Case Name: Travelex India Private Limited v. Dy. CIT Citation: ITA No. 8192/Mum./2010, AY 2006-07 Outcome: In favor of Assessee

1. CA. REETIKA G AGARWAL CASE ANALYSIS: TRANSFER PRICING 18TH
APRIL, ‘19
Case Name: Travelex India Private Limited v. Dy. CIT
Citation: ITA No. 8192/Mum./2010, AY 2006-07
Outcome: In favor of Assessee
Brief of assessee’s facts:
1. Travelex India (the assessee), a wholly owned subsidiary of Travelex Plc UK, was engaged in
providing information technology enabled services (ITeS) to its AEs.
2. In order to benchmark the aforementioned transaction, the assessee chose TNMM as most
appropriate method with OP/TC as profit level indicator. The assessee selected 20 companies as
comparables with arithmetic mean of 9.93% against its margin earned at 16.04% and claimed its
transaction at arm’s length.
3. Also, in its money changing business, the assessee pays interest to its AEs for delayed settlement of
traveler’s cheques (TCs) and pre-paid cards (PPCs). The assessee benchmarks such transaction at
LIBOR plus 200 basis points and claimed such transaction also at arm’s length.
Ld. TPO’s decision:
1. Ld. TPO completed the transfer pricing assessment and thereby:
a. Rejected the economic analysis of the assessee. Undertook a fresh search by selecting 13
companies as comparables with arithmetic mean of 24% against the assessee’s margin of
16.04%; and proposed an adjustment of Rs. 66,55,541/- to the income of the assessee.
b. Rejected the benchmarking done by the assessee for payment of interest on delayed settlement
of TCs and PPCs at LIBOR plus 200 basis points and took the interest rates as specified for
External Commercial Borrowings (ECBs) (for less than six months) as per RBI circular at LIBOR
plus 50 basis points. Thereby, proposed an adjustment of Rs. 4,38,499.
Hon’ble DRP’s decision:
1. Hon’ble DRP rejected the assessee’s objections and upheld the decision of Ld. TPO.
Issue to be decided:
Aggrieved, the assessee filed an appeal before Hon’ble tribunal and
1. challenged following comparables regarding their exclusion:
Company Name Remarks Reason for rejection given by the assessee
1. Vishal Information
Technologies Ltd.
TPO’s Comparable 1. Business Model is not comparable
2. Major portion of work outsourced to third
parties which is clearly evident from low cost
of employees
2. Maple e Solutions Ltd. TPO’s Comparable 1. Financial Data of Company is unreliable

2. CA. REETIKA G AGARWAL CASE ANALYSIS: TRANSFER PRICING 18TH
APRIL, ‘19
2. Ld. TPO’s ECBs Interest rate for benchmarking the transaction of interest paid on delayed settlement
of TCs and PPCs.
Hon’ble ITAT’s Decision:
Hon’ble ITAT decided both the issue in favor of the assessee and held that
1. Upon exclusion of below said two comparables, margin of the assessee fall within a tolerance band
of (+/-) 5%:
Company Name Remarks Reasons for excluding the comparables
1. Vishal
Information
Technologies
Ltd.
Directed
to
exclude
1. Business Model is not comparable
2. Major portion of work outsourced to third parties which is clearly
evident from low cost of employees
3. Relying on the decision of Hon’ble HC in the case of Ramp Green
Solutions Pvt. Ltd. v CIT [2017] 377 ITR 533 (Del.)
2. Maple e
Solutions
Ltd.
Directed
to
exclude
1. Financial Data of Company is unreliable.
2. Relying on the following decisions of various courts:
a. CIT v Cummins Turbo Technologies Ltd. [2018] 91
taxmann.com 307 (Bom.)
b. Stream International Services Pvt. Ltd. v ADIT [2013] 31
taxmann.com 227 (mum.)
c. Deutsche Networking Services Pvt Ltd. v DCIT ITA No
8972/Mum./2010 dated 14.09.2018
d. Franklin Templeton International Services India Pvt. Ltd. v
DCIT [2018] 89 taxmann.com 439 (mum.)
e. Goldman Sachs Services Pvt. Ltd. v DCIT [2015] 63
taxmann.com 9 (Bang.); and
f. HSBC Electronic Data Processing India Ltd. v ACIT [2013] 38
taxmann.com 141 (Hyd.)
2. Further, accepted the benchmarking done by the assessee for payment of interest on delayed
settlement of TCs and PPCs at LIBOR plus 200 basis points. Relying on the following judicial
pronouncements:
a. Tricom India Ltd. v ITO, ITA no 322/Mum./2014, dated 03.09.2014; and
b. M/s. Fire Start International Pvt. Ltd v CIT, ITA no 488/Mum./2015, dated 31.07.2015
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