Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 6582 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 4 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-04-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
16-03-2016
Assessment Year
2008-2009
Appeal Filed On
29-11-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1720/HYD/2012 ASSESSMENT YEAR: 2008-09 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD., HYDERABAD. PAN AAACJ 9549 G VS. INCOME-TAX OFFICER, WARD 3(2), HYDERABAD (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI RAVI BHARDWAJ REVENUE BY : SMT. VASUNDHARA SINHA DATE OF HEARING 16-03-2016 DATE OF PRONOUNCEMENT 22-04-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER PASSED U/S 143(3) R.W.S. 144C OF THE INCOME TAX ACT , 1961 (IN SHORT ACT) DATED 12/10/2012 RELATING TO AY 2008-09. 2. BRIEF FACTS OF THE CASE ARE, UNITED ONLINE SOFT WARE DEVELOPMENT (INDIA) PVT. LTD., IS A COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. THE COMPANY PROVIDES SOFTW ARE DEVELOPMENT AND ALLIED SERVICES IN THE AREA OF MAIL PLANT, WEB MAIL PLATFORM AND INTERNET RELATED SOFTWARE. THIS COMPAN Y IN HYDERABAD IS REGISTERED AS A 100% EOU UNDER STPI SCHEME OF GOVT. OF INDIA. THIS COMPANY IS ONE OF THE GROUP COMPANIES OF UNITED ONL INE, US. THIS COMPANY WAS INCORPORATED IN 1999 UNDER THE COMPANIE S ACT, 1956. THE NAME OF THE COMPANY WAS CHANGED FROM JUNO INDIA PVT. LTD. TO 2 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD ., WITH EFFECT FROM 19/06/07. 2.1 DURING THE RELEVANT PY, THE ASSESSEE COMPANY EN TERED INTO INTERNATIONAL TRANSACTION WITH ITS AE, M/S UNITED O NLINE INC., USA, FOR THE PROVISION OF SOFTWARE DEVELOPMENT SERVICES AND PURCHASES AS BELOW: 1. PROVISION OF SOFTWARE DEVELOPMENT SERVICES RS. 21,69,90,553/- 2. PURCHASE OF COMPUTER AND EQUIPMENT RS. 13, 26,687/- 2.2 FINANCIAL RESULTS FOR THE FY 2007-08 ARE AS UND ER: DESCRIPTION AMOUNT OPERATING REVENUE 21,69,90,553/- OPERATING COST 19,96,47,265/- OPERATING PROFIT (PBIT) 1,73,43,288/- OPERATING PROFIT TO COST RATIO 8.69% 2.3 THE FINAL COMPARABLES SELECTED BY TRANSFER PRIC ING OFFICER (TPO) WITH OP TO OC ARE AS UNDER: SL.NO. NAME OF THE COMPANY OP TO TOTAL COST 1. AVANI CINCOM TECHNOLOGIES 21.65 2. BODHTREE CONSULTING LTD. 19.14 3. CELESTIAL BIOLABS 87.94 4. E-ZEST SOLUTIONS LTD. 28.95 5. FLEXTRONICS (ARICENT) 8.07 6. IGATE GLOBAL SOLUTION LTD. 13.90 7. INFOSYS 40.41 8. KALS INFORMATION SYSTEMS LTD. (SEG.) 41.94 9. LGS GLOBAL LTD. 26.64 10. MINDTREE LTD. (SEG.) 17.51 11. PERSISTENT SYSTEMS LTD. 27.23 12. QUNITEGRA SOLUTION LTD. 21.74 13. R SYSTEMS INTERNATIONAL (SEG.) 15.30 14. RS SOFTWARE (INDIA) LTD. 6.46 15. SASKEN COMMUNICATION TECHNOLOGIES LTD. (SEG.) 13.44 3 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 16. TATA ELXSI (SEG.) 18.97 17. THIRDWARE SOLUTION LTD. 18.01 18. WIPRO LTD. (SEG.) 28.38 19. SOFTSOL INDIA LTD. 42.15 AVERAGE 26.20 2.4 ASSESSEE HAS SELECTED TRANSACTION NET MARGIN ME THOD (TNMM) AS THE MOST APPROPRIATE METHOD AND ALSO APPLIED MUL TIPLE YEAR DATA TO SELECT THE COMPARABLES. IT HAD SELECTED 23 COMPARAB LES. THOUGH, TPO HAS ACCEPTED THE TNMM AS THE MOST APPROPRIATE M ETHOD, HE REJECTED THE TP STUDY OF ASSESSEE AND HAS MADE FRES H TP STUDY WITH DATA FOR THE FY 2007-08. TPO HAD SELECTED THE ABOVE 19 COMPARABLES. 2.5 AFTER COMPARING THE AVERAGE MARGINS OF THE COMP ARABLES TO THE FINANCIALS OF THE ASSESSEE, THE TPO COMPUTED THE AD JUSTED ARMS LENGTH MARGIN AS UNDER: ARITHMETIC MEAN OF PLI AS ARRIVED AT BY THE TPO : 26.20% ADD: NEGATIVE WORKING CAPITAL ADJUSTMENT : 0. 27% ARMS LENGTH MARGIN AS ARRIVED AT BY THE TPO : 2 6.47% 2.6 ACCORDINGLY, THE TPO WHO PASSED AN ORDER U/S 92 CA(3) OF THE ACT ON 24/10/2011, RECOMMENDED ADJUSTMENT OF RS. 3, 55,03,343/-. THE SAME WAS INCORPORATED BY THE AO IN THE DRAFT AS SESSMENT ORDER. ASSESSEE PREFERRED A PETITION BEFORE THE DISPUTE RE SOLUTION PANEL (DR) RAISING VARIOUS OBJECTIONS. 3. DRP HAS GIVEN PARTIAL RELIEF TO THE ASSESSEE AS UNDER: 3.1 THE DRP HAS ELIMINATED THE COMPANY M/S CELESTIA L BIOLABS LTD. AS COMPARABLE, AS IT IS ENGAGED IN RESEARCH ACTIVIT IES WHICH RESULTS IN DEVELOPMENT OF PROPRIETARY PRODUCTS AND SERVICES FO R SPECIFIC SECTORS. IT PROVIDES CONTRACT RESEARCH SERVICES AND IS ALSO DIVERSIFIED INTO MARKETING AND MANUFACTURING ACTIVITIES. IT IS RECOG NIZED AS A RESEARCH FACILITY BY THE DEPT. OF SCIENTIFIC AND INDUSTRIAL RESEARCH, GOI. THUS, 4 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . THE FUNCTIONAL PROFILE OF CELESTIAL IS VERY MUCH DI FFERENT FROM THE ASSESSEE COMPANY. 3.2 CONSIDERING THE ABOVE FINDINGS OF DRP, THE AO H AS REDUCED THE ADJUSTMENT U/S 92CA TO RS. 2,61,59,851/-. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS IN A PPEAL BEFORE US. 5. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: TRANSFER PRICING MATTERS - RELATING TO DETERMINATIO N OF ARM'S LENGTH PRICE ('ALP') IN RESPECT OF PROVISION OF SOFTWARE SERVICES TO ASSOCIATED ENTERPRISES (' AES') UNDER T RANSACTIONAL NET MARGIN METHOD ('TNMM') BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED ASSESSING OFFICER (' AO') J LEARNED TRANSFE R PRICING OFFICER ('TPO') AND THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED IN THE FOLLOWING: REJECTION OF TRANSFER PRICING DOCUMENTATION MAINTAI NED 1. REJECTING THE TRANSFER PRICING DOCUMENTATION MAI NTAINED BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME TAX RULES, 1962 (,RULES') AND MAKING ADJ USTMENT OF RS 2,61,59,851; REJECTION OF USE OF CONTEMPORANEOUS DATA AND UNDERT AKING FRESH SEARCH OF COMPARABLES 2. REJECTING THE CONTEMPORANEOUS DATA (I.E., DATA E XISTING BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME) AND IN UNDERTAKING A FRESH COMPARABLE SEARCH DURING THE COURSE OF ASSESS MENT PROCEEDINGS USING INFORMATION DATA WHICH WAS NOT AV AILABLE TO THE APPELLANT AT THE TIME OF SATISFYING THE MANDATO RY DOCUMENTATION REQUIREMENTS UNDER THE ACT; ELIGIBILITY UNDER SECTION 10A 3. NOT APPRECIATING THAT THE APPELLANT IS ELIGIBLE FOR TAX HOLIDAY BENEFIT UNDER SECTION 10A OF THE ACT, AND THERE IS NO INCENTIVE FOR SHIFTING OF PROFITS; REJECTION OF USE OF MULTIPLE YEAR DATA 4. REJECTING THE USE OF MULTIPLE YEAR DATA AND USIN G DATA FOR THE FY 2007-08 ONLY; 5 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . INFORMATION OBTAINED UNDER SECTION 133(6) 5. A) USING INFORMATION/ DOCUMENTS OBTAINED BY EXER CISING POWERS U/ S 133(6) OF THE ACT WHICH ARE NOT AVAILAB LE IN PUBLIC DOMAIN; AND B) FURTHER NOT PROVIDING ANY OPPORTUNITY TO APPELLA NT TO CROSS- EXAMINE THE SAME. USE OF ADDITIONAL FILTERS 6. INTER-ALIA USE OF THE FOLLOWING ADDITIONAL FILTE RS IN UNDERTAKING THE COMPARATIVE ANALYSIS TO REJECT COMPARABLE COMPA NIES HAVING: A) ONSITE REVENUE IN EXCESS OF 75%; B) DIMINISHING REVENUE/LOSS MAKING COMPANIES; AND C) DIFFERENT FINANCIAL YEAR-END. SELECTION OF COMPANIES EARNING ABNORMAL HIGH MARGIN S 7. SELECTION OF COMPANIES EARNING ABNORMAL HIGH MAR GINS AS COMPARABLE TO THE APPELLANT; SELECTION OF UNCOMPARABLES 8. NOT UNDERTAKING AN OBJECTIVE COMPARATIVE ANALYSI S AND INTER- AIIA SELECTING THE FOLLOWING COMPANIES AS COMPARABL E TO THE SOFTWARE SERVICES OF THE APPELLANT: A) INFOSYS TECHNOLOGIES LIMITED; B) KALS INFORMATION SYSTEMS LTD; C) TATA ELXSI LIMITED (SEG); AND D) WIPRO LIMITED (SEG). 9. NOT UNDERTAKING AN OBJECTIVE COMPARATIVE ANALYSI S AND INTER-ALIA REJECTING THE FOLLOWING COMPARABLE COMPA NIES: A) ADITYA BIRLA MINACS IT SERVICES LTD; B) ADITYA BIRLA MINACS TECHNOLOGIES LTD; C) CG- VAK SOFTWARE EXPORTS LTD (SEG); D) GOLDSTONE TECHNOLOGIES LTD; E) INDIUM SOFTWARE INDIA LTD; F) THINKSOFT GLOBAL SERVICES LTD; G) LARSEN & T OUBRO INFOTECH LTD; H) V M F SOFTECH LTD. ADJUSTMENT FOR RISK DIFFERENCES 10. NOT ADJUSTING THE NET MARGINS OF THE COMPARABLE COMPANIES TAKING INTO ACCOUNT THE FUNCTIONAL AND RISK DIFFERE NCES BETWEEN 6 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . THE INTERNATIONAL TRANSACTION OF THE APPELLANT AND THE COMPARABLE COMPANIES IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B(1)(E); APPLICABILITY OF PROVISO TO SECTION 92C(2) 11. NOT ALLOWING THE OPTION UNDER THE PROVISO TO SE CTION 92C(2) OF THE ACT IN LIMITING THE ADJUSTMENT AT A VARIATION O F 5 PERCENT TO THE ARM'S LENGTH PRICE; LEVY OF INTEREST UNDER SECTION 234B 12. IMPOSING INTEREST UNDER SECTION 234B OF THE ACT ON THE TRANSFER PRICING ADJUSTMENTS; CORPORATE TAX MATTERS BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED ASSESSING OFFICER ('AO') AND THE HON'BLE DI SPUTE RESOLUTION PANEL ('DRP') ERRED IN: 13. REDUCING THE COMMUNICATION CHARGES OF RS 251,72 5 FROM THE EXPORT TURNOVER CONSIDERING IT AS ATTRIBUTABLE TO T HE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA AND FURTHER NOT RED UCING THE SAME FROM THE TOTAL TURNOVER IN COMPUTING THE DEDUC TION U/S 10A OF THE ACT; 14. INITIATING THE PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT. THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES L EAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GRO UNDS OF APPEAL. 5.1 DURING THE HEARING PROCEEDINGS, ASSESSEE FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL AS BELOW: THE ASSESSEE WISH TO OBJECT THE FOLLOWING COMPANIES FOR THE FIRST TIME BEFORE THE HONBLE TRIBUNAL: 1. AVANI CINCOM TECHNOLOGIES 2. BODHTREE CONSULTING LTD. (SEG.) 3. E-ZEST SOLUTIONS LTD. 4. LGS GLOBAL LTD. 5. PERSISTENT SYSTEMS LTD. 6. QUNITEGRA SOLUTIONS LTD. 7. SOFTSOL INDIA LTD. 6. LD. AR RELYING ON THE FOLLOWING JUDGMENTS, SUBMI TTED THAT THE ADDITIONAL GROUNDS MAY BE ADMITTED/ACCEPTED: 1. QUARK SYSTEMS INDIA (P.) LTD., CHANDIGARH SPECI AL BENCH DECISION. 2. NATIONAL THERMAL POWER CO. LTD., VS. CIT, 229 I TR 383 7 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 3. JUTE CORPORATION OF INDIA LTD. 187 ITR 688 (SC) 4. AHMEDABAD ELECTRICITY CO. LTD. 199 ITR 351 (BO RN) FB) 5. MAHALAXMI TEXTILE MILLS LTD. 66 ITR 710 (SC) 6. GILBERT AND BARKER MANUFACTURING CO. 111 ITR 5 29 (BORN) 7. CIT V. P.B. CORPORATION 266 ITR 548 (GUJ) 8. CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS P. LT D 349 ITR 336 (BORN) 9. CIT VS GANGAPPA CABLES LTD. 116 ITR 778 (A.P) 7. SINCE THE ADDITIONAL GROUNDS DO NOT REQUIRE ENQU IRY INTO ANY NEW FACTS, WE ADMIT THE SAME AND PROCEED TO ADJUDIC ATE UPON THE ADDITIONAL GROUNDS ALONG WITH THE MAIN GROUNDS ORIG INALLY RAISED IN THE APPEAL ON THE ISSUE OF INCLUSION OF CERTAIN COM PANIES BY THE TPO. 8. THE ASSESSEE HAS NOT PRESSED THE GROUNDS RAISED ABOVE EXCEPT GROUND NO. 8 AND ADDITIONAL GROUNDS. THEREFORE, ALL OTHER GROUNDS ARE REJECTED AS NOT PRESSED. 9. THE LD. AR OBJECTED TO THE SELECTION OF FOLLOWIN G COMPARABLES BY THE TPO. THEREFORE, WE WILL DEAL WITH EACH OF TH E COMPANY THAT WAS OBJECTED BY THE ASSESSEE. 1. INFOSYS TECHNOLOGIES LTD. 1.1 THE LD. AR OBJECTING TO THE AFORESAID COMPANY B EING TREATED AS COMPARABLE, RELIED ON THE DECISION OF THE ITAT, HYD ERABAD IN ASSESSEES OWN CASE FOR AY 2007-08 AND 2005-06. 1.2 THE ITAT IN AY 2007-08 VIDE ITA NO. 1658/H/2011 AND OTHERS HELD AS FOLLOWS: 7.2.3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE P ARTIES AND PERUSED THE MATERIALS ON RECORD. ON CONSIDERING THE SAME, WE AR E OF THE VIEW THAT THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE TO ASSES SEE DUE TO VARIOUS FACTORS SUCH AS ITS SIZE, TURNOVER, BRAND VALUE, SC ALE OF OPERATION, DIVERSIFIED ACTIVITIES AND OWNING OF INTANGIBLES. AS CAN BE SEE N FROM THE TP ORDER, THE TURNOVERS OF INFOSYS TECHNOLOGIES LIMITED DURING TH E YEAR UNDER CONSIDERATION ARE RS.13,149 CRORES AS AGAINST RS. 4 2 CRORES OF ASSESSEE. THOUGH IT IS A FACT THAT ASSESSEE IN THE TP DOCUMEN TATION, HAS SELECTED INFOSYS TECHNOLOGIES LTD. AS COMPARABLE BUT THAT CA NNOT PREVENT ASSESSEE FROM OBJECTING TO THE AFORESAID COMPANY BEING SELEC TED AS COMPARABLE, IF THERE ARE VALID REASONS FOR DOING SO. IN THIS CONTE XT, THE CONTENTION OF THE LEARNED AR THAT ASSESSEE HAS SELECTED INFOSYS LIMIT ED ON THE BASIS OF THREE 8 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . YEARS FINANCIAL DATA, WHEREAS THE TPO CONSIDERED ON LY THE CURRENT YEAR DATA ALSO NEEDS TO BE APPRECIATED. THEREFORE, CONSIDERIN G THE ENORMITY OF TURNOVER OF THE COMPANY AS WELL AS OTHER RELEVANT F ACTORS, THE AFORESAID COMPANY CANNOT BE TREATED AS COMPARABLE TO ASSESSEE IN ANY MANNER. THIS VIEW OF OURS IS ALSO IN TUNE WITH THE VIEW EXPRESSE D BY DIFFERENT BENCHES OF THIS TRIBUNAL AS STATED BELOW AS WELL AS THAT OF TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES PV T. LTD.,[2013] 85 CCH 146. A) M/S. FOURSOFT LIMITED (ITA.NO.1903/H/2011) B) M/ S. CONEXANT SYSTEM INDIA P. LTD. ITA.1978/H2011 C) M/S. VIRTUSA (I) P. LTD. ITA.NO.1962/HYD/2011 D) TELCORDIA TECHNOLOGIES INDI A P. LTD. ITA.7821/MUM/2011 E) TRIOLOGY E-BUSINESS SOLUTIONS ITA.NO.1054/BANG/2011 F) ADAPTEC (INDIA) P. LTD. VS . DCIT ITA.NO.1801/HYD/2009 G) TRINITY ADVANCED SOFTWARE L ABS P. LTD. VS. ACIT ITA.NO.1129/HYD/2005. WE THEREFORE DIRECT THE ASSESSING OFFICER /TPO TO EXCLUDE THIS WHILE COMPUTING ALP. 1.3 THE ITAT IN AY 2005-06 IN ASSESSEES OWN CASE F OR AY 2005-06 VIDE ITA NO. 1480/H/10 AND OTHERS HELD AS FOLLOWS: 15. WE HAVE HEARD SUBMISSIONS OF THE PARTIES AND P ERUSED THE MATERIALS ON RECORD. SO FAR AS INFOSYS TECHNOL OGIES LTD. IS CONCERNED THE ISSUE OF COMPARABILITY OF THE AFOR ESAID COMPANY HAS BEEN CONSIDERED BY DIFFERENT BENCHES OF THE TRIBUNAL INCLUDING THE HYDERABAD BENCHES. IT IS TO BE NOTED THAT THE CONSISTENT VIEW OF DIFFERENT BENCHES OF TH E TRIBUNAL IS TO THE EFFECT THAT INFOSYS TECHNOLOGIES LTD. BEING A BIG COMPANY IN ALL RESPECTS INCLUDING THE RANGE OF TURN OVER IS NOT A COMPARABLE TO SMALL COMPANIES WHICH ARE CAPTIVE S ERVICE PROVIDERS HAVING CONSIDERABLY LOW TURNOVER. IN FAC T, THE HONBLE DELHI COURT IN A JUDGEMENT DATED 19.7.2013 IN THE CASE OF AGNITY INDIA LTD. UPHELD THE DECISION OF IT AT DELHI BENCH IN EXCLUDING INFOSYS TECHNOLOGIES LTD., AS A COMPARABLE IN VIEW OF ITS SIZE. THEREFORE, KEEPING IN TUNE WITH THE CONSISTENT VIEW OF DIFFERENT BENCHES OF TH E TRIBUNAL IN RESPECT OF THE AFORESAID COMPANY, WE DIRECT THE AO/ TPO TO EXCLUDE THE AFORESAID COMPANY FROM THE LIST OF COMP ARABLES. 1.4 THE LD. AR ALSO PLACED RELIANCE ON THE FOLLOWIN G DECISIONS: 1. INVENSYS DEVELOPMENT CENTRE INDIA PVT. LTD., 16 92/H/12 AY 2008-09 2. 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-201 3(BANG)- TP) AY 2008-09. 3. CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 - AY 2008-09. 9 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 1.5 THE LD. DR, ON THE OTHER HAND RELIED ON THE ORD ERS OF REVENUE AUTHORITIES. 1.6. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND KEEPING IN TUNE WITH THE CONSISTENT VIEW OF DIFFERE NT BENCHES OF THE TRIBUNAL IN RESPECT OF THE AFORESAID, WE DIRECT THE AO/TPO TO EXCLUDE THE AFORESAID COMPANY FROM THE LIST OF COMPARABLES. 2. KALS INFORMATION SYSTEMS LTD., 2.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARABL E, THE AR OF THE ASSESSEE RELIED ON THE DECISION OF ITAT IN ASSE SSEES OWN CASE FOR AY 2007-08 WHEREIN THE TRIBUNAL HELD AS FOLLOWS : 7.9. AS FAR AS KALS INFORMATION SYSTEM LIMITED IS C ONCERNED, LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT IT IS FUNCTIONALLY DIFF ERENT FROM ASSESSEE. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR ASSESSEE RELIED UPON THE DECISION OF THE BANGALORE TRIBUNAL IN THE CASE M/S. TRILOGY E-BUSINESS SOFTWARE INDIA PRIVATE LIMITED (SUPRA) WHEREIN AT P ARAS 46 AND 47 OF ITS ORDER, THE TRIBUNAL HAS DISCUSSED THE FUNCTIONAL DI SSIMILARITY WITH ASSESSEE THEREIN AND HAS DIRECTED THAT THE COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. SIMILARLY, THE TRIBUNAL AT BANGALOR E IN THE CASE OF M/S. HCL EAI SERVICES LTD. VS. DCIT IT(TP) A. NO. 1348/ BANG /2011 AT PARA 17 AT PAGES 24 TO 26 OF ITS ORDER HAS DISCUSSED AT LENGTH THE R EASONS FOR NOT CONSIDERING THE SAID COMPANY AS COMPARABLE TO SOFTWARE DEVELOPM ENT SERVICES COMPANY. THE RELEVANT PORTION OF THE ORDER IS REPRO DUCED HEREUNDER : (D) KALS INFORMATION SYSTEMS LTD. 46. AS FAR AS THIS COMPANY IS CONCERNED, THE CONTEN TION OF ASSESSEE IS THAT THE AFORESAID COMPANY HAS REVENUES FROM BOTH SOFTWA RE DEVELOPMENT AND SOFTWARE PRODUCTS. BESIDES THE ABOVE, IT WAS ALSO P OINTED OUT THAT THIS COMPANY IS ENGAGED IN PROVIDING TRAINING. IT WAS AL SO SUBMITTED THAT AS PER THE ANNUAL REPORT, THE SALARY COST DEBITED UNDER TH E SOFTWARE DEVELOPMENT EXPENDITURE WAS RS.45,93,351. THE SAME WAS LESS THA N 25% OF THE SOFTWARE SERVICES REVENUE AND THEREFORE THE SALARY COST FILT ER TEST FAILS IN THIS CASE. REFERENCE WAS MADE TO THE PUNE BENCH TRIBUNALS DEC ISION OF THE ITAT IN THE CASE OF BINDVIEW INDIA PRIVATE LIMITED VS. DCI, ITA NO. ITA NO 1386/PN/1O WHEREIN KALS AS COMPARABLE WAS REJECTED FOR AY 2006 -07 ON ACCOUNT OF IT BEING FUNCTIONALLY DIFFERENT FROM SOFTWARE COMPANIE S. THE RELEVANT EXTRACT ARE AS FOLLOWS: 16. ANOTHER ISSUE RELATING TO SELECTION OF COMPARA BLES BY THE TPO IS REGARDING INCLUSION OF KALS INFORMATION SYSTEM LTD. ASSESSEE HAS OBJECTED TO ITS INCLUSION ON THE BASIS THAT FUNCTIONALLY THE COMPANY IS NOT COMPARABLE. WITH REFERENCE TO PAGES 185-186 OF THE PAPER BOOK, IT IS EXPLAINED THAT THE SAID COMPANY IS ENGAGED IN DEVEL OPMENT OF SOFTWARE 10 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . PRODUCTS AND SERVICES AND IS NOT COMPARABLE TO SOFT WARE DEVELOPMENT SERVICES PROVIDED BY ASSESSEE. THE APPELLANT HAS SU BMITTED AN EXTRACT ON PAGES 185-186 OF THE PAPER BOOK FROM THE WEBSITE OF THE COMPANY TO ESTABLISH THAT IT IS ENGAGED IN PROVIDING OF I T EN ABLED SERVICES AND THAT THE SAID COMPANY IS INTO DEVELOPMENT OF SOFTWARE PRODUC TS, ETC. ALL THESE ASPECTS HAVE NOT BEEN FACTUALLY REBUTTED AND, IN IT A NO.1658/HYD/2011 & 1239/HYD/2013 M/S. UNITED ONLINE SOFTWARE DEVELOPME NT (INDIA) PVT. LTD., HYDERABAD 19 OUR VIEW, THE SAID CONCERN IS LIABLE T O BE EXCLUDED FROM THE FINAL SET OF COMPARABLES, AND THUS ON THIS ASPECT, ASSESSEE SUCCEEDS. BASED ON ALL THE ABOVE, IT WAS SUBMITTED ON BEHALF OF ASSESSEE THAT KALS INFORMATION SYSTEMS LIMITED SHOULD BE REJECTED AS A COMPARABLE. 47. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE SU BMISSION MADE ON BEHALF OF ASSESSEE. WE FIND THAT THE TPO HAS DRAWN CONCLUS IONS ON THE BASIS OF INFORMATION OBTAINED BY ISSUE OF NOTICE U/S.133(6) OF THE ACT. THIS INFORMATION WHICH WAS NOT AVAILABLE IN PUBLIC DOMAI N COULD NOT HAVE BEEN USED BY THE TPO, WHEN THE SAME IS CONTRARY TO THE A NNUAL REPORT OF THIS COMPANY AS HIGHLIGHTED BY ASSESSEE IN ITS LETTER DA TED 21.6.2010 TO THE TPO. WE ALSO FIND THAT IN THE DECISION REFERRED TO BY THE LEARNED COUNSEL FOR ASSESSEE, THE MUMBAI BENCH OF ITAT HAS HELD THAT TH IS COMPANY WAS DEVELOPING SOFTWARE PRODUCTS AND NOT PURELY OR MAIN LY SOFTWARE DEVELOPMENT SERVICE PROVIDER. WE THEREFORE ACCEPT T HE PLEA OF ASSESSEE THAT THIS COMPANY IS NOT COMPARABLE. 7.9.1. WE FIND THAT BOTH M/S. HCL EAI SERVICES LTD. ITA.NO.1348/BANG/2011 AS WELL AS M/S. TRILOGY E-BUSINESS SOLUTIONS ITA.NO .1054/BANG/2011 ARE INTO SOFTWARE DEVELOPMENT SERVICES TO ITS PARENT CO MPANIES. ASSESSEE IS ALSO INTO SIMILAR TYPE OF ACTIVITY. THEREFORE, THE DECISION TAKEN IN M/S. TRILOGY E-BUSINESS SOFTWARE INDIA PRIVATE LIMITED A S WELL AS M/S. HCL EAI SERVICES LTD. TO EXCLUDE KALS INFORMATION SYSTEMS L TD. APPLIES TO THE FACTS OF THE CASE BEFORE US ALSO. SIMILAR VIEW HAS BEEN EXPR ESSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE FOLLOWING CASES : A) M/S. CONEXANT SYSTEM INDIA P. LTD. ITA.NO.1978/H YD/2011. B) INTOTO SOFTWARE INDIA P. LTD. ITA.2102/H/2010 C) BEARING POINT BUSINESS ITA.NO.1124/BANG/2011 D) LG SOFT INDIA P. LTD. ITA.1121/BANG/2011 E) TRANSWITCH INDIA P. LTD. ITA.948/BANG/2011 F) CS R INDIA P. LTD. ITA.NO.1119/BANG/2011 G) FIRST ADVANTAGE ITA.NO.108 6/BANG/2012 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE COORDINATE BENCHES (SUPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO EXC LUDE THE COMPANY FROM THE LIST OF COMPARABLES. 2.2 LD. AR ALSO RELIED ON THE DECISION OF INVENSYS DEVELOPMENT CENTRE INDIA PVT. LTD., 1692/H/12 AY 2008-09, WHERE IN THE TRIBUNAL HELD AS FOLLOWS: 11 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 4.4.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY CON SIDERED THE MATERIAL ON RECORD. WE FIND FROM THE RECORD THAT THE TPO HAS DR AWN CONCLUSIONS AS TO THE COMPARABILITY OF THIS COMPANY TO ASSESSEE BASED ON INFORMATION OBTAINED U/S.133(6) OF THE ACT. WE ALSO FIND THAT T HE CO-ORDINATE BENCHES OF THIS TRIBUNAL HAVE HELD THAT THIS COMPANY WAS DEVEL OPING SOFTWARE PRODUCTS AND WAS NOT PURELY OR MAINLY A SOFTWARE SERVICE PRO VIDER. APART FROM RELYING OF THE ABOVE CITED DECISIONS OF CO-ORDINATE BENCHES OF THE TRIBUNAL (SUPRA), ASSESSEE HAS ALSO BROUGHT ON RECORD EVIDEN CE FROM VARIOUS PORTIONS OF THE COMPANYS ANNUAL REPORT TO ESTABLISH THAT TH IS COMPANY IS FUNCTIONALLY DISSIMILAR AND DIFFERENT FORM ASSESSEE AND THAT SINCE THE FINDINGS RENDERED IN THE DECISIONS OF THE CO- 14 IT A.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERAB AD. ORDINATE BENCHES OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 (CITED SUP RA) ARE APPLICABLE FOR THIS YEAR I.E. ASSESSMENT YEAR 2008-09 ALSO, THIS C OMPANY OUGHT TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN THIS VIEW OF THE MATTER, WE HOLD THAT THIS COMPANY I.E. KALS INFORMATION SYSTEMS LTD ., IS TO BE OMITTED FROM THE LIST OF COMPARABLE COMPANIES. 2.3 LD. AR ALSO RELIED ON THE FOLLOWING DECISIONS: 1. 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-201 3(BANG)- TP) AY 2008-09. 2.. CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 - AY 2008-09. 2.4 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 2.5 IN VIEW OF THE ABOVE, IN LINE WITH THE DECISION S OF THE VARIOUS BENCHES OF THIS TRIBUNAL, WE HOLD THAT THIS COMPANY IS TO BE OMITTED FROM THE LIST OF COMPARABLE COMPANIES. 3. TATA ELXSI LTD. (SEG.) 3.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARABL E, THE LD. AR RELIED ON THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2007-08 WHERIEN THE TRIBUNAL HELD AS FOLLOWS: 7.7 FROM THE FACTS AND MATERIAL ON RECORD AND SUBM ISSIONS MADE BY THE LEARNED AR, IT IS SEEN THAT THE TATA ELXSI IS ENGAG ED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES, WHICH IS ENTIRELY DIFFERENT FROM ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNE D AR THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABO VE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY FIT FOR COMPARABILITY ANALYSIS FOR DETERMIN ING THE ITA NO.1658/HYD/2011 & 1239/HYD/2013 M/S. UNITED ONLINE SOFTWARE 12 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . DEVELOPMENT (INDIA) PVT. LTD., HYDERABAD 15 ARMS LE NGTH PRICE FOR ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARAB LE PARTIES. FOLLOWING THE DECISION OF THE ITAT MUMBAI BENCH AS AFORESAID AND ALSO CONSIDERING THE FACT THAT THE COMPANY ITSELF IN THE INFORMATION PROVIDED IN RESPONSE TO THE NOTICE ISSUED U/S 133(6) OF THE ACT HAS ADMITTED THAT IT CANNOT BE CONSIDERED AS COMPARABLE WITH OTHER ASSES SEES, WE DIRECT EXCLUSION OF THE AFORESAID COMPANY FROM THE LIST OF COMPARABLES WHILE DETERMINING ALP. 3.2 LD. AR ALSO RELIED ON THE DECISION OF THE TRIBU NAL IN CASE OF INVENSYS DEVELOPMENT CENTRE INDIA PVT. LTD., (SUPRA) WHEREIN THE IT HAS HELD AS FOLLOWS: 4.5.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PER USED AND CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAILS ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWARE DEVELOPMENT SERVICES. THE DETAILS IN THE A NNUAL REPORT SHOW THAT THE SEGMENT SOFTWARE DEVELOPMENT SERVICES RELATES TO DESIGN SERVICES AND ARE NOT SIMILAR TO SOFTWARE DEVELOPMENT SERVICES PE RFORMED BY ASSESSEE. 4.5.5 THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF T ELECORDIA TECHNOLOGIES INDIA PVT. LTD. V ACIT (ITA NO.7821/MUM/2011) HAS H ELD 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 DIFFERENT FROM THE ASSES SEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED B Y THIS COMPANY ARE DIFFERENT FROM ASSESSEE AS HAVE BEEN NARRATED IN PA RA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN P ROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARI NG THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMPARABILITY ANALYSIS FOR DETER MINING THE ARMS LENGTH PRICE FOR ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE PORTION. AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REPO RT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINING TO TATA EL XSI 17 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENT RE INDIA (P) LTD., HYDERABAD. HAVE NOT CHANGED FROM ASSESSMENT YEAR 20 07-08 TO ASSESSMENT YEAR 2008-09. WE, THEREFORE, HOLD THAT THIS COMPANY IS NOT TO BE CONSIDERED FOR INCLUSION IN THE SET OF COMPARABLES IN THE CASE ON HAND. IT IS ORDERED ACCORDINGLY. 3.3 LD. AR ALSO RELIED ON THE FOLLOWING DECISIONS: 1. 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-201 3(BANG)- TP) AY 2008-09. 13 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 2.. CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 - AY 2008-09. 3.4 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 3.5 IN VIEW OF THE ABOVE, IN LINE WITH THE DECISION OF THE VARIOUS BENCHES OF THIS TRIBUNAL, WE DIRECT THE AO TO EXCLU DE THIS COMPANY AS COMPARABLE. 4. WIPRO LTD., 4.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARABL E, THE AR RELIED ON THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2007-08 WHEREIN THE BENCH HELD AS FOLLOWS: 4.6.1. THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO. BEFORE THE TPO, THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES ON SEVERAL GROUNDS LIKE FUNCTIONAL D ISSIMILARITY, BRAND VALUE, SIZE, ETC. THE TPO, HOWEVER, BRUSHED ASIDE THE OBJE CTIONS OF THE ASSESSEE AND INCLUDED THIS COMPANY IN THE SET OF COMPARABLES . 4.6.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTAT IVE OF THE ASSESSEE CONTENDED THAT THIS COMPANY I.E. WIPRO 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 INTANGIB LES, OWNS IPRS AND HAS BEEN GRANTED 40 REGISTERED PATENTS AND HAS 62 PENDI NG APPLICATIONS AND ITS ANNUAL REPORT CONFIRMS THAT IT OWNS PATENTS AND INT ANGIBLES. (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 GIANT COMPANY AND A MARKET LEADER ASSU MING ALL RISKS LEADING TO HIGHER PROFITS, CANNOT BE CONSIDERED AS COMPARAB LE TO CAPTIVE 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 S ERVICE PROVIDER. (IV) WIPRO LTD. IS ENGAGED IN BOTH SOFTWARE DEVELO PMENT AND PRODUCT DEVELOPMENT SERVICES. NO INFORMATION IS AVAILABLE O N THE SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF PRODUCTS AND SO FTWARE SERVICES. (V) THE TPO HAS ADOPTED CONSOLIDATED FINANCIAL STAT EMENTS FOR COMPARABILITY PURPOSES AND FOR COMPUTING THE MARGINS, WHICH IS IN CONTRADICTION TO THE 14 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . TPOS OWN FILTER OF REJECTING COMPANIES WITH CONSOL IDATED FINANCIAL STATEMENTS. (VI) THE LEARNED A.R. FURTHER RELIED ON THE FOLLOWI NG DECISIONS : I) AGNITY INDIA TECHNOLOGIES P. LTD., VS. DCIT, CIR CLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 DATED 20TH SEPTEMBER, 2013. II) 3DPLM SOFTWARE SOLUTION LTD., (SUCCESSOR TO DE LMIA 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, C IRCLE 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 A CTION OF THE TPO IN INCLUDING THIS COMPANY IN THE LIST OF COMPARABLES. 19 ITA.NO.1692/HYD/2012 M/S. INVENSYS DEVELOPMENT CENTRE INDIA (P) LTD., HY DERABAD. 4.6.4. WE HAVE HEARD BOTH PARTIES AND CAREFULLY PER USED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND MERIT IN THE CONTENTION S OF THE ASSESSEE FOR EXCLUSION OF THIS COMPANY FROM THE SET OF COMPARABL ES. IT IS SEEN THAT THIS COMPANY IS ENGAGED BOTH IN SOFTWARE DEVELOPMENT AND PRODUCT DEVELOPMENT SERVICES. THERE IS NO INFORMATION ON TH E SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF PRODUCT AND SOFTWARE SERVIC ES. THE TPO APPEARS TO HAVE ADOPTED THIS COMPANY AS A COMPARABLE WITHOUT D EMONSTRATING HOW THE COMPANY SATISFIES THE SOFTWARE DEVELOPMENT SALE S 75% OF THE TOTAL REVENUE FILTER ADOPTED BY HIM. WE ALSO FIND THAT TH IS COMPANY OWNS INTELLECTUAL PROPERTY IN THE FORM OF REGISTERED PAT ENTS AND SEVERAL PENDING APPLICATIONS FOR GRANT OF PATENTS. IN THIS REGARD, THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM PVT. LTD. HAS HELD THAT A COMPANY OWNING INTANGIBLES CANNOT BE COMPARED TO A LOW RISK CAPTIVE SERVICE PROVIDER WHO DOES NOT OWN ANY SUCH INTANGIB LE AND HENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET. AS THE ASSESSEE IN THE CASE ON HAND DOES NOT OWN ANY INTANGIBLES, FOLLOWING THE AF ORESAID DECISION OF THE CO-ORDINATE BENCHES CITED SUPRA, WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE. WE, THE REFORE, DIRECT THE ASSESSING OFFICER/TPO TO OMIT THIS COMPANY FROM THE SET OF COMPARABLE COMPANIES. 4.2 THE LD. AR ALSO RELIED ON THE FOLLOWING CASES: 1. 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-201 3(BANG)- TP) AY 2008-09. 2.. CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 - AY 2008-09. 4.3 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 15 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 4.4 IN VIEW OF THE ABOVE, WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE. WE, THE REFORE, DIRECT THE ASSESSING OFFICER/TPO TO OMIT THIS COMPANY FROM THE SET OF COMPARABLE COMPANIES. 5. AVANI CINCOM TECHNOLOGIES LIMITED : 5.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARABL E, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS COMPANY IS INT O SOFTWARE PRODUCTS AND COMPANYS WEBSITE GIVES DETAILS THAT C OMPANY DEVELOPS AND SELLS CUSTOMIZED SOFTWARE SOLUTIONS LIKE DX CHA NGE, CARMA, ETC. AND RELIED ON THE DECISION OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR AY 2007-08 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 7.1. ASSESSEE HAS BASICALLY SOUGHT EXCLUSION OF ABO VE COMPANY ON TWO GROUNDS, FIRSTLY, THIS COMPANY HAS REVENUE F ROM BOTH PRODUCT AND SOFTWARE SERVICES AND SEGMENT-WISE DATA IS NOT AVAILABLE AND SECONDLY, IT IS CONTENDED THAT THE CO MPANY HAS SHOWN SUPER NORMAL PROFIT OF 52.59% AGAINST AVERAGE MARGIN OF OTHER COMPARABLES. IT IS VERY MUCH EVIDENT FROM THE TP ORDER THAT ASSESSEE HAS BEEN CATEGORISED AS A SOFTWARE DEVELOP MENT SERVICE PROVIDER. COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF VIRTUSA (INDIA) PVT. LTD. (ITA NO. 1962/HYD/2011 DA TED 30/08/2013) AFTER FOLLOWING SOME OTHER DECISIONS OF THE TRIBUNAL HAS HELD THIS COMPANY CANNOT BE TREATED AS COMPARAB LE AS THIS COMPANY IS ALSO INTO PRODUCT DEVELOPMENT. AS SEGMEN TAL DETAILS OF OPERATING INCOME OF SOFTWARE DEVELOPMENT SERVICE S AND SALE OF SOFTWARE PRODUCTS ARE NOT AVAILABLE, IT COULD NO T BE ASCERTAINED WHETHER THE PROFIT RATIO OF THIS COMPAN Y CAN BE TAKEN INTO CONSIDERATION FOR COMPARING WITH ASSESSEE. AS THE AFORESAID DECISION OF THE COORDINATE BENCH PERTAINED TO THE S AME ASSESSMENT YEAR I.E. A.Y. 2007-08, FOLLOWING THE SA ME, WE HOLD THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE T O ASSESSEE. OTHER CASES CONSIDERED THE SAME COMPARABLE AND REJE CTED ARE AS UNDER: A) M/S. FOURSOFT LIMITED (ITA.NO.1903/H/2011) B) M/S. CONEXANT SYSTEM INDIA P. LTD. ITA.1978/H201 1 C) INTOTO SOFTWARE INDIA P. LTD. ITA.2102/H/2010 D) TELCORDIA TECHNOLOGIES INDIA P. LTD. ITA.7821/MU M/2011 E) TRIOLOGY E-BUSINESS SOLUTIONS ITA.NO.1054/BANG / 2011 F) BEARING POINT BUSINESS ITA.NO.1124/BANG/2011 G) LG SOFT INDIA PVT. LTD. ITA.NO.1121/BANG/2011 H) TRANSWITCH INDIA P. LTD. ITA.NO.948/BANG/2011 16 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . I) MERCEDES BENZ RESEARCH & DEVELOPMENT ITA.NO.1222/BANG/2011 J) CSR INDIA P. LTD. ITA.NO.1119/BANG/2011 K) FIRST ADVANTAGE ITA.NO.1086/BANG/2012 L) HCL EAI SERVICES LTD. ITA.NO.1348/BANG/2011 WE HEREFORE DIRECT THE ASSESSING OFFICER /TPO TO EX CLUDE THIS WHILE COMPUTING ALP. 5.2 THE AR ALSO RELIED ON THE DECISION OF THE ITAT HYDERABAD IN CASE OF INVENSYS DEVELOPMENT CENTRE P. LTD. (SUPRA) WHEREIN THE COORDINATE BENCH HELD AS FOLLOWS: 4.1.4 WE HAVE HEARD BOTH PARTIES AND PERUSED AND C AREFULLY, CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY IN THE FINAL SET OF COMPARABLES ONLY O N THE BASIS OF INFORMATION OBTAINED UNDER SECTION 133(6) OF THE AC T. WE ALSO FIND SUBSTANTIAL MERIT 6 ITA.NO.1692/HYD/2012 M/S. INVEN SYS DEVELOPMENT CENTRE INDIA (P) LTD., HYDERABAD. IN THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THIS COMPANY HAS BEE N SELECTED BY THE TPO AS AN ADDITIONAL COMPARABLE ONLY ON THE GROUND THAT THIS COMPANY WAS SELECTED IN THE EARLIER YEAR. APART FROM PLACING RE LIANCE ON THE JUDICIAL DECISIONS CITED ABOVE, INCLUDING ASSESSEE'S OWN CAS E FOR ASSESSMENT YEAR 2007-08, ASSESSEE HAS BROUGHT ON RECORD EVIDENCE TH AT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND DIFFERENT FROM ASSESSEE AND HENCE IS NOT COMPARABLE. THEREFORE THE FINDING EXCLUDING IT FROM THE LIST OF COMPARABLES RENDERED IN THE IMMEDIATELY PRECEDING YEAR IS APPLI CABLE IN THIS YEAR ALSO. SINCE THE FUNCTIONAL PROFILE AND OTHER PARAMETERS B Y THIS COMPANY HAVE NOT UNDERGONE ANY CHANGE DURING THE YEAR UNDER CONSIDER ATION WHICH FACT HAS BEEN DEMONSTRATED BY ASSESSEE, FOLLOWING THE DECISI ONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007- 08 IN ITA NO.1780/HYD/2011, AND THE FINDINGS IN THE ABOVE CITED CASES WHEREIN THIS COMPANY WAS EXCLUDED, WE DIRECT THE A. O./TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 5.3 THE LD. AR ALSO RELIED ON THE FOLLOWING CASES: 1. 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-201 3(BANG)- TP) AY 2008-09. 2.. CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 - AY 2008-09. 5.4 FOLLOWING THE ABOVE DECISIONS, AS THE COMPANY I S FUNCTIONALLY DISSIMILAR AND DIFFERENT FROM THE ASSESSEE, WE DIRE CT THE AO/TPO TO EXCLUDE THE SAID COMPANY FROM THE LIST OF COMPARABL ES. 17 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 6. BODHTREE CONSULTING LTD. (SEG.) 6.1 THE LD. AR OBJECTING TO THE SAID COMPANY AS COM PARABLE, RELIED UPON THE DECISION OF THE ITAT, HYDERABAD IN ASSESS EES OWN CASE FOR AY 2005-06 WHEREIN THE BENCH HELD AS FOLLOWS: 20. THE LEARNED AR SUBMITTED THAT SINCE THE AFORES AID COMPANY FAILS THE RPT FILTER IT CANNOT BE TREATED A S A COMPARABLE. THE LEARNED DR SUPPORTED THE ORDER OF THE TPO. 21. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. THE GROUND ON WHI CH THE LEARNED AR SEEKS FOR EXCLUSION OF THE AFORESAID COM PANY IS, ITS RELATED PARTY TRANSACTION AS A PERCENTAGE TO THE TO TAL REVENUE IS 34.68% WHICH IS MORE THAN THE ACCEPT/REJECT MATRIX OF MORE THAN 25% FIXED BY THE TPO. IT IS TO BE NOTED THAT IN FI NAL FILTERS ADOPTED BY THE TPO IN PARA 9.7 OF HIS ORDER HE HIMS ELF HAS EXCLUDED COMPANIES HAVING RPT OF MORE THAN 25%. WE , THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO EXAM INE THIS ASPECT AND EXCLUDE IT FROM THE LIST OF COMPARABLES IF THE ASSESSEE'S CONTENTION IS FOUND TO BE CORRECT. 6.2 THE LD. AR ALSO RELIED UPON THE FOLLOWING CASES : 1. ITAT DELHI IN CASE OF CASH EDGE INDIA PVT. LTD. IN ITA NO. 5848/D/2012 FOR AY 2008-09 6.3 IT IS TO BE NOTED THAT IN THE CASE OF 3DPLM SOF TWARE SOLUTIONS LTD, (TS-359-ITAT-2013(BANG)-TP) AY 2008-09, THE CO ORDINATE BENCH HAS TAKEN THIS COMPANY AS COMPARABLE. 6.4 LD. AR SUBMITTED THAT THIS COMPANY IS ENGAGED I N PROVIDING OPEN AND END TO END WEB SOLUTIONS, SOFTWARE CONSULT ANCY, DESIGN AND DEVELOPMENT OF SOFTWARE AND ALSO SUBMITTED THAT THI S IS INTO BUSINESS OF SOFTWARE PRODUCTS. FOR THAT HE SUBMITTED SNAP SH OT OF COMPANIES PROFILE FROM THE NET IN PAGE 561 OF THE PAPER BOOK, WHICH STATES AS WE ALSO PROVIDE PRODUCT ENGINEERING AND ENTERPRISE SERVICES TO FORTUNE 500 FIRMS AND SMES. ALSO AS A PARTNER OF INDUSTRY LEADING TECHNOLOGY PROVIDERS, BODHTREE DELIVERS BEST-IN-CLA SS SOLUTIONS THAT ARE TAILORED TO MEET THE NEEDS OF GLOBAL SMES AND FORTUNE LISTED ORGANIZATIONS. LD AR ALSO SUBMITTED A LETTER FROM CHARTERED ACCOUNTATS, M/S GOKHALE & CO., WHICH IS ADDRESSED T O ACIT (TP), 18 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . HYDERABAD (REFER PAGES 563 & 564 OF THE PAPER BOOK) . M/S GOKHALE & CO., SUBMITS DETAILS ABOUT THE BODHTREE E PAPER S OLUTIONS. 6.5 AFTER ANALYZING THE ABOVE SUBMISSIONS, WE ARE O F THE VIEW THAT THE SUBMISSIONS ON PROFILE OF THE COMPANY, IT IS ME NTIONED AS WE ALSO PROVIDE PRODUCT ENGINEERING AND ENTERPRISE SER VICES TO FORTUNE 500 FIRMS. THIS ALSO WILL BE CATEGORIZED AS SOFTWA RE SERVICES AND CANNOT BE CATEGORIZED AS SOFTWARE PRODUCT. THE AUDI TOR OF THIS COMPANY SUBMITTED THE LETTER BEFORE TPO, WHICH WAS PART OF ASSESSMENT PROCEEDINGS. THESE SUBMISSIONS ARE MADE BY LD. AR AS ADDITIONAL EVIDENCE AND WE DIRECT AO/TPO TO ANALYSE THIS COMPARABLE WITH THE SUBMISSIONS OF THE ASSESSEE AFTER GIVING T HEM AN OPPORTUNITY OF BEING HEARD. IN CASE, THIS COMPARABLE IS FOUND T O BE INTO SOFTWARE PRODUCTS, IT MAY BE ELIMINATED FROM THE LIST OF COM PARABLES. 7. E-ZEST SOLUTIONS LTD. 7.1 OBJECTING TO THE SAID COMPANY AS COMPARABLE AS THIS COMPANY IS ENGAGED IN E-BUSINESS CONSULTANCY SERVICES AND A LSO IN BPO SERVICES, THE LD. AR RELIED ON THE DECISION OF THE COORDINATE BENCH OF HYDERABAD IN CASE OF INVENSYS DEVELOPMENT CENTRE P. LTD. (SUPRA) WHEREIN THE BENCH HELD AS FOLLOWS: 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 DEVELOPMENT SER VICES PERFORMED BY ASSESSEE. FROM THE DETAILS ON RECORD, WE FIND THAT WHILE ASSESSEE IS INTO SOFTWARE DEVELOPMENT SERVICE S, 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 SERVI CES ARE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND ARE THEREFORE 19 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . NOT COMPARABLE. FURTHER, THE DECISIONS OF THE COORD INATE BENCH IN THE AFORESAID CASES OF (I) AGNITY INDIA TECHNOLOGIE S P. LTD., VS. DCIT, CIRCLE 1(1), NEW DELHI ITA.NO.6485/DEL/2012 D ATED 20TH SEPTEMBER, 2013 AND (II) 3DPLM SOFTWARE SOLUTION LT D., (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, WE HOLD THAT THIS COMPANY, I.E. E-ZEST SOLUTIONS LTD. BE EXCLUDED FROM THE SET OF COMPARABLES. 7.2 THE LD. AR ALSO RELIED ON THE DECISION IN THE C ASE OF 3DPLM SOFTWARE SOLUTIONS LTD, (TS-359-ITAT-2013(BANG)-TP) AY 2008-09. 7.3 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 7.4 RESPECTFULLY FOLLOWING THE ABOVE, WE DIRECT THE AO/TPO TO EXCLUDE THE SAID COMPANY FROM THE LIST OF COMPARABL ES AS COMPARABLE. 8. LGS GLOBAL LTD. 8.1 OBJECTING TO THE SAID COMPANY AS COMPARABLE, LD . AR SUBMITTED THAT THIS COMPANY IS OFFERING SERVICES IN CONSULTAN CY SERVICES, BPO, TESTING SERVICES AND APPLICATION MAINTENANCE OUTSOU RCING. FURTHER, THIS COMPANY HAS CAPITAL WORK-IN-PROGRESS TOWARDS C APITALIZED SOFTWARE AND PRODUCT DEVELOPMENT COST. IN PRINCIPLE , SOFTWARE PRODUCTS CANNOT BE CONSIDERED AS COMPARABLES FOR SO FTWARE SERVICES COMPANY. THE LD. AR RELIED UPON THE DECISION OF THE ITAT DELHI BENCH IN CASE OF CASH EDGE INDIA PVT. LTD. (SUPRA) WHEREI N THE BENCH HELD AS FOLLOWS: 15. AS REGARDS THE ARGUMENT OF LD. A.R. REGARDING E XCLUSION OF LGS GLOBAL LTD., AVANI CINCON, KALS INFORMATION SYS TEMS AND BOTHTREE CONSULTANTS, WE ARE OF THE OPINION THAT TH E COMPANY HAVING SIMILAR FUNCTIONS CAN ONLY BE COMPARED WITH THE ASSESSEE AND AS PER VARIOUS DECISIONS OF THE TRIBUNAL AS REL IED UPON BY THE LD. A.R., THESE COMPANIES WERE INTO DEVELOPMENT OF THE PRODUCT ALSO IN ADDITION TO THE BUSINESS OF PROVIDI NG SERVICES. 16. LD. D.R. HAD ARGUED THAT THE TPO HAD TAKEN SEGM ENTAL FIGURES ONLY TO MAKE THE COMPARISON. THEREFORE, WE HOLD THAT THIS 20 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . ISSUE CAN BE EXAMINED BY THE ASSESSING OFFICER AFRE SH TO ASCERTAIN AS TO WHETHER SEGMENTAL DATA RELATING TO THE PROVISION OF SERVICES WERE USED OR CONSOLIDATED RESULTS WERE USED FOR MAKING COMPARISON. 17. AS REGARDS THE LAST ARGUMENT OF THE LD. A.R. RE GARDING INCLUSION OF FINANCE AND BANK CHARGES IN OPERATING EXPENSES WHILE COMPUTING THE MARGIN AND COMPARABLES, WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LD. A.R. THAT FI NANCE AND BANK CHARGES FORM PART OF OPERATING EXPENSES AND NE ED TO BE INCLUDED WHILE CALCULATING MARGIN OF COMPARABLES. 18. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE AND IN VIEW OF THE DISCUSSIONS MADE AB OVE AND IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMENTS, WE DIRECT THE ASSESSING OFFICER TO RE-ADJUDICATE THE ISSUE OF ARMS LENGTH P RICING AND DETERMINE THE SAME BY EXCLUDING THE COMPARABLES HAV ING TURNOVER OF MORE THAN RS.200 CRORES. THE ASSESSING OFFICER WILL ALSO TAKE INTO ACCOUNT THE BANK AND FINANCE CHARGES AS PART OF OPERATING EXPENSES OF COM PARABLES FOR ARRIVING AT THE MARGIN. SIMILARLY, ASSESSING OFFICER WILL ONLY TAKE SEGMENT AL RESULTS RELATING TO SERVICES ONLY FOR COMPARING THE COMPANI ES WS. KALS INFORMATION SYSTEMS, AVANI CINCON, LGS GLOBAL LTD. AND BODHTREE CONSULTING SYSTEMS AS THE CONSOLIDATED RES ULTS OF THESE COMPANIES CANNOT BE COMPARED WITH THE ASSESSE E, AS ASSESSEE IS ADMITTEDLY INTO SERVICE PROVIDING ACTIV ITIES. IT IS FURTHER DIRECTED THAT IF SEGMENTAL RESULTS OF THE A BOVE COMPANIES RELATING TO SIMILAR SERVICES AS BEING PROVIDED BY A SSESSEE ARE NOT AVAILABLE, THEN THESE COMPANIES WILL HAVE TO BE EXCLUDED AS COMPARABLES AS HELD IN VARIOUS JUDICIAL PRONOUNCEME NTS RELIED UPON BY LD. A.R . 8.2 IN VIEW OF THE ABOVE AND ALSO LD. AR SUBMITTED THAT THE REVENUE IN FY 2007-08 IS THREE TIMES HIGHER THAN THE REVENU E OF FY 2006-07. WE DIRECT THE AO TO APPLY THE TURNOVER FILTER AND E XCLUDE THE COMPANIES WHOSE TURNOVER ARE MORE THAN 200 CRORES. SINCE, WE DO NOT HAVE SEGMENTAL REPORT, WE DIRECT AO TO DETERMIN E THE SERVICE AND PRODUCT DETAILS FROM THIS COMPANY AND IF IN CASE IT IS FOUND THAT IT IS INTO PRODUCT, THIS COMPANY WILL HAVE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 9. PERSISTENT SYSTEMS LTD. 9.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARABL E, LD. AR SUBMITTED THAT THIS COMPANY IS ENGAGED IN SOFTWARE PRODUCT DESIGNING 21 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . AND ANALYTICAL SERVICES. IT HAS ALSO EXPENDITURE IN R&D. THE LD. AR RELIED ON THE DECISION OF THE COORDINATE BENCH OF I TAT BANGALORE IN CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) WHERE IN THE BENCH HELD AS FOLLOWS: 17.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE DETAILS ON RECORD THAT THIS COMPANY I.E. PERSISTENT SYSTEMS LTD., IS ENGAGED IN PRODUCT DEVELOPMENT AND PRODUCT DESIG N SERVICES WHILE THE ASSESSEE IS A SOFTWARE DEVELOPMENT SERVIC ES PROVIDER. WE FIND THAT, AS SUBMITTED BY THE ASSESSEE, THE SEG MENTAL DETAILS ARE NOT GIVEN SEPARATELY. THEREFORE, FOLLOW ING THE PRINCIPLE ENUNCIATED IN THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA 41 IT(T.P)A NO.1303/BANG/2012 TE CHNOLOGIES INDIA PVT. LTD. (SUPRA) THAT IN THE ABSENCE OF SEGM ENTAL DETAILS / INFORMATION A COMPANY CANNOT BE TAKEN INTO ACCOUNT FOR COMPARABILITY ANALYSIS, WE HOLD THAT THIS COMPANY I .E. PERSISTENT SYSTEMS LTD. OUGHT TO BE OMITTED FROM THE SET OF CO MPARABLES FOR THE YEAR UNDER CONSIDERATION. IT IS ORDERED ACCORDI NGLY. 9.2 LD. AR ALSO RELIED ON THE DECISION IN THE CASE OF CASH EDGE INDIA PVT. LTD., ITA NO. 5848/D/12 AY 2008-09. 9.3 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 9.4 RESPECTFULLY FOLLOWING THE SAID DECISION, WE DI RECT THE AO/TPO TO EXCLUDE THE SAID COMPANY AS COMPARABLE FROM THE LIST OF COMPARABLES. 10. QUNITEGRA SOLUTIONS LTD. 10.1 OBJECTING TO THE AFORESAID COMPANY AS COMPARAB LE, THE LD. AR RELIED ON THE DECISION OF THE COORDINATE BENCH OF I TAT BANLGAORE IN CASE OF IDPLM SOFTWARE SOLUTIONS LTD. (SUPRA) WHERE IN THE BENCH HELD AS FOLLOWS: 18.3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE DETAILS BROUGHT ON RECORD THAT THIS COMPANY I.E. QU INTEGRA SOLUTIONS LTD. IS ENGAGED IN PRODUCT ENGINEERING SE RVICES AND IS NOT PURELY A SOFTWARE DEVELOPMENT SERVICE PROVIDER AS IS THE ASSESSEE IN THE CASE ON HAND. IT IS ALSO SEEN THAT THIS COMPANY IS ALSO ENGAGED IN PROPRIETARY SOFTWARE PRODUCTS AN D HAS SUBSTANTIAL R&D ACTIVITY WHICH HAS RESULTED IN CREA TION OF ITS IPRS. HAVING APPLIED FOR TRADE MARK REGISTRATION OF ITS PRODUCTS, IT 22 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . EVIDENCES THE FACT THAT THIS COMPANY OWNS INTANGIBL E ASSETS. THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THECASE OF 24 /7 CUSTOMER.COM PVT. LTD. (ITA NO.227/BANG/2010 DT.9.1 1.2012) HAS HELD THAT IF A COMPANY POSSESSES OR OWNS INTANG IBLES OR IPRS, THEN IT CANNOT BE CONSIDERED AS A COMPARABLE COMPANY TO ONE THAT DOES NOT OWN INTANGIBLES AND REQUIRES TO B E OMITTED FORM THE LIST OF COMPARABLES, AS IN THE CASE ON HAN D. 18.3.2 WE ALSO FIND FROM THE ANNUAL REPORT OF QUINTEGRA SOLUT IONS LTD. THAT THERE HAVE BEEN ACQUISITIONS MADE BY IT IN THE PERI OD UNDER CONSIDERATION. IT IS SETTLED PRINCIPLE THAT WHERE E XTRAORDINARY EVENTS HAVE TAKEN PLACE, WHICH HAS AN EFFECT ON THE PERFORMANCE OF THE COMPANY, THEN THAT COMPANY SHALL BE REMOVED FROM THE LIST OF COMPARABLES. 18.3.3 RESPECTFULLY FOLLOWING THE DECISION OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF 24/7 CUSTOMER. COM PVT. LTD. (SUPRA), WE DIRECT THAT THIS COMPANY I.E. QUINTEGRA SOLUTIONS LTD. BE EXCLUDED FROM THE LIST OF COMPARABLES IN THE CAS E ON HAND SINCE IT IS ENGAGED IN PROPRIETARY SOFTWARE PRODUCT S AND OWNS ITS OWN INTANGIBLES UNLIKE THE ASSESSEE IN THE CASE ON HAND WHO IS A SOFTWARE SERVICE PROVIDER. 10.2 RESPECTFULLY FOLLOWING THE SAID DECISION, WE D IRECT THE AO/TPO TO EXCLUDE THE SAID COMPANY AS COMPARABLE FROM THE LIST OF COMPARABLES. 11. SOFTSOL INDIA LTD. 11.1 OBJECTING TO THE SAID COMPANY AS COMPARABLE, T HE LD. AR RELIED ON THE DECISION OF COORDINATE BENCH OF ITAT BANGLAO RE IN CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) WHEREIN THE B ENCH HELD AS FOLLOWS: 19.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ACTION OF THE TPO IN INCLUDING THIS C OMPANY IN THE LIST OF COMPARABLES AS THIS COMPANY WAS A PURE SOFT WARE DEVELOPMENT SERVICE PROVIDER LIKE THE ASSESSEE. 19.3 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAR EFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 HAS EXCLUDED THIS COMPANY FROM THE SET OF COMPARABLES F OR THE REASON THAT RPT IS IN EXCESS OF 15% FOLLOWING THE D ECISION OF ANOTHER BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM PVT. LTD. IN ITA NO.227/BANG/2011. AS THE FACTS FOR THIS YEAR ARE 23 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . SIMILAR AND MATERIAL ON RECORD ALSO INDICATES THAT RPT IS 18.3%, FOLLOWING THE AFORE CITED DECISIONS OF THE CO-ORDIN ATE BENCHES (SUPRA), WE HOLD THAT THIS COMPANY IS TO BE OMITTED FROM THE LIST OF COMPARABLES TO THE ASSESSEE IN THE CASE ON HAND. 11.2 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORI TIES. 11.3 RESPECTFULLY FOLLOWING THE SAID DECISION, WE D IRECT THE AO/TPO TO EXCLUDE THE SAID COMPANY AS COMPARABLE FROM THE LIST OF COMPANIES. 10. WE THEREFORE DIRECT THE ASSESSING OFFICER /TPO TO DETERMINE THE ALP KEEPING IN VIEW OUR DIRECTIONS GIVEN HEREIN ABOVE AND IF ON SUCH DETERMINATION THE PRICE CHARGED BY THE ASSESSE E FOR ITS INTERNATIONAL TRANSACTION IS FOUND TO BE WITHIN THE ARMS LENGTH THEN NO ADJUSTMENT IS REQUIRED TO BE MADE. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND APRIL, 2016 KV COPY TO:- 1) UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD., 6-3-1099/1100, 1 ST & 6 TH FLOOR, BABUKHANS MILLENNIUM CENTRE, SOMAJIGUDA, HYDERABAD 500 082 2) ITO, WARD 3(2), 7 TH FLOOR, INCOME-TAX TOWERS, MASAB TANK, HYD. 3) DRP, HYDERABAD 4. DIT, IT TOWERS, 10-2-3, AC GUARDS, HYD. 04. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 24 ITA NO. 1720 /HYD/2012 UNITED ONLINE SOFTWARE DEVELOPMENT (INDIA) PVT. LTD . 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
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