Bertelsmann Marketing Services India Pvt Ltd vs Dy. CIT
Assessee is a company engaged in the business of provision of IT enabled services which is resident, registered as an hundred percent export oriented unit Under the software technology Park scheme of the Ministry of information and technology, government of India. Assessee is also operating and managing the activities of BPO delivery centres, call centres and consumer services. It is a wholly-owned subsidiary of a German company and engaged in rendering back-office support services and back end information technology enabled support services. It benchmarked these international transactions adopting the Transactional Net Margin Method as the Most Appropriate Method adopting the Profit Level Indicator of operating profit/total cost and arrived at a set of 11 comparable companies.
With respect to TCS E serve Ltd it was submitted that it is functionally dissimilar, no segmental information available, significantly high turnover stating that the turnover of the comparable company is ₹ 1442 crores whereas the appellant has a turnover of ₹ 41.6 crores which is more than 34 times of the assessee’s turnover. It was further stated that it has presence of high intangibles. In (381 ITR 216) CIT versus Pentair water Ltd Honourable Bombay High Court held that a comparable company having a turnover of Rs 260 crores (HCL commet Ltd] cannot be compared with the assessee having only ₹ 11 crores turnover. Thus, the honourable Bombay High Court upheld the exclusion of the comparable which is having turnover 23 times of the assessee. Here we are pitched to compare a comparable which is having turnover 34 times larger than the assessee. Therefore on this ground, ITAT Delhi accepts the argument of the assessee that such a large comparable cannot be used to determine ALP of an international transaction of the assessee. Therefore respectfully following the criteria laid down by the honourable Bombay High Court, the learned transfer pricing officer was directed to exclude TCS E Serve Limited.