Quality Engineering and Software Technologies Private Limited , Bangalore V. Assistant Commissioner of Income Tax Circle-5(1)(1), Bangalore

ITA 189/BANG/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1362 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Business income; Transfer pricing; Opportunity of being heard; International transaction; Rule 8D; Set aside
• Section: 92C; 143(3); 142(1); 14A; 133(6); 144C; 143(2); 48; 13; 22; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.189/BANG/2017 ASSESSMENT YEAR : 2012-13 M/S QUEST GLOBAL ENGINEERING SERVICES PVT.LTD., (QUALITY ENGINEERING AND SOFTWARE TECHNOLOGIES PVT.LTD., MERGED WITH QUEST GLOBAL ENGINEERING SERVICES PVT.LTD., AND NOW KNOWN AS LATTER) PRIMROSE-7B,2 ND FLOOR EMBASSY TECH VILLAGE, SARJAPURA-MARATHAHLLI RING ROAD,DEVARABEESANAHALLI,VARTHUR HOBLI, BANGALORE-560095. PAN AAACQ0369B VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -5(1)(1), BANGALORE. APPELLANT RESPONDENT A SSESSEE BY : S HRI K.R VASUDEVAN, ADVOCATE RE VENUE BY : S HRI MUZAFFAR HUSSAIN, CIT (DR) DATE OF HEARING : 29 - 0 3 - 202 1 DATE OF PRONOUNCEMENT : 24 - 06 - 202 1 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PAGE 2 OF 29 IT(TP)A NO.189/BANG/2017 THE PRESENT APPEAL HAS BEEN FILED BY ASSESS EE AGAINST ORDER DATED 24/11/2016 PASSED BY THE LD.ACIT CIRCLE 5(1)( 1), BANGALORE UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT ON FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER ('LEARNED AO') A ND THE LEARNED TRANSFER PRICING OFFICER ('LEARNED TPO') GROSSLY ERRED IN MA KING A PROPOSED TRANSFER PRICING ADDITION OF INR 2,59,80,979/- AND THE HONOU RABLE DISPUTE RESOLUTION PANEL ('HON'BLE DRP') FURTHER ERRED IN I NCREASING THE ADJUSTMENT AMOUNT BY [NR 1,33,09,249/- AND ADJUSTING THE TRANS FER PRICE BY INR 3,92,90,228/- OF THE APPELLANT'S INTERNATIONAL TRAN SACTIONS WITH ITS ASSOCIATED ENTERPRISES ('AES') U/S 92CA OF THE INCO ME-TAX ACT, 1961 ('THE ACT'). 2. THE LEARNED AO / LEARNED TPO / HON'BLE DRP ER RED IN REJECTING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE AP PELLANT BY INVOKING PROVISIONS OF SUB-SECTION (3) OF 92C OF THE ACT WIT HOUT GIVING ANY COGENT REASON FOR THE SAME. 3. THE LEARNED AO / LEARNED TPO / HON'BLE DRP ERRE D IN REJECTING COMPARABILITY ANALYSIS UNDERTAKEN IN THE TRANSFER P RICING DOCUMENTATION AND IN CONDUCTING A FRESH COMPARABILITY ANALYSIS BY INTRODUCING VARIOUS FILTERS IN DETERMINING THE ARM'S LENGTH PRICE (ALP' ). 4. THE LEARNED AO / LEARNED TPO / HON'BLE DRP ER RED IN NOT CONSIDERING THE PREVIOUS TWO YEARS FINANCIAL DATA OF THE COMPARABLE COMPANIES WHILE DETERMINING THE ALP AND HAD SELECTED SINGLE YEAR DA TA OF THE COMPARABLE COMPANIES FOR THE YEAR ENDED MARCH 31, 2012 WITHOUT CONSIDERING THE FACT THAT THE CURRENT YEAR DATA WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF PREPARATION OF THE TRANSFER PRICING DOCUMEN TATION. 5. THE LEARNED AO / LEARNED TPO / HONBLE DRP ER RED IN APPLYING DIFFERENT FINANCIAL YEAR ENDING FILTER WHILE SELECTING THE CO MPARABLE COMPANIES, LEADING TO A NARROWER COMPARABLE SET AND HAD ALSO N OT CONSIDERED THE FACT THAT THE RELEVANT DATA FOR THE CONCERNED FINANCIAL YEAR COULD BE DEDUCED FROM THE CORRESPONDING FINANCIALS. 6. THE LEARNED AO / LEARNED TPO / HON'BLE DRP E RRED IN APPLYING EXPORT EARNING FILTER OF 75% OF THE TOTAL SALES, LEADING T O A NARROWER COMPARABLE SET. 7. THE LEARNED AO / LEARNED TPO / HON'BLE DRP ER RED IN APPLYING THE THRESHOLD LIMIT OF 25% IN RESPECT OF EMPLOYEE COST ON SALES OF THE COMPARABLE COMPANIES LEADING TO A NARROWER COMPARAB LE SET. 8. THE LEARNED AO / LEARNED TPO I HON'BLE DRP ERR ED IN NOT APPLYING THE UPPER LIMIT ON TURNOVER WHILE SELECTING THE COMPARA BLE COMPANIES. PAGE 3 OF 29 IT(TP)A NO.189/BANG/2017 9. THE LEARNED AO/LEARNED TPO/HONBLE DRP ERRED IN NOT APPRECIATING THE FACT THAT SINCE THE PRINCIPLE OF APPLYING LOWER LIM IT ON TURNOVER HAS BEEN MUTUALLY ACCEPTED BY THE APPELLANT AS WELL AS THE L EARNED TPO WHILE CARRYING OUT THE COMPARABILITY ANALYSIS, THE PRINCI PLE ON UPPER LIMIT ON TURNOVER SHOULD ALSO HAVE BEEN APPLIED. 10. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN SELECTING COMPANIES HAVING HIGHER MARGINS AS COMPARABLE TO THE APPELLAN T DISREGARDING THE FACT THAT THE APPELLANT HAD OPERATED IN A RISK-MITI GATED ENVIRONMENT WITH REGARD TO THE TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES. 11. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN COLLATING THE INFORMATION THAT ARE NOT PUBLICLY AVAILABLE USING POWERS UNDER SECTION 133(6) OF THE ACT. 12. THE LEARNED AO/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN NOT REJECTING THE FOLLOWING COMPANIES FROM THE LIST OF COMPARABLE COMPANIES ON ACCOUNT OF FUNCTIONAL DISSIMILARITY: UNIVERSAL PRINT SYSTEMS LTD. INFOSYS BPO LTD. TCSE-SERVE LTD. BNR UDYOG LTD. EXCEL INFOWAYS LTD. ACROPETAL TECHNOLOGIES LIMITED . 13. THE LEARNED AO/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN REJECTING COMPANIES THAT OUGHT TO HAVE BEEN INCLUDE D AS COMPARABLE COMPANIES ON ACCOUNT OF FUNCTIONAL SIMIL ARITY: ACCENTIA TECHNOLOGIES LTD. INFORMED TECHNOLOGIES LTD. JINDAL INTELLICOM LTD. TECH PROCESS LTD. CAMEO CORPORATE SERVICES LTD. CALIBER POINT BUSINESS SOLUTIONS LTD . FIRST SOURCE SOLUTIONS LTD. 14. THE LEARNED AO/LEARNED TPO/HONBIE DRP HAS ERRE D IN THE COMPUTATION OF MARK-UP OF E4E, HEALTHCARE SERVICES PVT. LTD. 15. THE LEARNED AU/LEARNED TPO/HONBLE DRP HAS ERR ED IN MAKING THE FOLLOWING ERRORS IN THE COMPUTATION OF WORKING CAPI TAL ADJUSTMENT: A. BY NOT CONSIDERING THE FACT THAT THE APPELLANT D OES NOT HAVE ANY WORKING CAPITAL RISK, THEREFORE, NO NEGATIVE WORKIN G CAPITAL ADJUSTMENT SHOULD BE ALLOWED. B. IN CONSIDERING THE WRONG SBI PLR WHILE COMPUTI NG THE WORKING CAPITAL ADJUSTMENT 16. THE LEARNED AO /LEARNED TPO/HONBLE DRP FAILED TO APPRECIATE THAT WORKING CAPITAL LOAN WAS TAKEN BY THE APPELLANT TO ENSURE ADEQUATE CASH IN THE BUSINESS AND THE INTEREST ON SUCH LOAN HAS B EEN INCLUDED IN THE COST PLUS MARKUP COMPUTATION AND APPROPRIATELY CHARGED T O THE SERVICE PAGE 4 OF 29 IT(TP)A NO.189/BANG/2017 RECIPIENTS. HENCE, ADVERSE WORKING CAPITAL ADJUSTME NT WILL LEAD TO DUPLICATION OF HARDSHIP TO THE APPELLANT. 17. THE LEARNED AO/LEARNED TPO/HONBLE DRP ERRED IN NOT ALLOWING APPROPRIATE ADJUSTMENT TOWARDS TO THE RISK DIFFEREN TIAL BETWEEN THE APPELLANT VIS--VIS INDEPENDENT COMPARABLE COMPANIE S. CORPORATE TAX 18. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS I N MAKING A DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE INCOME-TAX RULES, 1962 (THE 'RULES') TO THE EXTENT OF INR 3,46,454 WH ILE COMPUTING THE BUSINESS INCOME OF THE APPELLANT. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF COMPUTER AIDED ENGINEERING ANALYSIS. FOR THE YEAR U NDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME O N 30/11/2012 DECLARING TOTAL INCOME OF RS.46,77,37,065/-. ROI WA S SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) ALONG WITH 142(1) WAS ISSUED TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICE S, REPRESENTATIVE OF ASSESSEE APPEARED BEFORE THE LD.AO AND FILED REQ UISITE DETAILS AS CALLED FOR. 3. DURING THE ASSESSMENT PROCEEDINGS, THE LD.AO OBS ERVED THAT, ASSESSEE HAD INTERNATIONAL TRANSACTION WITH ITS ASS OCIATED ENTERPRISE EXCEEDING RS. 15 CRORES, AND ACCORDINGLY REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER TO DETERMINED THE ARMS LENGTH PRICE OF THE TRANSACTION. 4. ON RECEIPT OF THE REFERENCE, THE LD.TPO CALLED U PON ASSESSEE TO FILE ECONOMIC DETAILS OF INTERNATIONAL TRANSACTION OBSERVED THAT ASSESSEE DURING THE YEAR HAD FOLLOWING INTERNATIONA L TRANSACTION WITH ITS AE: 5. THE DETAILS OF THE MARGIN EARNED BY SEGMENTS ARE AS UNDER: 6. F ROM THE DETAILS FILED, THE LD. ENGINEERING CONSULTING SERVICES COMPUTED BY ASSESSE E WAS 37.78% WITH THE PLI OF THE TRANSACTION AS OP/OC. L PAGE 5 OF 29 IT(TP)A NO.189 /BANG/20 THE DETAILS OF THE MARGIN EARNED BY ASSESSEE UNDER BOTH THE SEGMENTS ARE AS UNDER: ROM THE DETAILS FILED, THE LD. TPO OBSERVED THAT THE MARGIN OF ENGINEERING CONSULTING SERVICES COMPUTED BY ASSESSE E WAS 37.78% WITH THE PLI OF THE TRANSACTION AS OP/OC. L D. TPO FOUND 7 /BANG/20 17 ASSESSEE UNDER BOTH THE THE MARGIN OF ENGINEERING CONSULTING SERVICES COMPUTED BY ASSESSE E WAS 37.78% TPO FOUND 7 COMPARABLES WITH T HE MARGIN OF 15.55% MARGIN TO BE AT ARMS LENGTH. 7. IN RESPECT OF BUSINESS SUPPORT SERVICES WHICH WAS C ATEGORISED AS I T ENABLED SERVICE SEGMENT IN THE TP STUDY, ASS ESSEE SELECTED FOLLOWING 9 COMPARABLES WITH AN ARITHMETIC MEAN OF 8. DISSATISFIED WITH THE COMPARABL LD. TPO CARRIED OUT FRESH SEARCH BASED ON THE FILTERS A PPLIED SELECTED FOLLOWING 10 COMPARABLES WITH AN ARITHMETIC MEAN OF 28.11%: PAGE 6 OF 29 IT(TP)A NO.189 /BANG/20 HE MARGIN OF 15.55% , AND THEREFORE HELD ITS MARGIN TO BE AT ARMS LENGTH. IN RESPECT OF BUSINESS SUPPORT SERVICES WHICH WAS C ATEGORISED AS I T ENABLED SERVICE SEGMENT IN THE TP STUDY, ASS ESSEE SELECTED FOLLOWING 9 COMPARABLES WITH AN ARITHMETIC MEAN OF 12.50%: DISSATISFIED WITH THE COMPARABL ES SELECTED BY ASSESSEE, TPO CARRIED OUT FRESH SEARCH BASED ON THE FILTERS A PPLIED SELECTED FOLLOWING 10 COMPARABLES WITH AN ARITHMETIC MEAN OF 28.11%: /BANG/20 17 AND THEREFORE HELD ITS IN RESPECT OF BUSINESS SUPPORT SERVICES WHICH WAS C ATEGORISED AS I T ENABLED SERVICE SEGMENT IN THE TP STUDY, ASS ESSEE SELECTED 12.50%: ES SELECTED BY ASSESSEE, TPO CARRIED OUT FRESH SEARCH BASED ON THE FILTERS A PPLIED SELECTED FOLLOWING 10 COMPARABLES WITH AN ARITHMETIC MEAN OF 28.11%: 9. THE LD.TPO HOWEVER RETAINED 3 COMPARABLES CONSIDERE D BY ASSESSEE. HE THUS COMPUTED ARMS LENGTH PRICE AT RS. BEING THE SHORTFALL. THE LD.TPO ALSO COMPUTED NEGAT IVE WORKING CAPITAL ADJUSTMENT AT 5.26%. 10. THE LD.AO ON RECEIPT OF THE TRANSFER PR DRAFT ASSESSMENT ORDER ON 22/03/2016 BY MAKING OF F URTHER DISALLOWANCE OF RS.3,46,454/ (2)(III) OF THE ACT. PAGE 7 OF 29 IT(TP)A NO.189 /BANG/20 THE LD.TPO HOWEVER RETAINED 3 COMPARABLES CONSIDERE D BY ASSESSEE. HE THUS COMPUTED ARMS LENGTH PRICE AT RS. 2 5,980,979/ BEING THE SHORTFALL. THE LD.TPO ALSO COMPUTED NEGAT IVE WORKING CAPITAL ADJUSTMENT AT 5.26%. THE LD.AO ON RECEIPT OF THE TRANSFER PR ICING ORDER PASSED THE DRAFT ASSESSMENT ORDER ON 22/03/2016 BY MAKING OF F URTHER DISALLOWANCE OF RS.3,46,454/ - UNDER SECTION 14A READ WITH RULE 8D /BANG/20 17 THE LD.TPO HOWEVER RETAINED 3 COMPARABLES CONSIDERE D BY 5,980,979/ - BEING THE SHORTFALL. THE LD.TPO ALSO COMPUTED NEGAT IVE WORKING ICING ORDER PASSED THE DRAFT ASSESSMENT ORDER ON 22/03/2016 BY MAKING OF F URTHER UNDER SECTION 14A READ WITH RULE 8D PAGE 8 OF 29 IT(TP)A NO.189/BANG/2017 11. AGGRIEVED BY THE DRAFT ASSESSMENT ORDER, ASSESS EE FILED OBJECTIONS BEFORE THE DRP. 12. THE DRP WHILE PASSING THE RESOLUTION REJECTED C ONTENTIONS OF ASSESSEE TO EXCLUDE INFOSYS BPO LTD., TCS E-SERVE L TD. BNR UDYOG LTD. (SEG) (MEDICAL TRANSCRIPTION), EXCEL INFO FACE LTD. (SEG). HOWEVER THE DRP SUO MOTO REJECTED ACCENTIA TECHNOLOGIES LTD., INFORMED TECHNOLOGIES LTD. AND JINDAL INTELLICOM LT D. 13. ON RECEIPT OF THE DRP ORDER, LD.AO PASSED THE F INAL ASSESSMENT ORDER BY COMPUTING TRANSFER PRICING ADDI TION IN THE HANDS OF ASSESSEE AT RS.3,92,90,228/-. 14. AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE IS IN APPEAL BEFORE US NOW. 15. AT THE OUTSET THE LD.AR SUBMITTED THAT ASSESSEE WISH TO ARGUE GROUND NO.12 AND CERTAIN COMPARABLES IN GROUND NO.1 3. HE ALSO SUBMITTED THAT GROUND NO.15, PERTAINING TO NEGATIVE WORKING CAPITAL ADJUSTMENT IS ALSO TO BE CONSIDERED. EXCEPT FOR THESE GROUNDS ALL OTHER GROUNDS WERE NOT PRESSED, AS SUBM ITTED BY THE LD.AR. 16. BEFORE WE UNDERTAKE THE COMPARABILITY ANALYSIS, IT IS SINE QUA NON TO UNDERSTAND THE FUNCTIONS PERFORMED, ASSETS OWNE D AND RISK ASSUMED BY ASSESSEE. 17. LD.TPO EXTRACTED THE FUNCTIONS PERFORMED BY ASS ESSEE UNDER THE ITES SEGMENT AS UNDER: 18. IT HAS BEEN SUBMITTED THAT, AS PER THE AGREEMEN T, ASSESSEE PERFORMS FOLLOWING FUNCTIONS: BUSINESS OR SERVICES (INCLUDING TALENT ACQUISITION TEAM) PAGE 9 OF 29 IT(TP)A NO.189/BANG/2017 FINANCE/ACCOUNTING/TAXATION SERVICES IS SERVICES RELATED TO MANAGEMENT INFORMATION SYSTE MS PROCUREMENT/PURCHASE QUALITY CONTROL TREASURY SERVICES GLOBAL DELIVERY OPERATIONS INFORMATION SECURITY SERVICES AND LEGAL SERVICES. ASSETS OWNED: 19. IN THE TP STUDY AT PAGE 353 OF PAPER BOOK, IT H AS BEEN SUBMITTED THAT ASSESSEE OWNS TANGIBLE ASSETS FOR CA RRYING OUT ITS BUSINESS LIKE LAND AND BUILDING, COMPUTER EQUIPMENT S, FURNITURES AND FITTINGS AND OTHER OF OFFICE EQUIPMENTS AND VEH ICLES. IT HAS BEEN SUBMITTED THAT ASSESSEE DO NOT OWN ANY NON-ROUTINE INTANGIBLES AND ACCORDINGLY DOES NOT OWN TRADE SECRETS OR UNDER TAKE RESEARCH AND DEVELOPMENT ACTIVITIES ON ITS ACCOUNT THAT WOUL D LEAD TO DEVELOPMENT OF ANY NON-ROUTINE INTANGIBLES. RISK ASSUMED: 20. IT HAS BEEN SUBMITTED THAT ITES SERVICES ARE IN TERCOMPANY SERVICE PROVIDED/AVAILED WITHIN QUEST GROUP. THE EN D CUSTOMER IN RAILING SUCH SERVICES ARE THE RESPECTIVE QUEST GROU P COMPANIES AND NO SPECIFIC RISK IN THE NATURE OF MARKET RISK/CONTR ACTORS/CREDIT RISK/FOREIGN EXCHANGE RISK ARE ALL WARRANTY RISK AR E BORN BY ASSESSEE IN RESPECT OF PROVIDING/PREVAILING ANY OF SUCH SERVICES. PAGE 10 OF 29 IT(TP)A NO.189/BANG/2017 THUS, ASSESSEE HAS BEEN CHARACTERISED AS A CAPTIVE SERVICE PROVIDER/RECIPIENT THAT ASSUMES LOWER THAN THE NORM AL MINIMAL RISK ASSOCIATED WITH THE BUSINESS OF PROVIDING BACK -OFFICE SUPPORT SERVICES. 21. BASED ON THE ABOVE FAR, WE SHALL UNDERTAKE THE COMPARABILITY ANALYSIS IN RESPECT OF THE COMPARABLES ALLEGED BY A SSESSEE FOR INCLUSION/EXCLUSION. AS SUBMITTED BY THE LD.AR, GROUND NOS.1-10 ARE NOT PRESSED AND ACCORDINGLY NOT ADJUDICATED. 22. GROUND NO.12: THE ASSESSEE SEEKS EXCLUSION OF FOLLOWING COMPARABLES: UNIVERSAL PRINT SYSTEMS LTD., INFOSYS BPO LTD., TCS E-SERVE LTD., BNR UDYOG LTD., EXCEL INFOWAYS LTD. 23. IT IS VEHEMENTLY SUBMITTED BY THE LD.AR THAT, T HESE COMPARABLES ARE FUNCTIONALLY NOT COMPARABLE WITH AS SESSEE, AS IT IS ENGAGED IN INTEGRATED IT-BPO DELIVERY MODEL DESIGNE D FOR ONE-STOP SHOP SOLUTION MODEL. 24. IN RESPECT OF UNIVERSAL PAINT SYSTEMS LTD., IT IS SUBMITTED THAT, THIS COMPANY IS ENGAGED IN PAINTING BUSINESS AND TH E FUNCTIONS ARE DIFFERENT WITH THAT OF THE SERVICES RENDERED BY ASS ESSEE. 25. LD.AR PLACED RELIANCE ON DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF IS INDICOM GLOBAL SERVICES INDIA PVT.LTD. , IN IT(TP)A NO.185/B/2018, BY ORDER DATED 28/09/2019 , WHEREIN THESE COMPARABLES ARE HELD TO BE NOT COMPARABLE IN CASE OF A CAPTIVE SERVICE PROVIDER LIKE THAT OF ASSESSEE 26. ON THE CONTRARY, LD.CIT.DR PLACED RELIANCE ON O RDERS PASSED BY AUTHORITIES BELOW. PAGE 11 OF 29 IT(TP)A NO.189/BANG/2017 27. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 28. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOT H SIDES AND THE DECISION RELIED BY THE LD.AR IN CASE OF INDICOM GLOBAL SERVICES INDIA PVT.LTD. (SUPRA). WE NOTE THAT THIS COMPARABLE WAS ALSO HELD TO BE A CAPTIVE SERVICE PROVIDER PROVIDING SERVICES ON LY TO ITS AE IS AND IT WAS UNDER THESE CIRCUMSTANCES THAT THIS TRIBUNAL HAD CONSIDERED THE AFORESTATED COMPARABLES AS UNDER: 1. UNIVERSAL PRINT SYSTEMS LTD (SEGMENTAL) (BPO) ASSESSEE SOUGHT TO EXCLUDE THIS COMPARABLE FOR THE REASON THAT, IT FAILS EMPLOYEE COST FILTER AND HAS INSUFFICIENT COM PANY INFORMATION. IT IS ALSO BEEN SUBMITTED THAT, FUNCTIONALLY THIS C OMPANY IS PROVIDING INTEGRATED PRINT SOLUTION TO ITS CUSTOMER S AND DOES NOT PROVIDES ROUTINE ITES SERVICES LIKE THAT OF ASSESSE E. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS NOT A CAPTIVE SERVIC E PROVIDER LIKE THAT OF ASSESSEE AND HAS PRODUCTS SALE AS WELL AS S ERVICES SALE, WHICH IS EVIDENT FROM PAGE 335 OF PAPER BOOK (INDEX FOR ANNUAL REPORTS). 4.1 LD.CIT DR PLACED RELIANCE UPON ORDERS OF AUTHOR ITIES BELOW AND SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY COMP ARABLE WITH THAT OF ASSESSEE. 5. WE HAVE HEARD SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORD PLACED BEFORE US. ON PERUSAL OF ANNUAL REPOR T OF THIS COMPANY PLACED IN PAPER BOOK, WE ARE OF CONSIDERED OPINION THAT THIS COMPARABLE IS BASICALLY INTO SALE OF PRODUCTS AND SERVICES UNLIKE A CAPTIVE SERVICE PROVIDER SUCH AS ASSESSEE, WHO WORKS ON PAGE 12 OF 29 IT(TP)A NO.189/BANG/2017 COST PLUS BASIS, PROVIDING SERVICES ONLY TO ITS AE' S. IT IS ALSO OBSERVED THAT THIS COMPARABLE IS BASICALLY PROVIDIN G BPO SERVICES FROM ITS PREPRESS UNITS. IN WRITTEN SUBMISSION FILE D, ASSESSEE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PUT LTD., VS ACIT REPORTED IN (2019) 101 TAXMCM.COM 292, WHEREIN THIS COMPARABLE HAS BEEN EXCLUDED BY OBSERVING AS U NDER: 10.4 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF UNIVERSAL PRINT SYSTEMS LTD. WI TH THAT OF THE ASSESSEECOMPANY HAS BEEN DULY CONSIDERED BY TPO AFT ER REFERRING TO INFORMATION CONTAINED IN ANNUAL REPORT. THE RELEVANT FINDINGS O F THE TPO HAD NOT BEEN COUNTENANCED BY LEARNED AR OF THE ASSESSEE. HOWEVER , THE ISSUE OF COMPARABILITY OF UNIVERSAL PRINT SYSTEMS LTD. HAS A LSO BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF C GI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS PUT. LTD. 'SUPRA) WHEREIN IT WAS HELD AS FOLLOWS: 47. THE NEXT SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS UTH REGARD TO EXCLUSION OF 2 COMPARABLE COMPANIES FROM THE LIST OF 7 COMPARABLE COMPANIES THAT REMAIN AFTER THE ORDER OF THE DRP. THE FIRST COMPARABLE COMPANY SOUGHT TO BE EXCLUDED IS UNIVERS AL PRINT SYSTEMS LTD. THIS COMPANY WAS CHOSEN AS A COMPARABLE COMPANY BY THE TPO. IN REPLY TO THE PROPOSAL OF THE TPO TO INCLUDE THIS COMPANY AS A COMPARABLE COMPANY, THE ASSESSEE VIDE ITS LETTER DATED 22.12.2 015 HAD POINTED OUT ITS OBJECTIONS TO INCLUDING THIS COMPANY AS A COMPARABL E COMPANY. A COPY OF THE SAID OBJECTION IS AT PAGE-785 OF THE ASSESSEE'S PAPER BOOK. THE ASSESSEE POINTED OUT THAT THE OP/TC OF THIS COM PANY AS WORKED OUT BY THE TPO AT 59.40% WAS WRONG AND UNALLOCATED COST S AS PER THE ANNUAL REPORT SHOULD BE ALLOCATED TO BPO SEGMENT AND IF TH AT IS DONE THEN THE OP/TC OF THIS COMPANY WILL BE ONLY 51.80%. THE AS.S ESSEE FURTHER POINTED OUT (PAGE 764 OF PAPER BOOK) THAT THE TPO HAD APPLI ED REVENUE FILTER OF MORE THAN 75% BEING FROM NON-FINANCIAL SERVICE INCO ME. THE ASSESSEE POINTED OUT THAT THE PERCENTAGE OF INCOME FROM ITES WAS ONLY 21.63% OF THE TOTAL REVENUE FROM OPERATIONS OF THIS COMPANY A S PER ITS ANNUAL REPORT. THE ASSESSEE ALSO POINTED OUT THAT IN THE PRE-PRESS BPO SEGMENT THIS COMPANY WAS PROVIDING INTEGRATED PRINT SOLUTIONS TO ITS CUSTOMERS, WHICH INCLUDES SCANNING, DESIGN/LAYOUT, TRAPPING, HAND-OU TLINED CLIPPING PATH AND IMAGE MASKING AND MAGAZINE AND CATALOGUE PUBLIS HING. THE ASSESSEE SUBMITTED THAT THE AFORESAID SERVICES ARE NOT IN THE NATURE OF ITES. THE ASSESSEE POINTED OUT THAT AS PER THE SAFE HARBOUR RULES INTRODUCED BY THE CBDT ITES HAS BEEN DEFINED AS BUS INESS PROCESS OUTSOURCING SERVICES PROVIDED MAINLY WITH THE ASSIS TANCE OR USE OF INFORMATION TECHNOLOGY. IT WAS ALSO SUBMITTED THAT THIS COMPANY DOES NOT PAGE 13 OF 29 IT(TP)A NO.189/BANG/2017 SATISFY THE DEFINITION OF ITES AS CONTAINED IN RULE IOTA('E) OF THE RULES. SINCE USE OF INFORMATION TECHNOLOGY IS ABSENT .IN T HE VARIOUS SERVICES PROVIDED BY THIS COMPANY, IT CANNOT BE REGARDED AS ITES COMPANY, THE ASSESSEE ALSO SUBMITTED THAT THIS COMPANY FAILS THE EMPLOYEE COST FILTER. THE EMPLOYEE COST FILTER REQUIRES THAT THE EMPLOYEE S COST INCURRED BY THE COMPANY MUST BE MORE THAN 25% OF ITS REVENUE. 48. THE TPO AT PAGE-20 OF HIS ORDER HAS DEALT WITH THE ABOVE OBJECTIONS BY OBSERVING AS FOLLOWS: (A) PRE-PRESS BPO UNIT PROVIDES BACK OFFICE SUPPORT SERVICES. (B) THIS COMPANY HAS FOUR MAJOR SEGMENTS VIZ., REPR O, LABEL PRINTING, OFFSET PRINTING AND PRE-PRESS BPO. THE EM PLOYEE COST OF PRE-PRESS BPO WAS MORE THAN 25% OF THE REVENUE F ROM PRE- PRESS BPO AND THEREFORE THE EMPLOYEE COST FILTER IS SATISFIED IN THE CASE OF THIS COMPANY. (C) ON THE SERVICE REVENUE FILTER VIZ., THE REQUIRE MENT THAT A COMPARABLE COMPANY MUST HAVE REVENUE FROM RENDERING SERVICES O F MORE THAN 75% OF ITS TOTAL REVENUE, THE TPO AGAIN HELD THAT THE PRE- PRESS BPO SEGMENT'S ENTIRE INCOME IS FROM SERVICES AND THEREFORE THIS O BJECTION IS NOT TO BE ACCEPTED 49. ON OBJECTIONS BY THE ASSESSEE BEFORE THE DRP, T HE DRP CONFIRMED THE ACTION OF THE TPO. ONE OF THE OBJECTION BEFORE THE DRP WAS THAT THIS COMPANY DID NOT FIGURE IN THE LIST OF COMPANIES ENG AGED IN ITES. ON THIS OBJECTION THE DRP HELD THAT THOUGH THIS COMPANY DID NOT FIGURE IN THE LIST OF COMPANIES IN ITES IN THE MAIN SEARCH OF CAPITAL LIN E AND PROWESS DATABASE BUT ON A SEGMENTAL SEARCH THESE TWO COMPAN IES SATISFIED THE REQUIREMENT OF BEING CONSIDERED AS COMPANIES ENGAGE D IN PROVIDING ITES. 50. AGGRIEVED BY THE DIRECTIONS OF THE DRP, THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE AS SESSEE REITERATED SUBMISSIONS THAT WERE MADE BEFORE THE TPO/DRP. IN P ARTICULAR IT WAS SUBMITTED THAT THE SERVICE REVENUE FILTER WAS APPLI ED BY THE TPO HIMSELF AT THE ENTITY LEVEL AND ON SUCH SEARCH THIS COMPANY WA S NOT REGARDED AS ENGAGED IN PROVIDING ITES. AT THIS STAGE THE TPO OU GHT TO HAVE DROPPED THIS COMPANY AS A COMPARABLE COMPANY BECAUSE THIS F ILTER HAS TO BE APPLIED AT THE ENTITY LEVEL AND NOT AT THE SEGMENTA L LEVEL. THE LEARNED DR SUBMITTED THAT IF THE SERVICE REVENUE FILTER IS APP LIED AT THE SEGMENTAL LEVEL THERE CAN BE NO OBJECTION BY THE ASSESSEE. SHE RELI ED ON THE ORDER OF THE DRP/TPQ. 51. THE REQUIREMENTS OF RULE 1OE(1)(2) & (3) OF THE RULES IN THE MATTER OF COMPARABILITY OF COMPANIES UNDER TNMM NEEDS TO BE S EEN. THE SAME READS AS FOLLOWS: '1OB. (1) FOR THE PURPOSES, OF SUB-SECTION (2) OF S ECTION 92C, THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSA CTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING THE MOST APP ROPRIATE METHOD, IN THE FOLLOWING MANNER, NAMELY:- (A)TO (D) PAGE 14 OF 29 IT(TP)A NO.189/BANG/2017 (E) TRANSACTIONAL-MARGIN METHOD, BY WHICH, (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRIS E FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSOCIATED ENTERPR ISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFFECTED OR ASS ETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD TO ANY OTHER RELEVANT BASE; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTI ON OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO THE SAME BASE; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAU SE (II)) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND T HE COMPARABLE UNCONTROLLED TRANSACTIONS, OR BETWEEN THE ENTERPRIS ES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT THE AMO UNT OF NET PROFIT MARGIN IN THE OPEN MARKET; (IV) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE AND REFERRED TO IN SUB- CLAUSE (I) IS ESTABLISHED TO BE THE SAME AS THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAUSE (III); (V) THE NET PROFIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT TO ARRIVE AT AN ARMS LENGTH PRICE IN RELATION TO THE I NTERNATIONAL TRANSACTION. (2) FOR THE PURPOSES OF SUB-RULE (1), THE COMPARABI LITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE FOLLOWING, NAMELY: (A) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TR ANSFERRED OR SERVICES PROVIDED IN EITHER TRANSACTION; (B) THE FUNCTIONS PERFORMED, TAKING INTO ACCOUNT AS SETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIVE P ARTIES TO THE TRANSACTIONS; (C) THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERM S ARE FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICI TLY OR IMPLICITLY HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVI DED BETWEEN THE RESPECTIVE PARTIES TO THE TRANSACTIONS; (D) CONDITIONS PREVAILING IN THE MARKETS IN WHICH T HE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLUDING THE GEOGRAPHICA L LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORC E, COSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMEN T AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE O R RETAIL (3) AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION IF- (I) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TR ANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT THE PRICE OR COST CHARG ED OR PAID IN, OR THE PROFIT ARISING FROM, SUCH TRANSACTIONS IN THE OPEN MARKET; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES.' PAGE 15 OF 29 IT(TP)A NO.189/BANG/2017 52. THERE APPEARS TO BE NO BAR IN THE RULES REFERRE D TO ABOVE TO CONSIDERING SEGMENTAL DATA UNDER TNMM BECAUSE THE C OMPARISON IS OF 'NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM AN IN TERNATIONAL TRANSACTION' WITH THE 'NET PROFIT REALIZED FROM A COMPARABLE UNC ONTROLLED TRANSACTION'. THEREFORE COMPARISON IS OF SIMILAR TRANSACTION. WHE N SEGMENTAL INFORMATION IS AVAILABLE AND IS NOT DISPUTED, IT CA NNOT BE ARGUED THAT FILTERS HAVE TO BE APPLIED AT ENTITY LEVEL. IT CANNOT BE AR GUED THAT WHEN THE TPO HIMSELF APPLIED THE FILTERS AT THE ENTITY LEVEL HE WAS NOT ENTITLED TO APPLY THE FILTERS AT SEGMENTAL LEVEL. AS WE HAVE ALREADY STATED IF CLEAR SEGMENTAL INFORMATION IS AVAILABLE THE FILTERS CAN BE APPLIED AT THE SEGMENTAL LEVEL IN TNMM. THEREFORE THE OBJECTION WITH REGARD TO THIS C OMPANY FAILING THE EMPLOYEE COST FILTER AND SERVICE REVENUE FILTER IN OUR VIEW WAS RIGHTLY REJECTED BY THE TPO AND DRP. IT IS HOWEVER SEEN THA T THIS COMPANY HAS FOUR SEGMENTS VIZ., REPRO. LABEL PRINTING, OFFSET P RINTING AND PRE-PRESS BPO. WHETHER THE LABEL PRINTING AND OFFSET PRINTING SEGMENTS SUPPLEMENT THE FUNCTIONS PERFORMED IN THE PRE- PRESS BPO SEGME NT HAS TO BE SEEN. WE THEREFORE SET ASIDE THE ORDER OF THE DRP IN THIS RE GARD AND REMAND FOR FRESH CONSIDERATION BY THE TPO THE COMPARABILITY OF THIS COMPANY. IN TERMS OF RULE 1OB(3) OF THE RULES THE PROFIT MARGINS OF P RE-PRESS BPO HAVE TO BE ADJUSTED TAKING INTO ACCOUNT THE FACT THAT TWO OTHE R SEGMENTS SUPPLEMENT THE PRE- PRESS BPO SEGMENT. IF SUCH ADJUSTMENT CANN OT BE REASONABLY OR ACCURATELY MADE THEN THIS COMPANY HAS TO BE EXCLUDE D FROM THE LIST OF COMPARABLE COMPANIES. THE TPO FOR THIS PURPOSE CAN USE HIS POWERS U/S. 133(6) OF THE ACT TO GET REQUIRED DETAILS FROM THIS COMPANY. AS FAR AS THE ARGUMENT THAT THIS COMPANY FAILS FUNCTIONAL COMPARA BILITY, WE FIND THAT NONE OF THE OBJECTIONS RAISED BY THE ASSESSEE IN TH IS REGARD ABOUT LACK OF INFORMATION ABOUT ALLIED SERVICES PERFORMED BY THE PRE-PRESS BPO SEGMENT OF THIS COMPANY AND THE BREAK-UP OF THE REVENUE FRO M SUCH ALLIED SERVICES HAVE BEEN DEALT WITH SPECIFICALLY BY THE TPO OR DRP . SIRICT THE COMPARABILITY OF THIS COMPANY IS BEING REMANDED TO BE TPO FOR CONSIDERATION OF ADJUSTMENTS AS MENTIONED ABOVE, TH E OBJECTION WITH REGARD TO FUNCTIONAL COMPARABILITY SHOULD ALSO BE L OOKED INTO BY THE TPO IN THE REMAND PROCEEDINGS ON THE BASIS OF MATERIALS WH ICH HE MAY GATHER U/S. 133(6) OF THE ACT, THE ASSESSEE SHOULD BE GIVE N OPPORTUNITY OF BEING HEARD BY THE TPO BEFORE THE ISSUE IS DECIDED BY THE TPO.' RESPECTFULLY FOLLOWING THE DECISION, WE REMAND THIS COMPARABLE TO THE FILE OF THE TPO/AOFORFRESH ADJUDICATION ON THE ABOVE LINES. RESPECTFULLY FOLLOWING AFORESAID DECISION, WE REMAN D THIS COMPARABLE TO FILE OF LD.AO/TPO, FOR FRESH ADJUDICATION, ON THE B ASIS OF DIRECTIONS REPRODUCED HEREINABOVE. NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO ASSESSEE AS PER LAW. ACCORDINGLY WE SET ASIDE THIS COMPARABLE BACK TO LD .TPO. 2 . INFOSYS BPO LTD. ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE PRIMARILY ON THE BASIS OF FUNCTIONAL INCOMPATIBILITY AND PRESENCE OF INTANGIB LES. IT HAS BEEN PAGE 16 OF 29 IT(TP)A NO.189/BANG/2017 SUBMITTED THAT THIS COMPANY OWNS HUGE BRAND AND NOT A FIT COMPARABLES FOR COMPANY LIKE ASSESSEE, WHO PROVIDE CAPTIVE SERV ICE TO ITS AE'S. LD.CIT DR OPPOSED THE EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 6. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. ASSESSEE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PUT LTD., US ACI T VIDE ORDER DATED 28/06/19 IN ITA (TP) A NO. 1661/BANG/2016, WHEREIN THIS COMPARABLE HAS BEEN EXCLUDED BY OBSERVING AS UNDER: '5. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE COMP ARABILITY OF INFOSYS BPO AS A COMPARABLE COMPANY. THE DELHI ITAT IN THE CASE OF BAXTER INDIA PUT. LTD. VS. ACIT ITA NO.6158/DEL/2016 FOR AY 2012 -13 IN THE CASE OF A COMPANY RENDERING ITES SUCH AS THE ASSESSEE, VIDE O RDER DATED 24.8.2017 PARAGRAPH 23 HELD THAT INFOSYS BPO IS NOT COMPARABLE WITH A COMPANY RENDERING ITES FOR THE FOLLOWING REASONS:- '23. IN SO FAR AS EXCLUSION OF INFOSYS BPO LTD. IS CONCERNED, WE FIND FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASS ESSING OFFICE R/TPO/DRP IS THAT INFOSYS BPO LTD. IS PREDOMINANTLY INTO AREAS L IKE INSURANCE, BANKING, FINANCIAL SERVICES, MANUFACTURING AND TELECOM WHICH ARE IN THE NICHE AREAS, UNLIKE THE ASSESSEE. FURTHER IT WAS ALSO SUBMITTED THAT THE INFOSYS BPQ LTD. COMPRISES BRAND VALUE WHICH WILL TEND TO I NFLUENCE ITS BUSINESS OPERATION AND THE PRICING POLICY THEREBY DIRECTLY I MPACTING THE MARGINS EARNED BY THE INFOSYS BPO LTD.. WE FIND THE SUBMISS IONS OF THE ID. COUNSEL FOR THE ASSESSEE BEFORE TPO/DRP THAT IN ORDER TO MA INTAIN THE BRAND IMAGE OF INFOSYS BPQ LTD. IN THE MARKET, THE COMPAN Y INCURS SUBSTANTIAL SELLING AND MARKETING EXPENDITURE WHEREAS THE ASSES SEE BEING A CONTRACT SERVICE PROVIDER DOES NOT INCUR SUCH EXPENSES TO MA INTAIN ITS BRAND HAS NOT BEEN CONTROVERTED BY THEM. FURTHER, INFOSYS BPO LTD. BEING A SUBSIDIARY OF INFOSYS HAS AN ELEMENT OF BRAND VALUE ASSOCIATED WITH IT. THIS CAN BE FURTHER CONFIRMED BY THE PRESENCE OF BR AND RELATED EXPENSES INCURRED BY INFOSYS BPO LTD. FURTHER, INFOSYS BPO L TD. HAS ACQUIRED AUSTRALIAN BASED COMPANY M/S PORTLAND GROUP PTY LTD . DURING FINANCIAL YEAR 2011-12. THEY PROVIDE SOURCING AND CATEGORY MA NAGEMENT SERVICES IN SYDNEY, AUSTRALIA. THEREFORE, THIS COMPANY ALSO FAILED THE TPO'S OWN FILTER OF REJECTING COMPANIES WITH PECULIAR CIRCUMS TANCES. IN VIEW OF THE ABOVE I.E. FUNCTIONALLY NOT COMPARABLE, PRESENCE OF BRAND AND EXTRAORDINARY EVENT THAT HAS TAKEN PLACE DURING THE YEAR ON ACCOUNT OF ACQUISITION OF AUSTRALIAN BASED COMPANY, WE ARE OF THE CONSIDERED OPINION THAT INFOSYS BPO LTD. SHOULD NOT BE INCLUDED IN THE LIST OF COMPARABLES. WE ACCORDINGLY DIRECT THE ASSESSING OFFLCER/ TPO TO EX CLUDE INFOSYS BPO LTD. FROM THE LIST OF COMPARABLES FOR THE PUIPOSE OF COM PUTING THE AVERAGE MARGIN.' IT WAS ALSO BROUGHT TO OUR NOTICE THAT THE HON'BLE DELHI HIGH COURT IN ITA NO.26012028 IN THE APPEAL FILED BY THE REVENUE AGAI NST THE AFORESAID ORDER PAGE 17 OF 29 IT(TP)A NO.189/BANG/2017 DISMISSED THE APPEAL AT THE ADMISSION STAGE OBSERVI NG THAT RATIONALE GIVEN BY THE ITAT FOR EXCLUSION WAS CORRECT. IN VIEW OF THE AFORESAID DECISION, WE DIRECT EXCLUSION OF INFOSYS BPO FROM THE LIST OF COMPARABL E COMPANIES CHOSEN BY THE TPO. FROM ABOVE, IT IS CLEAR THAT THIS COMPANY IS FUNCTI ONALLY NOT COMPRAB1E WITH CAPTIVE SERVICE PROVIDER. RESPECTFULLY FOLLOWING THE SAME WE DIRECT INFOSYS B PO TO BE EXCLUDED FROM THE LIST OF COMPARABLES AND REMAND UN IVERSAL PAINT TO LD.AO/TPO FOR FRESH CONSIDERATION. 3. TCS E-SERVE LTD. 29. LD.AR SUBMITTED THAT THIS COMPANY HAS BEEN OBJE CTED BY ASSESSEE FOR ITS FUNCTIONAL DISSIMILARITY AS IT REN DERS BOTH BPO AND KPO SERVICES WITHOUT SEGMENTAL REPORTING. IT IS SUB MITTED THAT THIS COMPANY OWNS HUGE BRAND OF TATA GROUP AND HAS ALSO INCURRED BRAND RELATED EXPENSES AND THEREFORE CANNOT BE ACCE PTED TO BE COMPARED WITH A CAPTIVE SERVICE PROVIDER LIKE ASSES SEE. 30. LD.CIT DR ON THE CONTRARY OPPOSED ITS EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 7. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN LIGHT OF RECORDS PLACED BEFORE US. ASSESSEE PLACED RELIANCE UPON FOLLOWING DECISIONS IN SUPPORT OF ITS ARGUMENT FOR EXCLUSION OF THIS COMPARABLE: ZYME SOLUTIONS PUT LTD. VS ACIT (SUPRA) BAXTER INDIA PUT. LTD VS ACIT REPORTED IN (2017) 85 TAXMANN.COM 285 (DELHI-TRIB) PCIT VS BC MANAGEMENT SERVICES PVT. LTD. REPORTED IN TS-948- HC-0 2017 (DEL)-TP PAGE 18 OF 29 IT(TP)A NO.189/BANG/2017 IT IS OBSERVED THAT THIS COMPARABLE HAS BEEN EXCLUD ED BY THIS TRIBUNAL. THE ASSESSEE PLACED RELIANCE UPON DECISIO N OF THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PUT LTD., VS ACIT REPORTED IN (2019) 101 TAXMAN.COM 292 , BY OBSERVING AS UNDER: '11.3 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED M ATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF THIS COMPANY WAS CONSIDER ED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF XLHEALTH CORPN. INDIA (P ) LTD. (SUPRA). THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. FROM THE PERUSAL OF THE ANNUAL REPORT OF THIS ENTIT Y PLACED AT PAGE NOS. 583 TO 678 OF PAPER BOOK, AT PAGE NO. 604 IT IS STATED AS UNDER. 2. COMPANY OVERVIEW YOUR COMPANY, ALONG WITH ITS SUBSIDIARY COMPANIES - TCS E-SERVE INTERNATIONAL LIMITED AND TCS E-SERVE AMERICA INC., IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS PROCESS SERVI CES ('BPO) FOR ITS CUSTOMERS IN BANKING, FINANCIAL SERVICES AND INSURA NCE DOMAIN. THE COMPANY'S OPERATIONS INCLUDE DELIVERING CORE BU SINESS PROCESSING SERVICES, ANALYTICS & INSIGHTS (KPO) AND SUPPORT SE RVICES FOR BOTH DATA AND VOICE PROCESSES. YOUR COMPANY IS AN INTEGRAL PART OF THE TATA CONSUL TANCY SERVICES' (TCS) STRATEGY TO BUILD ON ITS 'FULL SERVICES OFFERINGS' THAT OFFER GLOBAL CUSTOMERS AN INTEGRATED PORTFOLIO OF SERVICES RANGING FROM IT SERVICES TO BPO SERVICES. THE COMPANY PROVIDES ITS SERVICES FROM VARIOUS PROC ESSING FACILITIES, BACKED T) A ROBUST AND SCALABLE INFRASTRUCTURE NETW ORK TAILORED TO MEET CLIENTS' NEEDS. A DETAILED BUSINESS CONTINUITY PLAN HAS ALSO BEEN PUT IN PLACE TO ENSURE THE SERVICES ARE PROVIDED TO THE CU STOMERS WITHOUT ANY DISRUPTIONS.' THUS, THIS COMPANY IS ALSO STATED TO BE A KNOWLEDGE PROCESS OUTSOURCING AND THEREFORE FOR REASONS STATED BY US WHILE DEALING WI TH THIS ISSUE OF COMPARABILITY OF THE COMPANY INFOSYS BPO LTD. SHALL EQUALLY HOLD GOOD AND THEREFORE WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM : LIST OF C OMPARABLES. SINCE THE APPELLANT COMPANY IS INTO LOW END BPO, IT CANNOT BE COMPARED WITH KPO SERVICE PROVIDER. 11.4 RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF TRIBUNAL, WE DIRECT FOR EXCLUSION THIS COMPANY FROM THE LIST OF COMPARABLE'. IT IS OBSERVED THAT THIS COMPANY IS INTO HIGH-END K PO SERVICES AND AN ASSESSEE RENDERING LOW END BPO SERVICES CANNOT B E COMPARED WITH IT. FURTHER, THIS COMPANY HAS BEEN EXCLUDED DU E TO ABSENCE OF SEGMENTAL INFORMATION. PAGE 19 OF 29 IT(TP)A NO.189/BANG/2017 RESPECTFULLY FOLLOWING AFORESAID DECISION, WE DIREC T LD.TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 5.BNR UDYOG LTD. (SEGMENTAL) 31. LD.AR SUBMITTED THAT THIS COMPANY FAILS RPT FIL TER AND ALSO FAILS EXPORT FILTER APPLIED BY LD.TPO. IT IS SUBMIT TED THAT THIS COMPANY IS INTO MEDICAL TRANSCRIPTION, CODING, BUSI NESS SUPPORT SERVICES AND E- GOVERNANCE PROJECTS AND THEREFORE F UNCTIONALLY NOT SIMILAR WITH THAT OF ASSESSEE. 32. LD. CIT DR HOWEVER CONTENDED THAT THIS COMPANY IS COMPARED ONLY FOR SEGMENT OF MEDICAL TRANSCRIPTION AND THERE FORE SHOULD NOT BE EXCLUDED. SHE PLACED RELIANCE UPON DECISION OF T HIS TRIBUNAL IN CASE OF MOBILY INFOTECH INDIA (P) LTD VS DCIT REPORTED IN (2018) 97 TAXMAN.COM 2 IN SUPPORT. 33. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 34. ASSESSEE IS CHALLENGING FUNCTIONAL DISSIMILARIT Y OF THIS COMPANY WITH THAT OF ASSESSEE AS IT IS INTO MEDICAL TRANSCRIPTION. WE HAVE OUR RESERVATION TO CONSIDER MEDICAL TRANSCR IPTION SERVICES TO BE ONE OF KPO SERVICES. IN OUR CONSIDERED OPINIO N MEDICAL TRANSCRIPTION SERVICES IS BASICALLY BACK-OFFICE SER VICES PROVIDED BY GRADUATES WHO ARE TRAINED FOR SHORT PERIOD OF 6 MON THS TO ONE YEAR. THESE ARE SHORT CRASH COURSES UNDERTAKEN BY GRADUAT ES WHO ARE TRAINED TO UNDERSTAND AND SPEAK ENGLISH. THERE IS N O VALUE ADDITION IN THE SERVICES RENDERED BY PEOPLE IN MEDI CAL TRANSCRIPTION. TO OUR UNDERSTANDING, BASICALLY THESE PEOPLE WHO CA RRY OUT MEDICAL TRANSCRIPTION SERVICES ARE IRAINED TO UNDERSTAND LA NGUAGE SPOKEN BY PAGE 20 OF 29 IT(TP)A NO.189/BANG/2017 DOCTORS, OUTSIDE INDIA TO WHOM MEDICAL REPORTS OF P ATIENCE ARE SENT FOR EXPERT OPINION. MEDICAL TRANSCRIPTIONIST SIMPLY REPRODUCES OPINION EXPRESSED BY DOCTOR, WHICH IS THEN COMMUNIC ATED TO THE PATIENTS. 35. IT IS OBSERVED FROM ANNUAL REPORT PLACED AT PAG E 223 OF PAPER BOOK (INDEX TO ANNUAL REPORTS) THAT THIS COMPANY HA S SEGMENTAL INFORMATION OF MEDICAL TRANSCRIPTION AND REVENUE EA RNED UNDER THIS SEGMENT IS RS.147.40 LACS. IT IS ALSO BEEN OBSERVED THAT VARIOUS OTHER DECISIONS BY CO-ORDINATE BENCHES OF THIS TRIBUNAL HAS REMANDED THIS COMPARABLE BACK TO LD.TPO, FOR PROPER ANALYSIS AND FRESH CONSIDERATION. WE DRAW SUPPORT FOR SAME FROM INDEGENE (P) LTD VS ACIT REPORTED IN (2017) 85 TAXMANRT.COM 60 , WHEREIN IT HAS BEEN HELD AS UNDER: ' 9.3.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD INCLUDING THE JUD ICIAL PRONOUNCEMENTS CITED. FROM THE DETAILS ON RECORD WE OBSERVE THAT WHILE TH E ASSESSEE HAS CONTENDED THAT THE SERVICES RENDERED BY THIS COMPANY M/S TCS E-SERVE LTD ARE HIGH END KPO SERVICES, IT HAS NOT BROUGHT OUT AS TO WHICH OF THESE ARE THE SERVICES THAT WOULD COME UNDER TECHNICAL SERVICES. ON THE OTHER H AND, IV ALSO NOTICE THAT THAT THE TPO HAS HELD ALL THE SERVICES RENDERED BY THE A SS ESSEE TO BE EPO SERVICES WITH ANY PROPER ANALYSIS. IN THIS FACTUAL MATRIX OF THE CASE, WE FIND THAT ON SIMILAR FACTS, THE CO-ORDINATE BENCH O ITAT BANGALO RE IN THE CASE OF MDC GENE (P) LTD., (SUPRA) HAS REMANDED THE MATTER OF COMPARABIL ITY OF THIS COMPANY TO THE FILE OF THE TPO FOR FRESH CONSIDERATION. IN VIEW OF THE FACTUAL INATRX OF THE CASE ON HAND, AS LAID OUT ABOVE AND FOLLOWING THE DECISION F THE CO-ORDINATE BENCH IN THE CASE OF INCLEGENE (P) LTD. (SUPRA) WHICH IS ALSO RE NDERED ON SIMILAR FACTS, WE DEEM IT APPROPRIATE TO REMAND THE MATTER OF THE COM PARABILITY OF THIS COMPANY, TCS E-SERVE LTD. TO THE FILE OF THE TPO FOR FRESH C ONSIDERATION IN THE LIGHT OF OUT AHOY OBSERVATIONS. NEEDLESS TO ADD, THE TPO SHALL AFFORD THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS/ SUBMISSIONS IN THIS REGARD. IT IS ALSO BEEN OBSERVED THAT SIMILAR VIEW HAS BEEN TAKEN BY DECISION OF THIS TRIBUNAL IN CASE OF M/S NIELSON SPORTS INDIA PVT.LTD., VS ACIT IN IT(TP )A NO.196(B))/2017 VIDE ORDER DATED 28-06-2019. PAGE 21 OF 29 IT(TP)A NO.189/BANG/2017 RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THIS COMPARABLE BACK TO LD.TPO FOR CONSIDERING IT AFRESH. NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO ASSESSEE AS PER LAW. ACCORDINGLY WE SET ASIDE THIS COMPARABLE BACK TO LD .TPO 6. EXCEL INFOWAYS LTD. (SEGMENTAL) 36. THIS COMPARABLE SELECTED BY LD.TPO IS ALLEGED T O BE FUNCTIONALLY NOT COMPARABLE WITH ASSESSEE, AS IT IS HANDLING BUSINESS RELATIONS AND MANAGING CUSTOMER RELATIONSH IPS. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS COMPARABLE FAILS EMPLOYEE COST FILTER. 37. LD.CIT DR HOWEVER CONTENDED THAT THIS COMPANY I S COMPARED ONLY FOR SEGMENT OF MEDICAL TRANSCRIPTION AND THERE FORE SHOULD NOT BE EXCLUDED. SHE PLACED RELIANCE UPON DECISION OF T HIS TRIBUNAL IN CASE OF MOBILY INFOTECH INDIA (P) LTD VS DCIT REPORTED IN (2018) 97 TAXMAN.COM 2 IN SUPPORT. 9. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN LIGHT OF RECORDS PLACED BEFORE US. ANNUAL REPORT OF THIS COM PANY IS PLACED AT PAGE 273 OF PAPER BOOK (INDEX FOR ANNUAL REPORTS). IN THE SIGNIFICANT ACCOUNTING POLICIES REPORTED AT PAGE 30 8 OF PAPER BOOK, IT IS OBSERVED THAT THESE COMPANIES OPERATING BUSIN ESSES ARE ORGANIZED AND MANAGED SEPARATELY, ACCORDING TO NATU RE OF BUSINESS AND SERVICES PROVIDED WITH EACH SEGMENT, REPRESENTI NG DIFFERENT STRATEGIC BUSINESS UNIT. NOTE 15 AT PAGE 312 TO REF ERS TO REVENUES FROM OPERATIONS UNDER THE HEAD INFORMATION TECHNOLO GY/BPO RELATED SERVICES SEPARATELY. IT IS OBSERVED THAT TH E FUNCTION PERFORMED BY THIS COMPANY AS REPORTED AT PAGE 285 R EVEALS THAT IT PAGE 22 OF 29 IT(TP)A NO.189/BANG/2017 IS ENGAGED IN BUSINESS OF PROVIDING CUSTOMER CARE S ERVICES AND HANDLING CLIENT BUSINESS RELATIONS ON THEIR BEHALF BY MAINTAINING RELATION WITH CUSTOMERS AND ALSO PROVIDING SERVICES BY ASSISTING IN MANAGING THE WORKFLOW AND UPDATING THE RECORDS. IT IS OBSERVED THAT THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PUT LTD., US ACIT VIDE ORDER DATED 28/06/19 IN ITA (TP) A NO. 1661/BANG/20 16, THIS COMPARABLE IS EXCLUDED BY OBSERVING AS UNDER: 'THE THIRD AND LAST COMPANY THAT IS SOUGHT TO BE EX CLUDED FROM THE LIST OF COMPARABLE COMPANIES IS EXCLUSION OF EXCEL INFO LTD. THE TRIBUNAL HAD RETAINED THIS COMPANY AS A COMPARABLE COMPANY IN IT S ORIGINAL ORDER. THE ASSESSEE SOUGHT EXCLUSION OF THIS COMPANY ON THE GR OUND THAT THIS COMPANY WAS FUNCTIONALLY DIFFERENT FROM. THE ASSESS EE COMPANY AND THE EMPLOYEE COST TO THE REVENUE WAS LESS THAN THE THRE SHOLD LIMIT OF 25% AND THAT THERE WERE PECULIAR ECONOMIC CIRCUMSTANCES WHI CH IMPACTED THE PROFIT MARGIN OF THIS COMPANY THEREBY RENDERING THIS COMPA NY AS NOT COMPARABLE COMPANY. THE TRIBUNAL WHILE ADJUDICATING OF EXCLUSI ON OF THIS COMPANY IN PARAGRAPH 14.3 OF ITS ORDER HELD THAT ON APPLICATION OF EMPLOYEE COST FILTER THAT THE ASSESSEE HAS FAILED TO SHOW AS TO HOW THE F INDINGS OF THE TPO AND DRP ARE NOT CORRECT. 2. THE ASSESSEE HAS POINTED OUT CERTAIN FACTS WITH REGARD TO EMPLOYEE COST AND DIMINISHING REVENUE OF THIS COMPANY WHICH TAKES IT OUT OF THE COMPARABILITY AND THESE ASPECTS HAVE NOT BEEN CONSID ERED BY THE TRIBUNAL IN ITS ORDER. ON THE ABOVE OBJECTIONS IN THE MA, TH E TRIBUNAL HELD AS FOLLOWS:- WE HAVE EXAMINED THE CONTENTS IN THE MISC. PETITION AND WE FIND THAT THERE HAS BEEN OMISSION TO CONSIDER THE APPLICATION OF EMP LOYEE COST FILTER BY THE TRIBUNAL THOUGH ATTENTION OF THE BENCH WAS INVITED T O RELEVANT PAGES PAGE 23 OF 29 IT(TP)A NO.189/BANG/2017 POINTED OUT IN THE MISC. PETITION. WE DO NOT HOWEVER AGREE WITH THE ASSESSEE THAT FUNCTIONAL COMPARABILITY OF THIS COMP ANY HAS NOT BEEN EXAMINED BY THE TRIBUNAL IN PARAGRAPH 14.4. THE TRIB UNAL HAS COME TO THE CONCLUSION THAT THIS COMPANY IS A ITES COMPANY AND T HAT CANNOT BE REVIEWED IN THE MISC. APPLICATION. HOWEVER THERE HAS BEEN OMISSION TO ADJUDICATED EXCLUSION OF THIS COMPANY ON ACCOUNT OF EXTRAORDINARY EVENTS. WE THEREFORE RECALL THE ORDER OF THE TRIBUNAL TO THE LIMITED EXTENT OF EXAMINING OF THE EMPLOYEE COST FILTER AND THE PRESE NCE OF EXTRAORDINARY EVENTS ON WARRANTY EXCLUSION OF THIS COMPANY.' 3. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE EXCLUS ION OF THIS COMPANY ON THE BASIS OF EXTRAORDINARY EVENTS THAT OCCURRED D URING THE RELEVANT PREVIOUS YEAR WHICH HAD IMPACT ON THE PROFIT MARGIN OF THIS COMPANY AND THEREFORE RENDERING THIS COMPANY FROM BEING CHOSEN AS A COMPARABLE COMPANY. THE DELHI ITAT IN THE CASE OF BT E-SERVE (I NDIA) LTD. VS. ITO ITA NO.6690/DEL/2016 FOR AY 2012-13 ORDER DATED 19.6.2018 CONSIDERED THE COMPARABILITY OF THIS COMPANY AND CAME TO THE CONCLU SION IN PARAGRAPH 5.4 OF ITS ORDER THAT THERE WAS ABNORMAL VOLATILITY OF REVENUE OF THIS COMPANY FROM 2009-10 TO 2014-15 AND THEREFORE THIS C OMPANY SHOULD NOT BE REGARDED AS COMPARABLE COMPANY. RESPECTFULLY FOLLO WING THE AFORESAID DECISION, WE DIRECT EXCLUSION OF THE AFORESAID COMPA NY FROM THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. 38. IT IS OBSERVED FROM ORDER PASSED BY LD.TPO AT P AGE 10 THAT ASSESSEE OBJECTED THIS COMPANY THAT EMPLOYEE COST F ILTER BEING MORE THAN 25% HAS NOT BEEN EXAMINED BY LD.TPO. IT IS OBS ERVED THAT IN DECISION OF COORDINATE BENCH OF DELHI TRIBUNAL IN CASE OF BAXTER INDIA PVT.LTD VS ACIT REPORTED IN (2017) 85 TAXMANN.COM 285 THIS COMPARABLE FAILING EMPLOYEE COST FILTER HAS BEEN AN ALYZED AS UNDER: PAGE 24 OF 29 IT(TP)A NO.189/BANG/2017 FURTHER, FROM THE ORDER OF THE TPO WE FIND HE HAS OBT AINED THE EMPLOYEE COST AND THE SALE FOR THE ITES SEGMENT BY EXERCISE OF HIS POWERS U S. 133(6). WHEREIN THE SAID COMPANY HAS ALLOCATED ENTIR E EMPLOYEE COST TO IT - BPO SEGMENT WITH NO ALLOCATION TO INFRA ACTIVITY SEGMENT WHICH ACCOUNTS TO 49% OF EXCEL'S TOTAL REVENUE. IN OUR OPINION, IT IS HIGHLY IMPRACTICAL THAT NO EMPLOYEE HAS BEEN HIRED BY EXCEL FOR INFRA ACTIV ITY SEGMENT. WE. THEREFORE. FIND MERIT IN THE ARGUIUIT OF THE ID. COU NSEL FOR THE ASSESSEE THAT THE INFORMATION PROVIDED AS PER SECTION 133(6) BY E XCEL INFOWAYS LTD. IS UNRELIABLE AND SHOULD NOT BE USED TO COMPUTE EMPLOY EE COST FOR ITES SEGMENT. THE DELHI BENCH OF THE TRIBUNAL IN THE CAS E OF MOTOROLA SOLUTIONS INDIA (P.) LTD. U. ASSTS.CIT/2014J 48 TAXMANN.COM 24 842015] 152 LTD 158 (DELHI) HAS HELD THAT A COMPANY SHOULD BE REJECTE D AS COMPARABLE IN CASE THERE IS CONTRADICTION IN THE FACTS OR DATA SO URCED FROM ANNUAL REPORT AND AS PER THE INFORMATION GATHERED U/S. 133(6). IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT EXCEL INFOWAYS LTD. CANNOT B E CONSIDERED AS COMPARABLE AND SHOULD BE EXCLUDED FROM THE LIST OF COM PARABLES. WE HOLD AND DIRECT ACCORDINGLY'. 39. FROM THE ABOVE OBSERVATION BY COORDINATE BENCH, OBJECTION RAISED BY LD.CIT DR STANDS CLARIFIED, AS THIS COMPA NY FOR YEAR UNDER CONSIDERATION MADE A STATEMENT UNDER 133 (6) REGARDING ALLOCATING ENTIRE EMPLOYEE COST TO IT-BPO SEGMENT, WITH NO ALLOCATION TO OTHER SEGMENT, WHICH AMOUNTS TO ALMOS T 49% OF ITS TOTAL REVENUE DURING THE YEAR UNDER CONSIDERATION. AT THIS STAGE, WE CLARIFY THAT, WE ARE NOT INCLINED TO EXPRESS OUR OP INION REGARDING FUNCTIONAL SIMILARITIES/ DISSIMILARITY OF THIS COMP ANY WITH THAT OF PRESENT ASSESSEE BEFORE US AND THE SAME IS KEPT OPE N TO BE CONSIDERED IN AN APPROPRIATE CASE. PAGE 25 OF 29 IT(TP)A NO.189/BANG/2017 40. WE THEREFORE AGREE WITH CONTENTION RAISED BY AS SESSEE REGARDING THIS COMPARABLE NOT SATISFYING EMPLOYEE C OST FILTER. RESPECTFULLY FOLLOWING AFORESTATED DECISION OF DELH I TRIBUNAL REPRODUCED HEREINABOVE, WE DIRECT LD.TPO TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST. 41. BASED ON THE ABOVE OBSERVATION OF COORDINATE BE NCHES OF THIS TRIBUNAL , WE DIRECT INFOSYS BPO LTD., TCS E-SERVE LTD., EXC EL INFOWAYS LTD. TO BE EXCLUDED FROM FINALIST AND UNIV SERAL POINT SYSTEMS LTD., AND BNR UDYOG LTD. ARE REMANDED TO LD .AO/TPO FOR FRESH CONSIDERATION. ACROPETAL TECHNOLOGIES LTD. 42. IN RESPECT OF ACROPETAL TECHNOLOGIES LTD., THE LD.AR SUBMITTED THAT, THE HEALTHCARE SEGMENT CONSIDERED BY DRP IS A CCEPTABLE TO ASSESSEE HOWEVER THE MARGINS NEEDS TO BE CORRECTED ACCORDINGLY. HE SUBMITTED THAT THE MARGIN NEEDS TO BE REVISITED BY THE LD. AO/TPO IN RESPECT OF THIS COMPARABLE. ACCORDINGLY WE DIRECT THE LD.AO/TPO TO CORRECT THE MARGINS IN RESPECT OF ACROPETAL TECHNOLOGIES LTD. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED AS INDICATED HEREINABOVE. GROUND NO. 13 43. THE ASSESSEE SEEKS INCLUSION OF ACCENTIA TECHNO LOGIES LTD., INFORMED TECHNOLOGIES LTD., JINDAL INTELLICOM LTD. REMAINING COMPARABLES SOUGHT FOR INCLUSION HAS BEEN SUBMITTED TO BE NOT PRESSED BY ASSESSEE. ACCORDINGLY WE DO NOT CONSIDER THOSE COMPARABLES, FOR WHICH LD.AR HAS NOT ARGUED. PAGE 26 OF 29 IT(TP)A NO.189/BANG/2017 44. THE LD.AR SUBMITTED THAT, ACCENTIA TECHNOLOGIES LTD., INFORMED TECHNOLOGIES LTD., AND JINDAL INTELLICON L TD., WERE ACCEPTABLE TO ASSESSEE AS WELL AS REVENUE, HOWEVER THE DRP EXCLUDED IT SUO MOTO . THE LD.CIT.DR PLACED RELIANCE ON ORDERS OF THE DRP IN SUPPORT OF ITS EXCLUSION FOR NON-AVAILAB ILITY OF SEGMENTAL INFORMATION IS. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 45. WE NOTE THAT DRP IS NOT DISPUTING THE FUNCTIONA L SIMILARITIES OF THESE COMPARABLES. WE NOTE THAT ASSESSEE ALONG WITH ITS SYNOPSIS HAS FILED ANNUAL REPORTS OF THESE COMPARABLES WHERE IN THE SEGMENTAL DETAILS ARE SHOWN TO BE AVAILABLE. AS THE SE COMPARABLES WERE ACCEPTABLE TO ASSESSEE AS WELL AS REVENUE AND THAT THE LD.TPO HAD FOUND SEGMENTAL DETAILS AVAILABLE WHICH IS APPA RENT FROM THE RECORDS PLACED BEFORE US AND FROM THE ANNUAL REPORT S FILED, THE LD. AO/TPO IS DIRECTED TO CONSIDER ACCENTIA TECHNOLOGIE S LTD., INFORMED TECHNOLOGIES LTD., AND JINDAL INTELLICON L TD., THESE COMPARABLES IN THE FINAL LIST OF COMPARABLES IN ACC ORDANCE WITH LAW. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS P ARTLY ALLOWED. 46. GROUND NO. 15 HAS BEEN RAISED BY ASSESSEE FOR COMPUTING NEGATIVE WORKING CAPITAL ADJUSTMENT. AT THE OUTSET IS RELIANCE HAS BEEN PLACED ON COORD INATE BENCH OF THIS TRIBUNAL IN CASE OF E4E-BUSINESS SOLUTIONS INDIA PVT.LTD IN ITA NO.2900/B/2018 BY ORDER DATED 08/12/2020 . CONSISTENTLY THIS PAGE 27 OF 29 IT(TP)A NO.189/BANG/2017 TRIBUNAL HAS BEEN TAKING A VIEW THAT NEGATIVE WORKING CAPIT AL CANNOT BE GRANTED TO ASSESSEE. 47. THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO NEGATIVE WORKING CAPITAL ADJUSTMENT CARRIED OUT BY THE LD.TP O WHICH WAS CONFIRMED BY THE DRP. IT IS THE PLEA OF THE ASSESSE E THAT THOUGH THE LD.TPO HAS OBSERVED THAT THE ASSESSEE HAS A HEALTHY MARGIN, THE LD.TPO HAS ERRED IN MAKING AN ADJUSTMENT TOWARDS WO RKING CAPITAL AND THE DRP FURTHER ERRED IN UPHOLDING THE SAME. 48. IT WAS SUBMITTED THAT WORKING CAPITAL ADJUSTMEN T IS MADE FOR THE TIME VALUE OF MONEY LOST WHEN CREDIT TIME IS GI VEN TO THE CUSTOMERS. THE ASSESSEE HOWEVER DOES NOT BEAR ANY R ISK AND HAS NO WORKING CAPITAL CONTINGENCIES. THE ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR MEETING THE WORKING CAPITAL REQUIR EMENT. THE ASSESSEE IS RUNNING THE BUSINESS WITHOUT ANY WORKIN G CAPITAL RISK AS COMPARED TO THE COMPARABLES. THE ASSESSEE DOES N OT BEAR ANY MARKET RISK AS THE SERVICES ARE PROVIDED ONLY TO IT S GROUP ASSOCIATES. THEREFORE, REQUIREMENT FOR ADJUSTMENT O F NEGATIVE WORKING CAPITAL DOES NOT ARISE. 49. WE DRAW OUR SUPPORT FROM DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE REPORTED IN (2020) 120 COM 122 AND LAM RESEARCH INDIA (P.) LTD. V. DY. CIT IN [IT APPEAL N OS. 1473 & 1385 (BENG.) OF 2014, DATED 30-4-2015], TIVO TECH (P.) L TD. V. DY. CIT [2020] 117 TAXMANN.COM 259, AND DY. CIT V. SOFTWARE AG BANGALORE TECHNOLOGIES (P.) LTD. [IT APPEAL NO. 1628 OF 2014, DATED 31-3-2016] , WHERE IT HAS BEEN HELD THAT NEGATIVE WORKING CAPITA L ADJUSTMENT SHALL NOT BE MADE. PAGE 28 OF 29 IT(TP)A NO.189/BANG/2017 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN THE CASE OF LAM RESEARCH INDIA (P.) LTD . ( SUPRA ) AND SOFTWARE AG BANGALORE TECHNOLOGIES (P.) LTD . ( SUPRA ) PASSED BY THIS TRIBUNAL , IT HAS BEEN HELD THAT NEGATIVE WORKING CAPITAL ADJUSTM ENT SHALL NOT BE MADE IN CASE OF A CAPTIVE SERVICE PROVIDER AS THERE IS NO RISK AND IT IS COMPENSATED ON A TOTAL COST PLUS BASIS. WE THERE FORE DIRECT LD.TPO TO COMPUTE THE ALP IN ACCORDANCE WITH THE DI RECTIONS CONTAINED IN THIS ORDER AFTER AFFORDING ASSESSEE OP PORTUNITY OF BEING HEARD. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTL Y ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24 TH JUNE, 2021. SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 24 TH JUNE, 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 PAGE 29 OF 29 IT(TP)A NO.189/BANG/2017 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -6-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -6-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -6-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -6-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -6-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -6-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -6-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS