ACIT, CIRCLE-1(1)(1), BANGALORE, BANGALORE V. ACUITY KNOWLEDGE CENTRE (INDIA) PVT. LTD., BANGALORE

ITA 2110/BANG/2024

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax against the order of the Ld.CIT(A)-12, Bengaluru, which had allowed the appeal of M/s. Acuity Knowledge Centre (India) Pvt. Ltd. The primary issue was the determination of the arms length price for international transactions conducted by the assessee, which had been adjusted by the Transfer Pricing Officer (TPO). The Tribunal examined the comparables selected by the TPO and the reasons for their exclusion by the Ld.CIT(A). The Tribunal found that the companies excluded by the Ld.CIT(A) were not comparable due to functional differences and other factors such as high turnover, acquisition, and lack of segmental details.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398163 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Other Referred Cases: M/s e4e Business Solutions India Pvt Ltd. for A.Y.2012-13, DCIT v. C-Cube Solutions (P.) Ltd., ACIT v. AON Specialist Services Pvt. Ltd., Software Paradigms Infotech (P.) Ltd. v. ACTT, Aspect Technology Centre (India) P. Ltd. v. ITO, Finastra Software Solutions (India) (P.) Ltd. v. Assistant Commissioner of Income-tax, JCIT v. Dell International Services India P. Ltd., PCIT v. H & S Software Development and Knowledge Management Centre Pvt. Ltd., Assessee's own case for the assessment year 2010-11, Zyme Solutions (P.) Ltd. v. ACTT, Swiss Re Shared Services (India) (P.) Ltd. v. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARITHIVEL V
• Assessee Lawyers: TANMAYEE RAJKUMAR
• Keywords: Revised return; Transfer pricing; International transaction

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 2110/Bang/2024 Assessment Year : 2011-12 The Assistant Commissioner of Income Tax, Circle – 1 (1)(1), Bangalore. Vs. M/s. Acuity Knowledge Centre (India) Pvt. Ltd., 7th Floor, Elixir Chancery Building, Municipal Door No. 135/1-2, Residency Road, Bangalore – 560 025. PAN: AAECA9391H APPELLANT RESPONDENT Assessee by : Ms. Tanmayee Rajkumar, Advocate Revenue by : Shri Parithivel .V, JCIT-DR Date of Hearing : 05-03-2025 Date of Pronouncement : 03-06-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the Revenue challenging the order of the Ld.CIT(A)-12, Bengaluru dated 31/07/2024 in respect of the A.Y. 2011-12 and raised the following grounds: Page 2 of 33 ITA No. 2110/Bang/2024 Page 3 of 33 ITA No. 2110/Bang/2024 2. The brief facts of the case are that the assessee is a company filed their return of income on 29/11/2011. Thereafter, a revised return was Page 4 of 33 ITA No. 2110/Bang/2024 filed on 30/11/2011 declaring the very same income. The assessee paid the tax based on the MAT provision. The return was processed and the case of the assessee was selected for scrutiny manually on the basis of form no. 3CEB. During the year, the assessee company had international transactions and therefore the AO had referred the issue to the transfer pricing officer to determine the arms length price. Thereafter, the transfer pricing officer passed an order u/s. 92CA of the Act in which an adjustment to arms length price to the extent of Rs. 4,60,63,053/- was made. The AO also accepted the adjustment made by the TPO and added back the said adjustment to the total income of the assessee. 3. As against the said adjustment, the assessee filed an appeal before the Ld.CIT(A) and raised several grounds in respect of the transfer pricing issues and submitted that the addition made by the Ld.TPO as well as the assessing officer on account of adjustment in the arms length price is not correct. The assessee also challenged the corporate tax issues in the appeal filed before the Ld.CIT(A). The Ld.CIT(A) after considering the submissions made by the assessee as well as the various datas furnished by the assessee in support of their case and also by following the earlier decisions rendered by this Tribunal, finally allowed the appeal. 4. As against the said order of the Ld.CIT(A), the revenue is in appeal before this Tribunal. 5. At the time of hearing, the Ld.DR relied on the order of the Ld.TPO and submitted that the Ld.CIT(A) is wrong in taking the comparable companies when there are minor variations. Similarly, the Ld.DR argued that the other companies which were all excluded by the Ld.CIT(A) are also not correct since the companies are comparable to the core activities of the assessee company. The Ld.DR strongly relied on the grounds raised by the revenue and prayed that the appeal may be allowed. Page 5 of 33 ITA No. 2110/Bang/2024 6. The Ld.AR filed two paper books and also filed a synopsis of arguments in support of their case. In one of the paper books, the Ld.AR filed the annual reports of the six companies which are sought to be excluded for the purpose of determining the arms length price. In the other paper book, the assessee submitted the notices as well as their replies and the financial statements. The assessee also relied on the judgment of the Hon’ble Bombay High Court in ITA No. 1120/2014 dated 16/12/2016 in support of their case. The assessee also filed a chart in support of their pleadings. 7. We have heard the arguments of both sides and perused the materials available on record. 8. The Ld.CIT(A) had analysed the every company and compared them with the assessee company and excluded the said companies which are not comparable to the assessee company. The Ld.CIT(A) had given a clear finding with regard to each company and how it could not be taken as a comparable to the assessee company and also considered the finding given by this Tribunal in the earlier orders in which the companies were excluded for the purpose of calculating the arms length price. For the sake of easy reference, the finding given by the Ld.CIT(A) is extracted as below: Page 6 of 33 ITA No. 2110/Bang/2024 Page 7 of 33 ITA No. 2110/Bang/2024 Page 8 of 33 ITA No. 2110/Bang/2024 Page 9 of 33 ITA No. 2110/Bang/2024 Page 10 of 33 ITA No. 2110/Bang/2024 Page 11 of 33 ITA No. 2110/Bang/2024 Page 12 of 33 ITA No. 2110/Bang/2024 Page 13 of 33 ITA No. 2110/Bang/2024 Page 14 of 33 ITA No. 2110/Bang/2024 Page 15 of 33 ITA No. 2110/Bang/2024 Page 16 of 33 ITA No. 2110/Bang/2024 Page 17 of 33 ITA No. 2110/Bang/2024 9. Similarly, in respect of the exclusion of a company as comparables, the Ld.CIT(A) had given the following finding: “5.1.7 Inclusion of comparable Datamatics Financial Services Ltd. 5.1.7.1 The appellant contended that the comparable Datamatics Financial Services Ltd. should be included on the basis of functional similarity and relied on the ITAT Bengaluru decision in the case of M/s e4e Business Solutions India Pvt Ltd. for A.Y.2012-13 wherein it is held that: “13. Datamatics Financial Services Ltd.,- 'Datamatics' 13.1 This company was selected by the assessee in its TP study. The TPO, however, rejected this company on the grounds that no data is available. The DRP upheld the rejection of this company on the ground that while it is engaged in the business of registration and share transfer work and ITES, but there is no segmental information available in the Annual report Page 18 of 33 ITA No. 2110/Bang/2024 of this company. Further, this company also fails the export earning filter adopted by the TPO. 13.2 We have heard the rival contentions and perused and carefully considered the material on record. Before us, except for raising this ground and reiterating that this company, 'Datamatics' is functionally comparable to the assessee in the case on hand, no evidence was brought on record to controvert the observations and findings of the DRP. In this factual matrix of the case, we have no hesitation in upholding the decision of the TPO in rejecting this company, ‘Datamatics’ as a comparable to the assessee.”” 10. Insofar as the other issues, the revenue has not challenged the same and therefore we are not adjudicating the said issues. 11. We have also gone through the synopsis of arguments filed by the assessee in which the assessee had considered a through analysis of the each and every company and a detailed argument was submitted why the said companies are to be excluded for the purpose of calculating the arms length price. 12. The synopsis of the arguments filed by the assessee is as follows: “D. Assessee's submissions on Revenue's appeal.. (i) Acropetal Technologies Ltd. (\"Acropetal\"): It is submitted that the exclusion of this company was sought for the reasons that it was functionally dissimilar to the Assessee, since under the engineering design segment selected by the TPO for comparability analysis, the company renders services which are in the nature of KPO, which are incomparable to the ITE services of the Assessee. The CIT(A) rightly accepted the contention of the Assessee, and rightly relied on the decisions of this Hon'ble Tribunal in DCIT v. C-Cube Solutions (P.) Ltd. (reported in [2019] 109 taxmann.com 293 (Bangalore -Trib.)), ACIT v. AON Specialist Services Pvt. Ltd. (reported in [2020] 116 taxmann.com 368 (Bangalore - Trib.)), and Software Paradigms lnfotech (P.) Ltd. v. ACTT (reported in [2020] 116 taxmann.com 923 (Bangalore -Trib.)), wherein this Page 19 of 33 ITA No. 2110/Bang/2024 company was directed to be excluded, and therefore, no interference is warranted. As per the Annual Report of the company for the year ending 31st March 2010, the company is engaged in provision of a variety of IT enabled services comprising of Enterprise solutions, IT Infrastructure Management Services, Cloud Services, Greenhouse Gas Management, unlike the Assessee who is a provider of routine IT enabled services. Further, the company is engaged in provision of engineering design services which are in the nature of high end IT enabled services which are in the nature of Knowledge Process Outsourcing (\"KPO\"), which is not comparable to the Assessee's ITE services. That apart, during the year under consideration, the company announced acquisition of Line Beyond Inc., and Optech Consulting Inc., USA and acquired 100% of Line Beyond Inc. and 70% of Optech Consulting Inc on 01.04.2011. The acquisitions were a strategic move that would boost shareholder value, enable Acropetal to provide profitable solutions, strengthen its Healthcare IT Services and also enhance the wide range of IT services and solutions portfolio and expands its global presence and would augment Acropetal's presence in the US Healthcare markets with specialized healthcare products and solutions. While the acquisitions were made in the financial year 2011-12, since the company declared its intention to acquire the companies in the financial year 2010-11 under consideration, its cannot be ruled out with certainty that the proposed acquisitions did not have an effect on the margin of the company. Also, no reasonably accurate adjustments can be made to eliminate the effect if any on the margin of the company. This company is consistently excluded by this Hon'ble Tribunal in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  JCIT v. Dell International Services India P. Ltd. (reported in (2021) 133 taxmann.com 532 (Bang.-Trib.));  Aspect Technology Centre (India) P. Ltd. v. ITO (reported in (2020) 118 taxmannn.com 398 (Bangalore-Trib.));  DCIT v. C-Cube Solutions (P.) Ltd. (reported in [2019] 109 taxmann.com 293 (Bangalore - Trib.)): Page 20 of 33 ITA No. 2110/Bang/2024  ACIT v. AON Specialist Services Pvt. Ltd. (reported in [2020] 116 taxmann.com 368 (Bangalore - Trib.));  Software Paradigms Infotech (P.) Ltd. v. ACIT (reported in [2020] 116 taxmann.com 923 (Bangalore - Trib.))  Swiss Re Shared Services (India) (P.) Ltd. v. ACIT (reported in [2016] 76 taxmann.com 22 (Bangalore - Trib.));  e4e Business Solutions India P. Ltd v. DCIT [Order dated 13.01.2017 in IT(TP)A No.1397/Bang/2016]  Finastra Software Solutions (India) (P.) Ltd. v. Assistant Commissioner of Income-tax (reported in [2018] 93 taxmann.com 460 (Bangalore- Trib)). In view of the above, the decision of the CIT(A) in this regard ought to be affirmed by this Hon'ble Tribunal and the exclusion ought to be upheld. (ii) Accentia Technologies Ltd (Accentia): The Assessee sought exclusion of Accentia on the grounds that (i) the company is functionally different; (ii) while it renders varied services, segmental details are not available; (iii) revenue recognition is different; (iv) the company has faced inorganic growth; and (iv) the company owns significant intangible assets. The CIT(A) rightly accepted the contention of the Assessee, and rightly relied on the decisions of this Hon'ble Tribunal in Amba Research (India) (P.) Ltd. v. DCIT (reported in (2016] 67 taxmann.com 342 (Bangalore - Trib.)); Finastra (supra), wherein this company was directed to be excluded, and therefore, no interference is warranted. Pertinently, while this company was excluded on account of (i) inorganic growth; and (ii) functional dissimilarity and lack of segmental details, the Revenue has not challenged the exclusion on account of inorganic growth. Therefore, the company ought to remain excluded. In any event, the said company ought to remain excluded for the following reasons: Accentia is engaged in providing high end services in the nature of Knowledge Process Outsourcing (`KPO') which is evident from its annual report. Further, the said company not only does medical transcriptions, but has also ventured into healthcare receivables cycle management and high- end consultancy to start-ups requiring field experts. Page 21 of 33 ITA No. 2110/Bang/2024 As can be seen from the annual report, coding income is contributing 15% of the total income which activities are akin to software development activity while the assessee is a mere provider of IT enabled services. The company has invested huge sums in the development of EMR software. Segmental details of its various activities are unavailable. The company is also involved in product development. The company further owns significant intangibles. Accentia has continued to invest and acquire new companies for FY 2010-11. The company has invested in Tangent Corporation, a software development company having expertise in development of software related EMR and SaaS. Accentia also invested in Alpine Technologies Inc. through its subsidiaries during the year. This company is consistently excluded by this Hon'ble Tribunal in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  Aspect Technology Centre (India) P. Ltd. v. ITO (reported in (2020) 118 taxmannn.com 398 (Bangalore-Trib.));  Assessee's own case for the assessment year 2010-11 (Order dated 09.03.2016 passed in IT(TP)A No. 286/Bang/2015);  Finastra Software Solutions (India) (P.) Ltd. v. ACIT (reported in [2018] 93 taxmann.com 460 (Bangalore - Trib.));  Amba Research Ltd. v. DCIT (reported in [2016] 67 taxmann.com 342 (Bangalore - Trib.));  Swiss Re Shared Services (India) (P.) Ltd. v. ACIT (reported in [2016] 76 taxmann.com 22 (Bangalore - Trib.));  Acusis Software India Pvt. Ltd. v. ITO (Order dated 06.09.2019 passed in IT(TP)A No. 169/Bang/2016 for the assessment year 2011- 12) In view of the above, the decision of the CIT(A) ought to be affirmed by this Hon'ble Tribunal and Accentia ought to remain excluded from the final list of comparables. (iii) ICRA Online Ltd (\"ICRA\"): The Assessee sought exclusion of ICRA from the final list of comparables on the ground that the company is not comparable to the Assessee. The CIT(A) rightly accepted the contention of the Assessee, and rightly relied on the decision of this Hon'ble Tribunal in Acusis Software India (P.) Ltd. v. ITO (reported in Page 22 of 33 ITA No. 2110/Bang/2024 [2020] 115 taxmann.com 479 (Bangalore -Trib.)) wherein this company was directed to be excluded, and therefore, no interference is warranted. ICRA ought to remain excluded from the final list of comp'arables as it is not comparable to the Assessee. ICRA has three business segments - Information Services, Software Services and Outsourced Services. It is submitted that the TPO has considered the outsourced service segment as a comparable to the Assessee. While the annual report of ICRA does not provide for any description as to the nature of the services in the said segment, a reading of the annual report leads to the reasonable inference that KPO services are rendered under the said segment, which is not comparable to the services rendered by the Assessee. This company is consistently excluded by this Hon'ble Tribunal in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  Aspect Technology Centre (India) P. Ltd. v. ITO (reported in (2020) 118 taxmannn.com 398 (Bangalore-Trib.)):  Acusis Software India Pvt. Ltd. v. ITO (Order dated 06.09.2019 passed in 1T(TP)A No. 169/Bang/2016 for the assessment year 2011- 12) In view of the above, the order passed by the CIT(A) ought to be affirmed in this regard and ICRA ought to remain excluded from the final list of comparables. (iv) Infosys BPO Ltd. (\"Infosys BPO\"): The Assessee sought exclusion of this company for the reasons that it was a market leader, having a huge brand value and having turnover far in excess of the Assessee. The CIT(A) rightly accepted the contention of the Assessee, and rightly relied on the decision of this Hon'ble Tribunal in DCIT v. CGI Information Systems & Management Consultation (P.) Ltd. (reported in [2020] 115 taxmann.com 214 (Bangalore - Trib.)) wherein this company was directed to be excluded. and therefore, no interference is warranted. Pertinently, in the aforesaid decisions. this company was excluded on account of it being functionally not comparable to an ITE service provider, on account of high turnover, on account of high brand value and on account of existence of extraordinary event of acquisitions. While so, the Revenue has Page 23 of 33 ITA No. 2110/Bang/2024 challenged the exclusion of the company only on account of high turnover. Since there is no dispute on the other counts on which the company was excluded, this ground of the Revenue ought to be rejected, and the company ought to remain excluded from the final list of comparables. In any event, the company ought to remain excluded for the following reasons: The company is engaged in providing high-end integrated services by assisting its clients in improving their competitive positioning. The company is a market leader and an established player in the BPO industry. The brand value maintained by the company, which enables it to command the market and earn better margin renders it incomparable to the Assessee which is a captive service provider. Also, during the financial year 2010-11 under consideration, the company acquired McCamish Systems LLC, which constitutes a peculiar economic circumstance. Since no reasonably accurate adjustments can be made to eliminate the material effects thereof on the margin of the company the company ought to remain excluded from the final list of comparables. Moreover, the turnover of this company of Rs. 1129 crores is far in excess of the Assessee's turnover of Rs. 61 crores. This company is consistently excluded in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  JCIT v. Dell International Services India P. Ltd. (reported in (2021) 133 taxmann.com 532 (Bang.- Trib.));  PCIT v. H & S Software Development and Knowledge Management Centre Pvt. Ltd. (Order dated 03.01.2018 passed by the Hon'ble Delhi High Court in ITA No. 912/2017);  Assessee's own case for the assessment years 2008-09 and 2010-11 (Order dated 18.03.2016 passed by this Hon'ble Tribunal in 1T(TP)A No. 622/Bang/2013 and Order dated 09.03.2016 passed by this Hon'ble Tribunal in IT(TP)A No. 268/Bang/2015, respectively);  Zyme Solutions (P.) Ltd. v. ACTT (reported in [2019] 108 taxmann.com 495 (Bangalore - Trib.));  DCIT v. CGI Information Systems & Management Consultation (P.) Ltd. (reported in [2020] 115 taxmann.com 214 (Bangalore -Trib.)). Page 24 of 33 ITA No. 2110/Bang/2024 in view of the above, the order passed by the CIT(A) ought to be affirmed in this regard and Infosys ought to remain excluded from the final list of comparables. (v) Jeevan Scientific Technology Ltd. (\"Jeevan\"): The exclusion of this company was sought on the grounds that (i) the TPO had selected the BP0 and ERP segments as comparable to the Assessee, however, the ERP segment is not comparable to the Assessee; (ii) the turnover of the BPO segment is less than Rs. 1 crore and thus the company fails the TPO's filter; (iii) the company fails the export earning filter: (iv) the margins of the company fluctuate widely. The CIT(A) rightly accepted the contention of the Assessee. and rightly relied on the decisions of this Hontle Tribunal in C-Cube (supra) and Finastra (supra), wherein this company was directed to be excluded, and therefore, no interference is warranted. Pertinently, in the aforesaid decisions, this company was excluded on account of (i) the ERP segment being incomparable to ITE service providers; (ii) the turnover of the BPO segment is less than Rs. 1 crore and thus the company fails the TPO's filter; (iii) the company fails the export earning filter; (iv) the margins of the company fluctuate widely. While so, the Revenue has challenged the exclusion of the company only on account of fluctuation in margin. Since there is no dispute on the other counts on which the company was excluded, this ground of the Revenue ought to be rejected, and the company ought to remain excluded from the final list of comparables. In any event, the company ought to remain excluded for the following reasons: It is submitted that this company is functionally not comparable to the Assessee for the reason that it is engaged in rendering diverse functions and the same are reported under one segment without segmental details regarding the same being made available. In any event, it is submitted that the ERP segment of the company is not comparable to the ITeS segment of the Assessee. The company suffers from huge fluctuations which indicate that certain peculiar circumstances influencing the profit margin of the company exist, for which appropriate adjustments cannot be made to balance the effect. It is submitted that the ERP implementation services are not in the nature of IT enabled services which were notified by CBDT vide Notification No. SO 890(E) dated 26.09.2000. If the BPO segment is considered. the Page 25 of 33 ITA No. 2110/Bang/2024 company fails to satisfy the turnover filter from the relevant segment having revenue of Rs. 79 lakhs only which is less than Rs. 1 crore. Further, the Assessee submits that the foreign exchange earnings of Rs. 79.21 lakhs is only from the BPO operations and there is no foreign exchange earning in respect of the ERP segment, and therefore, the company fails the export earnings filter. This company is consistently excluded in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  JCIT v. Dell International Services India P. Ltd. (reported in (2021) 133 taxmann.com 532 (Bang.-Trib.));  Aspect Technology Centre (India) P. Ltd. v. ITO (reported in (2020) 118 taxmannn.com 398 (Bangalore-Trib.));  DCIT v. C-Cube Solutions P. Ltd. (reported in [2019] 109 taxmann.com 293 (Bangalore - Trib.));  Finastra Software Solutions (India) (P.) Ltd. v. ACIT (reported in 12018193 taxmann.com 460 (Bangalore - Trib.));  ACIT v. AON Specialist Services Pvt. Ltd. (reported in [2020] 116 taxmann.com 368 (Bangalore - Trib.)). In view of the above, the order passed by the CIT(A) ought to be affirmed and the exclusion of Jeevan ought to be upheld. (vi) iGate Global Solutions Ltd. (\"iGate\"): The exclusion of this company was sought on the grounds (i) that the company is functionally dissimilar and segmental details are unavailable; (ii) that there exists peculiar economic circumstance of acquisition; (iii) the company owns significant intangibles. The CIT(A) rightly accepted the contention of the Assessee, and rightly relied on the decisions of this Hon'ble Tribunal in AON (supra) and CGI (supra) wherein this company was directed to be excluded, and therefore, no interference is warranted. Pertinently, in the aforesaid decisions, this company was excluded on the grounds that (i) that the company is functionally dissimilar and segmental details are unavailable; (ii) that there exists peculiar economic circumstance of acquisition; (iii) the company owns significant intangibles; and (iv) the company's turnover is very high. While so, the Revenue has challenged the exclusion of the company only on account of lack of segmental details. Since there is no Page 26 of 33 ITA No. 2110/Bang/2024 dispute on the other counts on which the company was excluded, this ground of the Revenue ought to be rejected, and the company ought to remain excluded from the final list of comparables. In any event, the company ought to remain excluded for the following reasons: The company is functionally dissimilar as it is engaged in rendering diverse functions which are reported under one segment without segmental details regarding the same being made available. The company's software services segment is clubbed with its ITeS segment and there is no breakup between the revenues generated from the two segments. The company renders these services both under the onsite and offshore model. Further, during the year under consideration, the company has acquired majority equity interest in Patni Computer Systems Ltd. This acquisition constitutes a peculiar economic circumstance, which is bound to have its effect on the company's margin. In the absence of any reasonably accurate adjustments capable of being made, which would eliminate the effects of the acquisition on the margin of the company, the company cannot be selected as a comparable. In addition. the company owns significant intangibles in its name, which is evident from the balance sheet of the company for the Financial Year 2010-11. Moreover, the turnover of the company is Rs. 1184 crores which is far in excess of the Assessee's turnover of 61 crores. This company is consistently excluded in the case of similarly placed service providers as that of the Assessee. Reliance in this regard is placed on the following decisions:  Aspect Technology Centre (India) P. Ltd. v. ITO (reported in (2020) 118 taxmannn.com 398 (Bangalore-Trib.));  DCIT v. CGI Information Systems & Management Consultation (P.) Ltd. (reported in [2020] 115 taxmann.com 214 (Bangalore - Trib.));  ACIT v. AON Specialist Services Pvt. Ltd. (reported in [2020] 116 taxmann.com 368 (Bangalore - Trib.)). Therefore the company ought to remain excluded.” Page 27 of 33 ITA No. 2110/Bang/2024 13. We have also given our careful consideration to the facts and circumstances in which the Ld.CIT(A) had accepted the arguments advanced by the assessee that the companies ought to be excluded for the purpose of determining the arms length price. We have also perused the chart filed by the assessee and in respect of Acropetal Technologies Ltd., we found that the said company is functionally different since the company rendered services in the nature of high end ITeS / KPO services whereas the assessee is doing only Information Technology enabled Services. Further, the said company is functionally dissimilar to the assessee company since the engineering design segment selected by the TPO is in the nature of KPO. Further, the company also renders services comprising of enterprise solutions, IT infrastructure management services, cloud services, green house gas management etc. whereas the assessee is doing only the Information Technology enabled Services (ITeS) and therefore the said company cannot be compared to the assessee’s company. We have also perused the annual report of the Acropetal Technologies Ltd. and in the annual report, the said company had given the segment-wise revenues and also it was mentioned that the company had acquired two companies in USA and the key services are engineering design services, healthcare, enterprise solutions and IT infrastructure solutions. Therefore the activities done by the said company cannot be compared with the assessee company which was also accepted by the orders of this Tribunal and on that basis only, the Ld.CIT(A) had excluded the said company for the purpose of computing the arms length price. We, therefore, accept the finding of the Ld.CIT(A) in excluding Acropetal Technologies Ltd. as not a comparable. 14. Insofar as the Accentia Technologies Ltd., the assessee contended that the said company is functionally different and their segment details were not available and the revenue recognition is different and the company has faced inorganic growth. Page 28 of 33 ITA No. 2110/Bang/2024 15. The assessee submitted that the said company is also providing high end services in the nature of KPO and also entered into healthcare receivables cycle management and high end consultancy to start-ups. 16. We have also perused the annual report in respect of Accentia Technologies Ltd. and in the annual report, it was clearly mentioned that the company is developing their own EMR software rather than depending on third party offerings and propose to market the same all over US. Further, in the annual report, it was mentioned that the company realised that the adoption of EMR based clinical practice is opening up avenues for an integrated end to end Software as a Service (SaaS) model of service delivery. The annual report also says that the company had invested large amount in the development of EMR software and SaaS model and marketing of the same in the US. Therefore apart from the medical transcriptions, the said company is doing other development of software which will be very useful to the doctors and therefore the said company could not be taken as a comparable to the assessee company for the purpose of arriving the arms length price. The Ld.CIT(A) considered the said facts and also followed the earlier orders of this Tribunal and on that basis, the Ld.CIT(A) has rightly excluded the company from the comparables. 17. The revenue had challenged the exclusion of the company ICRA online Ltd. We have considered the submissions made by the assessee that the said company is rendering services in three segments and in fact, the exact nature of the services rendered by the said company are not available. Further, as seen from the three segments, i.e. the information services, software services and outsourced services, it seems that the said company is in the service of KPO and therefore the said company is functionally different. 18. We have also perused the annual report of the said company in which it was clearly mentioned that there are three lines of business carried on by the said company viz., outsourced services, information services and Page 29 of 33 ITA No. 2110/Bang/2024 software products and services. In the said annual report, it is mentioned that the company continues to focus on developing and offering new products in the area of health management and on broadening the range of offerings across other asset classes. Further, it is mentioned that capacity building and efficiency enhancement measures computed to be undertaken across all the lines of businesses to improve resource productivity and profitability. 19. From the said details available in the audit report of the said company, we came to the conclusion that the said company is functionally different and having three segments. Therefore the said services offered by the said company is in the nature of KPO services which could not be compared to the services rendered by the assessee company. The Ld.CIT(A) considered the said facts and also the findings given by the Tribunal in respect of the said company and correctly came to the conclusion that ICRA Technologies Ltd. is to be excluded from the list of comparables taken by the Ld.TPO. we do not find any error in the said finding given by the Ld.CIT(A) and therefore we are accepting the deletion of the said comparable by the Ld.CIT(A) as a correct one. 20. The next company which was deleted by the Ld.CIT(A) for the purpose of taking the same as comparables is M/s. Infosys BPO Ltd. 21. We have considered the submission made by the assessee that the said company is having a high brand value and they are market leader and therefore the said company could not be taken as a comparable. We also consider the submission made by the assessee that the said company is functionally dissimilar and it has huge brand value and the said company has acquired McCamish Systems LLC and their turnover is Rs. 1129 crores. 22. We have considered the above said arguments and the Ld.CIT(A) had considered all the reasons for excluding the said company including the turnover. The revenue had challenged the said finding of the Ld.CIT(A) on Page 30 of 33 ITA No. 2110/Bang/2024 the ground that the exclusion based on the huge turnover is not correct and insofar as the other reasons for excluding the said company, the revenue had not raised any pleas. 23. We have also gone through the audit report of the said company and also the name of the company itself indicates that the said company is having brand value and they are supposed to be the market leader. The revenue had also not disputed the acquisition made by the assessee and the functional dissimilarity between the assessee and the company. 24. In such circumstances, we are of the view that even though, there are several reasons for excluding the said company from the comparables, the revenue’s grievance that the company should not be excluded based on the huge turnover is not correct. The other reasons for excluding the said company were not disputed by the revenue and therefore on the other reasons, the said company could be excluded from the comparables. We, therefore, find that the order of the Ld.CIT(A) is in order and requires no interference insofar as the exclusion of M/s. Infosys BPO Ltd. is concerned. 25. The next company which was deleted by the Ld.CIT(A) for the purpose of taking the same as comparables is M/s. Jeevan Scientific Technology Ltd. We have considered the submission made by the assessee that the said company is also functionally different since they derive revenue from BPO operations, ERP projects implementation, corporate and student training program, income from study centres and HR staffing services. The assessee further submitted that the company’s segment details were not available and also the TPO had considered the BPO operations and the ERP projects implementation segments as comparables when the ERP segment is not at all comparable to the assessee. We have also considered the other contention that the company fails the export earning filter and the margins of the BPO also widely varies. Page 31 of 33 ITA No. 2110/Bang/2024 26. We have considered the said arguments and also gone through the annual report of the said company and from the said report, it is clear that the company is a functionally different company and their margins are fluctuated very widely and they also fail in the export earning filter. Further, the inclusion of the said company based on the ERP segment is also not correct which could not be taken as a comparable to the company. By considering all the details and also the functions performed by the said company, the Ld.CIT(A) had deleted the said company from the comparables. 27. In the present appeal, the revenue had challenged the said finding only on the ground that the fluctuation in margin could not be a reason to exclude the said company. We find that the other details available in the audit report as well as in the orders of the Tribunal, the said company is liable for exclusion not only based on the wide fluctuation profit margin but also on different reasons which includes the functional differentiation and the failure in the turnover filter and also failure in the export earning filter. The entire facts were considered by the Ld.CIT(A) and the said company was excluded on various factors. In such circumstances, the order of the Ld.CIT(A) in excluding the said company is in order. 28. The next company which was deleted by the Ld.CIT(A) for the purpose of taking the same as comparables is M/s. iGate Global Solutions Ltd. 29. We have considered the submission made by the assessee that the said company is functionally different since they are engaged in development of software and ITeS. Further, the assessee submitted that the said company had acquired major shares in Patni Computer Systems Ltd. and therefore there would be a peculiar economic circumstances when compared with the assessee company. We have also considered the fact that the company owns significant intangible assets. We have also gone through the annual report of the said company in which the annual turnover of the said company is Rs. 1184 crores which is very high when compared with the Page 32 of 33 ITA No. 2110/Bang/2024 assessee company. Therefore, considering the entire facts, the Ld.CIT(A) had excluded the said company. The revenue had contended that the said company could not be excluded only on account of lack of segmental details. It shows that the revenue had accepted the other reasons on which the company was excluded. When the Ld.CIT(A) had considered the said facts and the audit report of the said company also exhibits the said reasons and the several orders of this Tribunal had excluded the said company as comparables in respect of the similarly placed assessees, we do not find any reason to take a contrary view. We, therefore, accept the order of the Ld.CIT(A) in which the company was excluded as comparables. 30. In view of the above said reasons and also in view of the materials placed before us, we came to the conclusion that the order of the Ld.CIT(A) in excluding the above said companies from the list of comparables are in order and does not require any interference. 31. We have also perused the judgment relied on by the assessee cited supra in which the Hon’ble Bombay High Court had held as follows: “(c) By the impugned order, the Tribunal allowed the Respondent-Assessee's appeal. It held that merely because an Assessee has included M/s. Indowind Energy Ltd. and B. F. Utilities Ltd. in its list of comparables to determine the ALP would not by itself estop a party from establishing that these companies are not comparable. The impugned order found that the two comparables viz: M/s. Indowind Energy Ltd. and B. F. Utilities Ltd., were engaged in completely different line of business i.e. generation of wind energy while the Respondent-Assessee is engaged in generation of solar energy. Thus, not functtionally comparable. In the above view, the impugned order on the basis of Function, Assets & Risk (FAR) analysis excluded M/s. Indowind Energy Ltd. and B. F. Utilities Ltd. from the list of final comparables to determine the ALP. (d) We find that the impugned order of the Tribunal holding that a party is not barred in law from withdrawing from its list of comparables, a company, if the same is found to have been included on account of mistake as on facts, it is not comparable. The Transfer Pricing Mechanism requires Page 33 of 33 ITA No. 2110/Bang/2024 comparability analysis to be done between like companies and controlled and un- controlled transactions. This comparison has to be done between like companies and requires carrying out of FAR analysis to find the same. Moreover, the Assessee's submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are, in fact comparable. The impugned order has on FAR analysis found that M/s. Indowind Energy Ltd. and B. F. Utilities Ltd. are not comparable. They are in a different area i.e. wind energy while the Respondent-Assessee is in the field of solar energy.” The above said finding of the Hon’ble Bombay High Court also supports the view taken by us. 32. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 03rd June, 2025. Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 03rd June, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore "