M/s. Yahoo Software Development India Private Ltd, Bangalore V. DCIT, Bangalore

ITA 1129/BANG/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7016 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO.1129/BANG/2010 (ASSESSMENT YEAR: 2006 - 07) M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. TOR REY PINES , EMBASSY GOLF LINKS, BUSINESS PARK OFF. INDIRANAGAR - KORAMANGALA INTERMEDIATE RING ROAD, BANGALORE. APPELLANT PAN:AAACY1876D VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 12(5), BANGALORE. RESPONDENT APPELLANT BY : SHRI SRIRAM SESHADRI, ADVOCATE. RESPONDENT BY: SHRI FARHAT HUSSAI N QURESHI, CIT(DR) DATE OF HEARING : 22/12/2014. DATE OF PRONOUNCEMENT: 3 1 /12/2014. O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINS T THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C(13) OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'] DATED 23/07/2010 FOR THE ASSESSMENT YEAR 2006 - 07. ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 2 OF 17 2. THE ASSESSEE HAS FILED AS MANY AS 11 GROUNDS OF APPEAL. HOWEVER, AT T HE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WISHES TO PRESS ONLY GROUNDS NO.4.3 AND 9. ALL THE OTHER GROUNDS ARE REJECTED AS NOT PRESSED. 2.1 IN ADDITION TO THE ABOVE GROUNDS, THE ASSESSEE HAS ALSO FILED ADDITIONAL GRO UNDS OF APPEAL AND AN APPLICATION FOR ADMISSION OF THE SAID ADDITIONAL GROUND. IT IS STATED THAT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE NECESSARY TO ASSESS THE APPROPRIATE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE PETITIONER BEING THE SUBJECT MATTER OF APPEAL AND TO RENDER SUBSTANTIAL JUSTICE. IT IS STATED THAT THE ADOPTION OF TURNOVER FILTER AS AN ADEQUATE FILTER HAS BEEN UPHELD BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) P. LTD. VS. DY. CIT ( 152 TTJ 215) AND THEREFORE THE SAME SHOULD BE APPLIED IN THE ASSESSEE S CASE ALSO TO REJECT COMPANIES HAVING TURNOVER IN EXCESS OF INR 200 CRORES AS COMPARABLE TO THE ASSESSEE. IT IS ALSO SUBMITTED THAT THE TRIBUNAL HAS HELD IN VARIOU S CASES THAT SOFTWARE PRODUCT COMPANIES CANNOT BE COMPARED TO SOFTWARE DEVELOPMENT COMPANIES OWING TO FUNCTIONAL DISSIMILARITY AND THEREFORE R SYSTEMS INTERNATIONAL LTD AND PERSISTENT SYSTEMS LTD., SHOULD ALSO BE REJECTED AS COMPARABLE CASES AS THESE COMPA NIES ARE PRODUCT ORIENTED COMPANIES AND ARE FUNCTIONALLY DISSIMILAR TO THE ASSESSEE. THUS, THE ASSESSEE SOUGHT TO RAISE TWO ADDITIONAL ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 3 OF 17 GROUNDS OF APPEAL. HOWEVER, AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES N OT WISH TO PRESS THE ADDITIONAL GROUND NO.2 RELATING TO EXCLUSION OF R SYSTEMS INTERNATIONAL LTD AND PERSISTENT SYSTEMS LTD., FROM THE LIST OF COMPARABLE COMPANIES. THE SAID ADDITIONAL GROUND OF APPEAL IS ACCORDINGLY REJECTED AS NOT PRESSED. 2.2 THE LONE ADDITIONAL GROUND WHICH IS PRESSED BY THE ASSESSEE IS FOR ADOPTING THE TURNOVER FILTER AND TO EXCLUDE THE COMPANIES WHICH ARE HAVING TURNOVER OF MORE THAN RS.200 CRORES SINCE THE ASSESSEE S TURNOVER IS ONLY RS.80 CRORES. THE LEARNED DEPARTMENTAL REP RESENTATIVE, HOWEVER, OPPOSED THE ADDITIONAL GROUND ON THE GROUND THAT THE ASSESSEE HAS NOT ADOPTED SUCH FILTER AT THE TIME OF ITS OWN TP STUDY AND SELECTING THE COMPARABLES AND HAS NOT RAISED ANY OBJECTION BEFORE THE TRANSFER PRICING OFFICER ( TPO ) OR THE DISPUTES RESOLUTION PANEL( DRP ) . THEREFORE, ACCORDING TO HIM, THE ASSESSEE IS PRECLUDED FROM RAISING SUCH A GROUND AT THIS STAGE. 2.3 HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS FOR THE ADOPTION OF THE TURNOVER FILTER IN SELECTING THE COMPARABLES FOR DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION. THIS TRIBUNAL, IN THE CASE OF AGILE SOFTWARE ENTERPRISE P VT. LTD. IN IT(TP)A NO.1172/BANG/2010 DATED ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 4 OF 17 26/09 /2014 FOR ASSESSMENT YEAR 2006 - 07 HAS HELD THAT THIS POINT CAN BE RAISED AT ANY STAGE OF THE PROCEEDINGS. IN VIEW OF THE SAME, WE ADMIT THE SAID ADDITIONAL GROUND OF APPEAL FOR THE TURNOVER FILTER TO BE APPLIED AND THE EXCLUSION OF THE COMPARABLE COMPANIE S FROM THE LIST OF COMPARABLE COMPANIES. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED A CHART BEFORE US GIVING THE NAMES OF COMPANIES AND THE GROUNDS ON WHICH THE ASSESSEE SEEKS THEIR EXCLUSION. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE FO LLOWING COMPANIES FAIL THE TURNOVER FILTER OF INR RS.200 CRORES: SL. NO. NAME OF THE COMPANY TURNOVER (IN CROR E S) 1. IGATE GLOBAL SOLUTIONS LTD. RS. 527.91 2. INFOSYS TECHNOLOGIES LTD. RS.9028.00 3. MINDTREE LTD. RS. 448.79 4. SASKEN COM MUNICATION TECHNOLOGIES LTD. RS. 240.03 5. FLEXTRONICS SOFTWARE SYSTEMS LTD. RS. 595.12 THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, OPPOSED THE EXCLUSION OF THE SAID COMPANIES FROM THE LIST OF COMPARABLES ONLY ON THE BASIS OF THE TURNOVER FILTER . HE SUBMITTED THAT SINCE THE ASSESSEE HAS NOT RAISED ANY OBJECTIONS BEFORE THE TPO/AO/DRP WITH REGARD TO THE TURNOVER FILTER, THE AUTHORITIES WERE PREVENTED FROM CONDUCTING THE FAR ANALYSIS TO EXAMINE THEIR COMPARABILITY TO THE ASSESSEE. THEREFORE, ACCO RDING TO HIM, THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE TPO FOR FAR ANALYSIS . ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 5 OF 17 2.4 HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS TRIBUNAL, IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) P. LTD (CI TED SUPRA) HAS HELD THAT TURNOVER IS AN IMPORTANT FILTER WHICH HAS TO BE ADOPTED FOR DETERMINATION OF THE ALP. THE TRIBUNAL HAS BEEN CONSISTENTLY FOLLOWING THE SAID DECISION. THE FAR ANALYSIS WOULD NOT ALTER THE TURNOVER OF THE COMPANY. IN VIEW OF THE S AME, WE DO NOT FIND IT NECESSARY TO REMAND THE ISSUE OF COMPARABILITY OF THESE COMPANIES TO THE AO/TPO FOR RE - DETERMINATION OF THE ALP. IN VIEW OF THE TURNOVER BEING HIGHER THAN RS.200 CRORES IN THE CASE OF THE ABOVE COMPANIES, WE DIRECT THE AO TO EXCLUDE THESE COMPANIES FROM THE LIST OF COMPARABLES. 3. THE ASSESSEE HAS ALSO SOUGHT EXCLUSION OF THE FOLLOWING COMPANIES ON THE GROUND OF FUNCTIONAL DISSIMILARITY: SL. NO. NAME OF THE COMPANY FUNCTIONAL DISSIMILARITY 1. KALS INFORMATION SYSTEMS LTD. PRODUCT ORIENTED COMPANY 2. TATA ELXSI LTD. - DO - 3. ACCEL TRANSMATIC LTD. PRODUCT COMPANY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD RAISED OBJECTIONS WITH REGARD TO THESE COMPANIES BEFORE THE DRP. HOWEVER, THE DRP HAS C ONFIRMED THE ORDER OF THE AO WITHOUT CONSIDERING THE ASSESSEE S OBJECTIONS AT LENGTH WITH REGARD TO EACH OF THE COMPARABLE COMPANIES. HE SUBMITTED THAT THESE COMPANIES HAVE BEEN CONSIDERED AS NOT COMPARABLE ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 6 OF 17 BY THE TRIBUNAL IN THE CASE OF AGILE SOFTWARE EN TERPRISE P VT. LTD., ( CITED SUPRA) WHEREIN IT WAS DIRECTED THAT THESE COMPANIES ARE TO BE EXCLUDED. HE HAS DRAWN OUR PARTICULAR ATTENTION TO THE RELEVANT PARAGRAPHS OF THE SAID ORDER. 3.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 3.2 HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT AGILE SOFTWARE ENTERPRISE PVT. LTD., IS A COMPANY WHICH IS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES AND THE RELEVANT ASSESSMENT YEAR BEFORE THE TRIBUNAL IS ALSO ASSESSMENT YEAR 2006 - 07. IN THE CASE BEFORE US ALSO, THE ASSESSEE IS A SOFTWARE DEVELOPMENT SERVICES COMPANY AND NOT A SOFTWARE PRODUCT COMPANY. THEREFORE, FACTS OF THE CASE BEFORE US ARE SIMILAR TO THE FACTS O F THE CASE BEFORE THE TRIBUNAL IN THE CASE OF AGILE SOFTWARE ENTERPRISE PVT.LTD. (CITED SUPRA) IN VIEW OF TH E SAME, THE DECISION OF THE TRI B U NAL IN THE CASE OF AGILE SOFTWARE ENTERPRISE PVT.LTD. (CITED SUPRA) IS VERY MUCH APPLICABLE TO THE CASE BEFORE US AN D RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL ON SIMILAR SET OF FACTS, WE HOLD THAT THESE COMPANIES ARE ALSO TO BE EXCLUDED FROM THE LIST OF COMPARABLES ON ACCOUNT OF FUNCTIONAL DISSIMILARITY. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARAGRAPHS OF THE TRIBUNAL S ORDER ARE REPRODUCED HEREUNDER: ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 7 OF 17 8 . 7 KA L S I N F O R M A T I O N S YS T E M S L T D : T H E L D . A R S U B M IT TE D T HA T T H IS C O M P AN Y W A S A S O F T W A R E P R O D U CT C O M P AN Y A N D C O U LD N O T B E C O M PA R E D W I T H T H A T O F T H E A SS E S S EE . TH E A S S E S SE E W A S A S O F T W A R E S E R VIC E S C O M PA N Y A N D N O T A S O F T W A R E P R ODU CT C O M PAN Y. R E LI AN C E W A S P L A C E D O N T H E DE C I SI O N O F T RI L O G Y E - BU S I N ESS S O FT W A R E ( I ) P V T . L T D. ( S UP R A) . A S PE R T H E L D . A R, S A M E V I E W W A S T A K E N IN E M C D A T A ( S UPR A ) A L S O . 8 . 7 . 1 P E R C ON T R A , T H E L D . DR S UB M ITT E D T H A T KA L S I N F O RM A T I O N S YST E M S L T D . C O U L D N O T B E C O N S I D E R E D A S A S O F T W A R E P R O D U C T C O M P A N Y . 8 . 7 .2 W E H A VE PERU S E D T H E ORDER S A N D H E A R D T H E R IV A L C ON T EN T I O N S. W E F I N D T H A T KA L S I N F OR M A TI O N S Y ST E M S L T D . W A S C O N S I DER E D A S A S O F T W A R E P R O D U CT C O MPA N Y IN B O TH T R I L O GY E - B U S I N ES S ( S U P R A ) A S W E L L A S E M C D A T A ( S UPR A ) . IN T HE S E DE C I SI O N S, A H O ST O F C O M PAN I E S, I N T E R A LI A , I N CL U D I N G KA L S I N F OR M A T I O N S Y ST E M S L T D . W E R E DE L I BE RA T E D UP O N A N D H E LD A S UN D ER : - 1 2 . T H E F O LL O WI N G W ERE T H E RE L E V A N T O B S ER V A T I ON S O F T H E TR I BUN AL O N T H E A F O RE S A I D C O M P A RA B L E C O M P A N I ES I N T H E CA S E O F TR I O L OG Y E - BUS I N E S S SO F T W ARE I ND I A P V T . L T D. ( S UP RA): ( D ) K AL S I N F O R M A T I O N SY S T E M S L T D . AS F A R A S T H I S COMP AN Y I S C ONC E R N E D , T H E C O NTE N T IO N O F T H E A S S E SS E E I S T H A T T H E A F O R E S A I D COMP AN Y H A S R E V E N U E S FR O M B O T H S OF TWAR E D E V E L OPM E N T A N D S O F T W A R E P R O D U C T S . B E SI D E S T H E A BOV E , I T W A S A L S O P OIN TE D O U T T H A T T HI S COM P A N Y I S E N G A G E D I N P R OV I D I N G T R A INI N G. I T WA S A L S O S U B MI TT E D T H A T A S P E R TH E A N N U A L R E P O R T , T H E S A L AR Y C O S T D E BI T E D U N D E R TH E S OF TWA R E D E V E L O P M E N T EX P E N D IT U R E WA S Q 4 5 , 9 3 , 3 5 1 . T H E S A M E W A S L E S S T H A N 25 % O F T H E SOF TWA R E SERV I C E S R E VE N UE A N D T HER E FO R E T H E S A L AR Y C O S T F I L TE R TE S T F A I L S I N T H I S C A SE . R E F ER E N C E W A S M A DE T O T H E P U N E B E N C H T R I B U N A L S D E CISIO N O F T H E I T A T I N T H E C A S E O F B I N D V I E W I N D I A PR I V A T E L I M IT E D V S . D C I , I TA N O . I TA N O 1 3 8 6 / P N / 1 O W H ER EI N K A L S A S COMP ARA B LE W A S R EJ ECT E D FO R AY 20 0 6 - 0 7 O N A CCO U N T O F I T B EI N G F U N C T I O NA LLY D I F F ER E N T F R O M S O F TWAR E C O M P A N I E S . T H E R E L E V A N T EX TRA C T A R E A S F O LL O W S : 1 6. A NOT H E R I S S UE R E L AT IN G T O S E L EC T IO N O F C O M P A R A B L E S B Y T H E T P O I S R E G AR D I N G I N C L U SIO N O F KA LS I N F O R M A T I O N S Y S TE M L T D. T H E A S S E SS E E H A S OB JE C TE D T O I T S I N C L U S I O N O N T H E B A S I S T H A T F U NC T ION A LLY T H E C OM P A N Y I S N O T ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 8 OF 17 COMP ARA B L E . WI T H R E F E R EN C E T O P A G E S 1 8 5 - 1 8 6 O F T H E PA P E R B O O K , I T I S EX P L A I NE D T H A T T H E S A I D COMP AN Y I S E N G A G E D I N D E V E L O P M E N T O F S OF T W A R E PRO DU C T S A N D SE R V I C E S A N D I S N O T C O MP AR A B L E T O SOF TWA R E D E V E L O P M E N T SE R V I C E S P RO V I D E D B Y T H E A S SESSE E . T H E A P P E L L AN T H A S S U BMI TTE D A N EX TRA C T O N P A G E S 1 8 5 - 1 86 O F T H E P A P E R B OO K FRO M T H E W E B S I T E O F T H E COM P A N Y T O E ST A B L I S H T H A T I T I S E N G A G E D I N P R O VI D IN G O F I T ENA B L E D S E R V I C E S A N D T H A T T H E S A I D COM P A N Y I S I NT O D E V E L O PM E N T O F S O F T W A R E P R O D U C T S , ET C . A LL T H E S E A SP E C T S H A V E N O T BEE N F A C T U A LL Y R E B U T T E D AN D, I N O UR V IE W , T H E S A I D CONC E R N I S L I A B L E T O B E EX C LU D E D F R O M T H E F I NA L SE T O F C O MP A R A B L E S , A N D T H U S O N T HI S A SP E C T , A S S E S S E E S U CC E E D S . BA S E D O N A LL T H E A B OVE , I T W A S S U BMI TT E D O N B E H A L F O F T H E A S S E S S E E T H A T K A L S INFO R M AT IO N S Y S TE M S L I M I T E D SHO U L D B E RE J E CT E D A S A C O M P A R A B L E . W E H A V E G IV E N A C A R E F U L CO N SI D E R AT IO N T O T H E S U B M I S S I O N M A DE O N B E H A LF O F T H E A S S E SSE E . W E FIN D T H A T T H E T P O H A S D R A W N CO N C LU S I O N S O N T H E B A SI S O F I N F O R M A T I O N O B T A I N E D B Y I S S UE O F N O T I C E U / S . 1 33 ( 6 ) O F T H E A C T . T H I S INFO R M AT IO N W HI C H WA S N O T A V A I L A B LE I N P U B L I C D O M A I N CO ULD NO T H A V E B EE N U SE D B Y T H E T P O , W H E N T H E S A M E I S CON TRA R Y T O T H E AN N U A L R E P O R T O F T HI S COM P A N Y A S HI G H L I G H TE D B Y T H E A S S E S S E E I N I T S L E TTE R D A T E D 2 1 . 6 . 2 0 1 0 T O T H E T P O. W E A L S O FI N D T H A T I N T H E D E CISIO N R E F E R R E D T O B Y T H E L EAR N E D C O U NS E L FO R T H E A S S E SS EE , T H E M U M B A I BE NC H O F I T AT H A S H E LD TH A T T H I S C OM P A N Y W A S D E V E L OPIN G S O F TWA R E P R O D U C T S A N D N O T P U R E L Y O R M A I N L Y SOF TWA R E D E VE L O P M E N T S E R V IC E P R O VI D E R . W E T H E R E F O R E A C C E P T T H E P L E A O F T H E A S S E SS E E T H A T T H I S C OM P A N Y I S N O T C O M P A R A B L E . ( E ) A CC E L T R AN S M A T IC L T D . 4 8 . W I T H R E G A R D T O T HI S C O MP ANY , T H E COM P L A IN T O F T H E A S S E SS E E I S T H A T T H I S C O MP A N Y I S N O T A P U R E S O F T W A R E D E V E L OPM E N T S E RVIC E CO M P A N Y . I T I S F U RT H E R S U B M I T T E D T H A T I N A M U M B A I T RI B U NA L D E CISIO N O F C A P G E M I N I I N D I A ( F ) LT D V AD. C I T 1 2 T A X M A N . C O M 5 1 , T H E D R P A C C E P T E D T H E CONT ENT I O N O F T H E A S S E SS E E T H A T A CC E L T R A N S M A T I C SHO U L D B E RE J E C T E D A S COMP ARA B L E . T H E R E L E V A N T O B S E RV AT ION S O F D RP A S EXT R A C T E D B Y T H E I TAT I N I T S O R D E R A R E A S F O L L O W S : ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 9 OF 17 I N R E G AR D T O A CCE L T R AN S M AT I C S L T D. TH E A S S E SS E E S U BMI TTE D T H E COM P A N Y PROFI LE A N D I T S A N N U A L RE POR T F O R FIN AN CI A L YEA R 2 0 05 - 0 6 FRO M W H I C H T H E D RP NO TE D T H A T T H E B U SIN E S S A C T I V I T I E S O F T H E C O MP A N Y WE R E A S U N D E R . ( I ) T RA NSM AT I C S Y S T E M - D E S I G N , D E V E L O P M E N T A N D M AN U F A C T U R E O F M U L T I F U NC T IO N K IOS K S Q U E U E M ANA G E M EN T S Y S TE M , T I C K E T VE N D IN G S Y S T E M ( II ) U S H US T E CH N O L O G IE S - O FF SHO R E D E V E L O P M E N T C E N T R E FO R E MB E DD E D S OF T W A R E , NE T W O R K S Y S TE M , I M A G I N G TE CHN O L O G I E S , O U T S O U R C E D P RO DU C T D E V E L O P M E N T ( I I I ) A C C E L I T A C A D E M Y ( T H E NE T S T O P F O R E N G I N E E R S ) - T R A I N I N G S E R V I C E S I N H AR D W AR E AN D N E T W O R K I N G , E N TER PRIS E S Y S TE M M A N A G E M E N T , E MBE DD E D S Y S T E M , VLS I D E SI G NS , C A D / C A M / B P O ( I V ) A CC E L A N I M AT IO N S T U D I E S S O F T W A R E S E RV I C E S F O R 2 D / 3 D A NIM A T ION , S P E C I A L EFF E C T , E R E C T I O N , G A M E A SS E T D E V E L O P M E N T . 4 . 3 ON C A RE F UL P E R U S A L O F T H E B U S IN E S S A C TI V I T I E S O F A C C E L T RAN SM AT I C L T D. D RP A G R EE D W I T H T H E A S S E SS E E T H A T T H E COMP AN Y W A S F U NC T ION A LLY D I F F E R E N T FRO M T H E A S S E S S E E COMP A N Y A S I T W A S EN G A G E D I N T H E S ER VIC E S I N T H E FOR M O F A C C E L I T AN D A C C E L AN I M A TIO N S E R V I C E S FO R 2 D AN D 3 D A NIM AT I O N A N D T H ER E FOR E A SS E S S EE S CL A I M T H A T T H I S COM P A N Y WA S F U N C T I O NA L L Y D I FF E RE N T W A S A C C E P T E D . D RP T H E R E F O R E D I RE C TE D T H E A S S E S S I N G O FF I C E R T O EX C LU D E A CC E L T RA NSM AT I C L T D . FR O M T H E FIN A L L I S T O F COMP ARA B L E S FO R T H E P U R P O S E O F D ET E R MININ G T N M M M A R G I N . BE S I D E S T H E A BOV E , I T W A S P O I NTE D O UT TH A T T HI S C O M P A N Y H A S RE L ATE D P A R T Y T R A N S A C T I O N S W HIC H I S M O R E T H A N T H E P ER M I TT E D L E VE L AN D TH E R E FO R E S H O ULD NO T B E T A KE N F O R COMP ARA BI L I T Y P U R P OS E S . T H E S U BMISSI O N O F T H E L D . CO U N S E L FO R T H E A S S E SS E E W A S T H A T I F T H E A BOV E C O M P A N Y SHO U L D NO T B E CO N SI D E R E D A S COMP ARA B L E . T H E L D . D R , O N T H E O T H E R H A N D, R E L IE D O N T H E O R D E R O F T H E T P O . 50 . W E H A V E CO N SI D E R E D T H E S U B M I SSIO N S A N D A R E O F T H E VI E W T H A T T H E P L E A O F T H E A S S E S S E E T H A T T H E A F O R E S A I D COMP AN Y S H O ULD N O T B E T R E A T E D A S C O MP A R A B L E S W A S CON S I D E R E D B Y T H E T R IB U N A L I N C A P G E M I N I ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 10 OF 17 I N DIA L T D ( S U PR A ) W H E R E T H E A SS E SS E E WA S SOF TWA R E D E V E L O P E R . T H E T R I B U N A L, I N T H E S A I D D E CI S I O N R EF E R RE D T O B Y T H E L D . CO U N S E L FO R T H E A SS E S S EE , H A S A C C E P TE D T H A T T H I S COMP AN Y W A S N O T COMP AR A B L E I N T H E C A S E O F T H E A S S E S S EE S E N G A G E D I N SOF TWAR E D E V E L OPME N T S E R V I C E S B U S IN E S S . A CCE P T I N G T H E A R G U MEN T O F T H E LD. CO U N S E L F O R T H E A S S E S S EE , W E HO LD T H A T T H E A FO R ES A I D C O M P A N Y S HO U L D B E EX C L U D E D A S C O MP A R A B L E S . 13 . T H E F AC T S A N D C I RC U M S T A N C E S UN D ER W H I CH T H E A F O RE S A I D C O M P A N I E S W ERE C ONS I D ERED AS C O M P ARA B L E I S I D E N TI C AL I N T H E CA S E O F T H E A S S E S S E E AS WE L L AS I N T H E CA S E O F T R I O L O G Y E - B US I N E S S SO F TW ARE I ND I A PV T . L T D . ( SU P RA). R E S P E C T F U LL Y F O L L O W I N G T H E D EC I SI O N O F T H E T R I B U N A L RE F ERRED T O A B O V E I N T H E CA S E O F TR I O L OG Y E - BU S I N E S S S OF TW ARE I ND I A PV T . L T D . ( S U P RA), W E D I R E CT T H AT T H E F O L L O W I N G C O M P A N I ES ( LI S T ED A S S L. N O. 4 & 1 5 O F T H E LI S T O F C O M P ARA B L E C O M P A N I ES C HO S E N B Y T H E T P O A N D L IS T ED I N P ARA - 4 O F T H I S O R D E R) B E E X C L UD ED FR O M T H E LI S T O F 2 0 C O M P ARA B L E ARR I V ED AT B Y T H E T P O . 8 . 7 .3 I T M I G H T B E T RU E T H A T A NU MB E R O F S O F T W A R E D E V E L O P M EN T C O M PAN I E S I N T H E IR T P S T U D I E S M I G H T H A V E C O N SI DE RE D KA L S I N F O S Y S T E M S L T D . A S A C O M P A RA B LE A N D N O T A S A S O F TW AR E P R ODU CT C O M P AN Y . H O W E V E R T H I S, IN O U R O P I N I O N , W ILL NO T D I L U TE T H E F I N D I NG S IN T H IS R EG AR D G I V E N B Y T H E TR I B UNA L. T H E A SS E S S E E H A VI N G R E LI E D O N T H E D E CISI O N O F T H E T R I B UN A L W HERE I N IT H A S BE E N H E L D T H A T KA L S IS A S O F T W A R E P R O D U CT C O MP AN Y , U N L E SS T H E DE C I S I O N O F A H I GH E R AU T H OR I T Y W H I C H IS D IF F E REN T F RO M T H E O N E G I VE N B Y T H E C OORD I N A T E B E N C H IS S H O WN B Y T H E RE V EN U E , IT W ILL N O T B E PO S S I B LE TO DE V I A TE F RO M T H E V I E W E AR LI E R T A K E N B Y A C O O R D I N A T E B E N C H . A CC O R D I N G L Y , W E D I RE CT T H A T K A L S I N F OR M A TI O N S Y ST E M S L T D . B E E XC L UD E D F RO M T H E C O MP AR A B L E S. 8 . 8 A CC E L TR A N S M A TICS L T D . : LD . A R R A I S E D SI M I L A R C O N T E N TI ON S F O R E XCL U S I O N O F T H IS C O MP A N Y A S W A S M A D E I N T H E C A SE O F KA L S I N F OR M A TI O N S Y ST E M S L T D . ( S U P R A) . LD . DR A L S O RA IS E D SI M IL A R OB J E CT I O N S. W E FI N D T HA T A CC E L TR A N S M A TICS L TD . H A S A L S O BE E N C O N S I D E RE D A S A S O F T W A R E P R ODU CT C O M P AN Y B Y T H IS T R I B U N A L I N T H E D E CIS I O N S CIT E D A T PA R A 8 . 7 .2 A B O V E . R E L E V AN T P AR T O F T H E DE C I SI O N HA S B E E N R E P R O D U C E D B Y U S T HE R E I N . A CC OR D I N G L Y , WE D I R E CT T H A T A C C E L T RA N S M A TICS L T D . B E E XC L UD E D F RO M T H E C O M P A RA B L E S. 8 . 9 TA T A E LX S I L T D . : L D . A R S U B M ITT E D T H A T T H IS C O M P A N Y W A S E NG AG E D IN R E S EAR C H & D E V E L O P ME N T W H I C H RE S U LT E D IN C R E A T I O N O F I N T E L L E C T UA L P R O P ER T Y R I G H TS AN D T H E R E F OR E W A S ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 11 OF 17 A S O F TW A R E P R ODU CT C O M P AN Y . R E L I AN CE W A S P L A CE D O N TH E D E C I S I O N O F C OOR D I N A TE B E N CH O F T H E T R I B U NA L I N T H E C A SE O F EM C D A T A ( S U PR A ) . 8 . 9 . 1 P E R C ON T R A , T H E L D . D R S U B M I T T E D TH A T T A TA E LXSI L T D . W A S NO T A S O F T W A R E P RODU CT C O M P A N Y , BU T W A S E NG AGE D O N LY IN D E V E L OP M EN T O F S O F T W A R E . 8 . 9 . 2 W E HA VE H EA R D T H E R I V A L C O N T E N T I O N S . W HE T HE R T A T A E L XSI L T D . C O U L D B E C ON S I DE R E D A S A S OFT W A R E D E V E L O P M E N T COM P A N Y W A S ON E O F T H E ISS UE S W H I C H C A M E U P F O R C O N S I D E R A T I O N BE F OR E T H E T H I S T R I B U N A L IN T H E C A SE O F EM C D A T A ( S U PR A ) , W H E RE I N IT W A S H E LD A S U N D ER : - 17 . A S F AR AS C O M P A R A B L E AT S L . N O . 9 O F T H E L IS T O F C O M P ARA B L E C HO S E N B Y T H E T P O LI S T ED I N T H E C H A R T G I V EN AT P ARA - 4 O F T H I S O R D ER V I Z . , TA T A E L X S I L T D . , I S C O N C E R N E D , T H E C O M P ARA B IL IT Y O F T H E A F O R E S A I D T W O C O M P A N I ES W I T H T H AT O F T H E S O F TW ARE S ER V I CE P R O V I D ER W AS C O N S I D E R ED B Y T H E M U M B AI B E N CH O F T H I S TR I B UN AL I N T H E CA S E O F L OG I CA P V T . L T D . IT (T P ) 1129 / B A NG / 20 1 1 A Y 07 - 08 ) W H E RE I N O N T H E A F O R E S A I D C O M P A NY , T H E TR I BUN AL H E L D A S F O L L O W S: - 1 4 . AS F A R A S COMP ARA B LE A T S L . N O . 6 & 2 4 A R E CO N C ER N E D, T H E COMP ARA BI L I T Y O F T H E A FOR E S A I D T W O COM P A NI E S W I T H T H A T O F T H E SOF TWA R E S E RV I C E P R O V I D E R W A S CON S I D E R E D B Y T H E M U M B A I BE NC H O F T H E T R I B U N A L I N T H E C A S E O F T E L C O R D I A T E C H N O L O G I E S I N DIA P R I V A T E LT D. ( S U PR A ) W H ER E I N O N T H E A FOR E S A I D TW O C O M P A N I E S , T H E T RIB U NA L H E LD A S F O LL O W S : - 7 . 6 F L E X T R O N I C S S O F T W A R E S Y S T E M S L T D . : AS P E R T H E S TATE M EN T O F T H E L EA RN E D AR, T HI S C O M P A N Y I S A L S O I N V O L V E D I N T H E D E V E L O P M E N T O F T H E S O F T W A R E P RO D U C T A N D I S A L S O I N VO L VE D I N B P O S E R V I CES , B E S I D E S J OI N T S O F TWAR E CO N S UL TAN C I E S FO R T H E U S E I N TE L E C O MM U N I C AT IO N I N D U S TR I E S . T H U S , B E I N G P RO D U C T AN D S ER V I C E COM P A N Y , I T C AN NO T B E T AKE N A S COM P A R A B L E . HO WE V E R , T H E L EAR N E D C I T D R H A S A M P L Y CO NT ROV E R TE D T H E S A I D CO NT E NT IO N O F T H E L EA RNE D AR B Y S U B MIT T I N G B EFO R E U S A C O P Y O F P R OFI T AN D L O S S A CC O U N T O F T H E C O MP A N Y FO R T H E R E L E V A N T A S S E S S M E N T Y E A R , O B TA IN E D F R O M TH E P U B L I C D O M A I N . F RO M T H E P ER U S A L O F T H E P R OFI T A N D L O S S A CCO U N T O F T H E S A I D COM P A N Y , I T I S S E E N T H A T T H E R EVE N UE S A L E S F R O M S E R V IC E S C O N S T I T U TE S ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 12 OF 17 A L MOS T 9 0 % A N D T H E P R O D U C T S A L E S I S O N L Y 1 0 % . T H U S , I N T H I S C A S E A L S O N O T M U C H A D J U S T M EN T I S R E Q U I RE D T O B E M A D E FO R T A K I N G T H E P ROFI T RAT I O FO R COM P AR I N G I T W I T H T H E A S S E S S E E I N D E TE R MININ G T H E A RM S L E N G T H PRICE . I N V I E W O F T H E A B OV E , W E HO LD T H A T TP O H A S RI G H T L Y INC L U D E D T H E S A I D COM P A N Y A S COMP ARA B LE C A S E W H I C H C A N B E T AKE N I N T O CO N SI D ER A T IO N FO R CO M P AR I N G T H E PR O F I T R A T I O . 7.7 . T A T A E L X S I L I M I T E D . : F RO M T H E F A C T S A N D M A T E RI A L O N R E C O R D A N D S U B MIS S I O N S M A DE B Y T H E L E A R N E D AR, I T I S S E E N T H A T T H E T A T A E L X S I I S EN G A G E D I N D E V E L O PM E N T O F N I C H E P RO D U C T AN D D E VE L O P ME N T S E RVIC E S , W H IC H I S E N T I R E L Y D I F F ER E N T FR O M T H E A S S ESSE E COM P A N Y . W E A G R E E W I T H T H E CON T E NT I O N O F T H E L E AR N E D A R T H A T T H E N AT U R E O F P RO D U C T D E V E L O P E D A N D SE R VIC E S PRO V I D E D B Y T H I S COM P A N Y A R E D IFFE RE N T FRO M T H E A S S E S S E E A S H A V E B E E N NA R RA TE D I N P A R A 6 . 6 A BOV E . EV E N T H E S E G M E NT A L D E T A I LS F O R R E V E N U E S A L E S H A V E NO T B E E N PR O V I D E D B Y T H E T P O S O A S T O C O N SI D E R I T A S A C O MP A R A B LE P A RT Y F O R COM P A RIN G T H E P R O F I T RAT I O F R O M P R O D U C T A N D S E R V I C E S . T H U S , O N T H E S E F A C T S , W E A R E U N A B LE T O T R E A T T H I S COM P A N Y FI T F O R COMP A R A B I L I T Y A NA L Y S I S F O R D E TE R MININ G T H E A RM S L EN G T H PRIC E FO R T H E A SS E S S EE , H E NC E , S H O ULD B E E X C LUD E D FRO M T H E L I S T O F C O M P A R A B L E P A R T I E S . 1 5 . I N VI E W O F T H E A BOV E , T H E LD. CO U N S E L FO R T H E A SS E S S E E F A I R LY A D MI TT E D T H A T COM P A R A B LE C O MP AN Y A T S L . N O . 6 VIZ . , F L EXT RO N I C S S OF TWA R E S Y S T E M S P V T . L T D . SH O ULD B E T A K E N A S A C O M P A R A B L E , W H I L E C O M P A R A B LE A T S L . N O . 2 4 VI Z . , T AT A E L X S I L T D. SHO ULD B E R EJE C TE D A S A C O M P A R A B L E . 18 . IN V I EW O F T H E A FO R E S A I D D E C I S I ON , W E HO L D T H A T TA T A E L XS I H A S T O B E E X C L UD ED F R O M T H E L IS T O F C O M P AR A B L E C H OS EN B Y T H E T P O . 8 . 9 . 3 TH E A SS E S S E E BE F OR E U S IS N O T DE V E L O P I N G AN Y N I C H E P RO D U C T . A S H E L D B Y T H E C O O R D I N A T E B E N CH O F T H E TR I BU N A L ( S UPR A ) , TA TA E LXSI L T D . C O U LD N O T B E C O N S I DER E D A S A S O FT W A R E D E V E L O P ME N T C O M PA N Y S I M P LI C IT O R . T HA T TA TA E LXSI L T D . W A S F UN CTI O N A LLY D I FF EREN T, H A S B E E N HE L D B Y T H E C O O R D I N A T E B E N C H O F T H E T R I BU N A L I N T H E C A S E O F Y OD L EE I N F O T ECH P V T . L T D. ( I T A N O . 1 3 9 7 / B A N G / 2 01 0 DA T E D ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 13 OF 17 1 5 . 2 . 20 1 3 ) A S W E L L. W E T HERE F OR E D I R E CT T H A T TA TA E LXSI L T D . B E E XCL U D E D F RO M T H E C O MP A R AB L E S . 8 . 1 0 LU CID S O F T W A R E L T D . : T H E L D . C OUN S E L F O R T H E A S S E SS E E R A I S E D S I M I L A R C O N T E N T I O N S A S IN T H E C A SE O F TA T A E LX S I L T D . HE R E A L S O . A C C O R D I N G TO H I M , L U C I D S O FT W A R E L T D . W A S F U N C T I ON A L L Y D ISSI M IL A R AN D W A S D E V E L O P I N G P R O D U CTS AN D W A S N O T A N S O F T W A R E DE V E L O P M EN T S E R V I C E S C O M PA N Y . 8 . 10 . 1 W E F I N D T H A T LU C I D S O FT W A R E L T D . W A S A LSO O N E O F T H E C O M P A RA B L E S W H I C H C A M E U P F O R C O N S I D E R A TI O N BE F O R E T H E CO O R D I N A T E B E N C H O F T H IS T R I B UNA L I N T H E C A S E O F E M C D A T A ( S U PR A ) . E M C D A T A W A S A L S O D O I N G S O FT W AR E D E V E L O P M E N T S ER V IC E S I N ON E O F ITS S E G ME N TS A N D T P O H A D C O N S I D E R E D L U C ID S O F TW A R E L T D . A L S O F O R C OM P A R I S ON . T H E C O ORD I N A T E B E N C H IN T H E A F O R E S A ID D E C I S I O N H E L D A S U N DE R: - 1 4 . T H E L E A R N E D C O UNS EL F O R T H E A S S E S S EE B R OUG H T T O OU R NO T I CE T H AT T H E C O M P A R A B L E C O M P A N Y C HOS EN B Y T H E T P O AT S L. N O . 1 0 O F T H E C H ART G I V EN I N P A RA - 4 O F T H I S O R D ER V I Z . , L U C I D SO F T W ARE L I M IT E D , H AS T O B E E X C L UD ED AS FU N C T I ON A L L Y NO T C O M P ARA B L E W IT H T H AT O F T H E A SS E S S EE I N V I EW O F T H E D EC I S I O N O F T H E M U M B AI B E N CH O F T H E TR I B UN AL I N T H E CA S E O F T E L C O R D I A T EC HNO L OG I ES I ND I A P R I V A T E L T D . I N I T A NO . 7821 / M U M / 2011 , W H I C H W AS F O L L O W ED B Y T H E IT A T B A N G A L O RE B E N CH I N T H E CA S E O F L O G I CA P R I V A T E L T D . I T A N O . 1 1 29 / B A NG / 2 0 1 1 F O R A Y 07 - 08 , W H ERE I N I T W AS H E L D AS U ND ER : - 7 . 2 L U C I D S O F T W A R E L I M I T E D I T H A S BE E N S U BMI T TE D B E F O R E U S T H A T T H I S COM P A N Y , B E S I D E S D OIN G SOF TWA R E D E V E L O P M E N T S E R V IC E S , I S A L S O I N VO L V E D I N D EV E L OPM E N T O F S O F T W A R E P RO D U C T . T H E L E AR NE D AR H A S T RI E D T O D I S T I N GU IS H B Y P OIN T IN G O U T TH A T P RO DU C T D E VE L O P M E N T E X P E N D I T U R E I N T HI S C A S E I S AR O U N D 3 9 % O F T H E C A P I TA L E M P L O Y E D B Y T H E S A I D COMP ANY , A N D , T HE RE FOR E , S U C H A COM P A N Y C AN NO T B E CO N S I D ER E D A S TE S T E D P A R T Y . E V E N A S P E R T H E INFO R M AT IO N R E C E IV E D I N R ESPO N S E T O N O T I C E U N D E R S EC T IO N 1 33 ( 6 ) , TH E C O MP A N Y H A S D ESC RI B E D I T S B U S I NE S S A S S O F TWA R E D E V E L O PM E N T COM P A N Y O R P U R E SOF TWAR E D E V E L OPM E N T S ER V I C E P RO V I D E R . T H I S I N FORM A T IO N I T S E L F I S VE R Y V A GUE A S T H E S E G M E N T A L D E T A I LS O F O P E R AT IN G R E V E N UE H A S N O T B EE N M A D E A V A I L A B LE T O EXA MIN E H O W M U C H I S T H E RAT I O O F S A L E F R O M ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 14 OF 17 SOF TWAR E PR O D U C T AN D S A L E O F SOF TWA R E S E R V I C E AN D D EV E L OPM E N T . LOO K IN G T O T H E F A C T T H A T I T H A S D E VE L OP E D A SOF TWA R E P R O DU C T N A M E D A S M U U L A M W HIC H I S U S E D F O R C I V I L EN G I NE E R I N G S T R U C T U R E S A N D T H E P RO D U C T D EV E L OPME N T E X P E N D I T U R E I TS E LF I S S U B S TANT I A L V I S - A - VI S T H E C A PI TA L E MP L O Y E D B Y TH E S A I D COM P A N Y , T HI S CRI TE RI A FO R B EI N G TA KE N A S C O M P A R A B L E P A R TY , G E T S V I T I ATE D. F O R T H E P U R POS E O F C O M P A R A B I L I T Y ANA L Y S I S , I T I S E SS E N T I A L T H A T T H E C H A R A C T E R I S T IC S A N D T H E F U NC T ION S A R E B Y A N D L AR G E SIMI L A R A S T H A T O F T H E A SS E S S E E COMP AN Y A N D T . P . A N A L Y S I S / S T U D Y C A N B E M A DE W I T H FE W ES T A N D MOS T R E L I A B LE A D J U S T MEN T . I F A COM P A N Y H A S E MP L O YE D H EA V Y C A PI TA L I N D E VE L OP M E N T O F A PR O DU C T TH E N P R OF I TA B I L I T Y I N T H E S A LE O F P RO D U C T W O U L D B E E N T I RE L Y D IFF E R E N T FRO M T H E COM P A N Y , W H O I S IN V O L V E D I N S ER V I C E S E C T O R . T H ER EF O R E , T HI S COMP AN Y C A N N O T B E T R E A TE D A S H A V I N G S A M E F U NC T I O N AN D P R O FI TA BI L I T Y R A T I O . I N O UR VI EW , D U E T O NO N - A V A I L A BI L I T Y O F F U L L I N FORM AT IO N A BO U T T H E S E G M E N TA L D E T A I LS A S T O H O W M U C H I S T H E S A LE O F P R O D U C T A N D H O W M U C H I S F R O M T H E S E RVI C E S , T H E R E FO R E , T H I S E NT I T Y C A NN O T B E T A K E N I NT O A CCO U N T F O R C O MP A R A B I L I T Y ANA L Y S I S F O R D E TE R MININ G AR M S L E N G T H PRIC E I N T H E C A S E O F T H E A SS E S S EE . 15 . T H E F AC T S A N D C I RC U M S T A N C E S UN D ER W H I CH T H E A F O RE S A I D C O M P A N I E S W ERE C ONS I D ERED AS C O M P ARA B L E I S I D E N T I C AL I N T H E CA S E O F T H E A S S E S S EE AS W E L L AS I N T H E CA S E O F L OG I CA P R I V A T E L T D . , ( S UP RA). R E S P EC T FU L L Y F O L L O W I N G T H E D E CI S I O N O F T H E TR I BUN AL RE F ER R ED T O A BOV E I N T H E CA S E O F L OG I CA PV T . L T D . . ( S UP RA), W E D I R E CT T H AT T H E C O M P A N Y LI S T ED AS S L . N O . 1 0 O F T H E L I S T O F C O M P A R A B L E C O M P A N I E S C H OS E N B Y T H E T P O A N D L IS T ED I N P AR A - 4 O F T H I S O R D ER T O B E E X C L U D E D F R O M T H E L IS T O F 2 0 C O M P ARA B L E ARR I V ED A T B Y T H E T P O . 8 . 10 . 2 R E S P E CT F U L L Y F O LL O WI N G T H E S A ID DE CIS I ON , WE HO L D T H A T LU C I D S O F T W A R E L T D . W A S N O T F UN CTI O NA L L Y S I M IL A R TO T H E A SS E S SE E A N D T H E S A M E H A S TO B E E XC L U DE D F RO M T H E C O M P A RA B L E S. DI RE C T E D A CC O RD I NG L Y . 8 . 1 1 M E GA S O F T L T D . 8 . 1 2 A Z T E C H S O F T W A R E L T D . 8 . 1 3 G EO M E T R IC S O F TW A R E L T D . LD . A R SU B M ITT E D T H A T IN EA C H O F T H E A B O VE C O M PAN I E S T H E R P T F I L TE R E XC E E D E D 15 % . A C C O R D I N G T O H I M , R P T ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 15 OF 17 F ILT E R H A S B EE N U P H E L D B Y T H IS TR I BU N A L I N A H O ST O F DE CISI ON S I N C L UD I N G T HA T O F E M C D A T A ( S U PR A ) . P E R C O N TR A , T H E L D . D R S UP P OR T E D T H E O RD ER S O F A U T H O R ITI E S BE L O W . W E HA V E P E RU S E D T H E O R D E R S A N D HE A R D T H E R I V A L C O N T EN T I O N S. A PP L I C A TI O N O F R P T F I L T E R W H I LE S E L E CT I N G T H E C O M PAR A B L E S HA S B E E N H E LD TO B E A N AP P R O P R I A T E C R I T ER IA B Y T H I S T R I B U N A L I N A N U M BE R O F DE CISI O N S . IN T H E C A S E O F E M C D A T A ( S UPR A ) , I T W A S H E L D A S U N DER : - 16 . A S F AR A S C O M P A R A B L E C O M P A N I E S A T S L . N O . 1 & 2 & 1 9 O F T H E C H ART O F C O M P ARA B L E C O M P A N I E S C H O S EN B Y T H E T P O A T P A G E - 4 O F T H I S O R D E R V I Z . , A Z T EC S O F TW ARE L I M IT E D A N D G E O M E T R I C SO F T W ARE L T D . ( S E G . ) A N D M E G A SO F T L T D . , I S C O N C E R N E D , I T I S N O T I N D I SPU T E B EF O RE U S T H AT T H E R E L A T E D P AR T Y T R A NS AC TI O N I N T H E C A S E O F C O M P A N I E S E X CEE D S 1 5 % A N D I N V I EW O F T H E D EC I SI O N O F T H E TR I BUN AL I N T H E C A S E O F 2 4 X 7 C U S T O MER . C O M PV T . L T D . I N ITA N O . 2 2 7 / B A NG / 20 1 0 , F O L L O W ED B Y T H I S TR I B U N AL I N T H E C A S E O F L OG I CA P R I V A T E L T D . ( S UP R A ) W H ERE I N I T W AS H E L D T H AT W H ERE T H E RP T E X CEE D S 1 5 % , S U C H C O M P A N I ES SHOU L D NO T B E T A K EN A S C O M P ARA B L E C O M P A N I E S . F O LL O WI N G T H E S A I D D E C I S I ON , W E HO L D T H AT C O M P A N I E S AT S L . N O S . 1 & 2 & 1 9 RE F ERRED T O A BOV E O F T H E L I S T O F T H E C O M P AR A B L E C O M P A N I ES C HO S EN B Y T H E T P O B E E X C L U D ED F R O M T H E LI S T O F C O M P ARA B L E C O M P A N I ES W H I L E W O R K I N G O U T T H E A L P. THE R E IS N O D I S PU T E T H A T R P T F ILT E R I N T H E C A SE O F MEGA S O F T L T D . W A S 1 7 . 08 % , T H A T O F A Z T E C H S O F T W A R E L T D . W A S 1 7 . 7 8 % A N D T H A T O F G E O M E T R IC S O F T W A R E L T D . W A S 1 9 . 3 4 % . C O O R D I NA TE B E N C HE S O F T H E TR I B UNA L A R E C O N SIS T EN T L Y F O LL O W I N G 1 5 % A S C U T O F F M AR K F O R APP LYI N G T H E R P T F ILT ER . A CC OR D I N G L Y , WE D I R E CT E XCL U S I O N O F MEGA S O F T L T D ., A Z T E C H S O F T W A R E L T D . A N D G EO M E T R IC S O FT W A R E L T D . F RO M T H E C O M PA R AB L E S. 9 . B A S E D O N T H E A BO V E , WE D I R E CT T H E A O TO RE C O MP U TE D T H E P R O F IT L E V E L I N D I C A T O R A N D W OR K O U T T H E AR I T H M E TIC M E A N M A R G I N O F T H E C O M P A RA B L E S. TH E R EAF T ER , T H E A O H A S TO D E C I D E W HE T HE R T H E P L I O F T H E A SS E S S E E IS W IT H I N +/ - 5 % R AN G E O F T H E A R IT HM E TIC M EA N O F T H E C OM P A R AB L E S A S S E T O U T U /S. 9 2 C (2 ) O F T H E A CT A N D D E C I D E O N T H E A D J U S TM E N T , IF A N Y , REQU I RE D O N TH E A L P . O R D E R E D A C C O R D I N G L Y . 3.3 THE ASSESSEE ALSO SOUGHT TO HAVE MINDTREE LTD., EXC LUDED AS A COMPARABLE ON ACCOUNT OF RELATED PARTY ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 16 OF 17 TRANSACTIONS BEING MORE THAN 15% OF THE TOTAL TRANSACTION S . LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF AGILE SOFTWARE ENTERPRISE P VT. L TD., (CITED SUPRA) WHEREIN THE TRIBUNAL HAS HELD THAT 15% IS THE CUT - OFF MARK FOR APPLYING THE RPT FILTER AND ADOPTING THE SAME, MINDTREE LTD., WAS EXCLUDED. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE AO TO EXCLUDE THE SAID COMPANY ALSO FROM THE LIST OF COMPARABLE. THE ASSESSEE DOES NOT HAVE ANY GRIEVANCE FOR ADOPTION OF OTHER COMPANIES AS COMPARABLES. THE AO IS, THEREFORE, DIRECTED TO RE - COMPUTE THE ALP AFTER EXCLUDING THE COMPANIES DIRECTED BY THIS TRIBUNAL IN THIS ORDER. THE ASSESSEE S GROUND OF APP EAL 4.3 IS ACCORDINGLY ALLOWED. 4. AS REGARDS THE GROUND NO.9, WE FIND THAT IT IS WITH REGARD TO COMPUTATION OF DEDUCTION U/S 10A OF THE ACT AND THE ASSESSEE S PRAYER IS TO ADJUST BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER BY REDUCING 50% OF D ATA LINK CHARGES OF RS.33,96,939/ - FOR COMPUTING DEDUCTION U/S 10A OF THE ACT. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD. (349 ITR 98) . RESPECTFU LLY FOLLOWING THE SAME, WE ALLOW THE SAID GROUND OF APPEAL OF THE ASSESSEE AND DIRECT THE AO TO EXCLUDE DATA LINK CHARGES BOTH FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S 10A OF THE ACT. ITA NO . 112 9 /BANG/201 0 M/S.YAHOO SOFTWARE DEVELOPMENT INDIA P.LTD. PAGE 17 OF 17 5. IN THE RESULT, THE AS SESSEE S APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST OF DECEMBER, 2014. S D/ - S D/ - (JASON P BOAZ) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE.