Intelligroup Asia Pvt. Limited, Hyderabad V. ACIT, Hyderabad

ITA 1613/HYD/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9035 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: NIDA ZIA; SUVIBHA
• Keywords: Related party transaction; Transfer pricing; International transaction
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1613/HYD/2010 ASSESSMENT YEAR 2006-2007 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., (FORMERLY KNOWN AS INTELLIGROUP ASIA P. LTD., NOW MERGED WITH NTT DATA GLOBAL DELIVERY SERVICES LTD ) HYDERABAD 560 061. PAN AAACI7064D VS. ACIT, CIRCLE 2(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SMT. NIDA ZIA & SUVIBHA FOR REVENUE : MR. RAJEEV BENJWAL DATE OF HEARING : 20.11.2014 DATE OF PRONOUNCEMENT : 02.01.2015 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE A.O. PASSED UNDER SECTION 143(3) READ WITH SECTION 144C CONSEQUENT TO THE DIRECTIONS OF THE DI SPUTES RESOLUTION PANEL UNDER SECTION 144C(5) OF THE INCOM E TAX ACT, 1961 DT. 30.09.2010. 1.1. ASSESSEE RAISED AS MANY AS 8 GROUNDS HAVING S UB- GROUNDS IN THE APPEAL. 2. BRIEFLY STATED, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND RELATED SOFTWA RE SERVICES 2 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. AND IS REGISTERED WITH THE SOFTWARE PARK OF INDIA ( STPI). THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME DECLARI NG TOTAL INCOME OF RS.1,02,00,647 AFTER CLAIMING A DEDUCTION OF RS.21,48,92,417 U/S.10A OF THE ACT. A.O. EXAMINED T HE RETURN OF INCOME AND FOUND THAT IT IS NECESSARY TO INVOKE T.P. PROCEEDINGS UNDER SECTION 92CA. PROCEEDINGS, UNDER SECTION 92CA(3) OF THE ACT HAVE BEEN INVOKED AND THE ORDER WAS PREPARED AND SENT TO THE A.O. BASED ON THE ABOVE OR DER, A.O. PREPARED A DRAFT ASSESSMENT ORDER AND SERVED ON THE ASSESSEE ON 24.12.2009. ASSESSEE FILED ITS OBJECTIONS BEFORE DRP ON 2.2.2010 IN FORM NO.35A. ASSESSEES OBJECTIONS WERE CLASSIFIED BY THE DRP INTO TWO CATEGORIES VIZ., (I) TRANSFER P RICING ISSUES AND (II) OTHER THAN T.P. ISSUES. SINCE, ASSESSEE CO ULD NOT SUCCEED BEFORE THE DRP, IT FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL RAISING GROUNDS. 3. GROUND NO.2 IS NOT PRESSED. CORPORATE TAX ISSUES. 4. GROUND NOS. 3 TO 5.2 IS ON THE ISSUE OF DEFINIT ION OF EXPORT TURNOVER AND TOTAL TURNOVER. IT WAS THE CONTENTION THAT A.O. ERRED IN EXCLUDING THE FOREIGN EXCHANGE G AIN OF RS.10,36,754 FROM THE EXPORT TURNOVER FOR THE PUR POSE OF COMPUTING THE DEDUCTION U/S.10A OF THE ACT OR ALTER NATIVELY A.O. ERRED IN NOT EXCLUDING THE FOREIGN EXCHANGE GA IN OF RS.10,36,754 FROM THE TOTAL TURNOVER FOR THE PURP OSE OF COMPUTING THE DEDUCTION U/S.10A OF THE ACT. SIMILAR LY, COMMUNICATION EXPENSES OF RS.1,70,07,809 ALSO, BE D EDUCTED BOTH TOTAL TURNOVER AND EXPORT TURNOVER. 4.1. ASSESSEE RELIED ON THE DECISION OF ITO VS. SA K SOFT LTD., 313 ITR 353 OF THE HONBLE SPECIAL BENCH OF T HE CHENNAI 3 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. TRIBUNAL, WHEREIN, THE TRIBUNAL DISCUSSED THE ABOVE ARITHMETICAL CALCULATION IN DETAIL AND UPHELD THE P ARITY CONCEPT I.E., IF ANYTHING IS REDUCED FROM EXPORT TURNOVER , THE SAME ALSO NEEDS TO BE REDUCED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.10A OF THE A CT. THE ITAT, HYDERABAD FOLLOWING THE DECISION OF SAK SOFT LTD., (SUPRA), IN THE CASE OF ITO VS. DE BLOCK INDIA SOFT WARE (P) LTD., IN ITA.NOS. 983 & 984/H/2006 DT. 31.01.2007, ITO VS . VIRTUSA (INDIA) LTD., IN ITA.NO.757/HYD/2006 DT.29.02.2008 AND DCIT VS. MENTOR GRAPHICS (I) P. LTD., IN ITA.NO.696/H/20 09 DATED 18 TH AUGUST, 2009 ALSO UPHELD THE SAID PARITY CONCEPT F OR COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. THE AS SESSEE ALSO RELIED ON THE FOLLOWING CASE LAWS BEFORE DRP : (I) HONBLE GUJARAT HIGH COURT IN THE CASE OF AMBA IMPEX (2006) 282 ITR 144. (II) SMT. SUJATA GROVER (2002) 74 TTJ (DEL.) 347 (III) RENAISSANCE JEWELLERY P. LTD., (2007) 289 ITR (AT) 65 (MUM.) (IV) PRIYANKA GEMS VS. ACIT (2005) 94 TTJ (AHD.) 557 (V) SHAH ORIGINALS VS. ACIT (2007) 112 TTJ (MUM.) 754 (VI) ITO VS. BANYAN CHEMICALS P. LTD., (2009) 310 ITR 384. 4.2. AFTER HEARING, THE DRP PASSED THE FOLLOWING O RDER : 15.2. EVEN THOUGH WE WOULD TEND TO AGREE WITH THE ABOVE DECISIONS, WE ARE CONSTRAINED BY THE FACT THAT THE DRP ORDER IS FINAL AS FAR AS THE DEPARTMENT IS CONCERNE D AND THE DEPARTMENT HAS NOT ACCEPTED THE ABOVE DECISIONS . WE WOULD LIKE TO GIVE AN OPPORTUNITY TO THE DEPARTMENT TO PURSUE THE SAME. HENCE, ON THE ABOVE POINTS I.E., F OREX GAIN AND COMMUNICATION EXPENSES, WE UPHOLD THE DECISION OF THE A.O. SO THAT THE ISSUE WILL BE KEPT ALIVE. 5. SINCE THE ISSUE IS COVERED BY VARIOUS DECISION S AS ACCEPTED BY DRP, RESPECTFULLY FOLLOWING THE DECISIO NS ON THE 4 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. ABOVE ISSUE, WE DIRECT THE A.O. TO EXCLUDE THE SAME AMOUNTS FROM TOTAL TURNOVER ALSO. GROUND NOS. 3 TO 5.2 ARE ACCORDINGLY ALLOWED. TRANSFER PRICING ISSUES. 6. ASSESSEE WAS STARTED AS OFF-SHORE DEVELOPMENT CENTRE WHOLLY UNDER THE INTELLI GROUP USA. SUBSEQUE NTLY, IT STARTED RENDERING SERVICES TO OTHER GROUP COMPANIES AND THIRD PARTY CUSTOMERS. ASSESSEE HAS PROVIDED SERVICES TO A.E. WHICH ARE REPORTED BY ASSESSEE AT RS.102.74 CRORES OUT OF TOTAL REVENUE OF RS.132.17 CRORES. ITS OPERATING PROFIT T O COST RATIO WAS REPORTED AT 14.21%. ASSESSEE HAS FILED ITS OWN T.P. REPORT PREPARED BY DELLOITTE, HASKINS & SELLS. HOWEVER, TP O REJECTED THE SAME ON THE REASON THAT ASSESSEE DID NOT USE RE LEVANT DATA FOR THE YEAR AND USED MULTIPLE YEAR DATA AND ALSO F OUND OUT CERTAIN DEFICIENCIES IN THE REPORT. WHILE ACCEPTING THE TNMM IS THE MOST APPROPRIATE METHOD, TPO USING CERTAIN FILT ERS MADE A FRESH SEARCH OF DATA AND SHORT LISTED ABOUT 20 COMP ANIES AS COMPARABLES WHICH ARE AS UNDER: SL. NO. COMPARABLES SELECTED BY TPO UNADJUSTED MARGINS DRP/TPO ORDER. TPO ORDER WC ADJUSTED ASSESSEES SUBMISSIONS 1. AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD., 18.09% 24.31% 18.09% 2. BODHTREE CONSULTING LTD., 15.99% 20.53% 15.99% 3. GEOMETRIC LTD., (SEG.) 6.70% 11.22% 6.70% 4. IGATE GLOBAL SOLUTIONS LTD., (SEG.) 15.61% 19.17% 15.61% 5. LANCO GLOBAL SYSTEMS LTD., 5.27% 10.40% 5.27% 6. LUCID SOFTWARE LTD., 8.92% 10.99% 8.92% 7. MEDIA SOFT SOILUTIONS P. LTD., 6.29% 9.68% 6.29% 8. MINDTREE LTD., (SEG.) 14.67% 18.94% 14.67% 9. PERSISTENT SYSTEMS P. LTD., 24.67% 29.41% 24.67% 10. R SYSTEMS INTERNATIONAL (SEG.) 22.20% 25.87% 22.20% 5 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 11. RS SOFTWARE (INDIA) LTD., 15.69% 19.07% 15.69% 12. SIP TECHNOLOGIES AND EXPORTS LTD., 3.06% 6.63% 3.06% 13. SASKEN COMMUNICATION TECHNOLOGIES LTD., (SEG.) 13.90% 18.77% 13.90% 14. SYNFOSYS BUSINESS SOLUTIONS LTD., 10.61% 12.88% 10.61% 15. ACCEL TRANSMATIC LTD., (SEG.) 44.07% 16. FLEXTRONICS SOFTWARE SYSTEMS LTD., (SEG.) 27.24% 17. INFOSYS TECHNOLOGIES LTD., 40.38% 18. KALS INFORMATION SYSTEMS LTD., (SEG.) 39.75% 19. TATA ELXSI LTD., (SEG.) 27.65% 20. MEGASOFT LTD., 52.74% ASSESSEE OBJECTED BEFORE DRP WITHOUT MUCH SUCCESS ON THE ISSUE OF COMPARABILITY. 7. ASSESSEE HAS FILED REVISED GROUNDS 6.4.5 AS UND ER AND SUBMITTED THAT IF THESE GROUNDS ARE CONSIDERED, ASSESSEE WOULD NOT PRESS FOR OTHER GROUNDS ON THE COMPARABIL ITY ISSUE. GROUNDS ARE AS UNDER : GROUND NO.6.4.5 : A. THE LD. TPO/DRP ERRED IN NOT UNDERTAKING AN OBJECTI VE COMPARATIVE ANALYSIS AND INTER ALIA SELECTING THE FOLLOWING COMPANIES AS COMPARABLE TO THE APPELLANT FOR DETERMINATION OF ALP UNDER TNMM : I. ACCEL TRANSMATIC LTD. (SEG.) II. FLEXTRONICS SOFTWARE SYSTEMS LTD., (SEG.) III. INFOSYS TECHNOLOGIES LTD., IV. KALS INFOSYSTEMS LTD., V. TATA ELXSI LTD., ; AND VI. MEGASOFT LTD., 6 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. B. FURTHER, THE LD. TPO/DRP ERRED IN NOT UNDERTAKING A N OBJECTIVE COMPARATIVE ANALYSIS AND INTER ALIA REJEC TING THE FOLLOWING COMPANIES AS COMPARABLE TO THE APPELLANT FOR DETERMINATION OF ALP UNDER TNMM : I. GOLDSTONE TECHNOLOGIES LTD., II. LARSEN & TOUBRO INFOTECH LTD., III. QUINTEGRA SOLUTIONS LTD., IV. PSI DATA SYSTEMS LTD., V. TVS INFOTECH LTD.,; AND VI. VMF SOFTECH LTD., 8. OUT OF THE COMPARABLES, ASSESSEE HAS OBJECTED T O SL. NO. 15 TO 20 COMPARABLES REFERRED ABOVE. AMONG THE SIX COMPANIES, FIVE COMPANIES ARE ALREADY CONSIDERED B Y COORDINATE BENCH DECISION OF THE HYDERABAD TRIBUNAL IN THE CASE OF UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) P. LTD., HYDERABAD VS. ITO, WARD 3 (2), HYDERABAD ITA.NO.150 0/ HYD/ 2010 DATED 20.06.2014 AND THE FINDINGS ARE AS UNDE R : I. ACCEL TRANSMATIC LTD. II . KALS INFO. SYSTEMS LTD I. OBJECTING TO SELECTION OF THIS COMPANY, THE LEARNED AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT. IT WAS SUBMITTED THAT DURING THE YEAR TH E COMPANY HAD SOLD IP RIGHTS IN THE SOFTWARE DEVELOPED BY IT, WHICH HAS IMPACTED ITS PROFITABILI TY OF THE YEAR. HENCE, THE COMPANY NOT ONLY DOES NOT SATISFY THE 75% SERVICE REVENUE FILTER APPLIED BY T HE TPO, BUT, HAS AN EXCEPTIONAL YEAR OF OPERATIONS. IT WAS SUBMITTED THAT THE PERFORMANCE OF THE SOFTWARE SEGMENTS CLEARLY INDICATE THAT THE COMPANY HAS INCOME FROM SALE OF PRODUCTS. THE LEARNED AR FURTHER SUBMITTED THAT THE COMPANY HAS A NEGATIVE OPERATING MARGIN OF 18.73% FOR FY 2004-05. FURTHER, THE LEARNED AR SUBMITTED THAT AS PER THE ANNUAL REPORT SUBMITTED BY THE COMPANY IN RESPONSE TO 133(6) RELATED PARTY TRANSACTION (RPT) ALSO FAILS THRESHOLD LIMIT APPLIED BY THE TPO HIMSELF. IN THIS REGARD, THE LEARNED AR SUBMITTED THE FOLLOWING COMPUTATION: 7 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. PARTICULARS AE RENDERING OF SERVICES 56,274,970 RECEIVING OF SERVICES 10,011,622 INTEREST PAID 1,513,025 LEASE PAYMENTS 1,830,084 TOTAL RPT 69,629,701 RPT/SALES 60.60% II. IT WAS THEREFORE SUBMITTED THAT THIS COMPANY UNDER NO CIRCUMSTANCES CAN BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE, WHICH IS A PURELY SOFTWARE DEVELOPMENT SERVICE PROVIDER. THE LEARNED AR SUBMITTED THAT ITAT, BANGALORE BENCH IN CASE OF HUAWEI TECHNOLOGIES INDIA PVT. LTD. VS. ITO (ITA NO. 1338/BANG/2010 DATED 30/04/2013 HAS HELD THE AFORESAID COMPANY NOT TO BE A COMPARABLE IN RESPECT OF A PURELY SOFTWARE DEVELOPMENT SERVICE PROVIDER. FOR THE SAME REASON LD. AR SOUGHT EXCLUSION OF KALS INFOSYSTEMS LTD. HE ALSO RELIED UPON THE FOLLOWING OTHER DECISIONS: 1. TRILOGY E BUSINESS SERVICES SOFTWARE LD. VS. DCIT ( ITA NO. 1054/BANG/2001. 2. CSR INDIA PVT. LTD. (TS-68-ITAT-2013(BANG.-TP) 3. INTOTO SOFTWARE INDIA PVT. LTD., (ITA NO. 1196/HYD/2010) 4. TRANSWHICH INDIA PVT. LTD. VS. DCIT (ITA NO. 948/BANG/2011) III. THE LEARNED DR, ON THE OTHER HAND, SUPPORTING REASONING OF THE TPO AND DRP SUBMITTED THAT THERE IS NO NEED TO EXCLUDE THE ABOVE SAID COMPANY. IV. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. AS CAN BE SEEN, THE TPO AT PAGE 53 OF HIS ORDER HAS CATEGORIZED THE ASSESSEE AS A PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER. THE COMMENTS OF THE TPO IN THIS REGARD ARE EXTRACTED HEREUNDER FOR THE SAKE OF CONVENIENCE: SOFTWARE PRODUCT COMPANY A COMPANY WHO DEVELOPS A SOFTWARE PRODUCT BY FOLLOW ING ALL THE STEPS INVOLVED IN CREATING SOFTWARE AS EXPL AINED ABOVE FROM DOMAIN ANALYSIS TO TESTING. IN THIS CASE , 8 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. INTELLECTUAL PROPERTY BELONGS TO THE COMPANY. THE P RODUCTS ARE SOLD GENERALLY ON LICENSE BASIS WHEREIN THE RIG HT TO USE THE SOFTWARE IS TRANSFERRED WITHOUT GIVING THE SOURCE CODE. THESE TYPES OF COMPANIES ARE NOT SIMILAR TO T HE TAXPAYER, WHO IS A PURE SERVICE PROVIDER. PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER A PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER DOES A PORTION OF THE DESCRIBED SOFTWARE DEVELOPMENT LIFE CYCLE. IT DOES NOT GENERATE ANY INTELLECTUAL PROPERTY FOR ITS OWN. THE INTELLECTUAL PROPERTY GENERATED BELONGS TO THE CUSTOMER AND NOT TO THE SERVICE PROVIDER. THE TAXPA YER FALLS IN THIS CATEGORY. THUS COMPARABLES ARE ALSO T O BE CHOSEN FROM COMPANIES WHOSE SIGNIFICANT ACTIVITIES (> 75% OF THE OPERATING REVENUES) ARE IN THE NATURE OF OR RELATE TO SOFTWARE DEVELOPMENT SERVICES. AS CAN BE SEEN FROM THE ABOVE EXTRACTED PORTION, TH E TPO HAS HIMSELF MENTIONED THAT A PURE SOFTWARE DEVELOP MENT SERVICE PROVIDER DOES NOT GENERATE ANY INTELLECTUAL PROPERTY FOR ITS OWN. HE HAS FURTHER STATED THAT, T HE COMPANIES WHICH SELL THEIR PRODUCTS GENERALLY ON LI CENSE BASIS WHEREIN THE RIGHT TO USE THE SOFTWARE IS TRAN SFERRED WITHOUT GIVING SOURCE CODE CANNOT BE COMPARABLE TO PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER LIKE ASSESSEE . IT IS THE SPECIFIC CONTENTION OF THE LEARNED AR THAT ACCE L TRANSMATIC LTD., HAS SOLD IP RIGHTS FOR THE SOFTWA RE DEVELOPED BY IT. FURTHER, IT IS ALSO THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY FAILS THE RPT FILTER OF MORE THAN 25% APPLIED BY THE TPO HIMSELF. IN CASE OF HUA WEI TECHNOLOGIES INDIA PVT. LTD. VS. ITO (SUPRA), THE I TAT BANGALORE BENCH WHILE EXAMINING THE ISSUE OF COMPARABILITY OF THE AFORESAID COMPANY TO A PURELY SOFTWARE DEVELOPMENT SERVICE PROVIDER HAS HELD AS U NDER: IN SO FAR KALS INFO SYSTEMS LTD., AND ACCEL TRANS MATICS LTD., CHOSEN BY THE TPO AS COMPARABLES, THIS TRIBUN AL IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) HAS TAKEN A VIEW THAT THESE COMPANIES ARE N OT COMPARABLE TO THE SOFTWARE SERVICE PROVIDER COMPANI ES AS THEY ARE FUNCTIONALLY DIFFERENT. THE FOLLOWING ARE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS REGAR D:- 46. AS FAR AS THIS COMPANY IS CONCERNED, THE CONTENTION OF THE ASSESSEE IS THAT THE AFORESAID COMPANY HAS REVENUES FROM BOTH SOFTWARE DEVELOPMENT AND SOFTWARE PRODUCTS. BESIDES THE 9 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. ABOVE, IT WAS ALSO POINTED OUT THAT THIS COMPANY IS ENGAGED IN PROVIDING TRAINING. IT WAS ALSO SUBMITTE D THAT AS PER THE ANNUAL REPORT, THE SALARY COST DEBITED UNDER THE SOFTWARE DEVELOPMENT EXPENDITURE WAS RS.45, 93,351. THE SAME WAS LESS THAN 25% OF THE SOFTWARE SERVICES REVENUE AND THEREFORE THE SALARY COST FILTER TEST FAILS IN THIS CASE. REFERENCE WAS MADE TO THE. PUNE BENCH TRIBUNAL'S DECISION OF THE ITA T IN THE CASE OF BIND VIEW INDI A PRIVATE LIMITED VS. DC/, ITA NO. ITA NO 1386/PN/10 WHEREIN KALS AS COMPARABLE WAS REJECTED FOR AY 2006-07 ON ACCOUNT OF IT BEING FUNCTIONALLY DIFFERENT FROM SOFTWARE COMPANIES. THE RELEVANT EXTRACT ARE AS FOLLOWS: '16. ANOTHER ISSUE RELATING TO SELECTION OF COMPARABLES BY THE TPO IS REGARDING INCLUSION OF KALS INFORMATION SYSTEM LTD. THE ASSESSEE HAS OBJECTED TO ITS INCLUSION ON THE BASIS THAT FUNCTIONALLY THE COMPANY IS NOT COMPARABLE. WITH REFERENCE TO PAGES 185-186 OF THE PAPER BOOK, IT IS EXPLAINED THAT THE SAID COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS AND SERVICES AND IS NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES PROVIDED BY THE ASSESSEE. THE APPELLANT HAS SUBMITTED AN EXTRACT ON PAGES 185-186 OF THE PAPER BOOK FROM THE WEBSITE OF THE COMPANY TO ESTABLISH THAT IT IS ENGAGED IN PROVIDING OF I T ENABLED SERVICES AND THAT THE SAID COMPANY IS INTO DEVELOPMENT OF SOFTWARE PRODUCTS, ETE. ALL THESE ASPECTS HAVE NOT BEEN FACTUALLY REBUTTED AND, IN OU R VIEW THE SAID CONCERN IS LIABLE TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES, AND THUS ON THIS ASPECT, ASSESSEE SUCCEEDS. ' BASED ON ALL THE ABOVE, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT KALS INFORMATION SYSTEMS LIMITED SHOULD BE REJECTED AS A COMPARABLE. 47. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE. WE FIND THAT THE TPO HAS DRAWN CONCLUSIONS ON THE BASIS OF INFORMATION OBTAINED BY ISSUE OF NOTICE U/S.133(6) OF THE ACT THIS INFORMATION WHICH WAS NOT AVAILABLE IN PUBLIC DOMAIN COULD NOT HAVE BEEN USED BY THE TPO, WHEN THE SAME IS CONTRARY TO THE ANNUAL REPORT OF THIS COMPANY AS HIGHLIGHTED BY THE 10 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. ASSESSEE IN ITS LETTER DATED 21.06.2010 TO THE TPO. WE ALSO FIND THAT IN THE DECISION REFERRED TO BY TH E LEARNED COUNSEL FOR THE ASSESSEE, THE MUMBAI BENCH OF ITAT HAS HELD THAT THIS COMPANY WAS DEVELOPING SOFTWARE PRODUCTS AND NOT PURELY OR MAINLY SOFTWARE DEVELOPMENT SERVICE PROVIDER. WE THEREFORE ACCEPT THE PLEA OF THE ASSESSEE THAT THIS COMPANY IS NOT COMPARABLE. (E) ACCEL TRANSMATIC LTD. 48. WITH REGARD TO THIS COMPANY, THE COMPLAINT OF THE ASSESSEE IS THAT THIS COMPANY IS NOT A PURE SOFTWARE DEVELOPMENT SERVICE COMPANY. IT IS FURTHER SUBMITTED THAT IN A MUMBAI TRIBUNAL DECISION OF CAPGEMINI INDIA (F) LTD V AD. C/T 12 TAXMAN.COM 51, THE DRP ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ACCEL TRANSMATIC SHOULD BE REJECTED AS COMPARABLE. THE RELEVANT OBSERVATIONS OF DRP AS EXTRACTED BY THE ITAT IN ITS ORDER ARE AS FOLLOWS: 'IN REGARD TO ACCEL TRANSMATICS LTD. THE ASSESSEE SUBMITTED THE COMPANY PROFILE AND ITS ANNUAL REPORT FOR FINANCIAL YEAR 2005-06 FROM WHICH THE DRP NOTED THAT THE BUSINESS ACTIVITIES OF THE COMPANY WERE AS UNDER. (I) TRANSMATIC SYSTEM - DESIGN, DEVELOPMENT AND MANUFACTURE OF MULTI FUNCTION KIOSKS QUEUE MANAGEMENT SYSTEM, TICKET VENDING SYSTEM (II) USHUS TECHNOLOGIES - OFFSHORE DEVELOPMENT CENTRE FOR EMBEDDED SOFTWARE, NET WORK SYSTEM, IMAGING TECHNOLOGIES, OUTSOURCED PRODUCT DEVELOPMENT (III) ACCEL LT ACADEMY (THE NET STOP FOR ENGINEERS)- TRAINING SERVICES IN HARDWARE AND NETWORKING, ENTERPRISE SYSTEM MANAGEMENT, EMBEDDED SYSTEM, VLSI DESIGNS, CAD/CAM/8PO (IV) ACCEL ANIMATION STUDIES SOFTWARE SERVICES FOR 2D/3D ANIMATION, SPECIAL EFFECT, ERECTION, GAME ASSET DEVELOPMENT 11 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 4.3 ON CAREFUL PERUSAL OF THE BUSINESS ACTIVITIES O F ACCEL TRANSMATIC LTD. DRP AGREED WITH THE ASSESSEE THAT THE COMPANY WAS FUNCTIONALLY DIFFERENT FROM TH E ASSESSEE COMPANY AS IT WAS ENGAGED IN THE SERVICES IN THE FORM OF ACCEL IT AND A CC EL ANIMATION SERVICES FOR 2D AND 3D ANIMATION AND THEREFORE ASSESSEE'S CLAIM THAT THIS COMPANY WAS FUNCTIONALLY DIFFERENT WAS ACCEPTED DRP THEREFORE DIRECTED THE ASSESSING OFFICER TO EXCLUDE ACCEL TRANSMATIC LTD. FROM THE FINAL/IST OF COMPARABLES F OR THE PURPOSE OF DETERMINING TNMM MARGIN. ' 49. BESIDES THE ABOVE, IT WAS POINTED OUT THAT THIS COMPANY HAS RELATED PARTY TRANSACTIONS WHICH IS MORE THAN THE PERMITTED LEVEL AND THEREFORE SHOULD NOT BE TAKEN TOR COMPARABILITY PURPOSES. THE SUBMISSION OF THE ID. COUNSEL FOR THE ASSESSEE WAS THAT IF THE ABOVE COMPANY SHOULD NOT BE CONSIDERED AS COMPARABLE. THE ID. DR, ON THE OTHER HAND RELIED ON THE ORDER OF THE TPO. 50. WE HAVE CONSIDERED THE SUBMISSIONS AND ARE OF THE VIEW THAT THE PLEA OF THE ASSESSEE THAT THE AFORESAID COMPANY SHOULD NOT BE TREATED AS COMPARABLES WAS CONSIDERED BY THE TRIBUNAL IN CAPGEMINI INDIA LTD (SUPRA) WHERE THE ASSESSEE WAS SOFTWARE DEVELOPER. THE TRIBUNAL, IN THE SAID DECISION REFERRED TO BY THE ID. COUNSEL FOR THE ASSESSEE, HAS ACCEPTED THAT THIS COMPANY WAS NOT COMPARABLE IN THE CASE OF THE ASSESSEES ENGAGED IN SOFTWARE DEVELOPMENT SERVICES BUSINESS. ACCEPTING THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE, W E HOLD THAT THE AFORESAID COMPANY SHOULD BE EXCLUDED AS COMPARABLES. ' 13. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, KALS INFO SYSTEMS LTD., AND ACCEL TRANSMATICS LTD. ARE TO BE EXCLUDED FOR THE PURPOSE OF COMPARISON WHILE DETERMINING THE ALP OF THE IMPUGNED TRANSACTION IN THIS APPEAL. IT IS ORDERED ACCORDINGLY. FACTS BEING MATERIALLY SAME AND SINCE IT PERTAINS T O THE SAME ASSESSMENT YEAR, FOLLOWING THE VIEW ADOPTED BY THE ITAT, BANGALORE BENCH IN THE AFORESAID CASE, WE ARE ALSO OF THE VIEW THAT THIS COMPANY CANNOT BE COMPARABLE TO THE ASSESSEE. 12 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. FOR THE VERY SAME REASONS, II. KALS INFO. SYSTEMS L TD. ALSO CANNOT BE A COMPARABLE TO THE ASSESSEE. WE, THEREF ORE, DIRECT THE AO/TPO TO EXCLUDE THE AFORESAID COMPANIE S FROM THE LIST OF COMPARABILITY ANALYSIS. III. MEGASOFT LTD. I. OBJECTING TO THE AFORESAID COMPANY BEING TREATE D AS COMPARABLE, THE LEARNED AR SUBMITTED THAT AS PER TH E INFORMATION OBTAINED FROM THE SAID COMPANY U/S 133( 6) OF THE ACT, THE ANNUAL REPORT OF THE COMPANY CLEARLY I NDICATES THAT IT IS ALSO ENGAGED IN SELLING OF PRODUCTS, NAM ELY, XIUS SUIT OF PACKAGED PRODUCTS. IT WAS SUBMITTED THAT SI NCE SEGMENTAL FINANCIAL RESULTS IN RESPECT OF PRODUCT A ND SERVICES ARE AVAILABLE IN RESPECT OF THIS COMPANY, IF AT ALL THIS COMPANY IS TO BE TREATED AS COMPARABLE, THE TP O MAY BE DIRECTED TO CONSIDER THE PROFIT MARGIN OF SOFTWA RE DEVELOPMENT SERVICES SEGMENT ALONE WHICH IS 16.97%, IN RESPECT OF SUCH CONTENTION, THE LEARNED AR RELIED U PON THE FOLLOWING DECISIONS: 1. TRILOGY E BUSINESS SOFTWARE INDIA PVT. LTD. (ITA NO . 1054/BANG/2011) 2. LG SOFT INDIA P. LTD. (TS-64-ITAT-2013(BANG.-TP ) 3. BEARING POINT BUSINESS CONSULTING PVT. LTD. (ITA NO. 1124/BANG/2011) 4. INTOTO SOFTWARE INDIA PVT. LTD. (ITA NO. 1196/HYD/2010) 5. TRANSWHICH INDIA PVT. LTD. VS. DCIT (ITA NO. 948/BANG/2011) 6. MERCEDEZ BENZ RESEARCH & DEVELOPMENT INDIA PVT. LTD., (ITA. NO. 1222/BANG/2011). 7. HUAWEI TECHNOLOGIES INDIA PVT. LTD. VS. ITO (ITA NO. 1338/BANG/2010) II. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT THE TPO HAVING CORRECTLY CONSIDERED THE PROFIT MARG IN OF THE COMPANY BY EXAMINING THE ANNUAL REPORT THERE IS NO NEED TO MODIFY THE ORDER OF THE TPO IN THIS REGARD. 13 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. III. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD. ON A CONSIDERATION OF THE CONT ENTIONS RAISED BY THE ASSESSEE VIS--VIS MATERIALS ON RECOR D AS WELL AS DECISIONS OF DIFFERENT BENCHES OF THE TRIB UNAL PLACED BEFORE US, IT IS QUITE EVIDENT THAT THIS COM PANY HAS TWO SEPARATE SEGMENTS I.E. PRODUCT AND SERVICES. THEREFORE, IF AT ALL, THE AO/TPO CONSIDERS THE AFOR ESAID COMPANY TO BE A COMPARABLE, THEN, HE IS DIRECTED TO CONSIDER SOFTWARE DEVELOPMENT SERVICES SEGMENT ALON E FOR COMPARABILITY ANALYSIS. IV, INFOSYS TECHNOLOGIES LTD. I. OBJECTING TO THIS COMPANY, THE LEARNED AR SUBMITTED THAT UNDER NO CIRCUMSTANCES, THIS COMPANY CAN BE CONSIDERED AS COMPARABLE, TO A SMALL CAPTIVE SER VICE PROVIDER LIKE ASSESSEE. IT WAS SUBMITTED THAT INFO SYS IS ENGAGED IN DIVERSIFIED ACTIVITIES INCLUDING PRODUCT S, CONSULTANCY & SOLUTIONS. IT COMMANDS A PREMIUM IN T HE PRICING OF ITS PRODUCTS AND SERVICES DUE TO ITS GOO DWILL, REPUTATION AND BRAND VALUE. FURTHER, DUE TO SCALE OF OPERATIONS, INFOSYS ENJOYS ECONOMIES OF SCALE, WHIC H RESULTS IN LOWER COST OF INFRASTRUCTURAL FACILITIES AND OVERHEADS. FINALLY, THE LEARNED AR SUBMITTED THAT T HE ISSUE OF COMPARABILITY OF INFOSYS TO A CAPTIVE SERV ICE PROVIDER IS NO LONGER RES INTEGRA, DUE TO FOLLOWING DECISIONS OF THE DIFFERENT BENCHES OF THE TRIBUNAL: 1. TELCORDIA TECHNOLOGIES INDIA P. LTD. (ITA NO. 7821/MUM/2011-PARA 7.4) 2. ADAPTEE (INDIA) PVT. LTD. VS. DCIT (ITA NO. 1801/HYD/2009) 3. PATNI TELECOM SOLUTIONS PVT. LTD., VS. ACIT (ITA NO . 1846/HYD/2012) 4. TRILOGY E BUSINESS SERVICES SOFTWARE LTD. VS. DCIT (ITA NO. 1054/BANG/2011 PARA 20) 5. AGNITY INDIA TECHNOLOGIES VS. ITO (ITA NO. 3856/DEL/2010) 6. AGNITY INDIA TECHNOLOGIES PVT. LTD. VS. ITO (HIGH C OURT DECISION) ITA NO. 1204/2011 7. HUAWEI TECHNOLOGIES INDIA PVT. LTD. VS. IT) (ITA NO . 1338/BANG/2010) (AY 2006-07 8. CINCOM SYSTEMS INDIA P. LTD., VS. ACIT (ITA NO. 761/DEL/2012 (AY 2006-07) 9. ADOBE SYSTEMS INDIA PVT. LTD. (TS-320-ITAT-2011 (DE L.) 14 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 10. VIRTUSA INDIA PVT. LTD., VS. DCIT (ITA NO. 1962/H/2011) 11. INTOTO SOFTWARE INDIA PVT. LTD. (ITA NO. 1196/H /2010) II. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE DRP & TPO. III. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS ACCEPTED THE FACT THAT THE ASSESSEE IS PURELY A SOFTWARE DEVELOPMENT SERVICE PROVIDER TO ITS AE WHEREAS INFOSYS IS NOT A CAPTIVE SERVICE PROVIDER LIKE ASSESSEE. IT IS A FACT THAT INFOSYS IS ENGAGED IN DIVERSIFIED ACTIVITIES AND ALSO ENGAGED IN DEVEL OPMENT OF PRODUCTS CONSULTANCY AND SOLUTION. THAT APART, T HE SIZE, REPUTATION AND BRAND VALUE OF INFOSYS, IN NO WAY M AKES IT COMPARABLE TO A SMALL CAPTIVE SERVICE PROVIDER L IKE ASSESSEE. THEREFORE, FOLLOWING CONSISTENT VIEW OF D IFFERENT BENCHES OF TRIBUNAL, WE EXCLUDE THIS COMPANY FROM T HE LIST OF COMPARABLES. V. TATA ELXSI LTD. (SEG.) I. OBJECTING TO THE AFORESAID COMPANY BEING TREATED AS COMPARABLE, THE LEARNED AR SUBMITTED THAT THE SAID COMPANY SHALL BE REJECTED AS COMPARABLE SINCE IT IS A SPECIALIZED EMBEDDED SOFTWARE DEVELOPMENT COMPANY. FURTHER, HE SUBMITTED THAT AS PER THE INFORMATION O BTAINED FROM THE SAID COMPANY U/S 133(6) OF THE ACT, IT WAS STATED THAT DUE TO THE COMPLEX SEGMENTS IN WHICH TH EY ARE OPERATING, IT IS NOT COMPARABLE TO ANY OTHER SOFTWA RE SERVICES COMPANY. THE AR RELIED ON THE FOLLOWING PRECEDENTS IN SUPPORT OF HIS SUBMISSIONS: 1. CONEXANT SYSTEMS INDIA PT. LTD., (ITA NO. 1429/HYD/2010 AND 1978/HYD/2011) 2 TELCORDIA TECHNOLOGIES INDIA P. LD., (ITA NO. 7821/MUM/2011) 3. LOGICA PVT. LTD. (IT(TP)A NO. 1129/BANG/2011) 4. HUAWEI TECHNOLOGIES INDIA PVT. LTD. VS. IT) (ITA NO. 1338/BANG/2010) AY 2006-07 II. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE DRP & TPO. 15 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. III. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS DECISIONS RELIED UPO N BY THE LEARNED AR. W E FIND THAT IN CASE OF HUAWEI TECHNOLOGIES INDIA PVT. LTD. VS. ITO (SUPRA), ITAT BANGALORE BENCH EXCLUDED THIS COMPANY RELYING UPON THE DECISION OF ITAT, MUMBAI BENCH IN CASE OF TELCORDIA TECHNOLOGIES INDIA PVT. LTD. (SUPRA) PERTAINING TO THE SAME ASSESSMENT YEAR I.E. 2006- 07. IV. FOLLOWING THE VIEW EXPRESSED BY BANGALORE AND MUMBAI BENCHES, OF THE TRIBUNAL, WHICH IS IN RELATION TO A.Y. 2006-07, WE ARE OF THE VIEW THAT T ATA ELXSI LTD. IS ALSO TO BE EXCLUDED FROM THE LIST OF COMPARABLES WHILE DETERMINING THE, ALP OF THE INTERNATIONAL TRANSACTION 8.1. RESPECTFULLY FOLLOWING THE ANALYSIS MADE BY VARIOUS COORDINATE BENCHES, WE DIRECT THE AO/TPO TO EXCLUDE THE ABOVE FIVE COMPANIES AS THEY ARE NOT COMPARABLE TO THE FUNCTIONS OF ASSESSEE. 8.2. WITH REFERENCE TO VI. FLEXTRONICS SOFTWARE SYSTEMS LTD., (SEG) , IT WAS SUBMITTED THAT THIS WAS NOT CONSIDERED IN THE DECISION OF UNITED ONLINE AND IT WAS EXCLUDED IN A.Y. 2007-08 IN THE CASE OF INTOTO SOFT WARE INDIA P. LTD., IN ITA.NO.1196/H/2010, 1197/HYD/2010 (A.Y. 20 05-06) & 2102/HYD/2011 DATED 24.05.2013 (A.Y. 2007-08) ON THE REASON OF INCURRING EXPENDITURE ON SELLING PRODUCTS AND R & D AND NOT A COMPUTER SOFTWARE DEVELOPMENT COMPANY. TH E FINDING OF THE COORDINATE BENCH IN A.Y . 2005-06 IN FLEXTRONICS SOFTWARE SYSTEMS LTD., (SUPRA) IS AS UNDER : 27. AS FAR AS FLEXTRONICS SOFTWARE LIMITED IS CONC ERNED, WE FIND THAT AT PAGE 20 OF HIS ORDER, THE TPO HAS A LSO OBSERVED THAT THE SAID COMPANY HAS INCURRED EXPENDI TURE FOR SELLING OF PRODUCTS AND HAS INCURRED R & D EXPE NDITURE FOR DEVELOPMENT OF THE PRODUCTS. THE ABOVE FACTS CL EARLY DEMONSTRATE THAT THERE IS FUNCTIONAL DISSIMILARITY BETWEEN 16 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. THE ASSESSEE AND THESE COMPANIES AND WITHOUT MAKING ADJUSTMENT FOR THE DISSIMILARITIES BROUGHT OUT BY T HE TPO HIMSELF, THESE COMPANIES CANNOT BE TAKEN AS COMPARA BLE COMPANIES. THE METHOD ADOPTED BY THE TPO TO ALLOCAT E EXPENDITURE PROPORTIONATELY TO THE SOFTWARE DEVELOP MENT SERVICES AND SOFTWARE PRODUCT ACTIVITY CANNOT BE SA ID TO BE CORRECT AND REASONABLE. WHEREVER, THE A.O./TPO CANNOT MAKE SUITABLE ADJUSTMENT TO THE FINANCIAL RE SULTS OF THE COMPARABLE COMPANIES WITH THE ASSESSEE COMPA NY TO BRING THEM ON PAR WITH THE ASSESSEE, THESE COMPA NIES ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. TH EREFORE, WE DIRECT THE A.O./TPO TO EXCLUDE THESE THREE COMPA NIES FROM THE LIST OF COMPARABLES. 9. LIKEWISE, IN A.Y. 2007-08 ALSO THE COORDINATE BENCH HAS CONSIDERED THIS COMPARABLE COMPANY AND ST ATED THAT FLEXTRONICS SOFTWARE IS FUNCTIONALLY DIFFERENT AND A.O. COULD NOT HAVE TAKEN THIS COMPANY AS COMPARABLE COM PANY WITHOUT MAKING SUITABLE ADJUSTMENTS FOR THE DIFFERE NCES. THEREFORE, THIS COMPARABLE HAS TO BE EXCLUDED. HOWE VER, SINCE, THIS ASPECT WAS NOT EXAMINED BY ANY COORDINATE BENC H IN A.Y. 2006-07 AND NO ORDER OF COORDINATE BENCH WAS BROUGH T TO OUR NOTICE RELEVANT TO THIS YEAR. WE, IN THE INTEREST O F JUSTICE, RESTORE THIS TO THE FILE OF TPO TO EXAMINE THE FUNC TIONS OF THE ABOVE COMPANY AND DETERMINE WHETHER THAT IS COMPARA BLE OR NOT, KEEPING IN MIND THE DECISION OF COORDINATE BEN CH OF EARLIER A.Y. AND LATER A.Y. ABOUT THE FUNCTIONAL DI FFERENCES. THE ISSUE IS RESTORED TO THE FILE OF TPO. 10. COMING TO THE CLAIM OF ASSESSEE TO INCL UDE COMPANIES, AS STATED IN GROUND 6.4.5(B), WE ARE OF THE OPINION THAT TPO HAS REJECTED THEM ON VALID REASONS. NO DEC ISION OF ANY COORDINATE BENCH WAS ALSO BROUGHT TO OUR NOTICE CONSIDERING THESE SIX COMPANIES AS COMPARABLES. IN VIEW OF THIS WE REJECT ASSESSEE CONTENTION TO INCLUDE THEM. THIS SUB GROUND IS REJECTED. 17 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 11. WITH REFERENCE TO WORKING CAPITAL ADJUSTMENT, ASSESSEE MADE SUBMISSIONS THAT NEGATIVE WORKING CAP ITAL ADJUSTMENT IS NOT CORRECT AND SUBMITTED THAT ASSESS EE HAS NOT PAID ANY INTEREST PAYMENTS AND THE INTEREST PAYMENT CHARGED TO P & L ACCOUNT IS ON LEASE OF CARS AND NOT ON WO RKING CAPITAL LOANS. FURTHER, IT EARNED INTEREST INCOME WHICH WA S SHOWN IN OTHER INCOME ON WHICH RELIEF WAS GRANTED BY DRP. IT WAS SUBMITTED THAT ASSESSEE IS NOT BEARING ANY WORKING CAPITAL RISK AND DRP IN MANY OTHER CASES HAS PROVIDED RELIEF. LD . COUNSEL ALSO FURTHER BROUGHT TO OUR NOTICE THAT THIS ISSUE WAS SENT BACK TO TPO BY THE COORDINATE BENCH DECISION IN THE CASE OF CORDYS SOFTWARE INDIA P. LTD., HYDERABAD VS. ACIT, CIRCLE 1(2), HYDERABAD IN ITA.NO.1972/HYD/201 1 DATED 15.03.2013 WHEREIN IT WAS HELD AS UNDER : 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. ADMITTEDLY, THIS GROUND WAS NOT RAISED BEFORE THE DRP AND HAS BEEN RAISED FOR THE F IRST TIME BEFORE THE INCOME-TAX APPELLATE TRIBUNAL. HOWE VER, CONSIDERING THE SUBMISSIONS OF THE LEARNED A.R. WE ARE OF THE VIEW THAT THE ISSUE RAISED IN THE ADDITIONAL GR OUND MERITS CONSIDERATION. AS ALL THE FACTS RELATING TO THE ISSUE ARE ON RECORD AND NO NEW FACTS REQUIRED TO BE GONE INTO, FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD., VS. CIT 22 9 ITR 383, WE ARE INCLINED TO ADMIT THE ADDITIONAL GROUND . HOWEVER, SINCE THE GROUND IS RAISED FOR THE FIRST T IME BEFORE US, WE REMIT THE ISSUE BACK TO THE A.O. WHO SHALL TAKE A DECISION ON THE SAME AFTER CONSIDERING ALL T HE ASPECTS OF THE MATTER AND ALSO THE SUBMISSIONS OF T HE ASSESSEE TO BE MADE IN THIS REGARD. ACCORDINGLY, TH IS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 12. KEEPING IN VIEW THE SUBMISSIONS, WE NOTICE THA T THERE IS NO REASON WHY NEGATIVE WORKING CAPITAL ADJ USTMENT WAS MADE. MOREOVER, WE HAVE ALREADY DECIDED TO EXCL UDE CERTAIN COMPARABLES WHICH MAY RESULT IN VARYING WOR KING 18 ITA.NO.1613/HYD/2010 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. CAPITAL ADJUSTMENT. THEREFORE, THE ISSUE IS RESTORE D TO THE FILE OF TPO TO REWORK OUT, KEEPING IN MIND THE SUBMISSIO NS OF ASSESSEE AND PRINCIPLES LAID DOWN BY VARIOUS COORDI NATE BENCH DECISIONS ON THE ISSUE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02.01.2015. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 02 ND JANUARY, 2015 VBP/- COPY TO 1. M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., (FORMERLY KNOWN AS INTELLIGROUP ASIA P. LTD., MERGED WITH NTT DATA GLOBAL DELIVERY SERVICES LTD), 5 TH FLOOR, I- LABS CENTER, PLOT NO.18, SOFTWARE UNITS LAYOUT, MADHAPUR, HYDERABAD 560 061. 2. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2(1), HYDE RABAD 3. DISPUTES RESOLUTION PANEL, 4A, I.T. TOWERS, A.C. GU ARDS, HYDERABAD 500 004. 4. CIT & MEMBER, DRP, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD.