HSBC Electronic Data Processing Inida P. Ltd, Hyderabad V. The ACIT Circle -2(2), Hyderabad

CO 17/HYD/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8717 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKARA RAO
• Keywords: Business income; Transfer pricing; Double taxation relief; International transaction; Services rendered outside India; Arm length price

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER. ITA NO.1623/ HYD/2010 (ASSESSMENT YEAR -2005-06) M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD ( PAN - AAACH 8235 M ) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1677 /HYD/2010 (ASSESSMENT YEAR -2005-06) ASST. COMMISSIONER OF INCOME- TAX CIRCLE 2(2), HYDERABAD V/S. M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD ( PAN - AAACH 8235 M ) (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.17/HYD/2011 (IN ITA NO.1677/HYD/2010) (ASSESSMENT YEAR -2005-06) M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD ( PAN - AAACH 8235 M ) V/S. ASST. COMMISSIONER OF INCOME-TAX CIRCLE 2(2), HYDERABAD (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI RAJAN VORA REVENUE BY : SHRI D.SUDHAKARA RAO, DR DATE OF HEARING 15 .05.2013 DATE OF PRONOUNCEMENT 28.06.2013 ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 2 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDE R OF THE CIT(A) III, HYDERABAD DATED 14.10.2010 FOR THE ASSE SSMENT YEAR 2005- 06. AGAINST THE APPEAL OF REVENUE, ASSESSEE HAS A LSO PREFERRED CROSS- OBJECTION. AS THE FACTUAL BACKGROUND AND ISSUES I NVOLVED ARE COMMON, THESE MATTERS ARE BEING DISPOSED OFF BY THIS ORDER . ASSESSEES APPEAL : ITA NO.1623/HYD/2010 2. THE ASSESSEE HAS RAISED 18 GROUNDS, OUT OF WH ICH GROUNDS NO.1 TO 12 PERTAIN TO TRANSFER PRICING ISSUES, AND GROUNDS NO.13 TO 17 PERTAIN TO OTHER CORPORATE TAX MATTERS. 3. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSES SEE, SHRI RAJAN VORA AND THE LEARNED DEPARTMENTAL REPRESENTAT IVE SRI D. SUDHAKAR RAO IN DETAIL. THOUGH THE ASSESSEE FILED SEPARATE PAPER-BOOK FOR THE ASSESSMENT YEAR 2005-06, IN THE COURSE OF A RGUMENTS, THE ASSESSEE FILED REVISED PAPER-BOOKS COMMON FOR THE A SSESSMENT YEARS 2004-05 TO 2006-07, WHICH WERE HEARD TOGETHER WITH THESE APPEALS ON 15.5.2013, CONTAINING PAPERS IN TWO PARTS. 3. BRIEFLY STATED, ASSESSEE IS WHOLLY OWNED SUBSID IARY OF HSBC HOLDINGS PLC (HSBC GROUP) ONE OF THE LEADING BANKIN G AND FINANCIAL SERVICES ORGANISATION IN THE WORLD. THE ASSESSEE PR OVIDES A RANGE OF BACK OFFICE SERVICES INCLUDING CONTACT CENTRE AND D ATA ENTRY AND DATA PROCESSING AND RELATED SERVICES, TOGETHER REFERRED TO AS BPO SERVICES, TO ITS CROUP COMPANIES/ASSOCIATED ENTERPRISES (AE) ACR OSS THE GLOBE. THE COMPANYS SERVICE CENTRES ARE REGISTERED AS A 100% EXPORT ORIENTED ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 3 UNIT UNDER THE STPI SCHEME. THE ASSESSEE HAS ALSO ESTABLISHED A BRANCH IN UK TO FACILITATE THE IDENTIFICATION AND E FFECTIVE MIGRATION OF WORK TO INDIA FROM AES. THE ASSESSEE RENDERS SERVI CES AS A CAPTIVE SERVICE PROVIDER AND REMUNERATED ON A FULL TIME EQU IVALENT/COST BUDGETED PLUS MARK-UP BASIS ENSURING A MARK-UP ON T HE COST INCURRED FOR PROVIDING THE SERVICES TO ITS AES. 4. THE ASSESSEE FILED RETURN OF INCOME FOR THE AS SESSMENT YEAR 2005-06 ON 29.10.2005 DISCLOSING A TAXABLE INCOME O F RS.1,60,17,506, AFTER CLAIMING DEDUCTION UNDER S.10A OF THE INCOME- TAX ACT, IN RESPECT OF THE PROFITS FROM EXPORT OF SERVICES FROM THE STP I UNITS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE 2(2), VIZ. THE AS SESSING OFFICER, IN THE SCRUTINY PROCEEDINGS MADE A REFERENCE UNDER S.9 2CA(1)OF THE ACT TO THE TRANSFER PRICING OFFICER FOR DETERMINATION OF A RMS LENGTH PRICE(ALP) OF THE INTERNATIONAL TRANSACTIONS REPORTED WITH AE. 5. THE ASSESSEE, FOR THE PURPOSE OF ESTABLISHING THE ALP OF ITS TRANSACTIONS, HAS UNDERTAKEN A TRANSFER PRICING STU DY AND CONCLUDED THAT INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH AES ARE AT ARMS LENGTH. IN THE REPORT, THE ASSESSEE ADMITS THAT IT WAS CATE GORIZED AS RISK MITIGATED CONTRACT SERVICE PROVIDER AND TNMM WAS MO ST APPROPRIATE METHOD AND OPERATING MARGIN I.E. OPERATING PROFIT/O PERATING COST WAS SELECTED AS THE PROFIT LEVEL INDICATOR (PLI)FOR THE PURPOSE OF DETERMINING THE ALP. IT HAS ALSO UNDERTAKEN MULTIPLE YEAR DA TA OF THE COMPARABLE COMPANIES AND ARRIVED AT 13 COMPARABLES WITH WEIGHT ED AVERAGE ARITHMETIC MEAN OF 10.25%. EVEN THOUGH THERE ARE FU NCTIONAL AND RISK DIFFERENCES BETWEEN THE ASSESSEE AND COMPARABLES, N O ADJUSTMENTS WERE UNDERTAKEN IN THE TP REPORT, SINCE THE ASSESSE ES NET MARGIN FROM THE PROVISION OF SERVICES TO ITS AES WAS 8.87%, WHI CH WAS WITHIN THE ARMS LENGTH RANGE DETERMINED. IT IS ALSO ITS CONT ENTION THAT THE ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 4 ASSESSEE COMPANY HAS UNUTILIZED SURPLUS CAPACITY IN THE YEAR, AND ON MAKING ADJUSTMENTS FOR THE COST OF THE UNUTILISED F ACILITIES, THE NET MARGIN EARNED BY THE ASSESSEE FORM THE SERVICES TO THE AES IS 12.76%. THE TRANSFER PRICING OFFICER ACCEPTED THE TNMM METH OD AS THE MOST APPROPRIATE METHOD AND THE PLI (OPERATING PROFIT/OP ERATING COST) ADOPTED THEREIN, BUT REJECTED THE TP REPORT OF THE ASSESSEE AND HAS CONDUCTED FRESH SEARCH FROM THE DATA BASES. THE T PO ALSO USED MORE FILTERS FOR COMPARATIVE ANALYSIS AND ULTIMATELY SEL ECTED TEN COMPANIES AS COMPARABLES WITH AVERAGE MARGIN OF 24.14%. AFTER PR OVIDING WORKING CAPITAL ADJUSTMENT OF 0.56%, HE MADE TP ADJUSTMENT OF RS.51,70,38,468. 6. IN ADDITION TO THE TP ADJUSTMENTS, THERE ARE O THER ISSUES ON THE CORPORATE TAX MATTERS WHICH ARE CONSIDERED IN T HE COURSE OF THIS ORDER. TRANSFER PRICING ISSUES (GROUNDS NO.1 TO 12) 7. THE FIRST OBJECTION IS WITH REFERENCE TO SELECT ION OF COMPARABLE DATA BY THE TPO WITH REFERENCE TO THE FO LLOWING FOUR COMPANIES- (A) VISHAL INFORMATION TECHNOLOGIES LTD. (B) MAPLE E SOLUTIONS LTD.. (C) NUCLEUS NETSOFT AND GIS(INDIA) LTD. (D) WIPRO BPO SOLUTIONS LTD. 8. OUT OF THE ABOVE FOUR COMPARABLES, WE HAVE ALRE ADY CONSIDERED THE ASSESSEES OBJECTIONS WITH REFERENCE TO THE FIRST THREE COMPANIES, VIZ. VISHAL INFORMATION TECHNOLOGIES LTD ., MAPLE E SOLUTIONS ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 5 LTD. AND NUCLEUS NETSOFT AND GIS(INDIA) LTD., VIDE OUR SEPARATE ORDER OF EVEN DATE FOR THE ASSESSMENT YEAR 2006-07 IN ITA N O.1624/HYD/2010. FOR THE DETAILED REASONS DISCUSSED IN THAT ORDER FO R THE ASSESSMENT YEAR 2006-07, WE DIRECT THE TPO TO EXCLUDE THOSE THREE C OMPANIES. 9. WITH REFERENCE TO WIPRO BPO SOLUTIONS, IT WAS SUBMITTED THAT THE FUNCTIONS OF THAT COMPANY ARE DIFFERENT AN D THE RISKS UNDERTAKEN ARE MORE AND IT IS AN INDUSTRIAL GIANT, HAVING HIGH TURNOVER, AS COMPARED TO THAT OF THE ASSESSEE. THE ASSESSEE RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. IN ITA NO.961/H YD/2011. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE OPINION THAT THERE IS NO BASIS FOR CONSIDERING THE ASSESSEES SUBMISSIONS. IN THE COORDINATE BENCH DECISION RELIE D UPON BY THE ASSESSEE IN THE CASE OF CAPITAL IQ INFORMATION, WHI CH ALSO CONSIDERED THE OTHER CONDITIONS WHILE EXCLUDING THE WIPRO BPO SOLUTIONS, THE EXCLUSION WAS ONLY ON THE REASON THAT THE TURNOVER OF THE SAID COMPANY WAS NOT COMPARABLE WITH THE TURNOVER OF THAT ASSESS EE. RELEVANT DISCUSSION FROM PARA 20 TO 21 IS AS UNDER- 20. THE ASSESSEE HAS OBJECTED FOR THESE THREE COMP ANIES BEING TAKEN AS COMPARABLES MAINLY ON THE GROUND THAT THES E COMPANIES ARE INDUSTRIAL GIANTS CONSIDERING THEIR T URNOVER COMPARED TO THAT OF THE ASSESSEE, WHOSE TURNOVER IS ONLY RS.60 CRORES. IN THIS CONTEXT, THE ASSESSEE HAS REFERRED TO THE ANNUAL TURNOVER OF THESE THREE COMPANIES, WHICH ARE AS BEL OW- COMPANY TURNOVER (IN RS.CRORES) (1) HCL COMNET SYSTEMS & SERVICES LIMITED 260.19 (2 ) INFOSYS BPO LIMITED 649.57 (3) WIPRO LIMITED 939.78 IT IS THE CONTENTION OF THE ASSESSEE THAT THESE THR EE COMPANIES ARE INDUSTRIAL GIANTS IN THE AREA OF SOFTWARE DEVEL OPMENT AND SINCE THESE COMPANIES ASSUME ALL RISKS, THEY EARN H IGHER AMOUNT OF REVENUE RESULTING IN HIGHER PROFIT, WHEREAS THE ASSESSEE BEING A CAPTIVE UNIT OF ITS PARENT COMPANY IN THE USA, IT OPERATES IN A ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 6 RISK MITIGATED ENVIRONMENT. THEREFORE, THE MARGIN O F PROFIT IS ALSO LESS. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DECISION OF THE IT AT DELHI BENCH IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. V/ S. ITO IN ITA NO.3856/DEL/2010 DATED 4TH NOVEMBER, 2010 AND IN TH E CASE OF TRINITI ADVANCED SOFTWARE LABS(P)LTD.(2011-TII-92- ITAT-HYD- TP). THE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER CONTENDED THAT WHEN THE TPO HAS REJECTED COMPANIES WITH TURNOVER OF LESS THAN RS.ONE CRORE, BY STATING THAT THESE COMPANIES MAY NOT BE REPRESENTING THE INDUSTRY TREN D, BY APPLYING THE VERY SAME LOGIC, HE SHOULD NOT HAVE AL SO CONSIDERED THE COMPANIES HAVING TURNOVER OF MORE THAN RS.200 C RORES. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS RELIED UPON THE DECISION OF THE ITAT B ANGALORE BENCH IN THE CASE OF M/S. GENESYS INTEGRATING SYSTE M(INDIA) P. LTD. (2011) 64 DTR 225. 21. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN RELATION TO THESE THREE COMPANIES, WE FIND THAT THE TPO HAS EXC LUDED THE COMPANIES WHOSE TURNOVER IS LESS THAN RS.ONE CRORE, ON THE GROUND THAT THEY MAY NOT BE REPRESENTING THE INDUST RY TREND. THAT VERY LOGIC ALSO APPLIES TO THE COMPANIES HAVIN G HIGH TURNOVER OF OVER RS.200 CRORES AS AGAINST THE ASSES SEE'S TURNOVER OF ONLY RS.60 CRORES, AND THEREFORE, IT WO ULD BE FAIR ENOUGH TO EXCLUDE THOSE COMPANIES ALSO. IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. (SUPRA), THE DELHI BENCH OF THE TRIBUNAL, WHILE CONSIDERING THE COMPARABILITY WITH COMPANIES WHICH ARE MARKET LEADERS IN THEIR FIELD, AND HAVING SUBSTANTIALLY HIGH TURNOVER, OBSERVED AS FOLLOWS- '5.2. VARIOUS ARGUMENTS, AS STATED EARLIER, WERE TA KEN BEFORE THE DRP WHICH INTER-ALIA INCLUDED REJECTION OF COMPARABLE CASES; APPLICATION OF ARBITRARY FILTER O F WAGE TO SALES RATIO; IGNORING THAT THE ASSESSEE IS A LIMITE D RISK COMPANY; INCLUSION OF INFOSYS TECHNOLOGIES LTD.; AN D INCLUSION OF SATYAM COMPUTERS SERVICES LTD. IN SPIT E OF THE FACT THAT ITS DATA IS NOT RELIABLE AS PUBLICLY KNOW N. ON THE BASIS OF THESE ARGUMENTS, THE DRP EXCLUDED THE CASE OF SATYAM COMPUTERS SERVICES LTD., THEREBY REDUCING TH E ARM'S LENGTH MARGIN TO 25.6%. IT IS ARGUED THAT THE CASE OF THE ASSESSEE IS NOT COMPARABLE WITH INFOSYS TECHNOL OGIES LTD., THE REASON BEING THAT THE LATER IS GIANT IN T HE AREA OF DEVELOPMENT OF SOFTWARE AND IT ASSUMES ALL RISKS, L EADING TO HIGHER PROFIT. ON THE OTHER HAND, THE ASSESSEE I S A CAPTIVE UNIT OF ITS PARENT COMPANY IN THE USA AND I T ASSUMES ONLY LIMITED CURRENCY RISK. HAVING CONSIDER ED THESE POINTS, WE ARE OF THE VIEW THAT THE CASE OF T HE AFORESAID INFOSYS AND THE ASSESSEE ARE NOT COMPARAB LE AT ALL AS SEEN FROM THE FINANCIAL DATA ETC. OF THE TWO COMPANIES MENTIONED EARLIER IN THE ORDER. THEREFORE , WE ARE OF THE VIEW THAT THIS CASE IS REQUIRED TO BE EX CLUDED.' SIMILAR VIEW HAS ALSO BEEN EXPRESSED BY THE HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF TRINITY ADVANCED LABS P . LTD. (SUPRA). ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 7 IN THE CASE OF M/S. GENESYS INTEGRATING INDIA P. LT D. (SUPRA), THE BANGALORE BENCH OF THE TRIBUNAL HAS OBSERVED IN THE FOLLOWING MANNER- '9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS AND ALSO THE JURIDICAL PRECED ENTS ON THE ISSUE, WE FIND THAT THE TPO HIMSELF HAS REJECTE D THE COMPANIES WHICH ARE MAKING LOSSES AS COMPARABLES. T HIS SHOWS THAT THERE IS A LIMIT FOR THE LOWER END FOR I DENTIFYING THE COMPARABLES. IN SUCH A SITUATION, WE ARE UNABLE TO UNDERSTAND AS TO WHY THERE SHOULD NOT BE AN UPPER L IMIT ALSO. WHAT SHOULD BE UPPER LIMIT IS ANOTHER FACTOR TO BE CONSIDERED. WE AGREE WITH THE CONTENTION OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT THE SIZE MATTERS IN B USINESS. A BIG COMPANY WOULD BE IN A POSITION TO BARGAIN FOR THE PRICE AND ALSO ATTRACT MORE CUSTOMERS. IT WOULD ALS O HAVE A BROAD BASE OF SKILLED EMPLOYEES WHO ARE ABLE TO G IVE BETTER OUTPUT. A SMALL COMPANY MAY NOT HAVE THESE BENEFITS AND THEREFORE, THE TURNOVER ALSO WOULD COM E DOWN REDUCING PROFIT MARGIN. THUS, AS HELD BY THE V ARIOUS BENCHES OF THE TRIBUNAL WHEN COMPANIES WHICH ARE LO SS MAKING ARE EXCLUDED FROM COMPARABLES, THEN THE SUPE R PROFIT MAKING COMPANIES SHOULD ALSO BE EXCLUDED. FO R THE PURPOSE OF CLASSIFICATION OF COMPANIES ON THE BASIS OF NET SALES OR TURNOVER, WE FIND THAT A REASONABLE CLASSI FICATION HAS TO BE MADE. DUN & BRADSTREET AND NASSCOM HAS GI VEN DIFFERENT RANGES. TAKING THE INDIAN SCENARIO INTO CONSIDERATION, WE FEEL THAT THE CLASSIFICATION MADE BY DUN & BRADSTREET IS MORE SUITABLE AND REASONABLE. IN VI EW OF THE SAME, WE HOLD THAT THE TURNOVER FILTER IS VERY IMPORTANT AND THE COMPANIES HAVING A TURNOVER OF RS.1.00 CROR E TO 200 CRORES HAVE TO BE TAKEN AS A PARTICULAR RANGE A ND THE ASSESSEE BEING IN THE RANGE HAVING TURNOVER OF 8.15 CRORES, THE COMPANIES WHICH ALSO HAVE TURNOVER OF 1 .00 TO 200.00 CRORES ONLY SHOULD BE TAKEN INTO CONSIDERATI ON FOR THE PURPOSE OF MAKING TP STUDY.' IN VIEW OF THE AFORESAID CONSISTENT DECISIONS OF TH E TRIBUNAL, WE ACCEPT THE CONTENTION OF THE LEARNED AUTHORISED REP RESENTATIVE FOR THE ASSESSEE THAT THE AFORESAID THREE COMPANIES CANNOT BE TREATED AS COMPARABLE, CONSIDERING THEIR SUBSTANTIA LLY HIGH TURNOVER AS COMPARED TO THAT OF THE ASSESSEE. WE AL SO AGREE THAT THE TURNOVER FILTER OF RS.1 CRORE TO RS.200 CRORE A S APPLIED BY THE ITAT BANGALORE BENCH IN THE AFORESAID DECISION, SHO ULD ALSO APPLY TO THE FACTS OF THE PRESENT CASE, CONSIDERING THE ASSESSEE'S TURNOVER OF MERE RS.60 CRORES. WE THEREFOR4E, HOLD THAT COMPANIES HAVING TURNOVER OF RS.1 CRORE TO RS.200 C RORE ALONE CAN BE CONSIDERED AS COMPARABLE, IN THE CASE OF THE ASSESSEE. 11. AS CAN BE SEEN FROM THE ABOVE, MAIN REASON F OR EXCLUDING WIPRO BPO IS ON THE BASIS OF HIGHER TURNOVER CLAIME D BY THAT BPO WHEN COMPARED TO THE ASSESSEE IN THAT CASE. HOWEVER, IN THE CASE BEFORE US, ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 8 ASSESSEES TURNOVER IS NOT SMALL. IN FACT, ASSESSEE S TOTAL TURNOVER IS RS.334.54 CRORES, WHICH CANNOT BE CONSIDERED AS SMA LL GIVEN THE FACTS OF THE CASE. EXCEPT RELYING ON THE TURNOVER FILTER AS CONSIDERED IN THE COORDINATE BENCH DECISION, ASSESSEE DID NOT POINT O UT ANY OTHER DIFFERENCE IN FUNCTIONS OR ANY OTHER FILTERS ARE AP PLICABLE. SINCE THIS ASSESSEES TURNOVER IS ALSO EQUALLY HIGH, WE DO NOT SEE ANY REASON TO EXCLUDE THIS COMPARABLE. HOWEVER, IT IS ONE OF THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER RELIED ON UNAU DITED SEGMENTED DATA. EVEN THOUGH THIS ARGUMENT IS PLACED BEFORE U S, WE ARE UNABLE TO EXAMINE THIS ASPECT, IN THE ABSENCE OF ANY SEGMENTA L DATA AVAILABLE BEFORE US. THEREFORE, IN THE INTERESTS OF JUSTICE, WE RESTORE THIS ASPECT OF THE MATTER TO THE FILE OF THE ASSESSING OFFICER/TPO , WHO SHALL EXAMINE THE RELEVANT SEGMENTAL DATA OF WIPRO BPO SOLUTIONS, FURNISH THE SAME TO THE ASSESSEE, CALL FOR OBJECTIONS AND THEN DECIDE T HE ISSUE AFRESH BY ARRIVING AT OPERATING PROFITS VIS-A-VIS COSTS OF T HAT COMPANY, SO AS TO INCLUDE IT IN THE COMPARABLES. WITH THESE OBSERVATI ONS, THE ISSUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. NEXT ISSUE TO BE CONSIDERED IS ABOUT THE FOLL OWING COMPARABLES REJECTED BY THE TPO, WHICH ACCORDING TO THE ASSESSEE WAS DONE WITHOUT ANY DISCUSSION. (A) APEX ADVANCED TECHNOLOGY PVT. LTD. (B) PANTASOFT TECHNOLOGIES LTD. (C) GOLDSTONE TELE SERVICES LTD. (D) GOLD STONE TECHNOLOGIES LTD. (E) R.SYSTEMS INTERNATIONAL LTD. 13. AS FOR APEX ADVANCED TECHNOLOGY PVT. LTD.(14 .44%), IT IS SUBMITTED THAT THIS COMPARABLE WAS SELECTED FOR ASS ESSMENT YEARS ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 9 2006-07 AND 2007-08. SINCE THIS COMPARABLE IS SELE CTED IN LATER TWO YEARS, WE ARE UNABLE TO UNDERSTAND WHY THE SAME I S NOT ACCEPTABLE TO THE TPO IN THIS ASSESSMENT YEAR 2005-06. ASSESSING OFFICER IS DIRECTED TO EXAMINE THIS COMPARABLE AFRESH, AND IF IT IS FOU ND THAT THIS COMPARABLE IS FUNCTIONALLY SAME ALONG WITH THE RELI ABILITY OF THE DATA AVAILABLE, THE SAME CAN BE CONSIDERED AS COMPARABLE FOR THIS YEAR ALSO. 14. AS FOR M/S PANTASOFT TECHNOLOGIES LTD., EVEN T HOUGH THE ASSESSEE INCLUDED THE SAME, NO ARGUMENTS WERE AVAIL ABLE FOR ITS EXCLUSION. SINCE SEGMENTAL DATA HAS TO BE EXAMINED BY THE TPO, WE DIRECT THE TPO TO EXAMINE WHETHER THERE IS ANY SE GMENTAL DATA AND IF SO, WHETHER THE COMPANY IS ELIGIBLE FOR SELECTION A S COMPARABLE. THEREFORE, THE ISSUE OF PANTASOFT TEHCNOLOGY IS ALS O RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 15. AS FOR GOLDSTONE TELE SERVICES LTD., IT WAS SU BMITTED THAT THIS COMPANY IS SELECTED AS COMPARABLE FOR ASSESSME NT YEAR 2006-07. HOWEVER, AS SEEN FROM THE APPEAL OF THE ASSESSMENT YEAR 2006-07, WHICH WAS ALSO HEARD TOGETHER WITH THIS APPEAL, AND DISPOSED OF BY SEPARATE ORDER OF EVEN DATE, THERE IS NO SUCH COMPA NY SELECTED AS COMPARABLE FOR THAT YEAR. THEREFORE, ASSESSEES O BJECTION IN THIS BEHALF CANNOT BE ACCEPTED. 16. AS FOR GOLD STONE TECHNOLOGIES LTD., IT IS SUB MITTED THAT THIS COMPANY SHOULD BE SELECTED AS COMPARABLE ON THE BAS IS OF THE RESPONSE OF THE SAID COMPANY UNDER S.133(6). HOWEVER, THIS COMPANY WAS CONSIDERED AND REJECTED IN ASSESSMENT YEAR 2006-0 7 ON FUNCTIONALITY BASIS AND WE HAVE UPHELD THE VIEW TAKEN BY THE REVE NUE AUTHORITIES IN THAT BEHALF FOR THAT YEAR VIDE OUR SEPARATE ORDER O F EVEN DATE IN THE APPEAL FOR THAT YEAR NOTED ABOVE. ACCORDINGLY, WE ARE OF THE OPINION ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 10 THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE FOR THIS YEAR AS WELL. 17. AS FOR R.SYSTEMS INTERNATIONAL LTD., IT WAS S UBMITTED THAT THIS COMPANY WAS SELECTED AS COMPARABLE BY THE TPO FOR ALL OTHER YEARS, AND THE ASSESSEE HAS NOT OBJECTED TO THE SAM E. IT WAS SUBMITTED THAT THIS COMPANY ALSO SHOULD BE SELECTED AS A COMP ARABLE IN THIS ASSESSMENT YEAR AS WELL. ON SEEING THE RECORD OF A SSESSMENT YEAR 2006-07, WE FIND THAT R.SYSTEMS INTERNATIONAL LTD. IS ONE OF THE COMPARABLE ACCEPTED BY THE TPO. WHY THIS IS REJEC TED IN THIS YEAR COULD NOT BE ASCERTAINED BY US. THEREFORE, ASSESSIN G OFFICER/TPO IS DIRECTED TO EXAMINE THE SEGMENTAL REPORTS OF THIS C OMPANY, IF THE DETAILS ARE AVAILABLE IN THE PUBLIC DOMAIN AND IF I T IS FOUND THAT FUNCTIONS OF THAT COMPANY ARE SIMILAR TO THAT OF THE ASSESSEE EVEN IN THIS YEAR, ON THE REASON THAT THIS COMPANY WAS SELECTED IN THE LA TER YEARS, WE DIRECT THE AO/TPO TO INCLUDE THIS COMPANY AS ONE OF THE CO MPARABLE. 18. WITH THESE DIRECTIONS, THE ISSUE OF COMPARABLE S IS DECIDED ACCORDINGLY. 19. WITH REFERENCE TO VARIOUS ADJUSTMENTS UNDER TH E TP PROVISIONS, THE WORKING CAPITAL ADJUSTMENT OF 0.56% WAS ACCEPTED BY THE TPO, WHEREAS THE ASSESSEE IS SEEKING DEPRECIATI ON ADJUSTMENT AND RISK ADJUSTMENT. THESE ISSUES WERE ELABORATELY DIS CUSSED IN OUR SEPARATE ORDER OF EVEN DATE FOR ASSESSMENT YEAR 200 6-07, IN APPEAL, ITA NO.1624/HYD/2010. CONSISTENT WITH THE VIEW TAKE N THEREIN, WE DIRECT THE ASSESSING OFFICER /TPO TO EXAMINE THIS I SSUE AND ALLOW NECESSARY ADJUSTMENTS AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THESE ISSUES ARE ALSO RESTOR ED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR APPROPRIATE ADJUSTMENTS I N THE LIGHT OF THE ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 11 DIRECTIONS GIVEN IN OUR ORDER OF EVEN DATE FOR ASSE SSMENT YEAR 2006-07 NOTED ABOVE. 20. GROUND NO.13 OF THE ASSESSEE IN THIS APPEAL IS AGAINST NON- CONSIDERATION OF THE FOREIGN EXCHANGE GAIN AS EARNE D FROM BUSINESS OPERATIONS OF THE STPI UNDERTAKING ASSESSEE ELIGIBL E FOR DEDUCTION UNDER S.10A OF THE ACT. THE ISSUE INVOLVED IN THIS GROU ND IS SIMILAR TO THE ONE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 -07, AND THE SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE, VIDE OUR ORD ER OF EVEN DATE IN ITA NO.1623/HYD/2010. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE ASSESSMENT YEAR 2005-06 BEING SIMILAR, CONSISTENT W ITH THE VIEW TAKEN AS ABOVE FOR THE ASSESSMENT YEAR 2006-07, WE HOLD T HAT SINCE FOREIGN EXCHANGE GAIN IS ON ACCOUNT OF FLUCTUATIONS OF THE FOREIGN EXCHANGE RECEIVED FOR THE SERVICES RENDERED BY THE ASSESSEE, THIS HAS TO BE TREATED AS BUSINESS INCOME AND IT HAS TO BE CONSIDE RED AS PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUCTION UNDER S.10A OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO TREAT ACCORDINGLY, AND THIS GROUND OF THE ASSESSEE IS ALLOWED. 21. GROUND NO.14 OF THE ASSESSEE IN THIS APPEAL I S WITH REGARD TO CONSIDERATION OF THE WHOLE OF LEASED LINE CHARGE S OF RS.5,17,489,370 INCURRED BY THE ASSESSEE AS ATTRIBUTABLE TO THE DE LIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE ISSUE INVOLVED IN THIS GROUND IS SIMILAR TO THE ONE IN ASSESSEES OWN CASE FOR THE ASSESSMENT Y EAR 2006-07, AND DECIDED THE SAME VIDE OUR ORDER EVEN DATE IN ITA NO .1624/HYD/2010. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE ASSESSM ENT YEAR 2005-06 BEING SIMILAR, CONSISTENT WITH THE VIEW TAKEN AS AB OVE FOR THE ASSESSMENT YEAR 2006-07, WE HOLD, IN PRINCIPLE, THA T DATA LINK CHARGES CONSIDERED AS ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA SHOULD BE EXCLUDED FROM EXPORT TURNOVER AS WE LL AS TOTAL TURNOVER, ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 12 WHILE COMPUTING THE DEDUCTION UNDER S.10A. FURTHER , OUT OF THE DATA LINK CHARGES SPENT BY THE ASSESSEE, HOW MUCH IS FOR INTRA AND INTER OFFICE SERVICES AND HOW MUCH IS FOR DELIVERY OF SER VICES HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. THEREFORE, IN TH E INTERESTS OF JUSTICE, WE RESTORE THE ISSUE FOR QUANTIFICATION OF THE COMM UNICATION CHARGES TO THE FILE OF THE ASSESSING OFFICER, TO DECIDE IT ON FACTUAL BASIS, AND ACCORDINGLY DECIDE WHETHER THE COMMUNICATION CHARGE S SHOULD BE EXCLUDED OR NOT. IN CASE ANY AMOUNTS ARE TO BE EXC LUDED AS ATTRIBUTABLE TO DELIVERY OF SERVICES OUTSIDE INDIA, THE SAME SHO ULD BE EXCLUDED BOTH FROM EXPORT AND TOTAL TURNOVER, WHILE COMPUTING DED UCTION UNDER S.10A. THIS GROUND IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 22. GROUND NO.15 OF THE ASSESSEE IS AGAINST NON-C ONSIDERATION OF PROFITS OF OVERSEAS BRANCH OF THE ASSESSEE AS A RISING FROM EXPORT OF ITES. THE ISSUE INVOLVED IN THIS GROUND IS SIMILA R TO THE ONE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 , AND DECIDED THE SAME VIDE OUR ORDER EVEN DATE IN ITA NO.1623/HYD/20 10. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE ASSESSMENT YEAR 2 005-06 BEING SIMILAR, CONSISTENT WITH THE VIEW TAKEN AS ABOVE FO R THE ASSESSMENT YEAR 2006-07, WE HOLD THAT THE ASSESSEE, IN PRINCIPLE, I S ENTITLED TO CLAIM, EVEN IN THE COURSE OF AN APPELLATE PROCEEDINGS, FO R INCLUSION OF ITS PROFITS OF THE OVERSEAS BRANCH AS ARISING FROM EXPO RT OF ITES. HOWEVER, FOR ALLOWING THE DEDUCTION UNDER S.10A/10B, OTHER C ONDITIONS ARE REQUIRED TO BE SATISFIED, INCLUDING THE QUESTIONS ( A) WHETHER THE BRANCH IS RENDERING ANY BPO SERVICES; (B) WHETHER THE FUN CTIONS ARE SIMILAR; AND (C) WHETHER THE INCOMES CAN BE CONSIDERED AS I NCOME OF STPI ELIGIBLE FOR DEDUCTION, AND FOR THIS PURPOSE, WE AR E OF THE OPINION THAT THE ISSUE HAS TO BE CONSIDERED ON MERITS BY THE ASS ESSING OFFICER. THEREFORE, WHILE ALLOWING THIS GROUND ON THE LEGAL PRINCIPLE, FOR THE PURPOSE OF VERIFYING AND QUANTIFYING THE DEDUCTION, THE MATTER IS ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 13 RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO SHOULD EXAMINE AND CONSIDER DEDUCTION AFRESH IN ACCORDANCE WITH LAW, A FTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 23. THE NEXT GROUND OF THE ASSESSEE IN THIS APPEAL IS AGAINST NON-ALLOWANCE OF CREDIT FOR THE UK INCOME TAX AMOUN TING TO RS.16,86,963. THE ASSESSING OFFICER WITHOUT ANY REA SON DID NOT ALLOW THE FOREIGN TAXES PAID BY THE ASSESSEE ON THE INCOM E OF UK BRANCH IN UK. IT IS SUBMITTED THAT AS PER ARTICLE 24 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND U.K., WHERE I NCOME OF THE INDIAN TAX RESIDENT IS ALSO LIABLE TO TAX IN U.K, THEN INDIA SHALL ALLOW A CREDIT OF U.K. TAX PAID AGAINST THE INDIAN TAXES PA YABLE IN RESPECT OF SUCH DOUBLY TAXED INCOME. HOWEVER, SUCH CREDIT SHA LL BE LIMITED TO THE PROPORTIONATE TAXES PAYABLE ON DOUBLY TAXED INCOME IN INDIA. IT WAS THE CONTENTION THAT THE INCOME TAXED IN U.K HAS ALS O BEEN TAXED IN INDIA. IN OUR CONSIDERED VIEW, ASSESSEE IS ENTITL ED TO RELIEF UNDER ARTICLE 24 OF THE DTAA BETWEEN INDIA AND U.K. TO TH E EXTENT OF PROPORTIONATE TAXES PAID. SINCE THERE IS NO DISCUSS ION ON THIS ISSUE ALSO, AND WHETHER THE INCOME WAS CHARGEABLE TO TAX OR EXEMPT FROM INDIAN INCOME-TAX, THIS ISSUE REQUIRES EXAMINATION BY THE ASSESSING OFFICER. THEREFORE, THIS MATTER IS RESTORED TO THE FILE OF T HE ASSESSING OFFICER TO EXAMINE THE SAME AFRESH AND ALLOW NECESSARY CREDIT, AS PER THE PROVISIONS OF THE DTAA BETWEEN INDIA AND THE U.K. THIS GROUND IS ACCORDINGLY CONSIDERED AS ALLOWED FOR STATISTICAL P URPOSES. 24. GROUND NO.17 IS WITH REFERENCE TO INTEREST UND ER S.234B AND 234D. THIS GROUND IS ACADEMIC IN NATURE, BEING CO NSEQUENTIAL, AND AS SUCH IT IS REJECTED. ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 14 REVENUES APPEAL : ITA NO. 6177/HYD/2010 25. GROUNDS NO.1, 2 AND 5 OF THE REVENUE IN THIS A PPEAL ARE GENERAL AND DO NOT CALL FOR SEPARATE ADJUDICATION. OTHER GROUNDS READ AS FOLLOWS- 3. THE LEARNED CIT(A) OUGHT NOT TO HAVE HELD THAT THE COMMUNICATION CHARGES SHALL ALSO BE EXCLUDED FROM T OTAL TURNOVER IF EXCLUDED FORM EXPORT TURNOVER. 4. THE LEARNED CIT(A) OUGHT NOT TO HAVE DIRECTED TO ADOPT ARM LENGTH PRICE AT RS.51,00,49,929 INSTEAD OF RS.51,70 ,38,469 AS ADOPTED. 26. WITH REFERENCE TO GROUND NO.3, THE ASSESSING O FFICER EXCLUDED THE COMMUNICATION CHARGES FROM THE EXPORT TURNOVER, WHILE COMPUTING RELIEF UNDER S.10-A OF THE ACT. IT WAS T HE CONTENTION OF THE ASSESSEE THAT THESE ARE NET COMMUNICATION CHARGES S HOULD BE NOT BE EXCLUDED UNDER EXPLANATION TO CLAUSE (IV), AS THE E XPENDITURE DOES NOT RELATE TO DELIVERY OUTSIDE INDIA THIS CONTENTION W AS NOT ACCEPTABLE TO THE CIT(A), BUT THE ALTERNATE CONTENTION THAT THE S AME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER FOR THE PURPOSE O F COMPUTATION UNDER S.10A WAS ACCEPTED, VIDE PARA 6.3 OF THE ORDER OF THE CIT(A), FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF DE BLOCK INDIA SOFTWARE P. LTD. (ITA NOS.983 AND 984/H YD/20096) AND FOUR SOFT PVT. LTD.(ITA NO.1178/HYD/2006 DATED 26 TH SEPTEMBER, 2008). HE DIRECTED THE ASSESSING OFFICER TO EXCLUDE COMMUNICA TION EXPENSES CLAIMED BOTH FROM EXPORT TURNOVER AS WELL AS THE T OTAL TURNOVER. REVENUE IS AGGRIEVED. 27. FOR THE REASONS DISCUSSED BY THE CIT(A), WE AG REE WITH HIS ORDER ON HIS ISSUE. THE ASSESSEE, AS CONSIDERED EAR LIER WHILE DEALING WITH THE ASSESSEES APPEAL ON THIS VERY ISSUE, IS C HALLENGING THE VERY ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 15 NATURE OF COMMUNICATION CHARGES CONSIDERED BY THE A SSESSING OFFICER, AND THIS ISSUE WAS RESTORED TO THE ASSESSING OFFICE R TO EXAMINE WHETHER THESE CHARGES CAN BE CONSIDERED AS COMMUNICATION C HARGES SO AS TO EXCLUDE THEM. IT IS ALSO CLEARLY STATED THEREIN TH AT IN CASE THESE EXPENSES ARE CONSIDERED AS COMMUNICATION CHARGES FO R DELIVERY OUTSIDE INDIA OF SERVICES, THEN FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES AND ALSO THE DECISIONS OF THE KARNATAKA AND BOMBAY HIGH COURTS NOTED IN THAT CONTEXT, THE ASSESSING OFFICER HAS TO EXCLU DE THE SAME FROM BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER. THEREFORE, WE SEE NO MERIT IN THE REVENUES CONTENTION. REVENUES GROUND ON THIS ISSUE IS REJECTED. 28. GROUND NO.4 OF THE REVENUE PERTAINS TO DIRECTI ON OF THE CIT(A) TO ADOPT ARMS LENGTH PRICE AT RS.51,00,49,9 29 INSTEAD OF RS.51,70,38,469 ADOPTED BY THE ASSESSING OFFICER. T HE CIT(A), AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND EXAMININ G THE COMPARABLES VIDE PARA 13.5 HAS ARRIVED AT ARITHMETIC MEAN PLI A T 23.58 AS AGAINST 24.14 WORKED OUT BY THE TPO, AFTER CONFIRMING THE V ARIOUS COMPARABLES SELECTED BY THE TPO. IN ADDITION, THE LEARNED CIT( A) ALSO CONSIDERED THE REIMBURSEMENT OF EXPENDITURE AND ACCORDINGLY VIDE PARA 15 ARRIVED AT THE RESULTANT ADDITION. FURTHER VIDE PARA 17 ALSO, HE MODIFIED THE AMOUNT TO BE WORKED OUT AND THE CUMULATIVE FIGURES OF THESE THINGS RESULTED IN THE DIFFERENCE AS POINTED BY THE REVENU E IN THIS GROUND. THESE ARE ONLY ARITHMETIC ADJUSTMENTS, WITH WHICH W E DO NOT FIND ANY MISTAKE. HOWEVER, THIS COMPUTATION ITSELF IS SUB JECT TO RECONSIDERATION BY THE ASSESSING OFFICER, AS IN ASSESSEES APPEAL, SOME OF THE COMPARABLES WERE ALSO DIRECTED TO BE EXCLUDED AND V ARIOUS DIRECTIONS WERE GIVEN ON OTHER ISSUES. THEREFORE, THERE IS NO NEED TO ADJUDICATE ON THIS CONTENTION OF THE REVENUE, AS IT HAS BECOME AC ADEMIC IN NATURE. ACCORDINGLY, THE SAME IS REJECTED. ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 16 CROSS OBJECTION OF THE ASSESSEE : CO NO.17/HYD/11: 29. IN THIS CROSS-OBJECTION, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS, WHICH ARE NOT RAISED IN THE MAIN APPEAL OF THE ASSESSEE- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN THE FOLLOWING: 1. INCLUDING THE REIMBURSEMENTS OF RS.13,66,07,145 BY THE ASSOCIATED ENTERPRISES BEING TRAVEL COSTS REIMBURSED IN THE OP ERATING COST FOR THE PURPOSE OF DETERMINING THE ALP OF INTERNATIONAL TRANSACTIONS RELATING TO PROVISIONS OF BACK OFFICE ENABLED SERV ICES UNDER TNMM. 2. CONSIDERING THAT THE REIM BURSEMENT TO THE ASSOCIATED ENTERPRISES OF RS.155,527,057 WERE AT A MARGIN OF 23.58% AND ACCOR DINGLY MAKING AN ADJUSTMENT OF RS.2,96,75,740 TO THE TOTAL INCOM E OF THE APPELLANT. THE ISSUES INVOLVED IN THE ABOVE GROUNDS WAS ALSO C ONSIDERED BY US IN OUR SEPARATE ORDER OF EVEN DATE, WHILE DEALING WITH THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07, VIZ. ITA NO.1 624/HYD/2010. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UN DER APPEAL BEING SIMILAR, CONSISTENT WITH THE VIEW TAKEN BY US IN TH AT ORDER FOR ASSESSMENT YEAR 2006-07, WE ALLOW THE ABOVE GROUNDS OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER/TPO NOT TO TREAT T HE REIMBURSEMENT TRANSACTIONS AS PART OF OPERATIONAL COST, AND ACCOR DINGLY EXCLUDE THE SAME WHILE WORKING OUT THE OPERATING COSTS. THESE G ROUNDS ARE CONSIDERED ALLOWED. 30. TO SUM UP, WHILE THE ASSESSEES APPEAL, IT A NO.1623/HYD/2010IS PARTLY ALLOWED FOR STATISTICAL P URPOSES, REVENUES APPEAL, BEING ITA NO.1677/HYD/2010 IS DISMISSED AND THE ASSESSEES CROSS OBJECTION, BEING C.O. NO.17/HYD/2011 THEREIN, IS ALLOWED. ITA NO.1623 & 1677/HYD/ 2010 & CO M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., HYDERABAD 17 ORDER PRONOUNCED IN THE COURT ON 28.06.2013 SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 28 TH JUNE, 2013 COPY FORWARDED TO: 1. M/S. HSBC ELECTRONIC DATA PROCESSING INDIA LTD., S URVEY NO.64, HITECH CITY LAYOUT, MADHAPUR, HYDERABAD 500 081 2. 3. 4. 5. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) III, HYDERABAD COMMISSIONER OF INCOME-TAX II, HYDERABAD DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. BVS