M/s NTT Data India Enterprises Application Services Private Limited, Hyderabad V. Dy.CIT, Cir-16(1), Hyderabad

ITA 1862/HYD/2012

• Counselvise Citation: 186222514 RSA 2012
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1862/HYD/2012 ASSESSMENT YEAR 2008-2009 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., (FORMERLY KNOWN AS INTELLIGROUP ASIA P. LTD., PRESENTLY MERGED WITH NTT GLOBAL DELIVERY SERVICES LTD ) HYDERABAD 500 081. PAN AAACI7064D VS. DCIT, CIRCLE 16(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. PANKAJ JAIN FOR REVENUE : MR. RAJEEV BENJWAL DATE OF HEARING : 13.11.2014 DATE OF PRONOUNCEMENT : 02.01.2015 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE A.O. PASSED UNDER SECTION 143(3) READ WITH SECTION 144C CONSEQUENT TO THE DIRECTIONS OF THE DI SPUTES RESOLUTION PANEL UNDER SECTION 144C(5) OF THE INCOM E TAX ACT, 1961. 1.1. ASSESSEE RAISED AS MANY AS 13 GROUNDS IN THE MAIN APPEAL AND FURTHER RAISED ADDITIONAL GROUNDS O F APPEAL FROM 14 TO 18. IN THE COURSE OF PRESENT APPEAL PROC EEDINGS, ASSESSEES ADDITIONAL GROUNDS ARE ADMITTED BEING LE GAL IN NATURE AFTER CONSIDERING THE OBJECTIONS OF THE LD. D.R. 2 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 2. ASSESSEE, FORMERLY KNOWN AS INTELLI GROUP ASIA P. LTD., HAS BECOME NTT DATA INDIA ENTERPRISES APPLICA TIONS SERVICES P. LTD., AND AT PRESENT, MERGED WITH NTT G LOBAL DELIVERY SERVICES LTD., VIDE ORDERS OF HONBLE HIGH COURT OF A.P. DATED 10 TH JULY, 2013. ASSESSEE, ACCORDINGLY, FILED REVISED FORM 36B INDICATING CHANGE IN STATUS WHICH WAS TAKE N ON RECORD. 3. BRIEFLY STATED, ASSESSEE IS AN IT SOLUTION COMP ANY THAT PROVIDES SOFTWARE DEVELOPMENT SERVICE IN THE A REAS OF ERP SOLUTIONS DESIGN, IMPLEMENTATION & MAINTENANCE AND INTERNET TECHNOLOGY SOLUTIONS TO ITS CUSTOMERS. THE COMPANY HAS A HUNDRED PERCENT EXPORT ORIENTED UNDERTAKING (EOU) REGISTERED WITH THE SOFTWARE TECHNOLOGY PARKS OF IN DIA {STIP}. THE AE IS A GLOBAL PROVIDER OF INNOVATIVE CONSULTIN G, TECHNOLOGY, AND OUTSOURCING SERVICES. THE SERVICES I F THE GROUP ARE BROAD BASED AND INCLUDE BUSINESS PROCESS IMPROV EMENT, ANALYTICAL SERVICES, ERP IMPLEMENTATIONS, GLOBAL RO LL-OUTS, E- BUSINESS SOLUTIONS, UPGRADES, TESTING APPLICATION M ANAGEMENT, AND INFRASTRUCTURE SUPPORT AND LIFECYCLE MANAGEMENT SERVICES. ASSESSEE DURING THE YEAR AS PER FORM 3CEB ENTERED I NTO TWO INTERNATIONAL TRANSACTIONS FOR SOFTWARE DEVELOPMENT SERVICES AND REIMBURSEMENT OF EXPENSES AS GIVEN BELOW : M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., RS.123,46,25,254 REIMBURSEMENT OF EXPENSES RS. 12,56,96,824 AS PER THE ANNUAL REPORT, THE FINANCIALS OF THE ASS ESSEE FOR THIS F.Y. 2007-08, WERE AS UNDER : DESCRIPTION AMOUNT REVENUE RS.170,23,62,000 COST RS.151,00,98,000 3 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. PBIT RS. 19,22,64,000 PBIT AS % OF COST 12.73% FOR DETERMINATION OF THE ARM'S LENGTH PRICE OF THE ABOVE TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES, THE A SSESSEE ADOPTED TRANSACTIONS NET MARGIN METHOD (TNMM). TPO DID NOT DISPUTE THAT METHOD AND CONSIDERED IT TO BE THE MOS T APPROPRIATE METHOD. THE PROFIT LEVEL INDICATOR, OPERATING PROFIT TO COST RATIO, FOR THE ASSESSEE WAS 12.73%. ITS TP STUDY BASED ON 23 COMPARABLES YIELDED PLI OF 14.84%. HENCE, THE MARGI N EARNED WAS CONSIDERED AT ARM'S LENGTH BY THE ASSESSEE. BUT, THE TPO CARRIED OUT A FRESH SEARCH. ON THE BASIS OF THE SEARCH AND AFTER GOING THROUGH COMPARABLES OF THE ASSESSEE , CAME OUT WITH THE FOLLOWING COMPARABLES : S.NO. NAME OF THE COMPANY OPERATING REVENUE (RS.) CRORES. OP TO TOTAL COST 1. AVANI CINCOM TECHNOLOGIES 2.93 21.65 2. BODHTREE CONSULTING LTD., 10.42 19.14 3. CELESTIAL BIOLABS 20.21 87.94 4. E-ZEST SOLUTIONS LTD., 7.66 28.95 5. FLEXTRONICS (ARICENT) 956.20 8.07 6. IGATE GLOBAL SOLUTION LTD., 786.90 13.90 7. INFOSYS TECHNOLOGIES LTD., 15677.00 40.41 8. KALS INFORMATION SYSTEMS LTD., (SEG.) 2.05 41.94 9. LGS GLOBAL LTD., 136.52 26.64 10. MINDTREE LTD., (SEG.) 579.01 17.51 11. PERSISTENT SYSTEMS LTD., 405.49 27.23 12. QUINTEGRA SOLUTION LTD., 89.87 21.74 13. R SYSTEMS INTERNATIONAL (SEG.) 144.56 15.30 14. RS SOFTWARE (INDIA) 100.71 6.46 4 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. LTD., 15. SASKEN COMMUNICATION TECHNOLOGIES LTD., (SEG.) 354.12 13.44 16. TATA ELXSI (SEG.) 342.85 18.97 17. THIRDWARE SOLUTION LTD., 522.80 18.01 18. WIPRO LTD., (SEG.) 11258.00 28.38 19. SOFTSOLD INDIA LTD., 23.47 42.15 FOR THE ABOVE COMPARABLES, THE TPO CALCULATED THE W ORKING CAPITAL ADJUSTMENT OF (-) 3.42%. THUS, THE ARM'S LE NGTH MARGIN AS ARRIVED AT BY THE TPO WOULD BE 29.62 %. ARITHMETIC MEAN OF PLI AS ARRIVED AT BY THE TPO : 26.20% LESS: WORKING CAPITAL ADJUSTMENT : (-) 3.4 2% ARM'S LENGTH MARGIN AS ARRIVED AT BY THE TPO : 29.62% TPO ARRIVED AT SHORT FALL AS UNDER. OPERATING COST RS.151,00,98,000 OPERATING COST WITH REIMBURSEMENTS RECEIVED RS.163,57,94,824 ARMS LENGTH MARGIN 29.62% ON OPERATING COST. ARMS LENGTH PRICE (ALP) @ 129.62% OF OPERATING COST. RS.212,03,17,251 LESS: SALES MADE TO NON-A.ES. RS. 34,20,39,922 ARMS LENGTH SALES MADE TO A.ES. RS.177,82,77,329 PRICE RECEIVED BY THE ASSESSEE WITH REIMBURSEMENTS RS.136,03,22,078 SHORTFALL BEING ADJUSTMENT U/S.92CA RS. 41,79,55,25 1 THE ABOVE SHORTFALL OF RS. 41,79.55,251/- WAS TREAT ED AS TRANSFER PRICING ADJUSTMENT U/S. 92CA OF THE IT ACT BY THE TPO. 5 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 4. AGGRIEVED BY THE ABOVE ADJUSTMENT AS PROPOSED ON THE DRAFT ORDER, ASSESSEE PREFERRED APPLICATION TO THE DRP, HYDERABAD WHO VIDE THEIR ORDER DATED 03.08.2012 ALL OWED SOME OF THE OBJECTIONS. DRP DIRECTED THAT (A) T.P. ADJUSTMENT TO BE MODIFIED FROM PLI OF 26.20 OF OPERATING COST AS ADOPTED BY TPO TO 21.25% CONSEQUENT TO EXCLUSION OF SOME CO MPANIES FROM COMPARABLES (B) WORKING CAPITAL ADJUSTMENT TO BE RE- CALCULATED ON THE BASIS OF PRESENT COMPARABLES AND (C) REIMBURSEMENT OF RS.12,56,96,824 NOT TO BE TAKEN FO R ALP CALCULATIONS. CONSEQUENT TO THE ABOVE DIRECTIONS, A .O. PASSED ORDER MAKING THE ADJUSTMENTS TO AN EXTENT OF RS.18, 42,03,431. ASSESSEE IN ITS GROUNDS IS OBJECTING TO THE ULTIMAT E ADJUSTMENTS MADE BY TPO/A.O. ON VARIOUS ISSUES. 5. ASSESSEE HAS RAISED IN ALL 18 GROUNDS ON 5 MAIN ISSUES FOR CONSIDERATION. (1) INTERNAL TNMM IS TO B E CONSIDERED BEFORE CONSIDERING THE EXTERNAL TNMM ON THE BASIS O F COMPARATIVE ANALYSIS. (2) WITHIN THE COMPARABILITY ANALYSIS, IT WAS THE CONTENTION THAT 8 COMPANIES ARE NOT COMPARA BLE AND IF THEY ARE EXCLUDED, ASSESSEES ARMS LENGTH PRICE IS WITHIN THE RANGE. (3) ASSESSEE ALSO CONTESTS THAT A.O. HAS NO T CONSIDERED THE COMPARABLE SELECTED BY ASSESSEES 4 COMPANIES A ND WANT THEM TO BE INCLUDED (4) ASSESSEE IS CONTESTING THE INCORRECT WORKING CAPITAL ADJUSTMENT, AND (5) THAT THE TPO/AO MADE ADJUSTMENTS TO THE NON AE TURNOVER ALSO. FURTHER C ONTENTION THAT THE ADJUSTMENT SO MADE ARE IN EXCESS OF THE PR OFIT OF ENTIRE GROUP AND PRICE RECEIVED BY AE, SO THE ADJUS TMENT SHOULD BE RESTRICTED TO THE TOTAL PROFITS OF THE GR OUP IS ACADEMIC IN NATURE SO THE SAME IS NOT DEALT WITH HE RE. THE ABOVE FIVE CONTENTIONS ARE CONSIDERED IN DETAIL AFT ER HEARING THE LD. COUNSEL AND LD. D.R. 6 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 1. INTERNAL TNMM ANALYSIS : 6. IT WAS THE CONTENTION THAT ASSESSEE HAS INTERNATIONAL TRANSACTIONS WITH ITS AE BUT ALSO WIT H THIRD PARTIES AND THERE IS EVIDENCE AVAILABLE WITH REFERE NCE TO INTERNAL TNMM WHICH SHOULD BE GIVEN PREFERENCE OVER THE EXTERNAL TNMM. ASSESSEE RELIES ON THE DECISIONS OF COORDINATE BENCH IN THE CASE OF DCIT VS. BIRLA SOFT INDIA ITA.NO.4713/DEL/2011 (2) M/S. CABLE & WIRELESS (IND IA) LTD., VS. ADIT ITA.NO.822/MUM/2013 AND (3) LUMMUS TECHNOL OGY HEAT TRANSFER BV VS. DCIT ITA.NO.6227/DEL/2012. 7. LD. D.R. HOWEVER, OBJECTED THAT ASSESSEE HAS NO T TAKEN THIS ISSUE EITHER BEFORE THE TPO OR BEFORE TH E DRP. 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECORD PLACED BEFORE US. ASSESSEE IN ITS T.P. STUDY HAS NOT CONSIDERED INTERNAL TNMM AT ALL. AS PER THE ORDER O F TPO ASSESSEE IN FACT, HAS UNDERTAKEN COMPARABLES EXTERN ALLY BY SELECTING COMPARABLES FROM PROWESS & CAPITAL LINE D ATA BASES AND THEN SELECTED TNMM IS THE MOST APPROPRIATE METH OD BY APPLYING VARIOUS FILTERS. ASSESSEE SELECTED 23 COMP ARABLES WITH WEIGHTED AVERAGE MARGIN 14.84% ON COST. NOWHERE ASS ESSEE HAS SUBMITTED ANY REQUISITE DATA FOR INTERNAL TNMM. MOREOVER, EVEN BEFORE THE DRP ALSO ASSESSEE HAS NOT RAISED TH E ISSUE OF INTERNAL TNMM. JUST BECAUSE THERE ARE CERTAIN CASE LAW IN FAVOUR OF ASSESSEE FOR ACCEPTING INTERNAL TNMM IN P REFERENCE TO EXTERNAL TNMM, WE CANNOT DIRECT THE A.O./TPO TO START THE SEARCH PROCESS AFRESH OR THE T.P. ANALYSIS AFRESH I N THE ABSENCE OF ANY COMPARATIVE DATA PLACED BEFORE TPO/D RP EARLIER. IN VIEW OF THIS, WITHOUT GOING INTO VARIOU S PRINCIPLES LAID DOWN IN THE THREE CASES RELIED UPON BY ASSESSE E, WHICH, IN 7 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. OUR VIEW, DOES NOT HELP ASSESSEE ON THE FACTS OF TH E CASE, WE REFUSE TO ENTERTAIN THIS ADDITIONAL GROUND RAISED B Y ASSESSEE AS GROUND NO.14. SINCE ASSESSEE HAS NOT SUBMITTED ANY SEGMENTAL PROFITS OR THE PROFITS FOR COMPARISON OF INTERNAL TNMM AS CLAIMED BY IT, IN THE ABSENCE OF ANY DATA O R FACTS ON RECORD, THE ISSUE CANNOT BE CONSIDERED JUST BECAUSE THERE ARE CERTAIN LEGAL PRINCIPLES FAVOURBLY DECIDED. THEREFO RE, THIS ISSUE IS DECIDED AGAINST ASSESSEE. 2 . SELECTION OF COMPARABLES. 9. THE NEXT ISSUE FOR CONSIDERATION IS WITH REFERE NCE TO SELECTION OF COMPARABLES. AS BRIEFLY STATED ABOV E, TPO SELECTED 19 COMPANIES AS COMPARABLE COMPANIES OUT O F WHICH, ONE COMPANY VIZ., CELESTIAL BIO LABS WAS DELETED BY DRP. OUT OF THE BALANCE 18 COMPARABLES, ASSESSEE IS OBJECTIN G TO SELECTION OF 8 COMPARABLE COMPANIES WHICH ARE AS UN DER : 1. AVANI CINCOM TECHNOLOGIES LTD., 21.65% FUNCTIONALLY DIFFERENT. 2. BODHTREE CONSULTING LTD., 19.14% 3. E-ZEST SOLUTIONS LTD., 28.95% 4. INFOSYS TECHNOLOGIES LTD., 40.41% 5. KALS INFORMATION SYSTEMS LTD., 30.92% 6. TATA ELXSI LTD., (SEG.) 18.97% 7. THIRDWARE SOLUTIONS LTD., 18.01% 8. WIPRO LTD., (SEG.) 28.38% 9.1. IT WAS THE SUBMISSION THAT THESE COMPANIES AR E FUNCTIONALLY DIFFERENT AND THE OBJECTIONS ARE SUMMA RILY STATED IN THE CHART SUBMITTED. IT WAS THE SUBMISSION BY LD . COUNSEL THAT THESE COMPARABLES WERE ANALYSED BY VARIOUS COO RDINATE BENCHES PARTICULARLY IN THE CASE OF M/S. 3DPLM SOFT WARE SOLUTIONS LTD. VS. DCIT ITA.NO.1303/BANG/2012, AGNI TY INDIA TECHNOLOGIES P. LTD., VS. DCIT ITA.NO.6485/DEL/2012 , 8 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. NETHAWK NETWORKS INDIA P. LTD., VS. ITO ITA.NO.7633 /M/2012 AND IBM INDIA P. LTD., VS. JCIT ITA.NO.1543/BANG/20 12. 10. LD. D.R. HOWEVER, OBJECTED TO THE ABOVE AND FI LED WRITTEN SUBMISSIONS STATING THAT THE FUNCTIONAL DIF FERENCE HIGHLIGHTED BY ASSESSEE ARE LESS EFFECTED AS THE AN ALYSIS DONE IN THE TNMM AND ASSESSEE ITSELF IS NOT FOLLOWING TH E HIGH END AND LOW END DISTINCTION WHILE SELECTING THE COMPARA BLES. SINCE NEITHER THE TAX-PAYER NOR THE TPO HAS GONE INTO THE VERTICALS WITHIN THE SOFTWARE INDUSTRY IN ITS COMPARABLE STUD Y, THE OBJECTIONS OF ASSESSEE CANNOT BE CONSIDERED. LIKEWI SE, THE LD. D.R. OBJECTED FOR EXCLUDING THE ABNORMAL HIGH MARGI N COMPANIES, HIGH TURNOVER COMPANIES AND RELIED ON VA RIOUS CASE LAW IN FAVOUR OF REVENUE. 11. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE OPINION THAT THE ABOVE COMPANIES (EXCEPT BODHTR EE CONSULTING LTD.,) ARE TO BE EXCLUDED AS THESE ARE A NALYSED BY COORDINATE BENCH OF THE BANGALORE TRIBUNAL IN I.T.(T.P.)A.NO.1303/BANG/2012 DATED 28.11.2013 IN T HE CASE OF M/S. 3DPLM SOFTWARE SOLUTIONS LTD., BANGALORE VS . DCIT, CIRCLE(1), BANGALORE WHICH WAS RELIED UPON BY LD. C OUNSEL. BOTHTREE CONSULTING LTD WAS DISCUSSED IN THE CASE O F NET HAWK NET WORKS INDIA P LTD IN ITA NO 7633/MUM/2012 DT 06.11.2013BY ITAT MUMBAI BENCH K AND THIS IS ALSO TO BE EXCLUDED. FOR THE SAKE OF RECORD, THE FINDINGS OF V ARIOUS COMPANIES DECIDED BY THE COORDINATE BENCHES OF TRI BUNAL (SUPRA) ARE AS UNDER : 1. AVANI CINCOM TECHNOLOGIES LTD., 7.6.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM 9 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY I N THE FINAL SET OF COMPARABLES ONLY ON THE BASIS OF INFOR MATION OBTAINED UNDER SECTION 133(6) OF THE ACT. IN THESE CIRCUMSTANCES, IT WAS THE DUTY OF THE TPO TO HAVE NECESSARILY FURNISHED THE INFORMATION SO GATHERED T O THE ASSESSEE AND TAKEN ITS SUBMISSIONS THEREON INTO CONSIDERATION BEFORE DECIDING TO INCLUDE THIS COMPA NY IN ITS FINAL LIST OF COMPARABLES. NON-FURNISHING THE INFORMATION OBTAINED UNDER SECTION 133(6) OF THE AC T TO THE ASSESSEE HAS VITIATED THE SELECTION OF THIS COMPANY AS A COMPARABLE. 7.6.2 WE ALSO FIND SUBSTANTIAL MERIT IN THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THIS COMPANY HAS BEEN SELECTED BY THE TPO AS AN ADDITIONAL COMPARABLE ONLY ON THE GROUND THAT THIS COMPANY WAS SELECTED IN THE EARLIER YEAR. EVEN IN T HE EARLIER YEAR, IT IS SEEN THAT THIS COMPANY WAS NOT SELECTED ON THE BASIS ON ANY SEARCH PROCESS CARRIED OUT BY T HE TPO BUT ONLY ON THE BASIS OF INFORMATION COLLECTED UNDE R SECTION 133(6) OF THE ACT. APART FROM PLACING RELIA NCE ON THE JUDICIAL DECISION CITED ABOVE, INCLUDING THE AS SESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS BROUGHT ON RECORD EVIDENCE THAT THIS COMPANY IS FUNCTIONALLY DIS-SIMILAR AND DIFFERENT FROM THE ASS ESSEE AND HENCE IS NOT COMPARABLE. THEREFORE THE FINDING EXCLUDING IT FROM THE LIST OF COMPARABLES RENDERED IN THE IMMEDIATELY PRECEDING YEAR IS APPLICABLE IN THIS YE AR ALSO. SINCE THE FUNCTIONAL PROFILE AND OTHER PARAMETERS B Y THIS COMPANY HAVE NOT UNDERGONE ANY CHANGE DURING THE YE AR UNDER CONSIDERATION WHICH FACT HAS BEEN DEMONSTRATE D BY THE ASSESSEE, FOLLOWING THE DECISIONS OF THE CO-ORD INATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA.NO.845/BANG/2011 DT.22.2.2013, AND IN THE CASE OF TRIOLOGY E-BUSINES S SOFTWARE INDIA PVT. LTD. (ITA NO.1054/BANG/2011), W E DIRECT THE A.O./TPO TO OMIT THIS COMPANY FROM THE L IST OF COMPARABLES. 2. BOTHTREE CONSULTING LTD . 21. ON THIS COMPARABLE, CASE OF THE ASSESSEE IS TH AT THE COMPANY IS NOT A GOOD COMPARABLE IN VIEW OF THE SOF TWARE PRODUCTS PRODUCED BY THE COMPANY. AS SUCH, NO SEGMENTAL DATA IS ADEQUATELY AVAILABLE TOO. 10 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 22. ON THE OTHER HAND, LD DR FILED A COPY OF THE FINANCIAL STATEMENT AND ARGUED VEHEMENTLY STATING T HAT THIS COMPANY IS NOT ENGAGED IN THE SOFTWARE PRODUCT S. IN THIS REGARD, LD DR RELIED ON THE NOTE NO.3, RELATIN G TO THE RELATING TO THE REVENUE RECOMMENDATION IN SCHEDULE 12, NOTE NO.5 RELATING TO THE SEGMENTAL INFORMATION ETC ., TO MENTION THAT THE COMPANY IS ENGAGED IN THE SOFTWARE DEVELOPMENT ONLY. HOWEVER, THE ASSESSEE ARGUED VEHEMENTLY STATING THAT THIS COMPANY IS ENGAGED IN THE SOFTWARE BASED PRODUCTS. FURTHER, LD COUNSEL MENTIO NED THAT THE SAID COMPANY WAS ALREADY EXAMINED AND WAS HELD AS PRODUCT BASED COMPANY BY THE TPO IN THE TP STUDY OF OTHER CASE AND THE TPO CANNOT TAKE DIFFERE NT STAND IN THIS CASE. IN THIS REGARD, WE HAVE PERUSED THE PARA 29 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. WILLS PROCESSING SERVICES (I) P LTD (SUPRA) WHEREIN IT WAS MENTIONED THAT THE TPO DESCRIBED THIS COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE PRODUCTS, NOT T HE SOFTWARE DEVELOPMENT SERVICES. RELEVANT PORTIONS FR OM THE SAID PARA 29 OF THE ORDER OF THE TRIBUNAL IS REPROD UCED HERE UNDER : 29.1 THE ID SR COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THIS COMPANY IS ENGAGED IN THE SOFTWARE PRODUC TS. HE HAS REFERRED THE TPO ORDER AND SUBMITTED THAT IN THE PROFILE OF THE COMPARABLES SELECTED BY THE TPO ITSE LF HAS MENTIONED THE BUSINESS OF THE ASSESSEE IS IN SOFTWA RE PRODUCTS . THE ID AR HAS REFERRED THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE TPO AT PAGE 286 OF THE P APER BOOK AND SUBMITTED THAT THE ASSESSEE BROUGHT THIS F ACT THAT THIS COMPANY IS ENGAGED IN PROVIDING OPEN AND END TO END WEB SOLUTIONS, SOFTWARE CONSULTANCY, DESIGN AND DEVELOPMENT OF SOFTWARE, USING THE LATEST TECHNOLOG IES. FURTHER, THE COMPANY HAS IDENTIFIED ONLY ONE SEGMEN T I.E SOFTWARE DEVELOPMENT. THEREFORE, THE ID AR HAS SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH THE ASSESSEE AND CONSEQUENTLY SHOULD BE EXCLUDED FROM THE COMPARABLES. 29.2 ON THE OTHER HAND, THE ID DR HAS FILED THE INFORMATION COLLECTED U/S 133(6) OF THE I T ACT AND SUBMITTED THAT AS PER THIS INFORMATION, THIS COMPAN Y HAS REVENUE FROM ITES ACTIVITY TO THE EXTENT OF RS. 2,94,85,528/-. THEREFORE, THIS COMPANY IS A GOOD COMPARABLE HAVING FUNCTIONAL SIMILARITY. 11 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 29.3 ... 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE DETAILS FILED BY THE ID DR BEFORE US HAS BEEN OBTAINED BY THE TPO AT HYDERABAD AND NOT BY THE TPO OF THE ASSESSEE IN THE PRESENT CASE. IT IS STATED IN THE LETTER DATED 5.2. 2010 WRITTEN BY THE CHARTERED ACCOUNTANT OF BODHTREE CONSULTING LTD TO THE TPO HYDERABAD THAT THE COMPANY IS PROVIDING DATA CLEANING SERVICES TO CLIENTS FOR WHOM IT HAD DEVELOPED THE SOFTWARE APPLICATION. 23. CONSIDERING THE ABOVE, WE ARE OF THE OPINION TH AT BODHTREE CONSULTING LIMITED IS NOT ENGAGED IN THE SOFTWARE DEVELOPMENT SERVICES AND THERE IS NO SEGME NTAL DATA COMPARABLE. THEREFORE, THE FAR ANALYSIS GOES AGAINST THE TPO/AO. ACCORDINGLY, WE DISMISS THE ARGUMENT OF THE LD DR IN THIS REGARD. EX CONSEQUENT I THE AO/TPO IS DIRECTED TO EXCLUDE THE SAME FROM THE LIS T OF FINAL COMPARABLES FOR WORKING OUT THE ARITHMETIC ME AN. 3. E-ZEST SOLUTIONS LTD. 14.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RE CORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDE D THIS COMPANY IN THE LIST OF COMPARABALES ONLY ON THE BAS IS OF THE STATEMENT MADE BY THE COMPANY IN ITS REPLY TO T HE 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 DEVELOP MENT SERVICES PERFORMED BY THE ASSESSEE. FROM THE DETAIL S ON RECORD, WE FIND THAT WHILE THE ASSESSEE IS INTO SOF TWARE DEVELOPMENT SERVICES, THIS COMPANY I.E. E-ZEST SOLU TIONS LTD., IS RENDERING PRODUCT DEVELOPMENT SERVICES AND HIGH END TECHNICAL SERVICES WHICH COME UNDER THE CATEGOR Y OF KPO SERVICES. IT HAS BEEN HELD BY THE CO-ORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF CAPITAL I-Q INFORMATIO N SYSTEMS (INDIA) (P) LTD. SUPRA) THAT KPO SERVICES A RE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND ARE THEREFORE NOT COMPARABLE. FOLLOWING THE AFORESAID D ECISION OF THE CO-ORDINATE BENCH OF THE HYDERABAD TRIBUNAL IN THE AFORESAID CASE, WE HOLD THAT THIS COMPANY, I.E. E-Z EST SOLUTIONS LTD. BE OMITTED FROM THE SET OF COMPARABL ES FOR 12 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. THE PERIOD UNDER CONSIDERATION IN THE CASE ON HAND. THE A.O. / TPO IS ACCORDINGLY DIRECTED. 4. INFOSYS TECHNOLOGIES LTD. 11.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RE CORD. WE FIND THAT THE ASSESSEE HAS BROUGHT ON RECORD SUF FICIENT EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTION ALLY DIS-SIMILAR AND DIFFERENT FROM THE ASSESSEE AND HEN CE IS NOT COMPARABLE AND THE FINDING RENDERED IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA) FOR ASSESSMENT YEAR 2007-08 IS APPLICABLE TO THIS YEAR ALSO. WE ARE INCLINED TO CONCUR WITH THE ARGUMENT PUT FOR TH BY THE ASSESSEE THAT INFOSYS TECHNOLOGIES LTD IS NOT FUNCTIONALLY COMPARABLE SINCE IT OWNS SIGNIFICANT INTANGIBLE AND HAS HUGE REVENUES FROM SOFTWARE PROD UCTS. IT IS ALSO SEEN THAT THE BREAK UP OF REVENUE FROM S OFTWARE SERVICES AND SOFTWARE PRODUCTS IS NOT AVAILABLE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THIS COMPANY OUGHT TO BE OMITTED FROM THE SET OF COMPARABLE COMPANIES. IT IS ORDERED ACCORDINGLY. 5. KALS INFORMATION SYSTEMS LTD., : 10.4. WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIN D FROM THE RECORD THAT THE TPO HAS DRAWN CONCLUSIONS AS TO THE COMPARABILITY OF THIS COMPANY TO THE ASSESSEE BASED ON INFORMATION OBTAINED U/S.133(6) OF THE ACT. THIS INFORMATION WHICH WAS NOT IN THE PUBLIC DOMAIN OUGH T NOT TO HAVE BEEN USED BY THE TPO, MORE SO WHEN THE SAME IS CONTRARY TO THE ANNUAL REPORT OF THE COMPANY, AS PO INTED OUT BY THE LEARNED AUTHORISED REPRESENTATIVE. WE AL SO FIND THAT THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 (SUPRA) AND IN THE CASE OF TRIOLOGY E-BUSINESS SOFT WARE INDIA PVT. LTD. (SUPRA) HAVE HELD THAT THIS COMPANY WAS DEVELOPING SOFTWARE PRODUCTS AND WAS NOT PURELY OR MAINLY A SOFTWARE SERVICE PROVIDER. APART FROM RELY ING OF THE ABOVE CITED DECISIONS OF CO-ORDINATE BENCHES OF THE TRIBUNAL (SUPRA), THE ASSESSEE HAS ALSO BROUGHT ON RECORD EVIDENCE FROM VARIOUS PORTIONS OF THE COMPANYS ANN UAL REPORT TO ESTABLISH THAT THIS COMPANY IS FUNCTIONAL LY DIS- SIMILAR AND DIFFERENT FORM THE ASSESSEE AND THAT SI NCE THE 13 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. FINDINGS RENDERED IN THE DECISIONS OF THE CO-ORDINA TE BENCHES OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 (CITED SUPRA) ARE APPLICABLE FOR THIS YEAR I.E. ASS ESSMENT YEAR 2008-09 ALSO, THIS COMPANY OUGHT TO BE EXCLUDE D FROM THE LIST OF COMPARABLES. IN THIS VIEW OF THE M ATTER, WE HOLD THAT THIS COMPANY I.E. KALS INFORMATION SYSTEM S LTD., IS TO BE OMITTED FORM THE LIST OF COMPARABLE COMPANIES. IT IS ORDERED ACCORDINGLY. 6. TATA ELEXSI LTD. 13.4.1. WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED 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 DETAI LS IN THE ANNUAL REPORT SHOW THAT THE SEGMENT SOFTWARE DEVELOPMENT SERVICES RELATES TO DESIGN SERVICES AN D ARE NOT SIMILAR TO SOFTWARE DEVELOPMENT SERVICES PERFOR MED BY THE ASSESSEE. 13.4.2. THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. V ACIT (ITA NO.7821/MUM/2011) HAS HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEVELOPMENT SERVICE PROVIDER AND THEREFO RE IT IS NOT FUNCTIONALLY COMPARABLE. IN THIS CONTEXT THE RELEVANT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED B ELOW :- . TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY DIFFERENT FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. 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 AS FIT FOR COMPARABILITY ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR THE 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 PERTAIN ING TO 14 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. TATA ELXSI 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 ORDER ED ACCORDINGLY. 7. THIRDWARE SOLUTIONS LTD 15.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RE CORD. IT IS SEEN FROM THE MATERIAL ON RECORD THAT THE COM PANY IS ENGAGED IN PRODUCT DEVELOPMENT AND EARNS REVENUE FR OM SALE OF LICENSES AND SUBSCRIPTION. HOWEVER, THE SEG MENTAL PROFIT AND LOSS ACCOUNTS FOR SOFTWARE DEVELOPMENT SERVICES AND PRODUCT DEVELOPMENT ARE NOT GIVEN SEPARATELY. FURTHER, AS POINTED OUT BY THE LEARNED AUTHORISED REPRESENTATIVE, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF E-GAIN COMMUNICATIONS PVT. LTD. (SUPRA) HAS DIRECTED THAT SINCE THE INCOME OF THIS COMPANY INCLUDES INCOME FROM SALE OF LICENSES, IT OUGHT TO BE REJECTED AS A COMPARABLE FOR SOFTWARE DEVELOPMENT SERVICES. IN THE CASE ON HAND, THE ASSESSEE IS REN DERING SOFTWARE DEVELOPMENT SERVICES. IN THIS FACTUAL VIEW OF THE MATTER AND FOLLOWING THE AFORE CITED DECISION OF TH E PUNE TRIBUNAL (SUPRA), WE DIRECT THAT THIS COMPANY BE OM ITTED FROM THE LIST OF COMPARABLES FOR THE PERIOD UNDER CONSIDERATION IN THE CASE ON HAND. 8. WIPRO LTD., 12.4.1. WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. WE F IND MERIT IN THE CONTENTIONS OF THE ASSESSEE FOR EXCLUS ION OF THIS COMPANY FROM THE SET OF COMPARABLES. IT IS SEE N THAT THIS COMPANY IS ENGAGED BOTH IN SOFTWARE DEVELOPMEN T AND PRODUCT DEVELOPMENT SERVICES. THERE IS NO INFOR MATION ON THE SEGMENTAL BIFURCATION OF REVENUE FROM SALE O F PRODUCT AND SOFTWARE SERVICES. THE TPO APPEARS TO H AVE ADOPTED THIS COMPANY AS A COMPARABLE WITHOUT DEMONSTRATING HOW THE COMPANY SATISFIES THE SOFTWAR E DEVELOPMENT SALES 75% OF THE TOTAL REVENUE FILTER A DOPTED BY HIM. ANOTHER MAJOR FLAW IN THE COMPARABILITY ANA LYSIS CARRIED OUT BY THE TPO IS THAT HE ADOPTED COMPARISO N OF THE CONSOLIDATED FINANCIAL STATEMENTS OF WIPRO WITH THE STAND ALONE FINANCIALS OF THE ASSESSEE; WHICH IS NO T AN APPROPRIATE COMPARISON. 15 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 12.4.2 WE ALSO FIND THAT THIS COMPANY OWNS INTELLECTUAL PROPERTY IN THE FORM OF REGISTERED PAT ENTS AND SEVERAL PENDING APPLICATIONS FOR GRANT OF PATENTS. IN THIS REGARD, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF 24/7 CUSTOMER.COM PVT. LTD. (ITA NO.227/BANG/ 20 10) HAS HELD THAT A COMPANY OWNING INTANGIBLES CANNOT B E COMPARED TO A LOW RISK CAPTIVE SERVICE PROVIDER WHO DOES NOT OWN ANY SUCH INTANGIBLE AND HENCE DOES NOT HAVE AN ADDITIONAL ADVANTAGE IN THE MARKET. AS THE ASSESSEE IN THE CASE ON HAND DOES NOT OWN ANY INTANGIBLES, FOLL OWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I.E. 24/7 CUSTOMER.COM PVT. LTD. (SUPRA), WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE. WE, THEREFORE, DIRECT T HE ASSESSING OFFICER/TPO TO OMIT THIS COMPANY FROM THE SET OF COMPARABLE COMPANIES IN THE CASE ON HAND FOR THE YEAR UNDER CONSIDERATION. 12. RESPECTFULLY FOLLOWING THE DECISIONS OF COORDI NATE BENCHES OF THE TRIBUNAL REFERRED ABOVE, AND OTHER C ASES RELIED ON, WE HOLD THAT THE AFORESAID 8 COMPANIES HAVE TO BE EXCLUDED FROM THE LIST OF COMPARABLES CHOSEN BY TPO . 3. COMPARABLES SELECTED BY TPO 13. THIS ISSUE RAISED IN GROUND NO.16. ASSESSEE WA NTS FOLLOWING FOUR COMPANIES TO BE INCLUDED IN THE SELE CTION OF COMPARABLES MADE BY TPO. 1.INDIUM SOFTWARE INDIA LTD. 2.LARSEN & TOUBRO INFOTECH LTD 3. V M F SOFTTECH LTD 4. SIP TECHNOLOGIES LTD THESE COMPARABLES ARE CONSIDERED AND DECIDED BY COO RDINATE BENCH IN THE CASE OF CURAM SOFTWARE INTERNATIONAL P . LTD., ITA.NO.1280/BANG/2012 DATED 31.07.2013 AND SENT TO THE 16 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. TPO FOR FRESH EXAMINATION. HOWEVER, WE FIND THAT TH ERE IS NO NEED TO RESTORE THE MATTER TO TPO AS TPO HAS GIVEN DETAILED REASONS WHILE REJECTING THE SAID COMPARABLES, WHICH WERE BROUGHT TO OUR NOTICE BY LEARNED D.R. 13.1. CONSIDERING THE OBJECTIONS RAISED BY ASSESSE E AND TPO IN ITS STUDY, WE AGREE WITH THE FINDINGS OF TPO THAT THESE COMPANIES ARE NOT COMPARABLE AND THEREFORE, THEY NE ED NOT BE CONSIDERED FOR COMPARABILITY ANALYSIS AFRESH NOW. T HEREFORE, ADDITIONAL GROUND NO.16 RAISED BY ASSESSEE ON THIS ISSUE IS REJECTED. 4. WORKING CAPITAL ADJUSTMENT : 14. IT WAS THE OBJECTION OF ASSESSEE THAT TPO HAS ARRIVED AT NEGATIVE WORKING CAPITAL ADJUSTMENT WHER EIN ASSESSEE DOES NOT HAVE ANY RISK AND IS A CAPTIVE SE RVICES PROVIDER. THEREFORE, FOLLOWING THE DECISION OF COOR DINATE BENCH IN THE CASE OF CORDYS SOFTWARE INDIA P. LTD., IN ITA.NO.1972/H/2011 DATED 15.03.2013 FOR A.Y. 2007-0 8, ASSESSEE REQUESTS FOR POSITIVE WORKING CAPITAL ADJU STMENTS. AS FAR AS THE WORKING CAPITAL ADJUSTMENT IS CONCERNED, THESE ARE ACADEMIC IN NATURE AND REQUIRE TO BE ANALYSED ON TH E BASIS OF ASSESSEES WORK PROFILE AND COMPARABLE COMPANIES WO RKING RESULTS. NO CLEAR CUT DIRECTIONS CAN BE GIVEN IN TH IS AS IT REQUIRES EXAMINATION OF VARIOUS DOCUMENTS. IN FACT, DRP ITSELF HAS DIRECTED THE TPO TO RE-WORKOUT THE WORKING CAPI TAL ADJUSTMENT AFTER EXCLUDING CERTAIN COMPARABLE COMPA NIES. WE ALSO DIRECTED THE TPO TO EXCLUDE CERTAIN COMPARABLE S ABOVE. CONSEQUENTLY WE DIRECT THE A.O. / TPO TO RE-WORKOUT THE WORKING CAPITAL ADJUSTMENT AFTER GIVING DUE OPPORTU NITY TO 17 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. ASSESSEE, KEEPING IN MIND THE PRINCIPLES LAID DOWN ON THIS ISSUE. 14.1. WITH REFERENCE TO OBJECTION OF ASSESSEE THAT IT IS A CAPTIVE SERVICE PROVIDER FULLY FUNDED BY A.E. ASSES SEE ALSO UNDERTAKES WORKS FOR THIRD PARTIES. IT WAS ONE OF T HE OBJECTION THAT INTERNAL TNMM IS AVAILABLE AS ASSESSEE UNDERTA KES WITH THIRD PARTIES ALSO. THIS ASPECT NEED TO BE KEPT IN MIND BY A.O. WHILE CONSIDERING THE WORKING CAPITAL RISK IN ASSES SEES FUNCTIONAL ANALYSIS. WITH THESE DIRECTIONS, THE GRO UND IS RESTORED TO THE FILE OF TPO/A.O. TO DO ACCORDINGLY IN THE CONSEQUENTIAL ORDER. 5. ADJUSTMENT NOT TO INCLUDE NON-A.E. TRANSACTIONS 15. A.O. WHILE MAKING THE T.P. ADJUSTMENT HAS CONSIDERED THE ENTIRE TURNOVER INCLUDING THE NON-A. E. TRANSACTIONS. ASSESSEE OBJECTED BEFORE DRP AND DRP CONSIDERED VIDE PARA 57 AS UNDER : 57. THE ASSESSEE SUBMITTED THAT THE TPO ERRED IN CONSIDERING ENTIRE COST BASE OF THE COMPANY WITHOUT DIFFERENTIATING BETWEEN COST INCURRED IN A.ES TRANS ACTIONS AND NON-A.E. TRANSACTIONS AND IGNORING THE A.E. AND NON- A.E. SEGMENTAL RESULTS SUBMITTED BY THE ASSESSEE IN THIS REGARD FOR THE PURPOSE OF MAKING TRANSFER PRICING ADJUSTMENT. THE ASSESSEE ALSO INFORMED THAT THIS CONTENTION HAS BEEN UPHELD BY HONBLE DRP IN THE CA SE OF THE ASSESSEE FOR A.Y. 2006-07. EVEN FOR THE A.Y. 20 05-06, IN RESPECT OF THE ASSESSEE ITSELF, THE TPO HIMSELF HAD RESTRICTED THE TRANSFER PRICING ADJUSTMENT TO THE O PERATING COST BASE PERTAINING TO A.E. TRANSACTIONS ONLY. THE PANEL AGREES WITH THE ASSESSEE AND DIRECT THAT THE REIMBURSEMENT OF RS.12,56,96,824/- BE NOT TAKEN FOR ALP CALCULATION. 18 ITA.NO.1862/HYD/2012 M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., HYDERABAD. 16. LD. COUNSEL SUBMITTED THAT DRP GOT ITS FINDING S MIXED-UP WITH REFERENCE TO ANALYSIS OF NON-A.E. TRA NSACTION TO THAT OF REIMBURSEMENTS. WHILE DIRECTION OF REIMBURS EMENT IS CORRECT, THE DIRECTION WITH REFERENCE TO ADJUSTMENT OF NON-A.E. TRANSACTIONS HAS NOT BEEN GIVEN. CONSIDERING THE OB SERVATIONS OF DRP AND ALSO VARIOUS CASE LAW ON THE ISSUE RELIE D UPON BY ASSESSEE IN M/S. SAVEN TECHNOLOGIES LTD., VS. ACIT ITA.NO.1456/HYD/2010, WE DIRECT THE A.O. TO EXCLUDE THE T.P. ADJUSTMENT ON THE NON-A.E. TRANSACTIONS AND RESTRIC T THE ADJUSTMENT ONLY TO THE A.E. TRANSACTIONS, IN CASE A LP DETERMINED AFTER COMPARABILITY ANALYSIS REQUIRE ANY ADJUSTMENT UNDER THE PROVISIONS OF THE ACT. WITH TH ESE DIRECTIONS, GROUND IS CONSIDERED AS ALLOWED. 17. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02.01.2015. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 02 ND JANUARY, 2015 VBP/- COPY TO 1. M/S. NTT DATA INDIA ENTERPRISE APPLICATION SERVICES P. LTD., PLOT NO.18, 5 TH FLOOR, ILABS CENTRE, SOFTWARE UNITS LAYOUT, MADHAPUR, HYDERABAD 500 081. 2. DCIT, CIRCLE 16(1), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 3. DISPUTES RESOLUTION PANEL, 2 ND FLOOR, INCOME TAX TOWERS, 10-2-3, A.C. GUARDS, HYDERABAD 500 004. 4. DIRECTOR OF INCOME TAX (INTL. TAXATION & T.P.), INC OME TAX TOWERS, 10-2-3, A.C. GUARDS, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD.