DeputyCommissioner of Income tax, Bangalore V. M/s Informatica Business P Ltd, Bangalore

ITA 1285/BANG/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8421 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; International transaction; Question of law
• Section: 92C; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI A .K. GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T. (T.P) A. NO. 1285 /BANG/201 4 (ASSESSMENT YEAR : 20 09 - 10 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. VS. M/S. INFORMATICA BUSINESS PVT. LTD., NO.66/1, BAGMANE COMMERZ 02 BAGMANE TECH PARK, CV RAMAN NAGAR, BANGALORE - 560 093 PAN AABCI 0762M APPELLANT RESPONDENT. I.T. (T.P) A. NO. 1294 /BANG/201 4 (ASSESSMENT YEAR : 20 09 - 10 ) (BY ASSESSEE) AS SESSEE BY : NONE. REVENUE BY : SMT. SWAPNA DAS, JCIT (DR) (ITAT) - 2, BENGALURU. DATE OF H EARING : 24.01.2017. DATE OF P RONOUNCEMENT : 17 .0 3 . 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DT.19.08.2014 OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASST. YEAR 2009 - 10. 2. NONE HAS APPEARED ON BEHA LF OF THE ASSESSEE WHEN THESE APPEALS ARE CALL ED FOR HEARING DESPITE THE FACT THAT ON EARLIER OCCASION, THE LD. AR OF THE 2 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 ASSESSEE USED TO APPEAR REGULARLY AND SOUGHT ADJOURNMENTS. THIS APPEAL WAS EARLIER FIXED FOR HEARING ON 23.1.2017 BUT NONE APPEARED O N BEHALF OF THE ASSESSEE THEREFORE THE HEARING WAS POSTPONED TO 24.1.2017 FOR GIVING ONE MORE OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE AS WELL AS IN THE APPEAL OF THE REVENUE. DESPITE OPPORTUNITY GIVEN THE ASSESSEE DID NOT CH O OSE TO APPEAR EVEN T ODAY I.E. 24.01.2017. ACCORDINGLY, WE ARE SATISFIED THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE IT S APPEAL AS WELL AS TO DEFEND THE REVENUE S APPEAL. HENCE WE PROPOSE TO HEAR AND DECIDE THESE APPEALS EXPARTE. 3. FIRST WE TAKE UP THE REVEN UE S APPEAL WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 3 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 4 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 4. GROUND NO.1 IS GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS REQUIRED. 5. GROUND NO.2 IS REGARDING EXCLUSION OF COMPANY INFOSYS LIMITED FROM THE SET OF COMPARABLES BY THE CIT(A). 6. WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD . AT THE OUTSET, WE NOTE THAT THE COMPARABILITY OF THIS COMPANY HAS BEEN EXAMINED BY THIS TRIBUNAL IN A SERIES OF DECISIONS. IN THE LATEST DECISION OF T RIBUNAL IN THE CASE OF M/S. CITRIX RESEARCH & DEV ELOPMENT INDIA PVT. LTD. VS. DCIT IN IT(TP)A NO.1289/BANG/2014 DT.19.2.2016 HAS CONSIDERED THE COMPARABILITY OF THIS COMPANY IN PARA 12 AS UNDER : 12. OBSERVATION OF THE CO - ORDINATE BENCH IN THE VERY S AME ORDER WITH REGARD TO THE COMPARABILITY OF M/S INFOSYS LTD APPEARS AT PARA - 26.2 OF THE ORDER WHICH IS RE - PRODUCED HERE UNDER; 26.2 INFOSYS LTD. : - AS FAR AS THIS COMPANY IS CONCERNED, IT IS NOT IN DISPUTE BEFORE US THAT THIS COMPANY HAS BEEN CONSIDER ED TO BE FUNCTIONALLY DIFFERENT FROM A COMPANY PROVIDING SIMPLE SOFTWARE DEVELOPMENT SERVICES, AS THIS COMPANY OWNS SIGNIFICANT INTANGIBLES AND HAS HUGE REVENUES FROM SOFTWARE PRODUCTS. IN THIS REGARD, WE FIND THAT THE BANGALORE BENCH OF THE TRIBUNAL IN T HE CASE OF M/S. TDPLM SOFTWARE 5 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 SOLUTIONS LTD. V. DCIT, ITA NO.1303/BANG/2012, BY ORDER DATED 28.11.2013 WITH REGARD TO THIS COMPARABLE HAS HELD AS FOLLOWS: - 11.0 INFOSYS TECHNOLOGIES LTD. 11.1 THIS WAS A COMPARABLE SELECTED BY THE TPO. BEFORE THE TPO, T HE ASSESSEE OBJECTED TO THE INCLUSION OF THE COMPANY IN THE SET OF COMPARABLES, ON THE GROUNDS OF TURNOVER AND BRAND ATTRIBUTABLE PROFIT MARGIN. THE TPO, HOWEVER, REJECTED THESE OBJECTIONS RAISED BY THE ASSESSEE ON THE GROUNDS THAT TURNOVER AND BRAND ASPEC TS WERE NOT MATERIALLY RELEVANT IN THE SOFTWARE DEVELOPMENT SEGMENT. 11.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE IN THE CASE ON HAND. THE LEARNED AUTHORISED REPRESENTATI VE DREW OUR ATTENTION TO VARIOUS PARTS OF THE ANNUAL REPORT OF THIS COMPANY TO SUBMIT THAT THIS COMPANY COMMANDS SUBSTANTIAL BRAND VALUE, OWNS INTELLECTUAL PROPERTY RIGHTS AND IS A MARKET LEADER IN SOFTWARE DEVELOPMENT ACTIVITIES, WHEREAS THE ASSESSEE IS M ERELY A SOFTWARE SERVICE PROVIDER OPERATING ITS BUSINESS IN INDIA AND DOES NOT POSSESS EITHER ANY BRAND VALUE OR OWN ANY INTANGIBLE OR INTELLECTUAL PROPERTY RIGHTS (IPRS). IT WAS ALSO SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT : - (I) THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM PVT. LTD. IN ITA NO.227/BANG/2010 HAS HELD THAT A COMPANY OWNING INTANGIBLES CANNOT BE COMPARED TO A LOW RISK CAPTIVE SERVICE PROVIDER WHO DOES NOT OWN ANY INTANGIBLE AND HENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET. IT IS SUBMITTED THAT THIS DECISION IS APPLICABLE TO THE ASSESSEE'S CASE, AS THE ASSESSEE DOES NOT OWN ANY INTANGIBLES AND HENCE INFOSYS TECHNOLOGIES LTD. CANNOT BE COMPARABLE TO THE ASSESSEE ; (II) THE OBSERVATION OF THE ITAT, DELHI BENCH IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. IN ITA NO.3856 (DEL)/2010 AT PARA 5.2 THEREOF, THAT INFOSYS TECHNOLOGIES LTD. BEING A GIANT COMPANY AND MARKET LEADER ASSUMING ALL RISKS LEADING TO HIGHER PROFITS CANNOT BE CONSIDE RED AS COMPARABLE TO CAPTIVE SERVICE PROVIDERS ASSUMING LIMITED RISK ; 6 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 (III) THE COMPANY HAS GENERATED SEVERAL INVENTIONS AND FILED FOR MANY PATENTS IN INDIA AND USA ; (IV) THE COMPANY HAS SUBSTANTIAL REVENUES FROM SOFTWARE PRODUCTS AND THE BREAK UP OF SUCH REVENUES IS NOT AVAILABLE ; (V) THE COMPANY HAS INCURRED HUGE EXPENDITURE FOR RESEARCH AND DEVELOPMENT; (VI) THE COMPANY HAS MADE ARRANGEMENTS TOWARDS ACQUISITION OF IPRS IN AUTOLAY , A COMMERCIAL APPLICATION PRODUCT USED IN DESIGNING HIGH PERFO RMANCE STRUCTURAL SYSTEMS. IN VIEW OF THE ABOVE REASONS, THE LEARNED AUTHORISED REPRESENTATIVE PLEADED THAT, THIS COMPANY I.E. INFOSYS TECHNOLOGIES LTD., BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. 11.3 PER CONTRA, OPPOSING THE CONTENTIONS OF T HE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT COMPARABILITY CANNOT BE DECIDED MERELY ON THE BASIS OF SCALE OF OPERATIONS AND THE BRAND ATTRIBUTABLE PROFIT MARGINS OF THIS COMPANY HAVE NOT BEEN EXTRAORDINARY. IN VIEW OF THIS, THE LEARN ED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE DECISION OF THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLE COMPANIES. 11.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS BROUGHT ON RECORD SUFFICIENT EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DIS - SIMILAR AND DIFFERENT FROM THE ASSESSEE AND HENCE IS NOT COMPARABLE AND THE FINDING RENDERED IN THE CASE OF TRILOGY E - BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2007 - 08 IS APPLICABLE TO THIS YEAR ALSO. WE ARE INCLINED TO CONCUR WITH THE ARGUMENT PUT FORTH BY THE ASSESSEE THAT INFOSYS TECHNOLOGIES LTD IS NOT FUNCTIONALLY COMPARABLE SINCE IT OWNS SIGNIFICANT INTANGIBLE AND HAS HUGE REVENUES FROM SOF TWARE PRODUCTS. IT IS ALSO SEEN THAT THE BREAK UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCTS IS NOT AVAILABLE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THIS COMPANY OUGHT TO BE OMITTED FROM THE SET OF COMPARABLE COMPANIES. IT IS ORDERED ACCORD INGLY . 7 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 THE DECISION RENDERED AS AFORESAID PERTAINS TO A.Y. 2008 - 09. IT WAS AFFIRMED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT YEAR ALSO REMAINS IDENTICAL TO THE FACTS AND CIRCUMSTANCES AS IT PREVAILED IN AY 08 - 09 AS FAR AS THIS COMPARABLE COMPANY IS CONCERNED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE HOLD THAT INFOSYS LTD. BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES . IN VIEW OF THE VARIOUS DECISIONS OF THIS TRIBUNAL AS WELL AS THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF A CIT VS. A GNITY INDIA TECHNOLOGY PVT. LTD. 219 TAXMANN 0026 (DEL) . ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(APPEALS) IN DIRECTING THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE SET OF COMPARABLES. 7. GROUND NOS.3 TO 5 ARE REGARDING FOREIGN EXCHANGE LOSS/GAIN WAS TREATED AS OPERATING IN NATURE BY THE CIT(APPEALS). 7.1 WE HAVE CONSIDERED THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS PERUSED THE MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POINT THAT THE FOREIGN EXCHANGE LOSS OR GAIN ARISING ON ACCOUNT OF REALIZATION OF SALES/EXPORTS IS OPERATING IN NATURE HOWEVER IT REQUIRES VERIFICATION WHETHER SUCH GAIN OR LOSS PERTAINS TO THE SALES MADE DUR ING THE YEAR UNDER CONSIDERATION OR EARLIER YEAR. THEREFORE FOR LIMITED PURPOSE OF VERIFICATION OF THE FOREX GAIN ON REALIZATION OF SALE FOR THE YEAR UNDER CONSIDERATION. THE ISSUE IS SET ASIDE TO THE RECORD OF THE TPO/A.O. FOR VERIFICATION. 8 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 IN ITES S EGMENT 8. GROUND NO.6 IS REGARDING EXPORT REVENUE FILTER OF 75% APPLIED BY CIT(APPEALS). 9. WE HAVE HEARD THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE TPO APPLIED EXPORT REVENUE FILTER OF 75% IN SOFTWARE DEVELOPMENT SEGMENT BUT DI D NOT APPLY THE SAME IN ITES SEGMENT. THE LD. DR HAS CONTENDED THAT THE ASSESSEE DID NOT OBJECT BEFORE THE TPO REGARDING THIS ISSUE AND THEREFORE THE LD. CIT(A) IS NOT JUSTIFIED IN APPLYING THIS FILTER IN ITES SEGMENT. 10. IT IS PERTINENT TO NOTE TH AT THE INTERNATIONAL TRANSACTIONS EITHER IN THE SOFTWARE DEVELOPMENT OR IN ITES SEGMENT ARE 100% EXPORT SALES OF THE ASSESSEE AND THEREFORE TO COMPARE THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH THE UNCONTROLLED UNR ELATED PRICE ATLEAST 75% OF EXPOR T SALE IS PROPER AND JUSTIFIED. HENCE IN PRINCIPLE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) IN APPLYING THE FILTER OF 75% EXPORT REVENUE FOR SELECTION OF THE COMPARABLE COMPANIES WHEN THE SAME FILTER WAS APPLIED BY THE TPO IN SOFTWAR E DEVELOPMENT SEGMENT. 11. AS REGARDS THE CONTENTION OF THE LD. DR THAT THE ASSESSEE DID NOT RAISE ANY OBJECTION WE ARE OF THE VIEW THAT EVEN IF THE ASSESSEE HAS NOT RAISED BEFORE THIS 9 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 OBJECTION BEFORE THE CIT(A) AND THE CIT(A) IS OTHERWISE HAVING THE C O - TERMINUS POWER OF THE A.O. AND CAN TAKE UP THIS ISSUE FOR ADJUDICATION. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE. 12. GROUND NO.7 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATIO N. 13. GROUND NOS.8 & 9 ARE REGARDING EXCLUSION OF TELECOMMUNICATION CHARGES, FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S. 10A. 14. WE HAVE HEARD BOTH SIDES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD AND THE JUDICIAL DECISION CITED. ON PERUSAL THEREOF WE FIND THAT THE ISSUE BEFORE US FOR ADJUDICATION I.E. IF TELECOMMUNICATION CHARGES, FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY ATTRIBUTABLE TO THE DELI VERY OF COMPUTER SOFTWARE ABROAD IS REDUCED FROM EXPORT TURNOVER AN EQUAL AMOUNT SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE KARN ATAKA HIGH COURT IN THE CASE OF TATA ELXSI LTD. (SUPRA). IN THIS ORDER, THE HON BLE COURT HELD THE BOMBAY HIGH COURT HAD AN OCCASION TO CONSIDER THE EARNING OF THE WORD TOTAL TURNOVER IN THE CONTEXT OF SECTION 10 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 10A, IN THE CASE OF CIT VS. GEM PLU S JEWELLERY INDIA LTD. (2011) [330 ITR P. 175 (BOM)] (2010 - TIOL - 456 - HC - MUM - IT). INTERPRETING SUB - SECTION (4) OF SECTION 10A, IT IS HELD AS UNDER : UNDER SUB - SECTION (4) THE PROPORTION BETWEEN THE EXPORT TURNOVER IN RESPECT OF THE ARTICLES OR THINGS, OR AS THE CASE MAY BE, COMPUTER SOFTWARE EXPORTED, TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED OVER BY THE UNDERTAKING IS APPLIED TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN COMPUTING THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN COMPUTING THE PROFITS DERIVED FROM EXPORT. IN OTHER WORDS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING ARE MULTIPLIED BY THE EXPORT TURNOVER IN RESPECT OF THE ARTICLES, THINGS OR, AS THE CASE MAY BE, COMPUTER SOFTWARE AND DIVIDED BY THE TOTAL TURNOVER OF THE BUSINES S CARRIED ON BY THE UNDERTAKING. THE FORMULA WHICH IS PRESCRIBED BY SUB - SECTION (4) OF SECTION 10A IS AS FOLLOWS : PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. PROFITS OF THE BUSINESS OF THE UNDERTAKING. EXPORT TURNOVER IN RESPE CT OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE. TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING WOULD CONSIST OF THE TURNOVER FROM EXPORT AND THE TURNOVER FROM LOCAL SALES . THE EXPORT TURNOVER CONSTITUTES THE NUMERATOR IN THE FORMULA PRESCRIBED BY SUB - SECTION (4). EXPORT TURNOVER ALSO FORMS A CONSTITUENT ELEMENT OF THE DENOMINATOR IN AS MUCH AS THE EXPORT TURNOVER IS A PART OF THE TOTAL TURNOVER. THE EXPORT TURNOVER, IN THE NUMERATOR MUST HAVE THE SAME MEANING AS THE EXPORT TURNOVER WHICH IS CONSTITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DENOMINATOR. THE LEGISLATURE HAS PROVIDED A DEFINITION OF THE EXPRESSION EXPORT TURNOVER IN EXPLN.2 TO S.10A WHICH THE EXPRESSION I S DEFINED TO MEAN THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF 11 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 ARTICLES, THINGS OR COMPUTER SOFTWARE RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE BUT SO AS NOT TO INCLUDE INTER ALIA FREIGHT, TELECOMMUNIC ATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES, THINGS OR SOFTWARE OUTSIDE INDIA. THEREFORE IN COMPUTING THE EXPORT TURNOVER THE LEGISLATURE HAS MADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE CHARGES. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHARGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF THE REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S.10A. HOWEVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AND INSURANCE. SINCE EXP ORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICAT ION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION WHICH HAS BEEN ENUNCIATED EARLIER MUST PREVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OTHER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE CONTENTION OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRESSION VIZ. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNOTATION IN THE APPLICATION OF THE SAME FORMULA. THE SUBMISSION OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH THESE HAVE BEEN SPECIFICALLY EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSES OF THE NUMERATOR WOULD BE BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE TOTAL TURNOVER AS A DENOMINATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISION WHI CH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. THE SPECIAL BENCH OF THE TRIBUNAL, IN THE CASE OF ITO VS. SAK SOFT LTD. (2009) 313 ITR (AT) 353 (CHENNAI) (SB) (2009 - TIOL - 187 - ITAT - MAD - SB) ALSO HAD AN OCCASION TO CONSIDER THE 12 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 MEANING OF THE WORD TOTAL TURN OVER . AFTER REFERRING TO THE VARIOUS JUDGMENTS OF THE HIGH