M/s Altisource Business Solutions Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 208/BANG/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1384 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-04-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 18-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Retrospective amendment; Bad and doubtful debts; Unabsorbed depreciation; TDS; Set aside; CHAPTER IV
• Section: 92C; 43B; 234B; 274; 208; 264; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.208/BANG/2016 ASSESSMENT YEAR : 2011-12 M/S ALTISOURCE BUSINESS SOLUTIONS PVT.LTD., PRITECH PARK,SURVEY NUMBER 51 TO 64/4,BLOCK NUMBER- 12,3 RD FLOOR A WING,BELLANDUR VILLAGE,SARJAPUR MARATHAHALLI OUTER RING ROAD, BANGALORE-560103. PAN AAACO9467A VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -1(1)(1), BANGALORE. APPELLANT RESPONDENT IT(TP)A NO.209/BANG/2016 ASSESSMENT YEAR : 2011-12 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -1(1)(1), BANGALORE. VS. M/S ALTISOURCE BUSINESS SOLUTIONS PVT.LTD., PRITECH PARK,SURVEY NUMBER 51 TO 64/4,BLOCK NUMBER-12,3 RD FLOOR A WING,BELLANDUR VILLAGE,SARJAPUR MARATHAHALLI OUTER RING ROAD, BANGALORE-560103. PAN AAACO9467A PAGE 2 OF 25 IT(TP)A 208 & 209/BANG/2016 APPELLANT RESPONDENT A SSESSEE BY : S HRI K.R VASUDEVAN, ADVOCATE RE VENUE BY : SHRI SHISHIR SRIVASTAVA, CIT DATE OF HEARING : 07 - 0 4 - 202 1 DATE OF PRONOUNCEMENT : 02 - 0 7 - 202 1 ORDER PER BEENA PILLAI, JUDICIAL MEMBER THE PRESENT CROSS APPEALS HAVE BEEN FILED BY ASSESSEE AS WELL AS REVENUE AGAINST ORDER DATED 21/12/2015 PASSED BY THE LD.ACIT CIRCLE 1(1)(1) BANGALORE UNDER SECTION 143 (3) READ WITH SECTION 144C(5) READ WITH SECTION 144C(13) OF THE ACT, FOR ASSESSMENT YEAR 2011-12 ON FOLLOWING GROUNDS OF APPEAL: ITA NO.208/B/2016 THE LEARNED ASSESSING OFFICER ('LEARNED AO'), LEARN ED TRANSFER PRICING OFFICER ('LEARNED TPO') AND THE HONOURABLE DISPUTE RESOLUTI ON PANEL ('HON'BLE DRP') GROSSLY ERRED IN ADJUSTING THE TRANSFER PRICE BY IN R 15,17,38,598/- OF THE APPELLANT'S INTERNATIONAL TRANSACTIONS WITH ITS ASS OCIATED ENTERPRISES ('AES') WITH RESPECT TO THE SOFTWARE DEVELOPMENT SERVICES ( 'IT') AND IT ENABLED SERVICES ('ITES') RENDERED BY THE TAX PAYER U/S 92C A OF THE INCOME- TAX ACT, 1961. 2. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN REJECTING THE TP DOCUMENTATION MAINTAINED BY THE APPELLANT BY INVOKI NG PROVISIONS OF SUB- SECTION (3) OF 92C OF THE ACT. 3. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN REJECTING COMPARABILITY ANALYSIS CARRIED IN THE TP DOCUMENTATION AND IN CON DUCTING A FRESH COMPARABILITY ANALYSIS BY INTRODUCING VARIOUS FILTE RS IN DETERMINING THE ALP. 4. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN NOT CONSIDERING THE PREVIOUS TWO YEARS FINANCIAL DATA OF THE COMPARABLE COMPANIES WHILE DETERMINING THE ALP. PAGE 3 OF 25 IT(TP)A 208 & 209/BANG/2016 5. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN USING DATA AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS, INSTEAD OF THE DATA AVAILABLE AT THE TIME OF PREPARING THE TP DOCUMENTATION FOR COMPARABLE CO MPANIES WHILE DETERMINING ALP. 6. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN APPLYING EXPORT EARNING FILTER OF 75% INSTEAD OF 25% OF THE TOTAL SALES, LE ADING TO A NARROW COMPARABLE SET. 7. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN APPLYING RELATED PARTY FILTER OF 25% WITHOUT GIVING ANY COGENT REASON FOR DOING SO. 8. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN NOT APPLYING THE UPPER LIMIT ON THE SALES TURNOVER FILTER WHILE SELECTING THE COMPARABLE COMPANIES, DESPITE OF THE FACT THAT THE LOWER LIMIT ON THE SAL ES TURNOVER FILTER WAS APPLIED FOR COMPARABILITY ANALYSIS. 9. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN APPLYING DIFFERENT FINANCIAL YEAR ENDING FILTER WHILE SELECTING THE CO MPARABLE COMPANIES. 10. THE LEARNED AU/LEARNED TPO/HON'BLE DRP ERRED IN NOT CONSIDERING THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS EXTRAORDINA RY IN NATURE. 11. THE LEARNED AU/LEARNED TPO/HON'BLE DRP ERRED IN APPLYING ONSITE FILTER TO REJECT THE COMPANIES THAT ARE COMPARABLE TO THE APPELLANT. 12. SOFTWARE DEVELOPMENT SERVICES: 12.1 THE LEARNED AU/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN NOT ADJUDICATING UPON THE FUNCTIONAL COMPARABILITY OF T HE LARSEN & TOUBRO INFOTECH LTD. 12.2 THE LEARNED AU/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN NOT REJECTING PERSISTENT SYSTEMS & SOLUTIONS LTD AS IT IS FUNCTIONALLY DIFFERENT VIS- -VIS THE APPELLANT. 12.3 THE LEARNED AU/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN NOT REJECTING PERSISTENT SYSTEMS LTD. BASED ON FUNCTION AL DISSIMILARITY, NON- AVAILABILITY OF SEGMENTAL DATA, SIGNIFICANT RESEARC H & DEVELOPMENT ACTIVITIES, OWNING OF SIGNIFICANT INTANGIBLES AND PRESENCE OF E XTRAORDINARY EVENTS THAT OCCURRED DURING THE RELEVANT YEAR. 12.4 THE LEARNED AU/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN NOT REJECTING SASKEN COMMUNICATIONS TECHNOLOGIES LTD. O N THE GROUND OF FUNCTIONAL DISSIMILARITY AND NON- AVAILABILITY OF S EGMENTAL DATA. 12.5 THE LEARNED AU/LEARNED TPO/HON'BLE DRP HAS GRO SSLY ERRED IN REJECTING THE FOLLOWING COMPANIES THAT OUGHT TO HAVE BEEN INC LUDED AS COMPARABLES: (A) AKSHAY SOFTWARE TECHNOLOGIES LTD (B) COMP-U-LEARN TECH INDIA LTD. (C) HELIOS AND MATHESON INFORMATION TECHNOLOGY LTD . (D) LGS GLOBAL LTD. (E) MAVERIC SYSTEMS LTD. (F) THINKSOFT GLOBAL SERVICES LTD. (G) SILVERLINE TECHNOLOGIES LTD. (H) EVOKE TECHNOLOGIES PAGE 4 OF 25 IT(TP)A 208 & 209/BANG/2016 (I) R S SOFTWARE (INDIA) LTD. 13. IT ENABLED SERVICES 13.1 THE LEARNED AO/ LEARNED TPO/ HON'BLE DRP ERRED IN REJECTING COMPANIES THAT OUGHT TO HAVE BEEN ACCEPTED AS COMPARABLE: COSMIC GLOBAL LTD. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. MICROGENETICS SYSTEMS LTD. OMEGA HEALTHCARE MANAGEMENT SERVICES R SYSTEMS INTERNATIONAL LTD. CALIBER POINT BUSINESS SOLUTIONS LTD. INFORMED TECHNOLOGIES INDIA LTD. 13.2 THE LEARNED AO/ LEARNED TPO/HON'BLE DRP ERRED IN ACCEPTING ICRA ONLINE LTD. AS A COMPARABLE THAT OUGHT TO HAVE BEEN REJECTED. 14. THE LEARNED AO/LEARNED TPO/HON'BLE DRP HAS ERRE D IN MAKING THE FOLLOWING ERRORS IN THE COMPUTATION OF WORKING CAPI TAL ADJUSTMENT WHILE COMPUTING THE ALP OF INTERNATIONAL TRANSACTION: A. BY NOT CONSIDERING THE FACT THAT THE APPELLANT D OES NOT HAVE ANY WORKING CAPITAL RISK, THEREFORE, NO NEGATIVE WORKING CAPITA L ADJUSTMENT SHOULD BE ALLOWED. B. IN CONSIDERING THE WRONG SBI PLR WHILE COMPUTING THE WORKING CAPITAL ADJUSTMENT. C. BY WRONGLY COMPUTING THE WORKING CAPITAL ADJUSTM ENT OF CERTAIN COMPARABLE COMPANIES. 15. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN NOT ALLOWING APPROPRIATE ADJUSTMENT TOWARDS TO THE RISK DIFFEREN TIAL BETWEEN THE APPELLANT VIS--VIS COMPARABLE COMPANIES. B. CORPORATE TAX 1. RE-COMPUTATION OF DEDUCTION UNDER SECTION 10A BY REDUCING COMMUNICATION EXPENSES FROM EXPORT TURNOVER AND TOT AL TURNOVER THE LEARNED ASSESSING OFFICER (AO) AND THE LEARNED DISPUTE RESOLUTION PANEL ('DRP') HAVE ERRED IN REDUCING COMMUNICATION EXPENS ES FROM EXPORT TURNOVER AND TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING DE DUCTION UNDER SECTION BA. 2. DISALLOWANCE UNDER SECTION 40(A)(I) FOR SOFTWARE EXPENSES - RS. 24,723,240 A) THE LEARNED ASSESSING OFFICER (AO) AND THE LEARN ED DISPUTE RESOLUTION PANEL ('DRP') HAVE ERRED IN DISALLOWING SOFTWARE EX PENSE AMOUNTING TO RS. 24,723,240 FOR NON- DEDUCTION OF TAX AT SOURCE. B) THE LEARNED AO/DRP OUGHT TO HAVE OBSERVED THAT O N THE SAID EXPENSE, NO TDS WAS REQUIRED TO BE DEDUCTED AS PER THE TAX TREA TY OF INDIA WITH THE RESPECTIVE COUNTRIES OF PAYEES. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE ABOVE, C) THE LEARNED AO/DRP OUGHT TO HAVE APPRECIATED THA T SOFTWARE PURCHASED FROM ALTISOURCE SOLUTIONS INC IS IN THE NATURE OF R EIMBURSEMENT OF EXPENSES AND HENCE NOT SUBJECT TO WITHHOLDING. PAGE 5 OF 25 IT(TP)A 208 & 209/BANG/2016 D) THE LEARNED AO/DRP OUGHT TO HAVE APPRECIATED THA T AN EXPENSE CANNOT BE DISALLOWED UNDER SECTION 40(A) WHEN TDS LIABILITY O N SUCH EXPENSES HAS ARISEN DUE TO RETROSPECTIVE AMENDMENT. 18. DISALLOWANCE OF BROUGHT FORWARD BUSINESS LOSS A ND UNABSORBED DEPRECIATION INR21,112,859 THE LEARNED AO HAS ERRED IN DISALLOWING BROUGHT FOR WARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AMOUNTING TO INR RS.1,64,07 .586 AND INR 47,05,273 RESPECTIVELY WHICH IS CONSEQUENTIAL IN NA TURE TO THE APPEAL OF THE APPELLANT FOR AY 2010-11. 19. NON GRANT OF BROUGHT FORWARD MAT CREDIT - INR 2 ,73,54,274 THE LEARNED AO HAS ERRED IN GIVING MAT CREDIT OF ON LY INR 52,89,24 1 AS AGAINST THE AVAILABLE CREDIT OF INR 3,26,43,5 15 WH ICH IS CONSEQUENTIAL IN NATURE TO THE APPEAL OF THE APPELLANT FOR AY 2010-11 20. LEVY OF INTEREST UNDER SECTION 234B - ITHR 3,69 ,46,944 THE LEARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B AMOUNTING TO INR 3,69,46,944 WHICH IS CONSEQUENTIAL IN NATURE TO THE ABOVE ADJUSTMENTS 21. LEVY OF INTEREST UNDER SECTION 234C - INR 1,25, 877 THE LEARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234C AMOUNTING TO INR 9,01,239 AS AGAINST ACTUAL INTEREST OF INR7,75, 362 RESULTING IN EXCESS LEVY OF INTEREST OF INR1,25,877 22. LEVY OF INTEREST UNDER SECTION 234D - INR 5,51, 170 THE LEARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234D AMOUNTING TO INR 5,51,170 WHICH IS CONSEQUENTIAL IN NATURE TO TH E ABOVE ADJUSTMENTS THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND MODIFY THE ABOVE GROUNDS DURING THE COURSE OF THE APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RA ISED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE ASSESSI NG OFFICER BE SET ASIDE. ITA NO.209/B/2016 1. THE ORDERS OF THE DISPUTE RESOLUTION PANEL IS O PPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. SOFTWARE DEVELOPMENT SERVICES SEGMENT: 2. THE DRP ERRED IN DIRECTING THE AO/TPO TO EXCLUDE M/S. ACROPETAL TECHNOLOGIES LTD., M/S. LARSEN & TOUBRO INFOTECH LT D., AND M/S. R.S. SOFTWARE (INDIA) LTD., FROM THE LIST OF COMPARABLES , HOLDING THEM TO BE FUNCTIONALLY DISSIMILAR AS THEY ARE HAVING SIGNIFIC ANT ONSITE REVENUES, THEREBY SEEKING EXACT COMPARABILITY WHILE SEARCHING FOR COM PARABLE COMPANIES OF THE ASSESSEE UNDER TNMM METHOD, WHEREAS REQUIREMENT OF LAW AND INTERNATIONAL JURISPRUDENCE REQUIRE SEEKING SIMILAR COMPARABLE CO MPANIES. ALSO, THE NATURE OF ACTIVITY, IE., SOFTWARE DEVELOPMENT REMAINS THE SAME, IRRESPECTIVE OF THE COMPANY ENGAGED IN PROVIDING ONSITE OR OFFSHORE SER VICES. 3. THE DRP ERRED IN DIRECTING EXCLUSION OF M/S. ACR OPETAL TECHNOLOGIES LTD., M/S. LARSEN & TOUBRO INFOTECH LTD., AND M/S. R.S. SOFTWA RE (INDIA) LTD., ON THE PAGE 6 OF 25 IT(TP)A 208 & 209/BANG/2016 GROUND THAT THEY HAVE SIGNIFICANT ONSITE REVENUE, W ITHOUT APPRECIATING THE FACT THAT ONSITE DEVELOPMENT OF SOFTWARE ENTAILS MORE CO ST AND THEREBY RESULTS IN LOWER PROFIT MARGINS. 4. THE DRP ERRED IN DIRECTING THE AD TO EXCLUDE M/S . ACROPETAL TECHNOLOGIES LTD., FROM THE LIST OF FINAL COMPARABLES ALSO FOR T HE REASON THAT CLEAR SEGMENTAL INFORMATION OF THE EMPLOYEE COST AND EXPORT EARNING FILTER WAS NOT AVAILABLE WITHOUT APPRECIATING THAT PROPER SEGMENTAL INFORMAT ION WAS AVAILABLE ON PROWESS DATABASE AS WELL AS AUDITED FINANCIALS. 5. THE DRP ERRED IN DIRECTING TO EXCLUDE E-INFOCHIP S LTD., FROM THE LIST OF COMPARABLES HOLDING THAT NO SEGMENTAL INFORMATION I S AVAILABLE AND THAT IT FAILS 75% SERVICE REVENUE FILTER, BY NOT ACKNOWLEDG ING THE FACT THAT ENTIRE REVENUE OF THE COMPANY COMES FROM PROVISION OF SERV ICES, AND SERVICE INCOME BEING 100% OF ITS SALES, THE COMPANY QUALIFIES THE FILTER. 6. THE DRP ERRED IN DIRECTING EXCLUSION OF M/S. M/S .ICRA TECHNO ANALYTICS LTD., FROM THE LIST OF COMPARABLES ON THE GROUND THAT IT IS INTO DIVERSIFIED ACTIVITY AND NO SEGMENTAL DATA IS AVAILABLE, WITHOUT APPRECI ATING THAT THE BASIC FUNCTION OF THE COMPANY IS DEVELOPING SOFTWARE SOLU TIONS IN THOSE AND OTHER VERTICALS. THE COMPANY'S BUSINESS OF ANALYSIS OF ST ATISTICAL DATA OF ITS CLIENTS BEFORE PROVIDING SOFTWARE SOLUTIONS DOES NOT RENDER THE SERVICES TO BE FUNCTIONALLY DISSIMILAR. 7. THE DRP ERRED IN DIRECTING TO EXCLUDE M/S.E-ZEST SOLUTIONS LTD., FROM THE LIST OF COMPARABLES HOLDING IT TO BE FUNCTIONALLY UNCOMP ARABLE, THEREBY SEEKING EXACT COMPARABILITY BY IMPOSING CONDITION BEYOND LA W WHEREAS REQUIREMENT OF LAW IS TO ACKNOWLEDGE ONLY THOSE DIFFERENCES THA T ARE LIKELY TO MATERIALLY AFFECT THE MARGIN. THE DRP OUGHT TO HAVE APPRECIATE D THAT THE COMPARABLE QUALIFIED ALL THE QUALITATIVE AND QUANTITATIVE FILT ERS APPLIED BY THE TPO AND IN A COMPUTER SOFTWARE SERVICES, IF CONSIDERED AS A SECT OR OF BUSINESS, THE 15 DIFFERENT LINES PREVAILING IN THE BUSINESS CANNOT B E CONSIDERED FUNCTIONALLY DIFFERENT FROM EACH OTHER. 8. THE DRP ERRED IN DIRECTING EXCLUSION OF M/S.INFO SYS TECHNOLOGIES LTD., FROM THE LIST OF COMPARABLES HOLDING IT TO BE FUNCTIONAL LY UNCOMPARABLE, WITHOUT APPRECIATING THAT THE PRIMARY SOURCE OF INCOME OF T HE COMPARABLE IS FROM PROVISION OF SOFTWARE DEVELOPMENT SERVICES. ALSO, T HE DRP ERRED IN IMPOSING A CONDITION BEYOND LAW IN SEEKING EXACT COMPARABILITY , WHEREAS REQUIREMENT OF LAW IS TO ACKNOWLEDGE ONLY THOSE DIFFERENCES THAT A RE LIKELY TO MATERIALLY AFFECT THE MARGIN. 9. THE DRP ERRED IN DISREGARDING THE POSITION OF LA W THAT THERE COULD BE DIFFERENCES BETWEEN THE ENTERPRISES COMPARED UNDER TNMM METHOD THAT ARE NOT LIKELY TO MATERIALLY AFFECT THE PRICE OR COST C HARGED OR THE PROFITS ACCRUING TO SUCH ENTERPRISES. 10.THE DRP ERRED IN DIRECTING THE AO TO EXCLUDE M/S . TATA ELXSI LTD., FROM THE LIST OF COMPARABLES, HOLDING IT TO BE FUNCTIONALLY UNCOMPARABLE, WITHOUT APPRECIATING THE FACT THAT THE COMPARABLE QUALIFIED ALL THE QUALITATIVE AND QUANTITATIVE FILTERS APPLIED BY THE TPO AND IT IS A SIMILAR COMPARABLE COMPANY PAGE 7 OF 25 IT(TP)A 208 & 209/BANG/2016 AND MOREOVER, THE REQUIREMENT OF LAW AND INTERNATIO NAL JURISPRUDENCE REQUIRE SEEKING SIMILAR COMPARABLE COMPANIES WHILE SEARCHIN G FOR COMPARABLE COMPANIES UNDER TNMM. THE DRP HAS ALSO NOT APPRECIA TED THAT THERE HAVE BEEN NO PROJECTS IN VISUAL COMPUTING LABS DURING TH E RELEVANT PREVIOUS YEAR. 11.THE DRP ERRED IN DIRECTING THE AO/TPO TO EXCLUDE M/S. R.S. SOFTWARE (INDIA) LTD., FROM THE LIST OF COMPARABLES MERELY TO MAINTA IN CONSISTENCY, EVEN IN THE ABSENCE OF OBJECTION WITH RESPECT TO INCLUSION OF T HE SAID COMPARABLES IN THE LIST. ITES SEGMENT: 12.THE DRP ERRED IN DIRECTING THE AO/TPO TO EXCLUDE M/S. ACROPETAL TECHNOLOGIES LTD., HOLDING IT TO BE FUNCTIONALLY DI FFERENT BECAUSE IT PERFORMS ENGINEERING DESIGN, WITHOUT APPRECIATING THAT THE C OMPANY IS CONSIDERED TO BE A COMPARABLE BASED ON THE NOTIFICATION NO.11521 ISS UED BY THE CBDT, WHEREIN THERE IS NO DISTINCTION BETWEEN A BPO & KPO . THE DRP ALSO ERRED IN APPLYING 'ONSITE REVENUE FILTER' WITHOUT APPRECIATI NG THE FACT THAT THE FUNCTION CARRIED OUT IS 'SOFTWARE DEVELOPMENT' IRRESPECTIVE OF WHETHER ONSITE OR OFFSHORE. 13.THE DRP ERRED IN EXCLUDING M/S.ACROPETAL TECHNOL OGIES LTD., ON THE GROUND THAT IT HAS SIGNIFICANT ONSITE REVENUE WITHOUT APPR ECIATING THE FACT THAT ONSITE DEVELOPMENT OF SOFTWARE ENTAILS MORE COST AND THERE BY RESULTS IN LOWER PROFIT MARGINS. 14.THE DRP ERRED IN DIRECTING THE AO/TPO TO EXCLUDE M/S. JEEVAN SCIENTIFIC TECHNOLOGIES LTD., HOLDING IT TO BE FUNCTIONALLY UN COMPARABLE AS IT FAILS SERVICE INCOME FILTER, WHEN ONLY THE SEGMENTAL RESULTS HAVE BEEN CONSIDERED FOR COMPARABILITY AND IN SUCH A SCENARIO, THE APPLICATI ON OF SERVICE INCOME TO TOTAL INCOME FILTER DOES NOT ARISE. ALSO, SEEKING EXACT F UNCTIONAL SIMILARITY UNDER TNMM IS NOT RIGHT AS REQUIREMENT OF LAW AND INTERNA TIONAL JURISPRUDENCE REQUIRE SEEKING SIMILAR COMPARABLE COMPANIES. 15.THE DRP ERRED IN DIRECTING THE AO/TPO TO EXCLUDE M/S. ACCENTIA TECHNOLOGIES LTD., HOLDING IT TO BE FUNCTIONALLY DI FFERENT THEREBY INSISTING ON STRICT COMPARABILITY UNDER TNMM, WHICH DEFEATS THE VERY PURPOSE OF THE LAW RELATING TO DETERMINATION OF ALP UNDER I.T. ACT. TH E DRP HAS FAILED TO APPRECIATE THAT THE SERVICES RENDERED BY THE ASSESS EE IN THE HEALTHCARE RECEIVABLE MANAGEMENT USING ELECTRONIC MEDICAL RECO RDS, CODING, BILLING ETC., TO PROVIDE A PLATFORM FOR THE CLIENT TO MANAGE THEI R VARIOUS REQUIREMENTS, ARE ALL CONSIDERED TO BE PRIMARILY ENGAGED IN PROVIDING ITES TO ITS CLIENTS. 16.THE DRP ERRED IN DIRECTING TO EXCLUDE M/S.INFOSY S BPO LTD., FROM THE LIST OF COMPARABLES HOLDING THEM TO BE FUNCTIONALLY UNCOMPA RABLE, THEREBY SEEKING EXACT COMPARABILITY BY IMPOSING CONDITION BEYOND LA W, WHEREAS REQUIREMENT OF LAW IS TO ACKNOWLEDGE ONLY THOSE DIFFERENCES THA T ARE LIKELY TO MATERIALLY AFFECT THE PRICE OR COST CHARGED OR THE PROFITS ACC RUING TO SUCH ENTERPRISES. THE DRP FAILED TO APPRECIATE THAT THE BRAND NAME PERSE DOES NOT INCREASE THE PROFITABILITY BUT MAY ONLY GENERATE REVENUE. PAGE 8 OF 25 IT(TP)A 208 & 209/BANG/2016 17.THE DRP ERRED IN DIRECTING THE AO TO EXCLUDE M/S . IGATE GLOBAL SOLUTIONS LTD., FROM THE LIST OF COMPARABLES, HOLDING IT TO B E FUNCTIONALLY UNCOMPARABLE IN THE ABSENCE OF SEGMENTAL INFORMATION WITHOUT APP RECIATING THAT THE COMPARABLE HAD CLASSIFIED ITSELF TO BE OPERATING IN ONE SEGMENT IE., PROVISION OF ITES AND FURTHER, INSISTING ON STRICT COMPARABIL ITY UNDER TNMM DEFEATS THE VERY PURPOSE OF THE LAW RELATING TO DETERMINATION O F ALP UNDER I.T.ACT. CORPORATE ISSUE: 18. THE DRP ERRED IN DIRECTING THE AO TO FOLLOW THE RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 AND EXCLUDE TELECOMMUNICATION EXPENSES AND TRAVELLING EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER ALSO, WHILE COMPUT ING THE DEDUCTION U/S 10A OF THE I.T. ACT, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROVISION IN SECTION 10A THAT SUCH EXPENSES SHOULD BE REDUCED FR OM THE TOTAL TURNOVER ALSO, AS CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TUR NOVER. 