Cavium Networks India Private Limited, Hyderabad V. Asst. Commissioner of Income Tax, Circle-1(2), Hyderabad

ITA 1700/Hyd/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0740 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2015-2016
• Appeal Filed On: 20-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SIBENDU MOHARANA
• Assessee Lawyers: DANISH BAF N A
• Keywords: Transfer pricing; International transaction; Application of stay; Bad and doubtful debts
• Section: 92; 133(6); 201; 144C; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES : BENCH A HYDERABAD (THROUGH VIDEO CONFERENCE ) BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1 700 /HYD/201 9 A.Y. 201 5 - 16 & S.A. NO. 118/HYD/2020 (IN ITA NO. 1700/HYD/2019) AY. 2015 - 16 CAVIUM NETWORKS INDIA PVT. LTD. HYDERABAD [PAN: AA CCC1316J ] VS. A CIT, CIRCLE 1( 2 ) HYDERAB A D ( APPELLANT) (RESPONDENT) ASSESSEE BY: S H. DANISH BAF N A, ADV. REVENUE BY : SRI S IBENDU MOHARANA, DR DATE OF HEARING: 02 /0 2 /2021 DATE OF PRONOUNCEMENT: 18 /02/2021 ORDER PER BENCH THIS ASSESSEES MAIN APPEAL ITA 1700/HYD/18 AS WELL AS ITS STAY APPLICATION S.A.NO.118/H/2020 FOR A.Y.201 5 - 16 ARISE FROM ASST. COMMISSIONER OF INCOME TAX (APPEALS) , CIRCLE 1(2), [ A CIT], HYDERABADS ASSESSMENT DATED 25 TH OCTOBER, 2019 FRAMED IN FURTHERANCE TO DISPUTE RESOLUTION PANEL - 1 [ DRP - 1] BENGALURUS DIRECTION S DATED 17.09.2019 ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 2 CULMINATING IN ARMS LENGTH PRICE (ALP) ADJUSTMENT OF RS.5 , 85 , 28 , 202 / - IN PROCEEDINGS U/S 144C OF THE INCOME TAX ACT, 1961 [IN SHORT THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE ADVERT TO THE ASSESSEES FOREGOING MAIN APPEAL ITA 1700/HYD/2019 WHEREIN IT HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS. THE GROUNDS STATED HEREUNDER ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO ONE ANOTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED ASSESSING OFFICER ('LD. AO'), FOLLOWING THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION P ANEL ('LD. DRP'), ERRED IN CONFIRMING THE ACTION OF THE LEARNED TRANSFER PRICING OFFICER ('LD. TPO') IN REJECTING THE ARM'S LENGTH PRICE ('ALP') COMPUTATION UNDERTAKEN BY THE APPELLANT FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS PERTAINING TO SOFTWARE DEVELOPMENT SERVICES ('SDS') AND MARKETING SUPPORT SERVICES ('MSS'), THEREBY MAKING A TRANSFER PRICING ('TP') ADJUSTMENT OF INR 5,63,19,340 AND INR 22,08,862, RESPECTIVELY. THE APPELLANT PRAYS THAT THE TP ANALYSIS CONDUCTED BY THE APPELLANT OUGHT TO BE AC CEPTED AND CONSEQUENTLY THE TP ADJUSTMENT OUGHT TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO / LD. TPO/ LD. DRP ERRED IN: A) REJECTING THE TRANSFER PRICING STUDY WHICH WAS MAINTAINED IN GOOD FAITH AND WITH DUE DILIGENCE; B) REJECTING THE SEARCH PROCESS FOLLOWED BY THE APPELLANT AND CARRYING OUT FRESH COMPARABILITY ANALYSIS FOR DETERMINING THE ARM'S LENGTH PRICE; 3. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AOI LD. DRP/LD. TPO HAS ERRED IN REJECTING THE APPELLANT'S CONTENTION THAT THE USE OF INFORMATION UNDER SECTION 133(6) OF THE ACT, TANTAMOUNT TO CHOOSING SECRET COMPARABLE COMPANIES WHOSE INFO RMATION WERE NOT AVAILABLE IN PUBLIC DOMAIN WHILE UNDERTAKING THE TP STUDY FOR THE RESPECTIVE FINANCIAL YEAR ('FY'). 4. SOFTWARE DEVELOPMENT SERVICES SEGMENT (SDS SEGMENT) : 4.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO / LD. TPO/ LD. DRP ERRED IN: ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 3 A) APPLYING MODIFYING CERTAIN FILTERS WHILE UNDERTAKING COMPARABILITY ANALYSIS; AND B) NOT APPRECIATING APPLICATION OF TURNOVER FILTER FOR ACCEPTING COMPANIES HAVING TURNOVER IN THE RANGE OF INR 1 CRORES TO INR 200 CRORES. 4.2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO/LD.DRP/LD. TPO HAS ERRED IN CONSIDERING COMPANIES INCURRING SIGNIFICANT ONSITE EXPENDITURE AS COMPARABLE COMPANY. 4.3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO/ LD. DRP/LD. TPO HAS ERRED IN NOT CONSIDERING INFORMATION AVAILABLE ON WEBSITE OF COMPANIES AS REASONABLE SOURCE OF INFORMATION FOR DETERMINING THE FUNCTIONAL COMPARABILITY OF COMPANIES. 4.4. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. AO/ LD. TPO/LD. DRP ERRED IN INCLUDING THE FOLLOWING COMPANIES IN THE COMPARABLE SET WHICH ARE NOT COMPARABLE TO THE SDS SEGMENT'S FUNCTIONS, ASSET BASE AND RISK PROFILE: A) INFOSYS LTD. B) CYBAGE SOFTWARE PVT. LTD. C) PERSISTENT SYSTEMS LTD D) ASPIRE SYSTEMS (INDIA) PVT. LTD. E) INTEQ SOFTWARE PVT. LTD. F) NIHILENT TECHNOLOGIES LTD. G) INFOBEANS TECHNOLOGIES LTD. H) R S SOFTWARE (INDIA) LTD. I) LARSEN & TOURBO INFOTECH LTD. J) MINDTREE LT D. K) TATA ELXSI LIMITED (SOFTWARE DEVELOPMENT SEGMENT) L ) RHEAL SOFTWARE INDIA PRIVATE LIMITED 4.5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO / LD. TPO / LD. DRP ERRED IN EXCLUDING THE FOLLOWING COMPANIES IN THE COMPARABLE SET WHICH ARE COMPARABLE TO THE S D S SEGMENT'S FUNCTIONS, ASSET BASE AND RISK PROFILE: A) 12T2 INDIA LIMITED B) CELSTREAM TECHNOLOGIES PVT LTD C) INFOMILE TECHNOLOGIES LTD D) AKSHAY SOFTWARE TECHNOLOGIES LIMITED E) BELLS SOFTECH LTD F) TVS INFOTECH LTD ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 4 4.6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO/ LD. D RP/LD. TPO HAS ERRED IN CONSIDERING PROVISION FOR DOUBTFUL DEBTS AS NON - OPERATING EXPENSES . 6 . 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO / LD. DRP/ LD. TPO HAVE ERRED IN CONSIDERING A MARK - UP (DETERMINED BASED ON THE MODIFIED BENCHMARKING ANALYSIS) ON THE TOTAL VALUE OF ASSETS RECEIVED ON FREE OF COST BASIS FROM ITS AE WHICH HAS RESULTED IN AN ADJUSTMENT OF INR 7,336,991. 4.8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO / LD. D RP/LD. TPO HAVE ERRED IN NOT ALLOWING THE APPELLANT, THE BENEFIT OF AN ADJUSTMENT FOR THE DIFFERENCES IN THE LEVEL OF RISK BORNE BY TH E COM PARABLES AND THE ASSESSES AND THE ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN THE LEVEL OF WORKING CAPITAL BETWEEN THE ASSESSES VIS - A - VIS COMPARABLE COMPANIES. 4.9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO /LD.DRP/ LD. TPO HAVE ERRE D IN COMPUTING THE OPERATING MARGIN OF FINAL SET OF COMPARABLE COMPANIES FOR S D S SEGMENT FOR A Y 2015 - 16. THE APPELLANT PRAYS THAT THE TP ANALYSIS CONDUCTED BY THE APPELLANT OUGHT TO BE ACCEPTED AND CONSEQUENTLY THE TP ADJUSTMENT IN RELATION TO S D S SEGMEN T OUGHT TO BE DELETED. MARKETING SUPPORT SERVICE SEGMENT (MSS SEGMENT) 5.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO / LD. TPO/LD. DRP ERRED IN INCLUDING THE FOLLOWING COMPANIES IN THE COMPARABLE SET WHICH ARE NOT COMPARABLE TO THE MSS SEGMENT'S FUNCTIONS, ASSET BASE AND RISK PROFILE: A) UGAM SOLU TIONS PRIVATE LIMITED B) MAJESTIC RESEARCH SERVICES & SOLUTIONS PVT - LTD. C) JUST DIAL LTD. D) AXIENCE CONSULTING PVT. LTD. E) KILLICK AGENCIES & MKTG. LTD. F) DIGITAL RADIO (DELHI) BROADCASTING LTD G) PLATINUM ADVERTISING PVT. LTD. ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 5 5.2. ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO / LD. TPO / LD. DRP ERRED IN EXCLUDING THE FOLLOWING COMPANIES IN THE COMPARABLE SET WHICH ARE COMPARABLE TO THE MSS SEGMENT'S FUNCTIONS, ASSET BASE AND RISK PROFILE: H) MARKETING CONSULTANTS & AGE NCIES LIMITED I) MCI MANAGEMENT INDIA PVT. LTD. J) EMPIRE INDUSTRIES LIMITED - TRADING SEG K ) O FFICE CARE SERVICES LIMITED 5.3. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO / LD. DRP/LD. TPO HAVE ERRED IN COMPUTING THE OPERATING MARGIN OF FINAL SET OF COMPARABLE COMPANIES FOR MSS SEGMENT FOR A Y 2015 - 16. 5.4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO / LD. DRP/LD. TPO HAVE ERRED IN NOT ALLOWING THE APPELLANT , THE BENEFIT OF AN ADJUSTMENT FOR THE DIFFERENCES IN THE LEVEL OF RISK BORNE BY THE COMPARABLES AND THE ASSESSES AND THE ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN THE LEVEL OF WORKING CAPITAL BETWEEN THE ASSESSES VIS - A - VIS COMPARABLE COMPANIES. THE APPELL ANT PRAYS THAT THE TP ANALYSIS CONDUCTED BY THE APPELLANT OUGHT TO BE ACCEPTED AND CONSEQUENTLY THE TP ADJUSTMENT IN RELATION TO MSS SEGMENT OUGHT TO BE DELETED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO/LD. DRP ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1 )(C) OF THE ACT. THE APPELLANT PRAYS THAT THE PENALTY PROCEEDINGS OUGHT TO BE DROPPED. 2.1. LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED AT THE OUTSET THAT THE ASSESSEE IS NOT PRESSING FOR ITS FIRST, SECOND AND THIRD SUBSTANTIVE GROUNDS BEING GENERAL IN NATURE, 5 TH SUBSTANTIVE GROUND KEEPING IN MI N D THE SMALLNESS OF THE AMOUNT INVOLVED THEREIN AND SIXTH SUBSTANTIVE GROUND, BEING PREMATURE IN NATURE ; RESPECTIVELY. 2.2 . WE ARE LEFT WITH ASSSSEES FOURTH SUBSTANTIVE GROUND SEEKING TO REVERSE THE LEARNED LOWER AUTHORITIES ACTION MAKING ABOVE STATED ARMS LENGTH PRICE ADJUSTMENT IN ITS HANDS. THERE IS NO DISPUTE THAT THIS ASSESSEE VIZ., M/S ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 6 CAVIUM NETWORKS ( INDIA ) PRIVA TE LIMITED IS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES. I T HAD CARRIED OUT INTERNATIONAL TRANSACTIONS OF RS. 74.28 CRORES WITH ITS USA BASED ASSOCIATED ENTERPRISE M/S CAVIUM LLC US IN THE RELEVANT PREVIOUS YEAR. THES E TRANSACTIONS FORM ED THE SUB JECT MATTER OF SECTION 92 CA REFERENCE FROM THE A SSESSING O FFICER TO THE TRANSFER PRICING OFFICER TPO WHICH HAS RESULTED IN THE IMPUGNED A DJUSTMENT IN THE ASSESSMENT ORDER BEFORE US . 2.3. T HE ASSESSEES SOLE ARGUMENT DURING THE COURSE OF HEARING IS REGARDING THE PLI PERTAINING TO SOFTWARE DEVELOPMENT SERVICES CHALLENG ES THE ALLEGED WRONGFUL INCLUSION OF M/S INFOSYS LIMITED AS A COMPARABLE ENTITY IN THE TPOS ORDER. IT HAS SOUGHT TO BUTTRESS THE POINT THAT THE ASSESSEES TURNOVER IN THE IMPUGNED ASSESSMENT YEAR BY WAY OF EXPORT SERVICES TAKEN AS INTERNATIONAL TRANSACTIONS IS RS. 74.28 CRORES AS AGAINST THE INFOSYS TURNOVER TURNING OUT TO BE RS. 45658 CRORES IN THE VERY SEGMENT. LEARNED COUNSEL THEREFORE URGED THAT AUTHORITIES BE LOW OUGHT NOT HAVE INCLUDED THIS COMPARABLE FOR THE PURPOSE OF DETERMINING THE ALP OF ASSESSEES INTERNATIONAL TRANSACTION HEREINABOVE. 2.4. LEARNED CIT, DR ON THE OTHER HAND HAS TAKEN US TO THE DRPS FINDINGS IN PAGE 7 PARA 2.4 .4.2 THAT SUCH A TUR NOVER IS NOT A DECISIVE FACTOR IN SERVICE SECTOR IN VIEW OF A CATENA OF CASE LAWS HOLDING THAT THE IMPUGNED FILTER WOULD BE AFFECTING THE PLI IN CASE OF MANUFACTURING AND ALLIED SEGMENTS ONLY . HE HAS ALSO DRAWN OUR ATTENTION TO THE DRPS DETAILED DISCUSS ION ALSO MAKING A COMPARABILITY CHART AS WELL TO THIS EFFECT . MR. MOHRANA NEXT SUBMITTED THAT THE ASSESSEES ARGUMENT IS THAT M / S INFOSYS LTD. I S ALSO ENGAGED IN SOFTWARE PRODUCT SERVICES AS WELL AS RESEARCH DEVELOPMENT AND THEREFORE, ASSESSEES STAND SEEKING ITS EXCLUSION ON LATTER COUNT DESERVES TO BE REJECTED SINCE THE CORRESPONDING REVENUE DERIVED THEREFROM IS ONLY MI NI SCULE TO THE EXTENT OF 6. 3% AND 1.6% ; RESPECTIVELY . ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 7 3. W E HAVE GIVEN OUR THOUGHTFUL CONSI DERATION TO RIVAL PLEADINGS AGAINST AND IN SUPPORT OF THE IMPUGNED INCLUSION OF M /S INFOSYS LIMITED IN LEARNED LOWER AUTHORITIES ORDER (S) . WE NOTICE DURING THE COURSE OF HEARING THAT THIS TRIBUNAL S CO - ORDINATE BENCH DECISION(S) IN IN FO SYS INDIA P LTD. VS. ACIT ITA 1689/H/2019 FOR THE VERY A.Y. 2015 - 16 HAS HELD THAT THE VERY ENTITY M/S INFOSYS LTD. T O BE NOT A VALID COMPARABLE IN VIEW OF THE FOLLOWING FACTORS. 6.2.. IN RESPECT OF INFOSYS LTD., LARSEN & TOUBRO INFOTECH LTD. AND MINDTREE LTD. THIS TRIBUNAL HAS CONSIDERED THE ISSUE IN ASSESSEES OWN CASE FOR THE A.Y. 2013 - 14 TO 2014 - 15 AND EXCLUDED THE COMPARABLES WITH A FINDING THAT THESE COMPANIES ARE GIANT COMPANIES IN THE AREA OF DEVELOPMENT OF SOFTWARE. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARAS 7. 4 TO 7.6 IN ASSESSEES OWN CASE FOR THE AYS 2013 - 14 AND 2014 - 15 IN ITA NOS. 161 & 2307/H/18 DATED 6.8.2019 WHICH READS AS UNDER: - 7.4 AS REGARDS EXCLUSIO N OF INFOSYS LTD, LARSEN & TOUBRO INFOTECH LTD AND MINDTREE LTD, THE COMMON GROUND OF THE ASSESSEE IS THAT THEY HAVE HUGE TURNOVER OF RS.42,531 CRORES, RS.4,648.38 CRORES AND RS.3,031.6 CRORES RESPECTIVELY AS AGAINST THE ASSESSEE'S TURNOVER OF RS.116.00 CR ORES ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT THEY ARE FUNCTIONALLY DISSIMILAR AND OWN INTANGIBLES ETC. 7.5. THE LEARNED DR ARGUED THAT UNLESS THE ASSESSEE DEMONSTRATES AS TO HOW THE HUGE TURNOVER IMPACTS THE MARGIN OF THE SAID COMPANIE S, THEY SHOULD NOT BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 7.6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES (P) LTD(2013) 36 TAXMANN. COM 289 ( DELHI H.C) HAS HELD INFOSYS LTD AS NOT COMPARABLE AS IT IS A GIANT COMPAN Y IN THE AREA OF DEVELOPMENT OF SOFTWARE. THE SAME RATIO APPLIED TO BOTH L&T AND MINDTREE AS WELL. THUS, WE DIRECT EXCLUSION OF ALL THESE THREE COMPANIES ON ACCOUNT OF HUG E TURNOVER. ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 8 6.2.1. BOTH THE LD.AR AND THE LD.DR HAVE AGREED THAT THERE IS NO CHANGE IN THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE' S TURNOVER WAS RS.46.69 CRORES WHEREAS THE TURNOVER IN THE ABOVE COMPANIES IS HUGE AND UNCOMPARABLE. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE (SUPRA), WE HOLD THAT THE ABOVE COMPANIES ARE NOT COMPARABLES AN D DIRECT THE TPO / AO TO DELETE THE ABOVE COMPANIES FROM THE LIST OF FINAL COMPARABLES. 3.1. COUPLE D WITH THIS , TRIBUNALS YET ANOTHER DECISION IN YAHOO SOFTWARE DEVELOPMENT INDIA PVT. LTD. VS. JCIT HAS ALSO DIRECTED THE D EPARTMENT TO EXCLUDE M /S I NFOSYS L IMITED FROM THE ARRAY OF COMPARAB LES BY ADOPTING THE VERY REASON ING . W E ADOPT THE ABOVE DETAILED REASONING AND DIRECT THE TPO TO REDETERMINE ASS ESSEES ALP AFTER EXCLUDING INFOSYS LTD. IN ABO VE TERMS. 3.2. LEARNED COUNSEL S NEXT ARGUMENT HAS TAKEN US TO THE TPO'S ORDER DATED 29 .10.2018 AT PAGE 64 PARA 21 .4.2 MAKING A LP ADJUSTMENT OF RS. 87 , 51 , 502 / - AS PER THE FOLLOWING CHART : DESCRIPTION AMOUNT IN RS. VALUE OF THE FREE OF COST ASSETS RECEIVED FROM AE 3,19,74,945/ - ALP(MEDIAN MARGIN OF COMPARABLE SET) 27.37% ADJUST U/S 92CA(3) ON ACCOUNT OF MARGIN ON THE FREE OF COST ASSETS RECEIVED FROM AE 87,51,542/ - 3.3 . MR BAF N A ARGUED THAT THE TPO HAS ERRED IN MAKING IMPUGNED ADJUSTMENT ALLEGING IMPORT OF FREE OF COST SOFTWARE FOR THE PURPOSE OF TESTING SERVICES. HIS CASE IS THAT ASSESSEE HAS ALREADY ACCOUNTED THE REVENUE FROM TESTING SERVICES AND THE IMPUGNED AD DITION OVER AND ABOVE THE COST OF SE RVICES WOULD AMOUNT TO DOUBLE ADDITION ONLY. L EARNED CIT DR HAS SOUGHT TO DEFEND THE IMPUGNED AD DITION BY SUBMITTING THAT SECTION 92 B OF THE ACT IN CHAPTER X IS IN THE NATURE OF SPECIAL PROVISION HAVING SEEN AMENDMENTS ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 9 FROM TIME TO TIME AND THE LAT EST POSITION IN VIEW THEREOF IS THAT AN INTERNATIONAL TRANSACTION INCLUDES ALL SORTS OF THE ARRANGEMENTS BE IT ON COST TO COST OR FREE OF COST, WHATSOEVER. 4. W E HAVE HEARD RIVAL CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED AD DITION. WE EXPRESS OUR AGREEMENT WITH THE R EVENUE S ARGUMENTS SUPPORTING THE TPOS CONCLUSION THAT SUCH FREE OF COST IMPORT SERVICES IN DEED FORM INTERNATIONAL TRANSACTION AS PER PRO VISIONS OF THE A CT. THE FACT HOWEVER REMAINS THAT THE IMPUGNED AD DITION MADE IN THE TPOS ORDER HAS NOT TAKEN INTO ACCOUNT ANY COMPA RABLE OR MARKET CONDITION (S) REGARDING CAPTIVE SERVICE PROVIDER SEGMENT. NO R THE TPO HAS ADOPTED ANY OF THESE METHOD S , D IRECT OR INDIRECT , PROVIDED IN THE I NCOME T AX R ULES SO AS TO MAKE THE I MPUGNED ADJUSTMENT . W E FIND NO REASON TO SUSTAIN THE SAME ON MERITS THEREFORE. THIS IMPUGNED ADJUSTMENT OF RS.87,55,542/ - IS DIRECTED TO BE DELETED . 4.1. LASTLY COMES WORKING CAPITAL ADJUSTMENT ISSUE WHICH HAS BEEN DENIED TO THE ASSESSEE RIGHT FROM THE TPO TO THE DRPS DIRECTIONS. MR MOHRANA HAS REFERRED TO THE DRP DIRECTIONS UNDER CHALLENGE NOT ONLY OBSERVING THAT TH E ASSESSEE HA D NOT PROVIDED THE COR RESPONDING DETAILS OF WORKING CAPITAL OF THE COMPA RABLES IN ISSUE BUT ALSO TAKING NOTE OF THE TRIBUNAL'S DECISION IN M OBIS INDIA L IMITED IN ITA 2112/MDS/2011 . 4.2. MR BAF N A ON THE OTHER HAND HAS TAKEN US TO PAGE 241 OF APPEAL PAPER BOOK INDICATING THE ASSESSEE TO HAVE DULY PLACE D ON RECORD ALL THE RELEVANT DETAILS OF THE COMPA RABLE ENTITIES . THIS TRIBUNALS COORDINATE BENCH DECISION IN Y AHOO ( SUPRA ) HAS ALREADY TAKEN NOTE OF MOBIS INDIA LTD. (SUPRA) TO H O LD THA T THE CORRESPONDING ASSESSEE THEREIN HAD FAIL ED TO PROVIDE DETAILS IN THE ISSUE WHICH IS NOT THE CASE BEFORE US. WE THUS ACCEPT ASSESSEE 'S WORKING CAPITAL ADJUSTMENT IN PRINCIPLE AND DIRECT THE TP O TO VERIFY THE NECESSARY FACTS AS PER LAW . ITA 1700/HYD/2019 AY 2015 - 16 & SA 118/H/2020 (ARISING OUT OF ITA 1700/H/19) CAVIUM NETWORKS INDIA PRIVATE LTD. 10 NO OTHER ARGUMENT / GROUND HAS BEEN PRESSED BEFORE US IN VIEW OF THE FACT THAT WE H AVE ACCEPTED ASSESSEES PLEA SEEKING EXCLUSION OF M /S INFOSYS L IMITED . ALL OF THE ASSESSEES OTHER PLEADINGS ARE RENDERED ACADEMIC THEREFORE . TH IS ASSESSEE S APPEAL ITA 1700/HYD/2019 IS PARTLY ALLOWED IN ABOVE TERMS AND ITS AND ITS STAY APPLICATION S.A. NO.118/H/2020 IS D ISMISSED AS RENDERED INFRUCTUOUS. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN OPEN COURT ON 18 /02/ 2021. SD/ - SD/ - (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 18 TH FEBRUARY, 2021. * GMV COPY OF THE ORDER FORWARDED TO: 1. CAVIUM NETWORKS INDIA PRIVATE LIMITED, H.NO. 6 - 3 - 567 , 568, 1 ST AND 2 ND FLOOR, NORTH EAST BUILDING, ERRA MANZIL, SOMAJIGUDA, HYDERABAD, TELANGANA. PIN: 500 0 82 2. A CIT, CIRCLE 1 (2), HYDERABAD, TELANGANA 3. DRP - I, KENDRIYA SADAN, 4 TH FLOOR, C WING, BE NGALURU 4. CIT (TP), HYDERABAD. 5. DR, ITAT, HYDERABAD. 6 . GUARD FILE.