E4e Business Solutions India Private Limited, Bangalore V. Deputy Commissioner of Income-Tax, Bangalore

ITA 1397/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8653 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 08-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAMALADHAR HEARD ON P
• Assessee Lawyers: SHARAT RAO
• Keywords: Transfer pricing; International transaction; Services rendered outside India

Judgement Text

IT(TP)A.1397/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU, BENCH 'A', BENGALURU BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER I.T (TP).A NO.1397/BANG/2016 (ASSESSMENT YEAR : 2011-12) M/S. E4E BUSINESS SOLUTIONS INDIA P.LTD, 5 TH FLOOR, VAKIL SQUARE, BANNERGHATTA ROAD, BENGALURU 560 029 .. APPELLANT PAN : AAACI6324A V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2), BENGALURU 560 001 .. RESPONDEN T ASSESSEE BY : SHRI. SHARAT RAO, CA REVENUE BY : SHRI. KAMALADHAR, STANDING COUNSEL HEARD ON : 18.10.2016 PRONOUNCED ON : 13 .01.2017 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT (A), BENGALURU -2, DT.19.07.2016, FOR THE ASSESSMENT YEA R 2011-12. 02. THE FACTS IN BRIEF ARE THAT THE E4E BUSINESS S OLUTIONS INDIA PRIVATE LIMITED , FORMERLY KNOWN AS ISEVA SYSTEMS PRIVATE L IMITED, THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF CUSTOMER R ELATIONSHIP MANAGEMENT SERVICES AND RELATED BUSINESS PROCESS OUTSOURCING SERVICES THROUGH A VARIETY OF CUSTOMER CONTRACT CHANNELS SUCH AS VOICE , E-MAIL, CHAT AND WEB- IT(TP)A.1397/BANG/2016 PAGE - 2 BASED SERVICES. IT ACQUIRED ALL THE BUSINESS (ALL A SSETS, LIABILITIES, EMPLOYEES AND BUSINESS) FROM E4E TECH SUPPORT (INDIA) PRIVATE LIMITED, A GROUP COMPANY, WITH EFFECT FROM APRIL 1, 2007 ON SLUMP SA LE BASIS. CONSEQUENTLY, IT HAS ALSO STARTED RENDERING INFRASTRUCTURE MANAGE MENT SERVICES, WHICH IS IN THE NATURE OF INFORMATION TECHNOLOGY ENABLED SER VICES ('ITES'). E4E INDIA RENDERS SUCH IT ENABLED SERVICES TO ITS ASSOC IATED ENTERPRISES ('AES') AND OTHER THIRD PARTIES. 03. FOR THE ASSESSMENT YEAR ('A Y ') 2011-12, IT E -FILED ITS RETURN ON NOVEMBER 30, 2011 DECLARING A TAXABLE INCOME OF INR 11,13,09,999. IN ITS TP STUDY, IT HAS ADOPTED TRANSACTIONAL NET MARGIN M ETHOD ('TNMM') AS THE MOST APPROPRIATE METHOD ('MAM') TO ARRIVE AT THE AR M'S LENGTH PRICE ('ALP) IN RESPECT OF ITES, THE PROFIT LEVEL INDICAT OR ('PLI') ADOPTED IS OPERATING PROFIT TO THE TOTAL COSTS AS APPLICABLE T O THE AE SEGMENT ALONE . ON THIS BASIS, IT HAD COMPUTED ITS PLI @ 15.74 PERC ENT. IT HAS SELECTED 9 COMPARABLE COMPANIES WITH AN ARITHMETIC MEAN OF 15. 82 % AND SINCE IT FELL WITHIN THE SPECIFIED RANGE OF 5 PERCENT VARIATION, TREATED THE PRICE OF ITS INTERNATIONAL TRANSACTION AT ARM'S LENGTH. 04. HOWEVER, THE TRANSFER PRICING OFFICER (TPO) RE JECTED ITS TP DOCUMENTATION FOR THE REASON , INTER ALIA, THAT IT HAD USED MULTIPLE YEAR DATA, RE-DETERMINED THE ALP CONSIDERING 10 COMPANIE S AS COMPARABLE WITH CERTAIN FILTERS , WHICH INCLUDED 3 & 7 COMPANI ES SELECTED BY THE ASSESSEE & NEW ONES , RESPECTIVELY, WITH 'TNMM' AS THE 'MAM' WITH AN ADJUSTED MARGIN AT 31.02% AFTER GIVING WORKING CAPI TAL ADJUSTMENTS. THUS, IT(TP)A.1397/BANG/2016 PAGE - 3 THE TPO MADE AN ADDITION OF RS.136,642,740/- TO THE RETURNED INCOME. 05. ON THE CORPORATE TAX FRONT, WHILE COMPUTING DE DUCTION U/S 10A , THE ASSESSEE HAD EXCLUDED TELECOMMUNICATION CHARGES AT INR 85 04,197 AND TRAVEL EXPENDITURE AT INR 16,10,128 INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER. HOW EVER, THE AO REDUCED THEM FROM THE EXPORT TURNOVER ALONE AND RECOMPUTED A LESSER DEDUCTION U/S 10A IE MADE AN ADDITION OF INR 1,520,719 TO TH E RETURNED INCOME ON THIS COUNT ALONE. SINCE THE ASSESSEE DID NOT FILE OBJECTIONS BEFORE THE DRP, THE AO PASSED A FINAL ORDER DETERMINING THE TOTAL I NCOME AT RS. 249,473,458/-. 06. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) . THE CIT (A) UPHELD THE TP ADJUSTMENTS AND ON THE CORPORATE TAX FRONT , RELYING ON THE RATIO OF THE JURISDICTIONAL HIGH COURT REPORTED IN TATA ELXSI IN 349 ITR 98, THE CIT (A) DIRECTED THE AO TO REDUCE THE EXPE NDITURE INCURRED IN FOREIGN CURRENCY NOT ONLY FROM EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER . ON THE CIT (A) ORDER, THE ASSESSEE FILED THIS APPEAL WITH FOLLOWING GROUNDS OF APPEAL. IT(TP)A.1397/BANG/2016 PAGE - 4 IT(TP)A.1397/BANG/2016 PAGE - 5 07. THE AR SUBMITTED THAT THE APPELLANT HAS RENDERED SIMILA R SERVICE TO THIRD PARTIES, THE MARGIN EARNED BY THE APPELLANT FROM ITS AE IS COMPARABLE TO THE MARGIN EARNED BY IT FROM THIRD PARTIES AND H ENCE ITS INTERNATIONAL TRANSACTIONS SHOULD BE ACCEPTED AT ARMS LENGTH. FU RTHER, IT IS SUBMITTED THAT THIS TRIBUNAL HAS ALSO ACCEPTED THE APPLICATI ON OF INTERNAL TNMM IN ITS CASE IN AY 2010-11 IN IT(TP)A NO 324(B)/2015 DT 04. 11.2015. ON SUCH PLEA, THE CIT (A) HELD , INTER ALIA, THAT TNMM HA S BEEN UPHELD BY THE ITAT FOR AYS 2007-08,2008-09,& 2009-10. ALSO, IT IS SEEN THAT THE MANAGED SERVICE BUSINESS WHICH CATERED PRIMARILY TO THE NON -AE BUSINESS HAS BEEN SOLD W E F 08.02.2011, AND THEREFORE, A COMPARISON OF INTERNAL TNMM IS NOT POSSIBLE AS THE COMPARISON IS NOT OF THE SAME PERIO D IN RESPECT OF AE AND NON-AE BUSINESS WITH WHICH WE ARE IN AGREEMENT. HE NCE, THE CORRESPONDING GROUNDS OF APPEAL FAIL. 08. ON THE TP MATTERS, THE AR SUBMITTED THAT THE FO LLOWING COMPARABLES ARE TO BE REJECTED AS THEY ARE FUNCTIONALLY DIFFERE NT, FAILS RPT FILTER ETC . THE GIST OF HIS ARGUMENTS AND THE CASES RELIED ON, ARE AS UNDER: 1. ACCENTIA TECHNOLOGIES LTD : A. FUNCTIONALLY DIFFERENT : EARNS INCOME FROM MEDICAL TRANSCRIPTION BUSINESS, B ILLINGS AND COLLECTIONS AND CODING ACTIVITIES(SCHEDULE 8 OF FIN ANACIALS ) AS EVIDENCED IN PAGE 773 OF PAPER BOOK VOL-11 . IT(TP)A.1397/BANG/2016 PAGE - 6 B. PRESENCE OF GOODWILL, BRANDS, IPRS 0WNS GOODWILL, BRANDS AND IPRS AS EVIDENCED IN PAGE 729 OF PAPER BOOK VOL-11 . C. EXTRA-ORDINARY EVENTS MERGER OF GEOSOFT TECHNOLOGIES LTD AND IRIDIUM TECH NOLOGIES P. LTD AS EVIDENCED IN PAGE 727 OF PAPER BOOK VOL-11 . D. REJECTED BY ITAT IN EARLIER YEARS : REJECTED IN ASSESSEES OWN CASE FOR A Y 2008-09- IT (TP)A.1783/BANG/2013) AND A Y 2009-10; IT(TP)A.1777 /BANG/2013] ON THE ABOVE BASIS. 2. ACROPETAL TECHNOLOGIES LTD : A. FUNCTIONALLY DIFFERENT : ENGAGED IN ENGINEERING DESIGN SERVICES WHICH IS NOT ITES AS HELD BY BANGALORE ITAT IN THE CASE OF SYMPHONY MARKETING SO LUTIONS INDIA P. LTD [ITA NO.1316/BANG/2012) AND GLOBAL E BUSINESS OPERA TIONS [IT(TP)A NO.1678/BANG/2012 AS EVIDENCED IN PAGE 781OF PAPER BOOK VOL-11 . B. FAILS ONSITE COST FILTER : ONSITE DEVELOPMENT COST IS 47% AND THUS NOT COMPARA BLE TO E4E AS UPHELD BY DRP FOR A. Y. 2010-11 AS EVIDENCED IN PAGE 472 OF PAPER BOOK VOL-1 AND PAGES 809,815 & 816 OF PAPER BOOK VOL-11 . C. FAILS EMPLOYEE COST FILTER : IT(TP)A.1397/BANG/2016 PAGE - 7 EMPLOYEE COST IS ONLY 11.51% OF TOTAL COST. NOT CO MPARABLE AS UPHELD BY DRP FOR A Y 2010-11 BY APPLYING SAME FILTER AS EVI DENCED IN PAGE 472 OF PAPER BOOK VOL-1 AND PAGES 809,815 & 816 OF PAPER BOOK VOL-11 . D. REJECTED BY ITAT IN EARLIER YEARS : REJECTED IN ASSESSEES OWN CASE FOR A Y 2008-09 IT(TP)A.1783/BANG/2013) AND A Y 2009-10; IT(TP)A.17 77/BANG/2013] ON THE ABOVE BASIS. 3. INFOSYS BPO LTD : A. FUNCTIONALLY DIFFERENT : HAS TREMENDOUS BRAND VALUE WHICH IMPACTS PRICING IN THE MARKET AND CONSEQUENTLY THE MARGIN EARNED. ALSO COMPANY HAS I NCURRED HUGE SELLING AND MARKETING COST. ALSO COMPANY HAS SPENT SIGNIFI CANT AMOUNTS TO BUILD AND RETAIN BRAND VALUE. B. HIGH TURNOVER : HAS TURNOVER OF RS.1,129.11 CRORES AS COMPARED TO A SSESSEES TURNOVER OF RS.46.45 CRORES. ON APPLYING FILTER OF TEN TIMES O F TURNOVER FILTER, THE HIGHER LIMIT IS RS.464.5 CRORES AND THE MARGIN OF INFOSYS BPO CLEARLY EXCEEDS THIS LIMIT AS EVIDENCED IN PAGE 1102 OF PAPER BOOK VOL-1 1 . C. REJECTED EARLIER : IN ASSESSEES OWN CASE FOR A Y 2007-08 IN IT(TP)A. 819/BANG/2011 ; FOR A Y 2008-09 IN IT(TP)A.1783/BANG/2013; AND FOR A Y 200 9-10 IN IT(TP)A.1777/BANG/2013. HYDERABAD ITAT IN EXCELLENCE DATA RESEARCH P. LTD I N ITA NO.159/HYD/2014. BANGALORE BENCH IN SYMPHONY MARKETING SOLUTIONS IND IA P. LTD [ITA.1316/BANG/2012) IT(TP)A.1397/BANG/2016 PAGE - 8 HYDERABAD BENCH IN INTERNATIONAL SPECIALITY PRODUCT S (I) P. LTD [ITA NO.218/HYD/2014. 09. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH RELEVANT MATERIALS .THE RELEVANT PORTION OF THE ORDER FROM THE ASSESSES CASE IN IT (TP)A NO. 1845/BANG/2015 & IT(TP)A.1777/BANG/2013 DT 10.11.2015 FOR AY 2009-10 IS EXTRACTED AS UNDER : ACCENTIA TECHNOLOGIES LTD : ................................................... .................................. ................................................... ................................. (III) AS REGARDS THE FUNCTIONAL DISSIMILARITY, WE N OTE THAT ACCENTIA TECHNOLOGIES LTD IS ENGAGED IN DIVERSIFIED ACTIVITY OF MEDICAL TRANSCRIPTION, MEDICAL CODING, BILLING, RECEIVABLE MANAGEMENT. TH US IT IS CLEAR THAT THE SAID COMPANY IS ENGAGED IN THE HEALTHCARE ACTIVITY AND PROVIDING SPECIFIC SERVICES OF MEDICAL TRANSCRIPTION, MEDICAL CODING, MEDICAL BILLING ETC., WE NOTE THAT THESE ACTIVITIES ARE QUITE DIFFERENT FROM THE SERVICE OF CONTACT CENTRE PROVIDED BY THE ASSESSEE TO ITS AE WHICH IS PURELY IN THE NATURE OF CALL CENTRE. THEREFORE, WE ARE OF THE VIEW THAT TH E COMPANY ACCENTIA TECHNOLOGIES LTD CANNOT BE CONSIDERED AS A FUNCTION ALLY COMPARABLE COMPANY WITH THE SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. THE TPO IS DIRECTED TO EXCLUDE THE COMPANY FROM THE SET OF COM PARABLES. 10. THE RELEVANT PORTION OF THE ORDER FROM THE ASSE SSES CASE IN IT (TP)A NO. 1765/BANG/2013 & IT(TP)A.1783/BANG/2013 DT 04.11.2015 FOR AY 2008-09 IS EXTRACTED AS UNDER : 6.3. ACROPETAL TECHNOLOGIES LTD : 6.3.1. THE LEARNED AUTHORISED REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THIS COMPANY, SELECTED BY THE TPO, IS FUNCTION ALLY DIFFERENT FROM THE ASSESSEE AS APART FROM BEING ENGAGED IN THE BUSINES S OF EXPORT OF SOFTWARE SERVICES, IT IS ALSO ENGAGED IN RENDERING ENGINEERI NG DESIGN SERVICES AND SOFTWARE DEVELOPMENT SERVICES WHICH ARE HIGH END SE RVICE AND REQUIRE HIGHLY SKILLED EMPLOYEES, WHEREAS THE USSESSEE IN THE CASE ON HAND IS ENGAGED IN PROVIDING LOW END, ROUTINE BPO SERVICES. IN SUPPOR T OF ITS PROPOSITION FOR IT(TP)A.1397/BANG/2016 PAGE - 9 EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARAB LES ON GROUNDS OF FUNCTIONAL DIFFERENCES, THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE, INTER AIRA, PLACED RELIANCE ON THE DECISI ON OF THE CA-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SYMPHONY MARK ETING SOLUTIONS INDIA PVT. LTD. (SUPRA) FOR A.Y. 2008-09 WHEREIN THIS COM PANY WAS EXCLUDED FROM THE LIST OF COMPARABLES. 6.3.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUPPORTED THE ORDERS OF THE TPO IN INCLUDING THIS COMPANY AS A COMPARABLE TO THE ASSESSEE. 6.3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENT CITED BY THE ASSESSEE. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA P VT LTD. (SUPRA) HELD THIS COMPANY TO BE FUNCTIONALLY DIFFERENT FROM THE ASSESSEES PERFORMING ITES / BPO BACK END SUPPORT SERVICES WHEREAS, ACROP ETAL TECHNOLOGIES LTD.: SEGMENTAL REVENUES SHOW THAT ITS MAJOR SOURCE OF IN COME IS FROM PROVIDING ENGINEERING DESIGN SERVICES AND INFORMATION TECHNOL OGY SERVICES WHICH ARE KNOWLEDGE PROCESS OUTSOURCING SERVICES (KPO) AND NO T BPO / ITES LOW END BP0 SERVICES, LIKE THOSE PERFORMED BY THE AS S E S SEE IN THE CASE ON HAND. AT PARAS 12 AND 13 OF ITS ORDER, THE CO-ORDINATE BENCH HAS HELD AS UNDER 12. THIS COMPANY IS LISTED AT SI NO, 2 OF THE COMPARABLES CHOSEN BY THE TRO. AS FOR AS THIS COMPANY IS CONCERNED, THE O BJECTION OF THE ASSESSEE IS THAT THIS COMPANY IS NOT FUNCTIONALLY C OMPARABLE. THE ASSESSEE IS A BPO COMPANY THAT PROVIDES MARKET ANAL YTICS AND DATA MANAGEMENT SERVICES. TO PROVIDE MARKET ANALYTI CS SOLUTIONS, THE ASSESSEE GIVES STRATEGIES THAT IMPACT ON CLIENT REVENUE INCLUDING DATA BASED MARKETING STRATEGIES FOR CUSTO MER ACQUISITION, DEVISING CUSTOMER RETENTION STRATEGIES AND EXCLUDING LOSS MITIGATION STRATEGIES THROUGH CUTTING EDGE FOR ECASTING FOOLS. THE DATA MANAGEMENT SERVICES PROVIDED BY THE ASSESS EE INCLUDE ROUTINE BUSINESS DATA REPORTING AND MANAGEMENT, WEB SITE MANAGEMENT, MARKET/RIG DATA ANALYSIS AND TOP LINE R EPORTING AS FAR AS ACROPETAL TECHNOLOGIES LTD. IS CONCERNED, TH IS COMPANY DOES THE BUSINESS OF EXPORT OF SOFTWARE SERVICES. I T IS ALSO SEEN FRONT SEGMENTAL REVENUE OF THIS COMPANY (NOTE 15 TO THE NOTES ON ACCOUNTS TO ANNUAL REPORT FOR 07-08) THAT IT DER IVES INCOME FROM ENGINEERING DESIGN SERVICES AND SOFTWARE DEVEL OPMENT SERVICES, IT IS ALSO PERTINENT TO POINT OUT THAT BE FORE THE TPO, THE ASSESSEE RAISED AN OBJECTION THAT THIS COMPANY PERF ORMS DIFFERENT FUNCTIONS AND MAINLY ENGAGED IN THE AREA OF SOFTWARE DEVELOPMENT SERVICES AND ENGINEERING DESIGN SERVICE S. THE TPO IN HIS ORDER HAS OBSERVED THAT THE SERVICES REN DERED BY THIS COMPANY FELL IN THE DEFINITION OF ITES. IT(TP)A.1397/BANG/2016 PAGE - 10 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE ASSESSEE. ON A PERUSAL OF THE NOTE NO. 15 OF N OTES TO ACCOUNTS WHICH GIVES SEGMENTAL REVENUE OF THIS COMPANY, IT I S CLEAR THAT THE MAJOR SOURCE OF INCOME FOR THIS COMPANY IS FROM PRO VIDING ENGINEERING DESIGN SERVICES AND INFORMATION TECHNOL OGY SERVICES. THIS FUNCTIONS PERFORMED BY THE ENGINEERING DESIGN SERVI CES SEGMENT OF THE COMPANY CANNOT BE CONSIDERED AS COMPARABLE T O THE ITES/BPO FUNCTIONS PERFORMED BY THE ASSESSEE. THE P ERFORMANCE OF ENGINEERING DESIGN SERVICES IS REGARDED AS PROVI DING HIGH END SERVICES AMONG THE BPO, WHICH REQUIRES HIGH SKILL W HEREAS THE SERVICES PERFORMED BY THE ASSESSEE ARE ROUTINE LOW END ITES FUNCTIONS. WE THEREFORE HOLD THAT THIS COMPANY COUL D NOT HAVE BEEN SELECTED AS A COMPARABLE, ESPECIALLY WHEN IT P ERFORMS ENGINEERING DESIGN SERVICES WHICH ONLY A KNOWLEDGE PROCESS OUTSOURCING [KPO] WOULD DO AND NOT A BUSINESS PROCE SS OUTSOURCING [BPO]. FOLLOWING THE ABOVE DECISION OF THE CO-ORDINATE BEN CH IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD (SUPRA) FOR ASSESSMENT YEAR 2008-09, WE ORE OF THE VIEW THAT IN THE CASE ON HAN D ALSO, WHERE THE ASSESSEE IS ONLY PROVIDING ITES / BPO BASED LOW END SUPPORT SERVICES, THIS COMPANY I.E. ACROPETAL TECHNOLOGIES LTD. PROVI DING KPO SERVICES IS TO BE EXCLUDED FROM THE LIST OF COMPARABLES AS IT NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE, IN THE CASE ON HAND. WE HOLD AND D IRECT THE TPO ACCORDINGLY. 11. THE RELEVANT PORTION OF THE ORDER FROM THE ASSE SSES CASE IN IT (TP)A NO. 1765/BANG/2013 & IT(TP)A.1783/BANG/2013 DT 04.11.2015 FOR AY 2008-09 IS EXTRACTED AS UNDER : 6.7 INFOSYS BPO LTD. 6.7.1 AS FAR AS THIS COMPANY, CHOSEN BY THE TPO AS COMPARABLE, IS CONCERNED, THE LEARNED AUTHORISED REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THIS COMPANY, BEING A WHOLLY OWNED S UBSIDIARY OF INFOSYS TECHNOLOGIES LTD. WOULD ENJOY A PREMIUM IN THE MARK ET, DUE TO BRAND VALUE AND GOODWILL OF THE PARENT COMPANY, WHEREAS THE ASS ESSEE IS A LOW END PROVIDER OF BPO / ITES SUPPORT SERVICES. IT IS SUBM ITTED THAT INFOSYS BPO LTD. INCURRED HUGE SELLING AND MARKETING EXPENSES A ND IS NOT ONLY A MARKET LEADER BUT ALSO HAS HUGE, BREADTH IN TERMS OF ECONO MIES OF SCALE WITH DIVERSITY AND WORLDWIDE GEOGRAPHICAL DISPERSION OF CUSTOMERS. IT IS IT(TP)A.1397/BANG/2016 PAGE - 11 SUBMITTED THAT IN VIEW OF THESE FACTORS, INFOSYS BP O LTD. IS FUNCTIONALLY DIS- SIMILAR AND DIFFERENT FROM THE ASSESSEE IN THE CASE ON HAND. IN SUPPORT OF ITS PROPOSITION FOR EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLES, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SYMP HONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 WHEREIN THIS COMPANY WAS EXCLUDED FROM THE SET OF COMPARABLES. 6.7.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUPPORTED THE ORDERS OF THE TPO IN INCLUDING THIS COMPANY AS A CO MPARABLE TO THE ASSESSEE. 6.7.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL PRONOUNCEMENT RELIED ON BY THE ASSESSEE. WE FIND TH AT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SYMPHONY MARK ETING SOLUTIONS INDIA PVT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 HAS E XCLUDED THIS COMPANY I.E. INFOSYS BPO LTD. FROM THE LIST OF COMPARABLES TO LOW END ITES / BPO SUPPORT SERVICE PROVIDERS AS IT IS FUNCTIONALLY DIF FERENT BEING AN ESTABLISHED MARKET LEADER, ENJOYING HUGE BRAND VALUE AND GOODWI LL, WITH HUGE ECONOMIES OF SCALE AND DIVERSITY AND GEOGRAPHICAL D ISPERSION OF CUSTOMERS. AT PARA 24 OF ITS ORDER, THE CO-ORDINATE BENCH HAS HELD AS UNDER :- (7) INFOSYS BPO LTD 24. THIS COMPANY IS LISTED AT SL.13 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS COMPANY HAS A BRAND VALUE AND TH EREFORE THERE WOULD BE SIGNIFICANT INFLUENCE IN THE PRICING POLICY WHICH WILL IMPACT THE MARGINS. SCHEDULE 13 TO THE PROFIT & LOSS ACCOUNT OF THIS COMPANY FOR THE F.Y. 2007-08 SHOWS THAT THIS COMPANY INCURRED HUGE SELLING AND MARKETING EXPENSE S. PAGE 133 OF THE ANNUAL REPORT OF THIS COMPANY FOR THE F. Y. 2007-08 SHOWS THAT THIS COMPANY REALIZING ITS BRAND VALUE H AS CHOSEN TO VALUE THE SAME ON THE BASIS OF ITS EARNINGS AND THAT OF INFOSYS. THE BRAND VALUE OF THE ASSESSEE AND INFOSY S HAS BEEN VALUED AT RS.31,863 CRORES. INFOSYS BPO, BEING A SU BSIDIARY OF INFOSYS, HAS AN ELEMENT OF BRAND VALUE ASSOCIATED W ITH IT. THIS IS ALSO CLEAR FROM THE PRESENCE OF BRAND RELATED EX PENSES INCURRED BY THIS COMPANY. PRESENCE OF A BRAND COMMA NDS PREMIUM PRICE AND THE CUSTOMERS WOULD BE WILLING TO PAY, FOR THE SERVICES/PRODUCTS OF THE COMPANY. INFOSYS BPO I S AN ESTABLISHED PLAYER WHO IS NOT ONLY A MARKET LEADER BUT ALSO A COMPANY EMPLOYING SHEER BREADTH IN TERMS OF ECONOMI ES OF SCALE AND DIVERSITY AND GEOGRAPHICAL DISPERSION OF CUSTOMERS. THE PRESENCE OF THE AFORESAID FACTORS WILL TAKE THI S COMPANY OUT OF THE LIST OF COMPARABLES. WE THEREFORE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE REGARDED AS A COMPARABLE. IT(TP)A.1397/BANG/2016 PAGE - 12 FOLLOWING THE ABOVE CITED DECISION OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA P VT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09, WE ARE OF THE VIEW THAT IN THE CASE ON HAND ALSO, WHERE THE ASSESSEE IS ONLY PROVIDING LOW END ITES / BPO SUPPORT SERVICES, THIS COMPANY I.E. INFOSYS BPO LTD. IS TO BE EXCLUDE D FROM THE LIST OF COMPARABLES TO THE ASSESSEE IN THE CASE ON HAND. WE HOLD AND DIRECT THE TPO ACCORDINGLY. THUS, THE ASSESSEE HAS MADE OUT A CASE IN ITS FAVOU R FROM THE ABOVE DECISIONS. FOLLOWING THEM, THE TPO IS DIRECTED TO E XCLUDE ACCENTIA TECHNOLOGIES LTD , ACROPETAL TECHNOLOGIES LTD & I NFOSYS BPO LTD FROM THE LIST COMPARABLES AND THE ASSESSEES CORRESPONDING A PPEAL GROUNDS ARE ALLOWED. 12. ON ICRA ONLINE LTD (SEG), THE GIST OF THE ARS ARGUMENTS ARE AS UNDER: A. FUNCTIONALLY DIFFERENT : IT IS A KPO WHICH IS DIFFERENT FROM BPO AS HELD IN FIRST ADVANTAGE OFFSHORE P. LTD (ITA.1096/BANG/2011), SYMPHONY MARKETING SOL UTIONS INDIA P. LTD [ITA.1316/BANG/2012) AND CAPITAL IQ INFORMATION SYS TEMS (INDIA) P. LTD [ITA.1961/HYD/2011]. B. REJECTED BY DRP IN A Y 2010-11 : REJECTED BY DRP IN A Y 2010-11 FOR FAILING EXPORT EARNING FILTER OF 75% AND THE CURRENT YEAR EXPORT EARNING IS 64% ONLY. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH RELEVANT MATERIALS. THE RELEVANT PORTION OF THE ORDER FROM T HE CASE OF FIRST ADVANTAGE OFFSHORE SERVICES P. LTD (ITA.1096/BANG/2011) FOR A Y 2007-08 DT 30.4.2013 IS EXTRACTED AS UNDER : IT(TP)A.1397/BANG/2016 PAGE - 13 36. AS FAR AS 3RD GROUP IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUP CONSISTS OF- 1) BODHTREE CONSULTING LTD. 2) ECLERX SERVICES LTD. 3) MOLD TEK TECHNOLOGIES LTD, 37. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESS EE, THESE COMPANIES ARE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. HE SUBMITTED THAT . THE ASSESSEE IS BASICALLY A 'CALL CENTRE', WHEREAS THESE THREE COMPANIES ARE INTO THE BUSINES S OF 'KNOWLEDGE PROCESS OUT SOURCING (KPO)'. HE SUBMITTE D THAT WHILE THE ASSESSEE IS INTO SIMPLE ACTIVITIES LIKE CREDIT CHECK, IN HOUSE SUPPORT, BILL SEARCH, PEOPLE SEARCH, HIGH CHECK, AU TOMATED SERVICES, DOCUMENT MANAGEMENT ETC. WHILE THE 'KNOWL EDGE PROCESS OUTSOURCING' INCLUDES SPECIALIZED CUSTOMER & SOFTWARE SOLUTIONS SUCH AS DATA CLEANSING, E-LEARNING AND E- PAPER SOLUTION AND ALSO EARNS REVENUE FROM SOFTWARE PRODU CTS. AS FAR AS ECLERX SERVICES LTD. IS CONCERNED, HE SUBMITTED THAT IT IS ENGAGED IN PROVIDING DATA PROCESS AND ANALYTICS SERVICES AS IS EVIDENT FROM THE WEBSITE OF THE COMPANY. AS REGARDS MOLD TEK TECHNOL OGIES LTD., IS CONCERNED, HE SUBMITTED THAT IT IS PROVIDING HIGH-E ND ENGINEERING DESIGN AND DETAILING SERVICES WHICH ARE APPROPRIATELY CATEGORIZED AS STRUCTURAL ENGINEERING SERVICES AND ARE HIGH END ENGINEERING SERVICES AND CANNOT BE CONSIDERED AS CO MPARABLE TO THE ITES SERVICES RENDERED BY THE ASSESSEE. THUS , ACCORDING TO HIM, THESE THREE COMPANIES BEING FUNCT IONALLY DIFFERENT FROM THE ASSESSEE ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN SUPPORT OF HIS CONTENTION, HE PLACE D RELIANCE UPON THE DECISION OF 'A' BENCH OF THE TRIBUNAL AT H YDERABAD IN THE CASE OF M/S CAPITAL 1Q INFORMATION SYSTEMS (INDIA) PVT. LTD, IN ITA NO 1961/HYD/2011 DATED 23.11. 2012, WHEREIN THE TRI BUNAL HAS DIRECTED THAT MOLD TEK TECHNOLOGIES LTD IS TO BE EX CLUDED FROM THE LIST OF COMPARABLES BECAUSE OF 'EXCEPTIONAL RESULT' DUE TO MERGER/DEMERGER AND ALSO ON ACCOUNT OF 'SUPER NORMA L PROFIT' OF 113%. HE PLACED RELIANCE UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF MERCEDES BENZ RESEARCH & DEVELOPMENT INDIA PVT. LTD., WHEREIN IT HAS BEEN HELD THAT THE COMPANIES SHOWING ABNORMAL PROFITS CANNOT BE TREATED AS COMPARABLE. 38. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS FAILED TO ESTABLISH THAT THE NATURE OF ACTIVITIES PERFORME D BY THE ASSESSEE ARE DIFFERENT FROM THE COMPANIES WHICH ACC ORDING TO THE ASSESSEE ARE FUNCTIONALLY DIFFERENT. HE SUBMITTED T HAT IT IS THE BOUNDEN DUTY OF THE ASSESSEE TO ESTABLISH THAT THE COMPARABLES IT(TP)A.1397/BANG/2016 PAGE - 14 SELECTED BY THE TPO ARE NOT COMPARABLE TO THE ASSES SEE. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAD RAISED E LABORATE OBJECTIONS EACH OF THE COMPARABLES IN GROUP 3 BEFOR E THE TPO. THE TPO HAS ALSO REPRODUCED THE SAID OBJECTIONS IN HIS ORDER PARA 6.5.1 OF PAGE 178 OF HIS ORDER. HE HAS REJECTED THE CONTENTION OF THE ASSESSEE BY HOLDING THAT EVERY FUNCTION WITHIN BPO SECTOR CAN BE FROM LOW END TO HIGH END AND THE ACTIVITIES OF THE ASSESSEE SUCH AS ACCOUNTING, WEB MANAGEMENT, NETWOR K MANAGEMENT ARE BPO SERVICES USING TECHNOLOGY BUT TH ESE SERVICES ARE NOT CATEGORIZED AS KPO. HE HELD THAT A CALL CENTRE MAY OFFER SUPPORT SERVICES LIKE TELEMARKETING TO HIGH E ND SERVICES LIKE TECHNICAL SUPPORT SERVICES, WHERE NOT ONLY THE LEVE L OF KNOWLEDGE, SKILL REQUIRED WOULD BE HIGH, BUT THE TE CHNICAL KNOWLEDGE AS WELL WOULD BE HIGH. ACCORDING TO HIM, BACK OFFICE TRANSACTION PROCESS SERVICES MAY BE AS REMAR KABLE AND AS COMPLICATED AS INSURANCE/MARKET TRANSACTION PROCESS ING SERVICES. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND TREATED THE BPO AS EQUIVALENT TO KPO S ERVICES. 40. WE HAVE TO NOW CONSIDER WHETHER A BPO AND A KPO ARE FUNCTIONALLY SIMILAR AND ARE COMPARABLE TO EACH OTH ER. BPO IS A SUBSET OF OUTSCORING AND INVOLVES THE CONTRACTING O F THE OPERATIONS AND RESPONSIBILITIES OF SPECIFIC BUSINESS FUNCTIONS OR PROCESS TO A THIRD PARTY SERVICES PROVIDER. OFTEN BUSINESS PRO CESSES OUTSOURCING ARE INFORMATION TECHNOLOGY BASED AND REFERRED TO AS ITES-BPO. KPO IS ONE OF THE SUB-SEGMENT OF THE BPO INDUSTRY. IT INVOLVES OUTSOURCING OF CORE INFORMATION RELATED BUSINESS AC TIVITIES WHICH ARE COMPETITIVELY IMPORTANT OR FORM AN INTEGR AL PART OF A COMPANY'S VALUE CHAIN. IT THUS REQUIRES ADVANC ED ANALYTICAL AND TECHNICAL SKILLS AS WELL AS A HIGH DEGREE OF SP ECIALIST EXPERTISE. THE KPO SERVICES INCLUDE ALL KINDS OF RE SEARCH AND INFORMATION GATHERING. THUS IT CAN BE SEEN THAT EVE N THOUGH BOTH BPO AND KPO ARE OFFERING INFORMATION TECHNOLOGY BAS ED SERVICES, THE SKILL AND EXPERTISE AND MAY BE EVEN THE TOOLS REQUI RED ARE DIFFERENT WHICH MAY RESULT IN DIFFERENT ECONOMIC RESULTS OF B OTH THE SEGMENTS. THUS IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION T HAT THEY CANNOT BE COMPARED WITH EACH OTHER AND HAVE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. FROM THE ABOVE, IT IS CLEAR THAT THOSE WHOSE FUNCT IONS ARE OF HIGH END SERVICES AMONG THE BPO, WHICH REQUIRE HIGH SKILL CAN NOT BE COMPARED IT(TP)A.1397/BANG/2016 PAGE - 15 WITH THE ITES/BPO FUNCTIONS PERFORMED BY THE ASSESS EE WHICH ARE ROUTINE LOW END ITES FUNCTIONS. HOWEVER, WE FIND TH AT THE PROFILE OF ICRA ONLINE LTD (SEG) IS NOT AVAILABLE ALTHOUGH THE ASS ESSEE OBJECTED THIS CASE BEING INCLUDED BY THE TPO ON FUNCTIONAL DIFFERENCE. IN THE FACTS AND CIRCUMSTANCES, THIS ISSUE IS SET ASIDE TO THE TPO W HO WOUD RE- ADJUDICATE IT IN THE LIGHT OF THE ABOVE DECISIONS A FTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE. THE CORRESPONDING APPE AL GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 14. ON JEEVAN SCIENTIFIC TECHNOLOGY LTD , THE GIST OF THE ARS ARGUMENTS ARE AS UNDER: A. FAILS TPOS OWN FILTER OF ITES AND RELATED SERVI CES IE LESS THAN 75% OF TOTAL INCOME. FOREIGN EARNING IS ONLY 32.1% AT ENT ITY LEVEL AND 46% AT SEGMENT LEVEL AS EVIDENCED IN PAGE 1038 OF PAPER BO OK VOL-11 AND THE AR FURNISHED THE WORKINGS AS GIVEN BELOW. B. LOW EMPLOYEE COST : IE EMPLOYEE COST AT 26% ON LY AS EVIDENCED IN PAGE 473 OF PAPER BOOK VOL-1 AND PAGES 1030 & 103 4 OF PAPER BOOK VOL- 11 IT(TP)A.1397/BANG/2016 PAGE - 16 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE T HROUGH RELEVANT MATERIAL. ALTHOUGH, THE ASSESSEE OBJECTED THIS CASE BEFORE THE TPO, THE TPO INTER ALIA REJECTED STATING THAT THE ASSESSEE ACCE PTED THIS COMPARABLE IN THE EARLIER YEAR. IN THE FACTS AND CIRCUMSTANCES, THIS ISSUE IS SET ASIDE TO THE TPO WHO WOULD RE-ADJUDICATE IT AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE. THE CORRESPONDING APPEAL GROUND IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 15. ON IGATE GLOBAL SOLUTIONS LTD , THE GIST OF HIS ARGUMENTS ARE AS UNDER: A. FUNCTIONALLY DIFFERENT : RENDERS BOTH IT AND ITES SERVICES AND PROVIDES BOTH ONSHORE AND OFFSHORE SERVICES. AS PER THE SEGMENTAL INFORMATION PROVIDED BY IGATE, IT IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND SERVICES, CONT ACT CENTER SERVICES AND IT ENABLES SERVICES IS CONSIDERED AS THE ONLY BUSIN ESS SEGMENT AS EVIDENCED IN PAGE 1244 OF PAPER BOOK VOL-11 . B. EXTRA-ORDINARY EVENTS : AMALGAMATION OF IGATE GLOBAL SOLUTIONS SDN BHD, MAL AYSIA WITH THE COMPANY DURING THE PERIOD ENDED 31 ST MARCH 2010. ALSO ACQUIRED MAJORITY STAKE IN PATNI COMPUTER SYSTEMS LTD AS EVIDENCED IN PAGE 1244 OF PAPER BOOK VOL-11 . C. PRESENCE OF INTANGIBLES : 9.08% OF ASSET BASE COMPRISES OF INTANGIBLES (BOTH ACQUIRED GOODWILL AND OTHER INTANGIBLES). APPELLANT HAS NONE AS EVIDENCE D IN PAGE 1292 OF PAPER BOOK VOL-11 . IT(TP)A.1397/BANG/2016 PAGE - 17 D. HIGH TURNOVER OF RS.1,184.55 CRORES. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE T HROUGH RELEVANT MATERIAL. ALTHOUGH, THE ASSESSEE OBJECTED THIS CASE BEFORE THE TPO, THE TPO INTER ALIA , REJECTED IT STATING THAT IGATE GLOBAL SOLUTIONS LTD CONSIDERS ALL SERVICES UNDER ITES. IN THE FACTS AND CIRCUMSTANCES , THIS ISSUE IS SET ASIDE TO THE TPO WHO WOULD RE-ADJUDICATE IT AFTER A FFORDING DUE OPPORTUNITY TO THE ASSESSEE. THE CORRESPONDING APPE AL GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 16. THE NEXT ISSUE IS COMPUTATION OF DEDUCTION U/S 10A . IN THIS REGARD, THE AR RELIED ON THIS TRIBUNAL DECISION IN ITA NO 3 24(B)/2015 DT 04.11.2015 IN ITS OWN CASE FOR AY 2010-11. THE RELEVANT PORTIO N IS EXTRACTED AS UNDER : 8.6 AGAINST THE FINAL ASSESSMENT ORDER BOTH ASSESS EE AND THE DEPARTMENT ARE IN APPEAL. THE ASSESSEE HAS RAISED G ROUND NO.11. THE GROUND RAISED IN THE DEPARTMENT APPEAL IN IT (T P)A NO.220(B)/2015 IS AS FOLLOWS; 1. THE DIRECTIONS OF THE DRP ARE OPPOSED TO LAW A ND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DRP ERRED IN LAW IN DIRECTING THE AO TO EXCLUDE REIMBURSEMENT OF SPECIFIC EXPENDITURE BOTH FROM THE EXPORT TURNOVER AS WELL A S FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S 10A, WITHOUT APPRECIATING THE FACT THAT THE STATUTE ALLO WS EXCLUSION OF SUCH EXPENDITURE ONLY FROM EXPORT TURNOVER BY WAY O F SPECIFIC DEFINITION OF EXPORT TURNOVER AS ENVISAGED BY SUB-C LAUSE(4) OF EXPLANATION 2 BELOW SUB-SECTION (8) OF SECTION 10A AND THE TOTAL TURNOVER HAS NOT BEEN DEFINED IN THIS SECTION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE D RP ERRED IN DIRECTING THE AO TO COMPUTE DEDUCTION U/S 10A IN TH E ABOVE MANNER BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S TATA ELXSI LTD. WHICH HAS NOT BECOME IT(TP)A.1397/BANG/2016 PAGE - 18 FINAL SINCE THE SAME HAS NOT BEEN ACCEPTED BY THE D EPARTMENT AND SLPS ARE PENDING BEFORE THE HONBLE SUPREME COURT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS OF THE DR P IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED. 5. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND A ND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED B EFORE US THAT THE TELECOMMUNICATION EXPENSES AND TRAVEL EXPENSES INCU RRED IN FOREIGN CURRENCY SHOULD NOT BE REDUCED FROM BOTH ET AND TT AS THE SAME HAVE NOT BEEN INCURRED TOWARDS RENDERING OF TECHNIC AL SERVICES OUTSIDE INDIA AS CONTEMPLATED UNDER SECTION 10A OF THE ACT. 9.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SECOND LIMB OF THE DEFINITION OF ET UNDER SECTION 10A OF T HE ACT, PROVIDES FOR EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURREN CY IN CONNECTION WITH PROVIDING THE TECHNICAL SERVICES OUTSIDE IND IA. THE PRESENCE OF THE WORD THE BEFORE THE TERM TECHNICAL SERVICE INDICATES THAT THE ASSESSEE NEEDS TO PROVIDE A PARTICULAR OR SPECIFIC TECHNICAL SERVICE OUTSIDE INDIA AND EXPENSES INCURRED IN FOREIGN CURR ENCY IN PROVIDING THOSE TECHNICAL SERVICES ARE TO BE EXCLUDED. ACCORD INGLY, THIS CLAUSE OF EXCLUSION OF FOREIGN CURRENCY EXPENDITURE WOULD BE APPLICABLE ONLY IF THE ASSESSEE IS PROVIDING TECHNICAL SERVICE S OUTSIDE INDIA. THE ABOVE ARGUMENT HAS BEEN UPHELD IN THE FOLLOWING DEC ISIONS; JURISDICTIONAL BANGALORE BENCH OF THE ITAT IN THE C ASE OF INFOSYS TECHNOLOGIES LTD. (108 TTJ 282). JURISDICTIONAL BANGALORE BENCH OF ITAT IN THE CASE OF ROBERT BOSCH ENGINEERING AND BUSINESS SOLUTIONS LTD. IN ITA NO.4 12/BANG/2011). CHENNAI BENCH OF ITAT IN THE CASE OF INAUTIX TECHNO LOGIES PV.LTD. (ITA NOS.541/MDS/2006, 1439/MDS/2007, 20191/MDS/201 0 TO 2093/MDS/2010). CHENNAI BENCH OF ITAT IN THE CASE O F COGNIZANT TECHNOLOGIES SOLUIONS INDIA PVT.LTD. (ITA NO.209/MD S/2007); AND HYDERABAD BENCH OF ITAT IN THE CASE OF PATNI TELECO M PVT.LTD. (308 ITR 414). 9.2 WE HAVE HEARD BOTH PARTIES. FOLLOWING THE PATNI TELECOM PVT. LTD., WE ARE OF THE OPINION, THAT E4E IS NOT INVOLV ED IN RENDERING TECHNICAL SERVICES OUTSIDE INDIA, BUT IT IN THE BUS INESS OF EXPORT OF BPO SERVICES AS CONTEMPLATED UNDER THE PROVISIONS O F SECTION 10A OF THE ACT FROM ITS OFFSHORE CENTRE IN INDIA. IT IS NO T ENGAGED IN RENDERING ONSITE SERVICES AND THEREFORE, TELECOMMUN ICATION EXPENSES AND TRAVEL EXPENSES INCURRED IN FOREIGN CU RRENCY SHOULD NOT BE EXCLUDED FROM THE ET AND TT IN COMPUTING THE ELIGIBLE RELIEF UNDER SECTION 10A OF THE ACT. IT(TP)A.1397/BANG/2016 PAGE - 19 9.3 FURTHER, BPO SERVICES, UNDERTAKEN FOR THE PURPO SES OF EXPORT CANNOT BE EQUATED TO PROVIDING TECHNICAL SERVICES O UTSIDE INDIA SOLELY FOR THE PURPOSE OF EXCLUDING TRAVEL EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE ET AS ENVISAGED IN THE DE FINITION OF EXPORT TURNOVER AS PROVIDED IN SECTION 10A OF THE IT ACT. ACCORDINGLY, THE ADJUSTMENT MADE BY THE AO IS TO BE QUASHED IN ENTIR ETY. WE DIRECT THE AO TO RE-WORK THE SAME. SINCE WE HAVE DECIDED G ROUND NO.11, IN ASSESSEES APPEAL THE GROUNDS RAISED BY REVENUE IN IT(TP)A NO.220(B)/2015 ARE DISMISSED. FOLLOWING THE ABOVE DECISION, THE ADJUSTMENT MADE B Y THE AO IS QUASHED IN ENTIRETY. WE DIRECT THE AO TO RE-WORK THE SAME A S PER THE ABOVE DECISION. 17. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH JANUARY , 2017. SD/- SD/- (SUNIL KUMAR YADAV) (S. JAYARAMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR IT(TP)A.1397/BANG/2016 PAGE - 20