Hellosoft India Pvt.Ltd, Hyderabad V. DCIT, Circle-2(2), Hyderabad

ITA 1716/HYD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69816 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR
• Assessee Lawyers: A GOPAL
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1716/HYD/2011 ASSESSMENT YEAR : 2007-08 HELLOSOFT INDIA PVT. LTD., APPELLANT HYDERABAD. (PAN AAACZ0688E) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT HYDERABAD. APPELLANT BY : SHRI A. GOPAL RESPONDENT BY : SHRI D. SUDHAKAR DATE OF HEARING : 07/08 /2013 DATE OF PRONOUNCEMENT : 2 7/09/2013 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) R.W. S. 144C(5) OF THE IT ACT ON THE DIRECTION OF THE DISPU TE RESOLUTION PANEL (DRP) PERTAINING TO THE AY 2007-08 . 2. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956 A ND IS A WHOLLY OWNED SUBSIDIARY OF HELLOSOFT INC., USA . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE ON BEHALF OF ITS HOLDING COMPANY (HEREINAF TER CALLED ASSOCIATE ENTERPRISE. THE COMPANY IS MAINL Y INVOLVED IN MASS DEPLOYMENT OF LOW COST, POWER EFFI CIENT, ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 2 FULLY-FEATURED MULTI-MODE WIRE LINE AND WIRELESS DE VICES BY PROVIDING HIGHLY OPTIMIZED RISC-BASED VOIP PRODU CT WITH SUPERIOR VOICE QUALITY. THE ASSESSEE IS A CAPT IVE SERVICE PROVIDER TO ITS AE ONLY FOR WHICH IT GETS REMUNERATED AT COST PLUS 8% MARK UP AS PER THE TERM S AND CONDITIONS ENUMERATED IN THE AGREEMENT BETWEEN THE PARTIES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31/10/2007 DECLARING TOTAL INCOME OF RS. 1,92,500/- AFTER CLAI MING DEDUCTION U/S 10A OF THE ACT. DURING THE FY RELEVAN T TO AY UNDER DISPUTE, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE WORTH RS. 20,90,12,312/-. THE ASSESSEE ADOPTED THE COST PLUS METHOD (CPM) FOR COMPUTING ARMS LENGTH PRICE FOR I TS INTERNATIONAL TRANSACTIONS. IN COURSE OF SCRUTINY ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICI NG THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE, MADE A REFERENCE U/S 92CA (2) OF THE ACT TO THE ADDITIONAL COMMISSIONER OF INCOME - TAX/TRANSFER PRICING OFFICER (HEREINAFTER CALLED T PO) FOR DETERMINING ALP. 3. IN COURSE OF PROCEEDING, THE TPO CALLED UPON THE ASSESSEE TO PRODUCE ALL THE DOCUMENTS, WHICH WAS COMPLIED BY THE ASSESSEE. THE TPO AFTER VERIFYING T HE TP STUDY AND OTHER DOCUMENTS SUBMITTED BY THE ASSESSEE DID NOT ACCEPT THE CPM ADOPTED BY THE ASSESSEE. THE TPO WAS OF THE VIEW THAT TRANSACTIONAL NET MARGIN METHOD (TNMM) IS THE MOST APPROPRIATE METHOD FOR DETERMINING ALP IN CASE OF ASSESSEE. THE TPO ALSO D ID NOT ACCEPT THE TP STUDY DONE BY THE ASSESSEE AND REJECTED IT. AFTER REJECTING THE TP STUDY, THE TPO ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 3 UNDERTOOK A FRESH SEARCH BY APPLYING CERTAIN FILTER S AND ULTIMATELY DETERMINED THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION AT RS. 24,10,44,129/- THE REBY ARRIVING AT AN UPWARD TRANSFER PRICING ADJUSTMENT O F RS. 3,20,31,817/-. IN TERMS WITH THE ORDER BY THE TPO, THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER INCORPORATING THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO. THE ASSESSEE CHALLENGED THE DRAFT ASSESSME NT ORDER BY RAISING OBJECTIONS BEFORE THE DRP. THE DRP , HOWEVER, UPHELD THE DRAFT ASSESSMENT ORDER PASSED I N TERMS WITH THE ADJUSTMENT RECOMMENDED BY THE TPO EXCEPT EXCLUDING ONE OF THE COMPARABLES ADOPTED BY THE TPO I.E. CELESTIAL LABS LTD. AS PER THE DIRECTIONS MADE IN THE ORDER PASSED BY THE DRP, THE IMPUGNED ASSESSMEN T ORDER WAS PASSED BY THE ASSESSING OFFICER BY ONLY EXCLUDING M/S CELESTIAL LABS LTD. FROM THE LIST OF COMPARABLES AND ACCORDINGLY DETERMINED THE ALP. 4. BEING AGGRIEVED OF THE ASSESSMENT ORDER AND THE ORDER PASSED BY THE DRP, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR HAS SUBMITTED BEFORE US A BRIEF N OTE SUMMARIZING HIS CONTENTIONS TO THE FOLLOWING SEVEN ISSUES: 1. NO ADJUSTMENT REQUIRED AS THERE IS NO ALLEGATION OF SHIFTING PROFITS FROM ONE TAX JURISDICTION TO ANOTHER ESPECIALLY WHEN THE ASSESSEE IS ELIGIBLE TO CLAIM ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. 2. MOST APPROPRIATE METHOD TO DETERMINE ALP IS CPM AND NOT TNMM. 3. TURNOVER FILTER. ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 4 4. RISK FILTER. 5. ONSITE REVENUE FILTER. 6. EMPLOYEE COST FILTER. 7. RELIEF AS PER THE PROVISO TO SECTION 92C(2) TO B E ALLOWED AS TOLERANCE BAND AND NOT AS STANDARD DEDUCTION. 6. THE LEARNED AR SUBMITTED THAT ALL THESE ISSUES A RE COVERED BY THE EARLIER ORDER PASSED BY THE ITAT IN ASSESSEES OWN CASE IN ITA NO. 645/HYD/09 FOR AY 20 05- 06, C.O. NO. 40/HYD/09 (IN ITA NO. 645/HYD/09 FOR A Y 2005-06) AND IN ITA NO. 1411/HYD/10 FOR AY 2006-07, VIDE ORDER DATED 15/01/2013. 7. SO FAR AS THE FIRST AND SECOND ISSUES ARE CONCER NED, THE LEARNED AR FAIRLY CONCEDED THAT BOTH THESE ISSU ES ARE DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ITS ORDER PASSED IN CASE OF THE ASSESSEE FOR THE AY 2005-06 A ND 2006-07. 8. SO FAR AS THE THIRD ISSUE RELATING TO APPLICATIO N OF TURNOVER FILTER IS CONCERNED, THE LEARNED AR SUBMIT TED THAT THE SCALE OF OPERATIONS IS A DETERMINING FACTO R FOR DECIDING WHETHER A PARTICULAR COMPANY IS COMPARABLE OR NOT. HE SUBMITTED THAT A COMPANY WITH SMALL TURNOVE R CANNOT BE COMPARED WITH A COMPANY WITH LARGE TURNOV ER. HE FURTHER SUBMITTED THAT THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE AY 2005-06 AND 2006-07 VIDE ORDER DT. 15/01/2013 (SUPRA) HAVE ACCEPTED THAT TURNOVER FILT ER IS A RELEVANT FILTER FOR SELECTING COMPARABLES. IN THI S CONTEXT HE DREW OUR ATTENTION TO THE FINDING OF THE ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 5 TRIBUNAL IN PARA 11 AND 12 OF THE ORDER PASSED FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 A COPY OF WHIC H IS AT PAGE 170 OF THE PAPER BOOK. THE LEARNED AR AL SO RELIED UPON A DECISION OF THE HONBLE DELHI HIGH CO URT IN CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. TO CONT END THAT BIG COMPANIES LIKE INFOSYS, SATYAM AND WIPRO CANNOT BE TREATED AS COMPARABLE WITH THE ASSESSEE. 9. WITH REGARD TO THE RISK FILTER, THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS NOT EXPOSED TO ANY R ISK. REFERRING TO THE FAR ANALYSIS AT PAGES 68 AND 69 OF THE PAPER BOOK, HE SUBMITTED THAT THE OWNERSHIP OF THE INTANGIBLES BELONG TO THE AE. THE ASSESSEE IS A CAP TIVE SERVICE PROVIDER ASSUMING NO RISK UNDER THE AGREEME NT. HE SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE BY ALLOWING RISK ADJUSTMENT IN AY 2005-06. THE LEARNED AR FURTHER SUBMITTED THAT CBDT CIRCULAR NO. 6/2013, DATED 29/06/2013 IS IN SIMILAR LINE. 10. WITH REGARD TO THE TPO SELECTING/REJECTING COMPARABLES BY APPLYING ONSITE REVENUE FILTER, THE LEARNED AR SUBMITTED THAT THIS FILTER SHOULD NOT HA VE BEEN APPLIED BY TPO SINCE RELEVANT INFORMATION/MATE RIAL REQUIRED FOR THE SAME ARE NOT AVAILABLE IN PUBLIC D OMAIN. HE FURTHER SUBMITTED THAT THE TPO HAS NOT APPLIED T HIS FILTER UNIFORMLY WHILE SELECTING COMPARABLES. THE L EARNED AR SUBMITTED THAT THE TRIBUNAL HAS DISAPPROVED SUCH APPROACH OF THE TPO IN THE ORDER PASSED IN CASE OF THE ASSESSEE FOR THE AY 2005-06. 11. SO FAR AS APPLICATION OF EMPLOYEE COST FILTER I S CONCERNED, THE LEARNED AR SUBMITTED THAT THIS FILTE R ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 6 CANNOT BE APPLIED FOR SELECTING COMPARABLES SINCE M ANY COMPANIES REPORT EMPLOYEE COST UNDER VARIOUS HEADS LIKE SOFTWARE DEVELOPMENT CHARGES, PROJECT CHARGES, PROD UCT DEVELOPMENT CHARGES, PROFESSIONAL CHARGES ETC. INST EAD OF REPORTING THE SAME AS EMPLOYEE COST. THE LEARNED AR SUBMITTED, THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 HAS HELD THAT AGAINST APPLICATION OF THIS FILTER AS RELEVANT DATA/INFORMA TION ARE NOT AVAILABLE. 12. THE LEARNED AR FINALLY SUBMITTED THAT THE ASSES SING OFFICER/TPO MAY BE DIRECTED TO DETERMINE THE ALP IN TERMS WITH THE DIRECTION GIVEN IN THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2005-06 AND 2006-07. 13. THE LEARNED DR ALSO SUBMITTED THAT SINCE THE I SSUES RAISED ARE COVERED BY THE EARLIER ORDER PASSED BY T HE TRIBUNAL IN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, A DIRECTION CAN BE GIVEN TO TH E ASSESSING OFFICER TO DETERMINE THE ALP FOR THIS ASSESSMENT YEAR ALSO KEEPING IN VIEW THE EARLIER OR DER OF THE TRIBUNAL. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF T HE ORDER DATED 15/01/2013 PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 AND 2006-07 (SUPRA), WE FIND THAT ALL THE ISSUES RAISED IN THE PRESENT APPEAL ARE SQUARELY COVERED BY THE ORDER PASSED BY THE TRIBUNAL. SO FAR AS THE FIRST ISSUE IS CONCERNED TH E COORDINATE BENCH HAS REJECTED SUCH CONTENTION OF TH E ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 7 ASSESSEE IN PARA 25 OF THE SAID ORDER, WHICH IS AS FOLLOWS: 25. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS ON RECORD. WE HAVE ALSO EXAMINED THE DECISIONS REL IED UPON BY THE ASSESSEE. OUR FINDING ON THE ISSUE IS THOUGH IT IS A FACT THAT ASSESSEES INCOME IS EXEMPT U/S 10A OF THE ACT BUT THAT DOES NOT NECESSARILY MEAN THAT THE ASSESSING OFFICER HAS TO PROVE THE SHIFTING OF PROFITS BY THE ASSESSEE TO ITS AE BEFOR E APPLYING TRANSFER PRICING PROVISION. THE HONBLE P & H HIGH COURT IN THE CASE OF COCA COLA INDIA INC V/S. ACIT (309 ITR PAGE 14) WHILE CONSIDERING SOMEWHAT SIMILAR ISSUE HELD IN THE FOLLOWING MANNER :- WE DO NOT FIND ANY AMBIGUITY OR ABSURD CONSEQUENCE OF APPLICATION OF CHAPTER-X TO PERSONS WHO ARE SUBJEC T TO JURISDICTION OF TAXING AUTHORITIES IN INDIA NOR WE FIND ANY STATUTORY REQUIREMENT OF ESTABLISHING THAT THERE IS TRANSFER OF PROFIT OUTSIDE INDIA OR THAT THERE IS EVASION OF TAX. ONLY CONDITION PRECEDENT FOR INVOKING PROVISIONS OF CHAP TER X IS THAT THERE SHOULD BE INCOME ARISING FROM INTERNATIO NAL TRANSACTION AN D SUCH INCOME IS TO BE COMPUTED HAVI NG REGARD TO ARMS LENGTH PRICE. INTERNATIONAL TRANSA CTION AS DEFINED U/S 92B OF THE ACT, AS ALREADY OBSERVED, CE RTAINLY STANDS ON A DIFFERENT FOOTING THAN ANY OTHER TRANSA CTION. ARMS LENGTH PRICE IS NOTHING BUT A FAIR PRICE WHICH WOULD HAVE BEEN NORMAL PRICE. THERE IS ALWAYS A POSSIBIL ITY OF TRANSACTION BETWEEN A NON-RESIDENT AND ITS ASSOCIAT ES BEING UNDER VALUED AND HAVING REGARD TO SUCH TENDENCY, A PROVISION THAT INCOME ARISING OUT OF THE SAID TRANS ACTION COULD BE COM PUTED HAVING REGARD TO ARMS LENGTH PRICE, WILL NOT BE OPENED TO QUESTION AND IS WITHIN THE LEGISLA TIVE COMPETENCE TO EFFECTUATE THE CHARGE OF TAXING REAL INCOME IN INDIA. THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE BENCH IN CASE OF M/S SAP LABS INDIA PVT. LIMITED V/S. ACIT (ITA NO.398 /BANG./2008) DATED 30 TH AUGUST, 2010 WHILE CONSIDERING IDENTICAL ISSUE HEL D IN THE FOLLOWING MANNER:- THE ARGUMENT OF THE ASSESSEE WITH REFERENCE TO SEC. 10A STATUS ALSO NEEDS A MENTION. IT IS THE CASE OF THE ASSESSEE THAT IT IS ENJOYING SEC. 10A BENEFIT AND NO TAX IS PAYABLE ON EXPORT INCOME, WHICH MAKES THE INDIAN TAX RATE MORE ATTRACTIVE THAN GERMAN TAX RATE AND THEREFORE, THER E COULD BE NO MOTIVE TO UNDERSTATE ASSESSEES INCOME. THI S ARGUMENT COULD BE A GOOD LOGIC, BUT ONLY FOR THOSE ASSESSMENT YEARS COVERED BY SEC. 10A BENEFIT. ONCE THE BENEFIT IS EXHAUSTED, THE ASSESSEE WOULD BE LIABLE FOR TAXATION IN WHICH CASE, THE GERMAN TAX RATE MAY BE MORE ATTRACTIVE. IF THE PRICING FOR THE EXEMPTED YEARS I S ACCEPTED WITHOUT ANALYSIS THERE IS EVERY CHANCE THAT THE ASS ESSING AUTHORITY MIGHT BE ESTOPPED, ON THE DOCTRINE OF CON SISTENCY, ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 8 FROM EXAMINING THE PRICING FOR THE SUBSEQUENT NON- EXEMPTED YEARS. THIS IS QUITE UNCALLED FOR. IN VIEW OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, T HE CONTENTION RAISED BY THE ASSESSEE IS NOT ACCEPTABLE. ACCORDI NGLY, THE GROUND RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS DI SMISSED. 15. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH IN ASSESSEES OWN CASE (SUPRA), WE REJECT THI S ARGUMENT OF THE ASSESSEE. 16. AS REGARDS THE SECOND ISSUE RELATING TO THE CONTENTION OF THE ASSESSEE THAT CPM IS MOST APPROPR IATE METHOD TO DETERMINE THE ALP AND NOT TNMM, WE FIND T HAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 AND 2006-07 (SUPRA), WHICH FACT HAS BEEN ACCEPTED BY TH E LEARNED AR. ACCORDINGLY, FOLLOWING OUR EARLIER ORDE R WE HOLD THAT TNMM IS THE MOST APPROPRIATE METHOD TO DETERMINE THE ALP. 17. AS REGARDS THE THIRD ISSUE PERTAINING TO TURNOV ER FILTER, WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR A Y 2005-06 AND 2006-07 (SUPRA) HAS ACCEPTED TURNOVER FILTER AS A R ELEVANT FACTOR FOLLOWING THE DECISION OF THE ITAT, HYDERABAD BENCH IN CASE OF DELOITTEE CONSULTING (61 DTR 101). THE HONBLE DELH I HIGH COURT HAS ALSO UPHELD THIS VIEW IN CASE OF AGNITY INDIA T ECHNOLOGIES P. LTD., DATED 10/07/2013, A COPY OF WHICH HAS BEEN PL ACED ON RECORD. WE, THEREFORE, REMIT THIS ISSUE TO THE FILE OF THE AO FOR CONSIDERATION AFRESH KEEPING IN VIEW OUR ORDER DATE D 15/01/2013 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 200 5-06 AND 2006-07 AS WELL AS THE DECISION OF THE HONBLE DELH I HIGH COURT (SUPRA). HOWEVER, WE WOULD LIKE TO MAKE IT CLEAR T HAT WHILE ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 9 APPLYING THE TURNOVER FILTER A FIXED UPPER LIMIT CA NNOT BE APPLIED UNIFORMLY AND ACROSS THE BOARD IN ALL CASES. THE U PPER LIMIT HAS TO BE FIXED REASONABLY, KEEPING IN VIEW THE TURNOVE R OF THE ASSESSEE IN A GIVEN CASE. 18. AS REGARDS 4 TH ISSUE RELATING TO RISK FILTER, AS SUBMITTED BY THE LEARNED AR, THIS ISSUE IS ALSO COVERED BY THE D ECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2005 -06 AND 2006-07 (SUPRA), WHEREIN THE COORDINATE BENCH VIDE PARA 17, HELD AS FOLLOWS: 17. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES IN THIS REGARD. THE MATERIALS ON RECORD CLEARLY PROVE THE FACT THAT THE ASSESSEE IS A CAPTIVE SERVICE PROVIDER. IT HAS TRANSACTIONS ONLY WITH ITS AE. IT IS ALSO A FACT THAT ALL THE RISKS LIES WITH THE AE. DIFFERENT BENCHES OF THE TRIBUNAL HAVE ALSO TAKEN A DIVERGENT VIEW ON T HIS ISSUE. THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN THE CASE OF SIMONTECH (SUPRA) HAS HELD THAT NO SEPARATE ADJUS TMENT IS REQUIRED ON ACCOUNT OF RISK AND FUNCTIONAL DIFFEREN CE, THE INCOME- TAX APPELLATE TRIBUNAL DELHI BENCH IN THE CASE OF S ONY INDIA PVT. LIMITED V/S. DCIT (114 ITD 448) HAS HELD THAT DED UCTION ON ACCOUNT OF OWNERSHIP OF INTANGIBLES, RISK FACTORS C AN BE ALLOWED. IN AFORESAID VIEW OF THE MATTER, WE ARE INCLINED TO AC CEPT THE VIEW FAVORABLE TO THE ASSESSEE. WE THEREFORE UPHOLD THE DIRECTION OF THE CIT (A) IN THIS REGARD IN ALLOWING THE BENEFIT OF R ISK ADJUSTMENTS AT 1%. ACCORDINGLY, THE GROUND RAISED BY THE DEPARTME NT IS DISMISSED. 19. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICA L TO THAT OF THE CASE OF THE ASSESSEE IN AY 2005-06 AND 2006-07 (SUP RA), RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN THE SAID YEARS, WE ALLOW THE BENEFIT OF RISK ADJUSTMENT S AT 1%. THIS GROUND IS ALLOWED. 20. AS REGARDS THE 5 TH AND 6 TH ISSUES RELATING TO ONSITE REVENUE FILTER AND EMPLOYEE COST FILTER, WE FIND THAT THE I SSUES ARE SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2005-06 AND 2006-07 (SUP RA) WHEREIN ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 10 THE COORDINATE BENCH VIDE PARA NO. 12 IN ITS ORDER, HELD AS FOLLOWS: 12. IN VIEW OF THE AFORESAID, WE UPHOLD THE DECISI ON OF THE CIT (A) IN EXCLUDING COMPANIES WHOSE TURNOVER IS MORE THAN RS.100 CRORES. SIMILARLY THE CIT (A) IS EQUALLY CORRECT IN NOT SUS TAINING THE REJECTION OF COMPARABLES SELECTED BY THE ASSESSEE B Y APPLYING EMPLOYEE COST TO SALE FILTER AS RELEVANT DATA/INF ORMATION FOR THIS FILTER ARE NOT AVAILABLE. MOREOVER, IT IS ALSO A F ACT THAT PART OF THE EMPLOYEE COST IS INCLUDED BY MANY COMPANIES UNDER D IFFERENT OTHER HEADS. SELECTION OF COMPARABLES APPLYING THE ONSI TE INCOME FILTER ALSO STANDS ON THE SAME FOOTING AS RELEVANT DATA/IN FORMATION ARE NOT AVAILABLE IN RESPECT OF ALL THE COMPANIES IN TH E DATABASE. IT IS ALSO A FACT THAT THOUGH THE TPO HAS HIMSELF NOT APP LIED THIS FILTER BY OBSERVING THAT THE COMPANIES HAVING ONSITE INCOME O F MORE THAN 75% CANNOT BE TREATED AS COMPARABLES BUT TWO OF THE COMPANIES I.E. M/S FOURSOFT LIMITED AND SANKYA INFOTECH LIMIT ED SELECTED AS COMPARABLES BY THE TPO WERE HAVING ONSITE INCOME/EX PENSES OF MORE THAN 75%. IN THIS VIEW OF THE MATTER, THE CIT (A) WAS CORRECT IN HOLDING THAT REJECTION OF COMPARABLES SELECTED B Y THE ASSESSEE BY APPLYING THIS FILTER IS NOT CORRECT. WE ALSO FULLY SUBSCRIBE TO THE VIEW OF THE CIT (A) THAT LOSS MAKING COMPANIES AND COMPA NIES HAVING SUPER NORMAL PROFITS CANNOT BE CONSIDERED AS COMPAR ABLES IN VIEW OF THE RATIO LAID DOWN IN CASE OF MENTOR GRAPHICS (INDIA) PVT. LTD. V/S. DCIT (109 ITD 101) AND PHILIPS SOFTWARE (119 T TJ 721). IN AFORESAID VIEW OF THE MATTER, THE COMPANIES SELECT ED BY THE CIT (A) AS COMPARABLES IS RATIONAL AND APPROPRIATE IN T HE FACTS OF THE PRESENT CASE. WE THEREFORE UPHOLD THE ORDER OF T HE CIT (A) IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE ARIT HMETIC MEAN OF 11 COMPARABLES SELECTED BY HIM AND DETERMINE THE AL P AFTER COMPUTING THE ADJUSTED AVERAGE PLI. AS RESULT, G ROUNDS NOS. 1,2 AND 3 ARE DISMISSED. 21. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DI RECT THE AO TO DECIDE THE SAID ISSUES FOLLOWING THE DECISION OF TH E COORDINATE BENCH IN AY 2005-06 AND 2006-07 (SUPRA). 22. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO/TPO WHO SHALL DET ERMINE THE ALP AFRESH KEEPING IN VIEW OUR DIRECTION GIVEN HEREINAB OVE. ON DETERMINATION OF ALP BY THE AO/TPO IF IT IS FOUND T HAT THE PRICE SHOWN BY THE ASSESSEE FOR THE INTERNATIONAL TRANSAC TION IS WITHIN (+)/(-) 5% OF THE ALP DETERMINED THEN NO ADJUSTMENT IS REQUIRED TO BE MADE. ITA NO. 1716/HYD/2011 HELLOSOFT INDIA PVT. LTD. 11 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT 27/09/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 27 TH SEPTEMBER, 2013. KV COPY TO:- 1) HELLOSOFT INDIA PVT. LTD., 8-2-7036, ROAD NO.12, BANJARA HILLS, HYDERABAD 500 034. 2) DCIT, CIRCLE 2(2), HYDERABAD 3) DRP, HYDERABAD 4) ADDL. CIT(TRANSFER PRICING), HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER