Capgemini India Pvt. Ltd Vs DCIT (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal disposed of cross appeals filed by Capgemini India Pvt. Ltd. and the Revenue concerning Assessment Year 2011-12. The appeals arose from the final assessment order passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961, pursuant to directions of the Dispute Resolution Panel. The assessee had originally returned total income of Rs.129,87,11,835/-, while the final assessment determined total income at Rs.453,58,45,730/-, principally after a transfer pricing adjustment of Rs.323,60,70,374/-.
The assessee challenged several aspects of the transfer pricing exercise. Grounds relating to reference to the TPO, use of single-year data, financial-year filtering, certain comparables, additional comparables and risk adjustment were either stated to be general in nature or not pressed. The Tribunal specifically adjudicated the inclusion of Wipro Technology Services Ltd. and Infosys Ltd., the working-capital adjustment and the markup applied to recovery of out-of-pocket expenses.
On Wipro Technology Services Ltd., the assessee argued that the comparable operated in peculiar circumstances following its acquisition of Citigroup’s technology-services business and that a Master Service Agreement with Citigroup involved a prior controlled relationship. The assessee also pointed to the comparable’s unusually high margin of 54.42% on cost. The Revenue opposed exclusion merely because the comparable earned high profits. The Tribunal noted that the assessee had relied on the coordinate bench decision in Agilent Technologies (International) Pvt. Ltd. vs. ITO, ITA Nos. 1620/Del/2015, 477 & 6420/Del/2016, order dated 12.02.2018, where Wipro Technology Services Ltd. was excluded because the prior agreement meant that the transaction did not constitute an uncontrolled transaction. Following that proposition on identical facts, the Tribunal directed that Wipro Technology Services Ltd. be excluded from the comparable set.
