAW AND IN FACTS, BY EXERCISING HIS POWERS UNDER SECTION 133(6) OF THE ACT TO OBTAIN INFORMATION WHICH WAS NOT AVAILABLE IN PUBLIC DOMAIN AND RELYING ON THE SAME FOR COMPARABILITY PURPOSES; 8. LD.AO, DRP AND TPO ERRED, IN LAW AND IN FACTS, BY CONSIDERING THE PROVISION OF SERVICES BY SWISS RE INDIA TO ITS AES TO BE IN THE NATURE OF BACK OFFICE SUPPORT SERVICES AND TECHNICAL SERVICES I.E. KPO SERVICES (AS COMPARED TO THE ACTUAL ACTIVITY BEING IN THE NATURE OF BACK OFFICE SUPPORT SERVICES). 9. LD.AO, DRP AND TPO ERRED, IN LAW AND IN FACTS, BY ACCEPTING/ REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA A) LD.AO, DRP AND IPO ERRED, IN LAW AND IN FACTS, BY ACCEPTING THE FOLLOWING COMPANIES THAT CANNOT 1KE CONSIDERED AS COMPARABLE TO THE APPELLANT IN LAW AND FACT ON ONE OR MORE GROUNDS: I. INFOSYS BPO LIMITED ('INFOSYS BPO') II. MICROLAND LIMITED ('MICROLAND') III. ECLERX SERVICES LIMITED ('ECLERX') IV. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED (CROSSDOMAIN) V. MPS LIMITED ('MPS') B) LD.AO, DRP AND TPO ERRED, BY REJECTING THE FOLLOWING COMPARABLE COMPANIES SELECTED BY THE APPELLANT IN ITS TP DOCUMENTATION EVEN THOUGH THE COMPANIES ARE FUNCTIONALLY COMPARABLE TO THE APPELLANT: I. ALLSEC TECHNOLOGIES LIMITED ('ALLSEC') II. INFORMED TECHNOLOGIES INDIA LIMITED ('INFORMED TECHNOLOGIES') III. JINDAL INTELLICOM PRIVATE LIMITED ('JINDAL INTELLICOM') IV. R SYSTEMS INTERNATIONAL LIMITED ('R SYSTEMS') V. DATAMATICS FINANCIAL SERVICES LIMITED ('DATAMATICS') C) LD.AO, DRP AND TPO ERRED, BY REJECTING THE FOLLOWING COMPARABLE COMPANIES THAT WERE A PART OF THE SEARCH UNDERTAKEN BY ID. TPO EVEN THOUGH SUCH COMPANIES ARE FUNCTIONALLY COMPARABLE TO THE APPELLANT. I. HARTON COMMUNICATIONS LIMITED ('HARTRON') D) LD.AO DRP AND TPO ERRED, BY REJECTING ACE SOFTWARE EXPORTS LIMITED ('ACE SOFTWARE') EVEN THOUGH THE COMPANY IS FUNCTIONALLY COMPARABLE TO THE APPELLANT, ON GROUND THAT IT WAS ADDITIONALLY PROPOSED TO BE INCLUDED BY THE APPELLANT DURING TP ASSESSMENT PROCEEDING. ALTHOUGH SOME OF THE COMPANIES WERE CHOSEN/ NOT CHOSEN AS COMPARABLES IN THE TRANSFER PRICING STUDY, R :ASE UPON CONSIDERATION OF MORE DETAILS BEING AVAILABLE IN PUBLIC DOMAIN OR SUBSEQUENT DECISIONS AY OF SUCH COMPANIES IF FOUND TO BE NOT COMPARABLE FOR ANY REASONS, APPELLANT CRAVES LEAVE TO URGE AM SANE AT THE TIME OF HEARING. 10. WITHOUT PREJUDICE TO AND IN ADDITION TO ABOVE LD.AO, DRP AND TPO SHOULD HAVE EXCLUDED INFOSYS BPO, ECLERX AND MPS FROM COMPARISON CONSIDERING THAT INCOME WAS EARNED BY THESE COMPANIES BY DIFFERENT BUSINESS MODEL OF SUB-CONTRACTING WORK AND SECONDLY, AND EQUALLY IMPORTANT THAT THESE COMPANIES ARE RECOGNIZING REVENUE ON PERCENTAGE OF COMPLETION METHOD REQUIRING COMPLEX DETAILS THAT ARE NOT AVAILABLE IN PUBLIC DOMAIN TO ENABLE FAIR COMPARISON. SUCH REASONS THOUGH NOT PAGE 4 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 SPECIFICALLY RAISED ARE CONSPICUOUS FROM AUDITED ACCOUNTS VERIFIED AS PART OF TP AND DRP PROCEEDINGS. 11. LD.AO DRP AND TPO ERRED, IN LAW AND IN FACTS, BY WRONGLY COMPUTING OPERATING MARGINS OF SOME OF COMPARABLE COMPANIES CONSIDERED IN THE TP ORDER; 12. LD.AO DRP AND TPO ERRED, IN LAW AND IN FACTS, BY NOT MAKING SUITABLE ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN WORKING CAPITAL POSITION OF THE APPELLANT VIS--VIS THE COMPARABLES; 13. LD.AO, DRP AND TPO ERRED, IN LAW AND IN FACTS, BY NOT MAKING SUITABLE ADJUSTMENTS ON ACCOUNT OF DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIS--VIS THE COMPARABLES, WHILE CONDUCTING COMPARABILITY ANALYSIS; 14. LD.AO, DRIP AND TPO ERRED, IN LAW AND IN FACTS, IN DETERMINING SEPARATE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF THE INTEREST ON OUTSTANDING RECEIVABLES AMOUNTING TO INR 4,35,335. 15. WITHOUT PREJUDICE TO OUR GROUND OF APPEAL NO. 14 ABOVE, LD.AO, DRIP AND TPO ERRED, IN LAW AND IN FACTS, BY NOT APPRECIATING THAT THE OUTSTANDING TRADE RECEIVABLES FROM ITS AE'S ARISE FROM THE PROVISION OF IT ENABLED SERVICES TRANSACTION WHICH IS TO BE CONSIDERED AS CLOSELY LINKED TO SUCH TRANSACTION AND SHOULD NOT BE TESTED SEPARATELY FROM ARM'S LENGTH PERSPECTIVE. 16. WITHOUT PREJUDICE TO OUR GROUND OF APPEAL NO. 14 ABOVE, LD.AO, DRIP AND TPO ERRED, IN LAW AND IN FACTS, BY RE-CHARACTERIZING THE OUTSTANDING RECEIVABLES AS ON 31 MARCH 2014 AS A LOAN TRANSACTION. 17. WITHOUT PREJUDICE TO OUR GROUND OF APPEAL NO. 14 ABOVE, LD.AO, DRP AND TPC HAVE ERRED, IN LAW AND IN FACTS, BY NOT PROVIDING THE BASIS FOR ARRIVING AT THE ARM'S LENGTH INTEREST RATE OF LIBOR PLUS 300 BASIS POINT FOR COMPUTING NOTIONAL INTEREST TO BE CHARGED ON THE ALLEGED DELAY IN COLLECTION OF RECEIVABLES. 18. LD.AO ERRED, IN LAW AND IN FACTS, BY WRONGLY LEVYING INTEREST OF INR 3,40,37,289 UNDER SECTION 234B OF THE INCOME TAX ACT, 1961; 19 WITHOUT PREJUDICE TO OUR GROUND OF APPEAL NO. 18 ABOVE, LDAO ERRED, IN LAW AND IN FACTS, BY COMPUTING THE AMOUNT OF INTEREST OF INR 3,40,37,289 INCORRECTLY UNDER SECTION 234B OF THE INCOME TAX ACT, 1961; 20 LD.AO HAS ERRED, IN LAW AND IN FACTS, IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. APPELLANT SUBMITS THAT EACH OF ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT Y TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HON'BLE TRIBUNAL TO DECIDE ON THE APPEAL IN ACCORDANCE WITH THE LAW. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 28/11/15 DECLARING INCOME OF RS.18,12,97,820/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE PAGE 5 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 UNDER SECTION 143(2) WAS ISSUED TO ASSESSEE. NOTICES UNDER SECTION 142 (1) WAS ALSO ISSUED TO ASSESSEE IN RESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO AND FILED REQUIRED DETAILS AS CALLED FOR. LD.AO OBSERVED THAT ASSESSEE HAD INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRISES WHICH EXCEEDED RS.15 CRORE AND ACCORDINGLY THIS MATTER WAS REFERRED TO LD.TPO. LD.TPO UPON RECEIPT OF REFERENCE, CALLED UPON ASSESSEE TO FILE ECONOMIC DETAILS OF INTERNATIONAL TRANSACTION IN FORM 3 CEB. 3. LD.TPO OBSERVED THAT, ASSESSEE EXPORTS IT ENABLED BACK OFFICE SUPPORT SERVICES LIKE CONTRACT ADMINISTRATION, CLAIMS ADMINISTRATION AND TECHNICAL AS REINSURANCE ACCOUNTING SUPPORT. IT IS ALSO BEEN OBSERVED THAT ASSESSEE ENTERED INTO AGREEMENT WITH SWISS RE COMPANIES (AE IN KOREA AND SWITZERLAND NAMED AS SWISS RE KOREA AND SWISS RE ZURICH ), FOR RENDERING REMOTE DATA PROCESSING IN THE FIELD OF INSURANCE. IT HAS BEEN SUBMITTED THAT ASSESSEE PROVIDES SERVICES LIKE NON-LIFE INSURANCE ADMINISTRATION, PROVIDING TECHNICAL ACCOUNTING SERVICES IN THE FIELD OF PROPERTY, CASUALTY, LIFE AND HEALTH RE-INSURANCE. IT IS ALSO BEEN SUBMITTED THAT SWISS REINSURANCE CO, ZURICH IS THE HOLDING COMPANY OF THE ASSESSEE AND A GLOBAL REINSURER. OPERATION 1: BUSINESS APPLICATION SUPPORT ('BAS'), CLAIMS PROCESSING SUPPORT, L&H UNDERWRITING SUPPORT, ECONOMIC RESEARCH, LIFE EXPERIENCE ANALYSIS, CORPORATE ACTUARIAL, CAT- PERILS INDIA, ACTUARIAL SERVICES SPECIAL LINE, RLM GLOBAL SUPPORT, OPERATION 2: TECHNICAL ACCOUNTING FOR P&C REINSURANCE, TECHNICAL ACCOUNTING FOR L&H REINSURANCE, FINANCE COC. PAGE 6 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 4. THE INTERNATIONAL TRANSACTION UNDERTAKEN BY ASSESSEE AS REPORTED IN FORM 3CEB ARE AS UNDER: PARTICULARS PAYABLES (IN RS.) RECEIVABLES (IN RUPEES) PROVISION OF CONTRACT ITES ENABLED SERVICE 98, 25, 37, 470/ - REIMBURSEMENT OF EXPENSES TO AE 92,620/ - REIMBURSEMENT OF EXPENSES BY AE 62,26,429/ - 5. FOR YEAR UNDER CONSIDERATION ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD AND OP/OC AS PLI FOR COMPUTING ITS MARGIN AT 12.87% FOR ITES SEGMENT. FOR COMPARABILITY ANALYSIS ANALYSIS, ASSESSEE USED FOLLOWING FILTERS WHICH HAS BEEN COMMENTED BY LD.TPO AS UNDER: S L . NO. PARTICULARS REMARKS OF THE TPO 1 COMPANIES FOR WHICH SUFFICIENT FINANCIAL OR DESCRIPTIVE INFORMATION IS NOT AVAILABLE THIS IS AN APPROPRIATE FILTER 2 COMPANIES THAT HAD CEASED BUSINESS OPERATIONS OR WERE CURRENTLY INACTIVE THIS IS AN APPROPRIATE FILTER 3 COMPANIES THAT HAD BEEN DECLARED SICK OR HAD PERSISTENT NEGATIVE NET WORTH THIS IS AN APPROPRIATE FILTER 4 COMPANIES THAT HAVE TURNOVER LESS THAN 1 CRORE THIS IS AN APPROPRIATE FILTER 5 COMPANIES HAVING DIFFERENT FUNCTIONS AS COMPARED TO THE ASSESSEE COMPANY A SUBJECTIVE FILTER. TO BE SEEN ON A CASE TO CASE 6 COMPANIES THAT DO NOT HAVE SIGNIFICANT (LESS THAN 25 PERCENT) FOREIGN EXCHANGE EARNINGS INAPPROPRIATE FILTER. THE TPO HAS APPLIED MORE APPROPRIATE FILTER. 7 COMPANIES THAT HAD SUBSTANTIAL (IN EXCESS OF 25%) TRANSACTIONS WITH RELATED PARTIES THIS IS AN APPROPRIATE FILTER 8 COMPANIES THAT HAVE PERSISTENT OPERATING LOSSES THIS IS AN APPROPRIATE FILTER PAGE 7 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 9 COMPANIES THAT HAVE EXCEPTIONAL YEARS OF OPERATIONS INAPPROPRIATE FILTER. THE TPO HAS APPLIED MORE 10 COMPANIES THAT ARE DUPLICATED IN THE DATABASES WITH DIFFERENT NAMES OR MERGED TO FORM ANOTHER COMPANY THIS IS AN APPROPRIATE FILTER 6. IN TP STUDY, ASSESSEE USED COMPARABLE IS CONSIDERING WEIGHTED AVERAGE MARGIN OF DATA FOR 3 YEARS. ASSESSEE USED DATA PERTAINING TO FINANCIAL YEARS 2013-14 AND 2012-13 TO BE INCLUDED FOR CALCULATING WEIGHTED AVERAGE OF PRICE AS PER RULE 10CA. IT HAS BEEN SUBMITTED THAT, AS PER PROVISO TO RULE 10B(5) AT THE TIME OF ASSESSMENT PROCEEDINGS, CURRENT YEAR DATA SHALL BE USED IF AVAILABLE. IT HAS BEEN SUBMITTED THAT CURRENT YEAR TATA WAS NOT AVAILABLE AT THE TIME OF PREPARATION OF TRANSFER PRICING DOCUMENTATION. SL.NO PARTICULARS MARGIN 1. ALLSEC TECHNOLOGIES LTD -4.06% 2 JINDAL INTELLICOM PRIVATE LIMITED 2.81% 3 ACE BPO SERVICES PRIVATE LIMITED 6.36% 4 CALIBER POINT BUSINESS SOLUTIONS LIMITED (SEGMENTAL) 6.70% 5 INFORMED TECHNOLOGIES INDIA LIMITED 7.69% 6 DATAMATICS FINANCIAL SERVICES LIMITED 9.47% 7 R SYSTEMS INTERNATIONAL LIMITED 9.91% 8 MICROGENETICS SYSTEMS LIMITED 19.56% 9 MPS LIMITED 26.86% 10 COSMIC GLOBAL LIMITED 29.51% 11 INFOSYS BPO LIMITED 32.24% ARITHMETIC MEAN 13.37% 8. ASSESSEE THUS COMPUTED ARITHMETIC MEAN AT 13.37% AND AS ASSESSEES NET MARGIN WAS 12.3%, THE TRANSACTION WAS HELD TO BE AT ARMS LENGTH. PAGE 8 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 9. LD.TPO DID NOT ACCEPT THE ECONOMIC ANALYSIS UNDERTAKEN BY ASSESSEE AND CONDUCTED FRESH ANALYSIS. LD.TPO WAS OF THE VIEW THAT ARMS LENGTH OF INTERNATIONAL TRANSACTION OF ASSESSEE MUST BE COMPARED WITH FINANCIAL INFORMATION OF COMPARABLES PERTAINING TO FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION WHICH IS IN ACCORDANCE WITH REQUIREMENTS UNDER RULE 10 B (4) OF INCOME TAX RULES. LD.TPO THUS, APPLIED FOLLOWING FILTERS AND REJECTED CERTAIN COMPANIES SELECTED BY ASSESSEE IN TP STUDY: COMPANIES FOR WHICH CURRENT YEAR DATA WAS AVAILABLE; COMPARABLES HAVING DIFFERENT ACCOUNTING YEAR (OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS); COMPANIES HAVING A TURNOVER LESS THAN INR 1 CRORE; COMPANIES HAVING REVENUE FROM IT ENABLED SERVICES LESS THAN 75% OF THE TOTAL OPERATING REVENUES AS A COMPARABILITY CRITERION; COMPANIES HAVING RELATED PARTY TRANSACTIONS GREATER THAN 25% OF THE TOTAL REVENUES AS A COMPARABILITY CRITERION; COMPANIES HAVING EXPORT SERVICE INCOME LESS THAN 75% OF SALES AS A COMPARABILITY CRITERION; COMPANIES WITH EMPLOYEE COST LESS THAN 25% OF TURNOVER WERE EXCLUDED; COMPANIES THAT ARE FUNCTIONALLY DIFFERENT FROM THE APPELLANT . 