ITO, New Delhi V. M/s. Keane Worldzen (I) Pvt. Ltd., Gurgaon

ITA 1382/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7629 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 11-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 23-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: S D KAPILA
• Keywords: Related party transaction; Depreciation; Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-2 : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI KULDIP SINGH, JM ITA NO.1382/DEL/2012 ASSESSMENT YEAR : 2005-06 ITO, WARD-5(2), ROOM NO.234B, CR BUILDING, NEW DELHI. VS. NTT DATA GLOBAL DELIVERY SERVICES LTD., (FORMERLY KNOWN AS KEANE WORLDZEN (I) PVT. LTD.), 6 TH FLOOR, UNITECH TRADE CENTRE, SECTOR 43, SUSHANT LOK PHASE I, GURGAON. PAN: AABCW3622M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.D. KAPILA, ADVOCATE DEPARTMENT BY : DR. B.R.R. KUMAR, SR. DR DATE OF HEARING : 11.05.2016 DATE OF PRONOUNCEMENT : 16.05.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 23.12.2011 IN RELATION TO THE ASSESSM ENT YEAR 2005-06. ITA NO.1382/DEL/2012 2 2. THE ONLY ISSUE RAISED THROUGH TWO GROUNDS IS AGA INST THE DELETION OF ADDITION OF RS.2,86,92,601/- MADE BY THE ASSESSI NG OFFICER (AO) ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 3. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS A SUBSIDIARY OF KEANE WORLDZEN INC. THE ASSESSEE IS ENGAGED IN RENDERING BUSINESS PROCESS SERVICES IN THE CHOSEN FIELD OF INSURANCE, HEALTHCARE, COLLECTION AND FINANCIAL SERVICES. THE ASSESSEE FILED ITS RET URN DECLARING INCOME OF RS.93,784/- ACCOMPANIED BY AN AUDIT REPORT IN FORM NO. 3CEB, INDICATING FOUR INTERNATIONAL TRANSACTIONS, INCLUDI NG BPO AND SUPPORT SERVICES. THE ASSESSEE SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD WITH THE PROF IT LEVEL INDICATOR (PLI) OF OPERATING PROFIT TO TOTAL COST (OP/TC). I TS OWN PROFIT MARGIN WAS CALCULATED AT 15.62%. THE ASSESSEE SELECTED CE RTAIN COMPANIES AS COMPARABLE. CONSIDERING THE MULTIPLE YEAR DATA, TH E AVERAGE PROFIT MARGIN OF THOSE COMPANIES WAS WORKED OUT AT 10.25%. THAT IS HOW, THE ASSESSEE DECLARED THAT ALL OF ITS INTERNATIONAL TRA NSACTIONS WERE AT ARMS LENGTH PRICE (ALP) ON ENTITY LEVEL. THE AO REFERRE D THE MATTER OF ITA NO.1382/DEL/2012 3 DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTI ONS TO THE TRANSFER PRICING OFFICER (TPO), WHO ACCEPTED THE APPLICATION OF TNMM AS THE MOST APPROPRIATE METHOD WITHOUT DISPUTING THE PLI O F OP/TC. HOWEVER, THE TPO RE-DETERMINED THE PROFIT MARGIN OF THE COMPARABLE COMPANIES CHOSEN BY THE ASSESSEE FOR THE CURRENT YE AR ALONE BY DISCARDING THE USE OF MULTIPLE YEAR DATA BY THE ASS ESSEE. IT WAS THEREAFTER NOTICED THAT THE RATIO OF THE ASSESSEES PERSONNEL EXPENSES TO TOTAL EXPENSES WAS 52.11% AND THAT OF DEPRECIATION TO TOTAL EXPENSES WAS 14.36%. HE ADOPTED FILTER OF PERSONNEL COST TO TOTAL COST IN THE RANGE OF 48% TO 58.3% FOR SELECTION OF COMPARABLES. SIMILARLY, FILTER OF DEPRECIATION TO TOTAL COSTS WAS ALSO APPLIED. IN A PPLYING SUCH FILTERS, THE TPO REDUCED THE FINAL SET OF COMPARABLES TO THR EE, NAMELY, ALLSEC TECHNOLOGIES LTD., SAFFRON GLOBAL AND AIRLINE FINAN CIAL SUPPORT SERVICES (I) LTD. SUCH THREE COMPANIES WERE CHOSEN OUT OF THE ASSESSEES LIST OF 11 COMPANIES WITH THE CURRENT YE AR DATA ALONE. AVERAGE OP/TC OF THESE THREE COMPANIES WAS WORKED O UT AT 27.31%. BY APPLYING THIS PROFIT RATE OF 27.31% AS BENCHMARK ON THE ASSESSEES TOTAL COSTS, THE TPO PROPOSED TRANSFER PRICING ADJU STMENT AMOUNTING TO ITA NO.1382/DEL/2012 4 RS.2,86,92,601/-. THE AO MADE THE ABOVE ADDITION AN D COMPUTED TOTAL INCOME OF THE ASSESSEE AT RS.2.87 CRORE. THE ASSES SEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A), WHO DELETED THE TRANSFER PRICING ADDITION BY EXCLUDING AIRLINE FINANCIAL SUPPORT SER VICES (I) LTD. FROM THE FINAL LIST OF THREE COMPARABLES DRAWN BY THE TP O AND TREATING TWO MORE COMPANIES AS COMPARABLE, NAMELY, CS SOFTWARE E NTERPRISES LTD. AND SPANCO TELESYSTEMS AND SOLUTIONS LTD. THE REVE NUE IS AGGRIEVED AGAINST THE ABOVE ALTERATIONS MADE BY THE LD. CIT(A ) IN THE LIST OF COMPARABLES LEADING TO THE DELETION OF ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE REVE NUE IS AGAINST THE EXCLUSION OF AIRLINES FINANCIAL SUPPORT SERVICES (I ) LTD. FROM THE FINAL SET OF COMPARABLES DRAWN BY THE TPO AND INCLUDING T WO COMPANIES IN THE LIST, NAMELY, CS SOFTWARE ENTERPRISES LTD. AND SPANCO TELESYSTEMS AND SOLUTIONS LTD. 5.1. BEFORE EMBARKING UPON THE COMPARABILITY OR OTH ERWISE OF THE ABOVE REFERRED THREE COMPANIES, WE CONSIDER IT EXPE DIENT TO DISCUSS THE ITA NO.1382/DEL/2012 5 FUNCTIONAL PROFILE OF THE ASSESSEE, AS HAS BEEN GIV EN IN THE TRANSFER PRICING STUDY REPORT, AS UNDER:- INSURANCE INDUSTRY PROPERTY & CASUALTY AND LIFE INSURANCE-CLIENT ADMINISTRATION SERVICES; AGENCY ADMINISTRATION SERVICES; CLAIMS PROCESSING; NEW BUSINESS PROCESSING; NEW PRODUCT LAUNCH AND END-TO-END ANNUITY PROCESSIN G CLOSED/PASSIVE BLOCK PROCESSING; APPLICATION SERVICE PROVIDER; HEALTHCARE INDUSTRY PAYER O CLAIM ENTRY FORM; O SIMPLE CLAIM ADJUDICATION; O MEMBER ENROLLMENT; O POLICY HOLDER SERVICES; O FULFILLMENT O CORRESPONDENCE VOICE; O CORRESPONDENCE-WRITTEN/WEB. PROVIDER O MEDICAL COLLECTION; ITA NO.1382/DEL/2012 6 O ELIGIBILITY VERIFICATION; O MEDICAL CODING AND BILLING. FINANCIAL SERVICES INDUSTRY BACK OFFICE O ACCOUNT RECONCILIATION; O SECURITY PROCESSING; O MUTUAL FUND ACCOUNTING/PORTFOLIO VALUATION; O CLIENT REPORTING MIDDLE OFFICE O NEW ACCOUNT SET-UP; O CLIENT ADMINISTRATION-CASH RECEIPTS; O TRADE ENTRY. COLLECTIONS AND RECOVERY PORTFOLIO RECOVERY ANALYSIS & VALUATION O LETTERING; O CAMPAIGN DESIGN & MANAGEMENT PRE CHARGE-OFF THROUGH RECOVERY