TELEOGIC INIDA P. LTD ( IN RESPECT OF ERSTWHILE ASCENTIAL SOFTWARE (I) P. LTD ) (PURSUANT TO AMALGAMATION ), BANGALORE V. DCIT RG 8(2), MUMBAI

ITA 166/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92571 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 19-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Related party transaction; Transfer pricing; Principle of natural justice; International transaction
• Section: 143(3); 234B; 133(6); 144

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - K - BENCH , , BEFORE S/SH. VIJAY PAL RAO ,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 166 /MUM/20 11 , / ASSESSMENT YEAR - 20 06 - 07 TELELOGIC INDIA PRIVATE LIMITED (IN RESPECT OF ERSTWHILE ASCENTIAL S OFTWARE (INDIA) PRIVATE LIMITED (PURSUANT TO AMALGAMATION) C/O., IBM INDIA PRIVA TE LTD. SUBRAMANYA ARCADE, NO.12 BANNERGHATTA MAIN ROAD BANGALORE - 560 029 PAN: AAACI 2553 D VS THE DY. COMMISSIONER OF INCOME TAX , RANGE - 8(2) ROOM NO.209 , AAY A KAR BHAVAN, M K ROAD, MUMBAI - 20 . ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI AJIT KUMAR JAIN / REVENUE BY :SHRI N.K. CHAND - CIT / DATE OF HEARING : 18 - 0 5 - 2015 / DATE OF PRONOUNCEMENT : 18 - 0 5 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 11.10.2010 OF THE ASSESSING OFFICER(AO) , COMPLETED U/S. 144C (13) R.W.S. 143(3) OF THE ACT THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ASSESSMENT ORDER DATED OCTOBER 11, 2010 PASSED BY THE LEARNED ASSESSING OFFICER ('AO') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME - TAX ACT, 1961 ('ACT') IS NOT IN ACCORDANCE WITH THE LAW AND IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND IN ANY CASE VIOLATION OF PRINC IPLE OF EQUITY AND NATURAL JUSTICE. 2. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED IN LAW AND ON FACTS IN REJECTING WITHOUT ADEQUATE REASONS, THE DETAILED BENCHMARKING ANALYSIS CONDUCTED BY THE APPELLANT AND EMBARKING ON A FRESH SEARCH FOR CO MPARABLES. 3. THE LEARNED TPO ERRED IN FACT AND IN LAW IN APPLYING INAPPROPRIATE FILTERS IN THE BENCHMARKING SEARCH CARRIED OUT BY HIM AND THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED IN UPHOLDING THE SAME. 4. THE LEARNED TPO ERRED IN CONSIDERING COMPANIES WITH VERY HIGH TURNOVER AS COMPARABLES TO THE ASSESSEE AND THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED IN UPHOLDING THE SAME. 5. THE LEARNED TPO HAS ERRED IN SELECTING COMPANIES, WHICH ARE NOT COMPARABLE TO THE ASSESSEE DUE TO VARIOUS FACTORS SUCH AS FUNCTIONAL COMPARABILITY, PRODUCT LED REVENUES, HIGH LEVELS OF RELATED PARTY TRANSACTIONS, INADEQUATE FINANCIAL INFORMATION ETC. 6. THE LEARNED TPO ERRED IN COMPUTING THE OPERATING MARGINS OF THE COMPARABLE COMPANIES AT HIGHER LEVELS A ND THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED IN UPHOLDING THE SAME. 7. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED IN TREATING FOREIGN EXCHANGE GAIN / LOSS AS A NON OPERATING ITEM. ITA NO.166/MUM/11(06 - 07) 2 8. THE LEARNED AO/HONOURABLE DRP HAVE ERRED IN NOT G RANTING ADJUSTMENTS FOR THE DIFFERENCES IN THE RISK PROFILE, CONSIDERING THAT THE APPELLANT BEING A CAPTIVE SERVICE PROVIDER OPERATING UNDER A COST PLUS ARRANGEMENT CARRIES A MUCH LOWER RISK AS AGAINST THE COMPARABLE COMPANIES. 9. THE HONOURABLE DRP AN D THE LEARNED AO/TPO HAS ERRED IN LAW AND ON FACTS IN WRONGLY COMPUTING INTEREST UNDER SECTION 234B AND SECTION 234C OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS, AT ANY TIME BEFORE OR AT THE T IME OF HEARING OF THE APPEAL. EACH OF THE ABOVE OBJECTIONS IS INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS PREFERRED BY THE APPELLANT. THE ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIONAL GROUNDS VIDE ITS LETTER DT.12. 05 .2015. THE LD. DR/ASSESS ING OFFICER/TPO HAVE ERRED IN SELECTING COMPANY/IES, WHICH IS/ARE NOT COMPARABLE TO THE APPELLANT. SUCH COMPANY/IES CANNOT BE RETAINED AS COMPARABLE IN THE COMPARABLES LIST, MERELY BECAUSE THEY WERE INITIALLY SELECTED BY THE APPELLANT IN ITS TRANSFER PRICI NG DOCUMENTATION. 2. ASSESSEE - COMPANY, INCORPORATED IN THE YEAR 1996 IS A SUBSIDIARY OF A SCENTIAL S OFTWARE C ORPORATION, I NFOMIX I NTERNATIONAL C APITAL LLC,US. IT IS ENGAGED IN THE BUSINESS OF DEVELOPMENT SUPPORT AND MAINTENANCE OF DATA WARE SOFTWARE FOR ITS PARENT COMPANY. IT FILED ITS RETURN OF INCOME ON 28.11.2006 , DECLARING TOTAL INCOME OF RS . 36.42 LACS . DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO THREE INTERNATIONAL TRANSACTIONS. HE MADE A REFERENCE TO THE T R ANSFER PRICING O F FICER(TPO) FOR DETERMINATION OF ARMS LENGTH PRICE (ALP)U/S.92CA OF THE ACT. OUT OF THE THREE TRANSACTION S , THE TPO DID NOT PROPOSE ANY ADJUSTMENT WITH REGARD TO TWO TRANSACTION S THAT WERE ENTERED INTO BY THE ASSESSEE WITH ITS A SSOCIATED E NTE RPRISES (AE). 3. THE TPO FOUND THAT THE ASSESSEE HAD FURNISHED T R ANSFER P RICING (TP) REPORT IN SUPPORT OF THE ALP OF 9.75% (ON COST ) WITH REGARD TO SOFTWARE DEVELOPMENT SERVICES), THAT THE ASSESSEE HAD SELECTED THE TNMM AS THE MOST APPROPRIATE METHOD FOR BENC HMARKING ITS TRANSACTIONS, THAT IT HAD IDENTIFIED SEVEN ( 7 ) COMPANIES AS COMPARABLES. AFTER CONSIDERING THE 3 YEARS WEIGHTED AV ERAGE , PLI ( OPERATING PROFIT/COST) WAS CALCULATED @ 7.20%. SL.NO. NAME OF THE COMPANY WTD. AVG. 1. ASTRO BIO SYSTEMS LTD. 1.06 2. GOLDSTONE TECHNOLOGIES LTD. 6.26 3. MAARS SOFTWARE INTERNATIONAL LTD. 6.35 4. MEGASOFT LTD. 9.58 5. ORIENT INFORMATION TECHNOLOGY LTD. 8.81 6. PENTASOFT TECHNOLOGIES LTD. 11.13 7. RS SOFTWARE (INDIA) LTD. 7.19 ARITHMETIC MEAN 7.20 3.1 AFTER CONSI DERING THE STUDY SUBMITTED BY THE ASSESSEE, THE TPO HELD THAT MANY COMPANIES SELECTED BY THE ASSESSEE DID NOT PRESENT THE SOFTWARE DEVELOPMENT INDUSTRY IN A TRUE SENSE. THE TPO ACCEPTED TWO COMPARABLES OUT OF THE SEVEN COMPARABLES SELECTED BY THE ASSESSEE.H E GAVE THE REASONS FOR ACCEPTING TWO COMPARABLES IN FOLLOWING MANNER. S.N NAME OF THE COMPANY ACCEPTED/ REJECTED REASONS FOR REJECTION 1. ASTRO BIO SYSTEMS LTD. REJECTED AS THE NAME OF THE COMPANY SUGGESTS, THE COMPANY IS FUNCTIONALLY DIFFERENT FROM THE T AXPAYER. HENCE, THE SAME IS REJECTED AS A COMPARABLE. ITA NO.166/MUM/11(06 - 07) 3 2. GOLDSTONE TECHNOLOGIES LTD. REJECTED THE COMPANY IS WHOLLY ENGAGED IN IT ENABLED SERVICES AND NOT IN SOFTWARE DEVELOPMENT SERVICES. HENCE, THIS COMPANY IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AN D HENCE IS REJECTED AS A COMPARABLE. 3. MAARS SOFTWARE INTERNATIONAL LTD. REJECTED THE COMPANY IS PREDOMINANTLY AN ONSITE SERVICES COMPANY. HENCE, IT IS FUNCTIONALLY DIFFERENT FROM THE TAXPAYER AND THE SAME IS REJECTED AS A COMPARABLE. 4. MEGASOFT LTD. A CCEPTED --- ---- 5. ORIENT INFORMATION TECHNOLOGY LTD. REJECTED THE COMPANY IS PREDOMINANTLY AN ONSITE SERVICES COMPANY. HENCE, IT IS FUNTIONALLY DIFFERENT FROM THE TAXPAYER AND THE SAME IS REJECTED AS A COMPARABLE. 6. PENTASOFT TECHNOLOGIES LTD. REJECTE D RELATED PARTY TRANSACTIONS CONSTITUTE 64% OF THE REVENUES. HENCE, THE COMPANY IS REJECTED. 7. RS SOFTWARE (INDIA) LTD. ACCEPTED --- --- HE FURTHER MENTIONED THAT THE ASSESSEE HAD ADOPTED THREE - Y EA R DATA TO WORK OUT A WEIGHTED AV ERA G E FOR COMPUTING THE PLIS OF THE COMPARABLE COMPANIES, THAT THE METHOD ADOPTED BY THE ASSESSEE WAS NOT IN COMPLIANCE WITH R ULE 10D (4) OF THE INCOME TAX RULE, 1962 (RULES),T HAT THE B ENCH - MARKING CONDUCTED BY THE ASSESSEE WAS ERRONEOUS IN VIEW O F THE PROVISIONS OF SECTION 92C( 3)(A)OF THE ACT, THAT THE SAME WAS LIABLE TO BE REJECTED. THE TPO CONDUCTED A SEARCH FOR IDENTIFYING COMPARABLE FOR THE SOFTWARE DEVELOPMENT INDUSTRY. THE FINAL SET OF COMPARABLE, PREPARED BY THE TPO READ AS UNDER : S.N. COMPANY NAME SALES (RS.CR.) OP TO TOT AL COST % 1. AZTEC SOFTWARE LIMITED 128.61 18.09 2. GEOMETRIC SOFTWARE LIMITED (SEG.) 98.59 6.70 3. IGATE GLOBAL SOLUTIONS LTD.(SEG.) 527.91 15.61 4. INFOSYS LIMITED 9028.00 40.38 5. KALS INFO SYSTEMS LIMITED 1.97 39.75 6. MINDTREE CONSULTING LIMITED 448.79 14.67 7. PERSISTENT SYSTEMS LIMITED 209.18 24.67 8. R. SYSTEMS INTERNATIONAL LTD. 79.42 22.20 9. SASKEN COMMUNICATION LTD.(SEG.) 240.03 13.90 10. TATA ELXSI LTD. (SEG.) 188.81 27.65 11. LUCID SOFTWARE LIMITED 1.02 8.92 12. MEDIASOFT SOLUTIONS P. LTD. 1.76 6.29 13. R.S. SOFTWARE (INDIA) LTD. 91.57 15.69 14. SIP TECHNOLOGIES & EXPORTS LTD. 6.53 3.06 15. BODHTREE CONSULTING LTD. 5.32 15.99 16. ACCEL TRANSMATICS LTD.(SEG.) 8.02 44.07 17. SYNFOSYS BUSINESS SOLUTIONS LTD. 4.49 10.61 18. MEGASO FT LTD. 56.15 52.74 19. LANCO GLOBAL SOLUTIONS LTD. 35.63 5.27 20. FLEXTRONICS SOFTWARE SYSTEMS LTD. 595.12 27.24 AVERAGE 20.68% 3.2 THE TPO MENTIONED THAT AL L THE FIGURES WERE TAKEN FROM THE A NNUAL REPORTS, THAT THE COSTS TAKEN F OR THE COMPUTATION O F MARGIN S WERE CO S TS BEFORE INTEREST CHARGES, THAT FOREX GAIN /LOSS WAS ITA NO.166/MUM/11(06 - 07) 4 NOT TAKEN AS PART OF THE OPERATING EXPENSES, THAT FOREX GAIN WAS CATEGORI S ED AS OTHER INCOME, THAT LOSS OF SALE OF ASSETS WAS NOT TAKEN AS EXPENDITURE. HE ALLOWED T H E WORKING CAPITAL AD JUSTMENT OF 2.99 % OF THE MARGIN AND REVISED THE PLI AT 17.69%. HE DETERMINED THE ALP AS UNDER : - I) TOTAL COST INCURRED BY THE ASSESSEE ON PROVIDING SOFTWARE DEVELOPMENT RS.8,17,03,733/ - II) MARK UP AS PER C OMPARABLE (20.68 - 2.99 ASSESSEE 17.69 % ) RS.1,44,53,388/ - III) ACTUAL MARKUP RECEIVED - RS.79,65,880/ - AS PER THE TPO, THE ASSESSEE HAD SOUGHT BENEFIT OF (+/ - ) 5% IN RESPECT OF ADJUSTM ENT IN TERMS OF PROVISION TO SECTION 92C(2) OF THE ACT. HE HELD THAT, THE BENEFIT OF THE S. 92C(2) WAS AVAILABLE TO THE TAXPAYER IN THE CASE WHERE VARIATION IN PRICE @5% OF THE PRICE CHARGED FOR THE INTERNATIONAL TRANSACTION COMPARED WITH ALP, THAT THE VARIATION IN THE DISCLOSED PRICE AND THE DETERMINED ALP WAS MORE THAN THE LIMIT PRE SCRIBED BY THE ACT. AS A RESULT, HE RE COMMENDED UPWARD ADJUST MENT OF RS.64,87,508/ - . THE AO, AFTER RECEIVING THE ORDER OF THE TPO PASSED A DRAFT ORDER PROPOSING A N ADJUSTMENT OF RS.64.87 LACS. THE ASSESSEE AGITATED THE ISSUE BEFORE THE D ISPUTE R EDRESS E L PANEL (DRP - I). VIDE ITS DIRECTION, DT.27.9.2010 , ISSUED U/S. 144 C(5) OF THE ACT , THE DRP HELD THAT THE FINAL SET OF COMPARABLES BY THE TPO WAS BASED ON SCIENTIFIC BASIS, THAT THE TPO HAD APPLIED THE TNMM METHOD ON THE BASIS OF SEGMENTAL SEARCH, THAT THE AO HAD OBTAINED CURRE NT DATA BY ISSUE OF NOTICE U/S. 133(6) OF T HE AC T, THAT THE TPO HAD SHORTLISTED 20 CASES OF WHICH THE OPERATING PROFIT TO THE TOTAL COST RATIO WAS 20.68%, THAT HE HAD ALLOWED WORKING CAPITAL ADJUST MENT OF 2.99%, THAT PROFIT MARGIN OF 17.69% WAS RIGHTLY APPLIED BY TPO, THAT THERE WAS NO JUSTIFICATION TO IN TER FERE WITH THE ORDER OF THE TPO, THAT THE REASONS GIVEN BY THE TPO FOR EXCLUDING THE COMPARABLE RELIED UPON B Y THE ASSESSEE WAS JUSTIFIABLE. AFTER RECEIVING THE DIRECTIONS OF THE DRP , THE AO FINALIS ED THE ASSESSMENT AND MADE AN ADDITION OF RS.64,8 7,508/ - U/S.92CA(3) OF THE ACT. 4. DURING THE COURSE OF HEARING BEFORE US THE AUTHORISED REPRESENTATIVE ( AR ) STATED THAT THE TPO HAD REJECTED 5 COMPAR ABLES SELECTED BY THE ASSESSEE, THAT HE HAD TAKEN 20 COMPAR ABLES OUT OF WHICH 18 WERE NEW, THAT TPO HAD WORKED OUT FIN AL MARGIN AT 17.69% AS AGAINST THE MARGIN OF 7.2 % ADOPTED BY THE ASSESSEE, THAT IF TWO OF THE COMPARABLES, NAMELY KALS INFO SYSTEM LTD. (S.N O .5 ) ND MEGASOFT LTD. ( S.NO. 18) OF THE LIST PREPARED BY THE TPO WERE REJECTED THE PROFIT MARGIN W OULD BE WITHIN THE L IMIT OF (+/ - )5% , THAT BOTH THE COMPARABLES SHOULD NOT HAVE BEEN APPLIED WHILE DECIDING THE TP ADJUSTMENT FOR THE Y EA R UNDER APPEAL BY THE TPO. WITH REGARD TO KALS INFOSYS , H E STATED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, THAT KALS WAS A PRODUCT COMPANY , THAT COMPARISON OF KALS WITH THE ASSESSEE WAS NOT PROPER. HE REFERRED TO PG NO.499, 500,502, 503 , 511 , 715, 716 720, 726 OF THE PAPER BOOK. HE RELIED UPON THE CASES OF M/S. TRIOLOGY E - BUSINESS SOFTWARE INDIA P RIVATE LTD. (ITA / 1054/BANG/2011 DT.23/11/2012 AND INTOTO SOFTWARE INDIA P RIVATE L IMITED (ITTA NO.233 OF 2014 DT. 27/3/2014). HE FURTHER CONTENDED THAT MEGA S OFT LTD. WAS FOLLOWING CALENDAR Y EA R, THAT THE ASSESSEE WAS FOLLOWING FINANCIAL Y EAR WHILE PREPARING THE BOOKS OF ACC OUNT,THAT COMPARABLES ADOPTING DIFFERENT ACCOUNTING Y EAR COULD NOT BE BASIS FOR TP ADJUSTMENTS. HE REFERRED TO PG - 7 OF THE PAPER BOOK AND RELIED UPON THE CASE OF E VONIC INDIA PVT. LTD. ITA/1125/MUM/2014 DT. 18. 0 9.2014. DEPARTMENTAL REPRESENTATIVE ( DR ) ARGUED THAT MEGASOFT LTD. HAS BEEN ACCEPTED AS A COMPARABLE IN OTHER CASES. HE REFERRED TO ITA NO.1108/BANG/2010 AY 06 - 07, DT.31.1.2013 . HE ALSO REFERRED TO CASE OF AUTODESK INDIA PVT. LTD. (TS 62 ITAT 2013/BANG) AND HCL EAI SERVICES LTD. (TS - 133 ITAT 2013.BANG) . HE ALSO REFERRED TO THE CASE OF AGIL ENT TECHN O LOGIES INT ERNATIONAL PVT. L TD. ( ITA / 604 7 /DEL/2012 DT. 14.6.2013 AY :2008 - 09)AND FURTHER ARGUED THAT THE ASSESSEE HAS NOT RELIED UPON THE DATA OF THE RELEVANT YEAR, THAT SEGMENT AL DATA WAS NOT GIVEN BY IT. IN ITA NO.166/MUM/11(06 - 07) 5 RE JOINDER, THE AR STATED THAT F ROM THE ANNUAL REPORT, (PG - 511), IT WAS CLEAR THAT THE DATA WAS FOR THE Y EA R UNDER APPEAL ONLY , THAT SEGMENTAL DATA WAS AVAILABLE, THAT TH E ASSESSEE WAS NOT A PRODUCT COMPANY. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. TRANSFER PRICING PROVISIONS WERE INTRODUCED IN THE ACT WITH SPECIFIC PURPOSE - TO EVALUATE THE INTERN ATIONAL TRANSACTIONS,ENTERED IN TO BY AN ASSESSEE WITH ITS ASSOCIATES, IN A BALANCED AND JUDICIOUS MANNER. ARITHMETICAL PRECISION IS NEITHE R EXPECTED NOR POSSIBLE IN VALUING TRANSACTIONS COVERED BY THE TP PROVISIONS.EVERYTHING R EVOLVES AROUND THE COMPARABLES SELECTED BY THE AO OR THE ASSESSEE.IF THE VARIABLES OF THE COMPARABLES CHOSEN BY THE AO/THE ASSESSEE ARE IDENTICAL OR ALMOST IDENTICAL T O THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE ,IT IS CONSIDERED A VALID COMPARABLE.THUS,DEGREE OF NEARNESS TO THE FACTS OF THE TRANSACTION IN QUESTION IS THE BASIS FOR AN ACCEPTABLE TP STUDY. WE FIND THAT THE ONLY DISPUTE BETWEEN THE AO AND THE ASSESSEE IS ABOUT THE ADJUSTMENT MADE FOR THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITH ITS AE,THAT THE ASSESSEE HAD SELECTED SEVEN COMPARABLES OUT OF WHICH ONLY TWO WERE ACCEPTED BY THE TPO,THAT THE TPO HAD REFERRED TO EIGHTEEN NEW COMPARABLES,THAT THE ASSESSEE IS IN BUSINESS OF SOFTWARE DEVELOPMENT, THAT AS PER THE STUDY CONDUCTED BY IT THE PROFIT OF MARGIN WAS WITHIN THE RANGE OF (+/ - )5%,IF SEVEN COMPARABLES WERE ADOPTED,THAT THE TPO HAD DETERMINED THE PROFIT AT 17.69%. WE FIND THAT IF TWO OF THE C OMPARABLES,ADOPTED BY THE AO,ARE TAKEN OUT OF THE LIST RELIED UPON BY THE TPO, THE MARGIN WOULD BE WITHIN THE ALLOWABLE LIMITS AS ENVISAGED BY THE PROVISIONS OF THE ACT. IN SHORT, WE HAVE TO DECIDE AS TO WHETHER THE TWO COMPARABLES KALS AND MEGASOFT LTD. SHOULD BE TAKEN INTO CONSIDERATION OR NOT WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE . ONE OF THE VERY IMPORTANT VALID VARIABLE IS THE AY.,AS THE ASSESSMENT UNDER THE ACT ARE COMPLETED ON THE BASIS OF AN AY.AND EACH AY. IS CONSIDERED A SEPARATE UNIT. IT IS QUITE POSSIBLE THAT FACTS OF TWO AY.S. - EARLIER OR SUBSEQUENT - ARE NOT SIMILAR.THEREFORE,IT IS EXPECTED THAT WHILE COMPARING THE VARIABLES,SAME ASSESSMENT IS TAKEN TO ARRIVE AT THE POSSIBLE ADJUSTMENT OF INTERNATIONAL TRANSACTIONS.IN THE MATTER OF EVO NIK INDIA PVT.LIMITED(SUPRA),THE ISSUE OF CALENDAR YEAR/MARCH ENDING YEAR HAS BEEN DELIBERATED UPON.WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE SAID ORDER. 4. IT WAS THE CONTENTION OF LEARNED AR THAT AS PER THE BALANCE SHEET OF C RISIL LIMITED PLACED ON RECORD, THE COMPANY FOLLOWS 31.12.2008 YEAR ENDING WHICH IS DIFFERENT FROM THAT OF THE ASSESSEE WHICH IS 31.3.2009. ACCORDINGLY, IN VIEW OF THE DECISION OF THE COORDINATE BENCH IN THE CASE OF HAPAG LLOYD GLOBAL SERVICES (P) LTD., (2 013) 34 TAXMANN.COM 241 (MUM TRIB.), THE SAME SHOULD BE IGNORED . IT WAS ALSO ARGUED BY THE LEARNED AR THAT EVEN THOUGH THE CRISIL LIMITED WAS ITS OWN COMPARABLE, HOWEVER, IN VIEW OF THE FACT THAT IT IS NOT FUNCTIONALLY COMPARABLE, HE REQUESTED FOR EXCLUSIO N OF THE SAME AND FOR THIS PURPOSE HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: - I) QUARK SYSTEMS (P.) LTD. (201 OJ 38 SOT 307 (CHD(SB) II) STREAM INTERNATIONAL SERVICES PRIVALE LIMITED 2013 - T/1 - 42 - ITAT - MUM - TP; III) TECHBOOK INTERNATIONAL PRIVATE LIMITED TS - 117 - ITAT - 2014(DELHI) IV) ALCATEL LUCENT TECHNOLOGIES INDIA PRIVATE LIMITED TS - 125 - ITAT - 2014(DELHI) V) TATA POWER SOLAR SYSTEMS LIMITED TS - 14 - ITAT - 2014(MUMBAI) VI) PREMIER EXPLORATION SERVICES P. LIMITED TS - 146 - ITAT 2013 - DELHI - TP PARA - 14 VII) STREAM INTERNATIONAL SERVICES PRIVATE LIMITED 2013 - TII - 42 - ITAT - MUM - TP ITA NO.166/MUM/11(06 - 07) 6 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT CRISIL LIMITED WAS PROPOSED BY THE ASSESSEE ITSELF IN ITS TRANSFER PRICING DOCUMENT AFTER CONSIDERING FUNCTIONAL ASSET S, RISK AND ECONOMIC ANALYSIS OF THE COMPARABL E COMPANY. AT THE VERY SAME TIME, THE COORDINATE BENCH IN THE DECISION REFERRED ABOVE BY LEARNED AR HAD HELD THAT IN CASE OF COMPARABLE HAVING DIFFERENT YEAR ENDING, THE SAME SHOULD BE IGNORED. KEEPING IN VIEW THE TOTALITY OF FACTS, WE RESTORE FOR RECONSID ERATION OF CRISIL LIMITED AS COMPARABLE AFTER CONSIDERING ASSESSEES CONTENTION REGARDING DIFFER E NT YEAR ENDING BEING FOLLOWED BY THE ASSESSEE VIS - - VIS CRISIL LIMITED. WE DIRECT ACCORDINGLY. RESPECTFULLY,FOLLOWING THE SAME WE HOLD THAT A COMPARABLE HAVIN G A DIFFERENT ACCOUNTING YEAR CANNOT BE A VALID COMPARABLE.IN THE CASE UNDER CONSIDERATION THE ASSESSEE IS FOLLOWING FINANCIAL YEAR ENDING WHEREAS THE COMPARABLE CHOSEN BY THE TPO IS HAVING CALENDAR YEAR ENDING.WE ALSO FIND THAT IN THE CASES OF TRIOLOGY E BUSINESS SOFTWA RE INDIA PVT.LTD.( ITA/1054/BANG/2011 )INTOTO S OFTWARE INDIA PVT. LTD.(SUPRA) IT HAS BEEN HELD THAT SOFTWARE DEVELOPMENT SERVICE PROVIDER COMPANY CANNOT BE COMPARED WITH A PRODUCT COMPANY.IN THE CASE OF TRIOLOGY E BUSINESS SOFTWARE INDIA PVT.L TD.(SUPRA) , I T HAS BEEN HELD THAT MEGASOFT LTD. C ANNOT BE TAKEN AS A VALID COMPARABLE FOR SOFTWARE DEVELOPMENT COMPANY FOLLOWING THE SAME WE HOLD THAT MEGASOFT LTD. SHOULD BE EXCLUDED FROM THE COMPARABLES. AS FAR AS KL A S INFORMATION SYSTEMS LTD. I S CONCER NED, IT IS FOUND THAT COMPANY HAS REVENUES FROM SOFTWARE PRODUCTS AS WELL AS SOFTWARE DEVELOPMENT, WHEREAS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT ONLY. WE THEREFORE, AGREE WITH THE ASSESSEE THAT THE COMPANY I.E. KLAS INFORMATION S YSTEMS IS NOT A GOOD COMPARABLE. IF BOTH THESE COMPARABLES ARE TAKEN OUT OF THE LIST OF THE TPO THE PROFIT MARGIN IN C ASE OF THE ASSESSEE COMES WITHIN THE PERMISSIBLE RANGE AND NO UPWARD ADJUSTMENT WOULD BE REQUIRED TO BE MADE. WE HAVE GONE THROUGH THE DE CISION OF AUTODESK INDIA PVT. LTD., RELIED UPON BY THE DR. IT WAS FOUND THAT THE ASSESSEE HAD RENDERED TECHNICAL SUPPORT SERVICE TO THE AE. IN OUR OPINION THE NATURE OF THE SERVICE PROVIDED BY AUTODESK INDIA PVT. LTD. WERE OF DIFFERENT NATURE AS COMPARED TO THE SERVICES RENDERED BY THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE EFFECTIVE GROUND OF APPEAL IS DECIDED IN ITS FAVOUR AND ADDITIONAL GROUND IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED B Y THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY ,2015. 18 TH M AY , 2015 SD/ - SD/ - ( / VIJAY PAL RAO ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 18 .0 5 .2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / ITA NO.166/MUM/11(06 - 07) 7 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGI STRAR , / ITAT, MUMBAI.