Evalueserve.com Pvt. Ltd. Vs DCIT (ITAT Delhi)
We find that TCS E-serve Ltd. like Infosys BPO is a giant company which has high brand value and intangibles and in terms of risk profile, skill, nature of service, revenue etc. this comparable has been rejected in various judicial rulings. The turnover of TCS is more than Rs. 1578 crore and this company is having huge assets and is under taking high risk which have direct impact on turnover and in profitability. If a company is having huge asset base, brand value, goodwill and presence in global market with significant R & D, then it cannot be compared with a company which is purely captive service provider in ITeS/BPO, having low risk and insignificant assets. Even the deployment of human resources shows that TCS has 14,785 employees whereas the assessee has 1163 employees. This factor itself shows that in the terms of human resources, there is huge difference in the assets deployed.
Now there is latest judgment of Hon’ble Delhi High Court dated 24th July, 2019 in the case of M/s. Avaya India Pvt. Ltd. vs. ACIT in ITA no. 532/2019 which had considered the comparability of TCS E-serve Ltd. and TCS serve International Ltd. with the company providing ITeS services.
Respectfully following the aforesaid principle of Hon’ble Jurisdictional High Court which applies in the present case also we direct the TPO to exclude the said comparable.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeal has been filed by the assessee against final assessment order dated 30.01.2017, passed by the Assessing Officer u/s 143(3) read with section 144(c) (13) in pursuance of directions given by DRP vide order dated 21.12.2016 for assessment year 2012-13.
2. In various grounds of appeal assessee has challenged transfer pricing adjustment of Rs. 10,82,46,897/- made on international transactions with the AEs for rendering of IT enabled services (ITeS).
3. Brief facts qua the transfer pricing adjustment are that the assessee company, i.e. E-valueserve.com Pvt. Ltd. is a wholly owned subsidiary of E-valueserve Ltd. Bermuda. It is engaged in the business of providing IT enabled services to its AEs and is also registered with Software Technology Parks of India (STPI). The assessee derives business from following segments: –
a) Corporate and Professional services
b) Financial Services
c) Intellectual Property Research
In the TP study report the assessee has given following analysis of these 3 segments in the following manner: –
“EVS India carries out IT enabled services inform of research activities according to the terms of the agreement with its AE. The research carried out by EVS India is driven by corporate and professional services, financial services and intellectual property research. Normally, the client executives (based in Bermuda, US, Europe and Asia- pacific) operating from overseas form the interface between the client and EVS India. The deliverable is typically in the form of a research report that is forwarded directly to the client(s) under the supervision and post a quality assurance by the AEs. The reports and research studies prepared by EVS India are owned by the client only. The operations of EVS India primarily comprise the following segments:
a) Corporate and Professional services (CAPS): This segment caters to primarily market research firms based overseas. It focuses on primary research in the nature of business to business surveys only where data is collected via telephonic surveys. The surveys are carried out on a case to case basis and as per the specific client requirements.
The employees comprise mainly graduates, undergraduates and MBA’s. The surveys carried out include surveys like analyzing the trends in IT and telecom spending, etc. These surveys are normally carried out on the basis of a questionnaire received from the client.
EVS India carries out research based assignments of the following nature:
