Maximize Learning P. Ltd, Pune V. ACIT, Pune

ITA 2235/PUN/2012

• Counselvise Citation: 223524514 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS M S VERMA
• Keywords: Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 92C; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2235/PN/2012 (ASSESSMENT YEAR : 2008-09) MAXIMIZE LEARNING PRIVATE LIMITED, BASEMENT NO.34, ADM-166SQT BU, LOWER FLR., EAST STREET, GALLERIA PREMISES CHSL, HOUSE NO.2421, CAMP, PUNE 411 001. PAN : AAACC7416K . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 11(2), PUNE. . RESPONDENT ASSESSEE BY : MR. ARVIND SONDHE/PRAMOD JOSHI/ MR. RUGVED APTE DEPARTMENT BY : MRS. M. S. VERMA, CIT DATE OF HEARING : 05-12-2014 DATE OF PRONOUNCEMENT : 02-02-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE PERTAINING TO THE ASSESSMENT YEAR 2008-09, WHICH IS DIRECTED AGAI NST THE ORDER OF THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 11(2), PU NE (IN SHORT THE ASSESSING OFFICER) PASSED U/S 143(3) R.W.S. 144C O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28.09.2012, WHICH IS IN CONFORMITY WITH THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL, PUNE (IN SHO RT THE DRP) DATED 29.08.2012. 2. IN THIS APPEAL, GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER: - THE APPELLANT OBJECTS TO THE ORDER DATED SEPTEMBER 28, 2012 PASSED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE 11(2), PUNE ['ACIT'] UNDER SECTION 143(3) R.W.S. 144C OF THE IN COME-TAX ACT, 1961 ['THE ACT'] IN PURSUANCE OF THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL, PUNE ['DRP'] DATED AUGUST 29, 2012 FOR THE ASSESSME NT YEAR 2008-09 ON THE FOLLOWING AMONG OTHER GROUNDS: ITA NO.2235/PN/2012 1. TRANSFER PRICING ADJUSTMENT 1.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN MAKING AN ADJUSTMENT AMOUNTING TO RS.37,891,404 TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISE IN RESPECT OF PROVISION OF INFORMATION T ECHNOLOGY ENABLED SERVICES ['ITES']. 2. REJECTION OF BENCHMARKING DONE BY THE APPELLANT 2.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN REJECTING THE BENCHMARKING APPROACH AND METHODOLOGY FOLLOWED BY THE APPELLANT FOR BENCHMARKING THE INTERNATIONAL TRANSA CTION OF PROVISION OF ITES. 3. ERRONEOUS SELECTION OF COMPARABLE COMPANIES THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEAR NED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN SELECTING THE FOLLOWING COMPARABLE COMPANIES. 3.1 ACCENTIA TECHNOLOGIES LTD. 3.2 CORAL HUB LTD. 3.3 COSMIC GLOBAL LTD. 3.4 CROSSDOMAIN SOLUTIONS LTD. 4. ERRONEOUS REJECTION OF COMPARABLE COMPANIES THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEAR NED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN REJECTING THE FOLLOWING COMPARABLE COMPANIES. 4.1 ACE SOFTWARE EXPORTS LIMITED 4.2 HAMLET COMPUTER GROUP LTD. 4.3 PENTAMEDIA GRAPHICS LTD. 5. BENEFIT OF THE RISK ADJUSTMENT 5.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT GRANTING THE RISK ADJUSTMENT. 6. BENEFIT OF THE VARIATION / REDUCTION OF 5 PERCEN T FROM THE ARITHMETIC MEAN 6.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT GRANTING THE BENEFIT OF +/- 5 PERCENT AS PER PROVISO TO SECT ION 92C (2) OF THE ACT. 7. INITIATION OF PENALTY PROCEEDINGS 7.1 THE LEARNED ACIT ERRED ON THE FACTS AND IN LAW IN INITIATING PENALTY PROCEEDINGS SECTION 271 (1) (C) OF THE ACT. 8. LEVY OF INTEREST OBLIGATION ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENT 8.1 THE LEARNED ACIT HAS ERRED ON THE FACTS AND IN LAW BY LEVYING INTEREST UNDER SECTION 234B OF THE ACT, ON ACCOUNT OF THE UN ANTICIPATED ADJUSTMENTS MADE BY THE LEARNED TPO. ITA NO.2235/PN/2012 8.2 THE APPELLANT PLEADS THAT THE SHORTFALL IN ADVANCE TAX HAS RESULTED IN VIEW OF THE ADJUSTMENTS WHICH HAVE BEEN OBJECTED IN THE GROUNDS ABOVE AND ACCORDINGLY IS CONSEQUENTIAL IN NATURE 9. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 10. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTE R OR ADD TO THE GROUNDS OF APPEAL. 3. ALTHOUGH, ASSESSEE HAS RAISED MULTIPLE GROUNDS O F APPEAL BUT ESSENTIALLY THE SOLITARY GRIEVANCE IS WITH REGARD T O AN ADDITION OF RS.3,78,91,404/- MADE TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES IN RESPECT OF THE PROVISIONS OF INFORMATION TECHNOLOGY ENABLED SERVICES (IN SHORT ITES). 4. IN THIS CASE, ASSESSEE IS RENDERING ITES TO ITS ASSOCIATED ENTERPRISE I.E. APTARA INC. ABROAD. ASSESSEE IS A SERVICE PROVIDER OF E-LEARNING SOLUTIONS (IT ENABLED SERVICES LIKE CONTENT TECHNOLOGY SERVICES, DESKTOP TECHNOLOGY SERVICES, E-LEARNING AND CONVERSION SERVICES) FOR I TS ASSOCIATED ENTERPRISE. THE DISPUTE IS WITH REGARD TO THE DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF ITES PROVIDED TO THE ASSOCIATED ENTERPRISE BY APPLYING THE TRANSACTIONAL NET MARGIN (TNM) METHOD. ON APPLICATION OF THE TNM METHOD, THERE IS NO DISPUTE BETWEEN THE ASSESSE E AND THE REVENUE. BY APPLYING THE TNM METHOD, THE TPO PASSED AN ORDER U/ S 92CA(3) OF THE ACT DATED 31.10.2011 DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS AT AN AMOUNT WHICH IS HIGHER THAN THE STATED VALUE OF THE INTERNATIONAL TRANSACTIONS BY A SUM OF RS.4,58,87,2 84/-. SUBSEQUENTLY, CONSEQUENT TO THE DIRECTIONS OF THE DRP DATED 27.09 .2012, THE ASSESSING OFFICER HAD RE-WORKED THE ADJUSTMENT AT RS.3,78,91, 404/- AND ACCORDINGLY ADDED THE SAID SUM TO THE RETURNED INCOME. THE AFO RESAID ADDITION IS THE SUBJECT-MATTER OF DISPUTE BEFORE US. ITA NO.2235/PN/2012 5. THE TPO SELECTED THE FOLLOWING FINAL SET OF COMP ARABLES :- SR.NO. NAME OF THE COMPARABLE OP/TC WORKING CAPITAL ADJUSTED MARGIN 1 ACCENTIA TECHNOLOGIES LTD. 42.70 42.36 2 CORAL HUB LTD. 51.79 37.91 3 COSMIC CLOBAL LTD. 23.30 23.36 4 CROSSDOMAIN SOLUTIONS LTD. 27.59 26.98 5 E4E HEALTHCARE SOLUTIONS LTD. 19.38 19.53 ARITHMETIC MEAN 23.95% (164.76/5) 30.02% (150.14/5) 6. BEFORE US, THE PLEA OF THE ASSESSEE IS THAT THE TPO ERRED IN INCLUDING (I) ACCENTIA TECHNOLOGIES LTD.; (II) CORAL HUB LTD.; (I II) COSMIC GLOBAL LTD.; AND, (IV) CROSSDOMAIN SOLUTIONS LTD. IN THE LIST OF COMP ARABLES AND AT THE SAME TIME THE TPO ERRED IN NOT INCLUDING (I) ACE SOFTWAR E EXPORTS LIMITED; AND, (II) PENTAMEDIA GRAPHICS LTD. IN THE FINAL SET OF COMPAR ABLES. THE ARGUMENTS OF THE ASSESSEE ARE PRIMARILY IN RELATION TO THE AFORE SAID ASPECTS. 7. IN SO FAR AS THE ASSESSEES PLEA FOR INCLUSION O F PENTAMEDIA GRAPHICS LTD. IS CONCERNED, IT IS CONTENDED THAT THE SAME HA S BEEN UNJUSTLY EXCLUDED BY THE TPO. IT WAS CONTENDED BEFORE THE TPO THAT THE SAID CONCERN IS ENGAGED INTO ITES MARKET IN DIGITAL CONTENT DEVELOPMENT AND THEREFORE ITS ACTIVITIES ARE COMPARABLE TO THAT OF THE ASSESSEE. IT WAS ALSO CO NTENDED BEFORE THE TPO THAT THE SAID CONCERN WAS ACCEPTED BY THE TPO HIMSE LF AS A COMPARABLE IN ASSESSMENT YEAR 2007-08 AND FOLLOWING THE RULE OF C ONSISTENCY THE SAID CONCERN SHOULD ALSO BE INCLUDED AS A COMPARABLE THI S YEAR. 8. THE TPO REJECTED THE PLEA OF THE ASSESSEE ON THE GROUND THAT THE CONCERN WAS NOT FUNCTIONALLY COMPARABLE AND THAT TH E ANNUAL ACCOUNTS OF THE SAID CONCERN SHOW AN EXPENDITURE ON MULTIMEDIA DEVE LOPMENT AND WEB CASTING OF RS.3.57 CRORES. THE AFORESAID ARGUMENTS HAVE BEEN REITERATED BEFORE US BY THE LD. CIT-DR TO SUPPORT THE EXCLUSIO N OF THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. ITA NO.2235/PN/2012 9. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E ASSESSEE HAS VEHEMENTLY POINTED OUT THAT THERE IS NO CHANGE IN T HE BUSINESS ACTIVITIES OF THE SAID CONCERN IN COMPARISION TO THE ACTIVITIES FOR T HE PRECEDING ASSESSMENT YEAR WHEREIN THE SAID CONCERN WAS ACCEPTED BY THE T PO TO BE FUNCTIONALLY COMPARABLE. AT PAGE 377 OF THE PAPER BOOK, REFEREN CE HAS BEEN MADE TO THE ANNUAL FINANCIAL STATEMENT OF THE SAID CONCERN TO S HOW THAT THE EXPENDITURE INCURRED ON ACCOUNT OF MULTIMEDIA DEVELOPMENT AND W EB CASTING WAS ALSO INCURRED IN THE PRECEDING YEAR AND THERE IS NO CHAN GE IN CIRCUMSTANCES. 10. IN OUR VIEW, THE POINTS BROUGHT OUT BY THE LD. REPRESENTATIVE CLEARLY ESTABLISH THAT THE SAID CONCERN HAS BEEN WRONGLY EX CLUDED FROM THE LIST OF COMPARABLES. WE THEREFORE DIRECT THE ASSESSING OFF ICER TO CONSIDER THE SAID CONCERN AS A COMPARABLE. 11. WITH REGARD TO THE INCLUSION OF ACE SOFTWARE EX PORTS LTD., THE LD. REPRESENTATIVE SUBMITTED THAT THE SAME IS FUNCTIONA LLY COMPARABLE AND THEREFORE SHOULD BE INCLUDED IN THE FINAL SET OF CO MPARABLES. THE TPO HAD REJECTED THE SAID CONCERN IN TERMS OF HIS DISCUSSIO N CONTAINED IN PARA 17.1 OF THE ORDER. THE TPO HAS NOTED THAT THE SAID CONCERN HAS REPORTED A OPERATING LOSS OF 56% ON COSTS IN THE YEAR UNDER CONSIDERATIO N. SECONDLY, THE TPO HAS BEEN OBSERVED THAT THE COMPANYS OPERATIONS, AS REP ORTED IN THE ANNUAL REPORT, FALL UNDER THE SINGLE SEGMENT, NAMELY, COMPUTER SOFTWARE AND SERVICE EXPORTS AND THERE IS NO SEGMENT WISE PERFORMANCE DATA FURN ISHED. THEREFORE, THE CONCERN WAS HAVING INCOME FROM DIFFE RENT SOURCES AND IN THE ABSENCE OF SEGMENT WISE BIFURCATION IT COULD NOT BE INCLUDED AS A COMPARABLE. THE TPO HAS ALSO NOTED THAT THE CONCERN HAS DEBITED A STOCK VARIATION IN PROFIT & LOSS ACCOUNT WHICH CASTS A DOUBT ON THE NA TURE OF ACTIVITIES BECAUSE SUCH AN ENTRY IS UNEXPLAINABLE IN THE CASE OF A SER VICE COMPANY. THE TPO HAS ALSO NOTED THAT THE MAJOR EXPENDITURE IS ON SOF TWARE SOURCING WHEREAS A ITA NO.2235/PN/2012 SOFTWARE SERVICE PROVIDER NORMALLY WILL SPEND ON S ALARY AND PERSONNEL COST. IN VIEW OF THE AFORESAID FACTS, THE TPO EXCLUDED TH E SAID CONCERN FROM THE FINAL SET OF COMPARABLES. 12. HAVING REGARD TO THE DISCUSSION CONTAINED IN TH E ORDER OF THE TPO, WE FIND THAT THERE IS NO JUSTIFIABLE REASON TO CONSIDE R THE ACE SOFTWARE EXPORTS LTD. AS A COMPARABLE CONCERN IN ORDER TO BENCHMARK ASSESSEES INTERNATIONAL TRANSACTION OF PROVISION OF ITES TO ITS ASSOCIATED ENTERPRISE. THE ORDER OF THE TPO IS HEREBY AFFIRMED AND ASSESSEE FAILS ON THIS A SPECT. 13. NEXT, ASSESSEE HAD CONTENDED THAT ACCENTIA TECH NOLOGIES LTD. HAS BEEN WRONGLY INCLUDED BY THE TPO AS A COMPARABLE CO NCERN. AS PER THE ASSESSEE, THE SAID CONCERN WAS ENGAGED IN FUNCTIONA LLY DIFFERENT ACTIVITIES. IT WAS POINTED OUT THAT THE SAID CONCERN IS ENGAGED IN PROVIDING MEDICAL TRANSACTION, BILLING AND CODING SERVICES, APPLICATI ON DEVELOPMENT & CUSTOMIZATION (SEGMENTAL DATA NOT AVAILABLE). MORE OVER, IT WAS CONTENDED THAT THE SALES/TURNOVER OF THE SAID CONCERN WAS MOR E THAN RS.50 CRORES FOR THE YEAR UNDER CONSIDERATION WHICH DID NOT MEET WITH TU RNOVER FILTER APPLIED BY THE ASSESSEE. ON THIS POINT, IT WAS POINTED OUT THAT T HE ASSESSEE HAD SELECTED SALES/TURNOVER FILTER OF 1-50 CRORES I.E. ANY CONCE RNS HAVING A TURNOVER EXCEEDING RS.50 CRORES WERE EXCLUDED. THIRDLY, IT WAS POINTED OUT THAT THE ACTIVITIES OF THE SAID CONCERN WERE NOT COMPARABLE TO THE ACTIVITIES OF THE ASSESSEE. 14. THE TPO HAS NOTED THE AFORESAID OBJECTIONS OF T HE ASSESSEE IN PARA 18.1 OF HIS ORDER AND HAS REJECTED THE SAME BY MERE LY NOTICING THAT 75% OF THE REVENUE/INCOME OF THE SAID CONCERN IS FROM ITES AND THEREFORE IT IS TO BE CONSIDERED AS A COMPARABLE. BEFORE US, THE LD. REP RESENTATIVE FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS PUT-FORTH B EFORE THE TPO IN ORDER TO ITA NO.2235/PN/2012 JUSTIFY EXCLUSION OF THE SAID CONCERN FROM THE LIST OF COMPARABLES. IN PARTICULARLY, IT HAS BEEN POINTED OUT THAT FOR THE VERY SAME ASSESSMENT YEAR, THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. ITO, (2013) 38 TAXMAN N.COM 55 (BANG.) HAS EXCLUDED THE SAID CONCERN FROM THE LIST OF COMPARAB LES IN A SIMILAR SITUATION FOLLOWING THE DECISION OF THE HYDERABAD BENCH OF TH E TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMI TED VS. DCIT, (2013) 32 TAXMANN.COM 21 (HYD.). 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVE FOR THE ASSESSEE AND ALSO THE STAND OF THE REVENUE AS EMERG ING FROM THE ORDER OF THE TPO. IN OUR VIEW, THE RATIO LAID DOWN BY THE H YDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYST EMS (INDIA) PRIVATE LIMITED (SUPRA) AND BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) IS SQUA RELY APPLICABLE TO THE PRESENT CASE ALSO. THE AFORESAID BENCHES OF THE TR IBUNAL FOUND THAT DURING THE YEAR UNDER CONSIDERATION THERE WERE EXTRAORDINA RY EVENTS THAT TOOK PLACE IN THE SAID CONCERN WHICH WARRANTED EXCLUSION OF TH IS COMPANY AS A COMPARABLE. WE THEREFORE HOLD THAT THE SAID CONCER N CANNOT BE CONSIDERED AS A COMPARABLE. 16. THE SECOND CONCERN, WHICH IS SOUGHT TO BE EXCLU DED FROM THE LIST OF COMPARABLES IS CORAL HUBS LTD. (FORMERLY VISHAL INF ORMATION TECHNOLOGIES LTD.). IN PARA 18.3 OF THE ORDER OF THE TPO, THE S UBMISSIONS OF THE ASSESSEE FOR EXCLUDING THE SAID CONCERN FROM THE LIST OF COM PARABLE HAVE BEEN ELUCIDATED. THE PLEA OF THE ASSESSEE IS THAT THE S AID CONCERN IS FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE AS IT IS ENGAGED IN IT ENABLED SERVICES PARTICULARLY SELLING AND PURCHASING OF PRODUCTS AND GOODS WHEREAS ASSESSEE IS ENGAGED INTO E-LEARNING AND CONTENT DEVELOPMENT ACT IVITY. SECONDLY, IT WAS ITA NO.2235/PN/2012 CANVASSED ON THE BASIS OF THE ANNUAL REPORT OF THE SAID CONCERN THAT IT OUTSOURCES ITS WORK TO SUB-VENDORS AND THEREFORE TH E BUSINESS OPERATING MODEL OF THE SAID CONCERN WAS DIFFERENT FROM THAT O F THE ASSESSEE. CONSEQUENTLY, THE MARGINS EARNED BY THE SAID CONCER N ARE REFLECTIVE OF THE FUNCTIONS PERFORMED BY IT, WHICH ARE NOT AKIN TO TH E FUNCTIONAL PROFILE OF THE ASSESSEE. THE AFORESAID SUBMISSIONS OF THE ASSESSE E WERE CONSIDERED BY THE TPO, BUT REJECTED. THE SOLITARY GROUND OF REJE CTION BY THE TPO WAS THAT THE ACTIVITIES OF THE SAID CONCERN ARE MORE OR LESS IN THE FIELD OF IT ENABLED SERVICES WHICH IS SIMILAR TO THAT OF ASSESSEE. THE POINT MADE OUT BY THE REVENUE ON THIS ASPECT IS THAT THE SIMILARITY HAS T O BE SEEN ON A BROAD PERSPECTIVE AND THAT NO TWO CONCERNS CAN BE REPLICA OF EACH OTHER. 17. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE VEHEMENTLY POINTED OUT THAT THE DIFFERENCE IN THE OPERATING MODEL OF T HE SAID CONCERN FROM THAT OF THE ASSESSEE HAS TO BE APPRECIATED BY VARIOUS DECIS IONS OF THE TRIBUNAL, WHICH ARE AS UNDER :- (I) CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED (SUPRA); (II) SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA); (III) BRIGADE GLOBAL SERVICES PRIVATE LIMITED VS. ITO, (2013) 33 TAXMANN.COM 618 (HYD.); AND, (IV) COGNIZANT TECHNOLOGY SERVICES PVT. LTD. VS. AC IT, (ITA NO.1624/HYD/2010). 18. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVE FOR THE ASSESSEE AS ALSO THE STAND OF THE REVENUE AS EMERGI NG FROM THE ORDER OF THE TPO. WE FIND THAT THE INCLUSION OF THE CORAL HUBS LTD. AS A COMPARABLE CONCERN WAS A SUBJECT-MATTER OF CONSIDERATION BY TH E BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTION S INDIA PVT. LTD. (SUPRA) IN CIRCUMSTANCES WHICH ARE SIMILAR TO THOSE BEFORE US. THE BANGALORE BENCH OF ITA NO.2235/PN/2012 THE TRIBUNAL, AS PER THE DISCUSSION IN PARAS 14 TO 17 OF THE ORDER FOUND IT FIT TO EXCLUDE THE SAID CONCERN FROM THE FINAL SET OF COMP ARABLES. THE FOLLOWING DISCUSSION IS RELEVANT :- 14. THIS COMPANY IS LISTED AT SL.NO.6 OF THE LIST OF CO MPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, IT IS SEEN THAT THIS COMPANY WAS EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD. THE COMPARABILITY OF THIS COMPANY IN THE CASE OF AN ITES COMPANY BY NAME 24 X 7 CUSTOMER.COM PVT. LTD. WAS C ONSIDERED BY THE TRIBUNAL IN ITA NO.227/BANG/2010 AND BY ORDER DATED 09.11.2012 THE TRIBUNAL HELD THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARAB LE WITH ITES FOR THE FOLLOWING REASON: '17.3 VISHAL INFORMATION TECHNOLOGIES LTD. (VIT) - IN THE CASE OF THIS COMPARABLE, WE FIND THAT THE MUMBAI TRIBUNAL IN THE CASE OF MEARSK GLOBAL SERVICES (I) PVT LTD IN ITA NO.3774/MUM/2011 BY ORDER DT.9.11.2011 HAS HELD THAT SINCE VISHAL INFORMATION TECHNOLOGIES LTD IS OUTSOURCING MOST OF ITS WORK IT HAS TO BE EXCLUDED FROM THE LIST WHEREAS THE ASSESSEE IN THE CITED CASE WAS CARRYING OUT THE WORK BY ITSELF. IN THE INSTANT CASE OF THE ASSESSEE ALSO THE ASSESSEE WAS CARRYING OUT ITS WORK BY ITSELF WHEREAS IN THE CASE OF VITL, IT IS O UTSOURCING MOST OF ITS WORK. WE ARE THEREFORE OF THE CONSIDERED OPINION TH AT THE DECISION OF THE ITAT, MUMBAI IN THE CITED CASE ON THE ISSUE OF EXCLUDING VITL AS A COMPARABLE SQUARELY APPLIES. THIS DECISION WAS FOLL OWED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NETLINX INDIA (P) LTD IN ITA NO.454/BANG/2011 DT. 19.10.201 2 WHEREIN IT WAS HELD THAT VISHAL INFORMATION TECHNOLOGIES LTD CANNO T BE CONSIDERED AS A COMPARABLE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF MEARSK GLOBAL SERVIC ES (I) PVT LTD, DIRECT THE ASSESSING OFFICER / TPO TO EXCLUDE VISHA L INFORMATION TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES.' 15. FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE HOLD THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. IT MAY ALSO BE RELEVANT TO POINT OUT THAT THE TPO IN HIS ORDER HAS OBSERVED THAT THIS COMPANY IS RETAINED AS A COMPARABLE ON THE BASIS OF DETAILED DISCUSSION IN THE TP ORDER FOR THE A.Y. 2007-08. IN FACT IN A.Y. 2007-08, THERE WAS NO DETERMINATION OF ALP AND THEREFORE THERE WAS NO OCC ASION FOR ANY ORDER BEING PASSED BY THE TPO. IT IS ALSO SEEN THAT THIS COMPAN Y ENTERED INTO AN AREA OF BUSINESS KNOWN AS NEW VERTICAL DIGITAL LIBRARY & PR INT ON DEMAND IN F.Y. 2007-08. IN THE CASE OF CAPITAL IQ INFORMATION SYST EMS INDIA (P.) LTD. (SUPRA), THE ITAT HYDERABAD BENCH IN THE CASE OF ITES COMPAN Y CONSIDERED THE COMPARABLE OF THIS COMPANY AS AN ITES COMPANY AND H ELD AS FOLLOWS:- 'IV. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INF ORMATION TECHNOLOGIES LTD.): 16. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING T AKEN AS COMPARABLE MAINLY ON THE GROUND THAT THE ACTIVITIES OF THE COMPANY IS NOT ONLY FUNCTIONALLY DIFFERENT, BUT THE BUSINESS M ODEL OF THE COMPANY IS ALSO DIFFERENT AS IT SUB-CONTRACTS MAJOR ITY OF ITS ITES WORKS TO THIRD PARTY VENDORS AND HAS ALSO MADE SIGNIFICAN T PAYMENTS TO THOSE VENDORS. THE PAYMENTS MADE TO VENDORS TOWARDS THE D ATA ENTRY CHARGES ALSO SUPPORTS THE FACT THAT THE COMPA NY OUTSOURCES ITS ITA NO.2235/PN/2012 WORKS. IN THE CIRCUMSTANCES, IT CANNOT BE TAKEN AS A COMPARABLE TO THE ITES FUNCTIONS PERFORMED BY THE ASSESSEE. SINCE THIS COMPANY IS ACTING AS AGENT ONLY BY OUTSOURCING ITS WORKS TO TH E THIRD PARTY VENDORS. IN THIS CONTEXT, THE ASSESSEE RELIED UPON THE ORDER OF THE DRP IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008 -09, WHEREIN THE DRP, AFTER TAKING INTO CONSIDERATION, THE AFORESAID ASPECT, HAS ACCEPTED THE CLAIM OF THE ASSESSEE. THE ASSESSEE FU RTHER SUBMITTED THAT THE INCOME-TAX APPELLATE TRIBUNAL MUMBAI BENCH IN THE CASE OF ASSTT. CIT V. MAERSK GLOBAL SERVICE CENTRE (INDIA) (P.) LTD. [2011] 133 ITD 543/16 TAXMANN.COM 47 (MUM.), A COPY OF WHICH IS SUBMITTED BEFORE US, HAS ALSO DIRECTED FOR THE EXCLUSION OF T HE AFORESAID COMPANY SINCE IT HAS OUTSOURCED A CONSIDERABLE PORTION OF I TS BUSINESS. 17. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED A UTHORISED REPRESENTATIVE FOR THE ASSESSEE, WE FIND THAT THE D RP, IN THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2008-09 IN ASSE SSEE'S OWN CASE, AFTER TAKING NOTE OF THE COMPOSITION OF THE VENDOR PAYMENTS OF CORAL HUB FOR THE LAST THREE YEARS, AND THE FACT THAT IT HAS ALSO COMMENCED A NEW LINE OF BUSINESS OF PRINTING ON DEMAND (POD), W HEREIN IT PRINTS UPON CLIENTS REQUEST, CONCLUDED AS FOLLOWS- '18.4. IN VIEW OF THIS MAJOR DIFFERENCE IN FUNCTIO NALITY AND THE BUSINESS MODEL, THIS PANEL IS OF THE VIEW THAT 'CORAL HUB' I S NOT A SUITABLE COMPARABLE TO THE TAXPAYER AND HENCE NEEDS TO BE DR OPPED FROM THE FINAL LIST OF COMPARABLES.' IN CASE OF MAERSK GLOBAL SERVICE CENTRE INDIA (P.) LTD. (SUPRA), THE ITAT MUMBAI BENCH HAS ALSO DIRECTED FOR EXCLUSION O F THE AFORESAID COMPANY, BY OBSERVING IN THE FOLLOWING MANNER- 'INSOFAR AS THE CASES OF TULSYAN TECHNOLOGIES LIMIT ED AND VISHAL INFORMATION TECHNOLOGIES LIMITED ARE CONCERNED, IT IS NOTICED FROM THEIR ANNUAL ACCOUNTS THAT THESE COMPANIES OUTSOURC ED A CONSIDERABLE PORTION OF THEIR BUSINESS. AS THE ASSESSEE CARRIED OUT ENTIRE OPERATIONS BY ITSELF, IN OUR CONSIDERED OPINION, THESE TWO CAS ES WERE RIGHTLY EXCLUDED.' IN VIEW OF THE OBSERVATIONS MADE BY THE DRP AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MAERSK GLOBAL SERVIC E CENTRE, (SUPRA), WE ACCEPT THAT THIS COMPANY CANNOT BE TAKE N AS A COMPARABLE.' 16. IT IS ALSO FURTHER NOTICED THAT THE EMPLOYEE CO ST/OPERATING SALES OF THIS COMPANY IS A MERE 3%, WHEREAS THE THRESHOLD LIMIT FOR ACCEPTANCE AS A COMPARABLE ON THE BASIS OF EMPLOYEE COST TO SALES S HOULD BE AT LEAST 25%. THIS TRIBUNAL IN THE CASE OF FIRST ADVANTAGE OFFSHORE SERVICES LTD. V. CIT IT(TP)A NO.L086/BANG/2011, ORD ER DATED 30.4.2013 HAS TAKEN THE FOLLOWING VIEW: '36. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THEIR RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THA T THIS ISSUE HAD ARISEN IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMEN T YEAR 2006-07. THIS TRIBUNAL HAS HELD THAT EMPLOYEE COST FILTER IS TO BE THE SAME EVEN FOR ITES SEGMENT ALSO. THE LEARNED DR'S ARGUMENT TH AT THE EMPLOYEE COST FILTER IS APPLICABLE ONLY TO SOFTWARE DEVELOPM ENT SEGMENT AND NOT TO ITES SEGMENT IS NOT ACCEPTABLE. THOUGH IT IS WIT HOUT ANY DISPUTE THAT THE SOFTWARE DEVELOPMENT WOULD REQUIRE SKILLED EMPLOYEES AND, THEREFORE, THE EMPLOYEE COST WOULD DEFINITELY BE MO RE THAN 25% OF THE ITA NO.2235/PN/2012 TOTAL EXPENSES, IT CANNOT BE SAID THAT THE SAID FIL TER IS NOT APPLICABLE TO ITES SEGMENT, WHERE COMPARABLY LESS SKILLED EMPLOYE ES ARE EMPLOYED. IN THE ITES SEGMENT, THE ENTIRE WORK IS T O BE DONE BY THE EMPLOYEES AND, THEREFORE, EVEN THOUGH THEY MAY BE L ESS SKILLED COMPARED TO SOFTWARE DEVELOPMENT SEGMENT, THE NUMBE R OF EMPLOYEES WOULD DEFINITELY BE MORE AND THUS THE EMP LOYEE COST WOULD BE HIGH AND THUS APPLICATION OF EMPLOYEE COST FILTE R TO THE ITES SECTOR IS ALSO JUSTIFIED. IN VIEW OF THE SAME, WE DIRECT T HE TPO TO APPLY THE EMPLOYEE COST FILTER TO EXCLUDE COMPANIES WITH EMPL OYEE COST OF LESS THAN 25% FROM THE LIST OF COMPARABLES FOR THE COMPU TATION OF ALP.' 17. APPLYING THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. 19. MOREOVER, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PTC SOFTWARE INDIA PVT. LTD. (SUPRA) HAS ALSO FOUND IF FIT TO EX CLUDE THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES, WHICH WAS AGAIN A CASE OF ITES PROVIDER. 20. FOLLOWING THE AFORESAID DECISIONS, WE ARE OF TH E VIEW THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. WE HOLD SO. 21. THE THIRD CONCERN, WHICH IS SOUGHT TO BE EXCLUD ED BY THE ASSESSEE IS COSMIC GLOBAL LTD.. THE ASSESSEE HAS CONTENDED BEF ORE THE TPO THAT THE SAID CONCERN NEEDS TO BE REJECTED ON THE GROUND THA T IT WAS ENGAGED IN BPO AND TRANSLATION SERVICES WHEREAS ASSESSEE WAS AN IT ES PROVIDER, AND THEREFORE CONCERN WAS FUNCTIONALLY DISSIMILAR. HOW EVER, THE TPO REJECTED THE PLEAS OF THE ASSESSEE AND CONSIDERED THE SAID CONCE RN AS A COMPARABLE ON THE GROUND THAT EXPORT INCOME OF THE SAID CONCERN W AS MORE THAN 50%. 22. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE OBJECTIONS RAISED BEFORE THE DRP TO POINT OUT THAT THE SAID CONCERN WAS LIABLE TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. FIRSTLY, IT IS POINTED OUT THAT THE SAID CONCERN WAS OFFERING ACCOUNTS PROCESSING S ERVICES AND TRANSCRIPTION SERVICES AND WAS NOT COMPARABLE TO THE ACTIVITIES O F THE ASSESSEE AS THE SAID CONCERN WAS INTO BPO AND TRANSLATION SERVICES. IT WAS ALSO POINTED OUT BY ITA NO.2235/PN/2012 REFERRING TO THE WEBSITE OF THE SAID CONCERN THAT I T WAS ENGAGED IN THE DIVERSIFIED BUSINESS ACTIVITY. IT WAS ALSO POINTED OUT THAT THOUGH THE ACTIVITIES OF THE SAID CONCERN ARE IN MEDICAL TRANSCRIPTION, C ONSULTANCY, TRANSLATION AND ACCOUNTS BPO SERVICES BUT THERE WAS NO SEGMENTAL IN FORMATION AVAILABLE IN THE ANNUAL ACCOUNTS OF THE SAID CONCERN. APART THE REFROM, IT HAS BEEN POINTED OUT THAT THE SAID CONCERN HAS INCURRED A SUBSTANTIA L EXPENDITURE OF RS.2,86,29,348/- TOWARDS TRANSLATION CHARGES AS IS EVIDENT FROM THE ANNUAL REPORT OF THE SAID CONCERN. THE SAID TRANSLATION C HARGES ARE APPROXIMATELY 60.17% OF THE TOTAL COST INCURRED BY THE SAID CONCE RN AND THE EMPLOYEE COST COMPRISES OF MERELY 17.32% OF THE TOTAL COST. IT W AS THEREFORE CONTENDED THAT THE AFORESAID FACTS JUSTIFY AN INFERENCE THAT THE S AID CONCERN WAS NOT ADOPTING THE NORMAL AND ROUTINE BUSINESS MODEL FOR AN OTHERW ISE NORMAL ITES PROVIDER. THE PROPORTION OF EXPENDITURE INCURRED ON OUTSOURCI NG AND EMPLOYEE COSTS SHOW THAT THE SAID CONCERN SEEMS TO HAVE OUTSOURCED THE FUNCTIONS TO DIFFERENT VENDORS. THE AFORESAID WAS HIGHLIGHTED T O POINT OUT THAT THE OPERATING BUSINESS MODEL OF COSMIC GLOBAL LTD. WAS TOTALLY DIFFERENT FROM THAT OF THE ASSESSEE. IN THIS CONTEXT, THE LD. REPRESEN TATIVE POINTED OUT THAT THE TPO HAD REJECTED THE ACE SOFTWARE EXPORTS LIMITED F ROM THE LIST OF COMPARABLES AND ONE OF THE REASONS ASCRIBED WAS THA T THE SAID CONCERN WAS INCURRING MAJOR EXPENDITURE ON SOFTWARE SOURCING CH ARGES. THE TPO IN THE CONTEXT OF ACE SOFTWARE EXPORTS LIMITED CAME TO CON CLUDE THAT THE SAID CONCERN WAS NOT A SERVICE PROVIDER BUT A RECIPIENT OF THE SERVICES AND THEREFORE IT WAS REJECTED AS A COMPARABLE. THE LD. REPRESENTATIVE EMPHASIZED THAT IF ACE SOFTWARE EXPORTS LIMITED WAS REJECTED BY THE TPO FOR HAVING SUBSTANTIAL SOFTWARE OUTSOURCING CHARGES THE N M/S COSMIC GLOBAL LTD. ALSO NEEDS TO BE REJECTED FOR INCURRING A HIGH PROP ORTION OF EXPENDITURE ON OUTSOURCED TRANSLATION CHARGES. ITA NO.2235/PN/2012 23. THE LD. CIT-DR APPEARING FOR THE REVENUE HAS PR IMARILY REITERATED THE STAND OF THE TPO WHEREIN THE SAID CONCERN WAS REJEC TED ON THE GROUND THAT ITS EXPORT INCOME WAS MORE THAN 50%. THE LD. CIT-DR RE ITERATED THAT PRIMARILY THE SAID CONCERN WAS ALSO ENGAGED IN ITES ACTIVITIE S AND THE TPO WAS JUSTIFIED IN INCLUDING THE SAME IN THE LIST OF COMP ARABLES. 24. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE PERTINENT POINT MADE OUT BY THE LD. REPRESENTATIVE FOR THE AS SESSEE IS THAT THE SAID CONCERN IS OPERATING IN A DIFFERENT BUSINESS MODEL WHEREIN MUCH OF ITS ACTIVITIES ARE OUTSOURCED WHEREAS THE BUSINESS MODE L OF THE ASSESSEE IS DIFFERENT. IN AN OUTSOURCING BUSINESS MODEL OBVIOU SLY THE EXPENDITURE INCURRED ON EMPLOYEE COSTS WOULD BE LOW IN COMPARIS ON TO THE EXPENDITURE INCURRED ON OUTSOURCING. OSTENSIBLY, WHERE IT ENAB LED SERVICES ARE OUTSOURCED TO A THIRD PARTY VENDOR THEN THE MARGIN DERIVED BY THE SAID CONCERN WOULD BE ATTRIBUTABLE TO SERVICES RENDERED BY THE O UTSOURCED VENDOR. PER CONTRA, WHERE IT ENABLED SERVICES ARE BEING RENDERE D BY A CONCERN THROUGH ITS OWN EMPLOYEES, THE MARGINS FROM RENDERING OF SERVIC ES BY THE SAID CONCERN WOULD BE ATTRIBUTABLE TO ITS OWN EMPLOYEES. OBVIOU SLY, THE LEVEL OF MARGINS IN THE TWO BUSINESS MODELS WOULD NOT BE COMPARABLE. T HE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED (SUPRA) HAS HELD THAT CONCERNS WHO ACT AS I NTERMEDIATERIES HAVING OUTSOURCED IT ACTIVITY CANNOT BE SAID TO BE COMPARA BLE WITH A CONCERN WHO IS RENDERING SERVICES THROUGH ITS OWN EMPLOYEES. THE SAID PROPOSITION HAS ALSO BEEN UPHELD BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BRIGADE GLOBAL SERVICES PRIVATE LIMITED (SUPRA). HAVING RE GARD TO THE AFORESAID DISCUSSION, IN OUR VIEW, THE SAID CONCERN IS NOT A GOOD COMPARABLE TO BE INCLUDED FOR THE PURPOSES OF COMPARABILITY ANALYSIS AS IT OPERATES UNDER A DIFFERENT BUSINESS MODEL WHICH IMPACTS OPERATING MA RGINS. AS A ITA NO.2235/PN/2012 CONSEQUENCE, WE DIRECT THE ASSESSING OFFICER TO EXC LUDE THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. 25. THE LAST PLEA OF THE ASSESSEE IS TO EXCLUDE FR OM THE LIST OF COMPARABLES CROSSDOMAIN SOLUTIONS LTD.. IN THIS CONTEXT, BEFOR E THE TPO ASSESSEE SUBMITTED THAT THE SAID CONCERN WAS NOT COMPARABLE WITH THE ASSESSEE. IT WAS POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN TH E PAYROLL ACTIVITY APART FROM BEING ENGAGED IN KPO SERVICES. THE ASSESSEE A LSO REFERRED TO THE WEBSITE OF THE SAID CONCERN TO POINT OUT THAT THE S AID CONCERN WAS IDENTIFIED AS A KNOWLEDGE PROCESS OUTSOURCING SERVICES PROVIDER ( KPO) AND NOT A SIMPLE BUSINESS PROCESS OUTSOURCING SERVICES PROVIDER. BE FORE THE DRP, IT WAS ALSO CONTENDED THAT THE SAID CONCERN WAS ENGAGED IN HIGH END KPO SERVICES WHICH VARIES FROM A ROUTINE LOW END ITES PROVIDER IN TERM S OF SKILL SET USED AND NATURE OF SERVICES PROVIDED. IT WAS ALSO CONTENDED THAT THE SAID CONCERN HAS DEVELOPED PRODUCTS FOR EFFECTIVELY SERVICING ITS CU STOMERS AND THE SAME WAS ENTIRELY DIFFERENT THAN THAT OF THE ASSESSEES BUSI NESS OF RENDERING ROUTINE IT ENABLED SERVICES. AT THE TIME OF HEARING BEFORE US , THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE FOLLOWING TABULATI ON WHICH BRINGS OUT THE DIFFERENCE BETWEEN E-LEARNING ACTIVITIES CARRIED OU T BY THE ASSESSEE AND THE KPO ACTIVITIES CARRIED OUT BY THE SAID CONCERN :- E-LEARNING KPO THE ASSESSEE PROVIDES LOW-END IT ENABLED SERVICES IN THE FORM OF E- LEARNING SOLUTIONS. KPO IS A FORM OF OUTSOURCING, IN WHICH KNOWLEDGE-RELATED AND INFORMATION-RELATED WORK IS CARRIED OUT BY THE SERVICE PROVIDERS. E-LEARNING SOLUTIONS SERVICES PROVIDED BY THE ASSESSEE ARE NOT VERY COMPLEX IN NATURE AND THUS DO NOT REQUIRE HIGHLY SKILLED PROFESSIONALS TO PERFORM THE FUNCTIONS. UNLIKE THE OUTSOURCING OF MANUFACTURING OR ROUTINE SOFTWARE SERVICES, THIS TYPICALLY INVOLVES HIGH- VALUE WORK CARRIED OUT BY THE HIGHLY SKILLED STAFF. E-LEARNING SOLUTION PROVIDES CANNOT EARN HIGH MARGINS OF PROFITS SINCE THEY PRIMARILY DERIVE THEIR REVENUE FROM PERFORMING FUNCTIONS THAT ARE NOT EXCLUSIVELY PROVIDED BY THEM AND HAVE CLOSE SUBSTITUTES IN THE MARKET. MOST FIRMS PROVIDING KNOWLEDGE PROCESSING POSSESS EXCLUSIVE INFORMATION, KNOWLEDGE AND EXPERIENCE WHICH CANNOT BE FOUND IN MOST OF THEIR COMPETITORS. THUS, THEY TEND TO COMMAND HIGHER MARGINS OF PROFITS. ITA NO.2235/PN/2012 LOW-END IT ENABLED SERVICE PROVIDERS EMPLOY WORKERS WHO HAVE THE BASIC KNOWLEDGE AND CAN BE TRAINED TO PERFORM THE NECESSARY FUNCTIONS. KPO FIRMS EARN EXTRAORDINARY PROFITS DUE TO THE HIGHLY SKILLED RESOURCES THEY EMPLOY IN THE FORM OF HIGHLY- QUALIFIED PROFESSIONALS. 26. ON THE OTHER HAND, THE LD. CIT-DR APPEARING FOR THE REVENUE CONTENDED THAT THE TPO AS WELL AS THE DRP HAVE REJE CTED THE PLEA OF THE ASSESSEE AS THE SUBMISSIONS WERE ON A WRONG FOOTING . IT WAS REITERATED THAT THE NATURE OF SERVICES RENDERED BY THE SAID CONCERN WERE FALLING IN THE CATEGORY OF IT ENABLED SERVICES WHICH IS ALSO BROAD LY THE CATEGORY OF THE SERVICES BEING RENDERED BY THE ASSESSEE. THEREFORE , THE SAID CONCERN WAS RIGHTLY INCLUDED BY THE TPO IN THE LIST OF COMPARAB LES. 27. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. OSTENSIBLY, THE REASON ADVANCED BY THE TPO TO REJECT THE PLEA OF TH E ASSESSEE ARE TOO GENERAL AND ARE NOT JUSTIFIED. EVEN WHERE TWO CONC ERNS MAY BE UNDERTAKING ACTIVITIES WHICH CAN BE BROADLY CATEGORIZED AS ITES IN COMMON PARLANCE BUT WHERE AN ASSESSEE IS ABLE TO ESTABLISH THAT INTRINS ICALLY THE ACTIVITIES ARE NOT COMPARABLE, SUCH A CONCERN WOULD NOT BE INCLUDED FO R THE PURPOSES OF COMPARABILITY ANALYSIS. IN THE CONTEXT OF THE PRES ENT CASE, THE PLEA OF THE ASSESSEE IS THAT THE BUSINESS OF M/S CROSSDOMAIN SO LUTIONS LTD. RANGED FROM HIGH END KPO SERVICES, DEVELOPMENT OF PRODUCTS AND ROUTINE LOW AND IT ENABLED SERVICES. FOR INSTANT, THE WEBSITE EXTRACT AND ALSO THE ANNUAL REPORT OF THE SAID CONCERN SHOWS THAT IT WAS ENGAGED IN PA YROLL OUTSOURCING ON A SUBSTANTIVE SCALE. THE BANGALORE BENCH OF THE TRIB UNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA ) FOR THE VERY ASSESSMENT YEAR FOUND THAT THERE WAS NO BIFURCATION AVAILABLE FOR VARIOUS DIVERSIFIED ACTIVITIES BEING CARRIED OUT BY THE SAID CONCERN AN D THEREFORE ON AN ENTITY LEVEL THE SAID CONCERN COULD NOT BE COMPARED TO A NORMAL ITES PROVIDER. IN OUR VIEW, FOLLOWING THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE ITA NO.2235/PN/2012 OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SU PRA) WHICH WAS ALSO FOLLOWED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MARKET TOOLS RESEARCH PVT. LTD. VS. ACIT (ITA NO.1811/HYD/2012 D ATED 24.10.2013, THE AFORESAID CONCERN IS LIABLE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 28. APART FROM THE AFORESAID, NO OTHER SPECIFIC PLE A HAS BEEN RAISED WITH REGARD TO THE STATED GROUNDS OF APPEAL AND THEREFOR E THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 02 ND FEBRUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 02 ND FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE DRP, PUNE; 4) THE DIT (INTERNATIONAL TAXATION), PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE