OLF (India) Software Private Limited, Ulsoor V. Assistant Commissioner of Income Tax, Circle-5(1)(2), Bangalore

ITA 182/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5090 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 27-04-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 92D; 144C; 13; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.182/BANG/2021 ASSESSMENT YEAR : 2016-17 OLF (INDIA) SOFTWARE PVT. LTD., THE MILENIA TOWER-A, 7 TH FLOOR, 1 AND 2 MURPHY ROAD, ULSOOR, BENGALURU-560 008. PAN AADCC 8245 M VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-5(1)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI AJIT KUMAR JAIN, C.A REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 11-08-2021 DATE OF PRONOUNCEMENT : 28-09-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY ASSESSE E AGAINST ORDER DATED 30/03/2021 PASSED BY THE LD.ACIT, NATIONAL E- ASSESSMENT CENTRE DELHI FOR ASSESSMENT YEAR 2016-17 ON FOLLOWI NG GROUNDS OF APPEAL: PAGE 2 OF 13 IT(TP)A NO.182/BANG/2019 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, OLF (INDIA) SOFTWARE PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE APP ELLANT') RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY NATIONAL E- ASSESSMENT CENTRE (NEAC') DATED 30 MARCH 2021 IN PU RSUANCE OF DIRECTIONS ISSUED BY DISPUTE RESOLUTION PANEL (DRP' ), BANGALORE, DATED 26 FEBRUARY 2021 UNDER SECTION 253 OF THE INCOME-TA X ACT, 1961 ('ACT') ON FOLLOWING GROUNDS WHICH ARE INDEPENDENT OF AND W ITHOUT PREJUDICE TO EACH OTHER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW; THE LEARNED ASSESSING OFFICER ('AO')/TRANSFER PRICING OFFICER ( 'TPO') AND THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED MAKING I CON FIRMING TOTAL ADDITION OF RS. 2.21,22,670 UNDER SECTION 92CA (3) OF THE AC T IN RESPECT OF SOFTWARE SERVICES PROVIDED BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE ('AE'). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE REFERENCE MADE BY THE LEARNED AO TO THE LEARNED TPO FOR DETER MINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION IS BA D IN LAW AND ACCORDINGLY, CONSEQUENTIAL TRANSFER PRICING ORDER, DRP DIRECTIONS AND FINAL ASSESSMENT ORDER-ARE LIABLE TO BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO I TPO AND HON'BLE DRP ERRED IN DISREGARDING BENC HMARKING ANALYSIS AND COMPARABLE COMPANIES SELECTED BY THE APPELLANT BASED ON THE CONTEMPORANEOUS DATA REQUIREMENT IN THE TRANSFER PR ICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE ACT READ WITH RULE 1OD OF THE INCOME-TAX RULES, 1962 ('THE RULES'). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO / TPO AND THE HON'BLE DRP HAVE, I. ERRED IN RE-COMPUTING OPERATING MARGIN OF THE AP PELLANT. 2. ERRED IN APPLYING MODIFIED AND ADDITIONAL FILTER S WITHOUT PROVIDING COGENT REASONS FOR ARRIVING AT COMPARABLE SET. 3. ERRED IN NOT CONSIDERING APPLICATION OF TURNOVER FILTER PROPOSED BY THE APPELLANT 4. ERRED IN INCORRECTLY REJECTING FUNCTIONALLY COMP ARABLE COMPANIES SELECTED BY THE APPELLANT. 5. ERRED IN SELECTING HIGH MARGIN COMPANIES AND REJ ECTING LOW MARGIN COMPANIES WITHOUT CONSIDERING APPELLANT'S CONTENTIO NS OF FUNCTIONAL COMPARABILITY. 6. ERRED IN INCORRECTLY COMPUTING OPERATING MARGIN OF COMPARABLE COMPANIES. PAGE 3 OF 13 IT(TP)A NO.182/BANG/2019 7. ERRED IN NOT ALLOWING ECONOMIC ADJUSTMENTS IN AC CORDANCE WITH PROVISIONS OF RULE I OB OF THE INCOME TAX RULES, 19 62 TO ACCOUNT FOR DIFFERENCE BETWEEN THE APPELLANT AND COMPARABLE COM PANIES. Z ERRED IN NOT CONSIDERING THE FACT THAT EVEN SAFE HARBOUR RULES PROVIDES FOR LOWER OPERATING MARGIN VIS--VIS MEDIAN OF COMP ARABLE SET. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE LD. AO T O DECIDE THIS APPEAL ACCORDING TO LAW. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF BACK-END SOFTWARE DEVELOPMENT SERVICES. IT FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 29/11/2016 D ECLARING TOTAL INCOME OF RS.2,87,79,980/-. THE CASE WAS SELE CTED FOR SCRUTINY AND NOTICE UNDER SECTION 143 (2) WAS ISSUE D TO ASSESSEE. SUBSEQUENTLY NOTICE UNDER SECTION 142 (1) WAS ALSO ISSUED. FROM THE DETAILS FILED, THE LD.AO OBSERVED THAT, ASSESSE E HAD INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRIS E EXCEEDING RS.15 CRORES AND ACCORDINGLY THE CASE WAS REFERRED TO TRANSFER PRICING OFFICER UNDER SECTION 92CA OF THE ACT. 2.1 UPON RECEIPT OF THE REFERENCE, THE LD.TPO CALLE D FOR ECONOMIC ANALYSIS OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY ASSESSEE WITH ITS ASSOCIATED ENTERPRISE IN FORM 3 C EB. ON PERUSAL OF THE TRANSFER PRICING REPORT, THE LD.TPO OBSERVED THE FUNCTIONS PERFORMED BY ASSESSEE AS UNDER: 2.1. PROFILE: OLF (INDIA) SOFTWARE PVT. LTD. FORMA LLY KNOWN AS CUBE LOGIC (INDIA) PVT. LTD. WAS INCORPORATED ON 16TH DECEMBER 2009 UNDER COMPANY'S ACT, 1956. OLE (INDIA) SOFTWARE PVT. LTD IS THE IMMEDIATE SUBSIDIARY OF CUBE LOGIC LTD. UK AND BY VIRTUE OF, AND IT IS PROVIDING PAGE 4 OF 13 IT(TP)A NO.182/BANG/2019 BACK END SOFTWARE DEVELOPMENT SERVICES USING THE TE CHNOLOGY PLATFORM AS PER THE REQUIREMENT OF THE LETTER. 2.2 FUNCTIONS: OLF SOFTWARE PVT. LTD. PERFORMS SERV ICES UNDER THE BUSINESS MODEL OF A BACK END SOFTWARE DEVELOPMENT S ERVICE PROVIDER WHILE FULFILLING THE DUTIES UNDER THE SCOPE OF WORK ENTERED WITH ITS AES. THE TERMS AND CONDITIONS RELATING TO THE TRANSACTIO NS HAVE BEEN CLEARLY CHARTED INTO THE TERMS WITH THE ASSOCIATED ENTERPRI SE. 2.2 THE LD.TPO OBSERVED THAT ASSESSEE HAD ENTERED I NTO FOLLOWING INTERNATIONAL TRANSACTION WITH THE ASSOCI ATED ENTERPRISE: INTERNATIONAL TRANSACTION PARTICULARS RECEIVABLE/RECEIVED PAYABLE / PAID AS PER TP DOCUMENT (INR) METHOD SOFTWARE DEVELOPMENT 18,77,87,010 18,77,87,010 TNMM TRADE ADVANCES 4,06,76,816 TNMM TOTAL 4,06,76,816 18,77,87,010 22,84,63.826 2.3 THE LD.TPO OBSERVED THAT ASSESSEE COMPUTED ITS OPERATING MARGIN AT 15.18% BY USING OP/OC AS THE PLI AND TNMM AS MOST APPROPRIATE METHOD. ASSESSEE HAD USED FOLLOWING 11 COMPARABLES HAVING THE 55 TH PERCENTILE AT 10.97%. ASSESSEE THUS CONCLUDED ITS TRANSACTION TO BE AT ARMS LENGTH. PAGE 5 OF 13 IT(TP)A NO.182/BANG/2019 2.4 THE LD.TPO REJECTED COMPARABILITY CARRIED OUT B Y ASSESSEE AND APPLIED FRESH FILTERS, THEREBY SHORTLISTING FOL LOWING 13 COMPARABLES AS FINAL SET HAVING THE 35 TH PERCENTILE MARGIN TO BE 24.83% . S.N COMPANY NAME FINANCIAL YEAR WISE OP/OC (%) 2015-16 2014-15 2013-14 WEIGHTED AVERAGE 1 KALS INFORMATION SYSTEMS PVT. LTD. 3.97 % % 5.77 % 16.94 % 8.60 2 RHEAL SOFTWARE PVT. LTD. 3.20% 2.76% 36.64% 14.50% 3 C G-V A K SOFTWARE & EXPORTS LTD. 19.60% 19.87% 13.81% 18.50/0 4 R S SOFTWARE (INDIA) LTD. -2.09% 32.75% 24.14% 20.87% PAGE 6 OF 13 IT(TP)A NO.182/BANG/2019 5 LARSEN & TOUBRO INFOTECH LTD. 26.29% 24.22% 23.54% 24.83% 6 NIHILENT LTD. 15.94% 29.19% 35.72% 26.36% 7 INTEQ SOFTWARE PVT. LTD. 7.53% 32.14% 45.00% 28.20% 8 PERSISTENT SYSTEMS LTD. 26.92% 31.34% 35.64% 30.89% 9 INFOBEANS TECHNOLOGIES LTD. 34.98% 20.78% 41.95% 32.42% 10 THIRDWARE SOLUTION LTD. 23.89% 44.39% 44.68% 36.90% 11 INFOSYS LTD. 38.22% 41.30% 36.28% 38.61% 12 ASPIRE SYSTEMS (INDIA) PVT. LTD. 34.26% 47.56% 38.04% 39.28% 13 CYBAGE SOFTWARE PVT. LTD. 62.90% 68.68% 68.82% 66.45% 35TH PERCENTILE 24.83% MEDIAN 28.20% 65TH PERCENTILE 32.42% 2.5 BASED ON THE ABOVE, ADJUSTMENT WAS PROPOSED BY THE LD. TPO FOR SOFTWARE DEVELOPMENT SERVICE SEGMENT TO BE RS.2,21,22,670/- BEING THE SHORTFALL. 2.6 THUS, A SUM OF RS. 76,45,31,838 WAS SUGGESTED AS ADDITION TO TOTAL INCOME OF ASSESSEE ON DETERMINATION OF ALP BY THE TPO. THE ADDITION SUGGESTED BY THE LD.TPO IN THE ORDER P ASSED U/S. PAGE 7 OF 13 IT(TP)A NO.182/BANG/2019 92CA(4) OF THE ACT WAS INCORPORATED BY THE LD.AO IN THE DRAFT ORDER OF ASSESSMENT DATED 6-12-2017. 2.7 AGAINST THE ADDITION PROPOSED IN THE DRAFT ORDE R OF ASSESSMENT, THE ASSESSEE FILED OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL (DRP) U/S. 144C OF THE ACT. THE DR P EXCLUDED SQS INDIA BFSI LTD. FROM THE LIST OF COMPARABLE COM PANIES AND RETAINED THE REMAINING 7 COMPARABLES CHOSEN BY THE LD.TPO. 2.8 BEFORE THE DRP, ASSESSEE ALLEGED EXCLUSION OF C ERTAIN COMPARABLES WHICH WERE REJECTED. THE DRP ALSO REJEC TED OBJECTION REGARDING CORRECTING THE MARGINS OF THE COMPARABLES ADOPTED BY THE LD.TPO. 2.9 ON RECEIPT OF THE DRP DIRECTIONS, THE LD.AO PAS SED FINAL ASSESSMENT ORDER BY MAKING ADDITION AMOUNTING TO RS.2,21,22,670/-. 2.10 AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE IS I N APPEAL BEFORE US NOW. 2.11 AT THE OUTSET THE LD.AR SUBMITTED THAT AMONGST THE GROUNDS RAISED BY ASSESSEE IT IS SEEKING EXCLUSION OF FOLLOWING COMPARABLES: PERSISTENT SYSTEMS LTD. ASPIRE SYSTEMS (INDIA) LTD. LARSEN AND TOUBRO INFOTECH LTD. NIHILEANT TECHNOLOGIES LTD. INFOSYS LTD. PAGE 8 OF 13 IT(TP)A NO.182/BANG/2019 THIRDWARE SOLUTIONS LTD. CYBAGE SOFTWARE PVT.LTD 2.12 ACCORDINGLY ALL OTHER GROUNDS RAISED BY ASSESS EE STANDS DISMISSED AS NOT PRESSED. 2.13 BEFORE WE UNDERTAKE THE COMPARABILITY ANALYSIS IT IS NECESSARY TO UNDERSTAND THE FUNCTIONS PERFORMED, AS SETS OWNED AND RISKS ASSUMED BY ASSESSEE IN THE SOFTWARE DEVEL OPMENT SERVICE SEGMENT. FUNCTIONAL ANALYSIS CARRIED OUT BY THE LD.TPO HAS BEEN REPRODUCED IN THE EARLIER PART OF THIS ORD ER. INSOFAR AS THE ASSETS OWNED AND RISK ASSUMED, WE NOTE FROM THE TP STUDY AT AGE 29 OF THE PAPER BOOK THAT IT OWNS TANGIBLE ASSE TS FOR RUNNING THE BUSINESS LIKE COMPUTERS AND PERIPHERALS, FURNIT URE FIXTURES OFFICE EQUIPMENT. AS REGARDS THE RISK ASSUMED, WE N OTE THAT ASSESSEE HAS BEEN UNDERTAKING FOREIGN EXCHANGE FLUC TUATION RISK AS THE REMUNERATION RECEIVED IS IN FOREIGN EXCHANGE . 2.14 AT PAGE 31 ASSESSEE HAS BEEN CHARACTERISED TO BE A CAPTIVE SERVICE PROVIDER THAT ASSUMES LESS THAN NOMINAL RIS K ASSOCIATED WITH THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AES. 2.15 BASED ON THE ABOVE WE SHALL NOW UNDERTAKE THE COMPARABILITY OF ASSESSEE WITH THE ALLEGED COMPARAB LES SOUGHT FOR EXCLUSION 2.16 IT HAS BEEN SUBMITTED BY THE LD.AR THAT ALL TH ESE COMPARABLES DO NOT SATISFY THE TURNOVER FILTER APPL IED BY THE LD. PAGE 9 OF 13 IT(TP)A NO.182/BANG/2019 TPO AND AT THE OUTSET DESERVES TO BE ELIMINATED. HE SUBMITTED THAT THE ANNUAL REPORTS OF THESE COMPANIES ARE PLAC ED IN THE PAPER BOOK VOLUME 2 WHICH REVEALS THAT TURNOVER IS MORE THAN 200 CRORES WHICH DOESNT EVEN MASH 10 TIMES THE TUR NOVER OF ASSESSEES CRORE. IT HAS BEEN SUBMITTED THAT GOING BY THE COMPUTATION OF THE TURNOVER LIMIT EITHER BY CONSIDE RING 1 TO 200 CRORES OR 10 TIMES THE ASSESSEES TURNOVER THESE CO MPARABLES DESERVES TO BE EXCLUDED. HE ALSO SUBMITTED THAT THE Y ARE FUNCTIONALLY ALSO NOT COMPARABLE AS THESE ARE PRODU CT COMPANIES AND CARRIES HIGH INTANGIBLES AND R&D OF ITS OWN. 2.17 ON THE CONTRARY THE LD. DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN THE LIGHT OF RECORDS PLACED BEFORE US. 3.1 WE PLACE RELIANCE ON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF LSI INDIA RESEARCH DEVELOPMENT (P.) LTD. V. DCIT REPORTED IN [2021] 124 TAXMANN.COM 83. 3.2 THIS TRIBUNAL IN LSI INDIA RESEARCH DEVELOPMENT (P.) LTD. V. DCIT (SUPRA) OBSERVED IN RESPECT OF PERSISTENT SYSTEMS, L & T INFOTECH, THIRDWARE SOLUTIONS, INFOSYS LTD. AS UNDE R: 16. AS FAR AS THE CHALLENGE BY THE ASSESSEE ON EXCLUSI ON OF AFORESAID 5 COMPANIES IN GROUND NO. 2(F), THE LD. C OUNSEL FOR THE ASSESSEE HAS BROUGHT TO OUR NOTICE A DECISION OF BA NGALORE BENCH OF ITAT FOR THE VERY SAME ASSESSMENT YEAR 2014-15 IN T HE CASE OF LG SOFT INDIA (P.) LTD. V. DCIT [IT(TP) APPEAL NO. 312 2 (BANG.) OF 2018, DATED 28-5-2019]. IN THIS ORDER RENDERED IN A CASE OF ASSESSEE RENDERING SWD SERVICES SUCH AS THE ASSESSEE, THE TR IBUNAL EXCLUDED PAGE 10 OF 13 IT(TP)A NO.182/BANG/2019 3 OUT OF 5 COMPANIES REFERRED TO IN THE EARLIER PAR AGRAPH AND REMANDED 1 COMPANY FOR FRESH CONSIDERATION WITH THE FOLLOWING OBSERVATIONS:- '5. THE LD A.R SUBMITTED THAT M/S INFOSYS LTD, M/S PERSISTENT SYSTEMS LTD AND M/S THIRDWARE SOLUTIONS LTD HAVE BE EN EXCLUDED BY THE CO-ORDINATE BENCH IN THE ASSESSEE'S OWN CASE IN AY 2008-09 IN IT(TP)A NO. 1673/BANG/2012. 6. WE NOTICE THAT THE CO-ORDINATE BENCH HAS EXCLUDE D M/S INFOSYS LTD IN AY 2008-09 BY FOLLOWING THE DECISION RENDERED BY ANOTHER CO-ORDINATE BENCH IN THE CASE OF 3DPLM SOFT WARE SOLUTIONS LTD (IT(TP)A NO. 1303/BANG/2012 DATED 28- 11-2013, WHEREIN THE DECISION RENDERED IN THE CASE OF TRIOLO GY E BUSINESS SOFTWARE INDIA P LTD (ITA NO. 1054/BANG/2011) WAS F OLLOWED AND IT WAS HELD THAT M/S INFOSYS TECHNOLOGIES LTD I S NOT FUNCTIONALLY COMPARABLE SINCE IT OWNS SIGNIFICANT I NTANGIBLE AND HAS HUGE REVENUES FROM SOFTWARE PRODUCTS. IT WAS FU RTHER OBSERVED THAT THE BREAK-UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCT IS NOT AVAILABLE. 6.1 IT WAS STATED THAT THERE IS NO CHANGE IN FACTS. ACCORDINGLY, FOLLOWING THE DECISION RENDERED IN THE ASSESSEE'S O WN CASE IN AY 2008-09, WE DIRECT EXCLUSION OF M/S INFOSYS LTD. 7. IN AY 2008-09, THE CO-ORDINATE BENCH HAS EXCLUDE D M/S PERSISTENT SYSTEMS LTD ALSO BY FOLLOWING THE DECISI ON RENDERED IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD (SUPRA), W HERE IN IT WAS HELD THAT M/S PERSISTENT SYSTEMS LTD IS ENGAGED IN PRODUCT DEVELOPMENT AND PRODUCT DESIGN SERVICES WHILE THE A SSESSEE IS A SOFTWARE DEVELOPMENT SERVICE PROVIDER. FURTHER, T HE SEGMENTAL DETAILS WERE NOT AVAILABLE. 7.1 IT WAS STATED THAT THERE IS NO CHANGE IN FACTS. ACCORDINGLY, FOLLOWING THE DECISION RENDERED IN THE ASSESSEE'S O WN CASE IN AY 2008-09, WE DIRECT EXCLUSION OF M/S PERSISTENT SYST EMS LTD. 8. WE ALSO NOTICE THAT IN AY 2008-09, THE CO-ORDINA TE BENCH HAS EXCLUDED M/S THIRDWARE SOLUTIONS LTD ALSO BY FOLLOW ING THE DECISION RENDERED IN THE CASE OF 3DPLM SOFTWARE SOL UTIONS LTD. (SUPRA), WHERE IN IT WAS HELD THAT M/S THIRDWARE SO LUTIONS LTD IS ENGAGED IN PRODUCT DEVELOPMENT AND EARNS REVENUE FR OM SALE OF LICENSES AND SUBSCRIPTION. FURTHER, THE SEGMENTAL D ETAILS WERE NOT AVAILABLE. PAGE 11 OF 13 IT(TP)A NO.182/BANG/2019 8.1 IT WAS STATED THAT THERE IS NO CHANGE IN FACTS. ACCORDINGLY, FOLLOWING THE DECISION RENDERED IN THE ASSESSEE'S O WN CASE IN AY 2008-09, WE DIRECT EXCLUSION OF M/S THIRDWARE SOLUT IONS LTD. 17. AS FAR AS EXCLUSION OF LARSEN & TOUBRO INFOTECH LT D., IS CONCERNED, THE TRIBUNAL IN THE VERY SAME CASE OF LG SOFT (P.) LTD. (SUPRA) IN ANOTHER ORDER DATED 27-9-2019 IN MP NO. 95/BANG/2019 HELD THAT EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD ., WAS OMITTED TO BE ADJUDICATED IN THE ORIGINAL ORDER DATED 28-5-201 9 PASSED BY THE TRIBUNAL REFERRED IN THE EARLIER PARAGRAPH AND HELD THAT LARSEN & TOUBRO INFOTECH LTD., IS ALSO NOT A COMPARABLE COMP ANY BECAUSE THERE WERE EXTRAORDINARY EVENTS THAT OCCURRED IN TH E RELEVANT PREVIOUS YEAR AND THAT IT POSSESSED BRAND AND INTAN GIBLES AND THERE WAS NO SEGMENTAL INFORMATION OF SUB-CONTRACTING EXP ENSES. 3.3 THERE IS NOTHING ON RECORD BROUGHT BY THE LD.CI T.DR IN ORDER TO ESTABLISH THAT THESE ARE COMPARABLE WITH A SSESSEE THAT IS A CAPTIVE SERVICE PROVIDER WHICH FUNCTIONS AT THE S TRICT SUPERVISION AND INSTRUCTIONS BY THE AES. FURTHER W E NOTE THAT TURNOVER CRITERIA HAS TO BE APPLIED WITH AN UPPER L IMIT WHICH IS NOT BEEN CONSIDERED BY THE LD. TPO. THE TPO HAS APP LIED LESS THAN 1 CRORE TURNOVER LIMIT TO ELIMINATE THE COMPAR ABLES HOWEVER IT FAILED TO APPLY UPPER LIMIT CONSIDERING THE FUNC TIONS PERFORMED ASSETS OWNED AND RISK ASSUMED BY ASSESSEE UNDER THI S SEGMENT FOR THE YEAR UNDER CONSIDERATION. 3.4 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY COORDI NATE BENCHES IN RESPECT OF THE TURNOVER LIMITS THAT NEEDS TO BE APPLIED, WE DIRECT LD.AO/TPO TO REJECT THESE COMPARABLES FROM T HE FINALIST. 3.5 INSOFAR AS ASPIRE SYSTEMS (INDIA) LTD., NIHILEA NT TECHNOLOGIES LTD. AND CYBAGE SOFTWARE PVT.LTD IS CO NCERNED, IT IS ALSO BEEN SUBMITTED BY LD.AR THAT DIRECTION MAY BE GIVEN TO PAGE 12 OF 13 IT(TP)A NO.182/BANG/2019 THE LD. AO TO CONSIDER CORRECT MARGINS OF THE COMPA RABLES THAT IS FINALLY RETAINED IN THE FINAL LIST. 3.6 ACCORDINGLY WE DIRECT THE LD. AO/TPO TO ADOPT C ORRECT MARGINS OF THE COMPARABLES IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROUNDS RAISED BY ASSESSEE STANDS PARTLY ALLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPT, 2021 SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 28 TH SEPT, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE