Low employee cost, R&D activities, onsite expenses, and inorganic growth render company functionally dissimilar for transfer pricing comparability under TNMM; healthcare outsourcing services comparable to back office support.

ORDER

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the Revenue and cross objection filed by the assessee against the order of CIT (A) 55, Mumbai, vide order no. ITBA/APL/S/250/2025-26/1076574916(1), dated 30/05/2025, passed against the assessment order by ACIT - 9(2)(1), Mumbai, u/s. 143(3) r.w.s 144(C)(3)(b) of the Income-tax Act (hereinafter referred to as the “Act”), dated 13.04.2015, for Assessment Year 2011-12.

2. Grounds taken by Revenue and assessee are reproduced as under:

ITA No. 4907/MUM/2025

1. "Whether on the facts and circumstances of the case and in law, the ld. CITIA) has not erred in not appreciating the selection of functionally similar comparables as that of the assessee and making the adjustment by the ld.TPO, based on the TNMM Method."

2. a) "Whether on the fact and circumstances of the case and in law, the ld. CIT(A) is erred by relying on the stand of the Hon'ble ITAT in assessee's own case in AY 2008-09 regarding the comparable company Acropetal Technologies Ltd, without appreciating the fact that each year's transfer pricing proceeding is distinct and based on the facts and circumstances on that year only."

b) "Whether on the fact and circumstances of the case and in law, the ld. CITIA) has not erred by excluding the comparable M/s Acropetal Technologies Ltd based on application of "Employee cost filter-'a filter which neither has been used by the TPO for selection/rejection of comparables, nor has been applied to the assessee (tested party), while conducting transfer pricing analysis in the case?"

3. "Whether on the fact and circumstances of the case and in law, the ld. CIT(A) is erred in not appreciating the exclusion of comparables which are functionally dissimilar comparables to the assessee's comparables ie e4e Healthcare Business Services Pvt Ltd by the ld.TΡΟ.”

C.O. No. 276/MUM/2025

“1. On the facts and in the circumstances of the case and in law, the ld. Transfer Pricing Officer ('ld. TPO)/ Assessing Officer ('AO') made a TP adjustment to the arm's length price ('ALP') of the assessee's international transaction.

While making the TP adjustment, the ld. TPO/AO erred in:

1.1. rejecting the economic analysis undertaken by the assessee in the transfer pricing study report ("TPSR) and disregarding the submissions made by the assessee.

1.2. disregarding certain quantitative filters applied by the assessee while selecting the comparables and applying certain additional filters.

1.3. including certain functionally dissimilar companies in the final set of comparables for computing the arm's length price.

1.4. excluding certain functionally similar companies in the final set of comparables for computing the arm's length price.

1.5. disregarding the provisions of Rules 101B(2) and (3) read with Rule 10C of the Income-tax Rules, 1962 ('the Rules').

1.6. not allowing the working capital adjustment to eliminate the differences on account of varying working capital position between the assessee and the comparable companies, and

1.7. not allowing the risk adjustment to account for the differences in the risk profile between the assessee and the comparable companies.

1.8. not allowing the use of multiple year data of comparable companies, as prescribed under Rule 10B(4) of the Rules and determining the arm's length price on the basis of financial information for the FY 2010-11, which was unavailable in the public domain at the time of determination of the arm's-length price.

The assessee prays that the relief granted by the ld. CIT(A) be granted and the adjustment made by the ld. TPO/AO be deleted.

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