M/s Cypress Semiconductor Technology India Private Limited, Bangalore V. DCIT, Bangalore

CO 166/BANG/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2471 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 28-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R REDDY CITIDR
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Related party transaction; Business income; Transfer pricing; Opportunity of being heard
• Section: 260A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(TP)A NO. 614/BANG/2013 ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. VS. M/S. CYPRESS SEMICONDUCTORS TECHNOLOGY INDIA PVT. LTD., 65/2, LAUREL C BLOCK, BAGMANE TECH PARK, C.V. RAMAN NAGAR, BANGALORE 560 093. PAN: AABCC 2470Q APPELLANT RESPONDENT CO NO.166/BANG/2015 [IN IT(TP)A NO. 614/B ANG/2013 ASSESSMENT YEAR : 2005-06 M/S. CYPRESS SEMICONDUCTORS TECHNOLOGY INDIA PVT. LTD., BANGALORE 560 093. PAN: AABCC 2470Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI G.R. REDDY, CIT-I(DR) ASSESSEE BY : SHRI T. SURYANARAYANA, ADVOCATE DATE OF HEARING : 25.10.2016 DATE OF PRONOUNCEMENT : 04.11.2016 IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 2 OF 35 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AND THE C ROSS OBJECTION IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(APPEALS). THESE WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS:- 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN EXCLUDING IGATE G LOBAL SOLUTIONS LTD ., M/S L&T INFOTECH LTD , SATYAM COMPUTERS LTD., LNFOSYS TECHNOLOGIES LTD , M/S . FLEXTRONICS SOFTWARE SYSTEMS LTD. FROM THE LIST OF COMPARABLES IN THE SEGMENT BY HOLDING THAT THE SIZE, TURNOVER OF THE COMPANY ARE DECIDING FACT ORS FOR TREATING A COMPANY AS A COMPARABLE. 3. THE LEARNED CIT(A), ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE. ERRED IN HOLDING THAT M/S . BODHTREE CONSULTING LTD AND GEOMETRIC SOFTWARE SOLUTIONS CO. LTD. CAN NOT B E TAKEN AS COMPARABLES, WITHOUT APPRECIATING THAT THE COMPANIE S QUALIFY ALL THE QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE TPO IN SELECTION OF THESE COMPANIES AS COMPARABLES. 4. THE LEARNED CIT (A) HAS ERRED IN DIRECTING INC LUSION OF THE M/S. VJIL CONSULTING LTD., AS A COMPARABLE WITHOUT CALLI NG FOR A REMAND REPORT FROM THE TPO TO ASCERTAIN THE REASONS FOR REJECTION OF THE COMPARABLE BY THE TPO. 5. THE LEARNED CIT(A) HAS ERRED IN DIRECTING INCL USION OF THE M/S. VJIL CONSULTING LTD., WITHOUT APPRECIATING THE TPO' S CONCLUSION THAT THE COMPANY WAS AN INAPPROPRIATE CO MPARABLE FOR THE PURPOSE OF DETERMINING THE ARM'S LENGTH PRICE A S IT DID NOT SATISFY THE QUALITATIVE FILTERS APPLIED FOR THE PUR POSE OF COMPARABILITY ANALYSIS. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 3 OF 35 6. THE LEARNED CIT(A), ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, ERRED IN HOLDING THAT M/S. TATA ELXSI LTD., CAN NOT BE TAKEN AS A COMPARABLE, BEING FUNCTIONALLY DIFFERENT WITHOUT APPRECIATING THE FACT THAT IT SATISFIES ALL THE ALL THE QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE TPO. 7. THE LD. CIT(A) ERRED IN EXCLUDING EXENSYS SOFTW ARE SOLUTIONS LTD AND THIRDWARE SOLUTIONS LTD. FROM THE LIST OF COMPARABLES ON THE BASIS OF ABNORMAL PROFIT WITHOUT DEFINING WHAT CONSTITUTES ABNORMAL PROFIT FILTER AND HOW THE SAME IS DETERMINED. 8. THE LEARNED CIT(A) ERRED IN REJECTING THE DIMIN ISHING REVENUE FILTER USED BY THE TPO TO EXCLUDE COMPANIES THAT DO NOT REFLECT THE NORMAL INDUSTRY TREND. 9. THE LEARNED CIT(A) ERRED IN REJECTING THE EMPLO YEE COST FILTER APPLIED BY THE TPO TO SELECT COMPANIES WHICH ARE PREDOMINANTLY INTO SOFTWARE DEVELOPMENT SERVICES. 10. THE CIT (A) ERRED IN ALLOWING THE ASSESSEE'S C LAIM OF DEDUCTION U/S 10A IN RESPECT OF UNIT-II WITHOUT APPRECIATING THE FACT THAT THE CUSTOM BONDING LICENSES WERE OBTAINED ONLY ON 29.1.2002 WHILE THE BUSINESS ACTIVITY HAD COMMENCED EVEN BEFORE OBTAINING APPROVAL FROM THE STPI AUTHOR ITIES. 11. THE LD. CIT (A) ERRED IN NOT APPRECIATING THE FACTS AND CIRCUMSTANCES BROUGHT OUT BY THE AO TO DETERMINE WH ETHER THE UNIT-II WAS A NEW UNDERTAKING OR HAD FORMED BY TAKI NG OVER AN EXISTING CONCERN WHICH HAD ALREADY A SOURCE OF INCO ME. 12. THE LD. CIT (A) ERRED IN RELYING ON THE DECISI ON OF THE HON'BLE ITAT FOR THE A.YS 2002-03, 2003-04 & 2004-0 5 WITHOUT APPRECIATING THE FACT THAT THE DECISION RELIED UPON HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEALS U/S 260A HAVE BEEN FILED BEFORE HON'BLE HIGH COURT WHICH ARE STIL L PENDING. 14. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE U RGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 4 OF 35 15. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, T O AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITS CO AR E AS FOLLOWS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) - IV, BANGALORE ('LEARNED CIT(A)') ERRED IN UPHOLDING THE LEARNED ADDITIONAL DIRECTOR OF INCOME-TAX (TRANSFER PRICING ) - I, BANGALORE ('LEARNED TPO')'S APPROACH OF REJECTING T HE ECONOMIC ANALYSIS UNDERTAKEN BY THE RESPONDENT AND CONDUCTIN G A FRESH ECONOMIC ANALYSIS FOR DETERMINING THE ARM'S L ENGTH PRICE. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF DISREGARDING APPLICATION OF MULTI PLE YEAR/ PRIOR YEAR DATA AS USED BY THE RESPONDENT IN THE TR ANSFER PRICING DOCUMENTATION (TP DOCUMENTATION') AND HOLDING THAT CURRENT YEAR (I.E. FINANCIAL YEAR 2004-05) DATA FOR COMPANI ES SHOULD BE USED FOR COMPARABILITY. 3. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF USING DATA AS AT THE TIME OF ASSE SSMENT PROCEEDINGS, INSTEAD OF THAT AVAILABLE AS ON THE DA TE OF PREPARING THE TP DOCUMENTATION FOR COMPARABLE COMPANIES WHILE DETERMINING THE ARM'S LENGTH PRICE, IGNORING THE FA CT THAT THIS DATA WAS NOT AVAILABLE TO THE RESPONDENT AT THE TIME OF COMPLYING WITH THE TP DOCUMENTATION REQUIREMENTS. 4. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF COLLECTING SELECTIVE INFORMATION OF THE COMPANIES BY EXERCISING POWERS GRANTED TO HIM UNDER SECTION 133(6) OF THE ACT THAT WAS NOT AVAILABLE TO THE RES PONDENT IN THE PUBLIC DOMAIN AND RELYING ON THE SAME FOR COMPARABI LITY PURPOSES. 5. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF IGNORING THE LIMITED RISK NATURE OF THE SERVICES PROVIDED BY THE RESPONDENT AND IN NOT PROVIDING AN APPROPRIATE ADJUSTMENT TOWARDS THE RISK DIFFERENTIAL, EVEN WHEN FULL-FLEDGED ENTREPRENEURIAL COMPANIES ARE SELECTED AS COMPARABL ES. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 5 OF 35 6. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF USING THE FOREIGN EXCHANGE EARNIN GS> 25% OF TOTAL EARNINGS FILTER FOR THE EXCLUSION OF CERTAIN COMPANIES (SYNETARIOS TECHNOLOGIES LIMITED AND INDUS NETWORKS LIMITED (SEGMENTAL)) WHICH ARE COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT SERVICES. 7. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF USING THE ONSITE REVENUE> 75% OF EXPORT REVENUE FILTER FOR THE EXCLUSION OF CERTAIN COMPANI ES (AKSHAY SOFTWARE TECHNOLOGIES LIMITED, GOLDSTONE TECHNOLOGI ES LIMITED AND ORIENT INFORMATION TECHNOLOGY LIMITED) WHICH AR E COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFT WARE DEVELOPMENT SERVICES. 8. THAT THE LEARNED CITCA) ERRED IN UPHOLDING THE LEARNED TPO'S APPROACH OF EXCLUSION OF MELSTAR INFORMATION TECHNOLOGY LIMITED WHICH IS COMPARABLE TO THE RESPONDENT IN RE SPECT OF ITS SOFTWARE DEVELOPMENT SERVICES. 9. THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THA T CERTAIN COMPANIES (FLEXTRONICS LIMITED, INFOSYS TECHNOLOGIE S LIMITED AND SATYAM COMPUTER SERVICES LIMITED) FAIL THE TEST OF COMPARABILITY, EVEN APART FROM HAVING A TURNOVER> I NR 200 CRORES AND THUS NOT COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT SERVICES. 10. THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD TH AT CERTAIN COMPANIES (EXENSYS SOFTWARE SOLUTIONS LIMITED AND T HIRDWARE SOLUTIONS LIMITED) FAIL THE TEST OF COMPARABILITY, EVEN APART FROM HAVING A ABNORMALLY HIGH PROFITS AND THUS NOT COMPA RABLE TO THE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT S ERVICES. 11. THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THA T CERTAIN COMPANIES (BODHTREE CONSULTING LTD AND GEOMETRIC SO FTWARE SOLUTIONS CO. LTD) FAIL THE TEST OF COMPARABILITY O N ACCOUNT OF HAVING RELATED PARTY TRANSACTIONS> 15%, EVEN APART FROM BEING FUNCTIONALLY DIFFERENT AND THUS NOT COMPARABLE TO T HE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT S ERVICES. 12. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING TH E ACTION OF THE LEARNED TPO OF ACCEPTING SANKHYA INFOTECH LIMIT ED WHICH IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 6 OF 35 FAILS THE TEST OF COMPARABILITY, AS COMPARABLE TO T HE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT SERVICES. 13. THAT THE LEARNED CITCA) OUGHT TO HAVE HELD THA T FOUR SOFT LIMITED FAILS THE TEST OF COMPARABILITY ON ACCOUNT OF HAVING RELATED PARTY TRANSACTIONS> 15% AND IS ALSO FUNCTIO NALLY DIFFERENT AS COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS S OFTWARE DEVELOPMENT SERVICES. 14 THAT THE LEARNED C1T(A) ERRED IN REJECTING THE RESPONDENT'S APPROACH OF APPLYING THE R&D EXPENSES> 3% OF TOTAL SALES FILTER AND INCLUDING CERTAIN COMPANIES (FOUR SOFT LIMITED, VISUALSOFT TECHNOLOGIES LIMITED, SASKEN COMMUNICATION TECHNOLOGIES LIMITED AND FLEXTRONICS LIMITED) WHICH ARE NOT COMPARABLE TO THE RESPONDENT IN RESPE CT OF ITS SOFTWARE DEVELOPMENT SERVICES. 15. THAT THE LEARNED C1T(A) OUGHT TO HAVE HELD THA T VISUALSOFT TECHNOLOGIES LIMITED FAILS THE TEST OF C OMPARABILITY AS COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFT WARE DEVELOPMENT SERVICES. 16. THAT THE LEARNED C1T(A) OUGHT TO HAVE HELD THA T COMPANIES WITH RELATED PARTY TRANSACTIONS> 15% ARE NOT COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT SERVICES. 17. THAT THE LEARNED C1T(A) OUGHT TO HAW HELD THAT COMPANIES WHICH FAIL THE TEST OF COMPARABILITY ON THE BASIS O F FUNCTIONAL DIFFERENCE, COULD NOT BE TAKEN AS BEING COMPARABLE TO THE RESPONDENT IN RESPECT OF ITS SOFTWARE DEVELOPMENT S ERVICES AND SHOULD BE EXCLUDED. 18. THAT THE CONTENTION OF THE LEARNED AO IS BAD I N LAW AND ON FACTS WHILE STATING THAT THE ORDER OF THE LEARNED CIT(A) IS PREJUDICIAL TO THE INTEREST OF RE VENUE AND IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF T HE CASE. THAT THE RESPONDENT CRAVES LEAVE TO ADD TO AND/ OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 7 OF 35 4. APROPOS GROUND NOS. 1 TO 9 OF REVENUES APPEAL R ELATING TO TRANSFER PRICING (TP) ADJUSTMENTS, THE REVENUE WANTS INCLUSI ON OF CERTAIN COMPARABLES. THE FACTS IN BRIEF ON THIS ISSUE CULL ED OUT FROM THE ORDERS OF AUTHORITIES BELOW ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF VERY LARGE SCALE INTEGRATION (VLSI), BUSINESS AND DEVELO PMENT. THE ASSESSEE IS A LEADING SUPPLIER OF HIGH PERFORMANCE SOLUTION PERSONNEL/NETWORK ACCESS, ENTERPRISE, METRO SWITCH AND CORE COMMUNICA TIONS SYSTEM APPLICATIONS, ACCORDING TO THE ASSESSEE. IT DESIGN S, MANUFACTURES AND MARKETS HIGH PERFORMANCE DIGITAL AND MIXED-SIGNAL I NTEGRATED STORAGE FOR A RANGE OF MARKETS. IT IS A SUBSIDIARY OF CYPRESS SE MICONDUCTOR TECHNOLOGY LTD., CAYMAN ISLAND AND IS ENGAGED IN PROVIDING SOF TWARE DEVELOPMENT AND TESTING SERVICES TO ITS ASSOCIATES ENTERPRISE (AE) AS A CAPTIVE SERVICE PROVIDER IN THE AREAS OF INTEGRATED STORAGE FOR MEM ORY INTERFACES, DATA COMMUNICATION APPLICATIONS. 5. DURING THE IMPUGNED FINANCIAL YEAR RELEVANT TO A Y 2005-06, THE ASSESSEE RENDERED SOFTWARE DEVELOPMENT SERVICES TO ITS AE AT A PRICE OF RS.38,92,30,738 FOR WHICH A TP ADJUSTMENT WAS MADE BY THE TPO TO AN EXTENT OF RS.5,07,53,793. 6. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPE ALS), WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 7. THE METHODOLOGY ADOPTED BY THE ASSESSEE FOR COMP UTING THE OPERATING PROFIT IS TNMM AND THE METHODOLOGY ADOPTE D BY THE ASSESSEE IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 8 OF 35 WAS NOT DISPUTED BY THE TPO. NO DISPUTE WAS RAISED WITH RESPECT TO PROFIT LEVEL INDICATOR (PLI) AS THE ASSESSEE AND TPO HAS A DOPTED PLI AS OP/TC. DATABASE USED BY THE ASSESSEE AS WELL AS TPO IS PRO WESS & CAPITALINE PLUS. WHILE PREPARING TP STUDY, COMPARABLES SELECT ED FOR SOFTWARE DEVELOPMENT SERVICES BY THE ASSESSEE WERE 87, WHERE AS THE TPO HAS SELECTED THE COMPARABLES FOR COMPUTING THE ALP AS 1 7. 8. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS FILED A CHART DETAILING THE COMPARABLES TAKEN BY TH E TPO. IN THIS CHART, THE ASSESSEE HAS ALSO SOUGHT THE INCLUSION OF 2 MORE CO MPARABLES. THE TPO HAS TAKEN THE FOLLOWING 17 COMPARABLES:- 1. BODHTREE CONSULTING LTD. 2. LANCO GLOBAL SYSTEMS LTD. 3. EXENSYS SOFTWARE SOLUTIONS LTD. 4. SANKHYA INFOTECH LTD. 5. SASKEN NETWORK SYSTEMS LTD. 6. FOUR SOFT LTD. 7. THIRDWARE SOLUTION LTD. 8. R S SOFTWARE (INDIA) LTD. 9. GEOMETRIC SOFTWARE SOLUTIONS COMPANY LTD. 10. TATA ELXSI LTD. 11. VISUALSOFT TECHNOLOGIES LTD. 12. SASKEN COMMUNICATION TECHNOLOGIES LTD. 13. IGATE GLOBAL SOLUTIONS LTD. 14. FLEXTRONICS SOFTWARE SYSTEMS LTD. 15. L&T INFOTECH LTD. 16. SATYAM COMPUTER SERVICES LTD. 17. INFOSYS TECHNOLOGIES LTD. 9. THE CIT(APPEALS) HAS REJECTED 10 COMPARABLES OUT OF THE AFORESAID 17 COMPARABLES. THE REJECTED COMPARABLES ARE AS UN DER:- IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 9 OF 35 1. FLEXTRONICS SOFTWARE SYSTEMS LTD. 2. L&T INFOTECH LTD. 3. INFOSYS TECHNOLOGIES LTD. 4. SATYAM COMPUTER SERVICES LTD. 5. IGATE GLOBAL SOLUTIONS LTD. 6. EXENSYS SOFTWARE SOLUTIONS LTD. 7. THIRDWARE SOLUTIONS LTD. 8. BODHTREE CONSULTING LTD. 9. GEOMETRIC SOFTWARE SOLUTIONS LTD. 10. TATA ELXSI LTD. 10. AGAINST THE REJECTION OF THESE COMPARABLES BY T HE CIT(APPEALS), THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE TPO FOR THE INCLUSIO N. WHEREAS, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT ALL THE SE COMPARABLES WERE EXAMINED BY THE TRIBUNAL IN DIFFERENT CASES, THEREF ORE THEY HAVE TO BE RETAINED. COPIES OF THE ORDERS OF TRIBUNAL HAVE BE EN FILED. 11. HAVING CAREFULLY EXAMINED THE RIVAL SUBMISSIONS , WE FEEL IT PROPER TO DEAL EACH AND EVERY COMPARABLE OF WHICH EXCLUSION W AS SOUGHT BY THE REVENUE. 12. WITH RESPECT OF BODHTREE CONSULTING LTD. , THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS COMPANYS FUNCTION IS DIFFERENT AS IT IS ENGAGED IN PRODUCT DEVELOPMENT AND ITES. THIS COMP ANY WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. V. DCIT IN IT(TP)A NO.1360/BANG/2011 FOR THE AY 2005-06 BY THE TRIBUNAL AND THE TRIBUNAL HAS DIRECTED THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES, FOLLOWING THE ORDER OF TRIBUNAL IN THE CASE OF KODIAK NETWORKS INDIA PVT. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 10 OF 35 LTD. [IT(TP)A NO.532/BANG/2015 & CO 119/BANG/2015] . A COPY OF ORDER OF KODIAK NETWORKS INDIA PVT. LTD. IS PLACED ON RECORD. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDE R FOR THE SAKE OF REFERENCE:- 20. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVA L CONTENTIONS. DECISION OF THE COORDINATE BENCH IN M /S. KODIAK NETWORKS INDIA PVT. LTD. (SUPRA) HAS CONSIDERED THE COMPARABILITY OF M/S. BODHTREE CONSULTING LTD. WITH M/S. KODIAK NETW ORKS INDIA PVT. LTD., (SUPRA). M/S. KODIAK NETWORKS INDIA PVT . LTD., (SUPRA) WAS ALSO PROVIDING SOFTWARE DEVELOPMENT SERVICES AN D ITS REVENUE CAME TO RS.16.23 CRORES. CONCERNED ASSESSMENT YEAR WAS ALSO 2005- 06. VIS--VIS COMPARABILITY OF M/S. BODHTREE CONSU LTING LTD., THIS TRIBUNAL HAS HELD AS UNDER AT PARA 32 TO 34 OF ITS ORDER: 32. IN THE C.O. THE ASSESSEE HAS ALSO PRAYED FOR EX CLUSION OF BODHTREE CONSULTING LTD., WHICH WAS CONSIDERED AS A COMPARABLE COMPANY BY THE TPO/DRP. BODHTREE CONSULT ING LTD. WAS CHOSEN AS A COMPARABLE COMPANY BY THE ASSE SSEE IN ITS TP STUDY AND SAME WAS ACCEPTED AS A COMPARABLE BY THE TPO ALSO. EVEN BEFORE THE DRP, THE ASSESSEE DID NOT CHALLENGE THE INCLUSION OF THIS COMPANY AS A COMPAR ABLE. HOWEVER, IN THE CO FILED BEFORE THE TRIBUNAL, THE A SSESSEE HAS SOUGHT TO CHALLENGE THE INCLUSION OF THIS COMPA NY AS A COMPARABLE IN GROUND NO.5(D). THE LAW BY NOW IS WEL L SETTLED THAT ASSESSEE IS ENTITLED TO RAISE AN OBJEC TION REGARDING COMPARABILITY AT ANY STAGE OF PROCEEDINGS AND EVEN IN A CASE WHERE THE ASSESSEE HAS NOT RAISED OB JECTION FOR INCLUDING THE SAME AS A COMPARABLE BEFORE THE L OWER AUTHORITIES, OR THE ASSESSEE HAD CHOSEN IN ITS TP S TUDY A COMPANY WHICH IT SEEKS TO EXCLUDE AS A COMPARABLE. THE SPECIAL BENCH OF CHANDIGARH TRIBUNAL IN DCIT V. QUA RK SYSTEMS P. LTD. (2010) 38 SOT 307 HAS HELD THAT THE TRIBUNAL IS A FACT FINDING BODY AND THEREFORE HAS TO TAKE IN TO ACCOUNT ALL THE RELEVANT MATERIAL AND DETERMINE THE QUESTIO N AS PER THE STATUTORY REGULATIONS AND THAT TAX PAYER IS NOT ESTOPPED FROM POINTING OUT A MISTAKE IN THE ASSESSMENT, THOU GH SUCH IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 11 OF 35 MISTAKE IS A RESULT OF EVIDENCE ADDUCED BY THE TAX PAYER. WE THEREFORE PROCEED TO DETERMINE THE COMPARABILITY OF BODHTREE CONSULTING LTD. IN THIS REGARD, WE FIND THAT ITAT H YDERABAD BENCH IN IVY COMPUTECH (P) LTD. V. ACIT, (2014) 43 TAXMAN.COM 183 (HYD) TRIB. HAS TAKEN THE VIEW THAT BODHTREE CONSULTING LTD. SHOULD NOT BE REGARDED AS A COMPARABLE IN THE CASE OF SOFTWARE DEVELOPMENT SERV ICE PROVIDER. THE LD. COUNSEL FOR THE ASSESSEE ALSO BRO UGHT TO OUR NOTICE THAT COMPARABILITY OF THIS COMPANY WITH SOFT WARE DEVELOPMENT PROVIDER WAS CONSIDERED BY THIS TRIBUNA L IN MINDTECH INDIA LTD. V. DCIT, ITA NO.70/B/2014 FOR A Y 2009- 10, ORDER DATED 21.8.2014 AND IT WAS HELD AS UNDER: - 14. THE NEXT ASPECT THAT WAS CANVASSED BY THE LEAR NED COUNSEL FOR THE ASSESSEE WAS WITH REGARD TO THE EXC LUSION OF THE FOLLOWING COMPARABLES FROM THE LIST OF FINAL CO MPARABLES CHOSEN BY THE TPO : 1. BODHTREE CONSULTING LTD : AS FAR AS THIS COMPANY IS CONCERNED, THE SUBMISSION OF THE LEARNED COUNSEL FO R THE ASSESSEE WAS THAT THIS COMPANY MADE EXTRA ORDINARY PROFITS DURING THE PREVIOUS YEAR. OUR ATTENTION WAS DRAWN T O THE FACT THAT THE OPERATING PROFIT / OPERATING COST OF THIS COMPANY JUMPED FROM 17% FOR F Y 2007-08 TO 56% IN FY 2008- 09. IT DIPPED IN FY 2009-10 TO 40% AND IN FY 2010-11 IT BE CAME (- ) 2% AND 5% IN FY 2011-12 AND FINALLY TOUCHED (-) 9 % IN FY 2012-13. OUR ATTENTION WAS DRAWN TO THE FACT THAT T HE SPECIAL BENCH OF THE TRIBUNAL, MUMBAI, IN THE CASE OF MAERS K GLOBAL CENTRES (INDIA) P. LTD., IN ITA.7466/MUM/2012, DT 07.03.2014 FOR AY 2008-09 HAD AN OCCASION TO CONSID ER THE QUESTION AS TO WHETHER COMPANIES HAVING ABNORMAL PR OFITS SHOULD BE EXCLUDED AS A COMPARABLE. THE SPECIAL BEN CH TOOK THE VIEW THAT IT HAS TO BE SHOWN THAT THE HIGH PROF IT MARGIN DOES NOT REFLECT THE NORMAL BUSINESS CONDITIONS AND ONLY IN SUCH CIRCUMSTANCES, HIGH PROFIT MARGIN COMPANIES CA N BE EXCLUDED. OUR ATTENTION WAS DRAWN TO THE DRP'S OBSE RVATION IN ITS ORDER ON THE ISSUE WHICH IS AS FOLLOWS : 'BO DHTREE : THE ASSESSEE HAS OBJECTED TO SELECTION OF THIS ENTITY O N THE BASIS OF FOLLOWING OBJECTIONS: IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 12 OF 35 THE ENTITY HAS FLUCTUATING MARGINS THE COMPANY IS MORE OF A PRODUCT COMPANY RATHER T HAN SOFTWARE SERVICE COMPANY. THE PANEL HAS CONSIDERED THE OBJECTIONS OF THE ASSESSEE. INSOFAR AS THE CONTENTI ON REGARDING THE REJECTION OF THIS ENTITY ON THE BASIS OF FLUCTUATING MARGIN IS CONCERNED, IN ORDER TO APPREC IATE THE COMPATIBILITY OR OTHERWISE OF THIS ENTITY, IT IS IM PORTANT TO FIRST NOTE THAT THE INDIAN SOFTWARE INDUSTRY USES T WO DIFFERENT MODELS FOR REVENUE RECOGNITION. THE FIRST IS THE TI ME AND MATERIAL (T&M) CONTRACTS MODEL IN WHICH CUSTOMER AR E BILLED ON THE BASIS OF HOURS WORKED BY THE EMPLOYEE S OF SUPPLIER SOFTWARE COMPANIES. HOURLY RATES ARE AGREE D ON BY BOTH PARTIES AND ARE APPLIED TO THE TOTAL HOURS WOR KED TO ARRIVE AT THE REVENUE THAT IS TO BE RECOGNIZED. THE SECOND IS THE FIXED PRICE PROJECT MODEL (FPP). UNDER THE FIXE D PRICE PROJECT MODEL, THE TOTAL CONTRACT PRICE IS AGREED U PON BETWEEN THE PARTIES. BILLING MAY BE DONE EITHER AT THE END OF THE CONTRACT OR OVER THE PERIOD OF THE CONTRACT ON THE BASIS OF THE AGREED MILESTONE FOR BILLING. IN THIS RESPECT, THE BASIS OF REVENUE RECOGNITION BY THIS ENTITY CAN BE SEEN FROM THE ANNUAL REPORT AS BELOW: 3. REVENUE RECOGNITION : REVENUE FROM SOFTWARE DEVELOPMENT IS RECOGNISED BASED ON SOFTWARE DEVELOP ED AND BILLED TO CLIENTS. FROM PERUSAL OF THE ABOVE, IT IS SEEN THAT THIS ENTITY IS ENGAGED IN BUILDING REVENUES THROUGH FIXED PRICE PROJECT MODEL. AS IS A NATURAL COROLLARY IN S UCH TYPE OF REVENUE RECOGNITION, SOME PART OF THE EXPENDITURE M AY BE BOOKED IN ONE YEAR, FOR WHICH THE REVENUE MAY HAVE BEEN RECOGNISED IN THE EARLIER OR SUBSEQUENT YEAR. THERE FORE, IT IS BUT NATURAL THAT THERE IS SOME FLUCTUATION IN THE P ROFITABILITY MARGIN OF SUCH ENTITY. MERELY BECAUSE OF SUCH FLUCT UATIONS, AN ENTITY ENGAGED IN THE DEVELOPMENT OF SOFTWARE, B EING FUNCTIONALLY COMPARABLE TO THE ASSESSEE, CANNOT BE REJECTED ONLY ON THIS GROUND.' 14. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR A TTENTION TO THE FACT THAT BODHTREE CONSULTING ADMITTEDLY FOL LOWS A FIXED PRICE PROJECT MODEL WHEREBY REVENUES FROM SOF TWARE DEVELOPMENT IS RECOGNIZED BASED ON SOFTWARE AND BIL LED TO IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 13 OF 35 CLIENTS. IN SUCH BUSINESS MODEL EXPENDITURE FOR DEV ELOPING SOFTWARE WOULD BE BILLED IN AN EARLIER YEAR BUT THE REVENUE WOULD BE RECOGNIZED IN A SUBSEQUENT YEAR. IT WAS HI S SUBMISSION THAT THIS FACT IS RECOGNIZED BY THE DRP IN ITS ORDER. ACCORDING TO HIM THIS CIRCUMSTANCE WOULD BE SUFFICIENT TO SHOW THAT THE MARGIN REFLECTED OF THIS COMPANY D OES NOT REFLECT THE NORMAL BUSINESS CONDITION. 15. THE LEARNED DR PLACED RELIANCE ON THE REASON GI VEN BY THE DRP IN ITS ORDER. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE S PECIAL BENCH OF THE ITAT IN THE CASE OF MAERSK GLOBAL CENT RES (SUPRA) HAD AN OCCASION TO DEAL WITH THE QUESTION A S TO WHETHER HIGH PROFIT MARGIN MAKING COMPANIES SHOULD BE EXCLUDED AS A COMPARABLE. THE SPECIAL BENCH AFTER CONSIDERING SEVERAL ASPECTS HELD IN PARA 88 OF ITS ORDER THAT THE POTENTIAL COMPARABLE COMPANIES CANNOT BE EXCLUD ED MERELY ON THE GROUND THAT THEIR PROFIT IS ABNORMALL Y HIGH. THE SPECIAL BENCH HELD THAT IN SUCH CASES IT WOULD REQUIRE FURTHER INVESTIGATION TO ASCERTAIN THE REASONS FOR UNUSUALLY HIGH PROFIT AND IN ORDER TO ESTABLISH WHETHER THE E NTITIES WITH SUCH HIGH PROFITS CAN BE TAKEN AS COMPARABLE OR NOT . IN THE LIGHT OF THE AFORESAID DECISION OF THE SPECIAL BENC H AND IN VIEW OF THE ADMITTED POSITION THAT THE ASSESSEE FOL LOWS FIXED PRICE PROJECT MODEL WHERE REVENUES FROM SOFTWARE DEVELOPMENT IS RECOGNIZED BASED ON SOFTWARE DEVELOP ED AND BILLED TO CLIENTS, THERE IS A POSSIBILITY OF THE EX PENDITURE IN RELATION TO THE REVENUE BEING BOOKED IN THE EARLIER YEAR. THE RESULTS OF BODHTREE FROM FY 2003 TO 2008 EXCLUDING FY 2007 AS GIVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE WE RE ALSO PERUSED. PERUSAL OF THE SAME SHOWS, THAT THERE HAS BEEN A CONSISTENT CHANGE IN THE OPERATING MARGINS. THE CHA RT FILED BY THE ASSESSEE IN THIS REGARD IS GIVEN AS AN ANNEX URE TO THIS ORDER. IT APPEARS TO US THAT THE REVENUE RECOGNITIO N METHOD FOLLOWED BY THE ASSESSEE IS THE REASON FOR THE DRAS TIC VARIATION IN THE PROFIT MARGINS OF THIS COMPANY. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD BE SAFE TO EXCLUDE BODHTREE CONSULTING FROM THE FINAL LIST OF IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 14 OF 35 COMPARABLES CHOSEN BY THE ASSESSEE. WE HOLD AND DIR ECT ACCORDINGLY. 33. THE LD. COUNSEL FOR THE ASSESSEE FILED BEFORE US A CHART SHOWING THE FLUCTUATION MARGINS OF BODHTREE CONSULT ING LTD., WHICH ARE AS FOLLOWS:- 34. AS CAN BE SEEN FROM THE ABOVE ANALYSIS, THIS CO MPANY HAS ERRATIC MARGINS AND GROWTH OVER THE YEARS. THE MARGINS OF BODHTREE ARE CONSISTENTLY CHANGING. THIS REFLECT S THAT THE REVENUE RECOGNITION POLICY FOLLOWED BY BODHTREE IS NOT PROPER AND IS RESULTING IN CONSISTENT CHANGE IN MAR GINS. FURTHER, THE GROWTH RATE OVER THE YEARS IS ALSO FLU CTUATING TO EXTREMES. FURTHER, GROWTH IN REVENUES IS NOT SUPPOR TED BY GROWTH IN EXPENSES. IN SOME CASES, EXPENSE GROWTH I S HIGHER THAN THE REVENUE GROWTH. ALSO SALARY COST RATIO IS WIDELY FLUCTUATING. THESE CIRCUMSTANCES ARE PECULIAR IN NA TURE AND REQUIRE FURTHER ANALYSIS, WITHOUT WHICH THIS COMPAN Y SHOULD BE REJECTED AS A COMPARABLE. 21. CONTENTION OF THE LD. DR THAT ASSESSEE WAS INTO SOFTWARE PRODUCT DEVELOPMENT CANNOT BE ACCEPTED SINCE THE TPO HIMSE LF HAD CONSIDERED ASSESSEE TO BE INTO SOFTWARE DEVELOPMEN T SERVICES. THIS IS CLEAR FROM THE SEGMENTAL RESULTS COMPILED BY HIM AT PARA 2 OF HIS ORDER WHICH HAS BEEN REPRODUCED BY US AT PARA SIX A BOVE. ACCORDINGLY WE ARE OF THE OPINION THAT THE DECISION OF THE COORDINATE BENCH IN M/S. KODIAK NETWORKS INDIA PVT. LTD., WOUL D APPLY ON ALL FOUR SQUARES. WE THEREFORE DIRECT EXCLUSION OF M/S . BODHTREE CONSULTING LTD, FROM THE LIST OF COMPARABLES. 13. SINCE THE TRIBUNAL HAS EXAMINED THE PROFILE AND DATAS OF BODHTREE CONSULTING LTD. AND HAS COME TO THE CONCLUSION THAT THIS COMPANY CANNOT BE TAKEN AS GOOD COMPARABLE FOR COMPUTING THE ALP, WE FIND NO JUSTIFICATION IN RE-EXAMINING THE ISSUE AGAIN. ACC ORDINGLY, FOLLOWING THE IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 15 OF 35 AFORESAID ORDER OF TRIBUNAL, WE UPHOLD THE EXCLUSIO N OF BODHTREE CONSULTING LTD. FROM THE LIST OF COMPARABLES. 14. WITH REGARD TO EXENSYS SOFTWARE SOLUTIONS LTD. , THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS COMPARABLE WAS ALSO EXAMINED BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) IN PARA 10 AT PAGE 9 OF THE TRIBUNALS ORDER AND THE TRIBUNAL HAS CONFIRMED THE ORDER OF CIT(APPEALS) WHO EXCLUDED THIS COMPANY FROM THE LIS T OF COMPARABLES. THE RELEVANT OBSERVATION OF THE TRIBUNAL ARE EXTRAC TED HEREUNDER:- 10. THE CONTENTIONS OF BOTH COUNSELS ON M/S. EXENS YS SOFTWARE SOLUTION LTD (SUPRA) HAVE BEEN NARRATED BY US AT PARA TWO AND THREE ABOVE. NO DOUBT IT HAS BEEN HELD BY HON'BLE DELHI HIGH COURT IN CRYSCAPITAL INVESTMENT ADVISORS INDIA P. LTD, (SUPRA) THAT EXCESSIVE PROFITS OR ABNORMAL LOSS BY ITSELF WOULD NOT BE A REASON FOR EXCLUSION OF A COMPANY FROM THE LIS T OF COMPARABLES WHICH WAS OTHERWISE SIMILAR TO THE TEST ED PARTY. HOWEVER WHAT WE FIND IN THE CASE OF EXENSYS SOFTWAR E SOLUTION LTD, IS THAT THERE WAS AN AMALGAMATION OF ONE COMPA NY NAMED HOLOOL INDIA LTD, WITH EXENSYS SOFTWARE SOLUTIONS L TD, DURING THE RELEVANT PREVIOUS YEAR WHICH WAS CLEARLY MENTIO NED IN ITS ANNUAL REPORT. FURTHER THE SAID COMPANY ALSO HAD E ARNINGS FROM BPO SERVICES, AND SEGMENTAL RESULTS WERE NOT AVAILA BLE. THUS IT WAS NOT A CASE WHERE EXCLUSION WAS DIRECTED BY THE CIT (A) SOLELY FOR A REASON OF ABNORMAL PROFITS. SUCH DIRE CTIONS WERE GIVEN CONSIDERING THE FACT THAT SUCH PROFITS AROSE OUT OF AN EXTRA ORDINARY EVENT OF AMALGAMATION. THIS HAS NOT BEEN REBUTTED BY THE REVENUE. REVENUE HAS ALSO NOT PRODUCED ANYTHIN G TO SHOW THAT SEGMENTAL RESULTS OF THE SAID COMPANY WAS AVAI LABLE. WE ARE OF THE OPINION THAT CIT (A) HAD DIRECTED EXCLUSION OF EXENSYS SOFTWARE SOLUTIONS LTD, FROM THE LIST OF COMPARABLE S CORRECTLY. WE DO NOT FIND ANY GROUND TO INTERFERE WITH THE DEC ISION OF THE CIT (A). GROUND.2 OF THE REVENUE STANDS DISMISSED. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 16 OF 35 15. SINCE THE TRIBUNAL HAS ALREADY EXAMINED THE REA SONABLENESS OF EXCLUSION OF THIS COMPANY, WE FIND NO JUSTIFICATION TO DEAL WITH THE ISSUE AGAIN. ACCORDINGLY, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE APPROVE THE EXCLUSION OF THIS COMPANY I.E., EXENSYS SOFTWARE SOLUTION LTD. (SUPRA) FROM THE LIST OF COMPARABLES. 16. WITH RESPECT TO SANKHYA INFOTECH LTD. , THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THIS COMPARABLE WAS ALSO EXAMINED BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) IN PARAS 22 TO 24 AT PAGES 16 TO 19. 17. HAVING CAREFULLY EXAMINED THE CONTENTIONS OF TH E ASSESSEE, WE FIND THAT UNDISPUTEDLY, SANKHYA INFOTECH LTD. WAS EXAMIN ED BY THE TRIBUNAL AND THE TRIBUNAL FOLLOWING THE VIEW TAKEN IN THE CASE O F KODIAK NETWORK INDIA LTD. (SUPRA) HAS DIRECTED THE TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THE RELEVANT OBSERVATIONS OF THE TRIB UNAL ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 24. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IN THE CASE OF M/S. KODIAK NETWORKS I NDIA PVT.LTD., THIS TRIBUNAL AT PARA 29 TO 31 OF ITS ORDER HELD AS UNDER : SANKHYA INFOTECH LIMITED (SANKHYA) 29. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR T HE ASSESSEE THAT SANKHYA IS ENGAGED IN THE BUSINESS OF DEVELOPM ENT OF SOFTWARE PRODUCTS & SERVICES AND TRAINING. THE COMP ANY FOCUSES ON THE DEVELOPMENT OF NICHE PRODUCTS FOR THE TRANSP ORT AND AVIATION INDUSTRY. HOWEVER, SEGMENTAL INFORMATION I N RELATION TO THE ABOVE MENTIONED ACTIVITIES IS NOT AVAILABLE IN PUBLIC DOMAIN. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 17 OF 35 THEREFORE, AS SANKHYA ENGAGES ITSELF IN PRODUCTS AN D SERVICES AS WELL AS SOFTWARE TRAINING, IT CANNOT BE CONSIDERED AS A COMPARABLE OF THE APPELLANT. THE PRODUCTS DEVELOPED AND OWNED BY SANKHYA ARE LISTED BELOW: (1) SILICONTM TRAINING SUITE OF PRODUCTS: THE PRODU CTS ARE A COMPREHENSIVE ENTERPRISE WIDE TRAINING PLATFORM THA T COVERS THE ENTIRE SPECTRUM OF TRAINING IN A PAPERLESS ENVIRONM ENT. IT COMPRISES OF FOUR PRODUCTS:- - SILICONTM LMS (TRAIN ING MANAGEMENT INFORMATION - SILICONTM QT (ONLINE ASSES SMENT SYSTEM) - SILICONTM LCMS (LEARNING CONTENT MANAGEME NT SYSTEM) - IRMAQTM : THIS IS AN INTEGRATED RESOURCE PLANNING, MANAGEMENT TRACKING SYSTEM EXCLUSIVELY DEVELOPED FO R AIRLINE OPERATIONS. IT IS AN END-TO-END SOLUTION FOR ALL FL IGHT OPERATIONS. - SAKAI CLE : THIS IS A WIDELY USED AND POPULAR OPE N SOURCE LMS USED IN MANY LEADING EDUCATIONAL INSTITUTIONS A ND CORPORATE. THE RELEVANT EXTRACT FROM THE ANNUAL REP ORT SUBSTANTIATING THAT THE COMPANY ALSO ENGAGES IN DIF FERENT ACTIVITIES IS REPRODUCED BELOW: 2. ACTIVITIES THE COMPANY AS ENGAGED IN THE BUSINE SS OF DEVELOPMENT OF SOFTWARE PRODUCTS & SERVICES AND TRA INING. THE PRODUCTION OF SOFTWARE IS NOT CAPABLE OF BEING EXPR ESSED IN ANY GENERIC UNIT AND HENCE 11 IS RIOT POSSIBLE TO GIVE THE INFORMATION AS REQUIRED BY CERTAIN CLAUSES OF PARAGRAPHS 3.4C A ND 4 D OF PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956. 30. IT WAS ALSO BROUGHT TO OUR NOTICE THAT THE DELH I TRIBUNAL IN ITO V. COLT TECHNOLOGY SERVICES INDIA PVT. LTD. (JU DGMENT DATED 23.10.2012 IN ITA NO. 609I/DEL/2011 FOR THE ASSESSM ENT YEAR 2005-06) HAS HELD THAT THE SAID COMPANY IS NOT A CO MPARABLE TO THE ASSESSEE THEREIN WHICH WAS ALSO IN THE BUSINESS OF SOFTWARE DEVELOPMENT. 31. THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE CONSIDERED. THE ACTIVITIES SET OUT ABOVE AND TH E DECISION OF THE DELHI ITAT RENDERED IN THE CONTEXT OF A SOFTWAR E DEVELOPMENT COMPANY SUCH AS THE ASSESSEE MAKES IT AMPLY CLEAR T HAT THIS COMPANY SANKHYA CANNOT BE REGARDED AS A COMPARABLE. THE SAME IS DIRECTED TO BE EXCLUDED FROM THE LIST OF CO MPARABLE COMPANIES . IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 18 OF 35 ACCORDINGLY WE DIRECT EXCLUSION OF M/S. SANKHYA INF OTECH LTD, FROM THE LIST OF COMPARABLES. 18. SINCE THIS COMPARABLE WAS EXAMINED BY THE TRIBU NAL IN THE AFORESAID CASE, WE FIND NO JUSTIFICATION IN RE-EXAM INING THE CASE. ACCORDINGLY, WE EXCLUDE SANKHYA INFOTECH LTD. FROM THE LIST OF COMPARABLES. 19. WITH REGARD TO THIRDWARE SOLUTIONS LTD. , IT WAS AGAIN SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS COMPARAB LE WAS ALSO EXAMINED BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) IN PARA 31 AT PAGES 21 TO 25 OF ITS ORDER. 20. FROM THE ORDER OF THE TRIBUNAL, WE FIND THAT UN DISPUTEDLY THIRDWARE SOLUTIONS LTD. WAS EXAMINED BY THE TRIBUNAL IN THE LIGHT OF EARLIER ORDER OF TRIBUNAL IN THE CASE OF KODIAK NETWORK INDIA LTD. (SUPRA) AND IT WAS EXCLUDED FROM THE LIST OF COMPARABLES. THE RELEVAN T OBSERVATIONS OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REF ERENCE:- 31. WE HAVE PERUSED THE ORDERS AND HEARD THE RI VAL CONTENTIONS. THIS TRIBUNAL'S DECISION IN THE CASE OF M/S. KODIAK NETWORKS INDIA P. LTD, (SUPRA) HAS HELD AS UNDER AT PARAS 20 TO 24 OF ITS ORDER : 20. AS REGARDS GROUNDS NO. 3 TO 6 ARE CONCERNED, THIRDWARE SOLUTIONS LTD., AND GEOMETRIC SOFTWARE SOLUTIONS LT D., ARE CONCERNED, WERE HELD TO BE FUNCTIONALLY DIFFERENT F ROM A COMPANY RENDERING SOFTWARE DEVELOPMENT SERVICES SUCH AS THE ASSESSEE IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (I) PVT.LT D. BY THE ITAT BANGALORE ITA NO.1302/BNG/2011 FOR AY 05-06 OR DER IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 19 OF 35 DATED 11.6.2015. THE FOLLOWING WERE THE RELEVANT OB SERVATIONS OF THE TRIBUNAL. 22. WE HAVE CONSIDERED HIS SUBMISSION AND FIND TH AT THE ITAT HYDERABAD BENCH ON IDENTICAL FACTS, HELD THAT THE A FORESAID TWO COMPANIES VIZ., FOUR SOFT LTD., AND THIRDWARE SOLUT IONS LTD., ARE NOT COMPARABLE COMPANIES IN SOFTWARE DEVELOPMENT SE RVICES COMPANIES. THE FOLLOWING WERE THE RELEVANT OBSERVAT IONS:- 15.4. FOURSOFT LIMITED : THIS COMPARABLE IS OBJECT ED ON THE SAME REASON AS THIS COMPANY IS INVOLVED IN PROD UCT DEVELOPMENT AND OWNS PRODUCTS NAMELY 4S ETRANS AND 4S ELOG. THESE PRODUCTS ARE USED IN SUN MICROSYSTEMS INC, IN AN APPLICATION VERIFICATION KIT CERTIFIED FOR ENTERPRI SES AND ASSESSEE HAVE BEEN INVESTING CONTINUOUSLY ON PRODUC T DEVELOPMENTS. SINCE ASSESSEE IS IN THE PRODUCT DEVE LOPMENT, HAVING I.P. RIGHTS, THE SAME IS NOT COMPARABLE. 15.5. THIRDWARE SOFTWARE SOLUTIONS LIMITED : THIS COMPANY IS OBJECTED TO BY THE ASSESSEE ON THE REASON THAT THE SAID THIRDWARE SOFTWARE SOLUTIONS LTD. IS ENGAGED I N SALE OF SOFTWARE LICENCE AND RELATED SERVICES AND NOT A SER VICE PROVIDER. REFERRING TO THE ANNUAL REPORT, IT WAS SUBMITTED TH AT THIS COMPARABLE WAS REJECTED BY THE ITAT, PUNE IN THE CA SE OF EGAIN COMMUNICATIONS LTD. THIS COMPANY HAVING REVENUE FRO M PRODUCT LICENSE AND EARNING EXTRAORDINARY PROFIT DU E TO INTANGIBLE OWNS. 15.6. THESE THREE COMPARABLE ABOVE FLEXTRONICS SOFT WARE LIMITED, FOURSOFT LIMITED AND THIRDWARE SOFTWARE SO LUTION LIMITED WERE ANALYSED BY THE COORDINATE BENCH OF TH E TRIBUNAL IN THE CASE OF INTOTO SOFTWARE SOLUTIONS PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER : '23. THE OTHER COMPANIES WHICH ARE OBJECTED TO BY T HE ASSESSEE ARE FLEXTRONICS SOFTWARE LIMITED, FOURSOFT LIMITED AND THIRDWARE SOFTWARE SOLUTION LIMITED. AS FAR AS THES E THREE COMPANIES ARE CONCERNED, THE LEARNED COUNSEL APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THEY ARE INTO BOTH SOFTWARE AS WELL AS PRODUCT DEVELOPMENT. HE SUBMITTED THAT T HE TPO HAS TAKEN NOTE OF THE FACT THESE COMPANIES ARE ALSO INT O PRODUCT DEVELOPMENT BUT HAS SELECTED THESE COMPANIES AS COM PARABLES BY APPLYING THE FILTER OF MORE THAN 70% OF ITS REVENUE BEING FROM IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 20 OF 35 SOFTWARE DEVELOPMENT SERVICES. THE LEARNED COUNSEL SUBMITTED THAT THE FUNCTIONS OF THESE COMPANIES ARE DIFFERENT FROM THE ASSESSEE WHO WAS INTO SOLE ACTIVITY OF SOFTWARE DEV ELOPMENT FOR ITS ASSOCIATED ENTERPRISE. HE SUBMITTED THAT THE TP O HAS ALLOCATED THE EXPENDITURE IN THE PROPORTION OF THE REVENUE OF THESE COMPANIES FROM SOFTWARE SERVICES AND SOFTWARE PRODU CTS AND HAS ADOPTED THE FIGURE AS SEGMENTAL MARGIN OF THE COMPA NY AND HAS TAKEN THESE COMPANIES AS COMPARABLES. HE SUBMITTED THAT BY TAKING THE PROPORTIONATE EXPENDITURE, THE CORRECT F INANCIAL RESULTS WOULD NOT EMERGE. HE SUBMITTED THAT NOTHING PREVENT ED THE ASSESSING OFFICER/TPO FROM OBTAINING THE SEGMENTAL DETAILS FROM THE RESPECTIVE COMPARABLE COMPANIES BEFORE ADOPTING THEM AS COMPARABLE COMPANIES AND BEFORE TAKING THE OPERATIN G MARGIN FOR ARRIVING AT THE ARMS LENGTH PRICE. HE SUBMITTED THAT WHEREVER THE SEGMENTAL DETAILS ARE NOT AVAILABLE, THEN THE S AID COMPANIES SHOULD NOT BE TAKEN AS COMPARABLES. FOR THIS PURPOS E, HE PLACED RELIANCE UPON THE DECISION OF THE BANGALORE TRIBUNA L IN THE CASE OF FIRST ADVANTAGE OFFSHORE SERVICES PVT. LTD. VS. THE DCIT IN ITA.NO.1252/BANG/2010 WHEREIN THESE COMPANIES WERE DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 21. THE LEARNED D.R. HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 22. HAVING HEARD BOTH THE PARTIES AND HAVING GONE T HROUGH THE MATERIAL ON RECORD, WE FIND THAT THE TPO AT PAGE 37 OF HIS ORDER HAS BROUGHT OUT THE DIFFERENCES BETWEEN A PRODUCT C OMPANY AND A SOFTWARE DEVELOPMENT SERVICES PROVIDER. THUS, IT IS CLEAR THAT HE IS AWARE OF THE FUNCTIONAL DISSIMILARITY BETWEEN A PRODUCT COMPANY AND A SOFTWARE DEVELOPMENT SERVICE PROVIDER . HAVING TAKEN NOTE OF THE DIFFERENCE BETWEEN THE TWO FUNCTI ONS, THE ASSESSING OFFICER OUGHT NOT TO HAVE TAKEN THE COMPA NIES WHICH ARE INTO BOTH THE PRODUCT DEVELOPMENT AS WELL AS SO FTWARE DEVELOPMENT SERVICE PROVIDER AS COMPARABLES UNLESS THE SEGMENTAL DETAILS ARE AVAILABLE. EVEN IF HE HAS ADO PTED THE FILTER OF MORE THAN 75% OF THE REVENUE FROM THE SOFTWARE S ERVICES FOR SELECTING A COMPARABLE COMPANY, HE OUGHT TO HAVE TA KEN THE SEGMENTAL RESULTS OF THE SOFTWARE SERVICES ONLY. TH E PERCENTAGE OF EXPENDITURE TOWARDS THE DEVELOPMENT OF SOFTWARE PRO DUCTS MAY DIFFER FROM COMPANY TO COMPANY AND ALSO IT MAY NOT BE PROPORTIONATE TO THE SALES FROM THE SALE OF SOFTWAR E PRODUCTS. UNDER SECTION 133(6) OF THE I.T. ACT, THE TPO HAS T HE POWER TO IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 21 OF 35 CALL FOR THE NECESSARY DETAILS FROM THE COMPARABLE COMPANIES. IT IS SEEN THAT THE ASSESSING OFFICER/TPO AS EXERCISED THIS POWER TO CALL FOR DETAILS WITH REGARD TO THE VARIOUS COMPANI ES. AS SEEN FROM THE ANNUAL REPORT OF FOURSOFT LIMITED WHICH IS REPRODUCED AT PAGE 7 OF THE TPOS ORDER, THE SAID COMPANY HAS DERIVED INCOME FROM SOFTWARE LICENCE ALSO AND AMCS. 23. AS FAR AS THIRDWARE SOFTWARE SOLUTION LIMITED I S CONCERNED, WE FIND FROM THE INFORMATION FURNISHED BY THE SAID COMPANY THAT THOUGH THE SAID COMPANY IS ALSO INTO PRODUCT DEVELO PMENT, THERE ARE NO SOFTWARE PRODUCTS THAT THE COMPANY INVOICED DURING THE RELEVANT FINANCIAL YEAR AND THE FINANCIAL RESULTS A RE IN RESPECT OF SERVICES ONLY. THUS, IT IS CLEAR THAT THERE IS NO S ALE OF SOFTWARE PRODUCTS DURING THE YEAR BUT THE SAID COMPANY MIGHT HAVE INCURRED EXPENDITURE TOWARDS THE DEVELOPMENT OF THE SOFTWARE PRODUCTS. 24. IN VIEW OF THE AFORESAID DECISION, WE DO NOT FI ND ANY INFIRMITY IN THE ACTION OF THE CIT(A) IN EXCLUDING THE AFORES AID TWO COMPANIES FROM THE LIST OF COMPARABLE COMPANIES FOR DETERMINING ALP. FOLLOWING THE ABOVE DECISION WE DIRECT EXCLUSION OF THIRDWARE SOLUTIONS LTD, FROM THE LIST OF COMPARABLES. 21. SINCE THERE IS NO CHANGE IN THE FACTS AND PROFI LE OF THE ASSESSEE, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW. ACC ORDINGLY, WE APPROVE EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPA RABLES. 22. WITH REGARD TO GEOMETRIC SOFTWARE SOLUTIONS COM PANY LTD. , THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT COMPARA BILITY OF THIS COMPANY WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF NET DEVICES INDIA PVT. LTD. IN IT(TP)A NO.1099/BANG/2011 & CO NO.19/BANG/2011 IN PARA NOS.18.3.1. TO 18.3.3 OF THE ORDER AND THE MATTER WAS RESTORED TO THE AO/TPO FOR IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 22 OF 35 VERIFICATION OF APPLICABILITY OF RPT FILTER FOR ITS EXCLUSION. THE RPT IN THIS CASE WAS CONSIDERED TO BE 22%, BUT NO DATAS ARE AVA ILABLE. 23. THE LD. DR IN THE LIGHT OF NON-AVAILABILITY OF DATA BEFORE US HAS ARGUED THAT THIS ISSUE MAY BE SENT BACK TO THE AO/T PO FOR VERIFICATION OF THE FACTS IN THE LIGHT OF RPT FILTER FOR ITS EXCLUS ION. 24. WE FIND FORCE IN THE CONTENTION OF THE LD. DR. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE OF NET DEVICES INDIA PVT. LTD. (SUPRA) IN THIS REGARD IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 18.3.1 THE LEARNED AUTHORISED REPRESENTATIVE OF TH E ASSESSEE HAS SUBMITTED THAT THE RPT OF THIS COMPANY IS 22% W HEREAS THE TPO HAS WRONGLY CONSIDERED THE RPT AT 10.97%. THE L EARNED AUTHORISED REPRESENTATIVE HAS REFERRED THE COMPUTAT ION OF RPT AT PAGE 561 OF THE PAPER BOOK CONTAINING ANNUAL REP ORT AND SUBMITTED THAT IF ALL THE RPTS ARE TAKEN INTO CONSI DERATION AS REPORTED IN THE ANNUAL REPORT OF THIS COMPANY THEN IT COMES TO 22.52% OF THE TOTAL SALES. 18.3.2 ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE TPO HAS CONSI DERED THE RPT AS TAKEN FROM THE ANNUAL REPORT OF THIS COMPANY AND THEREFORE THIS OBJECTION WAS NOT RAISED BY THE ASSE SSEE BEFORE THE TPO. 18.3.3 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSES SEE HAS SUBMITTED COMPUTATION OF RPT OF THIS COMPANY AT PAG E NO.561 OF THE PAPER BOOK WHEREIN THE ASSESSEE HAS CALCULAT ED THIS PERCENTAGE BY CONSIDERING THE VARIOUS TRANSACTIONS WITH THE RELATED PARTIES WHICH CONSISTS OF SOFTWARE DEVELOPM ENT SERVICES CHARGES AND MARKETING EXPENSES. THEREFORE, THIS ISS UE REQUIRES A PROPER EXAMINATION AND VERIFICATION OF THE FACT AS PRODUCED BY THE ASSESSEE. ACCORDINGLY, IN THE FACTS AND CIRCUMS TANCES OF THE CASE, WE SET ASIDE THIS ISSUE OF COMPARABILITY OF T HIS COMPANY TO IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 23 OF 35 THE RECORD OF THE A.O./TPO FOR PROPER VERIFICATION OF THE FACTS AS CONTENDED AND PRODUCED BY THE ASSESSEE BEFORE US AN D THEN DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY OF HEA RING TO THE ASSESSEE. 25. SINCE THE DATAS ARE NOT AVAILABLE AND EVEN IN THE AFORESAID ORDER OF THE TRIBUNAL, THE TRIBUNAL HAS RESTORED THE MATTER TO THE TPO FOR VERIFICATION AND READJUDICATION ON THE APPLICABILITY OF RPT FILT ER, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD ALSO GO BACK TO THE TPO TO ADJUDI CATE THE JUSTIFICATION OF ITS EXCLUSION ON THE POINT OF RPT FILTER. 26. WITH REGARD TO TATA ELXSI LTD. , EXCLUSION OF THIS COMPANY WAS UPHELD BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) IN PARAS 35 TO 37 AT PAGES 26 TO 29 OF THE ORDER. THE RELEV ANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER FOR THE SAKE OF RE FERENCE:- 35. VIS-A-VIS TATA ELXSI (SEG), LD. AR SUBMITTED T HAT THIS COMPANY WAS ALSO DIRECTED TO BE EXCLUDED BY THE COO RDINATE BENCH IN THE CASE OF KODIAK NETWORKS INDIA P. LTD, (SUPRA) V IDE PARAS 18 AND 19 OF THE ORDER WHICH IS REPRODUCED HEREUNDER : 18. AS REGARDS GROUND NO.7, TATA ELXSI LTD., HAS TO BE EXCLUDED AS THIS COMPANY WAS HELD TO BE NOT COMPARABLE WITH AN ASSESSEE SUCH AS THE ASSESSEE IN THE PRESENT CASE PROVIDING SOFTWARE DEVELOPMENT SERVICES BY THE ITAT HYDERABAD BENCH IN THE CASE OF CNO IT SERVICES (INDIA) PVT. LTD. (FORMERLY KNOW N AS CONSECO DATA SERVICES (INDIA) PVT. LTD.) HYDERABAD VS. DCIT, CIRCLE 1(2) HYDERABAD, IN ITA.NO.1280/HYD/2010 ASSE SSMENT YEAR 2005-2006 ORDER DATED 12.2.2014. THE ITAT HYDE RABAD BENCH ON IDENTICAL FACTS, HELD ON COMPARABILITY OF TATA ELXSI LTD. AS FOLLOWS: 15.7. TATA ELXSI LIMITED : THE OBJECTION OF THE AS SESSEE IS THAT TATA ELXSI OPERATING TWO SEGMENTS SYSTEM COM MUNICATION IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 24 OF 35 SERVICES AND SOFTWARE DEVELOPMENT SERVICES. THE TPO ACCEPTED THE SOFTWARE DEVELOPMENT SERVICES SEGMENT IN HIS T. P. ANALYSIS AND ASSESSEES OBJECTION IS THAT THE SOFTWARE DEVEL OPMENT SERVICES SEGMENT ITSELF COMPRISES OF THREE SUB-SERV ICES NAMELY (A) PRODUCT DESIGN SERVICES (B)DESIGN ENGINEERING SERVI CES AND (C) VISUAL COMPUTING LABS. IT WAS SUBMITTED THAT THESE SERVICES ARE NOT AKIN TO ASSESSEE SOFTWARE SERVICES AND SEGMENTA L INFORMATION OF ONLY PRODUCT DESIGN SERVICES COULD HAVE BEEN ACC EPTED BY THE TPO AS A COMPARABLE BUT NOT THE ENTIRE SOFTWARE DEV ELOPMENT SERVICE. SINCE COMPANYS OPERATIONS ARE FUNCTIONALL Y DIFFERENT AS SUCH, THE SAME IS NOT COMPARABLE. FURTHER, ASSESSEE IS ALSO OBJECTING ON THE BASIS OF INTANGIBLE SCALE OF OPERA TIONS. THE COORDINATE BENCH IN THE CASE OF INTOTO (SUPRA) CONS IDERED THE ISSUE AS UNDER IN PARA 22: '22 TATA ELXSI LIMITED : AS REGARDS THIS COMPANY, T HE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE, FILED BEFORE US THE REPLY OF TATA ELXSI LIMITED TO THE ADDL. CIT (TRANS FER PRICING), HYDERABAD, WHEREIN THE CONCERNED OFFICER HAS BEEN I NFORMED THAT TATA ELXSI LIMITED IS SPECIALISED EMBEDDED SOF TWARE DEVELOPMENT SERVICE PROVIDER AND THAT IT CANNOT BE COMPARED WITH ANY OTHER SOFTWARE DEVELOPMENT COMPANY. IT WAS SUBMITTED THAT BECAUSE OF THE SPECIALISATION AND ALSO BECAUSE OF DIVERSE NATURE OF ITS BUSINESS, IT IS VERY DIFFICULT TO SCA LE-UP THE OPERATIONS OF TATA ELXSI LIMITED. IN VIEW OF THIS, TATA ELXSI LIMITED HAS INFORMED THAT IT IS NOT FAIR TO USE ITS FINANCIAL NUMBERS TO COMPARE IT WITH ANY OTHER COMPANY. THE COMMUNICATION DATED 25TH AUGUST, 2009 TO THE TPO IS PLACED BEFORE US. AS THIS COMMUNICATION WAS NOT BEFORE THE TPO AT THE TIME OF TRANSFER PRICING ADJUSTMENT WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE TPO TO RE CONSIDER ADOPTING THIS COMPANY AS THE COMPARABLE IN THE LIGH T OF OBSERVATIONS OF THIS COMPANY TO THE TPO IN THE CASE OF ANOTHER ASSESSEE. IN THE RESULT, THE ASSESSING OFFICER/TPO IS DIRECTED TO RECONSIDER THE ISSUE IN ACCORDANCE WITH LAW, AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. KEEPING THE ASSESSEES OBJECTIONS AND THE DECISIONS OF THE COORDINATE BENCH, PRIMA FACIE, WE ARE OF THE VIEW THAT TATA EL XSI LIMITED IS FUNCTIONALLY DIFFERENT AND HAS INCOMPARABLE SIZE TO THAT OF THE ASSESSEE. FURTHER, WE ARE UNABLE TO VERIFY WHETHER THE SEGMENTAL PROFITS ADOPTED BY THE TPO PERTAIN TO ENTIRE SOFTWA RE DEVELOPMENT SERVICES OR PERTAIN TO LIMITED SERVICE AKIN TO IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 25 OF 35 ASSESSEE SERVICES. SINCE, THESE ASPECTS ARE NOT CLE AR FROM THE DATA FURNISHED BEFORE US, WE DIRECT THE TPO TO EXAMINE A ND IN CASE, THE SEGMENTAL PROFITS OF A PARTICULAR SERVICE IS NO T AVAILABLE, THEN, TO EXCLUDE THE TATA ELXSI LIMITED FROM THE LI ST OF COMPARABLES. ACCORDINGLY, THIS ISSUE IS RESTORED TO THE FILE OF TPO FOR EXAMINATION AND TO DECIDE IN ACCORDANCE WIT H LAW AND FACTS, AFTER AFFORDING REASONABLE OPPORTUNITY OF BE ING HEARD TO ASSESSEE. 19. IN VIEW OF THE AFORESAID DECISION RENDERED ON I DENTICAL FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT TATA ELX SI LTD., WAS RIGHTLY EXCLUDED FROM THE LIST OF COMPARABLE COMPAN IES. 36. PER CONTRA, LD. DR SUBMITTED THAT TATA ELXSI (S EG) WAS DOING VERY SIMILAR WORK AS THAT OF THE ASSESSEE AND HENCE OUGHT NOT TO BE EXCLUDED. 37. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. FINDINGS OF THE TRIBUNAL AS IT APPEAR AT PARAS 18 A ND 19 IN THE CASE OF M/S. KODIAK NETWORKS INDIA P. LTD (SUPRA) HAS BEEN REPRODUCED IN PARA 35 ABOVE. ACCORDINGLY WE DIRECT EXCLUSION OF TATA ELXSI (SEG) FROM THE LIST OF COMPARABLES. 27. WE FIND THAT THE TRIBUNAL IN THE LIGHT OF DECIS ION IN KODIAK NETWORK INDIA LTD. (SUPRA) HAS HELD THAT TATA ELXSI LTD. CANNOT BE INCLUDED I N THE LIST OF COMPARABLES. WE, THEREFORE, FOLLOWING THE ORDER OF TRIBUNAL IN THE AFORESAID CASE, APPROVE THE EXCLUSION OF TATA ELXSI LTD. FROM THE LIST OF COMPARABLES. 28. WITH REGARD TO IGATE GLOBAL SOLUTIONS LTD., FLE XTRONICS SOFTWARE SYSTEMS LTD. , L&T INFOTECH LTD. , SATYAM COMPUTER SERVICES LTD. AND INFOSYS TECHNOLOGIES LTD. , OUR ATTENTION WAS INVITED TO THE FACT THAT TURNOV ER OF THIS COMPANY IS MORE THAN 10 TIMES OF THE TURNOV ER OF THE ASSESSEE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY APPLIED THE TURNOVER FILTER AND IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 26 OF 35 EXCLUDED THEM FROM THE LIST OF COMPARABLES. IT WAS FURTHER CONTENDED THAT THESE COMPANIES WERE ALSO EXAMINED BY THE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) IN WHICH THE TRIBUNAL HAS TAKEN A VIEW THAT WHEREVER TURNOVER OF THE COMPARABLES IS MORE T HAN 10 TIMES OF THE TURNOVER OF THE ASSESSEE, THE COMPARABLE HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. THE RELEVANT OBSERVATIONS OF THE T RIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVA L CONTENTIONS. NO DOUBT, LD. DR HAS RELIED ON THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CRYSCAPITAL INVESTMENT AD VISORS (INDIA) P. LTD V. DCIT (SUPRA). HOWEVER, WE ALSO FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. PENTAIR WATER INDIA P. LTD, (SUPRA) HAD AFFIRMED AN ORDER OF THE TRIBUNAL WHERE LARGE COMPANIES HAVING HUGE TURNOVER WERE EXCLUDED. BOMBA Y HIGH COURT HAD FOLLOWED THE JUDGMENT OF HONBLE DELHI HI GH COURT IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. CON SIDERING THIS CONFLICTING OPINIONS OF TWO NON-JURISDICTIONAL HIGH COURTS, WE PREFER TO GO BY THE VIEW MORE FAVOURABLE TO THE ASS ESSEE. WE CANNOT SAY THAT TURNOVER IS HAVING NO RELEVANCE, ES PECIALLY WHEN THE ASSESSEE WAS HAVING A TURNOVER BELOW RS.10 CROR ES AND WAS BEING COMPARED WITH ENTITIES HAVING TURNOVER WELL E XCEEDING RS.200 CRORES. WE ARE THEREFORE CONVINCED THAT CIT (A) WAS JUSTIFIED IN DIRECTING EXCLUSION OF COMPANIES HAVIN G TURNOVER IN EXCESS OF RS.200 CRORES FROM THE LIST OF COMPARABLE S. GROUND 3 OF THE REVENUE STANDS DISMISSED. 29. WE, THEREFORE, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, APPROVE THE EXCLUSION OF THESE COMPARABLES AS THEIR TURNOVE R EXCEEDS 10 TIMES OF THE TURNOVER OF THE ASSESSEE. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 27 OF 35 30. WITH REGARD TO FOUR SOFT LTD. , IT IS NOTICED THAT THE CIT(APPEALS) HAS INCLUDED THIS COMPARABLE FROM THE LIST OF COMPARABL ES, BUT THE ASSESSEE WANTS ITS EXCLUSION BY FILING CO ON THE GROUND OF R PT FILTER; BUT THE DATAS ARE NOT AVAILABLE WITH REGARD TO FOUR SOFT LTD. TH E LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF T HE TRIBUNAL IN THE CASE OF SYASSARIS SOFTWARE P. LTD. (SUPRA) . 31. WE HAVE CAREFULLY EXAMINED THE ORDER OF TRIBUNA L AND WE FIND THAT THE TRIBUNAL IN THE AFORESAID ORDER HAS APPLIED RPT FILTER AND EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES, BUT RPT OF TH IS COMPANY WAS NOT MENTIONED IN THE ORDER. THEREFORE, IN THE ABSENCE OF COMPLETE DETAILS, IT IS NOT PROPER TO FOLLOW THE ORDER OF TRIBUNAL BLINDLY. WE THEREFORE SET ASIDE THIS ISSUE TO THE FILE OF TPO/AO TO EXAMINE THE JUS TIFICATION OF ITS INCLUSION/EXCLUSION BY APPLYING THE RPT FILTER IN T HE LIGHT OF AVAILABLE DATAS OF THIS COMPANY. 32. WITH REGARD TO VJIL CONSULTING LTD. , THE LD. DR HAS CONTENDED THAT WITHOUT CONFRONTING THE REPORT AND DATAS TO THE TPO , THE CIT(APPEALS) HAS INCLUDED THIS COMPARABLE IN THE LIST OF COMPARABLES . THE LD. DR HAS INVITED OUR ATTENTION TO THE ORDER OF TPO IN WHICH THE TPO HAS CATEGORICALLY OBSERVED THAT DETAILS OF THE COMPANY WERE NOT FURNI SHED BY THE DIRECTOR OF THE COMPANY ON ACCOUNT OF PENDING COURT CASES. IN THE ABSENCE OF COMPLETE DETAILS, THE TPO HAS EXCLUDED THIS COMPANY FROM THE LIST OF IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 28 OF 35 COMPARABLES, WHEREAS THE CIT(APPEALS) HAS INCLUDED THIS COMPARABLE WITHOUT CONFRONTING THE DETAILS PLACED BEFORE HIM T O THE TPO/AO. 33. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS CONTENDED THAT CIT(APPEALS) HAS EXAMINED THE DATAS, ANNUAL RE PORT OF VJIL CONSULTING LTD. IN THE LIGHT OF TPOS OBSERVATION A ND THEREFORE HE HAS RIGHTLY INCLUDED THIS COMPARABLE IN THE LIST OF COM PARABLES. THE LD. COUNSEL FURTHER CONTENDED THAT THIS COMPARABLE WAS EXAMINED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF QUALCOMM INDIA PVT. LTD. IN IT(TP)ANO.5239/DEL/2010 IN PARAS 31 TO 32 OF THE ORDER AND FOUND THIS COMPARABLE TO BE A GOOD COMPARABLE AND DIRECTED THE TPO TO INCLUDE THE SAME IN THE LIST OF COMPARABLES. THE RELEVANT EXTR ACT OF THE ORDER OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REF ERENCE:- E. VJIL CONSULTING LTD(VJIL) 31. THE ACTION OF THE LD. TPO IN REJECTING VJIL HAS BEEN OBJECTED BY THE ASSESSEE. THE LD. A.R SUBMITTED THA T VJIL IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND HAS TO BE CONSIDERED AS SUCH WHILE DETERMINING THE ALP. HE SUBMITTED THA T VJIL IS AN I.T CONSULTING SOFTWARE DEVELOPMENT AND OUTSOURCING SERVICES PROVIDER HEADQUARTERED IN INDIA. THE COMPANY IS ENG AGED IN DEVELOPMENT OF APPLICATIONS AND SYSTEMS SOFTWARE, S TUDENT TRAINING. HOWEVER, ON PERUSAL OF THE PROFIT AND LOS S ACCOUNT FOR THE FINANCIAL YEAR 2005-06 IT WAS NOTICED THAT VJIL HAS DERIVED MORE THAN 97% OF THE OPERATING REVENUES FROM THE EX PORT OF SOFTWARE SERVICES. IT IS EVIDENT FROM THE MANAGEMEN T DISCUSSION AND ANALYSIS AND PROFIT AND LOSS ACCOUNT OF THE COM PANY. IT WAS SUBMITTED THAT DURING THE ASSTT. YEAR 2006-07 THE S ALES OF THE COMPANY IS RS. 15.38 CRORES AND REVENUE FROM EXPORT S OF SOFTWARE IS RS.14.94 CRORES AND BALANCE OF RS. 43.9 1 LAKHS APPEARS TO BE FROM TRAINING AND DOMESTIC OPERATIONS . IN SUPPORT IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 29 OF 35 THE LD. AR REFERRED PAGE NOS. 18 AND 42 OF PAPER BO OK NO. III. (I.E. THE ANNUAL REPORT OF THE COMPANY FOR THE ASST T. YEAR 2006-07). 32. CONSIDERING THE ABOVE SUBMISSIONS WE FIND SUB STANCE IN THE CONTENTION OF THE LD. AR THAT VJIL IS FUNCTIONA LLY COMPARABLE TO THE ASSESSEE SINCE MORE THAN 97% OF T HE REVENUE IS FROM COMPARABLE ACTIVITY. WE ACCORDINGLY DIRECT THE A.O/T.P.O TO TAKE IT INTO ACCOUNT FOR DETERMINATION OF ALP IN THE CASE OF THE ASSESSEE. 34. HAVING CAREFULLY EXAMINED THE RIVAL SUBMISSIONS IN THE LIGHT OF TPOS ORDER, WE FIND THAT BEFORE THE TPO, DATAS OF THIS C OMPARABLE WERE NOT AVAILABLE AS THE TPO HAS CATEGORICALLY OBSERVED IN HIS ORDER THAT THE DIRECTOR OF THE COMPANY, SHRI M. MALLESHAM, ALSO EX PRESSED HIS INABILITY TO FURNISH FURTHER DETAILS DUE TO PENDING COURT CASES. IN THE ABSENCE OF CLEAR DETAILS, THE TPO REJECTED THIS COMPARABLE. NOW THE DETAILS OF THIS COMPARABLE ARE AVAILABLE AND THE CIT(A) HAS INCLUDE D THE SAME IN THE LIST OF COMPARABLES WITHOUT CONFRONTING THE AUDIT REPORT AND DATAS TO THE TPO. WE THEREFORE FIND IT PROPER TO REMIT THE MATTER TO THE TPO TO RECONSIDER THE INCLUSION OF THIS COMPARABLE IN THE LIST OF COMPARA BLES IN THE LIGHT OF THE ORDER OF THE TRIBUNAL IN THE CASE OF QUALCOMM INDIA PVT. LTD. (SUPRA) . ACCORDINGLY ADJUDICATION OF THIS COMPARABLE IS REST ORED TO THE TPO. 35. WITH REGARD TO MELSTAR INFORMATION TECHNOLOGY L TD. , THE CIT(APPEALS) REJECTED THE INCLUSION OF THIS COMPARA BLE IN THE LIST OF COMPARABLES AND THE ASSESSEE IS BEFORE US WITH THE REQUEST THAT SINCE THIS COMPANY IS FUNCTIONALLY COMPARABLE AND PASSES ALL T HE FILTERS APPLIED BY THE IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 30 OF 35 TPO, THE SAME MAY BE INCLUDED IN THE LIST OF COMPAR ABLES. IN SUPPORT OF HIS CONTENTIONS, HE HAS PLACED RELIANCE UPON THE JU DGMENT OF THE TRIBUNAL IN THE CASE OF M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. IN IT(TP)A NO.1105/BANG/2011 & 1047/BANG/2011. 36. THE LD. DR HAS CONTENDED THAT THE TRIBUNAL HAS RESTORED THE CONSIDERATION OF THIS COMPARABLE TO THE TPO IN THE CASE OF M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. (SUPRA), THEREFORE, ITS INCLUSION CAN ONLY BE CONSIDERED BY THE TPO IN THE LIGHT OF DIREC TIONS GIVEN BY THE TRIBUNAL IN THE CASE OF M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. (SUPRA) . 37. HAVING CAREFULLY EXAMINED THE RIVAL SUBMISSIONS IN THE LIGHT OF ORDERS OF LOWER AUTHORITIES, WE FIND THAT INCLUSION OF THI S COMPARABLE WAS NOT CONSIDERED BY THE LOWER AUTHORITIES. NOW THE ASSES SEE WANTS ITS INCLUSION IN THE LIST OF COMPARABLES. BUT THE ANNUAL REPORT OF THIS COMPANY REQUIRES PROPER EXAMINATION. IN THE CASE OF M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. (SUPRA) , THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF TPO WITH A DIRECTION TO RE-EXAMINE THE CLAIM OF INC LUSION OF THIS COMPARABLE IN THE LIGHT OF THE ANNUAL REPORT AND DETAILS FURNI SHED BY THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE O F M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. (SUPRA) IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 31 OF 35 21. MELSTAR INFORMATION TECHNOLOGIES LTD. (MELSTA R): AS FAR AS THIS COMPANY IS CONSIDERED, THE SAME WAS CHOSEN AS COMPARABLE COMPANY BY THE ASSESSEE IN ITS TP STUDY. THE TPO REJECTED MELSTAR STATING THE FOLLOWING:- AS PER THE DIRECTORS REPORT MELSTAR HAS FACED ADVE RSE ECONOMIC CONDITIONS DURING THE FY 2004-05 AND ITS MARGINS ARE ADVERSELY AFFECTED BY ITS PECULIAR CIRCUMSTANCES. THE BUSINESS PROFILE OF MELSTAR IS N OT ALIGNED WITH THE NORMAL TREND OF THE SOFTWARE INDUS TRY IN INDIA. THE COMPANY THEREFORE IS NOT TREATED AS A COMPARABLE. (PAGE 82 OF THE TP ORDER) 22. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FO R THE ASSESSEE BEFORE US THAT THAT MELSTAR PASSES ALL FILTERS APPL IED BY THE TPO IN HIS ORDER AND IS FUNCTIONALLY COMPARABLE. THE FILTE RS APPLIED BY TPO AND THEIR SATISFACTION WAS TABULATED AS UNDER: IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 32 OF 35 23. IT WAS FURTHER POINTED OUT BY HIM THAT THE TPO HAS CONCLUDED THAT MELSTAR IS NOT COMPARABLE ON THE GRO UND THAT THERE WAS AN EXTRAORDINARY DEBIT OF RS. 2.85 CR AND ON TH E GROUND THAT THE COMPANYS SALES ARE DIMINISHING. A PERUSAL OF T HE REVENUES OF THE PREVIOUS FINANCIAL YEARS (PAGE 81 OF THE TP ORD ER) DEMONSTRATES THAT THE REVENUES ARE MORE OR LESS CON SISTENT FOR THE PREVIOUS FINANCIAL YEARS AND HAS ONLY SUBSTANTIALLY DECREASED IN THE FINANCIAL YEAR 2004-05. THE RELEVANT EXTRACT O F THE ANNUAL REPORT (PAGE 4) IS REPRODUCED BELOW: C) FINANCIAL PERFORMANCE BASED ON GIVEN INDICATORS AS PER THE AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 .3.2005: IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 33 OF 35 IF THE ABOVE EXTRAORDINARY EXPENSE OF RS. 2.85 CR I S EXCLUDED FROM THE OPERATING COST, THE MARK-UP ON TH E COST WORKS OUT TO 3.26%. THE DETAILED WORKING WAS ALSO G IVE AS BELOW:- 24. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT SI NCE MELSTAR IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND CLEARS ALL THE FILTERS APPLIED BY THE TPO, THE SAME SHOULD BE CONSIDERED A S COMPARABLE WITH NET COST PLUS MARGIN OF 3.26%. 25. THE SUBMISSIONS ARE CONSIDERED AND FOUND TO BE ACCEPTABLE. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, MELSTAR PASSES ALL THE TESTS OF COMPARABI LITY ADOPTED BY THE TPO. THE EXTRAORDINARY ITEM OF EXPENDITURE, IF REMOVED, WOULD RENDER THIS COMPANY AS A COMPANY REVENUES OF WHICH ARE NOT DIMINISHING. MELSTAR THEREFORE DESERVES TO BE INCLUDED AS A COMPARABLE COMPANY. WE HOLD ACCORDINGLY. 38. FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN THE CASE OF M/S. NOVELL SOFTWARE DEVELOPMENT (INDIA) PVT. LTD. (SUPRA), WE RESTORE THE MATTER TO THE FILE OF AO/TPO TO EXAMINE THE CLAIM OF INCLUSION OF THIS COMPARABLE IN THE LIGHT OF ANNUAL REPORT AND OTHER DETAILS. 39. THE REVENUE HAS ALSO RAISED ONE MORE GROUND TH ROUGH GROUND NO.10 THAT THE CIT(A) HAS ERRED IN ALLOWING DEDUCTI ON U/S. 10A IN RESPECT OF IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 34 OF 35 UNITII WITHOUT APPRECIATING THE FACT THAT CUSTOM B ONDING LICENSES WERE OBTAINED ONLY ON 29.1.2002. IN THIS REGARD, OUR AT TENTION WAS INVITED TO THE ORDER OF THE CIT(APPEALS) WHEREIN HE HAS EXAMINED T HIS ISSUE IN THE LIGHT OF THE ORDER OF TRIBUNAL FOR AYS 2002-03, 2003-04 & 20 04-05. 40. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE VIEW TAKEN BY THE TR IBUNAL IN AYS 2002-03 TO 2004-05 IN ASSESSEES OWN CASE WAS APPROVED BY THE HONBLE HIGH COURT OF KARNATAKA IN ITS JUDGMENT DATED 07.11.2004 IN IT A NO.1013 TO 1014/2008, THEREFORE, THE ISSUE IS COVERED IN FAVOU R OF ASSESSEE. THIS CONTENTION OF THE ASSESSEE WAS NOT REFUTED BY THE L D. DR. 41. WE HAVE CAREFULLY EXAMINED THE ORDER OF CIT(APP EALS) ON THIS ISSUE AND WE FIND THAT THE CIT(APPEALS) HAS EXAMINED THIS ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS OF DIFFERENT BENCHE S OF THE TRIBUNAL AND FINALLY HAVING RELIED UPON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2002-03 TO 2004-05, THE CIT(APPEALS) HAS HE LD THAT THE COMPANY IS ELIGIBLE TO CLAIM DEDUCTION U/S. 10A IN RESPECT OF LARA UNIT INCOME AND ALLOWED THE RELIEF. SINCE THE CIT(APPEALS) HAS DEC IDED THE ISSUE FOLLOWING THE ORDER OF TRIBUNAL WHICH WAS LATER ON CONFIRMED BY THE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF CIT(APP EALS), ACCORDINGLY WE CONFIRM THE SAME. IT(TP)A NO.614/BANG/2013 & CO NO.166/BANG/2015 PAGE 35 OF 35 42. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CO BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( S. JAYARAMAN ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 4 TH NOVEMBER, 2016. /D S/ COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.