Barclays Technology Centre India Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,Circle -1(1), Pune

CO 45/PUN/2017

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3499 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVDESH KUMAR
• Assessee Lawyers: RISHABH BAID
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / I TA NO. 1251/PUN/2015 / ASSESSMENT YEAR : 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), PUNE. / APPELLANT / V/S. BARCLAYS TECHNOLOGY CENTRE INDIA PVT. LTD. GROUND NO. 7 TH FLOOR, WING 3, CLUSTER A, EON FREE ZONE, MIDC KNOWLEDGE PARK, KHARADI, PUNE - 411 014 / RESPONDENT PAN : AADCB1173D . / CO NO. 45/PUN/2017 / ASSESSMENT YEAR : 2010 - 11 BARCLAYS TECHNOLOGY CENTRE INDIA PVT. LTD. GROUND NO. 7 TH FLOOR, WING 3, CLUSTER A, EON FREE ZONE, MIDC KNOWLEDGE PARK, KHARADI, PUNE - 411 014 / CROSS OBJECT OR PAN : AADCB1173D / V/S. THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), PUNE. / RESPONDENT ASSESSEE BY : SHRI RAJENDRA AGIWAL & SHRI RISHABH BAID REVENUE BY : SHRI A V DESH KUMAR / DATE OF HEARING : 20.09.2017 / DATE OF PRONOUNCEMENT : 29 . 09.2017 2 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 / ORDER PER SUSHMA CHOWLA , JM TH E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - 13, PUNE DATED 30.06.2015 RELATING TO ASSESSMENT YEAR 2010 - 11 AGAINST THE OR DER PASSED UNDER SECTION 143(3) R.W.S 144C(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APPEAL OF THE REVENUE . 2. THE REVENUE IN ITA NO.1251/PUN/2015 HAS FILED THE MODIFIED GROUNDS OF APPEAL , W HICH READ AS UNDER : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN EXCLUDING THE COMPARABLES FCS SOFTWARE INDIA LTD. WHICH WAS SELECTED BY THE TPO, ON THE BASIS THAT SEGMENTAL ACCOUNTS ARE NOT AVAILABLE WITHOUT CONSIDERING THAT EDUCATION AND INF RASTRUCTURE MANAGEMENT SEGMENTS ALSO PERFORM ACTIVITIES RELATED TO SOFTWARE SERVICES. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN INCLUDING THE FOLLOWING COMPARABLES, WHICH WERE R EJECTED BY THE TPO, WITHOUT CONSIDERING THAT THE FUNCTIONS, ASSETS & RISK PROFILE AND PREVAILING MARKET CONDITIONS FOR OFF - SHORE AND ONSIDE COMPANIES ARE DIFFERENT. I) QUINTEGRA SOLUTIONS LTD. II) R.S. SOFTWARE (I) LTD. III) ZYLOG SYSTEMS LTD. IV) THINKSOFT GLOBAL SERVICES LTD. 3. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE ITAT PUNE BENCH, PUNE. 3 . THE ASSESSEE IN CO NO.45/PUN/2017 HAS RAISED FOLLOWING GROUNDS OF OBJECTION S : - 3 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER (AO) HAS : REJECTING CERTAIN COMPANIES CONSIDERED IN THE COMPARABLE SET BY THE TPO 1 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, BY OBJECTING THE WELL - REASON ED ORDER PASSED BY CIT(A) FOR AY 2010 - 11 FOR REJECTING COMPANIES (I.E INFOSYS TECHNOLOGIES LIMITED, AND FCS SOFTWARE SOLUTIONS LIMITED), CONSIDERED AS COMPARABLE BY THE TPO, ON ACCOUNT OF THE VAST DIFFERENCE IN SIZE AND NATURE OF THE BUSINESS ACTIVITIES AN D ABSENCE OF SEGMENTAL ACCOUNTS IN THE ANNUAL REPORT. INCLUSION OF COMPANIES REJECTED BY THE TPO FROM THE COMPARABLE SET 2 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, BY OBJECTING THE APPROPRIATE ORDER GIVEN BY CIT(A) TO CONSIDER CERTAIN COMPANIES (I.E QUINTEGRA SOLUTIONS LIMITED, R.S SOFTWARE ( INDIA) LIMITED, ZYLOG SYSTEMS LIMITED AND THINKSOFT GLOBAL SERVICES LIMITED) AS COMPARABLE TO THE RESPONDENT AND REJECTION OF APPLICATION OF ONSITE FILTER USED BY THE TPO FOR SCREENING OF COMPANI ES. FURTHER, BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A) AND CONSEQUENTLY THE LEARNED AO AND LEARNED TPO HAS : NON - CONSIDERATION OF CONTEMPORANEOUS DATA 3 . ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, IN CONDUCTING AN ANALYSIS BASED ON INFORMATION CURRENTLY AVAILABLE FOR DETERMINING ARMS LENGTH PRICE BUT WHICH WAS NOT AVAILABLE AT THE TIME OF COMPLYING WITH TRANSFER PRICING REGULATIONS. NON - CONSIDERATION OF MULTIPLE YEAR DATA 4 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT CONSIDERING MULTIPLE YEAR DATA ( I.E FINANCIAL YEAR 2009 - 10 AND PRIOR TWO YEARS) FOR DETERMINING THE ARMS LENGTH PRICE. USE OF INAPPROPRIATE FILTERS FOR SCREENING OF COMPANIES 5 . ERRED IN LAW AND IN FACTS, BY APPLYING CERTAIN APPROPRIATE FILTERS FOR SCREENING OF COMPANIES. REJECTION OF CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE RESPONDENT AS COMPARABLES IN THE TRANSFER PRICING STUDY 6 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, IN REJECTING CERTAIN COMPANI ES FROM THE SET OF COMPARABLES IDENTIFIED BY THE RESPONDENT IN RESPECT OF INTERNATIONAL TRANSACTION PERTAINING TO PROVISION OF SOFTWARE SERVICES. CONSIDERING CERTAIN ADDITIONAL COMPANIES AS COMPARABLE TO THE RESPONDENT 7 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, IN ACCEPTING ADDITIONAL COMPANIES AS COMPARABLE TO THE RESPONDENT IN RELATION TO PROVISION OF SOFTWARE SERVICES. IGNORING CERTAIN ADDITIONAL COMPANIES WHICH CAN BE TAKEN AS COMPARABLE TO THE RESPONDENT BASED ON UPDATED DATA 4 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 8 . WITHOUT PREJUDICE TO THE ABOVE GROUNDS, ERRED ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, IN IGNORING CERTAIN ADDITIONAL COMPANIES WHICH CAN ALSO BE TAKEN AS COMPARABLES TO THE RESPONDENT BASED ON THE UPDATED DATA. SELECTION OF COMPANIES H AVING ABNORMAL NORMAL PROFITS 9 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, IN ACCEPTING COMPANIES EARNING ABNORMAL PROFIT DURING THE FY 2009 - 10. INCORRECT COMPUTATION OF OPERATING MARGINS OF CERTAIN COMPARABLE COMPANIES 10 . ERRED ON THE FAC TS AND CIRCUMSTANCES OF THE CASE , IN INCORRECTLY COMPUTING THE OPERATING MARGINS OF THE CERTAIN COMPARABLE COMPANIES. NON CONSIDERATION OF WORKINGS SUBMITTED BY THE RESPONDENT FOR WORKING CAPITAL ADJUSTMENT 11 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE AND IN LAW, IN CORRECTLY COMPUTING THE WORKING CAPITAL ADJUSTMENT REQUIRED IN CASE OF THE RESPONDENT. DENIAL OF ADJUSTMENT FOR RISK DIFFERENCES 12 . ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, IN COMPARING FULL FLEDGED RISK BEARING ENTI TIES WITH THE RESPONDENTS CAPTIVE OPERATIONS WITHOUT MAKING ANY RISK ADJUSTMENT FOR DIFFERENCES BETWEEN THE FUNCTIONAL AND RISK PROFILE OF COMPARABLE COMPANIES CONSIDERED AS COMPARABLE VIS A VIS THE RISK PROFILE OF THE RESPONDENT. APPLYING TRANSFER PRICIN G PROVISIONS OF THE RESPONDENT, BEING A TAX HOLIDAY UNIT 13 . ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, IN APPLYING TRANSFER PRICING PROVISIONS TO THE RESPONDENT, ENJOYING TAX HOLIDAY, WITHOUT APPRECIATING THE FACT THAT THERE CANNOT BE ANY M OTIVE OF SHIFTING PROFITS OUTSIDE INDIA. THE RESPONDENT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF CROSS OBJECTIONS INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER AND CRAVES, LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF CROSS OBJECTIONS. 4 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT IF THE ISSUE RAISED BY THE REVENUE IN MODIFIED GROUND OF APPEAL NO.1 IS DISMISSED I.E. FCS SOFTWARE INDIA LTD. IS NOT INCLUDED AS PART OF COMPARABLES BEING A PRODUCT COMP ANY AND BECAUSE OF ABNORMAL RESULTS AND ALSO BEING FUNCTIONALLY DIFFERENT AS AGAINST TO THE ACTIVITIES OF ASSESSEE IN PROVIDING CAPTIVE SERVICES TO ITS ASSOCIATED ENTERPRISES IN THE FIELD OF SOFTWARE DEVELOPMENT, THEN ALL THE GROUNDS OF APPEAL RAISED BY TH E REVENUE WOULD 5 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 BECOME ACADEMIC. HE FURTHER POINTED OUT THAT GROUNDS RAISED IN CROSS OBJECTIONS ALSO WOULD BECOME ACADEMIC IN NATURE. 5. THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WA S ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS ASSOCIATED ENTERPRISES AND IS CAPTIVE SERVICE PROVIDER. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSEE WAS ENGAGED IN DELIVERING SOFTWARE SOLUTIONS TO THE BARCLAYS GROUP WORLDWIDE AND THE OPERATIONS WERE CARRIED OUT FROM ITS TWO UNITS IN P UNE , ONE OF WHICH WAS REGISTERED AS 100% EXPORT ORIENTED UNIT (EOU) UNDERTAKING AND THE OTHER IS AN APPROVED SPECIAL ECONOMIC ZONE (SEZ). THE ASSESSING OFFICER HAD MADE REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) FOR C OMPUTING ARM'S LENGTH PRICE IN RELATION TO VARIOUS INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE, WHICH ARE TABULATED AT PAGE 8 OF THE TPOS ORDER. THE FIRST INTERNATIONAL TRANSACTION WHICH IS UNDER DISPUTE IS THE PROVISION OF SOFTWARE SERVICES TO BARCLAYS BANK PLC FOR TOTAL CONSIDERATION OF RS.306,97,13,935/ - . THE ASSESSEE IN THE TRANSFER PRICING STUDY REPORT HAD SELECTED TNMM METHOD AS MOST APPROPRIATE METHOD TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS RELATING TO PROVISION OF SOFTWARE DEVELOPME NT SERVICES AND CUP METHOD IN RESPECT OF OTHER INTERNATIONAL TRANSACTIONS I.E. RECEIPT OF INTEREST ON FD, PAYMENT OF BANK CHARGES AND PAYMENT OF INTEREST ON TERM LOANS. THE ASSESSEE HAD MADE SELECTION OF COMPARABLE COMPANIES TOTALING 21 AND 6 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 HAD ARRIVED AT THE AVERAGE PLI OF THE COMPARABLES AT 11.26%, WHEREAS THE PLI OF ASSESSEE WORKED OUT TO 18.51% . THEREFORE, THE ASSESSEE CLAIMED THAT INTERNATIONAL TRANSACTIONS WERE AT ARM'S LENGTH PRICE. HOWEVER, THE TPO OBJECTED TO THE TRANSFER PRICING ANALYSIS DONE BY THE ASSESSEE. ONE OF THE ISSUES WAS THE USE OF SINGLE YEARS DATA AND APPLICATION OF INCORRE CT MARGINS IN RESPECT OF CERTAIN COMPANIES. THE TPO ALSO PROPOSED ADDITIONAL FILTERS TO BE ADOPTED AND ALSO TURNOVER FILTER. THE TPO REJECTED 15 COMPARABLES OUT OF 21 COMPARABLES SELECTED BY THE ASSESSEE AND THE ASSESSEE IN REPLY, OBJECTED TO THE REJECTI ON OF 10 COMPARABLES AND FURTHER REQUESTED TO INCLUDE ADDITIONAL THREE CONCERNS. THE TPO THEREAFTER, TOOK INTO CONSIDERATION THE SUBMISSIONS OF ASSESSEE AND EVENTUALLY SELECTED 13 CONCERNS AS COMPARABLE AND THE MARGINS OF SAID CONCERNS WERE ALSO RE - WORKED AND AFTER ALLOWING WORKING CAPITAL ADJUSTMENT, THE OP/COST OF THE SAID CONCERNS WAS WORKED OUT. THE ARITHMETIC MEAN OF THE MARGINS OF COMPARABLES WORKED OUT AT 26.38% AS AGAINST THE MARGINS SHOWN BY THE ASSESSEE AT 1 8 . 5 1%. ACCORDINGLY, AN UPWARD ADJUSTM ENT OF RS.20,39,77,971/ - WAS PROPOSED TO THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS WHICH WAS ADOPTED BY THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT. 7. THE CIT(A) ANALYZED THE ISSUE RAISE D BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO INCLUDE QUINTEGRA SOLUTIONS LTD., R.S. SOFTWARE (I) LTD., ZYLOG SYSTEMS LTD. AND THINKSOFT GLOBAL SERVICES LTD. IN THE FINAL LIST OF COMPARABLE COMPANIES, IN CASE IT SATISFIES ALL THE FILTERS USED BY THE TPO IN HIS ORDER. THE CIT(A) ACCEPTED THE PLEA OF ASSESSEE FOR REJECTION OF COMPARABLE FCS SOFTWARE INDIA LTD. HE NOTED THAT THE PROFIT AND LOSS ACCOUNT OF SAID CONCERN ONLY GIVES NARRATION AS INCOME FROM SOFTWARE DEVELOPMENT AND OTHER 7 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 SERVICES BUT T HE SEGMENTAL ACCOUNTS WERE NOT AVAILABLE. HE REFERRED TO THE ANNUAL REPORT OF THE SAID CONCERN, WHEREIN AT PAGES 30 AND 31, THE COMPANY HAD EARNED 42% OF REVENUE FROM IT CONSULTING I.E. SOFTWARE SERVICES, 37% OF REVENUE FROM EDUCATION AND 21% OF REVENUE F ROM INFRASTRUCTURE MANAGEMENT. HE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SAID COMPANY FROM THE LIST OF COMPARABLES. HE ALSO DIRECTED EXCLUSION OF INFOSYS TECHNOLOGIES LTD. ON THE TURNOVER BASIS. 8. THE REVENUE IS IN APPEAL AGAINST REJECTION OF FCS SOFTWARE SOLUTIONS LTD. V IDE GROUND OF APPEAL NO.1 . T HE REVENUE IS IN APPEAL VIDE GROUND OF APPEAL NO.2 AGAINST INCLUSION OF QUINTEGRA SOLUTIONS LTD., R.S. SOFTWARE (I) LTD., ZYLOG SYSTEMS LTD. AND THINKSO FT GLOBAL SERVICES LTD. IN THE FINAL LIST OF COMPARABLES. HOWEVER, IN VIEW OF THE CONCESSION OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, WE PROPOSED TO ADJUDICATE ONLY THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE, WHEREIN THE LEARNED AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE CLAIMS THAT IN CASE THE COMPARABLE FCS SOFTWARE INDIA LTD. IS EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THE MARGINS SHOWN BY THE ASSESSEE ARE WITHIN RANGE AND COMPARABLE TO THE AVERAGE MARGINS OF COMPARABLES. 9. THE FIRST OBJECTION OF ASSESSEE IN RESPECT OF FCS SOFTWARE INDIA LTD. IS THE NON - AVAILABILITY OF BUSINESS SEGMENT PROFITABILITY, WHERE THE SAID CONCERN IS EARNING REVENUE FROM IT CONSULTING (4 2 %), EDUCATION (30%) AND INFRASTRUCTURE MANAGEMENT (21%). FURTHER, THE SAID COMPANY HAD EARNED REVENUE FROM SALE OF SOFTWARE DEVELOPMENT SERVICES AND PRODUCTS AND THE CONCERN WAS ENGAGED IN SOFTWARE PRODUCT DEVELOPMENT. IN THIS REGARD, THE LEARNED AUTHORIZED 8 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE TRI BUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 HAD HELD THAT THE COMPANYS EXPERIENCING ABNORMAL FLUCTUATIONS IN MARGINS SHOULD BE REJECTED FROM THE COMPARABLES SET AND FCS SOFTWARE SOLUTIONS LTD. WAS SO REJECTED. THE LEARNED AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE TRIBUNAL IN THE APPEALS RELATING TO ASSESSMENT YEAR 2010 - 11 IN THE CASE OF TIBCO SOFTWARE INDIA PVT. LTD. VS. DCIT IN ITA NO.276/PUN/2015 AND CROSS APPEAL IN ITA NO.334/PUN/2015, ORDER DATED 31.01.2017, A CIT VS. M/S. SYNECHRON TECHNOLOGIES PVT. LTD. IN ITA NO.536/PUN/2015 AND CROSS APPEAL IN ITA NO.622/PUN/2015, ORDER DATED 16.06.2017 AND IN DCIT VS. EXFO ELECTRO OPTICAL ENGG. INDIA PVT. LTD. IN ITA NO.1347/PUN/2015, ORDER DATED 07.07.2017 HAS DIRECTED EXC LUSION OF THE SAID CONCERN. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF TPO. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH NEEDS ADJUDICATION IN THE PRESENT APPEAL IS IN RELATION TO THE MODIFIED GROUND OF APPEAL NO.1, WHEREIN THE REVENUE IS AGGRIEVED BY EXCLUSION OF FCS SOFTWARE INDIA LTD. FRO M THE LIST OF COMPARABLES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE CIT(A) HAD DIRECTED EXCLUSION OF FCS SOFTWARE SOLUTIONS LTD. AND INFOSYS TECHNOLOGIES LTD. FROM THE FINAL LIST OF COMPARABLES AND IN CASE FCS SOFTWARE S OLUTIONS LTD. IS DIRECTED TO BE NOT COMPARABLE TO THE ASSESSEE, THEN THE ARM'S LENGTH MARGIN WOULD FALL TO 23.07%, WHICH WAS WITHIN +/ - 5% RANGE ALLOWED BY THE INCOME TAX ACT I.E. WHERE THE MARGINS OF ASSESSEE IS 18.51% . T HE REVENUE IS NOT IN APPEAL 9 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 AGAINS T THE ORDER OF CIT(A) IN DIRECTING EXCLUSION OF INFOSYS TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. THE MODIFIED GROUND OF APPEAL NO.1 IS AGAINST EXCLUSION OF FCS SOFTWARE SOLUTIONS LTD. THE SAID CONCERN WAS HELD TO BE A PRODUCT COMPANY AND NOT FUNCT IONALLY COMPARABLE TO THE CONCERN ENGAGED IN PROVIDING SOFTWARE SERVICES TO ITS ASSOCIATED ENTERPRISES. THIS VIEW HAS BEEN LAID DOWN BY THE TRIBUNAL IN TIBCO SOFTWARE INDIA PVT. LTD. VS. DCIT (SUPRA) AND ACIT VS. M/S. SYNECHRON TECHNOLOGIES PVT. LTD. (SUP RA). FOLLOWING THE SAME PARITY OF REASONING AND BECAUSE OF THE SAID CONCERN BEING A PRODUCT COMPANY, WE FIND NO MERIT IN INCLUDING IN THE LIST OF COMPARABLES WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATED ENTE RPRISES, WHERE IT IS PROVIDING SOFTWARE SERVICES TO THE ASSOCIATED ENTERPRISES. 12. ANOTHER ASPECT WHICH NEEDS TO BE KEPT IN MIND IS THAT THE CIT(A) HAD NOTED FROM THE ANNUAL REPORT OF THE COMPANY THAT THE SAID CONCERN HAD EARNED REVENUE FROM IT CONSULT ING (4 2 %), EDUCATION (30%) AND INFRASTRUCTURE MANAGEMENT (21%) . HOWEVER, NO BREAKUP OF BUSINESS SEGMENT PROFITABILITY IS AVAILABLE AND IN THE ABSENCE OF THE SAME, THE MARGINS OF SAID CONCERN CANNOT BE COMPARED. 1 3 . ANOTHER ASPECT IS THE ACTIVITY OF EDUCATION BEING IMPARTED BY THE SAID CONCERN IN THE FIELD OF IT EDUCATION TO CORPORATE COMPANIES AND INSTITUTIONS, CENTRAL AND STATE GOVERNMENT DEPARTMENTS, ETC. , THE SAID CONCERN THUS, IS FUNCTIONALLY DIFFERENT FROM THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE AND CANNOT BE INCLUDED IN THE FINAL LIST OF COMPARABLES. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. THE MODIFIED GROUND OF APPEAL NO.1 RAISE D BY THE REVENUE IS THUS, DISMISSED. THE MODIFIED GROUND OF APPEAL NO.2 RAISED BY THE 10 ITA NO.1251/PUN/2015 CO NO.45/PUN/2017 REVENUE BECOMES ACADEMIC IN NATURE, IN VIEW OF THE PLEADING OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER THE DISMISSAL OF MODIFIED GROUND OF APPEAL NO.1 R AISED BY THE REVENUE. 14. THE ISSUE RAISED VIDE CROSS OBJECTIONS ALSO BECOME ACADEMIC IN NATURE, IN VIEW OF OUR DISMISSAL OF MODIFIED GROUND OF APPEAL NO.1 RAISED BY THE REVENUE. 15. IN THE RESULT, BOTH THE APPEAL OF REVENUE AND CROSS OBJECTIONS OF THE A SSESSEE ARE DISMISSED. ORDER PRO NOUNCED ON THIS 29 TH DAY OF SEPTEMBER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) ( SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 29 TH SEPTEMBER , 2017 . GCVSR / COPY OF THE O RDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 13, PUNE. 4. THE CIT( IT/TP), / PR.CIT - 1, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE