Savista Global Solution Pvt. Ltd. (“the assessee”) was engaged in providing healthcare BPO services in the USA for AY 2020-21. The assessee had two separate segments - provision of support services and receipts from sub-contracts. The TPO aggregated both transactions and benchmarked them on a cost-plus basis, resulting in a TP adjustment. Further, an adjustment of ₹6,79,589 was made towards interest on outstanding receivables. The assessee challenged both adjustments before the Tribunal.
Assessee’s Contentions | Revenue's Contentions | Court's Judgment |
|---|---|---|
The assessee submitted that support services and sub-contract receipts were separate and independent transactions, having different functional and risk profiles and governed by separate agreements. Support services were provided on a cost-plus basis, whereas the assessee undertook full market and service liability risks in the sub-contracting segment. | The Revenue contended that both activities were BPO/ITeS services and no segmental audited accounts were furnished. Therefore, the transactions were integrated/ highly interdependent and were rightly aggregated under Rule 10A(d). | The Tribunal held that aggregation of the two segments was not justified. The transactions were governed by separate agreements and involved different functions, compensation models and risk profiles. The Tribunal also noted that audited separate segmental accounts had been furnished before the TPO. |
The assessee submitted that it was a debt-free company and had not taken any external debt. Therefore, it could not be presumed that borrowed funds were used to provide an extended credit period to the AE. It relied on PCIT v. Inductis India (P.) Ltd. | The Revenue relied upon the orders of the AO/TPO. However, it did not distinguish the facts of the present case from the decision of the jurisdictional Delhi High Court in Inductis India (P.) Ltd. | The Tribunal, following PCIT v. Inductis India (P.) Ltd., held that the notional interest adjustment on outstanding receivables was not justified and deleted the adjustment of ₹6,79,589. |
ITAT held that the aggregation of support services and sub-contract receipts was not justified, as the two segments had separate agreements and different functional and risk profiles. ITAT held that interest on outstanding trade receivables was not warranted where the assessee had not availed any external debt; hence, the TP adjustment was deleted.
