DCIT Vs EYBGS India Pvt. Ltd. (ITAT Bangalore)
The issue under consideration is whether the officer is correct in rejecting claim for deduction u/s 10AA of the Act on the amount of transfer pricing adjustment voluntarily made by the assessee?
In the present case, DRP took rejected transfer pricing adjustment and along with it Deduction u/s 10AA which is based on that adjustment with the reason that the assessee did not furnish the details as to how the said figure was arrived at by the assessee.
ITAT state that, the DRP was factually not correct in observing that the assessee did not furnish details of voluntary Transfer pricing adjustment. It has added the amount of voluntary TP adjustment while computing the revised margin of the assessee, which is placed in the paper book. He further submitted that the assessee has arrived at the amount of voluntary T.P adjustment in a scientific manner by comparing the margins of comparable companies selected by the assessee. Accordingly he submitted that the Ld DRP was not justified in observing that the same is an adhoc amount. He further submitted that the co-ordinate bench has held in the case of I-Gate Global Solutions Ltd (supra) has held that the assessee is eligible for deduction u/s 10AA on the amount of voluntary TP adjustment.
Accordingly ITAT hold that the assessee is eligible for deduction u/s 10AA of the Act in respect of voluntary Transfer Pricing adjustment made by it.
FULL TEXT OF THE ITAT JUDGEMENT
These cross appeals are directed against the assessment order dated 30-12-2014 passed by the assessing officer for assessment year 2010-11 u/s 143(3) r.w.s 144 of the Act in pursuance of directions given by Ld Dispute Resolution Panel (DRP).
2. The facts relating to the case are discussed in brief. The assessee is 100% subsidiary of EYGI B.V., Netherlands. It is engaged in the business of providing back office support services, which are in the nature of ‘Information Technology Enabled Services’ (ITES). The nature of services provided by the assessee to its Associated Enterprises (AEs) includes financial analysis and reporting functions such as standard reporting/analysis, work-in-progress details, time sheet details etc., accounting centre processing activities/functions such as accounts receivable, accounts payable functions, billing analysis and invoice preparation etc and financial assistance/administration functions such as time and expenses review, helpdesk providing assistance on employee queries etc. The assessee is remunerated at “cost plus” basis for the services provided to its AEs.
3. The assessee adopted TNMM method to benchmark its international transactions and adopted Operating Profit/Operating Cost (OP/OC) as Profit Level Indicator (PLI). The assessee made Transfer pricing adjustment of Rs.8,1 1,70,000/- voluntarily to its financial results. It also included foreign exchange gains as part of its operating income. Accordingly, it worked out the PLI at 28.86%. The arithmetic mean of PLI of comparable companies selected by the assessee worked out to 18.53%. Accordingly, the assessee claimed that its international transactions with the AEs are at arms length. The Transfer Pricing Officer (TPO), however, rejected the Transfer pricing study of the assessee. By applying certain filters, the TPO selected following set of 10 comparable companies:-
