SITEL OPERATING CORPORATION INDIA LTD NOW MERGED WITH SITEL INDIA P. LTD, MUMBAI V. DCIT WD 11(2)(1), MUMBAI

ITA 1821/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5721 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Assessee Lawyers: NIKHIL TIWARI ARS
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 271(1)(c); 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1821/MUM/2016 ASSESSMENT YEAR: 2011 - 12 M/S SITEL INDIA PVT. LTD., BOOMERANG UNIT NO. 501, WING - A&B, 5 TH FLOOR, CHANDIVALI STUDIO, ANDHERI (E), MUMBAI - 400072. VS. DY. COMMISSIONER OF INCOME TAX - 11(2)(1), ROOM NO. 417, AAYAKARBHAVAN, M.K. MARG, MUMBAI - 400020. PAN NO. AACCC0408M APPELLANT RESPONDENT REVENUE BY : MR. MANISH KUMAR SINGH, DR ASSESSEE BY : MR. M.P. LOHIA & MR. NIKHIL TIWARI, ARS DATE OF HEARING : 04/02/2019 DATE OF PRONOUNCEMENT: 03/05/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER U/S 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (THE ACT) PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, WARD - 11(2)(1), MU MBAI (HEREINAFTER AO) IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL (IN SHORT DRP). M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 2 2 . BRIEFLY STATED, THE FACTS ARE THAT THE APPELLANT - COMPANY IS WHOLLY OWNED SUBSIDIARY OF SITEL OPERATING CORPORATION (USA) PROVIDING INFORM ATION TECHNOLOGY ENABLED SERVICES COMPRISING OF CONTACT/CALL CENTRE SERVICES. THE LD. COUNSELS OF THE ASSESSEE SUBMIT THAT THE 1 ST , 2 ND , 6 TH , 7 TH GROUNDS OF APPEAL ARE GENERAL IN NATURE. ALSO IT IS SUBMITTED BY THEM THAT THE 3 RD , 4 TH , 5 TH GROUNDS OF APPEAL ARE NOT PRESSED. THE LD. COUNSELS FURTHER SUBMIT THAT THE 8 TH , 9 TH , 10 TH , 11 TH , 12 TH , 16 TH , 18 TH AND 19 TH GROUND OF APPEAL WILL BE ACADEMIC IN NATURE IN VIEW OF SPECIFIC DIRECTIONS IN 13 TH , 14 TH , 15 TH AND 17 TH GROUND OF APPEAL. THEREFO RE, WE TURN TO THE 13 TH , 14 TH , 15 TH AND 17 TH GROUND OF APPEAL. 3. THE 13 TH GROUND OF APPEAL THE AO ERRED IN CONSIDERING ACCENTIA TECHNOLOGIES LTD. AS COMPARABLE TO THE A SSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED SERVICES, DISREGARDING THE FACT THAT THE COMPANY IS FUNCTIONALLY DIFFERENT FROM THE A SSESSEE I.E. IT IS ENGAGED IN PROVISION OF SOFTWARE SERVICES AND OPERATES UNDER PECULIAR CIRCUMSTANCES. 3.1 THE TRANSFER PRICING OFFICER (TPO) HAS INCLUDED ACCENTIA TECHNOLOGIES LTD. ( ACCENTIA ) IN THE FINAL SET OF COMPARABLE ON THE GROUND THAT THE COMPANY IS A BPO AND IS INTO HEALTHCARE RECEIVABLE MANAGEMENT . THE LD. COUNSEL S OF THE ASSESSEE SUBMIT THAT ACCENTIA IS ENGAGED IN SOFTWARE DEVELOPMENT AND KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES IN THE NATURE OF HEALTHCARE REVENUE CYCLE MANAGEMENT AND LEGAL PROCESS OUTSOURCING SERVICES. HOWEVER, NO SEPARATE SEGMENTAL INFORMAT ION IS AVAILABLE FOR THE SOFTWARE DEVELOPMENT AND HEALTHCARE SERVICES PROVIDED BY THE COMPANY. THUS IT IS STATED THAT IN M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 3 THE ABSENCE OF SEPARATE SEGMENTAL INFORMATION, ACCENTIA HAS TO BE REJECTED AS A COMPARABLE. THE LD. COUNSELS SUBMIT THAT IN THE FOLLOW ING ORDERS OF THE TRIBUNAL, ACCENTIA IS REJECTED AS A COMPARABLE: (I) M/S SITEL OPERATING CORPORATION INDIA PVT. LTD. (SINCE AMALGAMATED WITH SITEL INDIA PVT. LTD.) V. ITO (ITA NO. 598/BANG/2015 & ITA NO. 452/BANG/2015) DATED 25 APRIL 2018 (II) ACIT V. M AERSK GLOBAL SERVICES CENTRE (I) (P.) LTD. (ITA NO. 944/MUM/2016) DATED 29 JULY 2016 [AY 2011 - 12] (MUM ITAT) (III) OMNIGLOBE INFORMATION TECHNOLOGIES (INDIA) (P.) LTD. V. ITO (ITA/1003/DELHI/2016) DATED 06 NOVEMBER 2017 [AY 2011 - 12] (IV) AVINEON INDIA (P.) LTD. V. DCIT (ITA NO. ITA NO. 238 AND 257/HYD/2016) DATED 07 JULY 2017 [AY 2011 - 12], (V) HYUNDAI MOTOR INDIA ENGINEERING PVT. LTD. V. ITO (ITA NO. 128 & 216/HYD/2016) DATED 21 DECEMBER 2016 [AY 2011 - 12], (VI) E4E BUSINESS SOLUTIONS INDIA PVT. LTD. V. DCI T (ITA NO. 1397/BANG/2016) DATED 13 JANUARY 2017 [AY 2011 - 12], (VII) M/S TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. V. DCIT(IT(TP)A NO. 191/BANG/2015) DATED 25 JANUARY 2017 [AY 2010 - 11] FURTHER, IT IS STATED THAT IN THE FOLLOWING HIGH COURT DECISIONS, ACCENTIA IS REJECTED AS A COMPARABLE TO AN ITES SERVICE PROVIDER : (I) PCIT V. APTARA TECHNOLOGY (P.) LTD. (IT APPEAL NO. 1209 OF 2015) DATED 26 MARCH 2018 [AY 2008 - 09] (BOM HC), (II) PCIT V. BNY MELLON INTERNATIONAL OPERATING (INDIA) (P.) LTD. (IT APPEA L NO. 1226 OF 2015) DATED 23 APRIL 2018 [AY 2009 - 10] (BOM HC), M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 4 (III) PCIT V. PTC SOFTWARE (I) (P.) LTD. (IT APPEAL NO. 598 OF 2016) DATED 16 APRIL 2018 [AY 2009 - 10] (BOM HC) 3.2 ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE TPO/AO HAS RIGHTLY INCLUDED AC CENTIA . IN THE FINAL SET OF COMPARABLES. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN THIS CONTEXT, WE WOULD BE REFERRING TO THE RELEVANT PAGES OF THE PAPER BOOK (P/B), WHICH WAS ALSO FILED BEFORE THE TPO. THE ANNUAL REPORT OF ACCENTIA CLEARLY INDICATES THAT IT IS ENGAGED IN THE PROVISION OF SOFTWARE SERVICES. AS PER THE CEOS LETTER TO SHAREHOLDERS ON PAGE 6 OF THE ANNUAL REPORT, IT IS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES AND IS USING SAAS DELIVERY MODEL. FURTHER, FROM PAGE 31 OF THE ANNUAL REPORT, IT CAN BE SEEN THAT THE COMPANY IS ALSO ENGAGED IN SALE OF SOFTWARE PRODUCTS , FOR WHICH NO SEGMENTAL BREAKUP IS AVAILABLE. AS PER THE MANAGEMENT DISCUSSION ANALYSIS ON PAGE 25 OF THE ANNUAL REPORT, THE COMPANY IS ENGAGED IN SOFTWARE DEVELOPMENT AS IT HAS SAAS MODEL, WHICH IS FURTHER EXPLAINED ON PAGES 28 AND 30 OF THE ANNUAL REP ORT. FURTHER, THE COMPANY HAS ALSO DEVELOPED SOFTWARE SOLUTIONS SUCH AS INSTAKARE AND INSTA PMS WHICH HELPS HEALTHCARE PROVIDERS WITH A HOLISTIC AND COMPREHENSIVE SOLUTIONS THAT FULFILS ALL THE MEDICAL AND ADMINISTRATIVE SUPPORT NEEDS. IN THE ABSENCE O F SEGMENTAL FINANCIAL INFORMATION FOR SOFTWARE DEVELOPMENT PRODUCT SALES (WHICH WOULD FORM PART OF INCOME EARNED FROM MEDICAL TRANSCRIPTION) THE COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 5 IN APPELLANTS OWN CASE FOR AY 2010 - 11 (ITA (TP)A NO. 598/BANG/ 2015) THE ITAT A BENCH, BANGALORE VIDE ORDER DATED 25.04.2018 AT PARA 13.4 HELD AS UNDER: 13.4 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF THIS COMPANY WAS CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF M/S.TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. IN IT(TP)A NO.191/BANG/2015 DATED 25/01/2017 WHEREIN IT HAS BEEN HELD: 13. AS REGARDS ACCENTIA TECHNOLOGIES LTD. AND ICRA ONLINE LTD. THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 HAS EXCLUDED THESE TWO COMPANIES FROM THE SET OF COMPARABLES IN PARA 5 AS UNDER : 5. THEREAFTER HE SUBMITTED THAT THE FOLLOWING COMPANIES SHOULD BE EXCLUDED ON THE BASIS OF FUNCTIONAL DISSIMILARITY AND I N SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. FLEXTRONICS TECH. (INDIA) PVT. LTD. VS. DCIT IN IT(TP)A NO.1559(B)/2012 DATED 23.10.2015, COPY AVAILABLE ON PAGE NOS.17 TO 38 OF COMPILATION OF CASE LAWS SUB MITTED BEFORE THE TRIBUNAL. A) ACCENTIAL TECH. LTD. (SEG.) B) ACROPETAL TECH. LTD. (SEG.) C) CORAL HUBS LTD. D) CROSSDOMAIN SOLUTIONS LTD. E) ECLERX SERVICES LTD. F) GENESYS INTERNATIONAL CORPN. LTD. G) MOLD TEK TECHNOLOGIES LTD. WE FURTHER NOTE THAT THE FUNCTIONAL COMPARABILITY HAS BEEN EXAMINED IN DETAIL BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EQUANT SOLUTIONS INDIA PVT. LTD. VS. DCIT IN IT(TP)A NO.1202/DEL/2015 AS WELL AS IN THE CASE OF ITO VS. INTERWOVEN SOFTWARE SERVICES (INDIA) PVT. LTD. IN ITA NO.461/BANG/2015. FURTHER IN THE CASE OF ACROPETAL TECHNOLOGIES LTD. (SEG.), THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KODIAK M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 6 NETWORKS (INDIA) PVT. LTD. VS. DCIT IN IT(TP)A NO.1540/BANG/2012 HAS CONSIDERED THE FUNCTIONAL COMPARABILI TY AND FOUND THAT THIS COMPANY IS NOT COMPARABLE WITH A CAPTIVE SERVICE PROVIDER. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THESE COMPANIES FROM SET OF COMPARABLES. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF TRIBUNAL, WE DIRECT THE AO/TPO TO DELETE ACCENTIA TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. 3.4 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR AND DIRECT THE TPO/AO TO DELETE ACCENTIA TECHNOLOGIES LTD. FROM THE FINAL LIST OF COMPARABLES. THUS THE 13 TH GROUND OF APP EAL IS ALLOWED. 4 . THE 14 TH GROUND OF APPEAL THE AO ERRED IN CONSIDERING ACROPETAL TECHNOLOG IES LTD. (SEG). AS COMPARABLE TO THE A SSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED SERVICES, DISREGARDING THE FACT THAT THE CO MPANY IS F UNCTIONALLY DIFFERENT FROM THE A SSESSEE I.E. IT IS ENGAGED INTO KNOWLEDGE PROCESS OUTSOURCING SERVICES. 4 .1 THE TPO/AO INCLUDED ACROPETAL TECHNOLOGIES LTD. (SEG) (IN SHORT ACROPETAL ) IN THE FINAL SET OF COMPARABLES ON THE GROUND THAT THE COMPANY IS ENGAGED IN PROVIDING SIMILAR ACTIVITY (IT ENABLED SERVICES ) AND AS PER NOTIFICATION NO. 11521 ISSUED BY CBDT, THERE IS NO DISTINCTION BETWEEN BPO AND KPO. 4 .2 THE LD. COUNSEL S OF THE ASSESSEE SUBMIT THAT ACR OPETAL IS ENGAGED IN PROVIDING KPO SERVICES. EXPLAINING THAT TPO HAS CONSIDERED ENGINEERING DESIGN SERVICES SEGMENT OF ACROPETAL AS COMPARABLE TO M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 7 THE ASSESSEE, IT IS ARGUED THAT THE ABOVE SEGMENT OF THE COMPANY IS IN THE NATURE OF KPO AND IS FUNCTIONALLY NOT COMPARABLE TO THE ITES SERVICES PERFORMED BY THE APPELLANT. IN THIS REGARD, THE LD. COUNSELS REL Y ON THE FOLLOWING ORDERS OF THE TRIBUNAL : (I) M/S SITEL OPERATING CORPORATION INDIA PVT. LTD. (SINCE AMALGAMATED WITH SITEL INDIA PVT. LTD.) V. ITO (ITA NO. 598/BANG/2015 & ITA NO. 452/BANG/2015) DATED 25 APRIL 2018 [AY 2010 - 11) (II) GOLDMAN SACHS (INDIA) SECURITIES (P.) LTD. V. ACIT (IT APPEAL (TP) NOS 902 & 927 (MUM) OF 2016) DATED 11 JANUARY 2017 [AY 2011 - 12) (MUM ITAT) (III) DCIT V. M/S INFOR(INDI A) PVT. LTD. (ITA NO. 113/HYD/2016) DATED 7 JULY 2017 [AY 2011 - 12] (IV) E4E BUSINESS SOLUTIONS INDIA PVT. LTD. V. DCIT (ITA NO. 1397/BANG/2016) DATED 13 JANUARY 2017 [AY 2011 - 12], (V) M/S TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. V. DCIT(IT(TP)A NO. 191/BANG/2015) DATED 25 JANUARY 2017 [AY 2010 - 11]. 4 .3 ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE TPO/AO ON THE GROUND THAT ACROPETAL IS ENGAGED IN PROVIDING SIMILAR ACTIVITY (IT ENABLED SERVICES). 4 .4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. AS PER PAGE 8 OF THE ANNUAL REPORT, ACROPETAL INCLUDE S SERVICES SUCH AS DESIGN ENGINEERING , ARCHITECTURAL, STRUCTURAL SERVICES. THESE SERVICES ARE IN THE NATURE OF A KPO SERVICES AS DEFINED IN SAFE HARBOUR RULES. M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 8 FURTHER, ACROPETAL OPERATES VARIOUS SERVICES SUCH AS ARCHITECTURAL, STRUCTURAL, ELECTRICAL ENGINEERING ETC. WHICH ARE FUNCTIONALLY D IFFERENT FROM THE ITES RENDERED BY THE APPELLANT. REGARDING THE RELIANCE PLACED BY THE TPO AND DRP ON NOTIFICATION NO. 11521 ISSUED BY CBDT, WE FIND THAT IT IS IN RELATION TO THE TYPE OF INFORMATION TECHNOLOGY ENABLED PRODUCTS OR SERVICES WHICH WILL BE EL IGIBLE FOR DEDUCTION U/S 10A(B)(I)(2), SECTION 10B(B)(I)(2) AND SECTION 80HHE(B). THE PURPOSE OF THE SAID CIRCULAR IS ENTIRELY DIFFERENT VIZ. TO STATE THE TYPE OF SERVICES W HICH ARE ELIGIBLE FOR DEDUCTION. WE FIND THAT THE SAFE HARBOUR RULES ISSUED BY CBD T CLEARLY DEMARCATES BETWEEN BPO AND KPO SERVICES AND HAS ALSO PROVIDED SEPARATE SAFE HARBOUR MARGIN FOR THESE TYPE OF SERVICES. 4 .4.1 IN APPELLANTS OWN CASE FOR AY 2010 - 11 (ITA (TP)A NO. 598/BANG/2015) THE ITAT A BENCH, BANGALORE VIDE ORDER DATED 25.0 4.2018 AT PARA 14.4 HELD AS UNDER: 14.4 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF THIS COMPANY WAS CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF M/S.TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. IN IT(TP)A NO.191/BANG/2015 DATED 25/01/2017 WHEREIN IT HAS BEEN HELD: 13. AS REGARDS ACCENTIA TECHNOLOGIES LTD. AND ICRA ONLINE LTD. THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 HAS EXCLUDED THESE TWO COMPANIES FROM THE SET OF COMPARABLES IN PARA 5 AS UNDER : 5. THEREAFTER HE SUBMITTED THAT THE FOLLOWING COMPANIES SHOULD BE EXCLUDED ON THE BASIS OF FUNCTIONAL DISSIMILARITY M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 9 AND IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. FLEXTRONICS TECH. (INDIA) PVT. LTD. VS. DCIT IN IT(TP)A NO.1559(B)/2012 DATED 23.10.2015, COPY AVAILABLE ON PAGE NOS.17 TO 38 OF COMPILATION OF CASE LAWS SUBMITTED BEFORE THE TRIBUNAL. A) ACCENTIAL TECH. LTD. (SEG.) B) ACROPETAL TECH. LTD. (SEG.) C) CORAL HUBS LTD. D) CROSSDOMAIN SOLUTIONS LTD. E) ECLERX SERVICES LTD. F) GENESYS INTERNATIONAL CORPN. LTD. G) MOLD TEK TECHNOLOGIES LTD. WE FURTHER NOTE THAT THE FUNCTIONAL COMPARABILITY HAS BEEN EXAMINED IN DETAIL BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EQUANT SOLUTIONS INDIA PVT. LTD. VS. DCIT IN IT(TP)A NO.1202/DEL/2015 AS WELL AS IN THE CASE OF ITO VS. INTERWOVEN SOFTWARE SERVICES (INDIA) PVT. LTD. IN ITA NO.461/BANG/2015. FURTHER IN THE CASE OF ACROPETAL TECHNOLOGIES LTD. (SEG.), THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KODIAK NETWORKS (INDIA) PVT. LTD. VS. DCIT IN IT(TP)A NO.1540/BANG/2012 HAS CONSIDERED THE FUNCTIONAL COMPARABILITY AND FOUND THAT THIS COMPANY IS NOT COMPARABLE WIT H A CAPTIVE SERVICE PROVIDER. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THESE COMPANIES FROM SET OF COMPARABLES. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF TRIBUNAL, WE DIRECT THE AO/TPO TO DELETE ACROPETAL TECHNOLOGI ES LTD.(SEG) FROM THE LIST OF COMPARABLES. M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 10 4 .4.2 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR AND DIRECT THE TPO/AO TO DELETE ACROPETAL TECHNOLOGIES LTD.(SEG) FROM THE LIST OF FINAL COMPARABLES. THUS THE 14 TH GROUND OF APPEAL IS ALLOWED. 5 . THE 15 TH GROUND OF APPEAL THE AO ERRED IN CONSIDERING ICRA ONLINE LTD. (SEG) AS COMPARABLE TO THE A SSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED SERVICES, DISREGARDING THE FACT THAT THE COMPANY IS F UNCTIONALLY DIFFERENT FROM THE A SSESSEE I.E. IT IS ENGAGED INTO KNOWLEDGE PROCESS OUTSOURCING SERVICES. THE 17 TH GROUND OF APPEAL THE AO ERRED IN COMPUTING THE OPERATING MARGIN OF ICRA ONLINE LIMITED (SEG) AS 33.54% ON OPERATING COSTS AS AGAINST THE CORRECT MARGIN OF 22.32%. 5 .1 THE TPO INCLUDED ICRA ONLINE LTD. (SEG) (IN SHORT ICRA ) ON THE GROUND THAT IT IS ENGAGED IN DATA PROCESSING AND DATA MINING AND ACCORDINGLY IT IS PROVIDING SIMILAR SER VICES (ITES). THE D RP UPHOLDS THE ORDER OF THE TPO, WHICH IS FOLLOWED BY THE AO. 5 .2 THE LD. COUNSEL S OF THE ASSESSEE SUBMIT THAT AS PER THE ANNUAL REPORT, THE COMPANY HAS FOLLOWING THREE BUSINESS SEGMENTS: (I) INFORMATION SERVICES, (II) SOFTWARE SERVICES AND (III) OUTSOURCE SERVICES IT IS FURTHER STATED THAT THE TPO HAS CONSIDERED THE OPERATIONS OF THE OUTSOURCED SERVICES SEGMENT AS COMPARABLE TO THE OPERATIONS OF M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 11 THE APPELLANT. THE LD. COUNSELS ARGUE THAT THE ANNUAL REPORT OF THE COMPANY DOES NOT PROVIDE ANY DESCRIPTION AS TO THE NATURE OF THE SERVICES CONTAINED IN THE SEGMENT. HOWEVER, A REFERENCE MAY BE DRAWN TO THE ANNUAL REPORT OF ICRA LTD., THE HOLDING COMPANY OF ICRA FROM WHERE IT CAN BE SEEN THAT THE OUTSOURCED SEGMENT OF THE COMPANY RELATES TO KPO AND ONLINE SOFTWARE SERVICES. THE LD. COUNSEL S FURTHER SUBMIT THAT THE ITAT IN APPELLANTS OWN CASE FOR AY 2010 - 11 HAS FOLLOWED THE TRIBUNAL DISCUSSION IN THE CASE OF TES CO HINDUSTAN SERVICE CENTRE PVT. LTD. V. DCIT (ITA NO. 191/BANG/2015) TO REJECT THE COMPANY FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT I.E. COMPANIES NOT ENGAGED IN PROVIDING ITES (BPO SERVICES). IN THIS REGARD , RELIANCE IS PLACED BY THEM ON THE FOLLOWIN G ORDER S OF THE TRIBUNAL : (I) M/S SITEL OPERATING CORPORATION INDIA PVT. LTD. (SINCE AMALGAMATED WITH SITEL INDIA PVT. LTD.) V. ITO (ITA NO. 598/BANG/2015 & ITA NO. 452/BANG/2015) DATED 25 APRIL 2018 [AY 2010 - 11] (II) M/S TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. V. DCIT(IT(TP)A NO. 191/BANG/2015) DATED 25 JANUARY 2017 [AY 2010 - 11] (III) OUTSOURCE PARTNERS INTERNATIONAL V. DCIT (IT(TP)A NO. 337/BANG/2015) [AY 2010 - 11]. 5 .3 ON THE OTHER HAND, THE LD. DR SUBMITS THAT ICRA IS ENGAGED IN DATA PROCESSING AND DATA MINING AND ACCORDINGLY IT IS ENGAGED IN PROVIDING SIMILAR SERVICES (ITES). THUS IT IS STATED THAT THE INCLUSION OF THE ABOVE COMPANY BY THE TPO/AO IN THE LIST OF FINAL COMPARABLES BE CONFIRMED. M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 12 5 .4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. THE TPO HAS CONSIDERED THE OPERATIONS OF THE OUTSOURCED SERVICES SEGMENT OF ICRA AS COMPARABLE TO THE OPERATIONS OF THE APPELLANT. HOWEVER, W E FIND THAT THE ANNUAL REPORT OF THE COMPANY DOES NOT PROVIDE ANY DESCRIPTION AS TO THE NATURE OF THE SERVICES CONTAINED IN THIS SEGMENT. AS PER PAGE 532 OF THE P/B, A REFERENCE MAY BE MADE TO THE ANNUAL REPORT OF ICRA LTD., THE HOLDING COMPANY OF ICRA FRO M WHERE IT CAN BE SEEN THAT THE OUTSOURCED SEGMENT OF THE COMPANY RELATES TO KPO AND ONLINE SOFTWARE SERVICES. ALSO PAGE 8 OF THE ANNUAL REPORT OF ICRA LTD. DELINEATES THE BUSINESS OF ICRA STATING THAT THE COMPANY IS ENGAGED IN PROVIDING KPO AND ONLINE SOF TWARE SERVICES. AS PER THE DESCRIPTION AT PAGE 532 OF THE P/B, THE KNOWLEDGE PROCESS OUTSOURCING DIVISION PROVIDES FINANCIAL AND ANALYTICAL SERVICES AND SUPPORT TO CLIENTS IN THE AREA OF DATA EXTRACTION, AGGREGATION, ELECTRONIC CONVERSION OF FINANCI AL STAT EMENTS, VALIDATION AND ANALYSIS, ACCOUNTING AND FINANCE, RESEARCH AND ANALYTICS. THUS THE APPELLANT IN THE INSTANT CASE PERFORMS ROUTINE ITES COMPRISING OF CONTACT/CALL CENTRE SERVICES AND HENCE IS A ROUTINE BPO SERVICE PROVIDER AND CANNOT BE COMPARED TO A COMPANY PROVIDING KPO SERVICES SUCH AS ICRA . ALSO WE FIND THAT THE TPO HAS WRONGLY COMPUTED THE MARGIN OF THE COMPANY AS 33.54% INSTEAD OF THE CORRECT MARGIN 22.32%, BECAUSE THE TPO HAS EXCLUDED FOREIGN EXCHANGE INCOME AND OTHER RECEIPTS (ALLOCATED BASI S REVENUE IN EACH SEGMENT), WHEREAS, THE SAME IS TO BE M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 13 ADDED FOR INFORMATION SERVICE, OUTSOURCE SERVICE AND SOFTWARE SERVICE TO ARRIVE AT THE CORRECT MARGIN. IN ASSESSEES OWN CASE FOR AY 2010 - 11, THE ITAT A BENCH BANGALORE HAS FOLLOWED THE TRIBUNAL DI SCUSSION IN THE CASE OF TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. (SUPRA) TO REJECT THE COMPANIES FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT I.E. COMPANIES NOT ENGAGED IN PROVIDING ITES (BPO) SERVICE. IN THE CASE OF TESCO HINDUSTAN SERVICE CENTRE PVT. LTD . (SUPRA), ICRA HAS BEEN HELD TO BE NON - COMPARABLE TO AN ITES SERVICE PROVIDER. ACCORDINGLY, FOLLOWING THE DECISION OF TESCO HINDUSTAN SERVICE CENTRE PVT. LTD. (SUPRA) AND THE OBSERVATIONS IN THE TRIBUNAL DECISION IN APPELLANTS OWN CASE FOR AY 2010 - 11, W E REJECT ICRA ONLINE AS A COMPARABLE. THUS THE 15 TH & 17 TH GROUND S OF APPEAL ARE ALLOWED. 6 . AS THE 13 TH , 14 TH , 15 TH AND 17 TH GROUND OF APPEAL ARE ALLOWED IN FAVOUR OF THE APPELLANT, THE 8 TH TO 12 TH , 16 TH , 18 TH AND 19 TH GROUND OF APPEAL BECOME ACADEMIC IN NATURE. THE 20 TH GROUND OF APPEAL STATING BENEFIT OF +/ - 5% UNDER PROVISO TO SECTION 92C(2) OF THE ACT BE GRANTED TO THE ASSESSEE, IF THE ADJUSTMENT UNDER TRANSFER PRICING FALLS WITHIN THE RANGE SPECIFIED THEREIN BE COMES CONSEQUENTIAL IN NATURE. THE 21 ST GROUND OF APPEAL REGARDING LEVY OF INTEREST U/S 234B, SIMILARLY BECOMES CONSEQUENTIAL IN NATURE. THE 22 ND GROUND OF APPEAL REGARDING INITIATION OF PENALTY U/S 271(1)(C) IS PREMATURE. M/S SITEL INDIA PVT. LTD. ITA NO. 1821/MUM/2016 14 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/05/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 03/05/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI