DCIT, Bangalore V. M/s GE BE Pvt. Ltd., Bangalore

ITA 251/BANG/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2156 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-11-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MUZAFFAR HUSSAIN
• Keywords: Related party transaction; Transfer pricing; International transaction; Working capital adjustments; Bad and doubtful debts; Provision of bad debts
• Section: 92C; 143(3); 142(1); 37(1); 143(1); 144C; 143(2); 13; 22; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.251/BANG/2016 ASSESSMENT YEAR : 2011 12 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU. VS. M/S GE BE PVT. LTD., NO.60, EPIP, WHITEFIELD, BENGALURU. PAN AAACG 6714 A APPELLANT RESPONDENT IT(TP)A NO.317/BANG/2016 ASSESSMENT YEAR : 2011 12 M/S GE BE PVT. LTD., NO.60, EPIP, WHITEFIELD, BENGALURU. PAN AAACG 6714 A VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SACHIT JOLLY, C.A RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, CIT (DR) DATE OF HEARING : 26-11-2020 DATE OF PRONOUNCEMENT : 27-11-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PAGE 2 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 PRESENT CROSS APPEALS HAS BEEN FILED BY ASSES SEE AS WELL AS REVENUE AGAINST FINAL ORDER DATED 28/12/2015 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT PA SSED BY LD.DCIT CIRCLE 3(1)(2), BANGALORE FOR ASSESSMENT YE AR 2011-12 ON FOLLOWING GROUNDS OF APPEAL: ITA (TP) A NO. 251/B/2016 1.THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL A RE OPPOSED TO LAW AND FACTS OF THE CASE. 2.WHETHER THE ORDER OF THE HON'BLE DRP IN REJECTING COMPARABLE CASES BY INSISTENCE ON STRICT COMPARABILITY UNDER TNMM DEFEA TS THE VERY PURPOSE OF THE LAW RELATING TO DETERMINATION OF ALP UNDER T HE IT ACT. 3.WHETHER THE HON'BLE DRP WAS RIGHT IN SEEKING EXAC T COMPARABILITY WHILE SEARCHING FOR COMPARABLE COMPANIES OF THE ASS ESSEE UNDER TNMM METHOD WHEREAS REQUIREMENT OF LAW AND INTERNATIONAL JURISPRUDENCE REQUIRE SEEKING SIMILAR COMPARABLE COMPANIES. 4.WHETHER THE HON'BLE DRP IS CORRECT IN FACT AND LA W IN CONCLUDING THAT THE COMPANIES SELECTED BY THE TPO ARE NOT COMPARABL E TO THE ASSESSEE OVERLOOKING THE FACT THAT REASONABLY ACCURATE ADJUS TMENTS COULD BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF THE DIFFERENCE S BETWEEN THEM. 5.FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS OF THE DISPUTE RES OLUTION PANEL IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. ITA (TP) A NO. 317/B/2016 THE GROUNDS MENTIONED HEREIN BY THE APPELLANT ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE ORDER PASSED BY THE LEARNED DEPUTY COMM ISSIONER OF INCOME- TAX, CIRCLE-3(1)(2), BANGALORE ASSESSING OFFICER (' ASSESSING OFFICER' OR 'LD. AO') PURSUANT TO THE DIRECTIONS OF THE LEARNED DISP UTE RESOLUTION PANEL ('DRP' OR 'LD. PANEL') UNDER SECTION 143(3) READ WI TH SECTION 144C OF THE INCOME-TAX ACT, 1961 ('THE ACT'), ALSO READ WITH TH E ORDER PASSED BY THE LEARNED ADDITIONAL COMMISSIONER OF INCOME-TAX (TRAN SFER PRICING)-1(3) (' LEARNED TRANSFER PRICING OFFICER' OR 'LD. TPO') UND ER SECTION 92CA OF THE ACT, IS ERRONEOUS ON FACTS AND BAD IN LAW AND IS LI ABLE TO BE QUASHED. [CORRESPONDING TO GROUND 1 OF ORIGINAL GROUNDS OF A PPEAL] 2. THAT THE LD. AO/ DRP ERRED BOTH IN FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF INR 1,83,23,932 TO THE TRANSFER PRICE OF THE INTERNATIONAL PAGE 3 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 TRANSACTION RELATING TO SERVICES SEGMENT OF THE APP ELLANT. [CORRESPONDING TO GROUND 2 OF ORIGINAL GROUNDS OF APPEAL] 3. THAT THE LD. AO/ DRP ERRED IN UPHOLDING THE PART IAL REJECTION OF THE TP DOCUMENTATION MAINTAINED BY THE APPELLANT IN RESPEC T OF THE SERVICES SEGMENT INVOKING THE PROVISIONS OF SECTION 92C(3) O F THE ACT AND CONTENDING THAT THE INFORMATION OR DATA USED IN THE COMPUTATION OF THE ARM'S LENGTH PRICE IS NOT RELIABLE OR CORRECT. [COR RESPONDING TO GROUND 3 OF ORIGINAL GROUNDS OF APPEAL] 4. THAT THE LD. AO/ DRP ERRED BOTH IN FACTS AND IN LAW IN HOLDING THAT THE INTERNATIONAL TRANSACTIONS IN THE SERVICES SEGMENT OF THE APPELLANT DOES NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UN DER THE ACT AND IN DOING SO GROSSLY ERRED IN: A) UPHOLDING THE DETERMINATION OF THE ARM'S LENGTH MARGIN/ PRICE USING FINANCIAL YEAR ('FY) 2010-11 (NOT FOLLOWING THE USE OF MULTIPLE YEAR DATA AS PRESCRIBED UNDER RULE L0B(4) OF THE INCOME-TAX RULE S, 1962 ('THE RULES') DATA AND CONSIDERING ADDITIONAL COMPARABLES AT THE TIME OF ASSESSMENT PROCEEDINGS, THE DATA PERTAINING TO WHICH WAS NOT A VAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFE R PRICING DOCUMENTATION ('TP DOCUMENTATION') REQUIREMENTS. [C ORRESPONDING TO GROUND 4(A) OF ORIGINAL GROUNDS OF APPEAL] B) DISREGARDING THE APPLICATION OF MULTIPLE YEAR/PR IOR YEAR DATA AS USED BY THE APPELLANT IN THE TP DOCUMENTATION AND HOLDIN G THAT CURRENT YEAR (I.E. FY 2010-11) DATA FOR COMPARABLE COMPANIES SHO ULD BE USED; [CORRESPONDING TO GROUND 4(B) OF ORIGINAL GROUNDS O F APPEAL] C) UPHOLDING THE NON-ACCEPTANCE OF THE ECONOMIC ANA LYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES, AND UPHOLDING CONDUCTING A FRESH ECONOMIC AN ALYSIS FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE IN CONNECTI ON WITH THE IMPUGNED INTERNATIONAL TRANSACTIONS BY THE LD. TPO AND IN HO LDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTION IN THE SERVIC ES SEGMENT IS NOT AT ARM'S LENGTH. [CORRESPONDING TO GROUND 4(C) OF ORIG INAL GROUNDS OF APPEAL] D) DISREGARDING THE FUNCTIONAL COMPARABILITY OF THE COMPARABLES IDENTIFIED BY THE APPELLANT WITH RESPECT TO THE SERVICES SEGME NT. [CORRESPONDING TO GROUND 4(D) OF ORIGINAL GROUNDS OF APPEAL] E) UPHOLDING THE ACCEPTANCE OF COMPANIES THAT FAIL THE PARAMETERS / TESTS OF COMPARABILITY ANALYSIS WHILE PERFORMING THE COMP ARABILITY ANALYSIS AND ARRIVING AT THE FINAL SET OF COMPARABLES IN THE TP ORDER WITH RESPECT TO THE APPELLANT'S SERVICES SEGMENT. (I) THE LEARNED TPO/DRP ERRED IN LAW AND FACTS IN CONSIDERING ACCENTIA TECHNOLOGIES LTD. AS A FUNCTIONALLY COMPAR ABLE COMPANY TO THE SERVICE SEGMENT OF THE APPELLANT EVEN THOUGH THIS C OMPANY SHOULD HAVE BEEN EXCLUDED SINCE IT IS FUNCTIONALLY DISSIMILAR B EING ENGAGED IN PRODUCT DEVELOPMENT ALSO SEGMENTAL DETAILS ARE NOT AVAILABL E. [CORRESPONDING TO GROUND 4(E) OF ORIGINAL GROUNDS OF APPEAL] PAGE 4 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 (II) THE LEARNED TPO/DRP ERRED IN LAW AND FACTS I N CONSIDERING ICRA ONLINE LTD. (OUTSOURCED SERVICE SEGMENT), AS A FUN CTIONALLY COMPARABLE COMPANY TO THE SERVICE SEGMENT OF THE APPELLANT EVE N THOUGH THIS COMPANY SHOULD HAVE BEEN EXCLUDED SINCE IT IS FUNCT IONALLY DISSIMILAR ENGAGED IN PROVIDING DATA ANALYTICS SERVICES ETC. [ CORRESPONDING TO GROUND 4(E) OF ORIGINAL GROUNDS OF APPEAL] F) UPHOLDING THE ACTION OF THE LEARNED TPO IN REJEC TING CERTAIN COMPANIES WHICH PASS THE TEST OF COMPARABILITY AND ARE FUNCTI ONALLY COMPARABLE TO THE APPELLANT IN RESPECT OF ITS SERVICES SEGMENT. (I) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS I N UPHOLDING THE ACTION OF THE LEARNED TPO IN REJECTING CADES DIGITE CH PRIVATE LIMITED FROM THE FINAL SET OF COMPARABLES EVEN THOUGH THIS COMPA NY SHOULD HAVE BEEN INCLUDED SINCE IT IS FUNCTIONALLY COMPARABLE BEING ENGAGED IN PROVIDING SERVICES SIMILAR TO THE APPELLANT. [CORRESPONDING T O GROUND 4(F) OF ORIGINAL GROUNDS OF APPEAL] (II) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS I N EXCLUDING TECHPROCESS SOLUTIONS LIMITED (TRANSACTION SERVICE SEGMENT) AS THE COMPANY IS FUNCTIONALLY DISSIMILAR BEING ENGAGED IN PROVIDING SERVICES SIMILAR TO THAT OF THE APPELLANT. [CORRESPONDING T O GROUND 4(F) OF ORIGINAL GROUNDS OF APPEAL] (III) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS IN EXCLUDING MICROLAND LIMITED BECAUSE THIS COMPANY FALLS REVENUE EARNING FILTER WHEREAS THIS COMPANY SHOULD HAVE BEEN INCLUDED AS IT IS FUNCTION ALLY COMPARABLE TO THE SERVICE SEGMENT OF THE APPELLANT. [CORRESPONDIN G TO GROUND 4(F) OF ORIGINAL GROUNDS OF APPEAL] G) UPHOLDING THE LEARNED TPO'S APPROACH OF DISREGAR DING CERTAIN FILTERS AS APPLIED BY THE APPELLANT IN SELECTION OF THE COMPAR ABLE AT THE TIME OF TRANSFER PRICING DOCUMENTATION AND FOR THE DETERMIN ATION OF COMPARABLES WHILE CONDUCTING THE SEARCH. [CORRESPONDING TO GROU ND 4(G) OF ORIGINAL GROUNDS OF APPEAL] H) ARBITRARY ADOPTION OF CERTAIN FILTERS FOR THE DE TERMINATION OF COMPARABLES WHILE CONDUCTING THE SEARCH. THE LEARNED AO/DRP ERRED IN CONFIRMING THE ACTION OF LEARNED TPO IN THE APPLICATION OF RELATED PARTY TRANSACTION FILTER OF GREATER THAN 25% OF SALES AS AGAINST 20% AS APPLIED BY THE APPELLANT. I) REJECTING CERTAIN COMPANIES WHICH OTHERWISE PASS THE TEST OF COMPARABILITY AND ARE FUNCTIONALLY COMPARABLE TO TH E APPELLANT IN RESPECT OF ITS SERVICES SEGMENT AND WERE ALSO NOT PARTICULA RLY DISPUTED BY THE APPELLANT. (I) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS IN EXCLUDING COSMIC GLOBAL LTD. BECAUSE THE COMPANY HAS SUBCONTRACTING EXPENSES WHEREAS THIS COMPANY SHOULD HAVE BEEN INCLUDED AS IT IS FUN CTIONALLY COMPARABLE. [CORRESPONDING TO GROUND 4(I) OF ORIGINAL GROUNDS O F APPEAL] PAGE 5 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 (I) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS IN EXCLUDING COSMIC GLOBAL LTD. BECAUSE THE COMPANY HAS SUBCONTRACTING EXPENSES WHEREAS THIS COMPANY SHOULD HAVE BEEN INCLUDED AS IT IS FUN CTIONALLY COMPARABLE. [CORRESPONDING TO GROUND 4(I) OF ORIGINAL GROUNDS O F APPEAL] (II) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS I N EXCLUDING MINDTREE LIMITED BECAUSE THE COMPANY IS FUNCTIONALLY DIFFERE NT AND HAS EXTRA ORDINARY EVENTS DURING THE YEAR WHEREAS THIS COMPAN Y SHOULD HAVE BEEN INCLUDED AS IT FUNCTIONALLY SIMILAR TO THE APPELLAN T. [CORRESPONDING TO GROUND 4(I) OF ORIGINAL GROUNDS OF APPEAL] (III) THE LEARNED AO/DRP ERRED IN LAW AND IN FACTS IN EXCLUDING E4E HEALTHCARE BUSINESS SERVICE PRIVATE LIMITED INCONSI STENCY IN ACCOUNTING PRINCIPLES REGARDING THE PROVISION OF BAD DEBTS WRI TTEN OFF WHEREAS THIS COMPANY SHOULD HAVE BEEN INCLUDED BEING FUNCTIONALL Y SIMILAR TO THE APPELLANT. [CORRESPONDING TO GROUND 4(I) OF ORIGIN AL GROUNDS OF APPEAL] J) COMPUTING THE WORKING CAPITAL ADJUSTMENTS OF CER TAIN COMPARABLE COMPANIES SELECTED BY THE LD. TPO/ DRP. [CORRESPOND ING TO GROUND 4(J) OF ORIGINAL GROUNDS OF APPEAL] K) CONSIDERING CERTAIN EXPENSES LIKE PROVISION FOR DOUBTFUL DEBTS, BAD DEBTS WRITTEN OFF ETC. AS NON-OPERATING IN NATURE W HILE COMPUTING THE OPERATING PROFIT! TOTAL COST OF THE COMPARABLE COMP ANIES SELECTED BY THE LD. AO / DRP. [CORRESPONDING TO GROUND 4(K) OF ORIG INAL GROUNDS OF APPEAL] 5. THAT THE LD. AO/ DRP ERRED BOTH IN FACTS AND IN LAW IN IGNORING THE LIMITED RISK NATURE OF THE SERVICES PROVIDED BY THE APPELLANT AS DETAILED IN THE TP DOCUMENTATION AND IN UPHOLDING THE CONCLUSIO N OF THE LEARNED TPO THAT NO ADJUSTMENT ON ACCOUNT OF RISK DIFFERENTIAL IS REQUIRED WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATI ONAL TRANSACTIONS IN THE SERVICES SEGMENT OF THE APPELLANT. [CORRESPONDING T O GROUND 5 OF ORIGINAL GROUNDS OF APPEAL] 6. THAT THE LEARNED AO ERRED IN CHARGING INTEREST U NDER SECTION 234D OF THE ACT. [CORRESPONDING TO GROUND 6 OF ORIGINAL GRO UNDS OF APPEAL] ALL THE AFORESAID GROUNDS ARE WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND, MODIFY, AMP LIFY OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF OBJECTION, OR ADD ANY F URTHER GROUNDS, BEFORE OR AT THE TIME OF HEARING. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSI NESS OF CONTRACT MANUFACTURING OF COMPONENTS AND PARTS OF M EDICAL DIAGNOSTIC IMAGING EQUIPMENT AND ALSO ENGAGED IN PR OVISION OF ENGINEERING DESIGN SERVICES TO ITS AFFILIATE WORLDW IDE. IT FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION WHICH WAS PAGE 6 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 SUBSEQUENTLY REVISED ON 18/11/2011 DECLARING TOTAL INCOME OF RS.86,34,42,657/-. THE RETURN WAS PROCESSED UNDER S ECTION 143(1) OF THE ACT, AND THE CASE WAS SELECTED FOR SC RUTINY. NOTICES UNDER SECTION 143(2) AND 142(1) WAS ISSUED TO ASSES SEE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF AS SESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS A S CALLED FOR. 3. LD.AO OBSERVED THAT ASSESSEE HAD INTERNATIONAL T RANSACTION EXCEEDING RS.15 CRORE AND THEREFORE REFERENCE WAS M ADE TO THE TRANSFER PRICING OFFICER TO DETERMINED ARMS LENGTH PRICE OF THE TRANSACTION AS PER PROVISIONS OF SECTION 92C OF THE ACT. 4. UPON RECEIPT OF REFERENCE, LD.TPO CALLED UPON AS SESSEE TO FILE REQUISITE DETAILS OF THE TRANSACTION IN FORM 3 CEB. LD.TPO OBSERVED THAT, ASSESSEE HAD FOLLOWING INTERN ATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISE: PARTICULARS AMOUNT (RS.) 1 CONTRACT MANUFACTURING A) IMPORT OF RAW MATERIALS 1286411783 B) PURCHASE OF CAPITAL GOODS 6374000 C) SALE OF MANUFACTURED GOODS 3716702436 PAYMENT OF ROYALTY/TECHNICAL KNOW -HOW FEES 4178060 7 III_ENGINEERING DESIGN SERVICES 216573152 III) REIMBURSEMENT OF EXPENSES 5243900 IV) RECOVERY OF EXPENSES 44401743 V) SALE OF CTD LINE 11485000 5. LD.TPO NOTED THAT, ASSESSEE USED FOLLOWING 13 CO MPARABLES IN RESPECT OF IT ENABLED SERVICES WITH AN AVERAGE M ARGIN OF 10.61% AS COMPARED TO ITS OWN MARGIN AT 10.01%. ASS ESSEE COMPUTED ITS MARGIN BY USING OP/OC AS PLI. IT APPLI ED TNMM AS PAGE 7 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 MOST APPROPRIATE METHOD AND HELD THE TRANSACTION TO BE AT ARMS LENGTH. SN NAME OF THE COMPARABLE MARGIN 1 AKSHAY SOFTWARE TECHNOLOGIES LTD -1.97% 2 CC-VAK SOFTWARE & EXPORTS LTD -3.80% 3 CADES DIGITECH PVT. LTD. 5.47% 4 LARSEN & TOUBRO INFOTECH LTD. 21.79% 5 HELIOS & MATHESON INFORMATION TECHNOLOGY LTD 14.77% 6 MASCON GLOBAL -2.57% 7 MINDTREE LTD(SEG) 7.75% 8 PERSISTENT SYSTEMS LTD 22.30% 9 SONATA SOFTWARE LTD. 21.20% 10 R S SOFTWARE (INDIA) LTD 15.69% 11 R SYSTEMS INTERNATIONAL LTD 4.88% 12 SASKEN COMMUNICATION TECHNOLOGIES LTD 24.53% 13 TATA ELXSI LTD 7.02% 6. LD.TPO REJECTED THE COMPARABILITY ANALYSIS UNDER TAKEN BY ASSESSEE IN THE TP DOCUMENTATION AND SELECTED A SET OF FOLLOWING 10 COMPARABLES WITH AN AVERAGE MARGIN OF 24.77%. LD .TPO THUS COMPUTED PROPOSED ADJUSTMENT AT RS.2,61,59,079/- AF TER GRANTING WORKING CAPITAL ADJUSTMENT. SL.NO NAME OF THE CASE _ --- 1 OP/OC 1 ACCENTIA TECHNOLOGIES LTD. 28.89% 26.86% 2 ACROPETAL TECHNOLOGIES 3 COSMIC GLOBAL LTD. 9.81% 4 E4E HEALTHCARE(CAPITALINE) 12.38% PAGE 8 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 5 ICRA ONLINE LTD.(SEG) 34.21% 6 JEEVAN SCIENTIFIC TECHNOLOGY LTD 70.66% 7 INFOSYS B P 0 LTD. 17.89% 8 JINDAL INTELLICOM (CAPITALINE) 11.13% 9 MINDTREE LTD (SEG) 10.76% 10 IGATE GLOBAL SOLUTIONS LTD 25.07% AVERAGE MARGIN 24.77% 7. AGGRIEVED BY THE PROPOSED ADJUSTMENT, ASSESSEE R AISED OBJECTION BEFORE DRP. 8. DRP IN ITS DIRECTIONS SUO MOTO EXCLUDED 3 COMPARABLES BEING COSMIC GLOBAL, E4E HEALTHCARE AND MIND TREE ( SEG). 9. IT ALSO AGREED TO EXCLUSION OF JEEVAN SCIENTIFIC TECHNOLOGY LTD., AND IGATE GLOBAL SOLUTIONS LTD., BASED ON THE SUBMISSIONS MADE BY ASSESSEE. 10. UPON RECEIPT OF THE DRP DIRECTIONS, LD.AO PASSE D FINAL ASSESSMENT ORDER MAKING TP ADJUSTMENT IN THE HANDS OF ASSESSEE AT RS.1,83,23,932/-. 11. AGGRIEVED BY THE ADDITION, ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. 12. LD.AR SUBMITTED THAT THERE IS ONE ADDITIONAL GR OUND RAISED BY ASSESSEE IN ITS APPEAL WHICH IS AS UNDER: GROUNDS RELATING TO OTHER THAN TRANSFER PRICING MA TTERS 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED AO/DRP ERRED IN NOT ALLOWING DEDUCTION UNDER SECTIO N 37(1) OF THE INCOME TAX ACT, 1961, ON ACCOUNT OF EDUCATION CESSES PAID BY THE APPELLANT WHILE ARRIVING AT THE ASSESSED INCOME FOR THE YEAR UNDER APPEAL. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL AND TO SUBMIT SUCH STATEMENTS , DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. PAGE 9 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 13. HE SUBMITTED IN THE APPLICATION FOR ADMISSION O F ADDITIONAL GROUND THAT SUBSTANTIAL JUSTICE WOULD BE RENDERED T O ASSESSEE BY ADMITTING THIS GROUND. IT HAS BEEN SUBMITTED THAT F OR ADJUDICATING THIS GROUND NO NEW FACTS NEEDS TO BE R EFERRED TO AS IT ARISES FROM THE RECORDS PLACED BEFORE US. HE ALS O SUBMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LTD. V. JT. CIT IT APPEAL NO. 52 OF 2018 BY ORDER DATED 31-7-2018. 14. ON THE CONTRARY LD. CIT DR THOUGH OBJECTED FOR ADMISSION OF THE ADDITIONAL GONE COULD NOT CONTROVERT THE SUB MISSIONS MADE BY LD.AR. 15. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOT H SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 16. WE NOTE THAT ISSUE RAISED BY THE ASSESSEE IN TH IS ADDITIONAL GROUND IS NO LONGER RES-INTEGRA. THE GROUND RAISED BY ASSESSEE UNDER THIS APPLICATION IS A LEGAL GROUND AND NEEDS TO BE ADMITTED. WE DRAW OUR SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CORPORATION LTD (NTPC) V. CIT REPORTED IN (1998) 229 ITR 383 . 17. ON MERITS, LD.AR SUBMITTED THAT, EDUCATION CESS IS NOT TAX AND HENCE IS NOT DISALLOWABLE. WE ALSO RELY ON THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LTD. V. JT. CIT (SUPRA), WHICH AFTER TAKING INTO ACCOUNT AFOREMENTIONED CBDT CIRCULAR HELD THAT SECT ION 40( A )( II ) PAGE 10 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 APPLIES ONLY TO TAXES AND NOT TO EDUCATION CESS. RE LEVANT EXTRACT OF THE DECISION IS REPRODUCED FOR EASE OF REFERENCE :- '13. ON THE THIRD ISSUE IN APPEAL NO. 52/2018, IN V IEW OF THE CIRCULAR OF CBDT WHERE WORD 'CESS' IS DELETED, IN O UR CONSIDERED OPINION, THE TRIBUNAL HAS COMMITTED AN E RROR IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE. APART FRO M THE SUPREME COURT DECISION REFERRED THAT ASSESSMENT YEA R IS INDEPENDENT AND WORD CESS HAS BEEN RIGHTLY INTERPRE TED BY THE SUPREME COURT THAT THE CESS IS NOT TAX IN THAT VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE V IEW TAKEN BY THE TRIBUNAL ON ISSUE NO. 3 IS REQUIRED TO BE REVER SED AND THE SAID ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE.' RESPECTFULLY FOLLOWING THE AFORESAID VIEW, WE ALLOW THE ADDITIONAL GROUND RAISED BY ASSESSEE. 18. ONLY ISSUES ALLEGED BY BOTH SIDES ARE IN RESPEC T OF COMPARABLES ALLEGED FOR INCLUSION/EXCLUSION BY ASSE SSEE AS WELL AS REVENUE UNDER ENGINEERING DESIGN SERVICES SEGMEN T. 19. BEFORE WE UNDERTAKE COMPARABILITY ANALYSIS, IT IS SINE QUA NON TO UNDERSTAND THE FUNCTIONS PERFORMED, ASSETS O WNED AND RISKS ASSUMED BY ASSESSEE UNDER THIS SEGMENT. 20. WE NOTE THAT LD.TPO HAS ANALYSED THE FUNCTIONS PERFORMED BY ASSESSEE AS UNDER: FUNCTIONS 21. AS PER THE MASTER SERVICES AGREEMENT: THE TAXPAYER IS INTO CONTRACT MANUFACTURING SEGMENT AND ALSO PROVIDES ENGINEERING DESIGN SERVICES TO ITS AES. 22. GE IS ENGAGED IN THE MANAGEMENT, LICENSING AND FUNDING OF THE RESEARCH AND DEVELOPMENT OF TECHNOLOGY FOR IMPR OVED PAGE 11 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 HEALTHCARE, INCLUDING MEDICAL EQUIPMENT, INFORMATIO N TECHNOLOGY, CONTRAST AGENTS, PROTEIN SEPARATIONS, AND DISCOVERY SYSTEMS. GE BE PVT.LTD. DESIRES TO LICENSE FROM GE THROUGH G TC THE RIGHT TO USE GE ENTITY INTELLECTUAL PROPERTY AND GE INTEL LECTUAL PROPERTY AS SPECIFIED HEREIN AND TO PARTICIPATE IN THE GLOBAL TECHNOLOGY DEVELOPMENT EFFORTS MANAGED OR FUNDED BY GE. 23. GIC SHALL GRANT TO COLLABORATOR DURING THE TERM OF THIS AGREEMENT, A NON-EXCLUSIVE, NON-TRANSFERABLE RIGHT AND LICENSE: A. TO USE THE LICENSED INTELLECTUAL PROPERTY AS REQ UESTED BY COLLABORATOR TO DEVELOP, MAKE HAVE MADE, ASSEMBLE, OR HAVE ASSEMBLED THE PRODUCE(S), AND THEREAFTER TO USE, SE LL, LEASE, OFFER FOR SALE OR OTHERWISE DISPOSE OF AND IF APPLICABLE SERVICE SUCH PRODUCTS, AND B. TO INCORPORATE THE LICENSED SOFTWARE, INCLUDING THE RIGHT TO COPY AND MODIFY THE LICENSED SOFTWARE AND TO MAKE O R HAVE MADE SOFTWARE DERIVED FROM THE LICENSED SOFTWARE, I NTO THE PRODUCT(S). AS PER THE TP DOCUMENT: 24. GE BE MANUFACTURES CT TUBES, X-RAY TUBES, HV TA NKS. DETECTORS AND OTHER PARTS AND ACCESSORIES FOR MEDIC AL DIAGNOSTIC IMAGING EQUIPMENT. THE SAID PRODUCTS ARE MANUFACTUR ED TO CATER TO BOTH DOMESTIC AND EXPORT MARKETS. THE PRODUCTS MANUFACTURED BY GE BE ARE SOLD ONLY TO AES WHETHER IN INDIA OR ABROAD. PAGE 12 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 25. GE BE ALSO PROVIDES ENGINEERING DESIGN SERVICES TO ITS AES. ITS SERVICES INCLUDE VALUE-ENGINEERING DESIGN SERV ICES FOR GEHC GLOBAL'S CUSTOMER RELATED PROBLEMS AND ISSUES, AND TAKE THE FORM OF TECHNICAL DRAWINGS AND DESIGNS. GE BE USES COMPU TER AIDED DESIGN ('CAD'), COMPUTER AIDED MANUFACTURING ('CAM' ) AND OTHER SOFTWARE TOOLS IN THE PROVISION OF THESE SERVICES. 26. IN THE TRANS-APPRISING STUDY ASSESSEE HAS BEEN CATEGORISED AS A CAPTIVE SERVICE PROVIDER TO GE SO FAR AS ITS ENGINEERING DESIGN SERVICES SEGMENT IS CONCERNED. ASSESSEE IS P AID ON A FULL COST +10% BASIS FOR THE SERVICES PROVIDED BY IT. ASSETS OWNED: 27. IT HAS ALSO BEEN SUBMITTED THAT ASSESSEE DO NOT ENGAGE IN SIGNIFICANT R&D FOR CREATION OF INVALUABLE IP. IT H AS BEEN SUBMITTED THAT ASSESSEE USES TANGIBLE ASSETS SUCH A S FURNITURE, FIXTURES, OFFICE EQUIPMENT, VEHICLES AND COMPUTERS. IT DOES NOT OWN ANY NON ROUTINE INTANGIBLE ASSETS. RISKS ASSUMED: 28. IN THE TP STUDY IT HAS BEEN SUBMITTED THAT ANY EXPOSURE TO FOREIGN EXCHANGE RISK IS LARGELY MITIGATED BY HEDGI NG THROUGH GE CORPORATE TREASURY. IT HAS ALSO BEEN SUBMITTED IN T HE TP STUDY THAT IT DOES NOT BEAR ANY SIGNIFICANT RISK OF TECHN OLOGY OBSOLESCENCE AS THE AE WHO OWNS ALL MANUFACTURING TECHNOLOGIES. IT IS ALSO BEEN SUBMITTED THAT THE AE INCURRED EXPENSES ON BEHALF OF ASSESSEE AND THAT ALL THE EXP ENSES INCURRED BY ASSESSEE IS REIMBURSED ON COST BASIS. PAGE 13 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 CLASSIFICATION: 29. IN THE TP STUDY ASSESSEE HAS BEEN CHARACTERISED AS CONTRACT MANUFACTURER OF MEDICAL EQUIPMENT COMPONENTS AND PR OVIDER OF ENGINEERING DESIGN SERVICES. 30. BASED ON THE ABOVE CHARACTERISATION, WE SHALL U NDERTAKE THE COMPARABILITY ANALYSIS OF THE COMPARABLES ALLEGED B Y ASSESSEE AS WELL AS REVENUE FOR EXCLUSION/INCLUSION. 31. AT THE OUTSET, LD.AR SUBMITTED THAT, GROUND NO. 4(I) OF ASSESSEES APPEAL AND GROUND NO.2 PARTLY AND GROUND NO.4 IN REVENUES APPEAL IS FOR INCLUSION OF 3 COMPARABLES. HE SUBMITTED THAT THESE GROUNDS RAISED BY ASSESSEE AS WELL AS RE VENUE ARE FOR INCLUSION OF FOLLOWING COMPARABLES: M/S COSMIC GLOBAL LTD, M/S E4E HEALTHCARE BUSINESS SERVICES PVT.LTD, M/S MINDTREE LTD. 32. ADMITTEDLY BOTH SIDES SUBMITTED THAT THESE COMP ARABLES WERE NEVER OBJECTED BY ASSESSEE BEFORE DRP HOWEVER THE SAME WERE EXCLUDED SUO MOTO BY APPLYING FILTER WHICH WAS NOT CONSIDERED BY LD.TPO. 33. AS BOTH SIDES DO NOT HAVE ANY OBJECTION IN INCL USION OF THESE COMPARABLES, WE DIRECT LD.AO/TPO TO INCLUDE THESE C OMPARABLES IN THE FINAL LIST. ACCORDINGLY, GROUND NO.4(I) OF ASSESSEES APPEAL AN D GROUND NO.2 PARTLY AND GROUND NO.4 IN REVENUES APPEAL STA NDS ALLOWED. PAGE 14 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 WE SHALL 1 ST TAKE UP REVENUES APPEAL: 34. GROUND NO. 1, 5, 6 ARE GENERAL IN NATURE AND TH EREFORE DO NOT REQUIRE ADJUDICATION. GROUND NO.2: 35. THE COMPARABLES THAT REMAINS TO BE ADJUDICATED IN GROUND NO.2 IS M/S.JEEVAN SCIENTIFIC TECHNOLOGY LTD AND M/ S.IGATE GLOBAL SOLUTIONS LTD. 36. LD.CIT.DR SUBMITTED THAT, LD.AO WRONGLY EXCLUDE D THESE COMPARABLES EVEN THOUGH IT SATISFIES ALL THE FILTER S APPLIED BY LD.TPO. M/S JEEVAN SCIENTIFIC TECHNOLOGY LTD: 37. LD.TPO INCLUDED THIS COMPARABLE AS THIS COMPARA BLE WAS ONE OF THE COMPARABLES ACCEPTED BY ASSESSEE IN THE PRECEDING YEAR AND THAT ASSESSEE IS RAISING ISSUES FOR THE SA KE OF OBJECTION WHICH IS NOT ACCEPTABLE. LD.CIT.DR THUS SUBMITTED T HAT DRP WRONGLY EXCLUDED THIS COMPARABLE AND PRAYED FOR ITS INCLUSION. ON THE CONTRARY, LD.AR SUBMITTED THAT, DRP CORRECTL Y OBSERVED THAT THIS COMPARABLE IS ENGAGED IN ERP IMPLEMENTATI ON AND SALES TO CLIENT WHICH IS NOT THE SERVICES RENDERED BY ASS ESSEE. IT HAS BEEN SUBMITTED BY HIM THAT THIS COMPARABLE IS NOT F UNCTIONALLY SIMILAR WITH THAT OF ASSESSEE AND IT ALSO FAILS THE SERVICE REVENUE FILTER APPLIED BY LD.TPO. HE ALSO SUBMITTED THAT BP O OPERATION SEGMENT IS LESS THAN 75% OF TOTAL OPERATING REVENUE WHICH IS ALSO ONE OF THE FILTERS APPLIED BY LD.TPO. LD.AR SUBMITT ED THAT THE ENTIRE FOREIGN EXCHANGE REVENUE PERTAINS TO BPO SEG MENT AND PAGE 15 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 THERE IS NO FOREIGN EXCHANGE REVENUE IN ERP SEGMENT . LD.AR PLACED RELIANCE ON THE SUBMISSIONS REGARDING THIS C OMPARABLE PLACED AT PAGE 215-219 OF PAPER BOOK. 38. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 39. BEFORE US, LD.CIT.DR ARGUED THAT, FOR PRECEDING ASSESSMENT YEAR, ASESSEE ALLEGED BEFORE THIS TRIBUNAL FOR INCLUSION OF THIS COMPARABLE. NOTHING HAS BEEN BROUGHT ON RECORD BY L D.CIT.DR IN SUPPORT OF THIS ARGUMENT. DRP EXCLUDED THIS COMPARA BLE AS IT FAILED REVENUE EARNING FILTER OF 75% APPLIED BY LD. TPO. WE ALSO NOTE THAT DRP EXCLUDED THIS COMPARABLE FOR ONE MORE REASON BECAUSE OF HUGE FLUCTUATION ON THE MARGINS OF THE C OMPANY OVER MANY YEARS AND FOR HAVING NO FOREIGN EXCHANGE EARNI NG IN RESPECT OF ERP SEGMENT. 40. WE NOTE THAT, LD.TPO HAS CONSIDERED THIS COMPAR ABLE AT ENTITY LEVEL WHICH IS NOT APPROPRIATE WHILE IT WITH COMPARING THE ENGINEERING DESIGN SEGMENT OF ASSESSEE. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD.AO IN EXCLUDING THIS COMPARABLE. IGATE GLOBAL SOLUTIONS LTD 41. THIS COMPARABLE WAS INCLUDED BY LEARNT TPO HOWE VER DRP REJECTED IT AS IT WAS ENGAGED IN DIVERSE IS FILED A CTIVITIES BEING, SOFTWARE DEVELOPMENT SERVICES, CONTACT CENTRE SERVI CES AND IT ENABLED SERVICES. DRP ALSO NOTED THAT THERE WAS NO SEGMENTAL INFORMATION AVAILABLE IN RESPECT OF THE 3 SEGMENTS. PAGE 16 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 42. LD.CIT DR RELIED ON ORDERS PASSED BY LD.TPO. 43. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN THE LIGHT OF RECORDS PLACED BEFORE US. 44. WE NOTE THAT FOR THE YEAR UNDER CONSIDERATION T HIS TRIBUNAL HAS REJECTED THIS COMPARABLE FOR IDENTICAL REASON I N CASE OF AON SPECIALIST SERVICES PVT.LTD., IN IT(TP)A NO. 440/B/ 2016 BY ORDER DATED 20/02/2020 AND GOLDMAN SACHS SERVICES PVT.LTD IN IT(TP)A NO.581/B/2016 AND CO NO.21/B/2017 BY ORDER DATED 12/09/2018 . 45. NOTHING CONTRARY TO THE VIEW TAKEN BY THIS TRIBUNAL AS RECORDED HEREIN ABOVE HAS BEEN BROUGHT TO OUR NOTIC E IN ORDER TO TAKE A DIFFERENT VIEW. 46. RESPECTFULLY FOLLOWING THE SAME WE DO NOT FIND ANY REASON TO INTERFERE WITH THE VIEW TAKEN BY LD.AO IN EXCLUDING THIS COMPARABLE. ACCORDINGLY WE UPHOLD THE EXCLUSION OF THIS COMPARA BLE. IN THE RESULT APPEAL FILED BY REVENUE STANDS PARTLY ALLOWED. ASSESSEES APPEAL: 47. ASSESSEE HAS FILED REVISED GROUNDS OF APPEAL 09 /08/2017 FILED BEFORE THIS TRIBUNAL IN ON 14/08/2017, WHICH HAS BEEN CONSIDERED BY LD.AR FOR ARGUMENTS. 48. AT THE OUTSET, LD.AR SUBMITTED THAT GROUND NO.1 -3, 4 (A)- (D), (G)-(H), (J) ARE GENERAL IN NATURE AND THEREFO RE DO NOT REQUIRE ANY ADJUDICATION. PAGE 17 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 49. IT IS ALSO BEEN SUBMITTED BY LD.AR THAT GROUND NO.4 (F) (II), (K) AND GROUND NO.5 ARE NOT PRESSED. ACCORDINGLY THESE GROUNDS ARE DISMISSED AS NOT PRES SED. 50. IN THE REMAINING GROUNDS WHICH LD.AR ARGUED ARE IN RESPECT OF EXCLUSION OF FOLLOWING COMPARABLES: FOR EXCLUSION: ACCENTIA TECHNOLOGIES LTD ICRA ONLINE LTD CADES DIGITECH PVT. LTD. MICROLAND LTD FOR INCLUSION COSMIC GLOBAL LTD MINDTREE LTD E4E-HEALTHCARE BUSINESS SERVICES PVT LTD. 51. WE HAVE ALREADY CONSIDERED FOLLOWING COMPARABLE S WHICH WAS COMMONLY RAISED BY REVENUE FOR INCLUSION IN PAR A -------- HEREINABOVE. ACCORDINGLY GROUND 4 (I) STANDS ALLOWED. FOR EXCLUSION ACCENTIA TECHNOLOGIES LTD 52. THIS COMPARABLE WAS INCLUDED BY LD.TPO BY HOLDI NG THAT IT IS FUNCTIONALLY COMPARABLE WITH THAT OF ASSESSEE. L D.AR SUBMITTED THAT THIS COMPARABLE IS ENGAGED IN A KNOW LEDGE PROCESS OUTSOURCING COMPANY AND ALSO RENDERS HEALTH CARE RECEIVABLE CYCLE MANAGEMENT SERVICES. IT IS ALSO IN VOLVED IN PAGE 18 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 OFFERING SOFTWARE DEVELOPMENT AS A SERVICE MODEL. H E SUBMITTED THAT THIS COMPARABLE HOLDS GOOD WILL AND BRANDS WHE REAS, ASSESSEE DO NOT OWN ANY PART OF SUCH INTANGIBLE ASS ETS. 53. WHEREAS, LEARNT CIT DR SUBMITTED THAT THIS COMP ANY BY USING SOFTWARE LIKE CAD AND CAM PROVIDES ENGINEERIN G SERVICES TO ITS AE WHICH CANNOT BE CONSIDERED AS NORMAL BPO SERVICES BUT SERVICES IN THE NATURE OF HIGH-END. HE THUS SUPPORT ED THE ORDER PASSED BY AUTHORITIES BELOW. 54. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US 55. WE NOTE THAT, THIS COMPARABLE WAS CHALLENGED BY ASSESSEE BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2009-10 IN ITA (TP) A NO. 1 TO 5 AND 65/B/2014 BY ORDER DATED 24/04/2019. THIS TRIBUNAL OBSERVED AS UNDER: 10. THE OTHER GROUNDS WITH REGARD TO EXCLUSION OF COMPARABLES, CHOSEN BY THE TPO AND CONFIRMED BY THE DRP ARE TAKE N UP FOR CONSIDERATION. IN GROUND NOS. 14, 16) 17 &. 18, THE ASSESSEE HAS OBJECTED TO THE ACTION OF DRP IN RETAINING THE FOLL OWING 04 COMPANIES AS COMPARABLE COMPANIES VIZ., I INFOSYS BPO LTD., II ACCENTIA TECHNOLOGIES LTD., III. COSMIC GLOBAL LTD., IV. ECLERX SERVICES LTD., 10.1. ON EXCLUSION OF THE AFORESAID 04 COMPANIES AS COMPARABLE COMPANIES, LD. COUNSEL FOR THE ASSESSEE DREW OUR AT TENTION TO THE DECISION OF THE ITAT, BANGALORE TRIBUNAL RENDERED I N THE CASE OF MIS. NOVO NORDISK INDIA PVT. LTD., VS. DCIT IN IT(TP)A NO. 12 2/BANG/2014, AY.2009-10, DT.08-05-2015, WHEREIN THE COMPARABILIT Y OF THE AFORESAID 04 COMPANIES WITH THE COMPANY ENGAGED IN PROVIDING ITE S SUCH AS THE ASSESSEE WAS CONSIDERED BY THE TRIBUNAL. IN PARA NO S. 86 AND 87, THE TRIBUNAL EXCLUDED INFOSYS BPO LTD., ON THE GROUND T HAT IT HAS A HUGE TURNOVER AND WAS INVOLVED IN RENDERING HIGH END INT EGRATED SERVICES AND THAT IT HAD BRAND VALUE. FURTHER, THERE WERE ALSO S OME EXTRAORDINARY PAGE 19 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 EVENTS DURING THE RELEVANT PREVIOUS YEAR, WHICH HAD AN IMPACT ON THESE PROFITS OF THIS COMPANY. 10.2. SIMILARLY IN THE AFORESAID CASE, ACCENTIA TEC HNOLOGIES LTD., WAS A SO EXCLUDED IN THE LIST OF COMPARABLE COMPANIES VIDE P ARA NOS. 86 AND 87 OF THE SAID ORDER ON THE GROUND THAT IT WAS FUNCTIONAL LY DIFFERENT AND WAS PROVIDING SERVICES IN THE FIELDS OF MEDICAL TRANSCR IPTION, BILLING AND CODING WAS ALSO HELD THAT THERE WAS AN EXTRAORDINARY EVENT OF ACQUISITION OF OAK TECHNOLOGIES, INCORPORATED AND TRANSMISSION SERVICE S DURING THE PREVIOUS YEAR. 14. WE HAVE PERUSED THE AFORESAID DECISION AND WE F IND THAT IN THE AFORESAID CASE, REASONS FOR EXCLUDING ACCENTIA TECH NOLOGIES LTD., WAS ON ACCOUNT OF MERGERS AND ACQUISITION THAT TOOK PLACE IN THE RELEVANT PREVIOUS YEAR AND TO VERIFY THAT FACTOR, THE ISSUE WAS SET A SIDE TO THE TPO. THE LD.DR SUBMITTED BEFORE US THAT BY IMPLICATION OF FU NCTIONAL COMPARABILITY OF THIS COMPANY HAS BEEN ACCEPTED. WE ARE OF THE VI EW THAT SUCH CONCLUSIONS CANNOT BE DRAWN AND WE FIND THAT FUNCTI ONAL COMPARABILITY HAS BEEN MADE IN THE CASE OF MIS. NOVO NORDISK INDI A PVT. LTD., VS. DCII (SUPRA) AND IT WAS FOUND THAT THIS COMPANY WAS IN T HE FIELD OF MEDICAL TRANSCRIPTION, BILLING AND CODING. THEREFORE, THERE IS NO SUBSTANCE IN THE STAND TAKEN BY THE DEPARTMENT. 56. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO INCLUDE THIS COMPARABLE IN THE FINALIST. ACCORDINGLY LD. AO/TPO IS DIRECTED TO EXCLUDE THIS COMPARABLE FROM THE FINALIST. ICRA ONLINE LTD 57. THIS COMPARABLE WAS INCLUDED BY LEARNT TPO BY H OLDING IT TO BE FUNCTIONALLY SIMILAR. LD.AR SUBMITTED THAT THIS COMPANY HAS ITS OPERATIONS BIFURCATED UNDER 3 BUSINESS SEGMENTS BEING OUTSOURCED SERVICES, INFORMATION SERVICES AND SERVE D SOFTWARE SERVICES. HE SUBMITTED THAT LEARNT TPO CONSIDERED T HE OUTSOURCED SERVICE SEGMENT FOR COMPARABILITY WITH A SSESSEE THAT IS CARRYING OUT WITH ENGINEERING DESIGN SERVICES. R EFERRING TO THE PAGE 20 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 ANNUAL REPORT PLACED AT PAGE 462 OF PAPER BOOK VOLU ME 1, LD.AR SUBMITTED THAT THIS COMPARABLE EARNS INCOME FROM OU TSOURCED SERVICES RECOGNISED FROM MAINTENANCE AND MANAGEMENT OF DATA. HE SUBMITTED THAT, THIS COMPARABLE ALSO DO NOT SATI SFY EXPORT REVENUE FILTER OF 75% APPLIED BY LEARNT TPO. REFERR ING TO PAGE 461 OF ANNUAL REPORT, HE SUBMITTED THAT THE TOTAL REVEN UE EARNED BY THIS COMPARABLE IS RUPEES ONE, 93, 583 WHICH IS ONL Y 63.59% OF THE TOTAL SALES. HE ALSO SUBMITTED THAT THIS COMPAN Y COMPARABLE HAS A HUGE RELATED PARTY TRANSACTION OF 29.57% AGE AND THEREFORE DO NOT SATISFY THE RPT FILTER OF 25% APPLIED BY LEA RNT TPO. 58. ON THE CONTRARY LEARN CIT DR SUBMITTED THAT THI S COMPARABLE IS FUNCTIONALLY SIMILAR WITH THAT OF ASS ESSEE AS IT IS INVOLVED IN KPO SERVICES. 59. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 60. ADMITTEDLY LD.TPO HAS CONSIDERED THE OPERATIONS OF OUTSOURCED SERVICE SEGMENT OF THIS COMPARABLE FOR C OMPARING WITH THE ENGINEERING DESIGN SERVICES OF ASSESSEE. F ROM THE ANNUAL REPORT PLACED IN THE PAPER BOOK, WE DO NOT F IND ANY DESCRIPTION AS TO THE NATURE OF THE SERVICES RENDER ED BY THIS COMPARABLE UNDER THIS SEGMENT. FROM THE ANNUAL REPO RT, WE NOTE THAT THIS COMPARABLE IS LARGELY ENGAGED IN ANALYTIC AL SERVICES AND SUPPORT FOR TO CLIENTS IN THE AREA OF DATA EXTRACTI ON, AGGREGATION, ELECTRONIC CONVERSION OF FINANCIAL STATEMENTS, VALI DATION AND ANALYSIS, ACCOUNTING AND FINANCE, RESEARCH AND ANAL YTICS. PAGE 21 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 WHEREAS IN THE INSTANT CASE, ASSESSEE HAS BEEN CATE GORISED TO BE RENDERING ENGINEERING DESIGN SERVICES WITH THE HELP OF SOFTWARE DEVELOPED BY ITS AE AS A CAPTIVE SERVICE PROVIDER. THEREFORE, WE DO NOT FIND ANY REASON TO HOLD IT TO BE FUNCTIONALL Y SIMILAR WITH THAT OF ASSESSEE. ACCORDINGLY WE DIRECT LD.AO/TPO TO EXCLUDE THIS COM PARABLE FROM THE FINALIST. CADES DIGITECH PVT. LTD. 61. THIS COMPARABLE WAS EXCLUDED BY LD.TPO FOR THE REASON THAT FINANCIAL INFORMATION WAS NOT AVAILABLE. AT TH E OUTSET, LD.AR SUBMITTED THAT ALL THE DETAILS RELEVANT FOR COMPARA BILITY WAS PROVIDED BY ASSESSEE HOWEVER THE SAME WAS NOT CONSI DERED. AT THE OUTSET, BOTH SIDES SUBMITTED THAT THIS COMPA RABLE MAY BE REMANDED TO LD.AO/TPO FOR RECONSIDERING IT AFRESH. 62. WE NOTE THAT LD.TPO HAS NOT CONSIDERED THE ANNU AL REPORTS AND THE DETAILS THAT HAS BEEN FILED BY ASSESSEE DUR ING THE TRANSFER PRICING ASSESSMENT. 63. WE ACCORDINGLY, REMAND THIS COMPARABLE TO LD.AO /TPO FOR CONSIDERING IT AFRESH ON THE LIGHTS OF ANNUAL REPOR TS/EVIDENCES FILED BY ASSESSEE. IN THE EVENT IT IS FOUND TO BE F UNCTIONALLY SIMILAR, THE SAME MAY BE INCLUDED. ACCORDINGLY, THIS COMPARABLE IS REMANDED TO LD.AO/T PO. MICROLAND LTD PAGE 22 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 64. LD.TPO EXCLUDED THIS COMPARABLE AS IT FAILS REV ENUE EARNING FILTER OF 75%. LD.AR SUBMITTED THAT THIS COMPANY HA S 2 SEGMENTS BEING INFRASTRUCTURE MANAGEMENT AND IT ENABLED SERV ICES. LEARNT TPO CONSIDERED BOTH THE SEGMENTS. HE SUBMITTED THAT FOR ASSESSMENT YEAR 2009-10 DRP HAD DIRECTED INCLUSION OF THIS COMPARABLE AND HAS HELD THIS COMPARABLE TO BE FUNCT IONALLY SIMILAR WITH THAT OF ASSESSEE. LD.AR REFERRED TO TH E DRP ORDER FOR ASSESSMENT YEAR 2009-10 PLACED AT PAGE 1565 OF PAPE R BOOK, REFERRING TO PAGE 01/06/2003 WHEREIN THE OBSERVATIO NS OF DRP HAVE BEEN RECORDED. 65. ON THE CONTRARY LD.CIT.DR PLACED RELIANCE ON OR DERS PASSED BY LD.TPO. 66. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 67. WE NOTE THAT THIS COMPARABLE IS ADMITTEDLY HAVI NG A SEGMENT OF INFRASTRUCTURE MANAGEMENT SERVICE WHICH IS COMPARABLE WITH THE ENGINEERING DESIGN SERVICES SEG MENT OF ASSESSEE. THE ONLY OBJECTION RAISED BY DRP IS NON-S ATISFYING THE REVENUE EARNING FILTER OF 75%. WE NOTE THAT LD. AO/ TPO HAS CONSIDERED THIS COMPARABLE AT THE ENTITY LEVEL AND THEREFORE HAS NOT VERIFIED THE SAME AT THE SEGMENTAL LEVEL. 68. IN THE INTEREST OF JUSTICE, WE DEEM IT APPROPRI ATE TO REMAND THIS COMPARABLE BACK TO LD.AO/TPO TO CONSIDER THIS COMPARABLE AT THE SEGMENTAL LEVEL FOR COMPARING WITH ASSESSEE. PAGE 23 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 ACCORDINGLY, THIS COMPARABLE IS REMANDED TO LD.AO/T PO FOR RE-EXAMINATION. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV, 2020 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 27 TH NOV, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 24 OF 24 ITA NO.251/BANG/2016 ITA NO.317/BANG/2016 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -11-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -11-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -11-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -11-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -11-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -11-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -11-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS