Maximize Learing Private Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 267/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93705 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKULESH DUBE
• Assessee Lawyers: RUGVED APTE
• Keywords: Related party transaction; Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 92C; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.267/PN/2014 ASSESSMENT YEAR: 2009-10 MAXIMIZE LEARNING PRIVATE LIMITED, BASEMENT NO.34, ADM-166SQT BU, LOWER FLOOR, EAST STREET, GALLERIA PREMISES CHSL, HOUSE NO.2421, CAMP, PUNE 411001 . APPELLANT PAN: AAACC7416K VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(2), PUNE . RESPONDENT APPELLANT BY : S/SHRI KETAN VED & RUGVED APTE RESPONDENT BY : SHRI MUKULESH DUBE, CIT DATE OF HEARING : 09-04-2015 DATE OF PRONOUNCEMENT : 29-04-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF ACIT, CIRCLE-11(2), PUNE DATED 27.01.2014 RELATING TO ASS ESSMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE INCO ME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE APPELLANT OBJECTS TO THE ORDER DATED JANUARY 27 , 2014 PASSED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CIRCL E 11(2), PUNE ['ACIT'] UNDER SECTION 143(3) R.W.S. 144C OF THE IN COME-TAX ACT, 1961 ['THE ACT'] IN PURSUANCE OF THE DIRECTIONS OF THE L EARNED DISPUTE RESOLUTION PANEL, PUNE ['DRP'] DATED DECEMBER 17, 2013 FOR THE ASSESSMENT YEAR 2009-10 ON THE FOLLOWING AMONG OTHER GROUNDS: 1. TRANSFER PRICING ADJUSTMENT 1.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS O F THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN MAKING AN ADJUSTMENT AMOUNTING TO RS.3,36,97,885/- TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE A PPELLANT WITH ITS ASSOCIATED ENTERPRISE IN RESPECT OF PROVISION OF IN FORMATION TECHNOLOGY ENABLED SERVICES ['ITES'], ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 2 2. REJECTION OF BENCHMARKING DONE BY THE APPELLANT 2.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN REJECTING THE BENCHMARKING APPROACH AND METHODOLOGY FOLLOWED BY THE APPELLANT FOR BENCHMARKING THE INTERNATIONAL TR ANSACTION OF PROVISION OF ITES. 3. BINDING DIRECTIONS OF THE DRP NOT FOLLOWED 3.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT FOLLOWING THE BINDING DIRECTIONS OF THE DRP WIT H RESPECT TO EXCLUSION OF CROSSDOMAIN SOLUTIONS LIMITED FROM LIS T OF COMPARABLE COMPANIES. 4. ERRONEOUS SELECTION OF COMPARABLE COMPANIES THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEAR NED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN SELECTING THE FOLLOWING COMPARABLE COMPANIES. 4.1 ACCENTIA TECHNOLOGIES LTD. 4.2 CORAL HUB LTD. 4.3 COSMIC GLOBAL LTD. 4.4 CROSSDOMAIN SOLUTIONS LTD. 4.5 E4E HEALTHCARE BUSINESS SOLUTIONS PVT. LTD. 5. BENEFIT OF THE RISK ADJUSTMENT 5.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT GRANTING THE RISK ADJUSTMENT. 6. BENEFIT OF THE VARIATION / REDUCTION OF 5 PERCEN T FROM THE ARITHMETIC MEAN 6.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT GRANTING THE BENEFIT OF +/- 5 PERCENT AS PER PR OVISO TO SECTION 92C (2) OF THE ACT. 7. INITIATION OF PENALTY PROCEEDINGS 7.1 THE LEARNED ACIT ERRED ON THE FACTS AND IN LAW IN INITIALING PENALTY PROCEEDINGS SECTION 271(1) (C) OF THE ACT. 8. LEVY OF INTEREST OBLIGATION ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENT 8.1 THE LEARNED ACIT HAS ERRED ON THE FACTS AND IN LAW BY LEVYING INTEREST UNDER SECTION 234B OF THE ACT ON ACCOUNT O F THE UNANTICIPATED ADJUSTMENTS MADE BY THE LEARNED TPO. ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 3 8.2 THE APPELLANT PLEADS THAT THE SHORTFALL IN ADVA NCE TAX HAS RESULTED IN VIEW OF THE ADJUSTMENTS WHICH HAVE BEEN OBJECTED IN THE GROUNDS ABOVE AND ACCORDINGLY IS CONSEQUENTIAL IN NATURE. 9. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHO UT PREJUDICE TO THE OTHER. 10. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTE R OR ADD TO THE GROUNDS OF APPEAL. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE, AT THE OUTSET, POINTED OUT THAT THE ISSUE OF TRANSFER PRICING ARISING IN T HE PRESENT APPEAL IS SIMILAR TO THE ISSUE RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2008-09. IT IS, FURTHER, POINTED OUT BY THE LD. AUTHORIZED REPR ESENTATIVE FOR THE ASSESSEE THAT IN CASE THE GROUND OF APPEAL NO.4 IS ADJUDICATED AN D THE COMPARABLES SELECTED BY THE TPO ARE EXCLUDED AS HAS BEEN FOUND TO BE NON -COMPARABLE BY THE TRIBUNAL IN THE EARLIER YEAR, THEN THE MARGIN OF TH E COMPARABLES WOULD BE 16.17% AS AGAINST THE ASSESSEES MARGIN OF 15.36% AND HENC E THE SAME WOULD BE WITHIN +/- 5% RANGE AND HENCE AT ARM'S LENGTH. IT IS, FURTHER, POINTED OUT BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE DRP HAD FOLLOWED ITS ORDER OF EARLIER YEAR IN UPHOLDING THAT AN ADJUSTME NT NEEDS TO BE MADE TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES IN VIEW OF THE ASSESSEES MARGIN BEING NOT COMPARABLE WITH THE MARGIN OF THE SAID COMPARABLES SELECTED BY THE TPO. 4. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN THE PRESENT APPEAL HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO AN ADDI TION OF RS.3,36,97,885/- MADE TO THE VALUE OF INTERNATIONAL TRANSACTION ENTERED I NTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISE IN RESPECT OF PROVISION OF IN FORMATION TECHNOLOGY ENABLED SERVICES (IN SHORT ITES). ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 4 6. BRIEFLY, IN THE FACTS OF THE CASE THE ASSESSEE H AD RENDERED ITES TO ITS ASSOCIATED ENTERPRISE I.E. APATARA INC.. DURING TH E YEAR UNDER CONSIDERATION, ASSESSEE HAD PROVIDED E-LEARNING AND CONTENT MANAGE MENT SERVICES (INCLUDING IT ENABLED SERVICES) TO ITS ASSOCIATED ENTERPRISES. THE DISPUTE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO DETERMINATION OF A RM'S LENGTH OF THE AFORESAID INTERNATIONAL TRANSACTIONS OF PROVIDING IT ENABLED SERVICES TO ITS ASSOCIATED ENTERPRISE. ADMITTEDLY, THE ASSESSEE HAD APPLIED T RANSACTIONAL NET MARGIN (TNM) METHOD FOR THE DETERMINATION THAT THE SERVICE S PROVIDED TO ITS ASSOCIATED ENTERPRISE WAS AT ARM'S LENGTH. THE TPO HAD ALSO A PPLIED THE TNM METHOD TO DETERMINE THE MARGINS OF THE COMPARABLES AND AFTER SELECTING THE SET OF COMPARABLE HAD COMPUTED THE PLI OF THE COMPARABLES AT 30.56% AS AGAINST THE PLI OF THE ASSESSEE 15.36%. THE TPO, THUS, PROPOSE D AN ADJUSTMENT OF RS.3,96,39,195/- TO BE MADE TO THE INTERNATIONAL TR ANSACTION PERTAINING TO IT ENABLED SERVICES OF THE ASSESSEE. THE DRP REVISED THE DETERMINATION OF ADJUSTMENT TO BE MADE UNDER SECTION 92CA(3) OF THE ACT AND SUBSEQUENTLY THE ASSESSING OFFICER RE-WORKED THE ADJUSTMENT AT RS.3, 36,97,885/-, AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE, AGAINST WHICH A SSESSEE IS IN APPEAL. THE TPO HAD SELECTED THE FOLLOWING SET OF COMPARABLES : - SR.NO. NAME OF THE COMPANY OP/OC 1 R SYSTEMS INTERNATIONAL LTD. (BPO SEGMENT) 14.08 2 ACCENTIA TECHNOLOGIES LTD. 43.42 3 CROSS DOMAIN SOLUTIONS LTD. 29.40 4 E4E-HEALTH SOLUTIONS LTD. (FORMERLY NITTANY OUTSO URCING) 33.31 5 COSMIC GLOBAL LTD. 40.75 6 ECLERX SERVICES LTD. 46.92 7 VISHAL INFORMATION TECHNOLOGIES LTD. 35.48 8 MICROGENETICS 1.13 AVERAGE 30.56 7. BEFORE US, THE PLEA OF THE ASSESSEE WAS THAT THE TPO HAD ERRED IN INCLUDING (I) ACCENTIA TECHNOLOGIES LTD.; (II) CROS S DOMAIN SOLUTIONS LTD.; (III) ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 5 COSMIC GLOBAL LTD.; AND, (IV) CORAL HUB LTD.. THE ASSESSEE BY WAY OF GROUND OF APPEAL NO.4 HAS OBJECTED TO THE SELECTION OF THE FO LLOWING COMPARABLES :- 4.1 ACCENTIA TECHNOLOGIES LTD.; 4.2 CORAL HUB LTD.; 4.3 COSMIC GLOBAL LTD.; 4.4 CROSSDOMAIN SOLUTIONS LTD.; AND, 4.5 E4E HEALTHCARE BUSINESS SOLUTIONS PVT. LTD. 8. HOWEVER, WHILE ARGUING THE APPEAL, THE SUBMISSIO NS WERE AGAINST SELECTION OF FOUR COMPARABLES I.E. (I) ACCENTIA TEC HNOLOGIES LTD.; (II) CORAL HUB LTD.; (III) COSMIC GLOBAL LTD.; (IV) CROSSDOMAIN SO LUTIONS LTD. AND NO SUBMISSIONS WERE MADE IN RESPECT OF THE COMPARABLE E4E HEALTHCA RE BUSINESS SOLUTIONS PVT. LTD.. THE CASE OF THE ASSESSEE BEFORE US WAS THAT THE SAID FOUR COMPARABLES WERE SELECTED BY THE TPO WHILE BENCHMARKING THE INT ERNATIONAL TRANSACTION OF THE ASSESSEE IN ASSESSMENT YEAR 2008-09 AND THE TRIBUNA L AFTER ELABORATING UPON THE ASSESSEE HAD DIRECTED THAT THE SAID FOUR COMPAR ABLES BE EXCLUDED FROM BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE A SSESSEE FOR ASSESSMENT YEAR 2008-09. 9. WE FIND THAT THE TRIBUNAL IN ITA NO.2235/PN/2012 RELATING TO ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 02.02.2015 HAD DELIBE RATED UPON THE AFORESAID ISSUE WHICH IS RAISED IN THE PRESENT APPEAL. THE I SSUE BEFORE THE TRIBUNAL WAS IN RESPECT OF EXCLUSION OF FOUR COMPARABLES (I) ACCENT IA TECHNOLOGIES LTD.; (II) CORAL HUB LTD.; (III) COSMIC GLOBAL LTD.; (IV) CROSSDOMAI N SOLUTIONS LTD. AND ALSO IN RESPECT OF INCLUSION OF TWO COMPARABLES IN THE FINA L SET OF COMPARABLES. HOWEVER BEFORE US, IN THE YEAR UNDER APPEAL THE LIMITED ISS UE IS IN RELATION TO EXCLUSION OF FOUR COMPARABLES AND THERE IS NO ISSUE RAISED IN RE SPECT OF INCLUSION OF ANY COMPARABLES. 10. THE FIRST ASPECT OF THE ISSUE IS THAT THE TPO H AD SELECTED FINAL SET OF COMPARABLES WHICH HAVE BEEN REFERRED TO BY US IN TH E PARAS HEREINABOVE. FROM ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 6 THE PERUSAL OF THE SAID DATA, IT APPEARS THAT THE T PO HAD SELECTED M/S CORAL HUB LTD. (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLO GY LTD.) AS A COMPARABLE WHILE DETERMINING THE PLI OF THE COMPARABLES FOR TH E YEAR UNDER CONSIDERATION. THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 (SUPRA) VIDE PARAS 16 TO 18 HAS GIVEN A FIN DING THAT CORAL HUB LTD. COULD NOT BE SELECTED AS A COMPARABLE. THE RELEVANT FIND INGS OF THE TRIBUNAL ARE AS UNDER :- 16. THE SECOND CONCERN, WHICH IS SOUGHT TO BE EXCL UDED FROM THE LIST OF COMPARABLES IS CORAL HUBS LTD. (FORMERLY VISHAL INF ORMATION TECHNOLOGIES LTD.). IN PARA 18.3 OF THE ORDER OF THE TPO, THE SUBMISSIO NS OF THE ASSESSEE FOR EXCLUDING THE SAID CONCERN FROM THE LIST OF COMPARA BLE HAVE BEEN ELUCIDATED. THE PLEA OF THE ASSESSEE IS THAT THE SAID CONCERN I S FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE AS IT IS ENGAGED IN IT ENABLED SERV ICES PARTICULARLY SELLING AND PURCHASING OF PRODUCTS AND GOODS WHEREAS ASSESSEE I S ENGAGED INTO E-LEARNING AND CONTENT DEVELOPMENT ACTIVITY. SECONDLY, IT WAS CANVASSED ON THE BASIS OF THE ANNUAL REPORT OF THE SAID CONCERN THAT IT OUTSO URCES ITS WORK TO SUB-VENDORS AND THEREFORE THE BUSINESS OPERATING MODEL OF THE S AID CONCERN WAS DIFFERENT FROM THAT OF THE ASSESSEE. CONSEQUENTLY, THE MARGI NS EARNED BY THE SAID CONCERN ARE REFLECTIVE OF THE FUNCTIONS PERFORMED B Y IT, WHICH ARE NOT AKIN TO THE FUNCTIONAL PROFILE OF THE ASSESSEE. THE AFORESAID SUBMISSIONS OF THE ASSESSEE WERE CONSIDERED BY THE TPO, BUT REJECTED. THE SOLI TARY GROUND OF REJECTION BY THE TPO WAS THAT THE ACTIVITIES OF THE SAID CONCERN ARE MORE OR LESS IN THE FIELD OF IT ENABLED SERVICES WHICH IS SIMILAR TO THAT OF ASS ESSEE. THE POINT MADE OUT BY THE REVENUE ON THIS ASPECT IS THAT THE SIMILARITY H AS TO BE SEEN ON A BROAD PERSPECTIVE AND THAT NO TWO CONCERNS CAN BE REPLICA OF EACH OTHER. 17. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE VEHEMENTLY POINTED OUT THAT THE DIFFERENCE IN THE OPERATING MODEL OF T HE SAID CONCERN FROM THAT OF THE ASSESSEE HAS TO BE APPRECIATED BY VARIOUS DECISIONS OF THE TRIBUNAL, WHICH ARE AS UNDER :- (I) CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVAT E LIMITED (SUPRA); (II) SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA); (III) BRIGADE GLOBAL SERVICES PRIVATE LIMITED VS. ITO, (2013) 33 TAXMANN.COM 618 (HYD.); AND, (IV) COGNIZANT TECHNOLOGY SERVICES PVT. LTD. VS. AC IT, (ITA NO.1624/HYD/2010). 18. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVE FOR THE ASSESSEE AS ALSO THE STAND OF THE REVENUE AS EMERGI NG FROM THE ORDER OF THE TPO. WE FIND THAT THE INCLUSION OF THE CORAL HUBS LTD. AS A COMPARABLE CONCERN WAS A SUBJECT-MATTER OF CONSIDERATION BY THE BANGAL ORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) IN CIRCUMSTANCES WHICH ARE SIMILAR TO THOSE BEFORE US. THE BANGALORE BENCH OF THE TRIBUNAL, AS PER THE DISCUSSION IN PARAS 14 TO 17 O F THE ORDER FOUND IT FIT TO ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 7 EXCLUDE THE SAID CONCERN FROM THE FINAL SET OF COMP ARABLES. THE FOLLOWING DISCUSSION IS RELEVANT :- 14. THIS COMPANY IS LISTED AT SL.NO.6 OF THE LIST OF CO MPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, IT IS SEEN THAT THIS COMPANY WAS EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD. THE COMPARABILITY OF THIS COMPANY IN THE CASE OF AN ITES COMPANY BY NAME 24 X 7 CUSTOMER.COM PVT. LTD. WAS CONSIDERED BY THE TRIBUNAL IN ITA NO.227/BANG/2010 AND BY ORDE R DATED 09.11.2012 THE TRIBUNAL HELD THAT THIS COMPANY IS NOT FUNCTION ALLY COMPARABLE WITH ITES FOR THE FOLLOWING REASON: '17.3 VISHAL INFORMATION TECHNOLOGIES LTD. (VIT) - IN THE CASE OF THIS COMPARABLE, WE FIND THAT THE MUMBAI TRIBUNAL I N THE CASE OF MEARSK GLOBAL SERVICES (I) PVT LTD IN ITA NO.3774/M UM/2011 BY ORDER DT.9.11.2011 HAS HELD THAT SINCE VISHAL INFOR MATION TECHNOLOGIES LTD IS OUTSOURCING MOST OF ITS WORK IT HAS TO BE EXCLUDED FROM THE LIST WHEREAS THE ASSESSEE IN THE CITED CASE WAS CARRYING OUT THE WORK BY ITSELF. IN THE INSTANT CAS E OF THE ASSESSEE ALSO THE ASSESSEE WAS CARRYING OUT ITS WORK BY ITSE LF WHEREAS IN THE CASE OF VITL, IT IS OUTSOURCING MOST OF ITS WOR K. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE DECISI ON OF THE ITAT, MUMBAI IN THE CITED CASE ON THE ISSUE OF EXCLUDING VITL AS A COMPARABLE SQUARELY APPLIES. THIS DECISION WAS FOLL OWED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NETLINX INDIA (P) LTD IN ITA NO.454/BANG/2011 DT. 1 9.10.2012 WHEREIN IT WAS HELD THAT VISHAL INFORMATION TECHNOL OGIES LTD CANNOT BE CONSIDERED AS A COMPARABLE. WE, THEREFORE , RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI T RIBUNAL IN THE CASE OF MEARSK GLOBAL SERVICES (I) PVT LTD, DIRECT THE ASSESSING OFFICER / TPO TO EXCLUDE VISHAL INFORMATION TECHNOL OGIES LTD. FROM THE LIST OF COMPARABLES.' 15. FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE HOLD THAT CORAL HUBS LTD. CANNOT BE CONSIDERED A S A COMPARABLE. IT MAY ALSO BE RELEVANT TO POINT OUT THAT THE TPO IN H IS ORDER HAS OBSERVED THAT THIS COMPANY IS RETAINED AS A COMPARABLE ON TH E BASIS OF DETAILED DISCUSSION IN THE TP ORDER FOR THE A.Y. 2007-08. IN FACT IN A.Y. 2007-08, THERE WAS NO DETERMINATION OF ALP AND THEREFORE THE RE WAS NO OCCASION FOR ANY ORDER BEING PASSED BY THE TPO. IT IS ALSO S EEN THAT THIS COMPANY ENTERED INTO AN AREA OF BUSINESS KNOWN AS NEW VERTI CAL DIGITAL LIBRARY & PRINT ON DEMAND IN F.Y. 2007-08. IN THE CASE OF CAP ITAL IQ INFORMATION SYSTEMS INDIA (P.) LTD. (SUPRA), THE ITAT HYDERABAD BENCH IN THE CASE OF ITES COMPANY CONSIDERED THE COMPARABLE OF THIS COMP ANY AS AN ITES COMPANY AND HELD AS FOLLOWS:- 'IV. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INF ORMATION TECHNOLOGIES LTD.): 16. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING T AKEN AS COMPARABLE MAINLY ON THE GROUND THAT THE ACTIVITIES OF THE COMPANY IS NOT ONLY FUNCTIONALLY DIFFERENT, BUT THE BUSINESS MODEL OF THE COMPANY IS ALSO DIFFERENT AS IT SUB-CONTRACT S MAJORITY OF ITS ITES WORKS TO THIRD PARTY VENDORS AND HAS ALSO MADE SIGNIFICANT PAYMENTS TO THOSE VENDORS. THE PAYMENTS MADE TO VEN DORS TOWARDS THE DATA ENTRY CHARGES ALSO SUPPORTS TH E FACT THAT THE COMPANY OUTSOURCES ITS WORKS. IN THE CIRCUMST ANCES, IT CANNOT ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 8 BE TAKEN AS A COMPARABLE TO THE ITES FUNCTIONS PERF ORMED BY THE ASSESSEE. SINCE THIS COMPANY IS ACTING AS AGENT ONL Y BY OUTSOURCING ITS WORKS TO THE THIRD PARTY VENDORS. I N THIS CONTEXT, THE ASSESSEE RELIED UPON THE ORDER OF THE DRP IN ASSESS EE'S OWN CASE FOR THE ASSESSMENT YEAR 2008-09, WHEREIN THE D RP, AFTER TAKING INTO CONSIDERATION, THE AFORESAID ASPECT, HA S ACCEPTED THE CLAIM OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITT ED THAT THE INCOME-TAX APPELLATE TRIBUNAL MUMBAI BENCH IN THE C ASE OF ASSTT. CIT V. MAERSK GLOBAL SERVICE CENTRE (INDIA) (P.) LT D. [2011] 133 ITD 543/16 TAXMANN.COM 47 (MUM.), A COPY OF WHICH IS SUBMITTED BEFORE US, HAS ALSO DIRECTED FOR THE EXCL USION OF THE AFORESAID COMPANY SINCE IT HAS OUTSOURCED A CONSIDE RABLE PORTION OF ITS BUSINESS. 17. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED A UTHORISED REPRESENTATIVE FOR THE ASSESSEE, WE FIND THAT THE D RP, IN THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2008-09 IN ASSE SSEE'S OWN CASE, AFTER TAKING NOTE OF THE COMPOSITION OF THE V ENDOR PAYMENTS OF CORAL HUB FOR THE LAST THREE YEARS, AND THE FACT THAT IT HAS ALSO COMMENCED A NEW LINE OF BUSINESS OF PRINTING ON DEM AND (POD), WHEREIN IT PRINTS UPON CLIENTS REQUEST, CONCLUDED A S FOLLOWS- '18.4. IN VIEW OF THIS MAJOR DIFFERENCE IN FUNCTIO NALITY AND THE BUSINESS MODEL, THIS PANEL IS OF THE VIEW THAT 'COR AL HUB' IS NOT A SUITABLE COMPARABLE TO THE TAXPAYER AND HENCE NEEDS TO BE DROPPED FROM THE FINAL LIST OF COMPARABLES.' IN CASE OF MAERSK GLOBAL SERVICE CENTRE INDIA (P.) LTD. (SUPRA), THE ITAT MUMBAI BENCH HAS ALSO DIRECTED FOR EXCLUSI ON OF THE AFORESAID COMPANY, BY OBSERVING IN THE FOLLOWING MA NNER- 'INSOFAR AS THE CASES OF TULSYAN TECHNOLOGIES LIMIT ED AND VISHAL INFORMATION TECHNOLOGIES LIMITED ARE CONCERNED, IT IS NOTICED FROM THEIR ANNUAL ACCOUNTS THAT THESE COMPANIES OUTSOURC ED A CONSIDERABLE PORTION OF THEIR BUSINESS. AS THE ASSE SSEE CARRIED OUT ENTIRE OPERATIONS BY ITSELF, IN OUR CONSIDERED OPINION, THESE TWO CASES WERE RIGHTLY EXCLUDED.' IN VIEW OF THE OBSERVATIONS MADE BY THE DRP AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MAERSK G LOBAL SERVICE CENTRE, (SUPRA), WE ACCEPT THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE.' 16. IT IS ALSO FURTHER NOTICED THAT THE EMPLOYEE CO ST/OPERATING SALES OF THIS COMPANY IS A MERE 3%, WHEREAS THE THR ESHOLD LIMIT FOR ACCEPTANCE AS A COMPARABLE ON THE BASIS OF EMPLOYEE COST TO SALES SHOULD BE AT LEAST 25%. THIS TRIBUNAL IN THE CASE O F FIRST ADVANTAGE OFFSHORE SERVICES LTD. V. CIT IT(TP)A NO.L086/BANG/ 2011, ORDER DATED 30.4.2013 HAS TAKEN THE FOLLOWING VIEW: '36. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THEIR RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FI ND THAT THIS ISSUE HAD ARISEN IN THE ASSESSEE'S OWN CASE FOR THE ASSES SMENT YEAR 2006-07. THIS TRIBUNAL HAS HELD THAT EMPLOYEE COST FILTER IS TO BE THE SAME EVEN FOR ITES SEGMENT ALSO. THE LEARNED DR 'S ARGUMENT THAT THE EMPLOYEE COST FILTER IS APPLICABL E ONLY TO SOFTWARE DEVELOPMENT SEGMENT AND NOT TO ITES SEGMEN T IS NOT ACCEPTABLE. THOUGH IT IS WITHOUT ANY DISPUTE THAT T HE SOFTWARE ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 9 DEVELOPMENT WOULD REQUIRE SKILLED EMPLOYEES AND, TH EREFORE, THE EMPLOYEE COST WOULD DEFINITELY BE MORE THAN 25% OF THE TOTAL EXPENSES, IT CANNOT BE SAID THAT THE SAID FILTER IS NOT APPLICABLE TO ITES SEGMENT, WHERE COMPARABLY LESS SKILLED EMPLOYE ES ARE EMPLOYED. IN THE ITES SEGMENT, THE ENTIRE WORK IS T O BE DONE BY THE EMPLOYEES AND, THEREFORE, EVEN THOUGH THEY MAY BE LESS SKILLED COMPARED TO SOFTWARE DEVELOPMENT SEGMENT, T HE NUMBER OF EMPLOYEES WOULD DEFINITELY BE MORE AND THUS THE EMPLOYEE COST WOULD BE HIGH AND THUS APPLICATION OF EMPLOYEE COST FILTER TO THE ITES SECTOR IS ALSO JUSTIFIED. IN VIEW OF THE S AME, WE DIRECT THE TPO TO APPLY THE EMPLOYEE COST FILTER TO EXCLUDE CO MPANIES WITH EMPLOYEE COST OF LESS THAN 25% FROM THE LIST OF COM PARABLES FOR THE COMPUTATION OF ALP.' 17. APPLYING THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABL E. 11. FURTHER, THE TRIBUNAL IN THE CASE OF PTC SOFTWA RE (INDIA) PRIVATE LIMITED VS. DCIT IN ITA NO.336/PN/2014 RELATING TO ASSESSME NT YEAR 2009-10 VIDE ORDER DATED 31.10.2014 HAD ALSO REJECTED M/S CORAL HUB LT D. (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD.) AS A COMPARAB LE. THE RELEVANT FINDING OF THE TRIBUNAL VIDE ORDER DATED 31.10.2014 (SUPRA) IS AS UNDER :- 45. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. IN THE TP STUDY CARRIED OUT BY THE TPO IN THE ITES SEGMENTS, FRESH SEARCH CRITERIA WERE APPLIED BY THE TPO AND LIST OF COMPARABLES WHICH WE RE NOT SELECTED BY THE ASSESSEE WERE PICKED UP IN THE TP STUDY AND THE MAR GINS OF THE SAID COMPARABLES WERE APPLIED TO DETERMINE THE ARMS LEN GTH PRICE OF THE TRANSACTIONS OF THE ASSESSEE IN ITES SEGMENTS. THE ASSESSEE WAS AGGRIEVED BY THE SELECTION OF THE SAID COMPARABLES AND THE PLEA OF T HE ASSESSEE WAS THAT IN CASE SAID COMPARABLES WERE NOT INCLUDED IN THE TP STUDY, THE MARGINS SHOWN BY THE ASSESSEE WOULD BE AT ARMS LENGTH. THE FIRST COMPA RABLE REFERRED TO BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS M/S. VISHAL INFORMATION TECHNOLOGIES LTD. THE SAID COMPANY WAS PROVIDING I T ENABLED SERVICES AND WAS ALSO ENGAGED IN OTHER DIVERSIFIED ACTIVITIES. FURT HER, IT HAS OUTSOURCED ITS SERVICES TO THIRD PARTY VENDOR AND ACTED AS INTERMEDIARY BET WEEN THE FINAL CUSTOMER AND THE VENDOR. THE ASSESSEE ON THE OTHER HAND WAS ENG AGED IN THE RUNNING OF A CALL CENTRE AND WAS PROVIDING TECHNICAL SUPPORT TO ITS AES. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2006-07 IN ITA NO.1346/PN/2010 AND IN ASSESSMENT YEAR 2007-08 IN I TA NO.1605/PN/2011 HAD EXCLUDED THE SAID COMPARABLES OBSERVING AS UNDER: 30. THE NEXT POINT RAISED BY THE ASSESSEE IS AGAIN ST THE INCLUSION OF VISHAL INFORMATION TECHNOLOGIES LTD., APPEARING AT ITEM (10) IN THE TABULATION IN PARA 25 AS A COMPARABLE CASE. THE TP O HAS DISCUSSED THE ISSUE IN PARA 6.9.6. OF THE ORDER. AS PER THE TPO, THE SAID CONCERN IS FUNCTIONALLY COMPARABLE TO THE IT-ENABLED SERVICES SEGMENT OF THE ASSESSEE AND FOR THAT REASON, THE SAID CONCERN HAS BEEN INCLUDED AS A COMPARABLE FOR THE PURPOSES OF COMPARABILITY ANALYS IS. IN THIS CONNECTION, THE PLEA SET UP BY THE ASSESSEE IS THAT THE SAID CONCERN IS ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 10 ENGAGED IN NOT ONLY IT-ENABLED SERVICES, BUT ALSO I N PROVIDING QUALITY PRODUCTS AND IN THE CREATION OF ANIMATED FILMS AND BOOKS. IT HAS ALSO BEEN ASCERTAINED BY REFERRING TO THE ANNUAL REPORT OF THE SAID CONCERN THAT IT IS ENGAGED IN PROVIDING AGENCY SERVICES BY WAY OF OUTSOURCING THE SERVICES TO THIRD PARTY VENDORS AND ACTING AS AN IN TERMEDIARY BETWEEN THE FINAL CUSTOMER AND THE VENDOR. THE ASSESSEE FURNIS HED DETAILED SUBMISSIONS IN THIS REGARD BEFORE THE LOWER AUTHORI TIES, COPIES OF WHICH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 420.8 T O 420.31. BY REFERRING TO THE WRITTEN SUBMISSIONS, IT IS ALSO SO UGHT TO BE POINTED OUT THAT THE INTERMEDIARY FUNCTIONS PERFORMED BY THE SAID CO NCERN CAN BE COMPARED TO THAT OF A DISTRIBUTOR WHICH TAKES TITLE TO SERVICE/PRODUCT FOR RESALE TO THE CUSTOMERS. THE AFORESAID ASSERTION I S SOUGHT TO BE SUBSTANTIATED BY THE DETAILS OF PAYMENTS MADE BY TH E SAID CONCERN FOR DATA ENTRY AND VENDOR PAYMENTS, PERSONNEL COSTS AND SALES. IT IS, THEREFORE, CONTENDED THAT THE SAID CONCERN IS FUNCT IONALLY DISSIMILAR TO THAT OF THE IT-ENABLED SERVICES SEGMENT OF THE ASSESSEE. IT HAS ALSO BEEN ARGUED THAT THE SAID CONCERN HAS EARNED SUPERNORMAL PROFITS AS HIGH AS 59.19% AND THEREFORE, THE SAME IS NOT INCLUDIBLE IN THE LIST OF COMPARABLES SO AS TO AVOID SKEWING OF THE COMPARABI LITY ANALYSIS. ON THE OTHER HAND, THE STAND OF THE REVENUE AS BROUGHT OUT BY THE TPO IN PARA 6.9.6. OF THE ORDER IS TO THE EFFECT THAT THE SAID CONCERN BEING CATEGORIZED AS AN IT-ENABLED SERVICES CONCERN, THE SAME IS LIAB LE TO BE INCLUDED. 31. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THIS ASPECT. AT THE OUTSET, WE MAY REFER TO PAGE 810 OF THE PAPE R BOOK, WHEREIN THE NOTES TO ACCOUNTS FOR THE YEAR ENDED 31.3.2007 OF T HE SAID CONCERN HAVE BEEN PLACED. AS PER THE AVAILABLE INFORMATION, THE SAID CONCERN HAS RELATED PARTY TRANSACTIONS AS REPORTED BY THE CONCE RN AT PARA 7 OF THE SAID NOTES AT 86.92%, WHICH BREACHES THE RPT FILTER. F URTHERMORE, THE FUNCTIONAL PROFILE OF THE SAID CONCERN BROUGHT OUT BY THE ASSESSEE ALSO REVEALS DIFFERENTIATION IN THE ACTIVITY PROFILE. THE TPO, IN OUR VIEW, HAS NOT APPRECIATED THE QUALITATIVE DIFFERENCE IN THE F UNCTIONS PERFORMED BY THE SAID CONCERN AS SOUGHT OUT TO BE BROUGHT OUT BY THE ASSESSEE. CONSIDERING THE AFORESAID, WE THEREFORE, FIND THAT THE ASSESSEE WAS JUSTIFIED IN ASCERTAINING THAT THE SAID CONCERN BE EXCLUDED FROM THE LIST OF COMPARABLES FOR THE REASONS CANVASSED. THUS, ON TH IS ASPECT ASSESSEE SUCCEEDS. 46. THE TRIBUNAL IN THE ASSESSEES OWN CASE HAD HEL D THAT THE SAID CONCERN WAS FOUND TO BE OPERATING IN DIFFERENT FUNCTIONAL E NVIRONMENT AND THE SAME WAS EXCLUDED FOR THE PURPOSE OF COMPARABILITY ANALYSIS. FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMEN T YEARS 2006-07 AND 2007- 08 (SUPRA), WE UPHOLD THE PLEA OF THE ASSESSEE IN E XCLUDING THE MARGINS OF THE SAID CONCERN M/S. VISHAL TECHNOLOGIES LTD. 12. FURTHER, THE PUNE BENCH OF THE TRIBUNAL IN BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PRIVATE LIMITED VS. DCIT IN ITA NO.23/PN/2014 RELATING TO ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 11.02.2015 HAD ALSO HELD THAT M/S CORAL HUB LTD. IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. FOLLOWING THE ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 11 ABOVE SAID PRECEDENTS, WE HOLD THAT M/S CORAL HUB L TD. IS TO BE EXCLUDED FROM FINAL SET OF COMPARABLES. 13. NOW, COMING TO THE NEXT CONTENTION OF THE ASSES SEE VIS--VIS M/S ACCENTIA TECHNOLOGIES LTD. THAT THE SAME HAS BEEN WRONGLY IN CLUDED BY THE TPO AS A COMPARABLE CONCERN. THE TRIBUNAL IN ASSESSEES OWN CASE VIDE PARAS 13 TO 16 HAD HELD THAT THE SAID CONCERN COULD NOT BE CONSIDE RED AS A COMPARABLE. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER :- 13. NEXT, ASSESSEE HAD CONTENDED THAT ACCENTIA TEC HNOLOGIES LTD. HAS BEEN WRONGLY INCLUDED BY THE TPO AS A COMPARABLE CONCERN . AS PER THE ASSESSEE, THE SAID CONCERN WAS ENGAGED IN FUNCTIONALLY DIFFER ENT ACTIVITIES. IT WAS POINTED OUT THAT THE SAID CONCERN IS ENGAGED IN PROVIDING M EDICAL TRANSACTION, BILLING AND CODING SERVICES, APPLICATION DEVELOPMENT & CUSTOMIZ ATION (SEGMENTAL DATA NOT AVAILABLE). MOREOVER, IT WAS CONTENDED THAT THE SA LES/TURNOVER OF THE SAID CONCERN WAS MORE THAN RS.50 CRORES FOR THE YEAR UND ER CONSIDERATION WHICH DID NOT MEET WITH TURNOVER FILTER APPLIED BY THE ASSESS EE. ON THIS POINT, IT WAS POINTED OUT THAT THE ASSESSEE HAD SELECTED SALES/TU RNOVER FILTER OF 1-50 CRORES I.E. ANY CONCERNS HAVING A TURNOVER EXCEEDING RS.50 CROR ES WERE EXCLUDED. THIRDLY, IT WAS POINTED OUT THAT THE ACTIVITIES OF THE SAID CONCERN WERE NOT COMPARABLE TO THE ACTIVITIES OF THE ASSESSEE. 14. THE TPO HAS NOTED THE AFORESAID OBJECTIONS OF T HE ASSESSEE IN PARA 18.1 OF HIS ORDER AND HAS REJECTED THE SAME BY MERELY NO TICING THAT 75% OF THE REVENUE/INCOME OF THE SAID CONCERN IS FROM ITES AND THEREFORE IT IS TO BE CONSIDERED AS A COMPARABLE. BEFORE US, THE LD. REP RESENTATIVE FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS PUT-FORTH BEFORE THE TPO IN ORDER TO JUSTIFY EXCLUSION OF THE SAID CONCERN FROM THE LIST OF COMP ARABLES. IN PARTICULARLY, IT HAS BEEN POINTED OUT THAT FOR THE VERY SAME ASSESSMENT YEAR, THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING S OLUTIONS INDIA PVT. LTD. VS. ITO, (2013) 38 TAXMANN.COM 55 (BANG.) HAS EXCLUDED THE SAID CONCERN FROM THE LIST OF COMPARABLES IN A SIMILAR SITUATION FOLLOWIN G THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INF ORMATION SYSTEMS (INDIA) PRIVATE LIMITED VS. DCIT, (2013) 32 TAXMANN.COM 21 (HYD.). 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVE FOR THE ASSESSEE AND ALSO THE STAND OF THE REVENUE AS EMERG ING FROM THE ORDER OF THE TPO. IN OUR VIEW, THE RATIO LAID DOWN BY THE HYDER ABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED (SUPRA) AND BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) IS SQUARELY APPLI CABLE TO THE PRESENT CASE ALSO. THE AFORESAID BENCHES OF THE TRIBUNAL FOUND THAT DU RING THE YEAR UNDER CONSIDERATION THERE WERE EXTRAORDINARY EVENTS THAT TOOK PLACE IN THE SAID CONCERN WHICH WARRANTED EXCLUSION OF THIS COMPANY AS A COMP ARABLE. WE THEREFORE HOLD THAT THE SAID CONCERN CANNOT BE CONSIDERED AS A COM PARABLE. ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 12 14. WE FIND THAT THE TRIBUNAL IN PTC SOFTWARE (INDI A) PRIVATE LIMITED VS. DCIT (SUPRA) AND BNY MELLON INTERNATIONAL OPERATIONS (IN DIA) PRIVATE LIMITED VS. DCIT (SUPRA) AND ALSO IN M/S CAPITAL IQ INFORMATION SYST EMS (INDIA) PVT. LTD. VS. ADDL.CIT IN ITA NO.124/HYD/2014 RELATING TO ASSESSM ENT YEAR 2009-10 VIDE ORDER DATED 31.07.2014 HAD HELD THAT M/S ACCENTIA T ECHNOLOGIES LTD. WAS NOT A COMPARABLE IN IT SEGMENT FOR HAVING EXTRA-ORDINARY CIRCUMSTANCES I.E. AMALGAMATION. THE RELEVANT FINDING OF THE TRIBUNAL IN PTC SOFTWARE (INDIA) PRIVATE LIMITED VS. DCIT (SUPRA) IS AS UNDER :- 47. THE NEXT OBJECTION OF THE LEARNED AUTHORIZED R EPRESENTATIVE FOR THE ASSESSEE WAS WITH REGARD TO THE INCLUSION OF M/S. A CCENTIA TECHNOLOGIES LTD. WHICH ADMITTEDLY WAS ENGAGED IN DEVELOPING ITS OWN SOFTWARE PRODUCTS AND WAS RENDERING MEDICAL TRANSCRIPTION SERVICES. FURTHER, THE SAID COMPANY DURING THE YEAR UNDER CONSIDERATION HAD MADE CERTAIN ACQUISITI ONS WHICH IN TURN AFFECTED THE MARGINS OF THE YEAR OF THE ACQUISITION. WE FIND TH AT HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYST EMS (INDIA) PVT. LTD. (SUPRA) HAD REJECTED ACCENTIA TECHNOLOGIES LTD. FOR HAVING EXTRA-ORDINARY CIRCUMSTANCES I.E. AMALGAMATION. FOLLOWING THE PARITY OF REASONI NG AS ADOPTED BY THE HYDERABAD BENCH OF THE TRIBUNAL, WE HOLD THAT THE S AID COMPANY HAD DIFFERENT FUNCTIONAL PROFILE AS COMPARED TO THE ASSESSEE, WHI CH IN TURN EXPLAINED THE ABNORMALLY HIGH PROFIT MARGINS EARNED BY THE SAID C OMPANY AS COMPARED TO THE ASSESSEE. ACCORDINGLY, WE ACCEPT THE PLEA OF THE A SSESSEE AND HOLD THAT THE SAID COMPANY IS NOT TO BE USED AS COMPARABLE IN ITE S SEGMENTS OF THE ASSESSEE. 15. IN VIEW THEREOF, WE HOLD THAT M/S ACCENTIA TECH NOLOGIES LTD. IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 16. SIMILARLY, THE THIRD CONCERN I.E. COSMIC GLOBAL LTD. WAS HELD TO BE NOT COMPARABLE BY THE TRIBUNAL IN ITS ORDER DATED 02.02 .2015 (SUPRA) IN THE HANDS OF THE ASSESSEE BECAUSE THE SAID CONCERN WAS OPERATING IN A DIFFERENT BUSINESS MODEL. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE A S UNDER :- 21. THE THIRD CONCERN, WHICH IS SOUGHT TO BE EXCLU DED BY THE ASSESSEE IS COSMIC GLOBAL LTD.. THE ASSESSEE HAS CONTENDED BEF ORE THE TPO THAT THE SAID CONCERN NEEDS TO BE REJECTED ON THE GROUND THAT IT WAS ENGAGED IN BPO AND TRANSLATION SERVICES WHEREAS ASSESSEE WAS AN ITES P ROVIDER, AND THEREFORE CONCERN WAS FUNCTIONALLY DISSIMILAR. HOWEVER, THE TPO REJECTED THE PLEAS OF THE ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 13 ASSESSEE AND CONSIDERED THE SAID CONCERN AS A COMPA RABLE ON THE GROUND THAT EXPORT INCOME OF THE SAID CONCERN WAS MORE THAN 50% . 22. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE OBJECTIONS RAISED BEFORE THE DRP TO POINT OUT THAT THE SAID CO NCERN WAS LIABLE TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. FIRSTL Y, IT IS POINTED OUT THAT THE SAID CONCERN WAS OFFERING ACCOUNTS PROCESSING SERVICES A ND TRANSCRIPTION SERVICES AND WAS NOT COMPARABLE TO THE ACTIVITIES OF THE ASS ESSEE AS THE SAID CONCERN WAS INTO BPO AND TRANSLATION SERVICES. IT WAS ALSO POINTED OUT BY REFERRING TO THE WEBSITE OF THE SAID CONCERN THAT IT WAS ENGAGED IN THE DIVERSIFIED BUSINESS ACTIVITY. IT WAS ALSO POINTED OUT THAT THOUGH THE ACTIVITIES OF THE SAID CONCERN ARE IN MEDICAL TRANSCRIPTION, CONSULTANCY, TRANSLATION AND ACCOUNTS BPO SERVICES BUT THERE WAS NO SEGMENTAL INFORMATION AVAILABLE IN THE ANNUAL ACCOUNTS OF THE SAID CONCERN. APART THEREFROM, IT HAS BEEN POINTED OUT THAT THE SAID CONCERN HAS INCURRED A SUBSTANTIAL EXPENDITURE OF RS.2,86,29,34 8/- TOWARDS TRANSLATION CHARGES AS IS EVIDENT FROM THE ANNUAL REPORT OF THE SAID CONCERN. THE SAID TRANSLATION CHARGES ARE APPROXIMATELY 60.17% OF THE TOTAL COST INCURRED BY THE SAID CONCERN AND THE EMPLOYEE COST COMPRISES OF MER ELY 17.32% OF THE TOTAL COST. IT WAS THEREFORE CONTENDED THAT THE AFORESAI D FACTS JUSTIFY AN INFERENCE THAT THE SAID CONCERN WAS NOT ADOPTING THE NORMAL AND RO UTINE BUSINESS MODEL FOR AN OTHERWISE NORMAL ITES PROVIDER. THE PROPORTION OF EXPENDITURE INCURRED ON OUTSOURCING AND EMPLOYEE COSTS SHOW THAT THE SAID C ONCERN SEEMS TO HAVE OUTSOURCED THE FUNCTIONS TO DIFFERENT VENDORS. THE AFORESAID WAS HIGHLIGHTED TO POINT OUT THAT THE OPERATING BUSINESS MODEL OF COSM IC GLOBAL LTD. WAS TOTALLY DIFFERENT FROM THAT OF THE ASSESSEE. IN THIS CONTE XT, THE LD. REPRESENTATIVE POINTED OUT THAT THE TPO HAD REJECTED THE ACE SOFTW ARE EXPORTS LIMITED FROM THE LIST OF COMPARABLES AND ONE OF THE REASONS ASCRIBED WAS THAT THE SAID CONCERN WAS INCURRING MAJOR EXPENDITURE ON SOFTWARE SOURCIN G CHARGES. THE TPO IN THE CONTEXT OF ACE SOFTWARE EXPORTS LIMITED CAME TO CON CLUDE THAT THE SAID CONCERN WAS NOT A SERVICE PROVIDER BUT A RECIPIENT OF THE S ERVICES AND THEREFORE IT WAS REJECTED AS A COMPARABLE. THE LD. REPRESENTATIVE E MPHASIZED THAT IF ACE SOFTWARE EXPORTS LIMITED WAS REJECTED BY THE TPO FO R HAVING SUBSTANTIAL SOFTWARE OUTSOURCING CHARGES THEN M/S COSMIC GLOBAL LTD. ALSO NEEDS TO BE REJECTED FOR INCURRING A HIGH PROPORTION OF EXPENDI TURE ON OUTSOURCED TRANSLATION CHARGES. 23. THE LD. CIT-DR APPEARING FOR THE REVENUE HAS PR IMARILY REITERATED THE STAND OF THE TPO WHEREIN THE SAID CONCERN WAS REJEC TED ON THE GROUND THAT ITS EXPORT INCOME WAS MORE THAN 50%. THE LD. CIT-DR RE ITERATED THAT PRIMARILY THE SAID CONCERN WAS ALSO ENGAGED IN ITES ACTIVITIES AN D THE TPO WAS JUSTIFIED IN INCLUDING THE SAME IN THE LIST OF COMPARABLES. 24. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE PERTINENT POINT MADE OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE IS THAT THE SAID CONCERN IS OPERATING IN A DIFFERENT BUSINESS MODEL WHEREIN MUC H OF ITS ACTIVITIES ARE OUTSOURCED WHEREAS THE BUSINESS MODEL OF THE ASSESS EE IS DIFFERENT. IN AN OUTSOURCING BUSINESS MODEL OBVIOUSLY THE EXPENDITUR E INCURRED ON EMPLOYEE COSTS WOULD BE LOW IN COMPARISON TO THE EXPENDITURE INCURRED ON OUTSOURCING. OSTENSIBLY, WHERE IT ENABLED SERVICES ARE OUTSOURCE D TO A THIRD PARTY VENDOR THEN THE MARGIN DERIVED BY THE SAID CONCERN WOULD B E ATTRIBUTABLE TO SERVICES RENDERED BY THE OUTSOURCED VENDOR. PER CONTRA, WHE RE IT ENABLED SERVICES ARE BEING RENDERED BY A CONCERN THROUGH ITS OWN EMPLOYE ES, THE MARGINS FROM RENDERING OF SERVICES BY THE SAID CONCERN WOULD BE ATTRIBUTABLE TO ITS OWN EMPLOYEES. OBVIOUSLY, THE LEVEL OF MARGINS IN THE TWO BUSINESS MODELS WOULD NOT BE COMPARABLE. THE HYDERABAD BENCH OF THE TRIB UNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED (SUP RA) HAS HELD THAT CONCERNS ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 14 WHO ACT AS INTERMEDIATERIES HAVING OUTSOURCED IT AC TIVITY CANNOT BE SAID TO BE COMPARABLE WITH A CONCERN WHO IS RENDERING SERVICES THROUGH ITS OWN EMPLOYEES. THE SAID PROPOSITION HAS ALSO BEEN UPHELD BY THE HY DERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BRIGADE GLOBAL SERVICES PRI VATE LIMITED (SUPRA). HAVING REGARD TO THE AFORESAID DISCUSSION, IN OUR VIEW, TH E SAID CONCERN IS NOT A GOOD COMPARABLE TO BE INCLUDED FOR THE PURPOSES OF COMPA RABILITY ANALYSIS AS IT OPERATES UNDER A DIFFERENT BUSINESS MODEL WHICH IMP ACTS OPERATING MARGINS. AS A CONSEQUENCE, WE DIRECT THE ASSESSING OFFICER TO E XCLUDE THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. 17. WE FURTHER FIND THAT THE TRIBUNAL IN PTC SOFTWA RE (INDIA) PRIVATE LIMITED VS. DCIT (SUPRA) AND BNY MELLON INTERNATIONAL OPERA TIONS (INDIA) PRIVATE LIMITED VS. DCIT (SUPRA) AND ALSO IN M/S CAPITAL IQ INFORMA TION SYSTEMS (INDIA) PVT. LTD. VS. ADDL.CIT (SUPRA) WHILE DECIDING THE APPEALS OF THE RELEVANT ASSESSEES IN ASSESSMENT YEARS 2009-10 HAD HELD THAT M/S COSMIC G LOBAL LTD. IS NOT TO BE CONSIDERED AS A COMPARABLE. THE RELEVANT OBSERVATI ONS OF THE TRIBUNAL IN BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PRIVATE LIM ITED VS. DCIT (SUPRA) ARE AS UNDER :- 16. THE THIRD CONCERN, WHICH IS SOUGHT TO BE EXCLU DED BY THE ASSESSEE IS COSMIC GLOBAL LTD.. BEFORE THE TPO ALSO, ASSESSEE HAD CANVASSED THAT THE SAID CONCERN WAS FUNCTIONALLY NOT COMPARABLE TO THE ASSE SSEE. IT WAS POINTED OUT THAT THE SAID CONCERN IS ENGAGED INTO TRANSLATION, TRANS CRIPTION OF DATA WHICH IS ENTIRELY DIFFERENT FROM THE FUNCTIONS BEING PERFORMED BY THE ASSESSEE. THE TPO HAS REJECTED THE PLEA OF THE ASSESSEE BY MERELY NOTICIN G THAT IN THE PRECEDING ASSESSMENT YEAR 2008-09, THE STATED CONCERN WAS SEL ECTED BY THE ASSESSEE AS A COMPARABLE CONCERN. 17. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT THE PLEA OF THE ASSESSEE FOR EXCLUSION OF COSMIC GLOBAL LTD. IS SUPPORTED BY THE DECISION OF THE PTC SOFTWARE (INDIA) PRIVATE LIMITE D (SUPRA), WHICH HAS ALSO BEEN RENDERED IN THE CONTEXT OF A CONCERN RENDERING SIMILAR SERVICES AS THE ASSESSEE. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 31.10.2014 IS RELEVANT IN THIS REGARD :- 50. THE NEXT COMPANY AS PER THE ASSESSEE WHICH SHO ULD NOT BE TAKEN AS COMPARABLE IS COSMIC GLOBAL LTD. ADMIT TEDLY, THE ASSESSEE HAD NOT OBJECTED TO ITS INCLUSION EITHER BEFORE THE TPO OR DRP. HOWEVER, THE ASSESSEE CHALLENGED THE EXCLUSION OF THE SAID C OMPANY AS COMPARABLE BEFORE THE TRIBUNAL. 51. WE FIND THAT THE SPECIAL BENCH OF CHANDIGARH TR IBUNAL IN THE CASE OF QUARK SYSTEMS PVT. LTD. (SUPRA) HAD HEL D THAT EVEN IF THE ASSESSEE HAD NOT CHALLENGED THE INCLUSION OF THE CO MPARABLE BEFORE THE AUTHORITIES BELOW, THE SAME COULD BE CHALLENGED BEF ORE THE TRIBUNAL FOR THE FIRST TIME. ACCORDINGLY, WE HOLD THAT THE ASSE SSEE AT THIS POINT CAN RAISE THE SAID ISSUE. NOW, THE SECOND PART OF THE OBJECTION WAS THAT THE COMPANY HAD OUTSOURCED ITS VENDOR AND WAS MAKING HI GH VENDOR ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 15 PAYMENTS AS COMPARED TO THE SALES AND HENCE WAS NOT COMPARABLE. WHILE ADJUDICATING THE EXCLUSION OF M/S. VISHAL INF ORMATION TECHNOLOGIES LTD., WE HAVE IN PARAS HEREINABOVE ALREADY CONSIDER ED THIS ASPECT OF THE COMPANIES OUTSOURCING TO VENDORS AND HELD M/S. VISH AL INFORMATION TECHNOLOGIES LTD. TO BE NOT FUNCTIONALLY COMPARABLE . FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT M/S. COSMIC GLOBA L LTD. IS NOT FUNCTIONALLY COMPARABLE. 18. APART FROM THE DECISION IN THE CASE OF PTC SOFT WARE (INDIA) PRIVATE LIMITED (SUPRA), THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD . VS. ADDL.CIT VIDE ITA NO.124/HYD/2014 DATED 31.07.2014 HAS ALSO BEEN RELI ED UPON BY THE ASSESSEE TO JUSTIFY THE EXCLUSION OF M/S COSMIC GLOBAL LTD. FROM THE FINAL SET OF COMPARABLES. THE HYDERABAD BENCH OF THE TRIBUNAL C ONSIDERED AN EARLIER DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERCER CONSULTING (INDIA) P. LTD. VS. DCIT VIDE ITA NO.966/DEL/2014 D ATED 06.06.2014 WHEREIN ALSO THE SAID CONCERN WAS FOUND TO BE INCOMPARABLE WITH AN ITES PROVIDER. THE FOLLOWING DISCUSSION IN THE ORDER OF THE HYDERABAD BENCH OF THE TRIBUNAL IS WORTHY OF NOTICE :- 19. THE MAIN OBJECTION OF ASSESSEE WITH REFERENCE TO THE INCLUSION OF THIS COMPANY IS WITH REFERENCE TO OUTS OURCING OF ITS MAIN ACTIVITY. EVEN THOUGH THIS COMPANY IS IN ASSESSEE'S TP STUDY, IT HAS RAISED OBJECTION BEFORE THE TPO THAT THIS COMPANY'S EMPLOYEE COST IS LESS THAN 21.30% AND MOST OF THE COST IS WITH REFERENCE TO THE OUTSOURCING CHARGES OR TRANSLATION CHARGES, AND AS SUCH THIS IS NOT A COMPARABLE COMPANY. THE TPO, THOUGH CONSIDERED THESE SUBMISSIO NS, REJECTED THE SAME, ON THE REASON THAT THIS DOES NOT IMPACT THE P ROFIT MARGIN OF THE COMPANY. OPPOSING THE VIEW TAKEN BY THE TPO, IT IS SUBMITTED THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE, AS SIMILA R ISSUE WAS DISCUSSED BY THE COORDINATE BENCH OF THE TRIBUNAL(D ELHI) IN THE CASE OF MERCER CONSULTING (INDIA) P. LTD. (SUPRA), VIDE PAR AS 13.2 TO 13.3 WHICH READ AS UNDER- '13.2. NOW COMING TO THE FACTUAL MATRIX OF THIS CAS E, WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CONSTITUTE 57.31% OF THE TOTAL OPERATING COSTS. THI S DOES NOT APPEAR TO US TO BE A VALID REASON FOR ELIMINATING T HIS CASE FROM THE LIST OF COMPARABLES. ON GOING THROUGH THE ANNUAL AC COUNTS OF COSMIC GLOBAL LIMITED, A COPY OF WHICH HAS BEEN PLA CED ON RECORD, WE FIND THAT ITS TOTAL REVENUE FROM OPERATI ONS ARE AT RS.7.37 CRORE DIVIDED INTO THREE SEGMENTS, NAMELY, MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES AT RS.9,90 L ACS, TRANSLATION CHARGES AT RS.6.99 CRORE AND ACCOUNTS BPO AT RS.27. 76 LAC. THE ID. AR HAS MADE OUT A CASE THAT OUTSOURCING ACTIVIT Y CARRIED OUT BY THIS COMPANY CONSTITUTES 57% OF TOTAL EXPENSES. THE REASON FOR WHICH WE ARE NOT AGREEABLE WITH THE ID. AR IS THAT WE HAVE TO EXAMINE THE REVENUE OF THIS CASE ONLY FROM ACCOUNTS BPO SEGMENT AND NOT ON THE ENTITY LEVEL, BEING ALSO FRO M MEDICAL TRANSCRIPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMINING THE RESULTS OF THIS COMPANY FROM THE ACCOUNTS BPO SEGME NT ALONE, THERE IS NO NEED TO EXAMINE THE POSITION UNDER OTHE R SEGMENTS. THE ENTIRE OUTSOURCING IS CONFINED TO TRANSLATION C HARGES PAID AT RS.3.00 CRORE, WHICH IS STRICTLY IN THE REALM OF TH E TRANSLATION SEGMENT, REVENUES FROM WHICH ARE TO THE TUNE OF RS. 6.99 CRORE. IF THIS SEGMENT OF TRANSLATION IS NOT UNDER CONSIDERAT ION FOR DECIDING ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 16 AS TO WHETHER THIS CASE IS COMPARABLE OR NOT, WE CA NNOT TAKE RECOURSE TO THE FIGURES WHICH ARE RELEVANT FOR SEGM ENTS OTHER THAN ACCOUNTS BPO. THUS IT IS HELD THAT THIS CASE CANNOT BE EXCLUDED ON THE STRENGTH OF OUTSOURCING ACTIVITY, WHICH IS A LIEN TO THE RELEVANT SEGMENT. 13.3. HOWEVER, WE FIND THIS CASE TO INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCED BY THE ID. AR TO THE EFFECT THAT TOTAL REVENUE OF THE ACCOUNTS BPO SEGMENT OF COSMIC GLOBA L LIMITED IS VERY LOW AT RS.27.76 LACS. WE HAVE DISCUSSED THI S ASPECT ABOVE IN THE CONTEXT OF CG-VAK'S CASE AND HELD THAT A CAP TIVE UNIT CANNOT BE COMPARED WITH A GIANT CASE AND THUS EXCLU DED CG-VAK WITH TURNOVER FROM ACCOUNTS BPO SEGMENT AT RS.86.10 LACS. AS THE SEGMENTAL REVENUE OF BPO SEGMENT OF COSMIC GLOB AL LIMITED AT RS.27.76 LAC IS STILL ON MUCH LOWER SIDE, THE RE ASONS GIVEN ABOVE WOULD FULLY APPLY TO HOLD COSMIC GLOBAL LIMIT ED AS INCOMPARABLE. THIS CASE IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. ' IN VIEW OF THE DETAILED ANALYSIS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ABOVE REFERRED CASE, IN THIS CASE A LSO WE ACCEPT THE CONTENTIONS OF ASSESSEE AND DIRECT THE ASSESSING OF FICER/TPO TO EXCLUDE THIS COMPARABLE FOR THE SAME REASONS. 19. THE AFORESAID DISCUSSION MADE BY THE RESPECTIVE BENCHES OF THE TRIBUNAL REVEALS THAT IN RELATION TO THE FINANCIAL YEAR UNDE R CONSIDERATION, THE BUSINESS MODEL IN WHICH M/S COSMIC GLOBAL LTD. HAS FUNCTIONE D IS QUITE DISSIMILAR TO THE BUSINESS MODEL OF THE ASSESSEE WHILE CARRYING OUT T HE ACTIVITY OF AN ITES PROVIDER. MOREOVER, NONE OF THE OBJECTIONS RAISED BY THE ASSESSEE HAVE BEEN MET BY THE TPO ON THE BASIS OF ANY COGENT REASONING . ON THAT COUNT ALSO, WE FIND THAT THE PLEA OF THE ASSESSEE TO EXCLUDE M/S C OSMIC GLOBAL LTD. FROM THE FINAL SET OF COMPARABLES IS JUSTIFIED. THE OBJECTI ON OF THE TPO THAT THE SAID CONCERN WAS FOUND COMPARABLE BY THE ASSESSEE IN EAR LIER YEAR CANNOT BE THE SOLE BASIS TO INCLUDE THE SAID CONCERN IN THE LIST OF COMPARABLES, IN VIEW OF THE AFORESAID DISCUSSION. THUS, ASSESSEE SUCCEEDS ON T HIS ASPECT. 18. SINCE THE SAID CONCERN, M/S COSMIC GLOBAL LTD. WAS OPERATING IN DIFFERENT BUSINESS MODEL THAN THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ALSO, THE SAME NEEDS TO BE EXCLUDED FROM THE FINAL SET OF COM PARABLES AND ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SAME FR OM THE FINAL SET OF COMPARABLES. FOLLOWING THE SAME PARITY OF REASONIN G, WE HOLD THAT M/S COSMIC GLOBAL LTD. IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 19. THE LAST PLEA RAISED BY THE ASSESSEE WAS FOR EX CLUSION OF CROSSDOMAIN SOLUTIONS LTD. FROM THE LIST OF COMPARABLES. THE S AID COMPARABLE WAS PART OF THE FINAL LIST OF COMPARABLES SELECTED BY THE TPO FOR B ENCHMARKING THE INTERNATIONAL ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 17 TRANSACTION OF THE ASSESSEE IN ASSESSMENT YEAR 2008 -09. THE SAID COMPARABLE WAS ENGAGED IN HIGH END KPO SERVICES AND HENCE WERE CLAIMED TO BE NOT A COMPARABLE WITH THE ASSESSEE WHICH WAS A NORMAL ITE S PROVIDER. THE TRIBUNAL ACCEPTING THE SAID PLEA OF THE ASSESSEE IN ASSESSME NT YEAR 2008-09 HELD THE SAID CONCERN WAS TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES BY OBSERVING AS UNDER :- 25. THE LAST PLEA OF THE ASSESSEE IS TO EXCLUDE F ROM THE LIST OF COMPARABLES CROSSDOMAIN SOLUTIONS LTD.. IN THIS CONTEXT, BEFOR E THE TPO ASSESSEE SUBMITTED THAT THE SAID CONCERN WAS NOT COMPARABLE WITH THE A SSESSEE. IT WAS POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN THE PAYROLL AC TIVITY APART FROM BEING ENGAGED IN KPO SERVICES. THE ASSESSEE ALSO REFERRE D TO THE WEBSITE OF THE SAID CONCERN TO POINT OUT THAT THE SAID CONCERN WAS IDEN TIFIED AS A KNOWLEDGE PROCESS OUTSOURCING SERVICES PROVIDER (KPO) AND NOT A SIMPL E BUSINESS PROCESS OUTSOURCING SERVICES PROVIDER. BEFORE THE DRP, IT WAS ALSO CONTENDED THAT THE SAID CONCERN WAS ENGAGED IN HIGH END KPO SERVICES W HICH VARIES FROM A ROUTINE LOW END ITES PROVIDER IN TERMS OF SKILL SET USED AN D NATURE OF SERVICES PROVIDED. IT WAS ALSO CONTENDED THAT THE SAID CONCERN HAS DEV ELOPED PRODUCTS FOR EFFECTIVELY SERVICING ITS CUSTOMERS AND THE SAME WA S ENTIRELY DIFFERENT THAN THAT OF THE ASSESSEES BUSINESS OF RENDERING ROUTINE IT ENA BLED SERVICES. AT THE TIME OF HEARING BEFORE US, THE LD. REPRESENTATIVE FOR THE A SSESSEE HAS REFERRED TO THE FOLLOWING TABULATION WHICH BRINGS OUT THE DIFFERENC E BETWEEN E-LEARNING ACTIVITIES CARRIED OUT BY THE ASSESSEE AND THE KPO ACTIVITIES CARRIED OUT BY THE SAID CONCERN :- E-LEARNING KPO THE ASSESSEE PROVIDES LOW-END IT ENABLED SERVICES IN THE FORM OF E-LEARNING SOLUTIONS. KPO IS A FORM OF OUTSOURCING, IN WHICH KNOWLEDGE-RELATED AND INFORMATION-RELATED WORK IS CARRIED OUT BY THE SERVICE PROVIDERS. E-LEARNING SOLUTIONS SERVICES PROVIDED BY THE ASSESSEE ARE NOT VERY COMPLEX IN NATURE AND THUS DO NOT REQUIRE HIGHLY SKILLED PROFESSIONALS TO PERFORM THE FUNCTIONS. UNLIKE THE OUTSOURCING OF MANUFACTURING OR ROUTINE SOFTWARE SERVICES, THIS TYPICALLY INVOLVES HIGH-VALUE WORK CARRIED OUT BY THE HIGHLY SKILLED STAFF. E-LEARNING SOLUTION PROVIDES CANNOT EARN HIGH MARGINS OF PROFITS SINCE THEY PRIMARILY DERIVE THEIR REVENUE FROM PERFORMING FUNCTIONS THAT ARE NOT EXCLUSIVELY PROVIDED BY THEM AND HAVE CLOSE SUBSTITUTES IN THE MARKET. MOST FIRMS PROVIDING KNOWLEDGE PROCESSING POSSESS EXCLUSIVE INFORMATION, KNOWLEDGE AND EXPERIENCE WHICH CANNOT BE FOUND IN MOST OF THEIR COMPETITORS. THUS, THEY TEND TO COMMAND HIGHER MARGINS OF PROFITS. LOW-END IT ENABLED SERVICE KPO FIRMS EARN EXTRAORDI NARY ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 18 PROVIDERS EMPLOY WORKERS WHO HAVE THE BASIC KNOWLEDGE AND CAN BE TRAINED TO PERFORM THE NECESSARY FUNCTIONS. PROFITS DUE TO THE HIGHLY SKILLED RESOURCES THEY EMPLOY IN THE FORM OF HIGHLY-QUALIFIED PROFESSIONALS. 26. ON THE OTHER HAND, THE LD. CIT-DR APPEARING FOR THE REVENUE CONTENDED THAT THE TPO AS WELL AS THE DRP HAVE REJECTED THE P LEA OF THE ASSESSEE AS THE SUBMISSIONS WERE ON A WRONG FOOTING. IT WAS REITER ATED THAT THE NATURE OF SERVICES RENDERED BY THE SAID CONCERN WERE FALLING IN THE CATEGORY OF IT ENABLED SERVICES WHICH IS ALSO BROADLY THE CATEGORY OF THE SERVICES BEING RENDERED BY THE ASSESSEE. THEREFORE, THE SAID CONCERN WAS RIGHTLY INCLUDED BY THE TPO IN THE LIST OF COMPARABLES. 27. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. OSTENSIBLY, THE REASON ADVANCED BY THE TPO TO REJECT THE PLEA OF TH E ASSESSEE ARE TOO GENERAL AND ARE NOT JUSTIFIED. EVEN WHERE TWO CONCERNS MAY BE UNDERTAKING ACTIVITIES WHICH CAN BE BROADLY CATEGORIZED AS ITES IN COMMON PARLANCE BUT WHERE AN ASSESSEE IS ABLE TO ESTABLISH THAT INTRINSICALLY TH E ACTIVITIES ARE NOT COMPARABLE, SUCH A CONCERN WOULD NOT BE INCLUDED FOR THE PURPOS ES OF COMPARABILITY ANALYSIS. IN THE CONTEXT OF THE PRESENT CASE, THE PLEA OF THE ASSESSEE IS THAT THE BUSINESS OF M/S CROSSDOMAIN SOLUTIONS LTD. RANGED FROM HIGH END KPO SERVICES, DEVELOPMENT OF PRODUCTS AND ROUTINE LOW AND IT ENAB LED SERVICES. FOR INSTANT, THE WEBSITE EXTRACT AND ALSO THE ANNUAL REPORT OF T HE SAID CONCERN SHOWS THAT IT WAS ENGAGED IN PAYROLL OUTSOURCING ON A SUBSTANTIVE SCALE. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKE TING SOLUTIONS INDIA PVT. LTD. (SUPRA) FOR THE VERY ASSESSMENT YEAR FOUND THA T THERE WAS NO BIFURCATION AVAILABLE FOR VARIOUS DIVERSIFIED ACTIVITIES BEING CARRIED OUT BY THE SAID CONCERN AND THEREFORE ON AN ENTITY LEVEL THE SAID CONCERN C OULD NOT BE COMPARED TO A NORMAL ITES PROVIDER. IN OUR VIEW, FOLLOWING THE D ECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING S OLUTIONS INDIA PVT. LTD. (SUPRA) WHICH WAS ALSO FOLLOWED BY THE HYDERABAD BE NCH OF THE TRIBUNAL IN THE CASE OF MARKET TOOLS RESEARCH PVT. LTD. VS. ACIT (I TA NO.1811/HYD/2012 DATED 24.10.2013, THE AFORESAID CONCERN IS LIABLE TO BE E XCLUDED FROM THE LIST OF COMPARABLES. 20. FURTHER, THE TRIBUNAL IN BNY MELLON INTERNATION AL OPERATIONS (INDIA) PRIVATE LIMITED VS. DCIT (SUPRA), IN ASSESSMENT YEA R 2009-10 HAD EXCLUDED THE SAID CONCERN AS COMPARABLE BY OBSERVING AS UNDER :- 12. ANOTHER PLEA RAISED BY THE ASSESSEE IS FOR EXC LUSION OF CROSSDOMAIN SOLUTIONS LTD. FROM THE FINAL SET OF COMPARABLES. IN THIS REGARD, ASSESSEE CANVASSED BEFORE THE TPO THAT THE SAID CONCERN WAS FUNCTIONALLY NOT COMPARABLE TO THE ACTIVITY OF IT ENABLED SERVICES BEING CARRIE D OUT BY THE ASSESSEE. IT WAS POINTED OUT BY THE ASSESSEE BEFORE THE TPO THAT THE SAID CONCERN WAS INVOLVED IN VARIOUS ACTIVITIES WHICH INVOLVED OUTSOURCING, H UMAN RESOURCES, INSURANCE, HEALTHCARE/ACCOUNTING AND CONSULTING, BUSINESS EXCE LLENCE, MARKET RESEARCH/ANALYSIS AND IT SERVICES. IT WAS POINTED OUT THAT THE ABOVE FUNCTIONS BEING PERFORMED BY THE SAID CONCERN WERE NOT COMPAR ABLE TO THE ACTIVITY OF AN IT ENABLED SERVICE PROVIDER UNDERTAKEN BY THE ASSESSEE . IT WAS ALSO CANVASSED THAT THERE WAS NO SEGMENTAL PROFITABILITY AVAILABLE FROM THE ANNUAL FINANCIAL STATEMENT OF THE ASSESSEE AND THE SAID CONCERN WAS NOT A COMPARABLE CONCERN ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 19 ON THE ENTITY LEVEL. THE TPO HAS REJECTED THE PLEA OF THE ASSESSEE ON SIMILAR GROUNDS AS TAKEN BY HIM FOR REJECTING THE ASSESSEE S PLEA FOR EXCLUSION OF ACCENTIA TECHNOLOGIES LTD.. 13. BEFORE US, THE LD. REPRESENTATIVE HAS RELIED UP ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS . M/S WILLIS PROCESSING SERVICES (INDIA) PVT. LTD. VIDE ITA NO.2152/MUM/201 4 DATED 10.10.2014 IN ORDER TO JUSTIFY THE EXCLUSION OF CROSSDOMAIN SOLUTIONS L TD.. 14. WE FIND THAT M/S WILLS PROCESSING SERVICES (IND IA) PVT. LTD. (SUPRA) WAS A CONCERN WHERE THE TESTED PARTY WAS PROVIDING IT ENA BLED SERVICES TO ITS VARIOUS GROUP CONCERNS AND ACTIVITIES WERE QUITE SIMILAR TO THE ACTIVITY OF IT ENABLED SERVICES RENDERED BY ASSESSEE TO ITS AFFILIATES. I N THIS CONTEXT, THE CONCERN, M/S CROSSDOMAIN SOLUTIONS LTD. WAS FOUND TO BE FUNCTION ALLY NOT COMPARABLE BY THE DRP AND SUCH DECISION WAS AFFIRMED BY THE TRIBUNAL BY MAKING THE FOLLOWING DISCUSSION :- 3. M/S CROSSDOMAIN SOLUTIONS LTD. THIS COMPANY HAS BEEN REJECTED BY THE DRP ON THE GR OUND THAT IT IS INDULGED IN HIGH SKILL IT SERVICES WHICH ARE NOT CO MPARABLE TO THE ROUTINE I.T. ENABLED SERVICES. THE TRIBUNAL HYDERABAD BENC H IN THE CASE OF M/S MARKET TOOLS RESEARCH PVT. LTD. IN ITA NO.1811/HYD/ 2012 HAS HELD THAT THIS COMPANY IS PROVIDING SERVICES WHICH ARE IN THE NATURE OF KPO. FURTHER, THE COMPANY IS ENGAGED IN PROVIDING NICHE SERVICES AS WELL AS DEVELOPED ITS OWN BRAND EXDION TO TARGET THE INSU RANCE INDUSTRY IN US. THE TRIBUNAL FOLLOWED THE FINDINGS OF THE BANGALORE BENCH IN THE CASE OF M/S SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. IN ITA NO.1316/BANG/2012 WHILE REJECTING THE ISSUE OF THIS COMPANY IN THE FINAL SET OF COMPARABLES. RESPECTFULLY FOLLOWING THE FIN DINGS OF THE CO-ORDINATE BENCH, WE UPHOLD THE DIRECTIONS OF THE DRP FOR THE REJECTION OF THIS COMPANY FROM THE FINAL LIST OF COMPARABLE. 15. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BE EN RENDERED IN THE CONTEXT OF THE SAME ASSESSMENT YEAR, WE UPHOLD ASSE SSEES PLEA FOR EXCLUSION OF CROSSDOMAIN SOLUTIONS LTD. FROM THE FINAL SET OF COMPARABLES. WE HOLD SO. 21. THE BUSINESS ACTIVITY CARRIED ON BY THE SAID CO MPARABLE BEING AT VARIANCE WITH BUSINESS OF THE ASSESSEE BEFORE US AND FOLLOWI NG THE PARITY OF REASONING LAID DOWN BY THE TRIBUNAL VIDE VARIOUS ORDERS OF DIFFERE NT ASSESSEES, WE HOLD THAT THE SAID COMPARABLE IS TO BE EXCLUDED FROM THE FINAL SE T OF COMPARABLES. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT M/S CROS SDOMAIN SOLUTIONS LTD. IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 22. THE ASSESSING OFFICER IS THUS DIRECTED TO RE-CO MPUTE THE MARGIN OF THE COMPARABLES AFTER EXCLUDING THE FOUR CONCERNS I.E. (I) CORAL HUB LTD.; (II) ACCENTIA TECHNOLOGIES LTD.; (III) COSMIC GLOBAL LTD.; AND, ( IV) CROSSDOMAIN SOLUTIONS LTD. ITA NO.267/PN/2014 MAXIMIZE LEARNING PVT. LTD. 20 AND DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNA TIONAL TRANSACTIONS IN THE HANDS OF THE ASSESSEE. 23. APART FROM MAKING SUBMISSIONS WITH REGARD TO TH E GROUND OF APPEAL NO.4 NO OTHER PLEA HAS BEEN RAISED BY THE ASSESSEE IN RE SPECT OF OTHER GROUNDS OF APPEAL AND HENCE GROUNDS OF APPEAL RAISED BY THE AS SESSEE ARE PARTLY ALLOWED. 24. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSE E AGAINST THE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT BEING CONSEQ UENTIALLY IS DISMISSED. 25. THE GROUND OF APPEAL NO.7 RAISED BY THE ASSESSE E AGAINST THE INITIATION OF PENALTY PROCEEDINGS BEING PRE-MATURE IS ALSO DISMIS SED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH APRIL, 2015 SUJEET COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE DRP, PUNE; 4) THE DIT (INTERNATIONAL TAXATION), PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE