TP -Giant companies are not comparable with smaller pygmy companies

Patni Telecom Solutions vs. ACIT (ITAT Hyderabad), ITA.No.1846/Hyd/2012, Date of pronouncement: 25.04.2013

With regard to ground No.3 the learned Counsel appearing on behalf of the assessee Shri A.V.Raghuram argued that the case of the assessee is not comparable with Infosys Technologies Ltd. and Wipro Ltd. The learned Counsel pointed out that the segmental turnover of Infosys was at Rs.156,48,00,00,000/- and that of Wipro is at Rs.112,58,490,000/-. The learned Counsel relied on the decision of the Delhi ITAT Bench in the case of Agnity India Technologies ITA.No.3856/D/2010 for the assessment year 2006-2007 and submitted that assessee is not comparable with Infosys and Wipro Ltd. as can be seen from the financial data etc., mentioned with respect to the two companies.

We find that the coordinate Bench of the Tribunal in the case of Deloittee Consulting India Pvt. Ltd. vide ITA. No. 1082 and 1084/2010 has dealt with the issue as to whether the TPO was correct in selecting Wipro BPO having turnover multiple number of times more than the assessee-company as comparable or not. The relevant para of the Tribunal Order is reproduced as under :

37. “We find that this issue is covered in favour of the assessee by the decision of Delhi ITAT in the case of Agnity India Technologies Pvt. Ltd. (2010) ITA.No. 3856/Del/2010. We find that the Wipro BPO is not  at all comparable as the assessee company is pigmy compared to giant Wipro, Wipro Company’s turnover is 20 times more than the assessee company. Hence, the assessee company is not comparable with Wipro BPO, the reasoning being that the later is a giant company having 20 times more turnover than the assessee company. In view of this, based on the facts and the circumstances of the case, and following the decision of Delhi Bench of ITAT in the aforesaid case, we are of the view that Wipro BPO should be excluded from the list of comparable companies. Hence, the ground raised by the assessee on this issue is allowed.”

Relying on the decision of the Coordinate Bench of the Tribunal we exclude the Giant Companies namely Wipro and Infosys which are taken as comparables as turnovers of these companies are multiple number of times higher compared to that of the assessee, we hold that the DRO erred in considering their PLI to arrive at the arithmetic mean.