Facts:
a) Assessee was providing voice
base customer care services, i.e., BPO to its Associated Enterprises (‘AE’).
b) The Assessing Officer (‘AO’)
made certain additions to transactions with AE on basis of comparables chosen
by TPO.
c) Assessee argued that two
companies chosen by TPO were not comparable as such companies were basically
providing knowledge process outsourcing (KPO) services.
Held:
1) As per Rule 10B(2)(a) of
income-tax Rules, 1962 the comparability of the transactions should be judged
with reference to service/product characteristics.
2)
The perception that a BPO
service provider may have the ability to move up the value chain by offering
KPO services could not be a ground to benchmark transactions of BPO service
provider with the transactions of KPO services providers.
3)
A KPO includes involvement of
advance skills normally; the services provided may include analytical services,
market research, legal research, engineering and design services, intellectual
management etc. On the other hand, Voice Call Centers are normally involved in
customer support and processing of routine data.
4) Comparability analysis by TNMM method may be less sensitive to
certain dissimilarities between the tested party and
the comparables. However, that could not be the consideration for diluting the
standards of selecting comparable transactions/entities. A higher product and
functional similarity would strengthen the efficacy of the method in
ascertaining a reliable Arm’s length Price. Therefore, as far as possible, the
comparables must be selected keeping in view the comparability factors as
specified.
5) Thus, where the tested party
was not a KPO service provider, an entity rendering KPO services could not be
considered as a comparable for the purposes of Transfer Pricing analysis. – RAMPGREEN
SOLUTIONS (P.) LTD. V. CIT - [2015] 60 taxmann.com 355 (Delhi)
