Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 82378 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
31-01-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. P.MADHAVI DEVI, JUDICIAL MEMBER ITA NO.144/HYD/2014 : ASSESSMENT YEAR 2009 - 10 M/S. PARE XEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD (PAN - AAECP 2199 N) V/S. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 16(3), HYDERABAD (APPELLANT) (RESPONDENT) AND ITA NO. 607/HYD/2014 : ASSESSMENT YEAR 2009 - 10 ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 16(3), HYDERABAD V/S. M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD (PAN - AAECP 2199 N) (APPELLANT) (RESPONDENT) ASSESS EE BY : MS. KANCHUN KAUSHAL & SHRI DHANESH BAFNA REVENUE BY : SHRI P.SOMA SEKHAR REDDY DR DATE OF HEARING 24 .0 9 .2014 DATE OF PRONOUNCEMENT 30.9.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THESE TWO APPEALS, ONE FILED BY THE ASSESSEE, B EING ITA NO.144/HYD/2014 AND THE OTHER FILED BY THE REVENUE, BEING ITA NO.607/HYD/2014, ARE CROSS APPEALS, WHICH ARE DIRECTED AGAINST THE ORDER OF THE ASST COMMISSIONER OF INCOME - TAX, CIRCLE 16(3), HYDERABAD (ASSESSING OFFICER) DATED 26.12.2013 PASSED UNDE R S.143(3) OF THE ACT READ WITH THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL(DRP) UNDER S.144C(5) OF THE ACT. I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 2 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO THESE APPEALS ARE AS FOLLOWS : - THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUS INESS OF PROVIDING IT ENABLED SERVICES TO THE OTHER GROUP CONCERNS. IT IS A WHOLLY OWNED SUBSIDIARY OF PAREXEL INTERNATIONAL HOLDING (BV) NETHERLANDS, WHICH IN TURN IS OWNED BY PAREXEL INTERNATIONAL CORPORATION, USA. THE ASSESSEE COMPANY MAINLY PROVIDES ROUTINE SERVICES SUCH AS OPERATIONALISING THE CASE - REPORT FORM IN COMPUTER SYSTEM AND UNDERTAKING CERTAIN CONTROL TESTS OF THE IMAGES SENT BY THE ASSOCIATE ENTERPRISES (AE). THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.9.2 009 DECLARING TOTAL INCOME OF RS.3,66,153 AFTER CLAIMING DEDUCTION OF RS.4,86,25,156 UNDER S.10AA OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS PROVIDED IT ENABLED PROCESSING SERVICES TO ITS AES AND A TOTAL AMOUNT OF RS.28,90,32,391 IS CHARGED FOR SUCH SERVICES AS UNDER - A.E. NATURE OF TRANSACTION AMOUNT(RS.) PERCEPTIVE INFORMATICS INC. USA PROVISION OF ITES 28,26,28,797 PAREXEL INTERNATIONAL LTD., UK PAYMENT FOR PROFESSIONAL SERVICES 56,20,434 PAREXEL INTERNATIONAL HOLDING BV, THE NETHERLANDS REIMBURSEMENT OF EXPENSES 7,83,160 28,90,32,391 IN ORDER TO DETERMINE THE ARMS LENGTH PRICE (ALP) OF THESE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS ASSOCIATED ENTERPRISES (AE) , A REFERENCE WAS MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER (TPO) UNDER S.92CA(1) OF THE ACT. IN THE TP STUDY REPORT SUBMITTED BY THE I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 3 ASSESSEE, TP ANALYSIS WAS DONE BY APPLYING TRANSA CTIONAL NET MARGIN METHOD (TNMM) , TAKING OPERATING PROFIT TO TOTAL COST (OP/TC) AS PRICE LEVEL INDICATOR (PLI) . IN THE SAID REPORT, FOURTEEN COMPARABLES WERE SELECTED BY THE ASSESSEE BY APPLYING CERTAIN FILTERS AND SINCE THE ARITHMETIC MEAN OF OP/TC OF TH E SAID FOURTEEN COMPARABLES WAS 11.91%, AS AGAINST THE OP/TC OF 15.57% OF THE ASSESSEE IN RELATION TO ITS INTERNATIONAL TRANSACTIONS WITH AES., THE PRICE CHARGED TO THE AE IN RESPECT OF THESE TRANSACTIONS WAS CLAIMED BY THE ASSESSEE TO BE AS AT ARMS LENGT H. 3. AFTER GOING THROUGH THE RELEVANT DOCUMENTS MAINTAINED BY THE ASSESSEE AND AFTER ANALYZING THE RELEVANT TRANSACTIONS, THE TPO WAS OF THE OPINION THAT THE METHOD ADOPTED BY THE ASSESSEE FOR SELECTING THE COMPARABLES SUFFERED FROM DEFECTS AND THE SAM E, THEREFORE, HAD RESULTED IN SELECTION OF INAPPROPRIATE COMPARABLES AND REJECTION OF APPROPRIATE COMPARABLES. HE ACCORDINGLY CONFRONTED THE ASSESSEE WITH HIS OBSERVATIONS IN THIS REGARD, SEEKING THE LATTERS EXPLANATION/OBJECTIONS AND AFTER TAKING INTO CONSIDERATION THE OBJECTIONS RAISED BY THE ASSESSEE, THE NEW SEARCH CONDUCTED BY HIM FOR SELECTING THE APPROPRIATE COMPARABLES AND THE ANALYSIS OF THE DATA BASE, THE RELEVANT ANNUAL REPORTS AND THE INFORMATION COLLECTED UNDER S.133(6) AS MADE BY HIM, THE TPO FINALLY SELECTED THE FOLLOWING 12 COMPANIES AS COMPARABLES WITH ARITHMETIC MEAN OF THEIR OP/TP AT 27.42%. SL. NO. COMPANY NAME OPERATING REVENUE RS.(IN CRORES) PBIT/ COST % 1. ACCENTIA TECHNOLOGIES LIMITED 78.73 49.40 2. A C ROPETAL TECHNOLOGIES LTD. (SEG.) 33.13 25.01 3. ADITYA BIRLA MINACS WORLDWIDE LTD. 231.57 0.53 4. COSMIC GLOBAL LTD. 7.76 48.20 I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 4 5. CROSSDOMAIN 33.76 29.38 6. ECLERX SERVICES LTD. 187.98 53.44 7. INFOSYS B P O LTD. 10 8 . 23 16.90 8. JEEVAN SOFTECH TECHNOLOGY LTD. 1.79 16.56 9. MICROLAND LIMITED 144.05 2.35 10. MICROGENETIC SYSTEMS LTD. 1.27 10.11 11. R.SYSTEMS INTERNATIONAL LTD.(SEG) 26.55 5.77 12. GENESYS INTERNATIONAL LTD. 83.18 71.50 AVERAGE 27.42 4. AFTER ALLOWING WORKING CAPITAL AD JUSTMENT OF 0.71%, ARITHMETIC MEAN MARGIN OF THE SELECTED COMPARABLES AT 26.71% WAS TAKEN BY THE TPO AS ADJUSTED ARMS LENGTH MARGIN AND APPLYING THE SAME TO THE CORRESPONDING OPERATING COST OF RS.24,89,73,773, THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS AE WAS WORKED OUT BY HIM AT RS.31,54,74,618, AS AGAINST THE PRICE OF RS.29,13,84,003 CHARGED BY THE ASSESSEE. THE DIFFERENCE OF RS.2,40,85,665 ACCORDINGLY WAS WORKED OUT BY THE TPO, AS TP ADJUSTMENT THAT IS REQUIRED TO BE MADE IN RESPECT OF INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AES. 5. WHEN THE ADDITION ON ACCOUNT OF TP ADJUSTMENT WORKED OUT BY THE TPO WAS PROPOSED TO BE MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE I N THE DRAFT ASSESSMENT, OBJECTIONS WERE FILED BY THE ASSESSEE BEFORE THE DISPUTE RESOLUTION PANEL, WHICH INTER ALIA INCLUDED THE OBJECTIONS OF THE ASSESSEE IN RESPECT OF COMPARABILITY ANALYSIS CARRIED OUT BY THE TPO AND THE APPLICATION OF ADDITIONAL FIL TERS BY THE TPO, WHICH ACCORDING TO THE ASSESSEE, RESULTED IN INCLUSION OF CERTAIN COMPANIES IN THE I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 5 COMPARABILITY ANALYSIS WHICH DID NOT SATISFY THE TEST OF COMPARABILITY. THE DISPUTE RESOLUTION PANEL DID NOT FIND MERIT IN THE SUBMISSIONS MADE BY THE ASSES SEE ON THIS ISSUE AND HOLDING THE ACTION OF THE TPO TO BE PROPER, THEY DECLINED TO INTERFERE WITH THE SAME. THE DRP ALSO OVERRULED SUBSTANTIALLY THE OTHER OBJECTIONS RAISED BY THE ASSESSEE. ACCORDINGLY, FINAL ASSESSMENT ORDER WAS PASSED BY THE ASSESSING O FFICER ON 26.12.2013 UNDER S.143(3) AS PER THE DIRECTIONS GIVEN BY THE DRP UNDER S.144C(5), MAKING THEREIN THE ADDITION OF RS.2,40,85,665 TO THE TOTAL INCOME ON ACCOUNT OF TP ADJUSTMENT. 6. WHILE COMPUTING THE DEDUCTION ALLOWABLE UNDER S.10AA, THE COMMUN ICATION COST WAS REDUCED BY THE ASSESSEE FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. ACCORDING TO THE ASSESSING OFFICER, THE REDUCTION OF COMMUNICATION COSTS FROM THE TOTAL TURNOVER AS MADE BY THE ASSESSEE, WHILE COMPUTING THE DEDUCTION UNDER S.10 AA, WAS NOT CORRECT AS PER THE RELEVANT PROVISIONS OF THE ACT AND ACCORDINGLY, HE RECOMPUTED THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER S.10AA BY TAKING THE TOTAL TURNOVER AT RS.28,45,98,214 AS AGAINST RS.26,35,21,371 TAKEN BY THE ASSESSEE. ACCORDINGLY , THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER S.10AA WAS COMPUTED BY THE ASSESSING OFFICER AT RS.4,50,21,046 AS AGAINST RS.4,86,25,156 CLAIMED BY THE ASSESSEE, AND THE EXCESS DEDUCTION OF RS.39,67,263 WAS DISALLOWED BY THE ASSESSING OFFICER. THE DISPUT E RESOLUTION PANEL, HOWEVER, ACCEPTED THE OBJECTION RAISED BY THE ASSESSEE ON THIS ISSUE AND DIRECTED THE ASSESSING OFFICER, RELYING INTER ALIA ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (330 ITR 175) TO REDUCE COMMUNICATION CHARGES OF RS.2,10,76,943 BOTH FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER. ACCORDINGLY, THE ENTIRE CLAIM OF THE ASSESSEE FOR I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 6 DEDUCTION UNDER S.10AA WAS ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED UNDER S. 143(3) AS PER THE DIRECTION OF THE DISPUTE RESOLUTION PANEL. 7. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER PASSED UNDER S.143(3) READ WITH READ WITH S.144C(5) OF THE ACT, ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. ASSESSEES APPEAL: I TA NO.144/HYD/2014: 8. IN ITS APPEAL, THE ASSESSEE COMPANY HAS RAISED THE FOLLOWING GROUNDS - 1 THAT THE LEARNED AO AND HONBLE DRP HAVE ERRED IN DETERMINING THE ARMS LENGTH MARK - UP FOR PROVISION OF IT ENABLED BACK OFFICE SERVICES AS 26.7 1 % (AFTER WO RKING CAPITAL ADJUSTMENT) AND CONSEQUENTLY MADE AN ADDITION OF RS. 2,40,85,665 TO THE TOTAL INCOME OF THE APPELLANT AS AN ADJUSTMENT TO THE ARMS LENGTH PRICE UNDER SECTION 92CA OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, HONBLE DRP ER RED IN UPHOLDING THE DECISION OF THE LEARNED ASSESSING OFFICER/LEARNED TPO IN REJECTING THE TRANSFER PRICING (TP) DOCUMENTATION. 3. THAT THE LEARNED. ASSESSING OFFICER/LEARNED TPO ERRED IN REJECTING THE COMPARABILITY ANALYSIS CARRIED OUT BY THE APPELLAN T IN THE TP DOCUMENTATION AND SHOULD NOT HAVE CARRIED OUT A FRESH COMPARABILITY ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE. 4. THAT THE LEARNED. ASSESSING OFFICER/LEARNED. TPO ERRED IN REJECTING THE COMPANIES SIMILAR TO THE APPELLANT IN FUNCTIONS, A SSET BASE AND RISK PROFILE WHILE PERFORMING COMPARABILITY ANALYSIS. 5. THAT THE LEARNED ASSESSING OFFICER/LEARNED TPO ERRED IN REJECTING COMPANIES SIMILAR TO THE APPELLANT IN FUNCTIONS, ASSET BASE AND RISK I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 7 PROFILE WHILE PERFORMING COMPARABILITY ANALYSIS 6. THAT THE LEARNED ASSESSING OFFICER/LEARNED TPO ERRED IN ERRED IN SELECTING FRESH COMPANIES WHICH ARE LARGER IN SIZE AS COMPARED TO THE APPELLANT AND COMPANIES THAT ARE EARNING SUPER NORMAL PROFITS. 7. THAT THE LEARNED ASSESSING OFFICER/LEARNED TPO ERRE D IN : USING THE DATA AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS INSTEAD OF THOSE AVAILABLE AS ON THE DATE OF PREPARING THE TP DOCUMENTATION, NOT APPLYING MULTIPLE YEAR DATA FOR COMPARABLE COMPANIES AND USING DATA FOR THE FINANCIAL YEAR 2008 - 09 ALO NE, AND COLLECTING SELECTIVE INFORMATION OF THE COMPANIES BY EXERCISING POWER GRANTED TO HIM U/S. 133(6) OF THE INCOME TAX ACT, 1961 THAT WAS NOT AVAILABLE TO THE APPELLANT IN THE PUBLIC DOMAIN. 8. THAT THE HON'BLE DRP/LEARNED AO ERRED IN IGNORING THE L IMITED RISK NATURE OF THE CONTRACTUAL SERVICES PROVIDED BY THE APPELLANT AND IN NOT PROVIDING AN APPROPRIATE ADJUSTMENT TOWARDS THE RISK DIFFERENTIAL EVEN WHEN THE FULL FLEDGED ENTREPRENEURIAL COMPANIES ARE SELECTED AS COMPARABLES. 9. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, GROUNDS NO.1 TO 3 RAISED IN THE APPEAL OF THE ASSESSEE ARE GENERAL IN NATURE SEEKING NO SPECIFIC DECISION THEREON. 10. IN GROUNDS NO.4 TO 6, THE ASSESSEE HAS CHALLENGED THE COMPARABLES SELECTED BY THE TPO FOR THE PUR POSE OF TP ANALYSIS AND AS SUBMITTED BY THE LEARNED COUNSEL OR THE ASSESSEE, THE ASSESSEE IS OBJECTING TO THE SELECTION OF ONLY THE FOLLOWING FIVE COMPARABLES, OUT OF THE TWELVE COMPANIES SELECTED AS COMPARABLES - I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 8 SL. NO. COMPANY NAME 1. ACCENTIA TECHNOLOGIES LIMITED 2. COSMIC GLOBAL LTD. 3. ECLERX SERVICES LTD. 4. GENESYS INTERNATIONAL LTD. 5. INFOSYS B P O LTD. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THE ISSUE OF INCLUSION/EXCLUSION OF THE ABOVE FIVE COMPANIES AS CO MPARABLES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE VARIOUS DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. AC CENTIA TECHNOLOGIES LIMITED 12. AS REGARDS THE SELECTION OF ACCENTIA T ECHNOLOGIES LIMITED AS COMPARABLE, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISIONS OF THIS TRIBUNAL IN THE CASES OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. V/S. ADDL./DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), HYDERABAD AND VIC E VERSA (ITA NO.124 AND 170/HYD/2014 DATED 31.7.2014); EXCELLENCE DATA RESEARCH PVT. LTD., HYDERABAD V/S. ITO WARD 2(1), HYDERABAD (ITA NO.159/HYD/2014 DATED 31.7.2014); AND HYUNDAI MOTORS INDIA ENGINEERING P. LTD., HYDERABAD V/S. DCIT, CIRCLE 2(2), HYDERA BAD (ITA NHO.255/HYD/2014 DATED 31.7.2014), WHEREIN M/S. ACCENTIA TECHNOLOGIES LIMITED (SEG) WAS EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLES ON THE GROUND THAT IT WAS A CASE OF MERGERS AND ACQUISITION, AND THE COMPANY WAS ALSO FOUND TO BE FUNCTIO NALLY DIFFERENT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL AS RECORDED IN PARA 19.2 OF THE ORDER PASSED IN THE CASE OF EXCELLENCE DATA RESEARCH PVT. LTD., HYDERABAD (SUPRA), BEING RELEVANT IN THIS CASE, ARE REPRODUCED BELOW - I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 9 19.2 WE HAVE CONSIDER ED THE RIVAL CONTENTIONS AND NOTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWTH AS ITS STRATEGY. IN EARLIER YEARS ON THE REASON OF ACQUISITION OF VARIOUS COMPANIES , BEING AN EXTRAORDINARY EVENT WHICH HAD AN IMPACT ON THE PROFIT, THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED COUNSEL, THIS YEAR ALSO, THE ACQUISITION OF SOME COMPANIES BY THAT COMPANY MAY HAVE IMPACT ON THE PR OFIT. CONSIDERING THE PROFIT MARGINS OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. MOREOVER, THIS IS ALSO NOT A COMPARABLE IN THE CASE OF M/S. MERCER CONSU LTING (INDIA) P. LTD. (SUPRA), WHICH INDICATES THAT THE TPO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPARABLE, FROM THE LIST OF COMPARABLES SELECTED. 13. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THERE WAS ACQUISITION OF A COMPANY BY M/S. ACCENTIA TECHNOLOGIES LIMITED DURING THE RELEVANT YEAR, AND THE SAID COMPANY, THEREFORE, CANNOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRAORDINARY EVENT WHICH OCCURR ED IN THE RELEVANT YEAR AS RIGHTLY HELD BY THE TRIBUNAL INTER ALIA IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD. (SUPRA). ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SOUGHT TO CONTEND THAT THE ACQUISITION OF A COMPANY BY M/S. ACCENTIA TECHNOLO GIES LTD. TOOK PLACE AT THE FAG END OF THE YEAR UNDER CONSIDERATION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE PROCESS OF ACQUISITION HAD STARTED ON 15.5.2008 ITSELF, I.E. IN THE EARLIER PART OF THE YEAR UNDER CONSIDERATION. WE, THERE FORE, FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EXCELLENCE DATA RESEARCH SERVICES PVT. LTD. (SUPRA) AND DIRECT THE AO/TPO TO EXCLUDE THE ACCENTIA TECHNOLOGIES LIMITED FROM THE LIST OF COMPARABLES. I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 10 COSMIC GLOBAL LTD. 14. AS REGARDS THE SELECTION OF COSMIC GLOBAL LTD. AS COMPARABLE, IT IS OBSERVED THAT THIS COMPANY WAS ALSO EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLES IN THE CASE OF EXCELLENCE DATA RESEARCH SERVICES P. LIMITED (SUPRA), FOLLOWING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MERCER CONSULTING (INDIA) LTD. V/S DCIT (VIDE ORDER DATED 6 TH JUNE, 2014 IN ITA NO.966/DEL/2014) , WHEREIN M/S. COSMIC GLOBAL LIMITED WAS NOT ACCEPTED AS COMPARABLE BY THE TRIBUNAL FOR THE FOLLOWIN G REASONS GIVEN IN PARAS 13.2 AND 13.3 OF ITS ORDER - 13.2. NOW COMING TO THE FACTUAL MATRIX OF THIS CASE, WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CONSTITUTE 57.31% OF THE TOTAL OPERATING COSTS. THIS DOES NOT A PPEAR TO US TO BE A VALID REASON FOR ELIMINATING THIS CASE FROM THE LIST OF COMPARABLES. ON GOING THROUGH THE ANNUAL ACCOUNTS OF COSMIC GLOBAL LIMITED, A COPY OF WHICH HAS BEEN PLACED ON RECORD, WE FIND THAT ITS TOTAL REVENUE FRO M OPERATIONS ARE AT RS.7.37 CRORE DIVIDED INTO THREE SEGMENTS, NAMELY, MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES AT RS.9.90 LACS, TRANSLATION CHARGES AT RS.6.99 CRORE AND ACCOUNTS BPO AT RS.27.76 LAC. THE LD. AR HAS MADE OUT A CASE THAT OUTSOURCING ACTIVITY CARRIED OUT BY THIS COMPANY CONSTITUTES 57% OF TOTAL EXPENSES. THE REASON FOR WHICH WE ARE NOT AGREEABLE WITH THE LD. AR IS THAT WE HAVE TO EXAMINE THE REVENUE OF THIS CASE ONLY FROM ACCOUNTS BPO SE GMENT AND NOT ON THE ENTITY LEVEL, BEING ALSO FROM MEDICAL TRANSCRIPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMINING THE RESULTS OF THIS COMPANY FROM THE ACCOUNTS BPO SEGMENT ALONE, THERE IS NO NEED TO EXAMINE THE POSITI ON UNDER OTHER SEGMENTS. THE ENTIRE OUTSOURCING IS CONFINED TO TRANSLATION CHARGES PAID AT RS.3.00 CRORE, WHICH IS STRICTLY IN THE REALM OF THE TRANSLATION SEGMENT, REVENUES FROM WHICH ARE TO THE TUNE OF RS.6.99 CROR E. IF THIS SEGMENT OF TRANSLATION IS NOT UNDER CONSIDERATION FOR DECIDING AS TO WHETHER THIS CASE IS COMPARABLE OR NOT, WE CANNOT TAKE RECOURSE TO THE FIGURES WHICH ARE RELEVANT FOR SEGMENTS OTHER THAN ACCOUNTS BPO. THUS IT IS HELD THAT THIS CASE CANNOT BE EXCLUDED ON THE STRENGTH OF OUTSOURCING ACTIVITY, WHICH IS ALIEN TO THE RELEVANT SEGMENT. 13.3. HOWEVER, WE FIND THIS CASE TO INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCED BY THE LD. AR TO THE E FFECT THAT TOTAL REVENUE OF THE ACCOUNTS BPO SEGMENT OF COSMIC GLOBAL LIMITED IS VERY LOW AT RS.27.76 LACS. WE HAVE DISCUSSED THIS ASPECT ABOVE IN THE CONTEXT OF CGVAKS CASE AND I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 11 HELD THAT A CAPTIVE UNIT CANNOT BE COMPARED WITH A GIANT CASE AND THUS EXCLUDED CG - VAK WITH TURNOVER FROM ACCOUNTS BPO SEGMENT AT RS.86.10 LACS. AS THE SEGMENTAL REVENUE OF BPO SEGMENT OF COSMIC GLOBAL LIMITED AT RS.27.76 LAC IS STILL ON MUCH LOWER SIDE, THE REA SONS GIVEN ABOVE WOULD FULLY APPLY TO HOLD COSMIC GLOBAL LIMITED AS INCOMPARABLE. THIS CASE IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 15. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE F R O M THE RELE V ANT DETAILS PLACED AT PAGE NO.391 OF HIS PAPER - BOOK, SUBSTANTIAL WORK WAS OUTSOURCED BY M/S. COSMIC GLOBAL L IMITED IN THE RELEVANT YEAR, WHICH IS EVIDENT FROM THE FACT THAT THE OUTSOURCING COST WAS 57% OF THE TOTAL OPE RA TING COST OF THE SAID COMPANY. KEEPING IN V IEW THIS POSITION CLEARLY EVI D EN T FROM THE REL E VANT DETAILS FURNISHED ON RECORD, WH I CH IS NOT DISPUTED EVEN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH O F TH E T RIBUNAL IN TH E C A S E OF MERCER CON S ULTING I NDIA P . L TD. (SUPRA) AND E X CELLENCE D A TA R E SEARCH P. LTD. (SUPRA) TO HOL D THAT M /S. COSMIC GLOBAL LIMI TE D CANNOT B E C ON S I D ERED AS COMPARABLE WITH THE ASSESSEE - C OMPANY. ACCOR D INGLY, THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE SAME FROM THE LI S T O F COMPARABLES. WE MAY CLARIFY HERE FOR THE SAKE O F COMPL E TEN ES S THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT AT THE TIM E OF H E ARING BEFORE US THAT M/S. COSMIC GLOBAL L IM I TED WAS INI T I A LLY SELECT E D BY THE ASSESSEE C OMPANY ITSELF AS A COMPARABLE IN TH E TP STUDY REPORT. IN OUR OPINION, THIS ASPECT ON ITS OWN IS NO T SUFFICIENT TO IN C LU D E M/S. COSMIC GLOBAL L TD. IN THE LI S T OF COMPARABLES, A S THE ASSESSEE HAS ALWAYS A RIGHT TO OBJECT SELECT ION OF A COMPANY TAKEN A S C OMPARABLE EARLIER, IF IT IS SUB S EQU E NTLY FOUND TO BE NOT CO M PARABLE, AS A RESULT OF DIFFERENCE IN FUN C TIONS PERFORMED ETC., AND SUCH OBJECTION IS REQUIRED TO BE CON S I D ERED ON MERITS. I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 12 ECLERX SERVICES LTD. 16. AS REGARDS SELECTION OF ECLERX SERVICES L TD. AS COMPARABLE, IT IS OBSERVED THAT THE SAID COMPANY WAS EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLES INTER ALIA IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD. (SUPRA), AFTER HAVING FOUND THE SAME TO BE FUNCTIONALLY DIFFERENT. THE RELEVANT OBS ERVATIONS OF THE TRIBUNAL AS RECORDED IN PARAGRAPH 16.2 OF ITS ORDER IN THAT CASE ARE REPRODUCED BELOW - 16.2 WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE A NNUAL REPORT AND THE OBJECTIONS OF ASSESSEE. AS SEEN FROM THE ANNUAL REPORT, THE ABOVE CO MPANY IS INVOLVED IN DIVERSE NATURE OF SERVICES, AND THERE WAS NO SEGMENTAL DATA FOR DIVERSIFIED SERVICE PORT FOLIO. MOREOVER THIS COMPANY CAN BE CONSIDERED AS KPO AND WE ARE OF THE OPINION THAT THIS COMPANY IS NOT COMPARABLE TO ASSESSEE S SERVICES. WE THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. 17. AT THE TIME OF HEARING BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RAISED A CONTENTION THAT M/S.EXCELLENCE DATA RESEARCH P. LTD. IS NOT FUNCTI ONALLY SIMILAR WITH THAT OF THE ASSESSEE COMPANY, AND THEREFORE, THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF M/S. EXCELLENCE DATA RESEARCH LTD. (SUPRA) TO EXCLUDE ECLERX SERVICES LTD. FROM THE LIST OF COMPARABLES ON THE GROUND OF FUNCTIONAL DIFFE RENCE, CANNOT BE STRAIGHT AWAY APPLIED IN THE CASE OF THE ASSESSEE, TO EXCLUDE THIS COMPARABLE. AS NOTED BY THE TRIBUNAL IN ITS ORDER, EXCELLENCE DATA RESEARCH P. LTD. WAS RENDERING BACK OFFICE/ DATA SEGREGATION, CONTENT DEVELOPMENT AND SUPPORT SERVICES IN RELATION TO ANALYSIS, CONTENT RESEARCH AND PROJECTIONS FOR ALL TYPES OF BUSINESS INFORMATION, WHILE THE ASSESSEE COMPANY IN THE PRESENT CASE, AS POINTED BY THE TPO IN HIS ORDER, IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES TO ITS GROUP CO NCERNS, SUCH AS OPERATIONALISING THE CASE - REPORT FORM IN THE COMPUTER SYSTEM, AND I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 13 UNDERTAKING QUALITY CONTROL TESTS OF THE IMAGES SENT BY THE AES. AFTER HAVING CONSIDERED THE NATURE OF FUNCTIONS PERFORMED BY THE ASSESSEE COMPANY VIS - A - VIS M/S. EXCELLENCE DATA RESEARCH P. LTD., WE FIND THAT BOTH THESE COMPANIES BASICALLY ARE PROVIDING DATA MANAGEMENT AND DATA PROCESSING SERVICES WHICH ARE IN THE NATURE OF LOW END SERVICES, AND THE SAME THEREFORE, CANNOT BE CONSIDERED AS FUNCTIONALLY DIFFERENT FOR THE PURPO SE OF COMPARABILITY ANALYSIS. WE, THEREFORE, REJECT THE CONTENTION RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, AND DIRECT THE ASSESSING OFFICER TO EXCLUDE ECLERX SERVICES P. LTD. FROM THE LIST OF COMPARABLES, IT BEING A FUNCTIONALLY DIFFERENT COMPAN Y. GENESYS INTERNATIONAL LTD. 18. AS REGARDS THE SELECTION OF GENESYS INTERNATIONAL LTD. AS COMPARABLE, IT IS OBSERVED THAT THIS COMPANY WAS ALSO EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLES IN THE CASE OF EXCELLENCE DATA RESEARCH P. LIMITE D (SUPRA), FOLLOWING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MERCER CONSULTING (INDIA) LTD. V/S DCIT (VIDE ORDER DATED 6 TH JUNE, 2014 IN ITA NO.966/DEL/2014) , WHEREIN M/S. GENESYS INTERNATIONAL LTD. WAS NOT ACCEPTED AS COMPA RABLE BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARAS 14.2 AND 14.3 OF ITS ORDER - 14.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RIVAL MATERIALS ON RECORD. IT HAS BEEN NOTICED SUPRA THAT ASSESSEE IS BASICALLY PROV IDING VARIOUS SERVICES TO THE CUSTOMERS OF ITS AES IN RELATION TO HUMAN RESOURCES WHICH ARE MORE OR LESS CENTERED AROUND THE EMPLOYEES OF THE PROSPECTIVE CLIENTS. WHEN WE CONSIDER THE NATURE OF SERVICES PROVIDED BY GENESYS INTERNATIONAL CORPORATION LTD., IT COMES TO THE FOREFRONT THAT THEY ARE PROVIDING FULL RANGE OF GEOSPATIAL SERVICES TO ITS CUSTOMERS. IN SIMPLE TERMS, GEOSPATIAL SERVICES MEANS THE SERVICES RELATING TO THE RELATIVE POSITION OF THINGS ON THE EARTHS SURFACE. THESE BASICALLY INCLUDE 3D MAPPING, NAVIGATION MAPS, I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 14 IMAGE PROCESSING, CADASTRAL MAPPING, ETC. IF WE TAKE INTO ACCOUNT THE NATURE OF SERVICES PROVID ED BY THE ASSESSEE, BEING FINANCIAL AND RETIREMENT SECURITY, HEALTH, PRODUCTIVITY OF EMPLOYEES AND EMPLOYMENT RELATIONSHIPS AND THEN TRY TO COMPARE THEM WITH THOSE RENDERED BY GENESYS, IT IS MANIFESTED THAT BOTH ARE TOTAL LY INCOMPARABLE. 14.3. THE TPO ON PAGE 48 OF HIS ORDER HAS EXAMINED CBDT CIRCULAR SO 890 (E) DATED 26.9.2000 WHICH PROVIDES A DETAILED LIST OF PRODUCTS OR SERVICES THAT CAN BE COVERED UNDER THE ITES FOR THE PURPOSES OF SECTION 10A AND 10B OF THE ACT. IN THIS CIRCULAR, INFORMATION TECHNOLOGY ENABLED PRODUCTS/SERVICES HAVE BEEN DIVIDED INTO FIFTEEN CATEGORIES, STARTING WITH BANK OFFICE OPERATIONS, CALL CENTRES ETC. AND ENDING WITH WEBSITE SERVICES. FROM THE VERY DESCRIPTION OF SUCH SERVICES, IT IS PALPABLE THAT EVEN THOUGH THESE FALL UNDER THE OVERALL ITES CATEGORY, BUT SOME OF THEM ARE QUITE DIFFERENT FROM EACH OTHER. TO CITE, SERVIC E AT SL.NO. (VI) OF THIS CIRCULAR IS GEOGRAPHIC INFORMATION SYSTEM SERVICES AND AT SL. NO. (VII) IS HUMAN RESOURCES SERVICES. NO DOUBT, ALL THESE FIFTEEN CATEGORIES OF PRODUCTS/SERVICES HAVE BEEN INCLUDED UNDER THE MAJOR HEAD OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES), BUT MOST OF THEM ARE QUITE DISTINGUISHABLE FROM OTHERS. IN OUR CONSIDERED OPINION, THE FIFTEEN BROAD CATEGORIES SET OUT IN THIS CIRCULAR CANNOT PER SE BE CLAIMED AS SIMILAR TO EACH OTHER. A CURSORY LOOK AT THESE PRODUCTS/SERVICES TRANSPIRES THAT SOME OF THEM ARE FUNCTIONALLY QUITE DIFFERENT FROM EACH OTHER. FURTHER THE LEVEL OF INVESTMENT REQUIRED FOR PROVIDING SUCH SERVICES IS ALSO NOT CONSISTENT. IN OUR CONSIDERED OPINION, THE MERE FACT THAT TWO SERVICES ARE PLACED UNDER THIS CATEGORY DO NOT BECOME AUTOMATICALLY COMPARABLE. IF A CASE PROVIDING ONE CATEGORY OF SERVICES UNDER ITES IS CLAIMED AS COMPARABLE WITH ANOTHER IN THE CATEGORY OF SERVICE UNDER ITES AS PER THIS CIRCULAR, THEN IT MUST BE SHOWN EX FACIE THAT IT IS BROADLY SIMILAR. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE SERVICES RENDERED BY GENESYS FALL UNDER CLAUSE (VI) WITH THE HEADING GE OGRAPHICAL INFORMATION SYSTEMS SERVICES, WHEREAS THOSE RENDERED BY THE ASSESSEE FALL PARTLY UNDER CLAUSE (VII) WITH THE HEADING HUMAN RESOURCES SERVICES AND PARTLY UNDER CLAUSE (XI) WITH THE HEADING PAYROLL. ON JUXTAPOS ITION EXAMINATION OF THESE TWO SETS OF SERVICES, WE FIND THAT THERE IS A VAST DIFFERENCE WHICH MAKE ONE QUITE DISTINCT FROM THE OTHER. IN VIEW OF SUCH FUNCTIONAL INCOMPARABILITY BETWEEN ASSESSEE AND GENESYS, WE HOLD THAT THIS CO MPANY CANNOT BE TREATED AS COMPARABLE. WE, THEREFORE, DIRECT TO EXCLUDE THIS CASE FROM THE LIST OF COMPARABLES. I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 15 19. AT THE TIME OF HEARING BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RAISED A CONTENTION THAT M/S.EXCELLENCE DATA RES EARCH P. LTD. IS NOT FUNCTIONALLY SIMILAR WITH THAT OF THE ASSESSEE COMPANY, AND THEREFORE, THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF M/S. EXCELLENCE DATA RESEARCH LTD. (SUPRA) TO EXCLUDE GENESYS INTERNATIONAL LTD. FROM THE LIST OF COMPARABLES ON THE GROUND OF FUNCTIONAL DIFFERENCE, CANNOT BE STRAIGHT AWAY APPLIED IN THE CASE OF THE ASSESSEE, TO EXCLUDE THIS COMPARABLE. AS NOTED BY THE TRIBUNAL IN ITS ORDER, EXCELLENCE DATA RESEARCH P. LTD. WAS RENDERING BACK OFFICE/ DATA SEGREGATION, CONTENT D EVELOPMENT AND SUPPORT SERVICES IN RELATION TO ANALYSIS, CONTENT RESEARCH AND PROJECTIONS FOR ALL TYPES OF BUSINESS INFORMATION, WHILE THE ASSESSEE COMPANY IN THE PRESENT CASE, AS POINTED BY THE TPO IN HIS ORDER, IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES TO ITS GROUP CONCERNS, SUCH AS OPERATIONALISING THE CASE - REPORT FORM IN THE COMPUTER SYSTEM, AND UNDERTAKING QUALITY CONTROL TESTS OF THE IMAGES SENT BY THE AES. AFTER HAVING CONSIDERED THE NATURE OF FUNCTIONS PERFORMED BY THE ASSESSEE C OMPANY VIS - A - VIS M/S. EXCELLENCE DATA RESEARCH P. LTD., WE FIND THAT BOTH THESE COMPANIES BASICALLY ARE PROVIDING DATA MANAGEMENT AND DATA PROCESSING SERVICES WHICH ARE IN THE NATURE OF LOW END SERVICES, AND THE SAME THEREFORE, CANNOT BE CONSIDERED AS FUNC TIONALLY DIFFERENT FOR THE PURPOSE OF COMPARABILITY ANALYSIS. WE, THEREFORE, REJECT THE CONTENTION RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, AND DIRECT THE ASSESSING OFFICER TO EXCLUDE GENESYS INTERNATIONAL LTD. FROM THE LIST OF COMPARABLES, IT BE ING A FUNCTIONALLY DIFFERENT COMPANY. INFOSYS BPO 20 AS REGARDS SELECTION OF INFOSYS BPO AS A COMPARABLE COMPANY, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 16 THE SAID COMPANY CANNOT BE TAKEN AS COMPARABLE BECAUSE OF ITS UNCOMPARABLE SIZE OF OPERATIONS. HE HAS CONTENDED THAT THE TURNOVER OF THE SAID COMPANY WAS MANY TIMES HIGHER THAN THAT OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE SIZE OF OPERATIONS DOES NOT MATTER AS FAR AS SELECTION OF COMPARABLES IS CONCERNED ESPECIALLY IN THE SECTOR OF IT ENABLED SERVICES, IT IS OBSERVED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. AGNITY TECHNOLOGIES PVT. LTD. (219 TAXMAN 26) HOLDING THAT HUGE TURNOVER COMPANIES LIKE INFOSYS AND WIPRO CANNOT BE CONSIDERED AS COMPARABLES WITH SMALLER COMPANIES LIKE THE ASSESSEE IN THE PRESENT CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF AGNITY TECHNOL OGIES P. LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE INFOSYS BPO FROM THE LIST OF COMPARABLES. 21. AS DISCUSSED ABOVE, THE FIVE COMPARABLES, VIZ. (1) ACCENTIA TECHNOLOGIES LIMITED, (2) COSMIC GLOBAL LTD., (3) ECLERX SERVICES LTD., (4) GENESYS INTERNATIONAL LTD., (5) INFOSYS BPO, OUT OF THE TWELVE COMPARABLES SELECTED BY THE TPO ARE THUS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES FOR THE PURPOSE OF COMPARABILITY ANALYSIS, AND IF IT IS DONE SO, THE ARITHMETIC MEAN OF MARGINS OF THE REMAINING SEVEN COMPARABLES COMES TO 11.85%, AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE BASIS OF WORKING FURNISHED BY HIM. THE SAME BEING LOWER THAN THE PROFIT MARGIN OF 15.57% CHARGED BY THE ASSESSEE COMPANY TO ITS AE IN THE RELEVANT INTERNATIONAL TRANSACTIONS, IT FOLLOWS THAT NO TP ADJUSTMENT IS REQUIRED TO BE MADE IN THE CASE OF THE ASSESSEE. WE, THEREFORE, DELETE THE ADDITION MADE BY THE ASSESSING OFFICER TO TOTAL INCOME OF THE ASSESSEE BY WAY OF TP ADJUSTMENT, AND A LLOW GROUND NO.4 TO 6 OF THE ASSESSEES APPEAL. I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 17 2 2 . AS REGARDS GROUNDS N O S .7 TO 8 OF THE ASSESSEES APPEAL , IT IS OB SE RVED THAT THE ISSUES RAISED THEREIN HAVE BECOME INFRUCTUOUS AS A RESULT OF OUR DECISION RENDERED ABOVE, WHILE DECIDING GROUND NOS. 4 T O 6, WHEREBY THE ADDITION MADE ON ACCOUNT OF TP ADJUSTMENT IS HELD TO BE UNSUSTAINABLE. THESE GROUNDS OF THE ASSESSEES APPEAL ARE ACCORDINGLY DISMISSED AS INFRUCTUOUS. REVENUES APPEAL: ITA NO.609/HYD/2014 2 3 . NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE, WHICH INVOLVES A SOLITARY ISSUE REGARDING TO THE INCLUSION/EXCLUSION OF THE COMMUNICATION COSTS FROM THE TOTAL TURNOVER, WHILE COMPUTING THE DEDUCTION UNDER S.10AA. 2 4 . AT THE TIME OF HEARING BEFORE US, THE LEARNED REPRESENTATIVES OF BOTH THE S IDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY LTD. (SUPRA), WHEREIN IT WAS HELD THAT ALTHOUGH THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN DEFINED AT ALL BY THE PARLIAMENT FOR THE PURPOSES OF S.10A , WHEN THE DEFINITION OF EXPORT TURNO V ER EXCLUDES SP E C I FICALLY CERTAIN ITEMS, THE EXPRESSION TOTAL TURNOVER CANNO T HAVE A DIFFE RE NT MEANING THAN THE TOTAL TURNOVER ESPECIALLY WHEN THE EXPORT T URNOVER FORMS A CONSTITUENT P A RT OF THE TOTAL TURNOVER FOR THE PU R PO SE OF THE APPLI C ATION OF TH E FORMULA. HONBL E BOMBAY HIGH C OU R T THUS HELD THAT ANY ITEM WHICH IS EXCLU D ED FOR THE PU R PO S E OF CO M P U TING EXPORT TURNOVER HA S NECESSARILY TO BE EXCLU D ED FOR COMPUTING THE TOTAL TURNOVER FOR THE PU RPOS E OF COMPUTING DEDUCTION UNDER S.10A O F THE AC T. RESPECTFULLY FOLLO W IN G THE SAID DECISION OF THE HON'BLE BOMBAY HIGH COURT, WE FIND NO I TA NO. 144 & 607 /H YD/20 1 4 M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, HYDERABAD 18 MERIT IN THE APPEAL O F TH E REVENUE . THE SAME IS ACCOR D INGLY DISMISSED. 2 5 . IN THE RESULT, APPEAL O F TH E ASSESSEE IS TREATED AS ALLOWED, WHEREAS THE APPEAL O F THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 30 TH SEPTEMBER , 2014 SD/ - SD/ - ( P.MADHAVI DEVI ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER D T/ - 30 TH SEPTEMBER, 2014 COPY FORWARDED TO: 1. M/S. PAREXEL INTERNATIONAL (INDIA) PRIVATE LIMITED, 11 TH FLOOR, BUILDING NO.20, SUNDEW PROPERTIES SEZ P. LTD., MINDSPACE, MADHAPUR, HYDERABAD 500 089 2 . DY. /ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(3), HYDERABAD 3. 4. DISPUTE RESOLUTION PANEL, HYDERABAD DIRECTOR GENERAL OF INCOME - TAX, INTERNATIONAL TAXATION, HYDERABAD 500 004. 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S
