M/s. OKS Span Tech Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1551/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3370 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 17-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Rule of consistency; Earning of tax free income; Wholly owned subsidiary
• Section: 92C; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBE R & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBE R ITA NO.-1551/DEL/2015 ( ASSESSMENT YEAR: 2010-11) OKS SPAN TECH PVT. LTD. 220, OKHLA INDUSTRIAL ESTATE PHASE-III NEW DELHI PAN : AAACO5682P VS DCIT CIRCLE-19(1), ROOM NO. 221, C.R.BUILDING, I.P.ESTATE NEW DELHI ASSESSEE BY MR. VED JAIN, ADV., MR. ASHISH GOEL, CA, MS. DEVINA SHARMA, ADV. REVENUE BY SH. SANJAY KUMAR YADAV, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DATED 29/01/2015 PASSED SUBSEQUENT TO THE DIRECTIONS OF THE LD. DISPUTE RES OLUTION PANEL (DRP) FOR ASSESSMENT YEAR 2009-10. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS PRIMARILY ENGAGED IN DATA PROCESSING AND DATA ENTRY SERVICES WHICH ARE RENDERED TO OVERSEAS AFFIL IATED AND DATE OF HEARING 24.05.2018 DATE OF PRONOUNCEMENT 23.08.2018 2 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) UNRELATED ENTITIES. DATA PROCESSING WORK IS ALSO OU T SOURCED IN THE MARKET. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY PROVIDED SERVICES TO ITS ASSOCIATE D ENTERPRISES (AES) AMOUNTING TO RS. 16,56,08,843/- A ND TO NON-ASSOCIATED ENTERPRISES AMOUNTING TO RS. 61,57,0 05/-. FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS ENT ERED INTO WITH ITS ASSOCIATED ENTERPRISES, THE ASSESSEE COMPANY SELECTED COST PLUS METHOD (CPM) AS THE MOST APPROPR IATE METHOD U/S 92C OF THE INCOME TAX ACT, 1961 (HEREINA FTER CALLED AS THE ACT). 2.1 THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED DECLARING A LOSS OF RS. 47,42,898/-. THE CASE WAS S ELECTED FOR SCRUTINY AND A REFERENCE WAS ALSO MADE TO THE TRANS FER PRICING OFFICER (TPO) TO DETERMINE THE ARMS LENGTH PRICE (ALP), U/S 92CA(3) IN RESPECT OF INTERNATIONAL TRAN SACTIONS ENTERED INTO BY THE ASSESSEE COMPANY. APART FROM TH E BENCHMARKING THE INTERNATIONAL TRANSACTIONS UNDER T HE COST PLUS METHOD, THE ASSESSEE COMPANY ALSO CARRIED OUT SECONDARY BENCHMARKING UNDER TNMM. THE AVERAGE PROF IT MARGIN OF THE COMPANY WAS 6.57% AS COMPARED TO THE AVERAGE MARGIN OF 7.31% WHICH WAS DERIVED BY SELECT ING 4 3 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) COMPARABLES COMPANIES. HOWEVER, THE TPO REJECTED TH E TRANSFER PRICING (TP) APPROACH OF THE ASSESSEE COMP ANY AND APPLIED TNMM AND AFTER SELECTING 10 COMPANIES AS COMPARABLES ARRIVED AT AN AVERAGE MARGIN OF 31.73%. THEREAFTER, THE TPO PROPOSED TRANSFER PRICING ADJUS TMENT OF RS. 3,27,13,144/-. 2.2 AGGRIEVED, THE ASSESSEE FILED OBJECTIONS BEFORE THE LD. DISPUTES RESOLUTION PANEL (DRP) WHICH ALLOWED ONLY PARTIAL RELIEF TO THE ASSESSEE AND, SUBSEQUENTLY, THE FINAL ASSESSMENT ORDER WAS PASSED MAKING A TRANSFER PRICI NG ADJUSTMENT OF RS. 3,19,42,549/-. APART FROM THIS, DISALLOWANCE U/S 14A OF THE ACT AMOUNTING TO RS. 3,68,759/- WAS ALSO MADE. 2.3 NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HA S RAISED THE FOLLOWING GROUNDS OF APPEAL:- FOR TRANSFER PRICING ISSUE: 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LEARNED TRANSFER PRICING OFFICER (LD. TPO)/ HONBLE DRP HAS ERRED IN MAKING ADJUSTMENT OF RS. 3,19,42,549/- TO THE INCOME OF THE APPELLANT 4 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) COMPANY ON ACCOUNT OF DIFFERENCE IN ARM LENGTH PRIC E FOR INTERNATIONAL TRANSACTIONS ENTERED WITH ITS AE. 1.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAS ERRED IN SELECTING THE COMPANIES AS COMPARABLE COMPANY WHICH ARE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT COMPANY USING TNMM AND WITHOUT UNDERSTANDING THE BUSINESS ACTIVITY OF THE APPELLANT COMPANY. 1.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAS ERRED IN APPLYING TURNOVER FILTER AS REJECTION OF COMPANIES WHOSE TURNOVER IS LESS THAN RS. 5 CRORES INSTEAD OF REJ ECTION OF COMPANIES WHOSE TURNOVER IS LESS THAN RS. 1 CROR E. 1.4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAS ERRED IN SELECTING THE COMPANIES AS COMPARABLE COMPANY WHICH ARE GIANT COMPANIES HAVING VERY HIGH TURNOVER. AS H ELD BY HONBLE ITAT, DELHI AND CONFIRMED BY HONBLE DEL HI HIGH COURT IN CASE OF CIT VS. AGNITY INDIA TECHNOLO GIES PVT. LTD. (2013) ITA 1204/2011 DATED 10 TH JULY, 2013, COMPANIES HAVING HIGH TURNOVER CANNOT BE CONSIDERE D AS COMPARABLE. 1.5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAVE ERRED IN SELECTING THE COMPANIES AS COMPARABLE COMPANIES WHI CH ARE EARNING SUPER NORMAL PROFITS. 1.6 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAS ERRED IN 5 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) REJECTING COMPARABLE COMPANIES SELECTED BY APPELLA NT COMPANY ON THE BASIS OF INCORRECT/INAPPROPRIATE REASONS. 1.7 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. TPO/HONBLE DRP HAVE ERRED IN REJECTING MOST APPROPRIATE METHOD APPLIED BY APPELL ANT COMPANY. 1.8 THAT THE LD. TPO DID NOT FOLLOW THE DIRECTIONS FO T HE HONBLE DRP RELATING TO INCLUSION OF MISC. INCOME A S NON- OPERATING INCOME, WHICH IS BEING DISPUTED. 1.9 THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, MODIFY , SUBSTANTIATE, DELETE AND / OR TO RESCIND ALL OR ANY OF THE GROUNDS OF OBJECTION ON OR BEFORE THE FINAL HEARING , IF NECESSITY SO ARISES. FOR DOMESTIC TRANSACTIONS ISSUE: 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND LAW ON THE POINT, THE LD. ASSESSING OFFICER HAS ERRED I N MAKING ADDITION OF RS. 3,68,759/- U/S 14A OF THE INCOME TA X ACT, 1961 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. ASSESSING OFFICER HAS ERRED I N ERRED IN MAKING DISALLOWANCE U/S 14A OF THE ACT WITHOUT GIVI NG CLEAR FINDING OF INCURRING OF EXPENDITURE IN RELATION TO EXEMPT INCOME AND HONBLE DRP HAS ERRED IN CONFIRMING SUCH REJECT ION. 2.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW ON THE POINT, THE LD. ASSESSING OFFICER HAS ERRED I N CALCULATING THE DISALLOWANCE OF RS. 3,68,759/- BY APPLYING THE PROVISIONS 6 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) OF RULE 8D OF THE INCOME TAX RULES, 1962 INCORRECTL Y AND HONBLE DRP HAS ERRED IN CONFIRMING SUCH CALCULATIO N. 3.0 THE LD. AUTHORISED REPRESENTATIVE (AR) SUBMITTE D THAT THE ASSESSEE WAS SEEKING EXCLUSION OF 10 COMPARABLE COMPANIES AND INCLUSION OF 3 COMPARABLE COMPANIES. 3.1 THE LD. AUTHORISED REPRESENTATIVE SUBMITTED HIS ARGUMENTS FOR EXCLUSION OF THE VARIOUS COMPARABLES AS UNDER:- (I) E4E HEALTHCARE: IT WAS SUBMITTED THAT THIS COMPANY WAS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY AS E4E IS MAINLY ENGAGED IN PROVIDING HEALTHCARE BUSINESS SERVICES, RECEIVAB LE CYCLE MANAGEMENT SERVICES AND SOFTWARE DEVELOPMENT FOR HE ALTH CARE INDUSTRY. IT WAS SUBMITTED THAT E4E IS PROVIDI NG HIGH- END SERVICES TO THEIR CLIENT IN THE AREA OF HEALTHC ARE BUSINESS AND IS ALSO IN RECEIVABLE CYCLE MANAGEMENT. IT WAS FURTHER SUBMITTED THAT THE PROFIT AND LOSS ACCOUNT WAS NOT AVAILABLE IN THIS COMPANYS CASE IN THE PROWESS TM DATABASE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD ALSO CONDUCTED A SEARCH ON THE MCA PORTAL AND IT WAS FOUND THAT THIS COMPANY HAD NOT FILED ITS PROFIT AND LOSS ACCOUNT, AND, 7 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) THEREFORE, THE CALCULATION OF OPERATING MARGIN MAY BE ERRATIC. THE LD. AR FURTHER SUBMITTED THAT WHILE CALCULATING THE OPERATING MARGIN, THE TPO HAS TAKEN FIGURES FROM TH E DIRECTORS REPORT AND THE PROFIT FIGURE GIVEN IN TH E DIRECTORS REPORT HAS BEEN ASSUMED AS THE OPERATING PROFIT WHI CH IS NOT CORRECT. IT WAS SUBMITTED THAT THE AMOUNT OF PR OFIT GIVEN IN THE DIRECTORS REPORT MAY BE INCLUSIVE OF NON-OP ERATING INCOMES/COST WHICH ARE NOT EXCLUDED BY THE TPO WHIL E COMPUTING THE OPERATING MARGIN. THE LD. AR SUBMITTE D THAT IN ABSENCE OF COMPLETE INFORMATION, E4E SHOULD NOT BE USED AS COMPARABLE COMPANY. (II) FORTUNE INFOTEC: IT WAS SUBMITTED THAT THIS COMPANY WAS FUNCTIONALLY DISSIMILAR AS FORTUNE INFOTECH LTD. WAS ENGAGED IN THE BUSINESS OF PROVIDING BPO AND KPO SERVICES TO ITS T HIRD PARTY CLIENTS. THE LD. AR SUBMITTED THAT THIS COMPANY SER VES A WIDE ARRAY OF SERVICES TO ITS CLIENTS THAT INCLUDE DOCUM ENT MANAGEMENT, INSURANCE CLAIM PROCESSING, CHEQUE PROC ESSING, TAXATION, ETC. IT WAS FURTHER SUBMITTED THAT DURING THE CAPTIONED YEAR THIS COMPANY HAD FACED THE IMPACT OF AN EXTRAORDINARY ACTIVITY I.E. SALE OF SUBSIDIARY COMP ANY BY THE 8 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) COMPANY DURING THE YEAR UNDER CONSIDERATION. THE LD . AR SUBMITTED THAT DURING THE FINANCIAL YEAR 2008-09, T HE COMPANY SOLD ONE OF ITS BUSINESS UNITS SITUATED IN BANGALORE AND FURTHER DURING THE FINANCIAL YEAR 2009-10, THE COMPANY SOLD ONE OF ITS SUBSIDIARY SITUATED IN USA WHICH AF FECTED THE SALES DRASTICALLY. SINCE, THE COMPANY HAS ENTERED I NTO AN EXTRAORDINARY ACTIVITY DURING THE YEAR IT WOULD NOT BE JUSTIFIABLE TO TAKE IT AS A COMPARABLE FOR THE DETE RMINATION OF THE ARMS LENGTH PRICE. IT WAS ALSO SUBMITTED THAT THE TURNOVER OF FORTUNE INFOTECH LTD. IS ABNORMALLY LOW AND, HEN CE, NOT A SUITABLE COMPARABLE COMPANY. (III) I-GATE GLOBAL: THE LD. AR SUBMITTED THAT THIS COMPANY WAS FUNCTION ALLY DISSIMILAR TO THE ASSESSEE COMPANY AS THE ASSESSEE COMPANY IS PROVIDING DATA PROCESSING SERVICES AND IS HAVING LOW PAID EMPLOYEES AND IS CATEGORIZED UNDER BUSINESS PROCESS OUTSOURCING (BPO) SECTOR WHEREAS IGATE PROVIDES CUS TOMIZED GLOBAL SOURCING SOLUTIONS TO A DIVERSE GROUP OF CLI ENTS. IT WAS FURTHER SUBMITTED THAT IN ADDITION TO A BROAD RANGE OF HORIZONTAL SERVICES INCLUDING IT HELPDESK, FINANCE & ACCOUNTING, HR SERVICES, ENTERPRISE- WIDE SERVICE D ESK AND 9 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) PRODUCT SUPPORT, THIS COMPANY ALSO PROVIDES A COMPR EHENSIVE SUITE OF CIS & BPO SERVICES FOR THE INSURANCE, FINA NCIAL SERVICES, TELECOM, LIFE SCIENCES VERTICAL MARKETS. IT WAS ALSO SUBMITTED THAT THIS COMPANY ALSO OFFERS OFFSHORE SE RVICES PERTAINING TO BENEFITS ADMINISTRATION LIFECYCLE AND , THUS, THERE ARE SIGNIFICANT FUNCTIONAL DIFFERENCES BETWEE N THE TWO COMPANIES. (IV) JINDAL INTELLICOM LTD: THE LD. AR SUBMITTED THAT ON PERUSAL OF THE ANNUAL REPORT OF THIS COMPANY FOR F.Y. 2009-10, IT WAS OBSERVED THAT THE FINANCIAL YEAR OF THIS COMPANY COMPRISED OF 15 MONT HS AS AGAINST 12 MONTHS OF THE ASSESSEE COMPANY. OUR ATTE NTION WAS DRAWN TO THE VERY FIRST PAGE OF THE ANNUAL REPO RT WHEREIN IT IS MENTIONED THAT THE REPORT IS FOR FIFTEEN MONT HS. IT WAS SUBMITTED THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE FOR THIS REASON. (V) OMEGA HEALTHCARE: THE LD. AR SUBMITTED THAT OMEGA HEALTHCARE IS ENGAG ED MAINLY IN THE BUSINESS OF MEDICAL CODING AND MEDICA L BILLING. IT MAINLY CATERS TO THE HEALTHCARE INDUSTRY. OMEGA PROVIDES 10 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) FINANCING TO QUALIFIED OPERATORS OF SKILLED NURSING FACILITIES, ASSISTED LIVING FACILITIES, REHABILITATION CENTERS, AND ACUTE CARE FACILITIES AND, THEREFORE, THIS COMPANY WAS FUNCTIO NALLY DISSIMILAR TO THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITTED THAT RELEVANT FINANCIAL DATA FOR FY 2009-10 OF THIS COMPANY IS NOT AVAILABLE IN THE PROWESS DATABASE. IT WAS FURTH ER SUBMITTED THAT THE ASSESSEE ALSO CONDUCTED A SEARCH ON THE MCA PORTAL AND FOUND THAT THIS COMPANY HAS NOT FILE D ITS PROFIT AND LOSS ACCOUNT AND, THEREFORE, THE CALCULA TION OF THE OPERATING MARGIN MAY BE ERRATIC. IT WAS SUBMITTED T HAT WHILE CALCULATING THE OPERATING MARGIN, THE TPO MIGHT HAV E USED THE FIGURES FROM THE DIRECTORS REPORT AND THE PROFIT F IGURE GIVEN IN DIRECTORS REPORT MIGHT HAVE BEEN ASSUMED AS THE OP ERATING PROFIT WHICH IS NOT CORRECT BECAUSE THE AMOUNT OF P ROFIT GIVEN IN THE DIRECTORS REPORT MAY BE INCLUSIVE OF NON-OP ERATING INCOMES WHICH WERE NOT EXCLUDED WHILE COMPUTING THE OPERATING MARGIN. IT WAS SUBMITTED THAT IN ABSENCE OF COMPLETE INFORMATION OMEGA HEALTH CARE SHOULD NOT B E USED AS A COMPARABLE COMPANY OR ALTERNATIVELY COMPLETE F INANCIAL STATEMENTS OF THE COMPANY SHOULD BE PROVIDED TO THE ASSESSEE. 11 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) (VI) TCS E-SERVE INTERNATIONAL LIMITED: IT WAS SUBMITTED THAT THIS COMPANY WAS FUNCTIONALLY DISSIMILAR FOR THE REASON THAT THE ASSESSEE COMPANY IS PROVIDING DATA PROCESSING SERVICES AND IS HAVING LO W PAID EMPLOYEES AND IS CATEGORIZED UNDER BUSINESS PROCESS OUTSOURCING SERVICE (BPO) SECTOR WHEREAS TCS E-SERV E INTERNATIONAL LTD. HAS MAINTAINED ITS LEADERSHIP PO SITION IN PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES ( ITES) OR BUSINESS PROCESS OUTSOURCING (BPO) (TRANSACTION PROCESSING) SERVICES TO THE BANKING & FINANCIAL SER VICES INDUSTRY DOMAIN (BFSI) AND TRAVEL, TOURISM AND HOSP ITALITY (TTH), WHICH ARE CONSIDERED AS INDUSTRY SEGMENT. IT WAS FURTHER SUBMITTED THAT THE GEOGRAPHIC SEGMENTS OF T HIS COMPANY ARE AMERICA, EUROPE AND OTHERS. THE LD. AR ALSO SUBMITTED THAT THE COMPANY IS 100% SUBSIDIARY OF TC S E- SERVE LTD. WITH REFERENCE TO THE ANNUAL REPORT OF T HE COMPANY, IT WAS SUBMITTED THAT THIS COMPANY PROVIDE S SIMILAR SERVICES AS TCS E-SERVE LTD. AND IS NOT COM PARABLE TO THE APPELLANT COMPANY FOR THE REASON OF DIFFEREN T BUSINESS MODEL AND HIGH SUPERNORMAL PROFIT. 12 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) (VII) TCS E-SERVE LTD: THE LD. AR SUBMITTED THAT THIS COMPANY IS MAINLY EN GAGED IN PROVIDING BUSINESS PROCESS OUTSOURCING SERVICES TO THE BANKING & FINANCIAL SERVICE INDUSTRY AND, THEREFORE , IT WAS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITTED THAT THE TURNOVER OF THIS COMPANY IS RS. 1359.41 CRORE FOR THE YEAR UNDER CONSIDERATION WHIC H IS 79.14 TIMES THE TURNOVER OF ASSESSEE COMPANY. IT WA S FURTHER SUBMITTED THAT THIS COMPANY IS MANAGED BY T HE TATA GROUP AND DURING THE YEAR UNDER CONSIDERATION, THIS COMPANY HAS MADE PAYMENTS TOWARDS THE USE OF THE TA TA BRAND. CONSEQUENTIALLY, THE USE OF THE TCS BRAND HA S SUBSTANTIALLY INCREASED THE OPERATING PROFITS. IT W AS ALSO SUBMITTED THAT THIS COMPANY WAS A GIANT COMPANY AS COMPARED TO THE ASSESSEE COMPANY AND, THEREFORE, IT COULD NOT BE TAKEN AS A COMPARABLE. (VIII) ACCENTIA TECHNOLOGIES LTD: THE LD. AR SUBMITTED THAT THIS COMPARABLE WAS REJEC TED BY THE ITAT IN ASSESSEES OWN CASE BEING FUNCTIONALLY DISSIMILAR IN ITA NO. 481/DEL/2014 FOR THE AY 2009-10 AND THER E BEING 13 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) NO CHANGE IN THE FUNCTIONAL PROFILES OF BOTH THE CO MPANIES, THIS COMPANY COULD NOT BE TAKEN AS A COMPARABLE. (IX) COSMIC GLOBAL LTD: THE LD. AR SUBMITTED THAT THIS COMPARABLE WAS REJEC TED BY THE ITAT IN ASSESSEES OWN CASE BEING FUNCTIONALLY DISSIMILAR IN ITA NO. 481/DEL/2014 FOR THE AY 2009-10 AND THER E BEING NO CHANGE IN THE FUNCTIONAL PROFILES OF BOTH THE CO MPANIES, THIS COMPANY COULD NOT BE TAKEN AS A COMPARABLE. (X) INFOSYS BPO LIMITED: THE LD. AR SUBMITTED THAT THIS COMPARABLE WAS REJEC TED BY THE ITAT IN ASSESSEES OWN CASE BEING FUNCTIONALLY DISSIMILAR IN ITA NO. 481/DEL/2014 FOR THE AY 2009-10 AND THER E BEING NO CHANGE IN THE FUNCTIONAL PROFILES OF BOTH THE CO MPANIES, THIS COMPANY COULD NOT BE TAKEN AS A COMPARABLE. 3.2 THE ARGUMENTS ADVANCED FOR THE INCLUSION OF THE 3 COMPANIES AS COMPARABLES WERE AS UNDER: (I) MICROGENETIC SYSTEMS LIMITED: IT WAS SUBMITTED THAT THIS COMPANY WAS REJECTED AS A COMPARABLE BY THE TPO BY APPLYING THE TURNOVER FILT ER OF RS. 5 CRORE AS AGAINST THE TURNOVER FILTER OF RS. 1 CRO RE APPLIED 14 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE TPO HAD HIMSELF APPLIED THE TURNOVER FILTER OF RS. 1 CRORE IN AY 2008- 09 AND, THEREFORE, THE TPO HAD ERRED IN CHANGING TH E FILTER. RELIANCE WAS PLACED ON THE ORDER OF THE ITAT BANGLO RE BENCH IN THE CASE OF ASSISTANT COMMISSIONER OF INCO ME- TAX, CIRCLE-12 (1), BANGALORE VS. MCAFEE SOFTWARE ( INDIA) (P.) LTD REPORTED IN [2016] 68 TAXMANN.COM 293 (BANGALORE - TRIB.) WHEREIN THE TRIBUNAL, WHILE DISCUSSING THE ISSUE OF TURNOVER FILTER HAD HELD THAT AS A GEN ERAL PROPOSITION, VARIOUS FILTERS ARE REQUIRED TO BE ADO PTED IN SELECTING A COMPANY AS A COMPARABLE. THIS IS PART O F FAR ANALYSIS. HOWEVER, THERE CANNOT BE RIGID RULE OR PE RCENTAGE FIXED IN ADOPTING VARIOUS FILTERS. GENERALLY, A TUR NOVER FILTER IS ADOPTED TO AVOID SELECTION OF HIGH END COMPANIES (BIG COMPANIES) WITH THAT OF 'MINNOWS' IN THE SIMILAR LI NE OF BUSINESS. HOW TO ADOPT THE FILTER DEPENDS ON EACH C ASE. RELIANCE WAS ALSO PLACED ON THE ORDER OF ITAT DELHI BENCH IN THE CASE OF TECHBOOKS INTERNATIONAL PVT. LTD. VS . DCIT REPORTED IN (2015) 7 TMI 473 ITAT DELHI, WHEREIN MICRO GENETICS SYSTEMS LTD. WAS DIRECTED TO BE INCLUDED A S A COMPARABLE. 15 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) (II) SUNTECH WEB SERVICES P. LTD: THIS COMPARABLE WAS REJECTED BY THE TPO ON THE GROU ND OF FUNCTIONAL DISSIMILARITY. THE LD. AR SUBMITTED THAT THIS COMPARABLE CAN NEITHER BE REJECTED ON THE GROUND OF FUNCTIONAL DISPARITY NOR BY APPLYING THE TURNOVER FILTER. IT W AS SUBMITTED THAT THE TURNOVER OF THE COMPANY IS RS. 7,88,55,854 /- WHICH IS MORE THAN RS. 5 CRORES AND, THUS, IT CANNOT BE REJE CTED ON THE BASIS OF TURNOVER. IT WAS ALSO SUBMITTED THAT IT IS FUNCTIONALLY A GOOD COMPARABLE AND THE SAME WAS NOT REBUTTED BY TH E TPO. IT WAS PRAYED THAT THIS COMPARABLE BE INCLUDED. (III) BSI FINANCIAL SERVICES: THE LD. AR SUBMITTED THAT THE TPO HAD REJECTED THIS COMPARABLE ON THE GROUND THAT IT WAS AN INTERNAL COMPARABLE AN D ALSO ON THE GROUND OF IT FAILING THE TURNOVER FILTER. IT WAS SU BMITTED THAT IT IS WELL SETTLED LAW THAT WHEN INTERNAL COMPARABLES ARE AVAILABLE THE SAME NEED TO BE PREFERRED. THE LD. AR PLACED RELIAN CE ON THE FOLLOWING JUDICIAL PRECEDENTS IN SUPPORT OF HIS CON TENTION THAT INTERNAL COMPARABLES SHOULD BE PREFERRED: (I) SUMITOMO CORPORATION INDIA PVT. LTD. VS. DCIT, CIRDE-24 (2), NEW DELHI REPORTED IN [2013] 24 ITR 385 (ITAT DELHI ) 16 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) (II) HUGHES SYSTIQUE INDIA PVT. LTD. VERSUS ACIT, C IRCLE 12(1), NEW DELHI, REPORTED IN [2013] 25 ITR (TRIB) 556 (IT AT [DEL]) (III) UCB INDIA (P) LTD. VS. ARRT.10 (ST) 95 (MUMBA I). (IV) GHARDA CHEMICALS LIMITED VS. DELL, 130 TTJ 556 (DEL) (V) BIRLASOFT (INDIA) LTD. VS. ACIT 136 ITJ 505 (DE L) (VI) DESTINATION OF THE WORLD VS. DCIT [ITA NO. 553 41/DEL/2010]. 3.3 WITH RESPECT TO THE ASSESSEES CHALLENGE TO THE DISALLOWANCE OF RS. 3,10,542/- U/S 14A OF THE ACT, THE LD. AR SU BMITTED THAT THIS GROUND WAS NOT BEING PRESSED IN VIEW OF THE SM ALLNESS OF AMOUNT IN THIS YEAR. THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE RESERVES THE RIGHT TO RAISE THE ISSUE OF DISALLOWAN CE IN OTHER ASSESSMENT YEARS SHOULD THE NEED SO ARISE. 4. IN RESPONSE THE LD. SR. DEPARTMENTAL REPRESENTAT IVE APPEARING ON BEHALF OF THE REVENUE PLACED EXTENSIVE RELIANCE ON THE ORDER OF THE LD. TRANSFER PRICING OFFICER AS WE LL AS THE DIRECTIONS OF THE LD. DRP AND VEHEMENTLY ARGUED THA T THE COMPARABLES HAD BEEN CORRECTLY INCLUDED FOR THE PUR POSE OF DETERMINATION OF ARMS LENGTH PRICE AND THERE WAS NO REQUIREMENT FOR EXCLUDING ANY OF THE COMPARABLES. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE TRANSFER PR ICING OFFICER HAS 17 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) REJECTED THE CPM METHOD APPLIED BY THE ASSESSEE COM PANY AND HAS APPLIED TNMM FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS WITH THE ASSOCIATED ENTERPRISES. THE T PO SELECTED 10 COMPANIES IN THE FINAL LIST OF COMPARABLES VIZ. ACCENTIA TECHNOLOGIES LTD., COSMIC GLOBAL LTD., E4E HEALTHCA RE, FORTUNE INFOTECH LTD., I-GATE GLOBAL LTD., INFOSYS BPO LTD. , JINDAL INTELLICOM LTD., OMEGA HEALTHCARE TCS E- SERVE INTE RNATIONAL LTD., TCS E- SERVE LTD. THE ASSESSEE IS CONTESTING ALL OF THESE 10 COMPANIES AND WANTS THEM TO BE EXCLUDED FROM THE LI ST OF COMPARABLES. THE ASSESSEE IS PRAYING FOR INCLUSION OF THREE COMPANIES VIZ. MICROGENETIC SYSTEMS LTD., SUNTEC WE BSERVICES (P) LTD. AND BSI FINANCIAL SERVICES INC. IT IS ALSO SEE N THAT COSMIC GLOBAL LTD., WHICH WAS INITIALLY SELECTED BY THE AS SESSEE AS A COMPARABLE, IS NOW BEING SOUGHT TO BE EXCLUDED. 5.1 WE NOW TAKE UP THE COMPARABLES BEING PRAYED FOR EXCLUSION ONE BY ONE AS UNDER: (I) E4E HEALTHCARE: IT HAS BEEN SUBMITTED THAT THIS COMPANY IS FUNCTION ALLY DISSIMILAR AS THIS COMPANY IS MAINLY ENGAGED IN PRO VIDING HEALTHCARE BUSINESS SERVICES, RECEIVABLES CYCLE MAN AGEMENT 18 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) SERVICES AND SOFTWARE DEVELOPMENT FOR HEALTHCARE IN DUSTRY WHEREAS THE ASSESSEE COMPANY IS ONLY PROVIDING DATA PROCESSING AND DATA ENTRY SERVICES. IT HAS ALSO BEEN SUBMITTED THAT THE PROFIT & LOSS ACCOUNT OF THIS COMPANY IS NOT AVAILABLE IN THE DATA BASE. IT HAS BEEN POINTED OUT THAT THE TPO HAS TAKEN FIGU RES FROM THE DIRECTORS REPORT AND THE PROFIT FIGURE DISCLOSED I N THE DIRECTORS REPORT IS TAKEN AS THE OPERATING PROFIT. WE HAVE GO NE THROUGH THE ANNUAL REPORT OF E4E HEALTHCARE AND WE NOTE THAT TH E AVERMENT OF THE LD. AUTHORISED REPRESENTATIVE IS CORRECT WIT H RESPECT TO THIS COMPANY BEING FUNCTIONING DISSIMILAR. WE NOTE THAT E4E IS PROVIDING HIGH END SERVICES TO THEIR CLIENTS IN THE FIELD OF HEALTHCARE BUSINESS AND ARE ALSO IN RECEIVABLES CYC LE MANAGEMENT. THIS COMPANY IS ALSO DEVELOPING SOFTWAR E FOR THE HEALTHCARE INDUSTRY. WE ALSO NOTE THAT THIS COMPANY WAS EXCLUDED BY THE ITAT DELHI BENCH IN THE CASE OF BEC HTEL INDIA (P) LTD. VS. DCIT REPORTED IN 2016 TAXMANN. COM 6 (DEL. TRIBUNAL) IN AY 10-11 WHEREIN THIS COMPANY WAS FOUND TO BE FUNCT IONALLY DISSIMILAR TO A COMPANY PROVIDING ENGINEERING DESIG N AND RELATED SERVICES TO ITS AE WHEREAS THIS COMPANY WAS INTO HE ALTHCARE OUTSOURCING SERVICES AS WELL AS INTO SOFTWARE DEVEL OPMENT. IT HAS ALSO BEEN NOTED THAT THIS COMPANY WAS 100% EXPORT O RIENTED 19 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) UNIT UNDER THE STPI GUIDELINES. IT IS UNDISPUTED TH AT THE ASSESSEE COMPANY IS ONLY PROVIDING DATA ENTRY SERVICES AND D ATA PROCESSING SERVICES AND, THEREFORE, THE SAME CANNOT BE CONSIDERED TO BE A GOOD COMPARABLE. THEREFORE, IN V IEW OF THE FUNCTIONAL DISSIMILARITY WE DIRECT THE TPO TO EXCLU DE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. (II) FORTUNE INFOTEC: IT HAS BEEN SUBMITTED THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING BPO AND KPO SERVICES TO ITS T HIRD PARTY CLIENTS AND IT ALSO PROVIDES SERVICES LIKE DOCUMENT MANAGEMENT, INSURANCE CLAIM PROCESSING, CHEQUE PROCESSING AND T AXATION. UNDISPUTEDLY, THE ASSESSEE COMPANY IS ONLY PROVIDIN G DATA ENTRY AND DATA PROCESSING SERVICES AND, THEREFORE, IT IS EVIDENT THAT THIS COMPANY IS FUNCTIONING NOT SIMILAR TO THE ASSESSEE COMPANY. WE ALSO NOTE THAT THIS COMPANY WAS DIRECTED TO BE EXCL UDED FROM THE FINAL SET OF COMPARABLES BY THE ITAT DELHI BENCH IN THE CASE OF EQUANT SOLUTIONS INDIA (P.) LTD. VS. DCIT IN ASSESS MENT YEAR 2010-11 AND REPORTED IN (2016) 66 TAXMANN.COM.192 ( DELHI TRIB.) ON THE GROUND THAT THIS COMPANY HAS DEVELOPE D AND OWNS ITS UNIQUE WEB BASED SOFTWARE BY WHICH IT PROVIDES NICHE SERVICES 20 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) TO ITS CUSTOMERS AND, THEREFORE, IT WAS NOT COMPARA BLE WITH A COMPANY PROVIDING ITES SERVICES HAVING NO INTANGIBL ES OF ITS OWN. THE ITAT DELHI BENCH FOLLOWED THE ORDER OF ITA T BANGALORE BENCH IN THE CASE OF 24/7 CUSTOMER.COM(P.) LTD. VS. DCIT REPORTED IN (2013) 140 ITD 344 BANGALORE WHILE DIRE CTING THE EXCLUSION OF THIS COMPANY WHEREIN IT WAS NOTED THAT FORTUNE INFOTEC HAD DEVELOPED ITS OWN SOFTWARE CALLED FINE TRAN AND IMAGE INDEX FOR PERFORMING SPECIALIZED SERVICES I N MEDICAL TRANSCRIPTION AND PATIENT RECORD MANAGEMENT. ACCORD INGLY, IN VIEW OF THE FUNCATIONAL DISSIMILARITY AS NOTED BY T HE COORDINATE BENCHES AND KEEPING IN MIND THAT THE ASSESSEE COMPA NY IS ONLY PROVIDING DATA ENTRY AND DATA PROCESSING SERVICES, WE DIRECT EXCLUSION OF FORTUNE INFOTEC LTD. FROM THE FINAL LI ST OF COMPARABLES. (III) I-GATE GLOBAL: IT HAS BEEN SUBMITTED THAT THIS COMPANY IS ALSO FUN CTIONALLY DISSIMILAR AS I-GATE IS PROVIDING CUSTOMIZED GLOBA L SOURCING SOLUTIONS TO A DIVERSE GROUP OF CLIENTS AS WELL AS SHARED CORPORATE SERVICES ALONG WITH IT HELPDESK, FINANCE AND ACCOUN TING, HR SERVICES, ENTERPRISE WIDE SERVICE DESK ETC. WHEREA S ASSESSEE 21 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) COMPANY IS PROVIDING ONLY DATA PROCESSING SERVICES. WE HAVE GONE THROUGH THE ANNUAL REPORT TO THE COMPANY I-GAT E GLOBAL AND WE FIND THAT THIS COMPANY, APART FROM PROVIDING CUSTOMIZED GLOBAL SOLUTIONS AND SHARED CORPORATE SERVICES, IS ALSO PROVIDING CIS & BPO SERVICES FOR THE INSURANCE, FINANCIAL SER VICES, TELECOM, LIFE SCIENCES. IN ADDITION, THIS COMPANY I S ALSO OFFERING OFFSHORING SERVICES OF THE ENTIRE BENEFITS ADMINIST RATION LIFECYCLE. THUS, IT IS VERY MUCH EVIDENT THAT THIS COMPANY IS NOT A GOOD COMPARABLE FOR THE ASSESSEE COMPANY. WE ALSO NOTE T HAT THIS COMPANY WAS EXCLUDED AS COMPARABLE IN ASSESSMENT YE AR 2010- 11 IN THE CASE OF AMERIPRISE INDIA (P) LTD. VS. DCI T REPORTED IN 2016 TAXMANN.COM 246 (DELHI TRIB.) IN THE CASE OF A SSESSEE PROVIDING IT ENABLE SERVICES ON THE GROUND THAT AN EVENT OF AMALGAMATION HAD TAKEN PLACE AND THE FINANCIAL RESU LTS OF THE COMPANY HAD ALSO INCLUDED THE RESULTS OF AMALGAMATI NG COMPANY AND, THEREFORE, IN VIEW OF THIS EXTRA ORDINARY FINA NCIAL EVENT IT WAS UNFIT FOR COMPARISON WITH THE ASSESSEE COMPANY. SIM ILAR VIEW WAS TAKEN BY THE ITAT DELHI BENCH BY EXCLUDING THIS COMPANY IN THE CASE OF TECHBOOKS INTERNATIONAL (P) LTD. VS. DC IT REPORTED IN 2015, 63 TAXMANN.COM 114 (DELHI TRIB.). ACCORDINGLY , RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATE BENCH, WE 22 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE FIN AL SET OF COMPARABLES. (IV) JINDAL INTELLICOM LTD: THIS COMPANY HAS BEEN OBJECTED TO ON THE GROUND THA T THE ANNUAL REPORT OF THIS COMPANY COVERS A PERIOD OF 15 MONTHS AS AGAINST 12 MONTHS OF THE ASSESSEE COMPANY. A PERUSA L OF THE ANNUAL REPORT OF THIS COMPANY PLACED ON RECORD CLEA RLY MENTIONS THAT THIS REPORT IS FOR 15 MONTHS. THE LD. SR. DR A LSO COULD NOT POINT OUT IF THE DATA/FINANCIAL RESULTS FOR THE 12 MONTHS PERIOD WAS AVAILABLE IN THE CASE OF THIS COMPANY. IN SUCH A SITUATION, WE HAVE NO OTHER OPTION BUT TO DIRECT THE TPO TO EXCLU DE THIS COMPANY FOR THE FINAL SET OF COMPARABLES. IT IS DIR ECTED ACCORDINGLY. (V) OMEGA HEALTHCARE: IT HAS BEEN SUBMITTED THAT THIS COMPANY IS FUNCTION ALLY DISSIMILAR TO THE ASSESSEE COMPANY AS OMEGA HEALTHC ARE IS ENGAGED MAINLY IN THE BUSINESS OF MEDICAL CODING AN D MEDICAL BILLING. IT HAS ALSO BEEN SUBMITTED THAT THIS COMPA NY PROVIDES FINANCING TO QUALIFIED OPERATORS OF SKILLED NURSING FACILITIES, 23 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) ASSISTED LIVING FACILITIES, REHABILITATION CENTRES, AND ACUTE CARE FACILITIES. UNDISPUTEDLY, THE ASSESSEE COMPANY IS O NLY INTO PROVIDING DATA PROCESSING AND DATA ENTRY SERVICES A ND A PERUSAL OF THE ANNUAL REPORT/DIRECTORS REPORT OF OMEGA HEA LTHCARE SHOWS THAT OMEGA HEALTHCARE IS PROVIDING SERVICES L IKE MEDICAL CODING, MEDICAL BILLING AS WELL AS PROVIDING FACILI TIES, REHABILITATION CENTRES AND ACUTE CARE FACILITIES. T HUS, WE AGREE WITH THE AVERMENTS OF THE LD. AUTHORISED REPRESENTA TIVE THAT THIS COMPANY IS NOT FUNCTIONALLY SIMILAR TO THE ASSESSEE COMPANY. WE ALSO NOTE THAT THIS COMPANY WAS DIRECTED TO BE EXCL UDED AS A COMPARABLE BY THE ITAT DELHI BENCH IN THE CASE OF B ECHTEL INDIA (P) LTD. VS. DCIT IN ASSESSMENT YEAR 2010-11 AND RE PORTED IN 2016 TAXMANN.COM 6 (DELHI TRIB.). THE ITAT DELHI BE NCH DIRECTED THE EXCLUSION OF THIS COMPANY FROM THE SET OF COMPA RABLES ON THE GROUND THAT THIS COMPANY WAS INVOLVED IN PROVISION OF OFF SHORING HEALTHCARE BUSINESS SERVICES LIKE MEDICAL C ODING, BILLING, ACCOUNTS RECEIVABLE MANAGEMENT, CLAIMS PROCESSING, AND HEALTHCARE REVENUE MANAGEMENT ETC. AND WAS, THUS, F UNCTIONING DISSIMILAR TO A COMPANY PROVIDING ENGINEERING DESIG N AND RELATED SERVICES. ON SIMILAR REASONING AND DULY NOTING THE FACT THAT THE FUNCTIONAL DISSIMILARITY BETWEEN THE ASSESSEECOMPAN Y AND 24 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) OMEGA HEALTHCARE IS UNDISPUTEDLY ESTABLISHED, WE DI RECT THE TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMP ARABLES. (VI) TCS E-SERVE INTERNATIONAL LIMITED : THIS COMPANY HAS BEEN OBJECTED TO AS A COMPARABLE O N THE GROUND OF HAVING A DIFFERENT BUSINESS MODEL AND HAV ING SUPER NORMAL PROFITS. A PERUSAL OF THE ANNUAL REPORT SHOW S THAT TCS E- SERVE INTERNATIONAL LTD. PROVIDES INFORMATION TECHN OLOGY ENABLED SERVICES/BUSINESS PROCESSING OUTSOURCING SERVICES T O THE BANKING AND FINANCIAL INDUSTRIAL SERVICES INDUSTRY, TRAVEL, TOURISM AND HOSPITALITY INDUSTRY. IT IS ALSO SEEN T HAT THE GEOGRAPHIC SEGMENTS OF THE COMPANY ARE AMERICAS, EU ROPE AND OTHERS CONTINENTS. ON THE OTHER HAND, THE ASSESSEE COMPANY IS ONLY PROVIDING DATA PROCESSING AND DATA ENTRY SERVI CES AND WE HAVE NO HESITATION IN HOLDING THAT TCS E-SERVE INTE RNATIONAL LTD. IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY AND THE SAME CANNOT BE TAKEN AS A COMPARABLE. WE ALSO NOTE THAT THIS COMPANY WAS EXCLUDED BY THE ITAT DELHI BENCH FROM T HE FINAL LIST OF COMPARABLES IN THE CASE OF BECHTEL INDIA PVT. LT D. VS. DCIT FOR ASSESSMENT YEAR 2010-11 AND REPORTED IN 66 TAXMANN. COM 6 (DELHI TRIB.) ON THE GROUND THAT THIS COMPANY HAD M ADE 25 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) PAYMENTS TOWARDS THE USE OF TATA BRAND AND THE USE OF THE BRAND HAD SUBSTANTIALLY INCREASED THE OPERATING PROFITS. IN VIEW OF THE OBSERVATIONS AND FINDINGS OF THE COORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF BECHTEL INDIA PVT. LTD. (SUPRA), WHI CH REMAIN UNDISPUTED, WE DIRECT THE TPO TO EXCLUDE THIS COMPA NY FROM THE FINAL SET OF COMPARABLES. (VII) TCS E-SERVE LTD: THIS COMPANY HAS BEEN OBJECTED ON THE GROUNDS OF BE ING FUNCTIONALLY DIFFERENT, HAVING SUPER NORMAL PROFITS AND HAVING A TURN OVER WHICH IS 79 TIMES MORE THAN THAT OF THE A SSESSEE COMPANY. EVEN IF, WE DO NOT CONSIDER THE ASSESSEES CONTENTION FOR EXCLUSION ON THE GROUND OF THE TURNOVER BEING 7 9 TIMES MORE THAN THAT OF THE ASSESSEE COMPANY, WE NOTE THAT THE ITAT DELHI BENCH IN THE CASE OF BECHTEL INDIA PVT. LTD. VS. DC IT IN ASSESSMENT YEAR 2010-11 AND REPORTED IN (2016) 66 TAXMANN.COM 6 (DELHI TRIB.) HAS DIRECTED EXCLUSION OF THIS COMPANY ON THE GROUND THAT THIS COMPANY HAD MADE PA YMENTS TOWARDS USE OF TATA BRAND WHICH HAD SUBSTANTIALLY I NCREASED THE OPERATING PROFITS. IT IS VERY MUCH UNDISPUTED THAT THE ASSESSEE COMPANY DOES NOT ENJOY THE BENEFITS OF BRAND VALUE AND ON THIS 26 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) GROUND ITSELF, TCS E-SERVE LTD. CANNOT BE CONSIDERE D TO BE A GOOD COMPARABLE TO THE ASSESSEE COMPANY. IN VIEW OF THE ORDER OF THE COORDINATE BENCH IN THE CASE OF BECHTEL INDIA PVT. LTD. VS. DCIT (SUPRA) WE DIRECT THE TPO TO EXCLUDE OF THIS COMPAN Y FROM THE FINAL SET OF COMPARABLES. (VIII) ACCENTIA TECHNOLOGIES LTD: IT IS SEEN THAT THIS COMPARABLE HAS BEEN EXCLUDED B Y THE ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2009-10 IN ITA NO. 481/DEL/2014 ON THE GROUND OF BEING FUNC TIONALLY DIFFERENT. IT IS UNDISPUTED THAT THE FUNCTIONAL PRO FILE OF THE ASSESSEE AS WELL AS ACCENTIA TECHNOLOGIES LTD. HAS REMAINED UNCHANGED. THEREFORE, IN VIEW OF THIS COMPANY HAVIN G BEEN EXCLUDED BY THE ITAT ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2009-10 AND HAVING DUE REGARD TO THE PRINCIPLE OF C ONSISTENCY WE DIRECT EXCLUSION OF THIS COMPANY IN THE YEAR UNDER CONSIDERATION ALSO. (IX) COSMIC GLOBAL LTD: IT IS SEEN THAT THIS COMPARABLE HAS BEEN EXCLUDED B Y THE ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2009-10 27 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) IN ITA NO. 481/DEL/2014 ON THE GROUND OF BEING FUNC TIONING DIFFERENT. IT IS UNDISPUTED THAT THE FUNCTIONAL PRO FILE OF THE ASSESSEE AS WELL AS COSMIC GLOBAL LTD. HAS REMAINED UNCHANGED. THEREFORE, IN VIEW OF THIS COMPANY HAVING BEEN EXCL UDED BY THE ITAT ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-1 0, HAVING DUE REGARD TO THE PRINCIPLE OF CONSISTENCY WE DIREC T EXCLUSION OF THIS COMPANY IN THE YEAR UNDER CONSIDERATION ALSO. (X) INFOSYS BPO LIMITED: IT IS SEEN THAT THIS COMPARABLE HAS BEEN EXCLUDED B Y THE ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2009-10 IN ITA NO. 481/DEL/2014 ON THE GROUND OF BEING FUNC TIONING DIFFERENT. IT IS UNDISPUTED THAT THE FUNCTIONAL PRO FILE OF THE ASSESSEE AS WELL AS INFOSYS BPO LTD. HAS REMAINED U NCHANGED. THEREFORE, IN VIEW OF THIS COMPANY HAVING BEEN EXCL UDED BY THE ITAT ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-1 0, HAVING DUE REGARD TO THE PRINCIPLE OF CONSISTENCY WE DIREC T EXCLUSION OF THIS COMPANY IN THE YEAR UNDER CONSIDERATION ALSO. 5.2 NOW, WE TAKE UP THE COMPANIES WHICH THE ASSESS EE IS PRAYING FOR BEING INCLUDED IN THE LIST OF COMPARABL ES 28 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) (I) MICROGENETIC SYSTEMS LIMITED: THE LD. AUTHORISED REPRESENTATIVE HAS ARGUED AT LEN GTH THAT THIS COMPANY SHOULD BE INCLUDED IN THE LIST OF COMPARABL ES AS IT WAS REJECTED ONLY ON THE GROUND OF APPLICATION OF TURN OVER FILTER OF BELOW RS. 5 CRORES. WE FIND THAT THIS COMPARABLE WA S NOT INCLUDED AS A COMPARABLE IN ASSESSMENT YEAR 2009-10 ALSO AND THE ITAT DELHI BENCH HAD REJECTED THE ASSESSEES PL EA FOR INCLUDING THIS COMPANY AS A COMPARABLE VIDE ORDER D ATED 9 TH JUNE, 2016 IN ITA NO. 481/DEL./2014 AND REPORTED IN (2016) 6 TMI 1253 ITAT DELHI BY HOLDING THAT AS THIS COMPANY WAS INTO ACTIVITY OF MEDICAL PRESCRIPTION, THE SAME CANNOT B E CONSIDERED TO BE A LOW END BPO AS THE ACTIVITY INVOLVED A PROCESS OF KNOWLEDGE. THE ITAT DELHI BENCH OBSERVED IN ITS ORDER FOR ASSE SSMENT YEAR 2009-10 AS AFORESAID THAT APPLYING THE FUNCTIONAL T EST IS A PRIMARY REQUIREMENT FOR CONSIDERATION OF A COMPANY AS A COMPARABLE. IT WAS OBSERVED THAT SINCE THE ASSESSEE COMPANY WAS CARRYING OUT THE WORK THROUGH LOW SKILLED OR UN DER GRADUATES, IT CANNOT BE SET TO BE FUNCTIONALLY COMP ARABLE TO MICROGENETIC SYSTEMS LIMITED. RESPECTFULLY FOLLOWIN G THE ORDER OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE AND IN VIEW OF THE PRINCIPLE OF CONSISTENCY, WE REJECT THE ASSESSEE CO NTENTION FOR 29 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) INCLUDING THIS COMPANY IN THE FINAL SET OF COMPARAB LES. (II) SUNTECH WEB SERVICES P. LTD: IT IS SEEN THAT THE TPO HAS REJECTED THE ASSESSEES CONTENTION FOR INCLUDING THIS COMPANY AS A COMPARABLE ON THE GROUN D THAT THIS COMPANY WAS NOT FUNCTIONALLY SIMILAR TO THE ASSESSE E COMPANY. WE HAVE GONE THROUGH THE ANNUAL REPORT OF THIS COMP ANY AND WE FIND THAT THE SERVICES FROM WHICH INCOME IS GENERAT ED IN THE CASE OF THIS COMPANY HAS NOT BEEN SPECIFIED AND THE PROF IT & LOSS ACCOUNT ONLY MENTIONS INCOME FROM SERVICES. THEREFO RE, IT IS OUR CONSIDERED OPINION THAT THE OBSERVATIONS OF THE TPO REGARDING FUNCTIONAL SIMILARITY NOT HAVING BEEN ESTABLISHED A RE CORRECT. WE ALSO NOTE THAT THIS COMPANY WAS SOUGHT TO BE INCLUD ED BY THE ASSESSEE BEFORE THE ITAT IN ASSESSMENT YEAR 2009-10 ALSO AND THE ITAT VIDE ORDER DATED 9 TH JUNE, 2016 IN ITA NO. 481/DEL./2014 HAD RESTORED THE ISSUE TO THE FILE OF THE TPO FOR DUE VERIFICATION AND TO CONSIDER THE SAME AFRESH FO R INCLUSION OR EXCLUSION IN THE FINAL LIST OF COMPARABLES BASED ON THE DETERMINATION OF FUNCTIONAL SIMILARITY. RESPECTFUL LY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2009-10, WE RESTORE THIS COMPARABLE TO THE FILE 30 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) OF THE TPO FOR DUE VERIFICATION RECONSIDERATION FOR INCLUSION OR EXCLUSION IN THE FINAL LIST OF COMPARABLES SUBJECT TO THE ASSESSEE ESTABLISHING FUNCTIONAL SIMILARITY WITH THIS COMPAN Y. (III) BSI FINANCIAL SERVICES : THIS COMPARABLE HAS BEEN REJECTED BY THE TPO ON THE GROUND THAT IT IS AN INTERNAL COMPARABLE OF THE ASSESSEE. IT HAS BEEN SUBMITTED BY THE LD. AUTHORISED REPRESENTATIVE THAT INTERNAL COMPARABLES ARE TO BE PREFERRED OVER EXTERNAL COMPA RABLES FOR UNDERTAKING THE BENCHMARKING ANALYSIS FOR DETERMINI NG THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S. A PERUSAL OF THE ORDER OF THE TPO SHOWS THAT THE TPO HAS NOT ASS IGNED ANY REASON FOR REJECTING THIS COMPANY AS A COMPARABLE. IN VIEW OF THE FACT THAT THIS COMPARABLE HAS BEEN REJECTED WITHOUT ASSIGNING ANY REASON, WE DEEM IT FIT TO RESTORE THIS COMPARAB LE TO THE FILE OF THE TPO TO EXAMINE IT AFRESH AND DECIDE ON THE INCL UDIBILITY OR EXCLUDABILITY OF THIS COMPANY AS A COMPARABLE AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND , THEREAFTER, ADJUDICATE THE ISSUE BY RECORDING A SPECIFIC FINDIN G. 5.3 COMING TO THE ISSUE OF DISALLOWANCE U/S 14A AMO UNTING TO RS. 3,68,759/-, IT HAS BEEN SUBMITTED BY THE LD. AU THORISED 31 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.) REPRESENTATIVE THAT THIS ISSUE IS NOT BEING PRESSED IN VIEW OF THE SMALLNESS OF AMOUNT. ACCORDINGLY, WE DISMISS THIS G ROUND AS NOT PRESSED WITH LIBERTY TO THE ASSESSEE TO RAISE A SIM ILAR GROUND IN OTHER ASSESSMENT YEARS IF THE NEED SO ARISES. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSE E STANDS PARTLY ALLOWED IN TERMS OF OUR OBSERVATIONS AND FINDINGS I N THE PRECEDING PARAGRAPHS. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2018 SD/- SD/- (PRAMOD KUMAR) (SUDHANSHU SRIVASTAV A) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23.08.2018 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 32 ITA NO. 1551/DEL/2015 (OKS SPAN TECH. PVT. LTD.)