EGain Communications P.Ltd, Pune V. ITO, Pune

ITA 1579/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7166 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 13-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PN; SUHAS S KULKARNI ITA NO S
• Assessee Lawyers: JITENDRA GUPTA; VIJAY MEHTA SHARAD JAIN
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction
• Section: 92C; 143(3); 115JB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 1 579 /P U N/20 1 3 / ASSESSMENT YEAR: 20 08 - 09 EGAIN COMMUNICATIONS PVT. LTD., OFFICE NO.702, 7 TH FLOOR, B - 1, THE CEREBRUM IT PARK, VADGAON SHERI, KALYANI NAGAR, PUNE 411014 . / APPELLANT PAN: AAAC N9946R VS. THE INCOME TAX OFFICER , WARD 1(4), PUNE . / RESPONDENT . / ITA NO. 16 7 4 /P U N/201 3 / ASSESSMENT YEAR: 20 08 - 09 THE INCOME TAX OFFICER, WARD 1(4), PUNE . / APPELLANT VS. EGAIN COMMUNICATIONS PVT. L TD., OFFICE NO.702, 7 TH FLOOR, B - 1, THE CEREBRUM IT PARK, VADGAON SHERI, KALYANI NAGAR, PUNE 411014 . / RESPONDENT PAN: AAACN9946R ASSESSEE BY : S /S HRI VIJAY MEHTA, SHARAD JAIN AND JITENDRA GUPTA REVENUE BY : SHRI SUHAS S. KULKARNI ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 2 / DATE OF HEARING : 18 . 0 1 .201 7 / DATE OF PRONOUNCEMENT: 31 . 01 .201 7 / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE ARE AGAINST ORDER OF CIT(A) - IT/TP, PUNE , DATED 28 . 0 6 .201 3 RELATING TO ASSESSMENT YEAR 20 08 - 09 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 1 44C OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. THE CROSS APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 3 . THE ASSESSEE IN ITA NO. 1 579 /PN/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING THE ACTION OF LEARNED TRANSFER PRICING OFFICER (TPO') / ASSESSING OFFIC ER ('AO') AS THE SAME IS IN BREACH OF PRINCIPLE OF NATURAL JUSTICE AND IS WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS OF SECTION 92CA(3) R.W.S. 92C(3) OF THE ACT 2 THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING THE TRANSFER PRICI NG ADJUSTMENT MADE BY THE TPO/AO IN THE APPELLANT'S CASE. 3 THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING TPO/AO'S ACTION OF REJECTING COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT AND ALSO IN UPHOLDING TPO/AO'S ACTION OF SELECT ING VARIOUS COMPARABLE COMPANIES WHICH ARE FUNCTIONALLY OR OTHERWISE NOT COMPARABLE TO THE APPELLANT. 4. THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING THE APPLICATION OF FOLLOWING FILTERS BY THE TPO/AO IN SELECTION OF COMPARABLE COMP ANIES: A) TURNOVER FILTER RANGING FROM RS 1 CRORE TO RS 200 CRORES B) EXPORT TURNOVER GREATER THAN 75% OF TOTAL TURNOVER B) EXPORT TURNOVER GREATER THAN 75% OF TOTAL TURNOVER ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 3 5 THE LEARNED CIT (A) GROSSLY ERRED, IN FACTS AND IN LAW, IN HOLDING THAT APPELLANT IS NOT LEGALLY ENTITLED TO CARRY OUT FRESH SE ARCH AND CONSEQUENTLY THE ADDITIONAL 18 COMPANIES IDENTIFIED BY THE APPELLANT IN THE COURSE OF ASSESSMENT PROCEEDINGS APPLYING THE TPO'S SEARCH CRITERIA CANNOT BE CONSIDERED FOR SELECTION OF COMPARABLE COMPANIES SET, THOUGH THEY ARE FUNCTIONALLY COMPARABLE TO APPELLANT. 6 THE LEARNED CIT (A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING THE ACTION OF TPO/AO OF NOT GRANTING APPELLANT'S CLAIM FOR ADJUSTMENT FOR MATERIAL DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIA - A - VIS COMPANIES SELECTED AS COM PARABLE COMPANIES, THOUGH THE ACT READ WITH RULE 10B(1)(E)(III) AND 10B(3) PROVIDE FOR CARRYING OUT SUCH COMPARABILITY ADJUSTMENTS. 7. THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, IN UPHOLDING TPO/AO'S ACTION OF NOT ALLOWING STANDARD DEDUCTION OF + - 5% AS PER PROVISO TO SECTION 92C(2) OF THE INCOME - TAX ACT . 8. THE LEARNED CIT(A) GROSSLY ERRED, IN FACTS AND IN LAW, BY HOLDING THAT THE APPELLANT HAD NOT POINTED OUT ANY SPECIFIC ERROR IN COMPUTATION OF INTEREST U/S. 234C BY THE A.O. WHEREAS THE CH ARGING OF INTEREST U/S. 234C OF THE ACT BY A.O. IS A LEGAL ERROR IN ITSELF. 4. THE REVENUE IN ITA NO. 167 4 /PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IS CONTRARY TO LAW AND TO TH E FACTS AND CIRCUMSTANCES OF THE CASE. TO LAW AND TO TH E FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO INCLUDE THE CASE OF AKSHAY SOFTWARE TECHNOLOGIES PRIVATE LIMITED INTO THE LIST OF THE COMPARABLE COMPANIES IN STEAD OF CONFIRMING THE ACTION OF THE TRANSFER PRICING OFFICER / ASSESSING OFFICER WHO HAD EXCLUDED THE AFORESAID COMPANY FROM THE LIST OF COMPARABLES ON VALID GROUNDS. 3. THE LEARNED COMMISSIONER OF INCOME - TAX{APPEALS) GROSSLY ERRED IN FAILING TO APPRE CIATE THAT THERE ARE REMARKABLE DIFFERENCES BETWEEN THE BUSINESS MODELS OF ONSITE AND OFFSHORE SERVICE PROVIDERS LEADING TO DIFFERENCES IN THEIR MARGINS; AND, THEREFORE, THE TRANSFER PRICING OFFICER HAD CORRECTLY EXCLUDED THE CASE OF AKSHAY SOFTWARE TECHNO LOGIES PRIVATE LIMITED AFTER FINDING OUT THAT IT IS PREDOMINANTLY AN ON - SITE SERVICE PROVIDER. 4. THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO INCLUDE THE CASE OF M/S. AKSHAY SOFTWARE TECHNOLOGIES PRIVATE LIMITED INTO THE LIST OF THE COMPARABLES MERELY ON THE GROUND THAT ITS TURNOVER TURNED OUT TO BE DIFFERENT FROM WHAT HAD BEEN POINTED OUT BY THE TRANSFER PRICING OFFICER AND WITHOUT IN ANY MANNER TAKING ANY COGNIZANCE OF THE DETAILED REASONS STATED BY THE TRANSFER PRICING OFFICER FOR EXCLUDING THE ABOVE CASE FROM THE LIST OF COMPARABLES, AND, FURTHER, WITHOUT APPRECIATING THAT MERE CHANGE IN THE FIGURE OF TURNOVER DOES NOT DETRACT FROM THE PATENTLY COGNIZABLE DIFFERENCES BETWEEN THE ASSESSEE ON THE ONE HAND AND THE IMPUGNED COMPANY ON THE OTHER. 5. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 4 5. FIRST, WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE. THE GROUNDS OF APPEAL NO.1, 4 AND 7 ARE NOT PRESSED AND HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 6. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS GENERAL IN NATURE, WHICH IS ALSO DI SMISSED. 7. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS AGAINST CHARGING OF INTEREST UNDER SECTION 234C OF THE ACT, WHICH IS CONSEQUENTIAL AND HENCE, THE SAME IS ALSO DISMISSED. 8. THE GROUNDS OF APPEAL NO.3 AND 5 RAISED BY THE ASSESSEE ARE AGAIN ST TRANSFER PRICING ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER (IN SHORT THE TPO) . THE ASSESSEE IS AGGRIEVED BY THE ORDER OF TPO IN SELECTING CERTAIN COMPARABLE COMPANIES AND ALSO AGAINST REJECTION OF COMPARABLE COMPANIES IDENTIFIED BY THE ASSESSEE TO BE FUNCTIONALLY COMPARABLE. THE ASSESSEE IS ALSO AGGRIEVED BY THE OBSERVATIONS OF CIT(A) THAT THE ASSESSEE IS NOT ENTITLED TO CARRY OUT FRESH SEARCH AND CONSEQUENTLY IDENTIFIED 18 ADDITIONAL COMPANIES IN THE COURSE OF ASSESSMENT PROCEEDINGS. 9. THE NEXT ISSUE RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.6 IS IN NOT GRANTING RISK ADJUSTMENT. 10. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL, UNDER WHICH IT HAS PROPOSED THAT M/S. BODHTREE CONSULTING LTD. IS NOT COMPARABLE WITH THE AS SESSEE COMPANY AND THEREFORE, THE SAME SHOULD NOT BE CONSIDERED IN THE FINAL LIST OF COMPARABLES. ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 5 11. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO INCLUDE M/S. AKSHAY SOFTWARE TECHNOLOGIES PVT. LTD. IN THE FINA L LIST OF COMPARABLES, WHERE THE BUSINESS MODEL OF ONSITE AND OFFSHORE SERVICE PROVIDER WERE DIFFERENT. 12. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.40,140/ - AND BOOK PROFIT S UNDER SEC TION 115JB OF THE ACT AT RS. 11,53,630/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOFTWARE PRODUCT DEVELOPMENT AND WAS 100% EXPORT ORIENTED UNIT (EOU) APPROVED BY THE SOFTWARE TECHNOLOGIES PARKS OF INDIA UNDER THE STP SCHEME VIDE LETTER DATED 22.03.200 5 . THE ASSESSEE WAS LEADING PROVIDER OF CUSTOMER SERVICE AND CONTACT CENTRE SOFTWARE BASED ON INTEGRATED COMMUNICATION PLATFORM. THE ASSESSEE HAD CLAIM ED DEDUCTION UNDER SECTION 10A OF THE ACT. THE TOTAL TURNOVER OF THE ASSESSEE FOR THE YEAR UNDER CONSI DERATION WAS RS.16.52 CRORES AND THE PROFIT DERIVED THEREFROM WAS RS. 1,18,31,644 / - WHICH WAS CLAIMED AS DEDUCTIBLE UNDER SECTION 10A OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE E NTERPRISES AND CONSEQUENTLY, REFERENCE WAS MADE TO THE TPO FOR COMPUTATION OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS UNDER SECTION 92C OF THE ACT. THE TPO NOTED THAT THE ASSESSEE PERFORMED LOW END SOFTWARE DEVELOPMENT SERVICES FOR ITS PARENT COM PANY. THE ULTIMATE SOFTWARE PRODUCTS WHICH WERE DEVELOPED BELONGS TO THE PARENT COMPANY, THUS, THE PARENT COMPANY WAS THE SOFTWARE PRODUCT COMPANY AND THE ASSESSEE WAS CAPTIVE SOFTWARE DEVELOP MENT SERVICE PROVIDER TO ITS PARENT COMPANY. ALL THE RISK ASSO CIATED WITH SOFTWARE PRODUCT DEVELOPMENT WAS WITH THE PARENT COMPANY AND THE ASSESSEE BEING CAPTIVE SOFTWARE PROVIDER WAS RISK INSULATED ENTITY AS IT WAS COMPENSATED BY THE PARENT COMPANY ON TOTAL COST PLUS 10% MARK - UP BASIS. THE ASSESSEE HAD ONLY ONE TYP E OF INCOME I.E. INCOME FROM PROVISION OF SOFTWARE DEVELOPMENT SERVICES TO ITS PARENT COMPANY. THE ASSESSEE ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 6 HAD REPORTED INTERNATIONAL TRANSACTIONS OF SOFTWARE DEVELOPMENT SERVICES AT RS.16,52,82,168/ - . THE ASSESSEE IN THE TP STUDY REPORT HAD DETERMINED ARM'S LENGTH PRICE BY APPLYING TNMM METHOD AND HAD OBSERVED THAT THE TRANSACTIONS WITH ASSOCIATE ENTERPRISES WERE AT ARM'S LENGTH PRICE. THE TPO ADOPTED DIFFERENT SETS OF FILTERS AND SELECTED FRESH COMPARABLE COMPANIES. THE ASSESSEE HAD INITIALLY SELECTE D 11 COMPANIES AS COMPARABLES ENLISTED UNDER PARA 12 AT PAGE 6 OF THE ORDER OF TPO. HOWEVER, THE TPO DID NOT FIND FAVOUR WITH THE RESULTS SHOWN BY THE ASSESSEE IN THE TP STUDY REPORT AND HE PROPOSED TO EXCLUDE SOME OF COMPANIES SELECTED BY THE ASSESSEE. THE TPO SELECTED ADDITIONAL COMPANIES AS COMPARABLE WHICH WERE OBJECTED TO BY THE ASSESSEE. HOWEVER, THE TPO FOUND SOME OF THE COMPANIES TO BE SUIT ABLE AND PROPOSED AS COMPARABLE. THE ASSESSEE ALSO GAVE SET OF 18 FRESH COMPARABLE COMPANIES CLAIMED TO BE SELECTED BY APPLYING THE FILTERS OF THE TPO , WHICH WERE COMMENTED UPON BY THE TPO AT PAGES 32 AND 34 OF THE ORDER OF TPO. ACCORDINGLY, FRESH SET OF COMPARABLES WERE SELECTED WHICH ARE AS UNDER: - 1 BODHTREE CONSULTING LTD : ASSESSEE / TPO O+F 2 E INFO CHIPS LTD. 3 EZEST SOLUTIONS LTD. 4 FCS SOFTWARE SOLUTIONS LTD. 5 GOLDSTONE TECHNOLOGIES 6 HELIOS AND MATHESON INFORMATION TECHNOLOGY LTD. 7 KALS INFORMATION SYSTEM 8 LGS GLOBAL LTD. ARITHMETIC MEAN (301.43/8) 13. THE TPO THEN CONSIDERED THE PLI SHOWN BY THE ASSESSEE AT 14.67% AFTER ADJUSTMENT ON ACCOUNT OF ACCELERATED DEPRECIATION AND EXCLUSION OF FOREIGN EXCHANGE LOSS. THE SAME WAS ACCEPTED AS SIMILAR PLEA OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 . THE PLI OF ASSESSEE BEING OP /OC IS COMPUTED AT PAGE 39 OF TPOS ORDER AT 14.67% . THE ARM'S LENGTH PRICE OF SOFTWARE SERVICES RENDERED BY THE ASSESSEE WAS WORKED OUT AS UNDER: - ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 7 DESCRIPTION RS. PRICE CHARGED (OPERATING REVENUE OF THE ASSESSEE) [B] 16,52,82,168 OPERATING COST (OC) 14,41,43,465 ARMS LENGTH MEAN MARGIN (OP/OC) [D] 33.49 ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION [A] (ALP=OC*(1+D)] 19,24,17,111 5% RANGE ON LOWER SIDE (THE ASSESSEES TRANSACTION FALLS OUTSIDE THE RANGE 18,28,96,255 ADJUSTMENT OVER OPER ATING INCOME [A - B] (SHORTFALL BEING ADJUSTMENT U/S 92CA) 2,71,34,943 14. THE ASSESSEE HAD ALSO SOUGHT RISK ADJUSTMENT AND THE DELIBERATING UPON THE ISSUE, THE TPO HELD THAT THE ASSESSEE WAS RISK BEARING ENTITY, WHICH HAD BORNE MOST OF THE RISK RELEVANT O F ITS BUSINESS AND HENCE, THE CLAIM OF RISK ADJUSTMENT WAS REJECTED. AGAINST THE PROPOSAL MADE BY THE TPO, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER MAKING ADDITION OF RS.2.71 CRORES. 15. BEFORE THE CIT(A), THE ASSESSEE HAD RAISED SEVERAL OBJEC TIONS TO THE DIFFERENT FILTERS APPLIED BY THE TPO AND ALSO AGAINST THE REJECTION OF COMPARABLES DIFFERENT FILTERS APPLIED BY THE TPO AND ALSO AGAINST THE REJECTION OF COMPARABLES SELECTED BY THE ASSESSEE DURING THE COURSE OF TP PROCEEDINGS. THE OBJECTIONS WERE RAISED BY THE ASSESSEE AGAINST THE REJECTION OF M/S. AKSHAY SOFTWARE TECHNOLO GIES PVT. LTD. , ON THE GROUND THAT ITS ONSITE REVENUE WAS RS.31.50 CRORES OUT OF TOTAL REVENUE OF RS.32.06 CRORES. THE TPO HAD OBSERVED THAT THE BUSINESS MODEL OF THE SAID CONCERN WAS DIFFERENT WHERE IT WAS AN ONSITE SOFTWARE DEVELOPER. THE CIT(A) ON THE OTHER HAND, OBSERVED THAT THE TOTAL TURNOVER OF THE COMPANY AS PER ANNUAL REPORT OF THE COMPANY HAS ONLY RS.8.89 CRORES AND NOT RS.32.06 CRORES. IT WAS ALSO OBSERVED THAT THE TPOS CONCLUSION THAT THE SAID CONCERN WAS PREDOMINANTLY ONSITE SOFTWARE DEVELO PMENT BUSINESS WAS ALSO NOT CLEAR FROM THE FACTUAL DATA AND HENCE, THE TPOS REJECTION OF THE SAID COMPANY WAS HELD TO BE NOT PROPER. FURTHER, EXTENSIVE SUBMISSIONS WERE MADE BY THE ASSESSEE AGAINST INCLUSION OF CERTAIN COMPANIES BY THE TPO AND EXCLUSION OF CERTAIN COMPANIES SELECTED BY THE TPO. THE CIT(A) HOWEVER, DID NOT FIND FAVOUR WITH THE ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 8 SUBMISSIONS OF ASSESSEE AND THE SAME WERE REJECTED AND THE ASSESSEE IS IN APPEAL BEFORE US. 16. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD IN THE F IRST INSTANCE POINTED OUT THAT BODHTREE CONSULTING LTD. WAS ACCEPTED TO BE COMPARABLE BY THE ASSESSEE AND THE TPO. FURTHER, FOLLOWING CONCERNS WHICH WERE PROPOSED BY THE TPO WERE BEING OBJECTED BY THE ASSESSEE: - 1. KALS INFORMATION SYSTEMS LIMITED - 41. 94 2. HELIO AND MATHERSON INFO TECH. - 36.3 3. E - ZEST SOLUTIONS LTD. - 28.95 4. E - INFOCHIP LTD. - 30.69 5. GOLDSTONE TECHNOLOGIES - 27.21 6. LGS GLOBAL LTD. - 26.66 17. IN RESPECT OF M/S. AKSHAY SOFTWARE TECHNOLOGIES P. LTD., IT WAS POIN TED OUT THAT THE SAID CONCERN PROPOSED BY THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER, ACCEPTED BY THE CIT(A) . ANOTHER SET OF COMPARABLES WHICH WERE PROPOSED BY THE ASSESSEE, BUT WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND CIT(A) ARE BY THE ASSESSEE, BUT WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND CIT(A) ARE AS UNDER: - 1. CAT TECHNOLOGIES LTD. - 14.02 2. SAGARSOFT - 6.44 3. CRESSENDA SOLUTIONS - 5.25 4. R.S. SOFTWARE LTD. - 6.68 5. SEVEN HILLS BUSINESS - 7.87 18. IN ADDITION TO ALL THIS, THE ASSESSEE HAS ALSO ASKED FOR RISK ADJUSTMENT. 19. THE LEAR NED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT IN CASE THE FINANCIAL DATA OF THE COMPANIES ARE VERIFIED, THEN THE ASSESSEE HAS PROPOSED TO INCLUDE CERTAIN PRODUCT COMPANIES AS BEING COMPARABLE AND EVEN M/S. AKSHAY SOFTWARE TECHNOLOGIES PV T. LTD. WAS ONSITE DEVELOPER AS AGAINST OFFSHORE DEVELOPER I.E. THE ASSESSEE. ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 9 20. EXTENSIVE ARGUMENTS WERE MADE BY BOTH THE LEARNED AUTHORIZED REPRESENTATIVES IN THIS REGARD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THEREAFTER, MADE AN AP PLICATION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL I.E. EXCLUSION OF BODHTREE CONSULTING LTD. BEING NOT COMPARABLE. THE SAID CONCERN WAS SELECTED BY THE ASSESSEE IN THE FIRST ROUND DURING TP STUDY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND TH E ASSESSEE WAS OF THE VIEW THAT THE SAID CONCERN IS COMPARABLE. HOWEVER, BEFORE US, AN ADDITIONAL GROUND OF APPEAL HAS BEEN FILED BY THE ASSESSEE REQUESTING FOR WITHDRAWAL OF THE SAID CONCERN FROM FINAL SET OF COMPARABLES. THE ASSESSEE IS ALSO AGGRIEVED BY SELECTION OF OTHER CONCERNS AND N ON CONSIDERATION OF NEW CONCERNS SELECTED BY IT. IN RESPECT OF AKSHAY SOFTWARE TECHNOLOGIES PVT. LTD. ALSO I.E. THE CONCERN WHICH WAS DIRECTED BY THE CIT(A) TO BE INCLUDED IN THE FINAL LIST OF COMPARABLES, THE LEARNED D EPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRESSED THAT IT WAS ONSITE DEVELOPER AND THE SAME HAS BEEN SO HELD BY THE PUNE BENCH OF TRIBUNAL IN BMC SOFTWARE INDIA PVT. LTD. VS. DCIT IN ITA NO.1425/PN/2010, RELATING TO ASSESSMENT YEAR 2006 - 07, ORDER DATED 1 6.03.2016 AND OTHER DECISIONS. IN SUCH SCENARIO, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE RE - LOOKED INTO BY THE TPO . VARIOUS CONTRADICTORY SUBMISSIONS WERE MADE BY BOTH THE LEARNED AUTHORIZED REPRESENTATIVES. ACCORDINGLY, WE SET ASIDE THE MATTER B ACK TO THE FILE OF ASSESSING OFFICER / TPO TO RE - WORK THE ADJUSTMENT, IF ANY, ON ACCOUNT OF ARM'S LENGTH PRICE IN THE HANDS OF ASSESSEE AFTER CONDUCTING FRESH SEARCH OF THE COMPARABLES AFTER APPLYING THE REQUISITE FILTERS. THE ASSESSEE IS ALSO AT LIBERTY TO SUBMIT FRESH LIST OF COMPARABLES WHICH SHALL BE CONSIDERED BY THE TPO, WHO IN TURN CAN ALSO SELECT THE COMPARABLES WHICH ARE FUNCTIONALLY COMPARABLE AND AFTER CONSIDERATION, THE ISSUE SHALL BE DECIDED IN ACCORDANCE WITH THE FACTUAL ASPECTS AND IN ACCORD ANCE WITH LAW. ITA NO S. 1 579 & 1 6 7 4 /PN/201 3 EGAIN COMMUNICATIONS P VT. LTD. 10 2 1 . THE ASSESSEE HAS ASKED FOR RISK ADJUSTMENT WHICH SHALL ALSO BE CONSIDERED BY THE TPO WHILE DECIDING TP ADJUSTMENT IN THE CASE OF ASSESSEE AS PER SETTLED PRINCIPLES IN THIS REGARD. BOTH THE LEARNED AUTHORIZED REPRESENTATIVES HAVE RELI ED UPON VARIOUS DECISIONS, WHICH WE ARE NOT BEING REFER RED AS THE ISSUE IS BEING SET ASIDE FOR RE - ADJUDICATION. CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 2 2 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THIS 31 ST DAY OF JANUARY , 201 6 . SD/ - SD/ - SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 31 ST JANUARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE CIT(A) - IT/TP, PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // ASSISTANT REGISTRAR