Evalueserve.com Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 1466/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4917 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 29-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Depreciation; Transfer pricing; Principle of natural justice; International transaction; Question of law; Bad and doubtful debts; Unabsorbed depreciation
• Section: 92C; 143(3); 92D; 244A; 80HHC; 115JB; 133(6); 10B; 37; 92

Judgement Text

1 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 6310/DEL/2 012 (A.Y 2008-09) EVALUESERVE.COM PVT. LTD. 701, GURU APARTMENTS, SECTOR-14, ROHINI NEW DELHI AAACE8014F (APPELLANT) VS ACIT CIRCLE-8(2) NEW DELHI (RESPONDENT) AND I.T.A .NO. 1466/DEL/2 015 (A.Y 2010-11) EVALUESERVE.COM PVT. LTD. 2 ND FLOOR, TOWER-A, UNITECH WORLD-CYBER PARK, JHARSA, SECTOR-39 GURGAON AAACE8014F (APPELLANT) VS ACIT CIRCLE-8(2) NEW DELHI (RESPONDENT) APPELLANT BY MS. ANANYA KAPOOR, ADV SH. SALIL KAPOOR, ADV RESPONDENT BY SH. KUMAR PRANAV, SR. DR ORDER PER SUCHITRA KAMBLE, JM ITA NO. 6310/DEL/2012 IS FILED BY THE ASSESSEE AGA INST THE ASSESSMENT ORDER DATED 17/11/2012 PASSED BY ASSESSING OFFICER U/S 143(3) R/W SECTION 144C OF INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 20 08-09 AND ITA NO. 1466/DEL/2015 IS FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER DATED DATE OF HEARING 04.05.2018 DATE OF PRONOUNCEMENT 03 .08.2018 2 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 14/11/2014 PASSED BY ASSESSING OFFICER U/S 143(3) R /W SECTION 144C OF INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2010-11. 2. WE ARE TAKING UP THE FACTS OF A.Y. 2010-11 FIRST . EVALUESERVE.COM INDIA IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SER VICES TO ITS AES. THE COMPANY IS REGISTERED WITH THE SOFTWARE TECHNOLOGY PARKS OF INDIA (STPI), NOIDA, AN AUTONOMOUS BODY UNDER THE MINISTRY OF INF ORMATION TECHNOLOGY OF GOVERNMENT OF INDIA. EVALUSERVE.COM INDIA DERIVES B USINESS FROM THE FOLLOWING FOUR MAJOR SEGMENTS:- A) BUSINESS INFORMATION EVS INDIA RENDERS RESEARCH SERVICES PRIMARILY TO IT S AES. EVS INDIA ANALYSTS COVER A RANGE OF INDUSTRIES INCLUDING BANKING, IN SURANCE, TELECOMMUNICATIONS, PHARMACEUTICALS AND BIO-TECHNOL OGY, CHEMICALS, ENERGY AND CONSUMER GOODS, EVS INDIA UTILIZES PRIMARY AND SECONDARY SOURCES TO CONDUCT ITS RESEARCH AND ANALYSIS IN THIS SEGMENT. ESSENTIALLY, THE RESEARCH CAPABILITIES INCLUDE: INDUSTRY AND VALUE CHAIN ANAL YSIS, IN-DEPTH ANALYSIS OF CUSTOMER SEGMENTS, PRODUCTS, CHANNELS, TECHNOLOGIES , COMPETITIVE BENCHMARKING, MONITORING AND CUSTOMIZED NEWSLETTERS , FORECASTING, MODELING, FINANCIAL ANALYSIS, DATABASE CONTENT CREATION, MANA GEMENT, UP-GRADATION OF EXISTING RESEARCH, COMMERCIALIZATION ANALYSIS AND B USINESS PLANS. THE DELIVERY IS MADE ON DEMAND AS WELL AS ON A CONTINUOUS BASIS. B) INTELLECTUAL PROPERTY THE SERVICES UNDER THIS CATEGORY INCLUDE THE FOLLOW ING AREAS: PATENTS DRAFTING AND PRIOR ART SEARCH INTELLECTUAL PROPERTY ASSET MANAGEMENT EVS INDIA IS INVOLVED IN CARRYING OUT PATENT ASSESS MENT, INTELLECTUAL PROPERTY RESEARCH AND ANALYSIS, PATENT CONSULTING AND PREPAR ING DRAFT OF PATENT APPLICATIONS TO BE FILED OVERSEAS. THIS RESEARCH IS DELIVERED TO ITS AES, WHICH 3 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 HAVE AN ARRANGEMENT WITH A TEAM OF LAWYERS FOR FILL ING OF THE PATENT APPLICATIONS IN THE APPROPRIATE JURISDICTIONS. APAR T FROM THIS, IT ALSO OFFERS INTELLECTUAL PROPERTY ASSET MANAGEMENT AND HELPS IN ANALYZING THE PORTFOLIO OF PATENTS. IT OFFERS ASSISTANCE ON PATENT OVERLAP, IN FRINGEMENT AND IN FINDING POTENTIAL COMPANIES WHICH WOULD BE INTERESTED IN LI CENSING A PARTICULAR INVENTION. C) INVESTMENT RESEARCH AND FINANCIAL ANALYTICS THIS INCLUDES FINANCIAL ANALYSIS AND RESEARCH FOCUS ED ON GLOBAL MUTUAL FUNDS AND EQUITIES. ESSENTIALLY, IT INVOLVES TRACKING THE PERFORMANCE OF SPECIFIC STOCKS AND MUTUAL FUNDS AND ANALYZING IT. THE BACKGROUND D ATA IS COMPILED AND PROVIDED TO THE CLIENTS THAT INCLUDE MAINLY INVESTM ENT BANKS. THE WORK IS CUSTOMIZED ACCORDING TO THE REQUIREMENTS OF THE CLI ENTS AND SPECIFIC REQUESTS RECEIVED BY THEM. D) MARKET RESEARCH: THIS INVOLVES VOICE-BASED SUPPORT FOR CONDUCTING TE LEPHONIC CUSTOMER SURVEYS IN DIFFERENT PARTS OF THE WORLD AND FORMULATION OF PRELIMINARY HYPOTHESIS BASES ON THE SURVEYS. EVS INDIA HAS EXTENSIVE PRIMARY RES EARCH CAPABILITIES, INCLUDING THE ABILITY TO CONDUCT RESEARCH IN MULTIP LE LANGUAGES. 3. THE INTERNATIONAL TRANSACTIONS ENTERED INTO ARE TABULATED BELOW:- SR. NO. NATURE OF TRANSACTION ARMS LENGTH PRICE AS PER TAXPAYER (I) PROVISION OF SERVICES BACK OFFICE OPERATIONS (RESEARCH SERVICES) 1,19,40,56,308 (II) COST REIMBURSEMENT 4,38,77,908 4. THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.10 .2010 DECLARING INCOME OF RS.77,03,114. SINCE THE ASSESSEE HAD UNDERTAKEN INT ERNATIONAL TRANSACTIONS 4 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 WITH ITS ASSOCIATED ENTERPRISES, A REFERENCE WAS MA DE BY THE ASSESSING OFFICER TO TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92C A (1). THE ASSESSEE FURNISHED THE TP STUDY AND SELECTED TNMM AS THE MOS T APPROPRIATE METHOD TO BENCHMARK ITS INTERNATIONAL TRANSACTION NAMELY INFO RMATION TECHNOLOGY ENABLE (ITES) SERVICES. IN RESPECT OF SAID SERVICES IN THE TP STUDY, THE ASSESSEE SELECTED 10 COMPARABLES, WHOSE AVERAGE MARGIN WAS 1 3.60% AS AGAINST ASSESSEES MARGIN OF 20.17%, THEREFORE, THE ASSESSE E HELD THAT HIS TRANSACTION WAS AT ARMS LENGTH. THE TPO DID NOT AGREE WITH THE VARIOUS FILTERS USED BY THE ASSESSEE IN ITS TP STUDY AND THE TPO USED CERTAIN M ORE FILTERS AND REJECTED 8 COMPARABLES FROM ASSESSEES SET AND SELECTED 10 NEW COMPARABLES. THUS, THE TPO SELECTED A SET OF 12 COMPARABLES (2 FROM ASSESS EES SET AND 10 FROM NEW COMPANIES) WHOSE AVERAGE MARGIN WAS 33.14% AS AGAIN ST THAT OF ASSESSEES AT 20.17%. VIDE ORDER DATED 09.01.2014 THE TPO PROPOSE D AN ADDITION OF RS. 18,66,87,657 AND THE ASSESSING OFFICER VIDE DRAFT A SSESSMENT ORDER AFTER CONSIDERING THE SAID ADDITION, PROPOSED TO ASSESS T HE ASSESSEE AT AN INCOME OF RS.19,57,81,350. 5. AGGRIEVED BY THE DRAFT ASSESSMENT ORDER, THE ASS ESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DRP PASSED DIRECTIONS VIDE ORDER DATED 23.09.2014. THE ASSESSING OFFICER PASSE D AN ASSESSMENT ORDER DATED 14.11.2014, THEREBY MAKING ADDITION OF RS. 19 ,57,81,350 TO THE INCOME OF THE ASSESSEE. 6. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE HAS FILED PRESENT APPEAL BEFORE US. THE GROUNDS OF APPEAL ARE AS FOLL OWS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ('AO') IS BAD IN LAW AND VOID AB- INITIO. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. TRANSFER PRICING OFFICER ('TPO')/ LD. DISPUTE RESOL UTION PANEL ('DRP') ERRED IN 5 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 MAKING AN ADDITION OF RS. 186,687,657/-TO THE RETUR NED INCOME OF THE APPELLANT BY RE-COMPUTING, THE ARM'S LENGTH PRICE O F THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE INCOME TAX ACT , 1961 ('ACT') AND RS. 1,390,576 ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIO D EXPENSES. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISDICTIONAL ERRO R AS THE LD. AO HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS 'EXPEDIENT AND NECESSARY ' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE ARM'S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 4. THAT THE LD. AO/ LD. TPO/ LD. DRP ERRED ON FACTS AND IN LAW IN THE ASSESSMENT OF THE ARM'S LENGTH PRICE OF THE APPELLA NT'S INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES BY- 4.1. REJECTING ON THE BASIS OF SUBJECTIVE GROUNDS A ND PRESUMPTIONS, THE COMPARABILITY ANALYSIS CONDUCTED BY THE APPELLANT F OR DETERMINING THE ARM'S LENGTH PRICE IN TERMS OF SECTION 92D OF THE ACT REA D WITH RULE 10D OF THE INCOME-TAX RULES, 1962 ('RULES') AS WELL AS FRESH S EARCH. FURTHER, THE LD. AO/ LD. TPO/ LD. DRP ERRED IN MODIFYING THE COMPARABLE COMPANIES SET ADOPTED BY THE APPELLANT ON THE BASIS OF ADDITIONAL/ MODIFI ED QUANTITATIVE FILTERS SELECTED BY HIM AND ARBITRARY STATEMENTS WHICH LACK ED VALID AND SUFFICIENT REASONING 4.1.1. REJECTING COMPANIES WHOSE EXPORT REVENUES A RE LESS THAN 75 PERCENT OF THE TOTAL REVENUES WITHOUT TAKING COGNIZ ANCE OF THE APPELLANT'S SUBMISSIONS 4.1.2. REJECTING COMPANIES WHOSE SALES TURNOVER IS LESS THAN INR 5 CRORES. 4.1.3. REJECTING COMPANIES WITH DIMINISHING REVENU E FOR THE PERIOD UNDER CONSIDERATION INSTEAD OF BEING GUIDED BY FUNCTIONAL COMPARABILITY. 4.1.4. REJECTING COMPANIES WITH DIFFERENT FINANCIA L YEAR ENDING WITHOUT TAKING COGNIZANCE OF THE APPELLANT'S SUBMISSIONS. 4.1.5 REJECTING COMPANIES WHOSE SERVICE INCOME IS LESS THAN 75 PERCENT OF THE TOTAL REVENUES WITHOUT TAKING COGNIZANCE OF THE APPELLANT'S SUBMISSIONS. 4.2. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED BY SEL ECTING CERTAIN 6 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 COMPANIES WHICH ARE NOT COMPARABLE IN VIEW OF THEIR SIGNIFICANTLY HIGH TURNOVER AS COMPARED TO THE APPELLANT 4.3 THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED BY SELE CTING CERTAIN COMPANIES WHICH WERE NOT COMPARABLE BY WAY OF FUNCT IONS AND ASSETS IN ORDER TO DETERMINE THE ARM'S LENGTH MARGIN APPLICAB LE TO THE APPELLANT AND ALSO ERRED BY REJECTING CERTAIN COMPANIES WHICH WER E COMPARABLE BY WAY OF FUNCTIONS AND ASSETS IN ORDER TO DETERMINE THE ARM' S LENGTH MARGIN APPLICABLE TO THE APPELLANT 4.4. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED IN INC ORRECTLY COMPUTING MARGINS OF SEVERAL COMPARABLE COMPANIES SELECTED IN THE FINAL COMPARABLE SET 5. THE LD. AO/LD. TPO/ LD. DRP ERRED IN TREATING P ROVISION FOR DOUBTFUL DEBTS AND DONATION EXPENSES AS AN OPERATING ITEM IN STEAD OF TREATING THEM AS NON-OPERATING WHILE COMPUTING THE OPERATING MARGIN OF THE APPELLANT 6. THE LD.AO/LD. TPO/ LD. DRP ERRED IN RECLASSIFYIN G EXPENSES RELATED TO THE NON- UNIT OF THE APPELLANT WHICH HAD BEEN TAKEN AS NON-OPERATING BY THE APPELLANT TO BE OPERATING EXPENSES. FURTHER, THE LD . AO/LD. TPO/ LD. DRP ALSO ERRED IN NOT CONSIDERING THE DOCUMENTARY EVIDE NCE SUBMITTED TO SUBSTANTIATE THE NON-OPERATIONS IN THE SAID UNIT OF THE APPELLANT. 7. THE LD.AO/ LD. TPO/ LD. DRP ERRED IN DISREGARDIN G THE MULTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION A ND IN SELECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2009-10) DATA FOR COMPARA BILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE APPELLANT, TH E COMPLETE DATA FOR FINANCIAL YEAR 2009-10 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN. 8. THAT THE LD. AO/ LD. TPO ERRED IN MAKING A TRANS FER PRICING ADJUSTMENT ESPECIALLY AS THE LD. TPO HAD ACCEPTED THE ARM'S LE NGTH NATURE OF THE INTERNATIONAL TRANSACTIONS IN FY 2008-09 AND COMMIS SIONER OF INCOME TAX APPEALS ('CIT(A)') HAD ACCEPTED THE ARM'S LENGTH NA TURE OF THE INTERNATIONAL TRANSACTIONS IN FY 2004-05 AND FY 2006-07 9. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED IN NOT AP PRECIATING THE FACT THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE P ROVISIONS OF THE COMPANIES ACT, 1956 AND ENJOYING THE TAX HOLIDAY BE NEFITS CONFERRED UNDER SECTION 10A OF THE ACT AS PER THE SOFTWARE TECHNOLO GY PARK OF INDIA ('STPI') SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE APPELLANT TO SHIFT THE PROFITS TO ANY OTHER JURISDICTION. HENCE THE CASE O F THE APPELLANT FALLS SQUARELY WITHIN THE AMBIT OF AFOREMENTIONED PRINCIPLE. 7 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 10.1. THAT, ON THE FACTS AND IN LAW, THE ORDER OF T HE LD. AO IS ERRONEOUS TO THE EXTENT OF NOT INCORPORATING THE BINDING DIRECTIONS OF THE HON'BLE DRP WHILE FINALIZING THE ORDER SECTION 143(3) READ WITH SECTI ON 144C OF THE ACT ON THE DISALLOWANCES MADE BY THE LD. AO OF RS. 13,90,576/- AS PRIOR PERIOD EXPENSE. 10.2. WITHOUT PREJUDICE TO GROUND 10 AND 11, THE LD . AO FAILED TO UNDERSTAND THAT THE APPELLANT HAS COMPUTED THE TAXABLE INCOME BEFORE GIVING ANY EFFECT TO PRIOR PERIOD ITEM IN THE PROFIT AND LOSS STATEMENT. THE LD. AO ERRED IN APPRECIATING THE FACT THAT THE DISALLOWANCE OF RS. 13,90,576/- AS PRIOR PERIOD EXPENSE WOULD RESULT IN DOUBLE TAXATION, WHICH IS B AD IN LAW. 11. THAT THE LD. AO ERRED IN FACTS AND IN LAW IN CH ARGING INTEREST UNDER SECTION 234B, 234C AND 234D OF THE ACT. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271 (L)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE SAT ISFACTION FOR SUCH INITIATION 7. GROUND NO. 1 IS GENERAL IN NATURE, HENCE DISMISS ED. GROUND NO. 2 IS CORRELATED WITH GROUND NO. 10.1 AND 10.2 AND ARE R ELATED TO DISALLOWANCE OF PRIOR PERIOD EXPENSES. HENCE GROUND NO. 2 IS DISCUS SED ALONGWITH GROUND NO. 10.1 AND 10.2. GROUND NO. 3 WAS NOT PRESSED BY THE LD. AR AT THE TIME OF HEARING. HENCE, GROUND NO. 3 IS DISMISSED. 8. THE LD. AR SUBMITTED THAT DURING THE COURSE OF T HE TRANSFER PRICING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PROVIDED A LL THE SUBMISSIONS AND RELEVANT BACK UP DOCUMENTS IN SUPPORT OF THE ARMS LENGTH NATURE OF THE INTERNATIONAL TRANSACTIONS. HOWEVER, THE TPO ISSUED A SHOW CAUSE NOTICE DATED 25.11.2013 INDICATING THEREIN TO MAKE A TRANSFER PR ICING ADJUSTMENT TO THE INTERNATIONAL TRANSACTIONS RELATED TO PROVISIONS OF ITES. THE TPO MODIFIED THE COMPARABILITY ANALYSIS CONDUCTED BY THE ASSESSEE FO R DETERMINING THE ARMS LENGTH PRICE FOR THE ITES AND CONCLUDED THAT THE FI LTERS USED IN TP 8 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 DOCUMENTATION ARE INAPPROPRIATE AND SUFFER FROM VAR IOUS LACUNA AND DEFECTS AND THAT THE ECONOMIC ANALYSIS CONDUCTED IS INADEQU ATE AND HENCE CANNOT BE ACCEPTED. THE TPO APPLIED CERTAIN ADDITIONAL/MODIFI ED QUANTITATIVE FILTERS (REJECT COMPANIES WITH DIFFERENT FINANCIAL YEAR END ING, EXPORT REVENUES AS A PERCENTAGE OF SALES LESS THAN 75%, REJECT COMPANIES WITH SALES TURNOVER INR 5 CRORES ETC.) SELECTED BY THE TPO WHICH LACKED VALID AND SUFFICIENT REASONING AND SELECTED COMPANIES WHICH IN TERMS OF THEIR FUNCTION S, ASSETS AND RISKS WERE NOT COMPARABLE TO THE ASSESSEE. WHILE APPLYING THESE QU ANTITATIVE FILTERS, THE TPO USED THE UPDATED FINANCIAL INFORMATION OF THE COMPA RABLE COMPANIES PERTAINING TO F.Y. 2009-10 WHICH WAS NOT AVAILABLE WITH THE ASSESSEE AT THE TIME OF PREPARATION OF TP DOCUMENTATION. ACCORDINGL Y, A DETAILED RESPONSE DATED 13.12.2013 WAS FILED BY THE ASSESSEE WITH THE TPO. THE ASSESSEE THEREIN EXPLAINED THAT IN UNDERTAKING THE BENCHMARKING ANAL YSIS, THE ASSESSEE UNDERTOOK THE SELECTION OF EXTERNAL COMPARABLES, US ING A SCIENTIFIC SCREENING PROCESS INVOLVING VARIOUS QUANTITATIVE AND QUALITAT IVE FILTERS, TO ARRIVE AT INDEPENDENT COMPANIES WITH A COMPARABLE FUNCTIONAL PROFILE. ACCORDINGLY, THE ASSESSEE HAS REJECTED COMPANIES THAT DO NOT MEET AN Y OF THE SPECIFIED QUANTITATIVE CRITERIA AS WELL AS COMPANIES THAT ARE ENGAGED IN A DIFFERENT PRODUCT LINE OR HAVE RELATED PARTY TRANSACTIONS OR HAVE AN INCOMPARABLE ASSET BASE. THE ASSESSEE, IN ORDER TO ARRIVE AT A SET OF DUE COMPARABLE COMPANIES, WAS SOLELY GUIDED BY THE PARAMETERS OF FUNCTIONAL C OMPARABILITY AND THEREFORE, THE ASSESSEE IN THE TP DOCUMENTATION OF F.Y. 2009-1 0 HAS NOT REJECTED COMPANIES ON THE BASIS OF MARGINS EARNED, WHETHER P ROFITS OR LOSSES. THE ASSESSEE ALSO EXPRESSED ITS DISAGREEMENT WITH THE U SE OF CURRENT YEAR DATA BY THE TPO. 9. IN RESPECT OF PROVISION OF IT ENABLED SERVICES, THE LD. AR SUBMITTED THAT THE ADDITIONAL/ MODIFIED QUANTITATIVE FILTERS USED BY THE TPO FOR REJECTING THE COMPARABLES WERE SUBJECTIVE, AND THE QUANTITATIVE T HRESHOLD LIMITS THAT WERE CONSIDERED FOR THESE FILTERS DO NOT PROVIDE A RATIO NAL BASIS FOR USING SUCH LIMITS. FURTHER, THE TPO REJECTED THE COMPANIES WITH DIMINI SHING REVENUE/PERSISTENT 9 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 LOSSES WHILE RETAINED THE COMPARABLES WHICH HAD SIG NIFICANT HIGH GROWTH AS COMPARED TO THE ASSESSEE COMPANY. IF COMPANIES WITH DIMINISHING REVENUE/PERSISTENT LOSSES ARE BEING ELIMINATED AS S AID BY THE TPO, THE SAME TREATMENT SHOULD BE GIVEN TO COMPANIES WITH HIGH SA LES/PROFITABILITY GROWTH. THE QUANTITATIVE FILTER OF EXPORT REVENUE USED BY T HE TPO IS NOT TRUE INDICATOR OF THE FUNCTIONAL COMPARABILITY OF THE COMPANY. EVALUA TION OF COMPARABLE COMPANIES BASED ON REVENUES IS NOT AN APPROPRIATE F ILTER. IN FACT, COMPARABILITY OF A COMPANY IS DEPENDENT ON ALTOGETHER DIFFERENT S ET OF FACTORS WHICH HAVE ALREADY BEEN CONSIDERED BY THE ASSESSEE IN ITS TRAN SFER PRICING DOCUMENTATION. FURTHER, IT WAS HIGHLIGHTED THAT THE FILTERING PROC ESS ADOPTED BY THE TPO AND THE COMPANIES FINALLY ARRIVED AT BY THE TPO DO NOT ADHERE TO THE COMPARABILITY CRITERIA SET OUT UNDER RULE 10B(2) OF THE INDIAN RE GULATIONS. ALSO, THE COMPANIES FINALLY SELECTED BY THE TPO WERE ENGAGED IN A DIFFERENT SET OF FUNCTIONS AS COMPARED TO THAT OF THE ASSESSEE AND H AD RELATED PARTY TRANSACTIONS. FURTHER THE TPO WRONGLY COMPUTED THE MARGINS OF COMPARABLE COMPANIES. THE TPO WRONGLY COMPUTED THE PLI OF THE ASSESSEE AT 16.17% INSTEAD OF 20.17% BY CONSIDERING PROVISION FOR DOUB TFUL DEBTS, DONATIONS AND EXPENSES RELATING TO NOIDA UNIT AS OPERATING. WORKI NG CAPITAL ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN THE WORKING CAPITAL POLI CIES OF THE ASSESSEE AND COMPARABLES IS ALSO REQUIRED. THE TPO USED THE UPDA TED FINANCIAL INFORMATION OF THE COMPARABLES TO DETERMINE THEIR COMPARABILITY AND ARRIVED AT AN ARMS LENGTH MARGIN. SUCH INFORMATION WAS NOT AVAILABLE W ITH THE ASSESSEE AT THE TIME TRANSFER PRICING STUDY WAS CONDUCTED. IT WAS E XPLAINED THAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF T HE COMPANIES ACT, 1956 AND ENJOYED TAX HOLIDAY BENEFITS CONFERRED UNDER SE CTION 10A OF THE ACT AS PER THE SOFTWARE TECHNOLOGY PARK OF INDIA SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE ASSESSEE TO SHIFT THE PROFITS TO ANY OT HER JURISDICTION. 10. THE LD. DR SUBMITTED REGARDING GROUNDS PERTAINI NG TO THE TP ADJUSTMENT THAT THE ASSESSEE IS PROVIDING RESEARCH AND ANALYSIS SERVICES 10 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 CONSISTING OF BUSINESS INFORMATION, INTELLECTUAL PR OPERTY RESEARCH, INVESTMENT RESEARCH & FINANCIAL ANALYTICS AND MARKET RESEARCH SERVICES, TO ITS AE AS MENTIONED IN THE TP STUDY REPORT. FROM THE PERUSAL OF THE ABOVE SERVICES IT IS EVIDENT THAT THE ASSESSEE IS PROVIDING HIGH END DOM AIN SPECIFIC KPO SERVICES AND NOT LOW-END BPO SERVICES. THE ITAT IN CASE OF ASSESSEE FOR THE AY 2006-07 (ITA NO. 4001 /DEL/2013) DATED 11.05.2017 HAS RESTO RED THE IDENTICAL ISSUE OF TRANSFER PRICING ADJUSTMENT BACK TO THE FILE OF AO/ TPO FOR ASCERTAINING THE CORRECT FUNCTIONAL PROFILE OF THE ASSESSEE. THE OPE RATING PARA OF THE ABOVE JUDGMENT IS GIVEN BELOW:- 34. ON READING OF THE ABOVE DECISION IT IS APPAREN T THAT COORDINATE BENCH IN ITS ORDER FOR AY 2007-08 WHILE READING THE ORDERS FOR AY 2005-06 OF THE COORDINATE BENCH IN CASE OF THE ASSESSEE, HAS E NTERED IN TO AN ERROR BY NOT LOOKING AT THE PARA NO 43 OF THE ORDER, WHERE F INDINGS ARE CONTAINED, WHERE IN IT HAS BEEN HELD THAT ASSESSEE IS HIGH END ITES SERVICES PROVIDER IN ITS T P STUDY REPORT BECAUSE THE ASSESSEE CONDUCTS RESEARCH ACTIVITY AND PROVIDES KNOWLEDGE MANAGEMENT SERVICES TO ITS AES. THE COORDINATE BENCH HAS LOOKED AT THE REFERENCE AND FINDING IN CASE OF MAERSK GLOBAL CENTERS (INDIA ) PVT. LTD. (ITA 7466/MUM/2012) IN PARA NO 3 8 AND 39 OF THAT JUDGMENT AND HAS HELD THAT ASSESSEE IS A LOW END IT ES SERVICE PROVIDER. ACCORDING TO US THOSE PARAS OF ORDER FOR AY 2005-06 DO NOT CONTAIN THE FINDING ABOUT THE FUNCTIONAL PROFILE OF THE ASSESSE E. ASSESSEE HAS SUBMITTED AT PAGE NO 245 ONWARDS OF THE PAPER BOOK ORDER OF L D TPO FOR AY 2005-06 WHERE IN WHERE IN AT PARA NO 2 ID. TPO HAS DESCRIBE D THE BUSINESS DESCRIPTION OF THE ASSESSEE AND AT PARA NO 2.3 ASSE SSEE HAS MENTIONED THE DESCRIPTION OF THE ASSESSEES BUSINESS AS UNDER:- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDIN G HIGH END IT ENABLES SERVICES TO ITS ASSOCIATED ENTERPRISES, THE COMPANY IS REGISTERED WITH SOFTWARE TECHNOLOGY OF THE GOVERNMENT OF INDIA. THE ASSESSEE CONDUCTS RESEARCH ACTIVITIES AND PROVIDES KNOWLEDGE MANAGEME NT SERVICES TO ITS ASSOCIATED ENTERPRISES. II THE ABOVE FUNCTIONAL PROFILE MATCHES WITH THE WEBSITE INFORMATION SUBMITTED BY THE ID DR. LOOKING AT THE ORDER OF THE ID TPO FOR IMPUGNED AY 2006-07, WE COULD NOT FIND, ON THE BASIS OF SERVICES MENTIONED, WHETHER ASSESSEE IS CLASSIFIED AS HIGH E ND ITES OR LOW END ITES 11 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SERVICE PROVIDER. EVEN ASSESSEE HAS ALSO NOT SUBMIT TED ITS SEARCH CRITERIA ( PARA NO (IV) AT PAGE NO 15 OF TPO ORDER) AND IT IS ALSO MENTIONED THAT ASSESSEE HAS CONDUCTED FRESH SEARCH PROCESS WITHOUT ASSIGNING ANY REASON FOR CONDUCTING FRESH SEARCH AND ALSO NOT PROVIDED D ETAILS OF SEARCH PROCESS EMPLOYED AND ITS DISTINCTION WITH EARLIER SEARCH PR OCESS FOR THE SAME YEAR. THIS HAS LEAD TO AN AMBIGUITY IN SELECTION OF COMPA RABLES QUA THE FUNCTIONAL PROFILE OF THE ASSESSEE. ON THE BASIS OF FACTS POIN TED OUT BY THE ID DR AND EXAMINING THE SUBMISSION OF THE ASSESSEE BEFORE US COUPLED WITH THE DOCUMENTS RELIED UPON, WE CANNOT CLOSE OUR EYES TO THIS STARTLING FACTS STARING AT US. IN VIEW OF THE ABOVE CATEGORICAL FIN DING OF THE COORDINATE BENCH FOR AY 2005-06 BASED ON THE T P STUDY REPORT OF THE ASSESSEE ITSELF NOW IT IS NOT POSSIBLE TO ASSUME THE FUNCTIONAL PROFILE OF THE ASSESSEE AS LOW END ITES PROVIDER. FURTHER IT IS ALSO NOT POSSIBLE TO IGNORE THE FINDI NGS OF THE COORDINATE BENCH FOR AY 2007-08 FURTHER THE APPEAL BEFORE US I S AY 2006-07 WHICH IS IN BETWEEN YEAR OF BOTH THE ABOVE YEARS DECIDED BY THE COORDINATE BENCH. THE TWO COMPARABLES OBJECTED BY THE ASSESSEE ALSO CANNO T BE DIRECTED FOR ITS EXCLUSION WITHOUT REACHING AT THE CORRECT FUNCTIONA L PROFILE OF THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE AND TO DIG OU T THE CORRECT FUNCTIONAL PROFILE OF THE ASSESSEE AMIDST HOST OF CONFUSION, WE SET AS IDE THE WHOLE ISSUE OF TRANSFER PRICING ADJUSTMENT BACK TO THE FILE OF LD AO/ TPO FOR ASCERTAINING THE CORRECT FUNCTIONAL PROFILE OF THE ASSESSEE FOR THIS YEAR WITHOUT BEING INFLUENCED BY THE ORDER OF THE COORDINATE BENCH FOR AY 2007-08, THEN CARRY OUT EXAMINATION OF COMPARABILITY ANALYSIS AND THEN DETERMINE ALP OF THE INTERNATIONAL TRANSACTIONS. NEEDLESS TO SAY THAT AS SESSEE SHALL BE DUTY BOUND TO PROVIDE CORRECT FUNCTIONAL PROFILE OF THE ASSESSEE AND ITS COMPLETE SEARCH PROCESS AND ITS STEPWISE RESULTS TO THE ID T PO/ AO ALONG WITH ITS JUSTIFICATION FOR CLAIM OF WORKING CAPITAL ADJUSTME NTS OR CAPACITY UTILIZATION FOR EXAMINATION BY THE ID AO/ TPO. IN THE RESULT GR OUND NO 3, 4, 5 AND ADDITIONAL GROUND ARE REMITTED BACK TO THE FILE OF ID AO/ TPO TO DECIDE THE WHOLE ISSUE AFRESH AND HENCE THESE GROUNDS OF APPEA L OF THE ASSESSEE ARE ALLOWED WITH ABOVE DIRECTIONS. THE ORDER OF THE ITAT IN CASE OF EVALUESERVE SEZ (GURGAON) PVT. LTD. FOR THE AY 2010-11 (ITA NO. 1467/DEL/2017) IS NOT APPLICABLE (AS ARGUED BY THE LD. AR) 12 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 AS IN THE ABOVE CASE THE ITAT HAS HELD THAT EVALUESERVE SEZ (GURGAON) PV T. LTD. IS NOT A KPO AND IS PROVIDING ONLY ITES SERVIC ES WHICH FALL IN THE REALM OF BPO AND THUS ECLERX, WHICH IS A KPO, CANNOT BE COMPARED WITH EVALUESERVE SEZ (GURGAON) PVT. LTD., WHICH IS A BPO. THE DEPARTMENT IS IN THE PROCESS TO FILE MA IN THE CASE OF EVALUESERVE SEZ (GURGAON) PVT. LTD. FOR 2010-11 (IT A NO. 1467/DEL/2017). THE FUNCTIONAL PROFILE OF THE ASSES SEE HAS NOT CHANGED EVEN IN THE AY 2010-11. HENCE, FOLLOWING THE ABOVE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE AY 2006-07, THE LD. DR SUBMITTED THAT THE ORDER OF THE AY 2010-11 MAY ALSO BE RESTORED TO THE AO/TPO FOR ASCE RTAINMENT OF CORRECT FUNCTIONAL PROFILE (WHETHER THE ASSESSEE IS A KPO O R BPO). UNLESS THE CORRECT PROFILE (FAR) OF THE ASSESSEE IS ASCERTAINED (WHETH ER THE ASSESSEE IS A KPO OR BPO) NO ARGUMENT CAN BE MADE FOR THE EXCLUSION/INCL USION OF COMPARABLES ON GROUND OF FUNCTIONAL DISSIMILARITY. 11. THE LD. AR IN HIS REJOINDER SUBMITTED THAT THE LD. DR CANNOT ARGUE THAT ASSESSE IS A KPO AS HE CANNOT GO BEYOND THE ORDER O F THE TPO. THE LD. AR SUBMITTED THAT LD. DR CANNOT BE PERMITTED TO GO BEY OND THE TPOS ORDER. ONCE THE TPO EXPRESSLY ACCEPTS THE FUNCTIONAL PROFILE OF THE APPELLANT, THEN REVENUE CANNOT BE ALLOWED TO ARGUE BEYOND IT. IN OUR CASE A T PARA 3 INTERNAL PAGE 3, THE TPO HAS GIVEN A CATEGORICAL FINDING THAT HE HAS PUR SUED THE TP STUDY AND HAS FOUND EVERYTHING IN ORDER. THE LD. AR SUBMITTED THAT THE REVENUE CANNOT IMPROVE THE ASSESSMENT ORDER. IT IS THE PREROGATIVE OF THE TPO TO ACCEPT OR REJECT THE FUNCTIONAL PROFILE AFTER CONSIDERING ALL THE RELEVANT ASPECTS. ONCE THE TPO ACCEPTS IT, THEN THAT BECOMES FINAL QUA THE REV ENUE. THE REVENUE CANNOT STEP INTO THE SHOES OF THE TPO TO UNDO WHAT WAS NOT DONE BY HIM. IF THIS IS ACCEPTED AND GIVEN A LOGICAL CONCLUSION, THEN INVAR IABLY ALL THE CASES PENDING BEFORE THE TRIBUNAL/ HIGH COURT WILL REQUIRE RESTOR ATION TO THE TPO, AND FRESH OPPORTUNITY WILL BE GIVEN TO THE TPO. THE LD. AR SU BMITTED THAT THE ROLE OF THE LD. DR, IN AN APPEAL BY THE ASSESSEE IS LIMITED TO DEFENDING THE ORDER OF THE TPO. HE CANNOT DO OR ARGUE WHAT THE TPO COULD HAVE DONE BUT FAILED TO DO. 13 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 FOR THE ABOVE PREPOSITION, THE LD. AR RELIED UPON T HE FOLLOWING DECISION: I) CIT VS. MS. AISHWARIYA K.RAI [2010] 127 ITD 204- MUMBAI ITAT II) MCORP GLOBAL P. LTD. VS. CIT [2009] 309 ITR 434 (SC) III) MCKINSEY KNOWLEDGE CENTRE (P.) LTD. VS. DCIT [ 2017] 77 TAXMANN.COM 164 (DELHI - TRIB.) IV) MAHINDRA & MAHINDRA LTD. VS. DCIT - MUMBAI IT A T - SPECIAL BENCH [2010] 122 ITD 216 (MUMBAI) (SB) V) EMISSION AB- DELHI ITAT- 20/56 SOT 177 VI) ITO VS. ANANT Y. CHAVAN [2009] 126 TTJ (PUNE) 9 84 VII) AMERICAN EXPRESS (INDIA) (P.) LTD. VS. DCIT- [2017] 83 TAXMANN.COM 345 (DELHI - TRIB.) VIII) MCKINSEY KNOWLEDGE CENTRE (P.) LTD. VS. DCIT [2017] 82 TAXMANN.COM 25 (DELHI TRIB) THE LD. AR POINTED OUT THAT IN THE RECENT DECISIONS IN CASE OF AMERICAN EXPRESS AND MCKINSEY (SUPRA), THE LD. DR RAISED THI S VERY ISSUE STATING THAT THOSE COMPANIES ARE KPOS AND HENCE MATTER SHOULD BE REMANDED. HOWEVER, ITAT DID NOT ENTERTAIN SUCH PLEA FOR THE REASON THA T THIS WAS NOT THE CASE OF THE TPO AND CLASSIFICATION IS NOT MANDATORY IN LAW. THE LD. AR SUBMITTED THAT CLASSIFICATION TO BPO/KPO IS NOT MANDATORY. THE HON BLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS 377 ITR 533 HELD THAT CLASSIFIC ATION IS NOT MANDATORY. FURTHERMORE, THE CONCEPT OF BPO AND KPO IS NOT MENT IONED IN RULE 10B OF THE INCOME TAX RULES, 1962 (THE RULES). ON EXAMINATIO N OF THE ACT AND THE RULES, IT IS EVIDENT THAT FOR COMPARABILITY ANALYSIS, INFO RMATION TECHNOLOGY ENABLED SERVICES ARE NOT BIFURCATED IN STRICT COMPASS OF BP O/KPO. THE BASIC RULE IS CONTAINED IN RULE 10B AND THAT SHOULD BE APPLICABLE . THE LD. AR RELIED ON DECISION OF THE ITAT DELHI IN CASE OF CHRYSCAPITAL INVESTMENT ADVISORS VS. DCIT (376 ITR (TRIB)183 )(DELHI). THIS VIEW IS REAFFIRME D AGAIN, IN AVENUE ASIA ADVISORS P. LTD. VS. DCIT ITA NO. 350/2016 ORDER DA TED 18.09.2017. THE LD. AR FURTHER SUBMITTED THAT EACH YEAR HAS TO BE SEEN ON ITS OWN FACTS. IT IS SETTLED LAW THAT EACH AY IS TO BE SEEN ON ITS OWN F ACTS. IN OUR CASE, THERE ARE 14 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 MANY DISTINGUISHING FEATURES BETWEEN THE FACTS OF A Y 2006-07 AND THE FACTS OF AY 2010-11. HENCE, ORDER OF AY 2006-07 SHOULD NOT B E FOLLOWED. THE DISTINGUISHING FACTORS POINTED OUT BY THE LD. AR AR E AS FOLLOWS: ADDITIONAL GROUNDS WERE RAISED FOR THE FIRST TIME I N AY 2006-07, WHICH IS NOT THE CASE IN AY 2010-11 AS ALL POINTS H AVE BEEN CONTESTED SINCE THE TPO LEVEL THE ASSESSE WAS WANTING TO EXCLUDE 2 COMPARABLES TA KEN BY IT IN ITS OWN TP STUDY ASSESSEE COULD NOT SUBMIT AND EXPLAIN WHY A DIFFER ENT STANCE WAS BEING TAKEN NOW ASSESSEE COULD NOT EXPLAIN HOW THESE 2 COMPARABLES WERE INITIALLY TAKEN AS COMPARABLE IN ITS OWN TP STUDY- THE REASON FOR RETRACTING ITS OWN COMPARABLES, AND INITIAL SEARCH PROCESS OF ASSESSE IS NOT KNOWN THERE IS NO COMMON COMPARABLE IN AY 2006-07 AND AY 2010-11, WHICH IS SUBJECT-MATTER OF DISPUTE. AY 2006-07 WAS REMANDED BACK BECAUSE THE LD. DR WAS AGAINST THE ADMISSION OF ADDITIONAL GROUND. THE LD. DR MADE A STATEMENT THAT DEPT, IS IN THE PR OCESS OF FILING AN MA IN AY 2007-08 ORDER. HOWEVER, TILL DATE NO SU CH MA HAS BEEN FILED AND THE EVEN THE TIME LIMITATION HAS EXP IRED. IT WAS INCORRECT ON BEHALF OF THE DEPT, TO MAKE SUCH A STA TEMENT, WHICH HAS NOT SUBSEQUENTLY BEEN HONOURED. 12. THE LD. AR SUBMITTED THAT THE LD. DR SUBMITTED WEBSITE PRINT AND STATED THAT IN THAT IT IS WRITTEN THAT ASSESSE IS K PO. THIS IS FACTUALLY INCORRECT. 15 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 THE WEBSITE PRINT IS OF THE PARENT COMPANY OF THE A SSESSE AND NOT OF THE ASSESSE. IN ANY CASE ASSESSE HAS NOT ACCEPTED THE O RDER OF TRIBUNAL FOR AY 2006-07 AND HAS FILED APPEAL IN HIGH COURT AND MA I N ITAT. THE LD. AR SUBMITTED THAT THE CASE OF SISTER CONCERN IS HAVING IDENTICAL FACTS. THE LD. AR SUBMITTED THAT THE TRIBUNAL HAS NOW RULED IN CASE O F SISTER CONCERN ON MERITS(ITA NO. 1467/D/2015- GROUP ENTITY (EVALUESER VE (SEZ)). THE LD. AR POINTED OUT THAT FUNCTIONAL PROFILE OF SISTER CONCE RN AND OF ASSESSE ARE IDENTICAL. IN THIS YEAR TP STUDY, TPO ORDER AND DRP ORDER OF BOTH ENTITIES ARE IDENTICAL. HENCE, REVENUE IS BOUND TO TAKE SAME STA ND WHEN LOOKING AT BOTH THE ENTITIES. AS TP STUDY AND TPO ORDER OF BOTH ENT ITIES ARE IDENTICAL, AND LD. DR DID NOT CHALLENGE THE FUNCTIONAL PROFILE WHEN CA SE OF EVALUESERVE (SEZ) WAS HEARD IN ITAT AND DID NOT TAKE A STAND THAT EVALUES ERVE (SEZ) IS A KPO, IN VIEW OF THE FACT THAT TP STUDY AND TPO ORDER OF BOT H ENTITIES IS IDENTICAL, LD. DR NOW CANNOT TAKE A DIFFERENT STANCE QUA BOTH THE ENTITIES. FURTHER, EVEN ITAT IN ITS ORDER AT PARA 8 HAS STATED THAT THE FAR ANALYSIS SHALL BE THE BASIS TO DETERMINE COMPARABILITY. FURTHER, ITAT HAS ALSO MENTIONED THAT TPO HAS NOT DISPUTED THE FUNCTIONAL PROFILE OF THE ASSESSE. THE LD. AR RELIED UPON THE HONBLE DELHI HIGH COURTS DECISION IN ASSESSEES O WN CASE FOR AY 2007-08. MORE IMPORTANTLY, DEPARTMENT APPEALED AGAINST THE ITAT ORDER FOR AY 2 007-08 IN DELHI HIGH COURT AND VIDE ORDER DATED 31.10.2017 , DEPARTMENTS APPEAL IN DELHI HIGH COURT HAS BEEN DISMISSED. FOR AY 2007-08 , ITAT HAD RULED IN FAVOUR OF THE ASSESSE. DELHI HIGH COURT ORDER HAS N OW SETTLED THIS ISSUE IN ASSESSEES OWN CASE. THE LD. AR SUBMITTED THAT IN T HE ORDER FOR AY 2007-08, DR DID RAISE THIS ISSUE DISPUTING FUNCTIONAL PROFIL E OF THE ASSESSEE, DURING THE COURSE OF HIS ARGUMENTS AND STATED THAT ASSESSE IS A KPO AND YET ITAT RULED IN OUR FAVOUR. THEREAFTER, APPEAL WAS FILED IN THE DELHI HIGH COURT BY THE DEPARTMENT IN WHICH SPECIFICALLY THIS GROUND WAS RA ISED IN DETAIL AND QUESTION OF LAW WAS ALSO FRAMED. YET, DELHI HIGH COURT HAS D ISMISSED THEIR APPEAL. THE LD. AR POINTED OUT THAT THIS ISSUE OF SO-CALLED CON FLICT BETWEEN ITAT FINDINGS IN AY 2005-06 AND 2007-08, WHICH IS ALSO MENTIONED AY 2006-07 ITAT ORDER, 16 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 WAS A SPECIFIC GROUND TAKEN BY THE DEPARTMENT IN TH EIR APPEAL MEMO AND YET IT HAS BEEN DISMISSED. HENCE, NOW PRINCIPLE OF MERGER IS APPLICABLE AND SINCE HIGH COURT HAS APPROVED THE ITAT ORDER AND PASSED A N ORDER AND DISMISSED DEPARTMENTS CONTENTION THAT ASSESSEE IS A KPO, THI S VIEW IS NOW BINDING ON DEPARTMENT. ITAT ORDER OF AY 2007-08, DEPARTMENTS APPEAL IN HIGH COURT AND HIGH COURT ORDER DATED 31.10.2017 IS BEING FILE D HEREWITH ALONGWITH ITAT ORDER OF AY 2007-08. 13. THE LD. AR SUBMITTED THE BACKGROUND OF ALL CASE S AS FOLLOWS: AY 2005-06- ITAT RULED IN ASSESSEES FAVOUR FOR THI S AY ON 30.09.2016, ON MERITS. NO APPEAL FILED BY DEPARTMENT IN HIGH CO URT. AY 2006-07- ITAT HAS REMANDED IT BACK PRIMARILY BEC AUSE ASSESSE WANTED TO CHANGE ITS OWN STAND AFTER 11.05.2017 AND RETRACT ITS OWN COMPARABLES. AY 2007-08- ITAT RULED IN ASSESSEES FAVOUR FOR THI S AY ON 13.12.2016, ON MERITS. APPEAL FILED BY DEPARTMENT IN WHICH BOTH ISSUES WERE RAISED AND CHALLENGED- FUNCTIONAL PROFILE OF ASSESS E AND COMPARABLES ON MERITS. HOWEVER, DELHI HIGH COURT VIDE ORDER DAT ED 31.10.2017, DISMISSED DEPARTMENTS APPEAL. THE TRIBUNAL VIDE ORDER DATED 30.06.2017 HAS ALSO R ULED IN CASE OF SISTER CONCERN, WHEREBY CASE HAS NOT BEEN REMANDED BACK (ITA NO. 1467/D/2015- GROUP ENTITY (EVALUESERVE (SEZ)). IT I S PERTINENT TO NOTE THAT FUNCTIONAL PROFILE OF SISTER CONCERN AND OF AS SESSE ARE IDENTICAL. IN THIS YEAR TP STUDY, TPO ORDER AND DRP ORDER OF BOTH ENTITIES IS IDENTICAL. 14. THE LD. AR SUBMITTED THAT IF ALL FACTS AND EVID ENCE ARE ON RECORD BEFORE THE HONBLE TRIBUNAL, A MERE REMAND WILL ONLY PROLO NG THE PROCEEDINGS AND LEAD TO MULTIPLICITY OF PROCEEDINGS. THE HONBLE DE LHI HIGH COURT HAS RECENTLY 17 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 IN 2017 HELD THAT UNNECESSARY REMAND IN TP CASES IS A PRACTICE WHICH SHOULD NOT BE FOLLOWED. FOR THE ABOVE PREPOSITION, THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: BECHTEL INDIA PRIVATE LIMITED VS. DCIT- DELHI HIGH COURT ORDER DATED 25.07.2017 ALCATEL -LUCENT INDIA LTD. VS. DCIT - DELHI HIGH CO URT ORDER DATED 08.05.2017 VOITH HYDRO PRIVATE LTD. VS. PCIT- DELHI HIGH COURT ORDER DATED 25.09.2017 15. THE LD. AR POINTED OUT THAT LD. DR FOR THE FIRS T TIME IS TAKING UP THE ISSUE OF FUNCTIONAL PROFILE OF THE ASSESSEE DURING THE COURSE OF THE HEARING PROCEEDINGS BEFORE THE TRIBUNAL. THIS WAS NEVER AN ISSUE TAKEN UP BY THE TPO/DRP AND ALSO THE DEPARTMENT/REVENUE WAS NOT IN APPEAL BEFORE THE TRIBUNAL. FURTHERMORE, ONLY THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: ASSAM CO-OPERATIVE APEX BANK LTD. V. COMMISSIONER O F INCOME TAX [1978] 112 ITR 257 (GAUHATI) V. RAMASWAMY IYENGAR V. COMMISSIONER OF INCOME-TAX [1960] 40 ITR 377 (MADRAS) IN NEW INDIA LIFE ASSURANCE CO. LTD. V. COMMISSIONER OF INCOME-TAX [1957] 31 ITR 844(BOM.)- 16. THE LD. AR SUBMITTED THAT THE LD. DR CANNOT AR GUE THAT ASSESSE IS A KPO AND CANNOT GO BEYOND THE TPOS ORDER. THE LD. DR CANNOT BE PERMITTED TO GO BEYOND THE TPOS ORDER. ONCE TPO EXPRESSLY AC CEPTS THE FUNCTIONAL PROFILE OF THE APPELLANT, THEN REVENUE CANNOT BE ALLOWED TO ARGUE BEYOND IT. IN OUR CASE AT PARA 3 INTERNAL PAGE 3, THE TPO HAS GIVEN A CATEGORICAL FINDING THAT HE HAS PURSUED THE TP STUDY AND HAS FOUND EVERYTHING I N ORDER. 17. FOR A.Y. 2010-11, THE LD. AR SUBMITTED THAT THE ASSESSEE IS CHALLENGING 18 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 10 COMPARABLES TO BE EXCLUDED. THESE ARE AS UNDER: I. ACCENTIA TECHNOLOGIES LTD. II. ECLERX SERVICES LTD. III. ICRA TECHNO ANALYTICS LTD. IV. INFOSYS BPO LTD. V. TCS E-SERVE INTERNATIONAL LTD. VI. TCS E-SERVE LTD. VII. IGATE GLOBAL SOLUTIONS LTD. VIII. E4E HEALTHCARE LTD. IX. R SYSTEMS X. OMEGA HEALTHCARE LTD. 17.1 THE LD. AR SUBMITTED THAT FOR ACCENTIA TECHNO LOGIES LTD., ECLERX SERVICES LTD., ICRA TECHNO ANALYTICS LTD., INFOSYS BPO LTD., TCS E-SERVE INTERNATIONAL LTD., TCS E-SERVE LTD., E4E HEALTHCAR E LTD. HAVE BEEN EXCLUDED BY THE ITAT IN THE SISTER CONCERN OF THE ASSESSEE I .E. E-VALUESEZ (GURGAON) PVT. LTD. FOR A.Y. 2010-11 IN ITA NO. 1467/D/2015. THE L D. AR SUBMITTED THAT FUNCTIONAL PROFILE AND FAR ANALYSIS OF BOTH THE COM PANIES ARE IDENTICAL. 17.2 THE LD. AR SUBMITTED THAT THE ITAT ERRED IN I NADVERTENTLY NOT EXCLUDING IGATE GLOBAL SOLUTIONS LTD., FROM THE LIS T OF COMPARABLES, BY STATING THAT IGATE GLOBAL SOLUTIONS LTD. IS FUNCTIONALLY CO MPARABLE TO THE ASSESSEE. THE LD. AR SUBMITTED THAT THIS IS FACTUALLY INCORRECT A ND IGATE GLOBAL SOLUTIONS LTD SHOULD BE EXCLUDED. THE LD. AR SUBMITTED THAT TRIBU NAL IN THE CASE OF E- VALUESEZ (GURGAON) PVT. LTD. FOR AY 2010-11- ITA NO. 1467/D/15 IN PARA 15 NOTED THAT IGATE GLOBAL SOLUTIONS LTD. IS ENGAGE D IN CONTRACT CENTRE SERVICES AND IT ENABLED SERVICES. THIS IS FACTUALLY INCORREC T. IN THE ANNUAL REPORT, JUST BEFORE THE USE OF WORDS CONTRACT CENTRE SERVICES A ND IT ENABLED SERVICES, IT IS 19 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 WRITTEN THAT IGATE GLOBAL SOLUTIONS LTD. IS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES ALSO AND ALL 3 ARE TAKEN AS ONE SEGMENT A ND THUS THERE IS NO SEGMENTAL REPORTING. HENCE, THE ITAT INADVERTENTLY OVERLOOKED THE WORDS SOFTWARE DEVELOPMENT SERVICES MENTIONED AT PAGE 5 6 OF ANNUAL REPORT OF IGATE GLOBAL SOLUTIONS LTD. THE ITAT IN ITS ORDER AT PARA 18, 24, 27 HAS EXCLUDED 3 COMPARABLES, ICRA TECHNO ANALYTICS LTD., TCS E-SERV E INTERNATIONAL LTD. AND TCS E-SERVE LTD., ON THE GROUND THAT THESE 3 COMPAN IES ARE ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT/TESTING ETC., AND HENCE IS NOT FUNCTIONALLY COMPARABLE. THUS, AS IGATE GLOBAL SOLUTIONS LTD IS ENGAGED IN SOFTWARE DEVELOPMENT AND ASSESSEE IS NOT, THE LD. AR SUBMITT ED THAT IGATE GLOBAL SOLUTIONS LTD SHOULD BE EXCLUDED. PAGE 56 OF THE AN NUAL REPORT CLEARLY MENTIONS THAT THE COMPANY IS ENGAGED IN SOFTWARE DE VELOPMENT. IGATE GLOBAL SOLUTIONS LTD. IS ENGAGED IN SOFTWARE PRODUCTS AND SERVICES. THIS IS MENTIONED IN PAGE 67, 29 AND 73 OF THE ANNUAL REPORT. THE ASS ESSEE IS NOT ENGAGED IN SALE OF ANY PRODUCTS. HENCE IT IS NOT COMPARABLE WI TH THE ASSESSEE. AT PAGE 73, IT USES THE WORDS PRODUCTS AND THEN WRITES 'SOFTW ARE ENGINEERING. AT PAGE 56, 67, 51 OF THE ANNUAL REPORT, STATED THAT THE COMPAN Y IS ENGAGED IN IT SERVICES, CONTRACT CENTRE SERVICES AND IT ENABLED SERVICES. I T IS A KNOWN FACT THAT IT SERVICES PERTAIN TO SOFTWARE INDUSTRY AND IS DIFFER ENT FROM IT ENABLED SERVICES. THERE ARE PLETHORA OF CASE-LAWS WHICH STATE THAT SO FTWARE DEVELOPMENT IS DIFFERENT FROM IT ENABLED SERVICES. AT PAGE 56, 67, 51 OF THE ANNUAL REPORT, IT IS STATED THAT THE COMPANY HAS ONLY 1 SEGMENT. HENCE I NCOME FROM SOFTWARE DEVELOPMENT, CONTRACT CENTRE SERVICES AND IT ENABLE D SERVICES IS REPORTED AS ONE SEGMENT- HENCE THERE IS LACK OF SEGMENTAL INFOR MATION. THE TRIBUNAL IN PARA 11 AND 18 HAVE EXCLUDED ACCENTIA TECHNOLOGIES LTD. AND ICRA TECHNO ANALYTICS LTD. ON THE GROUND THAT THERE IS LACK OF SEGMENTAL REPORTING. HENCE, THE LD. AR SUBMITTED THAT SAME REASONING IS APPLICA BLE IN THE PRESENT CASE. THE LD. AR POINTED OUT THAT E-VALUESEZ (GURGAON) PV T. LTD HAS NOT CHALLENGED THE ITAT ORDER EITHER IN APPEAL OR VIA MA, FOR THE SIMPLE REASON THAT IT HAS GOT RELIEF ON OTHER COMPARABLES AND HEN CE ADDITION STANDS DELETED 20 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 AND THUS CHALLENGING THE ITAT ORDER QUA THIS ISSUE WOULD ONLY BE AN ACADEMIC EXERCISE. HOWEVER, IN THE PRESENT CASE, THE ASSESSE E IS VERY MUCH CHALLENGING THE FINDING QUA IGATE GLOBAL SOLUTIONS LTD, ON GROU NDS MENTIONED ABOVE, STATING THAT IT SHOULD NOT BE FOLLOWED AND IGATE GLOBAL SOL UTIONS LTD SHOULD BE EXCLUDED. 17.3 THE LD. AR FURTHER SUBMITTED THAT REGARDING R SYSTEMS AND OMEGA HEALTHCARE LTD., THE ITAT REMANDED BACK THESE COMPARABLES WITH THE DIRECTIONS TO THE TPO. THE SAME FINDINGS MAY FOLLOW ED IN THE PRESENT CASE. 18. THE LD. DR RELIED UPON THE ORDERS OF THE TPO/AO AND DIRECTIONS OF THE DRP. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORDS. IT IS PERTINENT TO NOTE THAT THE ASSESSEE FOR A.Y. 2010-11 HAS NOT ARGUED THE COMPARABLES BEFORE US BUT ONLY S UBMITTED THE CHART TO THAT EXTENT AND SUBMITTED THAT THE SAME SHOULD BE CONSID ERED ACCORDING TO THE DIRECTIONS GIVEN BY THE TRIBUNAL FOR A.Y. 2010-11- ITA NO. 1467/D/15 IN CASE OF E-VALUESERVE SEZ (GURGAON) P. LTD. VS. ACIT ORDE R DATED 30.06.2017. FROM THE RECORDS OR FROM THE ARGUMENTS, THE LD. AR HAS N OT MADE OUT CLEAR SIMILARITIES BETWEEN THE E-VALUESERVE SEZ (GURGAON) P. LTD. AND THE ASSESSEE COMPANY I.E. EVALUSERVE.COM PVT. LTD. THE SAME WAS NOT DONE BY THE TPO ABOUT THE SIMILARITIES BETWEEN THE SISTER CONCERN A ND THE ASSESSEE COMPANY. THEREFORE, IF THERE IS SIMILARITY BETWEEN THE TWO E NTITIES THEN THESE COMPARABLES HAS TO BE CONSIDERED BY THE TPO/AO AS PER THE WRITT EN CHART SUBMITTED BEFORE US. OTHERWISE, THE SAME SHOULD BE LOOKED INTO AFRES H BY THE TPO AND IF ALL COMPARABLES ARE QUALIFYING ALL THE FILTERS SET OUT BY THE TPO/AO, THEN SAME SHOULD BE INCLUDED IN THE FINAL LIST. THEREFORE, T HIS ISSUE IS REMANDED BACK ENTIRELY TO THE FILE OF THE TPO FOR FRESH ADJUDICAT ION AFTER TAKING INTO CONSIDERATION THE FUNCTIONAL PROFILE OF THE ASSESSE E COMPANY AND THE COMPARABLES AS WELL AS TAKING INTO ACCOUNT THE DECI SION OF THE TRIBUNAL IN CASE OF SISTER CONCERN. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN PROPER OPPORTUNITY OF 21 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO. 4.1 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 20. AS REGARDS GROUND NOS. 4 AND MORE SPECIFICALLY GROUND NO. 4.4, THE LD. AR SUBMITTED THAT THE TPO ERRED IN CALCULAT ING THE PLI OF THE COMPARABLES. TPO HAS TAKEN 'MISCELLANEOUS INCOME A S OPERATING IN NATURE. THE LD. AR SUBMITTED THAT IN THE ABSENCE OF DETAILS AND NATURE OF MISCELLANEOUS INCOME RECEIVED BY COMPARABLES, IT SHOULD NOT BE TAKEN TO BE AN OPERATING ITEM. THIS IS MENTIONED IN TPOS ORDER ITSELF WHEREIN CALCULATIONS OF PLI OF COMPARABLES IS STATED. HENCE, THE LD. AR SUBMITTED THAT MISCELLANEOUS INCOME SHOULD BE NON-OPERATING AS D ETAILS ARE NOT KNOWN. IN THE CASE OF BNY MELLON INTERNATIONAL OPERATIONS (IN DIA) (P.) LTD. [2014] 52 TAXMANN.COM,,306 (PUNE - TRIB.), PUNE ITAT HAS HELD THAT MISCELLANEOUS INCOME IS NON-OPERATING IN NATURE. FURTHER, THE LD . AR SUBMITTED THAT IN CASE OF INTERGLOBE TECHNOLOGIES PVT. LTD, REIMBURSEMENT OF EXPENSES ARE TAKEN AS OPERATING. IT IS HUMBLY SUBMITTED THAT IN THE ABSEN CE OF DETAILS AND NATURE OF EXPENSES WHICH HAVE BEEN REIMBURSED, IT CANNOT BE T AKEN TO BE OPERATING IN NATURE. THE ANNUAL REPORT IS SILENT. HENCE, IT SHOU LD BE TAKEN TO BE NON- OPERATING. 21. THE LD. DR REGARDING GROUND NO. 4 SUBMITTED THA T THE EXPORT FILTER (EXCLUDING COMPANIES HAVING EXPORT LESS THAN 75% OF TOTAL INCOME) ADOPTED BY THE TPO IS A REASONABLE FILTER AS THE ASSESSEE EARN S PREDOMINANTLY FROM EXPORTS AND THUS ITS BUSINESS MODEL IS DIFFERENT FROM THE C OMPANIES EARNING IN DOMESTIC MARKET. GEOGRAPHICAL LOCATION COSTS SAVING BENEFITS ARE AVAILABLE TO THE EXPORTER DUE TO WHICH IT HAS HIGH MARGIN, UNLIK E THE COMPANY PROVIDING SERVICES IN DOMESTIC MARKET, AND THUS THE FAR OF EX PORT ORIENTED COMPANIES ARE DIFFERENT FROM THE FAR OF COMPANIES PROVIDING S ERVICES IN DOMESTIC SECTOR. THE ITAT DELHI I-2 BENCH IN CASE OF ACTIS GLOBAL SE RVICES PVT. LTD. ITA NO. 30/DEL/2015 DATED 10.12.2015 HAS UPHELD THE ABOVE F ILTER AFTER CONSIDERING THE PROVISIONS OF RULE 10B(2)(D)- 'CONDITIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLUDING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVE RNMENT ORDERS IN FORCE, COSTS 22 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONO MIC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE O R RETAIL'. 22. THE LD. DR FURTHER SUBMITTED THAT E XCLUSION OF COMPANIES HAVING TURNOVER LESS THAN RS. 5 CR IS NOT ACTUALLY A TURNOVER FILTER BUT A FILTER TO EXCLUDE THE COMPANIES WITH LOW CAPITAL BASE (VIS-A- VIS THE TURNOVER OF RS. 127 CRORE OF ASSESSEE). THESE EXTREMELY LOW TURNOVER (V IS-A-VIS THE TURNOVER OF THE ASSESSEE) COMPANIES LACK COMPETITIVE STRENGTH, OPER ATIONAL EFFICIENCIES AND HUMAN RESOURCES. IN MOST OF SUCH COMPANIES THE DIST INCTION BETWEEN THE SHAREHOLDERS AND KEY EMPLOYEES IS QUITE VAGUE AS TH E KEY EMPLOYEES ARE MOSTLY THE SHAREHOLDERS THEREBY OBLITERATING THE EC ONOMIC DISTINCTION BETWEEN PROFIT AND SALARIES. THE LD. DR SUBMITTED THAT EXCL USION OF DIMINISHING REVENUE COMPANIES IS A REASONABLE FILTER. THE ITAT DELHI IN CASE OF NAVISITE INDIA (P.) LTD. [2015] 53 TAXMANN.COM 73 (DELHI - T RIB.) HELD THAT DIMINISHING REVENUE/PERSISTENT LOSSES ARE NOT IN CONFORMITY WIT H NORMAL OPERATIONAL RESULTS AND, THUS, THE COMPANIES INCURRING LOSSES OR DIMINI SHING REVENUE CANNOT BE TAKEN AS COMPARABLE. THE LD. DR FURTHER SUBMITTED T HAT EXCLUDING COMPANIES HAVING DIFFERENT FINANCIAL YEAR, THE ITAT DELHI HE LD IN CASE OF AMERIPRISE INDIA (P.) LTD. V. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-1 (1), NEW DELHI[2015] 62 TAXMANN.COM 237 (DELHI - TRIB.) THAT IF TESTED PARTY HAS MARCH YEAR ENDING, THEN COMPARABLES MUST ALSO HAVE DATA RELATING TO FINANCIAL YEAR ENDING 31ST MARCH ITSELF AND IF SUCH A DATA IS NOT AVAILABLE, THEN A COMPANY ALBEIT FUNCTIONALLY COMPARABLE, DISQUALIFIE S. HOWEVER, IF THE RELEVANT DATA FOR THE CONCERNED FINANCIAL YEAR CAN BE DEDUCT ED FROM THE INFORMATION AVAILABLE FROM ITS ANNUAL REPORT, THEN, THERE CAN B E NO OBJECTION TO ITS INCLUSION IN THE LIST OF COMPARABLES WITH THE ADJUSTED DATA FOR THE RELEVANT FINANCIAL YEAR ITSELF. 23. THE LD. DR SUBMITTED THAT SINCE DATA FOR THE RE LEVANT FINANCIAL YEAR WAS NOT AVAILABLE HENCE THE TPO CORRECTLY EXCLUDED THOS E COMPARABLES. THE LD. DR FURTHER SUBMITTED THAT EXCLUDING COMPANIES HAVING S ERVICE INCOME LESS THAN 75% WHILE KEEPING IN VIEW THE FACT THAT THE ASSESSE E IS A 100% EOU AND PREDOMINANTLY EARNS SERVICE INCOME IN FOREX FROM PR OVIDING SERVICES TO ITS AE. THUS THE ABOVE FILTER WAS CORRECTLY APPLIED AT 75% TO EXCLUDE THE COMPANIES 23 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 HAVING DIFFERENT BUSINESS MODEL (PREDOMINANTLY MANU FACTURING COMPANY). 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE RECORD IT CAN BE SEEN THAT THE TPO HAS TAKEN 'MISCELLANEOUS INCOME AS OPERATING IN NA TURE. AS PER THE LD. ARS SUBMISSION IN THE ABSENCE OF DETAILS AND NATURE OF MISCELLANEOUS INCOME RECEIVED BY COMPARABLES, IT SHOULD NOT BE TAKEN TO BE AN OPERATING ITEM. THIS IS MENTIONED IN TPOS ORDER ITSELF WHEREIN CALCULATION S OF PLI OF COMPARABLES IS STATED. HENCE, THE LD. AR SUBMITTED THAT MISCELLAN EOUS INCOME SHOULD BE NON-OPERATING AS DETAILS ARE NOT KNOWN. PRIMA FACIE THIS APPEARS TO BE TRUE, BUT THE TPO/AO HAS NOT MADE ANY EFFORT TO LOOK UPON THIS ASPECT. THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO TH E FILE OF THE TPO/ASSESSING OFFICER FOR FRESH ADJUDICATION. WE THEREFORE RESTO RE THIS ISSUE TO THE FILE OF THE A.O/TPO FOR FRESH ADJUDICATION OF THE ISSUE AFTER G IVING DUE OPPORTUNITY OF BEING HERD TO THE ASSESSEE. GROUND NO. 4, MORE SPEC IFICALLY GROUND NO. 4.4 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 25. AS REGARDS GROUND NO. 5, RELATING TO PROVISIONS OF DOUBTFUL DEBTS AND DONATION EXPENSES AS AN OPERATING EXPENSES ITEM INS TEAD OF TREATING THEM AS NON-OPERATING WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE, THE LD. AR SUBMITTED THAT THE TPO HAS TAKEN DONATION AND PR OVISION FOR DOUBTFUL DEBT TO BE AN OPERATING EXPENSE WHEN CALCULATING ASSESSE ES PLI. THE LD. AR SUBMITTED THAT DONATION HAS NOTHING TO DO WITH DAY TO DAY OPERATIONS OF THE ASSESSEE AND HENCE SHOULD BE TAKEN TO BE A NON-OPER ATING EXPENSE. THE LD. AR RELIED UPON THE DECISION OF THYSSENKRUPP INDUSTR IES INDIA (P.) LTD. VS. ACIT - [2013] 33 TAXMANN.COM 107 (MUMBAI - TRIB.). FURTH ERMORE, TPO HIMSELF WHEN CALCULATING PLI OF COMPARABLES HAS TAKEN DONAT ION AND PROVISION FOR DOUBTFUL DEBT TO BE NON OPERATING IN NATURE AT PAGE 31 (E4E HEALTHCARE), PAGE 32 (FORTUNE), PAGE 35 (INFOSYS BPO). HENCE, THE LD. AR PRAYED THAT WHEN TPO HIMSELF ACCEPTS THAT DONATION AND PROVISION FOR DOU BTFUL DEBT IS NON-OPERATING, THEN SAME SHOULD BE APPLIED WHEN CALCULATING PLI OF ASSESSE AND IT SHOULD BE 24 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 TAKEN AS NON-OPERATING IN NATURE. 26. AS RELATES TO GROUND NO. 5 RELATING TO THE PROV ISION FOR DOUBTFUL DEBT, THE LD. DR SUBMITTED THAT IT IS LINKED WITH THE OPERATI ONS OF THE ASSESSEE AND THUS IT IS OPERATING IN NATURE. THE ITAT DELHI IN CASE O F TECHBOOKS INTERNATIONAL (P.) LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3 , NOIDA [2015] 63 TAXMANN.COM 114 (DELHI - TRIB.) HAS HELD THAT PROVI SION FOR DOUBTFUL DEBT IS OPERATING IN NATURE. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE TPO HIMSELF WHILE CALCULATING PLI OF COMPARABLES HAS TAKEN DONATION A ND PROVISION FOR DOUBTFUL DEBT TO BE NON OPERATING IN NATURE. THE TPO HAS NOT MADE OUT THE INTERLINK BETWEEN THE DONATIONS AND PROVISIONS FOR DOUBTFUL D EBT WHILE CONCLUDING THAT IT IS OPERATING IN NATURE. NO DIRECT CONNECTIVITY WAS MADE OUT BY THE TPO WHILE ARRIVING AT THE SAID CONCLUSION. THEREFORE, THE ORD ER OF THE TPO/AO IS NOT SUSTAINABLE ON THIS ACCOUNT WHILE MAKING ADDITIONS TO THAT EXTENT. GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. 28. AS RELATES TO GROUND NO. 6, THE LD. AR SUBMITTE D THAT TPO HAS ERRED IN RE-CALCULATING ASSESSEES PLI FROM 20.17% TO 16.17% . THE SAME IS NOT ACCEPTABLE TO THE ASSESSE AS PER THE LD. AR. THE LD . AR SUBMITTED THAT ASSESSE IN ITS TP STUDY AT PAGE 499, 485 OF PB VOL. 2 HAS STATED THAT RS. 3,06,71,861/- WAS INCURRED ON NOIDA UNIT WHERE NO O PERATION WAS DONE BUT FIXED COST HAD TO BE INCURRED. HENCE, THIS IS A NON -OPERATING EXPENSE. HOWEVER, TPO STATED THAT THIS IS AN OPERATING EXPEN SE BECAUSE ACCORDING TO HIM THE AE SHOULD HAVE REIMBURSED THIS EXPENSE. THE LD. AR SUBMITTED THAT THIS IS A NON-OPERATING EXPENSE AS THESE EXPENSES R ELATED TO NOIDA UNIT WHICH IS NOT OPERATIONAL DURING THE YEAR. FURTHER, THE LD . AR POINTED OUT THAT EVS INDIA HAD TWO STPI UNITS IN GURGAON AND NOIDA RESPE CTIVELY. HOWEVER, THERE WERE NO OPERATIONS IN THE NOIDA UNIT. THE SAID UNIT WAS IN THE PROCESS OF 25 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SHUTTING DOWN DUE TO CERTAIN BUSINESS REASONS. EVS INDIA DID NOT UNDERTAKE ANY OPERATIONS IN THE NOIDA UNIT WHILE IT CONTINUED TO INCUR THE FIXED COSTS PERTAINING TO THIS UNIT. THESE COSTS RELATE TO RENT AND HIRE CHARGES, DEPRECIATION, INSURANCE, SECURITY CHARGES, REPAIR A ND MAINTENANCE, ETC. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE DID NOT CARRY OUT OPERATIONS IN THE NOIDA UNIT AND THE FIXED COSTS INCURRED WERE UNPROD UCTIVE COSTS AND WERE NOT BILLED TO THE PARENT COMPANY. THUS, AS THE EXPENSES INCURRED FOR THE NOIDA UNIT WERE NON- RECURRING AND EXTRAORDINARY IN NATUR E, THESE EXPENSES HAVE BEEN EXCLUDED FROM THE OPERATING PROFIT COMPUTATION . THIS WAS MENTIONED IN TP STUDY AT PAGE 499, 485. ALSO DETAILED SUBMISSION S IN THIS REGARD HAVE BEEN FILED BEFORE TPO AND DRP. THE LD. AR SUBMITTED THAT THE COMPARABLES DID NOT INCUR SUCH EXTRAORDINARY / NON RECURRING EXPENSES A ND HENCE FOR A LIKE TO LIKE COMPARISON, IT IS NECESSARY TO ADJUST SUCH ABNORMAL EXPENSES FROM THE COMPUTATION OF OPERATING PROFIT. THE LD. AR SUBMITT ED THAT THE VERY BASIS OF TRANSFER PRICING REGULATIONS IS TO UNDERTAKE AN EXE RCISE OF COMPARABILITY TO ELIMINATE DIFFERENCES, IF ANY, BY A SUITABLE ADJUST MENT. THE LD. AR RELIED UPON RULE 10B(3) AND RULE 10B(1)(E)(II) OF THE INCOME TA X RULES, 1962 AS WELL AS RELIED UPON SAFE HAROUR RULES NOTIFIED BY CBDT, WHI CH IS NOW INCORPORATED AS RULE 10TA OF THE INCOME TAX RULES, 1962. THE SAID R ULES STATE THAT OPERATING EXPENSE MEANS THE COST INCURRED IN RELATION TO INT ERNATIONAL TRANSACTION. THIS FIXED COST OF NOIDA UNIT IS NOT IN RELATION TO INTE RNATIONAL TRANSACTION AS THIS YEAR BUSINESS AND OPERATIONS OF THE ASSESSEE WERE C ARRIED OUT ONLY IN THE GURGAON UNIT AND THERE WERE NO OPERATIONS IN THE NO IDA UNIT AND THUS ALL COSTS THAT WERE INCURRED IN RELATION TO THE INTERNA TIONAL TRANSACTION, WERE INCURRED IN THE GURGAON UNIT. THESE FIXED COST OF N OIDA UNIT HAS NO RELATION TO PROVIDING OF SERVICES TO THE AE. THE LD. AR SUBM ITTED THAT IT SPECIFICALLY REFERS TO EXPENSES INCURRED IN COURSE OF NORMAL OPE RATIONS AND EXCLUDES EXTRA- ORDINARY EXPENSES AND OTHER EXPENSES NOT RELATING T O NORMAL OPERATIONS OF THE ASSESSE. THUS, A BARE READING OF SAFE HARBOUR RULES STATES THAT THE INTENT IS TO EXCLUDE SUCH EXTRA-ORDINARY EXPENSES WHICH HAVE NO CORELATION WITH DAY-TO- 26 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 DAY OPERATIONS. FURTHER, THE LD. AR POINTED OUT THA T TPO AT PAGE 29 STATES THAT THESE SAFE HARBOUR RULES ARE APPLICABLE AND AP PLIES THEM WHEN DETERMINING THE PLI OF THE COMPARABLES. HENCE, THE LD. AR SUBMITTED THAT TPO MUST APPLY THESE SAFE HARBOUR RULES WHEN DETERMININ G THE PLI OF THE ASSESSEE ALSO. THE LD. AR RELIED UPON THE FOLLOWING JUDGMENTS- MARUBENI INDIA (P.) LTD. V. DIT 120131 354 ITR 638/ 215 TAXMAN 122 (MAQ.)/33 TAXMANN.COM 100 (DELHI)- DELHI HIGH C OURT CIT VS. TRANSWITCH INDIA (P.) LTD ITA NO. 678/2012- DELHI HIGH COURT HOV SERVICES LTD. VS. JCIT [2016] 73 TAXMANN.COM 31 1 (PUNE - TRIB.) HCL TECHNOLOGIES BPO SERVICES LTD. V. ASSTT. CIT 1 20151 60 TAXMANN.COM 186/69 SOT 571 (DELHI-TRIB) DY. CIT V. EXXON MOBIL GAS (INDIA) (P.) LTD. [2015 1 152 ITD 220/120141 51 TAXMANN.COM 256 (DELHI-TRIB) TRANSWITCH INDIA (P.) LTD. V. DY. CIT [20121 21 TA XMANN.COM 257/53 SOT 151 (DELHI-TRIB) 29. THE LD. AR SUBMITTED THAT MARUBENI INDIA (P.) L TD. V. DIT (2013) 354 ITR 638- DELHI HIGH COURT IS DIRECTLY ON THIS ISSUE WHE REIN THE HON'BLE DELHI HIGH COURT HELD THAT EXPENDITURE FOR CLOSURE OF ITS INDI A UNITS WOULD REPRESENT ABNORMAL COST AND THE SAME HAS TO BE EXCLUDED WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSE. IN THE CASE OF MARUBENI INDI A (SUPRA), ALSO THE REVENUE ARGUED THAT SINCE THE ASSESSEE IS A CAPTIVE UNIT OF ITS ASSOCIATED ENTERPRISE, IT WAS ACTUALLY THE LATTER THAT UNDERTOOK THE ENTIRE R ISK. EVEN IN ASSESSEES CASE, THE TPO STATES THAT ASSESSE IS A CAPTIVE UNIT AND R ISK IS WITH THE AE AND HENCE AE SHOULD BEAR THIS EXPENSE AND COMPENSATE. HOWEVE R, THIS WAS REJECTED BY THE HONBLE DELHI HIGH COURT. THE LD. AR FURTHER SUBMITTED THAT THE TPO CANNOT SIT IN THE CHAIR OF THE BUSINESSMAN AND DECI DE HOW THE BUSINESS IS TO BE CONDUCTED. THE INCURRING OF EXPENSE ARE NOT DOUB TED. TPO HAS NOT DOUBTED 27 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 THAT THERE IS A MATERIAL DIFFERENCE ON THIS ACCOUNT . HE HAS DENIED ONLY ON THE GROUND THAT ASSESSEE SHOULD HAVE BEEN COMPENSATED B Y THE AE WITHOUT REALIZING THAT THE ASSESSE IS NOT CHARGING ON COST PLUS BASIS. THE EXPENSE HAVE BEEN ALLOWED U/S 37 OF THE ACT AND THE LIMITED REAS ON FOR DENYING A HIGHER PLI BY THE TPO IS THAT THE EXPENSES SHOULD HAVE BEEN CO MPENSATED BY THE AE, WHICH IS NOT CORRECT. THE DRP AT PARA 11 HAS STATED THAT EVIDENCE WAS NOT MADE AVAILABLE. THIS IS FACTUALLY INCORRECT. ALL EVIDENCES/BILLS/DETAILS/CORRESPONDENCE WAS MADE AVA ILABLE TO THEM AND IS ALSO BEING FILED IN COURT TODAY. THIS ARGUMENT OF T HE REVENUE THAT AE SHOULD HAVE SHARED THIS COST, IS AGAIN REJECTED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TRANSWITCH INDIA P. LTD. ITA NO. 678/201 2. 30. THE LD. DR RELIED UPON THE ORDERS OF THE TPO/AO AND DIRECTIONS OF THE DRP. 31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT RECORDS. IT IS PERTINENT TO NOTE THAT THE DRP OBSERVED THAT THE EV IDENCE WAS NOT PRODUCED. BUT ACCORDING TO THE LD. AR, ALL EVIDENCES/BILLS/DE TAILS/CORRESPONDENCE WERE PRODUCED. SINCE THE EVIDENCES HAVE NOT BEEN VERIFIE D BY THE REVENUE AUTHORITIES, THEREFORE, IT WILL BE APPROPRIATE TO R EMAND BACK THIS ISSUE TO THE FILE OF THE TPO/AO FOR ADJUDICATING THE ISSUE IN TH E RIGHT OF ALL THE EVIDENCES PRODUCED BY THE ASSESSEE AND AFTER TAKING THE SAME INTO CONSIDERATION, DECIDE THE ISSUE AS PER FACT AND LAW. NEEDLESS TO THE SAY , THE ASSESSEE BE GIVEN THE OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF N ATURAL JUSTICE. GROUND NO. 6 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 32. AS RELATES TO GROUND NO. 9, THE LD. AR SUBMITTE D THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10A OF THE INCO ME TAX ACT, 1961 AS ALLOWABLE AFTER SETTING OFF BROUGHT FORWARD LOSSES OF THE PREVIOUS YEARS. THE LD. AR SUBMITTED THAT THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE 28 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT AND THEREFORE THE ISSUE NEEDS TO BE DECIDED IN FAVOUR OF THE ASSESSEE . 33. T HE LD. DR SUBMITTED REGARDING GROUND NO. 9 THAT THE ITAT DELHI HELD IN CASE OF INTERRA INFORMATION TECHNOLOGIES (INDIA) (P.) LTD. [2012] 27 TAXMANN.COM 1 (DELHI - TRIB.) THAT THE CONTENTION O F THE ASSESSEE THAT THE TRANSFER PRICING ADJUSTMENT SHOULD NOT BE MADE FOR THE REASON THAT ITS INCOME IS EXEMPT UNDER SECTION 10A AND HENCE THERE IS NO M OTIVE TO DIVERT PROFIT HAS TO BE REJECTED APPLYING THE JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF AZTEC SOFTWARE TECHNOLOGY S ERVICES LTD. V. ASSTT. CIT [2007] 15 SOT 49/162 TAXMAN 119 (BANG.). 34. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THIS ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN CASE OF CIT V S. YOKOGAWA INDIA LTD. (2017) 391 ITR 274. THE HONBLE APEX COURT HELD AS UNDER: 12. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED AN D THE PROVISIONS OF SECTION 10A AS IT STOOD PRIOR TO THE AMENDMENT M ADE BY FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001; THE AMENDED SECTION 10ATHEREAFTER AND ALSO THE AMENDMENT MADE BY FINANCE ACT, 2003 WITH RETROS PECTIVE EFFECT FROM 1.4.2001. 13. THE RETENTION OF SECTION 10A IN CHAPTER III OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE ME RELY SUGGESTIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTIO N AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDED BY THE UN-AMENDED SECTION. THE TRUE AND CORRECT PURPORT AND EFFECT OF THE AMENDED SECTION WILL HAVE TO BE CONSTRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN CHAPTER III. THE INTRODUCTION OF THE WORD DEDUCTIO N INSECTION 10A BY THE AMENDMENT, IN THE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF THE SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION 10A AS AL READY DISCUSSED, IT HAS TO BE UNDERSTOOD THAT THE SECTION EMBODIES A CLEAR ENUNCIATION OF THE 29 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 LEGISLATIVE DECISION TO ALTER ITS NATURE FROM ONE P ROVIDING FOR EXEMPTION TO ONE PROVIDING FOR DEDUCTIONS. 14. THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS EXE MPTION AND DEDUCTION, THOUGH BROADLY MAY APPEAR TO BE THE SAME I.E. IMMUN ITY FROM TAXATION, THE PRACTICAL EFFECT OF IT IN THE LIGHT OF THE SPECIFIC PROVISIONS CONTAINED IN DIFFERENT PARTS OF THE ACT WOULD BE WHOLLY DIFFERENT. THE ABO VE IMPLICATIONS CANNOT BE MORE OBVIOUS THAN FROM THE CASE OF CIVIL APPEAL NOS . 8563/2013, 8564/2013 AND CIVIL APPEAL ARISING OUT OF SLP(C) NO. 18157/20 15, WHICH HAVE BEEN FILED BY LOSS MAKING ELIGIBLE UNITS AND/OR BY NON-ELIGIBL E ASSESSEES SEEKING THE BENEFIT OF ADJUSTMENT OF LOSSES AGAINST PROFITS MAD E BY ELIGIBLE UNITS. 15. SUB-SECTION 4 OF SECTION 10A WHICH PROVIDES FOR PRO RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARIS ING OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE AMENDMENT . PROFITS OF AN ELIGIBLE UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENT ER INTO THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS IN CHAPTER IV AND DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SEC TION 6 OF SECTION 10A, AS AMENDED BY THE FINANCE ACT OF 2003, GRANTING THE BE NEFIT OF ADJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION ETC. COMMENCING FROM THE YEAR 2001-02 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIR TUALLY WORKS AS A DEDUCTION WHICH HAS TO BE WORKED OUT AT A FUTURE POINT OF TIM E, NAMELY, AFTER THE EXPIRY OF PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERE NCE TO DEDUCTION UNDER SECTION 10A IN CHAPTER VI OF THE ACT CAN BE U NDERSTAND BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WO ULD HAVE BEEN A REPETITION OF WHAT HAS ALREADY BEEN PROVIDED IN SEC TION 10A. THE PROVISIONS OF SECTIONS 80HHC AND 80HHE OF THE ACT PROVIDING FO R SOMEWHAT SIMILAR DEDUCTIONS WOULD BE WHOLLY IRRELEVANT AND REDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF O PERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE SAID PROVISIONS OF TH E ACT I.E. SECTION 80HHC AND 80HHE, DESPITE THE AMENDMENT OF SECTION 1 0A, IN OUR VIEW, INDICATES THAT SOME ADDITIONAL BENEFITS TO ELIGIBLE SECTION 10A UNITS, NOT CONTEMPLATED BY SECTIONS 80HHC AND 80HHE, WAS INTEN DED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FOR WORKING OUT THE DEDU CTIONS UNDER SECTION 10A AND 80HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT . THIS IS THE NEXT ASPECT OF THE CASE WHICH WE WOULD NOW LIKE TO TURN TO. 16. FROM A READING OF THE RELEVANT PROVISIONS OF SE CTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREI N IS QUA THE ELIGIBLE 30 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKING S OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DATED 9.8.2000 WHICH STATES IN PAR AGRAPH 15.6 THAT, THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURP OSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, A ND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS O F THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVI SION. 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AN D THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDI ATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THERE FORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN U NDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSE E FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTA L INCOME OF THE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION TOTA L INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF THE UNDERTAKING . 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THI S ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEA LS SHALL STAND DISPOSED OF ACCORDINGLY. 31 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 THUS, THE HONBLE APEX COURT HELD THAT THE AGGREGAT E OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARR Y FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMA TURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRI OR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI O F THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL I NCOME. THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A HAS TO BE UN DERSTOOD AS TOTAL INCOME OF THE UNDERTAKING. THUS, THERE WAS NO MOTIVE OF THE ASSESSEE TO DIVERT THE PROFIT OF THE ASSESSEE COMPANY. THEREFORE, GROUND NO. 9 IS ALLOWED. 35. AS RELATES TO GROUND NO. 10.1 AND 10.2 REGARDIN G ADDITION ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES TO THE EXTENT OF RS. 13,90,576, THE LD. AR SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 143(2) OF THE ACT VIDE ITS QUESTIONNAIRE DATED 19.09.2013. THE ASSESSEE WAS ASKED TO SUBMIT VARIOUS DETAILS RELATED TO THE RETURN OF INCOME FOR A.Y. 2010-11. IN COMPLIANC E TO THE SAID NOTICE, ASSESSEE ATTENDED AND THE RELEVANT INFORMATION AND DOCUMENTS AS ASKED FOR WERE PROVIDED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER FROM TIME TO TIME. THE ASSESSING OFFICER VIDE ITS DRAFT ORDER DATED 12 .03.2014 U/S 144C R/W SECTION 143(3) OF THE ACT PROPOSED AN ADDITION OF R S. 13,90,576 AS PRIOR PERIOD EXPENSE TO THE RETURNED INCOME. THE LD. AR SUBMITTE D THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO EXPLAIN/RE BUT THE DISALLOWANCES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY HAS PROFIT BEFORE TAX AND PRIOR PERIOD ITEMS AMOUNTING TO RS.9,33,39 ,128/- AS PER THE AUDITED PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD SHOWN PR IOR PERIOD ITEMS AMOUNTING TO RS. 37,40,361/- BELOW THE LINE IN THE PROFIT AND LOSS ACCOUNT. THE LD. AR FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE, THE PRIOR PERIOD INCOME OF RS. 13,90,576 WAS IN FACT THE REVERSAL OF THE PRIOR PERIOD EXPENSE FOR A.Y. 2009-10. THE BENEFIT OF THE SAID PRIOR PERIOD EXPENSES AMOUNTING TO RS. 32 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 32,055,199 WAS NOT CLAIMED IN THE TAX COMPUTATION F OR A.Y. 2009-10. SINCE THE BENEFIT OF EXPENSE WAS NOT TAKEN IN THE EARLIER YEA R TAX COMPUTATION, THE SAME SHOULD NOT BE CONSIDERED AS INCOME. 36. THE LD. DR RELIED UPON THE ORDERS OF THE TPO AN D ASSESSING OFFICER. 37. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT RECORDS AVAILABLE. AS REGARDS GROUND NOS. 10.1 AND 10.2, T HE DRP WHILE GIVING DIRECTIONS VIDE ORDER DATED 23.09.2014 AT PAGE 41 H AS GIVEN RELIEF ON DISALLOWANCE OF PRIOR PERIOD EXPENSE OF RS.13,90,57 6/-. HOWEVER, THIS ADDITION HAS NOT BEEN DELETED BY THE ASSESSING OFFICER. THER EFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THIS ADDITION AS PER TH E DIRECTIONS GIVEN BY THE DRP. GROUND NO. 10.1 AND 10.2 ARE PARTLY ALLOWED FOR STA TISTICAL PURPOSE. 38. GROUND NO. 7 AND 8 ARE ALREADY TAKEN INTO ACCOU NT WHILE DECIDING THE ISSUE OF COMPARABLES. THEREFORE, GROUND NOS. 7 AND 8 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 39. GROUND NO. 11 IS REGARDING CHARGING AND COMPUTI NG INTEREST UNDER SECTION 234B, 234D AND 244A OF THE INCOME TAX ACT, 1961. SINCE, NO SPECIFIC ARGUMENTS WERE RAISED BEFORE US AND SINCE CHARGING OF INTEREST IS CONSEQUENTIAL TO THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE, THEREFORE, GROUND NO. 11 IS DISMISSED. 40. GROUND NO. 12 IS REGARDING INITIATION OF PENALT Y PROCEEDINGS UNDER THE PROVISIONS OF SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961. THE SAME IS DISMISSED BEING PREMATURE AT THIS JUNCTURE. 41. IN RESULT, ITA NO. 1466/DEL/2015 FOR A.Y. 2010- 11 I.E. APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 33 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 42. NOW WE ARE TAKING UP THE APPEAL FOR A.Y. 2008-09 GROUNDS ARE AS FOLLOWS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ('AO' ) IS BAD IN LAW AND VOID AB-INITIO. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. TRANSFER PRICING OFFICER ('TPO')/ LD. DI SPUTE RESOLUTION PANEL ('DRP') ERRED IN MAKING AN ADDITION OF RS. 186,687, 657/-TO THE RETURNED INCOME OF THE APPELLANT BY RE-COMPUTING, THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE INCOME TAX ACT, 1961 ('ACT') AND RS. 1,390,576 ON ACCOUNT OF DISALLOWANC E OF PRIOR PERIOD EXPENSES. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISDICT IONAL ERROR AS THE LD. AO HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT O RDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS 'EXPEDIENT AN D NECESSARY' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE AR M'S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 4. THAT THE LD. AO/ LD. TPO/ LD. DRP ERRED ON FACTS AND IN LAW IN THE ASSESSMENT OF THE ARM'S LENGTH PRICE OF THE APPELLA NT'S INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES BY- 4.1.REJECTING ON THE BASIS OF SUBJECTIVE GROUNDS AN D PRESUMPTIONS, THE COMPARABILITY ANALYSIS CONDUCTED BY THE APPELLANT F OR DETERMINING THE ARM'S LENGTH PRICE IN TERMS OF SECTION 92D OF THE A CT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 ('RULES') AS WELL AS FRE SH SEARCH. FURTHER, THE LD. AO/ LD. TPO/ LD. DRP ERRED IN MODIFYING THE COM PARABLE COMPANIES SET ADOPTED BY THE APPELLANT ON THE BASIS OF ADDITI ONAL/ MODIFIED QUANTITATIVE FILTERS SELECTED BY HIM AND ARBITRARY STATEMENTS WHICH LACKED VALID AND SUFFICIENT REASONING 4.1.1. REJECTING COMPANIES WHOSE EXPORT REVENUES A RE LESS THAN 75 PERCENT OF THE TOTAL REVENUES WITHOUT TAKING COGNIZ ANCE OF THE APPELLANT'S 34 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SUBMISSIONS 4.1.2. REJECTING COMPANIES WHOSE SALES TURN OVER IS LESS THAN INR 5 CRORES. 4.1.3. REJECTING COMPANIES WITH DIMINISHING REVENU E FOR THE PERIOD UNDER CONSIDERATION INSTEAD OF BEING GUIDED BY FUNCTIONAL COMPARABILITY. 4.1.4. REJECTING COMPANIES WITH DIFFERENT FINANCIAL YEAR ENDING WITHOUT TAKING COGNIZANCE OF THE APPELLANT'S SUBMISSIONS. 4.1.5 REJECTING COMPANIES WHOSE SERVICE INCOME IS LESS THAN 75 PERCENT OF THE TOTAL REVENUES WITHOUT TAKING COGNIZANCE OF THE APPELLANT'S SUBMISSIONS. 4.2. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED BY SEL ECTING CERTAIN COMPANIES WHICH ARE NOT COMPARABLE IN VIEW OF THEIR SIGNIFICANTLY HIGH TURNOVER AS COMPARED TO THE APPELLANT 4.3 THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED BY SELE CTING CERTAIN COMPANIES WHICH WERE NOT COMPARABLE BY WAY OF FUNCT IONS AND ASSETS IN ORDER TO DETERMINE THE ARM'S LENGTH MARGIN APPLICAB LE TO THE APPELLANT AND ALSO ERRED BY REJECTING CERTAIN COMPANIES WHICH WER E COMPARABLE BY WAY OF FUNCTIONS AND ASSETS IN ORDER TO DETERMINE THE A RM'S LENGTH MARGIN APPLICABLE TO THE APPELLANT 4.4. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED IN INC ORRECTLY COMPUTING MARGINS OF SEVERAL COMPARABLE COMPANIES SELECTED IN THE FINAL COMPARABLE SET 5. THE LD. AO/LD. TPO/ LD. DRP ERRED IN TREATING P ROVISION FOR DOUBTFUL DEBTS AND DONATION EXPENSES AS AN OPERATIN G ITEM INSTEAD OF TREATING THEM AS NON-OPERATING WHILE COMPUTING THE OPERATING MARGIN OF THE APPELLANT 6. THE LD.AO/LD. TPO/ LD. DRP ERRED IN RECLASSIFYI NG EXPENSES RELATED TO THE NON- UNIT OF THE APPELLANT WHICH HAD BEEN TA KEN AS NON-OPERATING BY THE APPELLANT TO BE OPERATING EXPENSES. FURTHER, TH E LD. AO/LD. TPO/ LD. DRP ALSO ERRED IN NOT CONSIDERING THE DOCUMENTARY E VIDENCE SUBMITTED TO 35 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SUBSTANTIATE THE NON-OPERATIONS IN THE SAID UNIT OF THE APPELLANT. 7. THE LD.AO/ LD. TPO/ LD. DRP ERRED IN DISREGARDI NG THE MULTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTAT ION AND IN SELECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2009-10) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE APP ELLANT, THE COMPLETE DATA FOR FINANCIAL YEAR 2009-10 WAS NOT AVAILABLE W ITHIN THE PUBLIC DOMAIN. 8. THAT THE LD. AO/ LD. TPO ERRED IN MAKING A TRANS FER PRICING ADJUSTMENT ESPECIALLY AS THE LD. TPO HAD ACCEPTED T HE ARM'S LENGTH NATURE OF THE INTERNATIONAL TRANSACTIONS IN FY 2008-09 AND COMMISSIONER OF INCOME TAX APPEALS ('CIT(A)') HAD ACCEPTED THE ARM' S LENGTH NATURE OF THE INTERNATIONAL TRANSACTIONS IN FY 2004-05 AND FY 200 6-07 9. THE LD. AO/ LD. TPO/ LD. DRP HAS ERRED IN NOT AP PRECIATING THE FACT THAT THE APPELLANT IS A COMPANY INCORPORATED U NDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND ENJOYING THE TAX HOLIDA Y BENEFITS CONFERRED UNDER SECTION 10A OF THE ACT AS PER THE SOFTWARE TE CHNOLOGY PARK OF INDIA ('STPI') SCHEME. THUS, THERE IS NO MOTIVE ON THE PA RT OF THE APPELLANT TO SHIFT THE PROFITS TO ANY OTHER JURISDICTION. HENCE THE CASE OF THE APPELLANT FALLS SQUARELY WITHIN THE AMBIT OF AFOREMENTIONED P RINCIPLE. 10.1. THAT, ON THE FACTS AND IN LAW, THE ORDER OF THE LD. AO IS ERRONEOUS TO THE EXTENT OF NOT INCORPORATING THE BINDING DIRECTI ONS OF THE HON'BLE DRP WHILE FINALIZING THE ORDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT ON THE DISALLOWANCES MADE BY THE LD. AO OF RS. 13,9 0,576/- AS PRIOR PERIOD EXPENSE. 10.2. WITHOUT PREJUDICE TO GROUND 10 AND 11, THE LD. AO FAILED TO UNDERSTAND THAT THE APPELLANT HAS COMPUTED THE TAXA BLE INCOME BEFORE GIVING ANY EFFECT TO PRIOR PERIOD ITEM IN THE PROFI T AND LOSS STATEMENT. THE LD. AO ERRED IN APPRECIATING THE FACT THAT THE DISA LLOWANCE OF RS. 13,90,576/- AS PRIOR PERIOD EXPENSE WOULD RESULT IN DOUBLE TAXATION, WHICH IS BAD IN LAW. 11. THAT THE LD. AO ERRED IN FACTS AND IN LAW IN CHARGING INTEREST UNDER 36 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SECTION 234B, 234C AND 234D OF THE ACT. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE SAT ISFACTION FOR SUCH INITIATION 43. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE COMPANY, DURING THE YEAR UNDER CONSIDE RATION WAS CARRYING ON THE BUSINESS OF IT ENABLED SERVICE PROVIDER AND WAS REGISTERED WITH THE STPI AS A 100% EXPORT ORIENTED UNIT AND ALSO CLAIMED DEDUCT ION U/S 10A OF THE IT ACT AMOUNTING TO RS.19,51,11,412/-. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.97,66,189/- ON 30-09-2009. HOWEV ER, TAX WAS PAID U/S 115JB ON BOOK PROFIT OF RS.1,78,14,537/-. THE CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S 143(2) OF THE I T ACT WAS ISSUED AND SER VED UPON THE ASSESSEE ON 06.08.2009. IN RESPONSE TO THE NOTICE, CHARTERED AC COUNTANT AND AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEED INGS AND FILED REQUIRED DETAILS. IN THIS CASE, A REFERENCE WAS MADE TO THE ADDL.CIT,TPO-1(2), NEW DELHI; FOR DETERMINING ARMS LENGTH PRICE U/S 92CA(3) IN R ESPECT OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE DURING FIN ANCIAL YEAR 2007-08. THE ISSUE WAS EXAMINED BY THE ADDL.CIT,TPO-1(2), NEW DE LHI, WHO VIDE HIS ORDER DATED 28.10.2011 DETERMINED THE DIFFERENCE IN ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES AT RS. 1,43,47,80,664/-. THE TRANSFER PRICING OFFICER PASS ED AN ORDER U/S 92CA(3) OF THE ACT ON 28.10.2011 WHEREIN THE TPO PROPOSED AN A DJUSTMENT OF RS. 18,91,35,772/-. THE TPO COMPUTED THE ARMS LENGTH P RICE OF THE IT ENABLED SERVICES RENDERED BY ASSESSEE AS UNDER:- ARITHMETIC MEAN PLI : 29.16% LESS: WORKING CAPITAL ADJUSTMENT : 2.45% ARMS LENGTH PRICE : 26.17% OPERATING COST RS.1,278,722,867 ARMS LENGTH MARGIN 26,71% OF THE OPERATING COST 37 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 ARMS LENGTH PRICE (ALP) RS. 1,620,269,745 PRICE SHOWN IN THE INTERNATIONAL TRANSACTION RS.1,431,433,973 SHORTFALL BEING ADJUSTMENT U/S 92CA RS.189,135,772 THE ABOVE SHORTFALL OF RS. 18,91,35,772/- WAS TREAT ED AS TRANSFER PRICING ADJUSTMENT U/S 92CA OF THE ACT BY THE TPO. THE ASSE SSING OFFICER MADE ADDITION OF RS.189,135,772/- TO THE INCOME OF THE A SSESSEE. THE ASSESSEE FILED AN OBJECTION BEFORE THE DRP-1 AGAINST THE DRAFT ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THE DRP-1 PASSED AN ORDER U/ S 144C(5) FOR AY 2008-09 AND DIRECTED THE TPO TO RECOMPUTE THE TRANSFER PRIC ING ADJUSTMENT AFTER RE- EXAMINING THE COMPARABLES AND ACCORDINGLY, TPO-1(2) GAVE THE EFFECT TO THE DIRECTIONS ISSUED BY DRP-1 AND DETERMINED THE ARMS LENGTH PRICE AT RS.12,77,12,819/- INSTEAD OF RS.18,91,35,772/- AS P ER THE DRAFT ASSESSMENT ORDER. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 10A OF THE INCOME TAX ACT FROM THE PR OFITS AND GAINS OF BUSINESS AND THEREAFTER, SET OFF THE BROUGHT FORWAR D BUSINESS LOSS OF A.Y. 2002- 03 AGAINST THE BALANCE PROFITS UNDER THE HEAD. HOWE VER, THE ASSESSING OFFICER OBSERVED THAT THIS TREATMENT ADOPTED BY THE ASSESSE E WAS CONTRARY TO THE PROVISIONS OF THE ACT. THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 WAS COMPLE TED U/S 144C / 143(3) WHEREIN ALL THE BROUGHT FORWARD LOSSES / DEPRECIAT ION WAS ALREADY ADJUSTED IN THAT YEAR AND FOR THE CURRENT YEAR, THE ASSESSEE CO MPANY WAS LEFT WITH NO BROUGHT FORWARD LOSSES / DEPRECIATION. 44. AS REGARDS THE COMPARABLES, THE FOLLOWING 10 CO MPARABLES ARE TO BE EXCLUDED AS PER THE LD. AR FOR A. Y. 2008-09: 44.1 CORAL HUB (VISHAL INFORMATION TECHNOLOGIES LTD.) : THE LD. AR SUBMITTED THAT THIS COMPANY IS HAVING HEAVY OUTSOUR CING ACTIVITIES AS WELL AS HAVING DIFFERENT BUSINESS MODEL AND THIS VERY POSIT ION FOR THIS VERY COMPARABLE HAS BEEN ACCEPTED BY THE HONBLE DELHI HIGH COURT I N CASE OF RAMPGREEN 38 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SOLUTIONS (2015) 377 ITR 533 FOR THIS VERY ASSESSME NT YEAR. IT HAS SIGNIFICANT OUTSOURCING COST AND VENDOR PAYMENT ARE ALMOST 87% AND EMPLOYEE COST IS ABOUT ONLY 4.39%. THE ASSESSEE COMPANY, ON THE OTHE R HAND, HAS SIGNIFICANT EMPLOYEE COST WHEREBY COST OF ASSESSEE IS RS. 85,34 ,53,827/-. RECENTLY IN CASE OF CIT VS. NEW RIVER SOFTWARE SERVICES LTD. (ITA NO . 924/2016 ORDER DATED 22.08.2017, THE HONBLE DELHI HIGH COURT HELD THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE AS IT HAS A DIFFERENT BUSINES S MODEL. THE LD. AR FURTHER SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY DISS IMILAR AS IT IS ENGAGED IN DIGITAL LIBRARY AND PRINT ON DEMAND. IT IS IN THE F IELD OF DATA DIGITIZATION, CONVERSION AND PUBLISHING. 44.2 THE LD. DR RELIED UPON THE ORDER OF THE TPO/A O AND THE DIRECTIONS OF THE DRP. 44.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED AL L THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES TO ITS AES AND MAI NLY HAVING SEGMENT RELATING TO BUSINESS INFORMATION, INTELLECTUAL PROPERTY, INV ESTMENT RESEARCH AND FINANCIAL ANALYTICS AND MARKET RESEARCH. BUT CORAL HUB IS ENGAGED IN DIGITAL LIBRARY AND PRINT ON DEMAND. FROM THE PERUSAL OF TH E ANNUAL REPORT THE SEGMENTAL DETAILS WERE ALSO NOT AVAILABLE FOR THIS COMPARABLE. THEREFORE, IT WILL BE APPROPRIATE TO EXCLUDE THIS COMPARABLE. THEREFOR E, WE DIRECT THE TPO/AP TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.4 ACROPETAL TECHNOLOGIES PVT. LTD. : THE LD. AR SUBMITTED THAT THE TPO FAILS IN ITS OWN FILTERS ON THIS COMPARABLE. TH ERE IS CONTRADICTION AS FAR AS 2 SEGMENTS ARE CONCERNED. IN ANNUAL REPORT, IT IS W RITTEN AS ENGINEERING AND ITES SEGMENT WHEREIN IN INFORMATION U/S 133(6), I T IS WRITTEN AS SOFTWARE DEVELOPMENT AND ENGINEERING/ITES. HENCE, IT SHOW S THAT THE COMPARABLE IS INTER-CHANGEABLE BY USING THE WORDS SOFTWARE, EN GINEERING AND ITES AND HENCE THE DATA IS NOT RELIABLE. THE LD. AR SUBMITTE D THAT THE ASSESSEE CANNOT BE COMPARED WITH THIS COMPARABLE AS IT IS FUNCTIONA LLY DISSIMILAR. ACROPETAL 39 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 TECHNOLOGIES IS RENDERING SOFTWARE DEVELOPMENT AND ENGINEERING DESIGN SERVICES. THE LD. AR SUBMITTED THAT THESE SERVICES ARE DIFFERENT FROM THE SERVICES PROVIDED BY THE ASSESSEE. THE ASSESSEE IS NOT IN SOFTWARE DEVELOPMENT AND HENCE CANNOT BE COMPARED WITH OTHER SEGMENT. TH E COMPARABLE COMPANY DOES NOT PASS THE SERVICE INCOME FILTER OF 75% AS A PPLIED BY THE TPO I.E. ITES REVENUE IS LESS THAN 75% OF TOTAL REVENUE. THE LD. AR RELIED UPON THE DECISION OF THE MOTOROLA SOLUTIONS INDIA (P) LTD. VS. ACIT ( 2015 152 ITD 158 (DEL) AND BAXTER INDIA VS. ACIT (ITA NO. 6158/2016). 44.5 THE LD. DR RELIED UPON THE ORDER OF THE TPO/A O AND THE DIRECTIONS OF THE DRP. 44.6 WE HAVE HEARD BOTH THE PARTIES AND PERUSED AL L THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES TO ITS AES AND MAI NLY HAVING SEGMENT RELATING TO BUSINESS INFORMATION, INTELLECTUAL PROPERTY, INV ESTMENT RESEARCH AND FINANCIAL ANALYTICS AND MARKET RESEARCH. BUT ACROPE TAL TECHNOLOGIES LTD. IS RENDERING SOFTWARE DEVELOPMENT AND ENGINEERING DESI GN SERVICES. THOUGH THE TPO HAS COMPARED ENGINEERING DESIGN SERVICES SEGM ENT WITH THE ASSESSEE, HOWEVER, SUCH SERVICES ARE DIFFERENT FROM THE SERVI CES PROVIDED BY THE ASSESSEE. ASSESSEE IS NOT IN SOFTWARE DEVELOPMENT. THEREFORE, IT WILL BE APPROPRIATE TO EXCLUDE THIS COMPARABLE. THEREFORE, WE DIRECT THE T PO/AP TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.7 WIPRO LTD. : THE LD. AR SUBMITTED THAT THE TURNOVER OF THE ASSESSEE IS RS. 143 CRORES WHEREAS TURNOVER OF WIPR O IS RS. 176,581 MILLION. THE LD. AR RELIED UPON THE DECISION OF THE ITAT IN CASE OF SAMSUNG HEAVY INDUSTRIES INDIA P. LTD. VS. DCIT (2017) 84 TAXMANN .COM 154 WHEREIN IT IS HELD THAT TURNOVER IS A IMPORTANT FACTOR TO DETERMINE CO MPARABILITY. THE LD. AR SUBMITTED THAT THIS COMPARABLE IS HAVING ITS OWN SI GNIFICANT TANGIBLE WHICH IS NOT IN THE CASE OF THE ASSESSEE COMPANY. THE LD. AR FURTHER SUBMITTED THAT THERE IS SIGNIFICANT R & D ACTIVITIES IN THIS COMPA RABLE. BESIDES THIS, THE LD. AR 40 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 SUBMITTED THAT THIS COMPARABLE FAILS TPOS OWN 75% REVENUE INCOME FILTER. INCOME FROM THIS SEGMENT IS RS. 10,58,10,000 AND TO TAL IS RS. 176,58,10,000. IT FAILS THE TPOS FILTER BECAUSE BPO SEGMENT INCOM E FIGURE IS APPROXIMATELY 11,572 WHEREAS IT/SOFTWARE SEGMENT INCOME FIGURE IS 112,762 WHICH IS LESS THAN 75% FILTER. THUS, THE LD. AR SUBMITTED THAT TH IS COMPARABLE HAS TO BE EXCLUDED. 44.8 THE LD. DR RELIED UPON THE ORDER OF THE TPO/A O AND THE DIRECTIONS OF THE DRP. 44.9 WE HAVE HEARD BOTH THE PARTIES AND PERUSED AL L THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE BUSI NESS PROFILE OF WIPRO VIS-- VIS THE TAXPAYER THAT THERE ARE LOT OF DISSIMILARIT IES AS WIPRO IS A GIANT COMPANY HAVING HUGE ASSET BASE, BRAND VALUE, GOODWILL AND P RESENCE IN THE GLOBAL MARKET. THERE IS SIGNIFICANT R & D ACTIVITIES AND I T IS A FULL FLEDGED RISK BEARING SERVICE PROVIDER. THEREFORE, IT WILL BE APPROPRIAT E TO EXCLUDE THIS COMPARABLE. THEREFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COM PARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.10 ACCENTIA TECHNOLOGIES LTD. : THE LD. AR SUBMITTED THAT THERE WAS EXTRAORDINARY EVENTS DURING A.Y. 2008-09 I.E. AMALG AMATION AND ACQUISITION. THIS COMPANY HAS ACQUIRED FOUR COMPANIES AND HAS HA D SEVERAL OTHER COLLABORATIONS. THE LD. AR SUBMITTED THAT THE HONB LE DELHI HIGH COURT IN CASE OF PCIT VS. AMERIPRISE INDIA P. LTD. ITA NO. 461/20 16 UPHELD THE EXCLUSION OF THECOMPARABLE ON THE GROUND OF EXTRAORDINARY EVENTS THAT HAD TAKEN PLACE. THIS COMPARABLE IS FUNCTIONALLY DISSIMILAR TO THE A SSESSEE COMPANY. ACCENTIA TECHNOLOGIES LTD. IS ENGAGED IN HEALTH CARE RECEIVA BLES CYCLE MANAGEMENT. ITS INCOME IS DERIVED FROM THREE SOURCES I.E. MEDICAL T RANSCRIPTION, BILLING AND CODING AND SOFTWARE DEVELOPMENT AND IMPLEMENTATION. BUT ANNUAL REPORT STATED THAT IT HAS ONLY ONE SEGMENT. THUS, THERE IS NO SEGMENTAL DETAILS AVAILABLE OF THIS COMPARABLE. 41 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 44.11 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.12 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. ACCENTIA TECHNOLOGIES LTD. IS ENGAGED IN HEALTH CARE RECEIVABLES CYCLE MANAGEMENT. THERE WAS EXTRAO RDINARY EVENTS DURING A.Y. 2008-09 I.E. AMALGAMATION AND ACQUISITION. THERE IS NO SEGMENTAL DETAILS AVAILABLE. THEREFORE, IT WILL BE APPROPRIATE TO EXC LUDE THIS COMPARABLE. THEREFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COM PARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.13 ECLERX SERVICES LTD. : THE LD. AR SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY DISSIMILAR. IT IS ENGAGED IN DATA A NALYSIS AND FINANCIAL SERVICES AND THIS POSITION FOR THIS COMPARABLE HAS BEEN ACCE PTED BY THE HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS FOR A.Y. 2008-09. ECLERX SERVICES LTD. IS ENGAGED IN PROVIDING DATA ANALYSIS AND DATA PROCESS SOLUTIONS. PRICING ANALYTICS, BUNDLING OPTIMIZATION, CONTENT OPERATION S, SALES AND MARKETING SUPPORT, PRODUCT DATA MANAGEMENT, REVENUE MANAGEMEN T ARE SOME OF ITS FUNCTIONS. THIS COMPANY PROVIDES TAILORED PROCESS O UTSOURCING AND MANAGEMENT SERVICES IN ADDITION TO MULTITUDE OF THE DATA AGGREGATION AND MINING AND MAINTENANCE SERVICES. THERE IS EXTRAORDI NARY EVENTS DURING A.Y. 2008-09 THAT OF ACQUISITION. ECLERX SERVICES LTD. H AS BEEN ACQUIRED UK BASED IGENTICA TRAVEL SOLUTIONS LTD. WHICH GAVE IT A NEW CUSTOMER BASE. THE LD. AR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF PCIT VS. AMERIRPRISE INDIA PVT. LTD. (ITA NO. 461/2016). 44.14 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.15 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. ECLERX SERVICES LTD. IS ENGAGED IN PROVIDING DATA ANALYSIS AND DATA PROCESS SOLUTIONS. PRICING ANALYT ICS, BUNDLING OPTIMIZATION, 42 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 CONTENT OPERATIONS, SALES AND MARKETING SUPPORT, PR ODUCT DATA MANAGEMENT, REVENUE MANAGEMENT ARE SOME OF ITS FUNCTIONS. IT IS ENGAGED IN DATA ANALYTICS AND FINANCIAL SERVICES AND THIS POSITION FOR THIS C OMPARABLE HAS BEEN ACCEPTED BY THE HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTI ONS FOR A.Y. 2008-09. THERE IS EXTRAORDINARY EVENTS DURING A.Y. 2008-09 T HAT OF ACQUISITION. THEREFORE, IT WILL BE APPROPRIATE TO EXCLUDE THIS C OMPARABLE. THEREFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COMPARABLE FROM T HE FINAL LIST OF THE COMPARABLES. 44.16 INFOSYS BPO : THE LD. AR SUBMITTED THAT IT IS AN INDUSTRY GIANT AND BENEFITS FROM THE USE OF THE NAME INFOSYS. IT IS AMONG TOP 10 BPOS OF INDIA AS PER NASSCOM RANKING HAVING TURNOVER OF RS. 825 CROR ES. WHILE ASSESSEE COMPANYS TURNOVER IS RS. 143 CRORES. THERE IS AN E XTRAORDINARY EVENTS THAT OF ACQUISITION OF A GROUP DURING A.Y. 2008-09 AS HELD IN CASE OF AMERIPRISE INDIA PVT. LTD. (SUPRA) BY HONBLE DELHI HIGH COURT. THER E IS EXTENSIVE SELLING AND MARKETING EXPENSES OF RS. 50,87,97,083/- OF THIS CO MPARABLE COMPANY. 44.17. THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.18 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THERE IS AN EXTRAORDI NARY EVENT THAT OF ACQUISITION OF A GROUP DURING A.Y. 2008-09. THE HONBLE DELHI H IGH COURT IN CASE OF PCIT VS. ACTIS GLOBAL SERVICES HELD THAT SIZE AND SCALE OF OPERATIONS OF A COMPANY DOES MAKE IT UNSUITABLE AS COMPARABLE. THEREFORE, I T WILL BE APPROPRIATE TO EXCLUDE THIS COMPARABLE. THEREFORE, WE DIRECT THE T PO/AP TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.19 GENESYS INTERNATIONAL LTD. : THE LD. AR SUBMITTED THAT THE COMPARABLE COMPANY IS FUNCTIONALLY DIFFERENT. IT IS DEALING WITH GEOSPATIAL SERVICES AND CONTENT PROVIDERS. THE COMPANY CATERS TO THE NEEDS OF CONSUMER MAPPING, NAVIGATION, INTERNET PORTALS AS WELL AS IN FRASTRUCTURE PLAYERS 43 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 INCLUDING STATE AND LOCAL GOVERNMENTS. THIS COMPARA BLE ALSO COVERS MORE THAN HALF A MILLION KILO METERS OF ALL MAJOR INDIAN HIGH WAYS. THIS COMPANY IS ENGAGED IN PROVIDING GEOGRAPHICAL INFORMATION SERVI CES COMPRISING PHOTOGRAMMETRIC, REMOTE SENSING CARTONOGRPAHY, DATA CONVERSION, RELATED COMPUTER BASED SERVICES AND OTHER RELATED SERVICES. THERE IS AN EXTRAORDINARY EVENT IN THIS YEAR I.E. COMPANY HAS ACQUIRED 100% S TAKE IN LADYA SYSTECH LTD. THUS PROFIT HAS INCREASED FROM RS.2,18,87,251/- TO RS.15,19,86,605/-. 44.20 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.21 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS COMPANY IS ENGAG ED IN PROVIDING GEOGRAPHICAL INFORMATION SERVICES COMPRISING PHOTOG RAMMETRIC, REMOTE SENSING CARTONOGRPAHY, DATA CONVERSION, RELATED COMPUTER BA SED SERVICES AND OTHER RELATED SERVICES. THUS THE FUNCTION OF THIS COMPA RABLE COMPANY IS DIFFERENT FROM THE FUNCTION OF THE ASSESSEE COMPANY. THERE I S AN EXTRAORDINARY EVENT IN THIS YEAR. THEREFORE, IT WILL BE APPROPRIATE TO EXC LUDE THIS COMPARABLE. THEREFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COM PARABLE FROM THE FINAL LIST OF THE COMPARABLES. 44.22 DATAMATICS FINANCIAL SERVICES P. LTD. : THE LD. AR SUBMITTED THAT THIS COMPARABLE COMPANYS ITES SEGMENT DOES NO T PASS THE TPOS FILTER OF INCOME MORE THAN 75% FROM THE ITES SEGMENT AS TOTAL INCOME IS RS. 16,72,43,518 AND INCOME FROM ITES SEGMENT IS ONLY R S. 6,05,96,243/-. THUS, THE INCOME FROM ITES IS RS.13,28,776/- OUT OF TOTAL INCOME OF RS.6,19,25,019/-. THERE IS DISCREPANCY IN THE DATA PROVIDED U/S 133(6) QUOTED IN TPO ORDER AND WHAT IS REPORTED IN ANNUAL REPORT AS REGARDS TURNOVER OF THE COMPANY IN EACH SEGMENT, HENCE DATA IS NOT RELIABLE . THE LD. AR RELIED UPON THE TRIBUNAL DECISION IN CASE OF BAXTER INDIA VS. A CIT (ITA NO. 6158/2016) WHEREIN IT IS HELD THAT IN CASE OF DISCREPANCY IN T HE INFORMATION IN ANNUAL REPORT AND IN 133(6) REPLY, THE COMPANY CANNOT BE T AKEN AS A COMPARABLE. THE 44 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 LD. AR FURTHER SUBMITTED THAT DATAMATICS TECHNOLOGI ES LTD. WAS TAKEN BY THE ASSESSEE IN ITS TP STUDY AT ENTITY LEVEL. BUT THE T PO SAID IT IS COMPARABLE ONLY WITH ITES SEGMENT. 44.23 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.24 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ITES SEGMENT IS S IMILAR TO THAT OF THE ASSESSEE COMPANY. BUT THERE IS DISCREPANCY IN THE I NFORMATION IN ANNUAL REPORT AND IN 133(6) REPLY, THE COMPANY CANNOT BE T AKEN AS A COMPARABLE. THUS, FOLLOWING THE DECISION OF THE TRIBUNAL IN CAS E OF BAXTER INDIA (SUPRA), IT WILL BE APPROPRIATE TO EXCLUDE THIS COMPARABLE. THE REFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COMPARABLE FROM THE FINAL LI ST OF THE COMPARABLES. 44.25 CROSSDOMAIN SOLUTIONS PVT. LTD. : THE LD. AR SUBMITTED THAT THIS COMPARABLE COMPANY IS FUNCTIONALLY DIFFERENT. THE C OMPANY HAS DEVELOPED PRODUCT SUITES FOR PAYROLL PROCESSING SERVICES AND IT DEVELOPS INFORMATION SYSTEMS. IT IS INTO DATA PROCESSING AND INSURANCE C LAIMS PROCESSING AND PAYROLL PROCESSING. IN P& L ACCOUNT IT IS MENTIONED THAT RE VENUE IS FROM INTERNATIONAL SERVICES, C&B SS SERVICES, RETRIALS SERVICES, TRANS ITION SERVICES AND OTHER SERVICES WHICH IS NOT COMPARABLE TO THE ASSESSEE CO MPANY. 44.26 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.27 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS COMPARABLE IS FU NCTIONALLY DIFFERENT, SINCE THIS THE COMPANY HAS DEVELOPED PRODUCT SUITES FOR P AYROLL PROCESSING SERVICES AND THAT IT DEVELOPS INFORMATION SYSTEMS. THUS, IT IS INTO PRODUCT DEVELOPMENT. FURTHER, NO SEGMENTAL DATA IS AVAILABLE. THEREFORE, WE DIRECT THE TPO/AO TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST OF THE COMPARABLES. 45 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 44.28 HCL COMNET SYSTEMS & SERVICES LTD. : THE LD. AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR. THE C OMPANY HAS TWO SEGMENTS I.E. ITES ACTIVITIES AND TELECOMMUNICATION SERVICES . THE ITES ACTIVITIES IN HCL COMNET INCLUDES DATA CENTRE MANAGEMENT SERVICES, EN D USER COMPUTING SERVICES, MANAGED SECURITY SERVICES WHICH IS NOT FU NCTIONALLY SIMILAR TO THAT OF ASSESSEE COMPANY. THIS COMPARABLE ALSO FAILS TPOS RPT FILTER. BESIDES THERE IS DIFFERENT FINANCIAL YEAR ENDING AS THIS COMPARABLE COMPANY FOLLOWS YEAR ENDING IN JUNE. 44.29 THE LD. DR RELIED UPON THE ORDER OF THE TPO/ AO AND THE DIRECTIONS OF THE DRP. 44.30 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A LL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ITES ACTIVITIES, IN HCL COMNET INCLUDES DATA CENTRE MANAGEMENT SERVICES, END USER COMPUTING SERV ICES, MANAGED SECURITY SERVICES WHICH IS NOT FUNCTIONALLY SIMILAR TO THAT OF ASSESSEE COMPANY. THEREFORE, IT WILL BE APPROPRIATE TO EXCLUDE THIS C OMPARABLE. THEREFORE, WE DIRECT THE TPO/AP TO EXCLUDE THIS COMPARABLE FROM T HE FINAL LIST OF THE COMPARABLES. 45. AS REGARDS GROUND NO. 1 AND 2 OF THE APPEAL, TH E SAME ARE GENERAL IN NATURE. HENCE GROUND NO. 1 AND 2 ARE DISMISSED. AS REGARDS GROUND NO. 3, THE SAME HAS NOT BEEN CONTESTED BY THE ASSESSEE, TH EREFORE, GROUND NO. 3 IS DISMISSED. AS REGARDS GROUND NO. 4, 4.1, 4.2, 4.2.1 , 4.2.2, 4.2.3, 4.2.4 AND 4.3 AS WELL AS GROUND NO. 5, 6, 7 AND 8 ARE RELATING TO COMPARABLES WHICH IS DEALT IN THE ABOVE PARAS AND THE TPO/AO HAS TO FOLLOW THE DIRECTIONS GIVEN BY US. THUS, GROUND NO. 4, 4.1, 4.2, 4.2.1, 4.2.2, 4.2.3, 4.2.4 AND 4.3 AS WELL AS GROUND NO. 5, 6, 7 AND 8 ARE PARTLY ALLOWED FOR STA TISTICAL PURPOSE. 46 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 46. AS REGARDS GROUND NO. 9, THE SAME IS IDENTICAL TO THE GROUND NO. 9 OF THE ASSESSEES APPEAL FOR A.Y. 2010-11. GROUND NO. 9 IS ALLOWED. 47. AS RELATES TO GROUND NO. 10 OF THE ASSESSEES A PPEAL, THE LD. AR SUBMITTED THAT BROUGHT FORWARD LOSSES AND UNABSORBE D DEPRECIATION HAVE ALREADY BEEN ADJUSTED IN THE LAST YEAR AND CONSEQUE NTLY ERRED IN CREATING AN ADDITIONAL TAXABLE INCOME OF RS.47,28,931 FOR THE C URRENT A.Y. 2008-09. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFIC ER. 48. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT FROM THE RECORDS IT APPEARS THAT BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION HAVE ALREADY BEEN ADJUSTED IN THE LAST YEAR I.E. 2007-08, BUT THE ASS ESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION THE SAME. THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION WHICH WAS ADJUSTED IN T HE EARLIER YEAR AND MAKE THE ADDITIONS AS PER THE FACTS OF THE CASE AND THE LAW. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWI NG PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 10 IS ALLOWED FOR STATISTICAL P URPOSE. 48. AS REGARDS GROUND NO. 11 AND 12, THE SAME ARE C ONSEQUENTIAL HENCE DISMISSED. 49. IN RESULT, ITA NO. 6310/DEL/2012 FOR A.Y. 2008- 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD AUGUST, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 03/08/2018 R. NAHEED * 47 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 04 .06 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .0 6 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 03 .08 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 03 .08. 2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 03 .0 8 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 48 ITA NOS. 6310/DEL/2012 & 1466/DEL/2015