FNF Business Process Outsourcing, Bangalore V. DCIT CR 3(1)(2), Bangalore

ITA 221/BANG/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5572 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Transfer pricing; International transaction; Bad and doubtful debts
• Section: 92C; 143(3); 234B; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER IT (TP) A NO . 221 /BANG/201 5 ASSESSMENT YEAR : 20 1 0 - 1 1 M/S. FNF INDIA PRIVATE LIMITED (FORMERLY KNOWN AS FNF BUSINESS PROCESS OUTSOURCING SERVICES PRIVATE LIMITED), SURVEY NO. 46 (P) & 47 (P), ELECTRONIC CITY, PHASE II, HOSUR ROAD, BANGALORE 560 100. PAN: AAECP1100B VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 3 (1)(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.R. VASUDEVAN, ADVOCATE RESPONDENT BY : MS. NEERA MALHOTRA, CIT (DR) DATE OF HEARING : 3 0 .01.2019 DATE OF PRONOUNCEMENT : 31 . 0 1 . 201 9 O R D E R PER SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER PASSED U/S. 143(3) R.W.S. 144C OF IT ACT DATED 30.12.2014 IN CO NSEQUENCE TO DRP ORDER PASSED U/S. 144C(5) OF THE ACT DATED 17.11.2014. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS. I. TRANSFER PRICING 1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX (T RANSFER PRICING- IV), BANGALORE ('TRANSFER PRICING OFFICER' OR 'LEAR NED TPO') GROSSLY ERRED IN DETERMINING AN ADJUSTMENT U/S 92CA OF THE INCOME-TAX ACT, 1961 TO THE ARM'S LENGTH PRICE (ALP) OF THE INTER NATIONAL TRANSACTION ENTERED INTO BY THE APPELLANT WITH ITS ASSOCIATED E NTERPRISES ('AES') WITH RESPECT TO THE INFORMATION TECHNOLOGY ENABLED SERVICES ('ITES'). IT(TP)A NO. 221/BANG/2015 PAGE 2 OF 10 2. THE APPELLANT AGGRIEVED BY THE TPO ORDER FURTHER APPEALED BEFORE THE DISPUTE RESOLUTION PANEL (DRP') AGAINST THE TP O ORDER AND SUBSEQUENTLY, THE LEARNED ASSESSING OFFICER ('LEARN ED AO') ISSUED THE FINAL ASSESSMENT ORDER WITH A TRANSFER PRICING ('TP ') ADJUSTMENT OF INR 30,281,283/- 3. THE LEARNED AO / LEARNED TPO ERRED IN REJECTING THE TP DOCUMENTATION MAINTAINED BY THE APPELLANT BY INVOKI NG PROVISIONS OF SUB-SECTION (3) OF 92C OF THE ACT CONTENDING THAT T HE INFORMATION OR DATA USED IN THE COMPUTATION OF THE ALP IS NOT RELI ABLE OR CORRECT. THE LEARNED AO/ LEARNED TPO HAS GROSSLY ERRED THEREFORE IN : 3.A REJECTING COMPARABILITY ANALYSIS CARRIED IN THE TP DOCUMENTATION AND IN CONDUCTING A FRESH COMPARABILITY ANALYSIS BY INTRODUCING VARIOUS FILTERS IN DETERMINING THE ALP. 3.B REJECTING COMPANIES THAT ARE FUNCTIONALLY COMPA RABLE TO THE APPELLANT WHILE PERFORMING THE COMPARABILITY ANALYS IS. SPECIFICALLY, THE FOLLOWING COMPANIES OUGHT TO HAVE BEEN INCLUDED AS COMPARABLE: NITTANY OUTSOURCING SERVICES PRIVATE LIMITED DATAMATICS FINANCIAL SERVICES LIMITED R SYSTEMS INTERNATIONAL LIMITED CALIBER POINT BUSINESS SOLUTIONS LIMITED ULTRAMARINE & PIGMENTS LIMITED JINDAL INTELLICOM PRIVATE LIMITED 3.C INCLUDING COMPANIES THAT DO NOT SATISFY THE TES T OF COMPARABILITY. SPECIFICALLY, THE FOLLOWING COMPANIES SELECTED AS F UNCTIONALLY COMPARABLE BY THE LEARNED AO / LEARNED TPO OUGHT TO HAVE BEEN REJECTED: ACCENTIA TECHNOLOGIES LIMITED FORTUNE INFOTECH LIMITED JEEVAN SCIENTIFIC TECHNOLOGY LIMITED 4. THE LEARNED AO / LEARNED TPO HAS ERRED IN APPLIC ATION OF EMPLOYEE COST FILTER OF 25% BY SELECTING JEEVAN SCIENTIFIC T ECHNOLOGY LIMITED, WHICH HAS AN EMPLOYEE COST TO SALES RATIO OF 20.67% . 5. THE LEARNED AO / LEARNED DRP ERRED IN APPLYING E XPORT EARNING FILTER OF 75% INSTEAD OF 25%. 6. THE LEARNED AO / LEARNED DRP ERRED IN REJECTING ICRA ONLINE LIMITED, A COMPANY FUNCTIONALLY NOT COMPARABLE, BY APPLYING EXPORT EARNING FILTER. 7. THE LEARNED AO / LEARNED TPO ERRED IN NOT CONSID ERING THE MULTIPLE YEAR / PRIOR YEAR FINANCIAL DATA OF COMPARABLE COMP ANIES WHILE DETERMINING THE ALP. IT(TP)A NO. 221/BANG/2015 PAGE 3 OF 10 8. THE LEARNED AO / LEARNED TPO ERRED IN APPLICATIO N OF DIFFERENT FINANCIAL YEAR ENDING FILTER. 9. THE LEARNED AO / LEARNED TPO ERRED IN USING DATA AS AT THE TIME OF ASSESSMENT PROCEEDINGS, INSTEAD OF THAT AVAILABLE A S ON THE DATE OF PREPARING THE TP DOCUMENTATION FOR COMPARABLE COMPA NIES WHILE DETERMINING ALP. 10. THE LEARNED AO / LEARNED TPO ERRED IN NOT CONSI DERING THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS OPERATING I N NATURE. 11. THE LEARNED AO / LEARNED TPO ERRED IN COMPUTATI ON OF WORKING CAPITAL ADJUSTMENT. 12. THE LEARNED AO / LEARNED TPO ERRED IN IGNORING THE LIMITED RISK NATURE OF THE CONTRACTUAL SERVICES PROVIDED BY THE APPELLANT AND IN NOT PROVIDING AN APPROPRIATE ADJUSTMENT TOWARDS THE RIS K DIFFERENTIAL, EVEN WHEN THE FULL- FLEDGED ENTREPRENEURIAL COMPANIES AR E SELECTED AS COMPARABLE COMPANIES. II. CORPORATE TAX 1. INTEREST UNDER SECTION 234B OF THE ACT THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECT ION 234B OF THE ACT AMOUNTING TO INR 4,726,839/- THE LEVY OF INTEREST U NDER SECTION 234B OF THE ACT IS CONSEQUENTIAL IN NATURE. 2. INTEREST UNDER SECTION 234D OF THE ACT THE LEARNED AO ERRED IN LEVYING AN ADDITIONAL INTER EST UNDER SECTION 234D OF THE ACT AMOUNTING TO INR 165,275/-. THE LEV Y OF INTEREST UNDER SECTION 234D OF THE ACT IS CONSEQUENTIAL IN NATURE. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, RESCIND A ND MODIFY THE GROUNDS PROVIDED HEREIN ABOVE OR PRODUCE FURTHER DO CUMENTS, FACTS AND EVIDENCE BEFORE OR DURING THE COURSE OF HEARING OF THIS APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RA ISED AT THE TIME OF HEARING, IT IS PRAYED THAT NECESSARY RELIEF MAY BE PROVIDED. 3. AT THE TIME OF HEARING, ASSESSEE NOT PRESSE D GROUND NOS. 1, 2, 3, 3(A), 4, 5, 6, 7, 8, 9, 10,11 & 12. THE LD. AR PRESSED ONLY GR OUND RELATED TO THE COMPARABLES IN 3(B) WITH REFERENCE TO R SYSTEMS INTERNATIONAL L IMITED. OTHER FIVE COMPARABLES VIZ., NITTANY OUTSOURCING SERVICES PVT. LTD., DATAM ATICS FINANCIAL SERVICES LTD., CALIBER POINT BUSINESS SOLUTIONS LTD., ULTRAMARINE & PIGMENTS LTD. AND JINDAL INTELLICOM PVT. LTD. ARE NOT PRESSED. IT(TP)A NO. 221/BANG/2015 PAGE 4 OF 10 4. THE FIRST GROUND FOR CONSIDERATION IN THIS APPEAL IS WITH REGARD TO CONSIDERING R SYSTEMS INTERNATIONAL LTD. AS COMPARABLE. 5. THE ASSESSEE HAS SELECTED IN THE TRANSFER P RICING DOCUMENTATION R SYSTEMS INTERNATIONAL LTD. AS A COMPARABLE COMPANY SINCE IT IS FUNCTIONALLY COMPARABLE AND PASSING ALL THE FILTERS APPLIED BY THE ASSESSEE IN THE TP DOCUMENTATION. HOWEVER THE LOWER AUTHORITIES REJECTED THAT COMPANY ON THE BASIS THAT IT HAS DIFFERENT YEAR ENDING. AGAINST THIS ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT R SYSTEMS INTERNATIONAL LTD. ACCOUNT ING PERIOD IS JANUARY TO DECEMBER AND ASSESSEES ACCOUNTING PERIOD IS APRIL TO MARCH, THEREFORE THAT THE ASSESSEE AND R SYSTEMS INTERNATIONAL LTD. WERE OPER ATING FOR A PERIOD OF 12 MONTHS ACCOUNTING CYCLE. SINCE THEY WERE FACING SI MILAR BUSINESS CYCLES, MARKET AND ECONOMIC CONDITIONS, IT IS NOT POSSIBLE TO SAY THAT BECAUSE OF DIFFERENT ACCOUNTING PERIOD IT HAD ANY IMPACT ON ITS FINANCIA LS AND RESULTED INTO DISTORTION OF COMPARABILITY. SINCE USE OF DIFFERENT ACCOUNTIN G PERIOD HAVE NO EFFECT ON THE COMPARABILITY PARAMETERS AS MENTIONED IN RULE 10B(2 ) OF THE IT RULES 1962, THEREFORE IT WOULD BE INAPPROPRIATE TO REJECT R SYS TEMS INTERNATIONAL LTD. WHICH IS FUNCTIONALLY COMPARABLE COMPANY ONLY ON THE REAS ON THAT IT HAS DIFFERENT ACCOUNTING PERIOD. HE RELIED ON THE JUDGEMENT OF H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MERCER CONSULTING (INDIA) PVT. LTD. IN ITA NO. 101 OF 2015(O&M) DATED 24.08.2016 WHEREIN HONBLE H IGH COURT HELD THAT THE RULE 10(B)(4) DOES NOT EXCLUDE FROM CONSIDERAT ION THE DATA OF AN ENTITY MERELY BECAUSE ITS FINANCIAL YEAR IS DIFFERE NT FROM THE FINANCIAL YEAR OF THE ASSESSEE. WHAT THE RULE REQUIRES IS THAT THE DATA TO BE USED IN ANALYZING THE FINANCIAL RESULTS OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATIN G TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERE D INTO. THUS, SO LONG AS THE DATA RELATING TO THE FINANCIAL YEAR IS AVAIL ABLE, IT MATTERS NOT, IF THE FINANCIAL YEAR FOLLOWED IS DIFFERENT. IN THE CASE B EFORE US THE DATA RELATING TO THE RELEVANT FINANCIAL YEAR OF R.SYSTEMS INTERNA TIONAL LIMITED IS AVAILABLE. WE ARE, THEREFORE, ENTIRELY IN AGREEMEN T WITH THE DECISION OF THE TRIBUNAL THAT IF THE DATA RELATING TO THE FINAN CIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO IS DIRECTLY AVAILABLE FROM IT(TP)A NO. 221/BANG/2015 PAGE 5 OF 10 THE ANNUAL ACCOUNTS OF THAT COMPARABLE, THEN IT CAN NOT BE HELD AS NOT PASSING THE TEST OF SUB-RULE(4) OF RULE 10B. 6. ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE ACCOUNTING PERIOD OF ASSESSEE AND R SYSTEMS INTERNATIONAL LTD. ARE DIFFE RENT AND HENCE THE LOWER AUTHORITIES HAVE NOT CONSIDERED R SYSTEMS INTERNATI ONAL LTD. AS COMPARABLE. THE SAME TO BE UPHELD. FOR THIS PURPOSE SHE RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SCHLUMBERGER I NDIA TECHNOLOGY CENTRE (P.) LTD. VS. DDIT IN ITA NO. 640 (PUN.) OF 2014 DATED 1 0.01.2018 WHEREIN HELD IN PARA 21 AS FOLLOWS. 21. NOW, COMING TO THE CONCERN JINDAL INTELLICOM PV T. LTD. THE CASE OF ASSESSEE BEFORE US IS THAT THE SAID CONCERN HAS DIFFERENT FINANCIAL YEAR THAN THE ONE OF ASSESSEE. THE ASSESSING OFFICE R HAD APPLIED THE CURRENT YEAR DATA AS CONTEMPORANEOUS DATA TO BE USE D FOR BENCHMARKING THE ARM'S LENGTH PRICE OF INTERNATIONA L TRANSACTIONS OF ASSESSEE. THE ASSESSEE HAD PREPARED ITS FINANCIAL S TATEMENTS FOR THE FINANCIAL YEAR STARTING FROM 1ST APRIL, 2009 TO 31S T MARCH, 2010. THE CASE OF ASSESSEE BEFORE US IS THAT JINDAL INTELLICO M PVT. LTD. HAS PREPARED ITS FINANCIAL STATEMENTS FOR PERIOD OF 15 MONTHS AND THE SAME IS NOT TO BE SELECTED IN THE FINAL SET OF COMP ARABLES. 22. WE FIND THAT THE PUNE BENCH OF TRIBUNAL IN THE CASE OF BMC SOFTWARE INDIA PVT. LTD. VS. DCIT IN ITA NO.1425/PN /2010, RELATING TO ASSESSMENT YEAR 2006-07, ORDER DATED 16.03.2016 HAD REJECTED THE CONCERN HAVING 15 MONTHS FINANCIALS. 23. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. PTC SOFTWARE (I) PVT. LTD. IN INCOME TAX APPEAL NO.732 OF 2014 HAD ALSO HELD THAT THE COMPARABLE DATA SHOULD PERTAIN TO THE SAME FINANCIAL YEAR. ACCORDINGLY, WE HOLD THAT THE MARGINS OF CONCERN HA VING DIFFERENT ACCOUNTING PERIOD CANNOT BE SELECTED FOR BENCHMARKI NG INTERNATIONAL TRANSACTIONS AND THE SAME IS TO BE EXCLUDED FROM TH E FINAL SET OF COMPARABLES. ACCORDINGLY, WE DIRECT THE ASSESSING O FFICER TO EXCLUDE JINDAL INTELLICOM PVT. LTD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. AR, RULE 10(B)(4) DOES NOT E XCLUDE FROM CONSIDERATION THE DATA OF AN ENTITY MERELY BECAUSE ITS FINANCIAL YEAR IS DIFFERENT FROM THE FINANCIAL YEAR OF THE ASSESSEE. WHAT THE RULE REQUIRES IS THA T THE DATA TO BE USED IN ANALYZING THE FINANCIAL RESULTS OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATING TO THE FINAN CIAL YEAR IN WHICH THE IT(TP)A NO. 221/BANG/2015 PAGE 6 OF 10 INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. TH US SO LONG AS THE DATA RELATING TO THE FINANCIAL YEAR IS AVAILABLE, IT MATTERS NOT, IF THE FINANCIAL YEAR FOLLOWED IS DIFFERENT. IN THE CASE BEFORE US THE DATA RELATING TO THE RELEVANT FINANCIAL YEAR OF R.SYSTEMS INTERNATIONAL LIMITED IS AVAILABLE. WE A RE, THEREFORE, ENTIRELY IN AGREEMENT WITH THE DECISION RELIED BY LD. AR THAT I F THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTI ON HAS BEEN ENTERED INTO IS DIRECTLY AVAILABLE FROM THE ANNUAL ACCOUNTS OF THAT COMPARABLE, THEN IT CANNOT BE HELD AS NOT PASSING THE TEST OF SUB-RULE(4) OF RULE 10B AND THE SAME IS THE VIEW TAKEN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MERCER CONSULTING (INDIA) PVT. LTD. (SUPRA). BEING SO, IN OUR OPINION DATA RELATING TO THE ASSESSEE FINANCIAL YEAR TO BE INTERPOLATED AND THER EAFTER IF REQUIRED, IT SHOULD BE CONSIDERED AS A COMPARABLE TO THE ASSESSEES CASE. WITH THIS OBSERVATION WE REMIT THIS ISSUE TO THE FILE OF TPO FOR HIS FRESH C ONSIDERATION. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXCLUSION OF ACCENTIA TECHNOLOGIES LIMITED AS COMPARABLE. THE LD. AR SUB MITTED THAT ACCENTIA IS ENGAGED IN RENDERING IT ENABLED SERVIC ES IN THE FIELDS OF MEDICAL TRANSCRIPTION, BILLING AND CODING. FURTHER IT IS EVIDENT FROM THE WEBSITE OF THE COMPANY, THAT THE COMPANY DEVELOPS I TS OWN SOFTWARE PRODUCTS FOR BUSINESS PROCESS OUTSOURCING. FURTHERM ORE, ACCENTIA IS THE FIRST COMPANY TO OFFER SOFTWARE AS SERVICE MODE L IN THE HEALTHCARE RECEIVABLES MANAGEMENT AREA. HOWEVER, THE COMPANY H AS NOT PROVIDED ANY SEGMENTAL DATA. HENCE, THE COMPANY CAN NOT BE CONSIDERED COMPARABLE TO THE ASSESSEE. ACCENTIA POSSESSES BRAND VALUE/ IPRS AS REFLECTED IN THE FINANCIAL STATEMENTS, WHICH WILL TEND TO INFLUENCE THE PRICIN G POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED. ACCENTIA HAS ACQUIRED THE IQ GROUP OF COMPANIES OF UNITED KINGDOM CONSISTING OF THREE COMPANIES, TACTIQ LTD., CENTRIC LTD. AND NEOLOGIQ LTD AND ALSO AMALGAMATED ASCENT INFOSERVE. OWING TO THE SE EXTRA ORDINARY EVENTS, ACCENTIA SHOULD NOT BE CONSIDERED COMPARABL E TO THE ASSESSEE. FURTHER, THE IQ GROUP OF COMPANIES ARE ENGAGED IN F ULL PRODUCT IT(TP)A NO. 221/BANG/2015 PAGE 7 OF 10 DEVELOPMENT LIFECYCLE INVOLVING ELECTRONIC DESIGN A ND DEVELOPMENT, SOFTWARE DESIGN AND DEVELOPMENT AND SEPARATE VALIDA TION SERVICE, AND USER INTERFACE DESIGN AND IMPLEMENTATION AND PRODUC T DEVELOPMENT CONSULTANCY AND TROUBLESHOOTING INVOLVING SYSTEMATI C TECHNOLOGY CONSULTATION SOFTWARE PRODUCT DESIGN AND DEVELOPMEN T SERVICES. THE ASSESSEE ALSO PROVIDED THE WORKINGS HIGHLIGHTI NG THE ABNORMAL FLUCTUATIONS IN REVENUES AND PROFITS OF ACCENTIA FO R A 5 YEAR PERIOD. 9. HE SUBMITTED THAT THE ASSESSEE DOES NOT AGR EE TO THE ACCEPTANCE OF ACCENTIA AS A COMPARABLE COMPANY SINCE IT NOT ONLY PROVIDES ITES BUT IT IS ALSO INTO SOFTWARE PRODUCTS DEVELOPMENT AND PROVIDES SOFTWARE AS SERVICE. ALSO, THE LEARNED TPO IN ORDER TO SUIT HIS OWN REQUIREMENTS A ND NEEDS HAS ACCEPTED ACCENTIA AS A COMPARABLE. 9.1 THE LD. DR SUBMITTED THAT AS PER ITS ANNUA L REPORT THE ASSESSEES OPERATION INCLUDES MEDICAL TRANSCRIPTION, MEDICAL CODING, BIL LING AND RECEIVABLE MANAGEMENT (COLLECTION) ALL ARE INTEGRAL PART OF TH E HEALTH CARE BPO SERVICES TERMED AS HRCM SERVICES. IN REGARD TO REVENUE RECO GNITION, THE OBJECTION CANNOT BE UPHELD IN VIEW OF THE FINANCIAL REPORTING NARRATED IN ANNUAL REPORT WHEREIN IT WAS MENTIONED THAT COMPANY SHALL PREPARE AND MAINTAIN ITS ACCOUNTS FAIRLY AND ACCURATELY IN ACCORDANCE WITH THE ACCOUN TING AND THE FINANCIAL REPORTING QUESTION OF SEGMENTAL INFORMATION DOES NO T ARISE AS PER THE ANNUAL REPORT, THE COMPANY HAS ONLY ONE SEGMENT. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD. AR IS THIS ACCENTIA TECHNOLOGIES LTD. IS FUNCTIONALLY NOT COMPARABLE TO ASSESSEE, WHICH IS A BPO. THE SEGMEN TAL DATA RELEVANT TO SOFTWARE SERVICES AND PRODUCT ITES ARE NOT AVAILABL E IN THE ANNUAL REPORT. THAT COMPANY OWN INTANGIBLES. THESE FACTS WERE CONSIDER ED IN THE CASE OF THE COORDINATE BENCH IN THE CASE OF OUTSOURCE PARTNERS INTERNATIONAL PVT. LTD. VS. DCIT IN IT(TP)A NO. 337/BANG/2015 DATED 06.02.2017 AND HELD THAT IT CANNOT BE A COMPARABLE CASE AS IN THE CASE OF ASSESSEE. BEIN G SO, WE UPHOLD THE ARGUMENT OF LD. AR AND DIRECT THE TPO TO EXCLUDE TH E ABOVE COMPARABLE. IT(TP)A NO. 221/BANG/2015 PAGE 8 OF 10 11. THE NEXT GROUND OF THE APPEAL OF THE ASSES SEE IS WITH REGARD TO EXCLUDE FORTUNE INFOTECH LIMITED AS COMPARABLE. THE LD. AR SUBMITTED THAT THAT COMPANY USES WEB BASED SOFTWARE, UNIQUE TECHNOLOGY AND TECH NICAL KNOWHOW IMPORTED FROM ITS BUSINESS PARTNERS FOR PROVIDING BPO SERVIC ES. HE RELIED ON THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF OUTSOURCE PARTNERS INTERNATIONAL PVT. LTD. VS. DCIT (SUPRA). 11.1 ON THE OTHER HAND, LD. DR SUBMITTED THAT ON EXAMINATION OF THE ANNUAL REPORT OF FORTUNE INFOTECH LTD., IT WAS NOTICED THAT THERE IS NO MENTION IN THE ANNUAL REPORT ABOUT THE IMPORT OF THE UNIQUE TECHNOLOGY AN D TECHNICAL KNOWHOW FROM THE BUSINESS PARTNERS. EVEN OTHERWISE, EVERY COMPA NY IS REQUIRED TO USE THE SOFTWARE AND TECHNOLOGY FOR PROVIDING ITES SERVICES AND THEREFORE, ABOVE COMPANY IS TO BE CONSIDERED AS COMPARABLE TO THE AS SESSEES CASE. THE LD. DR RELIED ON THE DIRECTIONS OF DRP. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS DISCUSSED IN EARLIER YEAR THIS COMPARABLE FORTUNE I NFOTECH LTD. WAS REJECTED AS A COMPARABLE IN THE CASE OF OUTSOURCE PARTNERS INTE RNATIONAL PVT. LTD. VS. DCIT (SUPRA) AND IT WAS HELD THAT IT CANNOT BE A COMPARA BLE. ACCORDINGLY, WE DIRECT THE AO/TPO TO EXCLUDE THE SAME. 13. THE NEXT GROUND IS WITH REGARD TO EXCLUSIO N OF JEEVAN SCIENTIFIC TECHNOLOGY LIMITED IN GROUND NO. 3(C). THIS GROUND DOES NOT R EQUIRE ANY ADJUDICATION IN VIEW OF OUR FINDINGS WITH REGARD TO ISSUE RAISED IN ADDI TIONAL GROUND. 14. THE ASSESSEE HAS RAISED ADDITIONAL GROUND AND SUBMITTED THE REASON FOR RAISING AN ADDITIONAL GROUND AS FOLLOWS. GROUND NO. 4A: JEEVAN SCIENTIFIC TECHNOLOGY LTD. (H EREINAFTER REFERRED TO AS 'JEEVAN SCIENTIFIC') SHOULD BE REJEC TED AS IT FAILS SERVICE INCOME FILTER OF 75% AS APPLIED BY THE LD. TPO. THE APPELLANT SUBMITS THAT INCOME FORM ITES ACTIVIT IES FOR JEEVAN SCIENTIFIC IS LESS THAN 75% OF THE TOTAL OPERATING INCOME AND THEREFORE JEEVAN SCIENTIFIC DOES NOT QUALIFY THE SERVICE INCO ME FILTER AS APPLIED BY THE TPO AND THEREFORE IS NOT COMPARABLE TO THE A PPELLANT. REASON FOR FILING ADDITIONAL GROUND OF APPEAL IT(TP)A NO. 221/BANG/2015 PAGE 9 OF 10 THE APPELLANT IN THE FORM 36B HAS TAKEN A GENERIC G ROUND FOR REJECTION OF JEEVAN SCIENTIFIC ON COMPARABILITY AND EMPLOYEE COST FILTER. HOWEVER, IN ORDER TO BRING OUT A MORE SPECIFIC ARGU MENT FOR EXCLUSION OF JEEVAN SCIENTIFIC WE WOULD LIKE TO BRING TO YOUR KIND ATTENTION THAT JEEVAN SCIENTIFIC FAILS THE SERVICE INCOME FILTER A PPLIED BY THE TPO HIMSELF AND THEREFORE CANNOT BE COMPARABLE TO THE A PPELLANT. ON THE ABOVE BASIS, WE HUMBLY REQUEST THE HON'BLE BENCH ME MBERS TO REJECT THE ABOVE-MENTIONED COMPANY FROM THE FINAL SET OF C OMPARABLE. GROUND NO. 5A: DRP HAS ON ITS OWN MODIFIED THE FILT ER I.E., EXPORT EARNING FILTER THE APPELLANT SUBMITS THAT THE APPELLANT AND THE LD . TPO HAS UNILATERALLY APPLIED 25% EXPORT EARNING FILTER BUT THE DRP HAS ON ITS OWN APPLIED EXPORT EARNING FILTER OF 75% AND REJECT ED THE COMPANY WHICH WERE NOT DISPUTED EITHER BY THE APPELLANT OR BY THE DEPARTMENT BEFORE THE DRP. 15. THE LD. AR SUBMITTED THAT ADMITTEDLY THE A SSESSEE RAISED THAT IN GROUND NO. 3 FOR EXCLUSION OF JEEVAN SCIENTIFIC TECHNOLOGY LIM ITED AND ALSO IN GROUND NO. 5 WITH REGARD TO APPLYING EXPORT EARNING FILTER OF 75 % INSTEAD OF 25%. HOWEVER ASSESSEE HAS RAISED ADDITIONAL GROUND FOR EXCLUSION OF JEEVAN SCIENTIFIC TECHNOLOGY LIMITED ON THE BASIS THAT INCOME FROM IT ES ACTIVITIES OF JEEVAN SCIENTIFIC TECHNOLOGY LTD. IS LESS THAN 75% OF THE TOTAL INCOME AND THEREFORE JEEVAN SCIENTIFIC TECHNOLOGY LTD. DOES NOT QUALIFY THE SERVICE INCOME TREATED AS APPLIED BY THE TPO. HENCE IT IS TO BE EXCLUDED AS COMPARABLE TO THE ASSESSEES CASE. IN OUR OPINION THIS IS NOT ADDITIONAL GROUND BUT ONLY MODIFIED GROUND SO AS TO FACILITATE PROPER ADJUDICATION OF THE ISSUE. HE NCE, WE ARE INCLINED TO ADMIT THIS GROUND IN THE INTEREST OF JUSTICE. 16. THE LD. AR SUBMITTED THAT JEEVAN SCIENTIFI C TECHNOLOGY LTD. CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEES CASE AS IT FAILS SERVICE INCOME FILTER OF 75% AS APPLIED BY THE TPO. IT IS ALSO SUBMITTED THAT DRP HAS ITSELF EXCLUDED ICRA ONLINE LTD. AS COMPARABLE BUT THE FACT THAT 75 % OF EXPORT EARNING FILTER NEEDS TO BE APPLIED AS AGAINST 25% OF EXPORT EARNIN G FILTER APPLIED BY THE TPO. THEREFORE IN OUR OPINION THESE FACTS REQUIRED TO BE EXAMINED BY THE TPO AND IF IT IS SO ICRA ONLINE LTD. WAS EXCLUDED AS COMPARABL E, THIS COMPARABLE IS ALSO TO BE EXCLUDED ON THE SAME BASIS. ACCORDINGLY, THIS I SSUE IS REMITTED TO TPO FOR FRESH CONSIDERATION WITH THIS OBSERVATION. IT(TP)A NO. 221/BANG/2015 PAGE 10 OF 10 17. WITH REGARD TO LEVY OF INTEREST U/S. 234B AND 234D OF IT ACT WHICH ARE CONSEQUENTIAL AND MANDATORY IN NATURE TO BE COMPUTE D ACCORDINGLY. 18. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JANUARY, 2019. SD/- SD/- (LALIET KUMAR) (CHANDRA POOJ ARI) JUDICIAL MEMBER ACCOUNT ANT MEMBER BANGALORE, DATED, THE 31 ST JANUARY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.