10. ASSESSEE DURING THE TRANSFER PRICING ASSESSMENT PROPOSED TO ADDITIONAL COMPARABLES BEING, HARTON COMMUNICATIONS LTD AND TECH MAHINDRA BUSINESS SERVICES LTD., AS ADDITIONAL COMPANIES, WHICH WERE SUBSEQUENTLY REJECTED BY LD.TPO. FINAL LIST OF COMPARABLES SELECTED BY LD.TPO ARE AS UNDER: PAGE 9 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 11. THE MARGIN COMPUTED BY LD.TPO WAS 37.79% AND THEREBY PROPOSING ADJUSTMENT BEING SHORTFALL AT RS.19,13,14,563/- IN RESPECT OF ITES SEGMENT. 12. LD.TPO ALSO BENCHMARKED DELAY IN RECEIPT OF PAYMENT FOR RECEIVABLES UNDER WEIGHTED AVERAGE METHOD USING LIBOR +300 BASIS POINTS IN RESPECT OF PAYMENTS BEYOND THE AGREED CREDIT PERIOD OF 30 DAYS THAT WORKED OUT TO BE 3.3758%. 13. TRANSFER PRICING ADJUSTMENT PROPOSED BY LD.TPO IS AS UNDER: PAGE 10 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 AGGRIEVED BY PROPOSED ADJUSTMENT, ASSESSEE FILED OBJECTIONS BEFORE DRP. 14. THE DRP AFTER CONSIDERING VARIOUS SUBMISSIONS ADVANCED BY ASSESSEE INCLUDED TECH MAHINDRA BUSINESS SERVICES LTD., IN FINAL LIST OF COMPARABLES AND DIRECTED THE LD.AO/TPO TO RECTIFY FACTUAL ERRORS IN MARGIN COMPUTATION. 15. LD.AO, UPON RECEIPT OF DRP DIRECTIONS COMPUTED TRANSFER PRICING ADDITION AT RS.16,89,77,082/-. AGGRIEVED BY ORDER PASSED BY LD. AO, ASSESSEE IS IN APPEAL BEFORE US NOW. 16. LD.AR SUBMITTED THAT GROUND NO.1-2,4 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION 17. LD.AR SUBMITTED THAT VARIOUS ISSUES, AND HAS CHALLENGED VARIOUS COMPARABLES FOR IN APPROPRIATE INCLUSION/EXCLUSION IN ALLEDGED GROUNDS. IT HAS BEEN SUBMITTED BY LD.AR THAT ASSESSEE WISH TO PRESS CERTAIN GROUNDS AS UNDER: GROUND 5,6 (A), (D)AND 7, 10 ARE AGAINST CERTAIN FILTERS APPLIED BY LD.TPO, FOR EXCLUSION OF CERTAIN COMPARABLES. GROUND.9 (A) (I)-(V), GROUND 9 (C) FOR INCLUSION OF COMPARABLE. GROUND.12 FOR NOT GRANTING OF SUITABLE WORKING CAPITAL ADJUSTMENTS; AND GROUND.14-17 BEING ADDITION MADE ON INTEREST ON RECEIVABLES. 18. IT HAS BEEN SUBMITTED BY LD.AR THAT IN RESPECT OF OTHER COMPARABLES AND GROUNDS, LIBERTY MAY BE GRANTED FOR BEING CONSIDERED IN AN APPROPRIATE SITUATION. PAGE 11 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 19. LD.AR THUS RESTRICTED HIS ARGUMENTS ONLY TO RELEVANT GROUNDS MENTIONED HEREINABOVE. GROUND NO. 5 AND 6 (A): 20. THESE GROUNDS ARE RAISED BY ASSESSEE AGAINST NOT ACCEPTING WEIGHTED AVERAGE MARGIN CONSIDERED BY ASSESSEE IN TRANSFER PRICING STUDY FOR COMPUTING ARMS LENGTH MARGIN IN CASE OF COMPARABLES. 20.1. LD.AR SUBMITTED THAT DATA IN RESPECT OF COMPARABLES WAS NOT AVAILABLE IN MOST OF THE CASES FOR FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION AT THE TIME OF COMPILING TP DOCUMENTATIONS. IT HAS BEEN SUBMITTED THAT ASSESSEE THEREFORE USED MULTIPLE YEAR DATA, WHICH SHOULD NOT HAVE BEEN REJECTED BY LD.TPO. 20.2. ON THE CONTRARY LD.CIT DR SUBMITTED THAT, MULTIPLE YEAR DATA COULD BE USED ONLY FROM ASSESSMENT YEAR 2015-16 AND THEREFORE LD.TPO WAS RIGHT IN REJECTING THE TRANSFER PRICING ANALYSIS SUBMITTED BY ASSESSEE. HE SUBMITTED THAT ASSESSEE THOUGH OBJECTED FOR REJECTION OF AVERAGE OF MULTIPLE YEAR DATA, DURING TRANSFER PRICING ASSESSMENT PROCEEDINGS, THE LD.TPO HAD CALLED UPON ASSESSEE TO FILE ITS RESPONSE IN RESPECT OF USE OF SINGLE YEAR DATA, AS PER RULE 10B(4). HE SUBMITTED THAT ASSESSEE IN RESPONSE TO THE NOTICE, SUGGESTED NEW COMPARABLES FOR RELEVANT ASSESSMENT YEARS, AND THEREFORE NO PREJUDICE IS CAUSED TO ASSESSEE. 20.3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. VARIOUS ARGUMENTS WERE RAISED BY BOTH SIDES IN SUPPORT OF THEIR CONTENTIONS. PAGE 12 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 20.4. IT HAS BEEN NOTED THAT RULE 10B(4) CASTS OBLIGATION ON ASSESSEE TO CONDUCT COMPARABILITY ANALYSIS USING DATA FOR RELEVANT FINANCIAL YEAR. PROVISO TO RULE 10 B (4) WOULD APPLY ONLY IN A SITUATION WHERE, TATA RELATING TO RELEVANT FINANCIAL YEAR REVEALS FACTS WHICH COULD INFLUENCE DETERMINING TRANSFER PRICE. FURTHER RULE 10 B (5) GIVES AN OPTION OF USING EITHER OF THE METHOD WITH THE PROVISO THAT AT THE TIME OF DETERMINATION OF ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR RELEVANT ASSESSMENT YEAR IN THE EVEN DATA FOR RELEVANT FINANCIAL YEAR IS AVAILABLE, THEN SUCH DATA SHOULD BE USED IRRESPECTIVE OF THE FACT THAT THE DATA WAS NOT AVAILABLE AT THE TIME OF FURNISHING RETURN OF INCOME FOR RELEVANT YEAR. 20.5. AS WE ANALYSE TRANSFER PRICING ASSESSMENT PROCEEDINGS, IT IS NOTED THAT AT THE TIME OF ASSESSMENT, DATA FOR RELEVANT ASSESSMENT YEAR WAS AVAILABLE, WHICH WAS USED BY LD.TPO, AS AGAINST AVERAGE OF MULTIPLE YEAR DATA USED BY ASSESSEE TRANSFER PRICING DOCUMENT. THIS IN OUR VIEW IS IN ACCORDANCE WITH THE RULES SPECIFIED. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN ANALYSIS CARRIED OUT BY LD.TPO BY USING RELEVANT YEAR DATA. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 21. GROUND 6(D) 21.1. LD.AR SUBMITTED THAT AUTHORITIES BELOW APPLIED LOWER LIMIT OF TURNOVER FILTER OF RS.1 CRORE AND IGNORED APPLYING AN UPPER TURNOVER FILTER. IT WAS SUBMITTED THAT, CONSISTENTLY REVENUE ALWAYS TOOK STAND THAT TURNOVER IS NOT A RELEVANT FILTER IN SOFTWARE INDUSTRY. IT HAS BEEN CONTENDED BY REVENUE THAT IN SOFTWARE PAGE 13 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 INDUSTRY SIZE HAS NO INFLUENCE ON THE MARGINS EARNED BY A COMPARABLE COMPANY. WHAT MATTERS IS A HUMAN CAPITAL. IT WAS UNDER THESE CIRCUMSTANCES THAT LD.TPO APPLIED ONLY LOWER LIMIT OF TURNOVER FILTER FOR EXCLUDING COMPANIES HAVING TURNOVER LESS THAN RS.1 CRORE. 21.2. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE NOTE THAT LD.AO/TPO HAS APPLIED FILTER OF MORE THAN RS.1 CRORE BUT DID NOT PUT AN UPPER LIMIT TO THE FILTER. THIS TRIBUNAL IN CASE OF GENESIS INTEGRATING SYSTEMS INDIA PVT LTD VS DCIT REPORTED IN (2012) 53 SOT 159 AND VARIOUS OTHER DECISIONS HAVE HELD THAT, COMPANIES HAVING TURNOVER IN EXCESS OF 200 CRORES CANNOT BE COMPARED WITH COMPANIES HAVING TURNOVER LESS THAN RS.200 CRORE. THIS PREPOSITION HAS BEEN ACCEPTED BY HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS PENTAIR WATER PVT.LTD., BY ORDER DATED 16/09/2015 IN ITA NO. 18/2015 . HONBLE COURT UPHELD REJECTION OF COMPANIES HAVING TURNOVER HOLDING THAT TURNOVER IS A RELEVANT FACTOR IN CONSIDERING COMPARABILITY OF COMPANIES. 21.3. THE OBJECTION RAISED BY LD.CIT.DR BY PLACING RELIANCE UPON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CHRIS CAPITAL (SUPRA) HAS BEEN DEALT WITH BY THIS TRIBUNAL IN CASE OF AUTODESK INDIA PVT.LTD. VS DCIT IN (2018) 96 TAXMANN.COM 263 FOR ASSESSMENT YEAR 2005-06 . THIS TRIBUNAL REVIEWED GAMUT OF CASE LAWS TO CONSIDER, WHETHER COMPANIES HAVING TURNOVER SHOULD BE REGARDED AS COMPARABLE WITH A COMPANY HAVING TURNOVER LESS THAN RS.200 CRORE. PAGE 14 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 21.4. MOST OF THE DECISIONS OF THIS TRIBUNAL ARE IN FAVOUR OF OPTING FOR LIMIT AT LOWER-END OF 1/10 AND UPPER SIDE OF 10 TIMES OF TURNOVER OF COMPARABLES UNDER CONSIDERATION OF TP BENCHMARKING. CONSIDERING THE FACT THAT, PRESENT YEAR UNDER CONSIDERATION IS 2015-16, TURNOVER LIMIT OF COMPANIES FOR BEING TESTED UNDER THIS FILTER SHOULD BE LOWER SIDE TURNOVER OF 1/10 TO TURNOVER OF 10 TIMES WOULD BE APPROPRIATE. THUS, IN OUR VIEW ALSO, TESTING COMPARABLE WITH 10 TIMES BELOW AND 10 TIMES ABOVE THE TURNOVER OF THE ASSESSEE, APPEARS APPROPRIATE. ONLY RESTRICTION IS THAT SUCH COMPARABLES ALSO SHOULD BE FUNCTIONALLY COMPARABLE WITH ASSESSEE. IN OUR VIEW, TURNOVER FILTER WOULD VARY FROM COMPANY TO COMPANY DEPENDING ON FUNCTIONAL COMPARABILITY. 21.5. THIS VIEW ORIGINATES FROM DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS. M/S MCAFEE SOFTWARE ( INDIA ) PVT. LTD., REPORTED IN (2016) 68 TAXMANN.COM 293 . RELEVANT OBSERVATION IN THIS DECISION IS AS UNDER : 8. GENERALLY, A TURNOVER FILTER IS ADOPTED TO AVOID SELECTION OF HIGH END COMPANIES (BIG COMPANIES) WITH THAT OF 'MINNOWS' IN THE SIMILAR LINE OF BUSINESS. HOW TO ADOPT THE FILTER DEPENDS ON EACH CASE. SAY FOR EXAMPLE, IN THE TP ANALYSIS OF A COMPANY HAVING 20 CRORES RECEIPTS, A COMPANY WITH 2 CRORES TO 200 CRORES CAN BE STATED TO BE WITHIN THE RANGE I.E., FACTOR OF TEN AS UPPER AND LOWER LIMITS. IN CERTAIN CASES, THE ITAT ALSO ACCEPTED TURNOVER FILTER OF 1 CRORE TO 200 CRORES. BUT THE RANGE CANNOT BE FIXED, AS THE FACTS MAY VARY FROM CASE TO CASE. SIMPLY A COMPARABLE CAN NOT BE EXCLUDED ON UPPER TURNOVER LIMIT WHEN INFACT IN NUMBER OF CASES ASSESSEES DO NOT RAISE ANY OBJECTION ON INCLUSION OF COMPANIES WITH VERY SMALL TURNOVER. THE 200 CRORES UPPER LIMIT ALSO CANNOT BE CONSIDERED IN A CASE WHOSE TURNOVER IS, SAY 300 CRORES. THEREFORE, INSTEAD OF A FIXED 1CR - 200 CRORE RANGE, WHAT ONE HAS TO CONSIDER IS THE TURNOVER /RECEIPTS OF ASSESSEE AND RANGE OF UPPER LIMIT AT TEN TIMES AND LOWER LIMIT ALSO TEN TIMES..I.E.,ONE TENTH. THUS, FOR EXAMPLE THE RANGE FOR A 300 CRORES COMPANY CAN BE FROM 30 CRORES (1/10TH) TO 3000 CRORES (TEN TIMES). EVEN THIS HAS SOME LIMITATIONS. PAGE 15 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 21.6. THUS, WE ARE OF THE VIEW THAT FOR AS ASSESSEE BEFORE US HAS TURNOVER OF RS.98.25 CRORES SO, TURNOVER FILTER OF RS.9 CRORES ON LOWER SIDE TO RS.980 CRORES ON UPPER SIDE, SHOULD BE CONSIDERED PROVIDED THE FUNCTIONAL SIMILARITIES STANDS SATISFIED. WE NOTE THAT COMPANIES THAT HAVE BEEN POINTED OUT BY ASSESSEE IS VERY LARGE COMPANY THAT HAS TURNOVER MORE THAN RS.1000 CRORES. ASSESSEE HAS BEEN CATEGORISED TO BE A CAPTIVE SERVICE PROVIDER HAVING TURNOVER OF 98.25 CRORES. FURTHER IT IS NOTED THAT ASSESSEE DO NOT OWN ANY INTANGIBLES WHEREAS, THE COMPANY ALLEGED FOR EXCLUSION BY ASSESSEE BY APPLYING TURNOVER FILTER OWNS HUGE BRAND, HOLDING INVALUABLE INTANGIBLES AND ARE ENGAGED IN DIVERSIFIED ACTIVITIES. WE THEREFORE ARE OF OPINION THAT TURNOVER IS A VALID FILTER FOR ASSESSING COMPARABILITY. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 22. GROUND 9 (A) AND 9 (C), GROUND 10 A. ASSESSEE IS SEEKING EXCLUSION OF; INFOSYS BPO LTD. MICROLAND LTD ECLERX SERVICES LTD CROSSDOMAIN SOLUTIONS PVT.LTD. MPS LTD. B. ASSESSEE IS SEEKING INCLUSION OF; HARTON COMMUNICATIONS LTD 22.1. BEFORE WE UNDERTAKE COMPARABILITY ANALYSIS, IT IS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED BY ASSESSEE UNDER THIS SEGMENT. PAGE 16 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 I. FUNCTIONS: OPERATION 1: BUSINESS APPLICATION SUPPORT ('BAS'), CLAIMS PROCESSING SUPPORT, L&H UNDERWRITING SUPPORT, ECONOMIC RESEARCH, LIFE EXPERIENCE ANALYSIS, CORPORATE ACTUARIAL, CAT- PERILS INDIA, ACTUARIAL SERVICES SPECIAL LINE, RLM GLOBAL SUPPORT, OPERATION 2: TECHNICAL ACCOUNTING FOR P&C REINSURANCE, TECHNICAL ACCOUNTING FOR L&H REINSURANCE, FINANCE COC. DURING THE YEAR ASSESSEE PROVIDED FOLLOWING BACK-OFFICE SUPPORT TO ITS ASSOCIATED ENTERPRISE: ADMINISTRATIVE SERVICE FUNCTIONS: ASSESSEE PROVIDES ASSISTANCE IN DAY-TO-DAY MANAGEMENT OF ORGANISATION LIKE FINANCE, HUMAN RESOURCE, INFORMATION SYSTEMS. ASSESSEE IS IN FACT RESPONSIBLE FOR ARRANGING NECESSARY RESOURCES AND IS RESPONSIBLE FOR MANAGING ITS OWN CASH FLOW, ACCOUNTS PAYABLE, ACCOUNTS RECEIVABLE. PROJECT MANAGEMENT: ASSESSEE JOINTLY WITH ITS ASSOCIATED ENTERPRISE UNDERTAKE PROJECT MANAGEMENT. THOUGH THE PROJECT IS MANAGED LOCALLY BY ASSESSEE, SCHEDULES ARE DISCUSSED AND MUTUALLY AGREED BETWEEN ASSESSEE AND ASSOCIATED ENTERPRISE BEFORE COMMENCEMENT OF ASSIGNMENT. ASSESSEE HAS TO ENSURE CLOSE COORDINATION, QUALITY CONTROL AND BELIEVABLE REWORK IN THE CONTRACT EXECUTION. PERFORMANCE/QUALITY CONTROL: ASSESSEE IS RESPONSIBLE FOR ENSURING THAT REQUISITE QUALITIES/PERFORMANCE STANDARDS ARE MET AND IT IS FREE OF ERROR AND CONFIRMS TO DESIGN SPECIFICATIONS GIVEN BY ASSOCIATED ENTERPRISES. II. RISK ASSUMED: PAGE 17 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 ASSESSEE IN PROVIDING SERVICES TO ITS ASSOCIATED ENTERPRISES AND ASSUME ZERO RISK IN RESPECT OF SERVICES RENDERED TO ITS ASSOCIATED ENTERPRISE. III. ASSETS EMPLOYED: ASSESSEE OWNS ROUTINE ASSETS LIKE OFFICE EQUIPMENTS COMPUTER SYSTEMS AND PERIPHERALS FURNITURE FITTINGS MOTOR VEHICLES ETC KEY INTANGIBLE ASSETS ARE OWNED BY THE ASSOCIATED ENTERPRISES. IV. CHARACTERISATION: BASED ON THE ABOVE FAR ANALYSIS, ASSESSEE HAS BEEN CHARACTERISED TO BE OPERATING UNDER THE RISK MITIGATED ENVIRONMENT AND DOES NOT CARRY SIGNIFICANT ENTREPRENEURIAL ACTIVITIES, NOR DOES IT BEARS SIGNIFICANT RISK, ASSOCIATED WITH SUCH ACTIVITIES. IT IS ALSO NOTED THAT ASSESSEE IS REMUNERATED ON COST TO COST BASIS FOR SERVICES RENDERED TO ASSOCIATED ENTERPRISES. A. SEEKING EXCLUSION OF: A) INFOSYS BPO LTD. LD.AR SUBMITTED THAT THIS COMPANY WAS SELECTED AS COMPARABLE BY LD.TPO, THOUGH WAS OBJECTED BY ASSESSEE BEFORE AUTHORITIES BELOW. IT HAS BEEN SUBMITTED THAT THIS COMPARABLE HAS BEEN SELECTED BY LD.TPO ONLY FOR THE REASON THAT THIS COMPANY IS INTO SUB CONTRACTING. IT HAS BEEN SUBMITTED THAT THIS COMPARABLE HAS OWNERSHIP OF HUGE INTANGIBLES, HAS A BRAND VALUE. LD.AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT WITH THAT OF ASSESSEE AS IT PROVIDES SERVICES IN DIVERSIFIED ACTIVITIES IN THE AREA OF ANALYTICS, LEGAL PROCESS OUTSOURCING ETC. IT HAS BEEN SUBMITTED THAT THIS COMPANY ALSO PROVIDES MANAGEMENT SERVICES, CONSULTANCY AND END TO END OUTSOURCING. IT IS ALSO BEEN PAGE 18 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 SUBMITTED THAT THIS COMPANY IS ONE OF THE LEADING COMPANIES IN ITES SEGMENT HAVING HUGE TURNOVER OF ABOUT RS.2309 CRORES. ON THE CONTRARY LD. CIT DR PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE NOTE THAT THIS COMPANY IS PROVIDING SERVICES IN VARIOUS AREAS OF SOURCING AND PROCUREMENT, CUSTOMER SERVICES, FINANCE AND ACCOUNTING LEGAL PROCESS OUTSOURCING, SALES AND FULFILMENT, ANALYTICS, BUSINESS PLATFORMS, BUSINESS TRANSFORMATION SERVICES, HUMAN RESOURCE OUTSOURCING AND TECHNOLOGY SOLUTION OPTIMISATION. IT IS NOTED THAT THIS COMPARABLE ALSO PROVIDES SERVICES IN FINANCIAL SERVICES AND INSURANCE, MANUFACTURING, ENERGY UTILITIES COMMUNICATIONS AND SERVICES AND RETAIL, CONSUMER PACKAGED FOODS, LOGISTICS AND LIFE SERVICES. FURTHER IN THE ANNUAL REPORT IT HAS BEEN MENTIONED THAT THIS COMPARABLE PROVIDES SERVICES THAT ARE DIFFERENT FROM ROUTINE BACK OFFICE SERVICES. THIS NOTING ITSELF MAKES THIS COMPARABLE NOT FUNCTIONALLY SIMILAR WITH THAT OF ASSESSEE. ACCORDINGLY WE DIRECT THIS COMPARABLE TO BE EXCLUDED FROM FINALIST. B) MICROLAND LTD THIS COMPANY WAS SELECTED BY LD.TPO DESPITE VARIOUS OBJECTIONS RAISED BY ASSESSEE. LD.AR SUBMITTED THAT THIS COMPARABLE MONEY IS FUNCTIONALLY NOT SIMILAR WITH THAT OF ASSESSEE, AS IT IS INVOLVED IN PROVIDING CLOUD COMPUTING RELATED SERVICES AND PROVIDES HIGH END ITES SERVICES. LD.AR ALSO SUBMITTED THAT THIS COMPANY IS ENGAGED IN INFRASTRUCTURE MANAGEMENT SERVICES ALSO. FURTHER IT PAGE 19 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 HAS BEEN SUBMITTED THAT LD.TPO CONSIDERED THIS COMPARABLE AT ENTITY LEVEL WITHOUT LOOKING INTO THE SEGMENTAL DETAILS. ON THE CONTRARY, LD.CIT.DR SUBMITTED THAT, ASSESSEE HAS ADMITTED BEFORE DRP IN ITS SUBMISSION THAT ITES SEGMENT OF THIS COMPARABLE SHOULD BE CONSIDERED. HE THUS SUBMITTED FOR THE COMPARABLE TO BE SET ASIDE TO LD.TPO FOR VERIFICATION. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ADMITTEDLY, IT IS OBSERVED THAT, THIS COMPARABLE HAS 2 SEGMENTS, ONE BEING INFRASTRUCTURE MANAGEMENT SERVICE SEGMENT AND IT ENABLED SERVICE SEGMENT. BOTH DRP AS WELL AS LD.TPO CONSIDERED REVENUE GENERATED BY THIS COMPARABLE AT ENTITY LEVEL, INSTEAD OF CONSIDERING SEGMENTAL REVENUE UNDER ITES SERVICE SEGMENT. WE THEREFORE SET ASIDE THIS COMPARABLE BACK TO LD.AO/TPO WITH A DIRECTION TO CONSIDER THIS COMPARABLE HAVING REGARDS TO THE SEGMENTAL REVENUE GENERATED UNDER ITES SEGMENT IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD TO BE PROVIDED TO ASSESSEE. ACCORDINGLY THIS COMPARABLE IS SET ASIDE TO LD.AO/TPO. C) ECLERX SERVICES LTD THIS COMPARABLE WAS SELECTED BY LD.TPO BY OBSERVING THAT IT IS FUNCTIONALLY SIMILAR WITH THAT OF ASSESSEE. LD.AR SUBMITTED THAT THIS COMPANY PROVIDES DIGITAL MARKETING SERVICES TO LARGEST FORTUNE/FT/INTERNET RETAILER 500 SCALE COMPANIES AUGMENTING BANDWIDTH TO DRIVE GREATER QUALITY CONTROL TO THAT DIGITAL OPERATIONS, DATA MANAGEMENT AND ANALYTICAL. IT HAS ALSO BEEN SUBMITTED THAT THERE IS NO SEGMENTAL DETAILS AVAILABLE AND THIS COMPANY REVEALS OPERATING INCOME ONLY UNDER ONLY ONE SEGMENT, PAGE 20 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 WHICH IS DATA ANALYTICS AND PROCESS OUTSOURCING SERVICES. IT HAS BEEN SUBMITTED BY LD.AR THAT, SERVICES RENDERED BY THIS COMPANY IS IN THE NATURE OF KPO AND IS ONE OF INDIAS FIRST PUBLICLY LISTED KPO COMPANY. IT IS ALSO BEEN SUBMITTED BY LD.AR THAT THIS COMPANY IS INTO SUB CONTRACTING. ON THE CONTRARY, LD.CIT.DR SUBMITTED THAT ASSESSEE HAD NOT ARGUED REGARDING SUB CONTRACTING, BEFORE DRP OR BEFORE LD.TPO. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS NOTED THAT THIS COMPANY IS INVOLVED IN HIGH-END KPO SERVICES WHEREAS ASSESSEE IS PROVIDING IT ENABLED SERVICES BY RENDERING REMOTE DATA PROCESSING IN THE FIELD OF REINSURANCE. IN OUR OPINION FUNCTIONS PERFORMED BY THIS COMPANY IS NOT SIMILAR TO THAT OF ASSESSEE EVEN THOUGH ASSESSEE BEFORE US ALSO CARRIES OUT CERTAIN SERVICES ON CONTRACT BASIS. LD.AR HAS PLACED RELIANCE UPON DECISION OF HONABLE DELHI HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS LTD. VS.CIT, REPORTED IN [2015] 60 TAXMANN.COM 355 HONBLE COURT HAD HELD THAT ONCE A COMPANY FALLS INTO THE CATEGORY OF HIGH-END KPO, IT CANNOT BE FUNCTIONALLY COMPARABLE WITH A BPO SERVICE PROVIDER LIKE THAT OF ASSESSEE. APPLYING THIS REISSUE IN THE PRESENT CASE, WE DIRECT LD.AO TO ELIMINATE THIS COMPARABLE FROM FINAL LIST. D) CROSSDOMAIN SOLUTIONS PVT.LTD. LD.AR SUBMITTED THAT THIS COMPARABLE WAS CONSIDERED BY LD.TPO. IT HAS BEEN SUBMITTED THAT LD.TPO USED INFORMATION IN UNDER SECTION 133 (6) WHICH WAS NOT MADE AVAILABLE TO ASSESSEE. LD. CIT DR SUBMITTED THAT THE DETAILS COLLECTED UNDER 133 (6) WAS PROVIDED TO ASSESSEE IN SOFT COPY FOR ITS COMMENTS. PAGE 21 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 LD.AR AS REJOINDER SUBMITTED THAT CD WAS PROVIDED TO ASSESSEE HOWEVER THE INFORMATION WAS CONTRARY TO THE DETAILS AVAILABLE IN PUBLIC DOMAIN. HE SUBMITTED THAT ASSESSEE HAD REQUESTED FOR CROSS EXAMINATION OF THE PERSON WHO HAD PROVIDED THE INFORMATION UNDER SECTION 133 (6) THAT WAS DENIED BY LD. TPO. HE THUS SUBMITTED THAT DUE PROCESS OF LAW HAS NOT BEEN FOLLOWED BY LD.TPO. CONSIDERING THE ARGUMENTS ADVANCED BY BOTH SIDES, WE ARE OF OPINION THAT THE COMPARABLE MUST BE SET ASIDE TO LD.AO/TPO FOR RECONSIDERATION. ASSESSEE HAS FILED VARIOUS DETAILS BEFORE US SHOWING FUNCTIONAL DISSIMILARITIES WHEREAS LD.TPO IS SAID TO HAVE INFORMATION FROM THE COMPARABLE UNDER SECTION 133 (6). IT IS ALSO NOTED THAT LD.TPO HAS NOT DEALT WITH OBJECTIONS RAISED BY ASSESSEE. WE DIRECT LD.AO/TPO TO CONSIDER ALL OBJECTIONS RAISED BY ASSESSEE IN RESPECT OF THIS COMPANY AND TO VERIFY DETAILS IN RESPECT OF THIS COMPARABLE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT ASSESSEE SHALL BE GRANTED PROPER OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH LAW. ACCORDINGLY THIS COMPARABLE IS SET ASIDE TO LD.AO/TPO FOR EDIFICATION. E) MPS LTD. IT WAS SUBMITTED THAT, ASSESSEE PROVIDED THIS ADDITIONAL COMPARABLE TO LD.TPO DURING TRANSFER PRICING ASSESSMENT PROCEEDINGS. LD.AR SUBMITTED THAT INITIALLY LD.TPO REJECTED THIS COMPARABLE ON THE GROUND THAT IT FAILS SERVICE INCOME TO SALES BEING LESS THAN 75% FILTER. SUBSEQUENTLY LD.TPO IN THE NOTICE HELD THIS COMPARABLE TO BE FUNCTIONALLY SIMILAR TO ASSESSEE AND PAGE 22 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 PASSING ALL FILTERS. LD.AR SUBMITTED THAT THIS COMPARABLE DID NOT APPEAR IN THE SEARCH PROCESS UNDERTAKEN BY LD.TPO. IT HAS NOW BEEN SUBMITTED BY LD.AR THAT THIS COMPANY HOLDS HUGE INVENTORY IS PART OF ITS BUSINESS AND ONLY HAS ONE BUSINESS SEGMENT OF PROVIDING PUBLISHING SOLUTIONS I.E; TYPESETTING AND DATA DIGITIZATION. LD.AR PLACED RELIANCE ON SCREENSHOTS IN RESPECT OF THIS COMPANY PLACED IN PAPER BOOK PROVIDING BRIEF FACTS AND SUBMISSIONS AT PAGE 71. ON THE CONTRARY, LD. CIT DR SUBMITTED THAT ASSESSEE HAS RAISED VARIOUS ISSUES OF EXCEPTIONALLY YEAR OF OPERATIONS AND ACQUISITIONS BY THIS COMPANY DURING THE YEAR UNDER CONSIDERATION WHICH HAS NOT BEEN CONSIDERED BY LD.TPO. HE THUS REQUESTED FOR THIS COMPARABLE TO BE SET-ASIDE TO LD.TPO FOR DUE VERIFICATION AS THIS COMPARABLE IS ALSO INTO BACK-OFFICE SUPPORT SERVICES LIKE ASSESSEE. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS NOTED THAT VARIOUS OBJECTIONS RAISED BY THE LD.AR BEFORE US FOR EXCLUSION OF THIS COMPARABLE HAS NOT BEEN CONSIDERED BY AUTHORITIES BELOW. UNDER SUCH CIRCUMSTANCES IT IS NECESSARY THAT PROPER VERIFICATION IN RESPECT OF FUNCTIONS PERFORMED, ASSETS OWNED AND RISK ASSUMED BY THIS COMPARABLE NEEDS TO BE VERIFIED FOR ANALYSING COMPARABILITY WITH THAT OF ASSESSEE. ASSESSEE IS DIRECTED TO PROVIDE ALL RELEVANT DETAILS/INFORMATION REGARDING THIS COMPARABLE TO LD.AO/TPO. LD.AO/TPO SHALL THEN VERIFY ALL DETAILS FILED BY ASSESSEE AND THEN DECIDE UPON THE COMPARABILITY BASED UPON FAR ANALYSIS WITH ASSESSSEE. NEEDLESS TO SAY THAT, PROPER OPPORTUNITY OF BEING HEARD SHALL BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LAW. PAGE 23 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 ACCORDINGLY THIS COMPARABLE IS SET ASIDE TO LD.AO/TPO. B. ALLEGED FOR INCLUSION A) HARTRON COMMUNICATIONS LTD: IT HAS BEEN SUBMITTED THAT, LD.TPO/DRP REJECTED THIS COMPARABLE, AS IT WAS PERSISTENT LOSS MAKING COMPANY AND HAS INCURRED LOSSES IN BPO SEGMENT IN TWO YEARS, OUT OF PRECEDING 3 YEARS. LD.AR SUBMITTED THAT RELEVANT SEGMENTAL DETAIL ONLY WAS TO BE CONSIDERED, WHEREAS, LD.TPO CONSIDERED REVENUE EARNED BY THIS COMPARABLE ON ENTITY LEVEL. IT HAS BEEN SUBMITTED THAT, THIS CRUCIAL OBJECTION RAISED BY ASSESSEE, HAS NOT BEEN CONSIDERED BY AUTHORITIES BELOW. IN SUPPORT OF, LD.AR PLACING RELIANCE ON DECISION OF PUNE TRIBUNAL IN CASE OF YAZAKI INDIA PVT LTD VS DCIT IN ITA NO.621/PUN/2014 FOR ASSESSMENT YEAR 2009-10 BY ORDER DATED 11/07/2019. ON THE CONTRARY LD.CIT.DR PLACED RELIANCE ON OBSERVATIONS OF AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED THAT THIS COMPARABLE HAS NOT BEEN VERIFIED BY LD.AO/TPO HAVING REGARDS TO THE SUBMISSIONS MADE BY ASSESSEE. WE THEREFORE, DIRECT LD.AO/TPO TO VERIFY THIS COMPARABLE IN THE LIGHT OF OBSERVATIONS BY PUNE TRIBUNAL IN CASE OF YAZAKI INDIA PVT LTD VS DCIT (SUPRA). NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD MUST BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY THIS COMPARABLE IS SET ASIDE TO LD.AO/TPO. GROUND NO. 12: IT HAS BEEN SUBMITTED THAT WORKING CAPITAL ADJUSTMENT WAS DENIED WHILE COMPUTING THE MARGIN ON THE GROUND THAT ASSESSEE PAGE 24 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 HAS NOT BEEN ABLE TO DEMONSTRATE THE DIFFERENCES THAT HAD IMPACTED THE PROFIT. VARIOUS DECISIONS OF COORDINATE BENCH OF THIS TRIBUNAL HAS TIME AND AGAIN DIRECTED AUTHORITIES BELOW TO PROVIDE WORKING CAPITAL ADJUSTMENT IN ACTUALS WHICH IS IN ACCORDANCE WITH RULE 10 B (1) (E) OF THE RULES. 22.2. WE THEREFORE DIRECT LD.AO/TPO TO RECOMPUTE WORKING CAPITAL ADJUSTMENT IN ACTUALS TO THE SELECTED COMPARABLES TO MAKE THEM COMPARABLE WITH ASSESSEE. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 23. GROUND NO.14-17 ALLEGED BY ASSESSEE AGAINST ADJUSTMENT OF NOTIONAL INTEREST ON OUTSTANDING RECEIVABLES. FROM TP STUDY, IT IS OBSERVED THAT PAYMENTS TO ASSESSEE ARE NOT CONTINGENT UPON PAYMENT RECEIVED BY AES FROM THEIR RESPECTIVE CUSTOMERS. FURTHER LD.AR SUBMITTED THAT WORKING CAPITAL ADJUSTMENT UNDERTAKEN BY ASSESSEE INCLUDES THE ADJUSTMENT REGARDING THE RECEIVABLES AND THUS RECEIVABLES ARISING OUT OF SUCH TRANSACTION HAVE ALREADY BEEN ACCOUNTED FOR. ALTERNATIVELY, HE SUBMITTED THAT WORKING CAPITAL SUBSUMES SUNDRY CREDITORS AND THEREFORE SEPARATE ADDITION IS NOT CALLED FOR. 23.1. LD.TPO COMPUTED INTEREST ON OUTSTANDING RECEIVABLES UNDER WEIGHTED AVERAGE METHOD USING LIBOR + 300 BASIS POINTS APPLICABLE FOR YEAR UNDER CONSIDERATION THAT WORKED OUT TO 3.3758% ON RECEIVABLES THAT EXCEEDED 30 DAYS. IT HAS BEEN ARGUED BY LD.AR THAT AUTHORITIES BELOW DISREGARDED BUSINESS/COMMERCIAL ARRANGEMENT BETWEEN THE ASSESSEE AND ITS PAGE 25 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 AES, BY HOLDING OUTSTANDING RECEIVABLES TO BE AN INDEPENDENT INTERNATIONAL TRANSACTION. 23.2. LD.AR PLACED RELIANCE ON DECISION OF DELHI TRIBUNAL IN KUSUM HEALTHCARE PVT.LTD VS. ACIT REPORTED IN (2015) 62 TAXMANN.COM 79, DELETED ADDITION BY CONSIDERING THE ABOVE PRINCIPLE, AND SUBSEQUENTLY HONBLE DELHI HIGH COURT IN PR. CIT VS. KUSUM HEALTH CARE PVT. LTD. (2017) 398 ITR 66 (DEL) , HELD THAT NO INTEREST COULD HAVE BEEN CHARGED AS IT CANNOT BE CONSIDERED AS INTERNATIONAL TRANSACTION. HE ALSO PLACED RELIANCE UPON DECISION OF DELHI TRIBUNAL IN CASE OF BECHTEL INDIA VS DCIT REPORTED IN (2016) 66 TAXMAN.COM 6 WHICH SUBSEQUENTLY UPHELD BY HONABLE DELHI HIGH COURT VIDE ORDER DATED 21/07/16 IN ITA NO. 379/2016 , ALSO UPHELD BY HONBLE SUPREME COURT VIDE ORDER DATED 21/07/17, IN CC NO. 4956/2017. 23.3. IT HAS BEEN SUBMITTED BY LD.AR THAT OUTSTANDING RECEIVABLES ARE CLOSELY LINKED TO MAIN TRANSACTION AND SO THE SAME CANNOT BE CONSIDERED AS SEPARATE INTERNATIONAL TRANSACTION. HE ALSO SUBMITTED THAT INTO COMPANY AGREEMENTS PROVIDES FOR EXTENDING CREDIT PERIOD WITH MUTUAL CONSENT AND IT DOES NOT PROVIDE ANY INTEREST CLAUSE IN CASE OF DELAY. HE ALSO ARGUED THAT THE WORKING CAPITAL ADJUSTMENT TAKES INTO ACCOUNT THE FACTORS RELATED TO DELAYED RECEIVABLES AND NO SEPARATE ADJUSTMENT IS REQUIRED IN SUCH CIRCUMSTANCES. 23.4. ON THE CONTRARY LD.CIT.DR SUBMITTED THAT INTEREST ON RECEIVABLES IS AN INTERNATIONAL TRANSACTION AND LD.TPO RIGHTLY DETERMINED ITS ALP. IN SUPPORT OF THE CONTENTIONS, HE PLACED RELIANCE ON DECISION OF DELHI TRIBUNAL ORDER IN AMERIPRISE INDIA PAGE 26 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 PVT. LTD. VS. ACIT (2015- TII-347-ITAT-DEL-TP) WHEREIN IT IS HELD THAT, INTEREST ON RECEIVABLES IS AN INTERNATIONAL TRANSACTION AND THE TRANSFER PRICING ADJUSTMENT IS WARRANTED. HE STATED THAT FINANCE ACT, 2012 INSERTED EXPLANATION TO SECTION 92B, WITH RETROSPECTIVE EFFECT FROM 1.4.2002 AND SUB-CLAUSE (C) OF CLAUSE (I) OF THIS EXPLANATION PROVIDES THAT: (I) THE EXPRESSION 'INTERNATIONAL TRANSACTION' SHALL INCLUDE (C) CAPITAL FINANCING, INCLUDING ANY TYPE OF LONG-TERM OR SHORT-TERM BORROWING, LENDING OR GUARANTEE, PURCHASE OR SALE OF MARKETABLE SECURITIES OR ANY TYPE OF ADVANCE, PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS;. . 23.5. LD.CIT.DR SUBMITTED THAT EXPRESSION DEBT ARISING DURING THE COURSE OF BUSINESS REFERS TO TRADING DEBT ARISING FROM SALE OF GOODS OR SERVICES RENDERED IN COURSE OF CARRYING ON BUSINESS. ONCE ANY DEBT ARISING DURING COURSE OF BUSINESS IS AN INTERNATIONAL TRANSACTION, HE SUBMITTED THAT ANY DELAY IN REALIZATION OF SAME NEEDS TO BE CONSIDERED WITHIN TRANSFER PRICING ADJUSTMENT, ON ACCOUNT OF INTEREST INCOME SHORT CHARGED OR UNCHARGED. IT WAS ARGUED THAT INSERTION OF EXPLANATION WITH RETROSPECTIVE EFFECT COVERS ASSESSMENT YEAR UNDER CONSIDERATION AND HENCE UNDER/NON-PAYMENT OF INTEREST BY AES ON DEBT ARISING DURING COURSE OF BUSINESS BECOMES INTERNATIONAL TRANSACTIONS, CALLING FOR COMPUTING ITS ALP. HE REFERRED TO DECISION OF DELHI TRIBUNAL IN AMERIPRISE (SUPRA), IN WHICH THIS ISSUE HAS BEEN DISCUSSED AT LENGTH AND EVENTUALLY INTEREST ON TRADE RECEIVABLES HAS BEEN HELD TO BE AN INTERNATIONAL TRANSACTION. REFERRING TO DISCUSSION IN SAID ORDER, IT WAS STATED THAT HONBLE DELHI BENCH IN THIS CASE NOTED A DECISION OF THE PAGE 27 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PATNI COMPUTER SYSTEMS LTD., (2013) 215 TAXMANN 108 (BOM.), WHICH DEALT WITH QUESTION OF LAW: (C) `WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL DID NOT ERR IN HOLDING THAT THE LOSS SUFFERED BY THE ASSESSEE BY ALLOWING EXCESS PERIOD OF CREDIT TO THE ASSOCIATED ENTERPRISES WITHOUT CHARGING AN INTEREST DURING SUCH CREDIT PERIOD WOULD NOT AMOUNT TO INTERNATIONAL TRANSACTION WHEREAS SECTION 92B(1) OF THE INCOME-TAX ACT, 1961 REFERS TO ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES? 23.6. LD.CIT.DR SUBMITTED THAT, WHILE ANSWERING ABOVE QUESTION, HONBLE BOMBAY HIGH COURT REFERRED TO AMENDMENT TO SECTION 92B BY FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1.4.2002. SETTING ASIDE VIEW TAKEN BY TRIBUNAL, HONBLE BOMBAY HIGH COURT RESTORED THE ISSUE TO FILE OF TRIBUNAL FOR FRESH DECISION IN LIGHT OF LEGISLATIVE AMENDMENT. IT WAS THUS ARGUED THAT NON/UNDER-CHARGING OF INTEREST ON EXCESS PERIOD OF CREDIT ALLOWED TO AES FOR REALIZATION OF INVOICES, AMOUNTS TO AN INTERNATIONAL TRANSACTION AND ALP OF SUCH INTERNATIONAL TRANSACTION HAS TO BE DETERMINED BY LD.TPO. IN SO FAR AS CHARGING OF RATE OF INTEREST IS CONCERNED, HE RELIED ON DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. COTTON NATURALS (I) PVT. LTD (2015) 276 CTR 445 (DEL) HOLDING THAT CURRENCY IN WHICH SUCH AMOUNT IS TO BE RE-PAID, DETERMINES RATE OF INTEREST. HE, THEREFORE, CONCLUDED BY SUMMING UP THAT INTEREST ON OUTSTANDING TRADE RECEIVABLES IS AN INTERNATIONAL TRANSACTION AND ITS ALP HAS BEEN CORRECTLY DETERMINED. 23.7. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. PAGE 28 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 THIS BENCH REFERRED TO DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN CASE OF SPECIAL BENCH OF ITAT IN CASE OF INSTRUMENTATION CORPN. LTD. V. ASSTT. DIT IN ITA NO. 1548 AND 1549 (KOL.) OF 2009, DATED 15-7-2016, HELD THAT OUTSTANDING SUM OF INVOICES IS AKIN TO LOAN ADVANCED BY ASSESSEE TO FOREIGN AE., HENCE IT IS AN INTERNATIONAL TRANSACTION AS PER EXPLANATION TO SECTION 92 B OF THE ACT. WE ALSO PERUSED DECISION RELIED UPON BY LD.AR. IN OUR CONSIDERED OPINION, THESE ARE FACTUALLY DISTINGUISHABLE AND THUS, WE REJECT ARGUMENT ADVANCED BY LD.AR. 23.8. ALTERNATIVELY, IT HAS BEEN ARGUED THAT IN TNMM, WORKING CAPITAL ADJUSTMENT SUBSUMES SUNDRY CREDITORS. IN SUCH SITUATION COMPUTING INTEREST ON OUTSTANDING RECEIVABLES AND LONES AND ADVANCES TO ASSOCIATED ENTERPRISE WOULD AMOUNT TO DOUBLE TAXATION. HONBLE DELHI TRIBUNAL IN CASE OF ORANGE BUSINESS SERVICES INDIA SOLUTIONS PVT. LTD. VS. DCIT IN ITA NO. 6570/DEL/2016 VIDE ITS ORDER DATED 15.2.2018 HAS OBSERVED THAT : THERE MAY BE A DELAY IN COLLECTION OF MONIES FOR SUPPLIES MADE, EVEN BEYOND THE AGREED LIMIT, DUE TO A VARIETY OF FACTORS WHICH WOULD HAVE TO BE INVESTIGATED ON A CASE TO CASE BASIS. IMPORTANTLY, THE IMPACT THIS WOULD HAVE ON THE WORKING CAPITAL OF THE ASSESSEE WOULD HAVE TO BE STUDIED. IT WENT ON TO HOLD THAT, THERE HAS TO BE A PROPER INQUIRY BY THE TPO BY ANALYSING THE STATISTICS OVER A PERIOD OF TIME TO DISCERN A PATTERN WHICH WOULD INDICATE THAT VIS--VIS THE RECEIVABLES FOR THE SUPPLIES MADE TO AN AE, THE ARRANGEMENT REFLECTED AN INTERNATIONAL TRANSACTION INTENDED TO BENEFIT THE AE IN SOME WAY. SIMILAR MATTER ONCE AGAIN CAME UP FOR CONSIDERATION BEFORE THE HONBLE DELHI HIGH COURT IN AVENUE ASIA ADVISORS PVT. LTD. VS. DCIT (2017) 398 ITR 120 (DEL). FOLLOWING THE EARLIER DECISION IN KUSUM HEALTHCARE (SUPRA), IT WAS OBSERVED THAT THERE ARE SEVERAL FACTORS WHICH NEED TO BE CONSIDERED BEFORE HOLDING THAT EVERY RECEIVABLE IS AN INTERNATIONAL TRANSACTION AND PAGE 29 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 IT REQUIRES AN ASSESSMENT ON THE WORKING CAPITAL OF THE ASSESSEE. APPLYING THE DECISION IN KUSUM HEALTH CARE (SUPRA), THE HONBLE HIGH COURT DIRECTED THE TPO TO STUDY THE IMPACT OF THE RECEIVABLES APPEARING IN THE ACCOUNTS OF THE ASSESSEE; LOOKING INTO THE VARIOUS FACTORS AS TO THE REASONS WHY THE SAME ARE SHOWN AS RECEIVABLES AND ALSO AS TO WHETHER THE SAID TRANSACTIONS CAN BE CHARACTERIZED AS INTERNATIONAL TRANSACTIONS. 23.9. IN VIEW OF THE ABOVE, WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE TO LD.AO/TPO FOR DECIDING IT IN CONFORMITY WITH THE ABOVE REFERRED JUDGMENT. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH LAW. ACCORDINGLY THESE GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT, APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST MAY 2020. SD/- SD/- (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 21 ST MAY, 2020. /VMS/ PAGE 30 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 COPY TO: 1. ASSESSEE 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL. BANGALORE. PAGE 31 OF 31 IT(TP)A 3181/BANG/2018 A. Y : 2015 16 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR 19-03-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 19-03-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 19-03-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -04-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -04-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -05-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -05-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS