ACIT, Circle-16(2), Hyd, Hyderabad V. Progressive Digital Media Pvt.Ltd., Hyd, Hyderabad

CO 30/HYD/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3682 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-04-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 21-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Bad and doubtful debts
• Section: 143(3)

Judgement Text

ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.426/HYD/2016 (ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD VS M/S. PROGRESSIVE DIGITAL MEDIA PRIVATE LIMITED HYDERABAD PAN: AAFCP2745P (APPELLANT) (RESPONDENT) C.O. NO.30/HYD/2016 (ARISING OUT OF ITA NO.426/HYD/2016 (ASSESSMENT YEAR: 2011-12) M/S. PROGRESSIVE DIGITAL MEDIA PRIVATE LIMITED, HYDERABAD PAN: AAFCP2745P VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI K. SRINIVAS REDDY, DR FOR ASSESSEE : SHRI S.P. CHIDAMBARAM O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE CROSS APPEALS FILED BY BOTH THE ASSESSEE A S WELL AS THE REVENUE AGAINST THE FINAL ASSESSMENT OR DER DATED 21.08.2016 PASSED U/S 143(3) R.W.S. 92CA(3) R.W.S. 144C(5) OF THE I.T. ACT, 1961. DATE OF HEARING: 03.04 . 201 8 DATE OF PRONOUNCEMENT: 11.04.2018 ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 2 OF 12 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN PROVIDING DATA CREATION, CONTENT DEVELOP MENT AND BACK OFFICE DATA PROCESSING SERVICES, FILED ITS RET URN OF INCOME FOR THE A.Y 2011-12 ON 28.11.2011 ADMITTING TOTAL INCOM E OF RS.2,77,32,647. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS ENTERED INTO INTERNA TIONAL TRANSACTIONS OF PROVIDING TECHNICAL SUPPORT SERVICE S TO ITS AES. THEREFORE, A REFERENCE WAS MADE TO THE TPO FOR DETE RMINATION OF THE ALP OF THE SAID INTERNATIONAL TRANSACTION. THE TPO, AFTER GOING INTO THE PROFILE OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE IS ENGAGED IN PROVIDING BACK OFFICE DATA CREATION, CON TENT DEVELOPMENT AND SUPPORT SERVICES IN RELATION TO ANA LYSIS, CONTENT SEARCH AND PROJECTION FOR ALL TYPES OF BUSINESSES. THUS, HE OBSERVED THAT THE ASSESSEE IS PROVIDING ITES SERVIC ES TO ITS GROUP COMPANIES AND THAT THE ASSESSEE HAS ADOPTED TNMM AS THE MOST APPROPRIATE METHOD AND HAS ARRIVED AT ITS MARGIN AT 15.09% AS AGAINST THE MARGIN OF THE COMPARABLES AT 14.38% AND STATED THAT THE INTERNATIONAL TRANSACTION IS AT ARMS LENGTH. T HE TPO WAS HOWEVER, HELD THAT THE METHOD OF SEARCH PROCESS ADO PTED BY THE ASSESSEE SUFFERS FROM DEFECTS RESULTING IN SELECTIO N OF INAPPROPRIATE COMPARABLES AND REJECTION OF COMPANIE S THAT ARE APPROPRIATE COMPARABLES. HE THEREFORE, REJECTED THE TP DOCUMENT OF THE ASSESSEE AND MADE AN INDEPENDENT ANALYSIS UN DER TNMM AND ARRIVED AT THE ARMS LENGTH MARGIN OF THE COMPA RABLE AT 23.91% AND PROPOSED AN ADJUSTMENT OF RS.1,37,90,982 U/S 92C(3) OF THE I.T. ACT. THE TPO ADOPTED 13 COMPANIE S AS FINAL COMPARABLES. IN ACCORDANCE WITH THE TPOS ORDER, TH E DRAFT ASSESSMENT ORDER WAS PROPOSED BY THE AO AGAINST WHI CH THE ASSESSEE PREFERRED ITS OBJECTION BEFORE THE DRP. TH E DRP DIRECTED ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 3 OF 12 EXCLUSION OF 8 COMPANIES FROM THE FINAL LIST OF COM PARABLES, AGAINST WHICH, THE REVENUE IS IN APPEAL BEFORE US. WHILE EXCLUDING THE 8 COMPARABLE COMPANIES, THE DRP HAS SUO MOTO EXCLUDED MICROGENETIC SYSTEMS LTD AND ALSO EXCLUDED CERTAIN OTHER COMPANIES WHICH ACCORDING TO THE ASSESSEE, AR E COMPARABLE BUT ONLY A CORRECTION WITH REGARD TO THEIR MARGINS IS TO BE MADE. THEREFORE, THE ASSESSEE IS IN CROSS OBJECTION SEEKI NG INCLUSION OF THESE COMPANIES AND ALSO EXCLUSION OF CERTAIN COMPA NIES WHICH ACCORDING TO THE ASSESSEE, ARE NOT COMPARABLE BUT H AVE BEEN HELD TO BE COMPARABLE BY THE DRP. FOR THE SAKE OF CLARIT Y AND READY REFERENCE, THE GROUNDS OF APPEAL RAISED BY THE REVE NUE ARE REPRODUCED HEREUNDER: 1. THE DIRECTION OF LEARNED DRP-1 BENGALURU IS ERR ONEOUS ON FACTS AND CIRCUMSTANCES, IN LAW. 2. THE LEARNED DRP-1 BENGALURU, ERRED IN DIRECTING THE TPO/AO TO EXCLUDE 8 COMPARABLE COMPANIES OUT OF 13 COMPARABLE COMPANIES ADOPTED FOR TRANSFER PRICING ADJUSTMENT WHICH RESULTED IN REDUCTION IN FULL OF RS.1,37,90,982 PROPOSED FOR ADJUSTMENT IN ARMS LEN GTH PRICE OF THE INTERNATIONAL TRANSACTION . 3. THE GROUNDS OF CROSS OBJECTIONS RAISED BY THE AS SESSEE ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED ASSESSING OFFICER ['AO']I DISPUTE RESOLUTIO N PANEL ['DRP'] HAS ERRED IN REJECTING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE RESPONDENT AND MAKI NG AN ADJUSTMENT ON THE INTERNATIONAL TRANSACTIONS PER TAINING TO PROVISION OF IT ENABLED SERVICES ['ITES']. SELECTION OF UNCOMPARABLE COMPANIES 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN ACCEPTING FOLLOWING AS COMPARABLE COMPANIES AS SELECTED BY THE TPO: ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 4 OF 12 (I) ACCENTIA TECHNOLOGIES LTD; AND (II) CROSSDOMAIN SOLUTIONS PVT. LTD. EXCLUSION OF COMPARABLE COMPANIES NOT OBJECTED BY T HE RESPONDENT 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO/DRP HAS ERRED IN EXCLUDING MICROGENETIC SYSTEMS LTD AS A COMPARABLE, WHICH IS NOT OBJECTED BY THE RESPONDENT BEFORE DRP. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO/DRP HAS ERRED IN REJECTING THE FOLLOWING COMPANIES OUTRIGHT, WHEN ONLY MARGIN RECTIFICATION WAS SOUGHT BY THE RESPONDENT BEFORE DRP, VIZ, (I) E4E HEALTHCARE BUSINESS SERVICES PVT. LTD.; AND (II) MASTIFF TECH PVT. LTD. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO/DRP HAS ERRED IN EXCLUDING THE ABOVE COMPANIES WITHOUT PROVIDING ANY SHOW CAUSE NOTICE O R A REASONABLE OPPORTUNITY OF BEING HEARD TO THE RESPON DENT, COMPLETELY DISREGARDING THE PROVISIONS OF THE ACT A ND IN UTTER DISREGARD TO THE PRINCIPLES OF NATURAL JUSTIC E. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO/DRP HAS ERRED IN EXCLUDING THE COMPANIES NOT OBJECTED, WHEN THE TRANSFER PRICING OFFICER [TPO'] HAD ALREADY EXAMINED AND DECIDED THE ISSUES BASED ON TH E FACTS AND MATERIAL AVAILABLE ON RECORD. 7. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AOIDRP ERRED IN CONFIRMING THE TPO'S ST AND OF TREATING THE PROVISION FOR BAD AND DOUBTFUL DEBTS A ND BAD DEBTS WRITTEN OFF AS NON-OPERATING EXPENSES FOR THE PURPOSE OF MARGIN COMPUTATION OF COMPARABLE COMPANI ES AS SELECTED BY TPO. INCLUSION OF COMPARABLE COMPANIES REQUESTED BY THE APPELLANT 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN CONFIRMING THE REJECTION O F FOLLOWING COMPARABLE COMPANIES, AS REJECTED BY THE TPO: (I) R SYSTEMS INTERNATIONAL LTD; AND (II) MICROLAND LTD. ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 5 OF 12 USE OF FILTERS 8. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN UPHOLDING THE USE OF DIFFERENT FINANCIAL YEAR END FILTER FOR REJECTION OF COMPARAB LE COMPANIES WHILE UNDERTAKING THE COMPARATIVE ANALYSI S. REJECTION OF USE OF MULTIYEAR DATA 10. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN REJECTING THE USE OF MULTI YEAR DATA AND USING DATA FOR THE FY 2010-11 ONLY. ADJUSTMENT FOR RISK DIFFERENCES 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN DISREGARDING THE RISK PROF ILE OF THE APPELLANT VIS-A-VIS ALLEGED COMPARABLE COMPANIE S SELECTED BY THE TPO AND NOT ALLOWING RISK ADJUSTMEN T AS PER THE PROVISIONS OF RULE 108(1 )(E) OF THE RULES. ARM'S LENGTH RANGE OF 5% 12. THAT THE AO / TPO BE DIRECTED TO RE-WORK THE PR OFIT MARGINS OF THE APPELLANT VIS-A-VIS THE RESULTANT COMPARABLE COMPANIES AND TO ALLOW THE BENEFIT OF + /- 5% RANGE AS PROVIDED IN PROVISO TO SECTION 92C(2) OF T HE ACT. 13. THE RESPONDENT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER A ND CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 4. THE LEARNED DR SUBMITTED THAT AS SEEN FROM THE SERVICE AGREEMENT ENTERED BY THE ASSESSEE WITH ITS AE, THE ASSESSEE IS ALSO PROVIDING HIGH END SERVICES TO ITS AES AND THEREFORE, THE DRP OUGHT NOT TO HAVE HELD THE ASSES SEE TO BE ONLY A BACK OFFICE SERVICE PROVIDER TO EXCLUDE THE COMPA NIES WHICH ARE OTHERWISE COMPARABLE TO THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, REITERATED THE SUBMISSIONS MADE BY THE ASSESS EE BEFORE THE ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 6 OF 12 AUTHORITIES BELOW AND DREW OUR ATTENTION TO THE DOC UMENT FILED IN SUPPORT OF THE FINDINGS OF THE DRP FOR EXCLUSION OF THE COMPANIES OBJECTED TO BY THE ASSESSEE AND ALSO FOR INCLUSION OF SOME OF THE COMPARABLE COMPANIES. 6. HAVING HEARD THE PARTIES AT LENGTH AND HAVING GO NE THROUGH THE MATERIAL ON RECORD, WE FIND THAT THE FO LLOWING ARE THE FINAL COMPARABLES TAKEN BY THE TPO: I) ACCENTIA TECHNOLOGIES LTD II) ACROPETAL TECHNOLOGIES LTD (SEG.) III) COSMIC GLOBAL LTD IV) CROSSDOMAIN SOLUTIONS P LTD V) E4E HEALTHCARE VI) ECLERX SERVICES LTD VII) INFORMED TECHNOLOGIES LTD VIII) INFOSYS BPO IX) JEEVAN SCIENTIFIC TECHNOLOGIES LTD X) JINDAL INTELLICOME LTD XI) MASTIFF TECH P LTD XII) MICROGENETIC SYSTEMS LTD XIII) TCS E-SERVE LTD 7. FROM THESE COMPANIES, WE FIND THAT BOTH THE TPO AND THE ASSESSEE HAS ACCEPTED THE FOLLOWING COMPANIES A S COMPARABLE TO THE ASSESSEE: I) COSMIC GLOBAL LTD II) INFORMED TECHNOLOGIES LTD III) JEEVAN SCIENTIFIC TECHNOLOGIES LTD 8. AS REGARDS THE FOLLOWING COMPANIES, BOTH THE ASS ESSEE AS WELL AS THE REVENUE AGREE THAT THEY ARE COMPARAB LE TO THE ASSESSEE: I) E4E HEALTH CARE II) MASTIFF TECH P LTD III) MICROGENETIC SYSTEMS LTD ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 7 OF 12 9. THE ASSESSEES ONLY OBJECTION WAS THAT THE CORRE CT MARGIN OF THE TWO COMPANIES I.E. E4E HEALTHCARE AND MASTIFF TECH LTD IS TO BE ADOPTED FOR COMPARATIVE ANALYSIS. 10. SINCE BOTH THE ASSESSEE AS WELL AS THE REVENUE AGREE THAT THESE COMPANIES ARE COMPARABLE TO THE ASSESSEE , BUT ONLY AN ADJUSTMENT TO THE MARGINS TO BE MADE, WE DIRECT THE TPO TO CONSIDER THE SAME AS COMPARABLE AFTER MAKING NECESS ARY ADJUSTMENTS TO THE MARGINS OF THE RESPECTIVE COMPAN IES. 11. AS FAR AS MICROGENETIC SYSTEMS LTD IS CONCERNED , IT IS THE CASE OF BOTH THE PARTIES THAT IT IS COMPARABLE TO THE ASSESSEE, WE THEREFORE, DIRECT THE TPO TO INCLUDE THE SAME IN THE FINAL LIST OF COMPARABLES. 12. AS REGARDS THE COMPARABLES EXCLUDED BY THE DRP AGAINST WHICH REVENUE IS IN APPEAL BEFORE US, WE FI ND THAT THEY ARE AS FOLLOWS: (I) ACROPETAL TECHNOLOGIES LTD (SEG); (II) ECLERX SERVICES LTD; (III) INFOSYS BPO; (IV) JEEVAN SCIENTIFIC TECHNOLOGIES LTD; AND (V) TCS E-SERVE LTD. THE DRP HAS EXCLUDED ALL THESE COMPANIES ON THE GRO UND THAT THEY ARE FUNCTIONALLY DISSIMILAR. 13. THE LEARNED DR HAS REITERATED THAT THE ASSESSEE IS ALSO PERFORMING SIMILAR HIGH END SERVICES AND THEREFORE, THE DRP IS NOT RIGHT IN DIRECTING EXCLUSION OF THESE COMPANIES. ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 8 OF 12 14. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT BOTH THE TPO AS WELL AS THE DRP HAVE ACCEPTED THE ASSESSEE TO BE A BACK OFFICE SUPPORT SERVICE PROVIDER AND TH ERE IS NO CHALLENGE TO THE SAID FINDINGS BY THE REVENUE AND T HEREFORE, SUCH FINDINGS HAVE BECOME FINAL AND THE DR CANNOT ADVANC E A NEW GROUND BEFORE THE TRIBUNAL. 15. WE ACCEPT THIS CONTENTION OF THE ASSESSEE, BECA USE, IT IS THE TPO WHO HAS CONSIDERED THE ASSESSEE TO BE A BACK OFFICE SUPPORT SERVICE PROVIDER AND THE DR CANNOT NOW RE-C HARACTERIZE THE PROFILE OF THE ASSESSEE. ONCE IT IS ACCEPTED TH AT THE ASSESSEE IS ONLY A BACK OFFICE SUPPORT SERVICE PROVIDER (ITES), THEN SUCH COMPANIES WHICH ARE ALSO ENGAGED IN SIMILAR SERVICE S ONLY CAN BE CONSIDERED AS COMPARABLE TO THE ASSESSEE. 16. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF S&P CAPITAL IQ (INDIA) PRIVATE LIMITED VS. DCIT IN ITA NOS. 200 AND 435/HYD/2016 FOR THE A.Y 2011-12, WHEREIN S&P C APITAL IQ WAS ALSO PROVIDING I.T ENABLED SERVICES LIKE THE AS SESSEE BEFORE US AND THE TPO THEREIN ALSO HAD TAKEN THE VERY SAME 13 COMPANIES AS COMPARABLE TO THE ASSESSEE THEREIN. HE HAS ALSO DRAWN OUR ATTENTION TO THE RELEVANT PARAGRAPHS OF THE ORDER O F THE TRIBUNAL, WHEREIN, THESE COMPANIES HAVE BEEN CONSIDERED AT LE NGTH AND THE TRIBUNAL HAS HELD THAT THEY ARE NOT COMPARABLE TO T HE ASSESSEE THEREIN. THEREFORE, ACCORDING TO HIM, ON THE BASIS OF THE SAID DECISION, EXCLUSION OF THESE COMPANIES IS TO BE UPH ELD. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL, TO WHICH TH E LEARNED A.M. ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 9 OF 12 IS A SIGNATORY. THE TRIBUNAL AT PARAS 12,16, 18 AND 23 HAD HELD AS UNDER: II. ACROPETAL TECHOLOGIES LTD (SEG): 12. THIS COMPANY IS INCLUDED BY TPO BUT EXCLUDED BY DRP FOR THE FOLLOWING REASONS: 'HAVING CONSIDERED THE SUBMISSIONS, ON PERUSAL OF T HE ANNUAL REPORT, IT IS NOTICED BY US THAT THE ASSESSING OFFI CER HAS CONSIDERED THE REVENUE FROM THE ENGINEERING DESIGN SEGMENT. HO N'BLE ITAT, BANGALORE IN IT(TP)/A/1678/BANG/2012 IN THE CASE OF GLOBAL E BUSINESS OPERATIONS, DIRECTED TO EXCLUDE THE ABOVE :- 18 -: S&P CAPITAL IQ (INDIA) PVT LTD., COMPANY BY OBSERVING T HAT 'WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL FO R THE ASSESSEE, ON PERUSAL OF NOTE NO.15 OF NOTES TO ACCOUNTS, WHIC H GIVES SEGMENTAL REVENUE OF THIS COMPANY, IT IS CLEAR THAT THE MAJOR SOURCE OF THE INCOME FOR THIS COMPANY IS FROM PROVI DING ENGINEERING DESIGN SERVICES AND INFORMATION TECHNOL OGY SERVICES. THE FUNCTION PERFORMED BY THE ENGINEERING DESIGN SE RVICES OF THE COMPANY CANNOT BE CONSIDERED AS COMPARABLE TO THE I TES /BPO FUNCTION PERFORMED BY THE ASSESSEE. THE PERFORMANCE OF THE ENGINEERING DESIGN SERVICES IS REGARDED AS PROVIDIN G HIGH END SERVICES AMONGST THE BPO WHICH REQUIRE HIGH SKILL W HEREAS THE SERVICES PERFORMED BY THE ASSESSEE ARE ROUTING LOW END ITES FUNCTION. WE THEREFORE HOLD THAT THIS COMPANY COULD NOT HAVE BEEN SELECTED AS COMPARABLE, ESPECIALLY WHEN IT PER FORMS ENGINEERING DESIGN SERVICES WHICH ONLY A KNOWLEDGE PROCESSING OUTSOURCING- (KPO) WOULD DO AND NOT A BUSINESS PROC ESSING OUTSOURCING (BPO).' SIMILAR VIEW WAS TAKEN BY HON'B LE BANGALORE ITAT IN THE CASE OF - SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. ITO (IT (TP) A NO. 1316/BANG/20 12), HELD THAT ACROPETAL CANNOT BE CONSIDERED AS COMPARABLE AS IT PERFORMS ENGINEERING DESIGN SERVICES ACCORDINGLY WE DIRECT T HE ASSESSING OFFICER TO EXCLUDE THE COMPANY FROM THE COMPARABLES '. 12.1. WE DO NOT SEE ANY REASON TO DIFFER FROM THE F INDINGS OF DRP AS IT IS PROVIDING HIGH END KPO SERVICES AND IS FUN CTIONALLY DIFFERENT. THE ORDER OF EXCLUSION IS THEREFORE, UPH ELD. VI. ECLERX SERVICES LTD.,: 16. THIS COMPANY IS INCLUDED BY TPO BUT EXCLUDED BY DRP FOR THE FOLLOWING REASONS: ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 10 OF 12 'HAVING CONSIDERED THE SUBMISSION, RESPECTFULLY FOL LOWING THE DECISION OF HON'BLE THE ITAT FOR THE AY 200910 IN ASSESSEE'S OWN CASE, AS THE FUNCTIONAL PROFILE OF THE ASSESSEE COM PANY AND THE ABOVE COMPANY REMAIN THE SAME, WE DIRECT THE AO TO EXCLUDE THE ABOVE COMPANY FROM COMPARABLES'. 16.1. WE DO NOT SEE ANY REASON TO DIFFER FROM THE F INDINGS OF DRP AS IT IS PROVIDING HIGH END KPO SERVICES AND IS FUN CTIONALLY DIFFERENT. THE ORDER OF EXCLUSION IS THEREFORE, UPH ELD. VIII. INFOSYS BPO 18. TPO INCLUDED THE SAME IN THE LIST OF COMPARABLE S ON THE REASON THAT THE TURNOVER DOES NOT HAVE ANY EFFECT O N PROFITABILITY. DRP EXCLUDED THE SAME BEING FUNCTIONALLY DIFFERENT. EVEN THOUGH, LD. DR HAS ARGUED VEHEMENTLY FOR INCLUSION, WE DO N OT SEE ANY REASON TO INCLUDE AS INFOSYS BPO IS FUNCTIONALLY DI FFERENT AND BEING EXCLUDED IN MANY CASES IN EARLIER YEARS AS WE LL BEING UNIQUE IN ITS FUNCTIONALITY. XIII. TCS E-SERVE LTD: 23. TPO INCLUDED THE SAME IN THE LIST OF COMPARABLE S ON THE REASON THAT THE TURNOVER DOES NOT HAVE ANY EFFECT O N PROFITABILITY. DRP EXCLUDED THE SAME BY STATING AS UNDER: 'HAVING CONSIDERED THE SUBMISSIONS, ON PERUSAL OF A NNUAL REPORT, IT IS NOTICED BY US FROM THE SCHEDULE TO THE FINANC IAL STATEMENT THAT THE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY - ENABLED SERVICES/BUSINESS PROCESSING O UTSOURCING SERVICE, PRIMARY TO THE CITI GROUP COMPANIES INTROD UCED GLOBALLY THE TRANSACTION PROCESSING INCLUDE THE BROAD SPECTR UM OF :- 24 -: S&P CAPITAL IQ (INDIA) PVT LTD., ACTIVITIES INVOLVI NG THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITI GROUP TO ITS CORPOR ATE AND RETAIL CLIENTS. AS PER THE ANNUAL REPORT, THE COMPANY ALSO PROVIDE TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERI FICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATIO N AND DATA CENTRE MANAGEMENT ACTIVITIES, WHICH MAKES THE COMPA NY FUNCTIONALLY INCOMPARABLE WITH THE ASSESSEE, ACCORD INGLY, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE ABOVE C OMPANY FROM COMPARABLES'. EVEN THOUGH, LD. DR HAS ARGUED VEHEMENTLY FOR INCLU SION, WE DO NOT SEE ANY REASON TO INCLUDE AS THIS COMPANY IS FU NCTIONALLY ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 11 OF 12 DIFFERENT AND BEING EXCLUDED IN MANY CASES IN EARLI ER YEARS AS WELL BEING UNIQUE IN THE FUNCTIONALITY. 17. SINCE THE FACTS AND CIRCUMSTANCES IN THE CASE B EFORE US ARE SIMILAR AND THE LEARNED DR HAS NOT BROUGHT O UT ANY DISTINGUISHABLE FACTOR, RESPECTFULLY FOLLOWING THE DECISION ABOVE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE DRP/AO ON THESE COMPARABLES. 18. AS REGARDS JEEVAN SCIENTIFIC TECHNOLOGIES LTD I S CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT IT IS FUNCTIONALLY DIFFERENT AND ALSO FAILS THE ITES R EVENUE BEING MORE THAN 75% FILTER. 19. THE LEARNED DR, HOWEVER, SUBMITTED THAT THE TPO HAS TAKEN ONLY THE SEGMENTAL DETAILS OF THE SAID COMPAN Y AND THEREFORE, THERE WAS NO NEED TO EXCLUDE THE SAID CO MPANY FROM THE FINAL LIST OF COMPARABLES. 20. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE TO THE FILE OF THE AO/TPO FOR RECONSIDERATION AND ONLY IF THE S EGMENTAL RESULTS ARE TAKEN, THE SAME CAN BE TAKEN AS COMPARA BLE. 21. AS THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENTS WITH REGARD TO ANY OTHER GROU NDS OF APPEAL OTHER THAN THE EXCLUSION AND INCLUSION OF TH E COMPARABLES AS DISCUSSED ABOVE, THE OTHER GROUNDS ARE NOT ADJUD ICATED AND ARE REJECTED AS NOT PRESSED. ITA NO 426 AND CO 30 OF 2016 PROGRESSIVE DIGITAL ME DIA P LTD HYDERABAD. PAGE 12 OF 12 22. IN THE RESULT, REVENUES APPEAL AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL, 2018. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH APRIL 2018. VINODAN/SPS COPY TO: 1 DY. CIT, CIRCLE 16(2) HYDERABAD 2 PROGRESSIVE DIGITAL MEDIA PVT. LTD, 2 ND FLOOR, WING BNSL CENTRUM, PLOT NO.S-1 PHASE 1 & 2, OPP: BSNL OFFICE, KPHB COLONY, KUKATAPALLY, HYDERABAD 500072 3 CIT (A)-DRP-1, G-16 GROUND FLOOR, CENTRAL REVENUE BUILDINGS, QUEENS ROAD, BENGALURU 560001 4 PR. CIT 4, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER