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03-07-2019, GTS e-Services, Section 115JB, 144C(13), Tribunal Mumbai

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2 weeks 14 hours ago #9977 by amit
Section - 115JB, 144C(13), 92CA(3)
Order Date - 03-07-2019
Favouring - Partly
Court - Tribunal Mumbai
Appellant - GTS e-Services Private Ltd.
Respondent - ITO
Citation - 719Taxpundit66
Appeal No. - I .T.A. No.1231/Mum/2017
Asstt. Year - 2012-13


PER : Manoj Kumar Aggarwal

1.1 Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2012-13 contest the final assessment order dated 27/01/2017 passed by Ld. Income Tax Officer-15(1)(4), Mumbai [AO] u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act pursuant to the directions of Dispute Resolution Panel-I, Mumbai, [in short referred to as DRP] u/s 144C(5) dated 24/11/2016.

1.2 The Ld. Authorised Representative [AR] for the assessee, Shri Nilesh Patel, at the outset submitted that Ground No.1 is not being pressed whereas Ground Nos. 2.1, 5 & 6 are general grounds which would not require any adjudication. The remaining grounds as agitated before us, read as under: -

2. Transfer Pricing Adjustment on ITeS services rendered to the AE

2.1. General Ground Computation of Arm's Length Price under TNMM

2.2. The Learned AO/TPO based on the directions of DRP erred in adopting an inappropriate set of comparables for applying TNMM.

2.3. The Learned AO/TPO based on the directions of DRP erred in including four companies - Accentia Technologies Ltd, Universal Print Systems Ltd, BNR Udyog Ltd, and Excel Infoways Ltd. - as comparables for application of TNMM.

2.4. The Learned AO/TPO/DRP erred in not granting Working Capital Adjustment.

3. Plus/Minus 5% Tolerance Limit

3.1. The Learned AO/TPO erred in not allowing adjustment for the Plus/Minus 5 % Tolerance Limit.

4. Adding Transfer Pricing Adjustment to the Book Profit u/s 115JB

4.1. In computing the Total Income, the Learned AO has erred in adding Transfer Pricing Adjustment to the Book Profit u/s 115JB for purposes of MAT (This Ground is without prejudice to the grounds raised above.).”

2.1 The relevant facts are that the assessee being resident corporate assessee is stated to be engaged in the business of providing IT enabled services (ITeS) to Griffin Group entities in finance/accounts related services such as invoicing, refunds processing and other services such as ticketing, reservations etc.

2.2 The International Transactions as carried out by the assessee with its Associated Enterprises (AE) and as reported in Form No.3CEB were referred u/s.92CA (1) for determination of Arm’s Length Price [ALP] to Ld. Transfer Pricing Officer-2(2)(1), Mumbai [TPO].

2.3 It transpired that the assessee provided back office support services in the nature of IT enabled services and operated in single segment i.e. travel support services. These services were rendered to several constituents of Griffin Group which were mainly engaged in travel / travel related business worldwide over a large geographical spread. The assessee earned revenue of Rs.16.95 Crores by rendering these services. In its TP study report, the assessee classified itself as
back office support provider and benchmarked the transaction using transactional net margin method [TNMM] as the most appropriate method. The ProfitLevel Indicator [PLI] was taken as Operating Profit / Operating Cost. The assessee computed its own PLI at 13.78% as against mean margin of 9.39% reflected by 7 comparable entities and the same being within tolerance range of +5%, no Transfer Pricing [TP] adjustment was proposed by the assessee.

2.4 However, the assessee’s methodology was not termed as reliable and correct in view of the fact that the assessee used 3 year’s data and did not apply any export filter. Therefore, applying various filters, the Ld. TPO undertook a fresh search, as a result of which 5 comparables out of 7 comparables as selected by the assessee got rejected whereas 6 new comparable were identified. The mean PLI of these 8 entities worked out to be 22.63%. Applying the same to assessee’s financial data, ALP ofthe stated transactions was worked out to be Rs.18.27 Crores as against Rs.16.95 Crores reflected by the assessee. Accordingly, TP adjustment of Rs.1.31 Crores was proposed by Ld. TPO in its order u/s 92CA (3) dated 29/01/2016. Incorporating the said adjustment, draft assessment

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