19.THE DRP ERRED IN NOT APPRECIATING THE FACT THAT THE JURISDICTIONAL HIGH COURT'S DECISION IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFO RE THE HON'BLE SUPREME COURT. 20.THE DRP ERRED IN ALLOWING THE CLAIM OF THE ASSES SEE U/S.36(1)(VA) AMOUNTING TO RS.2,10,42,281/- WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE HAS NOT REMITTED THE EMPLOYEES' CONTRIBUTION TOWARDS THE PR OVIDENT FUND & ESI WITHIN THE DUE DATE AND AS SUCH, THESE SUMS ARE AN INCOME IN THE HANDS OF THE ASSESSEE IN TERMS OF SECTION 2(24)(X) R.W.S. 36(1)( VA). 21. THE DRP FAILED TO APPRECIATE THE FACT THAT THE EMPLOYEES' CONTRIBUTION TO PF/ESI IS TO BE ALLOWED U/S 36(1)(VA), IF SUCH CONT RIBUTIONS ARE REMITTED WITHIN THE DUE DATES PRESCRIBED UNDER THE RELEVANT ACTS AN D THE DUE DATE REFERRED IN SECTION 43B(B) ARE NOT APPLICABLE TO THE EMPLOYEES' CONTRIBUTION. 22.THE DRP ERRED IN DELETING THE DISALLOWANCE HOLDI NG THAT THE EMPLOYEES CONTRIBUTION TOWARDS ESI & PF HAD BEEN REMITTED WEL L BEFORE THE DUE DATE FOR FILING THE RETURN, WITHOUT APPRECIATING THE FACT TH AT THE MADRAS HC IN THE CASE OF CIT V MADRAS RADIATORS AND PRESSINGS LTD. [2003] 264 ITR 620 HAD MADE A CLEAR DEMARCATION BETWEEN THE EMPLOYEES' CONTRIBUTI ON AND THE EMPLOYER'S CONTRIBUTION AND THAT THE ITAT, KOLKATA IN THE CASE OF BENGAL CHEMICAL AND PHARMACEUTICALS LTD. [2011] 10 TAXMAN.COM 26, AFTER CONSIDERING THE DECISION OF THE CASE OF SABARI ENTERPRISES HAD CLARIFIED THA T THE EMPLOYEES' CONTRIBUTION TO PF & ESI IS NOT GOVERNED BY SECTION 43B AND AS S UCH THE AMENDMENT TO SECTION 43B(B) WOULD HAVE NO EFFECT ON THE ADDITION S OF THE SUMS COVERED U/S 2(24)(X) R.W.S 36(1)(VA). 23.THE DRP ERRED IN DELETING THE DISALLOWANCE OF EM PLOYEES' CONTRIBUTION TO PF AND ESI FUNDS WITHOUT APPRECIATING THE CLARIFICATIO N BROUGHT OUT BY THE CBDT AT PARAGRAPH 5, VIDE ITS LATEST CIRCULAR NO.22/2015 DATED 17.12.2015 PAGE 9 OF 25 IT(TP)A 208 & 209/BANG/2016 24 FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE DRP BE REVER SED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 25. THE APPELLATE CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A COMPANY AND FILED ITS RETURN O F INCOME FOR YEAR UNDER CONSIDERATION ON 30/11/2011 DECLARING TA XABLE INCOME OF RS.19,17,30,609/-. THE ASSESSEE FILED REVISED RE TURN OF INCOME ON 29/11/2012 DECLARING THE SAME INCOME BUT RECTIFYING THE BROUGHT FORWARD MAT CREDIT FROM ASSESSMENT YEAR 2010-11 RET URN OF INCOME. ASSESSEE HAD A TOTAL INCOME OF RS.31,63,01, 080/-FROM BUSINESS ON WHICH ASSESSEE HAD CLAIMED 10A/10AA DED UCTION AMOUNTING TO RS.10,36,40,466/- AND THEREAFTER CLAIM ED SET OFF OF BROUGHT FORWARD LOSSES AMOUNTING TO RS.1,64,07,586/ - AND UNABSORBED DEPRECIATION OF RS.47,05,273/- AFTER TAK ING INTO CONSIDERATION INCOME FROM OTHER SOURCES OF RS.1,82, 850/-. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WER E ISSUED IN RESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEAR ED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. 3. THE LD.AO OBSERVED THAT, ASSESSEE IS PROVIDING S ERVICES IN SWD AND ITES SEGMENT AND HAD ENTERED INTO INTERNATI ONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES EXCEEDI NG RS.15CRORES AND THEREFORE REFERENCE WAS MADE TO THE TRANSFER PR ICING OFFICER. UPON RECEIPT OF REFERENCE UNDER 92CA, THE LD.TPO CA LLED FOR ECONOMIC DETAILS OF THE INTERNATIONAL TRANSACTION E NTERED INTO BY ASSESSEE WITH ITS ASSOCIATED ENTERPRIS ASSESSEE HAD FOLLOWING INTERNATIONAL TRANSACTION: 4. I T WAS OBSERVED THAT ASSESSEE METHOD WITH OP/OC AS PLI THERE AND 14.38% FOR SWD AND ITES SEGMENT 5. THE LD.TPO OBSERVED THAT ASSESSEE HAD SELECTED COMPARABLES WITH AVERAGE MARGIN OF 13.71% DEVELOPMENT ACTIVITY AND 8 COMPARABLES 14.38% IN RESPECT OF IT ENABLED SERVICES THE DETAILS OF WH ICH ARE AS UNDER: SWD SEGMENT ----- THIS SPACE IS LEFT INTENTIONALLY PAGE 10 OF 25 IT(TP)A 208 & 209/BANG/2016 ASSOCIATED ENTERPRIS ES. THE LD. TPO OBSERVED THAT ASSESSEE HAD FOLLOWING INTERNATIONAL TRANSACTION: T WAS OBSERVED THAT ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD WITH OP/OC AS PLI THERE BY COMPUTING ITS MARGIN AT 15.10 AND 14.38% FOR SWD AND ITES SEGMENT . THE LD.TPO OBSERVED THAT ASSESSEE HAD SELECTED FOLLOWING WITH AVERAGE MARGIN OF 13.71% IN RESPECT OF SOFTWARE DEVELOPMENT ACTIVITY AND 8 COMPARABLES WITH AVERAGE MARGIN OF IN RESPECT OF IT ENABLED SERVICES THE DETAILS OF WH ICH ARE AS THIS SPACE IS LEFT INTENTIONALLY ------ 209/BANG/2016 TPO OBSERVED THAT USED TNMM AS MOST APPROPRIATE BY COMPUTING ITS MARGIN AT 15.10 % FOLLOWING 13 IN RESPECT OF SOFTWARE WITH AVERAGE MARGIN OF IN RESPECT OF IT ENABLED SERVICES THE DETAILS OF WH ICH ARE AS ITES SEGMENT PAGE 11 OF 25 IT(TP)A 208 & 209/BANG/2016 209/BANG/2016 6. UNHAPPY WITH ASSESSEES FRESH SEARCH AND SHORTLISTED FOLLOWING 13 COMPARABLES FOR SWD SEGMENT WITH AN AVERAGE MARGIN OF 24.82% AND 10 COM PARABLES FOR ITES SEGMENT WITH AN AVERAGE MARGIN OF 24.77%: SWD SEGMENT ITES SEGMENT ----- TH IS SPACE IS LEFT VACANT INTENTIONALLY PAGE 12 OF 25 IT(TP)A 208 & 209/BANG/2016 ASSESSEES COMPARABLES, THE LD. TPO CARRIED OUT SHORTLISTED FOLLOWING 13 COMPARABLES FOR SWD SEGMENT WITH AN AVERAGE MARGIN OF 24.82% AND 10 COM PARABLES FOR ITES SEGMENT WITH AN AVERAGE MARGIN OF 24.77%: IS SPACE IS LEFT VACANT INTENTIONALLY ------- 209/BANG/2016 TPO CARRIED OUT SHORTLISTED FOLLOWING 13 COMPARABLES FOR SWD SEGMENT WITH AN AVERAGE MARGIN OF 24.82% AND 10 COM PARABLES FOR ------- 7. THE LD.TPO ALSO RESTRICTED WORKING 1.63% AND 1.47% FOR SWD AND ITES SEGMENT RISK ADJUSTMENT. THE LD.TPO THUS COMPUTED SHORTFALL AT RS.51,322,305/- AND RS.129,984,850/ ITES SEGMENT RESPECTIVELY 8. ON RECEIPT OF THE DRAFT ASSESSMENT ORDER ON 17/03/2015 DISALLOWANCES WERE MADE AS UNDER: DISALLOWANCE OF BROUGHT FORWARD LOSS DEPRECIATION- RS.2,11,12, DISALLOWANCE OF EXCESS CLAIM OF DEDUCTI A/10 AA- RS. 40,76,587/ DISALLOWANCE UNDER SECTION 40 (A) (IA) O RS.2,47,23,240/- DISALLOWANCE UNDER SECTION 2 (24) (X) READ WITH SEC TION 36 (1) (VA)- RS.2,10,42,281/ 9. AGGRIEV ED BY THE ADDITIONS MADE BY LD. OBJECTIONS BEFORE THE DRP. 10. T HE DRP EXCLUDED CERTAIN COMPUTE DEDUCTION UNDER SECTION 10A/10 PAGE 13 OF 25 IT(TP)A 208 & 209/BANG/2016 THE LD.TPO ALSO RESTRICTED WORKING CAPITAL ADJUSTMENT AT 1.63% AND 1.47% FOR SWD AND ITES SEGMENT RESPECTIVELY RISK ADJUSTMENT. THE LD.TPO THUS COMPUTED SHORTFALL AT AND RS.129,984,850/ - UNDER SWD SERVICES AND AN RESPECTIVELY . ON RECEIPT OF THE TRANS FER PRICING ORDER, THE LD. DRAFT ASSESSMENT ORDER ON 17/03/2015 , WHEREIN MADE AS UNDER: DISALLOWANCE OF BROUGHT FORWARD LOSS AND UNABSORBED RS.2,11,12, 859/- DISALLOWANCE OF EXCESS CLAIM OF DEDUCTI ON UNDER 40,76,587/ - DISALLOWANCE UNDER SECTION 40 (A) (IA) O N SOFTWARE PURCHASES DISALLOWANCE UNDER SECTION 2 (24) (X) READ WITH SEC TION 36 (1) RS.2,10,42,281/ - ED BY THE ADDITIONS MADE BY LD. AO, ASSESSEE FIL OBJECTIONS BEFORE THE DRP. HE DRP EXCLUDED CERTAIN COMPARABLES AND DIRECTED LD. DEDUCTION UNDER SECTION 10A/10 AA IN ACCORDANCE WITH THE 209/BANG/2016 CAPITAL ADJUSTMENT AT RESPECTIVELY DENIED RISK ADJUSTMENT. THE LD.TPO THUS COMPUTED SHORTFALL AT UNDER SWD SERVICES AND AN FER PRICING ORDER, THE LD. AO PASSED WHEREIN , FURTHER AND UNABSORBED ON UNDER SECTION 10 N SOFTWARE PURCHASES - DISALLOWANCE UNDER SECTION 2 (24) (X) READ WITH SEC TION 36 (1) AO, ASSESSEE FIL ED COMPARABLES AND DIRECTED LD. AO TO AA IN ACCORDANCE WITH THE PAGE 14 OF 25 IT(TP)A 208 & 209/BANG/2016 DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS TATA ELXSI LTD. REPORTED IN 394 ITR 98 . ALL OTHER CORPORATE TAXES DISALLOWANCES WERE UPHELD BY THE DRP. 11. ON RECEIPT OF THE DRP ORDER THE LD.AO PASSED TH E FINAL IMPUGNED ORDER BY COMPUTING TOTAL INCOME OF RS.38,9 3,05,310/-. 12. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE AS W ELL AS REVENUE ARE IN APPEAL BEFORE US NOW. 13. IN THE APPEAL FILED BY REVENUE, ONLY ISSUE IS I N RESPECT OF DEDUCTION COMPUTED UNDER SECTION 10A/10AA OF THE AC T. 14. ADMITTEDLY THIS ISSUE IS RES INTEGRA SETTLED BY THE DECISION OF HONBLE SUPREME COURT IN CASE OF YOKOGAWA INDIA LTD., REPORTED IN 391 ITR 274 WHEREIN IT HAS BEEN HELD AS UNDER: THAT FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A IT IS MORE THAN CLEAR THAT THE DEDUCTIONS CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDE RTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEO US CIRCULAR NO. 794, DATED 9-8-2000. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRS T PROVISO TO SECTIONS 10A(1); 10A(1A) AND 10A(4)] THAT THE UNIT THAT IS C ONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 9-8- 2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THERE FORE, 'IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF IT S PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OT HER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 WOULD BE PREMATURE FOR APPLICATION. THE DEDU CTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENC EMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI FOR ARRI VING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL INCOME OF T HE ASSESSEE' IN PAGE 15 OF 25 IT(TP)A 208 & 209/BANG/2016 SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPR ESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL IN COME OF THE UNDERTAKING'. FOR THE AFORESAID REASONS IT IS HELD THAT THOUGH SE CTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGI BLE UNDERTAKING UNDER CHAPTER IV AND' NOT AT THE STAGE OF COMPUTATI ON OF THE TOTAL INCOME UNDER CHAPTER VI. 15. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE V IEW TAKEN BY THE LD.AO. ACCORDINGLY THE GROUNDS RAISED BY REVENUE STANDS DI SMISSED. 16. IN THE APPEAL FILED BY ASSESSEE, LD.AR SUBMITTE D THAT ASSESSEE WISH TO ARGUE GROUNDS 12.2-12.4 AND THE COMPARABLES (H), (J) IN GROUND 12.5. IT IS SUBMITTED BY THE LD.AR THAT, IN GROUND NO.13 ASSESSEE SEEKS INCLUSION OF COMPARABLES REFERRED IN 13.1 (A) AND (B) AND SEEKS EXCLUSION OF COMPARABLE ALLEGED IN GROUND NO.13.2. 17. THE LD.AR FURTHER SUBMITTED THAT, ASSESSEE IN G ROUND NO.14 ALLEGES THAT WORKING CAPITAL MAY BE GRANTED IN ACT UALS AND HAS NOT PRESSED GROUND 14 (A). 18. BEFORE WE UNDERTAKE THE COMPARABILITY ANALYSIS, IT IS SINE QUA NON TO UNDERSTAND THE FUNCTIONS PERFORMED THE RISK ASS UMED AND ASSETS OWNED BY ASSESSEE UNDER BOTH THE SEGMENTS. FUNCTIONS PERFORMED: 19. THE LD.TPO HAS RECORDED IN THE TRANSFER PRICING ORDER THAT ASSESSEE PROVIDES CONTRACT SOFTWARE SERVICE DEVELOP MENT AND IT ENABLED SERVICES INCLUDING DATA ANALYSIS, COMPILATI ON AND TRANSMISSION ON CUSTOMISED SOFTWARE TO OVERSEAS AE. IT IS ALSO BEEN PAGE 16 OF 25 IT(TP)A 208 & 209/BANG/2016 RECORDED THAT ASSESSEE HAS ENTERED INTO AN AGREEMEN T WITH ITS AE IN 2009 FOR RENDITION OF SUCH SERVICES. ASSETS OWNED 20. THE ASSETS OWNED BY ASSESSEE INCLUDES EMPLOYEES , PROPERTY, PLANT AND EQUIPMENT ETC WHICH IS REQUIRED TO CARRY OUT THE DAY-TO- DAY BUSINESS OF ASSESSEE. RISKS ASSUMED 21. IN THE TRANSFER PRICING STUDY, ASSESSEE ASSUMES ONLY HUMAN RESOURCE RISK AND ALL OTHER RISK ARE BEING BORN BY THE AE. BASED ON THE ABOVE IT CAN BE HELD THAT ASSESSEE IS A PURE CONTRACT SERVICE PROVIDER THAT RENDERS SERVICES ONLY TO ITS AE WITH BARE MINIMUM RISK OR NO RISK. 22. AS LD.AR HAS ONLY ARGUED IN RESPECT OF COMPARAB LES SOUGHT FOR INCLUSION/EXCLUSION IN THE GROUNDS REFERRED TO HERE IN ABOVE. WE THEREFORE RESTRICT OUR OPINION ONLY IS RESPECT OF T HESE GROUNDS. REMAINING GROUNDS ARE THEREFORE DISMISSED AS NOT PR ESSED. GROUND NO. 12.2-12.4: 23. ASSESSEE SEEKS EXCLUSION OF PERSISTENT SYSTEMS AND SOLUTIONS LTD., PERSISTENT SYSTEMS LTD., AND SASKEN COMMUNICA TION TECHNOLOGIES LTD., ON THE GROUND THAT IT IS FUNCTIO NALLY DIFFERENT WITH THAT OF ASSESSEE. IT HAS BEEN SUBMITTED THAT T HIS COMPARABLE IS EXCLUDED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF APPLIED MATERIALS INDIA PVT.LTD VS ACIT IN IT(TP)A NO.17/B/2016 FOR THE VERY SAME ASSESSMENT YEAR UNDER CONSIDERATION BY OBSERVI NG AS UNDER: 9.2.1 THESE TWO COMPANIES WERE PART OF THE TP STUDY ANALYSIS HOWEVER THE ASSESSEE RAISED OBJECTIONS AGAINST THESE COMPANIES BEFORE THE TPO AS WELL AS. PAGE 17 OF 25 IT(TP)A 208 & 209/BANG/2016 9.2.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTAT IVE OF THE ASSESSEE HAS SUBMITTED THAT THESE COMPANIES ARE FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE AS THESE ARE ENGAGED IN DIVERSIFIED ACTIVI TY I.E. RENDERING OF SOFTWARE DEVELOPMENT SERVICES AND LICENSING, ROYALTY OF SOFT WARE PRODUCTS. THUS WITHOUT HAVING THE SEPARATE SEGMENTAL DETAILS AND D ATA THESE DIVERSIFIED ACTIVITIES CANNOT BE COMPARED WITH THE ASSESSEE. HE HAS FURTHER POINTED OUT THAT THE COMPANY PERSISTENT SYSTEMS LTD. ALSO ENGAG ED IN DEVELOPING PRODUCTS AND THEREFORE THE ACTIVITIES ARE NOT COMPARABLE WIT H THAT OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE D ECISION OF THIS TRIBUNAL DT.24.2.2016 IN THE CASE OF DCIT VS. ELECTRONICS FO R IMAGING INDIA PVT. LTD. (SUPRA) AND SUBMITTED THAT THIS COMPANY WAS FOUND T O BE NOT COMPARABLE WITH THE SOFTWARE DEVELOPMENT SERVICES PROVIDER. HE HAS FURTHER POINTED OUT THAT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2010-11 , THE DRP VIDE ITS ORDER DT.24.11.2014 HAS EXCLUDED PERSISTENT SYSTEMS AND S OLUTIONS LTD. FROM THE LIST OF COMPARABLES BY HOLDING THAT THIS COMPANY IS NOT COMPARABLE TO THE ASSESSEE. 9.2.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED T HAT THE TPO AS WELL AS DRP HAS EXAMINED THE FUNCTIONAL COMPARABILITY OF THESE COMPANIES AND FOUND THAT THESE COMPANIES ARE COMPARABLE WITH THE ASSESSEE. T HESE TWO COMPANIES HAVE SATISFIED ALL THE FILTERS APPLIED BY THE TPO A ND DRP THEREFORE THE MINOR VARIATION IN THE ACTIVITY WOULD NOT RENDER THESE CO MPANIES NON-COMPARABLE WHEN A COMPARABLE PRICE IS CONSIDERED UNDER TNMM. 9.2.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS W ELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THE FUNCTIONAL COMPARABILITY OF THESE TWO COMPANIES HAVE EXAMINED BY THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. ELECTRONICS FOR IMAGING IND IA PVT. LTD. (SUPRA) IN PARA 60 AND 61 & PARAS 24 TO 26 AS UNDER : PERSISTENT SYSTEMS & SOLUTIONS LTD. 60. THE ASSESSEE HAS THE GRIEVANCE AGAINST REJECTIO N OF THIS COMPANY BY THE DRP. THE LD. AR HAS SUBMITTED THAT ASSESSEE DID NOT RAISE ANY OBJECTION AGAINST THIS COMPANY, HOWEVER, THE DRP HAS REJECTED THE SAID COMPANY. THEREFORE, THE SAID COMPANY SHOULD BE RETAINED IN T HE LIST OF COMPARABLES. 61. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET, WE NOTE THAT THE DRP HAS EXA MINED THE FUNCTIONAL COMPARABILITY OF THIS COMPANY BY CONSIDERING THE RE LEVANT DETAILS AS GIVEN IN THE ANNUAL REPORT OF THIS COMPANY. THE DRP HAS GIVE N THE FINDING THAT THE ENTIRE REVENUE HAS BEEN EARNED BY THIS COMPANY FROM THE SALE OF SOFTWARE SERVICES AND PRODUCTS AND IN THE ABSENCE OF SEGMENT AL DETAILS, IT CANNOT BE CONSIDERED AS COMPARABLE WITH SOFTWARE SERVICES SEG MENT. WE FIND THAT THIS COMPANY HAS SHOWN THE INCOME FROM SALE OF SOFTWARE SERVICES AND PRODUCTS TO THE TUNE OF RS.6.67 CRORES. WE FURTHER NOTE THAT AS PER SCHEDULE 11, THE ENTIRE REVENUE HAS BEEN SHOWN UNDER ONE SEGMENT I.E ., SALE OF SOFTWARE SERVICES AND PRODUCTS. THEREFORE, NO SEPARATE SEGME NT HAS BEEN GIVEN IN RESPECT OF SOFTWARE SERVICES. ACCORDINGLY, THE COMP OSITE DATA OF REVENUE AS PAGE 18 OF 25 IT(TP)A 208 & 209/BANG/2016 WELL AS MARGINS OF THIS COMPANY PERTAINING TO THE S ALE OF SOFTWARE SERVICES AND PRODUCTS CANNOT BE CONSIDERED AS COMPARABLE WIT H THE SOFTWARE DEVELOPMENT SERVICES SEGMENT OF THE ASSESSEE. IN VI EW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ERROR OR ILLE GALITY IN THE DIRECTIONS OF THE DRP IN EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLES. THIS GROUND OF CO IS DISMISSED. (4) PERSISTENT SYSTEMS LTD. 24. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE RAISED OBJECTIONS AGAINST SELECTION OF THIS COMPANY ON THE GROUND THAT THIS COMPANY IS FUNCTION ALLY NOT COMPARABLE AS ENGAGED IN THE PRODUCT DEVELOPMENT. THE SEGMENTAL I NFORMATION FOR SERVICES AND PRODUCT IS NOT AVAILABLE. FURTHER, THE ASSESSEE HAS ALSO POINTED OUT THAT THERE WAS AN ACQUISITION AND RESTRUCTURING DURING T HE YEAR UNDER CONSIDERATION. 25. THE DRP HAS NOTED THE FACT THAT THIS COMPANY HA S REPORTED THE ENTIRE RECEIPT FROM SALES AND SOFTWARE SERVICES AND PRODUC T. THEREFORE, NO SEGMENTAL INFORMATION WAS FOUND TO BE AVAILABLE FOR SALE OF SOFTWARE SERVICES AND PRODUCT. FURTHER, THE DRP HAS NOTED TH AT AS PER NOTE 1 OF SCHEDULE 15, THIS COMPANY IS PREDOMINANTLY ENGAGED IN OUTSOURCE SOFTWARE DEVELOPMENT SERVICE. APART FROM THE REVENUE FROM SO FTWARE SERVICES, IT ALSO EARNS INCOME FROM LICENCE OF PRODUCTS, ROYALTY ON S ALE OF PRODUCTS, INCOME FROM MAINTENANCE CONTRACT, ETC. THESE FACTS RECORDE D BY THE DRP HAS NOT BEEN DISPUTED BEFORE US. 26. THEREFORE, WHEN THIS COMPANY IS ENGAGED IN DIVE RSIFIED ACTIVITIES AND EARNING REVENUE FROM VARIOUS ACTIVITIES INCLUDING L ICENCING OF PRODUCTS, ROYALTY ON SALE OF PRODUCTS AS WELL AS INCOME FROM MAINTENANCE CONTRACT, ETC., THE SAME CANNOT BE CONSIDERED AS FUNCTIONALLY COMPARABLE WITH THE ASSESSEE. FURTHER, THIS COMPANY ALSO EARNS INCOME F ROM OUTSOURCE PRODUCT DEVELOPMENT. IN THE ABSENCE OF ANY SEGMENTAL DATA O F THIS COMPANY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE FINDINGS OF THE DRP THAT THIS COMPANY CANNOT BE COMPARED WITH THE ASSESSEE AND THE SAME I S DIRECTED TO BE EXCLUDED FROM THE SET OF COMPARABLES. WE FURTHER FI ND FROM THE ANNUAL REPORT THAT THERE IS NO CHANGE IN THE ACTIVITY AND FUNCTIONS OF THESE COMPANIES DURING THE YEAR UNDER CONSIDERATION IN CO MPARISON TO THE ASSESSMENT YEAR 2010-11. ACCORDINGLY, FOLLOWING THE DECISIONS OF THE CO- ORDINATE BENCHES OF THIS TRIBUNAL (SUPRA), WE DIREC T THE A.O./TPO TO EXCLUDE THESE TWO COMPANIES FROM THE SET OF COMPARABLES. (IV) SASKEN COMMUNICATION TECHNOLOGIES LTD. 9.3.1 THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THIS COMPANY IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE PRODUCTS AS IT HAS I NVENTORIES, INTANGIBLE ASSETS AS WELL AS HIGH EXPENDITURE ON R&D. THEREFOR E THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE. THE LD . AR HAS REFERRED TO THE PAGE 19 OF 25 IT(TP)A 208 & 209/BANG/2016 ANNUAL REPORT OF THIS COMPANY AND SUBMITTED THAT IT DERIVES INCOME FROM SOFTWARE PRODUCTS SPECIFICALLY NEW PRODUCTS LAUNCHE D CALLED VYAPARASEVA DURING F.Y. 2010-11. THUS THIS COMPANY IS ENGAGED I N PRODUCT DEVELOPMENT CANNOT BE COMPARED WITH THE ASSESSEE WHEN SEGMENTAL DETAILS ARE NOT AVAILABLE. HE HAS RELIED UPON THE DECISION DT.24.2. 2016 OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. ELEC TRONICS FOR IMAGING INDIA PVT. LTD. (SUPRA). 9.3.2 ON THE OTHER HAND, THE LEARNED DEPARTMENTAL R EPRESENTATIVE HAS SUBMITTED THAT THE INVENTORY SHOWN AT PAGE 70 OF TH E REPORT IS VERY NEGLIGIBLE. THE PRODUCT LAUNCHED IS FOR FUTURE PERIOD AND NOT G ENERATED IT(T.P)A NOS.17 & 39/BANG/2016 ANY REVENUE DURING THE YEAR UNDER CONS IDERATION. HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 9.3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS W ELL AS THE RELEVANT MATERIAL ON RECORD. THE CO-ORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF DCIT VS. ELECTRONICS FOR IMAGING INDIA PVT. LTD. (SUPRA) HAS CONSIDERED THE COMPARABILITY OF THIS COMPANY IN PARAS 27 TO 29 AS UNDER : (5) SASKEN COMMUNICATION TECHNOLOGIES LTD. 27. THE ASSESSEE RAISED OBJECTION THAT THIS COMPANY HAS REVENUE FROM SOFTWARE SERVICES, SOFTWARE PRODUCTS AND OTHER SERV ICES. THE DRP HAS COME TO THE CONCLUSION THAT THIS COMPANY EARNED REV ENUE FROM 3 SEGMENTS. HOWEVER, NO SEGMENTAL INFORMATION IS AVAILABLE. ACC ORDINGLY, THE DRP DIRECTED THE AO TO EXCLUDE THIS COMPANY FROM THE CO MPARABLES. 28. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE DRP HAS REPRODUCED THE BREAK-UP OF REVENUE IN THE IMPUGNED ORDER AS UNDER:- AMOUNT IN RS. LAKHS ___________________________________________________ _____________________ YEAR ENDED MARCH 31, 2010 MARCH 31, 2019 ___________________________________________________ _____________________ SOFTWARE SERVICES 37,736.22 40531.20 SOFTWARE PRODUCTS 2,041.00 6 146.43 OTHER SERVICES 372.77 1 297.05 TOTAL REVENUES 40,150.89 47,974.68 ___________________________________________________ _____________________ 29. THUS, THERE IS NO DISPUTE THAT THIS COMPANY EAR NS REVENUE FROM 3 SEGMENTS. HOWEVER, THE SEGMENTAL OPERATING MARGINS ARE NOT AVAILABLE. THEREFORE, IN THE ABSENCE OF SEGMENTAL RELEVANT DAT A AND PARTICULARLY OPERATING MARGINS, THIS COMPOSITE DATA CANNOT BE CO NSIDERED AS COMPARABLE WITH THE ASSESSEE FOR SOFTWARE DEVELOPME NT SERVICES SEGMENT. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE FINDINGS OF THE DRP. WE FURTHER NOTE THAT THE DRP HAS NOT ADJUDICATED TH E OBJECTIONS OF THE ASSESSEE WHEREAS FOR THE ASSESSMENT YEAR 2010-11, T HE DRP REJECTED THIS COMPANY AS COMPARABLE. ACCORDINGLY, WE SET ASIDE TH IS ISSUE TO RECORD OF THE A.O./TPO TO VERIFY THE RELEVANT FACTS AND COMPARE W ITH THE FACTS RECORDED BY PAGE 20 OF 25 IT(TP)A 208 & 209/BANG/2016 THE TRIBUNAL IN THE CASE OF DCIT VS. ELECTRONICS FO R IMAGING INDIA PVT. LTD. (SUPRA) FOR THE ASSESSMENT YEAR 2010-11 AND THEN DE CIDE THE ISSUE AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 24. WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL HELD THESE COMPANIES TO BE NOT FIT COMPARABLE FOR A CAPTIVE SE RVICE PROVIDER RENDERING SERVICES ONLY TO ITS ASSOCIATED ENTERPRIS E BEFORE US. NOTHING HAS BEEN BROUGHT ON RECORD BY REVENUE TO ES TABLISH ANY DISTINGUISHING FACTS SO AS TO TAKE A DIFFERENT VIEW . RESPECTFULLY FOLLOWING THE ABOVE VIEW WE DIRECT LD. AO TO EXCLUDE THESE COMPARABLES FROM THE FINALIST. ACCORDINGLY GROUND NO.12.2 STANDS ALLOWED. GROUND NO.12.5 (H)(J): 26. THE ASSESSEE SEEKS INCLUSION OF EVOKE TECHNOLOG IES AND RS SOFTWARE (INDIA) LTD. 27. THE LD.AR SUBMITTED THAT, ASSESSEE DO NOT HAVE ANY OBJECTIONS IF THESE COMPANIES ARE RESTORED TO THE S ET OF COMPARABLES AS ASSESSEE DID NOT RAISE ANY OBJECTIONS BEFORE THE DRP BUT DRP REJECTED THESE COMPANIES SUO MOTO . IN VIEW OF THE FACT THAT ASSESSEE AS WELL AS REVENUE ARE SEEKING INCLUSION OF THESE C OMPARABLES, WE SET ASIDE THE DIRECTIONS OF DRP QUA THESE COMPARABL ES AND RESTORE THESE COMPANIES TO THE FINAL SET OF COMPARABLES. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED. GROUND 13.1 (A)-(B): 28. THE ASSESSEE SEEKS INCLUSION OF COSMIC GLOBAL L TD. AND E4E- HEALTHCARE BUSINESS SERVICES PVT LTD., UNDER I T EN ABLED SERVICES. PAGE 21 OF 25 IT(TP)A 208 & 209/BANG/2016 IT HAS BEEN SUBMITTED THAT THESE COMPARABLES WERE E XCLUDED BY DRP THOUGH THESE WERE ACCEPTABLE TO THE ASSESSEE. I T HAS BEEN SUBMITTED THAT THE DRP HAS EXCLUDED THESE COMPARABL ES FOR THE RELEVANT REASON THAT IN CASE OF COSMIC GLOBAL LTD., EXPENSES TO THE EXTENT OF 41% IS ON SUB CONTRACTING/OUTSOURCING AN D IN CASE OF E4E-HEALTHCARE, IT HAS BEEN OBSERVED BY THE DRP THA T IT IS ENGAGED IN FORWARD CONTRACTS, WHICH IN TURN INFLUENCE MARGI N INCONSISTENCY IN ACCOUNTING ETC. 29. THE LD.AR SUBMITTED THAT, THESE COMPARABLES WER E INCLUDED BY THE LD.TPO AFTER VERIFYING THE OPERATING INCOME AND OPERATING COSTS. 30. IN VIEW OF THE FACT THAT ASSESSEE AS WELL AS RE VENUE ARE SEEKING INCLUSION OF THESE COMPARABLES, WE SET ASIDE THE DI RECTIONS OF DRP QUA THESE COMPARABLES AND RESTORE THESE COMPANIES TO T HE FINAL SET OF COMPARABLES. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED. GROUND NO. 13.2: 31. THE ASSESSEE SEEKS EXCLUSION OF A ICRA ONLINE L TD. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS COMPARABLE HAS BEEN RE MANDED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF FINEST RA SOFTWARE SOLUTIONS PVT.LTD VS.ACIT IN IT(TP)A NO. 491 & 529/ BANG/2016 BY ORDER DATED 25/05/2018 BY OBSERVING AS UNDER: 26. AS FAR AS THE COMPANY ICRA ONLINE LTD. IS CONC ERNED, THIS TRIBUNAL IN THE CASE OF M/S.ZYME SOLUTIONS PVT.LTD. VS. ACIT IT (TP) A.NO.85/BANG/2016 FOR AY 2011-12 ORDER DATED 28.4.2 017 IN PARAGRAPH- 26 OF ITS ORDER WAS PLEASED TO REMAND TO TPO/AO FOR FRESH CONSIDERATION, THE COMPARABILITY OF THIS COMPANY WITH THE ASSESSEE . FOLLOWING THE SAID PAGE 22 OF 25 IT(TP)A 208 & 209/BANG/2016 DECISION, WE SET ASIDE THE ORDER OF THE AO IN THIS REGARD AND REMAND TO THE TPO/AO FOR FRESH CONSIDERATION THE COMPARABILIT Y OF THIS COMPANY WITH THE ASSESSEE ON THE LINES INDICATED IN THE ORD ER IN THE CASE OF M/S.ZYME SOLUTIONS PVT.LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME WE DIRECT LD.AO/TPO TO CONSIDER THIS COMPARABLE AFRESH IN LIGHT OF VARIOUS DECISION S OF THIS TRIBUNAL. ACCORDINGLY THIS GROUNDS RAISED STANDS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 14 (B)-(C) 32. IT HAS BEEN SUBMITTED BY THE LD.AR THAT ASSESSE E IS SEEKING WORKING CAPITAL ADJUSTMENT IN ACTUAL INSTEAD OF RES TRICTING IT TO 1.63% AS DONE BY THE LD.TPO. 33. THE LD.AR SUBMITTED THAT CANNOT BE RESTRICTED A ND HAS TO BE COMPUTED ON ACTUAL. IT HAS BEEN SUBMITTED THAT COOR DINATE BENCH OF THIS TRIBUNAL IN PRECEDING ASSESSMENT YEAR IN IT(TP)A NO.178/BANG/2015 BY ORDER DATED 11/03/2021 HAD DIRE CTED THE LD.AO TO COMPUTE THE WORKING CAPITAL ADJUSTMENT ON ACTUAL. 34. WE HAVE HEARD BOTH THE PARTIES.RESPECTFULLY FOL LOWING THE EW TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN PR ECEEDING ASSESSMENT YEAR, WE DIRECT LD.AO TO COMPUTE THE MEA N OF WORKING CAPITAL ADJUSTMENT IN RESPECT OF COMPARABLES RETAIN ED AFTER GIVING EFFECT TO THIS ORDER OF THE TRIBUNAL . ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 35. GROUND NO.16 IS IN RESPECT OF COMPUTATION OF DEDUCTION UNDER SECTION 10A BY REDUCING COMMUNICATION EXPENSES FROM EXPORT TURNOVER AND TOTAL TURNOVER. PAGE 23 OF 25 IT(TP)A 208 & 209/BANG/2016 36. WE HAVE ALREADY CONSIDERED THIS ISSUE WHILE DIS POSING OF THE APPEAL FILED BY REVENUE. WE HAVE DIRECTED LD.AO TO COMPUTE THE DEDUCTION IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COURT IN CASE OF YUKOGAVA, (SUPRA). ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED AS INDICATED HEREINABOVE. 37. GROUND NO. 17 IS IN RESPECT OF DISALLOWANCE UNDER SECTION 40(A)(I) FORCED SOFTWARE EXPENSES AMOUNTING TO RS.2 4,723,240/-. 38. WE HAVE HEARD BOTH SIDES. 39. WE FIND THAT THAT THIS ISSUE CAME UP FOR CONSID ERATION BEFORE THE HONBLE SUPREME COURT IN THE CASE OF ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P.) LTD. V. CIT, [2021] 125 T AXMANN.COM 42 (SC) JUDGMENT DATED 02-03-2021 , WHEREIN IT WAS HELD THAT TRANSACTION RELATING TO SOFTWARE ARE IN THE NATURE OF SALE AND NOT LICENSE, NO COPYRIGHT OR PART OF ANY COPYRIGHT IS LICENSED TO T HE ASSESSEE. THE NON-RESIDENT OWNER CONTINUES TO HAVE PROPRIETARY RI GHTS IN THE SOFTWARE AND USE OF SOFTWARE BY THE INDIAN COMPANY IS LIMITED TO MAKING BACK-UP COPY AND REDISTRIBUTION. SO PAYMENT RECEIVED FOR SALE OF COMPUTER SOFTWARE IS BUSINESS INCOME. AS S UCH, SOFTWARE PURCHASED IS IN THE NATURE OF PURCHASE AND SALE OF PRODUCT AND NO TDS IS DEDUCTIBLE. BEING SO, IT IS ALLOWABLE AS EXP ENDITURE AND THERE IS NO QUESTION OF DEDUCTION OF ANY TDS ON THE SAME. 40. AS WE HAVE ALREADY ALLOWED THE EXPENSES, OTHER GROUNDS RAISED IN RESPECT OF THIS ISSUE BECOMES ACADEMIC. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED. PAGE 24 OF 25 IT(TP)A 208 & 209/BANG/2016 41. ALL OTHER GROUNDS WHICH IS NOT BEEN DISCUSSED H EREINABOVE ARE NOT ADJUDICATED FOR THE REASON THAT THE SAME HAS NO T BEEN PRESSED BY ASSESSEE. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED PARTLY AS INDICATED HEREINABOVE. ORDER PRONOUNCED IN OPEN COURT ON 2 ND JULY, 2021. SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 2 ND JULY, 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 25 OF 25 IT(TP)A 208 & 209/BANG/2016 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR - 7 - 2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER - 7 - 2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. - 7 - 2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS - 7 - 2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON - 7 - 2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE - 7 - 2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK - 7 - 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