DCIT 6(2), MUMBAI V. DEUTSCHE NETWORKS SERVICES P. LTD( THROUGH ITS SUCCESSOR DBOI GLOBAL SERVICES P.LTD), MUMBAI

ITA 2136/MUM/2012

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9213 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction
• Section: 13

Judgement Text

1 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (VICE PRESIDENT) AND SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.2136/MUM/2012 (ASSESSMENT YEAR 2007-08) DEPUTY COMMISSIONER OF INCOME- TAX-8(1), MUMBAI VS DBOI GLOBAL SERVICES PVT LTD (SUCCESSOR TO M/S DEUTSCHE NETWORKS SERVICES PVT LTD), LOGITECH PARK M.V. ROAD, SAKINAKA, ANDHERI (E) MUMBAI-400 072 PAN : AABCD7378L APPELLANT RESPONDENT I.T.A. NO.2254/MUM/2012 (ASSESSMENT YEAR 2007-08) DBOI GLOBAL SERVICES PVT LTD (SUCCESSOR TO M/SDEUTSCHE NETWORKS SERVICES PVT LTD), LOGITECH PARK M.V. ROAD, SAKINAKA, ANDHERI (E) MUMBAI-400 072 PAN : AABCD7378L VS DEPUTY COMMISSIONER OF INCOME-TAX- 6(1), MUMBAI APPELLANT RESPONDENT ASSESSEE BY SHRI SUNIL DESHPANDE / SHRI SUSHIL KUMAR MISHRA (DCIT) REVENUE BY SHRI JEHANGIR D MISTRY / MS RIDDHI BHATT 2 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 DATE OF HEARING 15-07-2021 DATE OF PRONOUNCEMENT 11-08-2021 O R D E R PER : SAKTIJIT DEY (JM) : CAPTIONED CROSS APPEALS ARISE OUT OF ORDER DATED 2 7-01-2012 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-15, MUMBAI FOR THE ASSESSMENT YEAR 2007-08. ITA 2254/MUM/2012 (ASSESSEES APPEAL) 2. IN GROUNDS 1 TO 10 ASSESSEE HAS CHALLENGED THE A DDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. THOUGH, THE ASSESSEE HAS RAISED VARIOUS ISSUES CONCERNING THE TRANSFER PRICING ADJUSTMENT; HOWEVER, THE DISPUTE BEFORE US IS MAINLY WITH REGARD TO SELECTION/REJECTION OF CERTAIN COMPARABLES. 3. SHRI J. D. MISTRY, LEARNED SENIOR COUNSEL APPEAR ING FOR THE ASSESSEE SUBMITTED, IF SOME OF THE COMPARABLES SELECTED BY T HE TPO ARE EXCLUDED, IN ANY CASE, WHICH ARE NOT COMPARABLES TO THE ASSESSEE, AS HELD IN ASSESSEES OWN CASE IN OTHER ASSESSMENT YEARS AND EVEN IN CASE OF VARIO US OTHER ASSESSES, THE PROFIT MARGIN SHOWN BY THE ASSESSEE WOULD BE WITHIN THE AC CEPTABLE RANGE OF THE AVERAGE PROFIT MARGIN OF THE REST OF THE COMPARABLE S. HOWEVER, BEFORE WE PROCEED TO DEAL WITH THE SUBSTANTIVE ISSUE RELATING TO SELECTION/REJECTION OF COMPARABLES, IT IS NECESSARY TO BRIEFLY DEAL WITH T HE RELEVANT FACTS. 4. THE ASSESSEE, A RESIDENT COMPANY, IS A WHOLLY OW NED SUBSIDIARY OF DEUTSCHE ASIA PACIFIC HOLDINGS PTE LTD, SINGAPORE. AS STATED BY THE TRANSFER PRICING OFFICER (TPO), THE ASSESSEE IS BASICALLY ENGAGED IN PROVIDING DATA PROCESSING AND BACK OFFICE SUPPORT SERVICES, INCLUDING, PAYMENT PR OCESSING, DATA PROCESSING, DOCUMENTATION PROCESSING, INVESTIGATION RELATED SER VICES AND TRADE CENTRAL PROCESSING SERVICES TO ITS OVERSEAS ASSOCIATED ENTE RPRISES (AE). DURING THE YEAR 3 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS AE. HOWEVER, INSOFAR AS PROVI SION OF DATA PROCESSING AND BACK OFFICE OPERATION IS CONCERNED, THE ASSESSEE RE PORTED REVENUE OF RS.112,84,66,814/-. IN THE TRANSFER PRICING STUDY R EPORT, ASSESSEE BENCHMARKED THE AFORESAID TRANSACTION WITH AE ADOPTING TRANSACT IONAL NET MARGIN METHOD (TNMM). TREATING ITSELF AS THE TESTED PARTY, ASSESS EE MADE A SEARCH IN THE DATABASES AND SHORTLISTED TWELVE COMPANIES AS COMPA RABLES WITH ARITHMETIC MEAN OF 14.91%. SINCE, MARGIN SHOWN BY THE ASSESSEE AT 11.20% WAS WITHIN (+)/(-) 5% VARIATION, THE TRANSACTION WITH AE WAS C ONSIDERED TO BE AT ARMS LENGTH. AFTER ANALYZING THE TRANSFER PRICING STUDY OF THE A SSESSEE, THE TPO, THOUGH, ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD; HOWEV ER, HE WAS OF THE VIEW THAT THE ASSESSEE DID NOT APPLY THE QUALITATIVE AND QUANTITATIVE FILTERS PROPERLY. APPLYING HIS OWN FILTERS, THE TPO ACCEPTED FIVE OF THE COMPARABLES SELECTED BY THE ASSESSEE, WHEREAS, HE REJECTED THE BALANCE SEVEN COM PARABLES. HAVING DONE SO, THE TPO PROCEEDED TO SELECT FRESH COMPARABLES ON HI S OWN AND FINALLY HE SELECTED TWENTY SEVEN COMPANIES AS COMPARABLES WITH ARITHMET IC MEAN OF 30.67% AS AGAINST THE MARGIN SHOWN BY THE ASSESSEE AT 11.20%. APPLYING THE ARITHMETIC MEAN OF THE SELECTED COMPARABLES, THE TPO DETERMINE D THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION WITH AE AND PROPOSED AN ADJUSTMENT OF RS.19,98,46,156/-. BASED ON THE ADJUSTMENT PROPOSED BY THE TPO, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER. THE ASSESSMENT ORDER SO PASSED WAS CHALLENGED BEFORE LEARNED COMMISSIONER (APPEALS). A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LEARNED COMMISSIONER (APPEALS) GRANTED PARTIAL RELI EF TO THE ASSESSEE. STILL AGGRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEA L. 4 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 5. OPENING HIS ARGUMENT, LEARNED SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED, OUT OF THE TWENTY SEVEN COMPARABLES FINALLY SELECTE D BY THE TPO, IF ELEVEN COMPARABLES ARE EXCLUDED, ASSESSEES MARGIN WOULD B E WITHIN THE ACCEPTABLE RANGE OF THE ARITHMETIC MEAN OF THE REST OF THE COM PARABLES. PROCEEDING FURTHER, HE DREW OUR ATTENTION TO THE TABULAR CHART AND SUBM ITTED THAT ASIT C MEHTA, INFOSYS BPO LTD, APEX KNOWLEDGE SOLUTIONS PVT LTD A ND VISHAL INFORMATION TECHNOLOGIES LTD ARE NOT AT ALL COMPARABLE TO THE A SSESSEE DUE TO FUNCTIONAL DISSIMILARITY AND OTHER FACTORS. HE SUBMITTED, THES E COMPARABLES HAVE BEEN REJECTED IN ASSESSEES OWN CASE IN EARLIER AS WELL A S SUBSEQUENT YEARS EITHER BY THE TRIBUNAL OR BY THE DISPUTE RESOLUTION PANEL (DR P) OR EVEN BY THE TPO HIMSELF. THUS, HE SUBMITTED, THESE COMPARABLES HAVE TO BE EX CLUDED. AS REGARDS ECLERX SERVICES LTD, MOLD-TEK TECHNOLOGIES LTD, INFORMED T ECHNOLOGIES INDIA LTD ARE CONCERNED, THEY ARE NOT COMPARABLE TO A ITES/BPO SE RVICE PROVIDER, AS HELD IN CASE OF VARIOUS OTHER ASSESSEES INVOLVED IN SIMILAR LINE OF BUSINESS. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE RELEVANT JUDICIAL PRECE DENTS. INSOFAR AS CALIBER POINT BUSINESS SOLUTIONS LTD AND HCL COMNET SYSTEMS LTD ( SEG) ARE CONCERNED, LEARNED SENIOR COUNSEL SUBMITTED, THEY CANNOT BE TREATED AS COMPARABLE, AS THEY DO NOT QUALIFY THE RELATED PARTY TRANSACTION (RPT) FILTER. FINALLY, HE SUBMITTED, I SERVICES INDIA PVT LTD CANNOT BE CONSIDERED AS COMPARABLE AS IT IS FUNCTIONALLY DISSIMILAR AND FINANCIAL DATA RELATING TO THIS COMPARABLE ARE NOT AVAILABLE IN PUBLIC DOMAIN. FURTHER, HE SUBMITTED, THIS COMPARABLE HAS SHOWN SU PER NORMAL PROFIT IN THE YEAR UNDER CONSIDERATION WHICH MAKES IT INCOMPARABLE. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL RELIED UPON THE FOLLOWING DECIS IONS:- 1. DBOI GLOBAL SERVICES PVT LTD (2018) 98 TAXMANN.C OM 52 (MUM-TRIB) 2. STREAM INTERNATIONAL SERVICES PVT LTD VS THE ADI T (INTERNATIONAL TAXATION)-7(2), MUMBAI (ITA NO.8290/MUM/2011) 5 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 3. ZAVATA INDIA PRIVATE LIMITED VS THE DCIT, CIR.3( 3), HYDERABAD (ITA NO.178/HYD/2011 4. FLEXTRONICS TECHNOLOGIES INDIA (P) LTD (TS-641-I TAT-2015 (BANG-TP) 5. AOL ONLINE INDIA PVT LTD VS DY.CIT, CIRCLE-11(1) , BANGALORE IT(TP)A.NO.1036/BANG/2011 6. POLE TO WIN INDIA PVT LTD VS DY.CIT, CIR.11(3), BANGALORE (2016) 70 TAXMANN.COM 318 (BANGALORE-TRIB) 7. THE ACIT, CIR.6(3) VS MAERSK GLOBAL SERVICE CENT RE (INDIA) PVT LTD ITA NO.3774(MUM) OF 2011 C.O. NO.111(MUM) OF 2011) 8. CAPGEMINI INDIA PVT LTD VS ITO(ITA NO.7099/MUM/2 012) 9. CIT VS PENTAIR WATER INDIA PVT LTD 69 TAXMANN.CO M 180 (BOM) 10. CALIBRATED HEALTHCARE SYSTEMS INDIA PVT LTD VS ACIT(OSD), CIT-1, NEW DELHI ITA NO.527/DEL/2012 11. CAPITAL IQ INFORMATION SYSTEMS PVT LTD VS DY.CI T (INT.TAXATION), HYDERABAD (ITA 1961/HYD/2011) 12. IQOR INDIA SERVICES PRIVATE LTD VS ITO, WARD 11 (4) ITA NO.6034/DEL/2012 & ITA NO.5934/DEL/2012 13. AVAYA INDIA (P) LTD ITA NO.5528/DEL/2011 14. CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT LTD VS DY.CIT(INT.TAXATION), HYDERABAD (ITA NO.1961/HYD/2011) 15. M/S AVINEON INDIA PVT LTD VS DY.CIT,CIR.1(1), H YDERABAD (ITA NO.1989/HYD/2011 16. COGNIZANT TECHNOLOGY SERVICES PVT LTD VS ACIT,C IR.1(2), HYDERABAD (ITA NOS 2106 & 17. TECH BOOK ELECTRONICS SERVICES P LTD (2016) 67 TAXMANN.COM 169 18. MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED V S ACIT,CIR.6(3) ITA NO.7466/MUM/2012 19. WILLIS PROCESSING SERVICES (I) P LTD (TS-49-ITA T-2013(MUM)-TP 6. STRONGLY RELYING UPON THE OBSERVATIONS OF THE TP O AND LEARNED COMMISSIONER (APPEALS), LEARNED DEPARTMENTAL REPRES ENTATIVE SUBMITTED, THE ASSESSEE HAS CHERRY-PICKED THE COMPARABLES AND IN T HE PROCESS, HAS LEFT OUT MANY COMPANIES WHICH ARE OTHERWISE COMPARABLE TO THE ASS ESSEE. HE SUBMITTED, THE TPO HAS UNDERTAKEN A THOROUGH ANALYSIS AND HAS FINA LLY SELECTED COMPARABLES TO DETERMINE THE ALP. HE SUBMITTED, BOTH THE TPO AND L EARNED COMMISSIONER 6 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 (APPEALS) HAVE PROVIDED VALID REASONS FOR RETAINING THE COMPARABLES CHALLENGED BY THE ASSESSEE. THEREFORE, THERE IS NO NEED TO INT ERFERE WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGH T OF DECISIONS RELIED UPON AND PERUSED MATERIALS ON RECORD. ASIT C MEHTA 7.1 THE CONTENTION OF THE ASSESSEE FOR EXCLUDING TH IS COMPANY IS, THE COMPANY IS HAVING MORE THAN ONE SEGMENT. WHEREAS, SEPARATE SEGMENTAL DATA IS NOT AVAILABLE IN THE PUBLIC DOMAIN. FURTHER, HE SUBMITT ED, THE EMPLOYEE COST OF THE COMPANY WORKS OUT TO 22.78% OF THE TOTAL COST AS CO MPARED TO ASSESSEES EMPLOYEE COST OF 48.27%. FURTHER, THE TURNOVER OF T HE ASSESSEE IS MORE THAN EIGHTY TIMES OF THE TURNOVER OF THE COMPANY. IT IS OBSERVED, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, THE TRIBUNAL, WHI LE CONSIDERING THE ACCEPTABILITY OF THE AFORESAID COMPANY AS A COMPARA BLE, HAS REJECTED THIS COMPANY AS A COMPARABLE DUE TO LOW EMPLOYEE COST. I T IS FURTHER OBSERVED, DUE TO NON AVAILABILITY OF SEGMENTAL DATA AND LOW EMPLO YEE COST, THIS COMPANY WAS REJECTED. 7.2 IN CASE OF DBOI GLOBAL SERVICES PVT LTD (SUPRA) , STREAM INTERNATIONAL SERVICES PVT LTD (SUPRA), ZAVATA INDIA PRIVATE LIMI TED (SUPRA), THERE BEING NO MATERIAL DIFFERENCE IN THE FACTUAL POSITION IN THE IMPUGNED ASSESSMENT YEAR, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE AS WELL AS IN CASE OF OTHER ASSESSES, AS REFERRED TO ABOVE, WE EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 7 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 INFOSYS BPO LTD 7.3 THIS COMPANY IS SOUGHT TO BE REMOVED ON THE GRO UND THAT IT PROVIDES END- TO-END KNOWLEDGE BUSINESS PROCESS SERVICES WHICH IS COMPARABLE TO THE ASSESSEE. FURTHER, THE TURNOVER OF THIS COMPANY IS MORE THAN SIX TIMES OF THE ASSESSEE. NOTABLY, WHILE CONSIDERING THE ISSUE OF COMPARABILI TY OF THIS COMPANY IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008-09, LEA RNED DRP HAS REJECTED IT DUE TO HEAVY MARKETING AND SELLING EXPENSES. WE HAVE FU RTHER NOTICED THAT THE TPO HIMSELF HAS REJECTED THIS COMPANY IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10 FOR THE FORE STATED REASONS. IN FACT, VARIO US OTHER DECISIONS OF THE CO- ORDINATE BENCHES CITED BEFORE US, THIS COMPANY HAS BEEN REJECTED AS COMPARABLE TO A ROUTINE BPO SERVICE PROVIDER. FACTS BEING IDEN TICAL, FOLLOWING THE DECISION CITED BEFORE US, WE EXCLUDE THIS COMPANY FROM THE L IST OF COMPARABLES. APEX KNOWLEDGE SOLUTION PVT LTD 7.4 THE ASSESSEE HAS SOUGHT EXCLUSION OF THIS COMPA NY ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND SCALE OF OPERATION. W E FIND THAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2006-07 CITED SUPRA, THE TR IBUNAL HAS EXCLUDED THIS COMPANY FOR THE REASON THAT IT IS ENGAGED IN RENDER ING SOFTWARE DEVELOPMENT AND RELATED TECHNICAL ACTIVITIES. WE HAVE ALSO FOUND F ROM RECORD THAT THE FACTS BASED ON WHICH THE COMPANY WAS REJECTED IN ASSESSMENT YEAR 2006-07 ARE NO DIFFERENT IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE AFO RESAID, WE EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. VISHAL INFORMATION TECHNOLOGIES LTD 7.5 THIS COMPANY WAS SOUGHT TO BE EXCLUDED PRIMARIL Y ON THE REASONING THAT THE COMPANY HAS VERY LOW EMPLOYEE COST SINCE IT MOS TLY OUTSOURCES ITS ACTIVITIES TO THIRD PARTY VENDORS. WE HAVE FOUND THAT IN ASSES SEES OWN CASE IN ASSESSMENT 8 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 YEAR 2005-06 THIS COMPANY WAS REJECTED FOR THE REASO N THAT IT OUTSOURCES ITS ACTIVITIES. WE HAVE ALSO NOTICED, THE DRP HAS EXCL UDED THIS COMPANY IN ASSESSEES OWN CASE FOR THE VERY SAME REASON IN ASSESSMENT YEA RS 2006-07 & 2008-09. IN FACT, IN VARIOUS OTHER DECISIONS CITED BEFORE US, T HIS COMPANY HAS BEEN EXCLUDED FOR THE REASON THAT INSTEAD OF PERFORMING THE WORK ITSELF, IT OUTSOURCES THE WORK TO THIRD PARTY VENDORS. THE FACTS IN THE IMPUGNED A SSESSMENT YEAR ARE MORE OR LESS IDENTICAL. IN VIEW OF THE AFORESAID, WE EXCLUD E THIS COMPANY FROM THE LIST OF COMPARABLES. WIPRO LIMITED (SEG) 7.6 THE ASSESSEE HAS SOUGHT EXCLUSION OF WIPRO LIMI TED (SEG) ON THE GROUND THAT IT HAS EXCEPTIONALLY HIGH TURNOVER COMPARED TO ASSESSEES TURNOVER. ON PERUSAL OF FACTS ON RECORD, WE FIND, AS AGAINST THE TURNOVER OF THE ASSESSEE AT 114.12 CRORES, THE TURNOVER OF WIPRO LIMITED (SEG) FOR THE YEAR UNDER CONSIDERATION IS RS. 13,684 CRORES, ALMOST 120 TIME S OF ASSESSEES TURNOVER. NOTABLY, IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005-06, THE TRIBUNAL, WHILE DECIDING THE COMPARABILITY OF THIS COMPANY WITH THE ASSESSEE IN ITA NO.812/MUM/2012 DATED 24-08-2016, TAKING NOTE OF TH E EXCESSIVELY HIGH TURNOVER OF THE COMPARABLE IN COMPARISON TO ASSESSE E HAS EXCLUDED IT. FURTHER IN A NUMBER OF DECISIONS OF THE CO-ORDINATE BENCHES RE NDERED IN CASE OF OTHER ASSESSES, THIS COMPANY HAS BEEN EXCLUDED NOT ONLY B ECAUSE OF HIGH TURNOVER BUT ALSO BECAUSE OF ITS BRAND VALUE, SIZE, ETC. IN THI S CONTEXT, WE MAY REFER TO THE FOLLOWING DECISIONS:- 1. DBOI GLOBAL SERVICES PVT LTD (SUPRA) 2. CAPGEMINI INDIA PRIVATE LTD VS ITO (SUPRA) 3. CIT VS PENTAIR WATER INDIA PVT LTD (SUPRA) 4. STREAM INTERNATIONAL SERVICES PVT LTD (SUPRA) 9 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 5. POLE TO WIN INDIA PVT LTD VS DY.CIT, CIR.11(3), BANGALORE (SUPRA) 6. CALIBRATED HEALTHCARE SYSTEMS INDIA PVT LTD VS A CIT(OSD), CIT-1, NEW DELHI (SUPRA) 7. STREAM INTERNATIONAL SERVICES PVT LTD VS THE ADI T (INTERNATIONAL TAXATION)-7(2), MUMBAI (SUPRA) 8. ZAVATA INDIA PRIVATE LIMITED VS THE DCIT, CIR.3( 3), HYDERABAD (SUPRA) 9. FLEXTRONICS TECHNOLOGIES INDIA (P) LTD (SUPRA)) 10. AOL ONLINE INDIA PVT LTD VS DY.CIT, CIRCLE-11(1 ), BANGALORE (SUPRA) 11. CAPITAL IQ INFORMATION SYSTEMS PVT LTD VS DY.CI T (INT.TAXATION), HYDERABAD (SUPRA) 12. TELCORDIA TECHNOLOGIES INDIA PVT LTD VS ACIT (S UPRA) 7.7 THUS, KEEPING IN VIEW THE DECISIONS OF THE CO-O RDINATE BENCHES IN ASSESSEES OWN CASE AS WELL AS IN CASE OF OTHER ASSESSEES, WE EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. ECLERX SERVICES LTD 7.8 IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT; HENCE, NOT COMPARABLE. ON PERUSAL OF FAC TS ON RECORD WE FIND THAT ECLERX SERVICES LTD IS BASICALLY ENGAGED IN KNOWLED GE PROCESS OUTSOURCING (KPO) SERVICES. FURTHER, THIS COMPANY HAS INCURRED A MAJOR PART OF ITS EXPENSES TOWARDS OUTSOURCING OF SERVICES, WHEREAS, THE ASSESSEE IS A ROUTINE BPO SERVICE PROVIDER WITHOUT OUTSOURCING ANY OF ITS ACTIVITIES. THUS, IN OUR VIEW, THIS COMPANY CANNOT BE COMPARABLE TO THE ASSESSEE. THIS VIEW OF OURS IS FURTHER FORTIFIED BY THE FOLLOWING DECISIONS OF THE TRIBUNAL:- 1. MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED VS ACIT (SUPRA) 2. STREAM INTERNATIONAL SERVICES PVT LTD VS THE ADI T (SUPRA) 3. POLE TO WIN INDIA PVT LTD VS DY.CIT, CIR.11(3), BANGALORE (SUPRA) 4. IQOR INDIA SERVICES PRIVATE LTD VS ITO, WARD 11( 4) (SUPRA) 5. AVAYA INDIA (P) LTD (SUPRA) 6. CAPITAL IQ INFORMATION SYSTEMS PVT LTD VS DY.CIT (INT.TAXATION), HYDERABAD (SUPRA) 10 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 7. AVINCON INDIA PVT LTD VS DY.CIT-1(1),HYDERABAD ( SUPRA) 8. ZAVATA INDIA PRIVATE LIMITED VS THE DCIT, CIR.3( 3), HYDERABAD (SUPRA) 9. COGNIZANT TECHNOLOGY SERVICES PVT LTD VS ACIT CI RCLE-1(2), HYDERABAD (SUPRA) MOLDTEK TECHNOLOGIES LTD 7.9 THE ASSESSEE HAS SOUGHT EXCLUSION OF THIS COMPA NY BECAUSE OF FUNCTIONAL DISSIMILARITY, ABNORMAL PROFIT MARGIN AND LOW EMPLO YEE COST. ON PERUSAL OF FACTS AND MATERIALS ON RECORD, WE FIND THAT THIS COMPANY IS PROVIDING STRUCTURAL ENGINEERING AND DESIGN SERVICES OF CONSTRUCTION OF BUILDING. FURTHER, THE COMPANY HAS UNDERTAKEN EXPANSION VIGOROUSLY. THUS, THERE IS EXTRAORDINARY GROWTH WHICH COULD HAVE RESULTED IN ABNORMAL PROFIT MARGIN OF 11 3.49%. FURTHER, THE EMPLOYEE COST OF THE COMPANY AS A PERCENTAGE OF THE TOTAL CO ST WORKS OUT TO MEAGER 8.41% AS COMPARED TO ASSESSEES EMPLOYEE COST OF 48.27%. THUS, THESE FACTORS, IN OUR VIEW, DO NOT MAKE THE COMPANY COMPARABLE TO THE ASS ESSEE. IN THIS REGARD, WE FIND SUPPORT FROM THE FOLLOWING DECISIONS OF THE TR IBUNAL:- 1. TECH BOOK ELECTRONICS SERVICES P LTD (SUPRA) 2. MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED VS ACIT (SUPRA)) 3. STREAM INTERNATIONAL SERVICES PVT LTD VS THE ADI T (INTERNATIONAL TAXATION)-7(2), MUMBAI (SUPRA) 4. POLE TO WIN INDIA PVT LTD VS DY.CIT, CIR.11(3), BANGALORE (SUPRA)) 5. CAPGEMINI BUSINESS SERVICES (INDIA) LTD VS ACIT (SUPRA) 6. CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT LTD V S DY.CIT(INT.TAXATION), HYDERABAD (SUPRA) 7. M/S AVINEON INDIA PVT LTD VS DY.CIT,CIR.1(1), HY DERABAD (SUPRA) 8. ZAVATA INDIA PRIVATE LIMITED VS THE DCIT, CIR.3( 3), HYDERABAD (SUPRA) 9. COGNIZANT TECHNOLOGY SERVICES PVT LTD VS ACIT,CI R.1(2), HYDERABAD (SUPRA) 7.10 ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER T O EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 11 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 INFORMED TECHNOLOGIES INDIA LTD 7.11 THE ASSESSEE HAS SOUGHT REMOVAL OF THIS COMPAN Y ON THE GROUND OF ITS FUNCTIONAL DISSIMILARITY, SCALE OF OPERATION AND LO W EMPLOYEE COST. ON A PERUSAL OF THE ANNUAL REPORT OF THE COMPANY FOR THE IMPUGNED A SSESSMENT YEAR, WE FIND THAT THE COMPANY IS INTO HIGH-END BPO SERVICES WHICH CAN BE TERMED AS KPO SERVICES. BASICALLY, THIS COMPANY SERVES THE NEEDS OF THE FIN ANCIAL CONTENT SECTOR IN THE USA. IT COLLECTS AND ANALYSES DATA ON FINANCIAL FUN DAMENTALS, CORPORATE GOVERNANCE, STRUCTURES/EXECUTES COMPENSATION AND CA PITAL MARKET. THE COMPANY CATERS TO THE NICHE MARKET SEGMENT OF FINANCIAL CON TENT AND ITS TARGETED CLIENTELE INCLUDE WELL KNOWN AND RESPECTED AMERICAN CORPORATE . THUS, AS IT APPEARS, THE COMPANY IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE. IT IS ALSO OBSERVED, IN CASE OF STREAM INTERNATIONAL SERVICES PVT LTD VS THE ADIT ( SUPRA) AND AOL ONLINE INDIA PRIVATE LIMITED VS DCIT (SUPRA), WHICH ARE FOR THE VERY SAME ASSESSMENT YEAR, THE TRIBUNAL HAS REJECTED THIS COMPANY AS A COMPARABLE O N THE GROUND OF LOW EMPLOYEE COST, ABNORMAL GROWTH AND CONSIDERABLE BUS INESS PROMOTION EXPENSES. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF T HE CO-ORDINATE BENCH, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. CALIBER POINT BUSINESS SOLUTIONS LTD & HCL COMNET S YSTEMS PVT LTD (SEG) 7.12 INSOFAR AS CALIBER POINT BUSINESS SOLUTIONS LT D AND HCL COMNET SYSTEMS PVT LTD (SEG) ARE CONCERNED, LEARNED COUNSEL FOR THE AS SESSEE HAS SOUGHT REMOVAL ON THE GROUND THAT THEIR RELATED PARTY TRANSACTION (RP T) IS SUBSTANTIALLY HIGH COMPARED TO ASSESSEE. ON PERUSAL OF FACTS ON RECORD , WE FIND THE AFORESAID SUBMISSION OF LEARNED SENIOR COUNSEL ACCEPTABLE. IN FACT, BOTH THE COMPANIES HAVE BEEN REJECTED DUE TO SUBSTANTIALLY HIGH RPT BY DIFFERENT BENCHES OF THE TRIBUNAL IN FOLLOWING CASES:- 12 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 (1) STREAM INTERNATIONAL SERVICES PVT LTD VS THE AD IT (INTERNATIONAL TAXATION)-7(2), MUMBAI (SUPRA) (2) WILLIS PROCESSING SERVICE INDIA PVT LTD (SUPRA) (3) AVAYA INDIA (P) LTD (SUPRA) (4) POLE TO WIN INDIA PVT LTD VS DY.CIT, CIR.11(3), BANGALORE (SUPRA) 7.13 FURTHER, WE FIND, HCL COMNET SYSTEMS INDIA LTD (SEG) HAS BEEN REJECTED BY DIFFERENT BENCHES OF THE TRIBUNAL IN CASE OF OTHER ASSESSES FOR THE REASON OF HAVING A DIFFERENT FINANCIAL YEAR ENDING, DIFFERENT BUSINESS MODEL AND SUPER NORMAL PROFIT. THUS, KEEPING IN VIEW VARIOUS DECISI ONS OF THE TRIBUNAL CITED BEFORE US, WE EXCLUDE THESE TWO COMPANIES FROM THE LIST OF COMPARABLES. I SERVICES INDIA PVT LTD 7.14 ASSESSEE SOUGHT REMOVAL OF THIS COMPANY DUE TO FUNCTIONAL DISSIMILARITY, SUPER NORMAL PROFIT AND NON AVAILABILITY OF CONTEMP ORANEOUS DATA IN PUBLIC DOMAIN. ON A PERUSAL OF FACTS ON RECORD, WE FIND T HAT THIS COMPANY IS ENGAGED IN PROVIDING REMOTE DATA ENTRY SERVICES TO ITS CLIENTS IN USA. FURTHER, IT HAS REPORTED A PROFIT MARGIN OF 50.27% FOR THE YEAR UNDER CONSID ERATION, WHICH IS EXCEPTIONALLY HIGH IN TERMS OF INDUSTRY NORMS. DUE TO THE SUPER N ORMAL PROFIT EARNED BY THE COMPANY FOR THE YEAR UNDER CONSIDERATION, THE TRIBU NAL EXCLUDED IT FROM BEING CONSIDERED AS A COMPARABLE IN CASE OF PENTAIR WATER INDIA P LTD VS ADDL CIT (SUPRA), WHICH IS FOR THE VERY SAME ASSESSMENT YEAR . FURTHER, IN CASE OF WILLIS PROCESSING SERVICE INDIA PVT LTD (SUPRA), WHICH IS ALSO FOR THE VERY SAME ASSESSMENT YEAR, THIS COMPANY HAS BEEN EXCLUDED DUE TO NON AVAILABILITY OF CONTEMPORANEOUS DATA IN PUBLIC DOMAIN. KEEPING IN V IEW THE AFORESAID DECISIONS OF THE TRIBUNAL, WE EXCLUDE THIS COMPANY FROM THE L IST OF COMPARABLES. 8. LEARNED SENIOR COUNSEL FOR THE ASSESSEE HAS SUBM ITTED BEFORE US THAT WITH EXCLUSION OF THESE ELEVEN COMPANIES, ASSESSEES MAR GIN WOULD BE WITHIN (+)/(-) 13 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 5% OF THE ARITHMETIC MEAN OF THE REST OF THE COMPAR ABLES SELECTED BY THE TPO. IN FACT, LEARNED SENIOR COUNSEL HAS ALSO FURNISHED A C HART DEMONSTRATING THE AFORESAID FACT. THUS, KEEPING IN VIEW THE AFORESAID SUBMISSION OF THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE, WE TREAT THE OTHER GROUNDS AS NOT PRESSED. HOWEVER, THE ISSUES RAISED THEREIN ARE KEPT OPEN FO R ADJUDICATION, IF THEY ARISE IN ASSESSEES CASE IN FUTURE. 9. BESIDES THE AFORESAID MAIN GROUNDS, THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUND:- 11.THE APPELLANTS SUBMIT THAT THE AO BE DIRECTED T O ALLOW DEDUCTION ON ACCOUNT OF EDUCATION CESS PAID BY THE APPELLANTS FO R THE ASSESSMENT YEAR 2007-08. 10. AT THE OUTSET, WE ARE OF THE VIEW THAT THE ISSU E RAISED IN THE ADDITIONAL GROUND IS A PURELY LEGAL ISSUE WHICH CAN BE DECIDED BASED ON THE FACTS AVAILABLE ON RECORD. THEREFORE, WE ADMIT THE ADDITIONAL GROU ND FOR ADJUDICATION. 11. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND TH AT THE ISSUE RAISED IN THE ADDITIONAL GROUND STANDS DECIDED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SESA GO A LTD VS ACIT TAX APPEAL NO.17 OF 2013 DATED 28-02-2020. RESPECTFULLY FOLLOWING TH E AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE ASS ESSING OFFICER TO VERIFY THE FACTS AND ALLOW DEDUCTION OF EDUCATION CESS PAID BY THE A SSESSEE. ITA 2136/MUM/2012 (REVNUES APPEAL) 12. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE BENEFIT OF -5% RELIEF TO THE ASSESS EE, WITHOUT APPRECIATING THE FACT THAT NO STANDARD EDUCATION OF 5% TO THE ASSESSEE IS ENVISAGED UNDER SECTION 92C(2) OF THE ACT.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE AMENDED PROVISO TO SECTION 92(2) I S NOT APPLICABLE TO THE AY 2007-08 AS THE AMENDMENT IS MADE EFFECTIVE FROM 01- 10-2009 EVEN THOUGH IT IS 14 ITAS 2136/MUM/2012 & ITA 2254/MUM/2012 A CLARIFICATORY AMENDMENT AS EVIDENCED BY MEMORANDU M TO THE FINANCE BILL (2) OF 2009.' 13. IN VIEW OF OUR DECISION IN GROUNDS 1 TO 10 IN A SSESSEES APPEAL, BEING ITA NO.2254/MUM/2012 DECIDED IN THE EARLIER PART OF THE ORDER, THESE GROUNDS HAVE BECOME INFRUCTUOUS. 14. SUFFICE TO SAY, AS PER SETTLED LEGAL PRINCIPLE, THE BENEFIT OF (+)/(-) 5% UNDER SECTION 92C(2) CANNOT BE ALLOWED AS STANDARD DEDUCT ION. WITH THE AFORESAID OBSERVATIONS, THESE GROUNDS ARE DISMISSED. 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED; AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON 11/08/2021. SD/- SD/- PRAMOD KUMAR SAKTIJIT DEY VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DT : 11/08/2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI