The Pr. Commissioner Of Income Tax-9 v. Xl India Business Services Pvt. Ltd

$~15 * IN THE HIGH COURT OF DELHI AT NEW DELHI+ ITA 978/2019 THE PR. COMMISSIONER OF INCOME TAX-9 ..... Appellant Through: Mr.Aseem Chawla, Sr.SC with Ms.Pratishtha Chaudhary, Adv. versus XL INDIA BUSINESS SERVICES PVT. LTD ..... Respondent Through: Ms.Ananya Kapoor, Mr.Salil Kapoor and Mr.Tarun Chanana, Advs. CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R% 15.04.2024 1.The Principal Commissioner assails the order of the Income Tax Appellate Tribunal [‘ITAT’] dated 03 August 2018 and has framed the following questions for our consideration:- “2.1 Whether the Ld. ITAT was justified In law in rejecting high margin comparables contested by the taxpayer and allowing to retain other low margin comparables in the final set of the TPO unopposed by the taxpayer, which were discharging similar nature of even while ignoring the decision of the Hon'ble Supreme Court in the case of Mumbai International Airport Pvt. Ltd. Vs. Golden Chariot Airport with regard to the "Doctrine of Election" and the "Doctrine of Approbation and Reprobation", wherein it has been laid down that a litigant cannot change and choose its stand to suit its convenience? 2.2 Whether the Ld. ITAT was justified in law in laying down stringent standards of comparability and attempting to identify exact replica of the taxpayer for comparability analysis, whereas the Indian law and the international jurisprudence recognize the reality that there cannot be an exact comparable in a given situation without any differences without appreciating that such stringency will defeat the purpose of flexibility provided III comparability analysis for determination of ALP? 2.3 Whether in the facts and circumstances of the case, the Hon'ble ITAT is justified in law in rejecting M/s Accentia Technology Pvt. Ltd. from the final list of comparables and has failed to establish the fact as to how amalgamation of the company has affected the FAR profile of the company; making it a non-comparable to the tested party? 2.4 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law rejecting M/s I gate Global Solutions Ltd. from the final list of 11 comparables and has failed to establish the fact as to how amalgamation of the company has affected the FAR profile of the company; making it a non-comparable to the tested party? 2.5 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law in rejecting M/s I gate Global Solutions Ltd. from the final list of comparables, ignoring the fact that in TNMM method on basis of minor functional differences comparable cannot be excluded? 2.6 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law in rejecting M/s Infosys BPO Ltd. from the final list of comparables and erroneously establishing relationship between goodwill/giant size with profitability of the company? 2.7 Whether in the facts and circumstances of the case, the ld. ITAT is justified in law in excluding TCS E-Serve Ltd, and TCS E-Serve International Ltd as functionally dissimilar ignoring the fact that the TPO himself has established functional similarity as per rule 10B(2)? 2.8 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law in remanding the comparables named Caliber Point Business and R. Systems International Ltd. (segmental) to the file of TPO to examine the quarterly result and work out the proportionate profit margin to benchmark with the PLI of the assessee ignoring the fact that data required to get quarterly results is not available in public domain? 2.7 Whether in the facts and circumstances of the case, the ld. ITAT is justified in law in excluding TCS E-Serve Ltd, and TCS E-Serve International Ltd as functionally dissimilar ignoring the fact that the TPO himself has established functional similarity as per rule 10B(2)? 2.8 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law in remanding the comparables named Caliber Point Business and R. Systems International Ltd. (segmental) to the file of TPO to examine the quarterly result and work out the proportionate profit margin to benchmark with the PLI of the assessee ignoring the fact that data required to get quarterly results is not available in public domain? 2.9 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law in directing the inclusion of three comparables namely Microgenetic System Ltd, CG-VAK Software & Export Ltd. (segmental) and Informed Technologies India Ltd. relying on the decision of Hon'ble Delhi High Court in the case of Chryscapital Investment India Pvt. Ltd. vs. Dy. CIT, (Supra) ignoring that facts of the said case are entirely different and decision is not applicable to this case? 2.10 Whether, in the facts and circumstances of the case, the Ld. ITAT is justified in excluding all the above comparables when none of the preconditions specified in Rule 10(B)(2) of the LT. Rules are satisfied? 2.11 Whether in the facts and circumstances of the case, the Ld. ITAT is justified in law and on facts in deleting In addition made amounting to Rs.80,72,451/-on account of payments given to entities specified under section 40A (2)(b) of the Act, 1961?” 2.The principal issues which were canvassed on the instant appeal pertain to the exclusion of comparables which came up for discussion before the Transfer Pricing Officer [‘TPO’]. As would be manifest from the record, the TPO after taking into consideration the nature of business which was being undertaken by the respondent- assessee had shortlisted and finalized the following 11 comparables:- 3.Out of the aforementioned entities, the TPO ultimately took into account Cosmic Global Ltd., E4e Healthcare, Jindal Intellicom Pvt. Ltd. and Fortune Infotech Ltd. Based on the aforesaid and on computing the average PLI of the aforenoted comparables to be 31.33%, an adjustment of INR 67,87,84,800/- was suggested. 4.On the basis of the aforesaid order of the TPO, the Assessing Officer [‘AO’] passed an order referable to Sections 143(3) read along with Section 144C of the Income Tax Act, 1961 [‘Act’] and determined the total taxable income of the respondent-assessee to be INR 7,52,54,490/-. 5.Aggrieved by the aforesaid, the assessee preferred an appeal. The Commissioner of Income Tax (Appeals) [„CIT(A)‟] in the course of consideration of the appeal excluded the following comparables from the final list:- A)M/s. Accentia Technology Pvt. Ltd. B)M/s. I-Gate Global Solution Ltd. C)M/s. Infosys BPOLtd. The order of the TPO rejecting the other comparables was upheld by the CIT(A). It is this order of the CIT(A) which was taken in appeal by the appellant as well as the respondent assessee before the ITAT. 6.The ITAT after due consideration dismissed the appeal of the Department and partly allowed the appeal of the assessee. 7.Mr. Chawla, learned counsel for the appellant has placed for our consideration the following chart insofar as the rejected comparables are concerned:- 8.As is manifest from the above, the exclusion of those comparables in identical situations has been affirmed and upheld by this Court in terms of the judgements aforenoted. In view of the aforesaid, we find no ground to interfere with the view ultimately expressed by the ITAT. C)M/s. Infosys BPOLtd. The order of the TPO rejecting the other comparables was upheld by the CIT(A). It is this order of the CIT(A) which was taken in appeal by the appellant as well as the respondent assessee before the ITAT. 6.The ITAT after due consideration dismissed the appeal of the Department and partly allowed the appeal of the assessee. 7.Mr. Chawla, learned counsel for the appellant has placed for our consideration the following chart insofar as the rejected comparables are concerned:- 8.As is manifest from the above, the exclusion of those comparables in identical situations has been affirmed and upheld by this Court in terms of the judgements aforenoted. In view of the aforesaid, we find no ground to interfere with the view ultimately expressed by the ITAT. 9.We also bear in consideration the admitted position that the ITAT has insofar as Caliber Point Business and R Systems International Ltd. are concerned, remanded the matter. Similarly and bearing in mind the judgment rendered by the Court in Chryscaptial Investment India Pvt. Ltd. vs. Dy. CIT [2015 SCC OnLine Del 9065], it has directed the inclusion of Microgenetic Systems Ltd., CG-VAK Software & Export Ltd. and Informed Technologies India Ltd. 10.The aforesaid procedure as adopted is not shown to suffer from any manifest or patent illegality and in any case does not give rise to any substantial question of law. 11.The appeal consequently fails and shall stand dismissed. YASHWANT VARMA, J. APRIL 15, 2024 RW PURUSHAINDRA KUMAR KAURAV, J.