IT/ILT : Comparable companies should have comparable normal profit, functional similarity and similar employee skill sets and performance
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[2015] 53 taxmann.com 43 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'B'
HSBC Electronic Data Processing India (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle 2 (2), Hyderabad*
B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SAKTIJIT DEY, JUDICIAL MEMBER
IT APPEAL NO. 1647 (HYD.) OF 2012
[ASSESSMENT YEAR 2008-09]
OCTOBER 24, 2014
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments) - Assessment year 2008-09 - Whether extraordinary events like merger or demerger in a company during relevant year warrants exclusion of said company as comparable - Held, yes - Whether a BPO company providing CAD/CAE services could not be compared with a company which is performing engineering design services (High end services) - Held, yes - Whether company which fails employee cost filter cannot be accepted as a comparable company - Held, yes - Whether company earning super normal profits could not be selected as a comparable - Held, yes - Whether where a company is having different employee skill sets and performing research and development services and also owns intangible, it is functionally dissimilar to BPO services provider - Held, yes - Whether where assessee paid certain expenses of AEs and AEs paid those of assessee for administrative convenience and reimbursed each other which had been adjusted at cost without mark up, while working out operating cost, reimbursement costs should be excluded as they did not involve any functions to be performed so as to consider it for profitability purposes - Held, yes [Partly in favour of assessee/Matter remanded] [Paras 14 and 16]
■■■
[2015] 53 taxmann.com 43 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'B'
HSBC Electronic Data Processing India (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Circle 2 (2), Hyderabad*
B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SAKTIJIT DEY, JUDICIAL MEMBER
IT APPEAL NO. 1647 (HYD.) OF 2012
[ASSESSMENT YEAR 2008-09]
OCTOBER 24, 2014
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments) - Assessment year 2008-09 - Whether extraordinary events like merger or demerger in a company during relevant year warrants exclusion of said company as comparable - Held, yes - Whether a BPO company providing CAD/CAE services could not be compared with a company which is performing engineering design services (High end services) - Held, yes - Whether company which fails employee cost filter cannot be accepted as a comparable company - Held, yes - Whether company earning super normal profits could not be selected as a comparable - Held, yes - Whether where a company is having different employee skill sets and performing research and development services and also owns intangible, it is functionally dissimilar to BPO services provider - Held, yes - Whether where assessee paid certain expenses of AEs and AEs paid those of assessee for administrative convenience and reimbursed each other which had been adjusted at cost without mark up, while working out operating cost, reimbursement costs should be excluded as they did not involve any functions to be performed so as to consider it for profitability purposes - Held, yes [Partly in favour of assessee/Matter remanded] [Paras 14 and 16]
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