BA Continuum India Private Limited (Previously known as BA Continuum Solutions Private Limited), Hyderabad V. Addl.CIT, Range-1, Hyderabad

ITA 1143/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5935 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2014
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: SAMPATH RAGHUNATHAN
• Keywords: Transfer pricing; International transaction; Working capital adjustments
• Section: 92D; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1143/HYD/2014 ASSESSMENT YEAR: 2008-09 BA CONTINUUM INDIA PRIVATE LIMITED [PREVIOUSLY KNOWN AS BA CONTINUUM SOLUTIONS PRIVATE LIMITED] HYDERABAD [PAN: AACCC2310C] VS ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI SAMPATH RAGHUNATHAN, AR FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR DATE OF HEARING : 03-11-2016 DATE OF PRONOUNCEMENT : 21-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD, DATED 24-03-2014. 2. BRIEFLY STATED, ASSESSEE-COMPANY, BA CONTINUUM SOLUTIONS PRIVATE LIMITED WAS INCORPORATED ON OCTOBER 10 , 2003 UNDER COMPANIES ACT, 1956. ASSESSEE PROVIDES INFOR MATION TECHNOLOGY ('IT') ENABLED BACK OFFICE PROCESSING SE RVICES TO BANK OF I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 2 -: AMERICA MANAGEMENT CORPORATION (BAMC) GROUP FROM ITS TH REE UNITS LOCATED AT HYDERABAD, MUMBAI & GURGAON. 3. DURING THE PREVIOUS YEAR RELEVANT TO AY.2008-09, ASSESSEE HAD THE FOLLOWING INTERNATIONAL TRANSACTIONS: INTERNATIONAL TRANSACTION ASSOCIATED ENTERPRISE AMOUNT (RS) MOST APPROPRIATE METHOD PROVISION OF ITES (RECEIVED OR RECEIVABLE) BANK OF AMERICA NATIONAL ASSOCIATION 472,46,87,363 TNMM BANK OF AMERICA SECURITIES LLC 44,97,95,840 TNMM PAYMENT TOWARDS PROFESSIONAL SERVICES BANK OF AMERICA N.A. (FOREIGN BRANCH) 1,18,44,421 TNMM PAYMENT TOWARDS SUPPORT COST BANK OF AMERICA N.A. (FOREIGN BRANCH) 53,93,280 TNMM REIMBURSEMENT OF IT SERVICES COST BANK OF AMERICA NATIONAL ASSOCIATION 24,77,238 TNMM PAYMENT TOWARDS SERVICES BANK OF AMERICA NATIONAL ASSOCIATION 1,45,78,949 TNMM PAYMENT FOR EMPLOYEE COMPENSATION AND OTHER COSTS BANK OF AMERICA MANAGEMENT CORPORATION 16,45,53,731 TNMM INTEREST PAYMENT ON LOAN BANK OF AMERICA MANAGEMENT CORPORATION 28,36,293 CUP METHOD 4. ASSESSEE ALSO MAINTAINED THE RELEVANT TRANSFER PRIC ING (TP) DOCUMENTATION AS REQUIRED U/S 92D OF THE ACT R/W RULE 10D OF THE INCOME-TAX RULES, 1962 (RULES). IN THE TP DOCUMENTA TION MAINTAINED BY THE COMPANY, TRANSACTIONAL NET MARGIN METH OD (TNMM) WAS SELECTED AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) FOR THE INTER NATIONAL TRANSACTIONS WITH AES PERTAINING TO PROVISION OF SERVICE S WITH RESPECT TO ITES, PAYMENT TOWARDS PROFESSIONAL SERVICES, PAYMENT TOWARDS SUPPORT COST, REIMBURSEMENT OF IT SERVICES COST, PAYMENT TOWARDS SERVICES, PAYMENT FOR EMPLOYEE COMPENSATION AN D OTHER I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 3 -: COSTS. ASSESSEE SELECTED THE MARK-UP ON OPERATING COS T (I.E. OP/OC) AS THE APPROPRIATE PROFIT LEVEL INDICATOR (PLI) IN APPLYING THE TNMM. AS A PART OF THE TP DOCUMENTATION, ASSESSEE UN DERTOOK A BENCHMARKING ANALYSIS TO JUSTIFY THE ARM'S LENGTH N ATURE OF ALL THE INTERNATIONAL TRANSACTIONS. ASSESSEE ARRIVED AT A SE T OF 11 COMPARABLE COMPANIES WITH THE ARITHMETIC MEAN OF COMPAR ABLE COMPANIES AT 12% AS AGAINST 19% MARGIN OF THE COMPANY . SINCE, ASSESSEE'S MARGIN WAS MORE THAN THE ARITHMETIC MEAN OF THE COMPARABLES, THE INTERNATIONAL TRANSACTIONS OF ASSESSEE WERE JUSTIFIED TO BE AT ARM'S LENGTH. 5. SINCE, ASSESSEE HAD INTERNATIONAL TRANSACTIONS, THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE 1, HYDER ABAD (AO) REFERRED THE INTERNATIONAL TRANSACTIONS REPORTED BY ASS ESSEE VIDE FORM 3CEB TO THE ADDITIONAL COMMISSIONER OF INCOME-TAX, TRANSFER PRICING (TPO) U/S. 92CA OF THE ACT FOR VERIF ICATION OF ARM'S NATURE OF THE INTERNATIONAL TRANSACTIONS. IN THE TP PROC EEDINGS U/S. 92CA OF THE ACT, ASSESSEE SUBMITTED RELEVANT INFORMATION/DOCUMENTS AS CALLED FOR BY TPO. THE TPO V IDE THE SHOW-CAUSE NOTICE DATED 30 SEPTEMBER 2011 HAS REJECT ED THE BENCHMARKING ANALYSIS OF ASSESSEE, CONDUCTED A FRESH BENCHMARKING ANALYSIS USING VARIOUS FILTERS, SELECTE D 20 COMPARABLE COMPANIES FOR BENCHMARKING THE INTERNATIONA L TRANSACTIONS OF ASSESSEE. THE TPO DETERMINED THE MARG IN OF ASSESSEE AT 20.10% AND THE ARM'S LENGTH MARGIN AT 29. 16% FOR THE 20 COMPANIES AND PROPOSED TO MAKE A TP ADJUSTMENT AMOU NTING RS. 39,27,44,531/-. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 4 -: 6. ASSESSEE MADE VARIOUS SUBMISSIONS TO THE TPO. TH E TPO PROVIDED A POSITIVE WORKING CAPITAL ADJUSTMENT OF 2 .80% AND REVISED THE TP ADJUSTMENT TO RS. 27,13,86,631/-. THE FO LLOWING ARE THE 20 COMPANIES SELECTED BY THE TPO AS PER THE TPO'S ORDER: SR. NO. COMPARABLE COMPANIES OPERATING REVENUE (RS. CR.) OP/OC AS PER TPO (%) 1 ACCENTIA TECHNOLOGIES LIMITED 50.48 44.50 2 ACROPETAL TECHNOLOGIES LIMITED (SEG) 20.80 35.30 3 CORAL HUB (VISHAL INFORMATION TECHNOLOGIES LIMITED) 38.08 51.84 4 WIPRO BPO 1,158.80 30.23 5 ECLERX SERVICES LIMITED 122.20 66.50 6 GENESYS INTERNATIONAL CORPORATION LIMITED 47.19 48.15 7 INFOSYS BPO LIMITED 827.68 20.03 8 MOLD - TEK SOLUTIONS LIMITED 17.85 96.66 9 HCL C OMNET SYSTEMS & SERVICES LIMITED 388.73 32.97 10 DATAMATRICS FINANCIAL SERVICES LIMITED (SEG) 6.19 34.87 11 COSMIC GLOBAL LIMITED 5.87 24.30 12 CROSSDOMAIN SOLUTIONS PRIVATE LIMITED 26.59 26.96 13 I - S ERVICES INDIA PRIVATE LIMITED 13.39 9.73 14 R SYSTE MS INTERNATIONAL LIMITED (SEG) 21.33 4.30 15 ICRA ONLINE LIMITED (SEG) 8.23 11.22 16 SPANCO LIMITED (SEG) 41.70 8.94 17 E4E (EARLIER KNOWN AS NITANNY) 25.82 16.87 18 ADITYA BIRLA MINACS WORLDWIDE LIMITED 183.08 - 0.55 19 ASIT C MEHTA FINANCIAL SERVICES LIMITED 4.24 9.42 20 CALIBER POINT BUSINESS SOLUTIONS LIMITED 53.14 10.97 29.16 SUBSEQUENTLY, AO HAS PASSED THE DRAFT ASSESSMENT ORDER DATED 26 DECEMBER 2011 BY INCORPORATING THE TP ADJUSTME NT PROPOSED BY TPO. ASSESSEE HAS COMMUNICATED TO THE AO TO EXERCISE THE OPTION OF FILING AN APPEAL BEFORE LD.CIT (A). THUS THE I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 5 -: AO HAS PASSED A FINAL ASSESSMENT ORDER DATED 31 JANU ARY 2012 CONFIRMING THE TP ADJUSTMENT AS PER THE DRAFT ASSESSMENT ORDER. 7. AGGRIEVED BY THE ORDER OF AO, ASSESSEE FILED AN A PPEAL BEFORE THE LD. CIT(A). SUBSEQUENTLY IN THE ORDER DATED 24 MAR CH 2014, THE LD. CIT(A) HAS UPHELD THE CONCLUSIONS OF THE TPO A ND DISMISSED THE GROUNDS OF ASSESSEE ON THE TP ADJUSTMENT. HOWEVER WITH REGARD TO ASSESSEE'S GROUND ON ERRONEOUS COMPUTA TION OF CERTAIN COMPANIES, THE LD. CIT(A) HAS DIRECTED TPO TO VERIFY THE SAME. HOWEVER, THERE WAS NO RELIEF GIVEN TO ASSESSEE IN THE CONSEQUENTIAL ORDER AS SUBMITTED BY ASSESSEE. 8. AGGRIEVED BY THE LD. CIT(A) ORDER, ASSESSEE FILE D THE APPEAL HAS ASSESSEE RAISED FIVE GROUNDS. GROUND NO S. 1 & 2 ARE GENERAL IN NATURE. GROUND NO. 5 WAS NOT PRESSED. GROU ND NOS. 3 & 4 PERTAIN TO TP ADJUSTMENT, WHICH ARE AS UNDER: GROUND 3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO ERRED AND THE LD. CIT(A) FURTHER ERRED IN U PHOLDING/ CONFIRMING THE ACTION OF THE TPO OF ADOPTING/ SELECTING PRE-DE TERMINED SET OF COMPARABLE COMPANIES TO ARRIVE AT THE ARM'S LENGTH PRICE AND THEREBY HAS: A) ERRED IN SELECTING HIGH PROFIT MARGIN COMPANIES; B) ERRED IN SELECTING COMPANIES HAVING SIGNIFICANT DIFFERENCES IN THE FUNCTIONS PERFORMED; C) ERRED IN SELECTING COMPANIES HAVING EXTRAORDINAR Y EVENTS DURING THE YEAR; D) ERRED IN SELECTING HIGH TURNOVER COMPANIES CONSI DERING SEVERAL COMPANIES HAVING DIFFERENT SCALE OF OPERATIONS; E) ERRED IN SELECTING COMPANIES INCURRING RESEARCH EXPENSES AND/OR MARKETING EXPENSES; F) ERRED IN SELECTING COMPANIES OWNING PROPRIETARY PRODUCTS; AND I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 6 -: G) ERRED IN CONSIDERING SEVERAL COMPANIES WHICH FAI LED THE LD TPO'S OWN PROPOSED QUANTITATIVE SCREENS. GROUND NO. 4: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO ERRED AND THE LD CIT(A) FURTHER ERRED ON FACTS BY COMMITTING ARITHMETICAL ERROR WHILE CALCULATING THE AVERAGE RE CEIVABLES OF THE TAX PAYER TO ASCERTAIN THE WORKING CAPITAL ADJUSTMENT I N THE INSTANCE CASE AND THUS ERRED IN COMPUTING THE WORKING CAPITAL ADJ USTMENT TO THE MARK- UP OF THE COMPARABLE COMPANIES. 9. WITH REFERENCE TO GROUND NO. 3, ASSESSEE IS OBJEC TING TO VARIOUS COMPANIES SELECTED BY AO/TPO. THE COMPANY-W ISE SUBMISSIONS BY ASSESSEE AND OUR DECISIONS ARE AS U NDER: I. ACCENTIA TECHNOLOGIES LIMITED (ACCENTIA): 10. IT WAS THE SUBMISSION THAT THERE WAS AN EXTRAORDINA RY SITUATION DURING THE YEAR. ACCENTIA'S ANNUAL REPORT FOR THE FINANCIAL YEAR 2007-08 CLEARLY SHOWS BUSINESS RESTRUCTURING/PEC ULIAR ECONOMIC CIRCUMSTANCES DURING THE YEAR UNDER CONSID ERATION. IT WAS FURTHER CONTENDED THAT THE EMPLOYEE COST OF ACCENTIA IS ONLY 16.81 % OF TOTAL OPERATING COST. THE RELEVANT EMPLOYEE COST CALCULATION OF ACCENTIA WAS GIVEN BELOW TO SUBSTANTIA TE THE CONTENTION: PARTICULARS AMOUNT (RS) REFERENCE TOTAL OPERATING COST AS PER TPOS ORDER (A) 34,93,32,496 AS PER TPOS ORDER EMPLOYEE COST: SALARY AND ALLOWANCES TO STAFF 5,48,44,678 AR PG. 58 CONTRIBUTION TO ESI 38,507 AR PG. 58 CONTRIBUTION TO PF 5,76,925 AR PG. 58 STAFF WELFARE EXPENSES 17,08,901 AR PG. 58 TOTAL EMPLOYEE COST (B) 5,71,69,011 EMPLOYEE COST % 16.37% I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 7 -: 10.1. THE TPO DID NOT AGREE TO THE CONTENTIONS OF ASSES SEE WITH REGARD TO EXTRAORDINARY BUSINESS OPERATIONS. ASSE SSEE DID NOT RAISE ITS CONTENTIONS WITH REGARD TO EMPLOYEE COST FILTER BEFORE THE TPO. LD. CIT(A) HAS REJECTED THE CONTENTION OF ASSESSE E WITH REGARD TO ACCENTIA'S EXTRAORDINARY SITUATION. WITH REGARD TO EM PLOYEE COST, LD. CIT(A) HAS REJECTED THE CONTENTION OF ASSESSEE AS IT WAS NOT RAISED BEFORE THE TPO. 10.2. ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWIN G JUDICIAL PRECEDENTS FOR REJECTION OF ACCENTIA AS A COMPARABLE C OMPANY: SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. - IT(TP)A NO. 1316/BANG/2012; VODAFONE INDIA SERVICES PRIVATE LTD. [FORMERLY KNOWN AS 3 GLOBAL SERVICES PRIVATE LTD, ('GSPL'/'3GSPL')] (ITA N O. 7514/MUM/2013); HSBC ELECTRONIC DATA PROCESSING INDIA P. LTD. ITA.NO.1647/HYD/2012; HYUNDAI MOTORS INDIA ENGINEERING P. LTD. HYDERABAD - 152/ITD/112]; CAPITAL IQ INFORMATION SYSTEMS (INDIA ) PVT. LTD VS. DCI T (LNT. TAXATION) (ITA NO. 1961/HYD/2011) (HYD. ITAT); ZAVATA INDIA PRIVATE LIMITED VS. DCIT (ITA NO. 1781/H YD/ 2011) (HYD. ITAT); COGNIZANT TECHNOLOGY SERVICES PVT. LTD., VS. ACIT (ITA . NOS. 2106 & 1864/HYD/2011) (HYD. ITAT); IN VIEW OF THE ABOVE, ASSESSEE REQUESTS TO EXCLUDE AC CENTIA TECHNOLOGIES LIMITED AS A COMPARABLE. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 8 -: 10.3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF EARLIER COORDINATE BENCHES. AS FAR AS THIS COMPARABLE IS CONCERNED, THE SAME HAS BEEN DECIDED BY THE CO-ORD INATE BENCH IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING P. L TD., VS. ITO IN ITA NO. 1850/HYD/2012 (AY. 2008-09) DT. 21-02-2014, WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER: I. ACCENTIA TECHNOLOGIES LTD. (SEG.) THIS WAS CONSIDERED AS A COMPARABLE BY THE TPO A ND LISTED AT SL.NO.1 OF THE COMPARABLE COMPANIES CHOSEN BY TH E TPO. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THERE ARE EXTRA ORDINARY EVENTS THAT OCCURRED DURING THE PREVIOUS Y EAR IN THIS COMPANY. 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 ACQU IRED THUNGA SOFTWARE PVT. LTD., GSR PHYSICIANS BILLING SERVICES INC., GSR SYSTEMS INC. AND DENMED INC. WAS MENTIONED. OUR ATTENTION WAS AL SO DRAWN TO THE DECISION OF THE HYDERABAD ITAT BENCH IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA ITA NO.1316/BANG/2012 PVT . LTD. V. DCIT [2013] 32 TAXMAN.COM 21 (HYD. TRIB). IN THE AFORESA ID DECISION, 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 THE A.Y. 2007-08. THE TPO HAD CONSIDERED ACCENTIA TECHNOLOGIES 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 PREVIOUS YEAR. TH E TRIBUNAL UPHELD THE ORDER OF THE DRP OBSERVING AS FOLLOWS :- 'I. ACCENTIA TECHNOLOGIES LTD. 10. IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS COMP ANY CANNOT BE TREATED AS A COMPARABLE BECAUSE OF UNCOMPARABLE FINANCIAL RESULT S ARISING OUT OF AMALGAMATION IN THE COMPANY. IN THIS REGARD, THE ASSES SEE HAS RELIED UPON THE ORDER OF THE DRP FOR THE ASSESSMENT YEAR 2008-09 IN ASSESSEE'S OWN CASE. IT IS SEEN THAT THE DRP WHILE CONSIDERING SIMILAR OBJECTION PLACED BY THE ASSESSEE IN THE CASE OF ANOTHER COMPANY, VIZ. MOLD TEK TECHNOLOGI ES LTD., IN THE PROCEEDINGS RELATING TO THE ASSESSMENT YEAR 2008-09, HAS OBSERVED IN THE FOLLOWING MANNER- '17.5. IN ADDITION TO THE ABOVE, THE DIRECTOR'S REPORT OF THE COMPANY FOR THE FY 2007-08 REVEALED THE MERGER AND THE DEMERGER. A COMPA NY KNOWN AS TECHMEN TOOLS PVT. LTD. HAD AMALGAMATED WITH MOLD-TEK TECHNOLOGIES LTD. WITH EFFECT FORM 1ST OCTOBER, 2006. THERE WAS A DE- M ERGER OF PLASTIC DIVISION I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 9 -: OF THE COMPANY AND THE RESULTING COMPANY IS KNOWN AS MOLDTEK PLASTICS LIMITED. THE DE-MERGER FROM THE MOLDTEK TECHNOLOGIES T OOK PLACE WITH EFFECT FROM 1ST APRIL, 2007. THE MERGER AND THE DE- MERGER NEEDED THE APPROVAL OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND ALSO THE AP PROVAL OF THE SHAREHOLDERS. THE SHAREHOLDERS OF THE COMPANY GAVE APPRO VAL FOR THE MERGER AND THE DE-MERGER ON 25.01.2008 AND THE HON'BLE HIGH C OURT OF ANDHRA PRADESH HAD APPROVED THE MERGER AND DE-MERGER ON 25TH JULY, 2008. SUBSEQUENTLY, THE ITA NO.1316/BANG/2012 ACCOUNTS OF MOLDTEK TECHNOLOGIES FOR FY 2007-08 WERE REVISED. ON A PERUSAL OF THE ANN UAL REPORT IT IS NOTICED THAT TECKMEN TOOLS PVT. LTD. AND THE PLASTIC DIVISION OF THE COMPANY WERE DEMERGED AND THE RESULTING COMPANY WAS NAMED AS MOLD TEK PLASTICS LTD. THE KPO BUSINESS REMAINED WITH THE COMPANY. A PERUSAL OF THE ANNUAL REPORT REVEALED THAT TO GIVE EFFECT TO THE MERGER AND DEMERG ER, THE FINANCIAL STATEMENTS WERE REVISED AND RESTATED AFTER SIX MONT HS FORM THE END OF THE FINANCIAL YEAR 31.3. 2008. THE ASSESSEE FILED FORM N O.21 UNDER THE COMPANIES ACT WITH THE REGISTRAR OF COMPANIES ON 26TH AUGUST, 20 08. THUS THE EFFECTIVE DATE OF THE SCHEME OF MERGER AND DEMERGER WAS 26TH AUG UST, 2008. THE ANNUAL REPORT SUPPORTED THE ARGUMENT OF THE ASSESSEE THAT THERE WERE MERGER AND DEMERGER IN THE FINANCIAL YEAR AND IT WAS AN EXC EPTIONAL YEAR OF PERFORMANCE AS FINANCIAL STATEMENTS WERE REVISED BY THIS COMPANY MUCH AFTER THE CLOSURE OF THE PREVIOUS YEAR. THE PANEL AGREES WIT H THE CONTENTION OF THE ASSESSEE THAT IT IS AN EXCEPTIONAL YEAR HAVING SIGNIF ICANT IMPACT ON THE PROFITABILITY ARISING OUT OF MERGER AND DEMERGER.' 11. ON CAREFUL CONSIDERATION OF THE MATTER, WE ALSO 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 FINANCIAL YEAR IN WHICH SUCH EVENT TAKES PLACE. IT IS THE CONTENTION OF THE ASSESS EE THAT IN CASE OF THE AFORESAID COMPANY, THERE IS AMALGAMATION IN DECEMBER , 2006, WHICH HAS IMPACTED THE FINANCIAL RESULT. THIS FACT HAS TO BE VER IFIED BY THE TPO. IF IT IS FOUND UPON SUCH VERIFICATION THAT THE AMALGAMATION IN FACT AHS TAKEN PLACE, THEN THE AFORESAID 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 LAID DO WN BY THE HYDERABAD BENCH OF THE ITAT IS SQUARELY APPLICABLE TO THE PRE SENT CASE ALSO. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF SYMPHONY MARKETI NG SOLUTIONS INDIA(P) LTD (SUPRA) BY THE BANGALORE BENCH. IT IS CLEAR THAT DURING THE PREVIOUS YEAR THERE WERE EXTRA ORDINARY EVENTS THAT TOOK PLACE IN THIS COMPANY WHICH WARRANTS EXCLUSION OF THIS COMPANY AS A COMPARABLE. WE THEREFORE HOLD THAT THIS COMPANY CANNOT BE CONSIDER ED AS A COMPARABLE. 10.4. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE ACCENTIA TECHNO LOGIES LIMITED FROM THE LIST OF COMPARABLES. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 10 -: II. CORAL HUB LIMITED ('CORAL') FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES L IMITED : 11. IT WAS SUBMITTED THAT CORAL HUB LIMITED (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LIMITED) IS FUNCTIONALLY DIFFERENT AND OPERATES ON A DIFFERENT BUSINESS MODEL . IT PRIMARILY OUTSOURCES ITS WORK TO THE VENDOR'S VIS-A-VIS THE ASSES SEE WHICH CARRIES OUT THE ENTIRE WORK ON ITS OWN. THE RELEVANT DE TAILS ARE TABULATED BELOW: COMPUTATION OF OUTSOURCING COST TO TOTAL COST OF CORAL: PARTICULARS AMOUNT (RS) REFERENCE SALARY COST 21,68,01,923 AR PG. 84 TOTAL COST 25,07,83,662 AS PER TPOS ORDER PG. 100 11.1. EVEN THOUGH ASSESSEE DID NOT RAISE OBJECTIONS O N CORAL BEFORE TPO, IT HAS RAISED GROUND ON CORAL BEFORE LD . CIT(A). HOWEVER, LD. CIT(A) HAS REJECTED THE CONTENTIONS OF AS SESSEE AS IT WAS NOT RAISED BEFORE THE TPO. 11.2. ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUD ICIAL PRECEDENTS FOR REJECTION OF CORAL: UNITED HEALTH GROUP INFORMATION SERVICES PVT. LTD. [ITA NO.6312/DEL/2012/AY 2008-09]; TECHBOOKS INTERNATIONAL PVT. LTD. [ITA NO.722/DEL/2014/ AY 2009-10]; BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PVT. LTD. [ ITA NO.2380/PN/2012/AY 2008-09]; I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 11 -: MAERSK GLOBAL SERVICE CENTER (INDIA) P. LTD. [ITA NO.3774/MUM/2011/AY 2005-06]; IN VIEW OF THE ABOVE, ASSESSEE REQUESTS TO EXCLUDE CO RAL AS A COMPARABLE. 11.3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS RELIED ON. AS FAR AS THIS COMPARABLE IS C ONCERNED, THE SAME HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF DEL HI IN THE CASE OF UNITED HEALTH GROUP INFORMATION SERVICES PVT. L TD. VS. ACIT [ITA NO.6312/DEL/2012-AY 2008-09] DT. 28-08-201 4, WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER: VISHAL INFORMATICS 12.1. THE TPO INCLUDED THIS COM PANY IN THE LIST OF COMPARABLES BY NOTICING THAT IT WAS ENGAGED IN PROV IDING BPO SERVICES. THE ASSESSEE FAILED TO CONVINCE HIM AND THE DRP THA T IT WAS INCOMPARABLE. 12.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL REPORT OF THIS COMPANY THAT IT IS MAINLY ENGAGED IN E-PUBLISHING BUSINESS. IT HAS MORE THAN 10,000 CLASSIC BOOKS TO ITS CREDIT WHICH ARE ALSO CONVERTE D INTO LARGE FONT TITLES FOR VISUALLY CHALLENGED. APART FROM E-PUBLISHING, THIS COMPANY IS ALSO ENGAGED IN DOCUMENTS SCANNING & INDEXING. IT CAN BE SEEN FROM THE FINANCIAL RESULTS OF THIS COMPANY THAT BOTH THE SEG MENTS VIZ., E- PUBLISHING AND DOCUMENTS SCANNING ETC. HAVE BEEN COMBINED AND THERE ARE NO SEPARATE FINANCIAL RESULTS IN RESPECT OF DOCUMENTS SCANNING WORK, WHICH MAY BE COMPARABLE WITH THE ASSESSEE TO SOME EXTENT. AS THE ASSESSEE IS NOT ENGAGED IN ANY E-PUBLISHING BUSINESS AND THE FI NANCIALS GIVEN BY THIS COMPANY ARE ON CONSOLIDATED BASIS, WE DIRECT TO EXC LUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THE ASSESSEE SUCCEEDS . 11.4. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE CORAL HUB LIM ITED (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LIMITED) FROM THE LIST OF COMPARABLES. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 12 -: III. ECLERX SERVICES LIMITED ('ECLERX') : 12. IT WAS SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN PROVIDING HIGH END SER VICES IN THE NATURE OF KPO ACTIVITIES LIKE DATA ANALYTICS, AND CUSTOM IZED PROCESS SOLUTIONS. THESE INCLUDE DATA ANALYTICS, OPERA TIONS MANAGEMENT, AUDITS AND RECONCILIATION, METRICS MANAGE MENT AND REPORTING SERVICES. FURTHER THERE WAS AN EXTRAORDINARY SITUATION OF MERGER DURING THE YEAR. ECLERX ACQUIRED UK-BASED IGE NTICA TRAVEL SOLUTIONS LIMITED ON JULY 27,2007. THE INTEGRATION PROC ESS WAS ON TRACK AS OF MARCH 2008. THIS FACT WAS EVIDENT AS PER P AGE NOS. 14, 18 & 19 OF ANNUAL REPORT OF ECLERX. THE TPO DID NOT A GREE TO THE CONTENTION OF ASSESSEE THAT ECLERX IS FUNCTIONALLY DIFFE RENT AND INVOLVED IN HIGH END KPO SERVICES. HOWEVER, ASSESSE E HAS NOT RAISED CONTENTION ON EXTRAORDINARY SITUATION BEFORE TPO. LD. CIT(A) REJECTED THE CONTENTIONS OF ASSESSEE ON FUNCTIONAL DI FFERENCE, HOWEVER HAS NOT COMMENTED ON CONTENTION OF ASSESSEE W ITH REGARD TO EXTRAORDINARY SITUATION OF ECLERX. 12.1. ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUD ICIAL PRECEDENTS FOR REJECTION OF ECLERX AS A COMPARABLE CO MPANY: MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED VS. ACI T, MUMBAI (I.T.A. NO.7466/MUM/2012/AY 2008-09); UNITED HEALTH GROUP INFORMATION SERVICES PVT. LTD. [ITA NO.6312/DEL/2012/AY 2008-09]; CALIBRATED HEALTHCARE SYSTEMS INDIA PVT. LTD. [ITA NO.5271/DE1/2012/AY 2007-08]; HYUNDAI MOTORS INDIA ENGINEERING P. LTD. [ITA NO. 1850/HYD/2012/AY 2008-09] I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 13 -: ACCORDINGLY, ASSESSEE REQUESTS TO EXCLUDE ECLERX SER VICES LIMITED AS A COMPARABLE. 12.2. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF EARLIER ASSESSMENT YEARS. AS FAR AS THI S COMPARABLE IS CONCERNED, THE SAME HAS BEEN DECIDED BY THE CO-ORD INATE BENCH IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING P. L TD., VS. ITO IN ITA NO. 1850/HYD/2012 (AY. 2008-09) DT. 21-02-2014, WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER: IV ECLERX SERVICES LTD. : THIS COMPANY IS LISTED AT SL.NO.10 IN THE LIST O F COMPARABLE COMPANIES CHOSEN BY THE TPO. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY OFFERS SOLUTIONS THAT INCLUDE DATA ANALYTIC S, OPERATIONS MANAGEMENT, AUDITS AND RECONCILIATION AND THEREFORE HAS TO BE CLASSIFIED AS HIGH END KPO. IN SUPPORT OF THE STAND OF THE ASS ESSEE, EXTRACTS FROM THE ANNUAL REPORT OF THIS COMPANY HAVE BEEN POINTED OUT. IT HAS FURTHER BEEN SUBMITTED THAT EXTRA ORDINARY EVENTS AND PECUL IAR CIRCUMSTANCES PREVAIL IN THE CASE OF THE ASSESSEE IN AS MUCH AS T HIS COMPANY ACQUIRED A UK BASED COMPANY WHICH HAS SIGNIFICANTLY CONTRIBUTE D TO THE INCREASE IN THE CUSTOMER AND REVENUE BASE OF THE COMPANY. THIS TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. ( SUPRA) HAD AN OCCASION TO DEAL WITH COMPARABILITY OF THIS COMPANY IN THE C ASE OF AN ITES COMPANY SUCH AS THE ASSESSEE AND THE TRIBUNAL HELD AS FOLLO WS:- '14. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING TAKEN AS COMPARABLE MAINLY ON THE GROUND THAT IT WAS HAVING A SUPERNORMAL PROFIT OF 89%, AND AS SUCH IT CANNOT BE TAKEN AS A COMPARABLE IN VIEW OF T HE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE M/S. TEVA INDIA LTD. (SUPRA). THAT APART, RELYING UPON THE ANNUAL REPORT OF THE COMPANY, THE LE ARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS CONTENDED THAT THAT THE CONCERNED COMPANY IS ENGAGED IN PROVIDING KNOWLEDGE PROCESS O UTSOURCING(KPO) SERVICES. 15. ON CONSIDERING THE OBJECTIONS OF THE ASSESSEE IN RELATION TO THIS COMPANY, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COM PANY CANNOT BE TAKEN AS A COMPARABLE BOTH FOR THE REASONS THAT IT WAS HAVING S UPERNORMAL PROFIT AND IT IS ENGAGED IN PROVIDING KPO SERVICES, WHICH IS DISTIN CT FROM THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE.' I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 14 -: WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DECISIO N OF THE HYDERABAD BENCH REFERRED TO ABOVE, THIS COMPANY CANNOT BE REG ARDED AS A COMPARABLE FOR THE REASON THAT IT WAS HAVING EXTRAO RDINARY EVENT AND SUPER NORMAL PROFITS. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) B Y THE BANGALORE BENCH. 12.3. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE ECLERX SERVICE S LIMITED FROM THE LIST OF COMPARABLES. IV. MOLD-TEK TECHNOLOGIES LIMITED ('MOLDTEK') : 13. IT WAS SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN PROVIDING ENGINEERING D ESIGN SERVICES FOR CONSTRUCTION OF BUILDINGS BY USING DESIGN TOOLS LI KE CADI CAM, STADD PRO BY EMPLOYING HIGHLY SKILLED SOFTWARE ENGIN EERS FOR THE PURPOSE. THESE SERVICES ARE IN NATURE OF KPO AND SH ARP CONTRAST TO THE NATURE OF WORK UNDERTAKEN BY ASSESSEE. FURTHER, TEC K-MEN TOOLS PVT. LTD. WAS AMALGAMATED WITH THE MOLDTEK WITH EFF ECT FROM 01 OCTOBER, 2006. THERE WAS A DE-MERGER OF PLASTIC D IVISION OF MOLD-TEK WHICH HAS BEEN NAMED AS MOLD TEK PLASTICS L IMITED AFTER DE-MERGER. THIS DE-MERGER FROM THE MOLD TEK TOOK PLAC E WITH EFFECT FROM 01 APRIL. 2007. AS PER PAGE NOS. 9, 10,41 & 42 OF THE ANNUAL REPORT SHOWS THAT THERE WERE MERGERS AND DEMERGERS DU RING THE YEAR UNDER CONSIDERATION. 13.1. THE TPO DID NOT AGREE TO THE CONTENTIONS OF ASSES SEE THAT MOLDTEK FUNCTIONALLY DIFFERENT AND INVOLVED IN HIG H END KPO SERVICES. HOWEVER, ASSESSEE HAS NOT RAISED CONTENTION ON EXTRAORDINARY SITUATION BEFORE TPO. LD. CIT(A) REJECT ED THE CONTENTIONS OF ASSESSEE ON FUNCTIONAL DIFFERENCE, HOW EVER HAS NOT I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 15 -: COMMENTED ON CONTENTION OF ASSESSEE WITH REGARD TO EXT RAORDINARY SITUATION OF MOLDTEK. 13.2. IN THIS REGARD, ASSESSEE PLACED RELIANCE ON TH E FOLLOWING JUDICIAL PRECEDENTS FOR REJECTION OF MOLDTEK AS A COMP ARABLE COMPANY ON ACCOUNT OF FUNCTIONALLY DIFFERENT AND EXTR AORDINARY SITUATION: MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED VS. ACI T, MUMBAI (ITA. NO.7466/MUM/2012/AY 2008-09); SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. - IT(TP)A NO. 1316/BANG/2012); CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD., HYDERA BAD (ITA NO. 1961/HYD/2011); IN VIEW OF THE ABOVE EXPLANATIONS AND SUBMISSIONS, AS SESSEE PRAYS TO EXCLUDE MOLD-TEK TECHNOLOGIES LIMITED FROM TH E LIST OF COMPARABLE COMPANIES. 13.3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS RELIED ON. AS FAR AS THIS COMPARABLE IS C ONCERNED, THE SAME HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF BA NGALORE IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD ., VS. ITO IN IT(TP)A NO. 1316/BANG/2012 (AY. 2008-09) DT.14-08 -2013, WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER: (8) MOLD-TEK TECHNOLOGIES LTD. 25. THIS COMPANY IS LISTED AT SL.NO.16 OF THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCER NED, THE SUBMISSION OF THE ASSESSEE BEFORE US IS THAT IT IS IN THE BUSI NESS OF KNOWLEDGE PROCESS OUTSOURCING AND CANNOT BE CONSIDERED AS A COMPARABL E. THE FUNCTIONAL PROFILE OF THIS COMPANY IS AS FOLLOWS:- I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 16 -: AS PER THE ANNUAL REPORT FOR THE F.Y. 2007-08, THE COM PANY PRIMARILY OPERATES IN TWO BUSINESS SEGMENTS: PLASTIC DIVISION : THE PLASTIC DIVISION IS ENGAGED IN THE MANUFACTURE OF TUBE & OILS, PAINTS, PET PRODUCTS, CONSUMER PRODUCTS, ETC. THE CO MPANY DEMERGED THE SAID SEGMENT EFFECTIVE 1 APRIL, 2007 AND TRANSFERRED THE BUSINESS UNIT TO THE COMPANY PLASTICS LT. THE EXTRACT FROM THE ANNUAL REPORT CONFIRMS THE FACT THAT THE COMPANY HAD RESTRUCTURED ITS OPERATIONS RESULTING IN DEMERGING THE PLASTIC SEGMENT BUSINESS. INFORMATION TECHNOLOGY (IT) DIVISION : THE IT DIVISION (ALSO REFERRED TO AS THE KPO DIVISION BY THE COMPANY) OF THE COMPANY SPECIALIZES I N PROVIDING STRUCTURAL DESIGN AND DETAILING SERVICES WHICH CAN BE CATEGORIZED AS ST RUCTURAL ENGINEERING SERVICES. THE STRUCTURAL ENGINEERING SERVICES PROVIDED BY THE I T DIVISION OF THE COMPANY CANNOT BE CLASSIFIED AS FALLING WITH THE SCOPE AND AMBIT OF ITES SERVICES. ON THE CONTRARY, THE SAID SERVICES WOULD FALL UNDER THE CATEGORY OF ENGIN EERING SERVICES. EXCERPTS FROM THE ANNUAL REPORT OF THE COMPANY PAGE 10 OF THE ANNUAL REPORT FOR THE FY 2007-08 CONTA INS THE FOLLOWING OBSERVATION REGARDING THE KPO DIVISION OF THE COMPANY: 'THE COMPANY HAS ACHIEVED ABOUT 56.49% GROWTH IN 20 07-08 TO REGISTER A TURNOVER OF RS.17.86 CRORE. THE COMPANY HAVING ESTABLISHED ITS CREDENTIA LS IN STRUCTURAL ENGINEERING SERVICES TO US CLIENTS IS DEVISING AGGRESSIVE MARKETING STRATEGY T O ACHIEVE RAPID GROWTH.' THIS COMPANY IS ALSO ENGAGED IN PROVIDING A HOST OF ENGINEERING SERVICES LIKE CIVIL AND STRUCTURAL ENGINEERING SERVICES, MEC HANICAL PRODUCT DESIGN, PLANT ENGINEERING, IT SERVICES AND GIS SERVICES. AS WE HAVE ALREADY SEEN, THIS COMPANY IS TO BE CLASSIFIED AS KPO AND CANNOT BE COMPARED WITH THE ASSESSEE. THE DECISION OF THE BANGALORE BENCH OF TH E ITAT IN THE CASE OF FIRST ADVANTAGE OFFSHORE SERVICES LTD. (SUPRA) WHIC H WE HAVE REFERRED TO IN THE EARLIER PART OF THIS ORDER WILL CLEARLY APPL Y TO THIS COMPANY. WE THEREFORE DIRECT THIS COMPANY TO BE EXCLUDED FROM T HE LIST OF COMPARABLES. 13.4. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE MOLD-TEK TECHNO LOGIES LIMITED FROM THE LIST OF COMPARABLES. V. GENESYS INTERNATIONAL CORPORATION LIMITED ('GENESYS' ) : 14. IT WAS SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN THE BUSINESS OF PROVIDI NG GEOGRAPHICAL I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 17 -: INFORMATION SERVICES COMPRISING PHOTOGRAMMETRY, REMOT E SENSING, CARTOGRAPHY, DATA CONVERSION SERVICES AS PER PAGE NO. 38 OF THE ANNUAL REPORT. FURTHER THERE WAS AN ABNORMAL GROWTH. GENESYS HAS WITNESSED ABNORMAL GROWTH OF AROUND 605.43% FOR ITS GEOSPATIAL SERVICES FOR THE FY 2007-08. THEREFORE, GE NESYS NEEDS TO BE REJECTED. ASSESSEE DID NOT RAISE ITS CONTENTIONS O N GENESYS BEFORE TPO. LD.CIT(A) DISREGARDED THE SUBMISSION OF ASSESSEE ON ABNORMAL GROWTH AND ON FUNCTIONAL DIFFERENCE. 14.1. ASSESSEE REITERATES ITS CONTENTIONS. IN THIS RE GARD, ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUDICIAL P RECEDENTS FOR REJECTION OF GENESYS AS A COMPARABLE COMPANY ON ACCO UNT OF FUNCTIONALLY DIFFERENT AND ABNORMAL GROWTH: TNS INDIA PVT. LTD., HYDERABAD (ITA NO. 1875/HYD/2012 ); BP INDIA SERVICES PRIVATE LIMITED (ITA NO. : 6977/MUM/2012); SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. [IT(TP)A NO. 1316/BANG/2012)] ; HYUNDAI MOTORS INDIA ENGINEERING P. LTD. HYDERABAD (152/ITD/112); SAPIENT CORPORATION PVT. LTD. VS. DCIT [(2011) 11 TAXMANN.COM 69 (DEL. ITAT]; ITO VS. SAUNAY JEWELS (P.) LTD. [(2010) 42 SOT 4 (MU M. ITAT)]; IN VIEW OF THE ABOVE EXPLANATIONS AND SUBMISSIONS, AS SESSEE PRAYS TO EXCLUDE GENESYS INTERNATIONAL CORPORATION LTD. , FROM THE LIST OF COMPARABLE COMPANIES. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 18 -: 14.2. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS RELIED ON. AS FAR AS THIS COMPARABLE IS C ONCERNED, THE SAME HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING P. LTD., VS. ITO IN ITA NO. 1850/HYD/2012 (AY. 2008-09) DT. 21-02-2014, WHEREIN THE CO- ORDINATE BENCH HELD AS UNDER: V. GENESYS INTERNATIONAL CORPORATION LTD. THIS COMPANY IS LISTED AT SL. NO.11 IN T HE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, THE STAND OF THE ASSESSEE HAS BEEN THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE AND THAT IT HAS A DIFFERENT EMPLOYEE SKI LL SET AND THAT THIS COMPANY PERFORMS R&D SERVICES AND ALSO OWNS INTANGI BLES. THIS COMPANY IS A GEOSPATIAL SERVICES CONTENT PROVIDER SPECIALIS ING IN LAND BASED TECHNOLOGIES. FROM THE NOTES TO ACCOUNTS OF THIS CO MPANY, IT IS SEEN THAT THIS COMPANY IS ENGAGED IN PROVIDING GEOGRAPHICAL I NFORMATION SERVICES COMPRISING OF PHOTOGRAMMETRY, REMOTE SENSING CARTOG RAPHY, DATA CONVERSION RELATED COMPUTED BASED SERVICES AND OTHE R RELATED SERVICES. FURTHER THE BUSINESS OF THIS COMPANY REQUIRES SKILL ED MANPOWER AND SCIENTISTS, CIVIL ENGINEERS, ETC. BESIDES THE ABOVE , THIS COMPANY ALSO CARRIES OUT R&D SERVICES AND OWN INTANGIBLES. THE A FORESAID FACTS, IN OUR VIEW, WILL TAKE THIS COMPANY OUT OF THE LIST OF COM PARABLES. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF SYMPHONY MARKETING S OLUTIONS INDIA(P) LTD (SUPRA) BY THE BANGALORE BENCH. IN VIEW OF THE ABOV E, WE ARE OF THE VIEW THAT THIS COMPANY CANNOT BE REGARDED AS A COMPARABL E AND DESERVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 14.3. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE GENESYS INTERNATIONAL CORPORATION LTD., FROM THE LIST OF COMPARABLES. 14.4. THE GROUND IS CONSIDERED ALLOWED. 15. WORKING CAPITAL ADJUSTMENTS : GROUND NO. 4: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO ERRED AND THE LD. CIT(A) FURTHER ERRED ON FACTS BY COMMITTING I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 19 -: ARITHMETICAL ERROR WHILE CALCULATING THE AVERAGE RE CEIVABLES OF THE TAX PAYER TO ASCERTAIN THE WORKING CAPITAL ADJUSTMENT I N THE INSTANCE CASE AND THUS ERRED IN COMPUTING THE WORKING CAPITAL ADJ USTMENT TO THE MARK- UP OF THE COMPARABLE COMPANIES. 15.1. ASSESSEE DURING THE COURSE OF ASSESSMENT PROC EEDINGS MADE SUBMISSION BEFORE THE TPO FOR GIVING WORKING CA PITAL ADJUSTMENT. ASSESSEE FILED DETAILED CALCULATION FOR TH E WORKING CAPITAL ADJUSTMENT BEFORE THE TPO. AS PER THE CALCULATIO N PROVIDED BY ASSESSEE, THE WORKING CAPITAL ADJUSTMENT WAS COMING TO 3.42%. THE TPO PROVIDED WORKING CAPITAL ADJUSTMENT OF 2.80% TO ASSESSEE. IT WAS SUBMITTED THAT THE TPO WHILE CALCULATIN G THE AVERAGE RECEIVABLES OF ASSESSEE COMMITTED ARITHMETICAL ERROR RESULTING IN ERRONEOUS COMPUTATION OF WORKING CAPITAL ADJUSTMENT. 15.2. LD. CIT(A) REJECTED THE CONTENTION OF ASSESSEE WITH REGARD TO CALCULATING THE AVERAGE RECEIVABLES AND REL IED ON THE TPO'S ORDER IN CALCULATION OF THE WORKING CAPITAL ADJ USTMENT. 15.3. ASSESSEE SUBMITTED THAT THE TPO AT THE TIME OF CALCULATING THE WORKING CAPITAL ADJUSTMENT CONSIDERED T HE AVERAGE RECEIVABLES AS RS. 47,37,03,063/- INSTEAD OF RS. 23, 68,51,532/- AND THUS RESULTED IN ERRONEOUS COMPUTATION OF WORKING C APITAL ADJUSTMENT. ONCE THE CORRECT AVERAGE RECEIVABLES IS CON SIDERED FOR COMPUTING THE WORKING CAPITAL ADJUSTMENT, THE ALP AFTER W ORKING CAPITAL ADJUSTMENT WILL COME TO 25.74% INSTEAD OF 26.36% , AS CALCULATED BY THE TPO AND THE MARGIN EARNED BY ASSESS EE WOULD FALL WITHIN THE +/- 5% RANGE AS PROVIDED IN PROVISO SECTION 92C(2) OF THE ACT AND THUS THERE WILL BE NO TP ADJUSTMENT TO ASSE SSEE. I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 20 -: 15.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF EARLIER ASSESSMENT YEARS. AS FAR AS WO RKING CAPITAL ADJUSTMENTS ARE CONCERNED, THERE IS NO DISPUTE ABOUT THE ADJUSTMENT PER SE. THE DISPUTE IS REGARDING THE WORKING OF ADJUSTMENT ONLY. AS REGARDS THE QUANTUM OF WORKING CA PITAL ADJUSTMENT, WE DIRECT THE AO/TPO TO VERIFY THE CORRECTNES S OF THE AMOUNT OF WORKING CAPITAL ADJUSTMENT CLAIMED BY THE ASSE SSEE AND THEN DECIDE AS PER FACTS AND LAW. THE GROUND IS ALLOW ED ACCORDINGLY. 16. AO IS ALSO DIRECTED TO WORK OUT THE CORRECT MARGIN S OF THE COMPARABLE COMPANIES AS DIRECTED BY LD. CIT(A) I N HIS ORDER AS ASSESSEE SUBMITS THAT THIS DIRECTION OF LD. CIT(A) WAS NOT FOLLOWED BY AO. AFTER THAT AO/TPO IS DIRECTED TO WORK OUT THE ALP AS PER THE PROVISIONS OF THE ACT. 17. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT ME MBER HYDERABAD, DATED 21 ST DECEMBER, 2016 TNMM I.T.A. NO. 1143/HYD/2014 BA CONTINUUM INDIA PRIVATE LIMITED :- 21 -: COPY TO : 1. BA CONTINUUM INDIA PRIVATE LIMITED, (PREVIOUSLY KNOWN AS BA CONTINUUM SOLUTIONS PRIVATE LIMITED), BUILDIN G NO. 5, K. RAHEJA MIND SPACE, HITECH CITY, MADHAPUR, HYDERA BAD. 2. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-1, HYDERABAD. 3. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICI NG), HYDERABAD 4. CIT(APPEALS)-II, HYDERABAD. 5. CIT-I, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.