Case Law Details
Crisil Limited Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that the expenses excluded from the export turnover have to be excluded from the total turnover as well while computing deduction u/s 10A of the Income Tax Act.
Facts- Assessee has two business divisions namely (i) Ratings and (ii) Research. Under the Ratings segment, the Assessee is engaged in rendering back-end support for data analysis services to its associated enterprises through the Global Analytical Centre ( GAC ) which is the transaction under dispute. The Assessee had undertaken, inter-alia, international transactions of provision of back-end support for data analysis services from the GAC to its associated enterprises for ₹.53,33,43,789/. The Assessee adopted the Transactional Net Margin Method (TNMM) to determine the arm’s length of the said international transactions. In relation to this transaction, CRISIL had entered into a Master Services Agreement, with its associated enterprise, Standard & Poor (S&P), whereby S&P would outsource services to CRISIL in accordance with the Statement of Work (SOW). These services are provided by CRISIL based on inputs from S&P.
It was submitted that depend upon the terms of each assignment agreed upon as per the SOW, CRISIL assigns their employees to provide services to S&P. These employees process the data and put them in appropriate structures/ form as required by CRISIL’s AE i.e., S&P. These services are akin to back-office data support services.
The case of the Assessee was selected for scrutiny and a reference was made to the Transfer Pricing Officer to determine the Arm’s Length Price of the international transactions. TPO rejected the characterisation of routine service provider / back-office service provider (BPO) and observed that the Assessee is engaged in providing high-end Knowledge process outsourcing (KPO) services. Consequently, rejected the study submitted by the assessee and he conducted a fresh search for comparables and proposed a final set of 6 companies which are engaged in provision of KPO Services like engineering and design services, financial analytical services etc. computing an arm’s length margin at 49.73% . Thus, the TPO made a TP adjustment amounting to ₹9,03,88,556/- in relation to the international transaction of provision of back-end support for data analysis services.
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