Invensys Development Centre India Private Limited, Hyderabad V. ACIT, Circle 2(1), Hyderabad

ITA 1692/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69721 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 234B; 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.1692/HYD/2012 ASSESSMENT YEAR 2008-2009 M/S. INVENSYS DEVELOPMENT CENTRE INDIA P. LTD., HYDERABAD. PAN AABCI1140F VS. THE ACIT, CIRCLE 2(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. K.C. DEVDAS FOR REVENUE : MR. D. SUDHAKAR RAO CIT(DR) DATE OF HEARING : 22.10.2014 DATE OF PRONOUNCEMENT : 12.11.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE DIRECTION OF THE DISPUTES RESOLUTION PANEL, HYDERAB AD PASSED UNDER SECTION 144C(5) OF THE INCOME TAX ACT DATED 0 3.08.2012 AND CONSEQUENTIAL ASSESSMENT ORDER PASSED BY A.O. U NDER SECTION 143(3) READ WITH SECTION 92CA OF THE I.T. A CT, 1961 RELATING TO A.Y. 2008-09. APPEAL FILED WAS EARLIER CONSIDERED AND DISMISSED EXPARTE VIDE THE ORDER DATED 07.08.20 13. ASSESSEE PREFERRED MISCELLANEOUS APPLICATION AND TH E ORDER/APPEAL WAS RECALLED VIDE M.A.NO.242/HYD/2013 DATED 22.11.2013. 2. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPANY INCORPORATED ON 19 TH JUNE, 2003 IS A WHOLLY OWNED SUBSIDIARY OF INVENSYS GROUP (HEREINAFTER 2 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. REFERRED TO AS IDC US OR AE). ASSESSEE IS PRIMARIL Y ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES AND QUALITY ASSURANCE AND SUPPORT SERVICES TO ITS GROUP COMPANIES OVERSEAS. F OR PROVISION OF SOFTWARE SERVICES TO AES, ASSESSEE IS REMUNERATED AT COST PLUS 10% MARK UP. FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING INCOME OF RS.6,10,86,409. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE REPORTED REVENUE OF RS. 67,44,77,623 TOWARDS PROVIS ION OF SOFTWARE DEVELOPMENT SERVICES. ASSESSEE UNDERTOO K TP STUDY THROUGH AN EXTERNAL CONSULTANT TO BENCHMAR K THE ALP OF THE INTERNATIONAL TRANSACTION. IN THE TP STUDY, TNMM WAS ADOPTED AS THE MOST APPROPRIATE METHOD. ASSESSEE SELECTED 23 COMPANIES AS COMPARABLES BY UNDERTAKING A SEARCH IN DATABASES HAVING AVERAGE PLI OF 14.41%. AS ASSESSEES MARGIN WAS 9.67%, THE PRICE CHARGED FOR THE INTERNATIONAL TRANSACTION WAS FOUND TO BE WITHIN ARMS LENGTH. T HE ASSESSING OFFICER IN COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS NOTICING THAT REVENUE EARNED FROM INTERNATIONAL TRANSACTION WITH ITS AE HAS EXCEEDED THE THRESHOLD LIMIT MADE A REFERENCE TO THE TPO FOR DETERMINING THE ALP. THE TPO AFTER ANALYSING THE T P STUDY OF ASSESSEE AND OTHER CONNECTED DOCUMENTS THOUGH ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD, HOWEVER REJECTED THE TP REPORT OF ASSESSEE BASICALLY ON THE GROUND THAT ASSESSEE HAS TAKEN I NTO CONSIDERATION MULTIPLE YEAR DATA. THE TPO ALSO NO TED THAT ASSESSEE HAS NOT PROPERLY FOLLOWED THE CRITERI A 3 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. WHILE ACCEPTING/REJECTING THE COMPARABLES AS VERTICALS/HORIZONTALS OF SOFTWARE INDUSTRY WERE NOT CONSIDERED. HE FURTHER NOTED THAT ASSESSEE WHILE APPLYING THE ACCEPT/REJECT MATRIX HAS OMITTED VARIO US COMPANIES THOUGH THEY WERE FUNCTIONALLY SIMILAR TO ASSESSEE AND HAS INCLUDED CERTAIN COMPANIES WHICH A RE NOT AT ALL COMPARABLE. AFTER REJECTING THE TP STUD Y OF ASSESSEE BY POINTING OUT VARIOUS DEFECTS/DEFICIENCI ES, THE TPO BY ADOPTING SOME OF THE FILTERS APPLIED BY ASSESSEE AND APPLYING CERTAIN ADDITIONAL FILTERS UNDERTOOK A SEARCH IN THE DATABASES WHICH YIELDED 1 9 COMPARABLES WITH AN AVERAGE MARGIN OF 26.20%. AFTER MAKING ADJUSTMENT TOWARDS WORKING CAPITAL AT 2.21%, THE ADJUSTED ARITHMETIC MEAN PLI WAS WORKED OUT TO 23.99%. BY APPLYING THE AFORESAID ARITHMETIC MEAN P LI TO THE OPERATING COST OF RS.61,16,13,064 THE ALP WA S DETERMINED AT RS.75,83,39,038. THE PRICE CHARGED BY ASSESSEE TOWARDS INTERNATIONAL TRANSACTION BEING RS.67,44,77,623, SHORTFALL OF RS.8,38,61,415 WAS TREATED AS ADJUSTMENT TO BE MADE U/S 92CA OF THE AC T. AS A CONSEQUENCE OF THE ORDER PASSED BY THE TPO, TH E ASSESSING OFFICER PASSED A DRAFT ASSESSMENT ORDER ADDING TRANSFER PRICING ADJUSTMENT. BEING AGGRIEVE D OF THE PROPOSED ADDITION, ASSESSEE RAISED OBJECTIONS B EFORE THE DRP ON VARIOUS GROUNDS. THE DRP HOWEVER REJECT ED ALMOST ALL OBJECTIONS RAISED BY ASSESSEE EXCEPT IN CASE OF ONE OF THE COMPARABLES SELECTED BY THE TPO I.E. M/S CELESTIAL LABS LIMITED WHICH WAS DIRECTED TO BE EXCLUDED BY THE DRP. 4 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 3. BEING AGGRIEVED OF THE ORDER PASSED BY T HE DRP ASSESSEE IS BEFORE US RAISING AS MANY AS 13 GROUNDS. ASSESSEE ALSO RAISED AN ADDITIONAL GROUND AS 8.1. OBJECTING SELECTION AVANI CIMCON TECHNOLOGIES LTD., AND E-ZEST SOLUTIONS LTD., AS COMPARABLES TO THE SOFTWARE SERVICES SEGMENT OF ASSESSEE. GROUND NOS.1 TO 11 ARE ON TRANSFER PRICING ISSUES. AT THE VERY OUTSET, THE LEARNED AR SUBMITTED BEFORE US THAT HE WANTS TO RESTRICT HIS ARGUMENTS TO THE FOLLOWING TH REE ISSUES. 1) GROUND NO.8 SELECTION OF COMPARABLES BY THE TPO. 2) GROUND NO.9, REJECTION OF COMPARABLES BY TPO. 3) GROUND NO.10 ADJUSTMENT FOR RISK DIFFERENCES. SO FAR AS GROUNDNO.8 IS CONCERNED, OUT OF 18 COMPARABLES SELECTED BY THE TPO, ASSESSEE IS OBJEC TING TO SELECTION OF SIX COMPARABLES. REST OF THE GROUND S ARE NOT PRESSED. 4. HEREINAFTER, WE WILL DEAL WITH EACH OF THE COMPARABLES OBJECTED TO BY ASSESSEE. 1.AVANI CIMCON TECHNOLOGIES LIMITED : 4.1.1 THIS COMPANY WAS SELECTED BY THE TPO AS A COMPARABLE. ASSESSEE OBJECTS TO THE INCLUSION OF TH IS COMPANY AS A COMPARABLE ON THE GROUND THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO ASSESSEE AS IT IS INTO S OFTWARE PRODUCTS WHEREAS ASSESSEE OFFERS SOFTWARE DEVELOPME NT SERVICES TO ITS AES. THE TPO HAD REJECTED THE OBJEC TIONS OF ASSESSEE ON THE GROUND THAT THIS COMPARABLE COMPANY HAS CATEGORIZED ITSELF AS A PURE SOFTWARE DEVELOPER, JU ST LIKE ASSESSEE, AND HENCE SELECTED THIS COMPANY AS A COMP ARABLE. 5 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. FOR THIS PURPOSE, THE TPO HAD RELIED ON INFORMATION SUBMITTED BY THIS COMPANY IN RESPONSE TO ENQUIRIES CARRIED OU T UNDER SECTION 133(6) OF THE ACT FOR COLLECTING INFORMATIO N ABOUT THE COMPANY DIRECTLY. 4.1.2 BEFORE US, THE LEARNED AUTHORISED REPRES ENTATIVE REITERATED ASSESSEE'S OBJECTIONS FOR THE INCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES ON TH E GROUND THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO ASSESSEE AS IT IS INTO SOFTWARE PRODUCTS. IT IS ALSO SUBMITT ED THAT THE SEGMENTAL DETAILS OF THIS COMPANY ARE NOT AVAILABLE AND THE ANNUAL REPORT AVAILABLE IN THE PUBLIC DOMAIN IS NOT COMPLETE. IN SUPPORT OF THIS COMPARABLE, THE LEARNED AUTHORIS ED REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING JUD ICIAL DECISIONS : I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALORE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013. 4.1.3 PER CONTRA, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUPPORTED THE ORDER OF THE TPO / DRP FOR INCLUSION OF THIS COMPANY AVANI CINCOM TECHNOLOGIES LTD. IN THE FINAL SET OF COMPARABLES. 4.1.4 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY, CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY IN TH E FINAL SET OF COMPARABLES ONLY ON THE BASIS OF INFORMATION OBT AINED UNDER SECTION 133(6) OF THE ACT. WE ALSO FIND SUBST ANTIAL MERIT 6 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. IN THE CONTENTION OF THE LEARNED AUTHORISED REPRESE NTATIVE THAT THIS COMPANY HAS BEEN SELECTED BY THE TPO AS AN ADD ITIONAL COMPARABLE ONLY ON THE GROUND THAT THIS COMPANY WAS SELECTED IN THE EARLIER YEAR. APART FROM PLACING RELIANCE ON THE JUDICIAL DECISIONS CITED ABOVE, INCLUDING ASSESSEE'S OWN CAS E FOR ASSESSMENT YEAR 2007-08, ASSESSEE HAS BROUGHT ON RE CORD EVIDENCE THAT THIS COMPANY IS FUNCTIONALLY DISSIMIL AR AND DIFFERENT FROM ASSESSEE AND HENCE IS NOT COMPARABLE . THEREFORE THE FINDING EXCLUDING IT FROM THE LIST OF COMPARABL ES RENDERED IN THE IMMEDIATELY PRECEDING YEAR IS APPLICABLE IN THIS YEAR ALSO. SINCE THE FUNCTIONAL PROFILE AND OTHER PARAME TERS BY THIS COMPANY HAVE NOT UNDERGONE ANY CHANGE DURING THE YE AR UNDER CONSIDERATION WHICH FACT HAS BEEN DEMONSTRATE D BY ASSESSEE, FOLLOWING THE DECISIONS OF THE CO-ORDINAT E BENCHES OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.1780/HYD/2011, AND THE FINDINGS I N THE ABOVE CITED CASES WHEREIN THIS COMPANY WAS EXCLUDED , WE DIRECT THE A.O./TPO TO EXCLUDE THIS COMPANY FROM TH E LIST OF COMPARABLES. 2. E-ZEST SOLUTION LTD : 4.2.1 THIS COMPANY WAS SELECTED BY THE TPO AS A COMPARABLE. BEFORE THE TPO, ASSESSEE HAD OBJECTED T O THE INCLUSION OF THIS COMPANY AS A COMPARABLE ON THE GR OUND THAT IT WAS FUNCTIONALLY DIFFERENT FROM ASSESSEE. THE TP O HAD REJECTED THE OBJECTIONS RAISED BY ASSESSEE ON THE G ROUND THAT AS PER THE INFORMATION RECEIVED IN RESPONSE TO NOTI CE UNDER SECTION 133(6) OF THE ACT, THIS COMPANY IS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES AND SATISFIES ALL THE FILTERS. 7 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 4.2.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTA TIVE CONTENDED THAT THIS COMPANY OUGHT TO BE EXCLUDED FR OM THE LIST OF COMPARABLES ON THE GROUND THAT IT IS FUNCTI ONALLY DIFFERENT TO ASSESSEE. IT IS SUBMITTED BY THE LEARN ED AUTHORISED REPRESENTATIVE THAT THIS COMPANY IS ENGAGED IN E-B USINESS CONSULTING SERVICES, CONSISTING OF WEB STRATEGY SE RVICES, I T DESIGN SERVICES AND IN TECHNOLOGY CONSULTING SERVIC ES INCLUDING PRODUCT DEVELOPMENT CONSULTING SERVICES A ND ENTERPRISE SOLUTIONS. IT IS FURTHER SUBMITTED THAT THIS COMPANY HAS NOT PROVIDED SEGMENTAL DATA IN ITS ANNUAL REPOR T. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITS THAT SINC E THE ANNUAL REPORT OF THE COMPANY DOES NOT CONTAIN DETAI LED DESCRIPTIVE INFORMATION ON THE BUSINESS OF THE COMP ANY, ASSESSEE PLACES RELIANCE ON THE DETAILS AVAILABLE O N THE COMPANYS WEBSITE WHICH SHOULD BE CONSIDERED WHILE EVALUATING THE COMPANYS FUNCTIONAL PROFILE. IT IS ALSO SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT KPO SERVICES ARE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND THEREFORE COMPANIES RENDERING KPO SERVICES OUGH T NOT TO BE CONSIDERED AS COMPARABLE TO SOFTWARE DEVELOPMENT COMPANIES AND RELIED ON THE DECISIONS OF THE COORDI NATE BENCHES OF THE TRIBUNAL IN THE CASES OF (I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DE LHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013 AND (II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALO RE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013 A ND PRAYED THAT IN VIEW OF THE ABOVE REASONS, THIS COMP ANY I.E. E- ZEST SOLUTIONS LTD., OUGHT TO BE OMITTED FROM THE L IST OF COMPARABLES. 8 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 4.2.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE INCLUSION OF THIS COMP ANY IN THE LIST OF COMPARABLES BY THE TPO. 4.2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED CAREFULLY THE MATERIAL ON RECORD. IT IS SEEN FROM T HE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY IN THE LIST OF CO MPARABLES ONLY ON THE BASIS OF THE STATEMENT MADE BY THE COMP ANY IN ITS REPLY TO THE NOTICE UNDER SECTION 133(6) OF THE ACT . IT APPEARS THAT THE TPO HAS NOT EXAMINED THE SERVICES RENDERED BY THE COMPANY TO GIVE A FINDING WHETHER THE SERVICES PERF ORMED BY THIS COMPANY ARE SIMILAR TO THE SOFTWARE DEVELOPME NT SERVICES PERFORMED BY ASSESSEE. FROM THE DETAILS ON RECORD, WE FIND THAT WHILE ASSESSEE IS INTO SOFTWARE DEVELOPMENT SE RVICES, THIS COMPANY I.E. E-ZEST SOLUTIONS LTD., IS RENDERING PR ODUCT DEVELOPMENT SERVICES AND HIGH END TECHNICAL SERVICE S WHICH COME UNDER THE CATEGORY OF KPO SERVICES. IT HAS BEE N HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF CAPITAL I-Q INFORMATION SYSTEMS (INDIA) (P) LTD. THAT KPO SERVICES ARE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND ARE THEREFORE NOT COMPARABLE. FURTHER, THE DECISIONS OF THE CO- ORDINATE BENCH IN THE AFORESAID CASES OF (I) AGNIT Y INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DE LHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013 AND (II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALO RE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013, WE HOLD THAT THIS COMPANY, I.E. E-ZEST SOLUTIONS LTD. BE EX CLUDED FROM THE SET OF COMPARABLES. 9 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 3. INFOSYS TECHNOLOGIES LTD.: 4.3.1 THIS WAS A COMPARABLE SELECTED BY THE TPO. B EFORE THE TPO, ASSESSEE OBJECTED TO THE INCLUSION OF THE COMPANY IN THE SET OF COMPARABLES, ON THE GROUNDS OF TURNOVER AND BRAND EFFECTING PROFIT MARGIN. THE TPO, HOWEVER, REJECTED THESE OBJECTIONS RAISED BY ASSESSEE ON THE GROUNDS THAT T URNOVER AND BRAND ASPECTS WERE NOT MATERIALLY RELEVANT IN T HE SOFTWARE DEVELOPMENT SEGMENT. 4.3.2 BEFORE US, THE LEARNED AUTHORISED REPRESENT ATIVE CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COM PARABLE TO ASSESSEE. THE LEARNED AUTHORISED REPRESENTATIVE DRE W OUR ATTENTION TO VARIOUS PARTS OF THE ANNUAL REPORT OF COMPANY TO SUBMIT THAT THIS COMPANY COMMANDS SUBSTANTIAL BRAND VALUE, OWNS INTELLECTUAL PROPERTY RIGHTS AND IS A MARKET L EADER IN SOFTWARE DEVELOPMENT ACTIVITIES, WHEREAS ASSESSEE IS MERELY A SOFTWARE SERVICE PROVIDER AND DOES NOT POSSESS EITH ER ANY BRAND VALUE OR OWN ANY INTANGIBLE OR INTELLECTUAL P ROPERTY RIGHTS (IPRS). THE OBSERVATION OF THE ITAT, DELHI B ENCH IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. IN ITA NO.3856 (DEL)/2010 AT PARA 5.2 THEREOF, THAT INFOSYS TECHNO LOGIES LTD. BEING A GIANT COMPANY AND MARKET LEADER ASSUMING AL L RISKS LEADING TO HIGHER PROFITS CANNOT BE CONSIDERED AS C OMPARABLE TO CAPTIVE SERVICE PROVIDERS ASSUMING LIMITED RISK WAS RELIED ON. LEARNED AUTHORISED REPRESENTATIVE PLEADED THAT, THIS COMPANY I.E. INFOSYS TECHNOLOGIES LTD., BE EXCLUDED FORM THE LIST OF COMPARABLE COMPANIES. 4.3.3 PER CONTRA, OPPOSING THE CONTENTIONS OF ASS ESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT COMPARABILITY CANNOT BE DECIDED MERELY ON THE BASIS OF SCALE OF 10 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. OPERATIONS AND THE BRAND AS PROFIT MARGINS OF THIS COMPANY HAVE NOT BEEN EXTRAORDINARY. IN VIEW OF THIS, THE L EARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE DECISION OF THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARAB LE COMPANIES. 4.3.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE ARE INCLINED TO CONCUR WITH THE ARGUMENT PUT FORTH BY A SSESSEE THAT INFOSYS TECHNOLOGIES LTD IS NOT FUNCTIONALLY C OMPARABLE SINCE IT OWNS SIGNIFICANT INTANGIBLES AND HAS HUGE REVENUES FROM SOFTWARE PRODUCTS. IT IS ALSO SEEN THAT THE BR EAK-UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCT S IS NOT AVAILABLE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THIS COMPANY OUGHT TO BE OMITTED FROM THE SET OF COMPARABLE COMP ANIES. COORDINATE BENCHES IN THE FOLLOWING CASES HAVE HELD THAT THIS COMPANY CANNOT BE TAKEN AS COMPARABLE. WE RELY ON T HEM. I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALORE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013. III) ADAPTEC (INDIA) P. LTD., HYDERABAD VS. ACIT, CIRCLE 1(1), HYDERABAD ITA.NO.1758/HYD/2012 DATED 21.03.2014. IV) M/S. PATNI TELECOM SOLUTIONS P. LTD., HYDERABAD VS. ACIT, CIRCLE 16(3), HYDERABAD ITA.NO.1846/ HYD/ 2012 DATED 25.04.2013. AO/TPO IS DIRECTED TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 11 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 4. KALS INFORMATION SYSTEMS LTD: 4.4.1 THIS IS A COMPARABLE SELECTED BY THE TPO. BE FORE THE TPO, ASSESSEE HAD OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES ON GROUNDS OF FUN CTIONAL DIFFERENCES AND THAT THE SEGMENTAL DETAILS HAVE NOT BEEN PROVIDED IN THE ANNUAL REPORT OF THE COMPANY WITH R ESPECT TO SOFTWARE SERVICES REVENUE AND SOFTWARE PRODUCTS REV ENUE. THE TPO, HOWEVER, REJECTED THE OBJECTIONS OF ASSESSEE O BSERVING THAT THE SOFTWARE PRODUCTS AND TRAINING CONSTITUTES ONLY 4.24% OF TOTAL REVENUES AND THE REVENUE FROM SOFTWARE DEV ELOPMENT SERVICES CONSTITUTES MORE THAN 75% OF THE TOTAL OPE RATING REVENUES FOR THE F.Y. 2007-08 AND QUALIFIES AS A CO MPARABLE BY THE SERVICE INCOME FILTER. 4.4.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTA TIVE CONTENDED THAT THIS COMPANY IS NOT FUNCTIONALLY COM PARABLE TO ASSESSEE AND OUGHT TO BE REJECTED/EXCLUDED FROM THE LIST OF COMPARABLES FOR THE FOLLOWING REASONS :- (I) THIS COMPANY IS FUNCTIONALLY DIFFERENT FROM THE SOFTWARE ACTIVITY OF ASSESSEE AS IT IS INTO SOFTWARE PRODUCT S. (II) THIS COMPANY HAS BEEN HELD TO BE DIFFERENT FRO M A SOFTWARE DEVELOPMENT COMPANY IN THE DECISION OF THE TRIBUNAL IN THE CASE OF BINDVIEW INDIA PVT. LTD.V DCIT IN ITA NO.1386/PN/2010. (III) THE REJECTION OF THIS COMPANY AS A COMPARABLE HAS BEEN UPHELD BY CO-ORDINATE BENCHES OF THE TRIBUNAL IN TH E CASE OF 12 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALORE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013. III) SYMPHONY SERVICES PUNE P. LTD., VS. ITO, WARD 1(4), PUNE ITA.NO.257/PN/2013 DATED 30.04.2014. IV) TRIOLOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (ITA.NO.1054/ BANG/2011). V) LG SOFT INDIA PVT. LTD. (IT (TP) A NO.112/BANG/2011) VI) CSR INDIA PVT. LTD. (IT (TP) A NO.1119/BANG/2011) AND VII) TRANSWITCH INDIA PVT. LTD. (ITA NO.6083/DEL/2010) (IV) THE FACTS PERTAINING TO THIS COMPANY HAS NOT C HANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09 AND THEREFORE THIS COMPANY CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPARABILITY. IN SUPPORT OF THIS CONTENTION, TH E LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO VAR IOUS PARTS OF THE ANNUAL REPORT OF THIS COMPANY. (V) THIS COMPANY IS ENGAGED NOT ONLY IN THE DEVELOP MENT OF SOFTWARE PRODUCTS BUT ALSO IN THE PROVISION OF TRAI NING SERVICES AS CAN BE SEEN FROM THE WEBSITE AND THE ANNUAL REPO RT OF THE COMPANY FOR THE YEAR ENDED 31.3.2008. (VI) THIS COMPANY HAS TWO SEGMENTS; NAMELY, 13 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. A) APPLICATION SOFTWARE SEGMENT WHICH INCLUDES SOFT WARE PRODUCT REVENUES FROM TWO PRODUCTS I.E. VIRTUAL IN SURE AND LA-VISION AND B) THE TRAINING SEGMENT WHICH DOES NOT HAVE ANY PRO DUCT REVENUES. 4.4.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE DECISION OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TRIOLOGY E-BUS INESS SOFTWARE INDIA PVT. LTD. (SUPRA) WAS RENDERED WITH RESPECT TO F.Y.2006-07 AND THEREFORE THERE CANNOT BE AN ASSUMP TION THAT IT WOULD CONTINUE TO BE APPLICABLE TO THE YEAR UNDE R CONSIDERATION I.E. A.Y. 2008-09. TO THIS, THE COUNT ER ARGUMENT OF THE LEARNED AUTHORISED REPRESENTATIVE IS THAT TH E FUNCTIONAL PROFILE OF THIS COMPANY CONTINUES TO REMAIN THE SAM E FOR THE YEAR UNDER CONSIDERATION ALSO AND THE SAME IS EVIDE NT FROM THE DETAILS CULLED OUT FROM THE ANNUAL REPORT AND QUOTE D ABOVE. 4.4.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND FROM THE RECORD THAT THE TPO HAS DRAWN CONCLUSIONS AS TO THE COMPAR ABILITY OF THIS COMPANY TO ASSESSEE BASED ON INFORMATION OBTAI NED U/S.133(6) OF THE ACT. WE ALSO FIND THAT THE CO-ORD INATE BENCHES OF THIS TRIBUNAL HAVE HELD THAT THIS COMPAN Y WAS DEVELOPING SOFTWARE PRODUCTS AND WAS NOT PURELY OR MAINLY A SOFTWARE SERVICE PROVIDER. APART FROM RELYING OF TH E ABOVE CITED DECISIONS OF CO-ORDINATE BENCHES OF THE TRIBUNAL (S UPRA), ASSESSEE HAS ALSO BROUGHT ON RECORD EVIDENCE FROM V ARIOUS PORTIONS OF THE COMPANYS ANNUAL REPORT TO ESTABLIS H THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND DIFFERENT FO RM ASSESSEE AND THAT SINCE THE FINDINGS RENDERED IN THE DECISIO NS OF THE CO- 14 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. ORDINATE BENCHES OF THE TRIBUNAL FOR ASSESSMENT YEA R 2007-08 (CITED SUPRA) ARE APPLICABLE FOR THIS YEAR I.E. ASS ESSMENT YEAR 2008-09 ALSO, THIS COMPANY OUGHT TO BE EXCLUDED FRO M THE LIST OF COMPARABLES. IN THIS VIEW OF THE MATTER, WE HOLD THAT THIS COMPANY I.E. KALS INFORMATION SYSTEMS LTD., IS TO B E OMITTED FROM THE LIST OF COMPARABLE COMPANIES. 5. TATA ELXSI LTD: 4.5.1 THIS COMPANY WAS A COMPARABLE SELECTED BY TH E TPO. BEFORE THE TPO, ASSESSEE HAD OBJECTED TO THE I NCLUSION OF THIS COMPANY IN THE SET OF COMPARABLES ON SEVERAL C OUNTS LIKE, FUNCTIONAL DISSIMILARITY, SIGNIFICANT R&D ACTIVITY, BRAND VALUE, SIZE, NICHE PRODUCTS ETC. THE TPO, HOWEVER, REJECTE D THE CONTENTION PUT FORTH BY ASSESSEE AND INCLUDED THIS COMPANY IN THE SET OF COMPARABLES. 4.5.2 BEFORE US IT WAS REITERATED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO ASSESSEE AS IT PERFORMS A VARIETY OF FUNCTIONS UNDER SOFTWARE DEVELOPMENT AND SERVICES S EGMENT NAMELY A) PRODUCT DESIGN, (B) INNOVATION DESIGN E NGINEERING AND (C) VISUAL COMPUTING LABS AS IS REFLECTED IN TH E ANNUAL REPORT OF THE COMPANY. THE LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED THAT, (I) THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA TECHNOLOGIES PVT. LTD. (SUPRA) HAS HELD THAT TATA ELXSI LTD. IS NOT A FUNCTIONALLY COMPARABLE FOR A S OFTWARE DEVELOPMENT SERVICE PROVIDER. 15 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. (II) THE FACTS PERTAINING TO TATA ELXSI LTD. HAVE N OT CHANGED FROM THE EARLIER YEAR I.E. ASSESSMENT YEAR 2007-08 TO THE PERIOD UNDER CONSIDERATION I.E. ASSESSMENT YEAR 200 8- 09 AND THEREFORE THIS COMPANY CANNOT BE CONSIDERED AS A CO MPARABLE TO ASSESSEE IN THE CASE ON HAND, AS THE SAME WAS EX CLUDED IN EARLIER YEAR BY ITAT IN ASSESSEE OWN CASE. (III) TATA ELXSI LTD. IS PREDOMINANTLY ENGAGED IN P RODUCT DESIGNING SERVICES AND IS NOT PURELY A SOFTWARE DEV ELOPMENT SERVICE PROVIDER. IN THE ANNUAL REPORT OF THIS COMP ANY THE DESCRIPTION OF THE SEGMENT SOFTWARE DEVELOPMENT SE RVICES RELATES TO DESIGN SERVICES AND ARE NOT TO SOFTWARE SERVICES PROVIDED BY ASSESSEE. (IV) TATA ELXSI LTD. INVESTS SUBSTANTIAL FUNDS IN R ESEARCH AND DEVELOPMENT ACTIVITIES WHICH HAS RESULTED IN THE E MBEDDED PRODUCT DESIGN SERVICES SEGMENT OF THE COMPANY TO CREATE A PORTFOLIO OF REUSABLE SOFTWARE COMPONENTS, READY TO DEPLOY FRAMEWORKS, LICENSABLE IPS AND PRODUCTS. THE LEARNE D AUTHORISED REPRESENTATIVE PLEADS THAT IN VIEW OF TH E ABOVE REASONS, TATA ELXSI LTD. IS CLEARLY FUNCTIONALLY DI FFERENT / DIS- SIMILAR FROM ASSESSEE AND THEREFORE OUGHT TO BE OMI TTED FORM THE LIST OF COMPARABLES. (V) THE LEARNED A.R. FURTHER RELIED ON THE COORDINA TE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES : I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CI RCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DEL MIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1 ), BANGALORE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013. 16 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 4.5.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE STAND OF THE TPO IN IN CLUDING THIS COMPANY IN THE LIST OF COMPARABLES. 4.5.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PER USED AND CONSIDERED THE MATERIAL ON RECORD. FROM THE DET AILS ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWARE DEVELOPMENT SERVICES. THE DETAILS IN THE ANNUAL REP ORT SHOW THAT THE SEGMENT SOFTWARE DEVELOPMENT SERVICES RE LATES TO DESIGN SERVICES AND ARE NOT SIMILAR TO SOFTWARE DEV ELOPMENT SERVICES PERFORMED BY ASSESSEE. 4.5.5 THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. V ACIT (ITA NO.7821/MUM/2011) HAS HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEVELOPMENT SERVICE PROVIDER AND THEREFORE IT IS NOT FUNCTIONALLY COMPARABLE. IN THIS CONTEXT THE RELEVA NT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED BELOW :- . TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY DIFFEREN T FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE NATU RE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COM PANY ARE DIFFERENT FROM ASSESSEE AS HAVE BEEN NARRATED I N PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE S ALES HAVE NOT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO F ROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMPARABILITY ANAL YSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR ASSESSEE, HE NCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE PORT ION. AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REPO RT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINING TO TATA ELXSI 17 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. HAVE NOT CHANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09. WE, THEREFORE, HOLD THAT T HIS COMPANY IS NOT TO BE CONSIDERED FOR INCLUSION IN TH E SET OF COMPARABLES IN THE CASE ON HAND. IT IS ORDERED ACCO RDINGLY. 6. WIPRO LTD: 4.6.1. THIS COMPANY WAS SELECTED AS A COMPARABLE B Y THE TPO. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO T HE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE S ON SEVERAL GROUNDS LIKE FUNCTIONAL DISSIMILARITY, BRAND VALUE, SIZE, ETC. THE TPO, HOWEVER, BRUSHED ASIDE THE OBJECTIONS OF T HE ASSESSEE AND INCLUDED THIS COMPANY IN THE SET OF CO MPARABLES. 4.6.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTA TIVE OF THE ASSESSEE CONTENDED THAT THIS COMPANY I.E. WI PRO LTD., IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE FOR THE FOLLOWING REASONS :- (I) THIS COMPANY OWNS SIGNIFICANT INTANGIBLES IN TH E NATURE OF CUSTOMER RELATED INTANGIBLES AND TECHNOLOGY RELATED INTANGIBLES, OWNS IPRS AND HAS BEEN GRANTED 40 REGI STERED PATENTS AND HAS 62 PENDING APPLICATIONS AND ITS ANN UAL REPORT CONFIRMS THAT IT OWNS PATENTS AND INTANGIBLE S. (II) THE ITAT, DELHI OBSERVATION IN THE CASE OF AGN ITY INDIA TECHNOLOGIES PVT. LTD. IN ITA NO.3856(DEL)/2010 AT PARA 5.2 THEREOF, THAT INFOSYS TECHNOLOGIES LTD. BEING A GIA NT COMPANY AND A MARKET LEADER ASSUMING ALL RISKS LEADING TO H IGHER PROFITS, CANNOT BE CONSIDERED AS COMPARABLE TO CAPT IVE SERVICE PROVIDERS ASSUMING LIMITED RISK; 18 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. (III) THE COORDINATE BENCH OF THE ITAT, MUMBAI IN T HE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. (ITA NO.7821/MUM/2011) HAS HELD THAT WIPRO LTD. IS NOT FUNCTIONALLY COMPARABLE TO A SOFTWARE SERVICE PROVI DER. (IV) WIPRO LTD. IS ENGAGED IN BOTH SOFTWARE DEVELOP MENT AND PRODUCT DEVELOPMENT SERVICES. NO INFORMATION IS AVA ILABLE ON THE SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF P RODUCTS AND SOFTWARE SERVICES. (V) THE TPO HAS ADOPTED CONSOLIDATED FINANCIAL STAT EMENTS FOR COMPARABILITY PURPOSES AND FOR COMPUTING THE MARGIN S, WHICH IS IN CONTRADICTION TO THE TPOS OWN FILTER OF REJE CTING COMPANIES WITH CONSOLIDATED FINANCIAL STATEMENTS. (VI) THE LEARNED A.R. FURTHER RELIED ON THE FOLLOWI NG DECISIONS : I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIRCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20 TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DELMIA SOLUTIONS P. LTD.,) BANGALORE VS. DCIT, CIRCLE 11(1), BANGALORE I.T.(T.P.)A.NO.1303/ BANG / 2012 DATED 28.11.2013. III) ADAPTEC (INDIA) P. LTD., HYDERABAD VS. ACIT, CIRCLE 1(1), HYDERABAD ITA.NO.1758/HYD/2012 DATED 21.03.2014. IV) M/S. PATNI TELECOM SOLUTIONS P. LTD., HYDERABAD VS. ACIT, CIRCLE 16(3), HYDERABAD ITA.NO.1846/ HYD/ 2012 DATED 25.04.2013. 4.6.3. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ACTION OF THE TPO IN I NCLUDING THIS COMPANY IN THE LIST OF COMPARABLES. 19 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. 4.6.4. WE HAVE HEARD BOTH PARTIES AND CAREFULLY P ERUSED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND MERI T IN THE CONTENTIONS OF THE ASSESSEE FOR EXCLUSION OF THIS C OMPANY FROM THE SET OF COMPARABLES. IT IS SEEN THAT THIS COMPAN Y IS ENGAGED BOTH IN SOFTWARE DEVELOPMENT AND PRODUCT DEVELOPMEN T SERVICES. THERE IS NO INFORMATION ON THE SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF PRODUCT AND SOFTWARE SERVIC ES. THE TPO APPEARS TO HAVE ADOPTED THIS COMPANY AS A COMPARABL E WITHOUT DEMONSTRATING HOW THE COMPANY SATISFIES THE SOFTWARE DEVELOPMENT SALES 75% OF THE TOTAL REVENUE FILTER A DOPTED BY HIM. WE ALSO FIND THAT THIS COMPANY OWNS INTELLECTU AL PROPERTY IN THE FORM OF REGISTERED PATENTS AND SEVE RAL PENDING APPLICATIONS FOR GRANT OF PATENTS. IN THIS REGARD, THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM PVT. LTD. HAS HELD THAT A COMPANY OWNI NG INTANGIBLES CANNOT BE COMPARED TO A LOW RISK CAPTIV E SERVICE PROVIDER WHO DOES NOT OWN ANY SUCH INTANGIBLE AND H ENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET . AS THE ASSESSEE IN THE CASE ON HAND DOES NOT OWN ANY INTAN GIBLES, FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCHES CITED SUPRA, WE HOLD THAT THIS COMPANY CANNOT BE CO NSIDERED AS A COMPARABLE TO THE ASSESSEE. WE, THEREFORE, DIR ECT THE ASSESSING OFFICER/TPO TO OMIT THIS COMPANY FROM THE SET OF COMPARABLE COMPANIES. 7. RISK ADJUSTMENT: 7.1. IN THE GROUNDS OF APPEAL AT S.NO.10, ASSESSEE HAS SUBMITTED THAT IT HAS A LIMITED RISK PROFILE VIS-- VIS THE COMPARABLE COMPANIES SELECTED BY THE TPO AND THEREF ORE THE TPO OUGHT TO HAVE ALLOWED APPROPRIATE POSITIVE ADJU STMENTS TO 20 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. ACCOUNT FOR DIFFERENCES BETWEEN THE RISK PROFILE OF ASSESSEE AND THE COMPANIES IDENTIFIED BY THE TPO AS COMPARABLES. 7.2. WE HAVE HEARD BOTH THE LEARNED AUTHORISED REPRESENTATIVE AND LEARNED DEPARTMENTAL REPRESENTAT IVE IN THE MATTER AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. AS REGARDS RISK ADJUSTMENT, THE TPO HAS ALLOWED ADJUSTMENT BY MAKING NEGATIVE ADJUSTMENT . CONSEQUENT TO OUR DECISION ON COMPARABLES THE RISK ADJUSTMENT MAY VARY. THEREFORE AO/TPO IS DIRECTED TO RE-WORKOUT THE SAME AFTER GIVING DUE OPPORTUNITY TO ASSESSEE FOR MAKING SUBMI SSIONS. THEREFORE, ISSUE OF RISK ADJUSTMENT IS RESTORED T O THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH CONSIDERATION. 8. COMPARABLES OMITTED BY AO/TPO. 8.1. ASSESSEE WANTS THE FOLLOWING COMPANIE S TO BE CONSIDERED AS COMPARABLES, WHICH ARE EXCLUDED BY TP O. S.NO. NAME OF THE COMPANY AVERAGE 1. ADITYA BIRLA MINACS IT SERVICES LTD., (PSI DATA SYSTEMS) 7.73% 2. ADITYA BIRLA MINACS TECHNOLOGIES LTD., (BIRLA TECHNOLOGIES) 6.04% 3. CG-VAK SOFTWARE EXPORTS LTD., (SEG.) -1.41% 4. GOLDSTONE TECHNOLOGIES LTD., 11.50% 5. INDIUM SOFTWARE INDIA LTD., -0.57% 6. THINKSOFT GLOBAL SERVICES LTD., 16.50% 7. LARSEN & TOUBRO INFOTECH LTD., 17.54% 8. V M F SOFTECH LTD., 3.65% AVERAGE 7.62% 8.2. HOWEVER THE LD. COUNSEL HAS NOT PRESSED FOR INCLUSION OF THE SAME AS EXCLUSION OF ABOVE COMPANI ES (DISCUSSED IN PARA 4 ABOVE) WILL RESULT IN ADJUSTED ALP WHICH IS SIMILAR TO ASSESSEE, THEREBY RESULTING IN ASSESSEE PROFIT MARGIN 21 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. AT ARMS LENGTH. SINCE INCLUSION OF ABOVE COMPANIES MAY BE ACADEMIC, WE DO NOT INTEND TO EXAMINE MERITS OF ASS ESSEE CONTENTIONS AT PRESENT. 9. CHARGING OF INTEREST UNDER SECTIONS 234B AND 2 34D OF THE ACT. 9.1. IN THE GROUNDS RAISED AT SL.NO.12, ASSESSEE CHALLENGES THE ASSESSING OFFICERS ACTION IN CHARGI NG ASSESSEE INTEREST UNDER SECTION 234B/234D OF THE ACT. THE CH ARGING OF INTEREST UNDER THE AFORESAID SECTIONS IS CONSEQUENT IAL AND MANDATORY AND THE ASSESSING OFFICER HAS NO DISCRETI ON IN THE MATTER AND IN THIS VIEW OF THE MATTER, WE UPHOLD HI S ACTION IN CHARGING THE SAID INTEREST. THE ASSESSING OFFICER I S, HOWEVER, DIRECTED TO RE-COMPUTE THE INTEREST CHARGEABLE UNDE R SECTION 234B/234D OF THE ACT, IF ANY, WHILE GIVING EFFECT T O THIS ORDER. 10. IN THE RESULT, APPEAL OF ASSESSEE IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12.11.201 4. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH NOVEMBER, 2014 VBP/- COPY TO 1. INVENSYS DEVELOPMENT CENTRE INDIA P. LTD., PLOT NO.18, 7 TH FLOOR, C-BLOCK, ILABS CENTRE, MADHAPUR, HYDERABAD 500 081. 2. THE ACIT, CIRCLE 2(1), 8 TH FLOOR, IT TOWERS, MASAB TANK, HYDERABAD. 3. DISPUTE RESOLUTION PANEL, HYDERABAD. 4. DIRECTOR OF INCOME TAX (TRANSFER PRICING), CHENN AI, MEMBER DRP, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD.