DCIT, Company Circle-2(1), Hyderabad, Hyderabad V. Invensys Development Centre India Private Limited, Hyd, Hyderabad

CO 23/HYD/2015

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2804 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Keywords: Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 92C; 143(3); 234B; 133(6)

Judgement Text

ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 1 OF 19 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.329/HYD/2015 (ASSESSMENT YEAR: 2010-11) AND C.O. 23/HYD/2015 (ARISING OUT OF ITA NO.318/HYD/2015) (A.Y. 2010-11) INVENSYS DEVELOPMENT CENTRE INDIA PVT. LTD HYDERABAD PAN: AABCI 1140 F VS DY.CIT CIRCLE 2(1) 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD ITA NO.318/HYD/2015 (ASSESSMENT YEAR: 2010-11) DY.CIT CIRCLE 2(1) 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD VS INVENSYS DEVELOPMENT CENTRE INDIA PVT. LTD HYDERABAD PAN: AABCI 1140 F FOR ASSESSEE : SHRI RAGHUNATHAN SAMPATH FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THE ABOVE CROSS APPEALS ARE FILED BY BOTH THE ASSES SEE AS WELL AS THE REVENUE AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 92CA(4) R.W.S. 144C OF THE I.T. ACT, 1961, DATED 21.09.2015. DATE OF H EARING : 12.01.2017 DATE OF PRONOUNCEMENT : 23.02.2017 ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 2 OF 19 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVEL OPMENT, QUALITY ASSURANCE AND SUPPORT SERVICES TO ITS AE, F ILED ITS RETURN OF INCOME FOR THE A.Y 2010-11 ON 14.10.2010 ADMITTIN G TOTAL INCOME OF RS.10,20,36,700. DURING THE ASSESSMENT PR OCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE, WHO IS ENGAGED I N PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AES, HAS RECEI VED CONSIDERATION FOR THE SERVICES RENDERED BY IT. THER EFORE, HE OBSERVED THAT THESE INTERNATIONAL TRANSACTIONS FALL WITHIN THE AMBIT OF THE TRANSFER PRICING PROVISIONS OF SECTION 92C OF THE ACT. HE ALSO OBSERVED THAT THE ASSESSEE HAS FILED AN AUD IT REPORT IN FORM NO.3CEB CONTAINING THE DETAILS OF THE TRANSACTI ONS WITH ITS ASSOCIATED ENTERPRISES (AES), AS PER WHICH, THE VAL UE OF THE TRANSACTIONS EXCEEDED RS.15.00 CRORES. HE THEREFORE , REFERRED THE DETERMINATION OF THE ARMS LENGTH PRICE (ALP) OF TH E INTERNATIONAL TRANSACTIONS TO THE TPO U/S 92CA OF THE ACT. THE TP O INITIATED PROCEEDINGS BY ISSUANCE OF NOTICE U/S 92C OF THE AC T DATED 14.2.2013. THE ASSESSEE FILED ITS REPLIES ON 28.2.2 013 AND 13.07.2013 AND ALSO EXPLAINED THE FACTS OF THE CASE . 3. THE TPO OBSERVED THAT THE ASSESSEE I.E. M/S. INV ENSYS DEVELOPMENT CENTRE (INDIA) PVT LTD, INCORPORATED ON JUNE 2003, WAS SET UP TO CATER TO THE SOFTWARE DEVELOPMENT, QU ALITY ASSURANCE AND SUPPORT SERVICES NEEDED FOR THE PRODU CTS OF INVENSYS GROUP AND THAT THE ASSESSEE HAS TWO CENTRE S, ONE LOCATED IN HYDERABAD AND THE OTHER IN MUMBAI. HE OB SERVED THAT THE INVENSYS DEV. CENTRE (P) LTD IS HEADQUARTERED I N LONDON AND IS A GLOBAL TECHNOLOGY GROUP PROVIDING SOFTWARE SOL UTIONS, PRODUCTS AND SERVICES TO CONTROL, OPTIMIZE AND AUTO MATE ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 3 OF 19 EQUIPMENT AND PROCESSES IN A BROAD RANGE OF INDUSTR IES AND ENVIRONMENTS. HE ALSO OBSERVED THAT THE GROUP HAS F ACILITIES IN MORE THAN 50 COUNTRIES AND ITS PRODUCTS AND SOLUTIO NS ARE USED IN OVER 180 COUNTRIES. HE OBSERVED FROM THE 3CEB RE PORT THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTION S WITH SOME OF ITS GROUP COMPANIES AND THE FINANCIALS OF THE TAXPA YER FOR THE FINANCIAL YEAR 2009-10 IS AS UNDER: DESCRIPTION AMOUNT (RS.) OPERATING REVENUE 67,91,24,540 OPERATING COST 61,37,37,099 OPERATING PROFIT 6,53,87,441 OP/OR (%) 9.63 OP/OC% 10.65 4. FURTHER, THE AO OBSERVED THAT THE ASSESSEE HAS SH OWN A SUM OF RS.3,31,14,045 AS CONTRACT TERMINATION FEE S RECEIVED FROM ITS AES ALSO AS PART OF THE OPERATING INCOME. VIDE SUBMISSIONS DATED 30.07.2013, THE ASSESSEE SUBMITTE D AS UNDER: FIRSTLY, WE WOULD LIKE TO HUMBLY SUBMIT THAT THE COMPANY IN ITS TP DOCUMENTATION CONSIDERED THE CONTRACT TERMINATION FEES OF RS.3,31,14,045/- RECEIVED FROM AES. SINCE, THE COMPANY IS A CAPTIVE SERVICE PROVIDER AND TO MITIGATE ANY LOSS OF NOT PROVIDING SERVICES, THE CONTRACT TERMINATION FEE WA S RECEIVED. AS THE SAME IS IN RELATION TO THE SOFTWAR E SERVICES PROVIDED TO THE AES, IT WAS INCLUDED IN THE OPERATING INCOME WHILE COMPUTING THE NET MARGIN UNDER TNMM METHOD. THE SAME HAS BEEN DISCLOSED IN THE AUDITED FINANCIAL STATEMENTS SUBMITTED TO YOUR GOOD-SELF VIDE SUBMISSION DATED 28 TH FEBRUARY, 2013. WE REQUEST YOUR GOOD SELF TO CONSIDER THE SAME FOR DETERMINATION OF ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS WITH THE AES). 5. THE TPO HOWEVER, HELD THAT THE CONTRACT TERMINAT ION FEE IS NOT PART OF THE OPERATING REVENUE SINCE IT D OES NOT RELATE TO ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 4 OF 19 SOFTWARE DEVELOPMENT ACTIVITY. HE WAS OF THE OPINIO N THAT THE SAID TERMINATION FEE IS NOT RECEIVED BY THE TAXPAYER IN LIEU OF THE PROVISIONS OF SOFTWARE SERVICES BY THE ASSESSEE BUT IS RECEIVED IN LIEU OF TERMINATION OF THE CONTRACT AND CONSEQUENTI AL LOSSES AND THEREFORE, IT IS IN THE NATURE OF THE NON OPERATING INCOME AND CAN ONLY BE LISTED AS OTHER INCOME. HE THEREFORE, EXCLU DED THE SAME FROM THE RECEIPTS FROM PROVISIONS OF SOFTWARE SERVI CES AND THEREAFTER PROCEEDED TO COMPUTE THE ALP. 6. ON GOING THROUGH THE T.P. DOCUMENT, THE AO OBSER VED THAT THE METHOD OF SEARCH PROCESS ADOPTED BY THE AS SESSEE SUFFERS FROM DEFECTS WHICH HAVE RESULTED IN USE OF INAPPROP RIATE COMPARABLES AND REJECTION OF COMPANIES THAT ARE APP ROPRIATE COMPARABLES. HE, THEREFORE, REJECTED THE ASSESSEES T.P. DOCUMENTATION AND PROCEEDED TO CONDUCT HIS OWN SEAR CH FOR THE COMPARABLES. THE ASSESSEE HAD ADOPTED 21 COMPANIES AS COMPARABLE TO THE ASSESSEE OUT OF WHICH THE TPO HAS ACCEPTED ONLY 7 COMPANIES AS COMPARABLE TO THE ASSESSEE AND REJECTED THE REMAINING COMPANIES. THEREAFTER, HE HAS ARRIVED AT THE FINAL LIST OF COMPARABLES WHICH IS AS UNDER: S.NO NAME OF THE COMPANY OR OP/OC 1 ACCELYA KALE SOLUTIONS LTD 1,27,05,82,108 28.42 2 AVANI CIMCON TECHNOLOGIES LTD 2,83,06,444 3.39 3 CAT TECHNOLOGIES LTD 8,15,37,696 13.04 4 COMP-U-LEARN TECH INDIA LTD 14,31,03,387 19.96 5 E-INFOCHIPS BANGALORE LTD 43,04,89,804 72.32 6 EVOK TECH 10,86,33,823 18.61 7 E-ZEST SOLUTIONS LTD 10,35,93,830 22.1 8 INFOSYS TECHNOLOGY LTD 2,12,06,00,00,000 45.44 9 KALS INFORMATION SYSTEMS LTD (SEG) 2,16,92,935 34.41 10 KULIZA TECH 9,91,21,132 25.92 11 L&T INFOTECH LTD 17,89,50,41,004 21.2 12 MINDTREE LTD (SEG.) 7,38,41,68,041 20.47 13 PERSISTENT SYSTEMS & SOLUTIONS LTD (MERGED) 6,67,28,828 11.37 14 RS SOFTWARE (INDIA) LTD 1,61,83,71,419 9.88 ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 5 OF 19 15 SASKEN COMMUNICATION TECHNOLOGIES LTD 4,19,37,03,000 25.23 16 TATA ELXSI LTD (SEG.) 3,37,77,99,096 18.02 17 THINKSOFT GLOBAL SERVICES LTD 74,55,94,965 11.22 18 ZYLOG SYSTEMS LTD 7,83,64,08,467 18.62 19 PERSISTENT SYSTEMS LTD 5,09,12,50,000 31.57 7. THE ASSESSEE HAD ALSO ASKED FOR RISK ADJUSTMENT WHILE DETERMINING THE ALP. HOWEVER, THE TPO REJECTED THE ASSESSEES CONTENTIONS HOLDING THAT THE ASSESSEE IS ALSO UNDER TAKING CERTAIN RISKS WHICH HE ENUMERATED AT PAGES 21 AND 22 OF HIS ORDER. THEREAFTER, THE TPO HAS ARRIVED AT THE ARITHMETIC M EAN MARGIN OF THE COMPARABLES AT 22.69% AND AFTER GIVING THE WORKI NG CAPITAL ADJUSTMENT, HE ARRIVED AT THE AVERAGE MEAN MARGIN A T 19.7%. HE THEREFORE, PROPOSED THE ADJUSTMENT OF SHORTFALL OF RS.5,60,71,131 U/S 92CA OF THE ACT. 8. ON THE BASIS OF THE TPOS ORDER, THE AO PROPOSED THE DRAFT ASSESSMENT ORDER DATED 4.3.2014 AGAINST WHICH THE ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP. THE DRP RE JECTED THE ASSESSEES OBJECTIONS EXCEPT FOR DIRECTING THE EXCL USION OF M/S INFOSYS TECHNOLOGIES LTD AND M/S L&T INFOTECH FROM THE FINAL LIST OF COMPARABLES. IN CONSONANCE WITH THE DIRECTIONS O F THE DRP, THE AO HAS PASSED THE FINAL ASSESSMENT ORDER AGAINST WH ICH THE ASSESSEE IS IN APPEAL BEFORE US IN ITA NO.329/HYD/2 015. AGAINST THE DIRECTION OF THE DRP TO EXCLUDE L&T INFOTECH FR OM THE FINAL LIST OF COMPARABLES, THE REVENUE IS IN APPEAL BEFORE US IN ITA NO.318/HYD/2015. ASSESSEES CROSS OBJECTION IS ONLY IN SUPPORT OF THE FINDINGS OF THE DRP THAT L&T INFOTECH IS NOT COMPARABLE TO THE ASSESSEE BY APPLYING VARIOUS PARAMETERS. WE SHA LL TAKE UP THE ASSESSEES APPEAL FIRST. ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 6 OF 19 9. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS: TRANSFER PRICING MATTERS - RELATING TO DETERMINATION OF ARM'S LENGTH PRICE (' ALP') IN RESPECT OF PROVISION OF SOFTWARE SERVICES PROVIDED TO THE ASSOCIATED ENTERPRISES (' AES') UNDER TRANSACTIONAL NET MARGIN METHOD ('TNMM') BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER (' AO')/LEARNED TRANSFER PRICING OFFICER ('TPO') AND THE HON'BLE DISPUTE RESOLUTION PANEL CDRP') ERRED IN: REJECTION OF TRANSFER PRICING DOCUMENTATION MAINTAINED 1. REJECTING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME TAX RULES, 1962 ('RULES') AND MAKING ADJUSTMENT OF RS 4,72,33,317. REJECTION OF USE OF CONTEMPORANEOUS DATA AND MULTIPLE YEAR DATA 2. USING SINGLE YEAR DATA OF COMPANIES TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS WITHOUT CONSIDERING THE FACT THAT THE SAME WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS AND DISREGARDING THE APPELLANT'S CLAIM FOR USE OF MULTIPLE YEAR DATA FOR COMPUTING THE ARM'S LENGTH PRICE. USE OF ADDITIONAL FILTERS 3. INTER-ALIA USE OF THE FOLLOWING ADDITIONAL FILTE RS IN UNDERTAKING THE COMPARATIVE ANALYSIS TO REJECT COMPARABLE COMPANIES HAVING: A) DIMINISHING REVENUE; ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 7 OF 19 B) PERSISTENT LOSSES; C) DIFFERENT FINANCIAL YEAR-END; AND D) EXPORT SALES LESS THAN 75% OF THE SALES. SELECTION OF COMPARABLES 4. NOT UNDERTAKING AN OBJECTIVE COMPARATIVE ANALYSIS AND INTERALIA SELECTING THE FOLLOWING COMPANIES AS COMPARABLE TO THE SOFTWARE SERVICES OF THE APPELLANT: I. CAMP U LEARN TECH INDIA LTD; II. E LNFOCHIPS BANGALORE LTD; III. KALS INFOSYSTEMS LTD.; AND IV. TATA ELXSI LTD. (SEG). RJECTION OF COMPARABLES 5. NOT UNDERTAKING AN OBJECTIVE COMPARATIVE ANALYSIS AND INTERALIA REJECTING THE FOLLOWING COMPARABLE COMPANIES: I. AKSHAY SOFTWARE TECHNOLOGIES LTD; II. CG- V AK SOFTWARE EXPORTS LTD ; III. SATYAM COMPUTERS SERVICES LTD; CONTRACT TERMINATION FEES 6. CONSIDERING CONTRACT TERMINATION FEES AS NON- OPERATING REVENUE IN NATURE: ERROR IN MARGIN COMPUTATION 7. COMPUTATION OF NET MARGINS OF THE FOLLOWING COMPANIES SELECTED AS COM PARABLES: I. CAT TECHNOLOGIES LTD; II. E-INFOCHIPS BANGALORE LTD. III. E-ZEST SOLUTIONS LTD; IV. KULIZA TECHNOLOGIES PRIVATE LIMITED V. KALS INFORMATION SYSTEMS LTD (SEG); AND VI. TATA ELXSI LTD (SEG) ADJUSTMENT FOR RISK DIFFERENCES 8. NOT ADJUSTING THE NET MARGINS OF THE COMPARABLE COMPANIES TAKING INTO ACCOUNT THE FUNCTIONAL AND RISK DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION OF THE APPELLANT AND ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 8 OF 19 THE COMPARABLE COMPANIES IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B(1)(E); APPLICABILITY OF PROVISO TO SECTION 92C(2) 9. NOT ALLOWING THE OPTION UNDER THE PROVISO TO SECTION 92C(2) OF THE ACT IN LIMITING THE ADJUSTMENT AT A VARIATION OF 5 PERCENT TO THE ARM'S LENGTH PRICE; LEVY OF INTEREST UNDER SECTION 234B 10. IMPOSING INTEREST U/S 234B OF THE ACT ON THE TRANSFER PRICING ADJUSTMENTS; INITIATING PENALTY PROCEEDINGS 11. INITIATING THE PENALTY PROCEEDINGS U/S 271(1(C) OF THE ACT. THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL.. 10. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE, INITIALLY ARGUED ON GROUNDS NO. 4 & 6. TH EREFORE, WE SHALL FIRST DEAL WITH THESE GROUNDS. 11. AS REGARDS GROUND OF APPEAL NO.6 RELATING TO TH E NATURE OF THE CONTRACT TERMINATION FEES, WHETHER FO RMS OPERATING OR NON OPERATING REVENUE, THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE SOFTWARE DEVELOPMENT AGREEMENT W ITH THE AE ITSELF PROVIDED FOR A CLAUSE FOR TERMINATION OF THE CONTRACT AND THE PAYMENTS TO BE MADE ON SUCH TERMINATION. HE HAS DRA WN OUR ATTENTION TO THE SOFTWARE DEVELOPMENT AND SUPPORT A GREEMENT BETWEEN VARIOUS GROUP COMPANIES AND THE ASSESSEE BE FORE US, WHICH IS PLACED AT PAGE NO.901 OF THE PAPER BOOK FI LED BEFORE US. ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 9 OF 19 AS PER CLAUSE 3 OF THE SAID AGREEMENT, THE ASSESSEE IS REQUIRED TO MEET THE STAFFING REQUIREMENT AS PER THE DOCKET ARR IVED AT, BETWEEN THE PARTIES WITHIN 90 DAYS OF THE COMMENCEM ENT OF THE AGREEMENT AND AS PER CLAUSE 12 OF THE AGREEMENT WHI CH DEALS WITH THE TERM AND TERMINATION, THE CONTRACT CAN BE TERMINATED BY BOTH THE PARTIES. CLAUSE 12.2 PROVIDES THAT WHERE T HE CONTRACT IS TERMINATED FOR CONVENIENCE BY THE GROUP COMPANY, TH EN IT SHALL PAY TO THE DEVELOPER A TERMINATION FEE IN RESPECT T HEREOF. CLAUSE 12.3 PROVIDED FOR TERMINATION COST. IT IS SUBMITTED THAT THE AE HAS TERMINATED THE CONTRACT AND SINCE THE ASSESSEE IS B EING COMPENSATED ON COST PLUS MARGIN BASIS, FOR THE SERV ICES RENDERED BY IT, THE CONTRACT TERMINATION FEE IS ALSO IN THE NATURE OF THE OPERATING INCOME AND SHOULD BE TAKEN INTO CONSIDERA TION FOR DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANS ACTIONS UNDERTAKEN BY THE ASSESSEE. REGARDING THE ITEMS OF EXPENDITURE CONSIDERED TOWARDS THE PAYMENT OF CONTRACT TERMINAT ION FEE, THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTE NTION TO PAGE 925 OF THE PAPER BOOK WHEREIN THE EXPENDITURE RELAT ING TO TRAINING AND ALSO OTHER EXPENDITURE IS GIVEN. 12. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT THOUGH THE AGR EEMENT CONTAINS THE CLAUSE FOR CONTRACT TERMINATION FEE, T HE ASSESSEE HAS NOT BEEN COMPENSATED IN ACCORDANCE WITH THE SAID AG REEMENT AND THEREFORE, THIS AMOUNT CANNOT BE TREATED AS SUCH. F URTHER, HE SUBMITTED THAT THE ASSESSEE HAD ITSELF, IN ITS BOOK S OF ACCOUNT, SHOWN IT AS THE EXCEPTIONAL ITEM AND NOT AS OPERATI NG INCOME. THEREFORE, ACCORDING TO HIM, THE ASSESSEE ITSELF HA S NOT TREATED IT ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 10 OF 19 AS OPERATIONAL INCOME IN ITS BOOKS AND HENCE SHOULD NOT BE TREATED AS OPERATING INCOME FOR DETERMINATION OF AL P. 13. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS ENTERED IN TO A CONTRACT FOR RENDERING SOFTWARE DEVELOPMENT SERVICES TO ITS GROUP COMPANIES AND ONE OF THE GROUP COMPANY HAS TERMINAT ED THE CONTRACT AND HAS PAID THE CONTRACT TERMINATION FEE AS PER THE AGREEMENT. THE NATURE OF THE SAID CONTRACT TERMINAT ION FEE IS, IN OUR OPINION, OPERATING REVENUE. ON EXECUTION OF A C ONTRACT, THE ASSESSEE IS RECEIVING THE CONSIDERATION ON A COST P LUS MARGIN BASIS. THE CONTRACT TERMINATION FEE IS ALSO BEING P AID ON SIMILAR LINES BUT PROPORTIONATELY. IT IS ONLY THAT THE CONT RACT IS BEING TERMINATED PREMATURELY. HAD THE CONTRACT BEEN EXECU TED COMPLETELY, THE ASSESSEE WOULD HAVE RECEIVED THE FU LL CONSIDERATION AT COST PLUS METHOD FOR THE ENTIRE PE RIOD OF THE CONTRACT AND IT WOULD FORM PART OF OPERATING INCOME . THE CONTRACT TERMINATION FEE IS IN EFFECT COMPENSATING THE ASSES SEE FOR THE EXPENSES INCURRED BY IT FOR EXECUTING THE CONTRACT PARTIALLY. THEREFORE, WE ARE OF THE OPINION THAT THE CONTRACT TERMINATION FEE ALSO PARTAKES THE CHARACTER OF THE CONTRACT RECEIPT AND IS TO BE TREATED AS OPERATING REVENUE OF THE INTERNATIONAL T RANSACTIONS MORE PARTICULARLY SINCE THE EXPENSES INCURRED BY TH E ASSESSEE ON SUCH CONTRACT HAS BEEN TAKEN AS OPERATING COST. IN VIEW OF THE SAME, WE DIRECT THE AO/TPO TO CONSIDER THE CONTRACT TERMINATION FEE ALSO AS A PART OF THE OPERATIONAL INCOME FOR CO MPUTING THE ALP OF THE INTERNATIONAL TRANSACTIONS. ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 11 OF 19 14. AS REGARDS GROUND NO.4, THE ASSESSEE IS SEEKING THE EXCLUSION OF THE FOLLOWING 4 COMPANIES FROM THE FIN AL LIST OF COMPARABLES: I) COMP-U-LEARN TECH INDIA LTD; II) E INFOCHIPS BANGALORE LTD; III) KALS INFO SYSTEMS LTD; IV) TATA ELXSI LTD (SEG.) 15. HOWEVER, AT THE TIME OF HEARING, THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT SEEKING THE EXCLUSION OF COMP-U-LEARN TECH INDIA LTD FROM THE F INAL LIST OF COMPARABLES. IN VIEW OF THE SAME, THE ASSESSEES GR OUND ON THIS COMPANY IS REJECTED. 16. AS REGARDS, E INFOCHIPS BANGALORE LTD IS CONCER NED, THE ARGUMENT OF THE ASSESSEE IS THAT IT IS FUNCTION ALLY DIFFERENT AS IT IS INTO THE BUSINESS OF SOFTWARE AND I.T. ENABLE D SERVICES AS STATED IN ITS ANNUAL REPORT AND FURTHER THAT THE SA ID COMPANY HAS NOT PROVIDED ANY SEGMENTAL INFORMATION IN RELAT ION TO THE TWO SERVICES. HE HAS ALSO REFERRED TO THE ANNUAL REPORT OF THE SAID COMPANY TO DEMONSTRATE HIS POINT. THE LEARNED COUNS EL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE SAID COMPANY HA S ALSO BEEN REJECTED BY THE TAX AUTHORITIES THEMSELVES DUE TO L ACK OF AVAILABILITY OF SEGMENTAL INFORMATION. FURTHER, IT I S SUBMITTED THAT THE SAID COMPANY HAS ABNORMAL FINANCIALS WITH SIGNI FICANT FLUCTUATION IN ITS MARGINS ON A YEAR TO YEAR BASIS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE FACT THAT THIS COMPANY HAS BEEN TAKEN AS A COMPARABLE BY THE TPO IN THE CASES OF COMPANIES WHICH ARE ALSO INTO SIMILAR BUSI NESS AS THE ASSESSEE HEREIN, AND ITS COMPARABILITY WITH SUCH CO MPANIES HAD ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 12 OF 19 COME FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL FOR THE VERY SAME A.Y AND IN THE FOLLOWING CASES, ITAT HAS DIRECTED THE EXCLUSION OF THE SAME FROM THE FIN AL LIST OF COMPARABLES ON THE GROUND OF LACK OF AVAILABILITY O F SEGMENTAL DATA BETWEEN THE I.T. AND I.T. ENABLED SERVICES. I) PEGASYSTEMS WORLDWIDE INDIA PVT LTD VS. ACIT IN ITA NO.1758 AND 1936/HYD/2014, DATED 16.10.2015 II) OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA ) PVT. LTD VS. ACIT IN ITA NO.434/HYD/2015 DATED 5.8.2016 III) PAREXEL INTERNATIONAL (INDIA) PVT. LTD VS. ACI T IN ITA NO.1918/HYD/2014 DATED 08.01.2016. 17. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 18. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS COMPANY HAS BEEN TAKEN AS A COMPARABLE IN MANY OTHER COMPANIES WHICH ARE INTO S IMILAR BUSINESS AS THE ASSESSEE. THE COORDINATE BENCH OF T HIS TRIBUNAL IN ITA NO.1758 & 1936/HYD/2014, DATED 16.10.2015 IN THE CASE OF M/S. PEGASYSTEMS WORLDWIDE INDIA PVT LTD HAS DIR ECTED THAT THIS COMPANY BE EXCLUDED ON THE GROUND OF LACK OF S EGMENTAL DATA. FOR THE SAKE OF CONVENIENCE AND READY REFERENC E, THE RELEVANT PARAGRAPH IS REPRODUCED HEREUNDER: E INFOCHIPS BANGALORE LTD: 8.3. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PE RUSING THE ANNUAL REPORTS PLACED ON RECORD, WE ARE OF THE OPIN ION THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE COMPANY FO R TP ANALYSIS. FIRST OF ALL, THIS COMPANY IS ENGAGED IN BOTH SOFTWARE DEVELOPMENT AS WELL AS ITES. ASSESSEE BEING ONLY CA PTIVE SERVICE PROVIDER, THE ABOVE COMPANY CANNOT BE CONSIDERED AS COMPARABLE ON FUNCTIONAL BASIS. NOT ONLY THAT, AS P OINTED OUT, SEGMENTAL INFORMATION PERTAINING TO THE ABOVE COMPA NY IS NOT ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 13 OF 19 AVAILABLE. AS SEEN FROM THE TP ORDERS, DOCUMENTS PL ACED ON RECORD, TPO RELIED ON LATER YEAR'S ANNUAL REPORT IN EXTRACTING THE INFORMATION. VARIATION IN PROFITABILITY OVER THE YE ARS ALONE CANNOT BE A REASON TO EXCLUDE THE COMPANY FROM COMP ARABILITY ANALYSIS BUT AS RIGHTLY POINTED, THE ABSENCE OF SEG MENTAL INFORMATION, HOW MUCH PROFIT EARNED WAS ON THE SOFT WARE DEVELOPMENT OR ITES CANNOT BE EXAMINED. IN THE ABSE NCE OF CLARITY ON OPERATIONAL DETAILS AND COMPARABLE COMPA NY HAVING DIVERSIFIED ACTIVITIES, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE CHOSEN AS A COMPARABLE COMPANY IN ASSESSE E'S CASE IN THIS ASSESSMENT YEAR. WE ARE ALSO AWARE OF THE DECI SION OF THE CO-ORDINATE BENCH GIVEN IN EARLIER ASSESSMENT YEAR ON THE REASON THAT SEGMENTAL REPORTING WAS NOT AVAILABLE. BE THAT AS IT MAY, SINCE THE SAID COMPANY IS FUNCTIONALLY DIFFERE NT FROM ASSESSEE'S ACTIVITIES AND IN THE ABSENCE OF SEGMENT AL INFORMATION, WE DIRECT AO/TPO TO EXCLUDE THE ABOVE WHILE WORKING OUT THE COMPARABILITY ANALYSIS. WE UPHOLD THE PLEA OF ASSES SEE IN THIS REGARD. 19. IN OTHER CASES CITED BY THE ASSESSEE AS REPRODU CED ABOVE ALSO, SIMILAR DIRECTION WAS GIVEN. RESPECTFUL LY FOLLOWING THE SAME, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. KALS INFORMATION SYSTEMS LTD: 20. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS COMPANY IS ALSO TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES AS IT IS NOT FUNCTIONALLY SIMILAR AND F URTHER THAT THE COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE PROD UCTS AND THAT THE WEBSITE OF THE COMPANY SHOWS THE PRODUCT OWNED BY KALS INFORMATION SYSTEMS LTD AND IT HAS INVENTORIES EQUI VALENT TO 27% OF THE TOTAL SALE. FURTHER, HE ALSO SUBMITTED THAT T HE ISSUE OF COMPARABILITY TO THIS COMPANY TO THE ASSESSEE HAS A LSO ARISEN IN THE ASSESSEES OWN CASE FOR THE A.YS 2008-09 AND 20 09-10 AND THE SAID COMPANY WAS REJECTED BY THE INCOME TAX APP ELLATE TRIBUNAL IN ITS OWN CASE. HE ALSO SUBMITTED THAT IN THE CASES ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 14 OF 19 REFERRED TO IN PARA 15 ABOVE, THE INCOME TAX APPELL ATE TRIBUNAL HAS DIRECTED THE EXCLUSION OF THIS COMPANY ALSO. 21. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 22. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE TPO HAS TAKEN NOTE OF T HE ASSESSEES OBJECTIONS THAT THIS COMPANY HAS INVENTORIES AND HA S OBSERVED THAT THE INVENTORY IS ONLY OF COMPUTERS AND NOT OF ANY PRODUCTS. ON THE OTHER HAND, THE ASSESSEE HAS STATED THAT THE WEBSITE OF THE COMPANY SHOWS VARIOUS PRODUCTS. WE FIND THAT THESE FACTS WERE CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. PEGASYSTEMS WORLDWIDE INDIA PVT LTD (CITED SUP RA) AND AT PARA 10.1, THE TRIBUNAL HAS HELD AS UNDER: KALS INFORMATION SYSTEMS LTD: 10.1. ASSESSEE'S MAIN OBJECTION BEFORE US IS ON FUN CTIONALITY OF THE COMPARABLE COMPANY. AS SEEN FROM THE ANNUAL REP ORT OF 2008-09 AND 2009-10 AND COMPARATIVE STATEMENT PLACE D BY ASSESSEE, THE COMPANY CLASSIFIED ITSELF AS 'THE COM PANY ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRO DUCTS SINCE ITS INCEPTION'. THE COMPANY CONSISTING OF STP I UNIT ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRO DUCTS AND A TRAINING CENTRE ENGAGED IN TRAINING OF SOFTWA RE PROFESSIONALS ON ON-LINE PROJECTS. THIS INDICATES T HAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE AND PRODUCTS AND ITS INVENTORY ALSO INDICATES THAT ASSESSEE HAS BEEN USI NG ITS READYMADE LIBRARIES FOR SALES. THIS COMPANY WAS REJ ECTED IN EARLIER YEAR ON FUNCTIONAL ANALYSIS BY ITAT IN THE CASE OF PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 WH ERE IN IT WAS HELD THAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS. SINCE ITS ANNUAL REPORT STATES THE SAME F ACTS IN THIS ASSESSMENT YEAR ALSO, WE ARE OF THE OPINION THAT TH E COMPANY CANNOT BE SELECTED AS A COMPARABLE AS IT WAS ENGAGE D IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. ACCO RDINGLY, ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 15 OF 19 ASSESSEE'S OBJECTIONS ARE ACCEPTED AND AO IS DIRECT ED TO EXCLUDE THE COMPANY. 23. SINCE THE FACTS AND CIRCUMSTANCES ARE SIMILAR, WE DIRECT THAT THIS COMPANY BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. TATA ELXSI LGD (SEG.): 24. THE ASSESSEES OBJECTION TO THIS COMPANY IS THA T IT IS FUNCTIONALLY NOT SIMILAR AS IT IS SPECIALIZED IN EM BEDDED SOFTWARE DEVELOPMENT TECHNOLOGY AND CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEE. IT IS ALSO SUBMITTED THAT IN RESPO NSE TO THE NOTICE U/S 133(6) OF THE ACT, THE SAID COMPANY ITSELF HAS STATED THAT IT IS INTO DIVERSE NATURE OF BUSINESS AND ITS SERVICES AR E COMPLEX AND CANNOT BE COMPARED TO ROUTINE SOFTWARE DEVELOPMENT COMPANIES. IT IS SUBMITTED THAT IN ASSESSEES OWN CASE FOR THE A.Y 2005-06 TO 2009-10, INCOME TAX APPELLATE TRIBUNAL HAS TAKEN NO TE OF THESE FACTS TO DIRECT EXCLUSION OF THE COMPANY FROM THE L IST OF COMPARABLE. HE SUBMITTED THAT IN THE CASES REFERRED TO ABOVE ALSO, THE TRIBUNAL HAS DIRECTED ITS EXCLUSION. 25. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 26. WE FIND THAT IN THE CASE OF M/S. PEGASYSTEMS WORLDWIDE INDIA PVT LTD, THE COORDINATE BENCH OF TH IS TRIBUNAL HAS CONSIDERED ALL THESE FACTS AS UNDER: TATA ELXSI LTD (SEG) 12.1. IT WAS THE OBJECTION OF ASSESSEE THAT ABOVE C OMPANY IS PREDOMINANTLY INTO PRODUCT DESIGN SERVICES, INNOVAT ION DESIGN ENGINEERING AND VISUAL COMPUTING LABS DIVISI ON WHICH ARE SPECIALIZED SERVICES. HE REFERRED TO THE ORDER OF ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 16 OF 19 ITAT IN AY. 2009-10 IN THE CASE OF PLANET ONLINE PV T. LTD., IN ITA NO. 464/HYD/2014 (SUPRA), WHEREIN THIS COMPANY WAS REJECTED ON THE REASON THAT IT IS ENGAGED IN MULTIP LE SEGMENTS. THERE IS NO BREAK-UP IN THE ANNUAL REPORT AND DATA ON WHICH MARGIN FROM SOFTWARE SERVICES ACTIVIT Y ONLY CAN BE COMPUTED IS ALSO NOT AVAILABLE. MOREOVER, TH E COMPANY ITSELF HAS INDICATED THAT IT CANNOT BE COMP ARED WITH ANY OTHER SOFTWARE SERVICE COMPANY BECAUSE OF ITS COMPLEX NATURE. SIMILAR VIEW WAS TAKEN BY MANY OF T HE CO- ORDINATE BENCHES IN EARLIER YEARS THAT TATA ELXSI L TD., CANNOT BE SELECTED AS COMPARABLE COMPANY. CONSISTENT WITH THE ABOVE VIEW, WE ARE OF THE OPINION THAT A COMPANY LI KE TATA ELXSI LTD., WHICH HAS COMPLEX ACTIVITIES AND SEGMEN TAL INFORMATION OF WHICH IS NOT AVAILABLE CANNOT BE SEL ECTED AS COMPARABLE COMPANY TO ASSESSEE. MOREOVER, AS SEEN F ROM THE TURNOVER AS REPORTED BY TPO ITSELF, IT WAS MANY TIMES ASSESSEE'S TURNOVER AND THEREFORE CANNOT BE EXACTLY CONSIDERED AS A SIMILAR COMPANY UNLESS THE NATURE O F ACTIVITY, THE INCOMES ARE ANALYSED IN DETAIL. SINCE NO SEGMENTAL DATA IS AVAILABLE, CONSIDERING THE SOFTWA RE DEVELOPMENT SERVICES AS A SEGMENT BY TPO CANNOT BE CONSIDERED AS SEGMENTAL DATA, UNLESS THE SERVICES R ENDERED BY THAT COMPANY ARE SIMILAR TO THE SERVICES RENDERE D BY ASSESSEE. IN VIEW OF THIS, WE ARE OF THE OPINION TH AT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE. AO IS DIR ECTED TO EXCLUDE THE SAME . 27. AS THE FACTS AND CIRCUMSTANCES ARE SIMILAR, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO/T PO TO EXCLUDE THIS COMPANY ALSO FROM THE FINAL LIST OF COMPARABLE S. THUS, GROUND OF APPEAL NO.4 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 28. AS REGARDS GROUNDS 1 TO 3 ARE CONCERNED, WE FIN D THAT THESE ISSUES ARE COVERED AGAINST THE ASSESSEE BY VA RIOUS DECISIONS OF THE INCOME TAX APPELLATE TRIBUNAL AND THE ASSESS EE IS RAISING ITS OBJECTIONS ONLY TO KEEP THE ISSUE LIVE. THEREFO RE, THESE GROUNDS ARE REJECTED. 29. AS REGARDS GROUND NO.5 RELATING TO INCLUSION OF THESE COMPANIES, IN REPLY TO OUR QUERY, THE LEARNED COUNS EL FOR THE ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 17 OF 19 ASSESSEE STATED THAT IF THE CONTRACT TERMINATION FE E IS TAKEN AS PART OF THE OPERATING REVENUE AND ALSO THE COMPANIE S MENTIONED AT GROUND NO.4 ARE EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THEN THE MARGIN OF THE ASSESSEE WOULD FALL WITHIN 5% OF THE AVERAGE MEAN MARGIN OF THE COMPARABLES AND THEREFOR E, THERE WOULD BE NO ALP ADJUSTMENT. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO ADJUDICATE THE GROUND OF APPEAL NO.5, AT THIS STAGE AS IT WOULD ONLY RESULT IN AN ACADEMIC EXERCISE. GR OUND NO.5 IS ACCORDINGLY REJECTED. 30. AS REGARDS GROUNDS OF APPEAL NO.7 TO 9 ARE CONC ERNED, WE FIND THAT THEY NEED NO ADJUDICATION IN VIEW OF O UR DECISION ON GROUND OF APPEAL NO.4. THESE GROUNDS ARE ALSO REJEC TED, IF ANY TO THE ASSESSEE. 31. WITH REGARD TO GROUND NO.10, WE FIND THAT IT IS CONSEQUENTIAL IN NATURE AND THEREFORE, WE DIRECT TH E AO TO GIVE CONSEQUENTIAL RELIEF. 32. GROUND NO.11 IS ONLY AGAINST THE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND THEREFORE IS PREMATURE. HENCE REJECTED. 33. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NO.318/HYD/2015 34. COMING TO THE REVENUES APPEAL WHICH IS AGAINST EXCLUSION OF L&T INFOTECH LTD FROM THE FINAL LIST O F COMPARABLES ON THE GROUND OF EXCEPTIONALLY LARGE SCALE OF OPERATIO N, IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS ITSELF TAKEN T HIS COMPANY AS ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 18 OF 19 A COMPARABLE AND THEREFORE, IT CANNOT CHALLENGE THE SAME BEFORE THE HIGHER AUTHORITIES. WE FIND THAT THOUGH THE ASS ESSEE HAS TAKEN THIS COMPANY AS COMPARABLE IN ITS TP STUDY, H AS CHALLENGED ITS COMPARABILITY BEFORE THE TPO ITSELF. FURTHER, IN THE CASE OF KENEXA SYSTEMS, THIS TRIBUNAL HAS HELD THAT IT IS O PEN TO THE ASSESSEE TO CHALLENGE THE COMPARABILITY OF A COMPAN Y TAKEN BY ITSELF AS A COMPARABLE IN ITS TP STUDY. THEREFORE, WE DO NOT AGREE WITH THE CONTENTIONS OF THE LEARNED DR THAT THE ASS ESSEE HAVING CONSIDERED THE SAME AS COMPARABLE CANNOT CHALLENGE IT BEFORE THE AUTHORITIES BELOW. 35. AS REGARDS ITS COMPARABILITY TO THE ASSESSEE, W E FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE C ASE OF M/S. PEGASYSTEMS WORLDWIDE PVT. LTD AND OTHERS (CITED SU PRA) HAS CONSIDERED ITS COMPARABILITY AND HELD AS UNDER: L&T INFOTECH LTD 14.3. AFTER CONSIDERING THE OBJECTIONS OF ASSESSEE AND PERUSING THE ORDER OF DRP IN THE CASE OF M/S. SUMTOTAL SYSTE MS INDIA PVT. LTD., (SUPRA), AS EXTRACTED ABOVE, WE ARE OF THE OP INION THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE BY THE SAM E REASONS WHICH DRP IN THE ABOVE REFERRED CASE ACCEPTED. MORE OVER, THERE ARE NO SEGMENTAL DETAILS AND AS SEEN FROM THE ANNUA L REPORT, REVENUES ARE REPORTED FROM SOFTWARE DEVELOPMENT SER VICES AND PRODUCTS, HOW MUCH IS FROM SERVICES AND HOW MUCH IS FROM PRODUCTS COULD NOT BE ANALYSED. EVEN THOUGH TPO CON SIDERED THE SOFTWARE EXPORTS REPORTED IN EARNING IN FOREIGN CUR RENCY AS THAT OF SOFTWARE DEVELOPMENT SERVICES, WE ARE NOT SURE W HETHER THE SOFTWARE EXPORTS REPORTED THEREIN EXCLUSIVELY PERTA IN TO SERVICES OR PRODUCTS. AS THERE ARE NO SEGMENTAL DETAILS, IT IS VERY DIFFICULT TO ANALYSE WHETHER THE INCOMES EARNED BY THE SAID C OMPANY DO REALLY PERTAIN TO THE SIMILAR SERVICES RENDERED BY ASSESSEE. AS ALSO SEEN FROM THE INCOME SCHEDULES, ENGINEERING SE RVICES REPORTED IN EARLIER YEAR WERE NOT THERE IN THIS YEA R, THEREFORE, IT IS VERY DIFFICULT TO ANALYSE WHETHER THE COMPANY IS FU NCTIONALLY SIMILAR OR NOT? KEEPING IN VIEW OF THE ABOVE DIFFIC ULTIES IN ANALYZING THE DATA AND CONSIDERING THE REASONS GIVE N BY DRP IN THE CASE OF M/S. SUMTOTAL SYSTEMS INDIA PVT. LTD., (SUPRA), WE ARE OF THE OPINION THAT L&T INFOTECH LTD., CANNOT BE SE LECTED AS A COMPARABLE COMPANY. AO/TPO IS DIRECTED TO EXCLUDE T HE SAME ITA NOS 329 318 OF 2015 AND CO 23 OF 2015INVENSYS D EV CENTRE INDIA P LTD HYDERABAD PAGE 19 OF 19 FROM THE LIST OF COMPARABLES. GROUND NO.4 IS ALLOWE D FOR STATISTICAL PURPOSES . 36. AS THE ORDER OF THE DRP IS IN CONSONANCE WITH T HE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, WE DO N OT SEE ANY REASON TO ADJUDICATE THE SAME. 37. IN THE RESULT, REVENUES APPEAL IS DISMISSED. C.O. 23/HYD/2015 38. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ON LY IN SUPPORT OF THE ORDERS OF DRP AND THEREFORE, WE SEE NO REASON TO ENTERTAIN IT. IT IS ACCORDINGLY DISMISSED. 39. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND THE REVENUES APPEAL AND CROSS OBJECTION OF THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 23 RD FEBRUARY, 2017. VINODAN/SPS COPY TO: 1 INFENSYS DEVELOPMENT CENTRE INDIA PVT LTD, PLOT N O.17, VANENBURG, I.T. PARK, SOFTWARE UNITS LAYOUT, MADHAP UR, HYDERABAD 500081 2 DCIT, CIRCLE 2(1), 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD 3 DRP HYDERABAD 4 CIT (INTERNATIONAL TAXATION) IT TOWERS, 10-2-3, AC GUARDS, HYDERABAD 500004 5 CIT-2 HYDERABAD 500004 6 T.P.O (ADDL. CIT (T.P) HYDERABAD 500004 7 DR INCOME TAX APPELLATE TRIBUNAL HYDERABAD 6 GUARD FILE BY ORDER