AcIT, Circle - 14(1), Kolkata , Kolkata V. M/s. Acclaris Business Solutions (P) Ltd., Kolkata

ITA 1458/KOL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4134 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL A
• Assessee Lawyers: J P KHAITAN
• Keywords: Transfer pricing; International transaction; Arm length price; TDS
• Section: 250; 274; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH KO LKATA BEFORE SHRI S. S. GODARA, JM & DR. A.L. SAINI, AM ITA NO.1458/KOL/2017 (ASSESSMENT YEAR: 2010-11) ACIT, CIRCLE-14(1), KOLKATA VS. M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. ECO SPACE TOWER, 2B, 2 ND FLOOR, UNIT 201, NEW TOWN, RAJARHAT, 24 PGS(N), KOLKATA 700156. ./ ./PAN/GIR NO. : AAECA2366E ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI SANJAY PAUL, ACIT(DR) RESPONDENT BY : SHRI J.P. KHAITAN, SR. ADVOCATE / DATE OF HEARING : 24/07/2020 /DATE OF PRONOUNCEMENT : 20/10/2020 / O R D E R PER DR. A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINI NG TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-22, KOLKATA WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U/S 143(1)/144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS F OLLOWS: GROUND NO.1- CIT(A) ERRED IN STATING THAT THE ASSES SEE IS PURELY ENGAGED IN PROCESSING CLAIMS RELATING TO MEDICAL CLAIMS AND TRAVEL AND NO T ALSO IN SOFTWARE DEVELOPMENTS. GROUND NO.2- THE CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE IS ENGAGED IN CUSTOMER RESEARCH SOFTWARE DEVELOPMENT AND KPO SERV ICES AS EVIDENCED BY VARIOUS CASES OR PORTALS AND WEBSITE OF THE COMPANY. 2 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. GROUND NO.3- THE CIT(A) ERRED IN STATING THAT THE T PO HAS NOT CONSIDERED FUNCTIONAL, ASSET AND RISK PROFILE OF THE ASSESSEE AND HAS OVER LOOKED THE EVIDENCE FILED BY THE ASSESSEE. GROUND NO.4- THE CIT(A) ERRED IN REJECTING COMPANIE S THAT ARE FUNCTIONALLY COMPARABLE OF THE ASSESSEE FROM THE FINAL LIST OF T HE COMPARABLE WITHOUT PROVIDING ANY COGENT REASONS FOR NON-COMPARABILITY OF FAR OF THES E COMPANIES. 1. ACCENTIA TECHNOLOGIES LTD. 2. TCS E-SERVE INTERNATIONAL LTD. 3. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 4. CROSSDOMAIN SOLUTIONS PVT. LTD. GROUND NO.5 THE CIT(A) ERRED IN ACCEPTING COMPANI ES THAT ARE FUNCTIONALLY DIFFERENT FROM THAT OF THE ASSESSEE WITHOUT PROVIDING ANY COG ENT REASONS FOR COMPARABILITY OF FAR OF THESE COMPANIES 1. COSMIC GLOBAL LTD. 2. TIMEX GROUP INDIA LTD - 3. AOK IN-HOUSE BPO SERVICES LTD 4. ADITYA BIRLA MINACS WORLDWIDE LTD. 5. OMEGA HEALTHCARE MANAGEMENT SERVICES PVT. LTD. 6. IN HOUSE PRODUCTIONS LTD. SEG 7. FORTUNE INFOTECH LTD. GROUND NO.6 THE CIT(A) ERRED IN DELETING ALP ADJU STMENT OF RS.2,97,51,782/-. 3. FIRST WE SHALL TAKE GROUND NO.1,2 AND 3 RAISED BY THE REVENUE , WHICH RELATE TO FUNCTIONAL, ASSET AND RISK (FAR) PROFILE OF THE A SSESSEE. THE STAND OF THE REVENUE IN THESE GROUNDS IS THAT THE ASSESSEE I S NOT A CAPTIVE BPO SERVICE PROVIDER. 4. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE RESPONDENT, ACCLARIS BUSINESS SOLUTIONS PVT. LTD. ( 'HEREINAFTER REFERRED TO AS THE ASSESSEE) WAS INCORPORATED ON 6 TH JUNE 2003 AS A SUBSIDIARY OF ACCLARIS INC. (FORMERLY KNOWN AS ACCLARIS LLC AND HEREINAFTER REF ERRED TO AS THE HOLDING COMPANY). THE ASSESSEE CLAIMED THAT IT IS A CAPTIV E SERVICE PROVIDER AND DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PROVIDED BACK OFFICE PROCESSING SERVICES OR BUSINESS PROCESS OUTSOURCING SERVICES ( 'BPO') TO SOME OF THE CLIENTS OF ITS HOLDING COMPANY. THE BPO ACTIVITIES INCLUDED VA RIOUS TYPES OF SERVICES, PRIMARILY RELATED TO COLLATION AND CHECKING OF MEDI CAL CLAIMS AND TRAVEL & 3 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. EXPENSE CLAIMS WITH THEIR RESPECTIVE BILLS. THE ASS ESSEE ALL ALONG OPERATED UNDER CONSTANT SUPPORT AND GUIDANCE FROM ITS HOLDING COMP ANY FOR THESE SERVICES. THE ASSESSEE IN ITS FORM 3CEB REPORTED TWO INTERNATIONA L TRANSACTIONS: SERVICES RENDERED AND EXPENSES RECOVERED . THE TRANSACTION UNDER LITIGATION IS THE TRANSACTION OF SERVICES RENDERED AND THERE IS NO DISPUTE WITH RESPECT TO THE TRANSACTIONS IN THE CATEGORY OF EXPENSES RECOVERED . AS PER THE FORM NO. 3CEB FILED BY THE ASSESSEE THE TRANSACTION OF SERVICES RENDERED WAS REPORTED AT INR 191,423,932/-. SUCH AMOUNTS WERE PAID BY THE ASSESSEES HOLDING COMPANY TO THE ASSESSEE FOR THE ABOVEMENTIONED BPO SERVICES WHICH WERE PROVIDED BY THE ASSESSEE TO ITS SUCH HOLDING COMPAN Y. THE ASSESSEE APPLIED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOS T APPROPRIATE METHOD FOR BENCHMARKING SUCH INTERNATIONAL TRANSACTION. A PROF IT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/OPERATING COST (OP/OC) WAS COMPU TED BY THE ASSESSEE AT 12.37%. FIVE COMPANIES WERE CONSIDERED AS COMPARABL E COMPANIES AND THEIR AVERAGE MARGIN WAS 8.54%. THE ARITHMETIC MEAN OF OP ERATING PROFITS MARGINS OF THESE FIVE COMPARABLE COMPANIES WERE COMPARED FAVOR ABLY WITH ASSESSEE'S PLI AND, HENCE, THE INTERNATIONAL TRANSACTION OF SERVICES RENDERED WAS CONCLUDED TO BE AT ARM'S LENGTH BY THE ASSESSEE. 5. A REFERENCE WAS MADE BY THE LD. ASSESSING OFFICE R (AO) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE I NTERNATIONAL TRANSACTIONS TO THE LD. TRANSFER PRICING OFFICER (TPO). IN THE COURSE OF THE PROCEEDINGS BEFORE THE LD. TPO, THE ASSESSEE FILED THE TRANSFER PRICING ST UDY REPORT (VIDE LETTER DATED 10 TH MAY, 2013 ADDRESSED TO THE LD. TPO WHICH IS AT PG. 3 OF THE PAPER BOOK , WHEREIN THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE W ERE DESCRIBED IN DETAIL AND THE RELEVANT PORTIONS THEREOF ARE AS FOLLOWS: 1.2.2 ACCLARIS BUSINESS SOLUTIONS PRIVATE LIMITED ACCLARIS INDIA PROVIDES BACK OFFICE PROCESSING (BP O) SERVICES TO ACCLARIS INC. AS A CAPTIVE SERVICE PROVIDER IN RELA TION TO SOME OF ACCLARIS INCS CLIENTS. THE BPO SERVICES INCLUDES V ARIOUS TYPES OF SERVICES INCLUDING E-RECRUITMENT SERVICES, FINANCIA L ACCOUNTING SERVICES 4 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. AND ROUTINE BACK OFFICE SERVICES WHICH COULD BE LIK E INDEXING AND ENROLLMENT FOR CLIENTS. OUR ANALYSIS RECOGNIZES THAT ACCLARIS INDIA WORKS A S AN IT ENABLED SERVICE PROVIDER PROVIDING BACK-OFFICE SERVICES TO ACCLARIS INC. ACCLARIS INC. BEARS ALL THE SIGNIFICANT BUSINESS AND ENTREPR ENEURIAL RISKS OF PRODUCT ACCEPTABILITY AND PERFORMANCES IN THE MARKE T. ACCLARIS INDIA DOES NOT OWN ANY INTEREST IN THESE INTANGIBLES AND IS A MERE SERVICE PROVIDER. BASED ON THE FUNCTIONAL ANALYSIS, ACCLARIS INDIA HA S LEAST COMPLEX OPERATIONS AND BEARS LESSER SHARE OF RISKS AND WAS ACCORDINGLY SELECTED AS THE TESTED PARTY FOR THE ECONOMIC ANALYSIS. OUR ANALYSIS RECOGNIZES THAT ACCLARIS INDIA WORKS A S A CONTRACT IT ENABLED SERVICE PROVIDER PROVIDING ROUTINE IT ENABL ED SERVICES TO THE GROUP. ACCLARIS INDIA LEVERAGES ON ALL THE VALUABLE INTELLECTUAL PROPERTY RIGHTS (KNOW-HOW, COPYRIGHTS ETC.) AND OTHER COMMER CIAL OR MARKETING INTANGIBLES (BRAND NAMES, TRADEMARKS ETC.) OWNED BY ACCLARIS INC. ACCLARIS INC. ALSO BEARS ALL THE SIGNIFICANT BUSINE SS AND ENTREPRENEURIAL RISKS OF PRODUCT ACCEPTABILITY AND PERFORMANCE IN T HE MARKET. ACCLARIS INDIA DOES NOT OWN ANY INTEREST IN THESE INTANGIBLE S AND IS A MERE SERVICE PROVIDER. FURTHER, IN RESPONSE TO THE NOTICE OF THE LD. TPO D ATED 18 TH SEPTEMBER, 2013, THE ASSESSEE, VIDE ITS LETTER DATED 17 TH OCTOBER 2013 FILED BEFORE THE LD. TPO, MADE DETAILED SUBMISSIONS INTER ALIA REGARDING THE FUNCT IONS PERFORMED AND ACTIVITIES UNDERTAKEN BY THE ASSESSEE. THE RELEVANT PORTIONS O F SUCH SUBMISSIONS, WHICH ARE AT PAGES 119-120 OF THE PAPER BOOK , ARE GIVEN BELOW: CLAIMS PROCESSING (CLAIMS INDEXING & DATA ENTRY): FOR EACH OF THE CLIENTS, THE FIRST STEP IN THE PROC ESS OF CLAIM APPROVAL IS CLAIMS PROCESSING. DURING THE SAID PROCESS, THE C LIENTS SUBMIT THEIR HEALTHCARE CLAIMS THROUGH FAX / IMAGES IN THE ACCLA RIS INC. WEB-BASED APPLICATION. THE ASSESSEES RESOURCES LOG INTO THE APPLICATION TO RETRIEVE THE SAID DATA. BASED ON THE CLAIMS SUBMITTED BY TH E CLIENTS, THE ASSESSEE PERFORMS THE NECESSARY DATA ENTRY FUNCTIONS . IN CASE ANY CLARIFICATION OR GUIDANCE IS REQUIRED BY THE ASSESS EE, THESE ARE PROVIDED BY THE US SUBJECT MATTER EXPERTS (SME). CUSTOMER ANALYSIS & RESEARCH (CARE): POST COMPLETION OF THE WORK THERE MAY BE INSTANCES WHEREIN QUERIES ARE RAISED BY THE CLIENTS WITH REGARD TO THE PROCESSING OF THEIR CLAIMS. 5 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. DURING SUCH A SCENARIO, THE ASSESSEE WOULD PERFORM A REVIEW OF THE BASIC DATA ENTRY FUNCTIONS UNDERTAKEN BY IT TO ENSURE THAT NO ERRORS HAVE BEEN MADE. IN CASE ANY ERRORS ARE FOUND IN THE LIMITED FUNCTIONS BEING PERFORMED BY THE ASSESSEE, THESE ARE RECTIFIE D. ALTERNATIVELY, IF NO ERRORS ARE PRESENT, THESE QUER IES ARE SENT ACROSS TO THE US SMES FOR RESOLUTION. OPERATIONAL ACCOUNTING: OPERATIONAL ACCOUNTING REFERS TO A RECONCILIATION PROCESS PERFORMED BY THE ASSESSEE TO CONFIRM WHETHER ALL PAYMENTS THAT W ERE REQUIRED TO BE MADE TO THE CLIENTS HAVE BEEN PROCESSED BY ACCLARIS INC. THE RECONCILIATION PROCESS IS PERFORMED USING THE RULES AND STEPS PROVIDED BY THE US SMES. IF ANY ERRORS ARE FOUND, THESE ARE INFORMED TO THE US SMES FOR INITIATION OF CORRECTIVE ACTION. IN SUCH LETTER, THE ASSESSEE FURTHER SUBMITTED THAT FOR THE RENDERING OF THE ABOVE MENTIONED BPO SERVICES, ACCLARIS INC (AE) HAD DEVEL OPED A SOFTWARE MODULE WHICH WAS ITS OWN PROPRIETARY PRODUCT INTENDED ONLY FOR THE PURPOSE OF CLAIM PROCESSING. THE ASSESSEE IN CERTAIN SITUATIONS, PRO VIDED SUPPORT TO ACCLARIS INC., WHICH WERE BASED ON SPECIFIC CUSTOMER NEEDS ASCERTA INED BY ACCLARIS INC. ASSESSEE`S FUNCTIONS WERE LIMITED TO MAKING INCIDEN TAL CHANGES TO THE MODULE NECESSARY FOR RENDERING BPO SERVICES; REQUIRING BAS IC CODING ACTIVITIES, UNDER THE GUIDANCE AND BASED ON THE REQUIREMENTS SHARED BY SU BJECT MATTER EXPERTS (SME) EMPLOYED BY ITS HOLDING COMPANY. 6. THE ASSESSEE, VIDE ITS ABOVE LETTER DATED 17 TH OCTOBER, 2013 FILED BEFORE THE LD. TPO, ANNEXED THE AGREEMENT DATED JUNE 30, 2003 WHICH IT HAD ENTERED INTO WITH ITS HOLDING COMPANY, ACCLARIS INC (PAGES 122-131 OF THE PAPER BOOK) UNDER WHICH SUCH BPO SERVICES, I.E. BACK OFFICE PROCESSIN G AND INFORMATION TECHNOLOGY ENABLED SERVICES WERE AGREED TO BE PROVI DED BY THE ASSESSEE TO ITS HOLDING COMPANY. SUCH AGREEMENT IN ITS ADDENDUM 1 M ADE REFERENCE TO SOFTWARE DEVELOPMENT/SUPPORT SERVICES WHICH THE ASSESSEE WOU LD BE WILLING TO PROVIDE ON THE TERMS AND CONDITIONS OF THE SERVICE AGREEMENT. THE SAID ADDENDUM WAS ALSO VALID FROM JUNE 30, 2003 WHICH IS THE DATE FROM WHI CH THE SERVICE ARRANGEMENT CAME INTO FORCE. THE ASSESSEE CLAIMED THAT SUCH AGR EEMENT HAD BEEN FILED WITH 6 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. THE DEPARTMENTAL AUTHORITIES IN THE COURSE OF THE A SSESSMENT PROCEEDINGS FOR THE EARLIER ASSESSMENT YEARS ALSO AND IN SUCH YEARS, IT WAS ALL ALONG ACCEPTED BY THE DEPARTMENT THAT THE ASSESSEE WAS ENGAGED IN PROVIDI NG BPO SERVICES AND THERE WAS NO DISPUTE WITH RESPECT THERETO IN THOSE ASSESS MENT YEARS. THE RELEVANT PORTION OF SUCH ADDENDUM IS AS UNDER: 1. IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT BETWEEN ACCLARIS, LLC (ACCLARIS) AND ACCLARIS BUS INESS SERVICES PVT LTD (ABSPL) DATED JUNE 30, 2003, (T HE AGREEMENT) IT IS AGREED BETWEEN THE PARTIES THAT T HE SERVICES DESCRIBED BELOW ARE NOT CURRENTLY INCLUDED IN THE S COPE OF SERVICES OF THE AGREEMENT AND THE ADDENDA AS THEY MAY HAVE B EEN MODIFIED FROM TIME TO TIME. 2. . ABSPL AGREES TO PROVIDE AND ACCLARIS AGREES TO U TILISE THE SERVICES OF UP TO 4 SOFTWARE DEVELOPERS, ONE OF WHOM MAY ALSO FUNCTION IN A SUPERVISORY CAPACITY. THE ASSESSEE STATES THAT ON MARCH 31 2010, THE SAID AGREEMENT BETWEEN THE ASSESSEE AND ACCLARIS INC. WAS FURTHER AMENDED, WIT H RESPECT TO THE KOLKATA SERVICE CENTRE OF THE RESPONDENT-ASSESSEE, TO INCLU DE FOR SPECIFIC PAYMENT RELATED TERMS PERTAINING TO THE PROVISION OF SOFTWA RE SERVICE FOR RUNNING OF THE ASSESSEES BPO SERVICES (PAGES 134-135 OF THE PAPER BOOK) . SUCH AMENDMENT WAS MADE EFFECTIVE FROM APRIL 1, 2009. THE RELEVANT PORTION OF SUCH AMENDMENT IS AS FOLLOWS: ACCLARIS (I.E. THE HOLDING COMPANY) WILL PAY ABSPL (I.E. THE ASSESSEE) MONTHLY CHARGES TOWARDS DIRECT FTES (I.E. FULL TIME EMPLOYEES) ENGAGED BY ABSPL FOR RENDERING BPO SERV ICES FOR CLIENTS OF ACCLARIS AS WELL AS FOR SOFTWARE SERVIC ES FOR RUNNING SUCH BPO SERVICES . A DIRECT FTE FOR SOFTWARE SERVICES IS DEFINED AS AN Y FTE ASSIGNED IN THE DEVELOPMENT (EITHER IN PART OR IN FULL) OR MAIN TENANCE OF ANY SOFTWARE, WHICH IS USED BY ACCLARIS FOR RUNNING ITS BPO SERVICES 7. THE LD. TPO, HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT SINCE SOME OF THE ACTIVITIES OF THE ASSESSEE P ERTAINED TO ADJUDICATION OVER 7 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. CLAIMS, THE ASSESSEE CARRIED OUT HIGHER FUNCTIONS T HAN A ROUTINE BPO, LEANING TOWARDS A KNOWLEDGE PROCESS OUTSOURCING (KPO). RE FERENCE IN THIS REGARD WAS ALSO MADE BY THE LD. TPO ON ONLINE JOB PROFILES OF SOME OF THE EMPLOYEES OF THE ASSESSEE. FURTHER, THE LD. TPO ALSO HELD THAT THE A SSESSEE CARRIED OUT SOFTWARE DEVELOPMENT WORK AND MAINTENANCE OF SOFTWARE FOR TH E WORK OF ITS HOLDING COMPANY. THE LD. TPO THEREFORE UNDERTOOK A FRESH SE ARCH FOR SELECTING COMPARABLES. IN SAID SEARCH, THE LD. TPO SELECTED S IX COMPANIES (MAINLY ENGAGED IN KPO SERVICES) AS COMPARABLES WITH AN ARI THMETIC MEAN PLI OF 29.83%. ACCORDINGLY, ADJUSTMENT WAS MADE TO THE ASS ESSEE'S ARM LENGTH PRICE (ALP) AND THE ADJUSTED AMOUNT OF RS, 2,97,51,782/- WAS ADDED TO THE INCOME OF THE ASSESSEE. 8. AGGRIEVED BY THE ORDER OF THE TPO/AO, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) WHO HAS DELETED THE ARM LENGTH PRICE ( ALP ) DETERMINED BY THE TPO AT RS, 2,97,51,782/- AND ALSO HELD THAT THE ASSESSEE IS A CAPTIVE BPO SERVICE PROVIDER. AGGRIEVED BY THE ORDE R OF THE LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 9. LEARNED DR FOR THE REVENUE, BEFORE THE BENCH, HAS PRIMARILY REITERATED THE STAND TAKEN BY THE TRANSFER PRICING OFFICER (TP O), WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 10. LEARNED COUNSEL FOR THE ASSESSEE, HAS RELIED ON THE ORDER OF THE LD CIT(A). 11. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE T HROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD TPO AND FINDINGS OF LD CIT(A) AND OTHER MATERIALS B ROUGHT ON RECORD. WE NOTE THAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE COMPANY SUBMITTED LETTER DATED 18 TH JANUARY 2017 BEFORE THE LD. CIT(A), WHEREIN THE AS SESSEE REITERATED ITS 8 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. SUBMISSIONS MADE BEFORE THE LD. TPO (PAGES 377-381 OF THE PAPER BOOK) . RELEVANT EXTRACTS OF THE SAID SUBMISSIONS ARE GIVEN BELOW: THE APPELLANT PROVIDES BACK OFFICE PROCESSING SERV ICES (BPO) TO SOME OF THE CLIENTS OF ITS HOLDING COMPANY, ACCLARI S INC. THE BPO ACTIVITIES INCLUDE VARIOUS TYPES OF SERVICES WHICH INCLUDE MEDICAL CLAIMS AND TRAVEL & EXPENSE CLAIMS. ON THE OTHER HA ND, ACCLARIS INC UNDERTAKES THE ENTIRE MARKETING AND BUSINESS DEVELO PMENT ACTIVITY TO GENERATE BUSINESS, NEGOTIATES AND ENTERS INTO CONTR ACTS WITH CUSTOMERS, BEARS THE COSTS OF THE ENTIRE PROJECT TRANSITION PH ASE, RENDERS THE REQUISITE TRAINING TO ITS EMPLOYEES OR THE EMPLOYEE S OF THE RESPONDENT AND LAST BUT NOT THE LEAST, PERFORMS THE FUNCTION O F SEEING THE COMPLETE PROJECT THROUGH. SOFTWARE SERVICES: ACCLARIS INDIA PERFORMS BASIC SOFTWARE CODING ACTIV ITIES WHICH IS UNDER THE GUIDANCE OF THE US EXPERTS. ACCLARIS INDIA HAS NO ACCESS TO THE SOURCE CODE OF THE SOFTWARE AND IS PROVIDED A COPY FOR USE. THE FUNCTIONS PERFORMED BY THE ENTITIES ARE SUMMARI SED BELOW: FUNCTIONS BRIEF OF THE FUNCTION ACCLARIS INC. APPLICANT DEPOSITS AND DISBURSEMENTS RECONCILIATION OF THE CLAIM TO CONFIRM THAT ALL PAYMENTS REQUIRED TO BE MADE TO CLIENTS EMPLOYEES HAVE BEEN PROCESSED BY ACCLARIS INC.-EXECUTED THROUGH ACCLAIM SOFTWARE OWNED BY ACCLARIS INC. DELIVERY SUPERVISION SUPERVISING ALL SERVICES TO CLIENT, PRIORITIZING DELIVERIES TO THE CLIENT X QUERY RESOLUTION (NON-VOICE) BASIC QUERY HANDLING THROUGH RAISING OF HELP DESK TICKETS QUERY RESOLUTION (VOICE) RESOLVING COMPLEX CUSTOMER QUERIES THROUGH VOICE-BASED SUPPORT X SOFTWARE REQUIREMENT AND DESIGN INTERACTION WITH CLIENTS TO SEEK REQUIREMENTS, DESIGNING OF SOLUTIONS, TESTING AND DEPLOYMENT X BASIC CODING AND TESTING BASIC SOFTWARE CODING AND TESTING UNDER SUPERVISION BY ACCLARIS INC. X (B) ASSETS 9 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. THE APPELLANT DOES NOT OWN ANY SIGNIFICANT INTANGIB LE AND DOES NOT UNDERTAKE ANY SIGNIFICANT RESEARCH AND DEVELOPMENT ON ITS ACCOUNT THAT LEADS TO THE DEVELOPMENT OF NON-ROUTINE INTANGIBLES . IT LEVERAGES ON THE PROCESS, KNOW-HOW, TECHNICAL DATA SOFTWARE, OPERATI NG / QUALITY STANDARDS ETC. DEVELOPED/ OWNED BY ACCLARIS INC. FO R UNDERTAKING THE ABOVE FUNCTIONS. (C) RISKS THE RISKS ASSUMED BY THE APPELLANT AND AE IN COURSE OF PERFORMING THE ABOVE FUNCTIONS ARE SUMMARISED BELOW. SINCE, THE AP PELLANT IS OPERATING UNDER THE CAPTIVE ARRANGEMENT AND ENTIRELY UNDER TH E SUPPORT AND GUIDANCE OF THE AE, IT IS ABSOLVED OF MOST OF THE B USINESS AND OPERATIONAL RISKS ARISING OUT OF THE OPERATION. PARTICULARS ACCLARIS INC. ACCLARIS INDIA MARKET RISK / PRICE RISK XX SERVICE LIABILITY / QUALITY RISK XX CREDIT RISK XX MANPOWER RISK ENTREPRENEURIAL RISK XX FOREIGN EXCHANGE RISK XX AS IT CAN BE SEEN FROM ABOVE THAT THE APPELLANT DOE S NOT ASSUME ANY SIGNIFICANT RISK FROM ITS BUSINESS OPERATION . (C) CHARACTERISATION IN LIGHT OF THE ABOVE, THE APPELLANT BEING A CAPTIV E SERVICE PROVIDER REMUNERATED ON A COST-PLUS MODEL DOES NOT BEAR RISK S LIKE R&D RISK, PRICE RISK WHEREAS ACCLARIS INC., BEING AN ENTREPR ENEUR IS EXPOSED TO ALL RISKS ASSOCIATED WITH ITS BUSINESS OPERATIONS. CONSIDERING THE SAME, THE APPELLANT WAS CHARATERISE D AS A ROUTINE IT ENABLED SERVICE PROVIDER PROVIDING BACK-OFFICE SERV ICES EXCLUSIVELY TO ACCLARIS INC., WHICH ASSUMES LESS THAN NORMAL RISKS ASSOCIATED WITH CARRYING OUT SUCH BUSINESS. THE SUBMISSIONS WERE ALSO MADE BY ASSESSEE TO COUNT ER THE ERRONEOUS AND ARBITRARY FINDINGS OF THE LD. TPO. AFTER CONSIDERIN G THE ACTIONS OF THE LD. TPO AND THE SUBMISSIONS AND REASONS OFFERED BY THE ASSE SSEE BEFORE THE LD. TPO AND ALSO IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) H ELD THAT THE LD. TPO HAD OVERLOOKED AND HAD NOT TAKEN INTO CONSIDERATION THE FUNCTIONS, ASSET AND RISK 10 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. PROFILE OF THE ASSESSEE AND THE LD. CIT(A) CONFIRME D THE FAR PROFILE OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE LD. CIT(A) A RE REPRODUCED BELOW: 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE L D. TPO AND THE SUBMISSIONS AND REASONS OFFERED BY THE APPELLANT BE FORE THE LD. TPO AS WELL AS IN APPEAL. AFTER EXAMINING THE ISSUES AT HA ND, AS ALSO THE DIFFERENT JUDICIAL DECISIONS PLACED ON RECORD BY TH E APPELLANT / LD. AR FOR THE APPELLANT, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE LD. TPO HAS NOT TAKEN INTO ACCOUNT THE FUNCTIONAL ASSET AND RISK (FAR) PROFILE OF THE APPELLANT COMPANY AND THE AE, AND HAS OVERLOOKED THE EVIDENCE PROVIDED BY THE APP ELLANT BEFORE HIM IN RESPECT OF THE COMPARABLES SELECTED OR REJECTED BY HIM. 2. THE BASIC FACTS AS EMANATING IN THE CASE ARE THAT T HE APPELLANT IS SHIELDED FROM ANY RISKS AND PERFORMS FUNCTIONS IN A CAPTIVE ARRANGEMENT. AS SUCH, IN MY CONSIDERED VIEW OF THE MATTER, THE FUNCTIONS UNDERTAKEN BY THE APPELLANT AND AE WHICH FORMS THE BASIC PREMISE OF UNDERTAKING THE SEARCH PROCESS AND IDENT IFYING THE COMPARABLE COMPANIES, ARE TO BE GUIDED BY THE FACT THAT THE APPELLANT IS PURELY ENGAGED IN PROCESSING CLAIMS RELATING TO MEDICAL CLAIMS AND TRAVEL . IT HAS BEEN SUBMITTED, THE CLIENT RELATIONSHIPS ARE MAINTAINED BY ACCLARIS INC. AND ONLY A PART OF THE DATA ENTRY FUNCTIONS ARE BEI NG OUTSOURCED TO THE APPELLANT IN INDIA. THE SERVICES ARE RENDERED BY APPELLANT UNDER CONSTANT SUPPORT AND GUIDANCE OF ACCLARIS INC . IT HAS ALSO BEEN SUBMITTED THAT ACCLARIS INC. PROVIDES USER MANUAL TO THE APPELLANT FOR PROVISION OF CLAIM PROCESSING SERV I CES. ACCORDINGLY, THE APPELLANT IS COMPLETELY SHIELDED FROM ANY RISKS ARISING OUT OF T HE OPERATION UNDER THE CAPTIVE ARRANGEMENT. 12. WE NOTE THAT THE LD. CIT(A) SELECTED ALL THE F IVE COMPARABLES CHOSEN BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY REPORT. THE LD. CIT(A) ALSO SELECTED A FURTHER TWO COMPARABLES WHICH WERE SELECTED BY THE LD. TPO AND WHICH WERE NOT DISPUTED BY THE ASSESSEE AND REJECTED THE FOUR OTHE R COMPARABLES SELECTED BY THE LD. TPO WHICH WERE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. CONSIDERING THE PROFIT LEVEL MARGINS OF SEVEN COMPANIES ( FIVE FROM THE TRANSFER PRICING STUDY AND REMAINING TWO COMPARABLES OF THE LD. TPO ), THE LD. CIT(A) HELD THAT NO ADJUSTMENT WAS WARRANTED IN ASSESSEE`S CASE AND ALL OWED THE APPEAL OF THE ASSESSEE. WE NOTE THAT LD. TPO HAS ERRED, IN LAW AND IN FACTS , BY NOT CONSIDERING THE FAR PROFILE OF THE ASSESSEE BEING THE KEY COMPARABILITY FACTOR IN SELECTION OF 11 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. COMPARABLE COMPANIES. THE LD. TPO HAS ERRONEOUSLY C HARACTERIZED THE ASSESSEE AS A BUSINESS ENGAGED IN HIGHER FUNCTIONS THAN A RO UTINE BPO, LEANING TOWARDS A KNOWLEDGE PROCESS OUTSOURCING (KPO). THE ASSESSEE PROVIDES BPO SERVICES TO ITS HOLDING C OMPANY AS A CAPTIVE SERVICE PROVIDER IN RELATION TO SOME OF THE CLIENTS. THE BP O SERVICES INCLUDES VARIOUS TYPES OF SERVICES INCLUDING E-RECRUITMENT SERVICES, FINANCIAL ACCOUNTING SERVICES AND ROUTINE BACK OFFICE SERVICES WHICH COULD BE LIK E INDEXING AND ENROLLMENT FOR CLIENTS. THE ASSESSEE RECONCILES CLAIMS TO CONFIRM THAT ALL PAYMENTS REQUIRED TO BE MADE TO CLIENTS EMPLOYEES HAVE BEEN PROCESSED BY T HE HOLDING COMPANY. ALL CLIENT RELATIONS ARE MAINTAINED BY THE HOLDING COMP ANY AND ONLY A PART OF THE DATA ENTRY FUNCTIONS IS OUTSOURCED TO THE ASSESSEE. THE HOLDING COMPANY, ON THE OTHER HAND, UNDERTAKES THE ENTIRE MARKETING AND BUSINESS DEVELOPMENT ACTIVITY TO GENERATE BUSINESS, NEGOTIATES AND ENTERS INTO CONTR ACTS WITH CUSTOMERS, BEARS THE COSTS OF THE ENTIRE PROJECT TRANSITION PHASE, RENDE RS THE REQUISITE TRAINING TO ITS EMPLOYEES OR THE EMPLOYEES OF THE RESPONDENT AND OV ERSEES THE RUNNING OF THE ENTIRE PROJECT. THE ASSESSEE FUNCTIONS ALL ALONG UN DER THE GUIDANCE AND SUPERVISION OF THE HOLDING COMPANY. A USER MANUAL I S PROVIDED TO THE ASSESSEE FROM THE HOLDING COMPANY FOR GUIDING AND AIDING THE ASSESSEE IN THE PERFORMANCE OF ITS FUNCTIONS. THESE RULE BOOKS ARE BASED ON THE STATUTORY RULES AND GUIDELINES APPLICABLE IN THE HOLDING COMPANYS COUNTRY, I.E. U SA, AND ARE COLLATED AND PREPARED BY THE HOLDING COMPANYS SUBJECT MATTER EX PERTS. FOR EACH OF THE CLIENTS, THE FIRST STEP IN THE PROCESS OF CLAIM APPROVAL IS CLAIMS PROCESSING . DURING THE SAID PROCESS, THE CLIENTS SUBMIT THEIR HEALTHCARE C LAIMS THROUGH FAX / IMAGES IN THE WEB-BASED APPLICATION OF THE HOLDING COMPANY. THE A SSESSEES RESOURCES LOG INTO THE APPLICATION TO RETRIEVE THE SAID DATA. BASED ON THE CLAIMS SUBMITTED BY THE CLIENTS, THE ASSESSEE PERFORMS THE NECESSARY DATA E NTRY FUNCTIONS. IN CASE ANY CLARIFICATION OR GUIDANCE IS REQUIRED BY THE ASSESS EE, THESE ARE PROVIDED BY THE HOLDING COMPANYS SUBJECT MATTER EXPERTS. 12 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. 13. WE NOTE THAT THE TRIBUNAL IN THE ASSES SEES OWN CASE IN AY 2007-08 AND AY 2008-09 HAD HELD THAT THE ASSESSEE IS ENGAGED IN PROVIDING BPO SERVICES TO ITS HOLDING COMPANY. VIDE ORDER PASSED BY THE TRIBU NAL FOR AY 2007-2008 IN ITA NO. 695/KOL/2011, WHICH IS REPRODUCED BELOW: THE ASSESSEE PROVIDES BACK OFFICE PROCESSING SERVI CES (BPO) TO ACCLARIS INC., AS A CAPTIVE SERVICE PROVIDER IN REL ATION TO SOME OF ACCLARIS INCS CLIENTS. THE BPO SERVICES INCLUDE VARIOUS TYPES OF SERVICES INCLUDING RECRUITMENT SERVICES, FINANCIAL SERVICES AND ROUTINE BACK OFFICE SERVICES LIKE INDEXING AND ENROLLMENT F OR CLIENTS. THE ASSESSEE WORKS AS AN IT ENABLED BACK OFFICE SERVICE S PROVIDER WHICH PROVIDES BACK OFFICE SERVICES TO THE CLIENT. THE AS SESSEE DOES NOT OWN ANY INTANGIBLES INTEREST IN THE INTANGIBLES OWNED B Y ACCLARIS INC. AND IS ONLY A SERVICE PROVIDER. TAKING INTO ACCOUNT THE ABOVE DISCUSSIONS AND ORDER OF LD CIT(A), WE NOTE THAT THERE IS NO ANY INFIRMITY IN THE ORDER PASSED BY TH E LD CIT(A). BESIDES, THE COORDINATE BENCH IN ASSESSEE`S CASE (SUPRA), HELD T HAT ASSESSEE WAS ENGAGED IN PROVIDING CAPTIVE BPO SERVICES TO ITS HOLDING COMPA NY. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE COORDINATE BENCH IN A SSESSEE`S CASE (SUPRA), WE HOLD THAT ASSESSEE IS ENGAGED IN PROVIDING CAPTIVE BPO SERVICES TO ITS HOLDING COMPANY AND HENCE WE DISMISS GROUNDS NOS.1, 2 AND 3 RAISED BY THE REVENUE. 14. NOW WE SHALL TAKE GROUND NOS. 4, 5 AND 6 RAISE D BY THE REVENUE WHICH RELATE TO COMPARABLES SELECTED AND REJECTED BY THE LD TPO AND LD CIT(A). THE GRIEVANCE OF THE REVENUE IN GROUND NO. 4 IS THAT THE CIT(A) ERRED IN REJECTING FOLLOWING COMPANIES THAT ARE FUNCTIONALLY COMPARABL E TO THE ASSESSEE: 1. ACCENTIA TECHNOLOGIES LTD. 2. TCS E-SERVE INTERNATIONAL LTD. 3. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 4. CROSSDOMAIN SOLUTIONS PVT. LTD. IN GROUND NO.5 THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) ERRED IN ACCEPTING FOLLOWING COMPANIES THAT ARE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE: 13 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. 1. COSMIC GLOBAL LTD. 2. TIMEX GROUP INDIA LTD - 3. AOK IN-HOUSE BPO SERVICES LTD 4. ADITYA BIRLA MINACS WORLDWIDE LTD. 5. OMEGA HEALTHCARE MANAGEMENT SERVICES PVT. LTD. 6. IN HOUSE PRODUCTIONS LTD. SEG 7. FORTUNE INFOTECH LTD. GROUND NO. 6 RAISED BY THE REVENUE IS GENERAL IN NA TURE. NOW, WE SHALL DISCUSS THESE COMPARABLES ONE BY ONE: 15. WE NOTE THAT THE FAR ANALYSIS, DISCUSSED IN AB OVE PARA, FORMS THE BASIC PREMISE OF UNDERTAKING THE SEARCH PROCESS AND IDENT IFYING COMPARABLE COMPANIES. WE NOTE THAT THE COMPARABLES CHOSEN BY THE LD. TPO ARE PRIMARILY ENGAGED IN KPO SERVICES, UNLIKE THE ASSESSEE WHICH IS ENGAGED IN PROVIDING BPO SERVICES. WE NOTE THAT THE ASSESSEE IS ENGAGED IN PERFORMING CAPTIVE BPO SERVICES TO ITS HOLDING COMPANY AND SUCH VIEW HAS BEEN ACCEPTED BY THE LD. CIT(A). WHEN A TESTED PARTY IS A BPO SERVICE PROVIDER ( AKIN TO THE ASSESSEE ), KPOS CANNOT BE CONSIDERED AS COMPARABLES FROM A TRANSFER PRICING P ERSPECTIVE. ON THE BASIS OF THE AFORESAID DETAILED DISCUSSIONS AND THE FAR PROFILE OF THE ASSESSEE DISCUSSED ABOVE, WE SHALL EXAMINE THE ACCEPTANCE/ REJECTION R EASONS OF EACH COMPARABLE WHICH HAVE BEEN SELECTED BY THE ASSESSEE AS WELL AS THOSE SELECTED BY THE LD. TPO AND LD CIT(A) AS FOLLOWS: (1). ACCENTIA TECHNOLOGIES LTD THE COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE P RODUCTS AND RENDERING KPO SERVICES IN THE HEALTHCARE SECTOR. AS PER ITS A NNUAL REPORT, ACCENTIA IS A MULTI-LOCATION DIVERSIFIED KNOWLEDGE PROCESS OUTSOU RCING COMPANY, OPERATING FROM MULTIPLE LOCATIONS IN INDIA, USA, UK AND THE M IDDLE EAST. IT IS ENGAGED IN SAAS (SOFTWARE AS A SERVICE) MODEL, SERVICES UNDER HEALTHCARE RECEIVABLES CYCLE MANAGEMENT INCLUDING MEDICAL TRANSCRIPTION, MEDICAL CODING AND BILLING AND 14 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. RECEIVABLES MANAGEMENT SERVICES. MEDICAL TRANSCRIPT ION IS AN IT ENABLED SERVICE REQUIRING SPECIALIZED SKILLS. IT HAS ALSO VENTURED INTO LEGAL PROCESS OUTSOURCING, DATA PROCESS OUTSOURCING AND HIGH END SOFTWARE SERV ICES DELIVERY. THE MEDICAL TRANSCRIPTION SERVICES OF ACCENTIA REPRESENT 68.82% OF TOTAL OPERATING REVENUES. THE LD COUNSEL SUBMITTED THAT THE COMPANY HAS ACQUI RED IQ GROUP OF COMPANIES (PG. 38 AND 40 OF PB) AND AMALGAMATED WITH ASSCENT INFOSERVE PRIVATE LIMITED DURING THE YEAR. THE LD COUNSEL PLACED RELIANCE ON THE ORDER THE DELHI HIGH COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX V. BC MANAGEMENT SERVICES PVT LTD. DELHI HIGH COURT DATED 28 TH NOVEMBER 2017 IN ITA 1064/2017 & CM NO. 43177/2017 & ITA 1083/2017 & CM NO. 43280/2017. THE ASSESSEE IN THIS CASE WAS ENGAGED IN PROVIDING IT ENABLED SERVICES TO ITS AE AND THE HONBLE HIGH COURT REJECTED ACCENTIA AS A COMPARABLE COMPANY BY HOLDING IN PARAGRAPH 13 PAGE 3 OF ITS ORDER AS UNDER: - THE ASSESSEE WAS AGGRIEVED BY THE INCLUSION OF ACCENTIA A SOFTWARE DEVELOPMENT COMPANY . THE REVENUE IS AGGRIEVED BY THE EXCLUSION OF ACCENTIA FROM THE TP ANALYSIS. THE DRP HAD DIRECTED ITS DELETION. WE OBSERVE THAT THE ITAT HAS NOTICED THE UNAVAILABILITY OF THE SEGMENTAL DATA SO FAR AS THESE COMPARABLES ARE CONCERNED. FURTHER MORE, THE FUNCTIONALITY OF THIS ENTITY WAS CONCERNED, IT IS DIFFERENT FROM THAT OF THE ASSESSEE; ACCENTIA WAS ENGAGED IN KPO SERVICES IN THE HEALTHCARE SECTOR . THEREFORE, CONSIDERING THE ABOVE FACTS AND PRECEDEN TS ACCENTIA TECHNOLOGIES LTD SHOULD BE REJECTED AS A COMPARABLE. THUS, WE ACCEPT THE VIEW TAKEN BY THE LD CIT(A). (2).TCS E-SERVE INTERNATIONAL LTD TCS E-SERVE INTERNATIONAL LTD HAS PROVIDED SERVICES LARGELY TO CITI GROUP BASED ON THE AGREEMENT ENTERED INTO BY TCSL AND CITI CONCURRENT TO THE ACQUISITION TRANSACTION. THIS WOULD IMPLY THAT PRICING AND TERMS ON WHICH SERVICE S ARE PROVIDED BY TCSE TO CITI IS INFLUENCED BY CITI ITSELF. THE COMPANY IS ENGAGED IN PROVISION OF SERVICES TO CITIGROUP INC. AND ITS AFFILIATES (CITI GROUP) BASED ON THE L ONG-TERM AGREEMENT FOR 9.5 YEARS WHICH 15 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. IS A PART OF SALE CONSIDERATION. AS PER THE ANNUAL REPORT OF TCS E-SERVE INTERNATIONAL LTD.-, THE COMPANY PROVIDES A BROAD RANGE OF SERVICES THAT CATER TO THE PROCESS MANAGEMENT REQUIREMENTS OF WIDE RANGE OF FI NANCIAL PRODUCTS AND ENTERPRISE SUPPORT FUNCTIONS, WHICH INCLUDE FIN ANCIAL INFORMATION PROCESSING (DATA PROCESSING) AND CUSTOMER CONTACT ( VOICE BASED) (PG. 117 OF SPB) SUCH VOICE-BASED SERVICES ARE COMPLETELY DIFFERENT FROM THE LOW-END CLAIM PR OCESSING SERVICES PROVIDED BY THE ASSESSEE. IT IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMAT ION TECHNOLOGY - ENABLED SERVICES (ITES) / BUSINESS PROCESSING OUTSOURCING ( BPO) SERVICES, PRIMARILY TO CITIGROUP ENTITIES GLOBALLY (PG. 140 OF SPB). THE COMPANY BECAME PART OF THE TCS/ TATA GROUP AND IS SUPPORTED BY THE SCALE AND LARGE CLIENT BASE BROUGHT BY THESE GROUPS. DURI NG THE YEAR UNDER CONSIDERATION, THIS COMPANY HAS MADE PAYMENTS TOWAR DS USE OF TATA BRAND. (PGS. 116-117, 145-146 OF THE PB). DUE TO THIS, THERE IS A 300% INCREASE IN PROFITS OF THE COMPANY (PG. 129 OF THE SPB). THE LD COUNSEL SUBMITS THAT TCS E-SERVE INTERNATION AL IS A SUBSIDIARY OF TATA CONSULTANCY SERVICES LTD. THE COMPANY IS BACKED BY THE TATA BRAND. THE BENEFITS OF BEING A PART OF THE WORLDS LARGEST IT SERVICES GRO UP AND ALSO, PART OF INDIAS LARGEST BUSINESS HOUSES RENDER THE COMPANY UNCOMPARABLE TO THE ASSESSEE. FURTHER, AS PER VARIOUS MEDIA REPORTS, TCS PURCHASED CITI GROUPS B USINESS PROCESS OUTSOURCING (BPO) ARM, FORMERLY KNOWN AS E-SERVE INTERNATIONAL LTD. T ATA CONSULTANCY SERVICES ACQUIRED CITIGROUP INC.S INTEREST IN CITIGROUP GLOBAL SERVI CES LIMITED (CGSL), THE INDIA-BASED CAPTIVE BUSINESS PROCESSING OUTSOURCING (BPO) FOR A N ALL CASH CONSIDERATION OF $512 MILLION. AS PART OF THE DEAL, TCS WILL PROVIDE PROC ESS OUTSOURCING SERVICES TO CITI AND ITS AFFILIATES FOR AN AGGREGATE AMOUNT OF US$ 2.5 BILLI ON OVER A PERIOD OF 9.5 YEARS (PG. 185- 190 OF PB). SINCE THE SERVICES ARE BEING PROVIDED AS A PART OF AN ACQUISITION DEAL, PRICING AND THE TERMS ON WHICH TCS E-SERVE INTERNAT IONAL PROVIDED SERVICES WOULD NOT HAVE BEEN AT MARKET DEFINED RATES. IN THIS REGARD, THE LD COUNSEL RELIED ON THE JUDGMENT OF THE COORDINATE BENCH OF DELHI ITAT IN THE CASE O F MORNINGSTAR INDIA PVT. LTD V. DCIT,CIRCLE-17(1), ( ITA NO. 1520/DEL/2015 ) DATED 6 TH MAY 2019 FOR AY 2010-11.THE ASSESSEE IN THIS CASE WAS ENGAGED IN PROVIDING DATA PROCESSING SERVICES TO ITS AES (PARA 16 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. 3 PAGE 4 OF THE ORDER) AND THE HONBLE TRIBUNAL REJECTED TCS E-SERVE INTER NATIONAL AS A COMPARABLE COMPANY (PARAGRAPH 22 PAGE 17 OF THE ORD ER) BY HOLDING AS UNDER: 22 . WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS AND FIND THE ANNUAL ACCOUNT OF THE ABOVE COMPARABLE COMPANY PLACED AT P AGE NUMBER 297 371 OF THE PAPER BOOK. APPARENTLY TCS E SERVE INTERNATIONAL IS A SUBSIDIARY OF TATA CONSULTANCY SERVICES LTD. BEHIND THE ABOVE COMPARABLE COMPANY, THERE IS A TATA BRAND. ON THE PERUSAL OF SCHEDULE M OF THE PROFIT AND LOSS ACCOUNT THERE IS A PAYMENT OF 3738000 TOWARDS THE TATA BRAND EQUITY CONTRIBUTION. FOR THIS REASON THAT IT BELONGS TO TATA GROUP AND HAS ALSO CONTRIBU TED TO TATA BRAND WHICH IS ONE OF THE LARGEST BRAND IN THE INFORMATIO N TECHNOLOGY SEGMENT, THERE IS A DEFINITE IMPACT ON THE PRICING CAPACITY OF THE COMPARABLE WHICH THE ASSESSEE LACKS. HENCE, WE FIND THAT TCS E SERVE INTERNATIONAL LTD DESERVES TO BE EXCLUDED. ACCORDINGLY WE DIRECT THE LEARNED TPO AO TO EXCLUDE THE ABOVE COMPARABLE. IN LIGHT OF THE ABOVE FACTS, THE TCS E-SERVE INTERN ATIONAL LTD SHOULD BE REJECTED AS A COMPARABLE. HENCE, WE ACCEPT THE VIEW TAKEN BY THE LD CIT(A). (3).E4E HEALTHCARE BUSINESS SERVICES PVT LTD AS PER ANNUAL REPORT OF THE COMPANY, THE COMPANY PROVIDES HEALTHCARE OUTSOURCING SERVICES AND SOFTWARE DEVELOPMENT. THE COMPANY IS A LSO A 100% EOU, UNDER STPI GUIDELINES. (PGS. 211 AND 222 OF THE PB). FURTHER, AS PER THEIR WEBSITE, E4E HEALTHCARE BUSINESS SERVICES WAS FORMED BY A GROUP OF ONCOLOGI STS BASED IN STATE COLLEGE, PENNSYLVANIA AS THEIR CAPTIVE OPERATIONAL CENTER. T HIS GROUP OWNED AND OPERATED A LARGE CHAIN OF ONCOLOGY AND RADIOLOGY CENTERS THROUGHOUT THE EAST COAST AND WAS ONE OF THE FIRST TO SEE THE QUALITY AND COST ADVANTAGE OF OFFS HORE PROCESSING OF THEIR MEDICAL BILLING AND TRANSCRIPTION FUNCTIONS. THE COMPANY HA S ALSO INVESTED HEAVILY ON DEVELOPING RIGOROUS PROCESS CONTROLS, IN SYSTEMS AN D SOFTWARE PLATFORMS AND IN INFORMATION SECURITY. ( PG. 236 OF SPB ).THE ASSESSEE SUBMITS THAT IT IS THUS EVIDENT THAT THE ABOVE COMPANY WAS ENGAGED IN BUSINESS OF PROVID ING HEALTHCARE OUTSOURCING SERVICES AND SOFTWARE DEVELOPMENT FOR THE HEALTHCAR E INDUSTRIES, THE SAME CANNOT BE COMPARED WITH THE ASSESSEE WHICH WAS ENGAGED IN PRO VIDING BPO SERVICES. IN THIS REGARD, THE LD COUNSEL RELIED ON THE JUDGMENT OF TH E COORDINATE BENCH OF DELHI ITAT IN THE CASE OF BECHTEL INDIA PVT. LTD. VS DCIT DATED 21 ST DECEMBER 2015 IN I.T.A NO.1478/DEL/2015 FOR AY 2010-11.THE ASSESSEE IN THIS CASE WAS 17 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. ENGAGED IN PROVIDING CAPTIVE SUPPORT SERVICES TO IT S AE (PARA 3 PAGES 1-2 OF THE ORDER) AND THE TRIBUNAL REJECTED E4E HEALTHCARE BUSINESS S ERVICES AS A COMPARABLE COMPANY BY HOLDING IN PARAGRAPH 3 P AGES 17 OF THE ORDER AS UNDER: 3) E4E HEALTHCARE BUSINESS SERVICES PRIVATE LIMITE D. THIS COMPANY HAS BEEN INCLUDED BY THE LD.TPO AS A COMPAR ABLE. FUNCTIONALLY THE COMPANY IS INTO HEALTH CARE OUTSOU RCING SERVICES AND IN ADDITION IT ALSO RENDERS SOFTWARE DEVELOPMENT SERVICES. IT IS ALSO OBSERVED THAT SEGM ENTAL INFORMATION IN RESPECT OF THIS COMPANY IS NOT AVAIL ABLE. THE COMPANY IS ALSO A 100% EOU, UNDER STPI GUIDELINES. WE ARE THEREFORE INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY SHOULD BE EXCLUDED AS A COMPARABLE. HENCE WE DIRECT THE ASSESSING OFFICER T O DO SO. IN LIGHT OF THE ABOVE FACTS, THE E4E HEALTHCARE BUS INESS SERVICES SHOULD BE REJECTED AS A COMPARABLE. HENCE, WE ACCEPT THE VIEW TAKEN BY THE LD CIT(A). (4).CROSSDOMAIN SOLUTIONS PVT LTD AS PER THE WEBSITE OF THIS COMPANY, CROSSDOMAIN IS A BUSINESS PROCESS MANAGEMENT COMPANY RELENTLESSLY FOCUSING ON KNOWLEDGE INTENSE PROCESSES. THE SERVICE OFFERINGS OF CROSSDOMAIN INCLUDE MEDICAL BILLING AND TRANSCRIPTI ON, KNOWLEDGE SERVICES OUTSOURCING IN INSURANCE, HEALTHCARE, HR AND ACCOUN TING DOMAINS. THE COMPANY ALSO OFFERS BUSINESS EXCELLENCE, MARKET RESEARCH & DATA ANALYTICS AND IT SERVICES. (PG. 237 OF PB). THE LD COUNSEL SUBMITS THAT IT IS EVIDENT THAT THE SAID CONCERN OPERATES AS A KNOWLEDGE PROCESS OUTSOURCING SERVICES PROVIDER ( KPO) AND NOT A SIMPLE BUSINESS PROCESS OUTSOURCING SERVICES PROVIDER AND CANNOT TH EREFORE BE COMPARED WITH THE ASSESSEE. IN THIS REGARD, THE LD COUNSEL RELIED ON THE JUDGMENT OF THE COORDINATE BENCH OF HYDRABAD ITAT IN THE CASE OF M/S MARKET TOOLS RESEARCH PVT. LTD. IN ITA NO.1811/HYD/2012 DATED 24TH OCTOBER 2013. IN THIS CASE, THE ASSESSE E WAS ENGAGED IN PROVIDING IT ENABLED BACK OFFICE SERVICES TO ITS AE (PARA 2 PAGE 1 OF THE ORDER) AND THE TRIBUNAL REJECTED CROSSDOMAIN SOLUTIONS PRIVATE LTD AS A COMPARABLE COMPANY (PARAGRAPHS 11.1-11.3 PAGES 17-19 OF THE ORDER) BY HOLDING AS UNDER - WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND P ERUSED THE MATERIAL ON RECORD WITH REGARD TO THE AFORESAID COM PANY. AS CAN BE SEEN FROM THE WEBSITE EXTRACT OF THE AFORESAID COMP ANY, IT IS ENGAGED IN 18 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. PROVIDING SERVICES WHICH ARE IN THE NATURE OF KPO. FURTHER, ON PERUSAL OF THE ANNUAL REPORT OF THE COMPANY, FURNISHED IN T HE PAPER BOOK, IT IS SEEN THAT THE SAID COMPANY IS ENGAGED IN PROVIDING NICHE SERVICES, AS WELL AS DEVELOPED ITS OWN BRAND EXDION TO TARGET THE INSURANCE INDUSTRY IN US. THE ANNUAL REPORT FURTHER REVEALS T HAT THE COMPANY HAS BEEN RUNNING MARKETING CAMPAIGNS IN THE US FOR EXPA NDING ITS PLANT BASE IN RELATION TO THE BRAND DEVELOPED BY IT. THE ASSESSEE HOWEVER, IS ONLY PROVIDING IT ENABLED SERVICES TO ITS AE AND DO ES NOT HAVE THE DIVERSIFIED ACTIVITIES LIKE THE AFORESAID COMPANY. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING S OLUTIONS INDIA P. LTD. V/S. ITO (SUPRA), WHILE CONSIDERING THE ISSUE OF AFORESAID COMPANY AS A COMPARABLE ACCEPTED THE ASSESSEES CONTENTION THAT CROSSDOMAIN CANNOT BE COMPARED TO A ROUTINE ITES PROVIDER AND D IRECTED FOR EXCLUSION OF THE SAME FROM THE LIST OF COMPARABLES. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF INCOME-TAX APPE LLATE TRIBUNAL BANGALORE IN THE CASE OF SYMPHONY MARKETING SOLUTIO NS (SUPRA), WE ALSO DIRECT THE ASSESSING OFFICER TO EXCLUDE THE AF ORESAID COMPANY FROM THE LIST OF COMPARABLES FOR THE PURPOSE OF DETERMIN ING ALP. IN LIGHT OF THE ABOVE FACTS, THE CROSSDOMAIN SOLUTI ONS PVT LTD SHOULD BE REJECTED AS A COMPARABLE. HENCE, WE ACCEPT THE VIEW TAKEN BY THE LD CIT(A). 16. NOW, WE DEAL WITH THE COMPARABLE COMPANIES ACCEPTED BY THE LD CIT(A), AS FOLLOWS: 1. COSMIC GLOBAL LTD THE LD COUNSEL SUBMITS THAT THIS COMPANY HAD BEEN P ROPOSED BY THE LD. TPO AS A COMPARABLE IN THE COURSE OF THE PROCEEDINGS BEFORE HIM (PG. 197 OF THE PAPER BOOK VIDE NOTICE DATED 13 TH JANUARY, 2014) AND THE SAME WAS NOT DISPUTED BY TH E ASSESSEE IN ITS REPLY DATED 21 ST JANUARY, 2014 (PG. 200-201 OF THE PAPER BOOK). THE MARGIN OF THIS COMPANY WAS TAKEN INTO CONSIDERATION BY THE LD. TPO IN MAKING THE ADJUSTMENT OF THE ARMS LENGTH PRICE OF THE ASSESSEE (PG. 268 PARA 13 OF THE PAPER BOOK).EVEN IN THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) SUCH CO MPANY WAS ACCEPTED IN THE ORDER OF THE LD. CIT(A) . THE LD COUNSEL SUBMITS THAT AS PER THE ANNUAL REPO RTS OF COSMIC GLOBAL LTD. AND VARIOUS JUDICIAL PRONOUNCEMENTS, SUCH COMP ANY IS NOT COMPARABLE TO THE ASSESSEE AS IT HAS DIFFERENT FUNCTIONS WHICH CANNOT BE COMPARED TO THOSE OF THE ASSESSEE. THE LD COUNSEL SUBMITS THAT COSMIC GLOBAL SHOULD BE EXCLUDED AS A COMPARABLE FOR THE REASONS STATED HEREUNDER- AS PER THE ANNUAL REPORTS OF COSMIC GLOBAL LTD., 19 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. THE COMPANY'S ACTIVITIES WERE IT ENABLED SERVICES L IKE MEDICAL TRANSCRIPTION, TRANSLATION AND SOFTWARE DEVELOPMENT . (PGS. 243-244, PG. 250 OF PB) THE COMPANY EMPLOYS ONLY EXPERIENCED AND TRAINED PR OFESSIONALS AS TRANSCRIPTIONISTS. (PG. 250 OF PB) MEDICAL TRANSLATION SERVICE INCOME ACCOUNTS FOR 94% OF TOTAL REVENUE. (PG. 248 OF PB) THE LD COUNSEL SUBMITS THAT COSMIC GLOBAL LTD WAS E NGAGED IN PROVIDING SERVICES WHICH WERE IN THE NATURE OF KPO. THE COMPANY WAS PR OVIDING SOFTWARE DEVELOPMENT, MEDICAL TRANSCRIPTION AND TRANSLATION SERVICES IN V ARIOUS STREAMS INCLUDING LEGAL, MARKETING, TECHNICAL, MEDICAL, ETC. THEREFORE, THIS COMPANY CANNOT BE COMPARED TO THE ASSESSEE. IN THIS REGARD, THE LD COUNSEL RELIED ON THE JUDGMENT OF THE COORDINATE BENCH OF PUNE ITAT IN THE CASE OF SCHLUMBERGER INDIA TECH NOLOGY CENTRE PVT. LTD. V. THE DY. DIRECTOR OF INCOME TAX (IT)-II, PUNE ( ITA NO.640/PUN/2014 ) DATED 10 TH JANUARY 2018 (AY 2010-11).THE ASSESSEE IN THIS CASE WAS ENG AGED IN PROVIDING TECHNICAL SUPPORT SERVICES TO ITS AES (PARA 4 OF THE ORDER) A ND THE HONBLE TRIBUNAL REJECTED COSMIC GLOBAL AS A COMPARABLE COMPANY (PARAGRAPHS 2 7-28 OF THE ORDER) BY HOLDING AS UNDER- 19 .. IN VIEW OF THE FINDINGS OF TRIBUNAL IN THE CASE OF ASSESSEE AND ANOTHER IT ENABLED SERVICE PROVIDER AND THE RATIO L AID DOWN BY HONBLE DELHI HIGH COURT, WE HOLD THAT WHERE COSMIC GLOBAL LTD. WAS OPERATING IN DIFFERENT BUSINESS MODEL THAN THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ALSO, THE SAME NEEDS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. ACCORDINGLY, WE HOLD SO. BASED ON THE ABOVE FACTS, WE REJECT COSMIC GLOBAL L TD AS A COMPARABLE. WE DO NOT AGREE WITH THE VIEW TAKEN BY THE LD CIT(A). 2. TIMEX GROUP INDIA LTD - SEGMENT THE GLOBAL SERVICES SEGMENT OF THE ABOVE COMPARABLE IS ENGAGED IN PROVIDING IT AND FINANCE RELATED BACK OFFICE SUPPORT SERVICES. THE S AME HAS BEEN CONFIRMED IN THE FINANCIAL STATEMENTS OF THE COMPANY PROVIDED IN PG. 297 OF PB. MOREOVER, IN TIMEX GROUP INDIA LTD.S OWN CASE, M/S. TIMEX GROUP INDIA LIMITED V. DCIT, CIRCLE 25 (2), 20 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. (ITA NO. 845/DEL./2016) AT PGS. 16 AND 25 OF ITS OR DER, THE TRIBUNAL MENTIONED THAT THE COMPANY WAS INTO IT-ES SERVICES IN THE PAYROLL PROC ESSES, ACCOUNT PROCESSES, ETC. THE RELEVANT PORTION OF THE DECISION IS PRODUCED BELOW: 29 . THE TAXPAYER DURING THE YEAR UNDER ASSESSMENT ENT ERED INTO INTERNATIONAL TRANSACTIONS QUA PROVISION OF INFORMA TION TECHNOLOGY ENABLED SERVICES (ITES) IN THE FORM OF PROVISIONS O F SERVICES IN THE NATURE OF PAYROLL PROCESSES, ACCOUNT PROCESSES, ETC . TO THE TUNE OF RS.2,60,97,175/- WITH ITS ASSOCIATED ENTERPRISES (A E). THE LD COUNSEL SUBMITS THAT THE TRIBUNAL AFTER DET AILED EXAMINATION ACCEPTED A MARGIN OF 7.86% FOR TIMEX GROUP INDIA LTD. (SEGMENT) FOR T HE RENDERING OF ITES; SERVICES WHICH ARE SIMILAR TO THAT PROVIDED BY THE ASSESSEE. THEREFORE, BASED ON THE FACTS AND PRECEDENT NARRATE D ABOVE THE TIMEX GROUP INDIA LTD. ( SEGMENT ) SHOULD BE ACCEPTED AS A COMPARABLE. WE AGREE WITH THE VIEW TAKEN BY THE LD CIT(A). 3. AOK IN-HOUSE BPO SERVICES LTD THE COMPANY IS ENGAGED IN PROVIDING BPO SERVICES. A S PER THEIR ANNUAL REPORT, THE COMPANY IS A BPO SERVICE PROVIDER (PG. 322 OF SPB). AS PER ITS WEBSITE, THE COMPANY IS A LEADING OUTSOURCED IT ENABLED BUSINESS PROCESSING AND BACKEND SUPPORT SERVICES, INSURANCE POLICY ISSUANCE AND CLAIMS PROCESSING ETC . (PAGE 342 OF SPB). THEREFORE, BASED ON THE FACTS AND PRECEDENT NARRATE D ABOVE THE AOK IN-HOUSE BPO SERVICES LTD SHOULD BE ACCEPTED AS A COMPARABLE. WE AGREE WITH THE VIEW TAKEN BY THE LD CIT(A). 4. ADITYA BIRLA MINACS WORLDWIDE LTD AS PER ITS ANNUAL REPORT, THE COMPANY PROVIDES A VA RIETY OF BUSINESS PROCESS OUTSOURCING SERVICES WHICH ARE NON-VOICE BASED. (PAGES 305 AND 318 OF PB).THE SERVICES PROVIDED BY ADITYA BIRLA MINACS WORLDWIDE LTD, BEING NON-VOI CE BASED BPO SERVICES, ARE SIMILAR TO THOSE PROVIDED BY THE ASSESSEE. THEREFOR E, BASED ON THE FACTS NARRATED ABOVE THE ADITYA BIRLA MINACS WORLDWIDE LTD SHOULD BE ACC EPTED AS A COMPARABLE. WE AGREE WITH THE VIEW TAKEN BY THE LD CIT(A). 21 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. 5. OMEGA HEALTHCARE MANAGEMENT SERVICES PVT LTD AS PER ITS ANNUAL REPORT, THE COMPANY WAS INTO BPO SERVICES LIKE MEDICAL BILLING, CODING, ACCOUNTS RECEIVABLE MANAGEMENT, CLINICAL ST AFF AUGMENTATION, AND TOTAL HEALTHCARE REVENUE MANAGEMENT SERVICES, DATA ENTRY SERVICES AND PHYSICIAN AND HOSPITAL CLAIMS SERVICES. (PG. 345, PG. 352 PB). IN THIS REG ARD, THE LD COUNSEL RELIED ON THE JUDGMENT OF THE COORDINATE BENCH OF DELHI IN THE C ASE OF BECHTEL INDIA PVT. LTD. VS DCIT ( I.T.A NO. 1478/DEL/2015 , AY 2010-11). THE ASSESSEE IN THIS CASE WAS ENGAGE D IN PROVIDING CAPTIVE SUPPORT SERVICES TO ITS AE (PA RA 3 PAGES 1-2 OF THE ORDER) AND THE TRIBUNAL ACCEPTED OMEGA HEALTHCARE MANAGEMENT SERVI CES PVT. LTD. AS A COMPARABLE COMPANY BY HOLDING IN PARAGRAPH 1 PAGES 17-18 OF TH E ORDER AS UNDER: .THE COMPANY IS INVOLVED IN THE PROVISION OF OFFS HORE HEALTHCARE BUSINESS OUTSOURCING SERVICES, LIKE MEDICAL CODING, BILLING, ACCOUNTS RECEIVABLE MANAGEMENT, CLAIMS PROCESSING, AND HEALT HCARE REVENUE MANAGEMENT. IT ALSO PROVIDES SERVICES TO AR MANAGEM ENT COMPANIES, AND THEIR HOSPITAL CLIENTS, FOR THEIR CREDIT BALANC E ACCOUNT, REGULAR ACCOUNTS RECEIVABLE AND FACILITY CODING NEEDS. IT I S NOTICED THAT THIS COMPANY IS BASICALLY INTO ITES BUSINESS... THE SERVICES PROVIDED BY OMEGA HEALTHCARE MANAGEMEN T SERVICES PVT LTD. ARE SIMILAR TO THOSE PROVIDED BY THE ASSESSEE. THEREFORE, BASED ON THE FACTS AND PRECEDENT NARRATED ABOVE THE OMEGA HEALTHCARE MANAGEMENT SERVICES PVT LTD SHOULD BE ACCEPTED AS A COMPARABLE. WE AGREE WITH THE VIEW TAKEN BY THE LD CIT(A). 6. IN HOUSE PRODUCTIONS LTD SEGMENT AS PER ITS ANNUAL REPORT, THE YEAR UNDER REVIEW HAS SEEN THE COMPANY HAVING INCOME FROM MEDICAL BPO ACTIVITIES (PAGES 386, 388, 390, 398 OF PB). THE SERVICES PROVIDED BY IN HOUSE PRODUCTIONS LTDSEGMENT ARE SIMILAR TO THO SE PROVIDED BY THE ASSESSEE. THEREFORE, BASED ON THE FACTS NARRATED ABOVE, THE I N HOUSE PRODUCTIONS LTD SEGMENT SHOULD BE ACCEPTED AS A COMPARABLE. WE AGREE WITH T HE VIEW TAKEN BY THE LD CIT(A). 7. FORTUNE INFOTECH LTD AS PER THE ANNUAL REPORTS OF FORTUNE INFOTECH LTD., THE COMPANY IS ENGAGED IN PROVIDING IT ENABLED SERVICES (PG. 410 OF PB).THE LD COUNSEL SUBMITS THAT IN FORTUNE INFOTECH LTD.S OWN CASE, FORTUNE INFOTECH LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 22 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. -1(2), ( ITA NO. 274 (AHD.) OF 2013 ) DATED 3 RD FEBRUARY 2016 REPORTED IN [2016] 66 TAXMANN.COM 92 (AHMEDABAD- TRIB.), THE TRIBUNAL HEL D THAT THE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES. T HE RELEVANT PORTION OF THE DECISION, IS REPRODUCED BELOW: 7 . IN ORDER TO ADJUDICATE ON THESE ISSUES, IT IS ESS ENTIAL TO TAKE A LOOK AT THE RELEVANT MATERIAL FACTS, AND DEVELOPMENTS LE ADING TO THIS APPEAL BEFORE US. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES IN THE AREA S OF INSURANCE CLAIM PROCESSING, MORTGAGE LOAN PROCESSING AND DOCU MENT PROCESSING SERVICES. THE LD COUNSEL SUBMITS THAT IT IS EVIDENT FROM THE ABOVE THAT THIS COMPANY IS ENGAGED IN PROVIDING IT ENABLED SERVICES SUCH AS CLAIMS AND DO CUMENT PROCESSING. THIS COMPANY HAD BEEN SELECTED AS A COMPARABLE BY THE LD. TPO AN D THE RESPONDENT-ASSESSEE DOES NOT DISPUTE THAT THIS COMPANY IS FUNCTIONALLY COMPA RABLE TO THE ASSESSEE. THEREFORE, BASED ON THE FACTS AND PRECEDENT NARRATE D ABOVE THE FORTUNE INFOTECH LTD SHOULD BE ACCEPTED AS A COMPARABLE. WE AGREE WITH T HE VIEW TAKEN BY THE LD CIT(A). 17. WE NOTE THAT LD. CIT(A) AFTER DETAILED EXAMINATION OF THE COMPARABLES AND AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE IN THAT REGARD, RIGHTLY CONCLUDED THAT THE TRANSACTION IS AT ARMS LENGTH, BY OBSERVING THE AS FOLLOWS: 07 .DECISION: 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD . TPO AND THE SUBMISSIONS AND REASONS OFFERED BY THE APPELLANT BEFORE THE LD. TPO AS WELL AS IN APPEAL. AFTER EXAMINING THE ISSUES AT HAND, AS ALSO THE DIFFERENT JUDICIAL DECISIONS PLACED ON RECORD BY THE APPELLANT/LD. A/RS FOR THE APPELLANT, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE LD. TPO HA S NOT TAKEN INTO ACCOUNT THE FUNCTIONAL ASSET AND RISK (FAR) PROFILE OF THE APPE LLANT- COMPANY AND THE AE, AND HAS OVERLOOKED THE EVIDENCE PROVIDED BY THE APP ELLANT BEFORE HIM IN RESPECT OF THE COMPARABLES SELECTED OR REJECTED BY HIM. 2. THE BASIC FACTS AS EMANATING IN THE CASE ARE THA T THE APPELLANT IS SHIELDED FROM ANY RISKS, AND PERFORMS FUNCTIONS IN A CAPTIVE ARRANGEMENT. AS SUCH, IN MY CONSIDERED VIEW OF THE MATTER, THE FUNCTIONS UNDERT AKEN BY THE APPELLANT AND AE WHICH FORMS THE BASIC PREMISE OF UNDERTAKING THE SE ARCH PROCESS AND IDENTIFYING THE COMPARABLE COMPANIES, ARE TO BE GUIDED BY THE F ACT THAT THE APPELLANT IS PURELY ENGAGED IN PROCESSING CLAIMS RELATING TO MED ICAL CLAIMS AND TRAVEL. IT HAS BEEN SUBMITTED, THE CLIENT RELATIONSHIPS ARE MA INTAINED BY ACCLARIS INC. AND ONLY A PART OF THE DATA ENTRY FUNCTIONS ARE BEING O UTSOURCED TO THE APPELLANT IN 23 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. INDIA. THE SERVICES ARE RENDERED BY APPELLANT UNDER CONSTANT SUPPORT AND GUIDANCE OF ACCLARIS INC. IT HAS ALSO BEEN SUBMITTE D THAT ACCLARIS INC. PROVIDES USER MANUAL TO THE APPELLANT FOR PROVISION OF CLAIM PROCESSING SERVICES ACCORDINGLY, THE APPELLANT IS COMPLETELY SHIELDED F ROM ANY RISKS ARISING OUT OF THE OPERATION UNDER THE CAPTIVE ARRANGEMENT. 3. THE APPELLANT HAS BEEN ABLE TO DEMONSTRATE THAT CONSIDERING THE FAR PROFILE IN ITS OWN CASE VIS--VIS THE AE IS TO BE COMPARED WITH SIMILAR ENTITIES WHICH ARE ENGAGED IN PROVIDING SERVICES AKIN TO WHAT THE APPE LLANT IS PROVIDING, TO DETERMINE THE ARM'S LENGTH PRICE OF THE SERVICES RE NDERED BY THE APPELLANT. IN ADDITION TO PROVIDING THE INFORMATION ON THE COMPAN IES ADOPTED BY THE LD. TPO, THE APPELLANT HAS ALSO PROVIDED THE RESULTS OF THE SCIENTIFIC SEARCH PROCESS BASED ON WHICH THE APPELLANT'S TRANSACTIONS WITH THE AE C AN BE CONCLUDED TO HAVE BEEN UNDERTAKEN AT ARM'S LENGTH; THE COMPARABLES ALSO IN CLUDES THE TWO ACCEPTED COMPANIES FROM THE LIST. 4. BASED ON THE ABOVE SUBMISSION AND APPARENT DEMON STRATION, I FIND MERIT IN THE SUBMISSIONS OF THE APPELLANT-COMPANY. CONSIDERI NG THE BUSINESS OPERATION OF THE APPELLANT, I FIND MERIT IN THE APPELLANT'S A RGUMENT SUMMARISED AS BELOW: SI NO NAME OF THE COMPANY REASON FOR DISPOSITION DISPOSIT ION 1 ACCENTIA TECHNOLOGIES LTD. MEDICAL TRANSCRIPTION SERVICES, CODING SERVICES, OFFERING SAAS MODEL. CASE OF BECHTEL INDIA PVT. LTD. VS DCIT (I.T.A NO. 1478/DEL/2015, AY 2010- 11). REJECT 2 TCSE-SERVE INTERNATIONAL LTD. ENGAGED IN PROVISION OF SERVICES TO CITIGROUP INC. AND ITS AFFILIATES ('CITI GROUP') BASED ON THE LONG TERM AGREEMENT FOR 9.5 YEARS WHICH IS A PART OF SALE CONSIDERATION. REJECT 3 E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. PROVIDES HEALTHCARE OUTSOURCING SERVICES AND SOFTWARE DEVELOPMENT CASE OF BECHTEL INDIA PVT. LTD. VS DCIT (I.T.A NO. 1478/DEL/2015, AY 2010-11) REJECT 4 CROSSDOMAIN SOLUTIONS PRIVATE LIMITED THE SERVICE OFFERINGS OF CROSSDOMAIN INCLUDE KNOWLEDGE SERVICES OUTSOURCING IN INSURANCE, HEALTHCARE, HR AND ACCOUNTING DOMAINS. THE COMPANY ALSO OFFERS BUSINESS EXCELLENCE, MARKET RESEARCH & DATA ANALYTICS AND IT SERVICES. CASE OF M/S. MARKET TOOLS REJECT 24 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. RESEARCH PVT. LTD., V/S. DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(2) AND BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PRIVATE LIMITED, V/S. DY. COMMISSIONER OF INCOME- TAX CIRCLE 1(1), PUNE. 5. BASED ON ABOVE, FINAL COMPARABLES ARE AS BELOW: SI NO COMPANY NAME DISPOSITION OP/TC 1 AOK IN-HOUSE BPO SERVICES LTD. ACCEPT 12.58% 2 ADITYA BIRLA MINACS WORLDWIDE LTD. ACCEPT 8.06% 3 OMEGA HEALTHCARE MANAGEMENT SERVICES PVT. LTD ACCEPT 9.34% 4 IN HOUSE PRODUCTIONS LTD. ACCEPT 4.32% 5 TIMEX GROUP INDIA LTD. ACCEPT 8.38% 6 FORTUNE INFOTECH LTD. ACCEPT 22.77% 7 COSMIC GLOBAL LTD. ACCEPT 14.97% MEAN 11.49% THE APPELLANT'S MARGIN IS 12.37%. 6. BASED ON THE ABOVE, IT IS HELD THAT THE TRANSACT ION OF THE APPELLANT WITH ITS AE IS AT ARM'S LENGTH AND NO ADJUSTMENT IS WARRANTED I N THIS CASE. THEREFORE, THE ADJUSTMENT MADE BY THE LD. TPO AND ACCORDINGLY CONF IRMED BY THE LD. AO STANDS DELETED. THEREFORE GROUND NO. 3 STANDS ALLOW ED IN FAVOUR OF THE APPELLANT. I HAVE TAKEN THE SUBMISSIONS OF THE APPE LLANT WITH REGARD TO THE OTHER GROUNDS RELATING TO THE IMPUGNED TRANSFER PRICING A DJUSTMENT; AS SUCH THE SPECIFIC GROUNDS NO 1 TO 5 STAND ALLOWED, WITH THE OBSERVATIONS THAT WITH THE FINDINGS GIVEN THE BALANCE GROUNDS DO NOT REQUIRE A NY SPECIFIC ADJUDICATION. 18. LEARNED CIT(A) ACCEPTED SEVEN COMPARABLE COMPA NIES. HOWEVER, WE HAVE REJECTED COSMIC GLOBAL LTD, AS COMPARABLE FOR THE R EASONS STATED IN OUR PARA 16 OF THIS ORDER, HOWEVER, THIS GIVES THE IMPACT ON AVER AGE MARGIN OF COMPARABLES, 25 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. THAT IS, AVERAGE PLI COMES AT 10.91% AND AVERAGE M ARGIN OF THE ASSESSEE IS AT 12.37, AS TABULATED BELOW: S NO COMPANY PLI 1 TIMEX GROUP INDIA LTD - SEG 8.38% 2 AOK IN HOUSE BPO SERVICES LTD 12.58% 3 ADITYA BIRLA MINACS WORLDWIDE 8.06% 4 OMEGA HEALTHCARE MGT SERVICES 9.34% 5 IN HOUSE PRODUCTIONS LTD - SEG 4.32% 6 FORTUNE INFOTECH LTD 22.77% AVERAGE 10.91% ASSESSEES MARGIN 12.37% SINCE THE MARGIN EARNED BY THE ASSESSEE IS HIGHER T HAN THE MARGIN OF THE COMPARABLES, THEREFORE THE TRANSACTION OF SERVICES RENDERED IS AT ARMS LENGTH. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) EXCEPT THAT WE HAVE REJECTED COSMIC GLOBAL LTD, AND THIS DOES NOT GIVE ANY IMPACT SO FAR THE A RM`S LENGTH PRICE ADJUSTMENT ( ALP ADJUSTMENT OF RS.2,97,51,782/-) IS DELETED BY THE LD CIT(A). THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A ) IN DELETING THE AFORESAID ALP ADJUSTMENT. HIS ORDER IS THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED . 19. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS /10/20 20. SD/- (S. S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED:..20/10/2020 RS, SR.PS 26 ITA NO. 1458/KOL/2017 M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT- ACIT, CIRCLE-14(1), KOLKATA 2. / THE RESPONDENT.- M/S ACCLARIS BUSINESS SOLUTIONS (P) LTD. 3. ( ) / THE CIT(A), 4. / CIT 5. ! $$% , % , / DR, ITAT, KOLKATA 6. ( / GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA .