M/s Flagstone Underwriting Support services India Private Limited, Hyderabad V. DCIT, Circle-1(3), Hyderabad

ITA 1018/HYD/2013

• Counselvise Citation: 101822514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Transfer pricing; International transaction; Working capital adjustments; Wholly owned subsidiary
• Section: 92C; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1018/HYD/2013 ASSESSMENT YEAR 2008-2009 M/S. FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA P. LTD., HYDERABAD 500 032. PAN AAACW6035A VS. THE DCIT, CIRCLE 1(3) HYDERABAD 500 029. (APPELLANT) (RESPONDENT) ITA.NO.990/HYD/2013 ASSESSMENT YEAR 2008-2009 DCIT, CIRCLE 1(3) HYDERABAD 500 029. VS. M/S. FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA P. LTD., HYDERABAD 500 032. PAN AAACW6035A (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. RAVI BHARADWAJ FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 10.11.2014 DATE OF PRONOUNCEMENT : 19.11.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS-APPEALS BY ASSESSEE AND REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, HYDERABAD DATED 26.03.2013. THE ISSUE IN APPEAL IS WITH REFERENCE T O T.P. ADJUSTMENTS MADE BY A.O./TPO ON ASSESSEES INTERNAT IONAL TRANSACTIONS UNDER THE PROVISIONS OF SECTION 92C OF THE ACT. ASSESSEE CHOOSE TO PREFER APPEAL BEFORE THE LD. CIT (A) RATHER 2 THAN GOING BEFORE THE DISPUTES RESOLUTION PANEL AND ACCORDINGLY, LD. CIT(A) ADJUDICATED THE ISSUES. 2. BRIEFLY STATED, FLAGSTONE INCORPORATED ON OCTOBER 10, 2005, IS BASED IN HYDERABAD, ANDHRA PRADESH. ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF FLAGSTONE GROUP [FLAGSTONE CAPITAL MANAGEMENT (BERMUDA) LIMITED [EARLIER KNOWN AS WEST END CAPITAL MANAGEMENT (BERMUDA] LIMITED) (AE). FLAGSTONE INDIA WAS ESTABLISHED TO PROVIDE BACK OFFICE SUPPORT SERVICES IN THE FIELD OF INVESTMENT AND INSURANCE MANAGEMENT PRIMAR ILY TO ITS ASSOCIATED ENTERPRISES. THE COMPANY PROVIDES SERVICES ONLY TO ITS ASSOCIATED ENTERPRISES. FLAGST ONE INDIA PRIMARILY PERFORMS THE TACTICAL MANAGERIAL FUNCTIONS REGARDING DAY TO DAY MANAGEMENT BUSINESS. FINANCIAL RESULTS OF TAXPAYER FOR THE F.Y. 2007-08 : DESCRIPTION AMOUNT OPERATING REVENUE RS.12,96,53,298 OPERATING COST RS.11,21,56,923 OPERATING PROFIT (PBIT) RS. 1,74,96,375 OPERATING PROFIT TO COST RATIO 15.60% INTERNATIONAL TRANSACTIONS (AS MENTIONED IN THE 92 CE REPORT): PROVISION OF IT ENABLED SERVICES RS.12,64,08,934 PAYMENT OF INTEREST ON CONVERTIBLE DEBENTURES RS. 43,71,230 THE MATTER WAS REFERRED TO THE TPO ON ACCOUNT OF THE INTERNATIONAL TRANSACTIONS WITH AE. THE TPO SUGGESTED AN ADJUSTMENT OF RS. L,84,52,948 UNDER SECTION 92CA OF THE INCOME-TAX ACT, 1961. ASSESSEE DECIDED TO FILE AN APPEAL 3 BEFORE THE CT(A) AND ACCORDINGLY DID NOT FILE ANY OBJECTIONS BEFORE THE DRP. THUS THE AO ON EXPIRY OF PRESCRIBED TIME LIMIT, HAS PASSED THE ASSESSMENT ORDER ON 17 TH FEBRUARY, 2012. THE ASSESSING OFFICER VIDE HIS ORDER HAS ADDED THE AMOUNT DETERMINED BY THE TPO AS ARMS LENGTH PRICE T O THE TOTAL INCOME OF ASSESSEE. THE ASSESSING OFFICER HAS ALSO MADE A DISALLOWANCE OF RS.20,37,817 ON ACCOUNT OF COMMUNICATION EXPENSES AS PER EXPLANATION 2 TO SECTION 10A AND RECALCULATED THE EXEMPTION UNDER SECTION 10A OF THE L.T. ACT, 1961. 3. AGGRIEVED BY THE ASSESSMENT ORDERS OF THE AUTHORITIES ASSESSEE PREFERRED APPEAL BEFORE THE LD . CIT(A) RAISING VARIOUS CONTENTIONS. LD. CIT(A) MAINLY CONC ENTRATED ON SELECTION OF COMPARABLE COMPANIES. LD. CIT(A) NOTED THAT TPO HAS SELECTED THE FOLLOWING 20 COMPARABLES BY GIVING REASONS SL. NO. NAME OF THE COMPARABLE COMPANY TOTAL INCOME (RS. IN CRORES) PBIT/COST % 1. ACCENTIA TECHNOLOGIES LIMITED 51.04 44.50 2. ACROPETAL TECHNOLOGIES LTD. (SEG.) 20.80 35.30 3. ADITYA BIRLA MINACS 183.17 -0.55 4. ASIT C. MEHTA 4.82 9.10 5. CALIBER POINT BUSINESS SOLUTION (SEG.) 53.00 10.97 6. CORAL HUB (VISHAL INFO) 13.07 51.84 7. COSMIC GLOBAL 5.86 24.30 8. CROSSDOMAIN SOLUTION P. LTD 27.40 26.96 9. DATAMATICS FINANCIAL (BPO DIV.) 16.72 34.87 10. E4E (EARLIER KNOWN NITANNY OUTSOURCING) 25.99 17.50 11. ECLERX 123.45 66.50 12. GENESYS INTERNATIONAL 47.52 51.91 4 13. HCL COMNET SYSTEMS & SERVICES LTD., (SEG.) 388.05 32.97 14. ICRA ONLINE LTD. (SEG.) 82.29 11.22 15. INFOSYS BPO LTD., 825.08 20.03 16. I-SERVICE INDIA PVT. LTD., 13.39 10.92 17. MOLD TEK TECHNOLOGIES LTD., 17.84 106.82 18. R SYSTEM INTERNATIONAL LTD. (SEG.) 21.33 4.30 19. SPANCO LTD., (SEG.) 42.27 8.94% 20. WIPRO LIMITED 1158.80 30.23 ARITHMETIC MEAN 29.16 3.1. LD. CIT(A) ALSO NOTED THAT ASSESSEE HAS NO OBJECTION FOR INCLUSION OF 11 COMPARABLES. SL.NO. NAME OF THE COMPARABLE COMPANY 1. ADITYA BIRLA MINACS 2. ASIT C. MEHTA 3. CALIBER POINT BUSINESS SOLUTION (SEGL.) 4. CROSSDOMAIN SOLUTION P. LTD., 5. DATAMATICS FINANCIAL (BPO DIV.) 6. E4E (EARLIER KNOWN NITANNY OUTSOURCING) 7. ICRA ONLINE LTD.,(SEG.) 8. I-SERVICE INDIA P. LTD., 9. R SYSTEM INTERNATIONAL LTD., (SEG.) 10. SPANCO LTD., (SEG.) 11. INFOSYS BPO LTD., 3.2. BUT WITH REFERENCE TO 9 COMPARABLES THEY HAVE OBJECTED IN TERMS OF FUNCTIONALITY. THEY ARE (1) AC CENTIA TECHNOLOGIES LTD., (2) ACROPETAL TECHNOLOGIES LTD., (SEG.) (3) COSMIC GLOBAL LTD., (4) ECLERX SERVICES LTD., (5) G ENESYS INTL. CORPORATION LTD., (6) HCL COMNET SYSTEMS & SERVICES LTD., (7) WIPRO BPO LIMITED (8) CORAL HUB AND (9) MOLDTEK TEC HNOLOGIES LTD., 3.3. AFTER NOTING THAT ASSESSEE HAS OBJECTED TO 9 COMPARABLES, THE LD. CIT(A) FURTHER NOTED THAT ASSE SSEE MAINLY CONTESTED AGAINST INCLUSION OF TWO COMPARABLES VIZ. , CORAL HUB AND MOLDTEK TECHNOLOGIES. ACCORDINGLY, RELYING ON T HE 5 COORDINATE BENCH DECISIONS AND THE DIRECTIONS OF DR P IN VARIOUS CASES, LD. CIT(A) EXCLUDED CORAL HUB AS COM PARABLE ALONG WITH MOLDTEK TECHNOLOGIES. VIDE PARA-8 OF THE ORDER, LEARNED CIT(A) NOTED THAT IF THE ABOVE TWO COMPARAB LES ARE EXCLUDED FROM THE LIST OF COMPARABLES FOR CALCULATI ON OF ALP, ASSESSEES ALP IS WELL WITHIN THE BAND OF ARITHMETIC MEAN ARRIVED AT BY TPO AND OTHER GROUNDS ON T.P. ADJUSTM ENTS BECOME ACADEMIC IN NATURE AND ARE NOT REQUIRED TO B E ADJUDICATED UPON. ACCORDINGLY, LD. CIT(A) DIRECTED TO EXCLUDE TWO COMPARABLES OUT OF 9 OBJECTED AND ISSUED DIRECT IONS ACCORDINGLY. 3.4. IN ADDITION TO THE ADJUSTMENTS ON T.P. ASSESS ING OFFICER ALSO EXCLUDED COMMUNICATION CHARGES FROM E XPORT TURNOVER WHILE WORKING OUT THE DEDUCTIONS UNDER SEC TION 10A. CONSIDERING THE OBJECTIONS RAISED BY ASSESSEE AND P RINCIPLES GOVERNED BY VARIOUS DECISIONS ON THE ISSUE, LD. CIT (A) DIRECTED THE A.O. TO EXCLUDE THE COMMUNICATION CHARGES FROM TOTAL TURNOVER AS WELL. 4. REVENUE IS AGGRIEVED ON THE EXCLUSION OF TWO COMPARABLES AND DIRECTION OF LD. CIT(A) ON EXCLUSIO N OF COMMUNICATION CHARGES FROM BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTI ON UNDER SECTION 10A OF THE I.T. ACT. REVENUE HAS RAISED 5 G ROUNDS IN THEIR APPEAL ON THIS ISSUE. 5. ON CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE W ITH THE ORDERS OF LD. CIT(A) ON THE ABOVE ISSUES. AS FAR AS CORAL HUB IS CONCERNED, LD. CIT(A) DISCUSSED THE SAME VIDE PARA 5.1 AND FOLLOWED THE DECISION OF DRP IN THE CASE OF ZAVATA INDIA P. LTD., 6 FOR A.Y. 2008-09 AND DECISION OF ITAT A BENCH, HY DERABAD IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA P. LTD., IT WAS HELD THAT CORAL HUB WORKS AS AN AGENT BY OUTSOURCIN G ITS WORK TO THIRD PARTY VENDORS AND CANNOT BE TAKEN AS A COM PARABLE TO THE ITES FUNCTIONS BEING INVOLVED BY ASSESSEE. SINC E THE DECISION OF LD. CIT(A) IS IN TUNE WITH THE DECISION S ALREADY AVAILABLE OF THIS COMPARABLE BOTH BY DRP AND ITAT IN VARIOUS CASES AND SINCE LD. CIT(A) HAS GIVEN FINDING THAT T HE COMPANY IS NOT COMPARABLE FUNCTIONALLY TO THE ASSESSEE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A ). LIKEWISE, IN THE CASE OF MOLDTEK TECHNOLOGIES, LD. CIT(A) FOL LOWED THE DECISION IN THE CASE OF CAPITAL IQ INFORMATION SYST EMS P. LTD., OF ITAT AND GAVE A FINDING THAT BECAUSE OF EXCEPTIO NAL FINANCIAL RESULTS DUE TO MERGER/DEMERGER, MOLDTEK LTD., CANNO T BE TAKEN AS COMPARABLE. LD. CIT(A) ALSO FOLLOWED THE COORDIN ATE BENCH DECISION OF MUMBAI IN THE CASE OF M/S. STREAM INTER NATIONAL SERVICES P. LTD., MUMBAI VS. ADIT (INTL. TAXATION) 7(2), MUMBAI ITA.NO.8997/MUM/2010 DATED 11.01.2013 ON THE UNRELI ABILITY OF THE DATA. SINCE LD. CIT(A) ORDER IS IN TUNE WITH THE VARIOUS DECISIONS OF THE COORDINATE BENCHES, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THE EX CLUSION OF TWO COMPARABLES. ACCORDINGLY, GROUND NOS. 2 AND 3 RAISE D BY REVENUE ARE DISMISSED. 6. GROUND NO.4 IS ON THE ISSUE OF EXCLUSION OF COMMUNICATION CHARGES BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. AS BRIEFLY STATED, A.O. EXCLUDED TH E COMMUNICATION CHARGES FROM EXPORT TURNOVER HOLDING THAT THEY ARE NOT TO BE INCLUDED IN THE EXPORT TURNOVER. ASSE SSEE CONTESTED THE SAME STATING THAT DATA LINK CHARGES C ANNOT BE CONSIDERED AS ATTRIBUTABLE TO EXPORT SERVICE, HOWEV ER, ALTERNATE 7 PLEA WAS MADE THAT IF THE SAME WAS EXCLUDED FROM TH E EXPORT TURNOVER, THE SAME WAS ALSO TO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10 A. FOLLOWING THE DECISION OF ITAT IN THE CASE OF CIT V S. MENTOR GRAPHICS (I) P.LTD IN ITA NO.696/HYD/2009 DATED 18. 08.2009 AND SPECIAL BENCH DECISION IN THE CASE OF ITO VS. S AKSOFT 313 ITR (AT) 353, LD. CIT(A) GAVE DIRECTION TO EXCLUDE COMMUNICATION CHARGES FROM THE TOTAL TURNOVER AS WE LL. SINCE, THIS DIRECTION IS IN TUNE WITH THE DECISION OF COOR DINATE BENCH INCLUDING CHENNAI SPECIAL BENCH DECISION OF ITAT IN THE CASE OF ITO VS. SAK SOFT LIMITED 313 ITR (AT) 353 AND A LSO AS APPROVED BY HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. GEMPLUS JEWELLERY LTD., 330 ITR 175 THERE IS NO NEE D TO INTERFERE WITH THE DIRECTION OF LD. CIT(A) AND ACCO RDINGLY, REVENUE APPEAL IS DISMISSED. 7. NOW COMING TO ASSESSEES APPEAL, IT WAS SUBMITT ED THAT LD. CIT(A) HAS WRONGLY CONSIDERED EXCLUSION OF ONLY TWO COMPARABLES WHEN ASSESSEE HAS OBJECTED TO 9 COMPARA BLES. LD. AR POINTED OUT THAT ASSESSEE HAS GIVEN WRITTEN SUBMISSIONS THAT NOT ONLY THE ABOVE TWO COMPARABLE S BUT ALSO WORKING CAPITAL ADJUSTMENTS AS SUGGESTED BY ASSESSE E WOULD MAKE THE ALP WITHIN THE BAND APPROVED UNDER I.T. AC T. HOWEVER, LD. CIT(A) DID NOT CONSIDER THE ISSUE OF W ORKING CAPITAL ADJUSTMENT. THEREFORE, ASSESSEE IS CONTESTI NG THE INCLUSION OF OTHER COMPARABLES OBJECTED BEFORE LD. CIT(A). LD. COUNSEL REFERRED TO THE SUBMISSIONS MADE BEFORE LD. CIT(A) TO SUBMIT THAT IF THE WORKING CAPITAL ADJUSTMENT WAS P ROVIDED THEN THE ALP WOULD BE WITHIN THE NORMS AS APPROVED. HOWEVER, SINCE THE ISSUE OF WORKING CAPITAL ADJUSTM ENT WAS NOT ADJUDICATED BY LD. CIT(A), ASSESSEE IS OBJECTIN G TO THE 8 BALANCE OF COMPARABLES. IT WAS SUBMITTED THAT 7 COM PARABLES OBJECTED BY ASSESSEE BEFORE LD. CIT(A) WERE ALREADY REJECTED AS COMPARABLES IN THE CASE OF HYUNDAI MOTORS INDIA ENG INEERING P. LTD., HYDERABAD VS. ITO, WARD 2(2), HYDERABAD IN ITA.NO.1850/HYD/2012 DATED 21.02.2014 AND SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. ITO, WARD 1 2(2), BANGALORE IT (T.P.)A.NO.1316/BANG/2012 DATED 14.08. 2013. IT WAS SUBMITTED THAT IF THESE COMPARABLES ARE EXCLUD ED, OTHER GROUNDS RAISED BY ASSESSEE WOULD BE ACADEMIC IN NAT URE. 8. LEARNED D.R. HOWEVER, RELIED ON THE ORDERS OF T PO AND A.O. 9. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE CONTENTIONS. AS FAR AS 7 COMPARABLES SELECTED BY TP O BUT OBJECTED TO BY ASSESSEE, THESE ARE ALREADY DECIDED BY COORDINATE BENCH IN VARIOUS ORDERS WHICH WE DO NOT REPEAT HERE BUT FOR THE SAKE OF RECORD THE ORDERS IN THE C ASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. IT O, WARD 12(2), BANGALORE IT (T.P.)A.NO.1316/BANG/2012 DATED 14.08.2013 ON THE ABOVE COMPARABLES ARE EXTRACTED. I. ACCENTIA TECHNOLOGIES LTD. (SEG.) THIS WAS CONSIDERED AS A COMPARABLE BY THE TPO AND LISTED AT SL.NO.1 OF THE COMPARABLE COMPANIES CHOSE N BY THE TPO. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THERE ARE EXTRA ORDINARY EVENTS THAT OCCURRED DURING THE PREVIOUS YEAR IN THIS COMP ANY. OUR ATTENTION WAS DRAWN TO THE ANNUAL REPORT OF THI S COMPANY FOR THE A.Y. 2007-08 WHEREIN THE FACT THAT THIS COMPANY HAD ACQUIRED THUNGA SOFTWARE PVT. LTD., GSR PHYSICIANS BILLING SERVICES INC., GSR SYSTEMS INC. AND DENMED INC. WAS MENTIONED. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HYDERABAD ITAT BENCH I N THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA ITA NO.1316/BANG/2012 PVT. LTD. V. DCIT [ 2013] 32 9 TAXMAN.COM 21 (HYD. TRIB). IN THE AFORESAID DECISIO N, THE HYDERABAD BENCH OF THE TRIBUNAL HAD TO DEAL WITH A CASE OF DETERMINATION OF ALP IN THE CASE OF AN ASSESSEE WHO WAS PROVIDING ITES BUSINESS SUPPORT SERVICES FOR TH E A.Y. 2007-08. THE TPO HAD CONSIDERED ACCENTIA TECHNOLOGI ES LTD. AS A COMPARABLE. THE DRP HOWEVER HELD THAT THE SAID COMPANY CANNOT BE COMPARED AS A COMPARABLE OWING TO EXTRA ORDINARY EVENTS THAT TOOK PLACE DURING THE PR EVIOUS YEAR. THE TRIBUNAL UPHELD THE ORDER OF THE DRP OBSE RVING AS FOLLOWS :- 'I. ACCENTIA TECHNOLOGIES LTD. 10. IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS A COMPARABLE BECAUSE OF UNCOMPARABLE FINANCIAL RESULTS ARISING OUT OF AMALGAMATION IN THE COMPANY. IN THIS REGARD, THE ASSESSEE HAS RELIED UPON THE ORDER OF THE DRP FOR T HE ASSESSMENT YEAR 2008-09 IN ASSESSEE'S OWN CASE. IT IS SEEN THAT THE DRP WHILE CONSIDERING SIMILAR OBJECTI ON PLACED BY THE ASSESSEE IN THE CASE OF ANOTHER COMPA NY, VIZ. MOLD TEK TECHNOLOGIES LTD., IN THE PROCEEDINGS RELATING TO THE ASSESSMENT YEAR 2008-09, HAS OBSERV ED IN THE FOLLOWING MANNER- '17.5. IN ADDITION TO THE ABOVE, THE DIRECTOR'S RE PORT OF THE COMPANY FOR THE FY 2007-08 REVEALED THE MERG ER AND THE DEMERGER. A COMPANY KNOWN AS TECHMEN TOOLS PVT. LTD. HAD AMALGAMATED WITH MOLD-TEK TECHNOLOGIE S LTD. WITH EFFECT FORM 1ST OCTOBER, 2006. THERE WAS A DE- MERGER OF PLASTIC DIVISION OF THE COMPANY AND THE RESULTING COMPANY IS KNOWN AS MOLDTEK PLASTICS LIMI TED. THE DE-MERGER FROM THE MOLDTEK TECHNOLOGIES TOOK PL ACE WITH EFFECT FROM 1ST APRIL, 2007. THE MERGER AND TH E DE- MERGER NEEDED THE APPROVAL OF THE HON'BLE HIGH COUR T OF ANDHRA PRADESH AND ALSO THE APPROVAL OF THE SHAREHOLDERS. THE SHAREHOLDERS OF THE COMPANY GAVE APPROVAL FOR THE MERGER AND THE DE-MERGER ON 25.01. 2008 AND THE HON'BLE HIGH COURT OF ANDHRA PRADESH HAD APPROVED THE MERGER AND DE-MERGER ON 25TH JULY, 200 8. SUBSEQUENTLY, THE ITA NO.1316/BANG/2012 ACCOUNTS OF MOLDTEK TECHNOLOGIES FOR FY 2007-08 WERE REVISED. O N A PERUSAL OF THE ANNUAL REPORT IT IS NOTICED THAT TEC KMEN TOOLS PVT. LTD. AND THE PLASTIC DIVISION OF THE COM PANY WERE DEMERGED AND THE RESULTING COMPANY WAS NAMED A S MOLDTEK PLASTICS LTD. THE KPO BUSINESS REMAINED WIT H THE COMPANY. A PERUSAL OF THE ANNUAL REPORT REVEALED TH AT TO 10 GIVE EFFECT TO THE MERGER AND DEMERGER, THE FINANCI AL STATEMENTS WERE REVISED AND RESTATED AFTER SIX MONT HS FORM THE END OF THE FINANCIAL YEAR 31.3. 2008. THE ASSESSEE FILED FORM NO.21 UNDER THE COMPANIES ACT W ITH THE REGISTRAR OF COMPANIES ON 26TH AUGUST, 2008. TH US THE EFFECTIVE DATE OF THE SCHEME OF MERGER AND DEME RGER WAS 26TH AUGUST, 2008. THE ANNUAL REPORT SUPPORTED THE ARGUMENT OF THE ASSESSEE THAT THERE WERE MERGER AND DEMERGER IN THE FINANCIAL YEAR AND IT WAS AN EXCEPT IONAL YEAR OF PERFORMANCE AS FINANCIAL STATEMENTS WERE RE VISED BY THIS COMPANY MUCH AFTER THE CLOSURE OF THE PREVI OUS YEAR. THE PANEL AGREES WITH THE CONTENTION OF THE ASSESSEE THAT IT IS AN EXCEPTIONAL YEAR HAVING SIGN IFICANT IMPACT ON THE PROFITABILITY ARISING OUT OF MERGER A ND DEMERGER.' 11. ON CAREFUL CONSIDERATION OF THE MATTER, WE ALS O AGREE WITH THE AFORESAID VIEW OF THE DRP THAT EXTRA - ORDINARY EVENT LIKE MERGER AND DE-MERGER WILL HAVE AN EFFECT ON THE PROFITABILITY OF THE COMPANY IN THE F INANCIAL YEAR IN WHICH SUCH EVENT TAKES PLACE. IT IS THE CON TENTION OF THE ASSESSEE THAT IN CASE OF THE AFORESAID COMPA NY, THERE IS AMALGAMATION IN DECEMBER, 2006, WHICH HAS IMPACTED THE FINANCIAL RESULT. THIS FACT HAS TO BE VERIFIED BY THE TPO. IF IT IS FOUND UPON SUCH VERIFICATION T HAT THE AMALGAMATION IN FACT AHS TAKEN PLACE, THEN THE AFOR ESAID COMPARABLE HAS TO BE EXCLUDED.' WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE RATIO LA ID DOWN BY THE HYDERABAD BENCH OF THE ITAT IS SQUARELY APPLICABLE TO THE PRESENT CASE ALSO. SIMILAR VIEW W AS ALSO TAKEN IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) BY THE BANGALORE BENCH. IT IS CLEAR THAT DURING THE PREVIOUS YEAR THERE WERE EXTRA ORDI NARY EVENTS THAT TOOK PLACE IN THIS COMPANY WHICH WARRAN TS EXCLUSION OF THIS COMPANY AS A COMPARABLE. WE THERE FORE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. II. ACROPETAL TECHNOLOGIES LTD. (SEG.) THIS COMPANY IS LISTED AT SL.NO.2 OF THE COMPARABLE S CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCER NED, THE OBJECTION OF THE ASSESSEE IS THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE. THE ASSESSEE IS A BPO COMP ANY THAT PROVIDES CAD/ CAE SERVICES.. AS FAR AS ACROPET AL 11 TECHNOLOGIES LTD. IS CONCERNED, THIS COMPANY DOES T HE BUSINESS OF EXPORT OF SOFTWARE SERVICES. IT IS ALSO SEEN FROM THE SEGMENTAL REVENUE OF THIS COMPANY (NOTE 15 TO THE NOTES ON ACCOUNTS TO ANNUAL REPORT FOR 07-08) T HAT IT DERIVES INCOME FROM ENGINEERING DESIGN SERVICES AND SOFTWARE DEVELOPMENT SERVICES. IT IS ALSO PERTINENT TO POINT OUT THAT BEFORE THE TPO, THE ASSESSEE RAISED AN OBJ ECTION THAT THIS COMPANY PERFORMS DIFFERENT FUNCTIONS AND MAINLY ENGAGED IN THE AREA OF SOFTWARE DEVELOPMENT SERVICE S AND ENGINEERING DESIGN SERVICES. THE TPO IN HIS ORDER H AS OBSERVED THAT THE SERVICES RENDERED BY THIS COMPANY FALL IN THE DEFINITION OF ITES. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. LD COUNSEL SUBMISSION WAS THAT THIS COMPANY WAS EXCLUDED IN THE CASE OF SYMPH ONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) BY THE BAN GALORE BENCH, SO THE SAME REQUIRE EXCLUSION. IN THE ABOVE CASE IT WAS CONSIDERED LIKE THIS: 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE ASSESSEE. ON A PERUSAL OF THE NOTE NO.15 OF NOTES TO ACCOUNTS WHICH GIVES SEGMENTAL REVENUE OF THIS COMPANY, IT IS CLEAR THAT THE MAJOR SOURCE OF INCOME FOR THIS COMPANY IS FROM PROVIDING ENGINEERING DESI GN SERVICE AND INFORMATION TECHNOLOGY SERVICES. THE FUNCTIONS PERFORMED BY THE ENGINEERING DESIGN SERVI CES SEGMENT OF THE COMPANY CANNOT BE CONSIDERED AS COMPARABLE TO THE ITES/BPO FUNCTIONS PERFORMED BY T HE ASSESSEE. THE PERFORMANCE OF ENGINEERING DESIGN SERVICES IS REGARDED AS PROVIDING HIGH END SERVICES AMONG THE BPO WHICH REQUIRES HIGH SKILL WHEREAS THE SERVICES PERFORMED BY THE ASSESSEE ARE ROUTINE LOW END ITES FUNCTIONS. WE THEREFORE HOLD THAT THIS COMPANY COULD NOT HAVE BEEN SELECTED AS A COMPARABLE, ESPEC IALLY WHEN IT PERFORMS ENGINEERING DESIGN SERVICES WHICH ONLY A KNOWLEDGE PROCESS OUTSOURCING [KPO] WOULD DO AND NOT A BUSINESS PROCESS OUTSOURCING [BPO]. AS CAN BE SEEN ABOVE, EVEN THOUGH THE SAID COMPANY WAS EXCLUDED ON THE DIFFERENTIATION OF HIGH END SERVICE S BEING PROVIDED BY THIS COMPANY, AS NOTICED ASSESSEE ALSO PROVIDE HIGH END SERVICES IN CAD / CAE DESIGNING AR EAS. THESE ARE HIGH END SERVICES AS CONSIDERED BY THE BANGALORE BENCH. THEREFORE WE ARE OF THE OPINION TH AT FUNCTIONS OF ASSESSEE ARE SIMILAR TO THE ABOVE COMP ANY. THE OBJECTIONS OF ASSESSEE ARE REJECTED. 12 III. COSMIC GLOBAL LTD., : THIS COMPARABLE WITH OPERATING PROFITS BY TOTAL COS T AFTER ADJUSTMENTS OF WORKING CAPITAL WAS SHOWN AT 26.51% BY THE TPO. ASSESSEE HAS NOT OBJECTED TO THI S COMPARABLE INITIALLY IN THE OBJECTIONS TO THE DRAFT ORDER AND VIDE ANNEXURE-26, IT HAS AGREED FOR TAKING THIS COMPANY AS COMPARABLE COMPANY BUT SUBJECT TO MODIFICATION OF THE MARK-UP/MARGIN CALCULATED. ASSE SSEE SUBMITTED AT PAGE 203 OF THE OBJECTIONS TO THE DRAF T ORDER VIDE ANNEXURE-26, THAT OPERATING PROFIT BY OPERATIN G COST ARRIVED AT BY THE TPO WAS 24.30% WHEREAS, AFTER INCLUSION OF INTEREST AND BANK CHARGES THAT COMES T O 23.30%. THIS REVISED WORKING WAS FURNISHED AS PART OF THE OBJECTIONS WITH A REQUEST FOR TAKING THE REVISE D MARGIN AGAINST THIS COMPARABLE. HOWEVER, SUBSEQUENTLY, VID E LETTER DATED 30.07.2012 ASSESSEE OBJECTED TO THE COMPARABLE ON THE REASON THAT IT FAILS EMPLOYEE COS T FILTER. THE EMPLOYEE COST SHOWN WAS AT RS.1.17 CRORES WHICH IS 19.96% OF THE OPERATING REVENUE OF RS.5.87 CRORES. IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT EMPLOYEES COS T FILTER DETERMINED BY THE TPO WAS BETWEEN 45% TO 60% WHEREAS, THIS COMPANY HAS ONLY 19.96% AS EMPLOYEE COST. ACCORDINGLY, THIS COMPANY IS NOT A COMPARABLE COMPANY AS IT MAY BE OUTSOURCING THE WORK. THE LEARNED D.R. HOWEVER, SUBMITTED THAT ASSESSEE HAS ACCEPTED THE SAME IN THE TPO PROCEEDINGS. THERE FORE, SHOULD NOT BE EXCLUDED NOW. WHILE THERE WAS NO OBJECTION FOR ASSESSEE OBJECTING TO THE COMPARABLE EVEN AT A LATER STAGE WHEN IT COM ES TO KNOW OF NEW FACTS, WHAT WE NOTICED IS THAT THE ASSE SSEES OBJECTIONS BEFORE THE DRP DATED 30.07.2012 HAVE NOT BEEN ADDRESSED BY THE DRP. IT IS FOR THE TPO TO DET ERMINE WHETHER THIS COMPANY FALLS WITHIN THE FILTERS AS AD OPTED BY THE TPO HIMSELF. IF THE ASSESSEE FAILS THE EMPLO YEE COST FILTER, THEN THE SAME CANNOT BE ACCEPTED AS A COMPA RABLE COMPANY. IN ORDER TO EXAMINE THIS ASPECT, WE ARE OF THE OPINION THAT SELECTION OF THIS COMPARABLE IS TO BE RESTORED TO THE FILE OF THE TPO FOR FRESH EXAMINATION, AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ISS UE IS RESTORED TO THE FILE OF THE TPO. 13 IV. ECLERX SERVICES LTD. : THIS COMPANY IS LISTED AT SL.NO.10 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. IT IS THE S TAND OF THE ASSESSEE THAT THIS COMPANY OFFERS SOLUTIONS THAT INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDI TS AND RECONCILIATION AND THEREFORE HAS TO BE CLASSIFI ED AS HIGH END KPO. IN SUPPORT OF THE STAND OF THE ASSESS EE, EXTRACTS FROM THE ANNUAL REPORT OF THIS COMPANY HAV E BEEN POINTED OUT. IT HAS FURTHER BEEN SUBMITTED THAT EXT RA ORDINARY EVENTS AND PECULIAR CIRCUMSTANCES PREVAIL IN THE CASE OF THE ASSESSEE IN AS MUCH AS THIS COMPANY ACQUIRED A UK BASED COMPANY WHICH HAS SIGNIFICANTLY CONTRIBUTED TO THE INCREASE IN THE CUSTOMER AND REV ENUE BASE OF THE COMPANY. THIS TRIBUNAL IN THE CASE OF C APITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. (SUPRA) HAD AN OCCASION TO DEAL WITH COMPARABILITY OF THIS COMPANY IN THE CASE OF AN ITES COMPANY SUCH AS THE ASSESSEE AND TH E TRIBUNAL HELD AS FOLLOWS:- '14. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEI NG TAKEN AS COMPARABLE MAINLY ON THE GROUND THAT IT WA S HAVING A SUPERNORMAL PROFIT OF 89%, AND AS SUCH IT CANNOT BE TAKEN AS A COMPARABLE IN VIEW OF THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE M/S. TEVA INDIA LTD. (SUPRA). THAT APART, RELY ING UPON THE ANNUAL REPORT OF THE COMPANY, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS CONTENDED THAT THAT THE CONCERNED COMPANY IS ENGAGE D IN PROVIDING KNOWLEDGE PROCESS OUTSOURCING(KPO) SERVICES. 15. ON CONSIDERING THE OBJECTIONS OF THE ASSESSEE I N RELATION TO THIS COMPANY, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE BOTH FOR THE REASONS THAT IT WAS HAVING SUPERNORMAL PROFIT AND IT IS ENGAGED IN PROVIDING K PO SERVICES, WHICH IS DISTINCT FROM THE NATURE OF SERV ICES PROVIDED BY THE ASSESSEE.' WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DECISIO N OF THE HYDERABAD BENCH REFERRED TO ABOVE, THIS COMPANY CANNOT BE REGARDED AS A COMPARABLE FOR THE REASON T HAT IT WAS HAVING EXTRAORDINARY EVENT AND SUPER NORMAL PRO FITS. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF SYMPHON Y 14 MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) BY THE BAN GALORE BENCH. V. GENESYS INTERNATIONAL CORPORATION LTD. THIS COMPANY IS LISTED AT SL. NO.11 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS T HIS COMPANY IS CONCERNED, THE STAND OF THE ASSESSEE HAS BEEN THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARAB LE AND THAT IT HAS A DIFFERENT EMPLOYEE SKILL SET AND THAT THIS COMPANY PERFORMS R&D SERVICES AND ALSO OWNS INTANGIBLES. THIS COMPANY IS A GEOSPATIAL SERVICES CONTENT PROVIDER SPECIALISING IN LAND BASED TECHNOLOGIES. F ROM THE NOTES TO ACCOUNTS OF THIS COMPANY, IT IS SEEN THAT THIS COMPANY IS ENGAGED IN PROVIDING GEOGRAPHICAL INFORM ATION SERVICES COMPRISING OF PHOTOGRAMMETRY, REMOTE SENSI NG CARTOGRAPHY, DATA CONVERSION RELATED COMPUTED BASED SERVICES AND OTHER RELATED SERVICES. FURTHER THE BU SINESS OF THIS COMPANY REQUIRES SKILLED MANPOWER AND SCIEN TISTS, CIVIL ENGINEERS, ETC. BESIDES THE ABOVE, THIS COMPA NY ALSO CARRIES OUT R&D SERVICES AND OWN INTANGIBLES. THE AFORESAID FACTS, IN OUR VIEW, WILL TAKE THIS COMPAN Y OUT OF THE LIST OF COMPARABLES. SIMILAR VIEW WAS ALSO TAKE N IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) BY THE BANGALORE BENCH. IN VIEW OF THE ABOV E, WE ARE OF THE VIEW THAT THIS COMPANY CANNOT BE REGARDE D AS A COMPARABLE AND DESERVES TO BE EXCLUDED FROM THE LIS T OF COMPARABLES. VI HCL COMNET SYSTEMS & SERVICES LIMITED : VII. WIPRO LIMITED : THE ASSESSEE HAS OBJECTED FOR THESE TWO COMPANIES BEING TAKEN AS COMPARABLES MAINLY ON THE GROUND THA T THESE COMPANIES ARE INDUSTRIAL GIANTS CONSIDERING T HEIR TURNOVER COMPARED TO THAT OF THE ASSESSEE, WHOSE TURNOVER IS ONLY RS.15 CRORES. IT IS THE CONTENTION OF THE ASSESSEE THAT THESE COMPANIES ARE INDUSTRIAL GIANTS IN THE AREA OF SOFTWARE DEVELOPMENT AND SINCE THESE COMPAN IES ASSUME ALL RISKS, THEY EARN HIGHER AMOUNT OF REVENU E RESULTING IN HIGHER PROFIT, WHEREAS THE ASSESSEE OP ERATES IN A RISK MITIGATED ENVIRONMENT. THEREFORE, THE MAR GIN OF PROFIT IS ALSO LESS. IN THIS CONTEXT, THE LEARNED A UTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DEC ISION OF THE ITAT DELHI BENCH IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. V/S. ITO IN ITA NO.3856/DEL/20 10 DATED 4TH NOVEMBER, 2010 AND IN THE CASE OF TRINITI 15 ADVANCED SOFTWARE LABS (P) LTD. (2011-TII-92-ITAT-H YD- TP). THE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER CONTENDED THAT WHEN THE TPO HAS REJECTED COMPANIES WITH TURNOVER OF LESS THAN RS. ONE CRORE, BY STATING THAT THESE COMPANIES MAY NOT BE REPRESENTIN G THE INDUSTRY TREND, BY APPLYING THE VERY SAME LOGIC, HE SHOULD NOT HAVE ALSO CONSIDERED THE COMPANIES HAVING TURNO VER OF MORE THAN RS.200 CRORES. IN THIS CONTEXT, THE LE ARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS RELI ED UPON THE DECISION OF THE ITAT BANGALORE BENCH IN TH E CASE OF M/S. GENESYS INTEGRATING SYSTEM(INDIA) P. LTD. ( 2011) (2012) 53 SOT 159 / 20 TAXMANN.COM 715 (BANG.) (URO ) / 64 DTR 225. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN RELATION TO THESE COMPANIES, WE FIND THAT THE TPO H AS EXCLUDED THE COMPANIES WHOSE TURNOVER IS LESS THAN RS.ONE CRORE, ON THE GROUND THAT THEY MAY NOT BE REPRESENTING THE INDUSTRY TREND. THAT VERY LOGIC AL SO APPLIES TO THE COMPANIES HAVING HIGH TURNOVER OF OV ER RS.200 CRORES AS AGAINST THE ASSESSEE'S TURNOVER OF ONLY RS.15 CRORES, AND THEREFORE, IT WOULD BE FAIR ENOUG H TO EXCLUDE THOSE COMPANIES ALSO. IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. (SUPRA), THE DELHI BENCH OF TH E TRIBUNAL, WHILE CONSIDERING THE COMPARABILITY WITH COMPANIES WHICH ARE MARKET LEADERS IN THEIR FIELD, AND HAVING SUBSTANTIALLY HIGH TURNOVER, OBSERVED AS FOL LOWS- '5.2. VARIOUS ARGUMENTS, AS STATED EARLIER, WERE TA KEN BEFORE THE DRP WHICH INTER-ALIA INCLUDED REJECTION OF COMPARABLE CASES; APPLICATION OF ARBITRARY FILTER O F WAGE TO SALES RATIO; IGNORING THAT THE ASSESSEE IS A LIM ITED RISK COMPANY; INCLUSION OF INFOSYS TECHNOLOGIES LTD .; AND INCLUSION OF SATYAM COMPUTERS SERVICES LTD. IN SPITE OF THE FACT THAT ITS DATA IS NOT RELIABLE AS PUBLICLY KNOWN. ON THE BASIS OF THESE ARGUMENTS, THE DRP EXCLUDED THE CASE OF SATYAM COMPUTERS SERVICES LTD. , THEREBY REDUCING THE ARM'S LENGTH MARGIN TO 25.6%. IT IS ARGUED THAT THE CASE OF THE ASSESSEE IS NOT COMPARA BLE WITH INFOSYS TECHNOLOGIES LTD., THE REASON BEING TH AT THE LATER IS GIANT IN THE AREA OF DEVELOPMENT OF SO FTWARE AND IT ASSUMES ALL RISKS, LEADING TO HIGHER PROFIT. ON THE OTHER HAND, THE ASSESSEE IS A CAPTIVE UNIT OF ITS P ARENT COMPANY IN THE USA AND IT ASSUMES ONLY LIMITED CURRENCY RISK. HAVING CONSIDERED THESE POINTS, WE A RE OF THE VIEW THAT THE CASE OF THE AFORESAID INFOSYS AND THE ASSESSEE ARE NOT COMPARABLE AT ALL AS SEEN FROM THE 16 FINANCIAL DATA ETC. OF THE TWO COMPANIES MENTIONED EARLIER IN THE ORDER. THEREFORE, WE ARE OF THE VIEW THAT THIS CASE IS REQUIRED TO BE EXCLUDED.' SIMILAR VIEW HAS ALSO BEEN EXPRESSED BY THE HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF TRINITY ADVANC ED LABS P. LTD. (SUPRA). IN THE CASE OF M/S. GENESYS INTEGRATING INDIA P. LTD. (SUPRA), THE BANGALORE BE NCH OF THE TRIBUNAL HAS OBSERVED IN THE FOLLOWING MANNER- '9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS AND ALSO THE JURID ICAL PRECEDENTS ON THE ISSUE, WE FIND THAT THE TPO HIMSE LF HAS REJECTED THE COMPANIES WHICH ARE MAKING LOSSES AS COMPARABLES. THIS SHOWS THAT THERE IS A LIMIT FOR T HE LOWER END FOR IDENTIFYING THE COMPARABLES. IN SUCH A SITUATION, WE ARE UNABLE TO UNDERSTAND AS TO WHY TH ERE SHOULD NOT BE AN UPPER LIMIT ALSO. WHAT SHOULD BE UPPER LIMIT IS ANOTHER FACTOR TO BE CONSIDERED. WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SIZE MATTERS IN BUSINESS. A BIG COMPANY WOULD BE IN A POSITION TO BARGAIN FOR THE P RICE AND ALSO ATTRACT MORE CUSTOMERS. IT WOULD ALSO HAVE A BROAD BASE OF SKILLED EMPLOYEES WHO ARE ABLE TO GIV E BETTER OUTPUT. A SMALL COMPANY MAY NOT HAVE THESE BENEFITS AND THEREFORE, THE TURNOVER ALSO WOULD COM E DOWN REDUCING PROFIT MARGIN. THUS, AS HELD BY THE VARIOUS BENCHES OF THE TRIBUNAL WHEN COMPANIES WHIC H ARE LOSS MAKING ARE EXCLUDED FROM COMPARABLES, THEN THE SUPER PROFIT MAKING COMPANIES SHOULD ALSO BE EXCLUDED. FOR THE PURPOSE OF CLASSIFICATION OF COMP ANIES ON THE BASIS OF NET SALES OR TURNOVER, WE FIND THAT A REASONABLE CLASSIFICATION HAS TO BE MADE. DUN & BRADSTREET AND NASSCOM HAS GIVEN DIFFERENT RANGES. TAKING THE INDIAN SCENARIO INTO CONSIDERATION, WE F EEL THAT THE CLASSIFICATION MADE BY DUN & BRADSTREET IS MORE SUITABLE AND REASONABLE. IN VIEW OF THE SAME, WE HOLD THAT THE TURNOVER FILTER IS VERY IMPORTANT AND THE COMPANIES HAVING A TURNOVER OF RS.1.00 CRORE TO 200 CRORES HAVE TO BE TAKEN AS A PARTICULAR RANGE AND T HE ASSESSEE BEING IN THE RANGE HAVING TURNOVER OF 8.15 CRORES, THE COMPANIES WHICH ALSO HAVE TURNOVER OF 1 .00 TO 200.00 CRORES ONLY SHOULD BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF MAKING TP STUDY.' IN VIEW OF THE AFORESAID CONSISTENT DECISIONS OF TH E TRIBUNAL, WE ACCEPT THE CONTENTION OF THE LEARNED 17 AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT THE AFORESAID COMPANIES CANNOT BE TREATED AS COMPARABLE , CONSIDERING THEIR SUBSTANTIALLY HIGH TURNOVER AS CO MPARED TO THAT OF THE ASSESSEE. WE ACCEPT THE CONTENTION O F ASSESSEE THAT THESE COMPANIES CAN NOT BE REGARDED A S COMPARABLES. 10. SINCE THE SEVEN COMPARABLES ARE HELD NOT COMPARABLE IN VARIOUS DECISIONS OF COORDINATE BENCH ES, A.O. / TPO IS DIRECTED TO EXCLUDE THE ABOVE COMPARABLES AN D RE- WORKOUT THE ALP. ASSESSEE SHOULD BE GIVEN AN OPPORT UNITY TO MAKE SUBMISSIONS ON THE RISK ADJUSTMENTS/WORKING CA PITAL ADJUSTMENT IF SO REQUIRED BEFORE FINALISING THE ORD ER. WITH THESE OBSERVATIONS, ASSESSEES APPEAL IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. AS BRIEFLY STATED, BALANC E OF THE GROUNDS RAISED BECOMES ACADEMIC IN NATURE. 11. IN THE RESULT, REVENUE APPEAL IS DISMISSED AND APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.11.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH NOVEMBER, 2014 VBP/- COPY TO 1. M/S. FLAGSTONE UNDERWRITING SUPPORT SERVICES IND IA P. LTD., PLOT NO. 36 & 37, SY.NO.115/1 & 22, GACHIBOWL I, NANAKRAMGUDA, HYDERABAD. 2. DCIT, CIRCLE 1(3), HYDERABAD. 3. COMMISSIONER OF INCOME TAX-II, HYDERABAD 4. COMMISSIONER OF INCOME TAX-I, HYDERABAD 5. ADDL.COMMISSIONER OF INCOME TAX (TRANSFER PRICIN G), 6 TH FLOOR, B-BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD-500 004. 6. D.R. ITAT B BENCH, HYDERABAD.