ALP adopted as comparable company excluded from comparability analysis

GE India Business Services Pvt. Vs DC/ACIT IT (ITAT Delhi)

Facts- The assessee company GE India Business Services Pvt. Ltd. is set up as a captive service provider to provide offshore outsourcing services primarily to GE entities/ business worldwide. The primary activity in which Assessee Company specializes is to render IT Enabled Services (“ITES”) and financial support services to various overseas GE Group Companies. Assessee company has filed its ROI on 30.11.2017, electronically, declaring a total income of Rs. 13,64,66,410/-. The return was processed under section 143(1) of the Income Tax Act, 1961.The case was selected under CASS and notice under section 143(2) of the Act was issued on 10.08.2018 and served on the assessee. Further notices under section 142(1) of the Act were issued along with questionnaire electronically. During scrutiny assessment proceedings, various information and details related to the assessee company were called for and verified. After verification of the information as available on record, the information filed by the assessee during the course of assessment proceedings. The order u/s 92CA(3) of the Act was passed on 30.01.2021. An adjustment of Rs 7,16,92,181/- was made on account of international transactions to the income of the assessee. Draft order u/s. 144C of the Act was passed on 31/03/2021. After receiving the draft order u/s. 144C of the Act, the assessee filed objection in Form 35A before Dispute Resolution Panel. Ld. DRP vide order dated 10.11.2021 has called for inclusion / exclusion of certain filters after verification and directed the adjustment u/s 92CA on account of international transaction related to software development services was revised to Rs.6,59,84,529/- from Rs. 7,04,93,545/- . The final assessment order came to be passed on 11/01/2022 by making addition of Rs. 6,71,83,164 and assessed the income of the assessee at Rs. 20,36,49,574/- as against the returned income of Rs. 13,64,66,410/-.

Aggrieved by the final Assessment order dated 11/01/2022, the assessee has preferred the present Appeal.

Conclusion- Respectfully following the decision of the coordinate bench of the Tribunal in assessee’s own case, we hold that the Infosys BPM Ltd. is not comparable. In view of exclusion of the Infosys BPM Ltd, the Counsel for the assessee substantiated the adjustment of arms length price. Since the margin would be within plus or Minus 5%, the Assessee’s international transaction is at Arm’s Length, the said fact has not disputed by the Ld. D.R.

With respect to working capital adjustment, it was held that differential impact of working capital of the assessee vis-à-vis its comparable has already been factored in the price/profitability of assessee which is in line with Arm’s Length principle when compared to comparable companies. Therefore, any further adjustment to the income of the assessee on the pretext of outstanding receivables is unwarranted to substantiate the contention.

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