Wipro HR Services India Private Limited Vs ACIT (ITAT Bangalore)
The Bangalore Bench of the ITAT partly allowed the appeal of Wipro HR Services India Private Limited against the final assessment order passed under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 for AY 2018-19. The assessee provided BPO, software development and human resources outsourcing services to its Associated Enterprises in the US, UK, Canada and Singapore. The TPO initially proposed transfer pricing adjustments of Rs.41.20 crore for software development services, Rs.22.42 crore for BPO/ITeS services and Rs.53.92 lakh towards interest on delayed receivables. Following the DRP’s directions, these were reduced to Rs.33.47 crore, Rs.13.83 crore and Rs.53.92 lakh respectively.
For the software development segment, the assessee had adopted TNMM and reported an operating margin of 14.89%. The Tribunal considered the assessee’s objections to selected comparables. In respect of Wipro Ltd. and Infosys Ltd., it noted their diversified operations, R&D expenditure and the DRP’s exclusion of these companies in the assessee’s own AY 2017-18 proceedings based on differences in FAR. Since these aspects had not been considered by the TPO, both issues were remitted for fresh consideration.
Tally Solutions Pvt. Ltd. was directed to be excluded. The Tribunal noted that 75.90% of Tally’s FY 2017-18 revenue arose from software product sales, whereas the assessee’s operating revenue comprised business process and technology outsourcing and consulting income. Tally also had an in-house R&D centre. The Tribunal therefore found it functionally dissimilar, including in assets employed and risk profile. Eclerx Services Ltd. was also excluded because the DRP’s own findings treated it as an ITeS/KPO service provider, making it unsuitable as a comparable for the software development segment.