COURT AS WELL AS THE SUPREME COURT HELD AS UNDER : 53. FOR THE ABOVE REASONS, WE HOLD THAT FOR THE PURPOSE OF APPLYING THE FORMULA UNDER SUB - SECTION (4) OF SECTION 10 - B, THE FREIGHT, TELECOM CH ARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE EXCLUDED, BOTH FROM THE EXPORT TURNOV ER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA .. THE FORMULA FOR COMPUTATION OF THE DEDUCTION UNDER SECTION 10A WOULD BE AS UNDER : PROFITS OF THE BUSINESS X EXPORT TURNOVER / TOTAL TURNOVER FROM THE AFORESAID JUDGMENTS, WHAT EMERGES IS THAT, THERE SHOULD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A IS A BENEFICIAL SECTION. IT IS INTENDED TO PROVIDE INCENTIVES TO PROMOTE EXPORTS. THE INCENTIVE IS TO EXEMPT PROFITS RELATABLE TO EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSINESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS AND DOMESTIC BUSINESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNOVERS. APPORTIONM ENT OF PROFITS ON THE BASIS OF TURNOVER WAS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF SECTION 80HHC, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSESSEE, WHEREAS IN SECTION 10A, THE EXPORT PROFIT IS T O BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERTAKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN OTHER WORDS, EXPORT TURNOVER AND DOMESTIC 13 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 TURNOVER. THE EXPORT TURNOVER WOULD BE A COMPONENT OR PART OF A DENOMINATOR, THE OTHER COMPONENT BEING THE DOMESTIC TURNOVER. IN OTHER WORDS, TO THE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONALITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IN VIEW OF THE COMMONALITY, THE UNDERSTANDI NG SHOULD ALSO BE THE SAME. IN OTHER WORDS, IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATO R. THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER CANNOT BE DIFFERENT. THEREFORE, THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL TURNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTION TO MANDATE THAT, WHAT IS EXCLUDED FROM THE NU MERATOR THAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. THOUGH WHEN A PARTICULAR WORD IS NOT DEFINED BY THE LEGISLATURE AND AN ORDINARY MEANING IS TO BE ATTRIBUTED TO THE SAME, THE SAID ORDINARY MEANING TO BE ATTRIBUTED TO SUCH WO RD IS TO BE IN CONFORMITY WITH THE CONTEXT IN WHICH IT IS USED. WHEN THE STATUTE PRESCRIBES A FORMULA AND IN THE SAID FORMULA, EXPORT TURNOVER IS DEFINED, AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING THE MEANING OF THE TOTAL TURNOVER, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, WH EN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. IF THAT WERE THE INTENTION OF THE LEGISLATURE, THEY WOULD HAVE EXPRESSLY STATED SO. IF THEY HAVE NOT CHOSEN TO EX PRESSLY DEFINE WHAT THE TOTAL TURNOVER MEANS, THEN, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE MEANING ASSIGNED BY THE LEGISLATURE TO THE EXPORT TURNOVER IS TO BE RESPECTED AND GIVEN EFFECT TO, WHILE INTERPRETING THE TOTAL TURNOVER WHICH IS INC LUSIVE OF THE EXPORT TURNOVER. THEREFORE THE FORMULA FOR COMPUTATION OF THE DEDUCTION UNDER SECTION 10A, WOULD BE AS UNDER : 14 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 PROFITS OF THE BUSINESS OF THE UNDERTAKING X EXPORT TURN OVER (EXPORT TURNOVER + DOMESTIC TURN OVER) TOTAL TURNOVER 11. IN T HAT VIEW OF THE MATTER, WE DO NOT SEE ANY ERROR COMMITTED BY THE TRIBUNAL IN FOLLOWING THE JUDGMENTS RENDERED IN THE CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10A WHEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAME. THEREFORE, W E DO NOT SEE ANY MERIT IN THESE APPEALS. THE SUBSTANTIAL QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD. (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED CIT (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE EXPENDITURE INCURRED ON TELECOMMUNICATION CHARGES, FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY FROM BOTH EXPORT TURNOVER AND TOTAL TURNO VER FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT IN THE CASE ON HAND. CONSEQUENTLY THIS GROUND RAISED BY REVENUE IS DISMISSED. 1 5 . IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED . 1 6 . THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS : 15 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 16 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 17 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 1 7 . GROUND NOS.1 TO 3 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 1 8 . GROUND NO.4 IS REGARDING RISK ADJUSTMENT. 1 9 . WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. THE TPO HAS DENIED THE RISK ADJUST M ENT BY CITING THE 18 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 REASONS THAT THE ASSESSEE HAS NOT PRODUCED THE RELEVANT DETAILS AND DATA AS WELL AS COMPUTATION OF THE RISK. THEREFORE IN THE ABSENCE OF THE CLARIFICATION OF THE RISK LEVEL O F ASSESSEE AS WELL AS COMPARABLES, THE TPO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE. ON APPEAL, THE CIT(A) HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE REASON THAT WHEN THE WORKING CAPITAL ADJUSTMENT HAS BEEN ALLOWED THEN THERE IS NO REQUIREMENT OF GIVIN G SEPARATE RISK ADJUSTMENT. THOUGH WE DO NOT CONCUR WITH THE VIEW OF THE CIT(A) HOWEVER WE FIND THAT THE TPO HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS NOT PRODUCED THE RELEVANT DETAILS AND DATA TO CLARIFY THE RISK ADJUSTMENT AND TO SHOW THE LE VEL OF RISK OF THE ASSESSEE AS WELL AS COMPARABLES. IN THIS VIEW OF THE MATTER WHEN THE ASSESSEE FAILED TO PRODUCE THE NECESSARY COMPUTATION AS WELL AS DETAILS AND DATA, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE TPO IN DENYING THE CLAIM O F THE ASSESSEE . THIS GROUND OF ASSESSEE IS DISMISSED. 20 . GROUND NO.5(A) IS REGARDING EMPLOYEE COST FILTER OF 25%. 20 .1 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) UPHOLDING THE TPO S ACTION IN APPLYING THE EMPLOYEE COST FILTER OF 25% FO R SELECTING AND REJECTING COMPARABLES. 20 .2 WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AS WELL AS PERUSED THE MATERIAL AVAILABLE ON RECORD. THE EMPLOYEE COST FILTER IS A RELEVANT CRITERIA 19 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 FOR SELECTION OF THE COMPARABLES BECAUSE OF THE FACT THAT IT SHOWS THE BUSINESS MODEL OF A PARTICULAR COMPANY . T HEREFORE TO ASCERTAIN THE COMPARABILITY OF THE COMPANY FOR THE PURPOSE OF DETERMINING TH E ARM S LENGTH PRICE ( ALP ) T HE BUSINESS MODEL OF THE SAID COMPANY IS ALSO A RELATIVE FACTOR. ACCORDINGLY, WE DO NOT FIND ANY ERROR IN APPLYING THE EMPLOYEE COST FILTER OF 25% WHEN ASSESSEE S EMPLOYEE COST IS MUCH MORE THAN 25% OF THE TOTAL REVENUE. N EEDLESS TO SAY THAT THE ASSESSEE IS AT LIBERTY TO RAISE THE OBJECTIONS OF THE FUNCTIONAL COMPARABILITY IF N EED ARISES BEFORE THE TPO. ACCORDINGLY, THE ISSUE RAISED BY THE DEPARTMENT AS WELL AS ASSESSEE ARE CONSEQUENTIAL IN NATURE AND THEREFORE, SET ASIDE TO THE RECORD OF THE TPO. 20 . 3 GROUND NO.5(B) IS REGARDING APPLYING THE EXPORT EARNINGS OF MORE THAN 75% OF SALE. THIS ISSUE WE HAVE CONSIDERED WHILE DEALING WITH APPEAL OF THE REVENUE. IN VIEW OF OUR FINDING IN REVENUE S APPEAL, THE ISSUE STAND DISMISSED. 20 . 4 GROUND NO.5(C) IS REGARDING REJECTING THE COMPARABLES HAVING DIFFERENT ACCOUNTING YEAR. 20.6 T HE AUTHORITIES BELOW HAVE REJECTED THIS COMPANY ON THE GROUND THAT THIS COMPANY IS FOLLOWING A DIFFERENT ACCOUNTING YEAR AND THEREFORE THE FINANCIAL RESULTS OF THIS COMPANY ARE NOT MATCHING WITH THE FINANCIAL PERIOD OF THE ASSESSEE. 20 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 20.7 WE HAVE HEA RD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. IT IS TO BE NOTED THAT THE FAR ANALYSIS HAS TO BE DONE BY CONSIDERING THE CONTEMPORA NEOUS FINANCIAL DATA OF THE ASSESSE E AS WELL AS THE COMPARABLES. FURTHER AS PER RULE 10B(4), THE DATA TO BE USED IN ANALYSIS OF COMPARABILITY OF UNCONTROLLED TRANSACTION SHALL BE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTIONS HAVE BEEN ENTERED INTO. SINCE THI S COMPANY IS FOLLOWING A DIFFERENT ACCOUNTING YEAR THEREFORE THE DATA ARE NOT CONTEMPORANEOUS WITH THE ASSESSEE'S FINANCIAL DATA. AS PER RULE 10 D(4), THE INFORMATION AND DOC UMENT SHOULD AS FAR AS POSSIBLE BE CONTEMPORANEOUS AND SHO ULD EXIST LATEST BY THE SPECIFIED DAT E REFERRED AS PER SECTION 92F. IN VIEW OF THE REQUIREMENT OF THE CONTEMPORANEOUS AND CURRENT FINANCIAL YEAR DATA AS PROVIDED UNDER RULE 10B(4) AS WELL AS RULE 10D(4) OF THE I.T. RULES, THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE FO R WANT OF NECESSARY DATA. 20.8 GROUND NO.5(D) IS REGARDING APPLYING THE TURNOVER FILTER OF LESS THAN RS.1 CRORE FOR REJECTING THE COMPARABLES. 20.9 WE HAVE HEARD THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS NOW SETTLED BY THE SERIES OF 21 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 DECISIONS OF THIS TRIBUNAL WHEREIN THE TRIBUNAL HAS TAKEN CONSISTENT VIEW THAT THE TURNOVER THOUGH IS A RELEVANT FACTOR FOR SELECTING THE COMPARABLES HOWEVER THE PROPER RANGE OF TURNOVER OF COMPARABLE S HOULD BE TEN TIMES TO THE TURNOVER OF THE ASSESSEE ON BOTH SIDES. ACCORDINGLY, WE DIRECT THE AO/TPO TO APPLY THE TURNOVER FILTER OF 10 TIMES OF ASSESSEE S TURNOVER AND THEN DECIDE THE EXCLUSION AND INCLUSION OF CERTAIN COMPARABLE COMPANIES IN THE SET OF COMPARABLES. 2 1 .1 GROUND NO.6(A) IS REGARDING DIFFERENT ACCOUNTING PERIOD IN ITES SEGMENT. THIS GROUND IS COMMON TO GROUND NO.5(C) OF THE ASSESSEE S GROUND. IN VIEW OF OUR FINDING ON THIS ISSUE, THIS GROUND STAND DISMISSED. 2 2 .2 GROUND NO.6(B) IS RE GARDING TURNOVER FILTER WHICH IS COMMON TO GROUND NO.5(D) AND ACCORDINGLY THE TURNOVER FILTER OF TEN TIMES OF ASSESSEE IS TO BE APPLIED. 2 3 .1 GROUND NO.7 IS DIMINISHING REVENUE AS A CRITERIA APPLIED BY THE TPO. 2 3 .2 WE HAVE HEARD THE LEARNED DEPA RTMENTAL REPRESENTATIVE AS WELL AS CONSIDERED THE RELEVANT RECORD. AT THE OUTSET, WE NOTE THAT THE TPO HAS NOT APPLIED ANY SUCH CRITERIA OF DIMINISHING REVENUE FOR SELECTION OR REJECTION OF A COMPARABLE. WE FIND THAT AT PAGE NO.24 OF THE ANNEXURE D TO TH E ORDER T HE TPO HAS REJECTED SUCH CRITERIA AS UNDER : 22 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 ACCORDINGLY, THIS GROUND OF THE ASSESSEE S APPEAL DOES NOT EMANATE FROM THE IMPUGNED ORDER OF THE AUTHORITIES BELOW. 2 4 .1 GROUND NO.8(A) IS REGARDING APPLYING THE EXPORT EARNING FILTER. THIS ISSU E IS COMMON TO GROUND NO.5(B) OF REVENUE S APPEAL AND IN VIEW OF OUR FINDING, THIS GROUND STAND DISMISSED. 2 4 .2 GROUND NO.8(B) IS VERY VAGUE AND GENERAL WITHOUT GIVING ANY SPECIFIC COMPARABLE COMPANY AND YEAR OF OPERATION. ACCORDINGLY, WHEN THE ASS ESSEE HAS NOT RAISED ANY OBJECTION ANY SPECIFIC COMPARABLE COMPANY, THIS GROUND IS ACADEMIC IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 2 5 .1 GROUND NO.9 IS REGARDING REJECTING THE MULTI YEAR DATA AND USING THE CURRENT YEAR DATA BY THE TPO . 23 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 2 5 .2 WE HAVE HEARD THE LD. DR AS WELL AS CONSIDERED THE RELEVANT MATERIAL ON RECORD. WHILE COMPUTING THE ALP UNCONTROLLED A ND UNRELATED COMPARABLE PRICE AND FINANCIAL DATA OF THE COMPARABLE COMPANY SHALL BE RELATING TO THE FINANCIAL YEAR IN WHICH T HE INTERNATIONAL TRANSACTION HAD BEEN ENTERED INTO. THEREFORE AS PER RULE 10B(4) OF I T RULES THE CURRENT YEAR DATA OF THE COMPARABLES ARE REQUIRED TO BE CONSIDERED FOR DETERMINATION OF ALP. FURTHER AS PER RULE 10D(4), IT IS AGAIN REITERATED THAT SO FAR AS POSSIBLE CONTEMPORANEOUS AND LATEST DATA SHOULD BE USED FOR COMPARING THE INTERNATIONAL TRANSACTION. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW IN USING THE CURRENT YEAR DATA INSTEAD OF MULTI YEAR DATA. THE OPTION OF MULTI - YEAR DATA IS GIVEN ONLY IN THE EXCEPTIONAL CASES WHERE NO COMPARABLE PRICE IS AVAILABLE OF THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO OR THE CURRENT YEAR DATA ARE NOT RELIABLE. WHEN THIS IS NOT A CASE OF EXCEPTIONAL SITUATION AND NON - AVAILABILITY OR UNRELIABILITY OF DATA OF THE CURRENT YEA R THEN THE ASSESSEE CANNOT INSIS T FOR USING THE MULTI - YEAR DATA. 2 6 .1 GROUND NO.10 - THE ASSESSEE IS SEEKING INCLUSION OF TWO COMPANIES NAMELY THINKSOFT GLOBAL SERVICES LTD. AND FCS SOFTWARE SOLUTIONS LTD. WHICH 24 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 WERE REJECTED BY THE TPO ON THE GROUND OF WORKING CAPITAL ADJUSTMENT EFFECTING PROFIT MARGIN. 2 6 .2 WE HAVE HEARD THE LD. DR AS WELL AS CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE TPO HAS REJECTED THESE TWO COMPANIES WHICH WERE PART OF THE INITIAL PROPOSAL/SHOW CAUSE NOTICE OF THE TPO BUT SUBSEQUENTLY, THE TPO DECIDED NOT TO INCLUDE THESE TWO COMPANIES IN THE FINAL SET OF COMPARABLES ON THE GROUND THAT IF THE WORKIN G CAPITAL OF THESE TWO COMPANIES IS CONSIDERED THE PROFIT MARGIN GET DISTORTED. AFTER GIVING OUR THROUGHT ON THIS ISSU E WE ARE OF THE OPINION THAT THE LIMIT OF WORKING CAPITAL IS RELEVANT FOR ADJUSTMENT IN THE PRICE AND CANNOT BE TAKEN AS A COMPARABLE F OR REJECTION OR SELECTION OF THE COMPARABLE COMPANY;. THEREFORE, THE TPO WAS NOT JUSTIFIED IN EXCLUDING THESE TWO COMPANIES FROM THE SET OF COMPARABLES MERELY BECAUSE THESE COMPANIES WERE HAVING BORROWED FUND AND THE WORKING CAPITAL IMPACT IS MORE THAN 4 % ON THE PROFIT OF THE C OMPANY. ACCORDINGLY WE DIRECT THE AO/TPO TO INCLUDE THESE TWO COMPANIES IN THE SET OF CO MPARABLES WHEN THE TPO ITSELF FOUND FUNCTIONALLY COMPARABLE WITH THE ASSESSEE. 2 7 .1 GROUND NO.11 IS REGARDING WORKING CAPITAL ADJUSTMENT. 2 7 .2 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS PERUSED THE MATERIAL ON RECORD. THOUGH THE ASSESSEE HAS RAISED THIS GROUND 25 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 AGAINST THE WORKING CAPITAL ADJUSTMENT GIVEN BY THE TPO HOWEVER WE FIND THAT THE TPO HAS GIVEN A DETAILED WO RKING OF ALLOWING THE WORKING CAPITAL ADJUSTMENT IN ANNEXURE C OF THE IMPUGNED ORDER. IN THE ABSENCE OF ANY ERROR OR OTHER DEFECT POINTED OUT BY THE ASSESSEE IN THE WORKING OF THE TPO, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE TPO IN AL LOWING THE WORKING CAPITAL ADJUSTMENT AS COMPUTED IN ANNEXURE C. 2 8 .1 GROUND NO.12 IS REGARDING THE HIGH TURNOVER OF THE COMPARABLE COMPANIES. 2 8 .2 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS PERUSED THE MATERIAL ON RECORD. W E HAVE ALSO CONSIDERED THIS ISSUE IN GROUND NOS.5 &6 OF THE ASSESSEE S APPEAL AND ACCORDINGLY THE TPO HAS BEEN DIRECTED TO CONSIDER THE TURNOVER FILTER OF TEN TIMES FILTER OF THE ASSESSEE ON BOTH SIDES. 2 9 .1 GROUND NO.13 IS BENEFIT OF PROVISO TO SECTIO N 92C(2). 2 9 .2 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS PERUSED THE MATERIAL ON RECORD. THE TPO IS DIRECTED TO CONSIDER THE BENEFIT OF PROVISO TO SECTION 92C (2) AFTER RECOMPUTATION OF THE ALP AS PER OUR DIRECTIONS. 26 IT (TP) A NO. 1285 & 1294 /BANG/ 2014 30 . I N THE RESULT, THE REVENUE S APPEAL AS WELL AS ASSESSEE S APPEAL ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 201 7 . SD/ - (A .K. GARODIA ) ACCOUNTANT MEMBER SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 17 .03. 2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE