Credence Resource Management Private Limited Vs ACIT (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal considered an appeal filed by Credence Resource Management Private Limited against directions issued by the Dispute Resolution Panel (DRP) for assessment year 2016-17 concerning a transfer pricing adjustment of Rs.42,152,857 in respect of Information Technology Enabled Services (ITes) provided to its Associated Enterprise.
The assessee initially challenged the DRP directions on legal grounds under Section 144C of the Income-tax Act, 1961, contending that the DRP had directed the TPO to verify and compute operating margins of Insync Analytics (India) Private Limited and Manipal Digital Systems Private Limited. The Tribunal noted that Section 144C(8) prohibits the DRP from setting aside any proposed variation or issuing directions for further enquiry. However, it held that the alleged defect concerned only two comparable companies and did not invalidate the other directions of the DRP. Accordingly, the prayer to quash the entire final assessment order was dismissed.
On merits, the Tribunal examined the comparability of various companies. The assessee was engaged in ITes primarily involving call-centre based debt collection services for the telecommunication and healthcare industries.
The Tribunal directed exclusion of Manipal Digital Systems Private Limited, observing that merely earning revenue from ITes was insufficient to establish comparability. Relying on the Delhi High Court’s decision in Rampgreen Solutions Pvt. Ltd. v. CIT, the Tribunal held that the specific characteristics and nature of services within the broad ITes category must be examined. The Revenue had not provided sufficient segmental or functional analysis to establish comparability.
