Income Tax Appellate Tribunal - Bangalore
M/S Fulcrum Fund Services India Pvt Ltd , ... vs Income Tax Officer Ward-11(1), ... on 1 October, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"B'' BENCH : BANGALORE
BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
ITA No.2519/Bang/2017
Assessment year: 2010-11
M/s Fulcrum Fund Services (India) Pvt. Vs. The Income-tax Officer,
Ltd., Ward-11(1),
Flat 102, Aradhana Apartments, Bengaluru.
Srinivagilu, 2nd Main Road,
ST Bed Layout, Koramangala,
Bengaluru-560 047.
PAN - AABCF 1230 B
APPELLANT RESPONDENT
Appellant by : Smt. Vaidhehi G, C.A
Respondent by : Shri R.N Siddappapji, Addl. CIT (DR)
Date of hearing : 09.07.2019
Date of Pronouncement : 01.10.2019
ORDER
Per B.R. Baskaran, Accountant Member
The assessee has filed this appeal challenging the order dated 28-09-2017 passed by Ld CIT(A)-3, Bengaluru and it relates to the assessment year 2010-11.
2. Though the assessee has raised many grounds and additional ground, the Ld A.R restricted her arguments with Ground No.10 relating to exclusion of two comparable companies, viz., Infosys BPO Ltd and E-Clerx Services Ltd. Accordingly we dismiss all other grounds and restrict our order on the above said issue alone.
ITA No.2519/Bang/2017 Page 2 of 53. The assessee is a subsidiary of M/s Fulcrum Group Ltd and it provides back office support services in the financial services industry. During the year under consideration, the assessee has received a sum of Rs.29.73 crores from its AE for back office support services. In the Transfer pricing study, it used TNMM as most appropriate method. The TPO rejected the T.P study conducted by the assessee and he finally selected 10 comparable companies with average margin of 26.86%. After allowing deduction of 0.21% towards working capital adjustment, the adjusted margin was arrived at by the TPO at 26.65% and accordingly made transfer pricing adjustment of Rs.2.04 crores. The assessee could not get any favour from Ld CIT(A).
4. Before us, the Ld A.R submitted that the following companies may be excluded on "turnover filter".
Name of Company Turnover
(a) E-clerx Services Ltd - 257.02 crores
(b) Infosys BPO Ltd. - 1,126.60 crores
In support of her plea, the Ld A.R placed her reliance on the decision rendered by co-ordinate bench in the case of M/s Neilsen Sports India P Ltd (IT(TP)A No.196/Bang/2017 dated 28-06-2019.
5. We heard Ld D.R and perused the record. In the case of Neilsen Sports India P Ltd (supra), the co-ordinate bench has applied turnover filter by following the decision rendered by another co-ordinate bench in the case of Genisys Integrating Systems Ltd (IT(TP)A No.1231/Bang/2010) with the following observations:-
ITA No.2519/Bang/2017 Page 3 of 5"10. We have heard the rival contentions on this issue and perused the record. Admittedly the turnover of the assessee company is 20.43 crores for the year under consideration. The turnover of Infosys BPO Ltd., for the year under consideration was 1312.41 crores and the turnover of TCS-E-Serve Ltd., was 1578.40 crores. The co-ordinate bench in the case of Northern Operating Services (Supra) has held that the decision rendered in the case of Genisys Integrating Systems in IT(TP)A No.1231/Bang/2010 is good law. In the case of Genisys Integrating Systems (supra) a guideline in the matter of turnover filter was suggested and the categorization of software companies in the Dun and Brad Street Study to be adopted as the method of classification by size. According to this study, 3 categories of firms are identified i.e small with turnover less than 200 cores, medium with turnover of 200 to 2000 crores and large with turnover greater than 2000 crores. Accordingly it was held that small companies cannot be compared with large companies. Accordingly, the assessee herein being a small company cannot be compared with large companies. Accordingly we find merit in the contentions of the assessee and direct the AO to exclude both the companies on the basis of turnover criteria."
6. In the instant case, the turnover of the assessee is 29.73 crores, where as the turnover of the above said two comparable companies are above Rs.200 crores. Accordingly, following the above said decision, we direct the AO to exclude the above said two companies and re-work the margin accordingly.
ITA No.2519/Bang/2017 Page 4 of 57. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 1st October, 2019.
Sd/- Sd/-
(Beena Pillai) (B.R Baskaran)
Judicial Member Accountant Member
Bangalore,
Dated, 1st October, 2019.
/ vms /
Copy to:
1. The Applicant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR, ITAT, Bangalore.
6. Guard file
By order
Asst. Registrar, ITAT, Bangalore.
ITA No.2519/Bang/2017
Page 5 of 5
1. Date of Dictation .............................................
2. Date on which the typed draft is placed before the dictating Member .........................
3. Date on which the approved draft comes to Sr.P.S ...................................
4. Date on which the fair order is placed before the dictating Member ....................
5. Date on which the fair order comes back to the Sr. P.S. .......................
6. Date of uploading the order on website...................................
7. If not uploaded, furnish the reason for doing so ................................
Dictation note enclosed ............................
8. Date on which the file goes to the Bench Clerk .......................
9. Date on which order goes for Xerox & endorsement..........................................
10. Date on which the file goes to the Head Clerk .........................
11. The date on which the file goes to the Assistant Registrar for signature on the order .....................................
12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order ...............................