ITO, New Delhi V. M/s. Omniglobe Information Technologies (I) Pvt. Ltd., New Delhi

ITA 1380/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8112 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K CHOUDHARY CIT DR MS NIMITA
• Keywords: Related party transaction; Transfer pricing; International transaction; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.1380/DEL/2016 (ASSESSMENT YEAR : 2011-12) ITO, WARD 19 (1), VS. M/S. OMNIGLOBE INFORMATION T ECHNOLOGIES NEW DELHI. (I) PVT. LTD., E 11, RAJOURI GARDEN, NEW DELHI 110 027. (PAN : AAACO6606M) (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ JAIN, ADVOCATE SHRI ABHISHEK AGARWAL, ADVOCATE REVENUE BY : SHRI H.K. CHOUDHARY, CIT DR MS. NIMITA PANDEY, SENIOR DR DATE OF HEARING : 28.03.2019 DATE OF ORDER : 15.04.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ITO, WARD 19 (1), NEW DELHI (HEREINA FTER REFERRED TO AS REVENUE) BY FILING THE PRESENT APP EAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 22.01.2016 PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOM E-TAX ACT, 1961 ITA NO.1380/DEL/2016 2 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2011- 12 ON THE GROUNDS INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE DRP-II HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE BY EXCLUDING M/S. ECLERX SERVICES LTD. AND M/S. ACROPE TAL TECHNOLOGIES LTD. AS A COMPARABLE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE DRP-II HAS ERRED IN DIRECTING THE TPO/AO THAT THE T RANSFER PRICING ADJUSTMENT, AT BEST, COULD NOT EXCEED THE A MOUNT OF MARGIN RETAINED BY THE ASSOCIATED ENTERPRISES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : OMNIGLOBE INFORMATION TEC HNOLOGIES INDIA PVT. LTD., THE TAXPAYER IS A WHOLLY OWNED SUB SIDIARY OF OMNIGLOBE INTERNATIONAL LLC, USA (ASSOCIATED ENTERP RISE/AE). THE TAXPAYER IS INTO THE PROVISION OF BPO/DATA PROC ESSING SERVICES TO ITS AE. IT IS ALSO PROVIDING IT ENABLE D SERVICES (ITES) RELATING TO PHONE ACTIVATION AND LOCAL NUMBER PORTA BILITY TO VARIOUS CLIENTS FOR AND ON BEHALF OF ITS PARENT COMPANY. 3. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER E NTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE AS UNDER :- SL. NO. INTERNATIONAL TRANSACTIONS ASSOCIATED ENTERPRISES AMOUNT (RS.) (RECEIPT) METHOD APPLIED 1. PROVISION OF BPO/ DATA PROCESSING SERVICES OMNIGLOBE LLC 33,98,09,045 TNMM ITA NO.1380/DEL/2016 3 4. THE TAXPAYER IN ITS TRANSFER PRICING DOCUMENTATI ON TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS APPLIED TR ANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM) WITH OPERATING PROFIT/OPERATING COST (OP/OC) AS PRO FIT LEVEL INDICATOR (PLI). THE TAXPAYER SELECTED 7 COMPARABL ES WITH AVERAGE OP/OC OF 7.56% AS AGAINST OP/OC OF 8% OF THE TAXPAY ER. HOWEVER, DURING THE TP PROCEEDINGS, THE TAXPAYER RE COMPUTED THE UPDATED MARGIN OF THE COMPARABLES AS PER TPOS DIRE CTION AT 5.58% AND TREATED ITS INTERNATIONAL TRANSACTIONS QU A PROVISIONS OF BPO SERVICES WITH ITS AE AT ARMS LENGTH. 5. TPO REJECTED ALL THE 7 COMPARABLES TAKEN BY THE TAXPAYER SELECTED 7 NEW COMPARABLES WITH AVERAGE OP/OC OF 32 .84% AND ALSO RECOMPUTED THE OP/OC OF THE TAXPAYER AT 8.63% CONSIDERING THE FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.35,03,1 98/- AS NON- OPERATING COST AND THEREBY PROPOSED ALP OF INTERNAT IONAL TRANSACTIONS QUA ITES AT RS.41,31,49,554/- AS AGAIN ST RS.33,98,09,045/- DETERMINED BY THE TAXPAYER. 6. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF FILING OBJECTIONS WHO HAS REJECTED 2 COMPARABLES VIZ. ACROPETAL TECHNOLOGIES LTD. AND ECLERX SERVICES LTD. FROM THE FINAL SET OF COMPARABLES AND OP/OC OF THE COMPARABLE COMPANIES R EDUCED TO ITA NO.1380/DEL/2016 4 26.24%. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. UNDISPUTEDLY, TNMM AS THE MAM WITH OP/OC AS THE PLI APPLIED BY THE TAXPAYER HAS BEEN ACCEPTED BY THE TP O/DRP. LD. TPO IN ORDER TO SELECT THE COMPARABLE COMPANIES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE TAXPAYER WITH ITS AE APPLIED FILTERS VIZ. (I) USE OF CURRENT YEAR DAT A; (II) REJECT COMPANIES WHERE TURNOVER IS LESS THAN RS.1 CRORES; (III) SELECT COMPANIES WHERE THE RATIO OF SERVICE INCOME TO TOTA L INCOME IS AT LEAST 75%; (IV) SELECT COMPANIES WHERE INCOME FROM EXPORTS IS AT LEAST 75% OF TOTAL INCOME; (V) COMPANIES THAT HAVE EMPLOYEE COST THAT IS LESS THAN 25% OF TOTAL COST; (VI) REJECT CO MPANIES WHERE RELATED PARTY TRANSACTIONS EXCEED 25% OF SALES; (VI I) COMPANIES THAT ARE AFFECTED BY SOME PECULIAR ECONOMIC CIRCUMSTANCE S. 9. AFTER APPLYING THE AFORESAID FILTERS, LD. TPO HA S FINALLY SELECTED THE 7 COMPARABLES TO BENCHMARK THE INTERNA TIONAL TRANSACTIONS WHICH ARE AS UNDER :- ITA NO.1380/DEL/2016 5 SL. NO. NAME OF THE COMPANY WORKING CAPITAL ADJUSTED OP/OC 1. ACCENTIA TECHNOLOGIES LIMITED 29.12% 2. ACROPETAL TECHNOLOGIES LIMITED (SEG.) 18.12% 3. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 13.74 % 4. ECLERX SERVICES LIMITED 58.57% 5. INFOSYS BPO LIMITED 21.56% 6. JINDAL INTELLICOM LIMITED 16.76% 7. T C S E-SERVE LIMITED 71.99% AVERAGE 32.84% 10. LD. TPO ACCORDINGLY PROPOSED THE ALP OF INTERNA TIONAL TRANSACTIONS QUA PROVISION OF ITES AS UNDER :- TOTAL REVENUES RECEIVED (A) 339,809,045 TOTAL OPERATING COST (B( 311,012,913 ARM S LENGTH PROFIT (C = 32.84% OF B) 102,136,641 ARMS LENGTH PRICE (D = B+C) 413,149,554 DIFFERENCE (E = D A) 7,33,40,509 11. IT IS ALSO NOT IN DISPUTE THAT THE LD. DRP HAS ALLOWED WORKING CAPITAL ADJUSTMENT IN ORDER TO COMPUTE THE MARGIN O F THE COMPARABLE COMPANIES AND ALSO ORDERED TO RESTRICT T HE ADJUSTMENT, IF ANY, TO THE MARGIN RETAINED BY THE AE. THE REVE NUE HAS CHALLENGED THE EXCLUSION OF ECLERX SERVICES LTD. AND ACROPETAL TECHNOLOGIES LTD. MADE BY THE DRP FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. SO, WE WOULD EXAMINE T HE COMPARABILITY OF AFORESAID COMPARABLES VIS--VIS TH E TAXPAYER QUA ITES AS UNDER. ITA NO.1380/DEL/2016 6 GROUND NO.1 ECLERX SERVICES LTD. (ECLERX) 12. LD. DR FOR THE REVENUE CHALLENGING THE EXCLUSIO N OF ECLERX BY THE LD. DRP RELIED UPON THE ORDER PASSED BY THE LD. TPO. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE TAXPAYER BY RELYING UPON THE ORDER PASSED BY THE LD. DRP CONTENDED INTE R ALIA THAT ECLERX IS FUNCTIONALLY NOT COMPARABLE; THAT IT HAS EXCEPTIONAL YEAR OF OPERATION; AND RELIED UPON THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. V. CIT, 377 ITR 533 (DEL.). 13. UNDISPUTEDLY, THE TAXPAYER IS INTO PROVIDING BP O/DATA PROCESSING SERVICES (ITES) TO ITS AE WHEREAS ECLERX IS INTO PROVIDING OUTSOURCING KP SERVICES AS HAS BEEN HELD BY HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- 37. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS ONCE AGAIN CLEAR THAT BOTH VISH AL AND ECLERX COULD NOT BE TAKEN AS COMPARABLES FOR DETERMINING T HE ALP. VISHAL AND ECLERX, BOTH ARE INTO KPO SERVICES. IN M AERSK GLOBAL CENTERS (INDIA) PVT. LTD. (SUPRA), THE SPECIAL BENC H OF THE TRIBUNAL HAD NOTED THAT ECLERX IS ENGAGED IN DATA A NALYTICS, DATA PROCESSING SERVICES, PRICING ANALYTICS, BUNDLING OP TIMIZATION, CONTENT OPERATION, SALES AND MARKETING SUPPORT, PRO DUCT DATA MANAGEMENT, REVENUE MANAGEMENT. IN ADDITION, ECLERX ALSO OFFERED FINANCIAL SERVICES SUCH AS REAL-TIME CAPITA L MARKETS, MIDDLE AND BACK-OFFICE SUPPORT, PORTFOLIO RISK MANA GEMENT SERVICES AND VARIOUS CRITICAL DATA MANAGEMENT SERVI CES. CLEARLY, THE AFORESAID SERVICES ARE NOT COMPARABLE WITH THE SERVICES RENDERED BY THE ASSESSEE. FURTHER, THE FUNCTIONS UN DERTAKEN (I.E. THE ACTIVITIES PERFORMED) ARE ALSO NOT COMPARABLE W ITH THE ITA NO.1380/DEL/2016 7 ASSESSEE. IN OUR VIEW, THE TRIBUNAL ERRED IN HOLDIN G THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE WERE BROADLY SI MILAR TO THAT OF ECLERX OR VISHAL. THE OPERATING MARGIN OF ECLERX , THUS, COULD NOT BE INCLUDED TO ARRIVE AT AN ALP OF CONTROLLED T RANSACTIONS, WHICH WERE MATERIALLY DIFFERENT IN ITS CONTENT AND VALUE. IN MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. (SUPRA), TH E SPECIAL BENCH OF THE TRIBUNAL HAD NOTED THE SAME AND HAD, T HUS, EXCLUDED ECLERX AS A COMPARABLE. IT IS FURTHER OBS ERVED THAT THE COMPARABILITY OF ECLERX HAD ALSO BEEN EXAMINED BY T HE HYDERABAD BENCH OF THE TRIBUNAL IN M/S CAPITAL IQ I NFORMATION SYSTEMS (INDIA) (P.) LTD. V. ADDITIONAL COMMISSIONE R OF INCOME- TAX (SUPRA),WHEREIN, THE TRIBUNAL DIRECTED THE EXCL USION OF ECLERX AS A COMPARABLE FOR THE REASON THAT IT WAS E NGAGED IN PROVIDING KPO SERVICES AND FURTHER THAT IT HAD ALSO RETURNED SUPERNORMAL PROFITS. 14. IN RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA), THE HONBLE DELHI HIGH COURT HAS ALSO CONSIDERED SPECIAL BENCH DECISION OF THE TRIBUNAL IN CASE OF MAERSK GLOBAL CENTERS (INDI A) PVT. LTD. WHEREIN ALSO ECLERX WAS ORDERED TO BE EXCLUDED BECA USE OF KPO SERVICES WHICH ARE HIGH END SERVICES INVOLVING SPEC IALIZED KNOWLEDGE AND DOMAIN EXPERTISE. SO, WE ARE OF THE CONSIDERED VIEW THAT ECLERX HAS BEEN RIGHTLY EXCLUDED BY THE L D. DRP. CONSEQUENTLY, WE DO NOT FIND ANY GROUND TO INTERFER E INTO THE FINDINGS OF THE LD. DRP. ACROPETAL TECHNOLOGIES LTD. (ACROPETAL) 15. LD. DRP EXCLUDED ACROPETAL ON THE GROUND THAT I T IS A KPO AND AS SUCH IT IS NOT A GOOD COMPARABLES. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE TAXPAYER CONTENDED THAT THE LD . DRP HAS RIGHTLY EXCLUDED THE ACROPETAL BECAUSE IT IS FUNCTI ONALLY DISSIMILAR ITA NO.1380/DEL/2016 8 AND IT ALSO FAILS EMPLOYEE COST FILTER AND RELIED U PON THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE OF ACIT VS. FLEXTRONICS TECHNOLOGIES (INDIA) (P.) LTD. (2 019) 101 TAXMANN.COM 348 (BANGALORE TRIB.) . 16. COORDINATE BENCH OF THE TRIBUNAL IN ACIT VS. FLEXTRONICS TECHNOLOGIES (INDIA) (P.) LTD. (SUPRA) EXCLUDED ACROPETAL ON THE GROUND THAT THE ENGINEERING DESIGN SERVICES SEGMENT OF ACROPETAL IS FUNCTIONALLY DIFFERENT AND IS NOT A GOOD COMPARA BLES TO A COMPANY RENDERING ITES TO ITS AE BY RETURNING FOLLO WING FINDINGS:- ACROPETAL TECHNOLOGIES LIMITED HAVING CONSIDERED THE SUBMISSIONS, ON PERUSAL OF TH E ANNUAL REPORT, IT IS NOTICED BY US THAT THE ASSESSI NG OFFICER HAS CONSIDERED THE REVENUE FROM THE ENGINEERING DES IGN SEGMENT. HON'BLE ITAT, BANGALORE IN IT (TP)/A/1678/BANG/2012 IN THE CASE OF GLOBAL E BUSIN ESS OPERATIONS, DIRECTED TO EXCLUDE THE ABOVE COMPANY B Y OBSERVING THAT 'WE HAVE CONSIDERED THE SUBMISSION O F THE LEARNED COUNSEL FOR THE ASSESSEE, ON PERUSAL OF NOT E NO.15 OF NOTES TO ACCOUNTS, WHICH GIVES SEGMENTAL REVENUE OF THIS COMPANY, IT IS CLEAR THAT THE MAJOR SOURCE OF THE INCOME FOR THIS COMPANY IS FROM PROVIDING ENGINEERI NG DESIGN SERVICES AND INFORMATION TECHNOLOGY SERVICES . THE FUNCTION PERFORMED BY THE ENGINEERING DESIGN SERVIC ES OF THE COMPANY CANNOT BE CONSIDERED AS COMPARABLE TO T HE ITES /BP0 FUNCTION PERFORMED BY THE ASSESSEE. THE PERFORMANCE OF THE ENGINEERING DESIGN SERVICES IS REGARDED AS PROVIDING HIGH END SERVICES AMONGST THE BPO WHICH REQUIRE HIGH SKILL WHEREAS THE SERVICES PERFO RMED BY THE ASSESSEE ARE ROUTING LOW END ITES FUNCTION. WE THEREFORE HOLD THAT THIS COMPANY COULD NOT HAVE BEE N SELECTED AS COMPARABLE, ESPECIALLY WHEN IT PERFORMS ENGINEERING DESIGN SERVICES WHICH ONLY A KNOWLEDGE PROCESSING OUTSOURCING (KPO) WOULD DO AND NOT A BUSINESS PROCESSING OUTSOURCING (BPO).' SIMILAR VIE W WAS TAKEN BY HON'BLE BANGALORE ITAT IN THE CASE OF - ITA NO.1380/DEL/2016 9 SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. IT O (IT (TP) A NO. 1316/BANG/2012), HELD THAT ACROPETAL CANNOT BE CONSIDERED AS COMPARABLE AS IT PERFORMS ENGINEERING DESIGN SERVICES ACCORDINGLY WE DIRECT T HE ASSESSING OFFICER TO EXCLUDE THE COMPANY FROM THE COMPARABLES THE ABOVE COMPANY WAS DIRECTED TO BE EXCLUDED BY THE HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR AY 2008-09. 9. IT IS THE PLEA OF THE REVENUE BEFORE US THAT TH ERE IS NO DIFFERENCE BETWEEN THE KPO AND BPO AND THE REASONS GIVEN BY THE DRP FOR EXCLUDING THE COMPANY CANNOT BE ACCEPTE D. 10. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE EXCLUSION OF THIS COMPANY BY THE DRP IS FULLY JUSTIFIED AND IN THIS CONNECTION DREW OUR ATTENTION TO THE ANNUAL REPORT OF THIS COMPANY WHICH IS AT PAGE 492 OF PB-I I FILED BY THE ASSESSEE. PERUSAL OF THE ANNUAL REPORT SHOWS THAT T HIS COMPANY HAS 4 DIVISIONS VIZ., ENGINEERING DESIGN SERVICES, HEALTHCARE, ENTERPRISE SOLUTIONS AND INFRASTRUCTURE SOLUTIONS. PERUSAL OF THE ORDER OF TPO AT PAGE 25 SHOWS THAT THE TPO HAS CONS IDERED ENGINEERING DESIGN SERVICES SEGMENT PROFIT MARGIN O F THIS COMPANY FOR THE PURPOSE OF COMPARISON WITH THE PROF IT MARGINS OF THE ASSESSEE COMPANY. THE FUNCTIONS PERFORMED BY THE ENGINEERING DESIGN SERVICES OF THIS COMPANY ARE AS FOLLOWS:- ARCHITECTURAL, STRUCTURAL, ELECTRICAL, PLUMBING, S TEEL DETAILING, EXTERNAL UTILITIES, DESIGN ENGINEERING. 11. THE FUNCTIONS PERFORMED BY THE ASSESSEE, AS WE HAVE ALREADY SEEN IS BACK OFFICE SERVICES RELATING TO FI NANCE AND HUMAN RESOURCE FUNCTIONS, INCLUDING ACCOUNTS PAYABL E TO ASSESSEE, REMOTE SERVER ACCESS, MAINTENANCE AND MAN AGEMENT SERVICES, PAYROLL PROCESSING, CREDIT ANALYSIS, LEDG ER MAINTENANCE, ETC. FOR ITS AFFILIATES WORLDWIDE. IT IS THUS CLEAR THAT THE INFORMATION TECHNOLOGY SERVICES PROVIDED BY THE ASS ESSEE CANNOT BE COMPARED WITH ENGINEERING DESIGN SERVICES PROVID ED BY ACROPETAL TECHNOLOGIES LTD. THEREFORE, THE CONCLUSI ON THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE IS FOUND TO BE CORRECT. WE ALSO FIND THAT THIS TRIBUNAL IN THE CASE OF NOVO NORDISK (I) P. LTD. IN ITA 247/BANG/2016 HAS HELD THAT IN THE CASE OF A COMPANY WHICH WAS RENDERING SIMILAR ITES AS THAT OF ASSESSEE IT WAS HELD THAT ACROPETAL TECHNOLOGIES LTD. CANNOT BE CONSIDERED AS A COMPARABLE IN ITES SEGMENT. FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD. 8.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. WE FIN D THAT A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SWISS ITA NO.1380/DEL/2016 10 RE SHARED SERVICES (INDIA) PVT. LTD., FOR ASST. YEA R 2011- 12 (SUPRA) HAS EXAMINED IN DETAIL THE COMPARABILITY OF THIS COMPANY AS A COMPARABLE TO THAT OF A SERVICE P ROVIDER OF ITES SERVICES TO ITS AE'S AND AT6 PARA 21 TO 24 THEREOF HELD AS UNDER:- 21. ARGUING EXCLUSION OF ACROPETAL TECHNOLOGIES LTD, (SEG), LD. AR SUBMITTED THAT ACROPETAL TECHNOLOGIES LTD, WAS RENDERING SERVICE IN THE FIELD OF ENGINEERING DESIGN FIN- HEALTH-CARE ENTERPRISE SOLUTIONS AND IT INFRASTRUCTURE SOLUTIONS. AS PER THE LD. AR, AO TOOK THE ENGINEERING DESIGN SERVICES DONE BY ACROPETAL TECHNOLOGIES LTD, AS A COMPARABLE SEGMENT WITH ITES SERVICES OF THE ASSESSEE. LD. AR POINTED OUT THAT ENGINEERING DESIGN SERVICES RENDERED BY M/S. ACROPETAL WAS ENTIRELY DIFFERENT FROM THE TYPE OF SERVICES DONE BY THE ASSESSEE. FURTHER ACCORDING TO HIM HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD V. ITO [17'A.159/1-IYD12014, DT.31.07.2014 HAD HELD THAT ACROPETAL TECHNOLOGIES LTD, WAS NOT A GOOD COMPARABLE IN THE BPO SEGMENT. AS PER THE LD. AR M'S. EXCELLENCE DATA RESEARCH P. LTD, WAS RENDERING BACK OFFICE DATA CREATION, CONTENT DEVELOPMENT AND SUPPORT SERVICES WHICH WERE NOT COMPARABLE TO WHAT ASSESSEE WAS DOING. THOUGH THE DECISION OF THE HYDERABAD BENCH WAS FOR A.Y. 2009-10, AS PER THE LD. AR, M/S. ACROPETAL TECHNOLOGIES LTD, WAS DOING THE VERY SAME BUSINESS DURING THE RELEVANT PREVIOUS YEAR ALSO AND THEREFORE IT COULD BE CONSIDERED AS A GOOD PRECEDENT. 22. PER CONTRA, LD. DR SUBMITTED THAT TPO HAD CONSIDERED THE ARGUMENT OF THE ASSESSEE THAT BPO AND KPO HAD TO BE DISTINGUISHED. ACCORDING TO HIM, ACROPETAL TECHNOLOGIES LTD, WAS GIVING ENGINEERING DESIGN SERVICES AND THE ASSESSEE WAS RENDERING INSURANCE SUPPORT SERVICES. THOUGH THESE SERVICES DID NOT FIT IN THE SAME MOULD, THE LEVEL OF EXPERTISE REQUIRED STOOD MORE OR LESS ON THE SAME PEDESTAL. ACCORDING TO HIM, APPLYING THE YARDSTICKS LAID DOWN BY HON'BLE DELHI HIGH COURT IN THE JUDGMENT OF RAMPGREEN SOLUTIONS P. LTD (SUPRA), ACROPETAL TECHNOLOGIES LID. COULD BE TAKEN AS A GOOD COMPARABLE. 23. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT M/S. ITA NO.1380/DEL/2016 11 ACROPETAL WAS HAVING AT LEAST THREE SEGMENTS, NAMELY, ENGINEERING DESIGN SERVICES, IT SERVICE AND HEALTH CARE. TPO HAD TAKEN ENGINEERING DESIGN SERVICE AS A GOOD COMPARABLE WITH THAT OF THE SERVICES DONE BY THE ASSESSEE. ENGINEERING DESIGN SERVICES THAT WERE BEING RENDERED BY ACROPETAL TECHNOLOGIES LID, APPEARS AT PAGE 8 OF ITS ANNUAL REPORT. IT COMPRISED OF ARCHITECTURAL, STRUCTURAL, ELECTRICAL, PLUMBING, STEEL DETAILING, AND UTILITIES DESIGNING. ITS REVENUE MODEL APPEARS AT PAGE 9 OF ITS ANNUAL REPORT. IT IS MENTIONED THA T THE SAID COMPANY WAS PROVIDING COMPREHENSIVE OFFERINGS USING ITS DEEP DOMAIN UNDERSTANDING OF INFRASTRUCTURAL HEALTHCARE, ENGINEERING DESIGN AND ENTERPRISE SOLUTIONS. IN OUR OPINION, THE TYPE OF SERVICES THAT WAS BEING PROVIDED BY ACROPETAL TECHNOLOGIES LTD, WAS NOT AT ALL COMPARABLE WITH THE TYPE OF SERVICES THAT THE ASSESSEE WAS PROVIDING. IT IS ALSO MENTIONED IN THE ANNUAL REPORT OF THE SAID COMPANY THAT IT WAS PROVIDING HIGH END SERVICES IN THE ENGINEERING DESIGN SERVICES. NO DOUBT AS MENTIONED BY THE LD DR, IT MAY NOT BE FEASIBLE TO HAVE COMPARABLES WHICH FIT IN THE EXACT MOULD AS THAT OF AN ASSESSEE IN TP ANALYSIS. HOWEVER, WHEN ONE COMPANY IS GIVING SOPHISTICATED SET OF SERVICES WHICH INVOLVES HIGHER LEVEL OF SKILL SETS, AND THE OTHER IS DOING IT ON A LOWER LEVEL, WE CANNOT SAY THAT THE FORMER SHOULD BE CONSIDERED AS A COMPARABLE TO THE LATTER. THOUGH FOR A DIFFERENT YEAR, COMPARABILITY OF ACROPETAL TECHNOLOGIES LTD, (SEG) HAD COME UP &FORE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD (SUPRA). OBSERVATIONS OF THE TRIBUNAL AS IT APPEARS AT PARA 18.1 READS AS UNDER 18.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AGREE WITH THE OBJECTIONS RAISED BY ASSESSEE. AS SEEN FROM THE ANNUAL REPORT, THIS COMPANY IS INVOLVED IN ENGINEERING DESIGN SERVICES AND HAS PRODUCTS ALSO, WHICH MAKES IT FUNCTIONALLY NOT COMPARABLE. EVEN AT THE SEGMENTAL LEVEL, IT PROVIDES ENGINEERING DESIGN SERVICES, WHICH WAS CONSIDERED AS HIGH END, BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HYUNDAI 'MOTORS INDIA ENGINEERING (SUPRA) IN EARLIER YEAR. THEREFORE, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A ITA NO.1380/DEL/2016 12 COMPARABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. 24. CONSIDERING ALL THESE, WE ARE CONSTRAINED TO TAKE A VIEW THAT ENGINEERING DESIGN SERVICES SEGMENT OF M/S. ACROPETAL TECHNOLOGIES LTD, (SEG.), CANNOT BE CONSIDERED AS A PROPER COMPARABLE FOR THE TP STUDY OF THE ASSESSEE. 8.3.2 TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SWISS RE SHARED SERVICES (I NDIA) PVT. LTD., FOR ASST. YEAR 2011-12 (SUPRA), WE HOLD THAT THE ENGINEERING DESIGN SERVICES SEGMENT OF ACROPETAL TECHNOLOGIES LTD., IS FUNCTIONALLY DIFFERENT AND HE NCE CANNOT BE CONSIDERED AS A GOOD COMPARABLE TO THE ASSESSEE IN THE CASE ON HAND WHO IS PROVIDING ONLY ITES SERVICES TO ITS AE'S. THE AO/TPO ARE, THEREFORE, DI RECTED TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLE S IN THE CASE ON HAND. 17. THE LD. DR FOR THE REVENUE CONTENDED THAT HEALT HCARE SEGMENT OF ACROPETAL SHOULD BE TAKEN AS A COMPARABL E. HOWEVER, BALANCE SHEET OF ACROPETAL, AVAILABLE AT PAGES 182 TO 261 OF THE PAPER BOOK, SHOWS THAT ITS HEALTHCARE SEGMENT IS NO T A BPO. SO, FOLLOWING THE DECISION RENDERED BY THE COORDINATE B ENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. FLEXTRONICS TECHNOLOGIES (INDIA) (P.) LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT LD. DRP HAS RIGHTLY EXCLUDED THE ACROPETAL FROM THE FINAL SET O F COMPARABLES. SO, GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. ITA NO.1380/DEL/2016 13 GROUND NO.2 18. LD. DRP REACHED THE CONCLUSION THAT TP ADJUSTME NT CANNOT EXCEED THE AMOUNT OF MARGIN RETAINED BY THE AE. LD. AR FOR THE TAXPAYER CONTENDED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE TAXPAYER BY THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HCL TECHNOLOGIES BPO LTD. VS. ACIT ITA NO.3547/DEL/2010 WHICH IS CONFIRMED BY HONBLE DELHI HIGH COURT AND HONBLE SUPREME COURT. OPERATIVE PART OF WHICH IS AS UNDER :- 11. WITHOUT PREJUDICE TO THE ASSESSEE COMPANYS C ONTENTION THAT THE ADJUSTMENT MADE BY THE TPO IN NOT SUSTAINA BLE, IT WAS SUBMITTED THAT THE ADJUSTMENT AT BEST COULD BE MADE ONLY TO THE EXTENT OF RS. 11,960,457, BEING THE AMOUNT WHICH HA S BEEN RETAINED BY THE ASSOCIATED ENTERPRISE. 12. THE LD. CIT(A) IN HIS ORDER RESTRICTED THE TRA NSFER PRICING ADJUSTMENT TO RS. 1.19 CRORES HOLDING AS UN DER: 'THE TRANSFER PRICING OFFICER HAS COMPUTED AN ADJUSTMENT OF RS.17.04 CRORES WHILE THE VALUE OF INTERNATIONAL TRANSACTIONS IS RS.13,00,89,632. THE TOTAL REVENUE RECEIVED BY THE ASSOCIATED ENTERPRISES IN R ESPECT OF BPO SERVICES RENDERED BY THE APPELLANT AMOUNTING TO RS.13,00,89,632 IS RS.14,20,50,089. IN OTHER WORDS, THE ASSOCIATED ENTERPRISE HAS RETAINED RS. 1, 19,60,457 OUT OF THE TOTAL PROCEEDS RECEIVED FROM THE CUSTOMERS. THE ADJUSTMENT COMPUTED BY THE TPO IN THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT AT BEST CANNOT EXC EED THE NET AMOUNT RETAINED BY THE ASSOCIATED ENTERPRIS ES IN RESPECT 'OF INTERNATIONAL TRANSACTIONS, I.E., GROSS REVENUE' RECEIVED FROM THE END CUSTOMERS LESS AMOUNT PAID' T O THE APPELLANT AND, OTHER OPERATING EXPENSES. IT IS OBSE RVED THAT THE GROSS REVENUE RECEIVED FROM THE END CUSTOM ERS IN RESPECT OF VARIOUS CONTRACTS, THE ASSOCIATED ENTERP RISE HAVE RETAINED ONLY RS. 1,19,60,457 AT THEIR END AND THE BALANCE HAS BEEN PASSED ON TO THE APPELLANT. ITA NO.1380/DEL/2016 14 12.3 THE ISSUE HAS BEEN CONSIDERED IN THE RECENT DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. GLOBAL VANTEDGE P. LID., WHEREIN, THE TRIB UNAL HELD THAT ADJUSTMENT ON ACCOUNT OF ARM'S LENGTH PRI CE OF INTERNATIONAL TRANSACTIONS CANNOT EXCEED THE MAXIMU M ARM'S LENGTH PRICE, I.E., THE AMOUNT RECEIVED BY TH E ASSOCIATED ENTERPRISE FROM THE CUSTOMER AND THE ACT UAL VALUE OF INTERNATIONAL TRANSACTIONS, I.E., THE AMOU NT RECEIVED BY THE ASSESSEE IN RESPECT OF INTERNATIONA L TRANSACTIONS. 12.4 IN VIEW OF THE SAME I AM OF THE CONSIDERED VI EW THAT THE ADJUSTMENT TO THE INCOME OF THE APPELLANT HAS TO BE RESTRICTED TO RS.1,19,60,457- BEING THE AMOUNT R ETAINED BY THE ASSOCIATED ENTERPRISES. 13. AGGRIEVED WITH THIS ORDER, THE REVENUE HAD COM E UP IN THE PRESENT APPEAL. LD. D.R. PLACED RELIANCE ON THE ORDER OF LD. CIT(A) AND HAD PRAYED FOR QUASHING OF CIT(A)S ORDE R ON THIS ISSUE. ON THE OTHER HAND, LD. SR. COUNSEL SUBMITTED THAT THE APPELLANT COULD NOT HAVE EXPECTED TO RECEIVE FROM T HE CUSTOMERS OF THE AES OF THE APPELLANT, ANYTHING MORE THAN THE AMOUNT PAID BY SOME CUSTOMER TO THE AE, IF THE APPELLANT WERE T O BE OBTAIN THE CONTRACTS FOR SERVICES FROM THE CUSTOMERS DIRECTLY, I.E., WITHOUT THE INVOLVEMENT OF THE AES OF THE APPELLANT. THUS, AT THE MOST THE CONSIDERATION RECEIVED BY THE APPELLANT FROM THE AE S MAY BE REPLACED BY THE CONSIDERATION RECEIVED BY THE AES F ROM ITS CUSTOMERS, FOR THE SERVICES PROVIDED BY THE APPELLA NT; THE PRICE CHARGED BY AES TO THE CUSTOMERS BEING THE CUP. RELI ANCE IS PLACED IN THIS REGARD ON THE DECISION OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF SONY INDIA P. LTD. VS. CBDT (D ELHI) ; 288 ITR 52 HAS AT PAGES 61-62, OBSERVED AS UNDER: 'THE CONCEPT OF TRANSFER PRICING LEADING TO TAX AVO IDANCE HAS BEEN ACKNOWLEDGED IN THE ACT ONLY RECENTLY. IT IS A CONCOMITANT OF THE OPERATIONS OF MULTINATIONAL CORPORATIONS (MNCS) THAT SET UP BASE BY INCORPORATI NG A LOCAL SUBSIDIARY IN A COUNTRY WHERE THEY SEEK TO OP ERATE. IT IS OFTEN SEEN THAT THE MNC TRANSFERS GOODS AND SERV ICES TO ITS LOCAL SUBSIDIARY AT A PRICE NOT REFLECTIVE OF T HE MARKET PRICE (OR ARM'S LENGTH PRICE AS IF IS REFERRED TO I N THE PRESENT CONTEXT) AND IN TURN THE SUBSIDIARY IS ABLE TO AVOID, PARTLY OR WHOLLY, PAYMENT OF THE LOCAL TAX, ALTH9UGH THE EXPRESSION 'TRANSFER PRICE' HAS NOT BE EN DEFINED IN THE ACT,' IT IS 'UNDERSTOOD TO MEAN 'THA T PRICE WHICH IS ARRIVED AT WHEN TWO ASSOCIATED OR RELATED' ENTERPRISES DEAL WITH EACH OTHER'. 14. REFERENCE WAS MADE TO THE FINANCE MINISTERS B UDGET SPEECH FOR THE YEAR 2001 THAT THE PRESENCE OF MULTI NATIONAL ITA NO.1380/DEL/2016 15 ENTERPRISES IN INDIA AND THEIR ABILITY TO ALLOCATE PROFITS IN DIFFERENT JURISDICTIONS BY CONTROLLING PRICES IN IN TRA-GROUP TRANSACTIONS HAS MADE THE ISSUE OF TRANSFER PRICING A MATTER OF SERIOUS CONCERN. THE PURPOSE OF INSERTING THESE PRO VISIONS IS THEREFORE TO DETERMINE THE ARM'S LENGTH PRICE (ALP) OF AN INTERNATIONAL TRANSACTION INVOLVING AN MNC AND ITS LOCAL ASSOCIATE.' 15. RELIANCE IS PLACED ON THE DECISION OF DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF DCIT VS GLOBAL VANTEDGE P. LID., (ITA NO. 1432 & 2321/0ELL2009 AND 116/0EI/2011), WHEREIN , THE HON'BLE TRIBUNAL HELD THAT ADJUSTMENT ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS CANNOT E XCEED THE AMOUNT RECEIVED BY THE ASSOCIATED ENTERPRISE FROM T HE CUSTOMER AND THE ACTUAL VALUE OF INTERNATIONAL TRANSACTIONS, I.E., THE AMOUNT RECEIVED BY THE ASSESSEE IN RESPECT OF INTER NATIONAL TRANSACTIONS. THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 14-03-2013 (IN ITA NOS. 1828/2010, 1829/2010 & 1254/2011) HAD DISMISSED THE REVENUE'S APPEAL AGAIN ST THE SAID ORDER OF THE TRIBUNAL. THE SPECIAL LEAVE PETITION ( SLP) OF THE REVENUE AGAINST THE SAID ORDER HAS ALSO BEEN DISMIS SED BY THE SUPREME COURT VIDE ORDER DATED 02-01-2014 (CC NO. 2 2166 OF 2013). 16. FURTHER RELIANCE IN THIS REGARD IS PLACED ON T HE FOLLOWING OBSERVATION OF THE HON'BLE DELHI BENCH OF THE TRIBU NAL IN THE CASE OF LI & FUNG (INDIA) PVT. LTD. VS. DC IT (ITA NO 5156/DEI/2010): 17. THE HON'BLE DELHI HIGH COURT RECENTLY VIDE ORD ER DATED 16-12-2013 (IN ITA NO.306/2012), WHILE ADJUDICATING ON THE SAID DECISION OF THE TRIBUNAL, HELD IN PARAGRAPH 40 OF T HE ORDER THAT 'THE APPROACH OF THE TPO AND THE TAX AUTHORITIES IN ESSENCE IMPUTES NOTIONAL ADJUSTMENT / INCOME IN THE ASSESSE E'S HANDS ON THE BASIS OF A FIXED PERCENTAGE OF THE FREE ON BOAR D VALUE OF EXPORT MADE BY UNRELATED PARTY VENDORS. ' ..... 18. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE RECENT DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF HYPER QUALITY INDIA PVT. LTD. VS. ACIT (ITA NO. 5630/0ELL 2011 ), WHEREIN, IT HAS BEEN HELD AS UNDER: 7. LD. TPO ERRED IN EVALUATING FAR (FUNCTIONS PERFORMED, ASSETS. EMPLOYED AND RISK ASSUMED) ANALY SIS WHICH HAS BEEN SUMMARILY CONFIRMED BY DRP. TO SUPPO RT ITS CASE, ASSESSEE FURNISHED SPLIT FINANCIALS OF TH E APPELLANT AND ITS AE. WHEREAS THE APPELLANT HAS BEE N ABLE TO EARN PROFIT IN INDIA ITS COUNTERPART THE AE HAS CONTINUOUSLY SUSTAINED LOSSES. THERE BEING NO ELEME NT OF PROFIT IN THE HANDS OF THE AE, THERE IS NO CASE OF SHIFTING ITA NO.1380/DEL/2016 16 OF PROFITS, PRACTICABLE OR PROBABLE. INVOKING A HIG HER ALP ON THE APPELLANT IS ONLY ANTICIPATORY AND COMPLETE IGNORANCE OF FACT. THE FACTS AND FIGURES PRODUCED B EFORE THE LD. TPO ESTABLISH THAT THERE IS NO COMMERCIAL P ROFIT AVAILABLE IN THE HANDS OF THE AE. IN ABSENCE OF PRO FIT AVAILABILITY, THE ANY ENHANCEMENT OF THE ALP RESULT S IN ARTIFICIAL PROFIT ANTICIPATED BY THE LD. TPO AND NO T EARNED BY THE APPELLANT. THE ORDER OF THE LD, TPO IN ENHAN CING THE ALP OFFERED BY THE APPELLANT IS IN IGNORANCE OF VALID FAR AND FACTUAL CONSIDERATIONS AND IS BAD IN LAW AN D FACTS.' 19. RELIANCE IN THIS REGARD IS PLACED ON THE RECENT DECISION OF DELHI HIGH COURT IN CASE OF SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. VS. CIT III (ITA NO. 16/2014) WHERE IN IT HAS BEEN HELD THAT THE ARM'S LENGTH SEE KS TO CORRECT DISTORTION AND SHIFTING OF PROFITS OF TAX THE ACTUA L INCOME EARNED BY A RESIDENT. THE HON'BLE DELHI HIGH COURT HELD AS UNDER: '77. AS A CONCEPT AND PRINCIPLE CHAPTER X DOES NOT ARTIFICIALLY BROADEN, EXPAND OR DEVIATE FROM THE CO NCEPT OF 'REAL INCOME'. 'REAL INCOME', AS HELD BY THE SUPREM E COURT IN POONA ELECTRICITY SUPPLY COMPANY LIMITED VERSUS CIT, [1965J 57 ITR 521 (SC), MEANS PROFITS ARRIVED AT ON COMMERCIAL PRINCIPLES, SUBJECT TO THE PROVISIONS OF THE ACT. PROFITS AND GAINS SHOULD BE TRUE AND CORRECT PROFITS AND GAINS, NEITHER UNDER NOR OVER S TATED. ARM'S LENGTH PRICE SEEKS TO CORRECT DISTORTION AND SHIFTING OF PROFITS TO TAX THE ACTUAL INCOME EARNED BY A RESIDENT/DOMESTIC AE. THE PROFIT WHICH WOULD HAVE ACCRUED HAD ARM'S LENGTH CONDITIONS PREVAILED IS BR OUGHT TO TAX. MISREPORTING, IF ANY, ON ACCOUNT OF NON-ARM 'S LENGTH CONDITIONS RESULTING IN LOWER PROFITS, IS CO RRECTED. XXX (XII) WHEN SEGMENTATION OR SEGREGATION OF A BUNDLE D TRANSACTION IS REQUIRED, THE QUESTION OF SET OFF AN D APPORTIONMENT MUST BE EXAMINED REALISTICALLY AND WI TH A PRAGMATIC APPROACH. TRANSFER PRICING IS AN INCOME ALLOCATING EXERCISE TO PREVENT ARTIFICIAL SHIFTING OF NET INCOMES OF CONTROLLED TAXPAYERS AND TO PLACE THEM O N PARITY WITH UNCONTROLLED, UNRELATED TAXPAYERS. THE EXERCISE UNDERTAKEN SHOULD NOT RESULT IN OVER OR DO UBLE TAXATION. THUS, THE ASSESSING OFFICER/TPO CAN SEGRE GATE AMP EXPENSES AS AN INDEPENDENT INTERNATIONAL TRANSACTION, BUT ONLY AFTER ELUCIDATING GROUNDS AND REASONS FOR NOT ACCEPTING THE BUNCHING ADOPTED BY T HE ASSESSED, AND EXAMINING AND GIVING BENEFIT OF SET O FF. SECTION 92(3) DOES NOT BAR OR PROHIBIT SET OFF.' ITA NO.1380/DEL/2016 17 20. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY S UBMITTED THAT THE ADJUSTMENT SHALL BE RESTRICTED TO RS. 1.19 CROR ES. 21. WE HAVE HEAD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. LD. CIT(A) HAD FOLLOWED THE RATIO LAID D OWN IN THE CASE OF GLOBAL VENTEDGE P. LTD. (SUPRA) (IN I.T.A. NO. 1432 & 2321 / DEL/2009 AND 116/DEL/2011). THIS DECISION WA S AFFIRMED BY BOTH HON'BLE HIGH COURT AND HON'BLE SUPREME COUR T AND HIS RATIO WAS FOLLOWED IN SUBSEQUENT DECISIONS AS SUBMI TTED EARLIER AND, THEREFORE, THE ORDER OF LD. CIT(A) ON THIS ISS UE IS REASONABLE AND WE DO NOT FIND ANY REASON TO INTERFE RE WITH THIS FINDING OF LD. CIT(A) AND HENCE, THE GROUNDS OF APP EAL FILED BY REVENUE ARE DISMISSED. ACCORDINGLY, APPEAL FILED B Y REVENUE IS DISMISSED. 19. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN HCL TECHNOLOGIES BPO LTD. VS. ACIT (SUPRA, AFFIRMED BY HONBLE DELHI HIGH COURT AND HONBLE SU PREME COURT, WE ARE OF THE CONSIDERED VIEW THAT LD. DRP H AS RIGHTLY HELD THAT TRANSFER PRICING ADJUSTMENT SHOULD NOT EXCEED THE AMOUNT OF MARGIN RETAINED BY THE AE. CONSEQUENTLY, FINDINGS RETURNED BY THE LD. DRP ARE HEREBY CONFIRMED. SO, GROUND NO.2 IS DE TERMINED AGAINST THE REVENUE. 20. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 15 TH DAY OF APRIL, 2019. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 15 TH DAY OF MARCH, 2019 TS ITA NO.1380/DEL/2016 18 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.