A comprehensive cases summary of Captive Service Providers_January '19 to July '19.

A comprehensive cases summary of Captive Service Providers_January '19 to July '19.

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  Low High 1 Black Rock ServicesIndia (P.) Ltd. v ITO [2019] 107 taxmann.com 93 (Delhi - Trib.) ITES TNMM 2010-11 2011-12 12% 26.61% Partly in Favour of Assessee 1. Accentia Technologies Ltd. 2. Infosys BPO 3. TCS E-Serve International Ltd. 4. E-Clerx Services Ltd. Companies providing or having: 1. healthcare and management services and LPO services 2. huge brand value 3. outsourced services for healthcare industry 4. KPO services could not be considered as comparables. NA NA SDS TNMM 10.15 24.48% Assessee 1. Helios and Matheson Informational Technology Ltd ITES TNMM 11.76 22.20% Assessee 1. Informed Technologies 2. Maple E solutions CASES SUMMARY ON CAPTIVE SERVICE PROVIDERS_2019 CA. REETIKA G AGARWAL NA NA NA NA ITeS Segment: Companies providing or having: 1. wide fluctuations in margins with wide fluctuation in revenue generation 2. abnormal profit margins in comparison to profit margins of preceding and succeeding years 3. fluctuating ratio of increase in employee cost 4. increase in sales was disproportionate to costs incurred and did not reflect a normal business trend 5. company engaged in call centre activities Sales Support Services Segment - Companies engaged in 1. rendering of services and training, 2. call centre activities 3. event business 4. technical assistance, HRD and institutional development projects 5. implementation of rural electrification projects could not be considered as comparables 1. Working Capital Adjustment 2. Risk Adjustment On Risk Adjustment: 1. Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 119 TTJ (Bang) 721 2. M/s. Sony India (P) Ltd. v. DCIT (2008) 114 ITD 448 (Delhi ITAT) Other Adjustments allowed to the assessee Companies excluded by ITAT/HC/SC ITAT/HC/SC Decision Adjustments Cases relied upon towards such adjustments Revenue Authorities' Margins/ Range Range of Margin BMC Software India (P.) Ltd. v. Dy. CIT [2019] 104 taxmann.com 373 (Pune - Trib.) S. N. Case Name with Citation Services Method Used 2 AYs Assessee's Margin Margin In Favour of Assessee/ Revenue 2007-08 ITES TNMM 11.76 22.20% Assessee 1. Informed Technologies 2. Maple E solutions MSS TNMM 10.34 24.19% Assessee 1. Cyber Media Events Ltd 2. Educational Consultants India Ltd 3. NTPC Electric Supply Co Ltd 4. ICRA Online Ltd 3 Capstone Securities Analysis (P.) Ltd. v. Dy. CIT, Pune [2019] 105 taxmann.com 62 (Pune - Trib.) ITES TNMM 2011-12 4.07% 13.65% Partly in favor of Assessee 1. Accentia Technologies Ltd. Companies providing KPO services could not be considered as comparables. 1. Working Capital Adjustment NA NA NA NA ITeS Segment: Companies providing or having: 1. wide fluctuations in margins with wide fluctuation in revenue generation 2. abnormal profit margins in comparison to profit margins of preceding and succeeding years 3. fluctuating ratio of increase in employee cost 4. increase in sales was disproportionate to costs incurred and did not reflect a normal business trend 5. company engaged in call centre activities Sales Support Services Segment - Companies engaged in 1. rendering of services and training, 2. call centre activities 3. event business 4. technical assistance, HRD and institutional development projects 5. implementation of rural electrification projects could not be considered as comparables 1. Working Capital Adjustment 2. Risk Adjustment On Risk Adjustment: 1. Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 119 TTJ (Bang) 721 2. M/s. Sony India (P) Ltd. v. DCIT (2008) 114 ITD 448 (Delhi ITAT) BMC Software India (P.) Ltd. v. Dy. CIT [2019] 104 taxmann.com 373 (Pune - Trib.) 2 2007-08 Page 1
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  Low High Other Adjustmentsallowed to the assessee Companies excluded by ITAT/HC/SC ITAT/HC/SC Decision Adjustments Cases relied upon towards such adjustments Revenue Authorities' Margins/ Range Range of MarginS. N. Case Name with Citation Services Method Used AYs Assessee's Margin Margin In Favour of Assessee/ Revenue 4 Carlyle India Advisors (P.) Ltd. v. ITO, Mumbai [2019] 104 taxmann.com 332 (Mumbai - Trib.) Investment advisory TNMM 2012-13 2013-14 15.00% 46.76% 29.78% 61.21% Assessee 1. Ladderup Corporate Advisory (P.) Ltd. 2. e-clerx Services Ltd. 3. Hartron Communications Ltd. 4. Acropetal Technologies Limited (by DRP) 5. Excel Infoways Limited (by DRP) 6. MPS Ltd. (by DRP) 7. IRIS Business Services Ltd. (by DRP) Companies providing or having: 1. research and survey, 2. merchant banking 3. investment banking, 4. KPO and BPO services 5. abnormal fluctuation in margins could not be considered as comparables NA NA 5 Dy. CIT v Siemens Power Engg. (P.) Ltd. [2019] 107 taxmann.com 73 (Delhi - Trib.) SDS TNMM 2008-09 14.35% 28.26% 12.68 40.81% Assessee 1. Alphageo 2. Stup Consultants Pvt. Ltd Companies providing: 1. seismic services of design and preplanning of 2D and 3D surveys, etc., for offshore drilling 2. consultancy services could not be considered as comparables 1. Working Capital Adjustment NA 1. Infosys Ltd. 2. Kals Information systems Ltd. 1. Companies engaged in diversified activities of business, having huge deployment of capital, resources and brand name could not be considered as comparables 2. Company whose software segment included revenues from software and training could not be considered as comparables 1. Working Capital Adjustment NA6 Giesecke & Devrient (India) (P.) Ltd. v Dy CIT [2019] 106 taxmann.com 14 (Delhi - Trib.) TNMM Partly in Favour of Assessee 2009-10 5 Dy. CIT v Siemens Power Engg. (P.) Ltd. [2019] 107 taxmann.com 73 (Delhi - Trib.) SDS TNMM 2008-09 14.35% 28.26% 12.68 40.81% Assessee 1. Alphageo 2. Stup Consultants Pvt. Ltd Companies providing: 1. seismic services of design and preplanning of 2D and 3D surveys, etc., for offshore drilling 2. consultancy services could not be considered as comparables 1. Working Capital Adjustment NA SDS 13.14% 20.85% (-)14.72% 67.84% SIM Card Assesmbly Segment 17.40% - 7 Harsco India Services (P.) Ltd. v. Dy. CIT [2019] 106 taxmann.com 254 (Hyderabad - Trib.) ITES TNMM 2013-14 15.00% 21.67% Partly in favour of assessee/ Matter remanded 1. Capgemini Business Services (India) Ltd. 2. Hartron Communications Ltd Companies providing: 1. BPO services, cloud business information management and other IT related services 2. BPO, LPO and ITES services & intellectual property services having no separate segmental information available could not be considered as comparables 1. Working Capital Adjustment NA NA NA 1. Infosys Ltd. 2. Kals Information systems Ltd. 1. Companies engaged in diversified activities of business, having huge deployment of capital, resources and brand name could not be considered as comparables 2. Company whose software segment included revenues from software and training could not be considered as comparables 1. Working Capital Adjustment NA6 Giesecke & Devrient (India) (P.) Ltd. v Dy CIT [2019] 106 taxmann.com 14 (Delhi - Trib.) TNMM Partly in Favour of Assessee 2009-10 Page 2
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  Low High Other Adjustmentsallowed to the assessee Companies excluded by ITAT/HC/SC ITAT/HC/SC Decision Adjustments Cases relied upon towards such adjustments Revenue Authorities' Margins/ Range Range of MarginS. N. Case Name with Citation Services Method Used AYs Assessee's Margin Margin In Favour of Assessee/ Revenue 8 Kaplan India (P.) Ltd. v Asst CIT [2019] 105 taxmann.com 210 (Delhi - Trib.) SDS, other support Services CPM 2007-08 17.04% 23.26% Partly in favour of assessee. 1. Celestial Labs (by CIT- A) 2. Infosys Ltd. (by CIT- A) 3. Wipro Ltd. (by CIT-A) 4. Avani Cincom Technologies Ltd 5. Helios Matheson Ltd 6. Ishirinfotech Ltd 7. Megasoft Ltd 8. Tata Elxsi Ltd Software product company and companies involved in design service could not be considered as comparables 1. Working Capital Adjustment NA 9 Knowledge Platform India (P.) Ltd. v Dy CIT [2019] 104 taxmann.com 60 (Delhi - Trib.) ITES TNMM 2010-11 10.10% 21.97% (-)8.20% 88.25% Assessee 1. Accelya Kale Solutions Ltd. 2. L&T Infotech 3. Mindtree Ltd. 4. Persistent Systems Ltd. 5. R.S. Software (India) Ltd. 6. Sasken Communication Technologies Ltd. 7. Sonata Software 8. Tata Elexsi (Segment) 9. Zylog Systems Ltd. 10. Infinite Data Systems (P.) Ltd. 11. E jest-Solutions Ltd. 12. ThirdWare Solutions Ltd. 13. CTIL Ltd. 14. e-Infochips Bangalore Ltd. 1. Companies providing: i. software package and service ii. software development and engineering iii. ITeS with diversified business activities iv. product engineering, technology consulting and IP-led business v. E-payments software development vi. high end satellite phone production vii. specialized embedded software development viii. infrastructural management services ix. emerging technologies such as cloud, SAS, business intelligence, etc. x. implementation and customer service xi. technical/vocational higher education services 2. Incurring huge R & D expenditure 3. With assets ranging from Rs. 30-1000 crore (Assessee- 2.29Cr.) 4. Incurring huge AMP expenses 5. With geographical