Transperfect Solutions India Pvt. Ltd. Vs ACIT (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal considered an appeal filed by Transperfect Solutions India Pvt. Ltd. against the final assessment order dated 24-03-2021 for assessment year 2016-17. The appeal involved a transfer pricing adjustment of Rs.29,47,928/- relating to the assessee’s international transaction concerning localization, translation and other IT enabled services.
The appeal was filed with a delay of 85 days. The assessee attributed the delay to the COVID-19 pandemic. Referring to the Supreme Court’s orders in Cognizance for Extension of Limitation, In re, the Tribunal condoned the delay and admitted the appeal for disposal on merits.
The assessee provided IT enabled services including translation, website localization, software localization, testing, training and e-learning. The international transaction valued at Rs.16,85,41,378/- was reported in Form No. 3CEB. The TPO selected certain comparable companies and determined an arithmetic mean margin of 21.17% under the Transactional Net Margin Method (TNMM), resulting in a transfer pricing adjustment of Rs.29,47,928/-. The DRP did not grant relief.
The Tribunal examined three disputed comparable companies.
Insync Analytics India Pvt. Ltd.: The Tribunal noted that related-party transactions of the company constituted 50.73% of its sales for the relevant year, compared with 100% and 97.53% in the preceding two years. The TPO himself had applied a filter under which companies having related-party transactions below 25% were to be selected. Since Insync Analytics breached this filter, the Tribunal directed its exclusion from the comparables.
