Principal Global Services Private Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 280/PUN/2014

• Counselvise Citation: 28024514 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS M S VERMA; B G REDDY
• Assessee Lawyers: ROSHAN LUNAWAT
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92B; 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.280/PN/2014 (ASSESSMENT YEAR : 2009-10) PRINCIPAL GLOBAL SERVICES PVT. LTD., LEVEL 6 & 7, TOWER VI, CYBERCITY, MAGARPATTA CITY, HADAPSAR, PUNE 411 013. PAN : AADCP7369P . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE- 1(2), PUNE. . RESPONDENT APPELLANT BY : MR. KANCHAN KAUSHAL & MR. ROSHAN LUNAWAT RESPONDENT BY : MRS. M.S. VERMA, CIT & MR. B. G. REDDY, CIT DATE OF HEARING : 13-03-2015 DATE OF PRONOUNCEMENT : 10-04-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE PERTAINING TO THE ASSESSMENT YEAR 2009-10, WHICH IS DIRECTED AGAI NST THE ORDER OF THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE ( IN SHORT THE ASSESSING OFFICER) PASSED U/S 143(3) R.W.S. 144C(1) OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 07.01.2014, PASSED IN CO NFORMITY WITH THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL, PUNE (IN SHO RT THE DRP) DATED 31.12.2013. 2. IN THIS APPEAL, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER: - 1. THE LD. ASSESSING OFFICER ('AO') PURSUANT TO TH E DIRECTIONS OF THE LD. DISPUTE RESOLUTION PANEL ('DRP') ERRED IN REJECTING THE BENCHMARKING APPROACH ADOPTED/CONTEMPORANEOUS DOCUMENTATION MAIN TAINED BY THE APPELLANT AND THEREBY MAKING A TRANSFER PRICING ADJ USTMENT OF RS. 93,951,619 TO THE INCOME OF THE APPELLANT BY HOLDING THAT THE INTERNATIONAL TRANSACTION, ITA NO.280/PN/2014 PERTAINING TO PROVISION OF INFORMATION TECHNOLOGY ( 'IT OR SOFTWARE SERVICES') AND IT ENABLED BACK OFFICE SUPPORT SERVICES ('ITES SERVICES OR BACK OFFICE SUPPORT SERVICES') TO THE ASSOCIATED ENTERPR ISE ('AE'), ARE NOT AT ARM'S LENGTH UNDER THE INCOME-TAX ACT, 1961 ('THE ACT'). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. DRP/AO ERRED IN MODIFYING THE BENCHMARKING ANALYSIS, AS CO NDUCTED BY THE APPELLANT USING TRANSACTIONAL NET MARGIN METHOD ('TNMM') FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS PERTAINING TO PROVISION OF IT AND ITES SERVICES TO THE AE, AND THEREBY MODIFYING THE SET OF COMPARABLES. I N DOING SO, THE LD. DRP/AO SPECIFICALLY ERRED IN: A) ELIMINATING COMPANIES THAT WOULD OTHERWISE BE CO MPARABLES, BUT FOR THE FACT THAT THEY ARE LOSS MAKING; B) INCLUDING THE COMPANIES WHICH ARE NOT FUNCTIONAL LY COMPARABLE TO THE IT AND ITES SERVICES RENDERED BY THE APPELLANT IN F INAL SET OF COMPARABLES ON AN ADHOC BASIS, THEREBY RESORTING TO CHERRY PICKING OF COMPARABLES; C) REJECTING COMPANIES FUNCTIONALLY SIMILAR T O THAT OF THE APPELLANT'S BUSINESS OPERATIONS OF PROVISION OF IT AND ITES SERVICES FROM FINAL SET OF COMPARABLES (IDENTIFIED BASED ON THE FRESH SEARCH CONDUCTED BY THE APPELLANT ON A WITHOUT PREJUDICE B ASIS). 3. THE LD. DRP/AO ERRED IN CONSIDERING THE SINGLE Y EAR DATA FOR THE COMPARABLES I.E. DATA FOR FY 2008-09 ONLY AND DISRE GARDING MULTIPLE YEAR DATA WHICH WAS CONSIDERED BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B(4) OF THE INCOME-TAX RULE, 1962 ('RULES'). 4. THE LD. DRP / AO ERRED IN NOT ALLOWING AN ADJUST MENT FOR THE DIFFERENCE BETWEEN THE LEVEL OF RISK BORNE/ASSETS E MPLOYED BY THE COMPARABLES AND THE APPELLANT AS PROVIDED BY THE AP PELLANT, WITHOUT PROVIDING ANY COGENT REASONS, AND DISREGARDING THE PROVISIONS OF RULES 10B (3) READ WITH RULE 10C OF THE RULES. IN DOING SO, THE LD. DR P / AO ERRED BY: (I) FAILING TO CAPTURE THAT THE APPELLANT IS A ROUT INE CAPTIVE SERVICE PROVIDER AS AGAINST THE COMPARABLE COMPANIES SELECTED BY THE LD. TPO WHICH INCLUDE ENTREPRENEURIAL COMPANIES AND HENCE AN ADJU STMENT IS NECESSARY; (II) DISREGARDING THE PROVISIONS OF RULES 10B(3) RE AD WITH RULE 10C OF THE RULES. 5. THE LD. AO WHILE PASSING THE ASSESSMENT ORDER HA S ERRED BY NOT FOLLOWING THE DRP DIRECTIONS FOR DISPOSING OFF THE RECTIFICATION APPLICATION FILED BY THE APPELLANT FOR RECTIFYING CERTAIN MISTAKES IN THE TRANSFER PRICING ORDER. 6. THE LD. AO WHILE PASSING THE ASSESSMENT ORDER HA S ERRED IN COMPUTING THE TAX COMPUTATION BY NOT CONSIDERING TH E ADVANCE TAX AND TAX DEDUCTED AT SOURCE AMOUNTS. FURTHER, ON A WITHOUT P REJUDICE BASIS, THE AO HAS ALSO ERRED IN THE TAX COMPUTATION BY NOT CONSID ERING THE CREDIT OF MINIMUM ALTERNATE TAX ('MAT') AVAILABLE TO THE APPELLANT. 3. IN THIS CASE, ALTHOUGH THE ASSESSEE COMPANY HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SUBSTANTIVE DISPUTE IS WI TH REGARD TO AN ADDITION OF RS.9,39,51,619/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DETERMINATION ITA NO.280/PN/2014 OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACT IONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. 4. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE SOLUTIONS AND BACK OFFICE OPERATIONS EXCLUSIVELY TO ITS ASSOCIATED ENTERPRISE S ABROAD. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT FILED A RET URN OF INCOME DECLARING TOTAL INCOME OF RS.2,33,171/-, WHICH WAS SUBJECT TO A SCR UTINY ASSESSMENT. THE INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES RELATED TO PROVISION OF SOFTWARE SERVIC ES AND PROVISION OF BACK OFFICE SUPPORT SERVICES AMOUNTING TO RS.45,26,17,03 8/- AND RS.18.82.13.428/- RESPECTIVELY. ON A REFERENCE MADE BY THE ASSESSING OFFICER, THE TRANSFER PRICING OFFICER (TPO) PASSED AN ORDER U/S 92CA(3) O F THE ACT DATED 28.01.2013 DETERMINING THE ARM'S LENGTH PRICE OF TH E AFORESAID INTERNATIONAL TRANSACTIONS AT A FIGURE HIGHER THAN THEIR STATED V ALUES BY A SUM OF RS.9,39,51,619/-. AFTER THE ASSESSING OFFICER PASS ED A DRAFT ASSESSMENT ORDER U/S 143(3) R.W.S. 144C(1) OF THE ACT DATED 26 .03.2013 PROPOSING THE ABOVE ADDITION TO THE RETURNED INCOME, ASSESSEE PRE FERRED TO RAISE OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) WHO VIDE ITS ORDER DATED 31.12.2013 PRIMARILY REJECTED THE PLEAS OF THE ASSE SSEE AND UPHELD THE DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNAT IONAL TRANSACTIONS AS DONE BY THE TPO. AS A CONSEQUENCE, THE ASSESSING OFFICER H AS PASSED AN ASSESSMENT ORDER U/S 143(3) R.W.S. 144C(13) OF THE ACT DATED 07.01.2014 WHEREBY ADJUSTMENT OF RS.6,70,55,721/- AND RS.2,68, 95,897/- HAS BEEN MADE TO THE STATED VALUES OF THE INTERNATIONAL TRANSACTI ONS OF PROVISION OF SOFTWARE SERVICES AND PROVISIONS OF BACK OFFICE SUPPORT SERV ICES RESPECTIVELY RENDERED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES. THE AFORESAID ADDITION MADE TO THE RETURNED INCOME IS THE SUBJECT-MATTER OF DISPUT E BEFORE US. ITA NO.280/PN/2014 5. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE F OR THE ASSESSEE HAD CONFINED HIS ARGUMENTS SUBSTANTIVELY WITH RESPECT T O THE ABOVE NOTED GROUND OF APPEAL NO.2 WHEREBY INCLUSION AND EXCLUSION OF C ERTAIN CONCERNS FROM THE FINAL SET OF COMPARABLES ADOPTED BY THE TPO IS SOUG HT TO BE CHALLENGED. 6. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS, TH E FOLLOWING DISCUSSION IS RELEVANT. THE APPELLANT COMPANY IS A 100% EXPORT O RIENTED UNIT (EOU) REGISTERED WITH THE SOFTWARE TECHNOLOGY PARKS OF IN DIA (STPI) AND ITS INCOME DERIVED FROM SUCH ACTIVITIES IS ELIGIBLE FOR DEDUCT ION U/S 10A OF THE ACT. PRIMARILY, ASSESSEE IS ENGAGED IN PROVISION OF SOFT WARE SERVICES AND BACK OFFICE SUPPORT SERVICES TO ITS PARENT ASSOCIATED EN TERPRISES, NAMELY, THE PRINCIPAL FINANCIAL GROUP (IN SHORT PFG). PERTIN ENTLY, ASSESSEE IS PROVIDING SUCH SERVICES ONLY TO ITS ASSOCIATED ENTERPRISES AN D THEREFORE IT CAN BE UNDERSTOOD AS A CAPTIVE SERVICE PROVIDER. FURTHER, ASSESSEE IS BEING REMUNERATED BY ITS ASSOCIATED ENTERPRISES ON A COST PLUS MARKUP BASIS. AS A CONSEQUENCE, IT IS TO BE UNDERSTOOD THAT THE ASSESS EE IS A CAPTIVE SERVICE PROVIDER WHICH IS OPERATING WITHIN ASSURED RETURN O N COSTS INCURRED BY IT. IN ORDER TO APPRECIATE THE SERVICES BEING RENDERED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES, WHICH REFLECT INTERNATIONA L TRANSACTIONS WITHIN THE MEANING OF SECTION 92B OF THE ACT, IT IS APPROPRIAT E TO OBSERVE THAT PFG IS A GLOBAL FINANCIAL SERVICES LEADER WHICH OFFERS WIDE RANGE OF FINANCIAL PRODUCTS AND SERVICES, SUCH AS RETIREMENT AND INVESTOR SERVI CES, INSURANCE, ASSET MANAGEMENT AND FINANCIAL SERVICES THROUGH FINANCIAL SERVICES COMPANY. PFG IS NOT ENGAGED IN DEVELOPING AND SELLING SOFTWARE P RODUCTS AND SUCH LIKE SERVICES I.E. SOFTWARE DEVELOPMENT SERVICES REQUIRE D TO UNDERTAKE ITS CORE BUSINESS AREA OF FINANCIAL PRODUCTS AND SERVICES AR E OUTSOURCED TO THE ASSESSEE COMPANY. THE SOFTWARE DEVELOPMENT SERVICE S RENDERED BY THE ASSESSEE COMPRISED OF APPLICATION DEVELOPMENT AND Q UALITY ASSURANCE SERVICES WHICH HAVE BEEN CATEGORIZED AS PROVISION O F SOFTWARE SERVICES AND ITA NO.280/PN/2014 FOR THE YEAR UNDER CONSIDERATION, ASSESSEE HAS BEEN REMUNERATED FOR SUCH SERVICES AT RS.45,26,17,038/-. THE SECOND STREAM O F INTERNATIONAL TRANSACTIONS ENTERED WITH THE ASSOCIATED ENTERPRIS ES RELATE TO THE ADMINISTRATIVE SUPPORT SERVICES PROVIDED BY THE ASS ESSEE FOR VARIOUS SERVICE DIVISIONS OF PFG E.G. INVESTOR SERVICES DIVISION, H EALTH SERVICES DIVISION AND INDIVIDUAL LIFE INSURANCE, UNDERWRITING OPERATIONS DIVISION, ETC.. SUCH SERVICES HAS BEEN CATEGORIZED AS PROVISION OF BACK OFFICE SU PPORT SERVICES FOR WHICH ASSESSEE HAS BEEN REMUNERATED DURING THE YEAR UNDER CONSIDERATION AT RS.18,82,13,428/-. 7. BOTH THE AFORESAID CATEGORY OF INTERNATIONAL TRA NSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES WERE SUBJE CT-MATTER OF DETERMINATION OF THE ARM'S LENGTH PRICE BY THE TPO IN ITS ORDER D ATED 28.01.2013 (SUPRA). THE TPO HAS DIFFERED WITH THE ASSERTIONS OF THE ASS ESSEE THAT THE STATED VALUE OF THE INTERNATIONAL TRANSACTIONS ARE AN ARM'S LENG TH PRICE. INSTEAD, AS PER THE TPO IN BOTH SEGMENTS, ADJUSTMENTS ARE REQUIRED TO B E MADE HAVING REGARD TO THE ARM'S LENGTH PRICE DETERMINED ON AN APPLICATION OF THE TRANSACTIONAL NET MARGIN (TNM) METHOD. NOTABLY, IN THE TRANSFER PRIC ING STUDY CARRIED OUT BY THE ASSESSEE, TNM METHOD WAS SELECTED AS THE MOST A PPROPRIATE METHOD IN ORDER TO BE BENCHMARK THE INTERNATIONAL TRANSACTION S OF PROVISION OF SOFTWARE SERVICES AND PROVISION OF BACK OFFICE SUPPORT SERVI CES UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. IN SO FA R AS THE APPLICATION OF THE TNM METHOD IN ORDER TO DETERMINE THE ARM'S LENGTH P RICE IS CONCERNED, THERE IS NO DIFFERENCE BETWEEN THE ASSESSEE AND THE REVEN UE. 8. HOWEVER, THE TPO HAS PRIMARILY DIFFERED WITH THE ASSESSEE ON ADOPTION OF CERTAIN CONCERNS AS COMPARABLES AND IN CONSIDERI NG SINGLE YEAR FINANCIAL DATA OF THE COMPARABLES RELEVANT TO THE YEAR UNDER CONSIDERATION AS AGAINST ITA NO.280/PN/2014 THE APPROACH OF THE ASSESSEE IN ITS TRANSFER PRICIN G STUDY TO CONSIDER MULTIPLE YEARS DATA OF THE COMPARABLES CONCERNS. 9. IN SO FAR AS THE SEGMENT RELATING TO THE PROVISI ON OF SOFTWARE SERVICES IS CONCERNED, THE PROFIT LEVEL INDICATOR (PLI) WAS COM PUTED BY THE ASSESSEE AT 15.66% BASED ON THE FORMULA OPERATING PROFIT/TOTAL COST (OP/TC). ON THE BASIS OF THE COMPARABLES SELECTED IN THE TRANSFER P RICING STUDY THE ARITHMETIC MEAN OF THE PLI OF THE COMPARABLES WAS TAKEN AT 14. 48% AND ON THIS BASIS ASSESSEE HAD ASSERTED BEFORE THE TPO THAT ITS INTER NATIONAL TRANSACTIONS OF PROVISION OF SOFTWARE SERVICES TO THE ASSOCIATED EN TERPRISES WAS AT AN ARM'S LENGTH PRICE. 10. AFTER REJECTING CERTAIN COMPARABLES CONCERNS SE LECTED IN THE TRANSFER PRICING STUDY AND INTRODUCING CERTAIN NEW CONCERNS AS COMPARABLES AND CONSIDERING THE SINGLE YEAR FINANCIAL DATA OF THE C OMPARABLES, THE TPO COMPUTED THE ARITHMETIC MEAN PLI I.E. OP/TC OF THE COMPARABLES AT 32.79%. THE FINAL SET OF COMPARABLES AND THE CORRESPONDING PLI TAKEN BY THE TPO IS AS UNDER :- SR.NO. COMPANY OP/TC USING SINGLE YEAR DATA FOR FY 2008-09 1. MINDTREE CONSULTING LTD. 27.60% 2. AKSHAY SOFTWARE TECHNOLOGIES LTD. 8.23% 3. F C S SOFTWARE SOLUTIONS LTD. 15.61% 4. L G S GLOBAL LTD. 18.88% 5. COMPUCOM SOFTWARE LTD. (SOFTWARE SEGMENT) 42.09% 6. TRANSWORLD INFOTECH LTD. (STERLING INTERNATIONAL ENTERPRISES LTD.) 46.73% 7. KALS INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGMENT) 42.36% 8. ICSA (INDIA) LTD. (ESS SEGMENT) 60.78% ARITHMETIC MEAN 32.79% 11. IN THIS MANNER, BY ADOPTING THE AFORESAID FINAL SET OF COMPARABLES, THE TPO COMPARED THE ASSESSEES PLI OF 15.66% IN THE SE GMENT OF PROVISION OF SOFTWARE SERVICES WITH THE ARITHMETIC MEAN PLI OF T HE COMPARABLES AT 32.79% ITA NO.280/PN/2014 AND ACCORDINGLY COMPUTED AN ADJUSTMENT OF RS.6,70,5 5,721/- WHICH WAS REQUIRED TO BE MADE TO THE STATED VALUE IN ORDER TO DETERMINE THE ARM'S LENGTH PRICE OF THE TRANSACTIONS RELATING TO THE PROVISION OF SOFTWARE SERVICES TO THE ASSOCIATED ENTERPRISES. 12. ON THIS ASPECT, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS MADE THREE-FOLD ARGUMENTS. FIRSTLY, IT IS CONTENDED THA T THE FOLLOWING CONCERNS, NAMELY, (I) COMPUCOM SOFTWARE LTD. (SOFTWARE SEGMEN T); (II) TRANSWORLD INFOTECH LTD. (STERLING INTERNATIONAL ENTERPRISES L TD.); (III) KALS INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGMENT); AND, ( IV) ICSA (INDIA) LTD. (ESS SEGMENT) ARE LIABLE TO BE EXCLUDED FROM THE FINAL S ET OF COMPARABLES. SECONDLY, IT IS SOUGHT TO BE MADE OUT THAT THE TPO HAS ERRED IN ADOPTING THE MARGIN OF 27.60% IN THE CASE OF MINDTREE CONSULTING LTD. INASMUCH AS ACCORDING TO THE ASSESSEE, ONLY THE MARGIN RELATING TO THE IT SERVICES SEGMENT OF THE SAID CONCERN IS TO BE ADOPTED WHICH COMES TO 5.27%. THIRDLY, IT IS ALSO SOUGHT TO BE POINTED OUT THAT THE TPO ERRED IN NOT INCLUDING TECHPROCESS SOLUTIONS LTD. (SOFTWARE SEGMENT) AND THINKSOFT GLO BAL SERVICES LTD. IN THE FINAL SET OF COMPARABLES. 13. IN THIS BACKGROUND, THE RIVAL CONTENTIONS HAVE BEEN HEARD WITH RESPECT TO THE ADDITION RELATING TO THE INTERNATIONAL TRANS ACTIONS OF PROVISION OF SOFTWARE SERVICES TO THE ASSOCIATED ENTERPRISES. 14. REGARDING THE KALS INFORMATION SYSTEMS LTD. (AP PLICATION SOFTWARE SEGMENT), THE CASE SETUP BY THE ASSESSEE IS THAT TH E SAID CONCERN IS FUNCTIONALLY NOT COMPARABLE WITH THE ACTIVITY OF PR OVISION OF SOFTWARE SERVICES RENDERED BY THE ASSESSEE. ACCORDING TO THE ASSESSE E, THE SAID CONCERN IS ENGAGED IN DEVELOPING SOFTWARE PRODUCTS AS WELL AS PROVISION OF SOFTWARE DEVELOPMENT SERVICES WHEREAS ASSESSEE IS ONLY ENGAG ED IN PROVIDING ITA NO.280/PN/2014 SOFTWARE DEVELOPMENT SERVICES. AT THE TIME OF HEAR ING, THE LD. REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE COPY OF ANNUAL REP ORT OF THE SAID CONCERN, WHEREIN AS PER SCHEDULE NO.18 RELATING TO NOTES TO THE FINANCIAL STATEMENTS, IT IS STATED THAT THE SAID CONCERN WAS NOT ONLY ENGAGE D IN DEVELOPMENT OF SOFTWARE SERVICES BUT ALSO IN DEVELOPMENT OF SOFTWA RE PRODUCTS AND ALSO ENGAGED IN RUNNING A TRAINING CENTRE FOR SOFTWARE P ROFESSIONALS ON ONLINE PROJECTS. FURTHER, IT HAS BEEN SUBMITTED BEFORE TH E LOWER AUTHORITIES AS WELL AS BEFORE US THAT THE WEBSITE OF THE SAID CONCERN ALSO MAKES OUT VARIOUS SOFTWARE PRODUCTS DEVELOPED BY THE SAID CONCERN. IT WAS POI NTED OUT THAT THE TPO IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 AS ALSO FOR ASSESSMENT YEAR 2010-11 IN HIS ORDERS PASSED U/S 92 CA(3) OF THE ACT DATED 28.01.2013 AND 29.01.2014 RESPECTIVELY EXCLUDED THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. IT WAS ALSO POINTED OUT THAT UNDER IDENTICAL CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUNAL IN TH E CASE OF PTC SOFTWARE (INDIA) PRIVATE LIMITED VS. DCIT VIDE ITA NO.336/PN /2014 DATED 31.10.2014 FOR ASSESSMENT YEAR 2009-10 HAS HELD THAT THE SAID CONCERN WAS NOT COMPARABLE TO AN ASSESSEE WHICH WAS ENGAGED IN PROV ISION OF ONLY SOFTWARE DEVELOPMENT SERVICES. 15. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE APPEARING FOR THE REVENUE HAS PRIMARILY RELIED UPON THE STAND OF THE TPO AS CONTAINED IN PARA 10 OF THE IMPUGNED ORDER. AS PER THE TPO, THE APPLICATION SOFTWARE SEGMENT OF THE SAID CONCERN WAS ALSO UNDERTAKING SO FTWARE DEVELOPMENT SERVICES AND THEREFORE IT WAS LIABLE TO BE INCLUDED AS A COMPARABLE. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE FIND THAT THE POINT MADE OUT BY THE ASSESSEE FOR EXCLUSION OF KAL S INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGMENT) IS ON A SOUND F OOTING INASMUCH AS THE SAID CONCERN IS FUNCTIONALLY DISTINCT FROM THE ACTI VITIES OF PROVISION OF SOFTWARE ITA NO.280/PN/2014 SERVICES RENDERED BY THE ASSESSEE. OSTENSIBLY, FOR THE VERY SAME ASSESSMENT YEAR IN THE CASE OF PTC SOFTWARE (INDIA) PRIVATE LIMITED (SUPRA), THE PUNE BENCH OF THE TRIBUNAL FOUND THAT THE SAID CONCERN WAS FUNCTIONALLY DIFFERENT FROM A CONCERN WHICH WAS UNDERTAKING PURE SOFTWARE DEVELOPMENT SERVICES. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 31.10.2014 (SUPRA) IS AS UNDER :- 27. THE ASSESSEE IS AGGRIEVED BY THE INCLUSION OF ITEM AT SR NO.5 KALS INFORMATION SYSTEMS LTD. (SEG). IT IS THE CASE OF THE ASSESSEE THAT THE SAID COMPANY WAS INCLUDED BY THE TPO IN ITS STUDY RELATI NG TO ASSESSMENT YEAR 2007-08 AND THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1605/PN/2011 RELATING TO ASSESSMENT YEAR 2007-08 VIDE ORDER DATE D 30.04.2013 HAD HELD THE SAID COMPANY TO BE NOT FUNCTIONALLY COMPARABLE WITH THE ASSESSEE. THE RELEVANT FINDING OF THE TRIBUNAL VIDE PARA 19 IS AS UNDER: 19. IN OUR CONSIDERED OPINION, THE POINT RAISED BY THE ASSESSEE IS POTENT IN AS MUCH AS IT IS QUITE EVIDENT THAT THE S AID CONCERN (KALS INFORMATION SYSTEMS LTD.) HAS NOT BEEN FOUND TO BE FUNCTIONALLY COMPARABLE WITH THE ASSESSEE IN THE IMMEDIATELY PRE CEDING ASSESSMENT YEAR AND IN THE PRESENT YEAR ALSO, ON TH E BASIS OF THE ANNUAL REPORT, REFERRED TO IN THE WRITTEN SUBMISSIO NS ADDRESSED TO THE LOWER AUTHORITIES, THE ASSESSEE HAS CORRECTLY ASSER TED OUT THAT THE SAID CONCERN WAS INTER ALIA ENGAGED IN SALE OF SOFTWARE PRODUCTS, WHICH WAS QUITE DISTINCT FROM THE ACTIVITY UNDERTAKEN BY THE ASSESSEE IN THE IT SERVICES SEGMENT. AT THE TIME OF HEARING, NEITH ER IS THERE ANY ARGUMENT PUT FORTH BY THE REVENUE AND NOR IS THERE ANY DISCUSSION EMERGING FROM THE ORDERS OF THE LOWER AUTHORITIES A S TO IN WHAT MANNER THE FUNCTIONAL PROFILE OF THE SAID CONCERN HAS UNDE RGONE A CHANGE FROM THAT IN THE IMMEDIATELY PRECEDING YEAR. THEREFORE, HAVING REGARD TO THE FACTUAL ASPECTS BROUGHT OUT BY THE ASSESSEE, IT IS CORRECTLY ASSERTED THAT THE APPLICATION SOFTWARE SEGMENT OF THE SAID C ONCERN IS NOT COMPARABLE TO THE ASSESSEES SEGMENT OF IT SERVICES . 28. IN THE YEAR UNDER CONSIDERATION ALSO, THE SAID COMPANY KALS INFORMATION SYSTEMS LTD. IS ENGAGED IN THE SALE OF SOFTWARE PRODUCTS, WHICH IS APPARENT FROM THE FINANCIAL STATEMENTS AND NOTES TO ACCOUNTS FILED BY THE ASSESSEE AT PAGES 479 TO 489 OF THE PAPER BOOK. TH E SAID COMPANY BEING NOT FUNCTIONALLY COMPARABLE IN VIEW OF THE FACTUAL ASPECTS REFERRED TO BY THE ASSESSEE AND IN VIEW OF FINDING OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08, WE HOLD THAT THE APPLICATI ON OF SOFTWARE SEGMENT OF THE SAID CONCERN WAS NOT COMPARABLE TO THE ASSESSEE S SEGMENT OF IT SERVICES. 17. NOTABLY, THE TRIBUNAL HAD FOLLOWED ITS EARLIER DECISION IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. FOR ASSESSMENT YEAR 2007-08 DATED 30.04.2013. EVIDENTLY, THE IT SERVICES SEGMENT OF PTC SOFTWARE (INDIA) PVT. ITA NO.280/PN/2014 LTD. (SUPRA) WAS ENGAGED IN RENDERING SOFTWARE DEVE LOPMENT SERVICES WHICH DID NOT INCLUDE DEVELOPMENT OF ANY SOFTWARE PRODUCT S AS WAS BEING DONE BY KALS INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGMENT). OSTENSIBLY, IN THE CASE OF THE APPELLANT ALSO IN THE COURSE OF RENDERING OF PROVISION OF SOFTWARE SERVICES TO THE ASSOCIATED ENTERPRISES, TH ERE IS NO DEVELOPMENT OF SOFTWARE PRODUCTS, WHICH IS DIFFERENT FROM THE SITU ATION IN THE CASE OF KALS INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGM ENT); AND, THEREFORE FOLLOWING THE AFORESAID PRECEDENTS, THE SAID CONCER N IS LIABLE TO EXCLUDED FROM THE FINAL SET OF COMPARABLES. MOREOVER, WE HAVE AL SO PERUSED THE ORDERS PASSED BY THE TPO U/S 92CA(3) FOR ASSESSMENT YEAR 2 007-08 (SUPRA) AS ALSO FOR ASSESSMENT YEAR 2010-11 (SUPRA) WHEREIN THE PLE A OF THE ASSESSEE FOR EXCLUSION OF KALS INFORMATION SYSTEMS LTD. (APPLICA TION SOFTWARE SEGMENT) HAS BEEN ACCEPTED. FOR ALL THE AFORESAID REASONS, WE UPHOLD THE PLEA OF THE ASSESSEE FOR EXCLUSION OF KALS INFORMATION SYSTEMS LTD. (APPLICATION SOFTWARE SEGMENT) FROM THE FINAL SET OF COMPARABLES . WE DIRECT ACCORDINGLY. 18. THE SECOND POINT MADE OUT BY THE ASSESSEE IS FO R EXCLUSION OF TRANSWORLD INFOTECH LTD. (EARLIER KNOWN AS STERLING INTERNATIONAL ENTERPRISES LTD.) FROM THE FINAL SET OF COMPARABLES. THE TPO V IDE HIS DISCUSSION IN PARA 10(8) INCLUDED THE SAID CONCERN IN THE FINAL SET OF COMPARABLES AND REJECTED ASSESSEES PLEA FOR ITS EXCLUSION. THE SHORT POINT MADE OUT BY THE ASSESSEE BEFORE US IS TO THE EFFECT THAT THE SAID CONCERN WA S NOT INCLUDIBLE IN THE FINAL SET OF COMPARABLES FOR THE REASON THAT THE ASSESSEE S FINANCIAL YEAR UNDER CONSIDERATION IS 01.04.2008 TO 31.03.2009 WHEREAS T HE RELEVANT DATA OF THE SAID CONCERN IS OF A DIFFERENT FINANCIAL PERIOD BEI NG FROM 01.07.2008 TO 30.06.2009. IT WAS THEREFORE POINTED OUT THAT SINC E THE DATA OF THE SAID CONCERN DID NOT CORRESPOND TO THE FINANCIAL YEAR OF THE ASSESSEE, THE SAID CONCERN CANNOT BE CONSTRUED TO BE A GOOD COMPARABLE . WE FIND THAT FACTUALLY THE AFORESAID POSITION IS NOT IN DISPUTE. MOREOVER , RULE 10B(4) OF THE INCOME ITA NO.280/PN/2014 TAX RULES, 1962 (IN SHORT THE RULES) PROVIDES THA T THE DATA TO BE USED IN ANALYZING THE COMPARABILITY OF AN UNCONTROLLED TRAN SACTION WITH THE INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATIN G TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO . OSTENSIBLY, IN THE PRESENT SITUATION, THE FINANCIAL DATA ADOPTED OF TRANSWORLD INFOTECH LTD. DOES NOT RELATE TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TR ANSACTIONS IN QUESTION HAVE BEEN CARRIED OUT BY THE ASSESSEE. WE, THEREFORE, A RE IN AGREEMENT WITH THE SUBMISSIONS OF THE ASSESSEE THAT THE SAID CONCERN I S EXCLUDIBLE FROM THE FINAL SET OF COMPARABLES. WE HOLD SO. 19. THE NEXT POINT MADE OUT BEFORE US IS WITH RESPE CT TO THE ACTION OF THE TPO IN INCLUDING ICSA (INDIA) LTD. (ESS SEGMENT) AS A COMPARABLE IN THE FINAL SET OF COMPARABLES. THE STAND OF THE ASSESSEE BEFO RE THE LOWER AUTHORITIES AS WELL AS BEFORE US IS TO THE EFFECT THAT THE SAID CO NCERN IS FUNCTIONALLY NOT COMPARABLE TO ASSESSEES ACTIVITY OF RENDERING OF P ROVISION OF SOFTWARE SERVICES TO ITS ASSOCIATED ENTERPRISES. SECONDLY, IT HAS ALSO BEEN POINTED OUT THAT THE SAID CONCERN HAS SIGNIFICANTLY HIGH RESEAR CH AND DEVELOPMENT EXPENSES AND ON THIS POINT ALSO THE SAID CONCERN IS LIABLE TO BE EXCLUDED. THIRDLY, IT IS SUBMITTED THAT THE TPO IN ASSESSMENT YEAR 2010-11 ACCEPTED ASSESSEES PLEA THAT THE SAID CONCERN WAS NOT COMPA RABLE TO THE ASSESSEES ACTIVITY OF RENDERING OF PROVISION OF SOFTWARE SERV ICES TO THE ASSOCIATED ENTERPRISES. 20. THE LD. CIT-DR HAS PRIMARILY REFERRED TO THE DI SCUSSION MADE BY THE TPO IN PARA 10(7) OF THE IMPUGNED ORDER TO SAY THAT THE SAID CONCERN WAS HAVING TWO DISTINCT SEGMENTS AS PER ITS ANNUAL REPO RT, AND THE SEGMENT CONSIDERED FOR THE COMPARABILITY ANALYSIS BY THE TP O WAS SOFTWARE SERVICES SEGMENT WHICH DID NOT INCLUDE PRODUCT DEVELOPMENT A CTIVITY. THEREFORE, THE SEGMENT CONSIDERED FOR COMPARABILITY ANALYSIS IS SI MILAR IN FUNCTION TO ITA NO.280/PN/2014 ASSESSEES ACTIVITY OF PROVISION OF SOFTWARE SERVIC ES TO ITS ASSOCIATED ENTERPRISES. 21. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. FIRSTLY, WE MAY REFER TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. DATED 30.04.2013 (SUPRA) WHEREIN THE INCLUSION OF ICSA (INDIA) LTD. (ESS SEGMENT) IN THE FINAL SET OF COMPARABLES WAS IN DISPUTE. IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. (SUPRA) ASSESSEE HAD MADE OUT A CASE THAT THE RESEARCH AND DEVELOPMENT ( R&D) EXPENDITURE INCURRED BY THE SAID CONCERN WAS IN EXCESS OF THE Q UANTITATIVE FILTER OF R&D EXPENSES APPLIED DURING THE TRANSFER PRICING PROCEE DINGS. THIS ASPECT OF THE MATTER WAS UPHELD BY THE TRIBUNAL AND THEREFORE IN- PRINCIPLE WE FIND NO REASONS TO DISAGREE WITH ASSESSEES PLEA TO EVALUAT E THE EXCLUSION OR INCLUSION OF THE SAID CONCERN BASED ON THE LEVEL OF R&D EXPENSES INCURRED. ON THIS POINT, IT IS POINTED OUT THAT IN SO FAR AS THE ICSA (INDIA) LTD. (ESS SEGMENT) IS CONCERNED, IT IS CARRYING ON SIGNIFICAN T R&D ACTIVITIES AND THE RATIO OF EXPENDITURE OF R&D TO SALES IS ALMOST 3% (I.E. R S.1983.79 LACS / RS.66350.72 LACS). THE AFORESAID POSITION WAS CANV ASSED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS IS EVIDENT FROM PAG E 86 OF THE APPEAL PAPER BOOK WHICH IS A COPY OF THE SUBMISSIONS MADE BEFORE THE DRP. IN COMPARISON ASSESSEES SEGMENT RELATING TO PROVISION OF SOFTWARE SERVICES DOES NOT ENTAIL ANY RESEARCH AND DEVELOPMENT ACTIVI TIES AND IN-FACT IT IS ENGAGED IN MERELY PROVIDING SOFTWARE SERVICES TO PF G AS PER THE SPECIFICATIONS PROVIDED. IN OUR CONSIDERED OPINION , HAVING REGARD TO THE PRECEDENTS AS ALSO THE OSTENSIBLE DIFFERENCE IN LEV EL OF EXPENDITURE INCURRED ON RESEARCH AND DEVELOPMENT EXPENSES, IN OUR VIEW, ICS A (INDIA) LTD. (ESS SEGMENT) CANNOT BE CONSIDERED AS A GOOD COMPARABLE SO AS TO JUSTIFY ITS INCLUSION FOR THE PURPOSES OF THE COMPARABILITY ANA LYSIS. ANOTHER ASPECT WHICH HAS BEEN MADE OUT BY THE ASSESSEE IS THAT THE ESS S EGMENT OF ICSA (INDIA) ITA NO.280/PN/2014 LTD. IS ALSO, INTER-ALIA, ENGAGED IN PROVIDING EMBE DDED SOFTWARE SOLUTIONS I.E. HARDWARE PRODUCTS ALONG WITH THE SOFTWARE SOLUTIONS AND DOES NOT MERELY PROVIDE STANDALONE SOFTWARE SERVICES TO ITS ASSOCIA TED ENTERPRISES. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE HA D REFERRED TO PAGES 69 TO 161 OF THE PAPER BOOK WHEREIN IS PLACED A COPY OF T HE ANNUAL REPORT OF THE SAID CONCERN. THE BUSINESS PROFILE OF THE SAID CON CERN WHICH IS EMERGING FROM A PERUSAL OF THE ANNUAL REPORT OF THE PAPER BOOK DO ES SUPPORT ASSESSEES PLEA THAT THE ACTIVITIES CARRIED OUT BY ICSA (INDIA ) LTD. (ESS SEGMENT) ARE NOT PURELY SOFTWARE SERVICES BUT, INTER-ALIA, ALSO INCL UDE EMBEDDED SOFTWARE SOLUTIONS, I.E. HARDWARE PRODUCTS ALONG WITH EMBEDD ED SOFTWARE PRODUCTS. ON THIS ASPECT ALSO WE FIND THAT THE ASSESSEE HAS JUST IFIABLE CASE FOR SEEKING EXCLUSION OF THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. WE HAVE ALSO PERUSED THE ORDER PASSED BY THE TPO U/S 92CA(3) OF THE ACT FOR ASSESSMENT YEAR 2010-11 DATED 29.01.2014 (SUPRA) WHEREIN THE S TAND OF THE ASSESSEE FOR EXCLUSION OF THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES STANDS ACCEPTED, A COPY OF THE SAID ORDER IS PLACED AT PAG ES 637 TO 668 OF THE PAPER BOOK. FURTHERMORE, THE LD. REPRESENTATIVE FOR THE ASSESSEE AT THE TIME OF HEARING FURNISHED A DETAILED TABULATION CONTAINING THE ACCEPT-REJECT MATRIX UNDERTAKEN BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY FOR ASSESSMENT YEAR 2010-11 WHEREIN THE SAID CONCERN WAS EXCLUDED ON TH E GROUNDS OF FUNCTIONAL DISSIMILARITY. OSTENSIBLY, SUCH A STAND OF THE ASS ESSEE HAS BEEN ACCEPTED BY THE TPO IN ASSESSMENT YEAR 2010-11. IN THIS BACKGR OUND OF THE MATTER, IN OUR VIEW, WE FIND MERIT IN THE ASSESSEES PLEA FOR EXCL USION OF THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES IN THE PRESENT YE AR TOO. WE HOLD SO. 22. THE NEXT POINT MADE OUT BY THE ASSESSEE IS FOR EXCLUSION OF COMPUCOM SOFTWARE LTD. (SOFTWARE SEGMENT) FROM THE FINAL SET OF COMPARABLES. IN THIS CONTEXT, THE PLEA OF THE ASSESSEE IS THAT THE SAID CONCERN IS NOT ONLY ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES BUT ALSO SALE OF SOFTWARE PRODUCTS, ITA NO.280/PN/2014 END-TO-END MOBILE SOLUTIONS, IT INFRASTRUCTURE SERV ICES, ETC. AND IN SUPPORT A REFERENCE HAS BEEN MADE TO PAGES 162 TO 213 OF THE PAPER BOOK WHEREIN IS PLACED A COPY OF THE ANNUAL REPORT PERTAINING TO FI NANCIAL PERIOD UNDER CONSIDERATION. SECONDLY, IT IS POINTED OUT THAT AS SESSEES PLEA FOR EXCLUSION OF THE SAID CONCERN, WAS ACCEPTED BY THE TPO IN ASSESS MENT YEAR 2007-08 AS WELL AS IN ASSESSMENT YEAR 2010-11 AND IN THIS REGA RD, REFERENCE HAS BEEN MADE TO THE ORDERS PASSED BY THE TPO U/S 92CA(3) OF THE ACT DATED 28.01.2013 (SUPRA) AND 29.01.2014 (SUPRA), COPIES O F WHICH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 603 TO 636 AND 637 TO 66 8 RESPECTIVELY. 23. ON THE OTHER HAND, THE LD. CIT-DR HAS DEFENDED THE INCLUSION OF COMPUCOM SOFTWARE LTD. (SOFTWARE SEGMENT) IN THE FI NAL SET OF COMPARABLES ON THE GROUND THAT THE PRODUCT DESCRIPTION OF THE S AID CONCERN WAS COMPUTER SOFTWARE AND THEREFORE IT WAS A GOOD COMPARABLE. I T WAS SUBMITTED BY THE LD. CIT-DR THAT WHILE APPLYING THE TNM METHOD ONLY A BR OAD COMPARABILITY IS REQUIRED TO BE ENSURED AND NOT A VERY STRICT LEVEL OF COMPARABILITY IS REQUIRED TO BE MADE OUT. THEREFORE, ACCORDING TO HER, THE TPO WAS JUSTIFIED IN INCLUDING THE SAID CONCERN IN THE FINAL SET OF COMPARABLES. 24. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS ON THIS ASPECT. A PERUSAL OF THE ASSESSEES SUBMISSIONS BEFORE THE DR P ON THIS ASPECT, WHICH ARE PLACED AT PAGES 181 TO 183 OF THE APPEAL PAPER BOOK REVEALS THAT THE APPELLANT MADE OUT A CASE THAT THE SAID CONCERN WAS ENGAGED IN DIVERSIFIED ACTIVITIES, SUCH AS SOFTWARE SERVICES (INCLUDING SO FTWARE PRODUCT DEVELOPMENT), LEARNING SOLUTIONS, WIND POWER GENERATION AND TREAS URY, ETC.. ASSESSEE ALSO POINTED OUT THAT THE SAID CONCERN WAS MAJORLY RENDE RING SERVICES TO THE GOVERNMENT BODIES AS WAS EVIDENT FROM THE EXTRACT O F THE ANNUAL REPORT FILED FOR RELEVANT PERIOD. EVEN WITH REGARD TO THE SOFTW ARE SERVICES SEGMENT, WHICH HAS BEEN ADOPTED BY THE TPO TO BE COMPARABLE WITH A SSESSEES ACTIVITIES, IT ITA NO.280/PN/2014 WAS POINTED OUT THAT THE SAID SEGMENT WAS INVOLVED IN INFRASTRUCTURE DEVELOPMENT, IT INFRASTRUCTURE SOLUTIONS, MOBILE SO LUTIONS AND DEVELOPMENT & SALE OF PRODUCTS, ETC.. FOR ALL THE ABOVE REASON S, THE CASE OF THE ASSESSEE WAS THAT THE SAID CONCERNS SOFTWARE SERVICES SEGME NT WAS NOT COMPARABLE TO THE RENDERING OF SOFTWARE SERVICES UNDERTAKEN BY TH E ASSESSEE FOR ITS ASSOCIATED ENTERPRISES. 25. THE AFORESAID POINTS WERE MADE OUT BY THE ASSES SEE BEFORE THE LOWER AUTHORITIES AND WE FIND THAT THERE IS NO ARGUMENTS PUT-FORTH BY THE LOWER AUTHORITIES TO REPUDIATE THE SAME. NO DOUBT THE AP PLICATION OF THE TNM METHOD REQUIRES BROAD FUNCTIONAL SIMILARITIES, AND A CONCERN CAN BE SAID TO BE FUNCTIONALLY COMPARABLE WITH THE TESTED PARTY IF IT IS ENGAGED IN SIMILAR ACTIVITY. HOWEVER, IN THE PRESENT CASE, IT IS REQUIRED TO BE APPRECIATED THAT M/S COMPUCOM SOFTWARE LTD. (SOFTWARE SEGMENT) IS ENGAGE D IN A WIDE SPECTRUM OF ACTIVITIES NOTED EARLIER AND ITS CUSTOMER PROFIL E INCLUDES GOVERNMENT BODIES, ETC. WHEREAS THE ASSESSEE IS A CAPTIVE SOFTWARE SER VICE PROVIDER RENDERING PURE SOFTWARE DEVELOPMENT SERVICES TO ITS ASSOCIATE D ENTERPRISES AS PER THE SPECIFICATIONS PROVIDED. IT HAS ALSO BEEN POINTED OUT BY THE ASSESSEE THAT THE SOFTWARE SERVICES SEGMENT OF COMPUCOM SOFTWARE LTD. IS, INTER-ALIA, ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS ALSO WHICH IS Q UALITATIVE DIFFERENT FROM WHAT IS BEING UNDERTAKEN BY THE ASSESSEE. THEREFOR E, IN THE ABSENCE OF ANY CREDIBLE DISCUSSION EMERGING FROM THE ORDER OF THE LOWER AUTHORITIES AS TO IN WHAT MANNER THE FUNCTIONAL PROFILE OF THE SAID CONC ERN IN THE SOFTWARE SEGMENT IS SIMILAR TO ASSESSEES TESTED ACTIVITY, WE ARE IN CLINED TO UPHOLD ASSESSEES PLEA THAT THE SOFTWARE SEGMENT OF COMPUCOM SOFTWARE LTD. IS NOT COMPARABLE TO ASSESSEES SEGMENT OF PROVISION OF SOFTWARE SERV ICES TO ITS ASSOCIATED ENTERPRISES. WE ACCORDINGLY DIRECT THE LOWER AUTHO RITIES TO EXCLUDE THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. ITA NO.280/PN/2014 26. WITH RESPECT TO THE DISPUTE IN THE SOFTWARE SER VICES SEGMENT, ANOTHER POINT MADE OUT BY THE ASSESSEE WAS THAT THE MARGIN OF MINDTREE CONSULTING LTD. CONSIDERED BY THE TPO AT 27.60% WAS WRONG. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT BE FORE THE TPO, ASSESSEE HAD ASSERTED THAT ONLY THE IT SERVICES SEGMENT OF T HE SAID CONCERN BE CONSIDERED AS A COMPARABLE AND NOT THE ENTIRE ENTIT Y AND THEREFORE THE MARGIN RELATABLE TO THE IT SERVICES SEGMENT OF THE SAID CO NCERN AT 5.52% BE ALONE CONSIDERED FOR THE PURPOSES OF THE COMPARABILITY AN ALYSIS. THE LD. REPRESENTATIVE SUBMITTED THAT THE TPO HAS CONSIDERE D THE MARGIN AT THE ENTITY LEVEL AND NOT THE SEGMENTAL LEVEL, WHICH WAS REQUIR ED TO BE DONE. 27. IN THIS CONTEXT, THE LD. CIT-DR REFERRED TO THE DISCUSSION MADE BY THE TPO IN PARA 10(5) OF THE IMPUGNED ORDER TO JUSTIFY NON-ADOPTION OF SEGMENTAL PROFITS FOR THE PURPOSES OF COMPARABILITY ANALYSIS. ACCORDING TO THE LD. CIT- DR, THE SAID CONCERN WAS ENGAGED IN THE ACTIVITY OF COMPUTER SOFTWARE AND EVEN THE R&D SERVICES WERE NOTHING BUT TO SUPPORT D EVELOPMENT SERVICES THEREFORE THE MARGIN OF THE SAID CONCERN AT THE ENT ITY LEVEL REFLECTED PROFITS FROM SOFTWARE DEVELOPMENT SERVICES ONLY AND THUS TH E TPO WAS JUSTIFIED IN ADOPTING THE MARGINS AT THE ENTITY LEVEL FOR THE PU RPOSES OF COMPARABILITY. 28. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE CONTEXT OF THE CONTROVERSY BEFORE US, WE HAVE PERUSED THE ANNU AL REPORT OF THE SAID CONCERN, A COPY OF WHICH IS PLACED AT PAGES 214 TO 267 OF THE PAPER BOOK. AT PAGE 263 OF THE PAPER BOOK IN PARA 15 OF THE SCHEDU LE TO THE ANNUAL FINANCIAL STATEMENT, THE SAID CONCERN HAS ENUMERATED ITS SEGM ENTAL REPORTING. AS PER THE ANNUAL REPORT, THE SAID CONCERN IS HAVING TWO B USINESS SEGMENTS VIZ. IT SERVICES AND R&D SERVICES. THE SEGMENTAL PROFITS R ELATING TO R&D SERVICES AND IT SERVICES HAVE BEEN SEPARATELY ENUMERATED THE REIN. THE PLEA OF THE ASSESSEE IS THAT THE MARGIN RELATING TO THE IT SERV ICES SEGMENT ALONE BE ITA NO.280/PN/2014 CONSIDERED COMPARABLE TO ASSESSEES ACTIVITIES OF P ROVISION OF SOFTWARE SERVICES AND NOT THE MARGIN RELATABLE TO THE R&D SE RVICES SEGMENT OF THE SAID CONCERN. IT HAS BEEN EMPHASIZED THAT THE ACTIVITIE S OF THE R&D SERVICES SEGMENT ARE NOWHERE COMPARABLE TO ASSESSEES ACTIVI TIES SINCE ASSESSEE DOES NOT RENDER SUCH SERVICES AND RATHER IT IS PROV IDING SOFTWARE DEVELOPMENT SERVICES ON THE BASIS OF THE SPECIFICATIONS PROVIDE D BY THE ASSOCIATED ENTERPRISES. IN OUR CONSIDERED OPINION, THE AFORES AID FUNCTIONAL DIFFERENCE POINTED OUT BY THE ASSESSEE VIS--VIS THE R&D SERVI CES SEGMENT OF THE SAID CONCERN ARE GERMANE AND RELEVANT TO DECIDE ABOUT TH E INCLUSION OF THE SAID CONCERN FOR THE COMPARABILITY ANALYSIS. THEREFORE, WE DIRECT THE LOWER AUTHORITIES TO EXCLUDE THE MARGINS RELATABLE TO THE R&D SERVICES SEGMENT OF THE SAID CONCERN AND CONSIDER ONLY THE MARGIN RELAT ABLE TO THE IT SERVICES SEGMENT ALONE TO BENCHMARK ASSESSEES ACTIVITY OF P ROVISION OF SOFTWARE SERVICES TO ITS ASSOCIATED ENTERPRISES. THUS, ON T HIS ASPECT ALSO ASSESSEE SUCCEEDS. 29. APART FROM THE AFORESAID, THERE IS NO OTHER PLE A RAISED BY THE ASSESSEE WITH REGARD TO THE DETERMINATION OF ARM'S LENGTH PR ICE OF INTERNATIONAL TRANSACTIONS RELATING TO PROVISION OF SOFTWARE SERV ICES TO THE ASSOCIATED ENTERPRISES. THEREFORE, WE DIRECT THE ASSESSING OF FICER TO RE-COMPUTE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE SERVICES IN THE LIGHT OF OUR AFORESAID DISCUSSION. 30. NOW, WE MAY TAKE-UP THE DISPUTE RELATING TO THE DETERMINATION OF ARM'S LENGTH PRICE WITH REGARD TO THE INTERNATIONAL TRANS ACTIONS OF PROVISION OF BACK OFFICE SUPPORT SERVICES RENDERED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES FOR STATED VALUE OF RS.18,82,13,428/-. ON THIS ASP ECT ALSO, THE TPO DISAGREED WITH ASSESSEES ASSERTION THAT THE STATED VALUE OF THE INTERNATIONAL TRANSACTIONS ARE AT AN ARM'S LENGTH PRICE. THE TPO SELECTED THE FOLLOWING FINAL SET OF ITA NO.280/PN/2014 COMPARABLES FOR THE PURPOSES OF DETERMINING THE ARM 'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS PERTAINING TO BACK OFFIC E SUPPORT SERVICES :- SR.NO. COMPANY OP/TC USING SINGLE YEAR DATA FOR FY 2008-09 1. COSMIC GLOBAL LTD. 40.61% 2. INFOSYS BPO LTD. 24.31% 3. NITTANY OUTSOURCING SERVICES PVT. LTD. 33.31% ARITHMETIC MEAN 33.58% 31. RELYING ON THE ABOVE SET OF COMPARABLES AND THE IR ARITHMETIC MEAN PLI OF 33.58%, TPO COMPARED IT WITH ASSESSEES MARGIN O F 16.88% AND PROCEEDED TO DETERMINE AN ADJUSTMENT OF RS.2,68,95, 897/- IN ORDER TO COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION RELATING TO THE BACK OFFICE SUPPORT SERVICES. 32. ON THIS ASPECT, THE FIRST POINT MADE OUT BY THE ASSESSEE IS TO EXCLUDE INFOSYS BPO LTD. FROM THE FINAL SET OF COMPARABLES. THE PLEA OF THE ASSESSEE IS THAT THE SAID CONCERN WAS A GIANT IN ITS AREA OF OPERATION AND POSSESSED BRAND VALUE OF INFOSYS TECHNOLOGY LTD. WHEREAS ASSE SSEE WAS A CAPTIVE SERVICE PROVIDER WITH NO SIGNIFICANT INTANGIBLES OR BRAND VALUE. THE LD. REPRESENTATIVE POINTED OUT THAT INFOSYS BPO LTD. HA S UNDERTAKEN BRAND BUILDING EXERCISE OVER A PERIOD OF TIME BY INCURRIN G HUGE EXPENDITURE AND THAT THE SAID CONCERN POSSESSED A HUGE ASSET BASE AND TH EREFORE IT WAS FUNCTIONALLY DISSIMILAR TO ASSESSEES ACTIVITY OF R ENDERING OF BACK OFFICE SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES. IN THIS CO NTEXT, THE LD. REPRESENTATIVE HAS PLACED RELIANCE ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES PVT. LTD. (2013) 219 TAXMANN.COM 26 (DEL). 33. THE LD. CIT-DR HAS REITERATED THAT THE ACTIVITY OF BACK OFFICE SUPPORT SERVICES RENDERED BY THE ASSESSEE IS SIMILAR TO THE ACTIVITY CARRIED OUT BY ITA NO.280/PN/2014 INFOSYS BPO LTD. AND THEREFORE THE SAID CONCERN BE NOT BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 34. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. (SUPRA), THE HO NBLE HIGH COURT NOTED THAT M/S INFOSYS TECHNOLOGIES LTD. WAS A CONCERN WITH A TURNOVER OF RS.9028 CRORES WHEREAS THE ASSESSEE BEFORE IT I.E. AGNITY I NDIA TECHNOLOGIES PVT. LTD. WAS HAVING A TURNOVER OF RS.16.09 CRORES. THE HON BLE HIGH COURT ALSO NOTED THE DIFFERENCE IN SPENDING ON ADVERTISEMENT, SALES PROMOTION AND RESEARCH & DEVELOPMENT BY INFOSYS TECHNOLOGY LTD. AND AGNITY I NDIA TECHNOLOGIES PVT. LTD.. WHEREAS INFOSYS TECHNOLOGIES LTD. WAS SPENDI NG SUBSTANTIAL SUMS ON ADVERTISEMENT, SALES, PROMOTIONS, BRAND, BUILDING A ND R&D ACTIVITY, AND AGNITY INDIA TECHNOLOGIES PVT. LTD.S SPENDING ON S UCH ACTIVITIES WAS NIL. AGNITY INDIA TECHNOLOGIES PVT. LTD. WAS A CAPTIVE S ERVICE PROVIDER FOR ITS ASSOCIATED ENTERPRISES, WHICH WAS NOT THE CASE OF I NFOSYS TECHNOLOGIES LTD.. UNDER THESE CIRCUMSTANCES, THE HONBLE DELHI HIGH C OURT APPROVED THE DECISION OF THE TRIBUNAL WHICH HELD THAT INFOSYS TE CHNOLOGIES LTD. COULD NOT BE COMPARED WITH M/S AGNITY INDIA TECHNOLOGIES PVT. LT D. HAVING REGARD TO THE FINANCIAL DATA, ETC. OF THE TWO CONCERNS. CONSIDER ING THE AFORESAID PARITY OF REASONING, IT HAS TO BE APPRECIATED IN THE PRESENT CASE THAT THE ACTIVITIES UNDERTAKEN BY INFOSYS BPO LTD. CANNOT BE QUALITATIV ELY COMPARED WITH THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE IN ITS BACK OFFICE SUPPORT SERVICES SEGMENT. UNDOUBTEDLY, INFOSYS BPO LTD. OWNS SIGNIF ICANT INTANGIBLES AND EMINENT BRAND VALUE WHEREAS IN THE CASE OF THE ASSE SSEE BEFORE US THERE IS NO SUCH SITUATION. THE TURNOVER ACHIEVED BY INFOSY S BPO LTD. IS MANY TIMES HIGHER IN COMPARISON TO THE ASSESSEE; THE SAID CONC ERN IS A GIANT IN COMPARISON TO THE ASSESSEE. IN OUR VIEW, THE PRESE NCE OF THE AFORESAID FACTORS JUSTIFY ASSESSEES ASSERTION THAT THE SAID CONCERN BE EXCLUDED FROM THE LIST OF COMPARABLES. WE HOLD SO. ITA NO.280/PN/2014 35. THE SECOND POINT MADE OUT BY THE ASSESSEE IS TH AT THE TPO ERRED IN INCLUDING COSMIC GLOBAL LTD. IN THE FINAL SET OF CO MPARABLES. IN THIS CONTEXT, THE PLEA OF THE ASSESSEE BEFORE THE LOWER AUTHORITI ES AS WELL AS BEFORE US IS THAT THE SAID CONCERN WAS SUB-CONTRACTING MOST OF I TS WORK WHEREAS ASSESSEE WAS UNDERTAKING ITS ACTIVITIES BY ITSELF. IT WAS P OINTED OUT THAT THE SAID CONCERN WAS SUB-CONTRACTING MAJORITY OF ITS TRANSLATION SER VICES WORK TO THIRD PARTY VENDORS AND HAD MADE SIGNIFICANT PAYMENTS WHICH WER E ALMOST 62% OF THE TOTAL COST, WHEREAS ASSESSEE WAS UNDERTAKING ITS AC TIVITIES ON ITS OWN. IN THIS CONTEXT, RELIANCE HAS BEEN PLACED ON THE DECISION O F THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. MAERSK GLOBAL SERV ICE CENTRE (INDIA) (P.) LTD., (2011) 16 TAXMANN.COM 47 (MUM.) AS ALSO THE DECISIO N OF THE PUNE OF THE TRIBUNAL IN THE CASE OF PTC SOFTWARE (INDIA) PVT. L TD. DATED 30.04.2013 (SUPRA). 36. ON THE OTHER HAND, THE LD CIT-DR REFERRED TO TH E DISCUSSION MADE BY THE TPO IN PARA 11(1) OF THE ORDER BY POINTING OUT THAT THE SAID CONCERN WAS A PART OF THE SEARCH CONDUCTED BY THE ASSESSEE ALSO. THEREFORE, ACCORDING TO HER, THE SAID CONCERN CANNOT BE EXCLUDED AT THE PRE SENT STAGE. 37. IN OUR CONSIDERED OPINION, THE POINT MADE OUT B Y THE LD. CIT-DR THAT THE ASSESSEE HAD INITIALLY SELECTED THE SAID CONCER N AS COMPARABLE CANNOT BE THE SOLE BASIS TO REJECT ASSESSEE PLEA FOR EXCLUSIO N OF THE SAID CONCERN IF THE ASSESSEE IS OTHERWISE ABLE TO JUSTIFY IT ON FACTS. QUITE CLEARLY, THE DIFFERENCE IN THE BUSINESS MODEL UNDERTAKEN BY THE ASSESSEE VIS- -VIS THE SAID CONCERN CANNOT BE DENIED. IN THE CASE OF MAERSK GLOBARL SE RVICE CENTRE (INDIA) (P.) LTD. (SUPRA) , THE MUMBAI BENCH OF THE TRIBUNAL NOT ED THAT A CONCERN WHICH WAS OUTSOURCING MOST OF ITS WORK COULD NOT BE CONST RUED TO BE A GOOD COMPARABLE WITH AN ASSESSEE WHO WAS CARRYING OUT TH E WORK BY ITSELF. TO THE SIMILAR EFFECT IS ALSO THE DECISION OF THE BANGALOR E BENCH OF THE TRIBUNAL IN THE ITA NO.280/PN/2014 CASE OF 24/7 CUSTOMER.COM PVT. LTD. VS. DCIT VIDE I TA NO.227/BANG/2010 DATED 09.11.2012. THE DECISION OF THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. DATED 30.04.2013 (SUPRA) IS ALSO TO THE SIMILAR EFFECT. THEREFORE, IN OUR CONSIDERED OPINI ON, HAVING REGARD TO THE DIFFERENCE IN THE BUSINESS MODEL BROUGHT OUT BY THE ASSESSEE, M/S COSMIC GLOBAL SERVICES LTD. IS LIABLE TO THE EXCLUDED FROM THE FINAL SET OF COMPARABLES. WE HOLD SO. 38. WITH REGARD TO RENDERING OF BACK OFFICE SUPPORT SERVICES SEGMENT, ASSESSEE HAS ALSO SUBMITTED THAT (I) OMEGA HEALTHCA RE MANAGEMENT SERVICES PVT. LTD.; (II) IN HOUSE PRODUCTIONS LTD.; AND, (III) GALAXY COMMERCIAL LTD. (BPO SEGMENT) HAVE BEEN WRONGLY EXCLUDED BY TH E TPO FROM THE FINAL SET OF COMPARABLES. 39. WITH RESPECT TO THE M/S OMEGA HEALTHCARE MANAGE MENT SERVICES PVT. LTD., WE FIND THAT THE TPO EXCLUDED THE SAID CONCER N ON THE GROUND THAT THE INFORMATION WITH REGARD TO THE SAID CONCERN WAS NOT AVAILABLE IN PUBLIC DOMAIN. FOR THE SAID REASON, THE FINANCIAL DATA WITH REGARD TO THE SAID CONCERN WAS NOT CONSIDERED BY THE TPO IN THE COMPARABILITY ANALYSIS . 40. THE LD. REPRESENTATIVE FOR THE ASSESSEE ASSERTE D AT THE TIME OF HEARING THAT THE TPO WAS WRONG IN STATING THAT THE ANNUAL R EPORT OF THE SAID CONCERN WAS NOT AVAILABLE IN THE PUBLIC DOMAIN WHEREAS ASSE SSEE HAD DULY FURNISHED A COPY OF THE ANNUAL REPORT OF THE SAID CONCERN PERTA INING TO FINANCIAL YEAR UNDER CONSIDERATION. IN THIS CONTEXT, REFERENCE HA S BEEN MADE TO PAGES 475 TO 494 OF THE PAPER BOOK WHEREIN IS PLACED A COPY O F THE ANNUAL REPORT OF THE SAID CONCERN FOR THE RELEVANT PERIOD. BY REFERRING TO PAGE 477 OF THE PAPER BOOK WHICH DEALS THE BUSINESS OPERATIONS OF THE SAI D CONCERN IT IS POINTED OUT ITA NO.280/PN/2014 THAT THE SAID CONCERN WAS ENGAGED IN RENDERING BACK OFFICE SUPPORT SERVICES AND THEREFORE IT WAS A GOOD COMPARABLE. 41. IN THIS CONTEXT, WE HAVE CONSIDERED THE SUBMISS IONS MADE BY THE ASSESSEE BEFORE THE DRP ALSO WHICH ARE EMERGING FRO M PAGE 116 OF THE APPEAL PAPER BOOK. EVEN BEFORE THE DRP, ASSESSEE H AD ASSERTED THAT THE ANNUAL REPORT OF THE SAID CONCERN WAS DULY SUBMITTE D TO THE TPO AND THEREFORE IT COULD NOT BE SAID THAT THE FINANCIAL D ATA OF THE SAID CONCERN WAS NOT AVAILABLE IN PUBLIC DOMAIN. THE ACTIVITIES REN DERED BY THE SAID CONCERN HAVE ALSO BEEN DETAILED IN THE SUBMISSIONS BEFORE T HE DRP AND IT WAS ASSERTED THAT THE SAID CONCERN IS FUNCTIONALLY COMP ARABLE TO ASSESSEES ACTIVITIES OF PROVIDING BACK OFFICE SUPPORT SERVICE S TO THE ASSOCIATED ENTERPRISES. THUS, ASSESSEE JUSTIFIED THE INCLUSIO N OF THE SAID CONCERN IN THE FINAL SET OF COMPARABLES. IN OUR CONSIDERED OPINIO N, THE ASSERTIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND AS WE LL AS BEFORE US ARE BORNE OUT OF THE MATERIAL ON RECORD. IN-FACT, IN THE FAC E OF THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES, THERE IS NO REPUDIATION EMERGING FROM THE ORDERS OF THE AUTHORITIES BELOW. THEREFORE, IN THE ABSENCE OF ANY ADVERSE FINDING THAT THE ACTIVITIES OF THE S AID CONCERN ARE NOT COMPARABLE TO ASSESSEES ACTIVITY OF RENDERING BACK OFFICE SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES, WE DEEM IT FIT AND PROP ER TO DIRECT THE LOWER AUTHORITIES TO INCLUDE THE SAID CONCERN IN THE FINA L SET OF COMPARABLES AS WAS CONTENDED BY THE ASSESSEE IN THE COURSE OF THE TRAN SFER PRICING PROCEEDINGS. 42. THE NEXT POINT MADE OUT BY THE ASSESSEE IS FOR INCLUSION OF M/S IN HOUSE PRODUCTIONS LTD. (HEALTHCARE DIVISION) IN THE FINAL SET OF COMPARABLES. THE TPO REJECTED THE SAID CONCERN ON THE GROUND THA T THE NOTES TO ACCOUNTS IN THE ANNUAL REPORT OF THE SAID CONCERN REVEALED T HAT A FIRE HAD DESTROYED A MAJOR PORTION OF THE ACCOUNT BOOKS. THEREFORE, ACC ORDING TO THE TPO, THE ITA NO.280/PN/2014 INTEGRITY OF THE FINANCIAL DATA REFLECTED IN THE AN NUAL ACCOUNTS WAS IN QUESTION. THE SAME STAND HAS BEEN REITERATED BY THE LD. CIT-D R BEFORE US IN ORDER TO JUSTIFY THE EXCLUSION OF THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. 43. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR T HE ASSESSEE VEHEMENTLY POINTED OUT THAT THE AUDITORS REPORT OF THE SAID C ONCERN DOES NOT REVEAL ANY ADVERSE FINDING OR QUALIFICATION WITH REGARD TO THE UNRELIABILITY OF THE FINANCIAL DATA. IT WAS THEREFORE CONTENDED THAT THE TPO HAS MISDIRECTED HIMSELF IN QUESTIONING THE INTEGRITY OF THE FINANCIAL DATA REF LECTED IN THE ANNUAL REPORT OF THE SAID CONCERN. 44. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. HAVING REGARD TO THE DISCUSSION IN THE ORDER OF THE TPO, WE FIND THA T THE ONLY REASON ADVANCED BY THE TPO TO REJECT THE SAID CONCERN WAS HIS PERCE PTION THAT THE FINANCIAL DATA OF THE SAID CONCERN WAS NOT RELIABLE. THE PER CEPTION OF THE TPO IS BASED ON THE FACT THAT A FIRE DESTROYED MAJOR PORTION OF THE ACCOUNT BOOKS OF THE CONCERN. THE POINT MADE OUT BY THE ASSESSEE IS THA T THE AUDITED FINANCIAL STATEMENTS HAVE NOT BEEN ADVERSELY COMMENTED BY THE STATUTORY AUDITORS OF THE SAID CONCERN WITH REGARD TO THE RELIABILITY OF THE DATA. THE SAID STAND OF THE ASSESSEE CANNOT BE BRUSHED ASIDE LIGHTLY. ON THE O THER HAND, THE TPO HAS NOT ADVANCED ANY CREDIBLE BASIS WHICH COULD DEMONST RATE UNRELIABILITY OF THE FINANCIAL DATA. IN OUR CONSIDERED OPINION, IT WOUL D MEET THE ENDS OF JUSTICE IF THE TPO IS CALLED UPON TO RE-VISIT THE CONTROVERSY WITH REGARD TO THE INCLUSION OF IN HOUSE PRODUCTIONS LTD. AFRESH HAVING REGARD T O THE SUBMISSIONS AND THE MATERIAL WHICH THE ASSESSEE MAY PUT-FORTH BEFORE HI M. ACCORDINGLY, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE TPO, WHO SHALL CARRY OUT AN EXERCISE AFRESH WITH RESPECT TO THE IN CLUSION OR OTHERWISE OF THE SAID CONCERN ON THE BASIS OF THE SUBMISSIONS AND TH E MATERIAL WHICH THE ASSESSEE MAY SETUP BEFORE HIM. NEEDLESS TO MENTIO N, THE ASSESSING ITA NO.280/PN/2014 OFFICER/TPO SHALL ALLOW THE ASSESSEE A REASONABLE O PPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT. THU S, ON THIS POINT ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 45. THE LAST POINT MADE OUT BY THE ASSESSEE IS FOR INCLUSION OF GALAXY COMMERCIAL LTD. (BPO SEGMENT)IN THE FINAL SET OF CO MPARABLES. THE TPO REJECTED THE SAID CONCERN FROM THE FINAL SET OF COM PARABLES ON THE GROUND THAT IT WAS A CONSISTENTLY LOSS-MAKING CONCERN. BEFORE US ALSO, THE LD. CIT-DR HAS REITERATED THE POINT MADE OUT BY THE TPO IN ORDER T O EXCLUDE THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES. 46. THE LD. REPRESENTATIVE FOR THE APPELLANT POINTE D OUT THAT THE BPO SEGMENT OF THE SAID CONCERN WAS NOT A CONSISTENT LO SS-MAKER. IN-FACT, BY REFERRING TO THE PROFITABILITY MARGINS OF THE BPO S EGMENT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008-09, IT IS SOUGHT TO BE MADE OUT THAT IT HAD A POSITIVE MARGIN. 47. WE HAVE CONSIDERED THE PLEA SETUP BY THE ASSESS EE AND PRIMA-FACIE IT APPEARS THAT IN THE IMMEDIATELY PRECEDING ASSESSMEN T YEAR THE SAID CONCERN HAD A POSITIVE MARGIN. NEVERTHELESS, IN ORDER TO E XAMINE AS TO WHETHER IT IS A CONSISTENT LOSS-MAKING OR NOT, A TREND OVER MORE TH AN ONE YEAR IS REQUIRED TO BE EVALUATED. FOR THE SAID PURPOSE, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE TPO, WHO SHALL EXAMI NE THE FINANCIAL RESULTS OF THE SAID CONCERN FOR TWO YEARS PRIOR AND SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATION SO AS TO FORMULATE A BELIEF AS TO WHETHER OR NOT IT IS A CONSISTENTLY LOSS-MAKING CONCERN. IF THE ASSESSING OFFICER/TPO COMES TO CONCLUDE, HAVING REGARD TO THE AFORESAID TREND ANAL YSIS THAT IT IS A CONSISTENTLY LOSS-MAKING UNIT THEN THE SAME IS LIABLE TO BE EXCL UDED OTHERWISE THE SAID CONCERN CANNOT BE EXCLUDED MERELY BECAUSE IN THE YE AR UNDER CONSIDERATION IT ITA NO.280/PN/2014 HAS SUFFERED A LOSS. FOR THE AFORESAID PURPOSE, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE TPO, WHO SHALL ALLOW A REASONABLE OPPORTUNITY THE ASSESSEE OF BEING HEARD AND THEREAF TER PASS AN ORDER AFRESH AS PER LAW ON THIS ASPECT. 48. WITH REGARD TO THE DETERMINATION OF ARM'S LENGT H PRICE IN RELATION TO THE PROVISION OF BACK OFFICE SUPPORT SERVICES, NO OTHER ARGUMENT HAS BEEN SET-UP BEFORE US AND THEREFORE WE DIRECT THE ASSESSING OFF ICER/TPO TO RE-COMPUTE THE ARM'S LENGTH PRICE IN RELATION TO THE INTERNATI ONAL TRANSACTIONS OF PROVISION OF BACK OFFICE SUPPORT SERVICES IN COMPLIANCE WITH OUR AFORESAID DECISION. THUS, IN SO FAR AS THE GROUND OF APPEAL NOS.1 AND 2 ARE CONCERNED, ASSESSEE PARTLY SUCCEEDS. 49. IN SO FAR AS THE GROUND OF APPEAL NOS.3, 4 AND 5 ARE CONCERNED, THE SAME ARE NOT PRESSED AT THE TIME OF HEARING AND ACC ORDING THE SAME ARE DISMISSED AS NOT PRESSED. 50. THE ONLY GROUND REMAINING IS GROUND OF APPEAL N O.6 WHEREIN THE PLEA OF THE ASSESSEE IS THAT WHILE PASSING ASSESSMENT OR DER THE ASSESSING OFFICER ERRED IN COMPUTING THE TAX LIABILITY BY NOT CONSIDE RING THE ADVANCE TAX AND THE AMOUNT OF TAX DEDUCTED AT SOURCE. ALTERNATIVELY, I T WAS POINTED OUT THAT THE ASSESSING OFFICER ERRED IN TAX COMPUTATION BY NOT C ONSIDERING THE CREDIT OF MAT AVAILABLE TO THE ASSESSEE. 51. ON THIS ASPECT, THE LD. REPRESENTATIVE POINTED OUT THAT THE ASSESSEE HAS ALREADY MOVED A RECTIFICATION APPLICATION BEFOR E THE ASSESSING OFFICER WHICH WAS PENDING FOR DISPOSAL. THE LD. CIT-DR HAS NO OBJECTION FOR THE MATTER TO BE RESTORED BACK TO THE FILE OF THE ASSES SING OFFICER WITH DIRECTIONS TO ITA NO.280/PN/2014 CONSIDER THE PLEA OF THE ASSESSEE ON MERITS AND PAS S AN APPROPRIATE ORDER AS PER LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS FO R STATISTICAL PURPOSES. 52. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 10 TH APRIL, 2015. SD/- SD/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 10 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