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ITA 1054/DEL/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9323 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction; Bad and doubtful debts; Tax effect
• Section: 92D; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH I - 2 NEW DELHI BEFORE SRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 1054 /DEL/201 6 A.Y. 20 11 - 12 M/S NAVISITE INDIA PVT.LTD. VS. ITO, WARD - 17(4) VIPUL PLAZA, 1 ST FLOOR NEW DELHI GOLF COURSE ROAD SECTOR - 54, SUN CITY GURGAON 122 002 PAN: AACCN0289R & ITA NO. 948 /DEL/201 6 A.Y. 20 11 - 12 ITO, WARD 17(4) VS. M/S NAVISITE INDIA PVT.LTD. ROOM NO.225D NEW DELHI C.R.BUILDING I.P.ESTATE NEW DELHI 110 002 (APPELLANT) (RESPONDENT) ASSESSEE BY: SH.MANONEET DALAL, ADV . SH. PRAG GARG, ADV. SH. YISHU GOEL, ADV. SH. JATIN CHAWLA, ADV. DEPARTMENT BY: SRI SARABJEET SINGH, SR.D.R. DATE OF HEARING: 03/12/ 2018 DATE OF PRONOUNCEMENT : 17/12/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER P RESENT C ROSS A PPEALS HA VE BEEN FILED BY ASSESSEE AS WELL AS R EVENUE AGAINST FINAL ASSESSMENT ORDER DATED 28/12/15 ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 2 PASSED BY I NCOME T AX O FFICER , WARD 17 (4), NEW DELHI FOR A SSESSMENT Y EAR 2011 - 12 ON FOLLOWING GROUNDS OF APPEAL: ITA NO. 1054/ D EL/2016 1 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER PASSED BY LD.AO IS BAD IN LAW AND VOID - AB - INITIO. 2 . LD.AO/LD.TPO ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT TO ARM S LENGTH PRICE OF THE APPELLANT S INTERNATIONAL TRANSACTIONS WHICH RESULTED IN THE ENHANCEMENT OF RETURNED INCOME OF THE APPELLANT BY INR 15,276,175. TRANSFER PRICING GROUNDS 3 . LD.TPO/A.O. FAILED TO APPRECIATE AND APPLY THE CLEAR DIRECTIONS OF HON BLE DRP AND GROSSLY ERRED ON FACTS AND IN LAW BY NOT REJECTING E - INFOCHIPS LIMITED FROM THE FINAL SET OF COMPARABLE COMPANIES. 4 . LD.TPO/A.O. FAILED TO APPRECIATE AND APPLY THE CL EAR DIRECTIONS OF HON BLE DRP AND GROSSLY ERRED ON FACTS AND IN LAW BY NOT REJECTING ACROPETAL TECHNOLOIGES LTD. FROM THE FINAL SET OF COMPARABLE COMPANIES. 5 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN MAKING AN UPWARD ADJUSTMENT OF ARM S LENGTH PRICE OF THE APPELLANT S INTERNATIONAL TRANSACTIONS WITH ITS A.ES. 5 . 1 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN REJECTING THE APPLICABILITY OF FUNCTIONAL FILTERS APPLIED IN THE SEARCH PROCESS BY THE APPELLANT AND CHALLENGED THE SAME. 5 . 2 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN CONCLUDING THAT THE APPELLANT BEARS VARIOUS RISKS WITHOUT PROVIDING ANY LOGICAL JUSTIFICATION OF THE SAME. 5 . 3 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN NOT DEMONSTRATING THE BASIS FOR CONCLUDING THAT THE COMPARABILITY ANALYSIS CONDUCTED IN T HE TP REPORT OF THE APPELLANT IS INAPPROPRIATE AND INADEQUATE. 5 . 4 . LD.TPO/A.O./DRP ERRED IN DISREGARDING THE PROVISIONS OF LAW BY CONSIDERING DATA ONLY FOR FINANCIAL YEAR 2010 - 11 FOR COMPARABILITY PURPOSE, DESPITE THE FACT THAT COMPLETE DATA FOR FY 2010 - 11 WA S NOT AVAILABLE TO THE APPELLANT AT THE TIME OF UNDERTAKING THE TRANSFER PRICING STUDY. 5 . 5 . LD.TPO/A.O./DRP ERRED ON FACTS IN ADOPTING A NEW SEARCH CRITERION AND INCONSISTENTLY APPLYING CERTAIN ADDITIONAL QUANTITATIVE FILTERS. 5 . 6 . LD.TPO/A.O./DRP ERRED ON FACTS IN REJECTING THE QUANTITATIVE FILTERS USED BY THE APPELLANT IN ITS TP DOCUMENTATION. 5 . 7 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN SELECTING THE HIGH PROFIT MARGIN COMPARABLE COMPANIES AS COMPARABLE TO THE APPELLANT. ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 3 5 . 8 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN REJ ECTING THE COMPARABLE COMPANIES SELECTED BY THE APPELLANT WITHOUT PROVIDING COGENT AND SUFFICIENT REASONING. 5 . 9 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN SELECTING THE COMPANIES THAT ARE NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSE T ASSUMED AND RISKS ASSUMED. 5 . 10 . LD.TPO/A.O./DRP ERRED ON FACTS AND IN LAW IN COMPUTING OPERATING MARGIN OF THE APPELLANT AS WELL AS OF THE COMPARABLE COMPANIES BY TREATING FOREIGN EXCHANGE GAIN/(LOSS), BANK CHARGES, PROVISION FOR DOUBTFUL DEBTS AND PROVISIONS WRITTEN BACK AS NON - OPERATING ITEMS. 5 . 11 . LD.TPO/A.O./ DRP FAILED TO APPRECIATE THAT THERE IS NO INTENTION OF SHIFTING OF PROFITS BY THE APPELLANT. 5 . 12 . LD.TPO/A.O./DRP HAS GROSSLY ERRED ON FACTS AND IN LAW IN DENYING THE RISK ADJUSTMENT FOR DIFFERENCE IN THE RISK PROFILE OF THE APPELLANT VIS - A - VIS COMPARABLE COMPANIES. 6 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 274 R.W.S.271(1)(C ) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS WIT HOUT RECORDING ANY ADEQUATE SATISFACTION FOR SUCH INITIATION. 7 . LD.A.O./DRP ERRED ON FACTS AND IN LAW IN CHARGING AND COMPUTING INTEREST U/S 234B, 234C AND 234D OF THE ACT. THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OT HER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF HEARING AS WE MAY BE ADVISED. THE ARGUMENTS TAKEN HEREINABOVE ARE WITHOUT PREJUDICE TO EACH OTHER. ITA NO. 948/ D EL/2016 1 . WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE DISPUTE RESOLUTION PANEL - IT HAS ERRED IN REDUCING THE TRANSFER PRICING ADJUSTMENT FROM RS. 1,83,28,563/ - TO RS 1,52,76,175 / - 2 . WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE ORDER OF THE LD. DRP WAS RIGHT IN NOT APPRECIATING THE FUNCTIONAL ANALYSIS OF COMPARABLE BASED ON THE TP STUDY, SUBMISSION MADE BY THE ASSESSEE AND INFORMATION AVAILABLE IN PUBLIC DOMAIN. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. DRP WAS RIGHT IN REJECTING INFOSYS TECHNOLOGIES LTD. AS A BEING AN INDUSTRY GIANT. ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 4 4. THAT THE ORDER OF THE LD. DRP IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORG O ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEF FACTS OF CASE ARE AS UNDER: A SSESSEE FILED ITS RETURN OF INCOME ON 19/09/11 DECLARING TOTAL INCOME OF RS.2,03,120/ - . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF INCOME TAX ACT, 1961 ( THE A CT ) AND CASE WAS SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143(2) WAS ISSUED ALONG WITH QUESTIONNAIRE AND NOTICE UNDER SECTION 142 (1) OF THE A CT TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICES, R EPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO AND FILED DETAILS AS CALLED FOR. 2.1. LD.AO OBSERVED THAT ASSESSEE WAS INCORPORATED ON 30/12/ 20 04 AND HAS BEEN ENGAGED IN BUSINESS OF DEVELOPMENT OF SOFTWARE SOLUTION S AND OTHER I NFORMATION T ECHNOLOGY E NABLED S ERVICES. HE OBSERVED THAT ASSESSEE HAS PROVIDED WEBSITE SERVICES WHICH FELL WITHIN THE MEANING OF COMPUTER SOFTWARE AS PER C LAUSE (B) OF S UB - C LAUSE (I) OF E XPLANATION 2 OF S ECTION 10 A OF THE A CT. ASSE S SEE IS REGISTERED IN S OFTWARE T ECHNOLOGY PARK OF INDIA , AND HAS COMMENCED MANUFACTURE/PRODUCTION AS ON 04/07/ 20 05. 2.2. LD. AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS: SL. NO. NATURE OF TRANSACTION METHOD VALUE OF TRANSACTION RS. 1. PROVISION OF CONTRACT SOFTWARE DEVELOPMENT SERVICES TNMM 23,64,73,194 2. REIMBURSEMENT OF EXPENSES TO AE TNMM 1,48,555 3. REIMBURSEMENT OF EXPENSES BY AE CUP 68,65,766 ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 5 2.3. AS VA LUE OF TRANSACTION EXCEEDED RS. 15 CRORES, REFERENCE WAS MADE TO T RANSFER P RICING O FFICER, FOR COMPUTING ARM S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY ASSESSEE WITH ITS A SSOCIATED E NTERPRISES (AE) , AFTER OBTAINING NECESSARY APPROVALS. 2.4. O N RECEIPT OF REFERENCE BY LD.TPO, PROCEEDINGS WERE TAKEN UP , AND NOTICE UNDER SECTION 92CA (2) READ WITH SECTION 92D (3) OF THE A CT TO ASSESSEE, TO SUBMIT DOCUMENTS MAINTAINED IN TERMS OF SECTION 92D. 2.5. LD.TPO , IN TP DOCUMENTATION OBSERVED THAT, IN R ESPECT OF INTERNATIONAL TRANSACTION FOR SOFTWARE DEVELOPMENT SERVICES PROVIDED TO ITS AE S, ASSESSEE APPLIED TNMM AS MOST APPROPRIATE METHOD, BY USING OP/OC AS PLI. ASSESSEE COMPUTED ITS PLI AT 13.88% ON COST , VIS - A - VIS MARGIN COMPUTED IN RESPECT OF 15 CO MPARABLES SELECTED BY ASSESSEE AT 11.94 %, WHICH ARE AS UNDER: NO. NAME OF THE COMPANY OP/OC % 1. AKSHAY SOFTWARE TECHNOLOGIES LTD. 3.63 2. BELLS SOFTECH LTD. 4.94 3. HELIOS & MATHESON INFORMATION TECHNOLOGIES LTD. 16.47 4. L G S GLOBAL LTD. 15.40 5. MINDTREE LTD. 20.94 6. OMNI AX S SOFTWARE LTD. 1.63 7. PERSISTENT SYSTEMS & SOLUTIONS LTD. 20.31 8. QUINNOX CONSULTANCY SERVICES LTD. 14.16 9. RELIANCE INSOLUTION PVT. LTD. 8.60 10. SPRY RESOURCES INDIA PVT.LTD. 27.54 11. CCE SOFTWARE PVT.LTD. 15.46 12. ALLIED DIGITAL SERVICES LTD. 13.38 ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 6 13. OCTANT INDUSTRIES LTD. 1.38 14. TECHPROCESS SOLUTIONS LTD. 10.16 15. MAXIMAA SYSTEMS LTD. 5.05 ARITHMETIC MEAN 11.94% 2.6. LD.AO UPON ANALYSING TP REPORT , REJECT ED CERTAIN COMPARABLES, FINALISED LIST OF 11 COMPARABLES WITH AVERAGE MARGIN OF 24.30% BY USING OP/TC AS PLI. 2.7. LD.AO , THUS COMPUTED ARM S LENGTH PRICE OF INTERNATIONAL TRANSACTION UNDERTAKEN BY ASSESSEE AT RS.25,48,01,757/ - , THEREBY MAKING A DJUSTMENT OF RS.1,83,28,563/ - . 3. AGGRIEVED BY ORDER OF LD.TPO, ASSESSEE PREFERRED OBJECTIONS BEFORE DRP. O NLY OBJECTION RAISED BEFORE DRP WAS IN RESPECT OF COMPARABLES FINALLY CONSIDERED BY LD.TPO. DRP UPON VERIFYING REL EVANT DETAILS FILED BY ASSESSEE, DIRECTED LD .TPO TO VERIFY WIPRO TECHNOLOGY SERVICES LTD , AND TO EXCLUDE, INFOSYS TECHNOLOGIES LTD . 3.1. LD.AO THUS PASSED IMPUGNED FINAL ASSESSMENT ORDER WHEREIN WIPRO TECHNOLOGY SERVICES LTD WAS RETAINED, EXCLUDED INFOSYS TECHNOLOGIES LTD AND COMPUTED ADJU STMENT AT RS.1,52,76,175/ - . 4. AGGRIEVED BY FINAL ASSESSMENT ORDER PASSED BY LD.AO, ASSESSEE IS IN APPEAL BEFORE US NOW. 5. LD. COUNSEL SUBMITTED THAT GROUND NO. 1, 2 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. LD.COUNSEL SUBMIT TED THAT GROUND NO. 4 - 5.5, 5.7, 5.10 - 5.12 ARE NOT PRESSED , AS PER DIRECTIONS OF ASSESSEE. 6. ACCORDINGLY THESE GROUNDS ARE DISMISSED , AS NOT PRESSED . ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 7 7. LD.COUNSEL SUBMITTED THAT EFFECTIVE GROUND S THAT WOULD BE ARGUED BY LD.COUNSEL IS G ROUND NO. 3 , G ROUND NO. 5.6, 5.8 - 5.9 . IT HAS BEEN SUBMITTED THAT VIDE THESE GROUNDS, ASSESSEE IS CHALLENGING INCLUSION/EXCLUSION OF FOLLOWING COMPARABLES: COMPARABLES FOR EXCLUSION: E INFOCHIPS LTD ; (GROUND NO. 3) WIPRO T ECHNOLOGY S ERVICES LTD. (GROUND NO. 5.9) COMPA RABLE FOR INCLUSION R SYSTEMS INTERNATIONAL LTD. (GROUND NO. 5.6 & 5.8) 8. B EFORE ADVERTING TO COMPATIBILITY OF ASSESSEE WITH THAT OF COMPARABLES THAT HAS BEEN INCLUDED/REJECTED BY LD.TPO/DRP , IT IS SINE QUA NON TO ANALYSE FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISK ASSUMED BY ASSESSEE DURING YEAR UNDER CONSIDERATION. 8. I. FUNCTIONS : ON PERUSAL OF TP STUDY REPORT PLACED AT PAGE 975 - 1034 OF PAPER BOOK VOLUME 3, IT IS OBSERVED THAT FUNCTIONS PERFORMED BY ASSESSEE IN INDIA INCLUDES , PROVISION OF CONTRACT INFORMATION TECHNOLOGY SERVICES IN NATURE OF SOFTWARE PROGRAMMING SERVICES, MONITORING AND DATABASE MANAGEMENT SERVICES, DATABASE AND APPLICATION MAINTENANCE SERVICES, CUSTOMER SUPPORT SERVICES, ESTABLISHMENT OF DATA CENTRES, INFRAST RUCTURE MANAGEMENT SERVICES, SERVICES RELATED TO SERVERS, NETWORK CONNECTIVITY, SECURITY, NETWORKING, STORAGE, WEB AND APPLICATION DEVELOPMENT, CO L L OCATION HOSTING, BRAND WI D TH OPTION, DISASTER RECOVERY, DIGITAL STORAGE SYSTEMS, ELECTRONIC SOFTWARE DISTRIB UTION, ONLINE CUSTOMER INFORMATION, BACKUP, RECOVERY, ARCHIVE, OFF - SITE VAULT STORAGE FOR ALL DATA ON SERVERS, ANTI - SPAM, ANTI - VIRUS, REPORTING, ENHANCED MONITORING AND VALUE - ADDED SERVICES, MESSAGE ARCHIVING AND ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 8 RETRIEVAL SERVICES , END TO END ARCHIVING SO LUTION AND OTHER CUSTOMER END - TO - END INFORMATION TECHNOLOGY SERVICES. IT IS FURTHER OBSERVED FROM TP REPORT AT PAGE 998 THAT , IN RELATION TO PROVISION OF ABOVE REFERRED SERVICES BY ASSESSEE, NEVISITE US (AE) SPECIFIES EXACT REQUIREMENT OF SERVICE PROCESS TO BE FOLLOWED BY ASSESSEE FOR PURPOSES OF EXECUTION OF VARIOUS PROJECTS, ASSIGNMENTS AND OTHER MODULES TO BE DEVELOPED BY ASSESSEE. ASSESSEE PROVIDES ITS INPUT IN REQUIREMENT ANALYSIS PHASE OF SOFTWARE DEVELOPMENT PROCESS. IT IS OBSERVED THAT A SSESSEE ASSIST S IN DEVELOPMENT OF CERTAIN MODULES , WHICH IT UNDERTAKES IN CODING AND DOCUMENTATION FUNCTION , WITH RESPECT TO SOFTWARE MODULE IT DEVELOPS. ASSESSEE ALSO UNDERTAKES QUALITY - CONTROL PROCEDURES , WITH RESPECT TO SERVICES UNDERTAKEN BY IT , WHICH IS IN L INE WITH OVERALL QUALITY STANDARDS FOLLOWED BY ITS AE. IT IS OBSERVED THAT QUALITY - CONTROL ACTIVITIES INVOLVED ESTABLISHING AND ENFORCING MINIMUM STANDARDS TO ENSURE THAT INFERIOR GOODS/SERVICES ARE NOT SOLD TO CONSUMERS. THIS PROCESS INVOLVES TESTING AND ANALYSING FINISHED PRODUCTS/SERVICES. QUALITY - CONTROL CAN BE PERUSED BY EMPLOYING COMBINATION OF AUTOMATED QUALITY - CONTROL EQUIPMENT AND QUALIFIED INSPECTORS. IN TP STUDY IT HAS BEEN RECORDED THAT ASSESSEE IS RESPONSIBLE FOR DAY - TO - DAY PROJECT MANAGEMENT A ND END DELIVERABLES WITH RESPECT TO MODULES OF SOFTWARE BEING DEVELOPED BY IT , AND TECHNICAL PERSONNEL PERFORMANCE TEST WITH SOFTWARE THAT HAS BEEN DEVELOPED. ASSESSEE ALSO MAINTAINS AND GENERATES DOCUMENTATION FOR THE CO DES . ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 9 8.II. ASSETS EMPLOYED: I N TP STUDY, A T PAGE 999 OF PAPER BOOK VOLUME 3, IT IS SUBMITTED THAT ASSESSEE OWNS ROUTINE ASSETS LIKE FURNITURE FIXTURES, OFFICE EQUIPMENT, COMPUTERS ETC. IT IS ALSO RECORDED THAT ASSESSEE DOES NOT OWN ANY INTANGIBLES , AND DOES NOT UNDERTAKE ANY RESEARCH AND DEVELOPMENT ON ITS ACCOUNT , THAT LEADS TO DEVELOPMENT OF NON - ROUTINE INTANGIBLES. ASSESSEE USES TRADEMARKS , PROCESSES KNOW - HOW AND TECHNICAL D ATA SOFTWARE OPERATING/QUALITY STANDARDS ETC ., DEVELOPED AND OWNED BY ITS AE. 8.III. RISKS ASSUMED : I T IS OBSERVED THAT RISK PROFILE OF ASSESSEE WITH RESPECT TO CONTRACT SOFTWARE/IT SERVICES IS MINIMAL , AND DOES NOT HAVE SIGNIFICANT EXPOSURES TO MARKET RISK, PRODUCT/SERVICE LIABILITY RISK (AS IT UNDERTAKES ONLY PART OF PROJECT WORK , AND IS NOT CONTRACT U ALLY RE SPONSIBLE TO END CUSTOMER), LOW TECHNOLOGY RISK ( SINCE ASSESSEE OBTAINS TECHNICALLY UPDATED TECHNOLOGIES FROM ITS AE ) , NOT EXPOSED TO RESEARCH AND DEVELOPMENT RISK (AS THESE ACTIVITIES ARE NOT UNDERTAKEN BY ASSESSEE ) , ZERO CREDIT RISK ( SINCE ASSESSEE IS PROTE CTED , AS IT IS COMPENSATED BY AE , IRRESPECTIVE OF COLLECTIONS BY AE FROM ULTIMATE CUSTOMERS ) , AND NORMAL PRICE RISK ( AS ITS REMUNERATION FROM AE IS NOT DEPENDENT UPON FINAL PRICE RECEIVED BY AE FROM ITS END CUSTOMER ) . ASSESSEE ONLY BEARS ROUTINE FOREIGN EX CHANGE RISK ( AS INVOICES RAISED BY IT ON ITS AE ARE REMUNERATED IN US DOLLARS ) , MANPOWER RISK ( SINCE IT IS RESPONSIBLE FOR MAINTAINING SKILLED AND TRAINED WORKFORCE TO CARRY OUT ITS ACTIVITIES ) , NORMAL LEGAL AND STATUTORY RISK ASSOCIATED WITH OPERATING IN IN DIAN ENVIRONMENT. ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 10 8.4. THUS FROM THE ABOVE , ASSESSEE HAS BEEN CHARACTERISED AS ROUTINE CONTRACT SOFTWARE/IT SERVICE PROVIDER WORKING IN A RISK INSULATED ENVIRONMENT IN TP STUDY . 9. NOW WE SHALL TAKE UP THE COMPARABILITY ANALYSIS OF ASSESSEE WITH THAT OF COMPARABLES OBJECTED TO FOR INCLUSION AND EXCLUSION. 10. COMPARABLES FOR EXCLUSION: E INFOCHIPS LTD. VIDE GROUND NO. 3 ASSESSEE IS OBJECTING FOR INCLUSION OF THIS COMPARABLE. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT SIMILAR WITH T HAT OF ASSESSEE AS IT IS ENGAGED IN DEVELOPMENT AND MAINTENANCE OF COMPUTER SOFTWARE, SOFTWARE DEVELOPMENT CONSULTING AND MANUFACTURING OF EVM AND VDP ELECTRONIC. IT IS SUBMITTED THAT THIS COMPANY PRIMARILY FAILS IN FUNCTIONALITY TEST , WITH THAT OF ASSESS EE. LD.TPO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND RETAINED THIS COMPANY AS A COMPARABLE. 10.1 LD.AR SUBMITTED THAT, THIS COMPANY, NOT ONLY PROVIDES SOFTWARE SERVICES, BUT ALSO ENGAGES IN MANUFACTURING AND TRADING OF PRINTED CIRCUIT ELECTRONIC BOARDS. IN SUPPORT OF HIS ARGUMENT LD.AR PLACED RELIANCE UPON DECISION OF COORDINATE BENCH OF THIS TRIBUNAL DATED 02/04/18 , IN CASE OF CADENCE DESIGN SYSTEM (I) PVT. LTD., VS. ACIT IN ITA NO. 6315/DEL/2015 . 10.2. ON THE CONTRARY L D. DR SUBMITTED THAT ASSESSEE IS ALSO HAVING INCOME FROM SOFTWARE DEVELOPMENT AND ITES SERVICES WHICH INCLUDES MAINTENANCE AND INF ORMATION TECHNOLOGY CONSIDERED CONSULTANCY IS A PART OF THE SERVICES RENDERED BY ASSESSEE TO ITS AE. HE SUBMITTED THAT THE COMPARABLES SELECTED IS ONLY HAVING ONE SEGMENT WHICH IS SOFTWARE DEVELOPMENT AND THE ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 11 REVENUE GENERATED UNDER THE SEGMENT IS ABOUT 86 % W HICH SATISFIES THE FILTERS. 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 11.1. FROM SCHEDULE OF INCOME AT PAGE 182 OF PAPER BOOK VOLUME 1, WHEREIN BREAK - UP OF REVENUE EARNED BY THIS COMPANY, DURI NG YEAR IS LISTED, IT IS OBSERVED THAT THIS COMPANY RECEIVES REVENUE FROM SOFTWARE DEVELOPMENT, HARDWARE MAINTENANCE, INFORMATION TECHNOLOGY CONSULTANCY, INFORMATION TECHNOLOGY SERVICES. IT IS ALSO OBSERVED THAT THIS COMPANY PROVIDES CUSTOMISED SOFTWARE DE VELOPMENT SERVICES FOR PC EMBEDDED DEVICES AND MOBILE TO CATER TYPICAL CUSTOMERS FROM CONSUMER ELECTRONICS, HEALTH CARE, AUTOMOTIVE AND SURVEILLANCE INDUSTRY. IT IS OBSERVED THAT THIS C OMPANY IS INTO SALE OF PRODUCTS WHICH IS EVIDENT FROM PAGE 147 OF PAPER BOOK. ON PERUSAL OF ANNUAL REPORT PLACED IN PAPER BOOK IT ALSO APPEARS THAT THIS COMPANY IS INTO HARDWARE DESIGNING AND HAS A BROAD PORTFOLIO INCLUDING PRODUCT DEVELOPMENT , PRODUCT RE - ENGINEERING PROVIDING COMPLIANCE AND CERTIFICATION, APPLICATION DEVELOPMENT AND INTEGRATION CONSULTING AND IMPLEMENTATION. WE ARE , THEREFORE , OF THE CONSIDERED OPINION THAT THIS COMPANY DO NOT SATISFY THE FUNCTIONALITY TEST TO INITIATE THE PR OCESS OF COMPARABILITY. WE DRAW OUR SUPPORT FROM THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT.LTD. VERSUS CIT REPORTED IN (2015) 60 TAXMAN.COM 355 , WHEREIN HON BLE C OURT HAS OBSERVED THAT MERELY BECAUSE THIS COMPANY IS AL SO INVOLVED IN IT ES INDUSTRY THE SAME CANNOT BE COMPARED TO A CAPTIVE SERVICE ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 12 PROVIDER LIKE ASSESSEE WHICH PROVIDES LIMITED SERVICES TO ITS AE AND NOT TO END CUSTOMERS. 11.2. WE THEREFORE DIRECT L D. TPO TO ELIMINATE THIS COMPANY FROM LIST OF COMPARABLES. 12. WIPRO T ECHNOLOGY S ERVICES LTD. : VIDE GROUND NO. 5.9, ASSESSEE IS OBJECTING FOR INCLUSION OF THIS COMPARABLE. LD.AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AND SEGMENTAL INFORMATION IS NOT AVAILABLE. IT HAS ALSO BEEN URGED B Y LD.AR THAT T HERE ARE SIGNIFICANT R ELATED PARTY TRANSACTIONS UNDERTAKEN BY THIS COMPANY. LD. TPO DID NOT ACCEPT ASSESSEE S CONTENTION OF RELATED PARTY TRANSACTIONS AND PROCEEDED TO INCLUDE IT IN THE FINAL SET OF COMPARABLES. 12.1. ON THE CONTRARY, LD.DR SUBMITTED THAT THERE IS NO RELATED PARTY TRANSACTION DURING THE YEAR UNDER CONSIDERATION. 13. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 13.1. LD. AR SUBMITTED THAT WIPRO TECHNOLOGY SERVICES LIMITED (FORMERLY CITI TECHNOLOGY SERVICES LIMITED) ( THE COMPANY ) WAS INCORPORATED ON 15 SEPTEMBER, 2004. THE ENTIRE SHARE CAPITAL OF THE COMPANY WAS HELD BY CITICORP BANKING CORPORATION, A COMPANY INCORPORATED UNDER LAWS OF DELAWARE, USA, UPTO 20 JANUARY, 2009. 13.2. IT WAS SUBMITTED THAT WIPRO LIMITED (WIPRO) EXECUTED AGREEMENT WITH CITIGROUP INC. FOR ACQUIRING ALL OF CITIGROUP INTEREST IN THE COMPANY W.E.F. 21 JANUARY 2009. ON 21 JANUARY 2009, WIPRO SIGNED MASTER SERVICE AGREEMENT (MSA) ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 13 WITH CITIGROUP INC. FOR DELI VERY OF TECHNOLOGY INF RASTRUCTURE SERVICES, APPLICATION DEVELOPMENT AND MAINTENANCE SERVICES AFTER ACQUISITION BY WIPRO, NAME OF COMPANY WAS CHANGED TO WIPRO TECHNOLOGY SERVICES LIMITED ( WTS OR THE COMPANY ) ON 16 MARCH 2009. 13.3. IT IS OBSERVED FR OM THE ABOVE THAT, WIPRO TECHNOLOGY SERVICES LTD., WHICH WAS EARLIER CITI TECHNOLOGY SERVICES LTD., WAS HELD BY CITI CORP. BANKING CORPORATION, USA UPTO 20TH JANUARY, 2009. WIPRO LTD., PARENT COMPANY OF WHICH EXECUTED A GREEMENT WITH CITI GROUP INC., FOR A CQUIRING CITI TECHNOLOGY SERVICES LTD., NOW CALLED WIPRO TECHNOLOGY SERVICES LTD. ON 21.1.2009, WIPRO LTD. SIGNED MASTER AGREEMENT WITH CITI GROUP INC., FOR DELIVERY OF T ECHNOLOGY INFRASTRUCTURE SERVICES AND APPLICATION DEVELOPMENT AND MAINTENANCE SERVIC ES FOR THE PERIOD OF SIX YEARS, WHICH ALSO INCLUDES YEAR UNDER CONSIDERATION. THIS SHOWS THAT INCOME FROM SOFTWARE DEVELOPMENT SUPPORT AND MAINTENANCE SERVICES WAS EARNED BY WIPRO TECHNOLOGY SERVICES LTD., FROM CITI GROUP INC., BY MEANS OF MASTER SERVICE AGREEMENT ENTERED INTO BETWEEN WIPRO LTD., ITS PARENT COMPANY AND CITI GROUP INC., A THIRD PERSON. 13.4. IT IS OBSERVE D THAT ISSUES RAISED BY LD. CIT , DR IN RESPECT OF COMPARABILITY OF THIS COMPARABLE HAS BEEN DEALT WITH BY COORDINATE BENCH OF DELHI T RIBUNAL IN SAXO INDIA PVT.LTD VS. ACIT (SUPRA) AS UNDER: WE HAVE NOTICED ABOVE FROM THE LANGUAGE OF RULE 10B(1)(E)(II) THAT IT IS THE NET PROFIT MARGIN REALIZED FROM A COMPARABLE UNCONTROLLED TRANSACTION, WHICH IS CONSIDERED FOR THE PURPOSES OF BENCHMARKI NG. ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 14 THE EPITOME OF `COMPARABLE UNCONTROLLED TRANSACTION IS THAT THE COMPANIES OR TRANSACTIONS IN ORDER TO FALL WITHIN THE AMBIT OF SUB - CLAUSE (II) OF RULE 10B(1)(E), SHOULD BE BOTH COMPARABLE AS WELL AS UNCONTROLLED. `UNCONTROLLED TRANSACTION HAS BEEN DEFINED IN RULE 10A(A) TO MEAN: A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON - RESIDENT. THIS SHOWS THAT IN ORDER TO BE CALLED AS AN UNCONTROLLED TRANSACTION, IT IS NECESSARY THAT THE SAME SHOULD BE BETWEEN ENTERPRISES, OTHER THAN ASSOCIATED ENTERPRISES. SECTION 92B(2) PROVIDES THAT: A TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES OF SUB - SECTION (1), BE DEEMED TO BE A TRANSACTION ENTERE D INTO BETWEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE . ON GOING THROUGH SUB - SECTION (2) OF SECTION 92B, IT IS CLEARLY BORNE OUT THAT A TRANSACTION WITH NON - AE SHALL BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO AES, IF THERE EXISTS A PRIOR AGREEMENT IN REL ATION TO THE RELEVANT TRANSACTION BETWEEN THIRD PERSON AND THE AE, OR THE TERMS OF RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN THE THIRD PERSON AND AE. WHEN WE CONSIDER SECTION 92B(2) IN COMBINATION WITH RULE 10A(A), IT FOLLOWS THAT TRANSACTIO N BETWEEN NON - AES SHALL BE CONSTRUED AS A TRANSACTION BETWEEN TWO AES, IF THERE EXISTS A PRIOR AGREEMENT IN ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 15 RELATION TO RELEVANT TRANSACTION BETWEEN THIRD PERSON AND AE. IF SUCH AN AGREEMENT EXISTS, THIRD PERSON IS ALSO CONSIDERED AS AN AE, AND TRANSACTIO N WITH SUCH THIRD PERSON BECOMES INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B. ONCE THERE IS A TRANSACTION BETWEEN TWO ASSOCIATED ENTERPRISES, IT CEASES TO BE AN UNCONTROLLED TRANSACTION AND, THEREBY, GOES OUT OF RECKONING UNDER RULE 10B(1 )(E)(II). ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT WIPRO TECHNOLOGY SERVICES LTD. EARNED REVENUE FROM MASTER SERVICES AGREEMENT WITH CITIGROUP INC. FOR THE DELIVERY OF TECHNOLOGY INFRASTRUCTURE SERVICES. THIS AGREEMENT WAS, IN FACT, EXECUTE D BETWEEN THE ASSESSEE'S AE, WIPRO LTD., AND CITIGROUP INC., A THIRD PERSON. THIS UNFOLDS THAT THE TRANSACTION OF EARNING REVENUE FROM SOFTWARE DEVELOPMENT SUPPORT AND MAINTENANCE SERVICES BY WIPRO TECHNOLOGY SERVICES LTD., IS AN INTERNATIONAL TRANSACTION BECAUSE OF THE APPLICATION OF SECTION 92B(2) I.E., THERE EXISTS A PRIOR AGREEMENT IN RELATION TO SUCH TRANSACTION BETWEEN CITIGROUP INC. (THIRD PERSON) AND WIPRO LTD. (ASSOCIATED ENTERPRISE). IN THE LIGHT OF THIS STRUCTURE OF TRANSACTION, IT CEASES TO BE U NCONTROLLED TRANSACTION AND, HENCE, WIPRO TECHNOLOGY SERVICES LTD., DISQUALIFIES TO BECOME A COMPARABLE UNCONTROLLED TRANSACTION FOR THE PURPOSES OF INCLUSION IN THE FINAL LIST OF COMPARABLES UNDER RULE 10B(1)(E)(II). WE, THEREFORE, DIRECT REMOVAL OF THIS COMPANY FROM THE LIST OF COMPARABLES. 13.5. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT EXCLUSION OF THIS COMPANY FROM FINAL LIST OF COMPARABLES. ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 16 14. NOW COMING TO COMPARABLE THAT WAS EXCLUDED BY LD.TPO , LD.TPO HAS REJECTED THE COMPANY ON ACCOUNT OF DIFFERENT FINANCIAL YEAR ENDING VIS - A - VIS THE ASSESSEE. THE LD.AR SUBMITTED THAT COMPANIES WHOSE FINANCIAL DATA WAS AVAILABLE FOR RELEVANT PERIOD, WERE CONSIDERED IN VIEW OF RULE 10 D (4), WHICH PROVIDES THAT INFORMATION TO BE USED MUST BE CONTEMPORANEOUS. THE LD.AR FURTHER SUBMITTED THAT THOUGH THE COMPANY HAS DIFFERENT FINANCIAL YEAR ENDING, WERE OPERATING DURING THE SAME PERIOD OF TIME AS THE ASSESSEE, AND WERE ALSO FACING SIMILAR BUSINESS CYCLES, MARKET AN D ECONOMIC CONDITIONS AS FACED BY ASSESSEE HAVING FINANCIAL YEAR FROM APRIL TO MARCH. HE THUS SUBMITTED THAT IN ABSENCE OF EVIDENCE AVAILABLE TO THE CONTRARY THAT THERE HAS BEEN A SIGNIFICANT IMPACT ON MARGINS DUE TO CHANGE IN DIFFERENT REPORTING/ACCOUNTI NG PERIOD, IT IS INCORRECT TO DISREGARD THE COMPARABLE USING THIS FILTER. 14.1. LD.DR, HOWEVER, REFER RED TO EXTRACTS MADE BY L D.TPO IN HIS ORDER TO SUBMIT THAT R SYSTEMS INTERNATIONAL LTD., SHOULD NOT BE CONSIDERED COMPARABLE WITH ASSESSEE. 14.2 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 14.3. WE FIND THAT LD.TPO HAS NOT POINTED OUT EXACT DIFFERENCE, CHANGE OF ACCOUNTING YEAR HAS MADE TO FINANCIAL RESULTS OF THIS COMPANY. THE LD.TPO FURTHER HAS NOT POINTED OUT, WHETHER, IT WOULD NOT BE POSSIBLE TO RESTATE THOSE FINANCIAL RESULTS, FOR DIFFERENT ACCOUNTING PERIOD, WITHOUT SIGNIFICANT CHANGE IN NET PROFIT MARGINS, OR ANY OTHER PARAMETERS CONSIDERED RELEVANT. MULTINATIONAL COMPANIES THAT ARE FUNCTIONALL Y SIMILAR OR EVEN IDENTICAL, GENERALLY OPERATE IN DIFFERENT GEOGRAPHICAL REGIONS AND, ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 17 DIFFERENT COUNTRIES FOLLOW DIFFERENT ACCOUNTING OR FINANCIAL YEARS, CANNOT BE HELD TO BE INCOMPARABLE, ONLY OWING TO DIFFERENCES IN DATE OF ENDING OF FINANCIAL YEAR, A S M OST BUSINESS ENTERPRISES , OPERATE ON GOING CONCERN CONCEPT, WHICH IS FUNDAMENTAL TO PRESENT ACCOUNTING SYSTEM . C ONCEPT USED IN ACCOUNTING IS JUST AN ARTIFICIAL MEANS TO RECKON OPERATING RESULTS OF BUSINESS OPERATION AT A GIVEN POINT AND TIME , AND NOTHING W OULD TURN UP ON CHANGING END OF ACCOUNTING PERIOD FROM 31 ST MARCH TO ANY OTHER DATE WITHIN A SHORT SPAN OF TIME. ASSUMING A SITUATION WHERE TESTED PARTY IS FOLLOWING D IFFERENT FINANCIAL YEAR ENDING (SAY 01/01/2010 TO 31/12/2010), FOLLOWING THE FILTER ADOPT ED BY L D.TPO, ONE WOULD REJECT ALL COMPAN IES WITH FINANCIAL YEAR ENDING 31 ST OF MARCH 201 1 AND ONLY CONSIDER COMPANIES WITH FINANCIAL YEAR ENDING 31/12/2010. THE NUMBER OF COMPARABLE COMPANIES AVAILABLE AFTER USING SUCH A FILTER WOULD BE VERY LIMITED AND THEREFORE, IN SUCH CASE S NET MARGIN EARNED BY COMPARABLE COMPANIES WOULD BE DIFFERENT FROM ONE THAT WOULD BE COMPUTED WITHOUT USING THIS FILTER. THIS VIEW IS SUPPORTED BY C OORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. MCKINSEY KNOWLEDGE CENTRE INDIA P RIVATE L IMITED IN ITA NO. 2195/ D EL/2011 , WHEREIN IT HAS BEEN HELD THAT IF A COMPANY I S FUNCTIONALLY COMPARABLE, IT CANNOT BE REJECTED MERELY ON GROUND THAT , DATA FOR ENTIRE FINANCIAL YEAR WAS UNAVAILABLE, I N CASE DATA CAN BE REASONABLY EXTRAPOLATED. THIS T RIBUNAL FURTHER OBSERVED THAT R ULE 10 B (4) CANNOT BE INTERPRETED IN SUCH A RIGID MA NNER SO AS TO DEFEAT ITS BASIC OBJECTIVE . THE RELEVANT EXTRACT OF THE RULING ARE REPRODUCED BELOW: ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 18 23. .. HOWEVER, IN OUR CONSIDERED OPINION, IF A COMPARABLE IS FUNCTIONALLY SAME AS THAT OF THE TESTED PARTY THEN THE SAME CANNOT BE REJECTED MERELY ON THE GROUND THAT DATA FOR ENTIRE FINANCIAL YEAR IS NOT AVAILABLE. IF FROM THE AVAILABLE DATA ON RECORD THE RESULTS WERE FINANCIAL YEAR CAN BE REASONABLY EXTRAPOLATED, THEN THE COMPARABLE CANNOT BE EXCLUDED SOLELY ON THIS GROUND. THE LEARN ADR AS REFERRED TO RU LE 10 B (4) WHICH ONLY MANDATES THAT THE DATA WHICH IS TO BE UTILISED FOR ANALYSING THE COMPARABILITY OF UNCONTROLLED TRANSACTIONS WITH AN INTERNATIONAL TRANSACTION, HAS TO BE FINANCIAL YEAR ONLY IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO . THIS RULE IS BASED ON MATCHING PRINCIPLE BUT THIS ROLE CANNOT BE INTERPRETED IN SUCH A RIGID MANNER SO AS TO DEFEAT THE BASIC OBJECT OF RULE VIZ., SELECTION OF THE COMPARABLE FOR DETERMINATION OF ARMS LENGTH PRICE OF AN INTERNATIONAL TRANSACTION ( EMPHASIS SUPPLIED) 14.4. IN ANY CASE LD.TPO HAS NOT CITED ANY INSTANCES OF FUNCTIONAL DISSIMILARITY OF THIS COMPARABLE COMPANY WITH THAT OF ASSESSEE. WE THEREFORE DIRECT LD. TPO TO INCLUDE THIS COMPANY IN FINAL LIST OF COMPARABLE . 15. ACCORDINGLY ON BASIS OF ABOVE DISCUSSIONS AND FOREGOING PARAGRAPHS GROUNDS RAISED BY ASSESSEE STANDS ALLOWED. 16. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED. 17. ITA NO. 948/DEL/2016 (APPEAL FILED BY REVENUE) : REVENUE IN ITS APPEAL IS AGGRIEVED WITH EXCLUSION OF INFOSYS T ECHNOLOGIES LTD., BY DRP THAT WAS SELECTED BY LD.TPO. 17.1. AT THE OUTSET LD.AR SUBMITTED A CHART WHEREIN THE TAX EFFECT IN THE DEPARTMENTAL APPEAL HAS BEEN COMPUTED AMOUNTS TO RS. 10, 13, 927/ - , WHICH IS BELOW 20 LA KHS . HE THUS SUBMITTED THAT C IRCULAR NO. 3/2018 , IS APPLICABLE TO THIS APPEAL AND DESERVES TO BE DISMISSED. 17.2. HOWEVER , ON MERITS , LD. AR SUBMITTED THAT , FUNCTIONALLY THIS COMPANY IS NOT COMPARABLE TO THAT OF ASSESSEE , WHICH IS A ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 19 CAPTIVE SERVICE PROVIDER. HE EMPHASISED THAT THIS COMPANY POSSESSES HUGE INTANGIBLES AND SEGMENTAL INFORMATION ARE NOT AVAILABLE THAT IS ATTRIBUTABLE TO SOFTWARE PRODUCT SEGMENT AND SOFTWARE SERVICE SEGMENT. IN ADDITION TO THIS , LD.AR SUBMITTED THAT , THIS COMPANY UNDERTAKES HUGE R&D ACTIVITIES , WHICH IS NOT AT ALL PERFORMED BY ASSESSEE BEFORE US. 17.3 . HE THUS PRAYED FOR REJECTION OF THIS COMPARABLE. 17.4. ON THE CONTRARY LD. DR THOUGH ARGUED FOR INCLUSION OF THIS COMPANY HOWEVER COULD NOT REFUTE APPL ICABILITY OF CIRCULAR NO. 3/2018 DUE TO LOW TAX EFFECT IN THIS APPEAL. 18. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 19. WE AGREE WITH LD. AR REGARDING CIRCULAR NO. 3/2018 THAT IS DIRECTLY APPLICABLE T O THE APPEAL FILED BY REVENUE. EVEN ON MERITS OF THE CASE LOOKING INTO FUNCTIONS PERFORMED BY THIS COMPANY VIS - A - VIS THAT OF ASSESSEE, WE ARE OF CONSIDERED OPINION THAT THESE ARE FUNCTIONALLY NOT SIMILAR. 20 . ACCORDINGLY GROUNDS RAISED BY REVENUE STAND DISMISSED. 21. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 / 1 2 / 2 0 1 8 . S D / - S D / - (R.K.PANDA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 1 7 T H DECEMBER,2018 * MVG ITA NO.1054/DEL/16 ITA NO.948/DEL/16 A.Y. 2011 - 12 M/S NAVISITE INDIA PVT.LTD. 20 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES S.NO. DETAILS DATE 1 DRAFT DICTATED ON DRAGON 17.12.18 2 DRAFT PLACED BEFORE AUTHOR 17.12.18 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 1 7 . 1 2 . 2 0 1 8 7. ORDER UPLOADED ON 8 FILE SENT TO BENCH CLERK 9 DATE ON WHICH THE FILE GOES TO HEAD CLERK 10 DATE ON WHICH FILE GOES TO A.R. 11 DATE OF DISPATCH OF ORDER