Income Tax Appellate Tribunal Mumbai Banc Tec India Private Limited, Navi ... vs Acit, Circle15(1)(2), Mumbai on 12 July, 2019 IN THE INCOME TAX APPELLATE TRIBUNAL "K" BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBERAND SHRI N.K. PRADHAN,ACCOUNTANT MEMBER ITA no.2692/Mum./2016 (Assessment Year : 201112) BancTec TPS India Pvt. Ltd. T341, Tower no.3, 4th Floor International Infotech Park ................ Appellant Vashi Railway Station Complex Vashi, Navi Mumbai 400 705 PAN AAACT8971E v/s Asstt. Commissioner of Income Tax ................ Respondent Circle15(1)(2), Mumbai Revenue by : Shri Anand Mohan Assessee by : Shri J.D. Mistry a/w Shri Madhur Agarwal and Ms. Urvi Mehta Date of Hearing 24.04.2019 Date of Order 12.07.2019 ORDER PER SAKTIJIT DEY. J.M. Captioned appeal has been filed by the assessee challenging the final assessment order dated 29thJanuary 2016, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short 2 BancTec TPS India Pvt. Ltd. "the Act") for the assessment year 201112, in pursuance to the directions of the Dispute Resolution Panel1 (DRP), Mumbai. 2. Grounds no.1 to 4 of the transfer pricing grounds relate to the addition made on account of adjustment to the arm's length price of international transaction with the Associated Enterprise (AE) towards provision of Business Process Outsourcing (BPO) services. 3. Brief facts are, the assessee, an Indian company, is engaged in the business of providing BPO services in the nature of email and voice management, collection services to its AE in USA. The assessee hitherto was earlier known as Tracmail India Pvt. Ltd. However, after acquisition of BancTec, USA, in financial year 201415, the assessee changed itself to its present name. During the year under consideration, the assessee provided BPO services to its AEand received an amount of ` 50,90,05,930. In its transfer pricing study report, the assessee benchmarked the arm's length price of the transaction with the AE by adopting internal transactional net margin method (Internal TNMM) with operating profit / total cost as the profit level indicator (PLI). Since, the margin of AE transactions worked out to 10.36% as against margin of nonA.E. transactions @ ()4.09%, the assessee claimed the transactions with its AE to be at arm's length. The Transfer Pricing Officer, however, did not accept the 3 BancTec TPS India Pvt. Ltd. transfer pricing analysis done by the assessee. He rejected the internal TNMM applied by the assessee and proceeded to benchmark the international transaction with the AE by applying external TNMM. Having done so, the Transfer Pricing Officer selected six companies as comparables with arithmetic mean of 17.06%. Applying the arithmetic mean of the comparables to the total cost, the Transfer Pricing Officer determined the arm's length price of the international transaction with the AE at ` 55,25,00,072. Accordingly, he made an adjustment of ` 3,16,12,419, to the arm's length price of the international transaction with the AE. Though, in the grounds raised the assessee has challenged the adjustment made to the arm's length price on various grounds, however, at the time of hearing of appeal, the only issue on which both the parties advanced their argument is with regard to selection / rejection of comparables. 4. At the outset, Shri J.D. Mistry, the learned Sr. Counsel for the assessee submitted, the major dispute between the parties is with regard to three comparables viz. Accentia Technologies Ltd., Acropetel Technologies Ltd. and Crossdomain Solutions Ltd. He submitted, in various decisions it has been held that these companies are not comparable to a BPO service provider for various reasons. He submitted, if these three comparables are excluded, assessee's margin would fall within the arm's length range of arithmetic mean of other 4 BancTec TPS India Pvt. Ltd. comparables, hence, all other transfer pricing issues raised by the assessee would become redundant. In view o