M/s Meritor CVS India (P) Ltd., Bangalore V. ITO, Bangalore

ITA 314/BANG/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9581 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 02-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C RAMESH
• Keywords: Business income; Transfer pricing; International transaction
• Section: 144C; 13

Judgement Text

IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER IT(TP)A NO.314/BANG/2016 ASSESSMENT YEAR: 2011-12 M/S. MERITOR CVS INDIA (P) LTD. TOWER 1, IT SECTOR SEZ, MYLASANDRA, KENGERI HOBLI, RVCE POST BANGALORE-560 059 PAN NO : AAFCM7571E VS. ITO WARD-4(1)(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI C. RAMESH, A.R. RESPONDENT BY : SHRI PRADEEP KUMAR, D.R. DATE OF HEARING : 05.01.2021 DATE OF PRONOUNCEMENT : 05.01.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER DATED 23.12.2015 PASSED BY THE A.O. U/S 143(3 ) R.W.S 144C OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] FOR A SSESSMENT YEAR 2011-12 IN PURSUANCE OF DIRECTIONS GIVEN BY LD. DIS PUTE RESOLUTION PANEL (DRP). 2. AT THE TIME OF HEARING, THE LD A.R ADVANCED H IS ARGUMENTS ONLY IN RESPECT OF GROUND NO.2 RELATING TO TRANSFER PRIC ING ADJUSTMENT MADE BY THE AO/TPO. IN THIS GROUND, THE ASSESSEE H AS SOUGHT EXCLUSION OF FOUR COMPARABLE COMPANIES AND INCLUSIO N OF TWO IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 2 OF 10 COMPARABLE COMPANIES. HOWEVER, AT THE TIME OF HEAR ING, THE LD A.R SUBMITTED THAT HE IS NOT PRESSING FOR EXCLUSION OF E-ZEST SOLUTIONS LTD AND ALSO NOT PRESSING FOR INCLUSION OF THINKSOF T GLOBAL SERVICES LTD. ACCORDINGLY, THE GROUNDS RELATING TO ABOVE SA ID TWO COMPANIES ARE DISMISSED AS NOT PRESSED. CONSEQUENTLY, THE ASS ESSEE IS SEEKING EXCLUSION OF THREE COMPARABLE COMPANIES AND INCLUSI ON OF ONE COMPARABLE COMPANY. THE DETAILS OF THE SAME ARE DI SCUSSED IN THE LATER PART OF THIS ORDER. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE HEREIN IS A SUBSIDIARY OF M/S. MERITOR INC., USA., WHICH IS ENGAGED IN THE MANUFACTURE OF AUTOMOTIVE COMPONENTS AND SYSTEM S. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING S OFTWARE TITLED AS COMPUTER RADIATED DESIGNING AND DEVELOPMENT OF COM MERCIAL VEHICLE SYSTEMS. THE ASSESSEE IS DEVELOPING SPECIFIC SOFTW ARE FOR ITS ASSOCIATED ENTERPRISES, I.E., IT IS CAPTIVE SOFTWAR E DEVELOPER. SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION S WITH ITS ASSOCIATED ENTERPRISES (AES), THE AO REFERRED THE M ATTER OF DETERMINATION OF ARMS LENGTH PRICE (ALP) OF THE INT ERNATIONAL TRANSACTION TO THE TRANSFER PRICING OFFICER (TPO). 4. THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO/ AO RELATES TO THE SOFTWARE DEVELOPMENT SERVICES OF THE ASSESSE E. THE TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSI DERATION IS RS.19.71 CRORES. THE ASSESSEE FOLLOWED TNM METHOD AS MOST APPROPRIATE METHOD AND PROFIT LEVEL INDICATOR (PLI) WAS TAKEN AS OPERATING PROFIT/OPERATING COST. THE ASSESSEE DECL ARED MARGIN OF 11.21%. ACCORDING TO THE TRANSFER PRICING STUDY CO NDUCTED BY THE ASSESSEE, ITS INTERNATIONAL TRANSACTIONS IN RESPECT OF SOFTWARE DEVELOPMENT SEGMENT WERE AT ARMS LENGTH. IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 3 OF 10 5. THE TPO REJECTED TRANSFER PRICING STUDY CONDU CTED BY THE ASSESSEE AND SELECTED FOLLOWING 13 COMPANIES: SL. NO. NAME SALES COST PLI 1 ACROPETAL TECHNOLOGIES LTD. (SEG) 81,40,16,893 61,67,54,876 31.98% 2 E - ZEST SOLUTIONS (FROM CAPITALINE) 11,28,66,098 9,32,55,341 21.03% 3 E - INFOCHIPS LTD. 26,03,84,251 167,64,47,527 56.44% 4 EVOKE (FROM CAPITALINE) 14,48,69,912 13,39,96,568 8.11% 5 ICRA TECHNO ANALYTICS LTD. (IN 000) 15,84,01,000 12,68,94,000 24.83% 6 INFOSYS LTD 253850000000 177,030,000,000 43.39% 7 LARSEN & TOUBRO INFOTECH LTD. 23318122096 19,764, 861,289 19.83% 8 MINDTREE LTD. (SEG) 8,783,000,000 7,937,143,242 10.66% 9 PERSISTENT SYSTEMS& SOLUTIONS LTD. 189,490,457 155,172,089 22.12% 10 PERSISTENT SYSTEMS LTD. 6,101,270,000 4,971,860,000 22.84% 11 R S SOFTWARE (INDIA) LTD. 1,882,638,471 1,617,804,170 16.37% 12 SASKEN COMMUNICATION TECHNOLOGIES LTD. 3,941,962,000 3,175,616,000 24.13% 13 TATA ELXSI LTD. (SEG) 3,581,985,000 2,962,533,352 20.91% AVERAGE MARGIN 24.82% THE AVERAGE MARGIN OF THE ABOVE SAID 13 COMPARABLE COMPANIES WAS 24.82%. AFTER ALLOWING WORKING CAPITAL ADJUSTMENT OF 1.48%, THE TPO ARRIVED AT ADJUSTED MARGIN OF 23.34%. ACCORDIN GLY, THE A.O. PROPOSED ADJUSTMENT OF RS.2,14,99,676/-. THE AO PA SSED DRAFT ASSESSMENT ORDER MAKING THE ADDITION CITED ABOVE TO WARDS TRANSFER PRICING ADJUSTMENT. 6. THE ASSESSEE FILED ITS OBJECTIONS BEFORE LD. DRP, WHICH REJECTED FOLLOWING 6 COMPANIES BY APPLYING TURNOVER FILTER. 1. INFOSYS LTD. 2. L&T INFOTECH LTD. 3. MINDTREE LTD. 4. PERSISTENT SYSTEMS LTD. 5. SASKEN COMMUNICATION TECHNOLOGIES LTD. 6. TATA ELXSI LTD. IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 4 OF 10 ACCORDINGLY, THE LD DRP CONFIRMED SELECTION OF REMA INING SEVEN COMPARABLE COMPANIES. AS A RESULT OF DIRECTION SO G IVEN BY DRP, THE TP ADJUSTMENT CAME TO BE REDUCED TO RS.1,56,84,934/ -. THE A.O. ADDED THE ABOVE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE IN THE FINAL ASSESSMENT ORDER PASSED BY HIM. 7. WE SHALL FIRST TAKE UP THE GROUNDS RELATING T O THE PLEA OF EXCLUSION OF COMPARABLE COMPANIES, WHICH WERE RETAINED BY LD DRP. THE LD. A.R. SUBMITTED THAT THE ASSESSEE SEEKS EXCLUSION OF FOLLOWING 3 COMPARABLE COMPANIES ALSO FROM THE LIST OF COMPARAB LE COMPANIES CONFIRMED BY LD DRP:- 1. ACROPETAL TECHNOLOGIES LTD. (SEG) 2. E-INFO CHIPS LTD. 3. PERSISTENT SYSTEMS & SOLUTIONS LTD. THE LD. A.R. SUBMITTED THAT ALL THE ABOVE SAID THRE E COMPANIES HAVE BEEN HELD TO BE NOT GOOD COMPARABLE COMPANIES FOR S OFTWARE DEVELOPMENT SEGMENT BY VARIOUS DECISIONS OF THE TRI BUNAL. THE LD A.R FURNISHED COPIES OF VARIOUS CASE LAWS RELIED UP ON BY HIM. 8. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT AL L THE ABOVE SAID COMPANIES SHOULD BE EXAMINED INDEPENDENTLY BY THE T RIBUNAL WITHOUT HAVING RECOURSE TO THE PAST DECISIONS RENDE RED BY THE TRIBUNAL. HE SUPPORTED THE ORDER PASSED BY LD DRP. 9. WE HEARD THE PARTIES ON THIS ISSUE. THE LD A.R SUBMITTED THAT M/S. ACROPETAL TECHNOLOGIES LTD, E-ZEST SOLUTIONS, E-INFOCHIPS LTD AND ICRA TECHNO ANALYTICS LTD HAVE BEEN EXCLUDED BY THE CO- ORDINATE BENCH IN THE CASE OF IN THE CASE OF M/S AP PLIED MATERIALS INDIA P LTD (IT(TP)A NO.17 & 39/BANG/2016 DATED 21. 9.2016. IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 5 OF 10 (A) ACROPETAL TECHNOLOGIES LTD:- 9.1 WE HEARD RIVAL CONTENTIONS ON THIS COMPARABL E COMPANY AND PERUSED THE RECORD. WE NOTICE THAT THE CO-ORDINATE BENCH HAS EXCLUDED THIS COMPANY IN THE CASE OF M/S APPLIED MA TERIALS INDIA P LTD (SUPRA) WITH THE FOLLOWING OBSERVATIONS:- 15. THE REVENUE IS ALSO SEEKING INCLUSION OF SOME OF THE COMPANIES IN THE LIST OF COMPARABLES WHICH WERE REFLECTED BY THE DRP . WE WILL DEAL WITH THE ISSUES ONE BY ONE AS UNDER : (I) ACROPETAL TECHNOLOGIES LTD.(SEG.) 16.1 THE DRP REJECTED THIS COMPANY ON THE GROUND OF EMPLOYEE COST FILTER. THE LD. DR HAS SUBMITTED THAT THE TPO HAS APPLIED T HE EMPLOYEE COST FILTER AND THIS COMPANY SATISFIES THE SAME. 16.2 ON THE OTHER HAND, THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE TOTAL EMPLOYEE COST OF THIS COMPANY IS11.51% OF THE TOTAL OPERATING REVENUE THEREFORE IT FAILS T HE EMPLOYEE COST FILTER OF 25%. FURTHER HE HAS POINTED OUT THAT THIS COMPANY A LSO FAILS THE SOFTWARE DEVELOPMENT SERVICES REVENUE FILTER OF 75%. HE HAS REFERRED THE DETAILS AT PAGE NOS.39 AND 53 OF THE ANNUAL REPORT AND SUBMITT ED THAT THE INCOME FROM SOFTWARE DEVELOPMENT IS RS.81.40 CRORES OUT OF TOTA L REVENUE OF RS.141 CRORES. THEREFORE THIS COMPANY FAILS THIS FILTER. 16.3 IN A REJOINDER THE LD. DR HAS SUBMITTED THAT T HE TPO HAS CONSIDERED ONLY INFORMATION TECHNOLOGY TRANSACTIONS SEGMENT AN D THEREFORE IT SATISFIES SOFTWARE DEVELOPMENT SERVICES INCOME FILTER AS WELL AS EMPLOYEE COST FILTER. 16.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS THE RELEVANT MATERIAL ON RECORD. AS PER THE SEGMENTAL REPORTING AT PAGE 53 OF THE ANNUAL REPORT THE INCOME FROM INFORMATION TECHNOLOGY SERVI CES IS RS.81.40 CRORES IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 6 OF 10 OUT OF THE TOTAL INCOME OF RS.141 CRORES. THEREFORE THE REVENUE FROM INFORMATION TECHNOLOGY TRANSACTIONS SERVICES IS LES S THAN 75% AND CONSEQUENTLY THIS COMPANY DOES NOT SATISFY THE FILT ER OF INFORMATION TECHNOLOGY REVENUE APPLIED BY THE TPO ITSELF. ACCOR DINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE DRP F OR THIS ISSUE. ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISION, WE DIRECT EXCLUSION OF M/S ACROPETAL TECHNOLOGIES LTD. (B) E-INFOCHIPS LTD:- 9.2 WE HEARD THE PARTIES ON THIS COMPARABLE CO MPANY. WE NOTICE THAT THE DELHI BENCH OF TRIBUNAL IN THE CASE OF SAX O INDIA P LTD (ITA NO.6148/DEL/2015 DATED 05-02-2016) HAS EXCLUDED THI S COMPANY WITH THE FOLLOWING OBSERVATIONS:- (I) E-INFOCHIPS LIMITED: 10.1. THE TRANSFER PRICING OFFICER INCLUDED THIS CO MPANY IN THE LIST OF COMPARABLES. ON BEING CALLED UPON TO EXPLAIN AS TO WHY IT SHOULD NOT BE CONSIDERED AS A COMPARABLE, THE ASSESSEE CONTENDED THAT THERE WAS FUNCTIONAL DISSIMILARITY INASMUCH AS THIS COMPANY W AS ENGAGED IN SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES AND ALSO PRODUC TS. THE TRANSFER PRICING OFFICER OBSERVED THAT THE REVENUES OF THIS COMPANY FROM PRODUCTS WAS ONLY 15% OF TOTAL REVENUE AND HENCE THE SAME QU ALIFIED TO BE ELIGIBLE FOR COMPARISON. THE DRP DID NOT ALLOW ANY RELIEF. 10.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND P ERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ANNUAL REPORT OF THIS COMPANY IS AVAILABLE IN THE PAPER BOOK WITH ITS PROFIT AND LOS S ACCOUNT AT PAGE 1025. SCHEDULE OF INCOME INDICATES ITS OPERATING REVENUE FROM SOFTWARE DEVELOPMENT, HARDWARE MAINTENANCE, INFORMATION TECH NOLOGY, CONSULTANCY ETC. REVENUE FROM HARDWARE MAINTENANCE STANDS AT RS . 3.92 CRORE, WHICH HAS IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 7 OF 10 BEEN CONSIDERED BY THE TRANSFER PRICING OFFICER HIM SELF AS SALE OF PRODUCTS. SUCH SALE OF PRODUCTS CONSTITUTES 15% OF TOTAL REVE NUE. THERE IS NO SEGMENTAL INFORMATION AVAILABLE AS REGARDS THE REVENUE FROM S ALE OF PRODUCTS AND REVENUE FROM SOFTWARE DEVELOPMENT SEGMENT. AS THE A SSESSEE IS SIMPLY ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES AND THERE IS NO SALE OF ANY SOFTWARE PRODUCTS, THIS COMPANY, IN OUR CONSIDE RED OPINION, CEASES TO BE COMPARABLE. IT IS OBVIOUS THAT FROM THE COMMON P OOL OF INCOME FROM BOTH THE STREAMS OF SOFTWARE PRODUCTS AND SOFTWARE SERVI CES, ONE CANNOT DEDUCE THE REVENUE FROM SOFTWARE SERVICES AND NO ONE KNOWS THE IMPACT OF REVENUE FROM PRODUCTS ON THE OVERALL KITTY OF PROFIT, WHICH MAY BE SIGNIFICANT. SINCE NO SEGMENTAL DATA OF THIS COMPANY IS AVAILABLE INDI CATING OPERATING PROFIT FROM SOFTWARE DEVELOPMENT SERVICES, WE ORDER TO EXC LUDE THIS COMPANY FROM THE LIST OF COMPARABLES. FOLLOWING THE DECISION RENDERED IN THE CASE OF SAXO INDIA P LTD (SUPRA), WE DIRECT EXCLUSION OF THE ABOVE SAID COMP ARABLE COMPANY. (C) PERSISTENT SYSTEMS AND SOLUTIONS LTD:- 9.3 WE HEARD THE PARTIES ON THIS COMPARABLE COM PANY. WE NOTICE THAT THIS COMPANY HAS BEEN EXCLUDED BY THE CO-ORDIN ATE BENCH IN THE CASE OF DCIT VS. ELECTRONICS FOR IMAGING INDIA P LT D (IT(TP)A NOS. 227 & 285/DEL/2013). FOR THE SAKE OF CONVENIENCE, WE E XTRACT BELOW THE OBSERVATIONS MADE BY THE TRIBUNAL IN RESPECT OF THI S COMPARABLE COMPANY:- PERSISTENT SYSTEMS & SOLUTIONS LTD. 60. THE ASSESSEE HAS THE GRIEVANCE AGAINST REJECTIO N OF THIS COMPANY BY THE DRP. THE LD. AR HAS SUBMITTED THAT ASSESSEE DID NOT RAISE ANY OBJECTION AGAINST THIS COMPANY, HOWEVER, THE DRP HAS REJECTED THE SAID COMPANY. THEREFORE, THE SAID COMPANY SHOULD BE RETAINED IN T HE LIST OF COMPARABLES. 61. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, AT THE OUTSET, WE NOTE THAT THE DRP HAS EXA MINED THE FUNCTIONAL IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 8 OF 10 COMPARABILITY OF THIS COMPANY BY CONSIDERING THE RE LEVANT DETAILS AS GIVEN IN THE ANNUAL REPORT OF THIS COMPANY. THE DRP HAS G IVEN THE FINDING THAT THE ENTIRE REVENUE HAS BEEN EARNED BY THIS COMPANY FROM THE SALE OF SOFTWARE SERVICES AND PRODUCTS AND IN THE ABSENCE OF SEGMENT AL DETAILS, IT CANNOT BE CONSIDERED AS COMPARABLE WITH SOFTWARE SERVICES SEG MENT. WE FIND THAT THIS COMPANY HAS SHOWN THE INCOME FROM SALE OF SOFTWARE SERVICES AND PRODUCTS TO THE TUNE OF RS.6.67 CRORES. WE FURTHER NOTE THAT AS PER SCHEDULE 11, THE ENTIRE REVENUE HAS BEEN SHOWN UNDER ONE SEGMENT I.E ., SALE OF SOFTWARE SERVICES AND PRODUCTS. THEREFORE, NO SEPARATE SEGME NT HAS BEEN GIVEN IN RESPECT OF SOFTWARE SERVICES. ACCORDINGLY, THE COMP OSITE DATA OF REVENUE AS WELL AS MARGINS OF THIS COMPANY PERTAINING TO THE S ALE OF SOFTWARE SERVICES AND PRODUCTS CANNOT BE CONSIDERED AS COMPARABLE WIT H THE SOFTWARE DEVELOPMENT SERVICES SEGMENT OF THE ASSESSEE. IN VI EW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ERROR OR ILLEGALI TY IN THE DIRECTIONS OF THE DRP IN EXCLUDING THIS COMPANY FROM THE LIST OF COMP ARABLES. THIS GROUND OF CO IS DISMISSED. WE NOTICE THAT THE CO-ORDINATE BENCH HAS EXCLUDED T HIS COMPANY IN THE CASE OF APPLIED MATERIALS INDIA PRIVATE LIMITED (SUPRA) BY FOLLOWING THE DECISION RENDERED IN THE CASE OF ELEC TRONICS FOR IMAGING INDIA P LTD (SUPRA). CONSISTENT WITH THE VIEW TAKE N IN THE ABOVE SAID CASES, WE DIRECT EXCLUSION OF THIS COMPARABLE COMPA NY. 10. THE ASSESSEE ALSO SEEKS INCLUSION OF ONE COM PANY, NAMED M/S CG VAK SOFTWARE & EXPORTS LTD . THE LD A.R SUBMITTED THAT THIS COMPANY HAS BEEN HELD TO BE A GOOD COMPARABLE IN TH E CASE OF ASPECT TECHNOLOGY CENTRE INDIA P LTD (IT(TP)A 187/BANG/201 6 DATED 30-07- 2020). 10.1 WE HEARD LD D.R AND PERUSED THE RECORD. WE NOTICE THAT THE BANGALORE BENCH OF TRIBUNAL HAS DIRECTED FOR INCLUS ION OF M/S CG VAK SOFTWARE & EXPORTS LTD, IN THE CASE OF ASPECT T ECHNOLOGY CENTRE IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 9 OF 10 INDIA P LTD FOR ASSESSMENT YEAR 2011-12. THE RELEV ANT OBSERVATIONS MADE BY THE TRIBUNAL ARE EXTRACTED BELOW:- 31. IN GROUND NO. 4(D) THE ASSESSEE INCLUSION OF C G VAK SOFTWARE AND EXPORT LTD. ('CG VAK' FOR SHORT), WHICH WAS PART OF ITS TP STUDY, IN THE FINAL LIST OF COMPARABLES AS THE COMPANY IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE. THE TPO REJECTED THE COMPANY ON THE GROUN D THAT IT FAILS THE EMPLOYEE COST FILTER. THE DRP THEN PROCEEDED TO UPH OLD ITS REJECTION ON THE IT(TP)A NOS.187 & 175/BANG/2016 GROUND THAT IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE COMPANY PASSES THE EMPLOYEE C OST FILTER IN THE ABSENCE OF DETAILS REGARDING THE SAME BEING MADE AVAILABLE, AND ALSO FOR THE REASON THAT IN THE ABSENCE OF DETAILS REGARDING THE EXPENS ES 'COST TO SERVICES' BEING MADE AVAILABLE, IT WAS NOT POSSIBLE TO ASCERTAIN IF THE COMPANY WAS ENGAGED IN SUB-CONTRACTING ITS SOFTWARE DEVELOPMENT SERVICE S. AFTER HEARING THE RIVAL SUBMISSIONS WE FIND THAT THIS COMPANY IS ENGAGED IN THE PROVISION OF ROUTINE SOFTWARE DEVELOPMENT SERVICES, AND THEREFORE, THE M AJOR PORTION OF EXPENSES UNDER THE HEAD 'COST OF SERVICES' COULD ONLY RELATE TO EMPLOYEE COST. THE RATIO OF COST OF SERVICES TO TOTAL SALES AMOUNTS TO 77.65 % AND THEREFORE IT COULD BE HELD THAT THE COMPANY PASSES THE EMPLOYEE COST FILT ER. DETAILED SUBMISSIONS IN THIS REGARD ARE MADE AT PAGES 231-233 OF THE PAP ERBOOK. THIS COMPANY HAS BEEN CONSISTENTLY INCLUDED IN THE FINAL LIST OF COMPARABLES IN CASE OF ASSESSEES PLACED SIMILARLY THAT OF THE ASSESSEE HER EIN. FURTHER, THE DRP'S OBSERVATION THAT THE COMPANY COULD BE ENGAGED IN SU B-CONTRACTING OF SERVICES FOR THE REASON THAT EXPENSES HAVE BEEN DEB ITED UNDER THE HEAD 'COST TO SERVICES' IS WITHOUT ANY BASIS MORE SO, WHEN THE RE IS NO FILTER REGARDING SUB-CONTRACTING OF SERVICES APPLIED BY THE TPO OR T HE DRP. WE ALSO FIND THAT IN THE DECISION OF THIS TRIBUNAL IN THE CASES OF CI SCO SYSTEMS (INDIA) (P.) LTD. V. DCIT ([2014] 50 TAXMANN.COM 280 (BANGALORE- TRIB.) AT P ARA 27.8 PAGE 1795; AND DCIT V. IVY COMPTECH PVT. LTD . ( COMMON ORDER PASSED IN ITA NO. 222/HYD/2015 AND ITA NO. 334/HYD/2015 ) IN PARA S 21 TO 21.3 AT PAGES 1837-1838, THIS COMPANY HAS BEEN DIRECTED TO BE INC LUDED IN THE LIST OF IT(TP)A NO.314/BANG/2016 M/S. MERITOR CVS INDIA PVT. LTD., BANGALORE PAGE 10 OF 10 COMPARABLE COMPANIES. WE THEREFORE DIRECT THAT THIS COMPANY BE INCLUDED IN THE FINAL LIST OF COMPARABLE COMPANIES. 10.2 FOLLOWING THE ABOVE SAID DECISION, WE DIRE CT THE AO TO INCLUDE M/S CG VAK SOFTWARE AND EXPORT LTD AS A COMPARABLE COMPANY. 11. IN VIEW OF THE FOREGOING DISCUSSIONS, THE ALP OF THE TRANSACTIONS RELATING TO SOFTWARE SEGMENT REQUIRES TO BE RE-DETE RMINED. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF A O/TPO WITH THE DIRECTION TO RE-COMPUTE THE ALP OF SOFTWARE DEVELOP MENT SERVICES SEGMENT IN THE LIGHT OF DISCUSSIONS MADE SUPRA. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JAN, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 5 TH JAN, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.