Revenue challenged ITAT's dismissal of transfer pricing additions against Fiserv India. Court found ITAT's exclusion of comparables well-reasoned and had no substantial question of law regarding foreign exchange fluctuation. Appeal dismissed.
None. The Revenue's appeal was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
PR COMMISSIONER OF INCOME TAX-3 ..... Appellant Through: Mr. Rohit Madan, Senior standing counsel.
versus
FISERV INDIA PVT LTD ..... Respondent Through: Mr. Sachit Jolly, Advocate.
CORAM:
JUSTICE S.MURALIDHAR JUSTICE VIBHU BAKHRU
O R D E R % 06.01.2016
1961 (‘Act’) is directed against the impugned order dated 26th June 2015
passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 1822/Del/2014 for the Assessment Year (‘AY’) 2009-10.
RISL is a 100% subsidiary of Fiserv Inc. USA (‘FI’). During the relevant
AY, FIPL provided software development and maintenance services to its
associate enterprises (‘AEs’), namely, Fiserv Global Services Inc., USA
ITA No. 17/2016
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(‘FGSI’), for which it was compensated in terms of the Master Service Agreement (‘MSA’) entered into between FIPL and FGSI on cost plus 15%. In its Transfer Pricing (‘TP’) document furnished for the AY in question, FIPL disclosed certain international transactions with its AEs. This included transactions involving the payment towards software development services for the value of Rs. 204,03,31,108. The arm’s length price (‘ALP’) was determined by FIPL by applying transactional net margin method (‘TNMM’). The operating profit to total cost (‘OP/TC’) ratio was taken as the profit level indicator (‘PLI’) in the TNMM analysis. The average PLI of comparables was arrived at 9.54% whereas PLI of FIPL was arrived at 15% on cost. 29 comparables were selected by FIPL in the aforementioned PLI exercise. Since the profit margin of FIPL on the above basis was more than
the determined range of the mean margin of the comparables, no TP adjustment was offered in the return of income.
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proposed a transfer pricing adjustment of Rs. 19,69,44,637 to the taxable income of the Assessee (FIPL).
it was held that since the Assessee was captive service provider to its AE,
Infosys Ltd. was not a valid comparable.
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ITAT in Westfalia Separator India Pvt. Ltd. v. ACIT (ITA No. 4446/D/02).
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Accordingly, the AO/TPO was directed to treat the foreign exchange gain/loss as an operating item. The AO/TPO was directed to compute the ALP of the international transactions entered into by FIPL with its AEs keeping in view the observations made in the order of the ITAT.
(ii) Whether the ITAT was right in foreign exchange fluctuation as operating expenses/income without considering that it has no bearing on the transaction and that Safe Harbour Rules stipulate exclusion of foreign exchange gain/loss as operating expenses/income?
question. Even otherwise the Court finds that the decisions relied upon by the ITAT in the impugned order covers this issue in favour of the Assessee
Page 5 of 6
ITA No. 17/2016
as far as the AY in question is concerned. Consequently, the Court declines
to frame any question on the issue.
that any substantial question of law arises as regards the said issue.
S.MURALIDHAR, J
VIBHU BAKHRU, J
JANUARY 06, 2016 Rk
ITA No. 17/2016
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2 issues framed by the court
Whether the ITAT was right in rejecting specific comparables in the transfer pricing analysis by applying stringent standards of comparability?
Whether the ITAT was right in treating foreign exchange fluctuation as operating expenses/income against the Revenue's reliance on the Safe Harbour Notification which stipulates exclusion thereof?
Colour shows how this judgement treated each authority
Westfalia Separator India Pvt. Ltd. v. ACITRelied on¶35
Westfalia Separator India Pvt. Ltd. v. ACIT (ITA No. 4446/D/02)
3 provisions across 2 enactments
PR Commissioner of Income Tax-3
Fiserv India Pvt Ltd
S.MURALIDHAR
VIBHU BAKHRU
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
