Parexel International (India) Private Limited, Hyderabad V. ACIT., Circle-16(2), Hyderabad, Hyderabad

ITA 1918/HYD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6179 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MO HARANA
• Assessee Lawyers: ABHIROOP K BHARGAV
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1918/HYD/2014 ASSESSMENT YEAR 2010-2011 PAREXEL INTERNATIONAL (INDIA) P. LIMITED, HYDERABAD 500 089 PAN A AECP2199N VS. THE ACIT, CIRCLE-16(2) HYDERABAD. (APPLICANT) (RESPONDENT) FOR ASSESSEE : MR. DHANESH BAFNA & MR. ABHIROOP K. BHARGAV FOR RE VENUE : MR. S. MOHARANA DATE OF HEARING : 1 0 .1 2 .201 5 DATE OF PRONOUNCEMENT : 08 . 0 1.201 6 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF A.O. UNDER SECTION 143(3) READ WITH SECTION 144C (5) OF THE I.T. ACT, CONSEQUENT TO THE DIRECTIONS GIVEN BY DRP VIDE ITS ORDER DATED 31.10.2014. THE ISSUE IN THE A PPEAL IS WITH REFERENCE TO THE TRANSFER PRICING ADJUSTMENT M ADE BY THE AO/TPO. 2. EVEN THOUGH ASSESSEE RAISED AS MANY AS 8 GROUNDS ON VARIOUS ISSUES, THE LD. COUNSEL RESTRICT ED HIS ARGUMENT TO GROUND NO.4 ON FOUR COMPARABLE COMPANIE S ONLY, WHICH ARE INCIDENTALLY CONSIDERED AND REJECTE D IN THE 2 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. CASE OF PEGASYSTEMS WORLDWIDE INDIA P. LTD., HYDERA BAD VS. THE ACIT, CIRCLE 16(2), HYDERABAD IN ITA.NOS.1758/HYD/2014 AND ITA.NO.1936/HYD/2014 DATED 16.10.2015. HENCE, THE OTHER GROUNDS ARE CONSIDERED WITHDRAWN. 3. WE HAVE HEARD THE LD. COUNSEL AND LD. D.R . AND PERUSED THE PAPER BOOK PLACED ON RECORD RUNNING TO PAGES 706. 4. BRIEFLY STATED, ASSESSEE IS ENGAGED IN BUSINESS WORKS AS CONTRACT IT AND ITES PROVIDER WHICH AID TH E CLINICAL TRIALS BUSINESS AND OTHER COMMERCIAL OR MA RKETING INTANGIBLES OWNED BY PARAXEL GROUP. ASSESSEE HAS VA RIOUS INTERNATIONAL TRANSACTIONS WITH THE GROUP INCLUDING PROVISION OF SERVICES AND ALL ARE CLUBBED AND ADOPT ED TNMM AS MOST APPROPRIATE METHOD (MAM). TPO DID NOT DISPUTE THE METHOD. THE PROFIT LEVEL INDICATOR OP/C OST RATIO FOR ABOVE SERVICES WAS AT 15.29%. ASSESSEE IN ITS T.P. STUDY, BASED ON 16 COMPARABLES JUSTIFIED THE A LP AS THE PLI OF 16 COMPARABLES WAS AT 13.18%. TPO REJECT ED THE T.P. DOCUMENT AS IT SUFFERS FROM DEFECTS SUCH A S SELECTION OF INAPPROPRIATE COMPARABLES, REJECTION O F COMPANIES THAT ARE APPROPRIATE ETC., TPO MADE INDEPENDENT ANALYSIS BY SEGREGATING TRANSACTIONS UN DER SOFTWARE/IT SERVICES AND ITES UNDER TNMM. FRESH SEA RCH RESULTED IN 18 AND 11 COMPARABLES CHOSEN RESPECTIVE LY AND THE RESULTANT PLI WAS WORKED OUT AT 22.69% AND 27.90% RESPECTIVELY. AFTER ALLOWING WORKING CAPITAL 3 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. ADJUSTMENT TPO FINALLY DETERMINED THE PLI AT 20.80% AND 27.53%. ALL THESE LEAD TO AN ADJUSTMENT OF RS.5,14,98,391. CONSEQUENT TO OBJECTIONS RAISED BY ASSESSEE BEFORE DRP AND AFTER DIRECTIONS, THE TPO R EVISED HIS WORKING ULTIMATELY RESULTING IN AN ADDITION OF RS.1,44,48,369. ASSESSEE IS OBJECTING TO THE SAME M AINLY ON INCLUSION OF 4 COMPARABLES IN ITES SEGMENT. 5. THE FINAL COMPARABLES AFTER DRP ORDER, AS SELECTED BY TPO ARE AS UNDER : SL. NO. NAME OF THE COMPARABLE COMPANY OP/TC AS PER TPO (POST WC ADJ.) 1. AVANI CIMCOM TECHNOLOGIES LTD., 2.53 2. CAT TECHNOLOGIES LTD., 7.03 3. COMP - U - LEARN TECHNOLOGIES INDIA LTD., 14.29 4. EV OKE TECHNOLOGIES 19.27 5. E - ZEST SOLUTIONS LTD., 21.32 6. KULIZA TECHNOLOGIES LTD., 24.65 7. MINDTREE LTD., (SEG.) 18.83 8. PERSISTENT SYSTEMS & SOLUTIONS LTD., 9.26 9. R S SOFTWARE (INDIA) LTD., 10.71 10. SASKEN COMMUNICATION TECHNOLOGIES LTD., 25.14 11. THINKSOFT GLOBAL SERVICES LTD., 9.13 12. ZYLOG SYSTEMS LTD., 15,13 13. PERSISTENT SYSTEMS LTD., 30.56 14. E - INFOCHIPS BANGALORE LTD., 66.52 15. KALS INFORMATION SYSTEMS LTD., 19.21 16. TATA ELXSI LTD., (SEG.) 15.86 17. L & T INFOTEC H LTD., 20.99 6. ASSESSEE IS OBJECTING TO COMPARABLES AT SL.NO.14 TO 17 I.E., 4 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. 1. E - INFOCHIPS BANGALORE LTD., 2. KALS INFORMATION SYSTEMS LTD., 3. TATA ELXSI LTD., (SEG.) 4. L & T INFOTECH LTD., 7. IT WAS FAIRLY ADMITTED THAT THESE FOUR COMPANIES WERE ANALYSED IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA P. LTD., HYDERABAD VS. ACIT, CIRCLE 16(2), HYDERABAD IN ITA.NO.1758/HYD/2014 DATED 16.10.2015 FOR THE SAME ASSESSMENT YEAR BY THE COORDINATE BENC H AT HYDERABAD AND EXCLUDED THEM BY STATING AS UNDER : E INFOCHIPS BANGALORE LTD., : 8. THIS COMPANY IS SELECTED BY TPO EVEN THOUGH ASSESSEE OBJECTED TO THE SAME (VIDE PAGE 34 AND 35 OF THE ORDER OF TPO). ASSESSEE OBJECTED THAT THE INFO RMATION FOR FY. 2009-10 WAS NOT AVAILABLE IN PUBLIC DOMAIN. IT WAS FURTHER CONTENDED THAT COMPANY IS FUNCTIONALLY DIFFERENT AND IS HAVING TWO DIFFERENT SEGMENTS I.E. , SOFTWARE DEVELOPMENT SERVICES AND ITES. COMPANY OF FERS BROAD PORTFOLIO OF SERVICES COMPRISING NEW PRODUCTS , PRODUCT DEVELOPMENT, PRODUCT SUSTENANCE AND MAINTENANCE, PRODUCT QUALITATIVE ANALYSIS (QA) AND INDEPENDENT TESTING HARDWARE AND SOFTWARE DESIGN ET C. TPO DID NOT ACCEPT ASSESSEES DOCUMENTS BY REFERRIN G TO THE SCHEDULES LIKE RESEARCH AND DEVELOPMENT, INVENT ORIES, SALES AND OTHER INCOMES. HE ALSO REPORTED THAT COM PANY IN THE NOTES TO THE ACCOUNTS HAS STATED THAT IT IS ENGAGED IN THE DEVELOPMENT AND MAINTENANCE OF COMPUTER SOFTWARE. THE PRODUCTION AND SALES OF SOFTWARE CAN NOT BE EXPRESSED IN ANY GENERIC UNIT. THUS, TPO REJECTED ASSESSEES OBJECTIONS AND RETAINED IT AS A COMPARAB LE. DRP ALSO AGREED WITH TPO. 8.1. IT WAS CONTENDED THAT AO RELIED ON THE ANNUAL REPORT OF FY. 2010-11 AND USED THE INFORMATI ON APPLICABLE TO FY. 2009-10 FROM THAT REPORT, AS THE INFORMATION FOR FY. 2009-10 WAS NOT AVAILABLE IN PU BLIC DOMAIN. IT IS ALSO SUBMITTED THAT THIS COMPANY WAS NEVER SELECTED EITHER BY TPO IN EARLIER YEAR OR IN LATER YEAR. IT WAS ALSO SUBMITTED THAT PROFITABILITY VARIES FROM Y EAR TO 5 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. YEAR AND IN THIS YEAR, THERE WAS ABNORMALLY VERY HI GH MARGIN, THE REASONS OF WHICH COULD NOT BE ANALYSED IN THE ABSENCE OF ANNUAL REPORT. IT WAS FURTHER CONTENDED THAT SEGMENTAL INFORMATION WAS NOT AVAILABLE. ON THE ARGUMENT THAT THE SAID COMPANY IS PROVIDING BOTH SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES LD. COUNSEL PLACED THE DISCLOSURES IN ANNUAL REPORT OF FY. 2008-09 AND ANNUAL REPORT OF FY. 2009-10 TO SUBMIT THAT THE COMPANY IS PRIMARILY ENGAGED IN SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES AND HAS REPORTE D BOTH OF THEM AS ONE SEGMENT. THEREFORE, COMPANY IS NOT COMPARABLE WITH ASSESSEES ON FUNCTIONAL ANALYSIS. I T WAS FURTHER SUBMITTED THAT COMPANY HAS MERGED IN 2012 W ITH ANOTHER COMPANY AND IT WILL BE DIFFICULT TO OBTAIN FURTHER INFORMATION/SEGMENTAL INFORMATION ABOUT THE COMPANY NOW. IN VIEW OF ITS FLUCTUATING PROFITS OVER THE Y EARS, THIS COMPANY WAS NOT SELECTED AS A COMPARABLE EARLIER OR IN LATER YEARS BY REVENUE. SINCE THE DISCLOSURE IN A NNUAL REPORT IS COMMON, ASSESSEE RELIED ON THE DECISION O F AHMADABAD BENCH OF ITAT IN THE CASE OF ALL SCRIPS ( INDIA) PRIVATE LTD., IN ITA NO. 771/AHD/2014 FOR AY. 2009- 10, WHEREIN THIS COMPARABLE WAS REJECTED ON THE BASIS O F LACK OF SEGMENTAL INFORMATION. ASSESSEE RELIED ON PARA 10 OF THE CO-ORDINATE BENCH ORDER, WHICH IS AS UNDER: PARA 10 WITH RESPECT TO E-INFOCHIP BANGALORE LTD., WE FIND THAT IN THE ANNUAL ACCOUNTS OF THE COMPANY, WITH RESPECT TO THE SEGMENT INFORMATION IT IS STATED THAT THE COMPANY IS PRIMARILY ENGAGED IN SOFTWARE DEVELOPMENT AND I.T ENABLED SERVICES WHICH IS CONSIDERED THE ONLY REPORTABLE BUSINESS SEGMENT AS PER ACCOUNTING STANDARD AS-17 SEGMENT REPORTING PRESCRIBED IN COMPANIES (ACCOUNTING STANDARD) RULES, 2006. WE THUS FIND THAT NO SEGMENTAL INFORMATION IS AVAILABLE ..CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE AFORESAID TWO COMPANIES NEEDS TO BE EXCLUDED WHILE WORKING OUT THE COMPARABILITY ANALYSIS AND THEREFORE UPHOLD THE PLEA OF THE ASSESSEE IN EXCLUDING THE MARGINS OF THE AFORESAID 2 COMPANIES. 6 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. 8.2. LD. DR, HOWEVER, REFERRED TO THE EXTRACTS MADE BY TPO IN THE ORDER TO SUBMIT THAT ASSESSEE IS A COMPARABLE COMPANY WITH THAT OF ASSESSEE. 8.3. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE ANNUAL REPORTS PLACED ON RECORD, WE AR E OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE COMPANY FOR TP ANALYSIS. FIRST OF ALL, THIS COMPANY IS ENGAGED IN BOTH SOFTWARE DEVELOPMENT AS WELL AS ITES. ASSESSEE BEING ONLY CAPTIVE SERVICE PROVIDER, THE ABOVE COMPANY CANNOT BE CONSIDERED AS COMPARABLE ON FUNCTIONAL BASIS. NOT ONLY THAT, AS POINTED OUT, SEGMENTAL INFORMATION PERTAINING TO THE ABOVE COMPANY IS NOT AVAILABLE. AS SEEN FROM THE TP ORD ERS, DOCUMENTS PLACED ON RECORD, TPO RELIED ON LATER YEA RS ANNUAL REPORT IN EXTRACTING THE INFORMATION. VARIA TION IN PROFITABILITY OVER THE YEARS ALONE CANNOT BE A REAS ON TO EXCLUDE THE COMPANY FROM COMPARABILITY ANALYSIS BUT AS RIGHTLY POINTED, THE ABSENCE OF SEGMENTAL INFORMATI ON, HOW MUCH PROFIT EARNED WAS ON THE SOFTWARE DEVELOPM ENT OR ITES CANNOT BE EXAMINED. IN THE ABSENCE OF CLA RITY ON OPERATIONAL DETAILS AND COMPARABLE COMPANY HAVING DIVERSIFIED ACTIVITIES, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE CHOSEN AS A COMPARABLE COMPANY IN ASSESSEES CASE IN THIS ASSESSMENT YEAR. WE ARE AL SO AWARE OF THE DECISION OF THE CO-ORDINATE BENCH GIVE N IN EARLIER ASSESSMENT YEAR ON THE REASON THAT SEGMENTA L REPORTING WAS NOT AVAILABLE. BE THAT AS IT MAY, SI NCE THE SAID COMPANY IS FUNCTIONALLY DIFFERENT FROM ASSESSE ES ACTIVITIES AND IN THE ABSENCE OF SEGMENTAL INFORMAT ION, WE DIRECT AO/TPO TO EXCLUDE THE ABOVE WHILE WORKING OU T THE COMPARABILITY ANALYSIS. WE UPHOLD THE PLEA OF ASSES SEE IN THIS REGARD. KALS INFORMATION SYSTEMS LTD : 10. ASSESSEE OBJECTED TO THE ABOVE COMPANY BEFORE TPO STATING THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN THE DEVE LOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. IT HAS INVENTOR IES EQUIVALENT TO 27% OF THE REVENUE. TPO HOWEVER REJE CTED ASSESSEES CONTENTIONS STATING THAT COMPANY CLASSIF IED ITSELF AS PURE SOFTWARE DEVELOPMENT SERVICE PROVIDE R. FURTHER, EXTRACTING PAGE NO. 22 OF THE ANNUAL REPOR T OF THE COMPANY, TPO OPINED THAT THE SEGMENTAL INFORMATION INDICATES THAT REVENUE IS SHOWN TO HAVE BEEN EARNED FROM APPLICATION SOFTWARE AND TRAINING. ACCORDINGLY, HE 7 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. REJECTED ASSESSEES OBJECTIONS AND INCLUDED AS THE COMPARABLE COMPANY. DRP CONFIRMED THE SAME. 10.1. ASSESSEES MAIN OBJECTION BEFORE US IS ON FUNCTIONALITY OF THE COMPARABLE COMPANY. AS SEEN F ROM THE ANNUAL REPORT OF 2008-09 AND 2009-10 AND COMPARATIVE STATEMENT PLACED BY ASSESSEE, THE COMPA NY CLASSIFIED ITSELF AS THE COMPANY ENGAGED IN DEVEL OPMENT OF SOFTWARE AND SOFTWARE PRODUCTS SINCE ITS INCEPTI ON. THE COMPANY CONSISTING OF STPI UNIT ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS AND A TRAINING CENTRE ENGAGED IN TRAINING OF SOFTWARE PROFESSIONALS ON ON-LINE PROJECTS. THIS INDICATES THAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE AND PRODUCTS AND ITS INVENTORY ALSO INDICATES THAT ASSE SSEE HAS BEEN USING ITS READYMADE LIBRARIES FOR SALES. THIS COMPANY WAS REJECTED IN EARLIER YEAR ON FUNCTIONAL ANALYSIS BY ITAT IN THE CASE OF PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 WHERE IN IT WAS HELD THAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODU CTS. SINCE ITS ANNUAL REPORT STATES THE SAME FACTS IN TH IS ASSESSMENT YEAR ALSO, WE ARE OF THE OPINION THAT TH E COMPANY CANNOT BE SELECTED AS A COMPARABLE AS IT WA S ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. ACCORDINGLY, ASSESSEES OBJECTIONS ARE A CCEPTED AND AO IS DIRECTED TO EXCLUDE THE COMPANY. TATA ELXSI LTD (SEG): 12. BEFORE TPO, ASSESSEE CONTENDED THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT SPECIALIZED IN EMBEDDED SOFTWARE DEVELOPMENT TECHNOLOGY. IT WAS ALSO OBJECTED BEFORE TPO THAT I N EARLIER YEAR THIS COMPANY HAS CLEARLY STATED THAT IT CANNOT BE COMPARED TO ANY OTHER SOFTWARE SERVICES COMPANY DUE TO COMPLEX NATURE OF ITS BUSINESS. ASSESSEE RELIED ON THE DECISIONS OF ITAT IN THE CASE OF CONEXANT SYSTEMS I NDIA PVT. LTD. (ITA NO.1429/HYD/2010 AND 1978/HYD/2011) AND OTHER CASES AS STATED BY TPO IN PAGE 41 OF HIS ORDER. HOWEVER, TPO DID NOT AGREE WITH THE OBJECTIONS STAT ING THAT THE COMPANY HAS TWO SEGMENTS INCLUDING SOFTWAR E DEVELOPMENT SERVICES AND REVENUE FROM SOFTWARE DEVELOPMENT SERVICES IS RS. 33,649 CRORES OUT OF TO TAL TURNOVER OF RS. 37,637 CRORES, WHICH IS AT 89.52%. THIS SIGNIFIED THE FACT THAT COMPANY IS PREDOMINANTLY IN TO 8 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. SOFTWARE DEVELOPMENT SERVICES. TPO REJECTED THE OBJECTIONS OF ASSESSEE SO AS DRP. 12.1. IT WAS THE OBJECTION OF ASSESSEE THAT ABOVE COMPANY IS PREDOMINANTLY INTO PRODUCT DESIGN SERVICES, INNOVATION DESIGN ENGINEERING AND VISUAL COMPUTING LABS DIVISION WHICH ARE SPECIALIZED SERVICES. HE REFERR ED TO THE ORDER OF ITAT IN AY. 2009-10 IN THE CASE OF PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 (SUPRA), WHEREIN THIS COMPANY WAS REJECTED ON THE REASON THAT IT IS ENGAG ED IN MULTIPLE SEGMENTS. THERE IS NO BREAK-UP IN THE ANN UAL REPORT AND DATA ON WHICH MARGIN FROM SOFTWARE SERVI CES ACTIVITY ONLY CAN BE COMPUTED IS ALSO NOT AVAILABLE . MOREOVER, THE COMPANY ITSELF HAS INDICATED THAT IT CANNOT BE COMPARED WITH ANY OTHER SOFTWARE SERVICE COMPANY BECAUSE OF ITS COMPLEX NATURE. SIMILAR VIEW WAS TA KEN BY MANY OF THE CO-ORDINATE BENCHES IN EARLIER YEARS TH AT TATA ELXSI LTD., CANNOT BE SELECTED AS COMPARABLE COMPANY. CONSISTENT WITH THE ABOVE VIEW, WE ARE OF THE OPINION THAT A COMPANY LIKE TATA ELXSI LTD., WHICH HAS COMPLEX ACTIVITIES AND SEGMENTAL INFORMATION OF WHI CH IS NOT AVAILABLE CANNOT BE SELECTED AS COMPARABLE COMP ANY TO ASSESSEE. MOREOVER, AS SEEN FROM THE TURNOVER A S REPORTED BY TPO ITSELF, IT WAS MANY TIMES ASSESSEE S TURNOVER AND THEREFORE CANNOT BE EXACTLY CONSIDERED AS A SIMILAR COMPANY UNLESS THE NATURE OF ACTIVITY, THE INCOMES ARE ANALYSED IN DETAIL. SINCE NO SEGMENTAL DATA IS AVAILABLE, CONSIDERING THE SOFTWARE DEVELOPMENT SER VICES AS A SEGMENT BY TPO CANNOT BE CONSIDERED AS SEGMENT AL DATA, UNLESS THE SERVICES RENDERED BY THAT COMPANY ARE SIMILAR TO THE SERVICES RENDERED BY ASSESSEE. IN V IEW OF THIS, WE ARE OF THE OPINION THAT THIS COMPANY CANNO T BE SELECTED AS COMPARABLE. AO IS DIRECTED TO EXCLUDE THE SAME. L & T INFOTECH LTD: 14. ASSESSEE HAS OBJECTED BEFORE TPO THAT THE DEPARTMENT IN EARLIER YEARS IS REJECTING THIS COMPA RABLE AS IT HAS REVENUE FROM SOFTWARE SERVICES AND PRODUCTS AND SEGMENTAL INFORMATION WAS NOT AVAILABLE. FURTHER, COMPANY DID NOT RESPOND TO THE NOTICE ISSUED U/S. 1 33(6) AND CHALLENGED THE SAID NOTICE BEFORE THE HON'BLE B OMBAY HIGH COURT. IT WAS FURTHER OBJECTED TO ON THE REAS ON THAT COMPANY HAD LESS MARGIN IN EARLIER YEAR AND THEREFO RE, 9 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. REJECTED BY THE DEPARTMENT, HOWEVER, MARGIN IS HIGH IN THIS YEAR, THE DEPARTMENT PROPOSED IT AS A COMPARAB LE AND THERE IS NO CONSISTENCY. THESE OBJECTIONS WERE REJECTED BY TPO VIDE HIS ANALYSIS IN PAGE 40 OF THE ORDER AND FROM THE EARNINGS IN FOREIGN EXCHANGE REPORTED, TPO CONSIDERED THE COMPANY AS INVOLVED IN SOFTWARE DEVELOPMENT SERVICES. THE SAME OBJECTIONS WERE REITERATED BEFORE DRP, BUT DRP REJECTED.. 14.1. IT WAS THE SUBMISSION OF THE LD. COUNSEL THA T DRP AT HYDERABAD IN THE CASE OF M/S. SUMTOTAL SYSTE MS INDIA PVT. LTD., [PAN: AABCC9379C] FOR THE SAME ASSESSMENT YEAR HAS EXCLUDED THE SAME BY STATING AS UNDER: WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE, INTERNATIONAL TRANSACTIONS INVOLVED, TP DOCUMENTATION OF THE ASSESSEE, THE MOST APPROPRIATE METHOD ADOPTED BY TPO AFTER REJECTING THE TP DOCUMENTATION OF THE ASSESSEE, THE FILTERS USED BY TPO AND ALSO VERIFIED THE FINANCIALS OF THE COMPARABLES WITH REFERENCE TO THE NOTES ON ACCOUNTS & WEBSITE NOTES. WE NOTICED THAT CERTAIN NOTES ON ACCOUNTS MADE IN CERTAIN CASES DO NOT MATCH WITH THAT OF THE FINANCIALS REPORTED. WE ALSO NOTICED THAT MEANING OF THE WORDS USED IN THE NOTES ON ACCOUNTS ARE NOT DEFINED. BASED ON CERTAIN ITAT DECISION, THE EARLIER DIRECTIONS OF THIS PANEL AND OTHER PANELS, THE HUGE TURNOVERS INVOLVED, HUGE BRAND VALUE, THEIR PREDOMINANT PRESENCE IN THE MARKET, IN VIEW OF INCOMPLETE DETAILS ETC., THIS PANEL IS OF THE VIEW THAT THE FOLLOWING COMPARABLES SELECTED BY TPO SHOULD BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES CHOSEN BY TPO IN THE ALP COMPUTATION. I) INFOSYS TECHNOLOGIES LTD., II) L&T INFOTECH LTD., WE DIRECT TPO TO EXCLUDE THE ABOVE REFERRED COMPARABLES FROM THE LIST OF FINAL COMPARABLES CHOSEN BY TPO IN THE ALP COMPUTATION AND RE- COMPUTE THE ALP ACCORDINGLY. 10 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. 14.2. IT WAS THE SUBMISSION THAT ONCE DRP HAS ACCEPTED THE OBJECTIONS OF ASSESSEE WHEREAS IN ASSESSEES CASE DRP DID NOT EXCLUDE L&T INFOTECH WH ILE EXCLUDING INFOSYS TECHNOLOGIES LTD., IT WAS THE SUBMISSION THAT SIMILAR FACTS EXIST FOR BOTH THE CO MPANIES AND DRP HAS EXCLUDED ONLY INFOSYS TECHNOLOGIES AND NOT L&T INFOTECH LTD., 14.3. AFTER CONSIDERING THE OBJECTIONS OF ASSESSEE AND PERUSING THE ORDER OF DRP IN THE CASE OF M/S. SUMTOTAL SYSTEMS INDIA PVT. LTD., (SUPRA), AS EXTRA CTED ABOVE, WE ARE OF THE OPINION THAT THIS COMPANY CANN OT BE SELECTED AS COMPARABLE BY THE SAME REASONS WHICH DR P IN THE ABOVE REFERRED CASE ACCEPTED. MOREOVER, THER E ARE NO SEGMENTAL DETAILS AND AS SEEN FROM THE ANNUAL RE PORT, REVENUES ARE REPORTED FROM SOFTWARE DEVELOPMENT SER VICES AND PRODUCTS, HOW MUCH IS FROM SERVICES AND HOW MUC H IS FROM PRODUCTS COULD NOT BE ANALYSED. EVEN THOUG H TPO CONSIDERED THE SOFTWARE EXPORTS REPORTED IN EARNING IN FOREIGN CURRENCY AS THAT OF SOFTWARE DEVELOPMENT SE RVICES, WE ARE NOT SURE WHETHER THE SOFTWARE EXPORTS REPORT ED THEREIN EXCLUSIVELY PERTAIN TO SERVICES OR PRODUCTS . AS THERE ARE NO SEGMENTAL DETAILS, IT IS VERY DIFFICUL T TO ANALYSE WHETHER THE INCOMES EARNED BY THE SAID COMP ANY DO REALLY PERTAIN TO THE SIMILAR SERVICES RENDERED BY ASSESSEE. AS ALSO SEEN FROM THE INCOME SCHEDULES, ENGINEERING SERVICES REPORTED IN EARLIER YEAR WERE NOT THERE IN THIS YEAR, THEREFORE, IT IS VERY DIFFICULT TO ANALYSE WHETHER THE COMPANY IS FUNCTIONALLY SIMILAR OR NOT? KEEPING IN VIEW OF THE ABOVE DIFFICULTIES IN ANALYZ ING THE DATA AND CONSIDERING THE REASONS GIVEN BY DRP IN TH E CASE OF M/S. SUMTOTAL SYSTEMS INDIA PVT. LTD., (SUP RA), WE ARE OF THE OPINION THAT L&T INFOTECH LTD., CANNOT B E SELECTED AS A COMPARABLE COMPANY. AO/TPO IS DIRECT ED TO EXCLUDE THE SAME FROM THE LIST OF COMPARABLES. GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 8. SINCE OBJECTION IS ONLY WITH REFERENCE TO THE ABOVE FOUR COMPARABLE COMPANIES, WE DIRECT THE TPO TO EXCLUDE THEM FOR THE SAME REASONS AS CONSIDERED AN D DECIDED IN THE ABOVE ORDER. THEREAFTER, TPO IS DIRE CTED TO EXAMINE WHETHER THE PLI DETERMINED IS WITHIN THE RA NGE AS PROVIDED UNDER SECTION 92C(2) OF THE ACT. 11 ITA.NO.1918/HYD/2014 PAREXEL INTERNATIONAL (INDIA) P. LTD., HYDERABAD. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 08.01.2016. SD/- SD/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 08 TH JANUARY, 2016 VBP/- COPY TO 1. PAREXEL INTERNATIONAL (INDIA) P. LTD., 11 TH FLOOR, BUILDING 20, SURVEY NO.64 (PART), SUNDEW PROPERTIES SEZ P. LTD., RAHEJA MINDSPACE, APIIC SOFTWARE UNIT S LAYOUT MADHAPUR, HYDERABAD 500 081. 2. THE ACIT, CIRCLE - 16(2), HYDERABAD. 3. DISPUTES RESOLUTION PANEL, 2 ND FLOOR, I.T. TOWERS, 10 - 2-3, A.C. GUARDS, HYDERABAD. 4. DIRECTOR OF INCOME TAX (T.P.), CHENNAI & MEMBER, DRP, HYDERABAD. 5. DIRECTOR OF INCOME TAX (I.T. & T.P.), HYDERABAD. 6. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICING) , HYDERABAD. 7. D.R. ITAT B BENCH, HYDERABAD 8 . GUARD FILE