M/s Nethawk Networks India Private Limited, Pune V. Assistant Commissioner of Income tax, Pune

ITA 173/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3113 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 195; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.173/PUN/2017 / ASSESSMENT YEAR: 2012-13 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED, 1249/50, 1 ST FLOOR, LIFESTYLE BUILDING, F.C. ROAD, DECCAN, PUNE 411 004 PAN : AACCN0994P VS. ACIT, CIRCLE-2, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 30-11-2016 PASSED BY THE ASSESS ING OFFICER (AO) U/S. 143(3) R.W.S. 144C(13) OF THE INCOME -TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND, WHICH IS NOTHING BUT AN ELABORATION OF THE GROUNDS TAKEN IN THE MEMORANDUM OF APPEAL. THE ADDITIONAL GROUND SPECIFICALLY REFERS TO THE NAM E OF ASSESSEE BY SHRI NIKHIL PATHAK REVENUE BY SMT. APARNA M. AGARWAL DATE OF HEARING 16-06-2021 DATE OF PRONOUNCEMENT 17-06-2021 ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 2 THE COMPANIES CHALLENGED, WHICH WERE EARLIER, ALBEIT NOT NAME D, BUT ASSAILED IN THE MEMORANDUM ON THE BASIS OF CERTAIN FILTERS ETC. THE LD. DR DID NOT RAISE ANY OBJECTION TO THE ADMISSION OF THE ADDITIONAL GROUND. AS SUCH, WE ADMIT THE SAME FOR DISPOSA L ON MERITS. 3. THE ONLY ISSUE IN THIS APPEAL IS AGAINST THE TRA NSFER PRICING ADDITION OF RS.1,35,74,804/- MADE BY THE AO. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RENDERING SOFTWARE DEVELOPMENT AND TESTING SERVICES TO ITS ASSOCIATED ENTERPRISE (AE). A RETURN WAS FILED DECLARING TOTAL INCOME OF RS.3.03 CRORE. CERTAIN INTERNATIONAL TRANSACTIONS W ERE REPORTED IN FORM NO. 3CEB. THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARMS LEN GTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS. INSTANTLY, WE ARE CONCERNED ONLY WITH THE INTERNATIONAL TRANSACTION OF `PROVISION O F SOFTWARE DEVELOPMENT SERVICES WITH TRANSACTED VALUE OF RS.25,32,80,385/-. THE ASSESSEE APPLIED THE TRANSACTION AL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR SHOWING THAT THE INTERNATIONAL TRANSACTION WAS AT ALP. IN DOING SO, IT USED PROFIT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/OPERATING ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 3 COST (OP/OC). ITS OWN PLI WAS WORKED OUT AT 13.24%. TEN COMPARABLES WERE CHOSEN TO SHOW THAT THE INTERNATIONAL TRANSA CTION WAS AT ALP. THE TPO RETAINED TWO COMPANIES FROM THE ASSESS EES LIST AND ADDED SEVEN NEW COMPANIES AND ACCORDINGLY WORKED OUT THE TRANSFER PRICING ADJUSTMENT AT RS.3,24,94,980/-. TH E DRP EXCLUDED ONE AND INCLUDED ONE COMPANY ALREADY CHOSEN BY THE ASSESSEE THAT WAS REJECTED BY THE TPO, THEREBY MAKING TOTAL NUMBER OF COMPARABLES AT NINE. THIS EXERCISE BY THE DRP R ESULTED IN REDUCING THE TRANSFER PRICING ADDITION TO RS.1,35,74,804/ -, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 4. AT THE OUTSET, IT IS STATED THAT THE DISPUTE IN THE EXTANT APPEAL REVOLVES AROUND CERTAIN COMPANIES CHOSEN BY THE TPO AS COMPARABLE. BUT FOR THAT, THERE IS NO QUARREL OVER THE AD OPTION OF THE TNMM AS THE MOST APPROPRIATE METHOD OR THE APPLICATION OR CALCULATION OF THE PLI. BEFORE ANALYZING COMPARABILITY OR OTHERWISE OF THE COMPANIES CHALLENGED BEFORE US, WE CONSID ER IT EXPEDIENT TO FIRST ASCERTAIN THE NATURE OF WORK CARRIED OUT BY THE ASSESSEE UNDER THE INTERNATIONAL TRANSACTION. THE TPO HAS S IMPLY REPRODUCED FROM THE ASSESSEES DEPICTION OF THE TRANSAC TION AS THAT OF RENDERING SOFTWARE DEVELOPMENT SERVICES. THERE IS NO ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 4 INDEPENDENT EVALUATION OF THE NATURE OF TRANSACTION W.R.T TH E RELEVANT AGREEMENT OR THE TRANSFER PRICING STUDY REPORT. TH E LD. AR INVITED OUR ATTENTION TOWARDS THE COMPUTER PROGRAMMING AN D PRODUCT SUPPORT SERVICES AGREEMENT (HEREINAFTER ALSO CALLED THE AGREEMENT) DATED 01-04-2007 UNDER WHICH THE ASSESSEE RENDERED THE SOFTWARE SERVICES. AS PER CLAUSE 6, THE AGREEMENT SH ALL COMMENCE ON THE EFFECTIVE DATE (01-04-2007) AND REMAIN IN FORCE UNTIL TERMINATED BY OYJ WITH THREE (3) MONTHS PRIOR NOTICE WRITT EN NOTICE TO NNIPL. FROM THE ABOVE CLAUSE, IT IS CLEAR THAT THE AGREEMENT IS RELEVANT TO THE YEAR UNDER CONSIDERATION. CLAUS E 1 OF THE AGREEMENT PROVIDES THE `DESCRIPTION OF THE DELIVERABLES REGARDING COMPUTER PROGRAMMING AND PRODUCT SUPPORT SERVICE S AS `DELIVERABLE(S) SHALL MEAN COMPUTER PROGRAMMING AND RELATED SERVICES, AND PRODUCT SUPPORT SERVICES FOR OYJ, INCLUDING ALL MATERIAL IN WHATEVER FORM, WHICH IS GENERATED. DELIVERABLE MAY INCLUDE, BUT IS NOT LIMITED TO, THE COMPUTER PROGRAM OR ANY P ART THEREOF. SOURCE AND OBJECT CODE, ANY ENHANCEMENTS THEREO F, ALL MATERIALS AND DOCUMENTATION NECESSARY FOR OYJ TO USE, MODIF Y, CORRECT, ADAPT, AND UNDERSTAND ANY COMPUTER PROGRAM AND RELATED ENHANCEMENTS DELIVERED BY NNIPL TO OYJ UNDER THIS AGREE MENT, ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 5 ALL MATERIALS AND DOCUMENTATION THAT SHALL BE PREPARED, WRITTEN, DEVELOPED OR OTHERWISE PROVIDED BY NNIPL TO OYJ UNDER TH IS AGREEMENT. CLAUSE 3 OF THE AGREEMENT STATES THAT THE: `OWNERSHIP AND TITLE TO ALL INTELLECTUAL PROPERTY RIGHTS OF WHATSOEVER NATURE IN OR RELATED TO ANY WORK PRODUCED BY NNIPL UNDER THIS AGREE MENT, INCLUDING BUT NOT LIMITED TO THE DELIVERABLES AND ASSOCIATED DOCUMENTATION, SHALL VEST EXCLUSIVELY WITH OYJ . THUS, IT IS BORNE OUT FROM THE AGREEMENT THAT THE ASSESSEE WAS SUPPOSED TO R ENDER SOFTWARE DEVELOPMENT SERVICES TO ITS AE, NAMELY, NETHAWK OYJ, FINLAND. THE TRANSFER PRICING STUDY REPORT OF THE ASSESSEE ALSO SUBSTANTIATES THAT THE ASSESSEE RENDERED ONLY SOFTWARE DEVELOPMENT SERVICES. WITH THE ABOVE UNDERSTANDING OF THE CHARACTER OF SERVICES RENDERED BY THE ASSESSEE UNDER T HE INTERNATIONAL TRANSACTION UNDER REVIEW, WE NOW PROCEED TO EXA MINE THE COMPARABILITY OR OTHERWISE OF THE COMPANIES CHALLENGED BE FORE US. (I) INFOBEANS SYSTEMS PVT. LTD. : 5. THE TPO CHOSE THIS COMPANY AS COMPARABLE. THE ASSES SEE OBJECTED TO ITS INCLUSION BY CONTENDING THAT THERE WAS A MERGE R IN THIS COMPANY EFFECTIVE FROM 26-09-2012 AND HENCE SHOULD BE ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 6 EXCLUDED BECAUSE OF THIS EXTRA-ORDINARY FINANCIAL EVENT. T HE TPO DID NOT FIND ANY MERIT IN THIS ARGUMENT BECAUSE THE EFFECTIVE DATE FELL BEYOND THE RELEVANT PREVIOUS YEAR. THE DRP OBSERVED THAT THOUGH THE MERGER WAS SANCTIONED BY THE HONBLE MADHYA P RADESH HIGH COURT ON 26-09-2012, BUT THE APPOINTED DATE WAS ONLY 01-04-2011 RELEVANT TO THE YEAR UNDER CONSIDERATION. IT, HOWEVER, WENT ON TO AFFIRM THE INCLUSION BY HOLDING THAT SUCH MERGER H AD NO IMPACT ON THE FINANCIAL RESULTS OF THE COMPANY. AGGRIEVED THE REBY, THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 6. WE HAVE HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND GO NE THROUGH THE RELEVANT MATERIAL ON RECORD. THE ONLY OBJECTION R AISED BY THE LD. AR AGAINST THE INCLUSION OF INFOBEANS SYSTEMS PVT. LTD. IS THE FACTUM OF MERGER TAKING PLACE DURING THE RELEVANT YEA R. EXCEPT FOR THAT, ITS OTHERWISE COMPARABILITY IS NOT ASSAILED. WE HAVE EXAMINED THE ANNUAL REPORT OF THIS COMPANY, A COPY O F WHICH HAS BEEN PROVIDED AT PAGE 195 ONWARDS OF THE PAPER BO OK. THE FACT OF DEMERGER HAS BEEN TAKEN NOTE OF IN PARA 2 OF THE AUDITORS REPORT READING AS UNDER: - 2. WE STATE THAT SOFTWARE BUSINESS OF THE INFOBEANS SYSTEMS INDIA PVT. LTD. (CURRENTLY KNOWN AS SEED ENTERPRISES PRIVATE LIMITED) IS DEMERGED AND TRANSFERRED TO THE COMPANY ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 7 IN PURSUANCE TO THE SCHEME OF ARRANGEMENT AS APPROVED BY THE HONBLE MADHYA PRADESH HIGH COURT DATED 26/09/2012 VIDE APPOINTED DATE 1 ST APRIL 2011. ACCORDINGLY THESE ARE THE REVISED FINANCIAL STATEMENTS INCLUDING THE FINANCIAL STATEMENTS OF THE SAID SOFTWARE BUSINESS OF DEMERGED COMPANY. 7. ON GOING THROUGH THE ABOVE PARA, IT IS OVERT THAT DEMERGE R OF THE SOFTWARE BUSINESS OF SEED ENTERPRISES PRIVATE LIMITED TOOK PLACE EFFECTIVE FROM 01-04-2011 AND THE ACCOUNTS OF SUCH COMPANY RELATING TO THE SOFTWARE BUSINESS WERE TRANSFERRED TO THE INF OBEANS SYSTEMS INDIA PVT. LTD. FROM SUCH DATE. THUS IT IS GLARING TH AT THE MERGER TOOK PLACE ON THE FIRST DAY OF THE RELEVANT FINANCIAL YEAR ONLY. BY NOW, IT IS FAIRLY SETTLED THAT AN EXTRAORDINARY FINANCIAL EVENT, SUCH AS, MERGER OR DEMERGER OR AMALGAMATION REN DER A COMPANY INCOMPARABLE. HOWEVER, OUR ATTENTION HAS BEEN DR AWN TOWARDS A PECULIAR FACT OF THIS COMPANY, WHICH IS MANIFESTED ON AN EXAMINATION OF ITS PROFIT AND LOSS ACCOUNT. ALL THE FIGURES OF THE PROFIT AND LOSS ACCOUNT OF THE IMMEDIATELY PRECEDING YEAR RE LATING TO THE BUSINESS OPERATIONS, SUCH, `REVENUE FROM OPERATIONS , `EMPLOYEE BENEFIT EXPENSE, `FINANCIAL COSTS OR `DEPRECIA TION AND AMORTIZATION EXPENSES ARE NIL. THERE IS ONLY ONE FIGURE OF `OTHER EXPENSES AT RS.10,068. SIMILAR POSITION FOLLOWS ON PERUSA L OF ITS ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 8 BALANCE SHEET. ALL THE FIGURES HAVING SOME RELEVANCE WITH TH E BUSINESS OPERATIONS, SUCH AS, FIXED ASSETS, TRADE RECEIVAB LES OR PAYABLES ARE NIL AT THE CLOSE OF THE LAST YEAR. TOTAL OF BALA NCE SHEET ITEMS FOR THE PRECEDING YEAR IS ONLY RS.92,690, AS AGAINS T THE TOTAL FOR THE YEAR UNDER CONSIDERATION AT RS.10,04,63,809. TH IS INDICATES THAT THE COMPANY HAD NO BUSINESS OPERATIONS IN THE PRECEDIN G YEAR AND STARTED EFFECTIVE FUNCTIONING ONLY W.E.F. 01-04-2011 , NAMELY, THE FIRST DAY OF THE RELEVANT FINANCIAL YEAR ON TAKING OVER THE SOFTWARE BUSINESS OF SEED ENTERPRISES PRIVATE LIMITED, WHICH WAS EARLIER CALLED AS INFOBEANS SYSTEMS INDIA PVT. LTD., BEING, THE COMPARABLE COMPANY ITSELF. 8. THE RAISON DETRE FOR THE EXCLUSION OF A COMPANY ON ACCOUNT OF EXTRA-ORDINARY FINANCIAL EVENTS IS THAT THE UNINTERRUPTED RES ULTS OF ITS HITHERTO CONTINUOUSLY EXISTING BUSINESS GET INTERRUPTED BECAUSE OF THE ABRUPT INFUSION OR DIFFUSION ON MERGER/DEME RGER, THEREBY RENDERING IT VULNERABLE FOR AN EFFECTIVE COMPARISON WITH AN OTHERWISE EVENLY POISED COMPANY. AU CONTRAIRE , IF THE COMPANY STARTS ITS OPERATIONS AB INITIO BY TAKING OVER BUSINESS OF ANOTHER ENTITY FROM THE FIRST DAY OF THE FINANCIAL YEAR, WITHOUT HAVING ANY PRE-EXISTING BUSINESS, THERE CAN BE NO QUESTION OF DISTORTION OF ITS ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 9 FINANCIAL RESULTS BECAUSE OF MERGER. SUCH A PANORAMA CANN OT JUSTIFY EXCLUSION OF AN OTHERWISE COMPARABLE COMPANY. 9. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT INFOBEANS COMMENCED ITS ACTUAL BUSINESS OPERATIONS FROM THE VERY FIRST DAY OF THE RELEVANT FINANCIAL YEAR BY TAKING OVER THE SO FTWARE BUSINESS OF SEED ENTERPRISES PRIVATE LIMITED. IT HAD NO SEP ARATE INDEPENDENT BUSINESS BEFORE THE MERGER. THUS, THE FINANCIA L RESULTS OF INFOBEANS FOR THE RELEVANT YEAR WERE NOT JEOPARDIZED IN ANY MANNER BECAUSE OF THE MERGER OF SOFTWARE BUSINESS OF AN OTHER COMPANY. THEY REPRESENTED A TRUE REFLECTION OF ITS SEAMLESS FUNCTIONING THROUGHOUT THE YEAR. THE SITUATION IS AKIN TO THE STANDALONE SOFTWARE BUSINESS OF THE ERSTWHILE SEED ENTERPRISES PRIVATE LIMITED BECOMING A COMPARABLE INDIRECTLY. THIS DISTINGUISHING FEATURE LEADS US TO THE INEVITABLE CONCLUSION THAT INFOBEANS, WHICH IS OTHERWISE ADMITTEDLY SIMILAR, CANNOT BE FILTERED OUT FROM THE FINAL LIST OF COMPARABLES. 10. TO BOLSTER HIS ARGUMENT OF EXCLUSION OF INFOBEANS, THE LD. AR BANKED ON A PUNE TRIBUNAL ORDER DATED 17-12-2020 PAS SED IN EGAIN COMMUNICATIONS PVT. LTD. VS. DCIT (ITA NO.544/PUN/2017) FOR THE SAME A.Y. 2012-13. THAT ORDER W AS ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 10 PASSED BY THIS VERY COMBINATION OF THE MEMBERS DIRECTING THE EXCLUSION OF INFOBEANS ON ACCOUNT OF THE EXTRA-ORDINARY FINANCIAL EVENT OF MERGER VIS--VIS THE ASSESSEE-COMPANY IN THAT CASE ENGAGED IN RENDERING SOFTWARE SERVICES IN THE MANNER SIMILA R TO THAT OF THE ASSESSEE UNDER CONSIDERATION. ON GOING THRO UGH THAT ORDER, IT IS DISCERNIBLE THAT THE AFORE-NOTED PECULIAR FACT OF INFOBEANS COMMENCING ITS ACTUAL BUSINESS OPERATIONS WITH THE MERGER ONLY, WITHOUT THERE BEING ANY EARLIER CONTINUED BUSINES S, WERE NOT HIGHLIGHTED BEFORE THE BENCH BY EITHER SIDE. ONCE TH E CORRECT POSITION HAS BEEN MADE GRAPHICALLY CLEAR, NO PARTY S HOULD IMPRESS UPON THE BENCH TO FOLLOW SUIT. IN THE HUE OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT INFOBEANS CANNOT BE EXCLU DED FROM THE TALLY OF COMPARABLES ON ACCOUNT OF EXTRAORDINARY FINANCIAL EVENT OF MERGER, MORE SPECIFICALLY, WHEN THE OTHERWISE SIM ILARITY OF THIS COMPANY HAS NOT BEEN CHALLENGED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, COUNTENANCE THE INCLUSION OF THIS COMPANY. (II) CYBERCOM DATAMETICS INFORMATION SOLUTIONS LTD. : 11. THIS COMPANY WAS INCLUDED BY THE TPO IN THE LIST OF COMPARABLES. THE ASSESSEE OBJECTED TO THE SAME BY CONTEN DING THAT IT WAS FUNCTIONALLY DISSIMILAR. THE DRP ECHOED THE VIEW OF ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 11 THE TPO, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL B EFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND SCANNED THROU GH THE RELEVANT MATERIAL ON RECORD INCLUDING THE ANNUAL REPORT OF THIS COMPANY, A COPY OF WHICH HAS BEEN PLACED AT PAGE 176 O NWARDS OF THE PAPER BOOK. NOTE 1A FORMING PART OF THE FINANCIAL STATEME NTS READS AS UNDER: ABOUT THE COMPANY .. THE PRINCIPAL OBJECT OF THE COMPANY IS TO ACT AS CONSULTANTS AND ADVISORS ON INFORMATION/INTERNET SYSTEM AND SURVEYORS OF INFORMATION SERVICES, AND TO CARRY ON THE BUSINESS OF DEVELOPMENT, TESTING, IMPLEMENTATION, MIGRATION OF HOME GROWN AND OTHER APPLICATIONS, MARKETING AND MANUFACTURING OF INFORMATION TECHNOLOGY PRODUCTS AND SERVICES, SOFTWARE AND HARDWARE SYSTEMS TO ENTERPRISE AND EMBEDDED TECHNOLOGIES IN THE TELECOM AND OTHER INDUSTRIES. 13. PROFIT AND LOSS ACCOUNT OF THIS COMPANY SHOWS, SALE OF SERVICES AS THE ONLY ITEM OF REVENUE FROM OPERATIONS, EX CEPT `OTHER INCOME. NOTE 23 FORMING PART OF THE FINANCIAL STATEMEN TS GIVES DETAILS OF `SEGMENT REPORTING AS UNDER : THE PRINCIPAL BUSINESS OF THE COMPANY IS OF PROVIDING OF TECHNICAL AND SOFTWARE SERVICES . ALL OTHER ACTIVITIES OF THE COMPANY REVOLVE AROUND ITS MAIN BUSINESS. HENCE NO ADDITIONAL DISCLOSURE UNDER ACCOUNTING STANDARD-17. SEGMENT REPORTING ARE REQUIRED IN THESE FINANCIAL STATEMENT. ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 12 14. ON GOING THROUGH THE ABOVE MATERIAL, IT IS MANIFEST THA T THE PRINCIPAL OBJECT OF THE COMPANY WAS TO ACT AS CONSULTANTS AND ADVISORS OF INFORMATION/INTERNET SYSTEMS AND SURVEYORS OF INFORMATION SERVICES AND FURTHER THAT IT WAS ENGAGED IN PROV IDING TECHNICAL AND SOFTWARE SERVICES. AS AGAINST THAT, THE ASSESS EE IS ENGAGED ONLY IN RENDERING SOFTWARE DEVELOPMENT SERVICES. I T IS NEITHER PROVIDING ANY TECHNICAL SERVICES NOR ANY CONSULTANCY SERVICES. THE ANNUAL REPORT OF THE COMPANY DOES NOT INDIC ATE ANY BIFURCATION OF PROFITS FROM TECHNICAL SERVICES AND SOFTWARE SERVICES. IN OTHER WORDS, THERE IS NO SEGMENTAL INFORMATIO N AVAILABLE SO AS TO CULL OUT THE FIGURES RELATING TO SOFTWARE SERVIC ES. SINCE THIS COMPARABLE WAS CHOSEN BY THE TPO, THE PRIMARY O NUS OF DEMONSTRATING ITS COMPARABILITY, WAS UPON HIM. EXCEPT FOR REPEATED ACCENTUATION OF COMPARABILITY IN HIS ORDER, THE TPO HAS NOWHERE PROVED HIS POINT IN THE LIGHT OF THE ANNUAL REPORT OF THE COMPANY OR ANY OTHER RELEVANT MATERIAL. THE LD. DR ALSO CO ULD NOT POINT OUT FROM THE ANNUAL REPORT OF THE COMPANY OR ANY OTHE R MATERIAL THAT IT WAS RENDERING ONLY SOFTWARE SERVICES. PER CONTR A, THE ANNUAL REPORT OF THE COMPANY STATES THAT IT IS ENGAGED IN RENDERING TECHNICAL SERVICES IN ADDITION TO SOFTWARE SERVICES A ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 13 SITUATION, WHICH DOES NOT MATCH WITH THE ASSESSEE ON HOLISTIC BAS IS. ON THE FAILURE OF THE REVENUE TO ESTABLISH THE COMPARABILITY OF THIS COMPANY CHOSEN BY THE TPO, WE DIRECT TO EXCLUDE IT FROM THE LIST OF COMPARABLES. 15. TO SUM UP, WE SET-ASIDE THE IMPUGNED ORDER AND RE MIT THE MATTER TO THE FILE OF AO/TPO FOR RE-DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES IN THE LIGHT OF OUR ABOVE DISCUSSION. NEEDLESS TO SAY, ADEQUATE OPPORTUNITY OF HEARING WILL BE PROVIDED TO THE ASSESS EE. 16. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE P RESIDENT PUNE; DATED : 17 TH JUNE , 2021 SATISH ITA NO.173/PUN/2017 M/S. NETHAWK NETWORKS INDIA PRIVATE LIMITED 14 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. THE PR.CIT-5, PUNE , , C / DR C, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-06-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-06-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *