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IN THE HIGH COURT OF DELHI AT NEW DELHI

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ITA 234/2022 & CM APPL. 33042/2022

PR. COMMISSIONER OF INCOME TAX-1, DELHI ..... Appellant

Through:

Mr.

Ajit

Sharma,

Sr.

Standing

Counsel for Revenue.

versus

M/S. CONVVERGYS INDIA SERVICES PVT. LTD & ANR.

..... Respondent

Through:

Mr. Deepak Chopra and Mr. Ankur

Goyal, Advocates.

%

Date of Decision: 29^thJuly, 2022

CORAM:

HON'BLE MR. JUSTICE MANMOHAN

HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA

J U D G M E N T

MANMOHAN, J (Oral):

CM APPL. 33042/2022

In view of the averments made in the application, the delay of 85 days

in filing the appeal is condoned.

Accordingly, this application is disposed of.

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002875

ITA 234/2022

1.

Present Income Tax Appeal has been filed challenging the Order

dated 22^ndNovember, 2019 passed by the Income Tax Appellate Tribunal

(‘ITAT’) in ITA 1934/Del./2018 for the Assessment Year (hereinafter

referred to as ‘AY’) 2012-13.

2.

Learned counsel for the Appellant states that the ITAT has erred in

laying down stringent standards of comparability and attempting to identify

exact replica of taxpayer for comparability analysis, whereas the Indian Law

and the international jurisprudence recognize the reality that there cannot be

an exact comparable in a given situation without any difference and without

appreciating that such stringency will defeat the purpose of flexibility

provided in the comparability analysis for determination of Arm’s Length

Price (ALP).

3.

He states that the ITAT erred in excluding Excel Infoways Ltd. by

relying on the decision of the coordinate Bench of the Tribunal in Baxter

India Pvt. Ltd. for the AY 2012-13. He states that upon an appeal being

filed against the judgment of the Tribunal in Baxtor India Pvt. Ltd., this

Court had framed questions of law. He, however, states that the said appeal

was disposed of on account of low tax effect. He further states that the

Tribunal wrongly concluded that the Excel’s ratio of employee cost to sales

was merely 13.05%. He states that in response to a notice under Section

133(6) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’),

Excel Infoways had informed that the segmental employee cost pertaining to

ITES/BPO was Rs.2.02 crores as against segmental value of Rs.7.07 crores.

Consequently, as according to him, the ratio of employee cost was more

than 25%, the filter selected by the Transfer Pricing Officer (TPO) was

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002875

satisfied in the present proceedings.

4.

He also contends that the service revenue filter from export/ITES of

75% is not sacrosanct. He states that as in the present case, since Excel

Infoways Ltd. satisfies the functional similarity test, the filter of service

revenue from exports/ITES could be diluted.

5.

Learned counsel for the appellant fairly states that he is not pressing

the present appeal qua exclusion of TCSE-Serve Ltd. and Infosys BPO in

view of the fact that the revenue itself has excluded TCSE-Serve Ltd. as a

comparable in subsequent assessment years in the case of the assessee and

Infosys BPO had acquired Portland Group Pty Ltd., Australia during the

year under assessment.

6.

Learned counsel for the respondent, who appears on advance notice,

points out that the TPO had insisted on service revenue filter from

export/ITES of 75% and had rejected the assessee’s suggestion to adopt the

filter of 50% export. In support of his contention, he relies upon the order

passed by the TPO dated 15^thFebruary, 2016. The relevant portion of the

said order is reproduced hereinbelow:-

xxx

xxx

xxx

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002875



Companies who have export service income less than 75% of the

sales were excluded

7.

He also states that the ITAT correctly held that Excel Infoways failed

the diminishing revenue filter. In support of his statement he relied upon a

chart reproduced in the impugned order