CONTACT CALLS O REMINDER CALLS; O AUTOMATED & MANUAL SKIP TRACING PAYMENT PLAN ARRANGEMENT & SETTLEMENTS O PAYMENT PROCESSING; O PUT-BACK MANAGEMENT; O PROPRIETARY SCORING; ITA NO.1382/DEL/2012 7 LITIGATION TRACKING O FINANCIAL REPORTING: O CUSTOMIZED PROCESSES TO MEET CLIENTS PORTFOLIO GOA LS. 5.2. AN OVERVIEW OF THE FUNCTIONAL PROFILE OF THE A SSESSEE, SEEN IN THE CONTEXT OF THE OVERALL GROUP ACTIVITIES, IT BECOMES VIVID THAT THE CUSTOMERS IN THE US ENTER INTO CONTRACTS WITH KWZ INC. AND KWZ INC. OUTSOURCES THE SERVICES TO THE ASSESSEE, WHICH, ULT IMATELY, EXECUTES THE PROJECT. IN DOING SO, THE ASSESSEE SERVES THE CRUC IAL ROLE OF MAKING AVAILABLE SERVICES WITH MATCHING SKILL SETS. IT AL SO UNDERTAKES PROVIDING ALTERNATIVE RESOURCES AND MANAGES TIMELY REPLACEMEN TS TO ENSURE SUCCESSFUL COMPLETION OF THE WORK OUTSOURCED TO IT WITHIN THE CONTRACT TIME SCHEDULE. THE ASSESSEE ALSO CONDUCTS PERSONNE L MANAGEMENT, INCLUDING THE DEVELOPMENT OF JOB DESCRIPTIONS, SALA RY LEVELS, FRINGE BENEFITS, VACATION POLICIES AND SIMILAR HUMAN RESOU RCE FUNCTIONS. WITH THE ABOVE UNDERSTANDING OF THE FUNCTIONAL PROFILE O F THE ASSESSEE, WE NOW ESPOUSE THE THREE COMPANIES AS DISCUSSED SUPRA FOR CONSIDERING THEIR COMPARABILITY OR OTHERWISE. ITA NO.1382/DEL/2012 8 (I) AIRLINE FINANCIAL SUPPORT SERVICES (I) LTD . 6.1. SINCE THIS COMPANY WAS CHOSEN BY THE ASSESSEE ITSELF AS A COMPARABLE, THERE WAS NO OCCASION FOR THE TPO TO DI SCUSS THE FUNCTIONAL PROFILE OF THIS COMPANY BECAUSE IT WAS ADDED BY HIM IN THE LIST OF COMPARABLES, WHOSE NATURE OF WORK WAS ADMITTED BY T HE ASSESSEE ITSELF AS COMPARABLE. HOWEVER, THE ASSESSEE ASSAILED THE I NCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES BEFORE THE LD. CI T(A) BY ARGUING THAT ITS RELATED PARTY TRANSACTIONS WERE 37.38% OF ITS S ALES. THE LD. CIT(A) CONCURRED WITH THE SUBMISSIONS ADVANCED ON BEHALF O F THE ASSESSEE AND ORDERED FOR THE ELIMINATION OF THIS COMPANY FROM TH E LIST OF COMPARABLES. THE REVENUE IS AGGRIEVED AGAINST THE EXCLUSION OF T HIS COMPANY. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. WE ARE DISINCLINED TO SUSTAIN THE PRELIMINARY OBJECTION TAKEN BY THE LD. DR THAT THE ASSESSEE SH OULD HAVE RESTRAINED FROM CHALLENGING THE INCLUSION OF THIS COMPANY IN T HE LIST OF COMPARABLES BEFORE THE LD. CIT(A) AS IT WAS ITS OW N COMPARABLE AND FURTHER NO OBJECTION WAS TAKEN ABOUT THE INCLUSION OF THIS COMPANY IN THE ITA NO.1382/DEL/2012 9 LIST OF COMPARABLES DURING THE COURSE OF PROCEEDING S BEFORE THE TPO. IT GOES WITHOUT SAYING THAT THE OBJECT OF AN ASSESSMEN T IS TO DETERMINE THE INCOME IN RESPECT OF WHICH THE ASSESSEE IS RIGHTLY CHARGEABLE TO TAX. AS THE INCOME NOT ORIGINALLY OFFERED FOR TAXATION, IF OTHERWISE CHARGEABLE, IS REQUIRED TO BE INCLUDED IN THE TOTAL INCOME, IN THE SAME BREATH, ANY INCOME WRONGLY INCLUDED IN THE TOTAL INCOME, WHICH IS OTHERWISE NOT CHARGEABLE, SHOULD ALSO BE EXCLUDED. THERE CAN BE N O ESTOPPEL AGAINST THE PROVISIONS OF THE ACT. EXTENDING THIS PROPOSITI ON FURTHER TO THE CONTEXT OF THE TRANSFER PRICING, WE FIND THAT IF A N ASSESSEE FAILS TO REPORT AN OTHERWISE COMPARABLE COMPANY, THEN THE TPO IS OB LIGED TO INCLUDE IT IN THE LIST OF COMPARABLES, AND IN THE SAME MANNER, IF AN ASSESSEE WRONGLY REPORTS AN INCOMPARABLE CASE AS COMPARABLE IN ITS TP STUDY AND THEN LATER ON CLAIMS THAT IT SHOULD BE EXCLUDED, T HEN, THERE SHOULD BE NOTHING TO FORBID THE ASSESSEE FROM CLAIMING SO, P ROVIDED THE AUTHORITY IS SATISFIED THAT THE COMPANY SO ORIGINALLY REPORTE D AS COMPARABLE IS, IN FACT, NOT COMPARABLE. THE SPECIAL BENCH OF THE TRIB UNAL IN DCIT VS. QUARK SYSTEMS PVT. LTD. (2010) 132 TTJ (CHD) (SB) 1 HAS ALSO HELD THAT A COMPANY WHICH WAS INCLUDED BY THE ASSESSEE AND AL SO BY THE TPO IN ITA NO.1382/DEL/2012 10 THE LIST OF COMPARABLES AT THE TIME OF COMPUTING AL P, CAN BE EXCLUDED BY THE TRIBUNAL, IF THE ASSESSEE PROVES THAT THE SA ME WAS WRONGLY INCLUDED. WE, THEREFORE, SEE NO EMBARGO ON THE POWE R OF THE LD. CIT(A) IN ENTERTAINING THIS OBJECTION OF THE ASSESSEE. 6.3. NOW WE TURN TO THE MERITS OF EXCLUSION OF AI RLINE FINANCIAL SUPPORT SERVICES (I) LTD. FROM THE LIST OF COMPARAB LES. RULE 10B(1)(E)(II) AND (III) TALK OF COMPARING THE NET P ROFIT MARGIN REALIZED BY THE ENTERPRISE FROM INTERNATIONAL TRANSACTION WITH THE SIMILAR NET PROFIT MARGIN REALIZED BY THE ENTERPRISE OR BY AN UNRELATE D ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION . AN UNCONTROLLED TRANSACTION HAS BEEN DEFINED IN RULE 10A(A) TO MEAN: A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON-RESIDENT . ON GOING THROUGH THE MANDATE OF RULE 10B(1)(E) IN J UXTAPOSITION TO RULE 10A(A), IT IS MANIFESTED THAT THE CONTROLLED T RANSACTIONS ARE NOT CONTEMPLATED FOR COMPARISON WITH THE INTERNATIONAL TRANSACTION UNDERTAKEN BY AN ENTERPRISE. IN A CASE WHERE A COMP ANY HAS ENTERED INTO CONTROLLED AS WELL AS UNCONTROLLED TRANSACTIONS, WE APPLY RPT FILTER FOR ITA NO.1382/DEL/2012 11 CONSIDERING WHETHER ON TOTALITY, SUCH A COMPANY SH OULD BE CONSIDERED AS COMPARABLE OR NOT. WHEN 25% RPT FILTER IS APPLI ED, IT MEANS THAT IF THE RELATED PARTY TRANSACTIONS OF SUCH COMPANY ARE MORE THAN 25%, THEN, IT SHOULD BE CONSIDERED AS A CONTROLLED TRANSACTION AND THE COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. IF , HOWEVER, THE RELATED PARTY TRANSACTIONS ARE LESS THAN 25%, THEN, NOTWITH STANDING THE FACT THAT THERE ARE CERTAIN RELATED PARTY TRANSACTIONS, BUT, ON THE OVERALL SCENARIO, SUCH A COMPANY CAN BE CONSIDERED AS COMPARABLE. 6.4. ADVERTING TO THE FACTS OF THIS COMPANY, WE F IND THAT THE LD. CIT(A) HAS EXCLUDED IT BY FINDING THE RATIO OF ITS RPTS AT MORE THAN 37%. THE PREDOMINANT VIEW OF THE TRIBUNAL ACROSS THE COUNTRY LAID DOWN IN SEVERAL CASES IS THAT THE TRANSACTIONS OF A COMPANY HAVING MORE THAN 25% RELATED PARTY TRANSACTIONS IS CONSIDERED AS CO NTROLLED, THEREBY FAILING THE TEST OF COMPARABILITY. THIS VIEW HAS B EEN TAKEN IN SEVERAL DECISIONS INCLUDING BY THE DELHI BENCH IN TOLUNA INDIA PVT. LTD. (SUPRA) AND ACTIS ADVISERS PVT. LTD. VS. DCIT, (2012) 20 ITR 13 8 (DEL.)(TRIB.) AND MUMBAI BENCH IN STREAM INTERNATIONAL SERVICES PVT. LTD. VS. ACIT ITA NO.1382/DEL/2012 12 (IT) (2013) 141 ITD 492 (MUM.) . EVEN THOUGH THE TPO HAS NOT EXPRESSLY APPLIED ANY RPT FILTER, BUT, THE FACT OF THE MATTER REMAINS THAT THE VERY INCLUSION OF A COMPANY IN THE LIST OF COMP ARABLES DEPENDS UPON THE FACT THAT IT SHOULD BE A COMPARABLE UNCONTROLLE D TRANSACTION. 6.5. REVERTING TO OUR POINT, WE FIND FROM THE ANNUA L REPORT OF THIS COMPANY, WHICH IS AVAILABLE ON PAGE 107 ONWARDS OF THE PAPER BOOK, THAT AS AGAINST ITS GROSS REVENUE FROM SERVICE FEES AMOUNTING TO RS.29.32 CRORE, THERE IS RECEIPT OF REVENUE FROM ITS ASSOCIA TED ENTERPRISES TO THE TUNE OF RS.9.31 CRORE. THIS SHOWS THAT THE PERCENT AGE OF RPT IS 32% (APPROX.), THEREBY FAILING THE RPT FILTER OF 25% A S HELD IN SEVERAL CASES DISCUSSED ABOVE. IN VIEW OF THE FACT THAT THE RPTS OF THIS COMPANY ARE MORE THAN 25%, IT BECOMES A CONTROLLED TRANSACTION AND DISQUALIFIES FROM BEING CONSIDERED AS A COMPARABLE UNCONTROLLED TRANSACTION, SO AS TO FIND A PLACE IN THE LIST OF COMPARABLES. ERGO, WE U PHOLD THE ACTION OF THE LD. CIT(A) IN EXCLUDING AIRLINE FINANCIAL SUPPORT S ERVICES (I) LTD. FROM THE LIST OF COMPARABLES. THE IMPUGNED ORDER IS UPH ELD ON THIS ISSUE. ITA NO.1382/DEL/2012 13 (II) & (III) CS SOFTWARE ENTERPRISES LTD. AND SPANC O TELESYSTEMS AND SOLUTIONS LTD. 7.1. THE ASSESSEE CONSIDERED THESE TWO COMPANIES AS COMPARABLES. HOWEVER, THE TPO REJECTED THE SAME IMPLIEDLY ON THE BASIS OF TWO FILTERS APPLIED BY HIM, NAMELY, PERSONNEL COST TO TOTAL COS T IN THE RANGE OF 48% TO 53.5% AND DEPRECIATION TO TOTAL COST. THERE IS N O SPECIFIC DISCUSSION ABOUT THE REASONS FOR THE EXCLUSION OF THESE TWO CO MPANIES, BUT, IT APPEARS, AS WAS CONCEDED BY THE LD. AR AS WELL, THA T THE SAME WERE ELIMINATED ON THE STRENGTH OF THE ABOVE REFERRED TW O FILTERS. THE ASSESSEE CHALLENGED THE EXCLUSION OF THESE TWO COMPANIES BEF ORE THE LD. CIT(A) WHO ORDERED FOR THEIR INCLUSION ON THE GROUND THAT IN SUBSEQUENT ASSESSMENT YEAR THESE TWO COMPANIES WERE TAKEN BY T HE TPO AS COMPARABLE. THE REVENUE IS AGGRIEVED AGAINST THE I NCLUSION OF THESE TWO COMPANIES. 7.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. IT IS MANIFEST THAT THE LD. CI T(A) HAS ORDERED FOR THE INCLUSION OF THESE TWO COMPANIES SIMPLY ON THE GROU ND THAT THESE WERE CONSIDERED AS COMPARABLE IN SUBSEQUENT YEAR. THIS F ACT, IN OUR ITA NO.1382/DEL/2012 14 CONSIDERED OPINION, IS NOT DECISIVE IN DECIDING THE COMPARABILITY FOR THE YEAR UNDER CONSIDERATION. THERE CAN BE CHANGE IN T HE FUNCTIONAL PROFILE OF A COMPANY FROM ONE YEAR TO ANOTHER. WHAT IS ALWA YS RELEVANT IS TO SEE COMPARABILITY FOR THE YEAR UNDER CONSIDERATION AND NOT EARLIER OR LATER YEARS. THE IMPUGNED ORDER IS CONSPICUOUSLY SILENT O N THIS ASPECT OF THE MATTER. APART FROM DEVOTING ONLY ONE LINE IN PAR A 5.3 TO THE EFFECT THAT: THESE TWO COMPANIES ARE IN THE SIMILAR LINE OF BUS INESS AND QUALIFYING THE FILTERS EMPLOYED BY THE TPO AND THE ASSESSEE, THERE IS NO DISCUSSION WHATSOEVER ABOUT THE NATURE OF BUSINESS CARRIED OUT BY THESE TWO COMPANIES AND HOW IT IS SIMILAR WITH THAT OF THE AS SESSEE. 7.3. AT THE SAME TIME, WE NOTE THAT THE TPO HAS NOTED ON PAGE 14 OF HIS ORDER THAT THE RATIO OF THE ASSESSEES PERSONNE L EXPENSES TO TOTAL EXPENSES IS 52.11% AND THAT APPEARS TO BE THE REASO N FOR HIS APPLYING FILTER OF 48% TO 53.5%. ON A CAREFUL PERUSAL OF TH E ASSESSEES PROFIT & LOSS ACCOUNT, WHICH IS AVAILABLE ON PAGE 176 OF THE PAPER BOOK, IT IS VIVID THAT THE ASSESSEE INCURRED PERSONNEL EXPENSES TO THE TUNE OF RS.10,97,53,391/- AND TOTAL EXPENSES STAND AT RS.24 ,21,37,190/-. WHEN ITA NO.1382/DEL/2012 15 WE COMPUTE THE PERCENTAGE OF PERSONNEL COST TO TOTA L COST ON THE BASIS OF THESE TWO FIGURES, THERE EMERGES FIGURE OF 45%. IF WE GO AHEAD WITH THE CORRECT RATIO OF THE ASSESSEES PERSONNEL COST TO TOTAL COST AT 45%, EVEN THE FILTER APPLIED BY THE TPO BETWEEN 48% TO 5 3.5% BECOMES ERRONEOUS BECAUSE THAT WAS BASED ON THE TPOS CALCU LATION OF THE ASSESSEES RATIO OF PERSONNEL EXPENSES TO TOTAL EXP ENSES AT 52.11%, WHICH ITSELF IS WANTING. UNDER THE GIVEN CIRCUMSTA NCES, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED ORDER TREATING THESE TWO COMPANIES AS COMPARABLE CANNOT BE UPHELD ON THE ASS IGNED REASONING AND, AT THE SAME TIME, THE ACTION OF THE TPO IN EXC LUDING THESE TWO COMPANIES ON THE BASIS OF INCORRECT CALCULATION OF THE ASSESSEES PERCENTAGE OF PERSONNEL COST TO TOTAL EXPENSES AND THE CONSEQUENTIAL WRONG FILTER ALSO CANNOT BE COUNTENANCED. IN OUR C ONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGN ED ORDER ON THIS SCORE IS SET ASIDE AND THE MATTER IS REMITTED TO TH E AO/TPO FOR A FRESH DETERMINATION OF THE COMPARABILITY OR OTHERWISE OF CS SOFTWARE ENTERPRISES LTD. AND SPANCO TELESYSTEMS AND SOLUTIO NS LTD. ITA NO.1382/DEL/2012 16 8. TO SUM UP, WE SET ASIDE THE IMPUGNED ORDER ON TH E ISSUE OF ADDITION TOWARDS TRANSFER PRICING ADJUSTMENT AND RE MIT THE MATTER TO THE FILE OF AO/TPO FOR FRESH DETERMINATION OF THE ALP O F THE INTERNATIONAL TRANSACTION IN CONSONANCE WITH OUR ABOVE DIRECTIONS . NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNI TY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.05.201 6. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH MAY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.