M/s Solidcore Techsoft Systems (India) Pvt. Ltd., Bangalore V. ITO ward-6(1)(2), Bangalore

CO 03/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6159 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) ASSESSMENT YEAR : 2010 - 11 M/S. SOLIDCORE TECHSOFT SYSTEMS, [NOW MERGED WITH MCAFEE SOFTWARE (INDIA) PVT. LTD.,] EMBASSY GOLF LINKS BUSINESS PARK, PINE VALLEY, 2 ND FLOOR, INTERMEDIATE RING ROAD, BANGALORE 560 071. PAN : AAHCS 7694 C VS. INCOME TAX OFFICER, WARD 6(1)(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI. K. R. VASUDEVAN, ADVOCATE REVENUE BY : SHRI. C. H. SUNDAR RAO, CIT DATE OF HEARING : 0 4 . 0 4 .201 9 DATE OF PRONOUNCEMENT : 10 . 0 5 .201 9 O R D E R PER SHRI. JASON P. BOAZ, A.M. THIS IS A CROSS OBJECTION (C.O.) FILED BY THE ASSESSEE IN RESPECT OF REVENUES APPEAL IN IT(TP)A NO.288/BANG/2015 FOR ASSESSMENT YEAR 2010-11, WITH RESPECT TO THE FINAL ORDER OF ASSESSMENT DATED 30.01.2015 FOR ASSESSMENT YEAR 2010-11. C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 2 OF 10 2. BRIEFLY STATED, THE FACTS OF THE MATTER ARE AS UNDER: 2.1 THE ASSESSEE COMPANY, A WHOLLY OWNED SUBSIDIARY OF SOLIDCORE, US, IS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS ASSOCIATED ENTERPRISES (AE); I.E., ITS HOLDING COMPANY. IN THE CASE ON HAND, THE CASE WAS TAKEN UP FOR SCRUTINY FOR THIS ASSESSMENT YEAR AND THE ASSESSING OFFICER (AO) MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE IN THE PERIOD UNDER CONSIDERATION. THE TPO, VIDE ORDER UNDER SECTION 92CA OF THE ACT DATED 30.01.2014 PROPOSED TP ADJUSTMENT OF RS.91,79,599/- IN RESPECT OF THE ASSESSEES INTERNATIONAL TRANSACTIONS WITH ITS AES IN THE SOFTWARE DEVELOPMENT SERVICES SEGMENT. THE DRAFT ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2010-11 WAS CONCLUDED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT VIDE ORDER DATED 17.03.2014 DETERMINING THE ASSESSEES INCOME AT RS.1,38,48,766/-; WHICH INCLUDED THE TP ADJUSTMENT OF RS.91,79,599/-. THE ASSESSEE FILED ITS OBJECTIONS THERETO BEFORE THE DRP; WHO VIDE DIRECTIONS ISSUED UNDER SECTION 144C(5) OF THE ACT ON 16.12.2014 ALLOWED THE ASSESSEE PARTIAL RELIEF; I.E., BY APPLYING THE UPPER TURNOVER FILTER, ALLOWED RISK ADJUSTMENT AT 1% AND THEREBY EXCLUDED CERTAIN COMPANIES FROM THE TPOS SET OF COMPARABLES. BY VIRTUE OF THE RELIEF GRANTED TO THE ASSESSEE IN THE DRPS ORDER, THE TP ADJUSTMENT PROPOSED BY THE TPO WAS REDUCED TO NIL AND THEREFORE THE ASSESSEE, IN ITS APPEAL BEFORE THE TRIBUNAL, DID NOT FILE GROUNDS ON OTHER ISSUES RELATED TO TRANSFER PRICING; THOUGH IT RAISED GROUNDS ON CERTAIN ISSUES PERTAINING TO CORPORATE TAX MATTERS. 2.2 AGGRIEVED WITH THE DRPS DIRECTIONS, PURSUANT TO WHICH THE TP ADJUSTMENT WAS REDUCED TO NIL AS PER THE IMPUGNED FINAL ORDER OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT DATED 30.01.2015, REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL ON VARIOUS ISSUES; INCLUDING BOTH THE ISSUES OF C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 3 OF 10 APPLICATION OF UPPER TURNOVER FILTER AND GRANT OF RISK ADJUSTMENT; VIZ., IN IT(TP)A NO.288/BANG/2015. THE ASSESSEE HAD PREFERRED CROSS APPEAL IN IT(TP)A NO.609/BANG/2015. THE ASSESSEE HAD ALSO FILED CROSS OBJECTIONS (C.O.) VIDE LETTER DATED 19.06.2015, WHICH WAS RECEIVED BY THE REGISTRY ON 23.06.2015; AS HAS BEEN ACKNOWLEDGED ON FORM NO.36A. 2.3 BOTH THE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2010-11 CAME TO BE DISPOSED OFF BY THE TRIBUNALS ORDER IN IT(TP)A NO.288 AND 609/BANG/2015 DATED 28.04.2017. HOWEVER, THE C.O. HAD NOT GOT LISTED WITH THESE APPEALS AND HENCE WAS NOT HEARD ALONG WITH THE CROSS APPEALS. IN THE TRIBUNALS ORDER DATED 28.04.2017, THE CO-ORDINATE BENCH CONFIRMED THE DECISION OF THE DRP IN APPLYING THE UPPER TURNOVER FILTER, BUT UPHELD REVENUES CONTENTION THAT RISK ADJUSTMENT SHOULD NOT BE GRANTED; THEREBY REVERSING THE DRPS ORDER ON THIS POINT. 2.4 AGGRIEVED BY THE TRIBUNALS ORDER DATED 28.04.2017 IN IT(TP)A NO.288 AND 609/BANG/2015, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT RAISING VARIOUS GROUNDS; INCLUDING, INTER ALIA, THAT THE TRIBUNAL ERRED IN NOT ADJUDICATING THE C.O. FILED. ON THIS ISSUE, THE HONBLE KARNATAKA HIGH COURT IN ITS ORDER IN ITA NO.848/2017 DATED 04.07.2018 RULED THAT IF THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NOT DECIDED BY THE TRIBUNAL, THE ASSESSEE ITSELF MAY FILE PROPER MISCELLANEOUS PETITION (M.P) BEFORE THE TRIBUNAL IN THIS REGARD. PURSUANT THERETO, THE ASSESSEE FILED AN APPLICATION AND THE C.O. GOT LISTED FOR HEARING AND IS BEFORE US FOR ADJUDICATION. 3.0 IN THE CROSS OBJECTIONS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE RESPONDENT WISHES TO RELY UPON THE DIRECTIONS (DATED 15 DECEMBER, 2014) PASSED UNDER SECTION 144C (5) OF THE INCOME-TAX ACT, 1961 BY THE HON'BLE DISPUTE RESOLUTION C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 4 OF 10 PANEL ('DRP') AND GROUNDS OF APPEAL FILED IN FORM 35A BEFORE THE HON'BLE DRP WHICH WAS DISREGARDED BY THE ASSESSING OFFICER ('LD. AO')/ TRANSFER PRICING OFFICER ('LD. TPO') WHILE FILING AN APPEAL BEFORE THE HON'BLE TRIBUNAL. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO ERRED IN OBJECTING TO THE UPPER LIMIT FOR SALES TURNOVER FILTER WITHOUT PROVIDING ANY EMPIRICAL ANALYSIS. IN DOING SO, THE LD. AO / LD. TPO ERRED IN NOT APPRECIATING THAT THE SOFTWARE/BUSINESS PROCESS OUTSOURCING INDUSTRY IS CLEARLY DEMARCATED BASED ON SIZE. 3. SUBJECT TO THE ABOVE, THE HON'BLE DRP HAS ERRED IN NOT ADJUDICATING ON THE OTHER GROUNDS APART FROM THE TURNOVER FILTER, RAISED BY THE ASSESSEE IN CASE OF THE FOLLOWING COMPARABLE COMPANIES: A. INFOSYS TECHNOLOGIES LIMITED ('INFOSYS') - THE HON'BLE DRP OUGHT TO HAVE ADJUDICATED ON THE GROUND THAT INFOSYS IS FUNCTIONALLY NOT COMPARABLE AS IT IS ENGAGED IN RESEARCH AND DEVELOPMENT ACTIVITIES AND HAS BRAND PRESENCE IN THE MARKET WHICH RESULTS IN CREATION OF SUBSTANTIAL INTELLECTUAL PROPERTY. B. TATA ELXSI LIMITED ('TATA ELXSI') - THE HON'BLE DRP OUGHT TO HAVE ADJUDICATED ON THE GROUND THAT TATA ELXSI IS ENGAGED IN HARDWARE DESIGN AND IS HENCE FUNCTIONALLY NOT COMPARABLE. C. LARSEN AND TOUBRO INFOTECH LIMITED ('L&T'): THE HON'BLE DRP OUGHT TO HAVE ADJUDICATED ON THE GROUND THAT L&T IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS AND IS HENCE FUNCTIONALLY NOT COMPARABLE. 4. SUBJECT TO THE ABOVE, THE HON'BLE DRP HAS ERRONEOUSLY UPHELD THE INCLUSION OF KALS INFORMATION SYSTEM LTD. ALTHOUGH THE COMPANY IS PREDOMINANTLY A PRODUCT COMPANY AND IS NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT. 4.1 IN THE PROCEEDINGS BEFORE US, THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE CROSS OBJECTION (CO) IS AN INDEPENDENT APPEAL AND CAN BE HEARD SEPARATELY. IT WAS SUBMITTED THAT THE C.O. WAS FILED IN TIME BY THE ASSESSEE AND THE FACT THAT IT WAS NOT LISTED FOR HEARING ALONG WITH REVENUES APPEAL IS NOT DUE TO ANY FAULT ON THE PART OF THE ASSESSEE, BUT DUE TO REASONS BEYOND ITS CONTROL. IT WAS ALSO SUBMITTED C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 5 OF 10 THAT, AFTER THE DECISION OF THE DRP WITH RESPECT TO RISK ADJUSTMENT WAS REVERSED BY THE TRIBUNAL, VIDE ITS ORDER IT(TP)A NO.288/BANG/2015 DATED 28.04.2017, THE ASSESSEE WILL BE LEFT WITH A TP ADJUSTMENT AND TAX DEMAND AND THEREFORE ADJUDICATION OF THE GROUNDS RAISED IN THE C.O. IS NECESSARY FOR THE ASSESSEE. IN SUPPORT OF THE PROPOSITION THAT THE C.O. IS AN INDEPENDENT APPEAL AND CAN BE HEARD INDEPENDENTLY EVEN IF REVENUES APPEAL HAS BEEN DISPOSED OFF, THE LEARNED AR PLACED RELIANCE, INTER ALIA, ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) CITY CENTRE BUILDERS AND DEVELOPERS IN WP NO.7668 OF 2016 DATED 02.06.2016 (KERALA HC); AND (II) DBS BANK LTD., VS. DDIT (IT) IN C.O. NO.189/MUM/2013 DATED 15.06.2016 (ARISING OUT OF ITA NO.434/MUM/2011 FOR ASSESSMENT YEAR 1995-96). 4.2.1 WE HAVE CONSIDERED THE SUBMISSIONS / CONTENTIONS PUT FORTH AND CAREFULLY PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. THE C.O. HAS BEEN FILED BEFORE THE TRIBUNAL BY THE ASSESSEE ON 23.06.2015; AS CAN BE SEEN FROM THE ENDORSEMENT OF THE REGISTRY ON FORM 36A IN THE CASE ON HAND AND THE REASON FOR NOT LISTING OF THE C.O. ALONG WITH REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 CERTAINLY CANNOT BE ATTRIBUTED TO THE ASSESSEE. THE HONBLE KERALA HIGH COURT IN THE CASE OF CITY CENTRE BUILDERS AND DEVELOPERS (SUPRA) HAD HELD THAT THE C.O. HAS TO BE TREATED AS AN INDEPENDENT APPEAL AND HAS TO BE DECIDED IRRESPECTIVE OF THE FACT THAT REVENUES APPEAL HAS BEEN DISMISSED, FOR WHATEVER GROUNDS. THE ABOVE PRINCIPLE HAS BEEN FOLLOWED, INTER ALIA, BY THE ITAT, BOMBAY BENCH IN THE CASE OF M/S. DBS BANK LTD., VS. DDIT (SUPRA); WHEREIN AT PARAS 3.3.1 AND 3.3.2 THEREOF, IT WAS HELD AS UNDER: C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 6 OF 10 3.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE JUDICIAL PRONOUNCEMENTS REFERRED TO (SUPRA). SECTION 253(4) OF THE ACT DEALS WITH THE FILING OF COS. RULE 22 OF THE IT(AT) RULES, 1963 ALSO LAYS DAWN THE PROCEDURE TO BE ADOPTED FOR TREATMENT OF COS. THE PROVISIONS OF SECTION 253(4) AND RULE ARE EXTRACTED HEREUNDER: - 'SECTION 253(4) - THE ASSESSING OFFICER OR THE ASSESSEE, AS THE CASE MAY BE, ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST THE ORDER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) OR THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL HAS BEEN PREFERRED UNDER SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECTION (2A) BY THE OTHER PARTY, MAY, NOTWITHSTANDING THAT HE MAY NOT HAVE APPEALED AGAINST SUCH ORDER OR ANY PART THEREOF; WITHIN THIRTY DAYS OF THE RECEIPT OF THE NOTICE, FILE A MEMORANDUM OF CROSS-OBJECTIONS, VERIFIED IN THE PRESCRIBED MANNER, AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL) OR DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), AND SUCH MEMORANDUM SHALL BE DISPOSED OF DBS BANK LTD. BY THE APPELLATE TRIBUNAL AS IF IT WERE AN APPEAL PRESENTED WITHIN THE TIME SPECIFIED IN SUB-SECTION (3) OR SUB-SECTION (3A).' 'RULE 22 - A MEMORANDUM OF CROSS-OBJECTIONS FILED UNDER SUB-SECTION (4) OF SECTION 253 SHALL BE REGISTERED AND NUMBERED AS AN APPEAL AND ALL THE RULES, SO FAR AS MAY BE, SHALL APPLY TO SUCH APPEAL.' 3.3.2 ON A PERUSAL OF THE PROVISIONS OF LAW AND THE CITED DECISION WE FIND THAT IN THE CASE OF KRIPA CHEMICALS (P) LTD. (2002) 82 ITD 449 (PUNE) THE PUNE BENCH OF THE ITAT HAS OBSERVED THAT THE HON'BLE APEX COURT IN THE CASE OF B. SUBBA REDDY AIR 1999SCW 1479 HAD HELD THAT EVEN WHERE AN APPEAL IS WITHDRAWN OR IS DISMISSED FOR DEFAULT, THE CO WAS TO BE ADMITTED AND ADJUDICATED. IT IS ALSO SEEN THAT THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. PURBANCHAL PARIBAHAN GOSTHI (SUPRA) ON THE ISSUE OF COS REFERRING TO SECTION 253 OF THE ACT R.W. RULE 22 OF THE IT(AT) RULES, 1963 HAS HELD THAT IT CAN BE SAFELY HELD THAT THERE IS ABSOLUTELY NO DIFFERENCE BETWEEN AN APPEAL AND A CO, SAVE THAT AN APPEAL CAN BE PREFERRED WITHIN 6O DAYS OF RECEIPT OF THE ORDER WHEREAS A CO CAN BE FILED WITHIN A PERIOD OF 30 DAYS OF THE DATE OF SERVICE OF APPEAL BY THE OPPOSITE PARTY. RESPECTFULLY, FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF SUPERINTENDENT ENGINEER VS. B. SUBBA REDDY (SUPRA) C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 7 OF 10 AND THE DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF KRIPA CHEMICALS (P) LTD. (SUPRA), WE HOLD THAT IN THE CASE ON HAND EVEN THOUGH REVENUE'S APPEAL IN ITA NO. 434/MUM/ 2011 FOR A.Y. 1995-06 WAS DISMISSED ON ACCOUNT OF LOW TAX EFFECT (I.E. TAX BEING BELOW ' 10 LAKHS), THE ASSESSEE'S CO IS TO BE ADMITTED AND ADJUDICATED. IN THIS VIEW OF THE MATTER, WE REJECT THE PRELIMINARY OBJECTION OF THE LEARNED D.R. FOR REVENUE IN RESPECT OF THE MAINTAINABILITY OF THE ASSESSEE'S CO FOR A.Y. 1995-96. 4.2.2 THE PRINCIPLE LAID DOWN IN THE AFORESAID DECISION OF THE ITAT, MUMBAI BENCH IN DBS BANK LTD., (SUPRA), IN OUR CONSIDERED VIEW, APPLIES SQUARELY TO THE ASSESSEES CASE. IN THIS VIEW OF THE MATTER, WE UPHOLD THE ASSESSEES CONTENTIONS THAT THE C.O. IS AN INDEPENDENT APPEAL AND PROCEED TO CONSIDER AND ADJUDICATE THE ISSUE RAISED THEREIN. 5. GROUND NOS. 1 TO 3 OF C.O. 5.1 AS REGARDS GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE IN THE C.O. (SUPRA), THE LEARNED AR FOR THE ASSESSEE AT THE OUTSET OF THE HEARING BEFORE US SUBMITTED THAT THESE GROUNDS ARE NOT BEING PRESSED BY THE ASSESSEE. IN VIEW OF GROUND NOS. 1 TO 3 OF C.O. (SUPRA) NOT BEING PRESSED BY THE ASSESSEE, THEY ARE RENDERED INFRUCTUOUS AND ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 6. GROUND NO.4 KALS INFORMATION SYSTEM LTD., (SEG) (KALS) 6.1 IN THIS GROUND (SUPRA), THE ASSESSEE SEEKS EXCLUSION OF THIS COMPANY KALS FROM THE TPOS SET OF COMPARABLES. ACCORDING TO THE LEARNED AR, THIS COMPANY, KALS, WAS CHOSEN AS A COMPARABLE BY THE TPO AND UPHELD BY DRP, OVERRULING THE OBJECTIONS RAISED BY THE ASSESSEE TO ITS INCLUSION ON GROUNDS OF BEING FUNCTIONALLY DIFFERENT AS IT IS A PRODUCT DEVELOPMENT COMPANY UNLIKE THE ASSESSEE IN THE CASE ON HAND WHO IS MERELY A PROVIDER OF SOFTWARE DEVELOPMENT SERVICES TO C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 8 OF 10 ITS AE. IT WAS SUBMITTED THAT IN A CATENA OF DECISIONS, CO-ORDINATE BENCHES OF THIS TRIBUNAL HAVE CONSISTENTLY HELD THAT KALS IS A PRODUCT COMPANY AND IS NOT COMPARABLE TO A COMPANY THAT IS MERELY PROVIDING SOFTWARE DEVELOPMENT SERVICES. IN SUPPORT OF THIS CONTENTION, THE LEARNED AR PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CERNER HEALTHCARE SOLUTIONS (P) LTD., VS. ITO IN IT(TP)A NOS.44 AND 69/BANG/2015 DATED 16.01.2017 FOR ASSESSMENT YEAR 2010-11; THE SAME ASSESSMENT YEAR AS THAT OF THE C.O./APPEAL IN THE CASE ON HAND. 6.2 PER CONTRA, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6.3.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS / SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. ADMITTEDLY, THIS COMPANY KALS IS A COMPARABLE CHOSEN BY THE TPO AND ITS INCLUSION UPHELD BY THE DRP REJECTING THE ASSESSEES OBJECTIONS TO ITS INCLUSION IN THE SET OF COMPARABLES ON GROUND OF IT BEING FUNCTIONALLY DIFFERENT FROM A SOFTWARE DEVELOPMENT SERVICE PROVIDER, LIKE THE ASSESSEE IN THE CASE ON HAND, AS IT IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE PRODUCTS. IN THIS REGARD, WE FIND THAT, INTER ALIA, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CERNER HEALTHCARE SOLUTIONS (P) LTD., IN ITS ORDER IN IT(TP)A NOS.44 AND 49/BANG/2015 DATED 16.01.2017; ALSO RENDERED FOR ASSESSMENT YEAR 2010-11 HAS HELD THAT KALS INFORMATION SYSTEMS LTD., ENGAGED IN THE DEVELOPMENT SOFTWARE PRODUCTS, CANNOT BE HELD TO BE COMPARABLE TO A COMPANY THAT RENDERS SOFTWARE DEVELOPMENT SERVICES TO ITS AE. THE RELEVANT PORTION OF THE AFORESAID DECISION OF THE CO-ORDINATE BENCH AT PARA 3 THEREOF IS EXTRACTED HEREUNDER:- C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 9 OF 10 (3) KALS INFORMATION SYSTEMS LTD. 6. THE ASSESSEE RAISED OBJECTIONS AGAINST THIS COMPANY ON THE GROUND THAT THIS COMPANY IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. FURTHER, THIS COMPANY CONSISTS OF STPI UNIT AND ALSO HAVING A TRAINING CENTRE ENGAGED IN TRAINING OF SOFTWARE PROFESSIONALS ON ONLINE PRODUCTS. THUS, WHEN THIS COMPANY IS HAVING REVENUE FROM SOFTWARE SERVICES AS WELL AS SOFTWARE PRODUCT. THE SAME CANNOT BE CONSIDERED AS COMPARABLE WITH SOFTWARE DEVELOPMENT SERVICE PROVIDING COMPANY. 7. THE DRP HAS DIRECTED THE AO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES BY TAKING NOTE OF THE FACT THAT THERE WERE INVENTORIES IN THE BOOKS OF ACCOUNTS OF THIS COMPANY WHICH SHOWS THAT THIS COMPANY IS IN THE SOFTWARE PRODUCT BUSINESS. FURTHER, BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA LTD. V. DCIT, ITA NO.1054/BANG/2011 DATED 23.11.2012, THIS COMPANY WAS FOUND TO BE NOT COMPARABLE WITH THAT OF THE ASSESSEE. 8. WE HAVE HEARD THE ID. DR AS WELL AS ID. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ID. DR HAS NOT DISPUTED THE FACT THAT COMPARABILITY OF THIS COMPANY HAS BEEN EXAMINED BY THIS TRIBUNAL IN A SERIES OF DECISIONS INCLUDING IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA LTD. (SUPRA). WE FURTHER NOTE THAT IN THE BALANCE SHEET OF THIS COMPANY AS ON 31.3.2010, THERE ARE INVENTORIES OF RS.60,47,977. THEREFORE, WHEN THIS COMPANY IS IN THE BUSINESS OF SOFTWARE PRODUCTS THE SAME CANNOT BE COMPARED WITH A PURE SOFTWARE DEVELOPMENT SERVICES PROVIDER. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED FINDINGS OF THE DRP. 6.3.2 RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CERNER HEALTHCARE SOLUTIONS PVT. LTD., (SUPRA) FOR ASSESSMENT YEAR 2010-11, WE HOLD THAT KALS INFORMATION SYSTEMS LTD., IS NOT A GOOD COMPARABLE TO THE ASSESSEE IN THE CASE ON HAND, WHO MERELY PROVIDES SOFTWARE DEVELOPMENT SERVICES AND THEREFORE DIRECT THE AO/TPO TO EXCLUDE IT FROM THE SET OF COMPARABLE COMPANIES. CONSEQUENTLY, GROUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED. C.O. NO.03/BANG/2019 (IN IT(TP)A NO.288/BANG/2015) PAGE 10 OF 10 7. IN THE RESULT, THE ASSESSEES CROSS OBJECTIONS FOR ASSESSMENT YEAR 2010-11 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF MAY, 2019. SD/- SD/ - SD/ - (LALIET KUMAR) JUDICIAL MEMBER (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 10 TH MAY, 2019. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.