M/s. Equant Solutions India Pvt Ltd., Gurgaon V. DCIT, Gurgaon

ITA 2478/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6591 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 21-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 2478/DEL/2014 ASSESSMENT YEAR: 2009-10 EQUANT SOLUTIONS INDIA PVT. LTD., TOWER-B, 8 TH FLOOR, DLF INFINITY TOWER, PHASE-II, CYBER CITY, SECTOR-25, GURGAON, HARYANA. PAN: AABCE 4540 P VS. DCIT, CIRCLE 1(1), GURGAON. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KANCHUN KAUSHAL, CA, SHRI ROHIT TIWARI, CA & MISS SHRUTI KHIMTA, ADV. DEPARTMENT BY : SHRI AMRENDRA KUMAR CIT DR DATE OF HEARING : 21 . 1 1 . 201 6 DATE OF PRONOUNCEMENT : 24.11.2016 ORDER PER: LALIET KUMAR, J.M.: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINS T THE ORDER DATED 20/02/2014 OF THE ASSESSING OFFICER FOR THE A.Y. 20 09-10 FRAMED PURSUANT TO THE DIRECTION OF THE LD. DRP DATED 26/12/2013. THE ASSESSEE HAS RAISED VARIOUS 2 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT GROUNDS IN ITS APPEAL. HOWEVER, THE ASSESSEE HAS PR ESSED ONLY FOLLOWING TWO GROUNDS :- 2.6 REJECTION COMPARABILITY ANALYSIS UNDERTAKEN BY THE APPELLANT IN THE TP DOCUMENTATION/FRESH SEARCH AND CONDUCTING A FRESH COMPARABILITY ANALYSIS BASED ON APPLICATION OF THE FOLLOWING ADDITIONAL/REVISED FILTERS IN DETERMINING THE ALP F OR THE INTERNATIONAL TRANSACTIONS: 2.6.1 EXCLUSION OF COMPANIES WHOSE DATA FOR F.Y. 20 08-09 WAS NOT AVAILABLE; 2.6.2 EXCLUSION OF COMPANIES HAVING SERVICE INCOME TO SALES LESS THAN 75% (AS AGAINST OTHER OPERATING TO SALES THAN 50% APPLIED BY THE APPELLANT); 2.6.3 EXCLUSION OF COMPANIES WITH RELATED PARTY TRA NSACTIONS (RPT) GREATER THAN 25% OF THEIR SALES; 2.6.4 EXCLUSION OF COMPANIES WITH EXPORT SALES THAT ARE LESS THAN 75% OF THEIR TOTAL REVENUE; 2.6.5 EXCLUSION OF COMPANIES WITH DIMINISHING REVENUES/PERSISTENT LOSSES FOR LAST THREE YEARS UPT O AND INCLUDING F.Y. 2008-09; 2.6.6 EXCLUSION OF COMPANIES HAVING DIFFERENT FINAN CIAL YEAR ENDING (I.E. NOT MARCH 31, 2009); 2.6.7 AND REJECTING, IN PARTICULAR, THE FOLLOWING F ILTERS APPLIED BY THE APPELLANT IN ITS TP DOCUMENTATION/FRESH SEARCH; 2.6.7.1 COMPANIES HAVING RESEARCH AND DEVELOPMENT C OSTS TO SALES LESS THAN 3% WERE ACCEPTED; AND; 3 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 2.6.7.2 COMPANIES WITH NET WORTH LESS THAN ZERO WER E REJECTED; 2.6.7.3 COMPANIES HAVING ADVERTISING, MARKETING AND DISTRIBUTION COSTS TO SALES LESS THAN 3% WERE ACCEPTED. 2.9 INCLUDING CERTAIN COMPANIES THAT ARE NOT COMPAR ABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS E MPLOYED AND RISKS ASSUMED; THE OTHER GROUNDS TAKEN BY THE ASSESSEE IN ITS APPE AL WERE NOT PRESSED DURING THE COURSE OF HEARING, THEREFORE, THE REMAINING GR OUNDS ARE DISMISSED BEING NOT PRESSED. 2. AS PER THE CASE OF THE ASSESSEE, ASSESSEE IS A S UBSIDIARY OF EGN BV, NEATHERLANDS. THE APPELLANT WAS PRIMARILY ENGAGED I N PROVIDING INFORMATION TECHNOLOGY ENABLED NETWORK MANAGEMENT/TECHNICAL SUP PORT AND OTHER BACK- OFFICE SUPPORT SERVICES (ITES) TO ITS GROUP SOFTWAR E DEVELOPMENT SERVICE (CSD/IT) FOR DEVELOPING SOFTWARE APPLICATIONS FOR U SE WITHIN EQUANT GROUP/ASSOCIATED ENTERPRISES (AES). 3. THE ASSESSEE HAS USED TNMM AS THE METHOD AND OP /TC (OPERATING PROFIT TO TOTAL COST) AS PLI (PROFIT LEVEL INDICATO R). THE ASSESSEE HAS ARRIVED AT A SET OF 17 COMPANIES WITHIN AN AVERAGE MARGIN OF 13. 28%. THE ASSESSEE HAS USED MULTIPLE YEAR DATA AND WORKED OUT OWN MARGIN T O 22.01%. BASED ON THE 4 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT ANALYSIS, THE ASSESSEE HAS CONCLUDED THAT ITS INTER NATIONAL TRANSACTIONS ARE AT ARM LENGTH. THE TPO HAS GONE THROUGH ALL THE FACTS AND ISSUES WITH AR OF THE ASSESSEE AND THEREAFTER A SHOW CAUSE NOTICE DATED 1 4/09/2012 WAS ISSUED TO THE ASSESSEE. 3.1 PARAGRAPH NOS. 7, 8, 8.1, 8.2, 8.3 AND 9 OF THE SHOW CAUSE NOTICE PROVIDES AS UNDER:- 7. USE OF CURRENT YEAR DATA:- IT IS PROPOSED TO USE THE CURRENT YEAR DATA ALONE I .E. THE DATA PERTAINING TO THE FY 2008-09. THE USE OF EARLIER YE AR DATA IS NOT ACCEPTABLE AS YOU HAVE NOT SHOWN ANY REASONS AS TO HOW THE EARLIER YEAR DATA HAS AN INFLUENCE ON TRANSFER PRIC ES. IN THE ABSENCE OF ANY COGENT, RELEVANT AND RELIABLE EVIDEN CE TO PROVE THAT THE DATA FOR PRECEDING TWO YEARS REVEALED FACT HAVE AN INFLUENCE ON THE DETERMINATION OF THE ALP, IN VIEW OF PROVISO TO RULE 10B(4) USE OF THE DATA PERTAINING TO THE TWO E ARLIER YEARS FY 2006-07 AND FY 2007-08 IS NOT JUSTIFIED. HENCE, UNL ESS IT IS SHOWN THAT CONDITIONS AS MENTIONED IN THE AFORESAID PROVI SO ARE FULFILLED, IT IS PROPOSED TO USE ONLY THE CURRENT YEAR DATA AN D TO EXCLUDE THE EARLIER YEAR DATA. 8. COMPARABLES SELECTED BY THE TAXPAYER:- THE COMPA RABLES SELECTED BY YOU IN BOTH THE SEARCH PROCESSES ARE DISCUSSED A S UNDER:- 5 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT SL. NO. NAME OF THE COMPANY REMARKS 1. ADITYA BIRLA MINOCS WORLDWIDE LTD. PASSES ALL F ILTERS, HENCE A SUITABLE COMPARABLE. 2. AEGIS BPO SERVICES (GURGAON) LIMITED COMPANY FAILS EXPORT FILTER, HENCE REJECTED. 3. BNR UDYOG LTD. SERVICE INCOME TO SALES IS 59.03% (LESS THAN 75%) HENCE REJECTED. 4. CAMEO CORPORATE SERVICES LTD. SERVICE INCOME IS 19.57% TO SALES, HENCE REJECTED. 5. COSMIC GLOBAL LIMITED PASSES ALL FILTERS, HENCE A SUITABLE COMPARABLE. 6. CSS TECHENERGY LTD. (FORMERLY KNOWN AS CS SOFTWARE ENTERPRISE LIMITED) EXPORT IS 23% OF THE SALES, HENCE THIS IS NOT A SUITABLE COMPARABLE. 7. EZEST SOLUTIONS LIMITED THE COMPANY IS PROVIDING SOFTWARE DEVELOPMENT SERVICES, HENCE FUNCTIONALLY DIFFERENT, REJECTED. 8. FCS SOFTWARE SOLUTIONS LIMITED THE COMPANY IS PR OVIDING SOFTWARE DEVELOPMENT SERVICES, HENCE FUNCTIONALLY DIFFERENT, THE COMPANY IS ALSO HAVING DECLINING SALES FOR LAST 3 YEARS, HENCE, REJECTED. 9. GALAXY COMMERCIALS LIMITED EXPORT IS NIL, HENCE REJECTED. 10. IN HOUSE PRODUCTIONS LTD. EXPORT TO SALES IS JU ST 0.09%, HENCE REJECTED. 11. INFORMED TECHNOLOGIES INDIA LIMITED PASSERS ALL FILTERS, HENCE A SUITABLE COMPARABLE. 12. INFOSYS BPO LTD. PASSES ALL FILTERS, HENCE A SUITABLE COMPARABLE. 13. ISOFT TECHNOLOGIES LIMITED COMPANY FAILS EXPORT FILTER, HENCE REJECTED. 14. JINDAL INTELLICOM LIMITED THE ANNUAL REPORT OF THIS COMPANY IS NOT AVAILABLE ON THE PUBLIC DOMAIN. THIS CANNOT BE USED AS A COMPARABLE. 6 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 15. MICROLAND LIMITED THIS IS A SUITABLE COMPARABLE , HOWEVER, SEGMENTAL RESULTS HAS TO BE TAKEN FOR ITES SERVICES. 16. NITTANY OUTSOURCING SERVICES PRIVATE LIMITED FINANCIAL YEAR DATA IS NOT AVAILABLE, HENCE REJECTED. 17. OMEGA HEALTHCARE MANAGEMENT SERVICES PVT. LTD. THE COMPLETE FINANCIALS ARE NOT AVAILABLE HENCE CANNOT BE TAKEN AS A SUITABLE COMPARABLE. 18. OPTIMUS GLOBAL SERVICES LTD. EXPORT IS NIL, HEN CE REJECTED. 19. PROXIMUS KNOWLEDGE & TECHNOLOGY SERVICES PRIVATE LIMITED EXPORT DURING THE YEAR ARE NIL, HENCE NOT A SUITABLE COMPARABLE. 20. SASKEN COMMUNICATION TECHNOLOGIES LIMITED THE COMPANY IS PROVIDING SOFTWARE DEVELOPMENT SERVICES, HENCE, FUNCTIONALLY DIFFERENT, REJECTED. 21. SHREEJAL INFO HUBS LTD. SALES BELOW 01 CRORE, H ENCE REJECTED. 22. SPANCO LIMITED (FORMERLY KNOWN AS SPANCO TELESYSTEMS & SOLUTIONS LIMITED) (BPO SERVICES SEGMENTS) THE ANNUAL REPORT OF THE COMPANY HAS BEEN PERUSED. SCH 0 OF THE ACCOUNTS INDICATE THAT INCOME FROM BPO OPERATIONS IN THE YEAR UNDER REVIEW IS NIL. THIS CANNOT BE USED AS A COMPARABLE. 23. SPARSH BPO SERVICES LTD. EXPORT INCOME NIL, HEN CE REJECTED 24. SYNETAIROS TECHNOLOGIES LIMITED THIS COMPANY FA ILS THE EXPORT SALES FILTER, HENCE REJECTED. 25. TATA BUSINESS SUPPORT SERVICES LIMITED THIS COMPANY FAILS THE EXPORT SALES FILTER, HENCE REJECTED. 26. TRITON CORP LTD. EXPORT TO SALES IS JUST 6.13%, HENCE REJECTED. 27 TUTIS TECHNOLOGIES LIMITED COMPANY IS HAVING DIM INISHING SALES, HENCE REJECTED. 28. TWINSTAR SOFTWARE EXPORTS LTD. THE ANNUAL REPOR T HAS BEEN PERUSED. THE REPORT DESCRIBES THE COMPANY AS , THE COMPANY 7 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT BEING A SOFTWARE DEVELOPMENT UNIT AND PROVIDING SERVICES ON SPECIFIC ORDERS FROM CLIENTS, THUS RAW MATERIAL AND FINISHED GOODS, ETC. ARE NOT QUANTIFIABLE. THERE ARE NO OPENINGS OR CLOSING STOCK OF GOODS. THE ANNUAL REPORT MENTIONS THAT LOCALLY IT PROVIDES SOME BACK OFFICE SERVICES BUT NO SEGMENTAL DATA IS AVAILABLE. THIS CANNOT BE USED AS A COMPARABLE. 29. VJIL CONSULTING LIMITED THE COMPANY IS PROVIDIN G SOFTWARE DEVELOPMENT SERVICES, AND HAVING PERSISTENT LOSSES, HENCE REJECTED. 30. TIMEX GROUP INDIA LTD. (TIMEX INDIA GLOBAL SERVICE DIVISION) THE ANNUAL REPORT IS PERUSED, THE DIVISION IS ENGAGE IN THE PROVISION OF BACK OFFICE SUPPORT TO GROUP COMPANIES ONLY. THEREFORE, IT FALLS THE RPT FILTER AND REJECTED. 8.1 BASED ON THIS ANALYSIS, THE COMPARABLES THAT A RE FINALLY SELECTED FROM THE COMPARABLES CHOSEN BY YOU AS FOLLOWS:- SL. NO. NAME 1 ADITYA BIRLA MINACS WORLDWIDE LTD. 2. COSMIC GLOBAL LIMITED 3. INFORMED TECHNOLOGIES INDIA LIMITED 4. INFOSYS BPO LTD. 5. MICROLAND LIMITED 8.2 AS A FURTHER STEP, THE ACCEPT-REJECT MATRIX THA T YOU HAVE PROVIDED ALONGWITH THE FRESH SEARCH CONDUCTED BY YOU, HAS BE EN EXAMINED. 8 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT IT IS SEEN THAT SOME OF THE COMPARABLES THAT HAVE B EEN REJECTED ON QUALITATIVE GROUNDS ARE ACTUALLY SUITABLE COMPAR ABLES. THESE ARE ANALYSED BELOW:- SL. NO. COMPARABLE TPOS REMARKS 1. CORAL HUB YOU HAVE REJECTED THESE COMPANIES ON THE GROUND THAT THESE ARE FUNCTIONALLY DIFFERENT. HOWEVER, THE ANNUAL REPORT OF THE COMPANIES HAVE BEEN PERUSED. THEY ARE VERY MUCH ITES COMPANIES. THEY PASS ALL FILTERS ALSO. THESE ARE SUITABLE COMPARABLES. 2 ECLERX SERVICE 3. GENESYS INTERNATIONAL LIMITED 4. MICROGENETIC SYSTEMS LTD. 8.3 AT THE END OF THIS EXERCISE THE COMPARABLES THA T ARE PROPOSED TO BE USED TO DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION RELATED TO THE PROVISION OF IT ENABLE S ERVICES ARE TABULATED BELOW: SL. NO. COMPARABLE OP/OC 1. ADITYA BIRLA MINACS WORLDWIDE LTD. 1.71% 2. CORAL HUB 36.93% 3. COSMIC GLOBAL 50.70% 4. ECLERX SERVICES 47.00% 5. GENESYS INTERNATIONAL LIMITED 58.45% 6. INFORMED TECHNOLOGY LIMITED 23.16% 7. INFOSYS BPO LTD. 24.42% 8. MICROGENETIC SYSTEMS LTD. 23.25% 9. MICROLAND LTD. (SEGMENT) -21.63% AVERAGE 27.11% 9. COMPUTATION OF OPERATING MARGIN: 9 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT PARTICULARS AMOUNT OPERATING INCOME 1,719,892.547 OPERATING COST 1,409,686,951 ADD FOREX LOSS 85,655,404 TOTAL OPERATING COST 1,495,342,355 OPERATING PROFIT 224,550,192 OP/OC 15.02% 3.2 THEREAFTER, THE CASE WAS DISCUSSED BY THE TPO W ITH THE AR OF THE COMPANY, THE COMPARABLES SELECTED BY THE ASSESSEE A ND REJECTED BY THE ASSESSEE WERE ANALYSED BY THE TPO AND FINALLY THE O P/OC OF THE ASSESSEE WAS WORKED OUT AT 24.52% BASED ON INCLUSION OF FOUR COM PARABLES NAMELY: SL. NO. COMPARABLE TPOS REMARKS 1. CORAL HUB YOU HAVE REJECTED THESE COMPANIES ON THE GROUND THAT THESE ARE FUNCTIONALLY DIFFERENT. HOWEVER, THE ANNUAL REPORT OF THE COMPANIES HAVE BEEN PERUSED. THEY ARE VERY MUCH ITES COMPANIES. THEY PASS ALL FILTERS ALSO. THESE ARE SUITABLE COMPARABLES. 2 ECLERX SERVICE 3. GENESYS INTERNATIONAL LIMITED 4. MICROGENETIC SYSTEMS LTD. FINALLY THE COMPARABLES ARRIVED AT BY THE TPO WERE AS UNDER:- SL. NO. COMPARABLES OP/OC 1 ADITYA BIRLA MINACS WORLDWIDE LTD. 0.50% 2. CORAL HUB 36.93% 3. COSMIC GLOBAL 48.20% 4. ECLERX SERVICES 47.00% 10 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 5. GENESYS INTERNATIONAL LIMITED 58.45% 6. INFORMED TECHNOLOGY LIMITED 23.13% 7. INFOSYS BPO LTD. 15.83% 8. MICROGENETIC SYSTEMS LTD. 10.00% 9. MICROLAND LTD. (SEGMENT) 19.32% AVERAGE 24.52% 4. BEING AGGRIEVED BY THE ORDER OF THE TPO, THE AS SESSEE PREFERRED PROCEEDINGS BEFORE THE DRP AND FILED OBJECTION TO T HE DRAFT ASSESSMENT ORDER. THE DRP, AFTER CONSIDERING THE MATERIAL ON RECORD HAS ISSUED A DIRECTION TO THE AO/TPO AND HAS HELD AS UNDER:- AFTER CAREFULLY CONSIDERING THE SUBMISSION AND THE ORDER OF THE TPO, THE DRP IS OF THE VIEW THAT THE REJECTION OF T HE TP STUDY BY THE TPO IS JUSTIFIED FOR THE FOLLOWING REA SONS: I. THE TAXPAYER HAD USED DATA PERTAINING TO PRIOR Y EAR FOR CARRYING OUT COMPARABILITY ANALYSIS WITHOUT FULFILL ING THE CONDITIONS MENTIONED IN THE PROVISO TO ' RULE 10B(4) I.E. THE TAXPAYER DID NOT DEMONSTRATE THAT THE DATA IN THE CASE OF THOSE COMPARABLES WOULD MATERIALLY AFFECT T HE TRANSACTIONS CARRIED OUT IN THE CURRENT YEAR. II. TP ORDER IS ALSO CONSIDERED UNDER THE LIGHT OF CIRCULAR NO . 12 OF 2001 AND CIRCULAR NO. 14/2001 AND INSTRUCTION NO. 3 OF 2003 WHICH REAFFIRM THE LEGAL POSITION THAT IF CONDITIONS MENTIONED IN CLAUSES (A ) TO 11 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT (D) OF SECTION 92C(3) ARE SATISFIED, THE ALP DETERM INED BY THE TAX PAYER CAN BE REJECTED. III. THE TPO'S ACTION IS CORRECT IN ACCORDANCE WIT H THE RATIO OF THE SPECIAL BENCH OF THE HON'BLE ITAT IN THE CAS E OF M/S AZTECH SOFTWARE [294 ITR 125 (AT)] WHERE I N IT HAS BEEN HELD THAT WHEN TAX AUTHORITIES ARE OF THE OPINION THAT THE ALP HAS NOT BEEN CORRECTLY DETERMI NED BY THE TAX PAYER, THEY CAN SUBSTITUTE THEIR OWN ALP ON THE BASIS OF MATERIAL OR INFORMATION FURNISHED BY T HE ASSESSEE OR COLLECTED BY THEM. BASED ON THE ABOVE, THE DRP IS OF THE VIEW THAT THE RE WERE FLAWS IN THE SEARCH PROCESS CARRIED OUT BY THE ASSE SSEE. THE ACTION OF THE TPO IS UPHELD. FURTHER THE DRP HAS DIRECTED THE TPO TO EXCLUDE MIC ROGENETIC SYSTEMS LIMITED IN THE LIST OF COMPARABLES. 4.1 BASED ON THE DIRECTION ISSUED BY THE DRP, COMPA RABLES AS PER THE TPO POST DRP DIRECTIONS FOR ITES SEGMENTS WERE AS UNDE R:- SL. NO. COMPANYS NAME MARGIN OP/TC 1 ADITYA BIRLA MINACS WORLDWIDE LTD. 23.88% 2. VISHAL INFORMATION TECHNOLOGIES LIMITED (CORAL HUB LIMITED) 38.69% 3. COSMIC GLOBAL SERVICES LIMITED 48.20% 4. ECLERX SERVICES LIMITED 57.70% 5. GENESYS INTERNATIONAL CORPORATION LIMITED 58.45% 12 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 6. INFORMED TECHNOLOGIES LIMITED 22.61% 7. INFOSYS BPO LTD. 24.51% 8. MICROLAND LTD. (SEG) -15.64% AVER AGE 32.30% FURTHER THE ASSESSMENT ORDER DATED 20/2/2014 FINAL IZED BY THE A.O. PROVIDED THE TOTAL INCOME OF THE ASSESSEE TO THE TUNE OF RS. 17,15,15,080/-. 5. FEELING AGGRIEVED BY THE ORDER PASSED BY THE AO, PRESENT APPEAL IS BEING PREFERRED BY THE ASSESSEE ON THE GROUNDS TAKEN AND MENTIONED HEREINABOVE ON THE APPEAL BEFORE US. IT HAS BEEN SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THE ASSESSEE WAS IN APPEAL BEFORE THE HONBLE TRIBU NAL IN PRECEDING YEAR ALSO AND THE COMPARABLES USED BY THE TPO IN THE PRECEDIN G YEARS WERE ALSO THE COMPARABLES USED BY THE TPO/DRP IN THE PRESENT YEAR ALSO. IT WAS SUBMITTED THAT THE SAME COMPANIES/ COMPARABLES NAMELY VISHAL INFORMATION TECHNOLOGIES LIMITED ( CORAL HUB LIMITED), ECLERX S ERVICES LIMITED, GENESYS INTERNATIONAL CORPORATION LIMITED AND INFOSYS BPO L IMITED WERE THE SAME SET OF COMPARABLES USED BY THE TPO FOR FINALIZING THE M ARGIN OPERATING COST TO THE TOTAL COST. THE HONBLE TRIBUNAL IN THE PREVIOUS YE AR, AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE FOR THESE COMPARABLES/CO MPANIES HAS RESTORED BACK THE MATTER TO THE FILE OF THE DRP PASSED IN ITA NO. 5906/DEL/2012 IN THE ASSESSMENT YEAR 2008-09 ORDER DATED 18/09/2015 WITH THE FOLLOWING OBSERVATIONS:- 13 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 14. FROM A PERUSAL OF THE ABOVE ORDER OF THE DRP, IT IS CLEAR THAT THE ASSESSEES OBJECTIONS/CONTENTIONS AGAINST THE INCLU SION/EXCLUSION OF THE COMPARABLES HAS NOT BEEN DEALT BY THE DRP WH ILE EXERCISING THE APPELLATE JURISDICTION AGAINST A QUA SI-JUDICIAL ORDER OF THE TPO, WHICH EXERCISE IS SINE QUA NON FOR DECI DING THE ISSUE AS TO WHETHER A COMPARABLE IS COMPARABLE TO THE FAR OF THE TESTED PARTY I.E. ASSESSEE. SIMPLY BY OBSERVING THA T TESTED PARTY IS BROADLY COMPARABLE WILL NOT SUFFICE. WE ARE OF THE OPINION THAT THE DRP CANNOT ABSOLVE FROM ITS DUTY WITHOUT GOING INTO THE MERITS OF THE CONTENTION OF THE ASSESSEE AS TO WHETHER A COMP ARABLE COMPANY IS COMPARABLE TO IT OR NOT AS ENVISAGED BY THE ACT AND RULES GOVERNING THE SUBJECT. SINCE THE DRP HAS NOT MET THE CONTENTION OF THE ASSESSEE IN RESPECT OF INCLUSION/ EXCLUSION OF COMPARABLE IN ITS ORDER, WE DEEM IT FIT TO REMAND T HE MATTER BACK TO THE FILE OF DRP FOR FRESH ADJUDICATION. EX CONSE QUENTI, THE DRP ORDER IS SET ASIDE AND THE MATTER REMANDED BACK TO THE FILE OF THE DRP FOR PASSING A SPEAKING ORDER IN RESPECT OF ALL THE GROUNDS RAISED BEFORE IT AND HAS TO DEAL WITH EACH OF THE C OMPARABLES CONTESTED ABOVE BY THE ASSESSEE. NEEDLESS TO SAY TH AT WHEN CONSIDERING THE ARGUMENTS IN RESPECT OF SELECTION O F THE COMPARABLES, THE DRP MUST KEEP IN MIND THE FOLLOWIN G ASPECTS:- (A) COMPANIES WITH EXTRA ORDINARY CIRCUMSTANCES, LI KE THOSE WHICH SUFFERED EVENTS LIKE MERGER/DEMERGER, IMPACTI NG THE FINANCIAL RESULTS COULD NOT BE TREATED AS COMPARABL ES: 14 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT (B) COMPANIES WHICH ARE FUNCTIONALLY DISSIMILAR CAN NOT BE TAKEN AS COMPARABLES; (C) COMPANIES ACTING MERELY AS INTERMEDIARY HAVING OUTSOURCED ITS ACTIVITY CANNOT BE CONSIDERED AS COMPARABLES; (D) COMPANIES WHOSE DIRECTORS WERE INVOLVED IN FRAU D CANNOT BE TAKEN AS COMPARABLE, AS THEIR FINANCIALS ARE NOT RE LIABLE. THE AFORESAID ASPECTS MAY BE KEPT IN MIND BY THE DR P WHILE ADDRESSING THE OBJECTIONS IN RESPECT TO INCLUSION/E XCLUSION OF COMPARABLES AND PASS A SPECKING ORDER AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 6. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUP PORTED THE ORDER OF THE TPO AND HAS SUBMITTED THAT PRESENT CASE BE ALSO SEN T BACK TO THE DRP AS HAS BEEN RESTORED IN THE EARLIER YEAR. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. SINCE IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 WAS RESTORED BACK TO THE FI LE OF THE DRP FOR ADJUDICATING THE ISSUES WITH RESPECT TO INCLUSION O F THE COMPARABLES REFERRED HEREINABOVE, WE DEEM IT APPROPRIATE TO REMAND THE M ATTER TO THE FILE OF DRP WITH THE SAME OBSERVATIONS AS HAS BEEN OBSERVED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2008-09 FOR THE PRESENT ASSESSMENT YEAR . 15 ITA NO. 2478 /DEL/2014 EQUANT SOLUTIONS INDIA PVT. LTD. VS DCIT 7. IN THE LIGHT OF THE ABOVE, THE ISSUE UNDER A PPEAL IS RESTORED BACK TO THE FILE OF THE DRP FOR FRESH ADJUDICATION. ACCORDINGLY , THIS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES ONLY. THE ORDER PRONOUNCED IN THE OPEN COURT ON 24.11.20 16. SD/- SD/- [R.S. SYAL] [LALIET KUMAR] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 24 TH NOVEMBER, 2016. *RANJAN COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.