M/s CGI Information System and Management Consultants Private Limited , Bangalore V. Deputy Commissioner of Income TAx Circle-2(1)(1), Bangalore

ITA 2460/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4084 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Related party transaction; Business income; Transfer pricing; Opportunity of being heard; International transaction
• Section: 143(3); 10AA; 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER IT (TP) A NO. 2460 / BANG/201 7 ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS PVT. LTD., (SUCCESSOR IN THE INTEREST OF M/S. LOGICA PVT. LTD.) E CITY TOWER, 2,95/1 & 95/2, ELECTRONIC CITY PHASE 1 (WEST), BANGALORE 560 100. PAN: AAACL3330M VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2 (1) (1), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI T. SURYANARAYANA, ADVOCATE RE VENUE BY : MS. NEERA MALHOTRA, CIT (DR) DATE OF HEARING : 12 . 09 .2018 DATE OF PRONOUNCEMENT : 26 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ASSESSMENT ORDER DATED 25.09.2017 PASSED BY THE AO FOR ASSESSMENT YEAR 2013-14 U/S. 143(3) R.W.S. 144C(13) OF IT ACT, 1961 AS PER THE DIRECTIONS OF DRP. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. THE GROUNDS MENTIONED HEREIN ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE ORDER OF THE DEPUTY COMMISSIONER OF INC OME-TAX, CIRCLE -2(1)(1), BANGALORE (THE 'LEARNED ASSESSING OFFICER' OR THE 'LEARNED AO') PURSUANT TO THE DIRECTION OF THE LEAR NED DISPUTE RESOLUTION PANEL (`THE LEARNED PANEL' OR 'THE LEARN ED DRP'), TO THE EXTENT PREJUDICIAL TO THE APPELLANT, IS BAD IN LAW AND LIABLE TO BE QUASHED. IT(TP)A NO. 2460/BANG/2017 PAGE 2 OF 20 TRANSFER PRICING RELATED 2. THAT THE LEARNED AO AND THE LEARNED DRP ERRED IN UPHOLDING THE REJECTION BY THE LEARNED TRANSFER PRICING OFFIC ER ('THE LEARNED TPO') OF THE ANALYSIS UNDERTAKEN BY THE APPELLANT I N ITS TRANSFER PRICING ('TP') DOCUMENTATION, AND THEREBY ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD PREPARED THE TP DOCUMENTATION IS BONA FIDE AND IN GOOD FAITH. 3. THE LEARNED AO AND THE LEARNED DRP ERRED IN LAW AND ON FACTS IN DISREGARDING APPLICATION OF MULTIPLE YEAR/ PRIOR YEAR DATA AS USED BY THE APPELLANT IN THE TP DOCUMENTATION AND H OLDING THAT ONLY CURRENT YEAR (I.E., FINANCIAL YEAR 2012-13) DA TA FOR COMPARABLE COMPANIES SHOULD BE USED. 4. THE LEARNED AO AND THE LEARNED DRP ERRED IN LAW AND ON FACTS IN UPHOLDING THE USE OF DATA WHICH WAS NOT CONTEMPO RANEOUS AND WHICH WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME THE TP DOCUMENTATION WAS PREPARED BY THE APPELLANT. 5. THE LEARNED AO AND THE LEARNED DRP ERRED ON FACT S AND IN LAW IN UPHOLDING THE ACTS OF THE LEARNED TPO: (A) IN REJECTING THE COMPARABILITY ANALYSIS OF THE APPE LLANT IN THE TP DOCUMENTATION AND IN SUBMISSIONS PROVIDED DU RING THE ASSESSMENT PROCEEDINGS, AND CONFIRMING THE COMPARABILITY ANALYSIS AS ADOPTED BY THE LEARNED TP O IN THE TRANSFER PRICING ORDER, WHICH IS BASED ON INAPPROPR IATE FILTERS AND APPLICATION OF INCONSISTENT COMPARABILI TY CRITERIA. (B) IN CONDUCTING A FRESH BENCHMARKING ANALYSIS USING N ON- CONTEMPORANEOUS DATA AND SUBSTITUTING THE APPELLANT 'S ANALYSIS WITH FRESH BENCHMARKING ANALYSIS BASED ON HIS OWN CONJECTURES/ ASSUMPTIONS AND APPLICATION OF NEW FIL TERS. 6. THAT THE LEARNED AO AND THE LEARNED DRP ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO IN THE US E OF INFORMATION UNDER SECTION 133(6) OF THE ACT, TANTAMOUNTING TO C HOOSING SECRET COMPARABLE COMPANIES WHOSE INFORMATION WAS NOT AVAI LABLE IN THE PUBLIC DOMAIN WHILE UNDERTAKING THE TP DOCUMENTATIO N FOR THE REFERRED FINANCIAL YEAR. COMPARABLE SPECIFIC GROUNDS FOR THE SOFTWARE DEVELO PMENT SEGMENT 7. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INCLUD ING C G-V A K SOFTWARE & EXPORTS LTD. AS A COMPARABLE TO THE APPE LLANT ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT IS FUNCTIONALLY DISSIMILAR TO THE APPELLANT, SEGMENTAL DATA NOT BEI NG AVAILABLE IN THE PUBLIC DOMAIN, IT HAS SIGNIFICANT R&D EXPENDITU RE AND HAS EXTRAORDINARY EVENTS DURING THE REFERRED FINANCIAL YEAR. IT(TP)A NO. 2460/BANG/2017 PAGE 3 OF 20 8. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INCLUD ING ICRA TECHNO ANALYTICS LTD. AS A COMPARABLE TO THE APPELL ANT ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT IS FUNCTIONALLY DISSIMILAR TO THE APPELLANT, FAILS THE RELATED PART Y TRANSACTION (`RPT') TO SALES FILTER [TO EXCLUDE COMPANIES HAVIN G RPT/SALES >25%] APPLIED BY THE TPO, HAS DIVERSIFIED OPERATION S AND NO SEGMENTAL DATA AVAILABLE IN THE PUBLIC DOMAIN. 9. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INCLUD ING LARSEN & TOUBRO INFOTECH LTD. AS A COMPARABLE TO THE APPELLA NT ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT IS FUNCTIONALLY DISSIMILAR TO THE APPELLANT AND HAS SIGNIFICANT INT ANGIBLE ASSETS AND BRAND VALUE. 10. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS BY UPHOLDING THE ACTIONS OF THE LEARNED DRP WHICH HAS NOT ADJUDICATE D/ COMMENTED ON THE SPECIFIC GROUND TAKEN BY THE APPELLANT AND T HEREBY IMPLYING TO UPHOLD THE ACTIONS OF THE TPO TO INCLUD E PERSISTENT SYSTEMS LIMITED AS A COMPARABLE TO THE APPELLANT. W HEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS TH AT THERE EXISTS EXTRAORDINARY EVENTS DURING THE YEAR, HAS DI VERSIFIED OPERATIONS, IS ENGAGED IN SOFTWARE PRODUCT DEVELOPM ENT AND IT HAS SIGNIFICANT RESEARCH & DEVELOPMENT EXPENDITURE. CON SEQUENTLY, A RECTIFICATION PETITION BEFORE THE LEARNED DRP HAS B EEN FILED AND THE APPELLANT AWAITS AN OPPORTUNITY FOR A HEARING. 11. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY EXC LUDING AKSHAY SOFTWARE TECHNOLOGIES LTD. AS A COMPARABLE TO THE A PPELLANT ON THE GROUNDS THAT IT IS FUNCTIONALLY NOT COMPARABLE, WHEREAS THIS COMPARABLE SHOULD HAVE BEEN INCLUDED ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE TO THE APPELLANT AND ALSO O N THE GROUND THAT IT PASSES ALL THE FILTERS APPLIED BY THE LEARN ED TPO. 12. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY EXC LUDING SPRY RESOURCES INDIA PVT. LTD. AS A COMPARABLE TO THE AP PELLANT ON THE GROUNDS THAT IT IS FUNCTIONALLY NOT COMPARABLE, WHE REAS THIS COMPARABLE SHOULD HAVE BEEN INCLUDED ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE TO THE APPELLANT AND ALSO O N THE GROUND THAT IT PASSES ALL THE FILTERS APPLIED BY THE LEARN ED TPO. COMPARABLE SPECIFIC GROUNDS FOR THE IT ENABLED SERV ICES SEGMENT 13. THE LEARNED AO AND THE LEARNED TPO HAVE ERRED I N LAW AND ON IT(TP)A NO. 2460/BANG/2017 PAGE 4 OF 20 FACTS BY INCLUDING ACROPETAL TECHNOLOGIES LTD. AS A COMPARABLE TO THE APPELLANT ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED AS A COMPARABLE BASED ON DRP DIRECTIONS ON THE GROUNDS THAT IT IS F UNCTIONALLY DISSIMILAR TO THE APPELLANT AND THAT IT UNDERTAKES R&D ACTIVITIES AND OWNS SIGNIFICANT IPR DURING THE REFERRED FINANC IAL YEAR. 14. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INC LUDING CAPGEMINI BUSINESS SERVICES (INDIA) LTD. AS A COMPA RABLE TO THE APPELLANT ON THE GROUND THAT IT PASSES ALL THE FILT ERS APPLIED BY THE LEARNED TPO, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT FAILS THE RPT/ SALES FILTER APP LIED BY THE LEARNED TPO. 15. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INC LUDING INFOSYS BPO LTD. AS A COMPARABLE TO THE APPELLANT ON THE GR OUND THAT IT IS FUNCTIONALLY COMPARABLE AND PASSES ALL FILTERS APPL IED BY THE LEARNED TPO, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT IS FUNCTIONALLY DISSIMILAR TO T HE APPELLANT AND OPERATES UNDER DIFFERENT BUSINESS MODEL WHERE IT CA RRIES OUT SUBCONTRACTING ACTIVITY. 16. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY INC LUDING HARTRON COMMUNICATIONS LTD. AS A COMPARABLE TO THE APPELLAN T ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE, WHEREAS THIS COMPANY SHOULD HAVE BEEN EXCLUDED ON THE GROUNDS THAT IT IS FUNCTIONALLY DISSIMILAR TO THE APPELLANT, HAS DIVERSIFIED OPERAT IONS AND HAS EXTRA-ORDINARY ACTIVITIES DURING THE REFERRED FINAN CIAL YEAR, WITHOUT CONSIDERING THE SUBMISSION MADE BY THE APPE LLANT. CONSEQUENTLY, A RECTIFICATION PETITION HAS BEEN FIL ED BEFORE THE LEARNED DRP FOR NOT CONSIDERING THE SUBMISSION MADE AND THE APPELLANT AWAITS AN OPPORTUNITY FOR A HEARING. 17. THE LEARNED AO AND THE LEARNED DRP HAVE ERRED I N LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO BY EXC LUDING ACE BPO SERVICES PVT. LTD. AS A COMPARABLE TO THE APPEL LANT ON THE GROUND THAT THE ANNUAL REPORT DOES NOT CONTAIN RPT DISCLOSURES AND THEREBY FAILS RPT FILTER, WHEREAS THIS COMPANY SHOULD HAVE BEEN INCLUDED ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE AND THAT IT PASSES ALL THE FILTERS APPLIED BY THE LEARN ED TPO. 18. THE LEARNED AO AND THE LEARNED DRP ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO IN NOT AP PRECIATING THE LOW RISK NATURE OF THE SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES PROVIDED BY THE APPELLANT AND THEREBY UPHO LDING THE SELECTION OF HIGH PROFIT MAKING ENTREPRENEURIAL COM PANIES AS COMPARABLES AND CONSEQUENTLY, REJECTING THE APPELLA NT'S REQUEST IT(TP)A NO. 2460/BANG/2017 PAGE 5 OF 20 TO PROVIDE FOR AN APPROPRIATE ADJUSTMENT TOWARDS TH E RISK DIFFERENTIAL. 19. THE LEARNED AO AND THE LEARNED DRP ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTIONS OF THE TPO IN COMPUT ING THE WORKING CAPITAL ADJUSTMENT FOR THE PURPOSE OF DETER MINING THE ARM'S LENGTH PRICE. 20. BASED ON THE ABOVE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LEARNED AO/ THE LEARNED DRP/ LEARNED TPO ERRED IN MAKING ADJUSTMENT TO THE TRANSFER PRICE OF THE APPELLANT'S INTERNATIONAL TRANSACTIONS WITH ITS RELATED PARTIES AND ENHANCING ITS INCOME BY INR 360,331,719. OTHER THAN TRANSFER PRICING RELATED 21. THE LEARNED DRP AND LEARNED AO HAVE ERRED, IN L AW AND IN FACTS, IN RE-COMPUTATION OF DEDUCTION UNDER SECTION 10AA OF THE ACT AS DETAILED BELOW: A) THE LEARNED DRP AND LEARNED AO HAVE ERRED IN REDUCI NG 'COMMUNICATION EXPENSES' OF RS 1,938,389 (FOR BANGA LORE SEZ UNIT) AND RS 5,965,121 (FOR CHENNAI SEZ UNIT) F ROM THE RESPECTIVE EXPORT TURNOVER DECLARED BY THE APPE LLANT FOR THE PURPOSE OF CALCULATING DEDUCTION UNDER SECTION 10AA OF THE ACT; AND B) THE LEARNED DRP AND LEARNED AO HAVE ERRED IN REDUCI NG 'TRAVELLING EXPENSES INCURRED IN FOREIGN CURRENCY' OF RS 44,575,947 (FOR CHENNAI SEZ UNIT) FROM THE EXPORT T URNOVER DECLARED BY THE APPELLANT FOR THE PURPOSE OF CALCUL ATING DEDUCTION UNDER SECTION 10AA OF THE ACT. C) WITHOUT OUT PREJUDICE TO ABOVE, THE LEARNED DRP AND LEARNED AO HAVE ERRED IN NOT MAKING CORRESPONDING REDUCTION TO THE TOTAL TURNOVER OF THE SEZ UNITS FO R THE PURPOSE OF CALCULATING DEDUCTION UNDER SECTION 10AA OF THE ACT. 22. THE CONSEQUENTIAL RELIEF IS TO BE GRANTED IN CO MPUTATION OF INTEREST UNDER SECTION 234B AND SECTION 234C OF THE ACT. 23. THE LEARNED AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT DESPITE THE FACT THAT THE APPELLANT HAS ACTED IN A BONA FIDE MANNER AND PROVI DED ALL NECESSARY DETAILS CALLED FOR BY THE ASSESSING OFFIC ER. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. IT(TP)A NO. 2460/BANG/2017 PAGE 6 OF 20 3. AT THE TIME OF HEARING OF THIS APPEAL, IT WAS SU BMITTED BY LD. AR OF ASSESSEE THAT ONLY GROUND NOS. 9,10,14,15,16 AND 21 ARE TO B E DECIDED AND THE REMAINING GROUNDS ARE NOT PRESSED AND ACCORDINGLY T HE REMAINING GROUNDS ARE REJECTED AS NOT PRESSED. 4. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THER E ARE TWO SEGMENTS IN THE PRESENT CASE I.E. 1) SOFTWARE DEVELOPMENT SERVICES AND 2) ITES. HE SUBMITTED THAT FOR THE FIRST SEGMENT I.E. SOFTWARE DEVELOPMENT SERVICES SEGMENT, THE ASSESSEE SELECTED 7 COMPARABLES HAVING ARITHMETIC MEAN OF 13.78% AND THE TPO ALSO SELECTED 7 COMPARABLES BUT ONLY TWO COMPARABLES ARE COMMON I.E. RS SOFTWARE (INDIA) LTD . AND MINDTREE LTD. HE FURTHER SUBMITTED THAT THE AVERAGE ARITHMETIC ME AN OF THESE 7 COMPARABLES SELECTED BY THE TPO WAS WORKED OUT AT 2 0.90% AND ACCORDINGLY, THE TPO MADE TP ADJUSTMENT OF RS. 30,0 0,49,230/-. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE DR P, THE DRP SELECTED 6 COMPARABLES AFTER EXCLUDING ONE COMPARABLE I.E. TEC H MAHINDRA LTD. (SEG). HE SUBMITTED THAT AS PER GROUND NO. 9 OF THE ASSESS EES APPEAL, LARSEN & TOUBRO INFOTECH LTD. SHOULD BE EXCLUDED FROM THE LI ST OF FINAL COMPARABLES IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES SEGMENT AN D AS PER GROUND NO. 10 OF THE ASSESSEES APPEAL, ANOTHER COMPARABLE I.E . PERSISTENT SYSTEMS LTD. SHOULD BE EXCLUDED FROM THE LIST OF FINAL COMP ARABLES. REGARDING THE ASSESSEES REQUEST FOR EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD. I.E. GROUND NO. 9 OF THE ASSESSEES APPEAL, HE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL O RDER RENDERED IN THE CASE OF PITNEY BOWES SOFTWARE INDIA PVT. LTD. VS. A CIT FOR THE SAME ASSESSMENT YEAR AS REPORTED IN [TS-163-ITAT-2018(DE L)-TP] AND THE RELEVANT PARAS OF THIS TRIBUNAL ORDER ARE PARAS 6 T O 11 AVAILABLE ON PAGES 1508 TO 1512 OF THE CASE LAW COMPILATION FILED BY T HE ASSESSEE. REGARDING THE ASSESSEES REQUEST FOR EXCLUSION OF PERSISTENT SYSTEMS LTD., IT WAS SUBMITTED THAT AS PER THE TRIBUNAL ORDER IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2012-13 IN IT(TP)A NO. 183/BANG/201 7 COPY AVAILABLE ON PAGES 1477 TO 1479 OF CASE LAW COMPILATION, BEING P ARAS 27 TO 30 OF THIS TRIBUNAL ORDER, IT WAS HELD BY TRIBUNAL THAT THIS C OMPARABLE SHOULD BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. IT WA S SUBMITTED THAT THERE IS NO IT(TP)A NO. 2460/BANG/2017 PAGE 7 OF 20 DIFFERENCE IN FACTS IN PRESENT YEAR AND THEREFORE, IN PRESENT YEAR ALSO, THIS COMPARABLE SHOULD BE EXCLUDED FROM THE FINAL LIST O F COMPARABLES. 5. IN RESPECT OF ITES SEGMENT, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ASSESSEE COMPANY SELECTED 9 COMPARABLES WITH ARITHM ETIC MEAN MARGIN OF 13.52% AND THE TPO ALSO SELECTED 9 COMPARABLES BUT ONLY TWO COMPARABLES WERE COMMON I.E. INFOSYS BPO LTD. AND J INDAL INTELLICOM LTD. AND AS PER THE TPOS WORKING, MARK-UP OF TOTAL COST AFTER ADJUSTMENT WAS WORKED OUT AT 22.27% AND THE TPO MADE ADJUSTMENT OF RS. 4,76,15,547/-. THEREAFTER, HE SUBMITTED THAT WHEN THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE DRP, THE DRP SELECTED 7 COMPARABL ES AFTER EXCLUDING TWO COMPARABLES I.E. ACROPETAL TECHNOLOGIES LTD. AN D TECH MAHINDRA LTD. (SEG.). NOW THE ASSESSEE IS REQUESTING FOR EXCLUSI ON OF CAPGEMINI BUSINESS SERVICES (INDIA) LTD. AS PER GROUND NO. 14 AND EXCLUSION OF INFOSYS BPO LTD. AS PER GROUND NO. 15 AND EXCLUSION OF HART RON COMMUNICATIONS LTD. AS PER GROUND NO. 16. IN RESPECT OF THESE THR EE EXCLUSIONS, THE ARGUMENTS OF THE LD. AR OF ASSESSEE ARE CONTAINED I N PARA NO. D(I) TO (III) OF SYNOPSIS OF ARGUMENTS AND THE SAME ARE REPRODUCED H EREINBELOW. D. APPELLANT'S SUBMISSIONS ON THE ITS APPEAL: (I) GROUND NO.14: IN THIS GROUND, THE ASSESSEE IS SEEKING THE EXCLUSI ON OF CAPGEMINI BUSINESS SERVICES (INDIA) LTD. ('CAPGEMINI' FOR SHORT) FROM THE FINAL LIST OF COMPARABLES TO THE APPELLANT'S ITE SE RVICE SEGMENT AS IT FAILS THE RPT FILTER APPLIED BY THE TPO. IN THIS REGARD, IT IS SUBMITTED THAT CAPGEMINI HAS SUBSTANTIAL RPT AMOUNTING TO 82.32% OF ITS TOTAL SALES FOR THE FINA NCIAL YEAR 2012- 13. THE APPELLANT SUBMITS THAT ALTHOUGH ITS RPT DET AILS ARE NOT DISCLOSED IN ITS ANNUAL REPORT FOR FY 2012-13, THE SAME ARE DISCLOSED IN ITS ANNUAL REPORT FOR FY 2013-14. WHEN THIS FACT WAS BROUGHT TO THE NOTICE OF THE DRP DURING THE COURSE OF THE PROCEEDINGS BEFORE IT, THE DRP WAS OF THE VIEW THAT THIS WAS NEW INFORMATION BASED ON DATA THAT WAS NOT AVAILABLE EA RLIER AND, ACCORDINGLY, DIRECTED THE TPO TO CROSS-VERIFY THIS INFORMATION WITH CAPGEMINI AND TO EXCLUDE IT AS A COMPARABLE IF THE APPELLANT'S CLAIM WAS FOUND TO BE CORRECT. HOWEVER, DESPITE THE ABOVE DIRECTION, THE TPO MEREL Y RETAINED THE SAID COMPANY IN THE LIST OF COMPARABLES DESPITE THE FACT ITS RPT IS WELL IN EXCESS OF THE THRESHOLD AT WHICH THE RPT FI LTER HAS BEEN APPLIED BY HIM. IT(TP)A NO. 2460/BANG/2017 PAGE 8 OF 20 THE APPELLANT SUBMITS THAT FROM A PERUSAL OF CAPGEM INI'S RELATED PARTY TRANSACTIONS, AS DISCLOSED BY IT IN ITS ANNUA L REPORT FOR FY 2013-14, IT IS WHOLLY APPARENT THAT THE RATIO OF IT S RPT TO SALES FOR FY 2012-13 IS 82.32%. THE RELEVANT WORKINGS ARE GIV EN AT PAGE 147 OF THE APPEAL SET. THEREFORE, AS IT FAILS THE RPT FILTER APPLIED BY TH E TPO, CAPGEMINI IS LIABLE TO BE EXCLUDED FROM THE LIST OF COMPARABL ES. (II) GROUND NO.15: IN THIS GROUND, THE ASSESSEE IS SEEKING THE EXCLUSI ON OF INFOSYS BPO LTD. (`INFOSYS' FOR SHORT) FROM THE LIST OF COMPARABLES . INFOSYS OUGHT TO STAND EXCLUDED FROM THE FINAL LIST OF COMPARABLES ON NUMEROUS COUNTS. IT IS ENGAGED IN THE PROVISION OF INTEGRATED IT AND BUSINESS PROCESS OUTSOURCING SOLUTIONS ACROSS A VARIETY OF VERTICALS INCLUDING BANKING AND CAPITAL MARKETS, CO MMUNICATION MEDIA AND ENTERTAINMENT, MANUFACTURING, EMERGING MA RKET SOLUTIONS, INSURANCE AND HEALTHCARE, RETAIL, ENERGY , UTILITIES AND RESOURCES, AUTOMOTIVE AND AEROSPACE, TRANSPORTATION AND SERVICES. THE SERVICES RENDERED CONSIST OF SOURCING AND PROCUREMENT, CUSTOMER SERVICE, FINANCING AND ACCOUN TING, KNOWLEDGE SERVICES AND HUMAN RESOURCES. FURTHER, TH E COMPANY IS ENGAGED IN PROVIDING CONSULTANCY, MANAGEMENT AND ST RATEGIC TRANSFORMATION SERVICES WHEREIN BUSINESS METRICS AN D BENCHMARKS DEVELOPED BY THE COMPANY IS USED IN ASSISTING THE C LIENT. THE COMPANY IS ALSO ENGAGED IN THE PROVISION OF CLOUD B ASED SERVICES SUCH AS 'E-DISCOVER' AS WELL AS SERVICES IN RELATIO N TO COMPLIANCE IN HEALTH, SAFETY AND ENVIRONMENT. THESE SERVICES C ANNOT BE COMPARED TO THE ROUTINE BACK OFFICE SERVICES PROVID ED BY THE APPELLANT. THE COMPANY FOCUSES OF DELIVERING SOLUTI ONS TO ITS CLIENTS WHICH GOES BEYOND RENDERING ROUTINE ITE SER VICES. FROM THE ABOVE, IT IS EVIDENT THAT INFOSYS IS ENGAGED IN RENDERING BUSINESS SOLUTIONS AND CONSULTANCY TO ITS CUSTOMERS WHICH IS DIFFERENT FROM THE FUNCTIONAL PROFILE OF THE APPELL ANT. IN ADDITION, INFOSYS ALSO ENJOYS SIGNIFICANT BRAND VALUE AND OWNS SEVERAL INTELLECTUAL PROPERTIES WHICH PLACE IT IN D IFFERENT FROM THAT APPELLANT. IN VIEW OF ITS SUBSTANTIAL BRAND VALUE, THE COMPANY ENJOYS AN ADVANTAGE IN THE MARKET AND HAS HIGH BARG AINING POWER. AS A RESULT OF THE BRAND VALUE, THE COMPANY RECEIVES A PREMIUM IN THE MARKET. RELEVANT SUBMISSIONS IN THIS REGARD ARE MADE AT PAGES 148-150 OF THE APPEAL SET. THE DRP, HOWEVER, FAILED TO PROPERLY APPRECIATE THE APPELLANT'S SUBMISSIONS AND ACCORDINGLY REJECTED ITS SUBMISSION S IN THIS REGARD. WHILE DOING SO, THE DRP NEVERTHELESS DIRECT ED THE TPO TO VERIFY IF IT FAILS THE EXPORT REVENUE FILTER. HOWEV ER, DESPITE THE ABOVE DIRECTION, THE COMPANY WAS RETAINED IN THE LI ST OF COMPARABLES. IT(TP)A NO. 2460/BANG/2017 PAGE 9 OF 20 IN SUPPORT OF ITS CONTENTIONS FOR EXCLUSION OF INFO SYS BPO, RELIANCE IS PLACED ON THE COMMON ORDER DATED 11.04.2018 OF T HIS HON'BLE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR AYS 2010-11 AND 2012-13 WHEREIN THIS HON'BLE TRIBUNAL HELD THAT INFOSYS BPO IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND, ACCORD INGLY, DIRECTED ITS EXCLUSION (PAGES 1471 TO 1473 AND 1484 - 1485 OF THE CASE-LAWS COMPILATION VOL-II). SINCE THERE IS NO CHANGE IN THE FUNCTIONS OF THE COMPANY DURING THE ASSESSMENT YEAR IN QUESTION, INFOSYS BPO IS LIABLE TO BE REJECTED AS A COMPARABL E FOR THIS AY AS WELL. FURTHER, THIS COMPANY HAS BEEN CONSISTENTLY REJECTE D IN CASES OF ASSESSEES PLACED SIMILARLY TO THAT OF THE APPELLANT . RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH CO URT IN PCIT V. H & S SOFTWARE DEVELOPMENT AND KNOWLEDGE MANAGEMENT CENTRE PVT LTD [JUDGMENT DATED 03.01.2018 IN ITA 912/2017 AT PAGE 1520 OF THE CASE-LAWS COMPILATION VOL-II] WHERE ITS EX CLUSION WAS UPHELD ON THE BASIS THAT THE COMPANY HAS SIGNIFICAN T BRAND PRESENCE AND LARGE CORPORATE SIZE, RELIANCE IS ALSO PLACED ON THE DECISIONS OF THIS HON'BLE TRIBUNAL IN E4E BUSINESS SOLUTIONS INDIA (P.) LTD. V. /TO ([2017] 87 TAXMANN.COM 254 (BANGAL ORE-TRIB.) AT PARA 10.3.1 TO 10.3.2) FOR ASSESSMENT YEAR 2012-13 AND E4E BUSINESS SOLUTIONS INDIA P. LTD. V. DCIT (ORDER DAT ED 13.01.2017 PASSED IN IT(TP)A NO. 1397/BANG/2016 AT PARA 11) FO R THE ASSESSMENT YEAR 2011-12. IN VIEW OF THE ABOVE, INFOSYS OUGHT TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. (III) GROUND NO.16: IN THIS GROUND, THE ASSESSEE IS SEEKING THE EXCLUSI ON OF HARTRON COMMUNICATIONS LTD. ('HARTRON') FROM THE LIST OF COMPARABLES. IN THIS REGARD, IT IS SUBMITTED THAT HARTRON, WHICH WA S CHOSEN BY THE TPO, HAS WIDE FLUCTUATIONS IN PROFIT WHICH SUGGEST PECULIAR ECONOMIC CIRCUMSTANCE FOR WHICH NO APPROPRIATE ADJU STMENT COULD BE MADE TO MITIGATE THE IMPACT ON THE MARGIN. THE COMPANY HAS SUFFERED LOSSES DURING THE PRECEDING TWO FINANC IAL YEARS AND ITS MARGINS FOR FINANCIAL YEARS 2010-11 TO 2012-13 VARY BETWEEN (40.53%) TO 33.43%. WHILE THE COMPANY REGISTERED PR OFITS DURING THE YEAR UNDER CONSIDERATION, IT HAS CONSISTENTLY R EGISTERED LOSSES OF -40.53% FOR THE FY 2010-11, -27.09% FOR THE FY 2 011-12, - 2.46% FOR THE FY 2013-14 AND 20.65 FOR THE FY 2014- 15. CONSIDERING THE WIDE FLUCTUATIONS IN THE MARGINS, I T IS SUBMITTED THAT THE SAID COMPANY OUGHT TO STAND EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. FURTHER, AS PER THE ANNUAL RE PORT OF THE COMPANY, THE POLICY FOLLOWED BY IT FOR RECOGNITION OF REVENUE/EXPENDITURE IS AS UNDER: 'ALL REVENUES AND EXPENSES ARE ACCOUNTED FOR ON ACC RUAL IT(TP)A NO. 2460/BANG/2017 PAGE 10 OF 20 BASIS EXCEPT FOR PROCESSING CHARGES (EXPORT INCOME) , INTEREST ON CALLS IN ARREARS, LISTING FEE AND LEAVE ENCASHME NT WHICH ARE ACCOUNTED FOR ON CASH BASIS. THE ABOVE NOTE SUGGESTS THAT CASH BASIS OF ACCOUNTI NG IS FOLLOWED FOR EXPORT INCOME (OFFICE BACK-UP OPERATIONS SEGMEN T) AS AGAINST ACCRUAL SYSTEM OF ACCOUNTING FOLLOWED FOR RECORDING EXPENSES, WHICH IS CONTRARY TO THE MATCHING PRINCIPLES OF ACC OUNTING. FURTHER, HARTRON IS ALSO LIABLE TO BE EXCLUDED AS T HE SERVICES PROVIDED IN THE SEGMENT SELECTED BY THE TPO FOR THE PURPOSES OF COMPARABILITY ARE DISSIMILAR TO THE ROUTINE ITE SER VICES PROVIDED BY THE APPELLANT TO ITS AES, AND THUS OUGHT TO STAN D EXCLUDED ON THIS GROUND AS WELL. RELEVANT SUBMISSIONS IN THIS R EGARD ARE MADE AT PAGES 150-154 OF THE APPEAL SET. THE DRP, HOWEVER, FAILED TO PROPERLY APPRECIATE THE APPELLANT'S SUBMISSIONS AND ACCORDINGLY REJECTED ITS SUBMISSION S IN THIS REGARD. IN VIEW OF THE ABOVE, THE COMPANY OUGHT TO BE EXCLU DED FROM THE FINAL LIST OF COMPARABLES. 6. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. SHE ALSO SUBMITTED THAT IN RESPECT OF EXCLU SION OF PERSISTENT SYSTEMS LTD., THERE ARE VARIOUS TRIBUNAL ORDERS I.E . TRIBUNAL ORDER RENDERED IN THE CASE OF MICROSOFT RESEARCH LAB INDIA PVT. LT D. VS. DCIT IN IT(TP)A NO. 1276/BANG/2017 DATED 03.11.2017, WM GLOBAL TECH NOLOGY SERVICES (INDIA) P. LTD. VS. ACIT IN IT(TP)A NO. 1963/BANG/2 017 DATED 28.02.2018, IN THE CASE OF PITNEY BOWES SOFTWARE INDIA PVT. LTD . VS. ACIT (SUPRA), COPY AVAILABLE IN CASE LAW COMPILATION FILED BY ASSESSEE IN VOL-II AND ALSO IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. ITO AS REPORTED IN [2018] 94 TAXMANN.COM 179 (BANGALORE-TR IB.) COPY MADE AVAILABLE AND IN THE CASE OF TECNOTREE CONVERGENCE PVT. LTD. VS. DCIT IN IT(TP)A NO. 1616/BANG/2017. SHE SUBMITTED THAT IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. I TO (SUPRA), THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF T HE REVENUE AS PER PARA 21 OF THIS TRIBUNAL ORDER WHEREAS IN THE CASE OF PI TNEY BOWES SOFTWARE INDIA PVT. LTD. VS. ACIT (SUPRA), THE ASSESSEE IN T HAT CASE DID NOT SEEK EXCLUSION OF PERSISTENT SYSTEMS LTD. AND IN THE REM AINING THREE TRIBUNAL ORDERS, THE MATTER WAS REMANDED BACK TO THE TPO FOR FRESH DECISION. SHE SUBMITTED THAT IN THE FACTS OF PRESENT CASE, THE TR IBUNAL ORDER RENDERED IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CEN TER (P.) LTD. VS. ITO IT(TP)A NO. 2460/BANG/2017 PAGE 11 OF 20 (SUPRA) SHOULD BE FOLLOWED AND THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 7. IN THE REJOINDER, THE LD. AR OF ASSESSEE SUBMITT ED A COMPARATIVE CHART POINTING OUT AS TO IN EACH OF THESE SEVERAL TRIBUNA L ORDERS, WHAT IS THE DECISION OF TRIBUNAL AND IT WAS POINTED OUT THAT AS PER PAGE NO. 861 OF THE ANNUAL REPORT OF PERSISTENT SYSTEMS LTD., THAT COMP ANY HAS DISCLOSED THAT IT EARNS REVENUE FROM ROYALTY AND IT COLLECTS SERVI CE TAX AND VALUE ADDED TAXES (VAT) WHICH IS LEVIABLE ONLY ON SALE OF GOODS BUT THESE FACTS WERE NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL IN THE CASE O F ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. ITO (SUPRA) AND TH EREFORE, THIS ASPECT WAS NOT CONSIDERED BY THE TRIBUNAL IN THAT CASE AND HEN CE, THIS TRIBUNAL ORDER SHOULD NOT BE FOLLOWED AND AS PER THE REMAINING THR EE TRIBUNAL ORDERS, THE MATTER IS RESTORED BACK TO THE FILE OF TPO FOR FRES H DECISION. REGARDING GROUND NO. 21 WHICH IS IN RESPECT OF CORPORATE TAX ISSUE, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDE RED IN THE CASE OFCIT VS. TATA ELXSI LTD., 349 ITR 98. HE ALSO SUBMITTED THAT THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT HAS BEEN CONFIRMED BY HONBLE APEX COURT ALSO AS PER ITS RECENT JUDGEMENT DATED 24.04.2018 I N CIT VS. HCL TECHNOLOGIES IN CIVIL APPEAL NOS. 8489-8490/2013. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE DECIDE GROUND NOS. 9 AND 10 OF THE APPEAL OF THE ASSESSEE. REGAR DING THE ASSESSEES REQUEST FOR EXCLUSION OF LARSEN & TOUBRO INFOTECH L TD. FOR SOFTWARE DEVELOPMENT SERVICES SEGMENT, IT IS THE SUBMISSION OF THE LEARNED AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE TRIBUNAL ORDER RENDERED IN THE CASE OF PITNEY BOWES SOFTWARE INDIA PVT. LTD. VS. ACIT FOR THE SAME ASSESSMENT YEAR. AS PER PARA NO. 3 OF THIS TRIBUNAL ORDER, THE TP ADJUSTMENT WAS MADE IN RESPECT OF PRO VISION OF SOFTWARE DEVELOPMENT SERVICES TO THE AE. IN THE PRESENT CAS E ALSO, THE ISSUE IN DISPUTE IS REGARDING EXCLUSION OR INCLUSION OF THIS COMPARABLE I.E. LARSEN & TOUBRO INFOTECH LTD. IN RESPECT OF THE SOFTWARE DEV ELOPMENT SERVICES SEGMENT OF THE ASSESSEE COMPANY. HENCE IT IS SEEN THAT THIS TRIBUNAL ORDER IS RELEVANT IN THE PRESENT CASE. WE ALSO FIND THAT IN RESPECT OF BOTH THESE IT(TP)A NO. 2460/BANG/2017 PAGE 12 OF 20 COMPARABLES I.E. PERSISTENT SYSTEMS LTD. AND LARSEN & TOUBRO INFOTECH LTD., THE TRIBUNAL ORDER RENDERED IN THE CASE OF AD VICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. ITO (SUPRA) IS AGA INST THE ASSESSEE. COPY OF THIS TRIBUNAL ORDER IS MADE AVAILABLE BEFOR E US. PARAS 14 TO 21 OF THIS TRIBUNAL ORDER ARE RELEVANT FOR DECISION IN RE SPECT OF EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD. AND PERSISTENT SYSTEMS LTD. RESPECTIVELY. HENCE FOR READY REFERENCE, THESE PARAS FROM THIS TRIBUNAL ORD ER ARE REPRODUCED HEREINBELOW. 14. LARSEN & TOUBRO INFOTECH LTD. AS FAR AS THIS CO MPANY IS CONCERNED, THIS COMPANY ALSO RENDERS SWD SERVICES. IN PAGE-15 OF THE TPOS ORDER, THE FUNCTIONAL SIMILARITY OF TH IS COMPANY WITH THAT OF THE ASSESSEE HAS BEEN TABULATED BY THE TPO. THE OBJECTIONS OF THE ASSESSEE FOR REJECTING SUCH OBJECTIONS HAS B EEN SET OUT AT PAGE-21 TO 23 OF THE TPOS ORDER. THE DRP UPHELD TH E ORDER OF THE TPO INCLUDING THIS COMPANY AS A COMPARABLE COMP ANY. 15. THE GROUNDS ON WHICH THE ASSESSEE SEEKS EXCLUSI ON OF THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES IS ON THE GROUND THAT (I) THIS COMPANY IS FUNCTIONALLY DISSIMILAR TO THAT OF SWD SERVICE PROVIDER AND THAT IT DEVELOPS SOFTWARE PROD UCTS ; (II) SEGMENTAL INFORMATION OF VARIOUS SEGMENTS ARE NOT A VAILABLE; (III) SCALE OF OPERATION AND PRESENCE OF INTANGIBLES, BRA ND ETC. 16. AS FAR AS FUNCTIONAL DISSIMILARITY OF THIS COMP ANY IS CONCERNED, THIS COMPANY ALSO RENDERS SWD SERVICES I N THREE CLUSTERS, IN THE FORM OF SERVICE CLUSTER FOR BANKIN G, FINANCIAL SERVICES, INSURANCE, MEDIA & ENTERTAINMENT AND TRAV EL & LOGISTICS), INDUSTRIAL CLUSTER COMPRISING OF ALL MA NUFACTURING SECTORS, TELECOM CLUSTER RELATING TO PRODUCT ENGINE ERING SERVICES. AS RIGHTLY HELD BY THE DRP ALL THE ABOVE ACTIVITIES ARE SWD SERVICES. THE FACT THAT THE ASSESSEE MAINLY CATERS TO SWD SERVICES IN BANKING INDUSTRY CANNOT BE THE BASIS TO HOLD THA T THIS COMPANY AND THE ASSESSEE ARE NOT FUNCTIONALLY COMPARABLE. T HE DIFFERENCE POINTED OUT BY THE ASSESSEE ARE NOT MATERIAL DIFFER ENCES IN TERMS OF RULE 10B(2) OF THE RULES. 17. AS FAR AS THE OBJECTION THAT THIS COMPANY APART FROM RENDERING SWD SERVICES IS ALSO ENGAGED IN DEVELOPIN G ITS OWN SOFTWARE PRODUCTS, THE TPO HAS BROUGHT OUT IN HIS O RDER THAT THE PRODUCTS DEVELOPED BY THE ASSESSEE ARE PLATFORMS US ED BY THIS COMPANY TO ENABLE DESIGN AND DEVELOPING SOFTWARE FO R USE BY A CUSTOMER IN PARTICULAR INDUSTRY. FOR E.G., THE PROD UCT UNITRAX IS A SOFTWARE THAT ENABLES RECORDING KEEPING ENABLI NG FUND AND INSURANCE COMPANIES TO MANAGE THE ADMINISTRATION OF THEIR WEALTH MANAGEMENT. BASED ON THIS SOFTWARE THE ASSES SEE DESIGNS SOFTWARE FOR SPECIFIC NEEDS OF A CUSTOMER. NO PRODU CT IS SOLD OFF THE SHELF BY THE COMPANY. HENCE THE OBJECTION OF TH E ASSESSEE THAT THIS COMPANY IS A SOFTWARE PRODUCT COMPANY WAS RIGH TLY HELD BY THE TPO/DRP TO BE NOT VALID. IT(TP)A NO. 2460/BANG/2017 PAGE 13 OF 20 18. THE OBJECTION WITH REGARD TO ABSENCE OF SEGMENT AL INFORMATION HAS BEEN MET BY THE TPO BY POINTING OUT THAT THE WH OLE SEGMENT OF SWD SERVICES WAS CONSIDERED FOR COMPARABILITY. THE OBJECTION OF THE ASSESSEE IN THIS REGARD IS NOT SPECIFIC AND IS VAGUE AND IS ON AN ASSUMPTION THAT THIS COMPANY OPERATES IN THREE S EGMENTS. THE TPO HAS POINTED OUT THAT THERE IS ONLY ONE SEGMENT AND HENCE THIS OBJECTION IN OUR VIEW WAS RIGHTLY DISREGARDED BY TH E REVENUE AUTHORITIES. 19. AS FAR AS THE OBJECTIONS REGARDING PRESENCE OF INTANGIBLES, IT IS SEEN FROM THE ORDER OF THE TPO THAT THE INTANGIB LES ARE NOTHING BUT OPERATING SYSTEMS, OFFICE TOOLS, DEVELOPMENT TO OLS, TESTING TOOLS ETC., THAT ARE USED IN THE PROCESS OF RENDERI NG SWD SERVICES BY THE ASSESSEE AND THEREFORE CANNOT BE THE BASIS T O HOLD THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH THE ASS ESSEE. AS FAR AS THE OBJECTION REGARDING PRESENCE OF BRAND VALUE IS CONCERNED, IT HAS BEEN HELD BY THE TPO THAT THERE IS NO INTANG IBLE IN THE FORM OF BRAND OWNED BY THIS COMPANY. THE SCALE OF OPERAT IONS OF THIS COMPANY CANNOT BE THE BASIS TO HOLD THAT THIS COMPA NY IS NOT COMPARABLE WHEN FUNCTIONALLY IT IS FOUND TO BE COMP ARABLE. 20. NONE OF THE OBJECTIONS RAISED BY THE ASSESSEE M EET THE CRITERIA FOR EXCLUDING THIS COMPANY IN TERMS OF COMPARABILIT Y CRITERIA LAID DOWN IN RULE 10B(2) OF THE RULES. WE THEREFORE UPHO LD THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE COMPANIES. 21. PERSISTENT SYSTEMS LTD.: THE OBJECTION OF THE A SSESSEE FOR EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES IS ON THE GROUND THAT THIS COMPANY IS ALSO ENGAGED IN MAKING SOFTWARE PRODUCTS AND IS NOT ONLY IN PROVIDING SWD SERVICES AND THAT THE SEGMENTAL DETAILS OF REVENUE FROM SALE OF SOFTWARE PRODUCTS AND REVENUE FROM RENDERING SWD SERVICES AR E NOT AVAILABLE. THIS OBJECTION IS EXAMINED IN THE LIGHT OF THE ANNUAL REPORT OF THIS COMPANY FOR 2013 WHICH IS AT PAGES 6 48 TO 841 OF VOLUME-III PAPER BOOK FILED BY THE ASSESSEE. THE LE ARNED AR POINTED OUT THAT EVEN IN THE ANNUAL REPORT THIS COM PANY IS STATED TO BE IN THE BUSINESS OF DEVELOPING SOFTWARE PRODUCTS. THE REFERENCE BY THE LEARNED AR IS TO THE CONSOLIDATED ACCOUNTS, I.E., INCLUSIVE OF THE ACTIVITIES OF THE GROUP (AE COMPANIES). THE UNC ONSOLIDATED ACCOUNTS OF THIS COMPANY IS AT PAGE 787 OF VOLUME-I II PAPER BOOK FILED BY THE ASSESSEE. THE PROFIT & LOSS ACCOUNT IS AT PAGE-793 OF VOLUME-III PAPER BOOK FILED BY THE ASSESSEE. INCOME FROM OPERATION IS RS.9967.53 MILLION. NOTE 21 TO THE NOT E ON ACCOUNTS GIVES THE BREAK OF THIS REVENUE WHICH IS AT PAGE- 8 14 AND IT IS FULLY FROM PROVIDING SOFTWARE DEVELOPMENT SERVICES.THIS R EVENUE HAS BEEN COMPARED WITH COSTS AND THE OP/TC OF THIS COMP ANY ARRIVED AT BY THE TPO. NOTE 26 TO THE NOTES ON ACCOUNTS GIV ES THE SEGMENTAL BREAK-UP AND THE SEGMENTS ARE ALL SOFTWAR E SERVICES SEGMENT AND THERE IS NO PRODUCT SEGMENT AT ALL. THE LEARNED AR PLACED RELIANCE ON DECISIONS WHERE THIS COMPANY WAS EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. THESE DECISI ONS DO NOT RELATE TO AY 13-14. WE CAN THEREFORE SAFELY PROCEED ON THE BASIS IT(TP)A NO. 2460/BANG/2017 PAGE 14 OF 20 THAT THOSE DECISIONS ARE RENDERED ON THEIR FACTS PR EVAILING IN THE RELEVANT AY. AS FAR AS THE PRESENT AY 13-14 IS CONC ERNED, THE PLEA OF THE ASSESSEE FOR EXCLUSION OF THIS COMPANY ON TH E GROUND THAT IT IS A SOFTWARE PRODUCT COMPANY IS HELD TO BE WITHOUT ANY BASIS AND IS REJECTED. NO OTHER ARGUMENTS WERE ADVANCED FOR E XCLUSION OF THIS COMPANY. HENCE, WE UPHOLD THE ORDERS OF THE RE VENUE AUTHORITIES INCLUDING THIS COMPANY IN THE LIST OF C OMPARABLE COMPANIES. 9. IN RESPECT OF THE APPLICABILITY OF THIS TRIBUNAL ORDER FOR EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD, THIS HAS BEEN SUBMITTED BY LD. AR OF ASSESSEE IN THE CHART SUBMITTED BEFORE US THAT ON PAGE NO. 698 OF A NNUAL REPORT PAPER BOOK, THIS COMPANY HAS DEBITED AN AMOUNT OF RS. 27, 10,89,274/- AS COST OF BOUGHT-OUT ITEMS FOR RESALE. BUT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. ITO (SUPRA). IT HAS ALSO BEEN SUBMIT TED THAT ON PAGE NO. 706 OF ANNUAL REPORT PAPER BOOK, THIS HAS BEEN REPORTED TH AT THIS COMPANY IS ENGAGED IN SALE OF SERVICES TO ITS RELATED PARTIES AND THIS FACT WAS ALSO NOT BROUGHT TO THE NOTICE OF TRIBUNAL IN CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. VS. ITO (SUPRA). WHEN WE EXAMINE PARAS 14 TO 20 OF THIS TRIBUNAL ORDER WHERE THERE IS DISCUSS ION REGARDING INCLUSION/EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD , WE FIND THAT THERE IS NO DISCUSSION ON THESE TWO ASPECTS THAT THIS COMPANY I S HAVING SIGNIFICANT AMOUNT OF COST OF BOUGHT-OUT ITEMS FOR RESALE AND I T IS ENGAGED IN SALE OF SERVICES AND PRODUCTS TO ITS RELATED PARTIES AND HE NCE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER CANNOT BE CONSIDERED A S A BINDING PRECEDENCE BECAUSE THIS TRIBUNAL ORDER IS SILENT ON THESE TWO IMPORTANT ASPECTS AS TO THIS ASPECT THAT THIS COMPANY IS HAVING SIZEABLE AM OUNT OF BOUGHT OUT ITEMS FOR RESALE AND HAVE RELATED PARTY TRANSACTIONS IN R ESPECT OF SALES OF SERVICES AND PRODUCTS. WE ALSO FIND THAT IN THE CASE OF REM AINING THREE TRIBUNAL ORDERS I.E.MICROSOFT RESEARCH LAB INDIA PVT. LTD. V S. DCIT (SUPRA), WM GLOBAL TECHNOLOGY SERVICES (INDIA) P. LTD. VS. ACIT (SUPRA) AND IN THE CASE OF TECNOTREE CONVERGENCE PVT. LTD. VS. DCIT (SUPRA) , THE MATTER WAS REMANDED TO THE TPO FOR FRESH DECISION. HENCE, WE FEEL IT PROPER THAT IN THE PRESENT CASE ALSO, THIS ISSUE SHOULD GO BACK TO THE FILE OF TPO FOR FRESH DECISION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BE ING HEARD TO THE IT(TP)A NO. 2460/BANG/2017 PAGE 15 OF 20 ASSESSEE AND WHILE DECIDING THE ISSUE AFRESH, ALL T HE AVAILABLE TRIBUNAL ORDERS ON THIS ISSUE SHOULD BE CONSIDERED BY THE TP O IN PROPER PERSPECTIVE. 10. SIMILARLY IN RESPECT OF EXCLUSION OF PERSISTENT SYSTEMS LTD. ALSO, THE LD. DR OF REVENUE HAS PLACED RELIANCE ON TRIBUNAL ORDER RE NDERED IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD . VS. ITO (SUPRA) AND IT HAS BEEN POINTED OUT BY HIM THAT IN THIS CASE, I T WAS HELD BY THE TRIBUNAL IN PARA 21 THAT THIS COMPANY IS NOT REQUIRED TO BE EXCLUDED BUT THIS IS THE SUBMISSION MADE BY LD. AR OF ASSESSEE BEFORE US THA T WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE IN THIS CASE, THE RELEVA NT PAGE OF THE ANNUAL REPORT OF THIS COMPANY BEING PAGE NO. 861 OF THE AN NUAL REPORT PAPER BOOK WAS NOT CONSIDERED PROPERLY AND IT IS POINTED OUT BEFORE US THAT IT HAS BEEN REPORTED ON THIS PAGE OF THE ANNUAL REPORT OF THAT COMPANY THAT THIS COMPANY IS EARNING REVENUE FROM ROYALTY AND THE COM PANY ALSO EARNS SERVICE TAX AND VALUE ADDED TAX. THIS IS THE CLAIM OF THE ASSESSEE BEFORE US THAT VAT IS LEVIABLE ONLY ON SALE OF GOODS AND T HEREFORE, IT HAS TO BE SEEN THAT WHAT IS THE QUANTUM OF SALE OF GOODS BY THAT C OMPANY AND WHETHER SEGMENTAL INFORMATION IN THAT REGARD IS AVAILABLE O R NOT. IT HAS BEEN SUBMITTED THAT AS PER THE REMAINING THREE TRIBUNAL ORDERS RENDERED IN THE CASE OF MICROSOFT RESEARCH LAB INDIA PVT. LTD. VS. DCIT (SUPRA), WM GLOBAL TECHNOLOGY SERVICES (INDIA) P. LTD. VS. ACIT (SUPRA ) AND IN THE CASE OF TECNOTREE CONVERGENCE PVT. LTD. VS. DCIT (SUPRA), T HE MATTER WAS REMANDED BACK TO THE TPO FOR FRESH DECISION AND THE REFORE, IN OUR CONSIDERED OPINION AND IN THE FACTS OF PRESENT CASE , WE FEEL THAT THIS ISSUE SHOULD ALSO BE RESTORED BACK TO THE FILE OF TPO FOR FRESH DECISION IN THE LIGHT OF ALL THESE FOUR TRIBUNAL ORDERS AFTER PROVIDING A DEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. 11. IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES SEG MENT, WE RESTORE THE MATTER BACK TO THE AO/TPO FOR FRESH DECISION REGARDING THE ASSESSEES CLAIM FOR EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD. AND PERS ISTENT SYSTEMS LTD. AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ISSUE SHOULD BE DECIDED AFTER CONSIDERING ALL AVAIL ABLE TRIBUNAL ORDERS FOR ASSESSMENT YEAR 2013-14 IN RESPECT OF EXCLUSION OF THESE TWO COMPANIES. ACCORDINGLY GROUND NOS. 9 AND 10 ARE ALLOWED FOR ST ATISTICAL PURPOSES. IT(TP)A NO. 2460/BANG/2017 PAGE 16 OF 20 12. NOW WE DECIDE THE ISSUE IN RESPECT OF ITES SEGM ENT. IN THIS SEGMENT, THE ASSESSEES CLAIM IS FOR EXCLUSION OF THREE COMPARAB LES I.E. CAPGEMINI BUSINESS SERVICES (INDIA) LTD., INFOSYS BPO LTD. AN D HARTRON COMMUNICATIONS LTD. IT HAS BEEN SUBMITTED BEFORE U S THAT ON PAGE NO. 1429 OF THE ANNUAL REPORT PAPER BOOK IS THE RELEVAN T PORTION OF THE ANNUAL REPORT OF HARTRON COMMUNICATIONS LTD. AND IT HAS BE EN POINTED OUT THAT IT HAS BEEN REPORTED IN PARA 1.6 OF SIGNIFICANT ACCOUN TING POLICIES TO THE FINANCIAL STATEMENT THAT ALTHOUGH ALL OTHER REVENUE S AND EXPENSES ARE ACCOUNTED FOR ON ACCRUAL BASIS EXCEPT FOR PROCESSIN G CHARGES (EXPORT INCOME), INTEREST ON CALLS IN ARREARS, LISTING FEE AND LEAVE ENCASHMENT WHICH ARE ACCOUNTED FOR ON CASH BASIS. IT HAS BEEN SUBMI TTED BEFORE US THAT THIS ASPECT OF THE ASSESSEES ARGUMENT WAS NOT CONSIDERE D AND DECIDED BY DRP. WE FIND THAT AS PER PARA 1.6 AVAILABLE ON PAG E NO. 1429 OF THE ANNUAL REPORT PAPER BOOK, THIS HAS BEEN STATED THAT PROCES SING CHARGES (EXPORT INCOME) WAS ACCOUNTED FOR ON CASH BASIS BUT AS PER PAGE 1438 OF THE SAME PAPER BOOK, THIS COMPANY IS HAVING REVENUE FROM OPE RATIONS ON ACCOUNT OF RENT INCOME, EXPORT EARNING FROM BPO, DOMESTIC EARN ING FROM BPO AND SALE OF LAND OUT OF TOTAL REVENUE FROM OPERATIONS O F RS. 33,12,01,272/- AND THERE IS NO OTHER INCOME IN THE PRESENT YEAR. HENC E IT IS SEEN THAT IN THE PRESENT YEAR, THERE IS NO INCOME REPORTED BY THAT C OMPANY ON ACCOUNT OF PROCESSING CHARGES (EXPORT INCOME). IN ADDITION TO THIS, IN THE SAME PARA I.E. 1.6 ON PAGE 1429 OF PAPER BOOK, IT HAS BEEN ST ATED THAT INTEREST ON CALLS IN ARREARS, LISTING FEE AND LEAVE ENCASHMENT WERE A CCOUNTED FOR ON CASH BASIS. WE FIND THAT AS PER PAGE NO. 1433 OF PAPER BOOK, THE CALLS IN ARREARS WERE ONLY RS. 2,58,500/- AND THEREFORE, WHETHER THE INTEREST ON THIS CALLS IN ARREARS IS ACCOUNTED FOR ON ACCRUAL BASIS OR CASH B ASIS, IT WILL NOT HAVE ANY MATERIAL EFFECT ON THE PROFITABILITY OF THAT COMPAN Y. REGARDING LISTING FEE AND LEAVE ENCASHMENT, WE FIND THAT AS PER NOTE NO. 21 IN RESPECT OF EMPLOYEES BENEFIT EXPENSES AS AVAILABLE ON PAGE NO. 1439 OF P APER BOOK, THERE IS NO AMOUNT DEBITED FOR LEAVE ENCASHMENT AND AS PER NOTE NO. 23 AS AVAILABLE ON PAGE NO. 1440, THE AMOUNT DEBITED UNDER THE HEAD LISTING FEES IS ONLY RS. 31,049/- IN THE PRESENT YEAR AND RS. 5,61,572/- IN THE PRECEDING YEAR AND IT HAS NOT BEEN SHOWN TO US THAT THERE MAY BE A NY MATERIAL EFFECT ON THE IT(TP)A NO. 2460/BANG/2017 PAGE 17 OF 20 PROFITABILITY OF THIS COMPANY IF THESE TWO EXPENSES ARE ACCOUNTED FOR ON ACCRUAL BASIS INSTEAD OF CASH BASIS. HENCE IN OUR CONSIDERED OPINION, THIS OBJECTION HAS NO MERIT BECAUSE SUCH ACCOUNTING OF S OME INCOME/EXPENSES ON CASH BASIS IS NOT SHOWN TO HAVE ANY MATERIAL EFF ECT ON THE PROFITABILITY OF THAT COMPANY. THERE IS NO OTHER OBJECTION RAISED B EFORE US IN RESPECT OF INCLUSION/EXCLUSION OF THIS COMPANY AND THEREFORE, WE FIND NO MERIT IN THIS REQUEST FOR EXCLUSION OF HARTRON COMMUNICATIONS LTD . (SEG). GROUND NO. 16 IS REJECTED. 13. NOW WE EXAMINE THE ASSESSEES REQUEST FOR EXCLU SION OF CAPGEMINI BUSINESS SERVICES (INDIA) LTD. REGARDING THIS COMP ANY, IT HAS BEEN STATED THAT RPT% OF THIS COMPANY IS 82.32% AND IN THIS REG ARD, OUR ATTENTION WAS DRAWN TO PAGE 140 OF PAPER BOOK. WE FIND THAT ON P AGE NO. 140 OF THE PAPER BOOK IS PART OF OBJECTIONS FILED BEFORE DRP I N FORM 35A AGAINST THE DRAFT ASSESSMENT ORDER. IT HAS BEEN SUBMITTED BEFO RE DRP THAT CAPGEMINI BUSINESS SERVICES (INDIA) LTD. HAS SUBSTANTIAL RELA TED PARTY TRANSACTIONS TO THE EXTENT OF 82.32% FOR FY 2012-13 AS EMANATING FR OM THE ANNUAL REPORT FOR FY 2013-14 AVAILABLE IN THE PUBLIC DOMAIN. ANN UAL REPORT OF THIS COMPANY I.E. CAPGEMINI BUSINESS SERVICES (INDIA) LT D. FOR THE FINANCIAL YEAR 2013-14 IS AVAILABLE ON PAGES 1087 TO 1268 OF ANNUAL REPORT PAPER BOOK. IT HAS BEEN SUBMITTED THAT ON PAGE NOS. 17 A ND 18 OF THE DRP DIRECTIONS, THIS IS NOTED BY DRP THAT AS PER THE AS SESSEES CLAIM, THE RPT% IN CASE OF CAPGEMINI BUSINESS SERVICES (INDIA) LTD. IS 82.32%. THE FINDING OF DRP IN THIS REGARD IS GIVEN ON PAGE NO. 18 OF TH E DRP DIRECTIONS WHERE IT HAS BEEN STATED THAT THIS WORKING IS OBTAINED FROM THE FINANCIALS OF FY 2013- 14 AND THIS IS THE NEW INFORMATION BROUGHT BEFORE D RP BASED ON A NEW DATA WHICH WAS NOT AVAILABLE IN THE PUBLIC DOMAIN EARLIE R. THE DRP HAS REJECTED THE ASSESSEES CONTENTION ON THIS BASIS THAT IT IS NOT CLEAR WHY THIS COMPANY HAS REPORTED THE RELATED PARTY TRANSACTION IN ITS A NNUAL REPORT FOR 2013-14 AND THE DRP DIRECTED THE TPO TO CROSS VERIFY THIS I NFORMATION WITH THE SAID COMPANY AND IF ASSESSEES CLAIM IS FOUND TO BE CORR ECT, THEN THIS COMPANY MAY BE EXCLUDED AS A COMPARABLE. IN THIS VIEW OF T HE DIRECTION OF DRP ON PAGE NO. 18 OF THE DIRECTIONS OF DRP, WE ARE OF THE CONSIDERED OPINION THAT IT(TP)A NO. 2460/BANG/2017 PAGE 18 OF 20 THERE IS NO INFIRMITY IN THE DIRECTIONS OF DRP ON T HIS ISSUE AND THEREFORE, GROUND NO. 14 HAS NO MERIT. THE SAME IS REJECTED. 14. NOW WE TAKE UP THE ASSESSEES CLAIM FOR EXCLUSI ON OF INFOSYS BPO LTD. AS PER GROUND NO. 15. THE ASSESSEE HAS PLACED RELIANC E ON FIVE TRIBUNAL ORDERS AS PER THE CHART BUT ALL THESE ORDERS ARE FO R EARLIER YEARS AND NOT FOR THE CURRENT YEAR. IT HAS ALSO BEEN EXPLAINED TO US THAT DIRECTION OF DRP IS AVAILABLE ON PAGES 19 AND 20 OF DRP DIRECTIONS. AS PER PARA NO. 45 OF THIS TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2012-13, IT HAS BEEN HELD BY THE TRIBUNAL THAT IT WAS HELD BY THE T RIBUNAL IN THE CASE OF BAXTER (I) PVT. LTD. VS. ACIT (2017) 85 TAXMANN.COM 285 (DELHI-TRIB.) THAT INFOSYS BPO LTD IS NOT COMPARABLE WITH A COMPANY PR OVIDING ITES BECAUSE OF BRAND VALUE AND EXTRAORDINARY EVENTS IN THE PREV IOUS YEAR RELEVANT TO ASSESSMENT YEAR 2012-13 VIZ., ACQUISITION OF AN AUS TRALIA BASED COMPANY WHICH HAD EFFECT ON ITS PROFITS. SINCE BEFORE US I S ASSESSMENT YEAR 2013-14 AND THEREFORE, IN THE PRESENT YEAR, THIS REASONING OF THE TRIBUNAL THAT THERE WAS EXTRAORDINARY EVENT IN ASSESSMENT YEAR 2012-13 HAS NO RELEVANCE IN ASSESSMENT YEAR 2013-14. BUT THIS ASPECT STILL REM AINS THAT INFOSYS BPO LTD IS NOT A COMPARABLE BECAUSE OF THIS BRAND VALUE AS PER THE TRIBUNAL ORDER IN EARLIER YEAR. BUT THIS ASPECT HAS ALSO TO BE EXAMINED AS TO WHAT IS THE COMPARABILITY OF BRAND VALUE OF THE PRESENT ASS ESSEE AND INFOSYS BPO LTD BECAUSE IF THE COMPARABLE COMPANY AND THE TESTE D PARTY BOTH HAVE BRAND VALUE WITHOUT MUCH DIFFERENCE THEN THIS CANNO T BE SAID THAT THE COMPARABLE COMPANY HAVING BRAND VALUE CANNOT BE CON SIDERED AS A GOOD COMPARABLE. IN THE PRESENT YEAR AS PER THE DIRECTI ONS OF DRP AVAILABLE ON PAGE NOS. 19 AND 20 OF THE DRP DIRECTIONS, WE FIND THAT THIS IS NOT CLAIM OF THE ASSESSEE IN THE PRESENT CASE THAT INFOSYS BPO L TD. IS NOT COMPARABLE BECAUSE THAT COMPARABLE COMPANY IS HAVING BRAND VAL UE. CONSIDERING ALL THE ARGUMENTS OF LD. AR OF ASSESSEE, WE FIND NO INF IRMITY IN THE DIRECTIONS OF DRP REGARDING HIS DECISION IN RESPECT OF ASSESSEES CLAIM FOR EXCLUSION OF INFOSYS BPO LTD. BECAUSE WE FIND THAT DRP HAS EXAMI NED ALL THE ASPECTS OF THE MATTER INCLUDING THIS ASPECT THAT INFOSYS BPO L TD. ACQUIRED 100% OF THE VOTING INTERESTS IN MCCAMISH SYSTEMS LLC AND A CATE GORICAL FINDING IS GIVEN BY DRP THAT THE SAID ACQUISITION HAS NOT INCR EASED THE PROFITABILITY OF IT(TP)A NO. 2460/BANG/2017 PAGE 19 OF 20 THAT COMPANY. WE ALSO FIND THAT REGARDING THIS COM PARABLE COMPANY ALSO, THE DRP HAS DIRECTED THE TPO/AO TO VERIFY THE FACTU AL POSITION IN RESPECT OF EXPORT REVENUE FILTER BECAUSE IT HAS BEEN NOTED BY THE DRP THAT THE TPO HAS TAKEN RS. 1675 CRORES AS EXPORT EARNINGS BUT AS PER PAGE NO. 26 OF THE ANNUAL REPORT OF THAT COMPANY, THE FOREIGN CURRENCY EARNINGS FROM BPO SERVICES WAS GIVEN AT RS. 1356 CRORES. IT IS NOTED BY DRP THAT IF THE EXPORT EARNINGS IS TO BE TAKEN AT RS. 1356 CRORES, IT MAY FAIL THE EXPORT REVENUE FILTER AND THEREFORE, THE MATTER WAS RESTORED BACK TO THE FILE OF AO/TPO FOR FRESH DECISION AFTER VERIFYING THE FACTUAL POSITION IN THIS REGARD. HENCE, REGARDING THE ASSESSEES CLAIM FOR EXCLUSION OF THI S COMPARABLE ALSO, WE FIND NO INFIRMITY IN THE DIRECTIONS OF DRP PARTICUL ARLY IN VIEW OF THIS FACT THAT THE DRP HAS RESTORED BACK THE MATTER TO AO/TPO FOR FRESH DECISION AFTER VERIFYING THE FACTUAL POSITION IN RESPECT OF EXPORT REVENUE FILTER. ACCORDINGLY GROUND NO. 15 OF ASSESSEES APPEAL IS A LSO REJECTED. 15. NOW WE ARE LEFT WITH ONLY CORPORATE TAX ISSUE R AISED BY ASSESSEE AS PER GROUND NO. 21 OF ASSESSEES APPEAL AND THERE IS NO DISPUTE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. TATA ELX SI LTD. (SUPRA) WHEREIN IT WAS HELD BY HON'BLE KARNATAKA HIGH COURT THAT TOTAL TURNOVER IS SUM TOTAL OF EXPORT TURNOVER AND DOMESTIC TURNOVER AND THEREFORE , IF ANY AMOUNT IS REDUCED FROM EXPORT TURNOVER THEN TOTAL TURNOVER AL SO GOES DOWN BY THE SAME AMOUNT AUTOMATICALLY. RESPECTFULLY FOLLOWING THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO RECOMPUTE THE DEDUCTI ON ALLOWABLE TO ASSESSEE U/S. 10AA OF THE IT ACT IN THE LIGHT OF TH IS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT. GROUND NO. 21 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE ME NTIONED ON THE CAPTION PAGE. SD/- SD/- (LALIER KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH OCTOBER, 2018. /MS/ IT(TP)A NO. 2460/BANG/2017 PAGE 20 OF 20 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, BANGALORE.