EMERSON ELECTRIC COMPANY ( INDIA) P. LTD, MUMBAI V. ASST CIT 9(2)(2), MUMBAI

CO 93/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1746 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AZHAR ZAIN VP
• Assessee Lawyers: NISHANT SHAH
• Keywords: Business income; Transfer pricing; International transaction; Question of law; Set aside
• Section: 10B; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM ITA NO. 345/MUM/2017 ( ASSESSMENT YEAR: 2011-12) ASSTT. COMMISSIONER OF INCOME TAX-9(2)(2), ROOM NO. 665A, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. EMERSON ELECTRIC COMPANY (INDIA) PVT. LTD., 301, SOLITAIRE CORPORATE PARK, 151, M.V. ROAD, ANDHERI (EAST), MUMBAI-400023 PAN/GIR NO.AAACE 1260 B (APPELLANT ) .. (RESPONDENT ) C.O. NO. 93/MUM/2017 (ARISING OUT OF ITA NO. 345/MUM/2017 ( ASSESSMENT YEAR: 2011-12) EMERSON ELECTRIC COMPANY (INDIA) PVT. LTD., 301, SOLITAIRE CORPORATE PARK, 151, M.V. ROAD, ANDHERI (EAST), MUMBAI-400023 VS. ASSTT. COMMISSIONER OF INCOME TAX-9(2)(2), ROOM NO. 665A, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. PAN/GIR NO.AAACE 1260 B (APPELLANT ) .. (RESPONDENT ) ITA NO. 373/MUM/2017 ( ASSESSMENT YEAR: 2011-12) EMERSON ELECTRIC COMPANY (INDIA) PVT. LTD., 301, SOLITAIRE CORPORATE PARK, 151, M.V. ROAD, ANDHERI (EAST), MUMBAI-400023 VS. ASSTT. COMMISSIONER OF INCOME TAX-9(2)(2), ROOM NO. 665A, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. PAN/GIR NO.AAACE 1260 B (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI AZHAR ZAIN VP (DR) ASSESSEE BY SHRI DHANESH BAFNA AND SHRI NISHANT SHAH ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 2 DATE OF HEARING 02/12/2019 DATE OF PRONOUNCEMENT 09/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE S EPARATE ORDERS OF THE LD. CIT(A)56, MUMBAI DATED 30/09/2016 FOR THE A.Y. 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3)/144C OF THE INCOM E TAX ACT, 1961 (IN SHORT, THE ACT). 2. BOTH THE APPEALS AND C.O. WERE HEARD TOGETHER AN D FOR THE SAKE OF CONVENIENCE, A COMMON ORDER IS BEING PASSED. 3. ITA NO. 373/MUM/2017 FOR THE A.Y. 2011-12 THIS APPEAL HAS BEEN FILED BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED FOR UPHOLDING PROPORTIONATE ALLOCATION OF THE HEAD OFFICE EXPENSES MADE BY THE A.O. WHILE COMPUTING THE PROFI TS OF THE UNITS ELIGIBLE FOR DEDUCTION U/S 10A/10B OF THE ACT. 4. THE LD AR OF THE ASSESSEE PLACED ON RECORD THE O RDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-11 DATED 09/10/2019 WHEREIN SIMILAR ISSUE WAS RESTORED BACK TO THE FILE OF A.O. FOR DECIDING AFRESH AFTER FOLLOWIN G THE ORDER OF THE TRIBUNAL DATED 25/09/2017 FOR THE A.Y. 2009-10. ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND FROM THE RECORD THAT WHILE COMPUTING BUSINESS INCOME, THE A.O. HAS ALLOCATED HEAD OFFICE EXPENSES PROPORTIONATELY FOR UNITS CLAIMING EXEMPTI ON U/S 10A/10B OF THE ACT ON THE BASIS OF THE TURNOVER OF THE UNITS. IT WAS CONTENTION OF THE A.O. THAT THE ASSESSEE HAS PARKED ITS HEAD OFFICE E XPENSES FOR THE UNITS GENERATING TAXABLE INCOME WITHOUT ANY VALID REASONS FOR NOT ALLOCATING THESE EXPENSES TO THE UNITS CLAIMING EXEMPTION U/S 10A/10B OF THE ACT. 6. WE HAD CAREFULLY GONE THROUGH THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE TRIBUNAL HAVE RESTORED THE MATTER BACK TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION FOR THE A.Y. 2009-10 VIDE ITS ORDER DA TED 25/09/2017 AFTER HAVING THE FOLLOWING OBSERVATION: 13. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD. THE AO HAS ALLOCATED HEAD OFFICE EXPENSE S PROPORTIONATELY FOR UNITS CLAIMING EXEMPTION U/S 10A / 10B, ON THE BASIS OF T HE TURNOVER OF THE UNITS. ACCORDING TO THE AO, THE ASSESSEE HAS PARKED ITS HE AD OFFICE EXPENSES FOR THE UNITS GENERATING TAXABLE INCOME WITHOUT ANY VALID R EASONS FOR NOT ALLOCATING EXPENSE TO THE UNITS CLAIMING EXEMPTION U/S 10A / 1 0B. THE ASSESSEE CLAIMS THAT HEAD OFFICE EXPENDITURE IN NO WAY CONNECTED TO THE UNITS CLAIMING EXEMPTION U/S 10A / 10B AND THE UNITS ARE FUNCTIONI NG INDEPENDENTLY. THEREFORE, THE AO WAS INCORRECT IN ALLOCATING HEAD OFFICE EXPENSES TO THE UNITS CLAIMING EXEMPTION U/S 10A / 10B. WE DO NOT FIND AN Y MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT ON PE RUSAL OF THE DETAILS OF EXPENDITURE INCURRED BY THE ASSESSEE IT IS DIFFICUL T TO ACCEPT EXPLANATION OF THE ASSESSEE THAT HEAD OFFICE EXPENDITURE HAS NO RELEVA NCE TO THE UNITS CLAIMING EXEMPTION U/S 10A / 10B. THE ASSESSEE IS HAVING FOU R UNITS BASED AT VARIOUS LOCATIONS WHICH WERE CONTROLLED THROUGH ITS HEADQUA RTER. THE EXPENDITURE INCURRED BY HEAD OFFICE LIKE TRAVEL AND CONVEYANCE, COMMUNICATION EXPENSES, LEGAL AND PROFESSIONAL CHARGES AND RATES AND TAXES DEFINITELY IS HAVING RELEVANCE TO ITS TOTAL BUSINESS. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 4 RIGHT IN ALLOCATING HEAD OFFICE EXPENSES TO THE UNI TS ELIGIBLE FOR CLAIMING EXEMPTION U/S 10A / 10B OF THE ACT. WE FURTHER OBSE RVE THAT THERE IS MERIT IN THE ARGUMENT OF THE ASSESSEE THAT ONLY NET EXPENSES OF HEAD OFFICE SHOULD BE ALLOCATED TO THE UNITS CLAIMING EXEMPTION U/S 10A / 10B, BECAUSE THE ASSESSEE IS GENERATING OTHER INCOME LIKE INTEREST ON FIXED D EPOSIT AND RENT WHICH MAY HAVE SOME BEARING ON THE FUNCTIONING OF ITS UNITS C LAIMING EXEMPTION U/S 10A / 10B. THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE RE-EXAMINED BY THE AO IN THE LIGHT OF THE SUBMISSIONS OF THE ASSES SEE. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF AO AND DIRECT HIM TO CONSIDER THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. THE TRIBUNAL HAVE ALSO FOLLOWED THE ABOVE ORDER IN THE APPEAL FILED BY THE ASSESSEE FOR THE A.Y. 2010-11 IN ITA N O. 372/MUM/2017 AND VIDE ITS ORDER DATED 09/10/2019, THE TRIBUNAL HAVE RESTORED THE MATTER BACK TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION . 8. THE LD DR HAS FAIRLY CONCEDED THE FACT THAT IN A SSESSEES OWN CASE FOR THE A.Y. 2009-10 AND 2010-11 THE MATTER WAS RES TORED BACK TO THE FILE OF THE A.O. AS THE FACTS AND CIRCUMSTANCES DUR ING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA, RESPECTFULLY FOLLOW ING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, THE MATTER IS REST ORED BACK TO THE FILE OF A.O. FOR DECIDING THE ISSUE AFRESH IN TERMS OF DIRE CTIONS GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 25/09/2017 FOR THE A.Y. 2009-10. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 10. ITA NO. 345/MUM/2017 & C.O. 93/MUM/2017 FOR THE A.Y . 2010-11. ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 5 IN THE APPEAL FILED BY THE REVENUE, THE REVENUE IS AGGRIEVED FOR THE ACTION OF THE LD. CIT(A) DIRECTING TO EXCLUDE C OMPANIES NAMELY M/S INFOSYS LTD., M/S LARSEN AND TURBO INFOTECH LIMITED AND M/S ZYLOG SYSTEMS LIMITED FROM THE FINAL SET OF COMPARABLES D UE TO LARGE SCALE OF OPERATIONS. IT WAS THE GRIEVANCE OF THE REVENUE THA T WITHOUT GIVING ANY FINDING AS TO WHAT SHOULD BE THE RANGE OF TURNOVER OF COMPANIES FOR SELECTING AS COMPARABLES CONSIDERING THE ASSESSEES TURNOVER OF RS. 17.69 CORES AND ALSO NOT APPLYING THE FILTER OF LAR GE SCALE OF OPERATIONS TO THE OTHER COMPANIES SELECTED AS COMPARABLES BY T HE TPO, THE LD. CIT(A) HAS DIRECTED FOR EXCLUSION OF THESE COMPARAB LES. 11. THE LD AR OF THE ASSESSEE HAS INVITED OUR ATTEN TION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 20 10-11 IN ITA NO. 372/MUM/2017 DATED 09/10/2019 WHEREIN EXACTLY SIMIL AR GROUND WAS RAISED BY THE REVENUE AND WAS DECIDED BY THE TRIBUN AL IN ASSESSEES FAVOUR. 12. WE HAD CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 09/10/2019 AND FOUND THAT THE TRIBUNAL HAVE DECIDED THE VERY SAME ISSUE AND UPHELD THE ORDER OF THE LD. CIT(A) ON THI S GROUND AFTER HAVING A FOLLOWING OBSERVATION: 8.1. THE DISPUTE BEFORE US IS ONLY WITH REGARD TO INCLUSION AND EXCLUSION OF CERTAIN COMPARABLES. THE PRIMARY DISPUTE LIES WITH REGARD TO EXCLUSION OF THREE COMPARABLES VIZ. INFOSYS LTD, WIPRO LTD AN D L & T INFOTECH LTD. ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 6 FROM THE FINAL LIST OF COMPARABLES CHOSEN BY THE LD . TPO. FROM THE ELABORATE CONSIDERATION OF TRANSFER PRICING DISPUTE BY THE LD. CIT(A) AS REPRODUCED HEREINABOVE, IT COULD BE SAFELY CONCLUDE D AND INFERRED THAT THE LD. CIT(A) HAD EXCLUDED INFOSYS LTD, L & T INFO TECH LTD. AND WIPRO LTD. FROM THE LIST OF COMPARABLES CHOSEN BY THE LD. TPO ON VARIOUS PARAMETERS AS DETAILED SUPRA. HENCE, THE ARGUMENTS MADE BY THE LD. DR AND IN THE GROUND NO.1 RAISED BY THE REVENUE THAT T HOSE THREE COMPARABLES WERE SOUGHT TO BE EXCLUDED ONLY DUE TO HIGHER TURNOVER IS NOT ACCEPTABLE AND DESERVES TO BE DISMISSED. 8.2. WE ALSO FIND THAT THE LD. DR BEFORE US DID NOT OBJECT TO THE EXCLUSION OF INFOSYS LTD, WIPRO LTD AND L & T INFOTECH LTD FROM THE LIST OF COMPARABLES CHOSEN BY THE LD. TPO DUE TO HIGHER TUR NOVER BUT HAD ONLY SOUGHT TO ADDRESS THE DISPUTE THAT APPLYING THE SAM E TURNOVER FILTER, THREE MORE COMPARABLES I.E. LGS GLOBAL LTD, SASKEN COMMUNICATION TECHNOLOGIES LTD AND MINDTREE LTD SHOULD ALSO BE EX CLUDED DUE TO LARGE-SCALE OF OPERATIONS FROM THE FINAL LIST OF CO MPARABLES. WE FIND THAT THESE THREE COMPARABLES WERE SOUGHT TO BE INCL UDED BY THE LD. TPO AND WHICH HAS NOT BEEN DISPUTED BY THE ASSESSEE. MO REOVER, THE EXCLUSION OF THESE THREE COMPARABLES I.E. LGS GLOBA L LTD, SASKEN COMMUNICATION TECHNOLOGIES LTD AND MINDTREE LTD DOE S NOT EMANATE OUT OF THE ORDERS OF THE LOWER AUTHORITIES. HENCE, WE HOLD THAT THE LD. DR IS ONLY TRYING TO IMPROVE THE CASE OF THE REVENU E WHICH CANNOT BE DONE BEFORE THE TRIBUNAL, WHICH EXERCISES ONLY APPE LLATE JURISDICTION. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 13. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA, RESPECTFULLY FOLLOW ING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-1 1, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR DIRECT ING EXCLUSION OF ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 7 COMPANIES NAMELY M/S INFOSYS LTD. AND M/S LARSEN & TURBO INFOTECH LIMITED FROM THE FINAL SET OF COMPARABLES. 14. IN RESPECT OF M/S ZYLOG SYSTEMS LIMITED, THE LD CIT(A) HAS DIRECTED FOR EXCLUSION AFTER RECORDING A FINDING TO THE EFFECT THAT IT IS A GIANT IN ITS AREA OF OPERATION AND ASSUMES GREATER RISKS TRANSLATING INTO HIGHER PROFITABILITY. THUS, THIS GIANT SIZED COMPAN Y WITH ADVANTAGES SUCH AS BRAND, INTANGIBLES ETC. CANNOT BE COMPARED TO A COMPANY SUCH AS THE ASSESSEE COMPANY WHICH IS A CAPTIVE UNIT OF HIS AE ASSUMING ONLY LIMITED RISKS. AFTER RECORDING A SIMILAR FINDING, THE LD. C IT(A) ALSO EXCLUDED INFOSYS LT., WHICH IS ALREADY COVERED BY THE ORDER OF THE TRIBUNAL. THE LD DR COULD NOT PLACE ON RECORD ANY MATERIAL SO AS TO PERSUADE US TO DEVIATE FROM THE FINDING OF THE LD. CIT(A). ACCORDI NGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT (A) IN THIS RESPECT. 15. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO AC TION OF THE LD. CIT(A) FOR NOT ADJUDICATING ON THE FUNCTIONAL COMPA RABILITY M/S THIRDWARE SOLUTIONS LTD. AND M/S KALS INFORMATION S YSTEMS LTD. WITH THE SOFTWARE DEVELOPMENT SERVICE SEGMENT OF THE ASSESSE E. 16. THE LD AR OF THE ASSESSEE HAS INVITED OUR ATTEN TION TO THE EXACTLY SIMILAR GROUND NO. 2 TAKEN BY THE REVENUE IN ITS AP PEAL FILED BEFORE THE TRIBUNAL FOR THE A.Y. 2010-11 AND THE TRIBUNAL VIDE ITS ORDER DATED 09/10/2019 CONFIRMED THE ACTION OF THE LD. CIT(A). ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 8 17. WE HAD CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 09/10/2019 AND FOUND THAT THE TRIBUNAL HAVE DECIDED THE VERY SAME ISSUE AND UPHELD THE ORDER OF THE LD. CIT(A) ON THI S GROUND AFTER HAVING A FOLLOWING OBSERVATION: 9. WITH REGARD TO EXCLUSION OF COMPARABLES I.E. TH IRDWARE SOLUTIONS LTD, PERSISTENT SYSTEMS LTD, TATA ELXSI LTD AND KALS INF ORMATION SYSTEMS LTD. FROM THE FINAL SET OF COMPARABLES AS DIRECTED BY TH E LD. CIT(A) ON THE GROUND OF FUNCTIONAL DISSIMILARITIES, THE LD. DR AR GUED THAT ANYTHING RELATED TO AUTOMIZING THE OPERATIONS IN DIGITAL FOR MAT TANTAMOUNT TO SOFTWARE DEVELOPMENT AND ACCORDINGLY, NON-AVAILABIL ITY OF BREAK-UP OF REVENUE FROM SOFTWARE SERVICES AND SALE OF SOFTWARE PRODUCTS DOES NOT AFFECT COMPARABILITY. WE FIND THAT MAIN CRUX OF THE ARGUMENT OF THE LD. DR IS THAT SOFTWARE DEVELOPMENT AND SALE OF SOFTWARE P RODUCTS ARE BOTH ONE AND THE SAME AND CANNOT BE CONSTRUED AS SEPARATE AN D DISTINCT ACTIVITY PER SE. WE FIND THAT THE LD DR ARGUED ADMITTED THE FACT THAT THERE IS NO SEGMENTAL BREAK UP OF REVENUE IN RESPECT OF SALE OF SOFTWARE PRODUCTS AND REVENUE DERIVED FROM SOFTWARE DEVELOPMENT IN RESPEC T OF THE AFORESAID COMPARABLES IN THE ANNUAL REPORTS OF THE RESPECTIVE COMPARABLES, BUT NEVERTHELESS, THE SAME WOULD NOT AFFECT THE COMPARA BILITY WITH THE ASSESSEE, AS ACCORDING TO HIM, BOTH THE SOFTWARE DE VELOPMENT AND SALE OF SOFTWARE PRODUCTS ARE ONE AND THE SAME ACTIVITY. WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THIS ARGUMENT OF THE L D. DR THAT THERE IS NO DIFFERENCE BETWEEN COMPANY ENGAGED IN SOFTWARE DEVE LOPMENT AND COMPANY ENGAGED IN SALE OF SOFTWARE PRODUCTS. WE FI ND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PT C SOFTWARE (I) PVT.LTD. IN INCOME TAX APPEAL NO.732 OF 2014 DATED 26/09/2016 H AD ADDRESSED THIS ISSUE IN THE CONTEXT OF EXCLUSION OF KALS INFORMATI ON SYSTEMS LTD. AND HELIOS AND MATHESON INFORMATION TECHNOLOGY LTD. SPE CIFIC QUESTION RAISED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THI S REGARD IS AS UNDER:- ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 9 (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ERRED IN EXCLUDING KALS INFORMATION SOLUTI ONS LTD. AND M/S. HELIOS & MATHERSON INFORMATION TECHNOLOGY LTD. FROM THE LIST OF COMOPARABLES ON THE BASIS OF PREVIOUS YEARS DOCUMENTATIONS OF THE ASSESSEE WITHOUT VERIFYING THE FUNCTIONS PER FORMED BY THE COMPARABLES IN THE YEAR UNDER CONSIDERATION ? 9.1. THE HONBLE JURISDICTIONAL HIGH COURT ADDRESSE D THE AFORESAID QUESTION BY OBSERVING AS UNDER:- 10. RE. QUESTION (II) : A) M/S. KALS INFORMATION SOLUTIONS LTD. (KALS LTD.) AND HELIOS & MATHESON INFORMATION TECHNOLOGY LTD. (HELIOS & MATHESON LTD. ) WERE INCLUDED BY THE TPO IN HIS COMPARABILITY ANALYSIS. THE GRIEVANC E OF THE RESPONDENT ASSESSEE BEFORE THE TRIBUNAL WAS THAT BOTH ARE FUNC TIONALLY DIFFERENT FROM THE RESPONDENT ASSESSEE AND, THEREFORE, COULD NOT B E USED AS COMPARABLES. THE RESPONDENT ASSESSEE POINTED OUT TH AT KALS LTD AND HELIOS & MATHESON LTD. ARE ENGAGED IN THE BUSINESS OF SELLING OF SOFTWARE PRODUCTS WHILE THE RESPONDENT ASSESSEE RENDERS SOFT WARE SERVICES TO ITS HOLDING COMPANY. (B) THE TRIBUNAL IN THE IMPUGNED ORDER RECORDS THAT FOR THE PRECEDING ASSESSMENT YEAR I.E. A.Y. 2006-07,THE TPO HAD FOUND THAT KALS LTD. AND HELIOS & MATHESON LTD. WERE FUNCTIONALLY NOT COMPAR ABLE WITH THE RESPONDENT ASSESSEE. IN THE SUBJECT ASSESSMENT YEAR ALSO, ON THE BASIS OF ANNUAL REPORT, IT WAS NOTED THAT THE KALS WAS ENGAG ED IN SELLING OF SOFTWARE PRODUCTS WHICH IS DIFFERENT FROM THE ACTIV ITY UNDERTAKEN BY THE RESPONDENT ASSESSEE, NAMELY, RENDERING OF SOFTWARE SERVICE TO ITS HOLDING COMPANY. FURTHER, THE IMPUGNED ORDER ALSO RECORDS T HAT NO ATTEMPT WAS EVEN MADE BY THE REVENUE BEFORE IT TO BRING ON RECO RD ANY CHANGE IN THE NATURE OF ACTIVITIES CARRIED OUT BY KALS LTD. AND H ELIOS & MATHESON LTD. IN THE SUBJECT ASSESSMENT YEAR, MAKING THEM FUNCTIONAL LY COMPARABLE TO THE RESPONDENT ASSESSEE. IN THE AFORESAID FACTS, THE TR IBUNAL RENDERED A FINDING OF FACT THAT KALS LTD. AND HELIOS & MATHESO N LTD. ARE NOT COMPARABLE WITH THE RESPONDENT ASSESSEE. (C) EVEN BEFORE US, NO SUBMISSIONS WERE ADVANCED JU STIFYING THE ORDER OF THE ASSESSING OFFICER THAT THE SERVICES RENDERED BY KALS LTD. AND HELIOS & MATHESON LTD. ARE COMPARABLE FOR THE SUBJECT ASSESS MENT YEAR WITH THAT OF THE RESPONDENT ASSESSEE. (D) IN THE ABOVE VIEW, AS THE FINDINGS OF THE TRIBU NAL BEING ONE OF THE FACT WHICH HAS NOT BEEN SHOWN TO BE PERVERSE, THE QUESTI ON AS PROPOSED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. T HUS, NOT ENTERTAINED. ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 10 9.2. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT SALE OF SOFTWARE PRODUCTS AND SOFTWARE DEVELOPMENT SERVICES ARE SEPARATE AND DISTINCT AND ACCORDINGLY, THE ARGUMENTS ADVANCED BY THE LD. DR ARE REJECTED IN TH IS REGARD. ACCORDINGLY, THE AFORESAID COMPARABLES I.E. THIRDWA RE SOLUTIONS LTD, PERSISTENT SYSTEMS LTD, AND KALS INFORMATION SYSTEM S LTD. DESERVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES WHICH HAD BEE N RIGHTLY DIRECTED BY THE LD. CIT(A) FOR EXCLUSION. WITH REGARD TO EXCLUS ION OF TATA ELXSI LTD, WE FIND FROM 895 TO 898 OF THE PAPER BOOK, THERE IS NO SEGMENTAL DATA AVAILABLE IN THE ANNUAL REPORT OF THE SAID COMPARAB LE AND WE ALSO FIND THAT THEY HAVE GOT THEIR OWN RESEARCH AND DEVELOPME NT WHICH MAKES IT FUNCTIONALLY UNCOMPARABLE WITH THAT OF THE ASSESSEE , AMONG OTHERS, IN AS MUCH AS THE ASSESSEE HEREIN BEFORE US BELIEVES ON R ESEARCH AND DEVELOPMENT SUPPLIED BY AE, WHICH FACT IS NOT IN DI SPUTE BEFORE US. 9.3. WE ALSO FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS. CASH EDGE INDIA PVT. LTD IN ITA NO.279/2016 DATED 0 4/05/2016 HAD ENDORSED THE VIEW TAKEN BY THE TRIBUNAL THAT PERSIS TENT SYSTEMS LTD WAS INVOLVED IN SOFTWARE DEVELOPMENT, SOFTWARE PRODUCTS AND MARKETING AND PERHAPS MORE IMPORTANTLY, PUBLISHED SEGMENTAL DATA WAS NOT AVAILABLE. ACCORDINGLY, THE SAID COMPARABLE HAS BEEN RIGHTLY E XCLUDED BY THE TRIBUNAL AS PER HONBLE DELHI HIGH COURT. ACCORDING LY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 18. WE HAD CAREFULLY PERUSED THE ORDER OF THE TRIBU NAL DATED 09/10/2019 AND FOUND THAT EXACTLY ON THE SIMILAR FA CTS AND CIRCUMSTANCES, THE TRIBUNAL HAVE CONFIRMED THE ACTI ON OF THE LD. CIT(A) FOR EXCLUSION OF THESE COMPANIES FROM THE SET OFF F INAL COMPARABLES. THE LD DR HAS FAIRLY CONCEDED THE FACT THAT THE ISSUE I S COVERED BY THE ORDER OF THE TRIBUNAL DATED 09/10/2019 FOR THE A.Y. 2010- 11, THEREFORE ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 11 RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DA TED 09/10/2019, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A) FOR EXCLUDING THESE COMPARABLES. 19. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 20. NOW WE TAKE ASSESSEES C.O. NO. 93/MUM/2017. GROUND NO. 1 OF THE C.O. WAS NOT PRESSED BY THE LD AR THEREFORE, THE SAME IS DISMISSED IN LIMINI AS NOT PRESSED. 21. GROUND NO. 2 OF THE CO RELATES TO THE LD. CIT(A )S ACTION FOR NOT ADJUDICATING ON ASSESSEES CLAIM FOR WORKING CAPITA L ADJUSTMENT WHILE DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION IN THE NATURE OF PROVISION OF SOFTWARE DEVELOPMENT SERVICE S. 22. THE LD AR OF THE ASSESSEE DRAWN OUR ATTENTION T O PARA NO. 10 OF THE TRIBUNAL ORDER DATED 09/10/2019 PASSED IN ITA N O. 372/MUM/2017 FOR THE A.Y. 2010-11 WHEREIN SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 23. WE HAD CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 09/10/2019 WHEREIN ISSUE WITH REGARD TO WORKING CAP ITAL ADJUSTMENT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL AFTER HAVING THE FOLLOWING OBSERVATION: ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 12 10. WITH REGARD TO WORKING CAPITAL ADJUSTMENT SOUG HT BY THE ASSESSEE, WE FIND THE ENTIRE WORKINGS OF WORKING CAPITAL ADJUSTMENT H AD BEEN FURNISHED BEFORE THE LD. TPO BY THE ASSESSEE WHICH ARE ENCLOS ED IN PAGE 300 OF THE PAPER BOOK. HENCE, THE LD. TPO OUGHT TO HAVE CONSID ERED THE SAME ON THE LIST OF COMPARABLES CHOSEN BY HIM WHILE DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS. HENCE, WE HOLD THAT THE LD. CIT(A) HAD RIGHTLY DIRECTED THE LD. TPO TO GRANT WORKING CAPITAL ADJUS TMENT ON THE FINAL SET OF COMPARABLES PURSUANT TO THE ORDER OF THE LD CIT(A). WE DO NOT DEEM IT FIT TO INTERFERE IN THE SAID ORDER OF THE LD CIT(A). A CCORDINGLY, THE GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 24. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA, ACCORDINGLY, WE DIR ECT THE A.O. TO GRANT WORKING CAPITAL ADJUSTMENT WHILE DETERMINING THE AL P FOR INTERNATIONAL TRANSACTION IN TERMS OF DIRECTION GIVEN BY THE TRIB UNAL IN PARA 10 OF ITS ORDER DATED 09/10/2019 FOR THE A.Y. 2010-11. 25. IN THE RESULT, THE C.O. FILED BY THE ASSESSEE I S ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH DECEMBER, 2019. SD/- (VIKAS AWASTHY) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 09/12/2019 *RANJAN COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. ITA NO. 345 & 373/MUM/2017 & CO 93/MUM/2017 ACIT VS EMERSION ELECTRIC COMPANY (I) P. LTD. 13 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//