First Advantage Global Operating Centre Private Limited, Bangalore V. Deputy Commissioner of Income-tax, Bangalore

CO 39/BANG/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5765 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2017
• Assessment Year: misc
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; International transaction; Source of fund; Initiation of penalty proceedings; Scheme of amalgamation; TDS; Set aside
• Section: 271(1)(c); 92C; 234B; 250

Judgement Text

IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI B.R.BASKARAN ACCOUNTANT MEMBER AND SMT.BEENA PILLAI, JUDICAL MEMBER SL. NO . ITA/IT(TP)A NO. ASS T. YEAR APPELLANT RESPONDENT 1 IT(TP)A NO S .190 (B)/2014 2009 - 10 DCIT, CIRCLE - 11(3), BANGALORE M/S FIRST ADVANTAGE GLOBAL OPERATING CENTER PVT. LTD. BANGALORE PANNO.AAACZ1029M 2 IT(TP)A NO.176(B)/2014 2009 - 10 M/S FIRST ADVANTAGE GLOBAL OPERATING CENTER PVT. LTD. BANGALORE PANNO.AAACZ102 9M DCIT, CIRCLE - 11(3), BANGALORE 3 C.O.N O . 3 9 (B)/201 6 (IN IT(TP)A NO.1 9 0 (B)/201 4 2011 - 12 M/S FIRST ADVANTAGE GLOBAL OPERATING CENTER PVT. LTD. BANGALORE DCIT, CIRCLE - 11(3), BANGALORE REVENUE BY : MISS. NEERA MALHOTRA, CIT APPELLANT BY SHRI NAGESHWAR RAO, ADVOCATE DATE OF HEARING : 0 2 - 07 - 2019 DATE OF PRONOUNCEMENT : 07 - 08 - 2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : PRESENT APPEALS HAS BEEN FILED BY ASSESSEE AND REVENUE ALONG WITH CROSS APPEAL FILED BY REVENUE AGAINST ORDER DATED 07/01/14 PASSED BY LD.CIT(A) - 4, BANGALORE FOR ASSESSMENT YEAR 2009 - 10 ON FOLLOWING GROUNDS OF APPEAL: IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 2 ITA NO. 176/BANG/2014 (ASSESSMENT YEAR 2009 - 10) BASED ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW, FIRST ADVANTAGE GLOBAL OPERATING CENTER PRIVATE LIMITED (FORMERLY KNOWN AS FIRST ADVANTAGE OFFSHORE SERVICES PRIVATE LIMITED AND HEREINAFTER REFERRED TO AS 'APPELLANT'), RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE APPEAL ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IV [HEREINAFTER REFERRED TO AS THE 'LEARNED CIT(A)'] UNDER SECTION 250 OF THE INCOME - TAX ACT, 1961 ('ACT') ON THE FOLLOWING GROUNDS: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ADDITION OF RS. 2,88,48,573 AND RS. 1,67,67,670 MADE BY THE AO/TPO TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE PROVISION OF SOFTWARE DEVELOPMENT SERVICES TRANSACTION AND PROVISION OF IT ENABLED SERVICES TRANSACTION, RESPECTIVELY, ENTERED BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES ('AES'); 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY NOT ACCEPTING THE APPELLANT'S PLEA IN ENTIRELY AND CONFIRMING WITH THE LEARNED AO/TPO ON NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 1962 ('RULES'), AND CONDUCTING A FRESH ECONOMIC ANALYSIS FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE IN CONNECTION WITH THE IMPUGNED INTERNATIONAL TRANSACTION AND HOLDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTION IS NOT AT ARM'S LENGTH; 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY UPHOLDING THE ACTION O F AO/TPO IN DETERMINATION OF THE ARM'S LENGTH MARGIN/ PRICE USING ONLY FY 2008 - 09 DATA WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 3 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN UPHOLDING THE ACTION OF AO/TPO IN REJECTING CERTAIN COMPARABLES CONSIDERED BY THE APPELLANT IN THE COMPARABILITY ANALYSIS BY APPLYING DIFFERENT QUANTITATIVE AND QUALITATIVE FILTERS: A) BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT WHER E CONSOLIDATED RESULTS HAD BEEN USED FOR ANALYSIS. THE APPELLANT HAD CONSIDERED THE CONSOLIDATED RESULTS IN ONLY THOSE CASES WHERE THE INCOME OF THE INDIAN COMPANY CONSTITUTED MORE THAN 75% OF THE CONSOLIDATED COMPANY - WIDE/ SEGMENTAL REVENUES; B) BY APPLYING THE TURNOVER < RS. 1 CRORE AS A COMPARABILITY CRITERION; C) BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E. COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIAL STAT EMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS); D) BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT' EARNINGS GREATER THAN 75% OF THE SALES AS A COMPARABILITY CRITERION. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE ACTION OF AO/TPO BY INCLUDING THE COMPANIES REFLECTING ABNORMAL PROFITS AS COMPARABLES. 5. THE LEARNED CIT(A) HAS ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT USING EMPLOYEE COST GREATER THAN 25% OF THE TOTAL REVENUES AS A COMPARABILITY CRITERION IN DETERMINING THE ARM'S LENGTH PRICE OF THE SOFTWARE DEVELOPMENT SERVICES TRANSACTION. IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 4 6. WITHOUT PREJUDICE TO OUR CONTENTION THAT THE EMPLOYEE COST FILTER SHOULD NOT BE APPLIED IN RESPECT OF THE SOFTWA RE DEVELOPMENT SERVICES TRANSACTION, THE LEARNED CIT(A) HAVE ERRED, IN LAW AND IN FACTS, BY NOT APPLYING THE SAME FILTER IN RESPECT OF THE IT ENABLED SERVICES TRANSACTION TO REJECT COMPANIES; 7. THE LEARNED CIT(A) HAVE ERRED IN LAW AND IN FACTS BY ACCEPTING/ REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA. 8. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE FOREIGN EXCHANGE FLUCTUATION GAIN AS OPERATING IN NATURE WHILE COMPUTING THE OPERATING MARGIN OF APPELLANT AND THAT OF COMPARABLE COMPANIE S. 9. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY REJECTING COMPANIES FOR WHICH WORKING CAPITAL ADJUSTMENT RESULTED IN REDUCTION OF PROFIT MARGINS BY MORE THAN 4% AND FURTHER ERRED IN COMPUTING THE QUANTUM OF WORKING CAPITAL ADJUSTMENT BENEFIT FOR THE AP PELLANT'S INTERNATIONAL TRANSACTION INCORRECTLY. 10. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIS - - VIS THE COMPARABLES BY HOLDING THAT ONCE THE AO/TPO HAS GRANTED WORKING CAPITAL ADJUSTMENT, THERE IS NO NECESSITY OF PROVIDING ANY FURTHER ADJUSTMENTS. 11. THE LEARNED CIT(A) HAS ERRED, IN LAW AND IN FACTS, BY IGNORING THE FACT THAT SINCE THE APPELLANT IS AVAILING TAX HOLIDAY U/S 10A OF THE ACT, THERE IS NO MOTIVE OR REASON TO SHIFT PROFITS OUT OF INDIA, CURBING WHICH IS THE BASIC INTENTION OF INTRODUCING THE TRANSFER PRICING PROVISIONS. IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 5 12. THE LEARNED CIT(A) ERRED IN CONFIRMING THE IMPOSITION OF INTEREST UNDER SECTION 234B OF THE ACT. 13. THE LEARNED CIT(A) ERRED, IN LAW AND IN FACTS, BY HOLDING THAT THE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) IS PREMATURE. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HON'BLE TRIBUNAL TO DECIDE ON THE APPEAL IN ACCORDANCE WITH THE LAW . ITA NO.1 90/BANG/2014 ( ASSESSMENT YEAR : 2009 - 10) 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT (A) ERRED IN DIRECTING THE AO TO COMPUTE THE MARGIN OF BOTH THE ASSESSEE AS WELL AS THE COMPARABLE COMPANIES BY INCLUDING THE FOREIGN EXCHANGE GAINS OR L OSS WITHOUT APPRECIATING THE FACT THAT THE FOREIGN EXCHANGE LOSS OR GAIN THOUGH ATTRIBUTABLE TO OPERATING ACTIVITY IS NOT DERIVED BY THE OPERATING ACTIVITY. 3. THE CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE MARGIN OF BOTH THE ASSESSEE AS WELL AS THE COMP ARABLE COMPANIES BY INCLUDING THE FOREIGN EXCHANGE GAINS OR LOSS WITHOUT APPRECIATING THE FACT THAT OPERATIONAL EXPENSES ARE THOSE EXPENSES WHICH ARE INCURRED TO EARN THAT INCOME AND THAT FOREIGN EXCHANGE LOSS OR GAIN CANNOT BE SAID TO BE ONE REALIZED FROM INTERNATIONAL TRANSACTION THOUGH THEY FORM PART OF THE GAIN/LOSS OF THE ENTERPRISE AND THEREFORE THEY SHOULD - BE EXCLUDED WHILE DETERMINING THE OPERATING COST. 4. THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT IF ANY FILTER OR CRITERIA APPLIED BY THE ASSESSEE IS ACCEPTED OR IF ANY IT(TP)A NO.190 & 176(B)/20 14 & CO NO.39(B)/2016 6 FILTER OR CRITERIA APPLIED BY THE TPO IS RELAXED, THE ENTIRE ACCEPT / REJECT MATRIX CHANGES RESULTING IN A NEW SET OF COMPARABLES INCLUDING THOSE COMPARABLES WHICH ARE NEITHER TAKEN BY THE ASSESSEE OR THE TPO AND WHICH DO NOT FIND A PLACE IN THE ORDER UNDER SECTION 92CA. 5. THE CIT(A) ERRED IN DIRECTING THE AO TO FOLLOW THE RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 AND EXCLUDE THE TELECOMMUNICATION EXPENSES OF RS. 22,99,558/ - AND EXPENSES I NCURRED IN FOREIGN CURRENCY OF RS. 22,98,997/ - FROM THE TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION U/S 10A OF THE I.T. ACT AS THE DECISION OF THE HIGH COURT IS BINDING, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROVISION IN SECTION 10A THAT SUC H EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO, AS CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TURNOVER: 6. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE JURISDICTIONAL H IGH COURT'S DECISION IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 8. THE APPELLATE CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF ITS GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 7 CO NO. 39/BANG/2014 (ASSESSMENT YEAR : 2009 - 10) 1. THE LD. CIT(A) HAS E RRED IN NOT CONSIDERING THE RESPONDENTS CONTENTIONS AS PER THE GROUNDS OF APPEAL RAISED BEFORE HIM. 2.THE LD.CIT(A) HAS ERRED IN NOT ADJUDICATING ON T HE APPLICATION OF EMPLOYEE COST FILTER BY TPO IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES TRANSACTION AND FURTHER NOT DECIDING ON THE INCONSISTENCY OF TPO BY NOT APPLYING THE S A ME FILTER IN RESPECT OF ITES SEGMENT. 3. THE LD.CIT(A) HAS ERRED IN HOLDING THAT IT I NOT OPEN TO THE ASSE S SEE TO DEMAND THAT INFORMATION TECHNOLOGY ENABLES SERVICES BE FURTHER DISSECTED AND BUSINESS OF SAME SECTOR BUT OPERATING IN A DIFFERENT LINE NEED NOT BE CON S I D ERED AS FUNCTION ALLY DISSIMILAR. RESPONDENT SUBMITS THAT EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO NE ANOTHER. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, AMEND OR DELETE ONE OR ORE OF THE ABOVE GROUNDS OF CROSS OBJECTION AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE APPELLATE TRIBUNAL TO DECIDE THIS RESPONSE ACCORDING TO LAW. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCO ME FOR YEAR UNDER CONSIDERATION ON 25/09/09 DECLARING TOTAL INCOME OF RS.1,65,88,001/ - . THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND CASE WAS SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143 (2) OF THE ACT WAS ISSUED TO ASSESSEE ALONG WITH NOTICE UNDER SEC TION 142 (1) AND QUESTIONNAIRE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. LD.AO OBSERVED THAT ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AES , AND IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 8 ACCORDINGLY REFERENCE WAS MADE TO TRANSFER PRICING OFFICER FOR DETERMINING ARMS LENGTH PRICE OF TRANSACTIONS AS PER PROVISIONS OF SECTION 92C OF THE ACT. UPON RECEIPT OF REFERENCE, LD.TPO ISSUED NOTICE TO ASSESSEE FOR FILING ECONOMIC DETAILS OF INTE RNATIONAL TRANSACTIONS IN FORM 3 CEB. FROM TP STUDY LD.TPO OBSERVED THAT ASSESSEE HAD FOLLOWING INTERNATIONAL TRANSACTIONS: 3. LD.TPO OBSERVED THAT ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD AND OP/OC AS PLI FOR DETERMINING MARGIN OF TRANSACTION UNDER BOTH SEGMENT. ASSESSEE COMPUTED 9.67% MARGIN FOR SOFTWARE DEVELOPMENT SERVICE SEGMENT AND USED FOLLOWING 21 COMPARABLES WITH AVERAGE MARGIN OF 14.13 % FOR SOFTWARE SERVICE DEVELOPMENT SEGMENT. AS ASSESSEES MARGIN WAS WITHIN + - 5%, TRANSACTION WAS HELD TO BE AT ARMS LENGTH PRICE BY ASSESSEE. SL N O NAME OF THE COMPARABLE REMARKS 1 AKSHAY SOFTWARE TECHNOLOGIES LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 2 AN CENT SOFTWARE INTERNATIONAL LTD. REJECTED: TOTAL SALES LESS THAN 1 CRORE 3 AZTECSOFT LTD. REJE C TED: EXPORT SALES LESS THAN 75% OF TOTAL REVENUE 4 CG VAK SOFTWARE & EXPORTS LTD. REJECTED: EMPLOYEE COST 25% TYPE OF INTERNATIONAL TRANSACTION METHOD SELECTED FIRST ADVANTAGE INDIA (TESTED PARTY) PRICE MARGIN OP/OC PROVISION OF SOFTWARE SERVICE TO ITS AES. TNMM USING OPERATING PROFIT AS PLI OPERATING COST 230,925,569 9.67 % PROVISION OF IT ENABLED SERVICES TO ITS AES. TNMM USING OPERATING PROFIT AS PLI /OPERATING COST 178,893,541 14.43% IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 9 5 GOLDSTONE TECHNOLOGIES LTD. REJECTED: FUNCTIONALLY DIFFERENT ENGAGED IN ITES 6 HELIOS & MATHESON INFORMATION TECHNOLOGY LTD. REJECTED: EXPORT SALES 75% . 7 INDIUM SOFTWARE (INDIA() LTD. REJECTED: REVENUE EARNINGS IN FOREX IS NIL 8 INFOSYS TECHNOLOGIES LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY TH E TPO. 9 KPIT CIUMMINS INFOSYSTEMS LTD. REJECTED SINCE RPT IS 100% 10 LARSEN & TOUBRO INFOTECH LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 11 LGS GLOBAL LTD REJECTED: EXPORT SALES 75% 12 MAARS SOFTWARE INTERNATIONAL LTD. REJECTED BY TPO: EMPLOYEE COST 25% 13 MINDTREE LTD.(SEG.) THE COMPANY IS INTO SOFTWARE DEVELOPMENT SERVICES AND QUALIFIES ALL THE FILTERS APPLIED BY TPO. THE IT SERVICES SEGMENT IS TAKEN AS COMPARABLE. THUS THE COMPANY IS CO NSIDERED AS A COMPARABLE. 14 PERSISTENT SYSTEMS PVT.LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 15 QUINTEGRA SOLUTIONS LTD. REJECTED: EXPORT SALES 75% OF TOTAL SALES (38%). 16 R S SOFTWARE (INDIA) LTD. THE COMPANY IS INTO SOFTWARE DEVELOPMENT SERVICES AND QUALIFIES ALL THE FILTERS APPLIED BY THE TPO. THUS THE COMPANY IS CONSIDERED AS A COMPARABLE. 17 SASKEN COM M UN I CATION TECHNOLOGIES LTD. THE COMPANY QUALIFIES ALL FILTERS APPLIED BY THE TPO. 18 SIP TECHNOLOGIES & EXPORT LTD. REJECTED. THE COMPANY HAS REPORTED PECULIAR ECONOMIC CONDITION DURING THE YEAR. DURING THE YEAR IT HAD TO WRITE OFF RS.1. CRORE LOSS FROM ITS INVESTMENTS. 19 SOFTSOL INDIA LTD. REJECTED. FAILS THE EMPLOYEE COST FILTER 20 VMF SOFT TECH LTD. REJECTED. SALES 1 CRORE (90 LAKHS) 21 ZYLOG SYSTEMS LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE T PO. 3.1 FOR ITES A SSESSE COMPUTED ITS MARGIN AT 14.43% A ND USED FOLLOWING 8 COMPARABLES WITH A VERAGE MARGIN OF 18.56%. AS ASSESSEES MARGIN WAS WITHIN + - 5%, TRANSACTION WAS HELD TO BE AT ARMS LENGTH PRICE BY ASSESSEE. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 10 SL NO. NAME OF THE COMPARABLE COMPANY REASONS FOR REJECTION 1 ALLSEC TECHNOLOGIES LTD THE COMPANY QUALIFIES ALL THE FILTER APPLIED BY THE TPO. HENCE ACCEPTED AS A COMPARABLE. 2 CG VAK SOFTWARE & EXPORTS LTD. THE COMPANY FAILS THE EMPLOYEE COT FILTER APPLIED BY THE TPO AND HENCE IS REJECTED. 3 COSMIC GLOBL LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 4 GENESYS INTERNATIONAL CORPORATION LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 5 ICRA ONLINE LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 6 INFORMED TECHNOLOGIES INDIA LTD. THE COMPANY PASSES ALL FILTERS APPLIED BY THE TPO 7 R SYSTEMS INTERNATIONAL LTD. THE COMPANY HAS A DIFFERENT FINANCIAL YEAR ENDING DECEMBER 2008 AND FAILS THE DIFFERENT FINANCIAL YE A R FILTER. 8 VISHAL INFORMATION TECHNOLOGIES LTD. THE COMPANY DETAILS ARE NOT AVAILABLE IN PUBLIC DOMAIN. 4. LD.TPO APPLIED V A RIOUS FILTERS TO BOTH SEGMENTS A ND CARRIED OUT FRESH SEARCH OF COMPARABLES THEREBY DETERMIN ING FINAL LIST OF COMPARABLES FOR BOTH SEGMENTS AS UNDER: 4.1 COMPARABLES SELECTED BY LD.TPO FOR SOFTWARE DEVELOPMENT SERVICE SEGMENT SL.NO. NAME OF THE COMPARABLE MARGIN 1 KALS INFORMATION SYSTEMS LTD. 13.89 % 2 AKSHAY SOFTWARE TECHNOLOGIES LTD 8.11% 3 BODHTREE CONSULTING LTD. 62.27% 4 R S SOFTWARE (INDIA)LTD. 9.97% 5 TATA ELXSI LTD (SEG.) 20.28% 6 SASKEN COMMUNICATION TECHNOLOGIES LTD. 27.91% 7 PERSISTENT SYSTEMS LTD. 41.40% 8 ZYLOG SYSTEMS LTD. 7.81% 9 MINDTREE LTD.(SEG.) 5.52% 10 LARSEN & TOUBRO INFOTECH LTD. 24.72% 11 INFOSYS LTD. 45.61% IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 11 C OMPARABLES SELECTED BY LD.TPO FOR IT ENABLED SERVICE SEGMENT SL.NO. ITES FINAL COMPARABLES MARGIN 1 INFOYS BPO LTD. 24.41% 2 ADITA BIRLA MINACS WORLDWIDE LTD. 23.86% 3 MICROLAND LTD.(BOTH SEGMENTS) 1.53% 4 ALLSEC TECHNOLOGIES LTD. - 16.63% 5 ACCENTIA TECHNOLOGIES LTD. 46.40% 6 INFORMED TECHNOLOGIES INDIA LTD. 22.61% 7 COSMIC GLOBAL LTD. 40.61% 8 ECLERX SERVICES LTD. 57.50% AVERAGE PLI 25.04% THUS MARGINS COMPUTED FOR THESE SEGMENTS BY LD.TPO WITH DIFFERENT SET OF COMPARABLES WERE 24.32% FOR SOFTWARE DEVELOPMENT SERVICE SEGMENT AND 25.04% FOR IT ENABLED SERVICE SEGMENT, ADJUSTMENT WAS PROPOSED AS UNDER: ADJUSTMENT IN SOFTWARE DEVELOPMENT SERVICES 2,88,48,573 ADJUSTMENT IN IT ENABLED SERVICES SEGMENT 1,67,67,670 TOTAL 4,56,16,243 LD.TPO DENIED CONSIDERING FOREIGN EXCHANGE GAIN/LOSS AS OPERATING REVENUE FOR COMPUTING MARGINS OF COMPARABLES UNDER BOTH SEGMENTS 5. AGGRIEVED BY PROPOSED ADJUSTMENTS, ASSESSEE RAISED OBJECTIONS BEFORE LD.CIT(A). LD.CIT (A) ALLOWED CLAIM OF ASSESSEE REGARDING DEDUCTION CLAIMED UNDER SECTION 10 A OF THE A CT AND ALSO ALLOWED ASSESSEES CLAIM OF CONSIDERING FOREIGN EXCHANG E GAIN/LOSS AS OPERATING REVENUE FOR COMPUTING MARGIN OF COMPARABLES UNDER BOTH SEGMENTS. HOWEVER LD.CIT (A) UPHELD COMPARABLES SELECTED BY LD.TPO. 6. AGGRIEVED BY ORDER OF LD.CIT (A), ASSESSEE AS WELL AS REVENUE FILED CROSS APPEALS BEFORE THIS TRIBUNAL. UPON RECEIPT OF APPEAL IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 12 FILED BY REVENUE ASSESSEE FILED CROSS OBJECTION IN SUPPORT OF DECISION OF LD.CIT (A) ON ISSUES RAISED THEREIN. THUS, CROSS APPEALS FILED BY ASSESSEE AS WELL AS REVENUE AND CROSS OBJECTION FILED BY ASSESSEE IN APPEAL FILED BY REVENUE FOR ASSESSMENT YEAR 2009 - 10 ARE BEING DISPOSED OFF BY WAY OF COMMON ORDER. FIRST WE TAKE UP APPEAL FILED BY REVENUE IN ITA NO. 190/BANG/2014 7. GROUND NO. 1 RAISED BY REVENUE IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 8. GROUND NO. 2 - 3 IS IN RESPECT OF ALLOWING FOREIGN EXCHANGE GAIN/LOSS AS OPERATING REVENUE FOR COMPUTING MARGINS OF COMPARABLES UNDER BOTH SEGMENTS. IT HAS BEEN SUBMITTED BY THE LD.AR THAT ISSUE STANDS SETTLED IN FAVOUR OF ASSESSEE BY DECISION OF THIS TRIBUNAL IN CASE OF SAP LABS INDIA PVT. LTD. VS ACIT REPORTED IN (2010) 8 TAXMANN.COM 207 AND TRIOLOGY E - BUSINESS SOFTWARE INDIA PVT LTD. VS DCIT REPORTED IN (2011) 12 TAXMANN.COM 464 . IT HAS BEEN SUBMITTED THAT CONSISTENTLY THE VIEW HAS BEEN FOLLOWED TO CONSIDER FORE IGN EXCHANGE GAIN OR LOSS HAS TO BE TREATED AS OPERATING REVENUE INSTEAD OF INCOME FROM OTHER SOURCES AS HELD BY LD. TPO. 9. ON THE CONTRARY, LD. CIT DR SUBMITTED THAT, SHE DOES NOT HAVE ANY OBJECTION IN CONSIDERING FOREIGN EXCHANGE GAIN/LOSS AS OPERATING REVENUE PROVIDED, FOREIGN EXCHANGE FLUCTUATION RELATES TO INCOME EARNED DURING YEAR UNDER CONSIDERATION FROM INTERNATIONAL TRANSACTION UNDER CONSIDERATION. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 13 10. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. IT IS UNDISPUTED FACT THAT, INCOME EARNED BY ASSESSEE/COMPARABLE IS FROM INTERNATIONAL TRANSACTION WITH ITS AES, AND IS RECEIVED IN FOREIGN EXCHANGE CURRENCY. FURTHER GAIN OR LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION CAN BE COMPUTED ONLY ON ACCRUAL OF INCOME BY ASSESSEE/COMPARABLE. THUS WE CANNOT ACCEPT CONTENTION OF LD.CIT DR THAT FLUCTUATION MUST RELATE TO INCOME EARNED FROM INTERNATIONAL TRANSACTION UNDER CONSIDERATION EARNED DURING THE YEAR. THE MOMENT THERE IS NO DISPUTE REGARDING NEXES WITH INCOME EARNED AND FOREIGN EXCHANGE FLUCTUATION, IT HAS TO BE CONSIDERED AS OPERATING REVENUE. THUS RESPECTFULLY FOLLOWING DECISIONS OF THIS TRIBUNAL IN CASE OF SAP LABS INDIA PVT. LTD. VS ACIT (SUPRA) AND TRIOLOGY E - BUSINESS SOFTWARE INDIA PVT LTD. VS DCIT (SUPRA), WE DIRECT LD.AO/TPO TO CONSIDER GAIN/LOSS EARNED BY COMPARABLE DUE TO FOREIGN EXCHANGE FLUCTUATION AS OPERATING REVENUE FOR COMPUTING ITS MARGIN. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE VIEW TAKEN BY LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. 11. GROUND NO. 5 - 6 IS IN RESPECT OF COMPUTATION OF DEDUCTION UNDER SECTION 10 A OF THE ACT. REVENUE IS AGITATED THAT LD.CIT (A) BY FOLLOWING DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS TATA ELXSI LTD REPORTED IN 349 ITR 98 DIRECTED LD.AO TO COMPUTE DEDUCTION UNDER SECTION 10 A AS PER RATIO LAID DOWN BY SAP LABS INDIA PVT. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 14 LTD. VS ACIT REPORTED IN (2010) 8 TAXMANN.COM 207 AND TRIOLOGY E - BUSINESS SOFTWARE INDIA PVT LTD. VS DCIT HONBLE COURT. IT HAS BEEN AGITATED THAT TELECOMMUNICATION EXPENSES AND EXPENSES INCURRED IN FOREIGN CURRENCY CANNOT BE REDUCED FROM TOTAL TURNOVER FOR COMPUTING SECTION 10 A OF THE ACT, AS T HERE IS NO SUCH PROVISION. IT I S SUBMITTED BY LD.CIT, DR THAT SECTION 10 A (IV) IS VERY CLEAR THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM EXPORT TURNOVER. 12. ON THE CONTRARY, LD.AR SUBMITTED THAT TOTAL TURNOVER IS SUM TOTAL OF EXPORT TURNOVER AND DOMESTIC TURNOVER AND IF AN AMOUNT IS REDUCED FROM EXPORT TURNOVER , THEN TOTAL TURNOVER ALSO GOES DOWN BY SAME AMOUNT AUTOMATICALLY. 13. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED THAT HONBLE SUPREME COURT WHILE DECIDING CASE OF CIT VS HCL TECHNOLOGIES LTD (2018) 93 TAXMA NN.COM 33 HELD AS UNDER: 19. IN THE INSTANT CASE THE DEDUCTION OF RIGHT, TELECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE UNDER SECTION 10 A OF THE ACT ARE ALLOWED ONLY INTO EXPORT TURNOVER BUT NOT FROM THE TOTAL TURNOVER THEN, IT WOULD GIVE RISE TO AN INADVERTENT, UNLAWFUL, MEANINGLESS AND ILLOGICAL RESULT WHICH WOULD CAUSE GRAVE INJUSTICE TO THE RESPONDENT WHICH COULD HAVE NEVER BEEN THE INTENTION OF THE LEGISLATURE. 20. EVEN IN COMMON PARLANCE, WHEN THE OBJECT OF THE FOR MALISED TO ARRIVE AT THE PROFIT FROM EXPORT BUSINESS, EXPENSES EXCLUDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM TOTAL TURNOVER ALSO. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 15 OTHERWISE, ANY OTHER INTERPRETATION MAKES THE FORMULA UNWORKABLE AND APPS ERRED. HENCE, WE ARE SATISFIED THAT SUCH DE DUCTION SHALL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTION AS WELL. 21. ON THE ISSUE OF EXPENSES OF TECHNICAL SERVICES PROVIDED OUTSIDE, WE HAVE TO FOLLOW THE SAME PRINCIPLE OF INTERPRETATION AS FOLLOWED IN THE CASE OF EXPENSES OF RIGHT, TELECOMMU NICATION ETC, OTHERWISE THE FORMULA OF CALCULATION WOULD BE FUTILE. HENCE, IN THE SAME BE, EXPENSES INCURRED IN FOREIGN EXCHANGE FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA SHALL BE ALLOWED TO EXCLUDE FROM THE TOTAL TURNOVER. RESPECTFULLY FOLLOWING VIE W EXPRESSED BY HONBLE SUPREME COURT, WE DO NOT FIND ANY INFIRMITY IN THE VIEW TAKEN BY LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED. 14. IT(TP)ANO.176 /(B)/2014 A LONG WITH CO NO.39/(B)/2016. IT HAS BEEN SUBMITTED BY LD.AR THAT GROUNDS RAISED IN CROSS OBJECTION WILL OVERLAP WITH CERTAIN GROUNDS RAISED IN ASSESSEES APPEAL AND CERTAIN GROUNDS RAISED IN ASSESSEES APPEAL WILL OVERLAP WITH CERTAIN GROUNDS RA ISED IN REVENUES APPEAL. 15. GROUND NO. 1 - 3 RAISED BY ASSESSEE ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. 16. GROUND NO. 4 - 7 ARE IN RESPECT OF COMPARABLES SELECTED/EXCLUDED BY LD. TPO WHICH ARE DEALT WITH AS UNDER. AT THE OUTSET , LD.COUNSEL SUBMITTED CHARTS IN RESPECT OF SEGMENTS FOR WHICH ADDITION HAS BEEN MADE TO ALP OF IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 16 TRANSACTIONS. IT HAS BEEN SUBMITTED THAT ISSUES AROSE DUE TO INAPPROPRIATE COMPARABLES SELECTED / EXCLUDED BY LD.TPO, WHICH IS SOUGHT TO BE EXCLUDED BY ASSESSEE UND ER BOTH SEGMENTS. I. SOFTWARE DEVELOPMENT SERVICE SEGMENT: ASSESSEE SEEKS EXCLUSION OF FOLLOWING COMPARABLES UNDER THIS SEGMENT: INFOSYS LTD PERSISTENT SYSTEMS LTD LARSEN AND TOUBRO INFOTECH LTD BODHTREE CONSULTING LIMITED TATA ELXSI LTD (SEGMENTAL) KALS INFORMATION SYSTEMS LTD ASSESSEE SEEKS INCLUSION OF FOLLOWING COMPARABLES UNDER THIS SEGMENT: AZTEC SOFT LIMITED CG - VAK SOFTWARE AND EXPORTS LTD QUINTEN GROH SOLUTIONS LTD MAARS SOFTWARE INTERNATIONAL LTD II. IT ENABLED SERVICES SEGMENT: ASSESSEE SEEKS EXCLUSI ON OF FOLLOWING COMPARABLES UNDER THIS SEGMENT: COSMIC GLOBAL LTD ECLERX SERVICES LTD INFOSYS BPO LTD ACCENTIA TECHNOLOGIES LTD INFORMED TECHNOLOGIES INDIA LTD IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 17 ASSESSEE SEEKS INCLUSION OF FOLLOWING COMPARABLES UNDER THIS SEGMENT: MICROGENETIC LTD CAPHA IMA GING IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT, IN THE EVENT COMPARABLES SOUGHT TO BE EXCLUDED ARE CONSIDERED FOR EXCLUSION, MARGIN OF ASSESSEE WOULD BE WITHIN TOLERANCE RANGE +/ - 5% THEN COMPARABLES SOUGHT FOR INCLUSION WOULD BE NOT PRESSED. 17. BEFORE WE U NDERTAKE COMPARABILITY ANALYSIS ITS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORMED, ASSETS OWNED AND RISKS ASSUMED BY ASSESSEE UNDER THEIR RESPECTIVE SEGMENTS. SOFTWARE DEVELOPMENT SERVICE SEGMENT FUNCTIONS: IT IS OBSERVED THAT ASSESSEE HAS ENTERED INTO AGREEMENTS WITH ITS GROUP CONCERN AT U.S., AUSTRALIA, HONG KONG, MALAYSIA WHEREIN IT PERFORMS FOLLOWING FUNCTIONS: TRANSACTION WITH FIRST ADVANTAGE U.S. ASSESSEE CARRIES OUT SOFTWARE DEVELOPMENT OF BUSINESS APPLICATIONS DEVELOPED BY 1 ST ADVANTAGE U.S. AND INCLUDES DEVELOPMENT AND MAINTENANCE OF APPLICATION SYSTEM, PROTOTYPING AND TESTING AND THAT THE CONVERSION AND MAINTENANCE OF DATABASE. PAYMENT IS RECEIVED BY ASSESSEE UPON INVOICES RAISED ON A QUARTERLY BASIS IN ADVANCE. TRANSACTION W ITH FIRST ADVANTAGE AUSTRALIA, HONG KONG AND MALAYSIA: IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 18 ASSESSEE PROVIDE DESIGN, PROGRAMMING AND TESTING OF HARDWARE AND SOFTWARE, PRODUCTION SERVICES, REPORTING AND DOCUMENTATION OF SERVICES AND SUCH OTHER SERVICES AS MAY BE A GREAT FROM TIME TO TIME BETWE EN THE PARTIES. ASSESSEE IS REMUNERATED ON COST PLUS BASIS PAYMENT IS RECEIVED BY ASSESSEE UPON INVOICES RAISED ON A MONTHLY BASIS WITHIN 15 DAYS OF RECEIPT OF INVOICE BY THE AE. ASSETS OWNED: ASSESSEE IS EMPLOYED WITH ASSETS LIKE COMPUTERS, SOFTWARE IS, F URNITURE FIXTURES, LEASEHOLD IMPROVEMENTS OFFICE EQUIPMENT ETC. IT IS ALSO BEEN SUBMITTED THAT ASSESSEE DO NOT OWN ANY INTEREST IN INTANGIBLES. THE TRADEMARK THE PROCESSES, KNOW - HOW, TECHNICAL TATA SOFTWARE, QUALITY STANDARDS USED ARE DEVELOPED AND OWNED B Y ITS GROUP COMPANIES. IT HAS BEEN SUBMITTED THAT ASSESSEE IS A CONTRACT SERVICE PROVIDER FOR SOFTWARE DEVELOPMENT SERVICE ASSESSEE EARNED RS.23,09,25,569/ - AS INCOME UNDER THIS SEGMENT FROM ITS AES. BASED UPON THE ABOVE, WE SHALL UNDERTAKE COMPARIBILITY ANALYSIS AS UNDER: BASED UPON THE ABOVE, WE SHALL CONSIDER CO M PARABL E S OUGHT FOR EXCLUSION BY AS S ESSEE UNDER SOFTWARE DEVELOPMENT SERVICE SEGMENT. 18. COMPARABLES ALLEDGED BY ASSESSEE FOR EXCLUSION: INFOSYS LTD THIS COMPANY HAS BEEN INCLUDED BY LD.TPO WHI CH IS OBJECTED BY ASSESSEE DUE TO VERY HIGH TURNOVER, WHICH IS MORE THAN 200 CRORES. IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT THIS COMPANY IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 19 FOR DURING YEAR ENDING 31/03/10 HAD TURNOVER OF ABOUT RS.21,140 CRORES, WHICH IS MUCH HIGHER THAN THAT OF ASSESSEE. F URTHER SHE SUBMITTED THAT THIS COMPANY IS A JOINT AND SOFTWARE DEVELOPMENT SPACE WHILE ASSESSEE IS A SMALL CAPTIVE SERVICE PROVIDER, PROVIDING EXCLUSIVE SERVICES ONLY TO ITS AES. IT IS ALSO BEEN SUBMITTED BY LD. COUNSEL THAT THIS COMPANY HAS HEAVY R&D EXP ENSES AND THUS HAS INTANGIBLES ASSOCIATED WITH IT. ON THE CONTRARY LD. CIT DR SUPPORTED THE VIEW OF LD. AO. 19. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT IS OBSERVED THAT IN CASE OF AGNITY INDIA TE CHNOLOGIES PVT LTD REPORTED IN (2015) 58 TAXMANN.COM 167 DELHI BENCHES OF THIS TRIBUNAL AFTER ANALYSING VARIOUS ASPECTS TOOK A VIEW THAT THIS COMPANY IS NOT A FIT COMPARABLE FOR A CAPTIVE SERVICE PROVIDER . THE SAID VIEW HAS BEEN UPHELD BY HONBLE DELHI HI GH COURT WHEREIN, HONBLE COURT UPHOLDING THE VIEW TAKEN BY THE TRIBUNAL, OBSERVED THAT COMPANY HAVING BRAND VALUE AS WELL AS INTANGIBLE ASSETS CANNOT BE COMPARED WITH AN ORDINARY ENTITY WHO PROVIDE CAPTIVE SERVICES. IT IS OBSERVED THAT THIS COMPANY PROVID ES SOLUTIONS THAT SPAN THE ENTIRE SOFTWARE RUN LIFE - CYCLE ENCOMPASSING TECHNICAL CONSULTING, DESIGN, DEVELOPED MEANT, RE - ENGINEERING, MAINTENANCE, SYSTEMS INTEGRATION, PACKAGE EVALUATION AND IMPLEMENTATION, TESTING AND INFRASTRUCTURE MANAGEMENT SERVICES. W ITH SUCH DIVERSIFIED ACTIVITIES CARRIED ON THIS COMPANY, IT IS NOT APPROPRIATE TO COMPARED IT WITH A ONE - TO - ONE SERVICE PROVIDER LIKE ASSESSEE. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 20 RESPECTFULLY FOLLOWING THE DECISIONS RELIED UPON AND CITED HEREINABOVE, WE DIRECT LD. TPO TO EXCLUDE THIS COMPANY FROM THE FINALIST. 20. KALS INFORMATION SYSTEMS LTD. THIS COMPANY WAS PROPOSED BY LD.TPO TO WHICH ASSESSEE OBJECTS TO BE INCLUDED FOR COMPUTATION OF ALP. IT HAS BEEN SUBMITTED THAT IS INTO SOFTWARE DEVELOPMENT AND SOFTWARE PRODUCTS. IT IS ALSO BEE N POINTED OUT THAT THIS COMPANY HAS INVENTORY IS WHICH CLEARLY INDICATES THAT IT IS A PRODUCT COMPANY. FURTHER IT IS ALSO SUBMITTED THAT THERE ARE SERIES OF DECISIONS WHEREIN THIS COMPANY HAS BEEN EXCLUDED. RELIANCE HAS BEEN PLACED ON DECISION OF THIS TRI BUNAL IN CASE OF TRIOLOGY E - BUSINESS SOFTWARE INDIA PVT.LTD VS DCIT REPORTED IN (2013) 140 ITD 540 WHERE THIS COMPANY HAS BEEN FOUND NOT COMPARABLE DUE TO PRESENCE OF INVENTORIES. 22. ON THE CONTRARY, LD.CIT DR PLACED RELIANCE UPON VIEW EXPRESSED BY LD.TPO FOR INCLUSION. SHE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF DCIT VS AOL ONLINE INDIA (P) LTD REPORTED IN (2017) 84 TAXMANN.COM 70. SHE SUBMITTED THAT THERE IS A CATE GORICAL FINDING BY THIS TRIBUNAL IN DCIT VS AOL ONLINE INDIA (P) LTD (SUPRA) THAT FOR THE YEAR UNDER CONSIDERATION THERE IS NO SOFTWARE PRODUCT DEVELOPED BY THIS COMPARABLE. 23. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 23.1 AT PAGE 1577 - 1600 OF PAPER BOOK VOLUME IV, ANNUAL REPORT OF THIS COMPARABLE IS ANNEXED. FROM THE SCHEDULES TO PROFIT AND LOSS ACCOUNT IT IS OBSERVED THAT THIS COMPANY DERIVES INCOME IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 21 FROM SALES, SERVICES AND TRAINING. INCOME FROM SA LES ARE IN RESPECT OF EXPORT OF SOFTWARE DEVELOPMENT SERVICES TO AE, INCOME FROM TRANSLATION AND INTERPRETATION AND TRAINING RECEIPTS. IT IS OBSERVED THAT ALL THESE 3 SEGMENTS HAVE BEEN SEPARATELY ITEMISED. 23.2 ON PERUSAL OF NOTES TO FINANCIAL STATEMENT IN SCHEDULE 18 AT PAGE 1594, IT IS OBSERVED THAT REVENUE RECOGNITION BY THIS COMPANY IS PRIMARILY FROM SOFTWARE SERVICES AND SOFTWARE PRODUCTS. IT IS FURTHER MENTIONED THEREIN THAT REVENUE FROM TIME AND MATERIAL CONTRACT IS RECOGNISED ON THE BASIS OF SOF TWARE DEVELOPED AND BUILT IN ACCORDANCE WITH TERMS OF CONTRACT WHEREAS REVENUE FROM FIXED - PRICE CONTRACT IS RECOGNISED ON COMPLETION OF MILESTONE IN CONTRACTS, AS PER PERCENTAGE OF COMPLETION METHOD. INCOME FROM TRAINING IS RECOGNISED ON TIME PROPORTIONATE BASIS. THUS, IN OUR CONSIDERED OPINION THOUGH SEGMENTAL INFORMATION HAS BEEN SHOWN AS INCOME FROM SOFTWARE DEVELOPMENT EXPORT, IT INCLUDES SOFTWARE PRODUCTS ALSO WHICH HAS NOT BEEN SEPARATELY CATEGORISED. 23.3 LD.TPO CONSIDERED TH IS COMPARABLE ONLY ON BASIS THAT IN ANNUAL REPORTS, SEGMENT INFORMATION IS GIVEN IN RESPECT OF SOFTWARE DEVELOP MENT S ERVICES AND THERE ARE NO PRODUCTS MENTIONED THEREIN. HOWEVER LD.TPO MISSED OUT NOTES TO ACCOUNTS REGARDING REVENUE RECOGNITION, AS OBSERVED HEREIN BOVE . WITH DUE RESPECT, DECISION RELIED UPON BY LD.CIT DR IN CASE OF DCIT VS AOL ONLINE INDIA (P) LTD (SUPRA) DID NOT CONSIDER THIS ASPECT AS WELL. WE THEREFORE PLACING RELIANCE UPON REASONING IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 22 ADOPTED IN DECISION OF THIS TRIBUNAL IN CASE OF DCIT VS ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA) AND ACIT VS BROADCOM INDIA RESEARCH (P) LTD (SUPRA) DIRECT LD. AO/TPO TO EXCLUDE THIS COMPANY. RESPECTFULLY FOLLOWING THE SAME WE DIRECT LD. AO/TPO TO REMOVE THIS COMPARABLE FROM FINAL LIST. 24. PERSISTENT SYSTEMS LTD THIS COMPANY HAS BEEN INCLUDED BY LD.TPO AND ASSESSEE OBJECTS TO THE SAME AS THIS COMPANY IS ENGAGED IN RENDERING OUTSOURCED PRODUCT DEVELOP MENT AS AGAINST SOFTWARE DEVELOPMENT SERVICES. IT HAS BEEN SUBMITTED THAT THIS IS NOT FUNCTIONALLY SIMIL AR WITH THAT OF ASSESSEE. LD.COUNSEL SUBMITTED IN WRITTEN SYNOPSIS THAT THIS COMPANY HAS ACQUIRED ASSETS IN PAXONIC INC AND HAS BEEN INVOLVED IN MERGERS/D - MERGERS ACTIVITIES DURING FINANCIAL YEAR 2009 - 10. LD.CIT DR ON CONTRARY , SUPPORTED VIEW OF AUTHORITIE S BELOW AND OPPOSED EXCLUSION. 25. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED THAT ANNUAL REPORT OF THIS COMPANY IS PLACED AT ONE 1260 - 1410 OF PAPER BOOK AND AT PAGE 1347 BREAKUP OF INCOME FORM ING PART OF PROFIT AND LOSS ACCOUNT HAS BEEN GIVEN IN SCHEDULE 11. IT IS OBSERVED THAT THIS COMPANY EARNS ITS INCOME FROM SALE OF SOFTWARE SERVICES AND PRODUCTS HOWEVER THERE IS NO SEPARATE SEGMENTAL INFORMATION IN RESPECT OF THESE 2 SEGMENTS. THUS IT IS C LEAR THAT THIS COMPANY IS EARNING REVENUE FROM ACTIVITIES WHICH INCLUDES LICENSING OF PRODUCTS, ROYALTY ON SALE OF IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 23 PRODUCTS AS WELL AS INCOME FROM MAINTENANCE CONTRACTS ETC WHICH COULD NOT BE CONSIDERED FUNCTIONALLY SIMILAR WITH THAT OF ASSESSEE HOLDERS ON LY CARRYING OUT SOFTWARE DEVELOPMENT SERVICE AT THE BEHEST OF ITS AES ON A CAPTIVE BASIS. SIMILAR VIEW HAS BEEN TAKEN BY THIS TRIBUNAL IN CASE OF DCIT VS ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA). RESPECTFULLY FOLLOWING THE SAME WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST. 26. TATA ELXSI LTD. THIS COMPANY WAS SELECTED BY LD.TPO. BEFORE LD.TPO, ASSESSEE OBJECTED TO INCLUSION ON SEVERAL COUNTS LIKE, FUNCTIONAL DIS - SIMILARITY, SIGNIFICANT R& D ACTIVITY, BRAND VALUE, SIZE, ETC. THE TPO, HOWEVER, REJECTED THE CONTENTION PUT FORTH BY THE ASSESSEE AND INCLUDED THIS COMPANY IN THE SET OF COMPARABLES. IN SUBMISSIONS MADE, LD.COUNSEL QUOTED RELEVANT PORTIONS FROM ANNUAL REPORT OF THIS COMPANY AND SUB MITTED THAT THIS COMPANY BE EXCLUDED FROM THE LIST OF COMPARABLES. ON THE CONTRARY LD.CIT DR SUPPORTED VIEW TAKEN BY LD.CIT (A) IN INCLUDING THIS COMPANY IN LIST OF COMPARABLES. 27. WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED AND CONSIDERED MATERIAL O N RECORD. FROM DETAILS ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWARE DEVELOPMENT SERVICES. DETAILS IN ANNUAL REPORT SHOW THAT SOFTWARE DEVELOPMENT SERVICES SEGMENT OF THIS COMPANY RELA TES TO DESIGN SERVICES AND ARE NOT SIMILAR TO SOFTWARE DEVELOPMENT SERVICES PERFORMED BY ASSESSEE. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 24 MUMBAI TRIBUNAL IN CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. V ACIT (ITA NO.7821/MUM/2011) HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEVELOPMENT SERV ICE PROVIDER AND THEREFORE IT IS NOT FUNCTIONALLY COMPARABLE. IN THIS CONTEXT THE RELEVANT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED BELOW : - . TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY DIFF ERENT FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMPARABILIT Y ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR THE ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE PORTION. AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REPORT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINING TO TATA ELXSI HAVE NOT CHANGED FROM ASSESSMENT YEAR 2007 - 08 TO ASSESSMENT YEAR 2008 - 09. WE, THEREFORE, HOLD THAT THIS COMPANY IS NOT TO BE CONSIDERE D FOR INCLUSION IN THE SET OF COMPARABLES IN THE CASE ON HAND. IT IS ORDERED ACCORDINGLY. RESPECTFULLY FOLLOWING DECISI ON OF COORDINATE BENCH OF THIS TRIBUNAL, WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 25 28. LARSEN AND TOUBRO INFOTECH LTD THIS COMPARABLE WAS SELECTED BY LD.TPO AND HAS BEEN OBJECTED BY ASSESSEE FOR REASON THAT IT IS INTO SOFTWARE DEVELOPMENT COMPANY AND HAS A HIGH TURNOVER OF MORE THAN 562 CRORES, WHEREAS ASSESSEE HAS TURNOVER OF 23.09 LACS DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO BEEN SUBMITTED THAT THIS COMPANY OWNS MORE THAN 33.33% OF INTANGIBLE SOFTWARE IS WITH ITSELF MAKES THIS COMPANY TO BE NOT COMPARABLE WITH THAT OF ASSESSEE WHO PROVIDES LTD SERVICES TO ITS AES. 28.1 ON THE CONTRARY, LD.CIT DR SUBMITTED THAT THIS COMPANY IS HELD TO BE COMPARABLE BY DELHI TRIBUNAL IN CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD VS ITO REPORTED IN (2015) 58 TAXMANN.COM 167 . 29. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF THE RECORDS PLACED BEFORE US. ASSESSEE PLACED THE ANNUAL ACCOUNTS OF THIS COMPANY AT PAGE 1543 - 1576 OF PAPER BOOK VOLUME IV, REVELS THAT THIS COMPANY ENTERED INTO SALE OF SERVICES AS WELL AS SALE OF PRODUCTS. IT IS ALSO OBSERVED THAT THERE IS NO SEGMENTAL INFORMATION AVAILABLE IN RESPECT OF SE RVICES AND PRODUCTS DEMONSTRATED SEPARATELY BY THIS COMPANY. 29.1 FURTHER THIS COMPANY HAS BEEN CONSIDERED TO BE COMPARABLE BY DELHI TRIBUNAL IN AGNITY INDIA TECHNOLOGIES PVT.LTD VS ITO (SUPRA) FOR FOLLOWING REASONS: 14. LARSEN AND TOUBRO INFOTECH LTD HA D AN OPERATIONAL MARGIN OF 20% FOR ASSESSMENT YEAR UNDER CONSIDERATION, AND IT WAS CONSIDERED AS A COMPARABLE IN ASSESSEES OWN CASE FOR IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 26 ASSESSMENT YEAR 2006 - 07 WHICH WAS UPHELD BY THE TRIBUNAL AND THE SAID ORDER OF TRIBUNAL HAD ALREADY BEEN UPHELD BY ORDE RABLE HIGH COURT (SUPRA) AND SO WE DIRECT THE INCLUSION OF LARSEN AND TOUBRO INFOTECH IN THE LIST OF COMPARABLES. IT IS CLEAR FROM THE ABOVE OBSERVATION BY DELHI TRIBUNAL THAT SINCE THIS COMPARABLE WAS CONSIDERED TO BE A GOOD COMPARABLE IN PRECEDING YEAR IN THAT CASE, WHICH WAS UPHELD BY HONBLE DELHI HIGH COURT , THE SAME WAS CONSIDERED TO BE GOOD COMPARABLE FOR SUBSEQUENT ASSESSMENT YEAR THAT WAS CONSIDERED. IN THE FACTS OF PRESENT CASE, THIS TRIBUNAL FOR ASSESSMENT YEAR 2005 - 06 HAVE HELD THIS COMPARABLE TO BE NOT FUNCTIONALLY SIMILAR TO THAT OF ASSESSEE DUE TO HIGH TURNOVER FILTER. THIS TIRBUNAL WHILE DECIDING SO, OBSERVED THAT THIS TRIBUNAL IN CASE OF AUTODESK INDIA PVT.LTD VS ACIT REPORTED IN IT(TP)A NO.220/BANG/2016, AFTER CONSIDERING VARIOUS VIEWS HEL D IT TO BE NOT COMPARABLE WITH ASSESSEE, WHO IS PERFORMING LIMITED FUNCTIONS IN PROCESS OF SOFTWARE DEVELOPMENT CARRIED OUT BY AES. 30. FOR YEAR UNDER CONSIDERATION, WE HAVE ALREADY OBSERVED HEREINABOVE THAT THIS COMPANY HAS NO SEGMENTAL DETAILS AVAILABLE FOR SOFTWARE SERVICES RENDERED AND SOFTWARE PRODUCTS AND FINANCIAL RESULTS ARE COMBINED. FURTHER HOLDING THAT THIS COMPANY OWNS HIGH INTANGIBLES AS MUCH AS 33.33% WHICH MAKES IT ONE OF A GIANT COMPANY IN CATEGORY OF SOFTWARE DEVELOPMENT COMPANY, WHICH CAN NOT BE ANYWAYS COMPARED WITH SMALL COMPANY LIKE ASSESSEE WHICH IS PROVIDING LTD SERVICES IN SOFTWARE DEVELOPMENT PROCESS CARRIED OUT BY AE. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 27 RESPECTFULLY FOLLOWING THE VIEW IS ADOPTED BY THIS TRIBUNAL REPRODUCED HEREINABOVE IN CASE OF ASSESSEE FOR PRECEDIN G ASSESSMENT YEAR AS WELL AS IN CASE OF AUTODESK INDIA PRIVATE LTD (SUPRA) , WE DIRECT LD. AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST. 31. BODHTREE CONSULTING LIMITED LD.TPO INCLUDED THIS COMPARABLE AND OBJECTED BY ASSESSEE. IT HAS BEEN SUBMITTED THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 THIS COMPARABLE HAS BEEN EXCLUDED BY HOLDING THAT IT IS A PURE SOFTWARE DEVELOPMENT COMPANY AND THEREFORE IS FUNCTIONALLY DIFFERENT WITH THAT OF ASSESSEE. LD.COUNSEL PLACED RELIANCE ON DECISION BY THIS TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 IN ITA (TP) A NO. 877 AND 888/BANG/2013 DATED 03/04/19 PLACED AT PAGE 3601 - 3620 OF PAPER BOOK VOLUME 8. 31.1 ON THE CONTRARY, LD.CIT DR PLACED RELIANCE UPON DECISIONS OF THIS TRIBUNAL IN CASE OF NMS COM MUNICATIONS PVT LTD VS DCIT REPORTED IN (2017) 85 TAXMANN.COM 123 AND DECISION OF DELHI TRIBUNAL IN AGNITY INDIA TECHNOLOGIES PVT. LTD VS ITO (SUPRA) . 32. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT I S OBSERVED THAT ANNUAL REPORT OF THIS COMPANY HAS BEEN PLACED AT PAGE 1016 - 1091 OF PAPER BOOK VOLUME III. PERUSAL OF THE SAME AT PAGE 1061 REVEALS THAT, REVENUE RECOGNISED BY THIS COMPANY IS FROM SOFTWARE DEVELOPMENT AND ARE BUILLED TO CLIENTS DIRECTLY. IT IS FURTHER OBSERVED IN PROFIT AND LOSS ACCOUNT AT PAGE 1055 THAT INCOME IS ONLY FROM EXPORT SALES AMOUNTING TO IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 28 RS.17,61,57,405/ - . FURTHER AT PAGE 1030 IN DIRECTORS REPORT IT HAS MENTIONED AS UNDER: SEGMENT WISE AND PRODUCT WISE PERFORMANCE BODHTREE HAS ONLY ONE SEGMENT, NAMELY SOFTWARE DEVELOPMENT. BEING A SOFTWARE SOLUTION COMPANY, IT IS ENGAGED IN PROVIDING OPEN AND END TO END WEB SOLUTIONS, OFF SHORING DATA MANAGEMENT, DATA WAREHOUSING, SOFTWARE CONSISTENCY, DESIGN AND DEVELOPMENT OF SOLUTIONS, USING THE LATEST TECHNOLOGIES. AS WE PERUSE DECISION RELIED UPON BY LD.CIT DR IN CASE OF AGNITY INDIA PVT.LTD (SUPRA) , THIS COMPARABLE HAS BEEN INCLUDED FOR FOLLOWING REASONS: 26. HAVING CONSIDERED THE RIVAL SUBMISSION, WE NOTICE THAT THIS COMPANY WAS A COMPARABLE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09. AT THE TIME THE ASSESSEE DID NOT CONTEST THE INCLUSION OF THIS COMPANY AND ALLOWED IT TO REMAIN AS A COMPARABLE. H OWEVER THIS YEAR, JUST BECAUSE PROFIT MARGIN IS HIGHER, THIS COMPANY DOES NOT CEASE TO BECOME A COMPARABLE. THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND THE UPHOLD THE SAME. IT IS CLEAR FROM ABOVE THAT COMPANY WAS INCLUDED SINCE ASSESSEE THEREIN HAD NOT OBJECTED IN PRECEDING YEARS FOR ITS INCLUSION BY. IN PRESENT FACTS OF THE CASE IT IS OBSERVED THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 EXCLUDED THIS COMPARABLE. EVEN OTHERWISE IT IS OBSERVED THAT, THIS COMPARA BLE IS FULL - FLEDGED SOFTWARE DEVELOPMENT SERVICE PROVIDER AND THEREFORE CANNOT BE COMPARED WITH COMPANY LIKE ASSESSEE WHICH IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 29 IS PROVIDING LTD SERVICES TO ITS AE IN THE PROCESS OF SOFTWARE DEVELOPMENT CARRIED OUT BY AE. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 - 06 AS WELL AS THE DISCUSSION ON THE BASIS OF ANNUAL ACCOUNTS OF THIS COMPANY, WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM THE LIST. 33. IT ENABLED SERVICES SEGMENT: BEFORE WE START CO MPATIBILITY ANALYSIS OF COMPARABLES ALLEGED FOR EXCLUSION WITH ASSESSEE, IT IS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORMED ASSETS ASSUMED AND RISKS OWNED BY ASSESSEE UNDER THIS SEGMENT. FUNCTIONS: IT IS OBSERVED IN TRANSFER PRISING STUDY THAT ASSESSEE PROVIDES IT ENABLED SERVICES TO ITS AE IN U.S. AND UK. ASSESSEE ENTERED INTO SEPARATE SERVICE AGREEMENTS WITH THESE AES WHEREIN IT PROVIDES FOLLOWING SERVICES: S ERVICES PROVIDED TO AE IN U.S. ASSESSEE PROVIDES SERVICES LIKE CREDIT CHECK, IN - HOUSE SUPPORT, FOR SEARCH, PEOPLE SEARCH, HIGHER CHECK, AUTOMATED SEARCHES, DOCUMENT MANAGEMENT, OCCUPATIONAL HEALTH SERVICES AND OTHER SPECIAL PROJECTS. ASSESSEE IS REMUNERATED ON A COST PLUS BASIS FOR THE SAME AS PER AGREEMENT DATED 01/04/07. SERVICES PROVIDED TO AE IN UK ASSESSEE ENTERED INTO AGREEMENT WITH UK AE AS ON 01/11/08 UNDER WHICH IT PROVIDES BUSINESS PROCESS OUTSOURCING SERVICES AND SUCH OTHER SERVICES AS MAY BE AGREED FROM TIME TO TIME IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 30 BETWEEN THE PARTI ES. REMUNERATION RECEIVED BY ASSESSEE IS ON COST PLUS BASIS AS AND WHEN THE INVOICES RAISED ON MONTHLY BASIS. ASSETS EMPLOYED: ASSESSEE IS EMPLOYED WITH ASSETS LIKE COMPUTERS, SOFTWARE IS, FURNITURE FIXTURES, LEASEHOLD IMPROVEMENTS OFFICE EQUIPMENT ETC. IT IS ALSO BEEN SUBMITTED THAT ASSESSEE DO NOT OWN ANY INTEREST IN INTANGIBLES. IT IS OBSERVED THAT TURNOVER OF ASSESSEE UNDER THIS SEGMENT IS RS.18,12,83,620/ - WITH OPERATING MARGIN OF 14.99%. WITH THIS BACKGROUND WE SHALL ANALYSE THE COMPARABLES SOUGHT FOR EXCLUSION UNDER ITES SGMENT . 34. COSMIC GLOBAL LTD IT HAS BEEN SUBMITTED THAT LD.TPO INCLUDED THIS COMPARABLE IN FINAL LIST EVEN THOUGH IT HAS BEEN ALLEGED TO BE FUN CTIONALLY DIFFERENT WITH ASSESSEE. LD.COUNSEL SUBMITTED THAT THIS COMPANY PROVIDES SERVICE S WHICH ARE IN THE NATURE OF KPO, WHEREAS ASSESSEE IS CARRYING OUT BACK OFFICE SERVICES TO SUPPORT ACTIVITIES OF AES. 35. LD.COUNSEL PLACED RELIANCE UPON FOLLOWING DECISION IN SUPPORT OF EXCLUSION OF THIS COMPARABLE: DCIT VS M/S INFORMATICA BUSINESS PVT. LTD ITA (TP) A NO. 1285, 1294/BANG/2014; M/S BRADY COMPANY PVT. LTD. VS DCIT (ITA NO.1223/BANG/2018; FINESTRA SOFTWARE SOLUTIONS (INDIA) PVT. LTD., ITA (TP) A NO. 1329, 1577/BANG/2014; IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 31 TE CONNECTIVITY GLOBAL SHARED SERVICES INDIA PVT.LTD., ITA (TP) A NO. 1280/BANG/2014; ALTERIA ENGINEERING PVT.LTD. ITA (TP)A NO. 171/BANG/2014 LD. CIT DR OPPOSED EXCLUSION OF THIS COMPARABLE FROM FINALIST AND PLACED RELIANCE UPON ORDERS OF AUTHORITIES BELOW. 36. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT IS OBSERVED THAT ANNUAL REPORT OF THIS COMPARABLE HAS BEEN PLACED AT PAGES 2426 - 2443 OF PAPER BOOK VOLUME V. IN PROFIT AND LOSS ACCOUNT PLACED AT PAGE 2434 IT IS OBSERVED THAT REVENUE IS EARNED BY THIS COMPANY FROM OPER ATIONS, DETAILS OF WHICH HAS BEEN PROVIDED IN SCHEDULE 8 AT PAGE 2438. IN SCHEDULE 8, REVENUE FROM OPERATIONS HAS BEEN RECEIVED BY ASSESSEE FROM MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES AND TRANSLATION CHARGES. FURTHER IT IS RELEVANT TO NOTE REVENUE RECOGNITION IN SCHEDULE 13 AT PAGE 2440, WHICH HAS BEEN STATED TO BE AS UNDER: SCHEDULE 13 .. 1.2. REVENUE RECOGNITION: IN RESPECT OF MEDICAL TRANSCRIPTION SERVICES, AND TRANSLATION SERVICES THE COMPANY FOLLOWS THE PRACTICE OF RAISING MONTHLY INVOICES JOB WISE ON THE CLIENTS BASED ON THE NUMBER OF LINES AND NUMBER OF WORDS RESPECTIVELY, ETC., AS ACCEPTED BY THEM AND IN RESPECT OF ACCOUNTS BPO SERVICES THE INVOICES ARE RAISED AFTER ACCEPTANCE BY THE CLIENT ON MUTUALLY AGREED BASIS. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 32 THIS YEAR THE COMPANY HAS RAISED THE BILL ON ALL THE JOBS ACCEPTED AND HENCE THE APPLICATION OF PROPORTIONATE COMPLETION METHOD ACCORDING TO AS - 9 HAS NOT ARISEN. EXPORT/CONSULTANCY SERVICES ARE BUILT AT MUTUALLY DISCUSSED RATE WHEREVER THE TERMS HAVE NOT BEEN REDUCED TO WRITING . REVENUE FROM OPERATIONS INCLUDE REVENUES EARNED THROUGH TRANSLATION SERVICES RS.6,99,35,756.45, THROUGH MEDICAL TRANSCRIPTION RS.9,90,737 AND THROUGH ACCOUNTS BPO SERVICES RS.27,76,090. IT IS ALSO NOTED IN PROFIT AND LOSS ACCOUNT THAT TRANSLATION CHARGE S PAID BY THIS COMPANY IS RS.3,00,25,326/ - WHICH MEANS THAT THEY ARE ALSO INTO OUTSOURCING OF TRANSCRIPTION ACTIVITY. HOWEVER SEGMENT THAT HAS TO BE CONSIDERED FOR COMPARABILITY IS ACCOUNTS BPO SERVICES FROM WHICH REVENUE EARNED IS RS.27,76,090/ - AND ASSES SEE DURING YEAR EARNED FROM BPO ACTIVITIES SUM OF RS.18,12,83,620/ - WHICH IS MUCH HIGHER THAN INCOME EARNED BY THIS COMPARABLE. HENCE ON THIS COUNT WE DIRECT LD. TPO TO EXCLUDE THIS COMPANY. 37. ECLERX SERVICES LTD LD.TPO INCLUDED THIS COMPARABLE WHICH HAS BEEN OBJECTED BY ASSESSEE AS THIS COMPANY IS ENGAGED IN HIGH - END ACTIVITIES PROVIDING KPO SERVICES, CANNOT BE COMPARED TO ASSESSEE WHO IS INTO BPO ACTIVITIES. LD.AR PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1086/BANG/2011 FOR EXCLUSION OF THIS COMPANY. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 33 38. LD.CIT DR OPPOSED EXCLUSION OF THIS COMPARABLE FROM THE FINALIST AND PLACED RELIANCE UPON THE ORDERS OF AUTHORITIES BELOW. 39. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT IS OBSERVED THAT ANNUAL REPORT OF THIS COMPANY HAS BEEN PLACED AT PAGE 2444 - 2539 OF PAPER BOOK VOLUME V. AT PAGE 2465 OF PAPER BOOK, INCOME FROM OPERATIONS HAS BEEN HELD TO BE CONSISTING OF REVENUE FRO M DATA ANALYTICS SERVICES AND PROCESS SOLUTIONS AND COMPRISES OF BOTH TIME/UNIT PRICE AND FIXED FEE - BASED SERVICE CONTRACTS. IS OBSERVED THAT THIS COMPANY SUPPORTS CORE AND COMPLEX ACTIVITIES FOR ITS CLIENTS, USING PROPRIETARY PROCESSES AND SCALABLE OFFSHO RE DELIVERY MODEL. THIS COMPANY HAS ACCESS TO CAPITAL MARKET AND THEREFORE, THIS COMPANY IS A PUBLIC LISTED KPO COMPANY IN INDIA. THE COMPANY IS ALSO ENGAGED IN CONSULTING SERVICES AND PROCESS OUTSOURCING AS WELL AS IN THE ACTIVITY OF PROCESS RE - ENGINEERI NG AND AUTOMATION APART FROM MIDDLE OFFICE AND BACK OFFICE SUPPORT TO CAPITAL MARKET. IN SUPPORT OF THE OBSERVATIONS FROM ANNUAL REPORT IS, WE DRAW SUPPORT FROM DECISION OF THE SPECIAL BENCH IN CASE OF MAERSK GLOBAL CENTRES ( INDIA ) (P.) TD. V. ASSTT. CIT REPORTED IN [2014] 43 TAXMANN.COM , WHEREIN IT HAS BEEN OBSERVED AS UNDER: (I) ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THIS COMPANY IS UNDI SPUTEDLY IN THE BUSINESS OF ITES AND THEREFORE, THE NOMENCLATURE THAT OF KPO WILL NOT MAKE IT FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. (II) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MAT ERIAL ON RECORD. WE FIND THAT THE COMPANY ECLERX SERVICES LTD. IS ENGAGED IN DIVERSIFIED ACTIVITY OF IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 34 PROVIDING SERVICES INCLUDING ANALYTIC SERVICES AND DATA PROCESS SOLUTIONS TO ITS GLOBAL CLIENTS. THE SERVICE PROVIDED BY ECLERX SERVICES LTD., IS IN VARIOU S AREAS INCLUDING CAPITAL MARKET AND THEREFORE, THE SERVICES ARE IN THE NATURE OF CONSULTANCY AND END TO END SUPPORT THROUGH TRADE CENTRE INCLUDING TRADE CONFIRMATION, SETTLEMENT, TRANSACTION, MAINTENANCE AND ANALYTIC AND REPORTING. THUS IT IS APPARENT FRO M THE NATURE OF THE ACTIVITY OF THIS COMPANY THAT IT IS NOT PROVIDING A SIMPLE SERVICE OF DATA PROCESSING BUT IT IS ENGAGED IN THE ACTIVITY OF PROVIDING HIGH - END SERVICES INVOLVING DECISION MAKING ANALYSIS WHICH REQUIRES THOUGHT PROCESS AND EVALUATION OF V ARIOUS FACTS AND FACTORS. FUNCTIONAL COMPARABILITY OF THIS COMPANY WITH THAT OF SIMPLE BPO'S SERVICE PROVIDING COMPANY HAS BEEN EXAMINED BY THE SPECIAL BENCH IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) (P.) LTD. ( SUPRA ) IN PARAS.82 & 83 AS UNDER : 82. IN SO FAR AS M/S ECLERX SERVICES LIMITED IS CONCERNED, THE RELEVANT INFORMATION IS AVAILABLE IN THE FORM OF ANNUAL REPORT FOR FINANCIAL YEAR 2007 - 08 PLACED AT PAGE 166 TO 183 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE SAID COMPANY PROVIDES DATA A NALYTICS AND DATA PROCESS SOLUTIONS TO SOME OF THE LARGEST BRANDS IN THE WORLD AND IS RECOGNIZED AS EXPERTS IN CHOSEN MARKETS - FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. IT IS CLAIMED TO BE PROVIDING COMPLETE BUSINESS SOLUTIONS BY COMBINING PEOPLE, PR OCESS IMPROVEMENT AND AUTOMATION. IT IS CLAIMED TO HAVE EMPLOYED OVER 1500 DOMAIN SPECIALISTS WORKING FOR THE CLIENTS. IT IS CLAIMED THAT ECLERX IS A DIFFERENT COMPANY WITH INDUSTRY SPECIALIZED SERVICES FOR MEETING COMPLEX CLIENT NEEDS, DATA ANALYTICS KPO SERVICE PROVIDER SPECIALIZING IN TWO BUSINESS VERTICALS FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. IT IS CLAIMED TO BE ENGAGED IN PROVIDING SOLUTIONS THAT DO NOT JUST REDUCE COST, BUT HELP THE CLIENTS INCREASE SALES AND REDUCE RISK BY ENHANCING EFFIC IENCIES AND BY PROVIDING VALUABLE INSIGHTS THAT EMPOWER BETTER DECISIONS. M/S ECLERX SERVICES PVT. LTD. IS ALSO CLAIMED TO HAVE A SCALABLE DELIVERY MODEL AND SOLUTIONS OFFERED THAT IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 35 INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RECONCILIATION, M ETRICS MANAGEMENT AND REPORTING SERVICES. IT ALSO PROVIDES TAILORED PROCESS OUTSOURCING AND MANAGEMENT SERVICES ALONG WITH A MULTITUDE OF DATA AGGREGATION, MINING AND MAINTENANCE SERVICES. IT IS CLAIMED THAT THE COMPANY HAS A TEAM DEDICATED TO DEVELOPING A UTOMATION TOOLS TO SUPPORT SERVICE DELIVERY. THESE SOFTWARE AUTOMATION TOOLS INCREASE PRODUCTIVITY, ALLOWING CUSTOMERS TO BENEFIT FROM FURTHER COST SAVING AND OUTPUT GAINS WITH BETTER CONTROL OVER QUALITY. KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY M/S ECLERX SERVICES PVT. LTD. AND ITS FUNCTIONAL PROFILE, WE ARE OF THE VIEW THAT THIS COMPANY IS ALSO MAINLY ENGAGED IN PROVIDING HIGH - END SERVICES INVOLVING SPECIALIZED KNOWLEDGE AND DOMAIN EXPERTISE IN THE FIELD AND THE SAME CANNOT BE COMPARED WITH THE ASSESSEE COMPANY WHICH IS MAINLY ENGAGED IN PROVIDING LOW - END SERVICES TO THE GROUP CONCERNS. 83. FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT IF THE FUNCTIONS ACTUALLY PERFORMED BY THE ASSESSEE COMPANY FOR ITS AES ARE COMPARED WITH THE FUNCTIONAL PROFILE OF M/S ECLERX SERVICES PVT. LTD. AND MOLD - TEC TECHNOLOGIES LTD., IT IS DIFFICULT TO FIND OUT ANY RELATIVELY EQUAL DEGREE OF COMPARABILITY AND THE SAID ENTITIES CANNOT BE TAKEN AS COMPARABLES FOR THE PURPOSE OF DETERMINING ALP OF THE TRANSACTIONS O F THE ASSESSEE COMPANY WITH ITS AES. WE, THEREFORE, DIRECT THAT THESE TWO ENTITIES BE EXCLUDED FROM THE LIST OF 10 COMPARABLES FINALLY TAKEN BY THE AO/TPO AS PER THE DIRECTION OF THE DRP. RESPECTFULLY FOLLOWING THE AFORESTATED OBSERVATIONS, AND THE DISCUSSIONS ON BASIS OF ANALYSIS OF ANNUAL REPORT, WE ARE OF CONSIDERED OPINION THAT THIS COMPANY BEING A PUBLIC LISTED COMPANY IS NOT A GOOD COMPARABLE. ACCORDINGLY WE DIRECT LD. TPO TO EXCLUDE THIS COMPANY FROM THE LIST. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 36 40. INFO SYS BPO LTD ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE PRIMARILY ON THE BASIS OF FUNCTIONAL INCOMPATIBILITY AND PRESENCE OF INTANGIBLES. IT HAS BEEN SUBMITTED THAT THIS COMPANY OWNS HUGE BRAND AND NOT A FIT COMPARABLES FOR COMPANY LIKE ASSESSEE, WHO PROVIDE CAPTIVE SERVICE TO ITS AES. 41. LD.CIT DR OPPOSED EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 42. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. FROM A NNUAL REPORT OF THIS CO MPANY PLACED AT PAGE 2540 - 2616 IT IS OBSERVED THAT, THERE IS AMALGAMATION OF PAN FINANCIAL SERVICES INDIA PVT. LTD. W.E.F. 1/4/2008. THE SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HON'BLE HIGH COURT ON 6/4/2009 AND 10/3/2009. THEREFORE, THERE IS AN EX TRAORDINARY EVENT OF AMALGAMATION DURING THE YEAR UNDER CONSIDERATION AND HENCE THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE FOR THE PURPOSE OF DETERMINING THE ALP. IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT, THIS COMPANY IS ENGAGED IN PROVIDING BU SINESS PROCESS MANAGEMENT SERVICES TO ORGANIZATIONS WITH OUTSOURCING THEIR BUSINESS PROCESS. THEREFORE, THIS COMPANY IS IN A DIFFERENT KIND OF BUSINESS ACTIVITY IN PROVIDING THE MANAGEMENT SERVICE OF BUSINESS PROCESSES AND IS NOT DIRECTLY PROVIDING ANY BUS INESS PROCESS OUTSOURCE SERVICES. APART FROM THIS, WE FURTHER NOTE THAT AS PER THE IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 37 SEGMENT REPORTING IN PARA.16.2.21 THIS COMPANY IS PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES AS UNDER: ' SEGMENT REPORTING THE COMPANY'S OPERATIONS PRIMARILY RELATE TO PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES TO ORGANIZATIONS THAT OUTSOURCE THEIR BUSINESS PROCESSES. ACCORDINGLY. REVENUES REPRESENTED ALONG INDUSTRY CLASSES COMPRISE THE PRIMARY BASIS OF SEGMENTAL INFORMATION SET OUT IN THESE FINANCIAL STATEMENTS. SEC ONDARY SEGMENTAL REPORTING IS PERFORMED ON THE BASIS OF THE GEOGRAPHICAL LOCATION OF CUSTOMERS. THE ACCOUNTING PRINCIPLES CONSISTENTLY USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS ARE ALSO CONSISTENTLY APPLIED TO RECORD INCOME IN INDIVIDUAL SEGMENTS . THESE ARE SET OUT IN THE NOTE ON SIGNIFICANT ACCOUNTING POLICIES.' FROM ABOVE, IT IS CLEAR THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH CAPTIVE SERVICE PROVIDER. WE THEREFORE DIRECT THIS COMPANY TO BE EXCLUDED FROM LIST OF COMPARABLES. 43. ACCE NTIA TECHNOLOGIES LTD LD.TPO CONSIDERED THIS COMPARABLE AND ASSESSEE OBJECTED TO THE SAME FOR THE REASON THAT DURING THE YEAR UNDER CONSIDERATION THIS COMPANY ACQUIRED M/S.OAK TECHNOLOGIES INC, USA AND THEREFORE, THERE IS EXTRAORDINARY EVENT OF ACQUISITION OF ANOTHER COMPANY. LD.COUNSEL SUBMITTED THAT, IN VIEW OF EXTRAORDINARY EVENT OF ACQUISITION, THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE WITH ASSESSEE. APART FROM THIS OBJECTION, 44. LD.COUNSEL SUBMITTED THAT EVEN OTHERWISE THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE WITH ASSESSEE IN SO FAR AS SERVICES PROVIDED TO AE. HE REFERRED TO VARIOUS BUSINESS TRANSACTIONS AND SERVICES PROVIDED BY THIS COMPANY AND SUBMITTED THAT THIS IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 38 COMPANY PROVIDES SERVI CES UNDER VARIOUS SEGMENTS OF LIKE MEDICAL TRANSCRIPTION, MEDICAL CODING, MEDICAL BILLING, ETC DIRECTLY TO ITS CLIENTS. HE THUS WHERE MENTALLY ARGUED THAT BUSINESS MODEL OF THIS COMPANY IS MUCH DIFFERENT FROM THAT OF ASSESSEE, WHO IS A CAPTIVE SERVICE PROV IDER PROVIDING SERVICES TO ITS AE IS ONLY. 45. LD.CIT DR OPPOSED THE EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 46. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US IS. IT APPEARS T HAT THIS COMPANY PURCHASED UP TO 96% OF SHARE HOLDING OF M/S. OAK TECHNOLOGIES. IF IT IS ONLY A TRANSACTION OF PURCHASE OF SHARES OF SAID COMPANY, IT MAY BE A CASE OF PURCHASE AS AN ONGOING BUSINESS, AND MAY NOT BE A CASE OF MERGING THE SAME WITH BUSINESS OF ACCENTIA TECHNOLOGIES LTD AND M/S.OAK TECHNOLOGIES STILL REMAINS AN INDEPENDENT ENTITY. THEREFORE, IN THE ABSENCE OF COMPLETE RELEVANT FACTS, IT CANNOT BE HELD THAT THE SO - CALLED ACQUISITION OF M/S.OAK TECHNOLOGIES CAN BE CONSIDERED AS EXTRAORDINARY EV ENT HAVING IMPACT ON THE REVENUE AS WELL AS BUSINESS ACTIVITY OF ACCENTIA TECHNOLOGIES LTD. 46.1 FURTHER, IT IS OBSERVED THAT ANNUAL REPORT OF THIS COMPANY IS PLACED AT PAGE 2337 - 2045 OF PAPER BOOK VOLUME 5. AT PAGE 2390, INCOME FROM OPERATIONS EARNED BY THIS COMPANY AMOUNTS TO RS.80,14,40,931/ - THE DETAILS OF WHICH ARE AT PAGE 2397 IN SCHEDULE 8. VARIOUS SEGMENTS UNDER WHICH REVENUE HAS BEEN IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 39 EARNED BY THIS COMPANY IS MEDICAL TRANSCRIPTION, BILLING AND COLLECTIONS, INCOME FROM CODING, INTEREST ON FD. THUS I T IS CLEAR THAT THIS COMPANY IS ENGAGED IN HEALTHCARE ACTIVITY AND PROVIDING BPO SERVICE IN HEALTHCARE SECTOR, THAT TOO BY PROVIDING SPECIFIC SERVICES OF MEDICAL TRANSCRIPTION, MEDICAL CODING, MEDICAL BILLING ETC. WE NOTE THAT THESE ACTIVITIES ARE QUITE DI FFERENT FROM SERVICE OF CONTACT PROVIDED BY ASSESSEE TO ITS AES WHICH ARE PURELY IN NATURE OF CALL CENTRE. ACCORDINGLY WE DIRECT LD. TPO TO EXCLUDE THIS COMPANY ON THIS COUNT. 47. INFORMED TECHNOLOGIES INDIA LTD LD.TPO INCLUDED THIS COMPANY WHICH HAS BEEN OBJECTED BY ASSESSEE FOR THE REASON THAT THIS COMPANY HAS SEVERAL OTHER SOURCES OF INCOME FOR WHICH THERE ARE NO SEGMENTAL DETAILS. IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT THIS COMPANY DOES NOT PASSES THROUGH ALL FILTERS APPLIED BY LD.TPO. 48. LD.CIT DR HOWEVER PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES SUPPORTED INCLUSION. 49. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACE D BEFORE US. IT IS OBSERVED THAT THIS COMPARABLE HAS BEEN NOT DISPUTED FOR FUNCTIONAL DISSIMILARITY BY DRP. HOWEVER THE OBSERVATION THAT SEGMENTAL INFORMATION ARE NOT AVAILABLE NEEDS TO BE VERIFIED. IN AN ORDER PASSED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S NIELSON SPORTS INDIA PVT.LTD. VS ACIT IN IT(TP)A NO.196(B)/2017 (SUPRA) FOLLOWING OBSERVATIONS HAS BEEN MADE IN RESPECT OF THIS COMPARABLE: IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 40 RESPECTFULLY FOLLOWING AFORESTATED DECISION, WE ARE OF CONSIDERED OPINION THAT, THIS COMPARABLE NEEDS TO BE SET - ASIDE TO LD.TPO FOR VERIFICATION AFRESH. NEEDLESS TO SAY THAT ASSESSEE SHALL BE GRANTED PROPER OPPORTUNITY AS PER LAW TO REPRESENT ITS CASE. ACCORDINGLY WE SET ASIDE THIS COMPARABLE BACK TO LD.TPO LD.COUNSEL SUBMITTED THAT IN THE EVENT COMPARABLES SOUGHT TO BE EXCLUDED BY ASSESSEE UNDER BOTH SEGMENTS ARE UPHELD, COMPARABLES SOUGHT FOR INCLUSION WOULD NOT BE RELEVANT TO BE CONSIDERED AT THIS STAGE. ACCORDINGLY, WE ARE NOT GOING INTO DECIDING COMPARABILITY OF T HOSE COMPANIES SOUGHT FOR INCLUSION BY ASSESSEE UNDER THE SEGMENTS. ACCORDINGLY GROUND NO. 4 - 7 AND GROUNDS RAISED IN CROSS OBJECTIONS ARE PARTLY ALLOWED AS DISCUSSED HEREINABOVE. IT IS OBSERVED THAT ISSUES RAISED BY ASSESSEE IN CROSS OBJECTIONS OVERLAP WIT H COMPARABILITY ANALYSIS CARRIED OUT HEREINABOVE IN RESPECT OF BOTH SEGMENTS WHICH ARE MAIN GROUNDS ALLEGED BY ASSESSEE IN ITS APPEAL. 50. GROUND NO. 8 IS IN RESPECT OF FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS WHICH WE HAVE ALREADY CONSIDERED WHILE DECIDING REVENUES APPEAL. RESPECTFULLY FOLLOWING THE VIEW TAKEN HEREINABOVE WE ALLOW THIS GROUND. 51. GROUND NO.9 - 10 IS IN RESPECT OF WORKING CAPITAL ADJUSTMENT NOT PROVIDED BY LD. TPO. IT HAS BEEN SUBMITTED THAT LD.TPO DID NOT GRANT APPROPRIATE WORKING CAPITAL ADJUSTMENT TO COMPARABLE S TO REMOVE DIFFERENCES BETWEEN THEM AND ASSESSEE. IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 41 52. LD. CIT DR HOWEVER SUPPORTED ORDERS OF AUTHORITIES BELOW. 53. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT IS OBSERVED THA T CONSISTENTLY THIS TRIBUNAL HAS BEEN TAKING A VIEW OF GRANTING ACTUAL ADJUSTMENT TOWARDS DIFFERENCES IF ANY TO IRON OUT DIFFERE NCES IN WORKING CAPITAL BETWEEN ASSESSEE AND COMPARABLES CONSIDERED IN FINAL SET. WE DIRECT LD.T PO/AO TO PROVIDE ADJUSTMENT TO COMPARABLES TO REMOVE DIFFERENCES IF ANY, IN WORKING CAPITAL. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 54. GROUND NO.11 STANDS NOT PRESSED BY ASSESSEE. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED 55. GROUND NO.12 IS CONSEQUENTIAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 56. GROUND NO.13 IS PREMATURE AT THIS STAGE. 57. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED AND CROSS OBJECTION AND APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED A S INDICATED ABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2019. SD/ - SD/ - (B.R.BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 7 TH AUGUST, 2019. *AM IT(TP)A NO190,176(B)/2014 & C.O NO.39(B)/2016 IN IT(TP)A NO190(B)/2014. 42 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST.REGISTRAR