Referred Sections:
section 143 (3)
section 144C of The Income Tax Act
section 920(3) of the Act
section 92D of the Act
Referred Cases / Judgments
Ramp green solutions private limited vs. CIT
Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I-1": NEW DELHI
BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 1520/Del/2015
(Assessment Year: 2010-11)
Morningstar India Pvt. Ltd, Vs. DCIT,
9th Floor, Platinum Tech Circle-17(1),
Park, Delhi
Plot No. 17/18, Sector-30A,
Vashi, Navi Mumbai
PAN: AAACX0362K
(Appellant) (Respondent)
Assessee by : Mr. Piyush Chawla, CA
Ms. Shruti Khimta, CA
Revenue by: Shri Sandeep Kr. Mishra,
Sr. DR
Date of Hearing 07/02/2019
Date of pronouncement 06/05/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
1. This appeal is filed by assessee, Morningstar India private limited
for assessment year 2010 11 against the order of the learned
Deputy Commissioner Of Income Tax, Circle 17 (1), New Delhi
(the learned Assessing Officer) (AO) under section 143 (3) read
with section 144C of The Income Tax Act [ The Act] passed in
pursuance to the direction of the learned Dispute Resolution
Panel III (the learned DRP), New Delhi dated 27/11/2014
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
against objection filed by the assessee in proposed draft of
assessment dated 14/2/2014 wherein the order u/s 92 CA (3) of
the Act passed by The Assistant Director Of Income Tax, Transfer
Pricing Officer I (6), New Delhi (the learned TPO) dated
28/1/2014 proposing an adjustment of INR 25575349/ as
arms-length price (ALP) of the International Transaction ( IA) was
upheld.
2. The assessee has raised the following grounds of appeal:-
"That on the facts and circumstances of the case, and in law;
1. The assessment order passed by the Learned Assessing
Officer (,,Ld. AO) pursuant to the directions of Learned
Dispute Resolution Panel (,,Ld. DRP) is bad in facts and law.
2. The Ld. AO (following the directions of the Ld. DRP), erred
both on facts and in law in confirming the addition of Rs.
14,770,775/- to the income of the Appellant proposed by the
Transfer Pricing Officer (,,Ld. TPO) by holding that the related
party international transactions pertaining to provision of IT
Enabled back-office support (,,ITES) services do not satisfy
the arms length principle envisaged under the Income-tax
Act, 1961 ('the Act'). In doing so, the Ld. DRP and the Ld. AO
have grossly erred in agreeing with and upholding the Ld.
TPOs action of:
2.1 not appreciating that none of the conditions set out in
section 920(3) of the Act are satisfied in the instant
case;
2.2 disregarding the Arms Length Price (,,ALP) as
determined by the Appellant in the Transfer Pricing (TP)
documentation maintained as per section 92D of the Act
read with Rule 10D of the Income-tax Rules, 1962
(,,Rules) as well as fresh search; and in particular
modifying/ rejecting the filters applied by the Appellant;
2.3 rejecting the comparability analysis undertaken by the
Appellant in the TP documentation and conducted a
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
fresh comparability analysis based on application of the
following additional/ revised filters in determining the
ALP:
2.3.1 exclusion of companies with export sales that are
less than 75% of their total revenue/ sales as a
comparability criterion;
2.3.2 exclusion of companies identified by the Appellant
with employee cost less than 25% of their
operating cost as a comparability criterion;
2.3.3 applying sales filter of Rs. 5 crore on for selecting
comparable companies, thereby rejecting the
turnover filter of Rs. 1 crore, applied by Appellant;
and
2.3.4 exclusion of companies with diminishing
revenues/ having persistent losses during the
year under consideration as a comparability
criterion.
2.4 including companies having abnormal margins/volatile
margins in the final comparables set without
appreciating the fact those abnormal/volatile margins
are due to certain abnormal conditions like business
restructuring, super normal growth in revenue/net
profits etc. and on the other hand resorting to arbitrary
rejection of low-profit/loss making companies based on
erroneous and inconsistent reasons.
2.5 including certain companies in the final set that are not
comparable to the ITES segment of the Appellant in
terms of functions performed, assets employed and
risks assumed and excluding certain companies on
arbitrary/ frivolous/inconsistent grounds even though
they are comparable to the Appellant in terms of
functions performed, assets employed and risks
assumed;
2.6 ignoring the business/ commercial reality that since the
Appellant is remunerated on an arms length cost plus
basis, i.e. it is compensated for all its operating costs
plus a pre-agreed mark-up based on a benchmarking
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
analysis, the Appellant undertakes minimal business
risks as against comparable companies that are full-
fledged risk taking (which may include market risk,
price risk, capacity utilization risk, etc.) entrepreneurs
as is evident from the volatile margins earned over the
period of years and by not allowing a risk adjustment to
the Appellant on account of the fact."
3. Brief facts of the case shows that assessee is a 100% subsidiary
of Corporate Fundamentals Incorporation, USA engaged in the
business of captive Data processing services provider to its group
companies. The assessee is also involved in the sale of access to
online databases in services of Morningstar incorporation USA.
The assessee company filed its return of income (ROI) on
29/9/2010 declaring loss of INR 14666670/. The assessment
u/s 143 (3) of the act was taken up and it was found that
assessee has entered into an international transaction
amounting to INR 121476495/ with its associated enterprise.
Case was referred to the learned transfer pricing officer for
determining its arms-length price. The learned transfer pricing
officer found that assessee has entered into a transaction of
provision of data processing and software services to its
associated enterprise amounting to Rs. 116698529/ which was
benchmarked by the assessee adopting the Transactional Net
Margin Method (TNMM) is most appropriate method (MAM) using
the profit level indicator (PLI) of operating profit/total cost
(OP/TC) selecting 7 comparable wherein the comparable mean
PLI was 12.19 percent and assessee has earned the margin of
14.04 %, assessee submitted that its international transaction is
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
carried out at arms-length. The learned transfer pricing officer
issued a show cause notice with respect to the several aspects of
the benchmarking analysis of the assessee. After that he issued
a show cause notice with respect to the selection of the
comparables, use of current year data, the rejection of the certain
filters et cetera. The learned TPO also referred to the cost
allocation methodology adopted by the assessee for the login sale
revenue of the assessee. Thereafter recording the objection of the
assessee and considering reply of the assessee after giving the
reasons for the rejection, the learned TPO finally selected 12
comparables whose average profit level indicator of operating
profit/operating cost was found to be 31.47 percentage,
compared it with the PLI of the assessee and determined arms-
length price of the transaction at Rs. 139444849/- against the
transaction value of Rs. 113869500/. Accordingly shortfall of
transfer pricing adjustment of INR 25575349/- was
determined. Consequently draft of proposed assessment was
passed. Assessee objected it before the learned dispute
resolution Panel. The learned dispute resolution passed the
direction on 27/11/2014. As per the direction of the learned
dispute resolution panel all the 12 comparables selected by the
learned transfer pricing officer was approved and the authentic
mean of operating profit/total cost of the comparable companies
was computed at 28.83 percentages. Based on those directions
order u/s 143 (3) read with section 144C of the act was passed.
Subsequently an order u/s 154 of the income tax act was passed
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
by the learned Deputy Commissioner Of Income Tax, Transfer
Pricing Officer 2 (1) (1), New Delhi on 18/12/2014 wherein the
proposed adjustment u/s 92CA of the act was restricted to INR
14770775/. Assessee aggrieved with the assessment order
passed u/s 143 (3) read with section 144C has preferred this
appeal before us.
4. The learned authorised representative submitted that assessee
challenges the transfer pricing adjustment made to the
international transaction of the assessee of INR 147770775/
and is pressing for exclusion of following comparables:
a. Accentia technologies Ltd
b. E Clerx services Ltd
c. Infosys BPO Ltd
d. TCs E serve international Ltd
5. He submitted a detailed chart with respect to the each of the
comparable. Over and above, this he also pressed for inclusion
of the comparable Mphasis finsources Ltd.
6. The learned departmental representative vehemently supported
the order of the learned transfer pricing officer and the learned
dispute resolution panel.
7. We have carefully considered the rival contention and perused
the orders of the lower authorities. The only dispute is with
respect to the software development and maintenance and data
processing services of the assessee. Assessee is performing the
IT support services to its associated enterprise. It is an IT
support and software development and maintenance service
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
provider to its associated enterprise whereas its associated
enterprise are engaged in marketing and sales, quality control,
invoicing on collection, client relationship, engagement control,
execution of services and management support services for
software development. Therefore according to the transfer
pricing study report furnished by the assessee and not disputed
by the learned assessing officer, Morningstar India, assessee
provides, assistance in website and web application development
of customers of associated enterprise, assistance in development
and maintenance of STAR framework and Morningstar corporate
website, assistance into tracking and data feeding, assistance in
sales analysis and market research and assistance in quality
testing of software developed by associated enterprises. Assessee
is also involved in sale of online access of various databases of
Morningstar group from its Mumbai office. It provided data
processing and software services to its associated enterprise
Morningstar incorporation of INR 58412756/ and to Corporate
fundamental incorporation of INR 58285773/. The only dispute
rose before us is the selection of comparables.
8. The 1st comparable disputed by the assessee for its exclusion is
Actentia technologies Ltd stating that it is functionally dissimilar
as it is engaged in medical transcription services and further it
has a significant amount of brands , IPRS and goodwill. Further
due to non-availability of the segmental information and
business restructuring resulting in extraordinary circumstances
being amalgamation in the company, it should be excluded. The
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
assessee further relied upon several judicial precedents wherein
the above comparable company was excluded.
9. The learned transfer pricing officer considered the argument of
the assessee that it is functionally dissimilar and rejected that
stating that annual report has been produced and it is seen that
the company is into an healthcare receivable cycle management
predominantly which is an ITeS segment. He further held that
86% of the receipt is from healthcare receivable field and a small
portion is in the coding activity. He thereafter extracted the
annual accounts and the reports of the above comparable
company and stated that healthcare management receivable
system is of one single operational segment consisting of various
activities which are closely related and complementary and the
services cannot be termed as diversified activity. He further held
that SaaS (software as a service) is nothing but growing of all the
services under one umbrella. He therefore held that the above
comparable companies functionally similar and passes all the
filters applied by the learned transfer pricing officer. He further
held that there is no abnormal fluctuation in the profit earning
capacity of the comparable for the year under this situation and
it is showing good margin consistently over the years and
therefore there is no issue of supernormal profits. Therefore he
stated that the comparable is robust comparable in case of the
taxpayer and is retained as a suitable comparable. The learned
dispute resolution panel was also of the view that the FAR profile
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
of the company is essentially similar to that of the assessee
hence it was retained as a comparable.
10. On careful consideration of the annual report of the above
comparable company for financial year 2009 10 at page
number 41 of the annual report it is stated that the comparable
company provides healthcare and receivable management
services involving medical transcription, medical coding, billing
and receivables management (collections). At page number 42,
description of the medical transcription services have been
provided with shows brief process of the medical transcription
giving the process flowchart and in the end it is stated that
medical transcription profession is considered very much a
skilled work which can be done only after undergoing 6 to 8
months of rigorous training as it involves the identifying the
generic name and trade name of the various drugs. That can be
done only after reference to the pharmacology reference books
which should always be a part of the library of a medical
transcription profession. Further at page number 43 medical
coding has also been explained by way of a flowchart. The
company says that it has a sizeable number of certified coders
which is assigning codes to diagnosis and procedures which help
in financial reimbursement from insurance companies and
government companies et cetera. It is further stated that medical
coders are specialized in coding after thorough training program
and certification. Further the assessee has contended that it has
a significant amount of brands and software for providing IT
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
services. For this proposition we look at page number 37 of the
annual report wherein management discussion and analysis it is
submitted that it is the 1st company to offer SaaS model MHRC
area. It is also entering into the legal process outsourcing
segment. It is also using Immaculate business process
outsourcing management solutions for healthcare, financial and
insurance sector and health the dox cutting-edge offshore HRC
solutions for healthcare sector are provided by this company.
The assessee has also contested that it has undergone
amalgamation of another company with the comparable
company. The AR referred to page numbers 78 of the annual
report wherein in ,,notes to accounts the reference has been
made that pursuant to the scheme of amalgamation of accentia
private limited with the company as approved by the shareholder
in the court convened meeting held on 25th day of April 2009 and
subsequently sanctioned by the honourable High Court of
Mumbai vide order dated 21/08/2009 and the High Court of
Karnataka vide order dated 06/02/2010, the assets and
liability of the erstwhile company was transferred invested in this
company with effect from 01/04/2008. On reading the above
note it is apparently clear that amalgamation has happened with
effect from 01/04/2008, and therefore it does not pertain to this
year which is assessment year 2010 11. And therefore we
reject the argument that there is an extraordinary event in the
comparable company. However looking to the functions
performed by the Accentia technology and the various kinds of
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
advanced assets in the form of software et cetera utilized, it is
apparent that functionally the above company is not comparable
with the assessee company. Hence we direct the learned transfer
pricing officer /learned AO to exclude the above company from
the comparability analysis.
11. The next comparable challenged for its exclusion is E Clerx
services Ltd stating that it is functionally dissimilar as it is
engaged in rendering knowledge process services focused on
financial services and sales and marketing support services and
TPO services. It is further stated that it provides end-to-end
financial transaction support services with services that span
both on the sale side and buy-side of the financial transaction.
The comparable company also provides strategy process
consulting services helping clients devise solution to improve
efficiency, reduce risk and meet regulatory and market demands.
In the sales and marketing support division, the comparable
company provides services in all elements of products and
services marketing. It is further argued that honourable Delhi
High Court in Ramp green solutions private limited vs. CIT it is
held that it is engaged in the knowledge process outsourcing
business and therefore it cannot be compared with simple ITeS
service provider.
12. Before the learned transfer pricing officer assessee contested for
exclusion of the above comparable stating that it is functionally
dissimilar and a very large company. The learned transfer
pricing officer rejected the contention of the assessee and stated
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
that assessee itself has accepted that these companies into a
BPO segment and therefore he rejected the contention of the
assessee as the comparable company passed all the filters. The
learned transfer pricing officer further stated that under the
TNMM method the standard of comparability are relatively
relaxed and only broad similarity of the functions are required to
be compared. The learned dispute resolution panel also
approved the contention of the learned transfer pricing officer.
13. We have carefully perused the annual accounts of E Clrex
services for financial year 2009 10 placed at page number 109-
212 of the paper book. On page number 4 of the annual report,
it is mentioned that E Clrex services Ltd is a leading knowledge
process outsourcing company supporting its clients. Therefore it
is apparent that it is a knowledge process outsourcing company.
It is also undisputed that the profile of the assessee company is
not of knowledge process outsourcing company. The honourable
Delhi High Court in Ramp green solutions private limited vs. CIT
[2015] 60 taxmann.com 355 (Delhi)/ [2015] 234 Taxman 573 (Delhi)/ [2015] 377 ITR
533 (Delhi)/ [2015] 279 CTR 441 (Delhi) has held that expression 'KPO'
indicates the involvement of domain knowledge in providing ITeS.
Typically, KPO includes involvement of advanced skills; the
services provided may include analytical services, market
research, legal research, engineering and design services,
intellectual management etc. It is further held that the KPO
sector has been described as 'a value play'. The honourable High
Court referred to in report and held that KPO services are likely
to span activities such as 'patent advisory, high-end research
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
and analytics, online market research and legal advisory'.
Therefore respectfully following the decision of Honourable Delhi
High court as stated above, it is apparent that the E clerx
services Ltd is not a comparable company with the ITeS segment
of the assessee. Therefore, we direct the learned transfer pricing
officer/AO to exclude this company.
14. The 3rd comparable contested is Infosys BPO Ltd. The learned
authorised representative says that above company provides
high-end integrated services in the nature of business
transformation services, sourcing and procurement outsourcing
et cetera and which has a significant intangible asset in the form
of Infosys brand. It is further stated that it has acquired a
company and therefore there is an extraordinary event hence it
should be excluded. He further referred to page number 264 of
the paper book wherein the amalgamation has taken place of
PAN financial services India private limited with comparable
company. Therefore it is stated that it should be excluded.
15. The learned transfer pricing officers considered the above
objection of the assessee vide para number 15.5 page number 28
of his order. He held that as per the profit and loss account,
significant accounting policies and notes on accounts of the
above company, it is clear that this company is an ITeS company
and fully comparable with the assessee. With respect to the
presence of brand value the learned TPO noted that annual
report of Infosys BPO does not mention anything regarding the
brand deriving its profitability. He further stated that by
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
spending a meager amount of revenue Infosys BPO could not
have generated brand value as suggested by the taxpayer. The
learned dispute resolution panel also upheld reasoning given by
the learned transfer pricing officer.
16. We have carefully considered the annual report of Infosys BPO
Ltd for financial 2009 10 placed at page number 213 296 of
the paper book. Undoubtedly the comparable company belongs
to Infosys group and therefore it has the support and backing of
the Infosys brand which will have its own impact on the
profitability and price of this comparable company. It is also not
necessary that the comparable company must have spent for the
brand value. In the present case of comparable is not required to
do so as it belongs to as such one of the largest group in the IT
segment "Infosys". As per page number 281 in schedule 12
selling and marketing expenses shows that comparable company
has spent approximately INR 7,500,000 towards the brand
building and advertisement expenditure. Coupled with the fact
that the comparable company belongs to an Infosys group, has
incurred the expenditure on the brand building and on the
annual report itself shows the imprint of being part of the large
IT segment group, it is apparent that the functional profile, the
assets utilized by the comparable company are not comparable
with the assessee company. Therefore, for this reason only, we
direct the learned transfer pricing officer, AO to exclude the
above comparable from comparability analysis.
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
17. With reference to the argument of the learned authorised
representative that it has acquired one company MaCmish
system LLC and therefore there is an extraordinary event in the
company, deserves to be rejected at the threshold because it is
merely a purchase of shares of the target company by this
comparable. Purchasing shares of the company does not make
any impact on the price of the margin of the comparable
company. Therefore there is no extraordinary event when a
company invest in some other company by purchase of shares.
It is neither a case of amalgamation/merger. Hence on this
ground the above comparable company cannot be excluded.
18. Further the authorised representative also stated that there is an
amalgamation of PAN financial services India private limited with
the company and therefore it should be excluded. We have
carefully considered the contention and find that the board of
directors in that meeting held on 06/10/2008 approved subject
to the approval of the Karnataka and mothers High Court of
scheme of amalgamation to amalgamate PAN financial services
India private limited which is engaged in providing business
process management services with the Infosys BPO Ltd with
effect from 01/04/2008. Therefore even if there is an
amalgamation or merger, it has happened in financial year 2008
09, and impugned financial year before us is financial year
2009 10 , hence it does not pertain to this year and therefore
for this reason Infosys BPO cannot be excluded.
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ITA No. 1520/Del/2015
Assessment Year: 2010-11
19. However for the reasons given by us above, we direct the learned
TPO/AO to exclude the Infosys BPO Ltd from the comparability
analysis for the reasons of having huge brand value.
20. The 4th comparable TCS E serve international Ltd challenged by
the learned AR on functional dissimilarity stating that it is
engaged in transaction processing and technical services like
software testing, verification and validation of the software. It is
further contended that segment information is not available. The
AR further stated that there are extraordinary event in the form
of acquisition by the comparable company from Citigroup of
certain business. It was further stated that there is a payment
for TATA brand equity, further the comparable became part of
TATA group and has a huge scale and large client base which
has enhanced its offerings and has also started servicing new
clients during the year under review. Hence it was submitted
that this company is not comparable with the assessee company.
He also referred to several judicial precedents where the above
company was held to be not comparable for the reason of the size
and scale of its operation which makes it an inapposite
comparable.
21. Before the learned transfer pricing officer assessee argued that it
is a very large company which has been rejected by the learned
transfer pricing officer in para number 15.6 of his order. The
learned dispute resolution panel also rejected the contention of
the assessee and upheld its inclusion by the TPO.
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
22. We have carefully considered the contentions and find the
annual account of the above comparable company placed at page
number 297 371 of the paper book. Apparently TCS E serve
international is a subsidiary of Tata consultancy services Ltd.
Behind the above comparable company, there is a Tata brand.
On the perusal of schedule M of the profit and loss account there
is a payment of 3738000s towards the Tata brand equity
contribution. For this reason that it belongs to Tata group and
has also contributed to Tata brand which is one of the largest
brand in the information technology segment, there is a definite
impact on the pricing capacity of the comparable which the
assessee lacks. Hence, we find that TCS E serve international
Ltd deserves to be excluded. Accordingly we direct the learned
TPO AO to exclude the above comparable.
23. The last comparable challenged by the assessee is TCS E serve
limited. The assessee challenged its exclusion for the reason of
the functional dissimilarity as the comparable companies
engaged in transaction processing and technical services like
software testing, verification and validation of the software. The
learned authorised representative also challenged it as it owns
intangibles, pays for Tata brand equity and non availability of the
segment information. Further it is also not comparable on the
ground of incomparable scale of operations.
24. The learned transfer pricing officer in para number 15.7 of the
order rejected the argument of the assessee similar to TCS E
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
serve international Ltd. The learned dispute resolution panel
also rejected the objection of the assessee.
25. On identical facts and circumstances we have excluded TCS E
serve international Ltd that it belongs to a Tata group and has
paid contribution for Tata brand. We have also perused the
annual report of the comparable company which is placed at
page number 372 507 of the paper book on careful analysis of
the annual report it is found that in schedule ,,N, Tata brand
equity contribution of this comparable companies is Rs 46065
thousands. Therefore we direct the learned transfer pricing
officer to exclude the above comparable from the comparability
analysis.
26. The next ground on the comparability analysis of the assessee is
that one comparable selected by the assessee by the name of
Mphasis Fincources Ltd has been rejected by the learned transfer
pricing officer as it failed the employee cost filter. The learned
authorised representative submitted that on perusal of the page
number 13 of the annual report indicated that the total employee
cost is INR 7 2651206 and the total expenditure incurred by the
assessee is INR 1 63475456 and therefore the employee cost is
only 44.44 percentage and thus meets the filter applied by the
learned transfer pricing officer. He further stated that even if
only salary cost is taken then also the employee cost to total cost
comes to 40% approximately. It was further stated that the
above companies also functionally comparable and therefore it
should be included for the comparability analysis. With respect
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
to the financial result for FY 2009 10, he submitted a copy
thereof.
27. The learned transfer pricing officer rejected the above comparable
stating that that is not a suitable comparable as it has been
selected by the assessee on the basis of the data for a financial
year 2008 09 despite the fact that assessee has used
companies with financial year for FY 2009 10 as a filter.
Further according to the TPO the functional profile is also
different and employee compensation is a percentage to total
expenses is less than 25%. The learned dispute resolution panel
also accepted the reasons recorded by the learned transfer
pricing officer for its rejection.
28. We have carefully considered the contention of the assessee on
this aspect. In the transfer pricing study report submitted before
the learned transfer pricing officer the assessee did not submit
the financial for Year 2009 10 of this comparable company.
Further same were neither produced before the learned transfer
pricing officer or before the learned dispute resolution panel and
it is first-time produced before us. There is no application made
by the assessee of admission of any additional evidences also. In
view of this we do not find any merit in the case of the assessee
for inclusion of the above comparable. Hence we reject the same.
29. In ground number 2.6 the assessee also contested that the claim
for risk adjustment may be allowed as the appellant undertakes
minimum business risk as against comparable companies that
are full-fledged risk entrepreneurs. The learned transfer pricing
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ITA No. 1520/Del/2015
Assessment Year: 2010-11
officer and the learned dispute resolution panel has rejected the
argument of the assessee for the reason that assessee failed to
demonstrate before them that the risk profile of the assessee is
making a difference in the margins earned by the assessee and
the comparables. Before us also assessee could not demonstrate
that how the risk profile is making a difference in the margin of
the comparable companies as well as the assessee. Therefore we
do not find any reason to interfere in the decision of the learned
transfer pricing officer and approved by the learned dispute
resolution panel.
30. Accordingly we direct the learned transfer pricing officer to
exclude Accentia technology Ltd, E Clerx services Ltd, Infosys
BPO Ltd, TCS E serve international Ltd and TCS E serve limited.
Accordingly ground number 2 of the appeal is partly allowed.
31. Ground number 1 and ground number 3 of the appeal is general
in nature and therefore there dismissed.
32. Accordingly appeal of the assessee is partly allowed.
Order pronounced in the open court on 06/05/2019.
-Sd/- -Sd/-
(H.S.SIDHU) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 06/05/2019
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
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Morningstar India Pvt. Ltd Vs DCIT
ITA No. 1520/Del/2015
Assessment Year: 2010-11
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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