market in a number of countries (Assessee-single geographical market) 6. Abnormal events like enhanced profit/turnover much higher 7. Companies with substantial stock (Assessee- no stock) could not be considered as comparables NA NA NA 9 Knowledge Platform India (P.) Ltd. v Dy CIT [2019] 104 taxmann.com 60 (Delhi - Trib.) ITES TNMM 2010-11 10.10% 21.97% (-)8.20% 88.25% Assessee 1. Accelya Kale Solutions Ltd. 2. L&T Infotech 3. Mindtree Ltd. 4. Persistent Systems Ltd. 5. R.S. Software (India) Ltd. 6. Sasken Communication Technologies Ltd. 7. Sonata Software 8. Tata Elexsi (Segment) 9. Zylog Systems Ltd. 10. Infinite Data Systems (P.) Ltd. 11. E jest-Solutions Ltd. 12. ThirdWare Solutions Ltd. 13. CTIL Ltd. 14. e-Infochips Bangalore Ltd. 1. Companies providing: i. software package and service ii. software development and engineering iii. ITeS with diversified business activities iv. product engineering, technology consulting and IP-led business v. E-payments software development vi. high end satellite phone production vii. specialized embedded software development viii. infrastructural management services ix. emerging technologies such as cloud, SAS, business intelligence, etc. x. implementation and customer service xi. technical/vocational higher education services 2. Incurring huge R & D expenditure 3. With assets ranging from Rs. 30-1000 crore (Assessee- 2.29Cr.) 4. Incurring huge AMP expenses 5. With geographical market in a number of countries (Assessee-single geographical market) 6. Abnormal events like enhanced profit/turnover much higher 7. Companies with substantial stock (Assessee- no stock) could not be considered as comparables NA NA Page 3
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  Low High Other Adjustmentsallowed to the assessee Companies excluded by ITAT/HC/SC ITAT/HC/SC Decision Adjustments Cases relied upon towards such adjustments Revenue Authorities' Margins/ Range Range of MarginS. N. Case Name with Citation Services Method Used AYs Assessee's Margin Margin In Favour of Assessee/ Revenue 10 MACOM Technology Solutions (India) (P.) Ltd. v Dy CIT [2019] 107 taxmann.com 58 (Pune - Trib.) Designe and development TNMM 2012-13 16.11% 23.57% 8.43% 59.15% Assessee 1. E Clerx Services Ltd. 2. Genesys International Corporation Ltd. Companies providing: 1. data analytics services 2. geographical information system services could not be considered as comparables 1. Working Capital Adjustment 2. Risk Adjustment On Risk Adjustment: 1. Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 119 TTJ (Bang) 721 2. M/s. Sony India (P) Ltd. v. DCIT (2008) 114 ITD 448 (Delhi ITAT) 3. MSC Software Corporation India Pvt. Ltd. v. ACIT (Pune) 10 MACOM Technology Solutions (India) (P.) Ltd. v Dy CIT [2019] 107 taxmann.com 58 (Pune - Trib.) Designe and development TNMM 2012-13 16.11% 23.57% 8.43% 59.15% Assessee 1. E Clerx Services Ltd. 2. Genesys International Corporation Ltd. Companies providing: 1. data analytics services 2. geographical information system services could not be considered as comparables 1. Working Capital Adjustment 2. Risk Adjustment On Risk Adjustment: 1. Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 119 TTJ (Bang) 721 2. M/s. Sony India (P) Ltd. v. DCIT (2008) 114 ITD 448 (Delhi ITAT) 3. MSC Software Corporation India Pvt. Ltd. v. ACIT (Pune) 11 Schneider Electric IT Business India (P.) Ltd. V JCIT [2019] 106 taxmann.com 70 (Bangalore - Trib.) SDS TNMM 2009-10 9.59% 23.11% 5.52% 62.27% In favour of assessee. 1. Kals Information Systems Ltd. 2. Bodhtree Consulting Ltd. 3. Tata Elxsi Ltd. 4. Persistent Systems Ltd 5. Infosys Ltd. 6. Sasken Communication Technologies Ltd. 7. Larsen & Toubro Infotech Ltd Companies providing: 1. general insurance services 2. software consultancy and design and development of software using latest technology 3. embedded product design services, industrial design and engineering services and visual computing labs and system integration services segment 4. both product designing services and software product development could not be considered as comparables NA NA 12 ST Microelectronics (P.) Ltd. v Addl CIT [2019] 104 taxmann.com 337 (Delhi - Trib.) SDS TNMM 2007-08 13.61% 19.07% Partly in favour of assessee. 1. Helios and Matheson Information Technology Ltd. 2. Sasken Communication Technologies Ltd. 3. TATA ELXSI Ltd. 1. Software product company 2. Company having abnormal event like merger & acquisition during the year 3. Engaged in development and sale of niche software products and also exploited TATA brand could not be considered as comparables 1. Working Capital Adjustment NANA Page 4