D.E.Shaw India Software Pvt.Ltd., Hyderabad, Hyderabad V. ACIT, Circle-17(1), Hyderabad, Hyderabad

ITA 304/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6520 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S NARASAMMA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Transfer pricing; International transaction
• Section: 92C; 142(1); 115JB

Judgement Text

ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.304/HYD/2015 (ASSESSMENT YEAR: 2010-11) DE SHAW INDIA SOFTWARE PRIVATE LIMITED HYDERABAD PAN: AAACD 7214 J VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 17(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI R. VIJAYARAGHAVAN FOR REVENUE : SMT. S. NARASAMMA, DR DATE OF HEARING : 08.03.2016 DATE OF PRON OUNCEMENT : 31 .05.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11. IN T HIS APPEAL, THE ASSESSEE HAS CHALLENGED THE TRANSFER PR ICING ADJUSTMENTS MADE BY THE AO, IN ACCORDANCE WITH THE DIRECTIONS OF THE DRP CONFIRMING THE ARMS LENGTH PRICE CONFIR MED BY THE TPO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT SER VICES FOR SECURITIES SYSTEMS. THE ASSESSEE FILED ITS RETURN O F INCOME DECLARING A TOTAL INCOME OF RS.18,71,49,874 UNDER T HE NORMAL PROVISIONS OF THE ACT AND RS.18,20,22,870 U/S 115JB OF THE ACT. INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) OF T HE ACT. ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 2 OF 9 SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND D ULY SERVED ON THE ASSESSEE COMPANY. THE ASSESSEES REPRESENTAT IVE APPEARED FROM TIME TO TIME AND FURNISHED NECESSARY INFORMATION CALLED FOR. THE AO OBSERVED THAT THE ASSESSEE HAD E NTERED INTO AN INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISES (AE) WHICH EXCEEDS THE LIMITS FIXED BY THE CBDT. THEREFO RE, A REFERENCE WAS MADE TO THE TPO FOR DETERMINATION OF THE ARMS LENGTH PRICE (ALP) U/S 92CA OF THE I.T. ACT. THE TP O PASSED AN ORDER U/S 92CA(3) OF THE ACT ON 25.11.2013. THE AO PASSED THE DRAFT ASSESSMENT ORDER IN ACCORDANCE WITH THE PROPO SED ADJUSTMENT OF RS.16,32,27,395. AGGRIEVED BY THE SAM E, THE ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP AN D VIDE ORDER DATED 12.11.2014 THE DRP DETERMINED THE AVERAGE MAR GIN OF THE FINAL COMPARABLE COMPANIES AFTER EXCLUDING 4 COMPAR ABLES I.E. INFOSYS TECHNOLOGIES LTD, L&T INFOTECH LTD, MIND TR EE LTD AND COMP U LEARN TECHNOLOGIES LTD FROM THE LIST OF 18 C OMPARABLES. THE AVERAGE MARGIN OF THE REMAINING 14 COMPARABLES WAS ARRIVED AT 21.61% AND AFTER REDUCING THE WORKING CAPITAL AD JUSTMENT, THE ADJUSTED ARMS LENGTH MARGIN WAS WORKED OUT TO 1 8.20% AND THE ALP WAS COMPUTED AT RS.206,19,56,946 AND THE CONSEQUENTIAL ADJUSTMENT U/S 92CA OF THE ACT WAS RS.14,28,98,384. THE AO ACCORDINGLY PASSED THE FINA L ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. THOUGH THE ASSESSEE HAS FILED AS MANY AS 17 GRO UNDS OF APPEAL, WE FIND THAT THE ASSESSEE IS MAINLY AGGRIEV ED BY THE TRANSFER PRICING ADJUSTMENT. THE ASSESSEE IS SEEKIN G EXCLUSION OF THE FOLLOWING FOUR COMPANIES FROM THE FINAL LIST OF COMPARABLES FOR TRANSFER PRICING ADJUSTMENT: ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 3 OF 9 A) E-INFOCHIPS BANGALORE LTD B) KALS INFORMATION SYSTEMS LTD C) SASKEN COMMUNICATION TECHNOLOGIES LTD D) TATA ELXSI LTD 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED A CHART STATING AS TO HOW THESE COMP ANIES ARE NOT COMPARABLE TO THE ASSESSEE AND HAS RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O F PEGASYSTEMS WORLD INDIA (P) LTD FOR THE VERY SAME A.Y IN WHICH THE ABOVE COMPANIES WERE DIRECTED TO BE EXCLUDED FROM THE FIN AL LIST OF COMPARABLES. A COPY OF THE SAID ORDER IS FILED BEFO RE US. WHILE THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UP ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE RELEVANT A.Y BEFORE US IS 2010-11 AND THE ASSESSEE IS ENGAGED IN THE DEVELOPMENT OF COMPU TER SOFTWARE AND PROVISION OF SOFTWARE SERVICES TO ITS AE. WE FI ND THAT M/S. PEGASYSTEMS WORLDWIDE INDIA P LTD IS ALSO A SOFTWAR E SOLUTION PROVIDER AND IS INVOLVED IN SIMILAR BUSINESS. THUS, WE FIND THAT THE ASSESSEE AS WELL AS PEGASYSTEMS WORLDWIDE INDIA P LTD ARE PERFORMING SIMILAR FUNCTIONS AND THE ORDER OF THE T RIBUNAL IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA P LTD IS ALSO F OR A.Y 2010- 11 IS APPLICABLE TO THE FACTS BEFORE US AS WELL. IT IS ALSO SEEN THAT IN THE CASE OF THE ASSESSEE BEFORE US, THE TPO HAD TAKEN THE FOLLOWING 18 COMPANIES AS THE FINAL COMPARABLES AND THE VERY SAME COMPANIES WERE ALSO TAKEN AS COMPARABLES BY TH E TPO IN ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 4 OF 9 THE CASE OF PEGASYSTEMS WORLDWIDE INDIA P LTD WHICH ARE REPRODUCED ON PAGE 4 OF THE TRIBUNALS ORDER. OP/OC % 1. AVANI CIMCON TECHNOLOGIES LTD., - 3.39 2. CAT TECHNOLOGIES LTD., - 13.04 3. EVOKE TECHNOLOGIES PVT LTD., - 18.61 4. E ZEST SOLUTIONS LTD., - 22.10 5. KULILZA TECHNOLOGIES PVT LTD., - 25.92 6. MINDTREE LTD (SEG) - 20.47 7. PERSISTENT SYSTEMS AND SOLUTIONS LTD., - 11.37 8. RS SOFTWARE INDIA LTD., - 9.88 9. THINKSOFT GLOBAL SERVICES LTD., - 11.22 10. ZYLOG SYSTEMS LTD., - 18.62 11. E INFOCHIPS BANGALORE LTD., - 72.32 12. COMP-U-LEARN TECH INDIA LTD., - 19.96 13. KALS INFORMATION SYSTEMS LTD (SEG) - 22.05 14. PERSISTENT SYSTEMS LTD., - 31.57 15. TATA ELXSI LTD (SEG) - 17.24 16. SASKEN COMMUNICATION TECHNOLOGIES LTD., - 25.23 17. L&T INFOTECH LTD., - 19.97 THEREFORE, THE DECISION TAKEN BY THE TRIBUNAL IN TH E CASE OF PEGASYSTEMS WORLDWIDE INDIA P LTD IS CLEARLY APPLIC ABLE TO THE CASE BEFORE US ALSO. WE FIND THAT THE TRIBUNAL HAS OBSERVED AS UNDER WITH REGARD TO THE COMPARABLE COMPANIES CHALL ENGED BY THE ASSESSEE COMPANY: E INFOCHIPS BANGALORE LTD., : 8. THIS COMPANY IS SELECTED BY TPO EVEN THOUGH ASSE SSEE OBJECTED TO THE SAME (VIDE PAGE 34 AND 35 OF THE ORDER OF TPO). ASS ESSEE OBJECTED THAT THE INFORMATION FOR FY. 2009-10 WAS NOT AVAILABLE I N PUBLIC DOMAIN. IT WAS FURTHER CONTENDED THAT COMPANY IS FUNCTIONALLY DIFFERENT AND IS HAVING TWO DIFFERENT SEGMENTS I.E., SOFTWARE DEVELO PMENT SERVICES AND ITES. COMPANY OFFERS BROAD PORTFOLIO OF SERVICES CO MPRISING NEW PRODUCTS, PRODUCT DEVELOPMENT, PRODUCT SUSTENANCE A ND MAINTENANCE, PRODUCT QUALITATIVE ANALYSIS (QA) AND INDEPENDENT T ESTING HARDWARE AND SOFTWARE DESIGN ETC. TPO DID NOT ACCEPT ASSESSEES DOCUMENTS BY REFERRING TO THE SCHEDULES LIKE RESEARCH AND DEVELO PMENT, INVENTORIES, SALES AND OTHER INCOMES. HE ALSO REPORTED THAT COMP ANY IN THE NOTES TO THE ACCOUNTS HAS STATED THAT IT IS ENGAGED IN THE D EVELOPMENT AND MAINTENANCE OF COMPUTER SOFTWARE. THE PRODUCTION AN D SALES OF SOFTWARE CANNOT BE EXPRESSED IN ANY GENERIC UNIT. THUS, TPO REJECTED ASSESSEES OBJECTIONS AND RETAINED IT AS A COMPARABLE. DRP ALS O AGREED WITH TPO. ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 5 OF 9 8.1. IT WAS CONTENDED THAT AO RELIED ON THE ANNUAL REPORT OF FY. 2010- 11 AND USED THE INFORMATION APPLICABLE TO FY. 2009-10 FROM THAT REPORT, AS THE INFORMATION FOR FY. 2009-10 WAS NOT AVAILABLE I N PUBLIC DOMAIN. IT IS ALSO SUBMITTED THAT THIS COMPANY WAS NEVER SELECTED EITHER BY TPO IN EARLIER YEAR OR IN LATER YEAR. IT WAS ALSO SUBMITTE D THAT PROFITABILITY VARIES FROM YEAR TO YEAR AND IN THIS YEAR, THERE WAS ARBNO RMALLY VERY HIGH MARGIN, THE REASONS OF WHICH COULD NOT BE ANALYSED IN THE ABSENCE OF ANNUAL REPORT. IT WAS FURTHER CONTENDED THAT SEGMEN TAL INFORMATION WAS NOT AVAILABLE. ON THE ARGUMENT THAT THE SAID COMPAN Y IS PROVIDING BOTH SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES LD. CO UNSEL PLACED THE DISCLOSURES IN ANNUAL REPORT OF FY. 2008-09 AND ANN UAL REPORT OF FY. 2009-10 TO SUBMIT THAT THE COMPANY IS PRIMARILY ENG AGED IN SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES AND HAS REPORTE D BOTH OF THEM AS ONE SEGMENT. THEREFORE, COMPANY IS NOT COMPARABLE W ITH ASSESSEES ON FUNCTIONAL ANALYSIS. IT WAS FURTHER SUBMITTED THAT COMPANY HAS MERGED IN 2012 WITH ANOTHER COMPANY AND IT WILL BE DIFFICULT TO OBTAIN FURTHER INFORMATION/SEGMENTAL INFORMATION ABOUT THE COMPANY NOW. IN VIEW OF ITS FLUCTUATING PROFITS OVER THE YEARS, THIS COMPANY WA S NOT SELECTED AS A COMPARABLE EARLIER OR IN LATER YEARS BY REVENUE. SI NCE THE DISCLOSURE IN ANNUAL REPORT IS COMMON, ASSESSEE RELIED ON THE DEC ISION OF AHMADABAD BENCH OF ITAT IN THE CASE OF ALL SCRIPS (INDIA) PRI VATE LTD., IN ITA NO. 771/AHD/2014 FOR AY. 2009-10, WHEREIN THIS COMPARAB LE WAS REJECTED ON THE BASIS OF LACK OF SEGMENTAL INFORMATION. ASSE SSEE RELIED ON PARA 10 OF THE CO-ORDINATE BENCH ORDER, WHICH IS AS UNDER: PARA 10 WITH RESPECT TO E-INFOCHIP BANGALORE LT D., WE FIND THAT IN THE ANNUAL ACCOUNTS OF THE COMPANY, WITH RE SPECT TO THE SEGMENT INFORMATION IT IS STATED THAT THE COMPANY I S PRIMARILY ENGAGED IN SOFTWARE DEVELOPMENT AND I.T ENABLED SER VICES WHICH IS CONSIDERED THE ONLY REPORTABLE BUSINESS SEGMENT AS PER ACCOUNTING STANDARD AS-17 SEGMENT REPORTING PRESC RIBED IN COMPANIES (ACCOUNTING STANDARD) RULES, 2006. WE THU S FIND THAT NO SEGMENTAL INFORMATION IS AVAILABLE ..CONSIDERING THE AFORESAID FACTS, WE ARE O F THE VIEW THAT THE AFORESAID TWO COMPANIES NEEDS TO BE E XCLUDED WHILE WORKING OUT THE COMPARABILITY ANALYSIS AND THEREFOR E UPHOLD THE PLEA OF THE ASSESSEE IN EXCLUDING THE MARGINS OF TH E AFORESAID 2 COMPANIES. 8.2. LD. DR, HOWEVER, REFERRED TO THE EXTRACTS MADE BY TPO IN THE ORDER TO SUBMIT THAT ASSESSEE IS A COMPARABLE COMPANY WIT H THAT OF ASSESSEE. 8.3. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PE RUSING THE ANNUAL REPORTS PLACED ON RECORD, WE ARE OF THE OPINION THA T THIS COMPANY CANNOT BE SELECTED AS COMPARABLE COMPANY FOR TP ANALYSIS. FIRST OF ALL, THIS COMPANY IS ENGAGED IN BOTH SOFTWARE DEVELOPMENT AS WELL AS ITES. ASSESSEE BEING ONLY CAPTIVE SERVICE PROVIDER, THE A BOVE COMPANY CANNOT BE CONSIDERED AS COMPARABLE ON FUNCTIONAL BASIS. NO T ONLY THAT, AS ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 6 OF 9 POINTED OUT, SEGMENTAL INFORMATION PERTAINING TO TH E ABOVE COMPANY IS NOT AVAILABLE. AS SEEN FROM THE TP ORDERS, DOCUMENT S PLACED ON RECORD, TPO RELIED ON LATER YEARS ANNUAL REPORT IN EXTRACT ING THE INFORMATION. VARIATION IN PROFITABILITY OVER THE YEARS ALONE CAN NOT BE A REASON TO EXCLUDE THE COMPANY FROM COMPARABILITY ANALYSIS BUT AS RIGHTLY POINTED, THE ABSENCE OF SEGMENTAL INFORMATION, HOW MUCH PROF IT EARNED WAS ON THE SOFTWARE DEVELOPMENT OR ITES CANNOT BE EXAMINED. IN THE ABSENCE OF CLARITY ON OPERATIONAL DETAILS AND COMPARABLE COMPA NY HAVING DIVERSIFIED ACTIVITIES, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE CHOSEN AS A COMPARABLE COMPANY IN ASSESSEES CASE I N THIS ASSESSMENT YEAR. WE ARE ALSO AWARE OF THE DECISION OF THE CO-O RDINATE BENCH GIVEN IN EARLIER ASSESSMENT YEAR ON THE REASON THAT SEGME NTAL REPORTING WAS NOT AVAILABLE. BE THAT AS IT MAY, SINCE THE SAID CO MPANY IS FUNCTIONALLY DIFFERENT FROM ASSESSEES ACTIVITIES AND IN THE ABS ENCE OF SEGMENTAL INFORMATION, WE DIRECT AO/TPO TO EXCLUDE THE ABOVE WHILE WORKING OUT THE COMPARABILITY ANALYSIS. WE UPHOLD THE PLEA OF A SSESSEE IN THIS REGARD. KALS INFORMATION SYSTEMS LTD : 10. ASSESSEE OBJECTED TO THE ABOVE COMPANY BEFORE T PO STATING THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. IT H AS INVENTORIES EQUIVALENT TO 27% OF THE REVENUE. TPO HOWEVER REJEC TED ASSESSEES CONTENTIONS STATING THAT COMPANY CLASSIFIED ITSELF AS PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER. FURTHER, EXTRACTING P AGE NO. 22 OF THE ANNUAL REPORT OF THE COMPANY, TPO OPINED THAT THE S EGMENTAL INFORMATION INDICATES THAT REVENUE IS SHOWN TO HAVE BEEN EARNED FROM APPLICATION SOFTWARE AND TRAINING. ACCORDINGLY, HE REJECTED ASSESSEES OBJECTIONS AND INCLUDED AS THE COMPARABLE COMPANY. DRP CONFIRMED THE SAME. 10.1. ASSESSEES MAIN OBJECTION BEFORE US IS ON FUNCTIONALITY OF THE COMPARABLE COMPANY. AS SEEN FROM THE ANNUAL REP ORT OF 2008-09 AND 2009-10 AND COMPARATIVE STATEMENT PLACED BY ASS ESSEE, THE COMPANY CLASSIFIED ITSELF AS THE COMPANY ENGAGED I N DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS SINCE ITS INCEPTION . THE COMPANY CONSISTING OF STPI UNIT ENGAGED IN DEVELOPMENT OF S OFTWARE AND SOFTWARE PRODUCTS AND A TRAINING CENTRE ENGAGED IN TRAINING OF SOFTWARE PROFESSIONALS ON ON-LINE PROJECTS. THIS INDICATES T HAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE AND PRODUCTS AND ITS INVENTORY ALSO INDICATES THAT ASSESSEE HAS BEEN USING ITS READYMAD E LIBRARIES FOR SALES. THIS COMPANY WAS REJECTED IN EARLIER YEAR ON FUNCTI ONAL ANALYSIS BY ITAT IN THE CASE OF PLANET ONLINE PVT. LTD., COMPAN Y IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS. SINCE ITS ANNUAL REPORT STATES THE SAME FACTS IN THIS ASSESSMENT YEAR ALSO, WE ARE OF THE OPINION THAT THE COMPANY CANNOT BE SELECTED AS A COMPARABLE AS IT WA S ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. ACCO RDINGLY, ASSESSEES OBJECTIONS ARE ACCEPTED AND AO IS DIRECTED TO EXCLU DE THE COMPANY. ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 7 OF 9 TATA ELXSI LTD (SEG): 12. BEFORE TPO, ASSESSEE CONT ENDED THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT SPECIA LIZED IN EMBEDDED SOFTWARE DEVELOPMENT TECHNOLOGY. IT WAS ALSO OBJECT ED BEFORE TPO THAT IN EARLIER YEAR THIS COMPANY HAS CLEARLY STATED THA T IT CANNOT BE COMPARED TO ANY OTHER SOFTWARE SERVICES COMPANY DUE TO COMPLEX NATURE OF ITS BUSINESS. ASSESSEE RELIED ON THE DECI SIONS OF ITAT IN THE CASE OF CONEXANT SYSTEMS INDIA PVT. LTD. (ITA NO.14 29/HYD/2010 AND 1978/HYD/2011) AND OTHER CASES AS STATED BY TPO IN PAGE 41 OF HIS ORDER. HOWEVER, TPO DID NOT AGREE WITH THE OBJECTIO NS STATING THAT THE COMPANY HAS TWO SEGMENTS INCLUDING SOFTWARE DEVELOP MENT SERVICES AND REVENUE FROM SOFTWARE DEVELOPMENT SERVICES IS RS. 3 3,649 CRORES OUT OF TOTAL TURNOVER OF RS. 37,637 CRORES, WHICH IS AT 89 .52%. THIS SIGNIFIED THE FACT THAT COMPANY IS PREDOMINANTLY INTO SOFTWAR E DEVELOPMENT SERVICES. TPO REJECTED THE OBJECTIONS OF ASSESSEE S O AS DRP. 12.1. IT WAS THE OBJECTION OF ASSESSEE THAT ABOVE COMPANY IS PREDOMINANTLY INTO PRODUCT DESIGN SERVICES, INNOVATION DESIGN ENGINEER ING AND VISUAL COMPUTING LABS DIVISION WHICH ARE SPECIALIZED SERVI CES. HE REFERRED TO THE ORDER OF ITAT IN AY. 2009-10 IN THE CASE OF PLA NET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 (SUPRA), WHEREIN THIS COMPA NY WAS REJECTED ON THE REASON THAT IT IS ENGAGED IN MULTIPLE SEGMENTS. THERE IS NO BREAK-UP IN THE ANNUAL REPORT AND DATA ON WHICH MARGIN FROM SOFTWARE SERVICES ACTIVITY ONLY CAN BE COMPUTED IS ALSO NOT AVAILABLE . MOREOVER, THE COMPANY ITSELF HAS INDICATED THAT IT CANNOT BE COMP ARED WITH ANY OTHER SOFTWARE SERVICE COMPANY BECAUSE OF ITS COMPLEX NAT URE. SIMILAR VIEW WAS TAKEN BY MANY OF THE CO-ORDINATE BENCHES IN EAR LIER YEARS THAT TATA ELXSI LTD., CANNOT BE SELECTED AS COMPARABLE COMPAN Y. CONSISTENT WITH THE ABOVE VIEW, WE ARE OF THE OPINION THAT A COMPAN Y LIKE TATA ELXSI LTD., WHICH HAS COMPLEX ACTIVITIES AND SEGMENTAL IN FORMATION OF WHICH IS NOT AVAILABLE CANNOT BE SELECTED AS COMPARABLE COMP ANY TO ASSESSEE. MOREOVER, AS SEEN FROM THE TURNOVER AS REPORTED BY TPO ITSELF, IT WAS MANY TIMES ASSESSEES TURNOVER AND THEREFORE CANNOT BE EXACTLY CONSIDERED AS A SIMILAR COMPANY UNLESS THE NATURE O F ACTIVITY, THE INCOMES ARE ANALYSED IN DETAIL. SINCE NO SEGMENTAL DATA IS AVAILABLE, CONSIDERING THE SOFTWARE DEVELOPMENT SERVICES AS A SEGMENT BY TPO CANNOT BE CONSIDERED AS SEGMENTAL DATA, UNLESS THE SERVICES RENDERED BY THAT COMPANY ARE SIMILAR TO THE SERVICES RENDERED B Y ASSESSEE. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THIS COMPANY CA NNOT BE SELECTED AS COMPARABLE. AO IS DIRECTED TO EXCLUDE THE SAME. SAS KEN COMMUNICATION TECHNOLOGIES LTD: 13. THIS COMPARABLE WAS NOT OBJEC TED TO EITHER BEFORE TPO OR BEFORE DRP. OBJECTIONS WERE RAISED BEFORE US ON THE COMPARABILITY OF THIS COMPANY ON THE REASON THAT TH IS COMPANY IS HAVING PRODUCT SALES AND ALSO A PROVIDER OF TELECOMMUNICAT ION SOFTWARE SERVICES. SINCE THERE IS NO BREAK-UP OF COST AVAILA BLE, ASSESSEE SUBMITS THAT THEY HAVE DIFFICULTY IN COMPARING THE SAID COM PANY ON FAR ANALYSIS. ASSESSEE ALSO RELIES ON THE DECISION OF I TAT IN THE CASE OF ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 8 OF 9 PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 (S UPRA), WHEREIN THE ITAT REMITTED THE ISSUE TO COMPARABILITY OF THIS CO MPANY FOR FRESH ADJUDICATION BY AO/TPO IN AN EARLIER YEAR. CONSIDER ING THE VIEW TAKEN EARLIER, SINCE AO/TPO DID NOT HAVE THE OPPORTUNITY TO ANALYSE THE OBJECTIONS OF ASSESSEE AS THEY HAVE NOT OBJECTED EA RLIER, WE ARE OF THE OPINION THAT INCLUSION OF THIS COMPANY AS COMPARABL E COMPANY IS TO BE ANALYSED AFRESH BY TAKING THE OBJECTIONS FROM ASSES SEE AND THEN AFTER DUE ANALYSIS, TPO SHOULD CONSIDER WHETHER THE SAME CAN BE INCLUDED AS A COMPARABLE COMPANY. THEREFORE, WITHOUT EXPRESSING ANY OPINION OR FINDING IN THIS REGARD, WE REMIT THE ISSUE RELATING COMPARABILITY OF THIS COMPANY FOR FRESH ADJUDICATION BY TPO. 5. FURTHER, AS REGARDS THE COMPARABLE COMPANY, CAT TECHNOLOGIES LTD, REJECTED BY THE TPO, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MARGIN CALCULATED B Y THE AO/TPO IS TO BE RECTIFIED. CALCULATION OF THE CORRE CT MARGIN OF THE CAT TECHNOLOGIES IS ALSO FILED BEFORE US. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA PVT LTD, WE DIRECT THAT THE ABOVE FOUR COMPANIES BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES IN THE CASE OF THE ASSESSEE HEREIN ALSO . WE ALSO DIRECT THE TPO TO CONSIDER THE CALCULATION OF MARGI N OF CAT TECHNOLOGIES FILED BEFORE US AND RECTIFY THE MARGIN , IF NECESSARY. THE TPO THEREAFTER SHALL RE-COMPUTE THE ARMS LENGT H PRICE AND THE ADJUSTMENT U/S 92C OF THE ACT. THE OTHER GROUND S WITH REGARD TO TP ADJUSTMENTS ARE ACCORDINGLY NOT ADJUDI CATED AT THIS STAGE AS IT WOULD ONLY RESULT IN AN ACADEMIC EXERCI SE. 7. COMING TO GROUND NOS. 14 AND 15, THE GRIEVANCE O F THE ASSESSEE IS THAT THE AO HAS ERRED IN GRANTING CREDI T IN RESPECT OF ADVANCE TAX ONLY TO THE EXTENT OF RS.6,14,01,877 AS AGAINST ITA NO 304 OF 2015 DE SHOW INDIA SOFTWARE P LTD HYD ERABAD PAGE 9 OF 9 RS.6,58,40,000 CLAIMED IN THE RETURN OF INCOME FILE D BY THE ASSESSEE AND ALSO THAT THE AO HAS ERRED IN GRANTING CREDIT IN RESPECT OF TAX DEDUCTED AT SOURCE (TDS) ONLY TO THE EXTENT OF 22,40,040 AS AGAINST RS.23,58,189 CLAIMED IN THE RE TURN OF INCOME FILED BY THE ASSESSEE. AS THESE GROUNDS NEE DS FACTUAL VERIFICATION, WE REMIT THE ISSUES TO THE FILE OF TH E AO FOR VERIFICATION AND GRANTING OF RELIEF IF ANY, IN ACCO RDANCE WITH THE LAW. 8. GROUND NO.16 IS ONLY AGAINST THE CONSEQUENTIAL L IABILITY OF INTEREST U/S 234C OF THE ACT. THIS GROUND IS ALSO R EMITTED TO THE FILE OF THE AO FOR VERIFICATION AND CONSEQUENTIAL R ELIEF, IF ANY. 9. IN VIEW OF THE ABOVE, ASSESSEES APPEAL IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2016. S D/ - S D/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY, 2016. VNODAN/SPS COPY TO: 1. DE SHAW INDIA SOFTWARE P LTD. PLOT NO.573 B AND C, ROAD NO.1, JUBILEE HILLS, HYDERABAD 500096 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 17(1) 6 TH FLOOR, BOCK B, IT TOWERS, HYDERABAD 3. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, IT TOWERS, 10-2-3 AC GUARDS, HYDERABAD 500004 4. TPO (ADDL.CIT (TP) HYDERABAD 500004 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER