M/s Tech Book Electronics Services P. Ltd., New Delhi V. ACIT, New Delhi

CO 93/DEL/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2132 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 02-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ PARDASANI
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 143(3); 142(1); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I, NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.1060/DEL/2013 (ASSESSMENT YEAR 2008-09) ACIT, CIRCLE 16(1), VS. TECH BOOK ELECTRONICS SERVI CES P. LTD., NEW DELHI A-28, MOHAN COOPERATIVE INDL. ESTATE , MATHUR ROAD, NEW DELHI GIR / PAN :AAACT6050A C.O. NO.93/DEL/2013 (ASSESSMENT YEAR 2008-09) TECH BOOK ELECTRONICS SERVICES P. LTD., VS. ACIT, C IRCLE 16(1), A-28, MOHAN COOPERATIVE INDL. ESTATE, NEW DELHI MATHUR ROAD, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRENDRA KUMAR, CIT DR SHRI VIVEK SHARMA, SR. DR RESPONDENT BY : SHRI MANOJ PARDASANI, CA DATE OF HEARING: 02.12.2015 DATE OF PRONOUNCEMENT: 15.02.2015 ORDER PER KULDIP SINGH, JM: AFORESAID APPEAL AND CROSS APPEAL ARE BEING DECIDE D BY WAY OF CONSOLIDATED ORDER AS COMMON QUESTION FOR DETERMINA TION HAS BEEN RAISED, TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, ACIT, CIRCLE 16(1), NEW DELHI (HE REINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE 2 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 IMPUGNED ORDER DATED 18.12.2012 PASSED BY LD. LD. C IT(A) XX, NEW DELHI QUA THE ASSESSMENT YEAR 2008-09 ON THE GROUND THAT: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF R S.18,77,813/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSFE R PRICING ADJUSTMENT. 3. AT THE SAME TIME, APPELLANT M/S. TECH BOOK ELECT RONICS SERVICES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE ) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 18.12.2012 PASSED BY LD. LD. CIT(A) XX, NEW DELHI QUA THE ASSESSMENT YEA R 2008-09 ON THE GROUNDS INTER ALIA THAT: 1. THAT ON FACTS AND IN LAW, THE LEARNED COMMISSIO NER OF INCOME TAX APPEALS XX ('CITA) AND THE LEARNED ADDL COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICE R - 11(3) AND THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRC LE 16, NEW DELHI ('AO') HAVE ERRED IN USING SINGLE YEAR DATA O F COMPANIES WITHOUT CONSIDERING THE FACT THAT THE SAME WAS NOT AVAILABLE TO THE RESPONDENT AT THE TIME OF COMPLYING WITH THE TRANSF ER PRICING DOCUMENTATION REQUIREMENTS AND DISREGARDING THE RES PONDENT'S CLAIM FOR USE OF MULTIPLE YEAR DATA FOR COMPUTING T HE ARM'S LENGTH PRICE. 2. THAT ON FACTS AND IN LAW, THE TPO/AO HAS CHERRY PICKED COMPARABLES AND GAVE NO COGNIZANCE TO BUSINESS PROF ILE OF THE RESPONDENT AND VARIOUS COMPARABILITY CRITERIA BEFOR E EITHER. ACCEPTING OR REJECTING COMPANIES AS COMPARABLE COMP ANIES. 3. THAT ON FACTS AND IN LAW, THE TPO/AO HAVE FAILED TO MAKE APPROPRIATE ADJUSTMENTS TO ACCOUNT FOR VARYING RISK PROFILES OF THE RESPONDENT VIS-A-VIS THE COMPARABLES AND IN THE PRO CESS ALSO NEGLECTED THE INDIAN TRANSFER PRICING REGULATIONS, OECD GUIDELINES ON TRANSFER PRICING AND JUDICIAL PRECEDENCE. . 3 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 4. THE SHORT QUESTION TO BE DETERMINED IN THE APPEA L PREFERRED BY THE REVENUE IS, DELETION OF ADDITION OF RS.18,77,813/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT ( TPA) IN COMPUTATION OF ARMS LENGTH PRICE (ALP) IN THE INTERNATIONAL TR ANSACTION. ON THE OTHER HAND, THE ASSESSEE, IN THE CROSS APPEAL, CHAL LENGED THE EXCLUSION OF E-CLREX SERVICES LTD. AND SOUGHT INCLUSION OF COSM IC GLOBAL LTD. FOR THE COMPARABLES CHOSEN BY THE TRANSFER PRICING OFFICER (TPO) AND ACCEPTED BY THE LD. CIT(A). 5. BRIEF FACTS OF THIS CASE ARE: ASSESSEE COMPANY I S WHOLLY OWNED SUBSIDIARY OF APTARA. DURING THE PROCESSING OF RET URN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09, THE C ASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENTLY, NOTICES U/SS 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE SERVED UPON THE ASSESSEE AN D IN RESPONSE THERETO, SHRI B. R. MEHRA, FCA /AR APPEARED AND THE CASE WAS DISCUSSED WITH HIM. 6. DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE C OMPANY BEING INTO THE BUSINESS OF SOFTWARE / I T ENABLED SERVICES, HA S ENTERED INTO INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRIS ES (AE) AND FORM 3CEB HAS BEEN FILLED AND CONSEQUENTLY REFERENCE HAS BEEN MADE TO THE TPO TO DETERMINE THE ALP OF INTERNATIONAL TRANSACTION. 7. THE ASSESSEE DETERMINED THE ARMS LENGTH PRICE O F INTERNATIONAL TRANSACTION OF I T ENABLED SERVICES PROVIDED TO ITS AE BY USING TNMM METHOD. THE OPERATING PROFIT TO THE TOTAL COST (O P/TC) RATIO, TAKEN AS THE PROFIT LEVEL INDICATOR (PLI) WAS COMPUTED AT 15.50% WHICH WAS SHOWN AS 4 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 AT ALP BY COMPARING WITH THE SIMILAR PLI OF 20.33% OF 15 COMPARABLES TAKEN AT AN AVERAGE. 8. THE TPO PASSED THE ORDER U/S 92CA(3) OF THE ACT AFTER MAKING TRANSFER PRICING (TP) ADJUSTMENT OF RS.18,77,813/- ON ACCOUNT OF ALP BY DETERMINING ARMS LENGTH MARGIN OF COMPARABLES @ 23. 29% ON THE GROUND THAT THERE IS VARIATION IN THE PRICES CHARGED BY TH E ASSESSEE BY MORE THAN 5% FOR THE VALUE OF INTERNATIONAL TRANSACTION, AN A DJUSTMENT OF RS.18,77,813/- FOR PROVISIONS OF I T ENABLED SERVI CES HAS BEEN MADE TO THE INCOME OF THE ASSESSEE FOR DIFFERENCE BETWEEN A LP AND PRICE CHARGED BY THE ASSESSEE FROM ITS AES. 9. IT IS NOTICED THAT THE COMPARABLE COMPANIES HAVI NG WORKED OUT BY ADOPTED WEIGHTED AVERAGE FOR THE CURRENT YEAR AND T HE IMMEDIATELY PRECEDING TWO YEARS AND THEREAFTER, THE ARITHMETIC MEAN OF WEIGHT AVERAGE HAS BEEN TAKEN FOR COMPUTATION OF ALP. PLI AND COM PARABLE HAS BEEN ARRIVED AT BY CONSIDERING THE DATA FOR THE ASSESSME NT YEARS 2005-06, 2006-07 AND 2007-08. 10. TPO AFTER EXAMINING 15 COMPARABLES SELECTED BY THE ASSESSEE AS WELL AS SUBMISSIONS MADE BEFORE HIM, FOUND COMPARAB LES IN 8 COMPANIES OUT OF 15 COMPARABLES TAKEN BY THE ASSESSEE AND FIN ALLY SELECTED 15 COMPARABLES TABULATED AT PAGE 16 OF HIS ORDER BY HI GHLIGHTING THEIR OP/TC PERCENTAGE. FOR READY REFERENCE, 15 FINALLY SELECT ED COMPARABLES ARE TABULATED AS UNDER: S.NO. NAME OF THE COMPANY OP/TC % 1 ADITYA BILA MINACS WORLDWIDE LTD. 0.55 2 BNR UDYOG LTD. (SEG) 39.22 3 CALIBER POINT BUSINESS SOLUTIONS LTD., 10.97 5 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 4 COSMIC GLOBAL LTD. 24.3 5 CROSSDOMAIN SOLUTIONS PVT. LTD., 26.96 6 DATAMATIX FINANCIAL LTD. (BPO DIVISION) 34.87 7 ECLERX SERVICES LTD. 66.25 8 GENESYS INTERNATIONAL CORPORATION LTD. 51.91 9 ICRA LTD. (SEG) 11.22 10 I SERVICE INDIA PVT. LTD. 10.92 11 MAPLE E SOLUTIONS LTD. 20.73 12 MOLD TEK TECHNOLOGIES LTD. 106.82 13 R SYSTEMS INTERNATIONAL LTD. (SEG) 4.3 14 SPANCO TELESYSTEMS AND SOLUTIONS LTD. 8.94 15 TRITON CORP. LTD. 23.5 AVERAGE 29.36 11. THE TPO ACCEPTED THE COMPUTATION MADE BY ASSESS EE OF OP/TC @15% DETAILED AS UNDER: PARTICULARS AMOUNT INCOME: I T ENABLED SERVICES 1,56,48,440 INTEREST RECEIVED ON BANK DEPOSITS TOTAL OPERATING INCOME 1,56,48,440 EXPENSES: PERSONAL EXPENSES 34,99,923 OTHER OPERATING AND ADMINISTRATIVE EXPENSES 99,61,9 05 DEPRECIATION 45,248 FRINGE BENEFIT TAX 41,357 TOTAL OPERATING COST 1,35,48,433 OPERATING PROFIT 21,00,007 OPERATING PROFIT/OPERATING COST (OP/OC 15.50% 12. THE TPO BY CONSIDERING THE ARMS LENGTH MARGIN O F THE COMPARABLES @ 23.36% WORKED OUT THE TP ADJUSTMENT T O THE TUNE OF RS.18,77,813/- AND CONSEQUENTLY, ASSESSING OFFICER MADE THIS ADDITION BY VIRTUE OF ORDER DATED 21.02.2012 U/S 143(3) OF THE ACT. 6 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 13. THE ASSESSEE CARRIED THE MATTER BEFORE LD. LD. CIT(A) BY FILING THE APPEAL WHO HAS DELETED THE ADDITION BY EXCLUDING BNR UDYOG LTD. (SEG ), DATAMATICS FINANCIAL LTD. (BPO DIVISION), GENESIS I NTERNATIONAL CORPORATION LTD., MAPLE E SOLUTIONS LTD., MOULD TEK TECHNOLOGIES LTD. AND TRITON CORP. LTD. 14. ON THE OTHER HAND, ASSESSEE BY FILING THE CROSS APPEAL, SOUGHT EXCLUSION OF ECLERX SERVICES LTD. FROM THE LIST OF FINAL COMPARABLES AND SOUGHT INCLUSION OF COSMIC GLOBAL LTD. AND C G GLAC K SOFTWARE. 15. WE HAVE HEARD BOTH THE LD. AUTHORIZED REPRESENT ATIVES, GONE THROUGH THE MATERIAL PLACED ON RECORD IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE AND ORDERS PASSED BY LOWE R AUTHORITIES. 16. UNDISPUTEDLY, THOUGH THE ASSESSEE AS WELL AS TP O SELECTED TNMM AS MOST APPROPRIATE METHOD FOR COMPUTATION OF TP AD JUSTMENT OF INTERNATIONAL TRANSACTION AT ASSESSEES OWN ALP WIT H ITS OP/TC @ 15.50%. THE REVENUE BY FILING THE APPEAL CHALLENGE D DELETION OF ADDITION OF RS.18,77,813/- MADE BY LD. CIT(A) ON ACCOUNT OF TPA BY EXCLUDING BNR UDYOG LTD. (SEG ), DATAMATICS FINANCIAL LTD. (BPO DIVISION), GENESIS INTERNATIONAL CORPORATION LTD., MAPLE E SOLUTIONS L TD., MOULD TEK TECHNOLOGIES LTD. AND TRITON CORP. LTD. ON THE OTH ER HAND, ASSESSEE BY FILING CROSS OBJECTIONS SOUGHT EXCLUSION OF ECLERX SERVICES LTD. AND INCLUSION OF COSMIC GLOBAL LTD. AND C G GLACK SOFTW ARE. 17. THE ISSUE AS TO THE COMPARABILITY AND DISAGREEM ENT BETWEEN THE PARTIES IS TO BE DETERMINED ON THE BASIS OF TP STUD Y REPORT OF THE ASSESSEE, AVAILABLE ON THE RECORD, WHICH HAS BEEN INCORPORATE D IN THE TPO ORDER. A PERUSAL OF THE MASTER SERVICE AGREEMENT DATED 01.10 .2003 VALID FOR THE YEAR UNDER ASSESSMENT AVAILABLE AT PAGES 263 TO 276 OF THE PAPER BOOK 7 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 SHOWS THAT ASSESSEE COMPANY IS ENGAGED IN PROVIDING ELECTRONIC PUBLISHING SERVICES FOR ANY MEDIA FORMAT, INCLUDING WEB, ONLINE DATABASE, E-BOOKS OR EVEN WIRELESS DEVICES. TBES S PECIALIZES IN PROVISION OF TECHNICAL SERVSICS SUCH AS DATA CONVER SION, WEB PAGE CONSTRUCTION, DATA ENTRY / KEYBOARDING NEW DELHI SO FTWARE DEVELOPMENT. TBES WILL PROVIDE SUCH SERVICES TO TH E COMPANY, WHERE AND WHEN REQUESTED. UNDER THE AGREEMENT, THE ASSESSEE HAS UNDERTAKEN ITS STAND AND INCLUDED SERVICES DESCRIBE D IN EXHIBIT WHICH STATEMENT OF WORK EMBODYING THE TERMS AND RELATIONS HIP BETWEEN THE ASSESSEE AND TECH ENTERPRISES INC. PARA 2 OF THE EXHIBIT A CLARIFIES THAT THE ASSESSEE IS RESPONSIBLE FOR PROVIDING SERVICES DESCRIBED IN PARA 3 WHICH READS AS UNDER: THE NATURE OF WORK THAT TECHBOOKS INTERNATIONAL PV T. LTD. PERFORMS IS ELECTRONIC PUBLISHING AND PRE PRESS SER VICES INCLUDING PRINT READY FILES TO PRINTERS AND ELECTRONIC DELIVE RABLES FOR ON-LINE PUBLISHING, IN ADDITION TO SERVING THE PUBLISHERS, TECHBOOKS ALSO WORKS WITH CORPORATE AND INFORMATION AGGREGATORS TO CONVERT DATA FROM ONE FILE FORMAT TO ANOTHER WHICH INCLUDE CONVE RSION OF LEGACY MATERIAL TO ELECTRONIC FORMATS, CONVERSION FROM ONE ELECTRONIC TO ANOTHER FOR VARIOUS NEEDS OF INFORMATION PROCESSING , DATA MANAGEMENT, STORAGE, ARCHIVAL AND RE-PURPOSING OF I NFORMATION FOR VARIOUS END USES AS REQUIRED BY THE CUSTOMERS. 18. THE SERVICES MADE AVAILABLE BY THE ASESSEES AE , AND THE LIST OF THE CUSTOMERS IS GIVEN IN PARA 3.2 OF THE AGREEMENT, WH ICH INCLUDE BLACKWELL PUBLISHING, JOHN WILLEY AND SONS LTD., ELSEVIER SCI ENCE, CAMBRIDGE UNIVERSITY PRESS, SPRINGER SBM, I ACHIEVES AND PEAR SON EDUCATION. PARA 5 OF THE AGREEMENT EXPLAINS THE MANNER OF REMUNERAT ION TO BE PAID TO THE ASSESSEE @ 100% OF ALL COSTS AND EXPENSES INCURRED IN THE PROVISIONS OF SUCH SERVICES PLUS AN APPROPRIATE AMOUNT OF MARK UP ON THE UTILIZED 8 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 CAPACITY COST. THE WORK CARRIED OUT BY THE ASSESSE E IS ELECTRONIC PUBLISHING AND PRE-PRESS SERVICE INCLUDING PRINT RE ADY FILES TO PRINTERS AND ELECTRONIC DELIVERABLES FOR ONLINE PUBLISHING BY CO NVERTING DATA FROM ONE FILE TO ANOTHER FORMAT AND STORING OF SUCH DATA FOR THE ULTIMATE USE AS REQUIRED BY THE CUSTOMERS. IN THE BACKDROP OF THE AFORESAID FUNCTIONAL PROFILE OF THE ASSESSEE, GROUND RAISED BY THE REVEN UE AS TO THE DELETION OF ADDITION OF RS.18,77,813/- ON ACCOUNT OF TPA BY EXC LUDING BNR UDYOG LTD. (SEG ), DATAMATICS FINANCIAL LTD. (BPO DIVISION), GENESIS INTERNATIONAL CORPORATION LTD., MAPLE E SOLUTIONS L TD., MOULD TEK TECHNOLOGIES LTD. AND TRITON CORP. LTD. ARE TAKEN F OR DISCUSSION AS UNDER: A. BNR UDYOG LTD. (SEG): THIS COMPARABLE HAS BEEN CHOSEN BY TPO BUT EXCLUDED BY LD. CIT(A) FROM THE LIST OF COMPARABLES TO DETERMINE TH E TRANSFER PRICING ADJUSTMENT (TPA) OF INTERNATIONAL TRANSACTION. THE REVENUE CHALLENGED EXCLUSION OF THIS COMPARABLE ON THE GROUND THAT THI S COMPARABLE HAS BEEN EXCLUDED BY LD. CIT(A) ARBITRARILY AND ON THE BASIS OF RELATED PARTIES TRANSACTION (RPT) WITHOUT MAKING ANY INVESTIGATION NOR LD. CIT(A) CALLED ANY EVIDENCE TO ARRIVE AT THE IMPUGNED DECISION. T HE ASSESSEE HAS CHALLENGED THIS COMPARABLE ON THE GROUND THAT THIS COMPARABLE COMPANY HAS RPT OF 75% AND AS SUCH, IS LIABLE TO BE REJECTE D. TPO REJECTED THE CONTENTIONS RAISED BY THE ASSESSEE ON THE GROUND THAT AS PER ANNUAL REPORT, THE COMPARABLE COMPANY H AS TOTAL TURNOVER OF ONLY RS.1.98 CRORES, WHICH INCLUDES RS.1.33 CRORES IN THE SEGMENT OF MEDICAL TRANSCRIPTION. TPO FURTHER STATED THAT AS PER AS-18 AT PAGE 33 OF THE ANNUAL REPORT EXPLAINING THE RELATED PARTYS TR ANSACTIONS DURING THE YEAR UNDER CONSIDERATION. THERE WERE PURCHASES, SA LES AND SERVICES WITH 9 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 ENTERPRISES HAVING COMMON MANAGEMENT PERSONNEL AT R S.14.97 CRORES AND AS SUCH THIS IS NOT A RELATED PARTY TRANSACTION. O N THE OTHER HAND, LD. CIT(A) BY GIVING GENERAL OBSERVATIONS, WITHOUT GOIN G INTO ANY EVIDENCE, RELIED UPON BY THE TPO, HELD THAT IN VIEW OF ABNORM AL RPT, THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE COMPANY. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSE E HAS RAISED OBJECTION TO THE INCLUSION OF THIS COMPANY AS COMPA RABLE COMPANY ON THE GROUND THAT ITS RPT IS 75%, WHICH WAS REQUIRED TO BE DECIDED BY EXAMINING THE RPT PERCENTAGE, WHICH IS UNDISPUTEDLY NOT AVAILABLE ON RECORD. CIT(A) HAS ERRED IN EXCLUDING THE SAME WITH OUT EXAMINING THE DATA. TPO AS WELL AS CIT(A) WERE EMPOWERED TO CALL THE DATA BY EXERCISING POWERS U/S 133(6) OF THE ACT, WHICH THEY HAVE NOT EXERCISED TO DECIDE THE RPT OF COMPARABLE COMPANY ALLEGED TO BE @75% BY THE ASSESSEE ON THE BASIS OF RPT PERCENTAGE ONLY. CIT(A ) HAS FAILED TO POINT OUT THE MATERIAL ON THE BASIS OF WHICH HE HAS ARRIV ED AT THE CONCLUSION AS TO RPT OF 75% OF THE COMPARABLE COMPANY. SO, WE ARE OF THE CONSIDERED VIEW THAT WHEN FUNCTIONAL COMPARABILITY OF THIS COM PANY IS NOT IN DISPUTE AND RPT PERCENTAGE IS REQUIRED TO BE DETERMINED ON THE BASIS OF DATA, IF AVAILABLE, THE MATTER IS REQUIRED TO BE RESTORED TO THE FILE OF TPO TO DECIDE THE ISSUE AFRESH ON THE BASIS OF RPT OF BNR UDYOG L TD. AS COMPARABLE COMPANY. B. DATAMATIX FINANCIAL LTD. : TPO HAS CHOSEN THIS COMPANY AS COMPARABLE BY MAKIN G FOLLOWING OBSERVATIONS: THIS COMPANY CAN ALSO BE USED AS COMPARABLE. THE SERVICES THAT IT IS PROVIDING ARE VERY MUCH I T ENABLED SERVICES. 10 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 THE ASSESSEE CHALLENGED THE INCLUSION OF THIS COMPA NY AS COMPARABLE COMPANY ON THE GROUNDS INTER-ALIA THAT T HIS IS A FUNCTIONALLY DIFFERENT COMPANY; THAT ITS SEGMENTAL INFORMATION IS NOT AVAILABLE AND THIS COMPANY HAD SHOWN 450% PROFITS IN ITS P & L ACCOUNT MEANING THEREBY, IT IS HIGHLY PROFITABLE BUSINESS; THAT ASSESSEE HAS NOT BEEN PROVIDED WITH ANY OPPORTUNITY TO CROSS EXAMINE THE EVIDENCE TAKEN ON RECORD; THAT THERE IS NO MATERIAL TO REACH OUT AT THE CONCLUSION THAT AS TO HOW 34.8% PROFIT HAS BEEN COMPUTED BY THE TPO. LD. CIT(A) BY ACCEPT ING THE CONTENTION OF THE ASSESSEE, EXCLUDED THIS COMPARABLE COMPANY O N ACCOUNT OF FUNCTIONAL DISPARITY AS WELL AS ON GROUND OF NON AV AILABILITY OF THE AUDITED SEGMENTAL INFORMATION. FROM THE PERUSAL OF MATERIAL AVAILABLE ON RECORD R ELIED UPON BY THE TPO IN ARRIVING AT THE DECISION TO INCLUDE THE DATA MATIX FINANCIAL SERVICES AS COMPARABLE COMPANY, IT IS APPARENTLY CL EAR THAT THE TPO HAS CHOSEN THIS COMPARABLE ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS BY IGNORING THE FACT THAT THE COMPARABLE COMPANY HAS S HOWN 450% PROFIT AND FALLS IN THE CATEGORY OF HIGHLY PROFITABLE BUSINESS AND AS SUCH, IS LIABLE TO BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANY. T PO IN HIS ANALYSIS FOR FINALLY CHOOSING THIS COMPANY AS COMPARABLE, HAS CA TEGORICALLY TAKEN DATAMATIX FINANCIAL LTD. AS BPO DIVISION. THERE IS NO SEGMENTAL INFORMATION AVAILABLE ON THE FILE TO MAKE OUT IF TH IS COMPARABLE COMPANY IS A BPO DIVISION. THIS IS A MYSTERY AS TO HOW THE TPO HAS SHOWN OP/TC @ 34.87% OF THIS COMPARABLE COMPANY AS SHOWN IN PAR A 3.7 OF THE ORDER. EVEN LD. D.R. HAS FAILED TO ANSWER AS TO HOW THIS F IGURE HAS COME OUT ON RECORD. WHEN THE SEGMENTAL INFORMATION REGARDING I T ENABLED SERVICE IS 11 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 NOT AVAILABLE, IT IS BEYOND COMPREHENSION, AS TO HO W THE TPO HAS CHOSEN THIS COMPANY AS COMPARABLE COMPANY. AT THE SAME TI ME, CIT(A) HAS ALSO SUMMARILY EXCLUDED THIS COMPARABLE AS PER CONTENTIO N OF THE ASSESSEE WITHOUT EXAMINING IF THIS COMPANY IS A BPO DIVISION . SO, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE RESTORED TO THE TPO TO VERIFY IF THE FIGURES RELIED UPON BY HIM ARE OF BPO DIVISION. IF THE COMPARABLE COMPANY IS NOT ASCERTA INED AS BPO DIVISION THEN IT IS TO BE EXCLUDED AND IN CASE FIGURES RELIE D UPON BY TPO ARE OF BPO DIVISION THEN IT IS TO BE INCLUDED AS A COMPARA BLE COMPANY. IN CASE, THE FIGURES ARE OF ENTITY LEVEL, IT IS TO BE EXCLUD ED. C. GENESYS INTERNATIONAL CORPORATION LTD: THIS COMPARABLE IS ALSO CHOSEN BY TPO BY TAKING OP/ TC @51.91%. TPO HAS CHOSEN THIS COMPANY AS COMPARABLE ON THE BASIS OF ANNUAL REPORT BY STATING THAT THE FUNCTIONS OF THIS COMPANY IS COMPARABLE TO THE ASSESSEE AND IT PASSES ALL THE FILTERS. EVE N OTHERWISE, THIS COMPARABLE COMPANY IS HAVING OP/TC @ 51.91% AND FAL LING IN THE CATEGORY OF SUPER PROFIT MAKING COMPANY. TPO REJEC TED THIS ARGUMENT OF ASSESSEE BY APPLYING THE LOGIC THAT SUPER NORMAL PR OFIT MAKING COMPANIES ARE ALSO PART OF THE INDUSTRY AND HENCE, CANNOT BE REJECTED MERELY BECAUSE THEY HAVE EARNED SUCH PROFIT UNLESS PECULIAR ECONOM IC CIRCUMSTANCES OF SUCH COMPANY ARE POINTED OUT. IT IS SETTLED PRINCI PLE THAT FOR TP ADJUSTMENT, TWO COMPANIES CAN ONLY BE CONSIDERED AS COMPARABLES WHEN BOTH ARE HAVING OVER ALL SIMILAR FUNCTIONS AND THEI R OP/TC MARGIN IS ALSO NEAR TO EACH OTHER. HOWEVER, LD. CIT(A) BY ACCEPTING THE CONTENTION O F THE ASSESSEE, EXCLUDED THIS COMPARABLE FROM TP STUDY ON THE GROUN D OF FUNCTIONAL 12 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 DISSIMILARITY BETWEEN THE ASSESSEE COMPANY AND COMP ARABLE COMPANY. THE COMPARABLE COMPANY, GENESYS, HAS BEEN USING HIG HLY SPECIALIZED WORK FORCE COMPRISING OF URBAN PLANNER, CARTOGRAPHERS, REMOTE SENSING SCIENTISTS, PHOTOGRAMMETRISTS, CIVIL ENGINE ERS, FIELD SURVEY PERSONNEL AND ROCKET SCIENTISTS AND RELATED COMPUTE R BASED SERVICES AND IT HAS BEEN MAKING SUBSTANTIAL INVESTMENT IN RESEARCH AND DEVELOPMENT. EVEN FROM THE PERUSAL OF ANNUAL REPOR T OF THE COMPARABLE COMPANY FOR THE YEAR 2007-08 BROUGHT OUT ON RECORD BY LD. A.R., IT IS PROVED THAT SKILL AND EXPERTISE OF THE EMPLOYEES OF THE COMPARABLE COMPANY I.E. GENESYS IS DIAMETRICALLY OPPOSITE TO T HE SKILL AND EXPERTISE OF EMPLOYEES OF THE ASSESSEE COMPANY AS THE ASSESSE E COMPANY IS PRIMARILY HAVING GRADUATES VIS--VIS THE MOST SKILL ED WORKFORCE WITH THE COMPARABLE COMPANY. ANNUAL REPORT OF GENESYS FOR T HE ASSESSMENT YEAR 2007-0-8 DESCRIBES IT S WORKFORCE AS UNDER: TALENT ECO SYSTEM WITHIN GENESYS INCLUDE URBAN PLA NNERS, CARTOGRAPHERS, REMOTE SENSING SCIENTISTS, PHOTOGRAM METRISTS, CIVIL ENGINEERS, FIELD SURVEY PERSONNEL AND EVEN ROCKET S CIENTISTS, GIVING THE COMPANY A UNIQUE AND FORMIDABLE SET OF SKILLS I N ALL KINDS OF LAND BASE WORK. HOWEVER, ON THE OTHER HAND, ASSESSEE COMPANY IS INT O THE BUSINESS OF ELECTRONIC PUBLISHING SERVICES LIKE DATA CONVERS ION AND COPYING IN DIFFERENT FORMATS WHICH ARE CLASSIFIED AS I T ENABL ED SERVICES (ITES). FROM THE BARE PERUSAL OF FUNCTIONAL PROFILES OF THE ASSESSEE COMPANY VIS A VIS COMPARABLE COMPANY IT IS PROVED THAT BOTH ARE F UNCTIONALLY DISSIMILAR AND AS SUCH, CANNOT BE TAKEN A COMPARABLE COMPANY F OR TPA. SO, WE HEREBY AFFIRM THE FINDINGS RETURNED BY LD. CIT(A). 13 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 D. MAPLE E SOLUTIONS LTD.: TPO HAS CHOSEN THIS COMPARABLE BY MAKING FOLLOWING OBSERVATIONS: THE COMPARABLE HAS BEEN REJECTED WHILE PROVIDING T HE CURRENT YEAR MARGINS ON THE GROUND THAT IT HAS NIL SERVICE INCOME DURING THE YEAR. HOWEVER THE ANNUAL REPORT OF THE COMPARA BLE SHOWS THAT THE FUNCTIONS OF THIS COMPANY ARE COMPARABLE TO THE ASSESSEE. THE COMPANY PASSES ALL THE FILTERS. IT CAN BE USED AS A COMPARABLE. HOWEVER, THE ASSESSEE CHALLENGED THE INCLUSION OF T HIS COMPANY ON THE GROUNDS INTER ALIA THAT THIS COMPANY DOES NOT Q UALIFY 75% SERVICE INCOME FILTER AND IS PERFORMING NON COMPARABLE SERV ICES LIKE TRADING IN I T PERIPHERALS AND I T SOFTWARE AND DISTRIBUTION OF WIRELESS COMMUNICATION. LD. CIT(A) BY RELYING UPON THE ORDE R PASSED BY ITAT IN THE CASE OF CRM SERVICES INDIA PVT. LTD. VS ITO (I.T.A.NO. 4796/DEL/2010) , REJECTED THIS COMPARABLE FOR THE FOLLOWING REASON S: FURTHER, THE BUSINESS REPUTATION OF RASTOGI GROUP, OWNING MAPLE E SOLUTIONS AND TRITON CORPORATION, IS UNDER SERIOU S INDICTMENT. THEY ARE ALSO CARRYING ON THE BUSINESSES OF DATA PR OCESSING SERVICES AND ITES SERVICES APART FROM BPO SERVICES. IN VIEW OF A QUESTION MARK ON THE REPUTATION OF THE OWNER, ALBEI T FOR EARLIER YEARS, IT WOULD BE UNSAFE TO TAKE THEIR RESULTS FOR COMPARISON OF THE PROFITABILITY OF THE ASSESSEE. WE ARE OF THE VIEW THAT THIS COMPANY HAS BEEN RIGHT LY EXCLUDED AS COMPARABLE COMPANY ON THE GROUND THAT THIS COMPANY IS UNDER SEVERE INDICTMENT AS HAS BEEN HELD BY THE COORDINATE BENCH OF ITAT IN THE JUDGEMENT IN CASE OF CRM SERVICES INDIA PVT. LTD. (SUPRA) AND ALSO ON THE GROUND THAT OUT OF THE TOTAL SALE OF 33.64 CROR ES, RS.13.66 CRORES IS FROM I T PERIPHERALS AND RS.2.21 CRORES FROM IT SOF TWARE AND ITS SEGMENTAL PROFITABILITY IS NOT AVAILABLE IN THE ANN UAL REPORT. SO, KEEPING 14 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 IN VIEW THE LOW CREDIBILITY OF THE COMPARABLE COMPA NY, WHICH IS UNDER SERIOUS INDICTMENT, THE SAME IS FUNCTIONALLY DISSIM ILAR TO THE ASSESSEE COMPANY, WE HEREBY AFFIRM THE FINDINGS OF LD. CIT(A ) TO EXCLUDE THIS COMPANY AS COMPARABLE COMPANY FOR TPA. D. MOLD-TEK TECHNOLOGIES LTD.: TPO HAS CHOSEN THIS COMPANY AS COMPARABLE BY MAKIN G FOLLOWING OBSERVATIONS: THIS COMPANY CAN ALSO BE USED A COMPARABLE. THE S ERVICES THAT IT IS PROVIDING ARE VERY MUCH I T ENABLED SERVICES. T HE ANNUAL REPORT OF THE COMPARABLE WAS ANALYZED AND SEEN THAT IT HAS SERVICE INCOME OF 95%, EXPORTS EARNING OF 95.05% AND RPT OF 20.45% . AS THE COMPANY PASSES ALL THE FILTER, IT WILL BE USED AS A COMPARABLE. THE ASSESSEE CHALLENGED THIS COMPARABLE ON THE GRO UNDS INTER ALIA THAT THE COMPANY IS ENGAGED IN PROVIDING HIGH END E NGINEERING CONSULTANCY SERVICES; THAT THIS COMPANY HAS ALSO EX CEPTIONAL YEAR OF OPERATION DUE TO THE ACQUISITION OF CROSSROADS DETA ILING INC. USA AND IS EARNING SUPER NORMAL PROFITS. BUT THE TPO STATED T O HAVE APPLIED BROADER CRITERIA WHILE ACCEPTING OR REJECTING THE COMPANY A S COMPARABLE SO FAR AS FUNCTIONAL COMPARABILITY OF THE COMPANY IS CONCERNE D. LD. CIT(A) HAS EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES BY MAKING FOLLOWING OBSERVATIONS: THIS COMPANY AS TWO SEGMENTS, ITES AND PLASTIC DI VISION. ITES IS HAVING 100% EXEMPTION WHEREAS ON THE PROFIT S OF PLASTIC DIVISION THE COMPANY' HAS TO PAY TAX. IT IS NOT UNC OMMON TO SEE SUCH FINANCIAL RESULTS WHERE THE TAX EXEMPT UNIT HA S EXTRAORDINARY PROFIT WHILE THE TAXPAYING UNIT SUFFERS LOSSES UNDE R THE SAME 15 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 MANAGEMENT CONTROL. THE EXTRAORDINARY PROFIT IN THE ITES SEGMENT REACHING UPTO 106.82% FOR THE FY 2007-08 IS A POINT ER IN THIS DIRECTION. IN THE SUBSEQUENT AUDITED ACCOUNTS, THIS FACT OF ENDING THE TAX HOLIDAY FOR ITES SEGMENT IS MENTIONED BY TH E ANNUAL REPORT AND SOME CORRECTIVE ENTRIES HAVE BEEN PASSED. THE EMPLOYEE COST FILTER MIGHT NOT HAVE BEEN USED B Y THE TPO BUT IN THE PRESENCE OF EXTRAORDINARY DEVIATION FROM THE RATIO OF EMPLOYEE COST TO SALES OF THE APPELLANT'S CASE C ANNOT BE SIMPLY BRUSHED ASIDE. IN THE CASE OF MOLD-TEK TECHNOLOGIES LTD IT IS 7.6%. BY IMPLICATION, EITHER MOLD-TEK TECHNOLOGIES LTD. H AS EMPLOYED LARGER CAPITAL AGAINST THE MAN POWER TO GET THE KIN D OF PRODUCTIVITY TO GENERATE PROFIT OF 106.82% OR THE EMPLOYEES ARE SO EXTRAORDINARY THAT THEY HAVE ACCEPTED THE LOWER WAG ES AND STILL WORK SO HARD FOR THE COMPANY TO GENERATE THAT KIND OF PROFITABILITY. IN EITHER SITUATION, THE COMPANY BECOMES NOT COMPAR ABLE TO THE APPELLANT. EVEN ON FUNCTIONALITY GROUND MOLD-TEK TE CHNOLOGIES LTD. IS NOT COMPARABLE BECAUSE AS COMPARED TO THE A PPELLANT THIS COMPARABLE IS MAINLY DEALING IN ENGINEERING DESIGN AND DETAILING SERVICES, WEBSITE DESIGN SERVICES, SOFTWARE TESTING , IN-HOUSE SOFTWARE DEVELOPMENT ETC. - THEREFORE, I HOLD THAT THIS COMPANY SHOULD BE EXC LUDED FROM THE LIST OF COMPARABLES. WHEN UNDISPUTEDLY, THE COMPARABLE COMPANY HAS TWO S EGMENTS ONE ITES AND ANOTHER PLASTIC DIVISIONS AND ITES DIV ISION IS HAVING 100% EXEMPTION AND THE COMPANY HAS ONLY TO PAY TAX ON TH E PROFITS OF ITS PLASTIC DIVISION AND THUS EARNING PROFITS @ 106.82% FOR THE FINANCIAL YEAR 2007- 08 IT FALLS IN THE CATEGORY OF UNITS EARNING EXTRA ORDINARY PROFITS. EVEN OTHERWISE, COMPARABLE COMPANY IS FUNCTIONALLY DISSI MILAR TO THE ASSESSEE COMPANY BECAUSE COMPARABLE COMPANY IS DEALING IN EN GINEERING DESIGNS AND DETAILING SERVICES, WEB DESIGNING SERVICES, SOF TWARE TESTING, IN HOUSE SOFTWARE DEVELOPMENT ETC. WHEREAS, FUNCTIONALLY THE ASSESSEE COMPANY IS PROVIDING ELECTRONIC PUBLISHING SERVICES SUCH AS CO MPUTERIZED DATA 16 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 CONVERSION, WE PAGE CONSTRUCTION, DATA ENTRY / KEY BOARDING, COPY EDITING AND CAD / CIVIL MAPPING SERVICES TO ITS AES, WHICH ARE DIAMETRICALLY DISSIMILAR TO EACH OTHER. SO, WE ARE OF THE CONSIDERED VIEW THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE COMPANY, CONSEQUENTLY FINDING S RETURNED BY LD. CIT(A) QUA THIS COMPANY ARE HEREBY AFFIRMED. E. TRITON CORP. LTD.: THIS IS ASSESSEES OWN COMPARABLE AND THE TPO HAS ACCEPTED IT WITHOUT ASSIGNING ANY REASONS. HOWEVER, LD. CIT(A) EXCLUDED THIS COMPARABLE ON THE GROUND THAT THE TPO WITHOUT HAVIN G ANY SEGMENT PROFITABILITY CONSIDERED THAT THE COMPARABLE COMPAN Y SOLD I T PERIPHERALS OF RS.61.578 CRORES AND OTHER AT RS.4.03 CRORES OF THE TOTAL SALE OF RS.145.76 CRORES. SINCE THE COMPARABLE COMPANY DOE S NOT QUALIFY FOR SERVICE INCOME FILTER APPLIED BY THE TPO, THE LD. C IT(A) HAS RIGHTLY CONSIDERED THE SAME AS UNCOMPARABLE COMPANY VIS--V IS ASSESSEE COMPANY. HOWEVER APART FROM FUNCTIONAL DISSIMILA RITY, THIS COMPANY IS ALSO LIABLE TO BE EXCLUDED ON THE GROUND THAT THIS COMPANY IS A FRAUD COMPANY AS HAS BEEN HELD BY ITAT DELHI BENCH B NE W DELHI IN CASE ENTITLED ITO VS CRM SERVICES INDIA (P) LTD IN I.T.A.NO. 4068/DEL/2009, OPERATIVE PART OF WHICH FOR READY REFERENCE, IS REP RODUCED AS UNDER: 17.2 IN REGARD TO MAPLE E SOLUTIONS & TRITON CORPO RATION, IT IS RASTOGI FAMILY MENTIONED IN THE REPORT OF THE TPO T HAT THE FIRST NAMED COMPANY IS CARRYING ON THE BUSINESS OF RENDER ING DATA PROCESS SERVICES AND BPO SERVICES. OBJECTION HAS BE EN RAISED THAT THE DIRECTORS OF THE COMPANY WERE INVOLVED IN A FRA UD. THIS COMPANY IS A WHOLLY OWNED SUBSIDIARY OF HARYANA FIB RES LTD., WHOSE PROMOTERS WERE INVOLVED IN FRAUD AS PER NEWS PAPER - 17 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 REPORT AND THE CBI REPORT. THE TPO MENTIONED THAT ACCORDING TO CBI BULLETIN OF DECEMBER, 2008, IT WAS REPORTED THA T THE CHEATED GOVERNMENT OF INDIA TO THE TUNE OF RS. 54.00 CRORE IN LATE 1980S AND MID 1990S. RASTOGI BROTHERS HAD FLOATED 14 FIRM S FOR THE PURPOSE OF EXPORT OF BICYCLE ARTS TO RUSSIA AND HON G KONG. THEY WERE ARRESTED BY THE FBI AND U.K. AUTHORITIES AND S ENTENCED TO IMPRISONMENT FOR MORE THAN 9 YEARS. HOWEVER, THE RE PORT NOWHERE CONTAINS THE NAME OF THIS COMPANY. ACCORDING TO THE DATA AVAILABLE AT PROWESS DATA BASE, IT IS ENGAGED IN THE BUSINESS OF CALL CENTRE ACTIVITIES; IT HAD SET UP 100% EOU AND IT HOLDS REG ISTRATION UNDER SECTION 10-B. IN REGARD TO THE SECOND MENTIONED COM PANY, IT WAS SUBMITTED THAT IT IS ENGAGED IN TWO ACTIVITIES I.E. , TELECOM SECTOR AND BPO SECTOR. IT IS ALSO COMPANY OF RASTOGI GROUP AND , THEREFORE, OTHER OBJECTIONS ARE THE SAME AS IN THE CASE OF FIR ST MENTIONED COMPANY. THE TPO MENTIONED THAT THE FROM ITES ACTIV ITIES WHICH ARE COMPARABLE. SO, WE ARE OF THE CONSIDERED VIEW THAT THIS COMPAR ABLE COMPANY BEING A FRAUD COMPANY CANNOT BE TAKEN AS COMPARABLE AND AS SUCH, FINDINGS RETURNED BY LD. CIT(A) ARE HEREBY AFFIRMED . 19. THE ASSESSEE, BY FILLING THE CROSS OBJECTIONS, SOUGHT EXCLUSION OF ECLERX SERVICES LTD. AND SOUGHT INCLUSION OF COSMIC GLOBAL LTD. FROM THE FINAL LIST OF COMPARABLES. NOW, IN ORDER TO DECIDE THE CROSS OBJECTIONS FILED BY THE ASSESSEE, WE ARE TO EXAMINE AS TO WHETHER EC LERX SERVICES LTD. IS LIABLE TO BE EXCLUDED FROM THE LIST OF COMPARABLE C OMPANIES AND COSMIC GLOBAL LTD. AND CG GLACK SOFTWARE ARE LIABLE TO BE INCLUDED IN THE LIST OF COMPARABLES AS CONTENDED BY THE ASSESSEE. (I) ECLERX SERVICES LTD.: TPO CHOSEN THIS COMPANY AS COMPARABLE BY MAKING FOL LOWING OBSERVATIONS: 18 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 THE ANNUAL REPORT OF THE COMPARABLE FOR F.Y. 2007- 08 WAS ANALYZED AND SEEN THAT IT HAS SERVICE INCOME OF 94. 76%, EXPORTS EARNING OF 83.95% AND RPT IS 11.54%. AS THE COMPAN Y PASSES ALL THE FILTERS, IT WILL BE USED AS A COMPARABLE. TPO BY TAKING OP/TC RATIO @ 66.25% CHOSEN THIS COMP ANY AS COMPARABLE ON THE BASIS OF ANNUAL REPORT FOR THE FI NANCIAL YEAR 2007-08 SHOWING SERVICE INCOME @ 94.76% EXPORT EARNINGS AT 83.95% AND RPT @ 11.84% AND STATED TO HAVE PASSED ALL THE FILTERS. THE ASSESSEE SOUGHT TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES O N THE GROUND OF AMALGAMATION AND ON THE GROUND THAT THIS IS A COMPA NY EARNING SUPER NORMAL PROFITS @ 66.25%. BUT LD. CIT(A) RETAINED T HIS COMPANY AS COMPARABLE AS THE GROUND OF FUNCTIONAL DIFFERENCE P OINTED OUT BY THE ASSESSEE IS NOT SIGNIFICANT ENOUGH TO REJECT THIS C OMPANY AS COMPARABLE. LD.A.R. RELIED UPON THE ORDER PASSED BY ITAT DELHI BENCH I IN I.T.A.NO.5207/DEL/2013 ORDER DATED 10.06.2015, IN C ASE CITED AS XCHANGING TECHNOLOGY SERVICES INDIA PVT. LTD. VS AC IT AND REFERRED PARA 17 & 18, WHICH IS REPRODUCED FOR READY REFEREN CE AS UNDER: 17. IN VIEW OF ABOVE, WE ARE INCLINED TO DEMOLISH CONTENTION OF THE LD. DR THAT THIS COMPANY IS INCLUDABLE AS A SUI TABLE COMPARABLE BECAUSE IT WAS INCLUDED BY THE ASSESSEE IN ITS LIST PLACED BEFORE THE TPO IN THE TP STUDY. WE ARE OF TH E CONSIDERED VIEW THAT MERELY BECAUSE THE ASSESSEE COMPANY INCLU DED THIS COMPANY IN THE LIST OF COMPARABLES THE FUNCTIONALLY DIFFERENT COMPANY CANNOT BE ACCEPTED AT SUITABLE COMPARABLES. WHEN THE ASSESSEE IS CLAIMING THAT THE COSMIC GLOBAL LTD. WA S INCLUDED DUE TO INADVERTENT MISTAKE IN THE SET OF COMPARABLES PR OPOSED BY THE ASSESSEE THEN THIS BONA FIDE ACT OF THE ASSESSEE CA NNOT BE A REASON TO PROHIBIT THE ASSESSEE FROM CLAIMING AND CONTENDI NG THAT IT WAS INCLUDED BY MISTAKE. IN OUR CONSIDERED OPINION, THE REVENUE AUTHORITIES AND THE TRIBUNAL HAS TO SEE THAT WHETHE R THE COMPANY IS, IN FACT, FUNCTIONALLY COMPARABLE OR NOT. WE FURTHER MAKE IT CLEAR 19 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 THAT THE OBJECTION TO THE INCLUSION OF A PARTICULAR COMPARABLE CANNOT BE REJECTED AT THRESHOLD ONLY BECAUSE THE SA ME WAS INCLUDED BY THE ASSESSEE UNDER A BONA FIDE MISTAKE IN THE LI ST OF PROPOSED COMPARABLE. ON THIS ISSUE, WE RESPECTFULLY FOLLOW T HE VIEW TAKEN BY THE ITAT DELHI IN THE CASE OF MERCER CONSULTING (I NDIA) PVT. LTD. VS. DCIT (SUPRA) WHEREIN SIMILAR CONTENTION OF THE REVENUE HAS BEEN DISMISSED IN PARA 12.2, WHICH READS AS UNDER:- '12.2. WE ARE DISINCLINED TO SUSTAIN THE LEGAL OBJE CTION TAKEN BY THE LD. DR THAT THE ASSESSEE SHOULD BE PROHIBITE D FROM TAKING A STAND CONTRARY TO THE ONE WHICH WAS TAKEN AT THE STAGE OF THE TP STUDY OR DURING THE COURSE OF PROCE EDINGS BEFORE THE AUTHORITIES BELOW. IT GOES WITHOUT SAYIN G THAT THE OBJECT OF ASSESSMENT IS TO DETERMINE THE INCOME IN RESPECT OF WHICH THE ASSESSEE IS RIGHTLY CHARGEABLE TO TAX. AS THE INCOME NOT ORIGINALLY OFFERED FOR TAXATION, IF OTHERWISE C HARGEABLE, IS REQUIRED TO BE INCLUDED IN THE TOTAL INCOME, IN THE SAME BREATH, ANY INCOME WRONGLY INCLUDED IN THE TOTAL IN COME, WHICH IS NOT OTHERWISE CHARGEABLE, SHOULD BE EXCLUD ED. THERE CAN BE NO ESTOPPEL AGAINST THE PROVISIONS OF THE AC T. EXTENDING THIS PROPOSITION FURTHER TO THE CONTEXT O F THE TRANSFER PRICING, IF THE ASSESSEE FAILS TO REPORT A N OTHERWISE COMPARABLE CASE, THEN THE TPO IS OBLIGED TO INCLUDE IT IN THE LIST OF COMPARABLES, AND IN THE SAME MANNER, IF THE ASSESSEE WRONGLY REPORTED AN INCOMPARABLE CASE AS COMPARABLE IN ITS TP STUDY AND THEN LATER ON CLAIMS THAT IT SHOULD BE EXCLUDED THEN, THERE SHOULD BE NOTHING TO FORBID THE ASSESSE E FROM CLAIMING SO, PROVIDED THE TPO IS SATISFIED THAT THE CASE SO ORIGINALLY REPORTED AS COMPARABLE IS, IN FACT, NOT COMPARABLE. THE SPECIAL BENCH OF THE TRIBUNAL IN DC IT VS. QUARK SYSTEMS PVT. LTD. (2010) 132 TTJ (CHD) (SB) 1 HAS ALSO HELD THAT A CASE WHICH WAS INCLUDED BY THE ASS ESSEE AND ALSO BY THE TPO IN THE LIST OF COMPARABLES AT THE T IME OF COMPUTING ALP, CAN BE EXCLUDED BY THE TRIBUNAL IF T HE ASSESSEE PROVES THAT THE SAME WAS WRONGLY INCLUDED. ' 18. WHILE, WE CONSIDERED THE FUNCTIONALLY COMPARAB ILITY ISSUE OF COSMIC GLOBAL SERVICES WITH THE PRESENT ASSESSEE CO MPANY THEN WE FIND OURSELVES VIEW TAKEN BY THE TRIBUNAL IN ITS OR DER IN THE CASE OF 20 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 UNITED HEALTH GROUP INFORMATION SERVICES PVT. LTD. VS. ACIT (SUPRA) WHEREIN FOR THE SAME A Y 2008-09 IT WAS HEL D THAT THE MAJOR PART OF INCOME FROM TRANSLATION CHARGES IS AM OUNTING TO RS.5.59 CRORES OUT OF TOTAL REVENUES OF RS.5.86 CRO RE, WHICH IS TOTALLY DISSIMILAR TO THAT OF THE ASSESSEE OF THAT CASE. IN THE PRESENT CASE, THE DRP/AO HAS ONLY DISPUTED THE INTERNATIONA L TRANSACTION OF THE PRESENT ASSESSEE ONLY ITES SEGMENT WHEREAS A S PER ANNUAL REPORT OF COSMIC GLOBAL LTD. AT PAGE 578 OF ASSESSE E PAPER BOOK VOL.-II, WE CLEARLY NOTE THAT THE REVENUE FROM ITES SEGMENT IS VERY LOW WHICH CREATES A GREAT FUNCTIONAL DIFFERENCE FRO M PRESENT ASSESSEE AS THE PRESENT ASSESSEE IS NOT INDULGED IN TO TRANSLATION SEGMENTAL BUSINESS. HENCE, WE ARE INCLINED TO ACCEP T THE CONTENTION OF THE ASSESSEE THAT THE COSMIC GLOBAL LTD. IS FUNC TIONALLY DISSIMILAR TO THE PRESENT ASSESSEE AND COSMIC GLOBA L LTD. IS NOT A SUITABLE COMPARABLE TO THE PRESENT ASSESSEE FOR BEN CHMARKING AND DETERMINING THE ARM'S LENGTH PRICE (ALP) OF PRESENT ASSESSEE ITES SEGMENTAL INTERNATIONAL TRANSACTIONS FOR A Y 2008-0 9. ACCORDINGLY, WE HOLD THAT COSMIC GLOBAL LTD. WAS WRONGLY INCLUDE D IN THE FINAL SET OF COMPARABLES WHICH DESERVES TO BE DELETED. WE ORDERED ACCORDINGLY. IN THE CASE CITED EXCHANGING TECHNOLOGY SERVICES I NDIA PVT. LTD. (SUPRA), THE TRIBUNAL RELIED UPON THE CASE CITED A S TOLUNA INDIA PVT. LTD. VS ACIT I.T.A.NO. 5645/DEL/20123 DATED 26.08.2014 , WHEREIN IT WAS HELD THAT MERGER/DEMERGER IN A COMPANY MAKES SUCH C OMPANY AS UNFIT FOR COMPARISON AND THE SAME CANNOT BE CONSIDERED AS SUI TABLE COMPARABLE BECAUSE OF THE EXCEPTIONAL FINAL RESULT DUE TO MERG ER AND DEMERGER. FINDINGS RETURNED BY THE TRIBUNAL IN PARA 15 OF THE ORDER IN CASE ENTITLED XCHANGING TECHNOLOGY SERVICES INDIA PVT. LTD. (SUPR A) ARE FURTHER REPRODUCED AS UNDER: 14. ON CAREFUL CONSIDERATION OF ABOVE, AT THE VER Y OUTSET, WE RESPECTFULLY TAKE COGNIZANCE OF THE DECISION OF THE ITAT 'I' BENCH NEW DELHI DATED 28.08.2014 IN THE CASE OF UNITED HE ALTH GROUP INFORMATION SERVICES PVT. LTD. VS. ACIT (SUPRA), WH EREIN FOLLOWING 21 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 THE VIEW TAKEN BY THE TRIBUNAL IN THE CASE OF TOLUN A INDIA PVT. LTD. VS. ACIT IN ITA NO. 5645/DE1/2013 DATED 26.08.2014 IT WAS HELD THAT THE MERGERS/DEMERGERS IN A COMPANY MAKE SUCH O RDER IS UNFIT FOR COMPRISING AND THE SAME CANNOT BE CONSIDERED AS SUITABLE COMPARABLE BECAUSE OF EXCEPTIONAL FINAL RESULT DUE TO MERGER/DEMERGER. THE RELEVANT OPERATIVE PART OF THE TRIBUNAL (SUPRA) FOR THE SAME A Y 2008-09 READS AS UNDER:- 'ECLERX SERVICES LTD. 10.1. THIS COMPANY WAS INCLUDED BY THE TPO IN HIS L IST OF COMPARABLES. THE ASSESSEE OBJECTED TO ITS INCLUSION BY POINTING OUT SOME FUNCTIONAL DIFFERENCES. NOT CONVI NCED, THE TPO WENT AHEAD WITH ITS INCLUSION, WHICH GOT THE SE AL OF APPROVAL FROM THE DRP. 10.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH IS COMPANY IS ENGAGED IN PROVIDING DATA ANALYTICS AND CUSTOMIZ ED PROCESS SOLUTIONS TO A HOST OF GLOBAL CLIENTS. IT P ROVIDES SERVICES TO THE BANKING, MANUFACTURING, RETAIL, TRA VEL AND HOSPITABILITY VERTICALS. THE SOLUTIONS OFFERED BY I T INCLUDE DATA ANALYTICS, OPERATION MANAGEMENT, AUDIT AND RECONCILIATION, METRICS MANAGEMENT AND REPORTING SE RVICES. THIS COMPANY ALSO PROVIDES TAILORED PROCESS OUTSOUR CING AND MANAGEMENT SERVICES ALONG WITH A MULTITUDE OF DATA AGGREGATION, MINING AND MAINTENANCE SERVICES. A LOO K AT THE FUNCTIONAL PROFILE OF THIS COMPANY FROM ITS ANNUAL REPORT, IT CAN BE SEEN THAT IT IS NOWHERE CLOSE TO THE ASSESSE E'S INSTANT SEGMENT OF 'MANUAL CLAIM PROCESSING SERVICES '. 10.3. IT IS FURTHER RELEVANT TO NOTE THAT THIS COMP ANY ACQUIRED UK BASED IGENICA AND TRAVEL SOLUTIONS LTD. ON 27.7. 2007 AND THE FINANCIAL RESULTS OF THAT COMPANY ARE ALSO INCLUDED IN ITS. RECENTLY, THE DELHI BENCH OF THE TRIBUNAL IN T OLUNA INDIA PVT. LTD. VS ACIT (ITA NO.5645/DEL/2013) VIDE ITS O RDER DATED 26.8.2014 HAS HELD THAT THE MERGERS/DE-MERGER S IN A COMPANY MAKE SUCH YEAR AS UNFIT FOR COMPARISON. IN REACHING THIS CONCLUSION, THE DELHI BENCH FOLLOWED AN ORDER 22 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO ARALDITE (P) LTD. VS DCIT (2013) 154 TTJ (MUM.) 176 IN WHICH IT HAS BEEN HELD THAT A COMPANY CANNOT BE CON SIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESU LTS DUE TO MERGER/DE-MERGER ETC. IN VIEW OF THE FOREGOING DISC USSION, WE ARE OF THE CONSIDERED OPINION THAT THIS COMPANY CANNOT BE INCLUDED IN THE LIST OF COMPARABLES. THE ASSESSEE S UCCEEDS. ' 15. IN VIEW OF ABOVE, WE NOTE THAT THE ECLERX SERV ICES LTD. IS ENGAGED IN PROVIDING DATA ANALYTICS AND CUSTOMIZED PROCESS TO ITS HOST OF GLOBAL CLIENTS WHICH ALSO PROVIDES SERVICES TO THE BANKING, MANUFACTURING, RETAIL, TRAVEL AND HOSPITABILITY BUS INESS ENTITIES. LD. DRP HAS NOT DISPUTED THIS FACT THAT THE ITES SEGMEN TAL SOLUTIONS OFFERED BY IT ALSO INCLUDE DATA ANALYTICS OPERATION MANAGEMENT, AUDIT AND RECONCILIATION, METRICS MANAGEMENT AND RE PORTING SERVICES. APPARENTLY, THIS COMPANY PROVIDES TAILORE D PROCESS OUTSOURCING AND MANAGEMENT SERVICES IN ADDITION TO MULTITUDE OF THE DATA AGGREGATION, AND MINING AND MAINTENANCE SE RVICES FROM VIGILANT READING OF ANNUAL REPORT AVAILABLE AT PAGE 659 TO 738 OF THE ASSESSEE PAPER BOOK VOLUME-II, IT CAN BE EASILY SEEN THAT IT IS NOT CLOSED TO THE ASSESSEE ITES SEGMENTAL SERVICES TRANSACTION WHICH ARE IMPRESSED BY THE MANUAL PROCESS ITES SERV ICES. WE ARE ALSO NOT IN AGREEMENT WITH THE CONCLUSION OF THE DR P THAT NO COMPARABLE CAN BE EXCLUDED ON THE GROUND OF ABNORMA L MARGIN IF ITS FUNCTIONALLY COMPARABLE TO THE TESTED PARTY BEC AUSE MERGERS/DEMERGERS BRINGS EXCEPTIONAL FINANCIAL RESU LT WHICH MAKE A SUCH ORDER AS UNFIT FOR COMPARISON. IN VIEW OF OU R FOREGOING DISCUSSION, WE REACH TO A LOGICAL CONCLUSION THAT T HE ECLERX SERVICES LTD. IS NOT A SUITABLE COMPARABLE TO THE A SSESSEE COMPANY FOR A Y 2008-09 DUE TO HIGH PITCHED FINANCIAL RESUL T AND THE SAME DESERVE TO BE DELETED FROM THE FINAL SET OF COMPARA BLES. WE ORDERED ACCORDINGLY. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND F OLLOWING THE ORDER PASSED BY THE COORDINATE BENCH OF ITAT, THE E CLERX SERVICES LTD. CANNOT BE TAKEN A COMPARABLE ON THE GROUND OF ISSUE OF AMALGAMATION AND 23 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 ON GROUND OF EARNING SUPER NORMAL PROFIT @ 66.25% A S DISCUSSED BY THE TRIBUNAL IN THE JUDGEMENT CITED AS EXCHANGING TECHN OLOGY SERVICES INDIA PVT. LTD. (SUPRA). SO, WE HEREBY REVERSE THE FINDI NGS RETURNED BY LD. CIT(A) RETAINING THIS COMPANY AS COMPARABLE AND THE SAME IS ORDERED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. (II) COSMIC GLOBAL LTD.: TPO BY TAKING THE OP/TC RATIO @ 24.5%, CHOSEN THIS COMPARABLE FOR TPA, BUT WITHOUT DISCLOSING ANY REASON WHATSOEV ER. AT THE SAME TIME, NEITHER ASSESSEE HAS CHALLENGED THIS COMPARABLE BEF ORE LD. CIT(A) NOR LD. CIT(A) HIMSELF EVALUATED THE COMPARABILITY OF T HIS COMPANY FOR TPA. SO, WITHOUT ENTERING INTO MERITS OF THIS COMPARABLE , WE ARE OF THE CONSIDERED VIEW THAT TO ARRIVE AT LOGICAL CONCLUSIO N, THIS ISSUE IS REQUIRED TO BE RESTORED BACK TO THE TPO TO DECIDE THE COMPAR ABILITY OF THIS COMPANY AFRESH BY PROVIDING OPPORTUNITY OF BEING HE ARD TO THE PARTIES. (III) C G VOK SOFTWARE: THIS IS ASSESSEES OWN COMPARABLE, REJECTED BY THE TPO BY MAKING FOLLOWING OBSERVATIONS: THE AR OF THE COMPARABLES SHOWS THAT INCOME IN THE ITES SEGMENT IS RS.93 LAKHS DURING THE YEAR. AS THE FIL TER OF TURNOVER MORE THAN RS.1 CRORE HAS BEEN CONSIDERED APPROPRIAT E, THIS WILL NOT BE USED AS A COMPARABLE. ASSESSEE SOUGHT INCLUSION OF THIS COMPARABLE FOR T P ADJUSTMENT ON THE GROUND THAT HE COMPANY HAS EARNED TOTAL REVENUE OF RS.,6,05,05,301/- 24 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 AND UNDER THE RELEVANT YEAR, IT MEETS RS.1 CRORE TU RNOVER FILTER ADOPTED BY THE TPO. LD. CIT(A) WITHOUT HAVING ANY MATERIAL ON RECORD, UPHELD THE FINDINGS OF TPO THAT THIS COMPANY HAS TURNOVER OF R S.93,00,000/- FROM ITES SEGMENT. EVEN OTHERWISE, THIS COMPANY HAS ALR EADY BEEN INCLUDED IN THE LIST OF COMPARABLES FOR T P ADJUSTMENT IN AS SESSEES OWN CASE IN I.T.A.NO. 240/DEL/2015 DATED 06.07.2015. IN THE AFORESAID CASE (SUPRA) THE TRIBUNAL HAS HELD THAT THIS COMPANY CANNOT BE EXCLUDED FROM THE LIST OF COMPARA BLES ON THE GROUND OF ITS LOW TURNOVER AND IS ORDERED TO BE INCLUDED I N THE RELEVANT SEGMENT OF THIS COMPANY IN THE LIST OF COMPARABLES. 20. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE I MPUGNED ORDER PASSED BY LD. CIT(A) IS HEREBY SET ASIDE AND THE IS SUE AS TO THE COMPUTATION OF ALP OF INTERNATIONAL TRANSACTION IS HEREBY RESTORED TO ASSESSING OFFICER/TPO TO DECIDE AFRESH IN PURSUANCE TO THE DISCUSSION MADE, AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE PARTIES. 21. CONSEQUENTLY, APPEAL FILED BY THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. HOWEVER, CROSS OBJECTIONS FI LED BY THE ASSESSEE ARE HEREBY ALLOWED. 22. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEB., 2016. SD/- SD/- (R. S. SYAL) (KULDIP SI NGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 15.02. 2016 SP. 25 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DE LHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 26 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 7/1,11/2 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12/2 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER 27 I.T.A.NO.1060/DEL/2013 C.O.93/DEL/2013