M/s Salesforce.Com India Private Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

ITA 3286/BANG/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9051 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction; Services rendered outside India; Wholly owned subsidiary; Bad and doubtful debts; Scheme of amalgamation; Notional interest; Tax effect; Revised return; TDS; Set aside
• Section: 143(3); 92D; 92B; 40(a)(ia); 133(6); 143(1); 194J; 13; 22; 92CA; 6; 28; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.3286/BANG/2018 ASSESSMENT YEAR : 2014-15 SALESFORCE.COM INDIA PVT. LTD., NO.10, FIRST FLOOR 12 TH MAIN PALACE ROAD, VASANTHNAGAR, BENGALURU. PAN AAJCS 3582 R VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-6(1)(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI SUMEET KHURANA, C.A REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 08-02-2021 DATE OF PRONOUNCEMENT : 22-03-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAI NST FINAL ASSESSMENT ORDER DATED 23/10/2018 PASSED BY LD.ACIT CIRCLE- 6(1)(1) UNDER SECTION 143(3) READ WITH 144C(13) OF THE ACT ON FOLLOWING GROUNDS OF APPEAL: THE GROUNDS MENTIONED HEREIN BY THE APPELLANT ARE WITHOUT PREJUDICE TO ONE ANOTHER. TRANSFER PRICING MATTERS PAGE 2 OF 33 IT(TP)A NO.3286/BANG/2018 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, DISPUTE RESOLUTION PANEL ('LEARNED DRP') ERRED IN CONFIRMIN G THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6(I)(1), BENGALURU ('LEARNED AO')/ DEPUTY COMMISSIONER OF INCOME-TAX (TRANSFER P RICING), CIRCLE 2(2)(1), BENGALURU ('LEARNED TPO') IN MAKING AN ADJ USTMENT OF RS26,548,569 TO THE TRANSFER PRICE OF THE APPELLANT 'S INTERNATIONAL TRANSACTIONS IN RESPECT OF SOFTWARE DEVELOPMENT SER VICES, RS. 102,622,022 TO THE TRANSFER PRICE OF THE APPELLANT' S INTERNATIONAL TRANSACTIONS IN RESPECT OF MARKETING AND SALES SUPP ORT SERVICES AND RS. 113,123 IN RESPECT OF NOTIONAL INTEREST ON OUTSTAND ING RECEIVABLES. (TAX EFFECT: RS. 43,943,534) 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WITH RESPECT TO ADJUSTMENT TO THE TRANSFER PRICE OF THE SOFTWARE DEVELOPMENT SERVICES AND MARKETING AND SALES SUPPORT SERVICES, THE LEARNED DRP/ AO/TPO ERRED IN: 2.1. REJECTING THE TRANSFER PRICING ('TP') DOCUMENT ATION MAINTAINED BY THE APPELLANT UNDER SECTION 92D OF THE ACT, IN GOOD FAITH AND WITH DUE DILIGENCE. 2.2. REJECTING THE COMPARABILITY ANALYSIS CARRIED O UT BY THE ASSESSEE IN THE TP DOCUMENTATION AND IN CONDUCTING A FRESH COMP ARABILITY ANALYSIS FOR THE INTERNATIONAL TRANSACTION OF SOFTWARE DEVEL OPMENT SERVICES AND MARKETING AND SALES SUPPORT SERVICES BASED ON THE A PPLICATION OF ADDITIONAL FILTERS IN DETERMINING THE ARM'S LENGTH PRICE. 2.3. USING DATA, WHICH WAS NOT CONTEMPORANEOUS AND WHICH WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF PREPA RING THE TP DOCUMENTATION. 2.4. NOT CONSIDERING THE MULTIPLE YEAR/PRIOR YEAR D ATA OF COMPARABLE COMPANIES WHILE DETERMINING THE ARM'S LENGTH PRICE IN RELATION TO THE APPELLANT'S INTERNATIONAL TRANSACTIONS WITH ITS AES . 2.5. USING INFORMATION UNDER SECTION 133(6) OF THE ACT, WHICH TANTAMOUNT TO CHOOSING SECRET COMPARABLE COMPANIES WHOSE INFOR MATION WAS NOT AVAILABLE IN PUBLIC DOMAIN WHILE PREPARING THE TRAN SFER PRICING DOCUMENTATION FOR THE RELEVANT FINANCIAL YEAR. 2.6. DISREGARDING CERTAIN FILTERS APPLIED BY THE AP PELLANT IN SELECTION OF THE COMPARABLE COMPANIES AT THE TIME OF TP DOCUMENT ATION. 2.7. APPLYING/ MODIFYING THE FOLLOWING FILTERS WHIL E UNDERTAKING COMPARABILITY ANALYSIS 2.8. INCLUDING THE FOLLOWING COMPARABLE COMPANIES E VEN THOUGH THEY ARE FUNCTIONALLY DIFFERENT FROM OPERATIONAL PROFILE OF THE APPELLANT: SOFTWARE DEVELOPMENT SERVICES A) INFOSYS LIMITED; B) PERSISTENT SYSTEMS LIMITED; C) THIRDWARE SOLUTIONS LIMITED; D) MINDTREE LIMITED; E) R S SOFTWARE (INDIA) LIMITED; S PAGE 3 OF 33 IT(TP)A NO.3286/BANG/2018 F) LARSEN & TUBRO INFOTECH LTD; AND G) CIGNITI TECHNOLOGIES LTD. MARKETING AND SALES SUPPORT SERVICES A) I MEDIA CORP LIMITED B) IRUNWAY INDIA PVT. LIMITED C) ALIA CREATIVE CONSULTANTS PVT. LIMITED D) KILLICK AGENCIES & MARKETING LIMITED 2.9. EXCLUDING THE FOLLOWING COMPANIES EVEN THOUGH THEY ARE FUNCTIONALLY COMPARABLE TO THE APPELLANT AND PASSES ALL THE FILTERS APPLIED BY THE LEARNED TPO IN ITS ORDER: SOFTWARE DEVELOPMENT SERVICES A)SASKEN COMMUNICATION TECHNOLOGIES LIMITED; B) AKSHAY SOFTWARE TECHNOLOGIES LIMITED; C) E-ZEST SOLUTIONS LIMITE D) SANKHYA INFOTECH LIMITED; E) 12T2 INDIA LIMITED; F) DAFFODIL SOFTWARE LIMITED; G) KIREETI SOFT TECHNOLOGIES LIMITED; H) EXILIAIIT TECHNOLOGIES PRIVATE LIMITED; I) CELSTREAM TECHNOLOGIES LIMITED; J) MAVERIC SYSTEMS LIMITED; AND K) EVOKE TECHNOLOGIES LIMITED. MARKETING AND SALES SUPPORT SERVICES A) CONCEPT PUBLIC RELATIONS INDIA LIMITED; B) ICRA MANAGEMENT & KESTONE INTEGRATED; AND C) MCI MANAGEMENT (INDIA) LTD. 2.10. NOT CONSIDERING CERTAIN EXPENSES SUCH AS PROV ISION FOR DOUBTFUL DEBTS, PROVISION FOR WARRANTIES, PROVISION OF DOUBT FUL DEPOSITS, AND MISCELLANEOUS EXPENDITURE WRITTEN OFF, AS PART OF O PERATING COST FOR THE COMPUTATION OF APPELLANT'S PROFIT LEVEL INDICATOR ( 'PU'). 2.11. NOT PROVIDING ADJUSTMENT FOR THE DIFFERENCES IN WORKING CAPITAL OF THE APPELLANT AND THE COMPARABLE COMPANIES. 2.12. NOT PROVIDING SUITABLE ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIS-A- VIS THE COMPAR ABLE COMPANIES. 2.13. COMPUTING INCORRECT OPERATING MARK-UP OF CERT AIN COMPARABLE COMPANIES. (TAX EFFECT: RS. 43,905,084) GROUNDS FOR IMPUTATION OF NOTIONAL INTEREST ON OUTS TANDING RECEIVABLES 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LEARNED DRP/AO/TPO ERRED IN: 3.1. CONSIDERING OVERDUE RECEIVABLES FROM ASSOCIATE D ENTERPRISES ('AES') AS A SEPARATE INTERNATIONAL TRANSACTION UNDER THE P ROVISIONS OF SECTION 92B OF THE ACT. PAGE 4 OF 33 IT(TP)A NO.3286/BANG/2018 3.2. WITHOUT PREJUDICE TO GROUND NO 3.1, THE LEARNE D DRP/AO/TPO ERRED IN IGNORING THAT, IF AT ALL TRANSFER PRICING ADJUST MENT TO BE SUSTAINED WITH RESPECT TO NOTIONAL INTEREST ON OVERDUE RECEIVABLES , IT SHOULD BE RESTRICTED TO AES OUTSTANDING FOR MORE THAN 18O DAY S. (TAX EFFECT: RS. 38,451) OTHER THAN TRANSFER PRICING RELATED 4. DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED AO AND THE LEARNED PANEL ERRED IN HOLDING THAT TAX HAD NOT BEEN DEDUCTED AT SOURCE ON EXPENDITURE AMOUNTING TO INR 24,586,94 6 UNDER SECTION 194-I OF THE ACT AND DISALLOWING THE SAME UNDER SEC TION 40(A)(IA) OF THE ACT. 4.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED PANEL FAILED TO APPRECIATE THAT THE APPELLANT HAD DULY DE DUCTED TAX AT SOURCE ON INR 24,586,946, WHERE EVER APPLICABLE, UNDER SEC TION 194C/ 194J OF THE ACT DEPENDING ON THE NATURE OF TH E EXPENSE AND DEPOSITED THE SAME TO THE GOVERNMENT TREASURY. 4.3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LEARNED PANEL FAILED TO TAKE COGNIZANCE OF THE SUBMISSIONS/ EXPLA NATIONS AND UNDERLYING DOCUMENTS FURNISHED BY THE APPELLANT EVI DENCING THAT TAX HAD BEEN DEDUCTED AT SOURCE ON INR 24,586,946. (TAX EFFECT: RS. 8,357,103) THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN BELOW OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 28/11/2014 DECLARING TOTAL INCOME OF RS.11,31,24,620/-. SUBSEQUENTLY, REVISED RETURN WAS FILED ON 30/03/2016 DECLARING TOTAL INCOME OF RS.11,32,46,17 0/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE AC T AND THE CASE WAS SELECTED FOR SCRUTINY. THE LD.AO OBSERVED THAT, THE ASSESSEE HAD INTERNATIONAL TRANSACTION EXCEEDING RS .15 CRORES, AND ACCORDINGLY, THE ISSUE WAS REFERRED TO THE TRAN SFER PRICING OFFICER TO DETERMINE ARMS LENGTH PRICE OF INTERNAT IONAL TRANSACTION ENTERED BY THE ASSESSEE WITH ITS AE. PAGE 5 OF 33 IT(TP)A NO.3286/BANG/2018 3. UPON RECEIPT OF THE REFERENCE UNDER SECTION 92CA , THE LD.TPO CALLED UPON ASSESSEE TO FURNISH ECONOMIC DET AILS OF INTERNATIONAL TRANSACTIONS ENTERED BY ASSESSEE. THE LD.TPO FROM THE DETAILS FILED OBSERVED THAT, THE ASSESSEE HAD F OLLOWING INTERNATIONAL TRANSACTIONS WITH ITS AE: SI. NO. PARTICULARS AMOUNT (IN INR) 1. RECEIPTS FOR SWD SERVICES 23,95,52,266 2. RECEIPTS FOR MSS SERVICES 62,42,08,406 3. COST REIMBURSEMENTS 9,67,50,260 4. THE LD.TPO NOTED THAT, ASSESSEE FOLLOWED TNMM AS MOST APPROPRIATE METHOD WITH OP/OC AS PLI. THE LD.TPO OB SERVED THAT, ASSESSEE COMPUTED ITS MARGIN AT 15.36% UNDER SOFTWARE DEVELOPMENT SEGMENT AND 10.91% UNDER MSS SEGMENT. IT HAS BEEN SUBMITTED THAT, THE ASSESSEE SELECTED F OLLOWING 22 COMPARABLES UNDER SOFTWARE DEVELOPMENT SERVICE SEGM ENT WITH AVERAGE MARGIN OF 13.08%: SL. NO COMPARABLE COMPANY AVERAGE ADJUSTED % MARKUP ON TOTAL COST 1 AKSHAY SOFTWARE TECHNOLOGIES LIMIT ED 5.97% 2 BLUESTAR INFOTECH LIMITED (CONSOLIDATED ) 4.43% 3 CALIBER POINT BUSINESS SOLUTIONS LIMITED(SEGMENTAL) 4. 1 9% 4 CAT TECHNOLOGIES LIMITED -11.91% 5 CG-VAK SOFTWARE & EXPORTS LIMITED (SEG) 3.29% 6 CIGNITI TECHNOLOGIES LIMITED 19.81% 7 EVOKE TECHNOLOGIES PRIVATE LIMITED 11.60% 8 GOLDSTONE TECHNOLOGIES LIMITED 11.01% 9 HELIOS & MATHESON INFORMATION TECHNOLOGY LIMITED 18.45% 10 KELLTON TECH SOLUTIONS LTD 24.19% 11 LARSEN & TOUBRO INFOTECH LIMITED 24.74% PAGE 6 OF 33 IT(TP)A NO.3286/BANG/2018 12 LUCID SOFTWARE LIMITED 7.08% 13 MAVERIC SYSTEMS LIMITED 9.96% 1 4 MINDTREE LIMITED (SEG) 17.40% 15 PERSISTENT SYSTEMS LIMITED 30.16% 16 R S SOFTWARE INDIA LIMITED 19,56% 17 R SYSTEMS INTERNATIONAL LIMITED (SEG) 13.38% 18 SASKEN COMMUNICATIONS TECHNOLOGIES LIMITED (SEGMENT AL) 8.59% 19 SATYAM COMPUTER SERVICES LIMITED 18.92% 20 SPRY RESOURCES INDIA PVT LTD 7.45% 21 THINKSOFT GLOBAL SERVICES LIMITED 20.70% 22 ZYLOG SYSTEMS LIMITED 18.11% 5. INSOFAR AS MSS SEGMENT IS CONCERNED, ASSESSEE SE LECTED FOLLOWING 7 COMPARABLES WITH AN AVERAGE MARGIN OF 5 .10% S.N N COMPARABLE COMPANY AVERAGE ADJUSTED % MARKUP ON TOTAL COST 1 CONCEPT PUBLIC RELATIONS 11 .44% 2 EDCIL (INDIA) LTD. (SEG) 2.4% 3 ICRA MANAGEMENT INDIA LTD. 4.39% 4 IMPRESARIO EVENT -0.31% 5 INDIA TOURISM DEVELOPMENT CORPORATION LTD. (SEG) 2.08% 6 MCI MANAGEMENT (INDIA) LTD. 5.57% 7 KESTONE INTEGRATED MARKETING SERVICES PVT. LTD. (SE G) 10.15% 6. THE ASSESSEE USED FOLLOWING FILTERS TO SELECT AB OVE COMPARABLES TO DETERMINE THE ARMS LENGTH OF THE IN TERNATIONAL TRANSACTIONS UNDER BOTH THE SEGMENTS: SL. NO. AS PER TP STUDY 1. COMPANIES FOR WHICH SUFFICIENT FINANCIAL OR DESC RIPTIVE INFORMATION IS NOT AVAILABLE TO UNDERTAKE ANALYSIS. 2. COMPANIES THAT HAD CEASED BUSINESS OPERATIONS OR WERE CURRENTLY INACTIVE. PAGE 7 OF 33 IT(TP)A NO.3286/BANG/2018 3. COMPANIES THAT HAD BEEN DECLARED SICK OR HAD PER SISTENT NEGATIVE NET WORTH. 4. COMPANIES THAT HAVE TURNOVER LESS THAN INR 1 CRO RE. 5 COMPANIES UNDERTAKING SIGNIFICANTLY DIFFERENT FUN CTIONS COMPARED TO SIPL. 6 COMPANIES THAT DO NOT HAVE SIGNIFICANT (LESS THAN 25 PERCENT) FOREIGN EXCHANGE EARNINGS. 7 COMPANIES THAT HAD SUBSTANTIAL (IN EXCESS OF 25 P ERCENT) TRANSACTIONS WITH RELATED PARTIES. 8 COMPANIES THAT EXPERIENCED PERSISTENT OPERATING L OSSES. 9 COMPANIES THAT HAVE EXCEPTIONAL YEAR(S) OF OPERATIO NS. 7. THE LD.TPO DISSATISFIED WITH THE FILTERS ADOPTED AND THE COMPARABLES SELECTED, CARRIED OUT FRESH SEARCH BASE D ON FOLLOWING FILTERS UNDER BOTH THE SEGMENTS: FILTERS ADOPTED BY THE TPO: SWD SEGMENT COMPANIES WHOSE DATA IS NOT AVAILABLE FOR THE FY 20 13-14 WERE EXCLUDED. COMPANIES WHOSE SERVICE INCOME RS.1 CRORE WERE EXCL UDED. COMPANIES WHOSE SOFTWARE DEVELOPMENT SERVICE IS LES S THAN 75% OF THE TOTAL OPERATING REVENUES WERE EXCLUDED. COMPANIES WHO MORE THAN 25% HAVE RELATED PARTY TRAN SACTIONS OF THE SALES WERE EXCLUDED. COMPANIES HAVING DIFFERENT FINANCIAL YEAR ENDING (I .E. NOT MARCH 31, 2013) OR DATE OF THE COMPANY NOT AVAILABLE FOR THE 12 MONTH PERIOD I.E. 01-04-2013 TO 31-03-2014, WERE REJECTED. / COM PANIES WHOSE EMPLOYEE COST TO SALES IS LESS THAN 25% WERE EXCLUD ED. COMPANIES WHOSE EXPORT SERVICE INCOME IS LESS THAN 75% OF THE SALES WERE EXCLUDED. MSS SEGMENT COMPANIES WHOSE DATA IS NOT AVAILABLE FOR THE FY 20 13-14 WERE EXCLUDED. COMPANIES WHOSE SERVICE INCOME RS.1 CRORE WERE EX CLUDED. COMPANIES WHO MORE THAN 25% HAVE RELATED PARTY TRAN SACTIONS OF THE SALES WERE EXCLUDED. COMPANIES HAVING POSITIVE NET WORTH. COMPANIES WHOSE EXPORT SERVICE INCOME IS LESS THAN 75% OF THE SALES WERE EXCLUDED. COMPANIES HAVING DIFFERENT FINANCIAL YEAR ENDING (I .E. NOT MARCH 31, 2013) OR DATE OF THE COMPANY NOT AVAILABLE FOR THE 12 MONTH PERIOD I.E. 01-04-2013 TO 31-03-2014, WERE REJECTED. PAGE 8 OF 33 IT(TP)A NO.3286/BANG/2018 COMPANIES THAT EXPERIENCED PERSISTENT OPERATING LOS SES WERE EXCLUDED. 8. THE LD.TPO THUS SELECTED FOLLOWING COMPARABLES IN THE FINAL LIST: 8.1 SWD SEGMENT SI. NO COMPARABLE COMPANY MARKUP ON TOTAL COST 1 INFOSYS LTD 36.13 % 2# LARSEN & TOUBRO INFOTECH LIMITED 24.61 % 3# MINDTREE LTD 20 .43 % 4# PERSISTENT SYSTEMS LTD 35.10 % 5# R S SOFTWARE INDIA LTD 24.25 % 6# CIGNITI TECHNOLOGIES LIMITED 27.62% 7 SQS INDIA BFSI LTD 22.37 % 8 THIRDWARE SOLU TIONS LTD 404.68 % 8.2 MSS SEGMENT SL. NO COMPARABLE COMPANY MARKUP ON TOTAL COST 1 I MEDIA CORP LTD. 34.17% 2 IRUNWAY INDIA PVT. LTD. 44.83% 3 ALIA CREATIVE CONSULTANTS PVT. LTD. 14.51% 4 KILLICK AGENCIES & MKTG. LTD. 23.05% 9. THE LD.TPO COMPUTED PROPOSED ADJUSTMENT BEING SH ORTFALL UNDER BOTH THE SEGMENTS AS UNDER: SL. NO. DESCRIPTION ADJUSTMENT U/S 92CA (IN RS.) 1 SOFTWARE DEVELOPMENT SEGMENT 2,91,65,138/- 2 MSS SEGMENT 10,26,22,022/- PAGE 9 OF 33 IT(TP)A NO.3286/BANG/2018 3 INTEREST ON DELAYED RECEIVABLE 1,13,123/- TOTAL 13,19,00,283/- 10. THE LD.TPO ALSO COMPUTED INTEREST ON RECEIVABLE S AS AN INDEPENDENT INTERNATIONAL TRANSACTION THEREBY PROPO SING AN AMOUNT OF RS.1,13,123/- AS TRANSFER PRICING ADJUSTM ENT ON INTEREST ON TRADE RECEIVABLES OVER THE CREDIT PERIO D FOR SWD SEGMENT. 11. ON RECEIPT OF THE TRANSFER PRICING ORDER, THE L D.AO PASSED THE DRAFT ASSESSMENT ORDER ON 29/12/2017. WHILE PAS SING THE DRAFT ASSESSMENT ORDER THE LD.AO DISALLOWED SUM OF RS.2,45 86,946/-UNDER SECTION 40(A)(IA) OF THE ACT, BEING T HE DIFFERENCE IN THE RENT DECLARED IN 3CD REPORT AND AS PER STATEMEN T OF COMPUTATION OF INCOME, ON WHICH TDS WAS NOT DEDUCTE D. 12. AGGRIEVED BY THE ADDITION MADE BY THE LD.AO, AS SESSEE RAISED OBJECTIONS BEFORE DRP. DRP UPHELD THE ACTION OF THE LD.TPO IN RESPECT OF MOST OF THE COMPARABLES. 13. ON RECEIPT OF DRP DIRECTION THE LD.AO PASSED IM PUGNED ORDER ON 23/10/2018 BY MAKING ADDITION IN THE HANDS OF ASSESSEE WITHOUT GRANTING ANY RELIEF. 14. AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE IS IN APPEAL BEFORE US NOW. 15. AT THE OUTSET THE LD.AR SUBMITTED THAT, ASSESSE E DO NOT WISH TO ARGUE GROUND NO.1-2.7 RAISED THE GROUNDS OF APPEAL. 51.1 IN GROUND NO.2.8, UNDER THE SWD, ASSESSEE DO N OT WISH TO ARGUE FOR EXCLUDING RS SOFTWARE (INDIA) LTD. PAGE 10 OF 33 IT(TP)A NO.3286/BANG/2018 UNDER MSS SERVICES ASSESSEE DO NOT WISH TO ARGUE FO R EXCLUSION OF ALIA CREATIVE CONSULTANTS PVT LTD. 15.2 IN GROUND NO. 2.9 UNDER SOFTWARE DEVELOPMENT SERVICE SEGMENT ASSESSEE DO NOT WISH TO ARGUE FOR INCLUSION OF THE SASKEN COMMUNICATION TECHNOLOGIES LTD, AKSHAY SOFTW ARE TECHNOLOGIES LTD., E-ZEST SOLUTIONS LTD., SANKHYA I NFOTECH LTD. AND DAFFODILS SOFTWARE LTD. 15.3 UNDER MSS SERVICE SEGMENT ASSESSEE DO NOT WIS H TO ARGUE FOR INCLUSION OF ICRA MANAGEMENT AND KEYSTONE INTEG RATED. ASSESSEE ALSO DO NOT PRESS GROUND 2.10-2.13 RAISED IN THE GROUNDS OF APPEAL. ACCORDINGLY, THESE COMPARABLES AND ISSUES RAISED IN THE RESPECTIVE GROUNDS ARE DISMISSED AS NOT ARGUED. 16. WE RESTRICT OUR DECISION ONLY IN RESPECT OF THE COMPARABLES SOUGHT FOR EXCLUSION/INCLUSION BY ASSESSEE IN GROUN D NO.2.8, - 2.9, ALONG WITH GROUND NO. 3-3.2 AND 4-4.3 AS UNDER . 17. BEFORE WE UNDERTAKE THE COMPARABILITY ANALYSIS IT IS ( SINE QUA NON) TO UNDERSTAND THE FUNCTIONS PERFORMED, ASSETS OWNED AND RISKS ASSUMED BY ASSESSEE UNDER BOTH THESE SEGM ENTS.: FUNCTIONS PERFORMED: 17.1 SWD SEGMENT: THE ASSESSEE HAS ENTERED INTO AN INTERCOMPANY AGRE EMENT WITH ITS AE ACCORDING TO WHICH IT SHALL PERFORM CON TRACT SWD SERVICES FOR ITS AE AND IS COMPENSATED ON A COST +1 5% MARKUP BASIS. IN THE TRANSFER PRISING STUDY, IT IS STATED THAT ASSESSEE PAGE 11 OF 33 IT(TP)A NO.3286/BANG/2018 SHALL PERFORM FOLLOWING ARE FUNCTIONS AS PER THE SE RVICE AGREEMENT: CONCEIVING, PROPOSING AND DEVELOPING NEW PRODUCTS UNDER THE DIRECTIONS AND INSTRUCTIONS OF SALESFORCE INC ANALYZING COMPETITIVE PRODUCTS, EVALUATING COSTS A ND BENEFITS OF COMPETITIVE OR ALTERNATIVE DESIGNS AND REPORTING IT S FINDINGS TO SALESFORCE INC. AND PROVIDING SUCH OTHER SERVICES WITH RESPECT TO THE P RODUCTS AS SALESFORCE INC. MAY REQUEST FROM TIME TO TIME. 17.2 MSS SERVICES: THE ASSESSEE IS ENGAGED IN PROVIDING MSS SERVICES FOR ITS AE AND IS COMPENSATED ON A COST +11% MARKUP THE BASIS. IN THE TRANSFER PRICING STUDY, IT IS STATED THAT ASSESSEE WOULD BE PERFORMING FOLLOWING SERVICES AS PER THE SERVICE AG REEMENT: SIPL SHALL PERFORM FOLLOWING SERVICES AS PER THE SE RVICE AGREEMENT. SIPL SHALL ASSIST SSPL IN MARKETING SALESFORCE INC' S PRODUCTS AND SERVICES WITHIN INDIA. SIPL SHALL HAVE FULL RESPONSIBILITY FOR THE PRODUCT S AND SERVICES AND SHALL ALONE BE RESPONSIBLE FOR ANY AND ALL QUESTION S RELATING TO THE SAID PRODUCTS AND SERVICES. SIPL IS PERMITTED TO USE TRADEMARKS, TRADE NAMES, S ERVICE MARKS AND SIMILAR INTELLECTUAL PROPERTIES ('IP'S') BELONG ING TO SSPL OR SALESFORCE INC. SOLELY PROVIDING SERVICES TO SSPL. SIPL IDENTIFIES CUSTOMERS, GENERATES CUSTOMER LEADS , EDUCATES PROSPECTIVE CUSTOMERS ABOUT THE SOLUTIONS/SERVICES, COMPILES MARKET INFORMATION HR SSPL SO THAT IT RAN PREPARE B USINESS PLANS. 18. ASSETS OWNED: THE ASSOCIATED ENTERPRISE OWNS ALL THE VALUABLE IP RIGHTS ANOTHER COMMERCIAL OR MARKETING INTANGIBLES, KNOW-H OW COPYRIGHTS EXCEPT FOR UNDERTAKING THE PROVISION OF SWD AND MSS SERVICES. ASSESSEE ONLY OWNS THAT TANGIBLE ASSETS L IKE COMPUTERS OFFICE SPACES FURNITURE FIXTURES ETC WHICH IS REQUI RED FOR ITS DAY- PAGE 12 OF 33 IT(TP)A NO.3286/BANG/2018 TO-DAY ACTIVITIES TO CARRYOUT DAY TO DAY ACTIVITIES UNDER BOTH SEGMENTS. 18.1 RISKS ASSUMED: UNDER BOTH THE SEGMENTS ASSESSEE DO NOT ASSUME ANY MARKET RISK FOREIGN EXCHANGE RISK PRODUCT AND SERVI CE LIABILITY RISK CREDIT AND COLLECTION RISK OR R&D RISK. ASSESSEE IS THUS A MINIMAL RISK BEARING COMPANY REN DERING SERVICES TO AE UNDER A CONTRACT. 19. BASED ON THE ABOVE WE SHALL UNDERTAKE THE COMPA RABILITY ANALYSIS IN RESPECT OF THE COMPARABLES ARGUED BY TH E LD.AR. 20. IN GROUND NO. 2.8 , ASSESSEE IS SEEKING EXCLUSION OF FOLLOWING COMPARABLES UNDER RESPECTIVE SEGMENTS: SWD SEGMENT: INFOSYS LTD. PERSISTENT SYSTEMS LTD. THIRDWARE SOLUTIONS LTD. MINDTREE LTD. LARSEN AND TOUBRO INFOTECH LTD. CIGNITY TECHNOLOGIES LTD. MSS SEGMENT I MEDIA CORP LTD. IRUNWAY INDIA PVT.LTD KILLICK AGENCIES AND MARKETING LTD. 1. INFOSYS LIMITED : 20.1 IT IS SUBMITTED THAT, THIS COMPANY IS FUNCTION ALLY DISSIMILAR AND PROVIDES END TO END BUSINESS SOLUTIONS LIKE BUS INESS PAGE 13 OF 33 IT(TP)A NO.3286/BANG/2018 CONSULTING TECHNOLOGY ENGINEERING AND OUTSOURCING S ERVICES AND NO SEGMENTAL DETAILS IN RESPECT OF SERVICES ARE AVA ILABLE. IT IS ALSO SUBMITTED THAT THIS COMPARABLE MADE INVESTMENTS IN PRODUCTS TO ESTABLISH AS A TRADABLE IPO OWNER. THE LD.AR SUBMIT TED THAT THIS COMPARABLE OWNS SIGNIFICANT BRAND VALUE PRODUCTS AN D FOCUS ON BRAND BUILDING AND INCURRED EXPENDITURE ON R & D AN D THAT THE COMPANY OWNS 7 EDGE PRODUCTS / PLATFORMS, AND SIX O THER PRODUCT BASED SOLUTIONS. THE COMPANY LEVERAGES ON I TS PREMIUM BANKING SOLUTION AND DURING THE YEAR THE COMPANY ME RGED WITH ITS WHOLLY OWNED SUBSIDIARY INFOSYS CONSULTING INDI A LIMITED. 20.2 IT IS SUBMITTED THAT THIS COMPANY WAS EXCLUDED FROM THE FINAL LIST OF COMPARABLES IN ASSESSEE'S OWN CASE FO R THE ASSESSMENT YEAR 2011-12, WHICH HAS BEEN ACCEPTED BY REVENUE. THE LD.AR RELIED ON DECISION OF CO-ORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF LG SOFT INDIA (P.) LTD. V. DY. CIT IN IT(TP)A NO. 3122/BANG OF 2018 FOR DATED 28.5.2019 FOR ASSESSMEN T YEAR 2014-15, THE. THE CONTRARY, THE LD.CIT.DR PLACED RELIANCE ON ORDE RS PASSED BY AUTHORITIES BELOW. 20.3 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.4 WE SUPPORT THE VIEW TAKEN BY THIS TRIBUNAL IN CASE OF LG SOFT INDIA PVT. LTD. (SUPRA), WHERE THIS TRIBUNAL OBSERVED AS UNDER: '6. WE NOTICE THAT THE CO-ORDINATE BENCH HAS EXCLUD ED M/S.INFOSYS LTD IN A.Y 2008-09 BY FOLLOWING THE DECISION RENDERED BY A NOTHER CO-ORDINATE BENCH IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD ( IT(TP)A NO.1303/BANG/2012 DATED 28.11.2013, WHEREIN THE DEC ISION RENDERED IN THE CASE OF TRIOLOGY E BUSINESS SOFTWARE INDIA P LTD. (ITA PAGE 14 OF 33 IT(TP)A NO.3286/BANG/2018 NO.1054/BANG/2011) WAS FOLLOWED AND IT WAS HELD THA T M/S. INFOSYS TECHNOLOGIES LTD IS NOT FUNCTIONALLY COMPARABLE SIN CE IT OWNS SIGNIFICANT INTANGIBLE AND HAS HUGE REVENUES FROM SOFTWARE PROD UCTS. IT WAS FURTHER OBSERVED THAT THE BREAK UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCT IS NOT AVAILABLE. 20.5 WE NOTE THAT THIS COMPARABLE HAS SIGNIFICANT I NTANGIBLES AND HUGE REVENUES FROM SOFTWARE PRODUCTS AND WAS CO NSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR EXCLUS ION IN THE ASSESSMENT YEAR 2014-15. BASED ON THE ABOVE OBSERVATION WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. PERSISTENT SYSTEMS LTD. 20.6 THE LD.AR SUBMITTED THAT THIS COMPANY IS FUNCT IONALLY DIFFERENT, AS IT IS ENGAGED IN RENDERING IT SERVICE S AND DEVELOPMENT OF SOFTWARE PRODUCTS, WITHOUT THERE BEI NG SEGMENTAL INFORMATION. IT IS SUBMITTED THAT THIS COMPANY IS A LSO ENGAGED IN IP LED SOLUTIONS AND UNDERTAKES SIGNIFICANT R & D A CTIVITIES, OWNS IP. IT IS SUBMITTED THAT DURING THE YEAR, THE COMPA NY MADE ACQUISITIONS. IT WAS SUBMITTED THAT THIS COMPANY HA S MADE SIGNIFICANT INVESTMENT IN IP AND THEIR SOLUTIONS AN D HAS A DEDICATED TEAM FOR RESEARCH AND IP DEVELOPMENT. THE COMPANY IS FUNCTIONALLY DIFFERENT AS IT PROVIDES COMPLETE LIFE CYCLE SERVICES AND HAS SPECIALIZED SOFTWARE PRODUCT AND TECHNOLOGY INNOVATION. THE LD.AR ALSO SUBMITTED THAT ENTIRE REVENUE OF THE COMPARABLE COMPANY IS FROM OUTSOURCED PRODUCT DEVELOPMENT AND HAS PRESENCE OF INTANGIBLES, BRAND OWNERSHIP AND PROVIS ION OF APPLIED SOLUTIONS AND FURTHER HOLDS PROPRIETARY PRODUCTS. A NEW BUSINESS UNIT WAS ESTABLISHED IN THE SAID YEAR EXCLUSIVELY F OR THE PRODUCT PAGE 15 OF 33 IT(TP)A NO.3286/BANG/2018 BUSINESS ENGAGED IN R & D AND ALSO HAS ONSITE ACTIV ITIES AND NO SEGMENTAL INFORMATION IS AVAILABLE. DURING THE YEAR THERE ARE EXTRAORDINARY EVENTS OF ACQUISITIONS OF CLOUD SQUAD S AND FAILS THE TURNOVER FILTER OF MORE THAN RS. 200 CRORES. THE LD .AR RELIED ON DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF LG SOFT INDIA ( P. ) LTD. V. DY. CIT [IT (TP) APPEAL NO. 3122 (BANG.) OF 2018, DATED 28-5-2019. 20.7 ON THE CONTRARY, THE LD.CIT.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 20.8 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.9 WE SUPPORT THE VIEW TAKEN BY THIS TRIBUNAL IN CASE OF LG SOFT INDIA PVT. LTD., WHERE THIS TRIBUNAL OBSERVED AS UNDER : '7. IN AY 2008-09, THE CO-ORDINATE BENCH HAS EXCLUD ED M/S PERSISTENT SYSTEMS LTD. ALSO BY FOLLOWING THE DECISION RENDERE D IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA), WHERE IN IT WAS HELD THAT M/S PERSISTENT SYSTEMS LTD. IS ENGAGED IN PRODUCT D EVELOPMENT AND PRODUCT DESIGN SERVICES WHILE THE ASSESSEE IS A SOF TWARE DEVELOPMENT SERVICE PROVIDER. FURTHER, THE SEGMENTAL DETAILS WE RE NOT AVAILABLE. 7.1 IT WAS STATED THAT THERE IS NO CHANGE IN FACTS. ACCORDINGLY, FOLLOWING THE DECISION RENDERED IN THE ASSESSEE'S OWN CASE IN AY 2008-09, WE DIRECT EXCLUSION OF M/S PERSISTENT SYSTEMS LTD.' BASED ON THE ABOVE OBSERVATION WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. THIRDWARE SOLUTIONS LTD. 20.10 THE LD.AR SUBMITTED THAT THIS COMPARABLE IS TO BE EXCLUDED FOR ITS HUGE TURNOVER OF RS. 206.75 CRORES AND THE MARGIN IS 44.68%. IT IS ALSO SUBMITTED THAT THIS CO MPARABLE IS FUNCTIONALLY DIFFERENT AND HAS DIVERSIFIED ACTIVITI ES AND EARNS REVENUE FROM EXPORT OF SERVICES, TRANSCRIPTION AND PROVIDES PAGE 16 OF 33 IT(TP)A NO.3286/BANG/2018 CONSULTANCY SERVICES AND THERE IS NO SEGMENTAL DATA . FURTHER DELIVERY LOCATIONS ARE OUTSIDE INDIA AND HAS AN EXT RAORDINARY EVENTS AND FAILS THE TURNOVER FILTER OF MORE THAN R S. 200 CRORES. THE LD.AR RELIED ON LG SOFT INDIA ( P. ) LTD. ( SUPRA ). 20.11 ON THE CONTRARY LD.CIT.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 20.12 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.13 WE FOUND THAT THE TRIBUNAL IN THE CASE OF LG SOFT INDIA(P.) LTD. (SUPRA) HAS OBSERVED AT PAGE 4 PARAS 8 & 8.1 AS UNDER '8. WE ALSO NOTICE THAT IN AY 2008-09, THE CO-ORDIN ATE BENCH HAS EXCLUDED M/S THIRDWARE SOLUTIONS LTD. ALSO BY F OLLOWING THE DECISION RENDERED IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA), WHERE IN IT WAS HELD THAT M /S THIRDWARE SOLUTIONS LTD. IS ENGAGED IN PRODUCT DEVE LOPMENT AND EARNS REVENUE FROM SALE OF LICENSES AND SUBSCRI PTION. FURTHER, THE SEGMENTAL DETAILS WERE NOT AVAILABLE. 8.1 IT WAS STATED THAT THERE IS NO CHANGE IN FACTS. ACCORDINGLY, FOLLOWING THE DECISION RENDERED IN THE ASSESSEE'S O WN CASE IN AY 2008-09, WE DIRECT EXCLUSION OF M/S THIRDWARE SO LUTIONS LTD.' CONSIDERING THE FACTS, FINDINGS AND JUDICIAL DECISI ONS, WE ARE OF THE OPINION THAT THE FOLLOWING THREE COMPARABLES ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES FOR DETERMINA TION OF ALP BY THE TPO. BASED ON THE ABOVE OBSERVATION WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. MINDTREE LTD. PAGE 17 OF 33 IT(TP)A NO.3286/BANG/2018 20.14 THE LD.AR SUBMITTED THAT THIS COMPANY DESERVE S TO BE EXCLUDED FROM THE FINALIST LIST AS IT IS FUNCTIONAL LY NOT SIMILAR WITH THAT OF ASSESSEE. HE SUBMITTED THAT, THIS COMPANY O WNS 19 PATENTS AND HAS HUGE SCALE OF OPERATION WITH TURNOV ER OF RS.3031 CRORES. IT HAS BEEN SUBMITTED THAT THIS COMPARABLE IS ENGAGED IN SALE OF PRODUCTS LIKE VMUNIFY WHICH IS CLOUD MANA GEMENT AND OUGHT ORCHESTRATION PLATFORM ETC. IT IS SUBMITTED T HAT IT ALSO ENGAGES IN IT CONSULTING FOR HIGH-END SERVICES AND IS RENDERING INTO AN DIGITAL TRANSFORMATION AND TECHNOLOGY SERVI CES TO ITS CLIENTS THE LD.AR THUS SUBMITTED THAT THIS COMPARAB LE IS FUNCTIONALLY NOT SIMILAR WITH THAT OF ASSESSEE AND IS A GIANT COMPANY WITH HUGE TURNOVER THEREBY NOT FULFILLING T URNOVER CRITERIA. 20.15 ON THE CONTRARY LD.CIT DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 20.16 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.17 THE DECISION RENDERED IN THE CASE OF GENISYS INTEGRATING ( SUPRA ) BY COORDINAT BENCH OF THIS TRIBUNAL HAD ANALYSED THE APPLICATION OF UPPER TURNOVER FILTER I N ORDER TO EXCLUDE COMPANIES WHOSE TURNOVER IS MORE THAN THAT OF ASSESSEE. ON THIS ISSUE, THE FIRST ASPECT WHICH WE NOTICE IS THAT THE DECISION RENDERED IN THE CASE OF GENISYS INTEGRATING ( SUPRA ) WAS THE EARLIEST DECISION RENDERED ON THE ISSUE OF COMPARAB ILITY OF COMPANIES ON THE BASIS OF TURNOVER IN TRANSFER PRIC ING CASES. ADMITTEDLY, THE TURNOVER OF ABOVE SAID COMPANIES IS MORE THAN PAGE 18 OF 33 IT(TP)A NO.3286/BANG/2018 200 CRORES AND HENCE CANNOT BE CONSIDERED AS GOOD C OMPARABLE COMPANIES. WE ALSO OBSERVED THAT THIS COMPANY IS FU NCTIONALLY NOT SIMILAR WITH THAT OF ASSESSEE AS IT IS INVOLVED IN DIVERSIFIED ACTIVITIES WHICH IS NOT COMPARABLE WITH A CAPTIVE C ONTRACT SERVICE PROVIDER LIKE THAT OF ASSESSEE. ACCORDINGLY WE DIRECT LD.AO/TPO TO EXCLUDE THIS COM PARABLE FROM FINALIST. LARSEN AND TOUBRO INFOTECH LTD. 20.18 THIS COMPARABLE WAS UPHELD BY AUTHORITIES BEL OW AND HAS BEEN OBJECTED BY ASSESSEE FOR ITS INCLUSION. LD .AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WI TH THAT OF ASSESSEE AND IS ENGAGED IN PROVIDING CONSULTANCY AN D TESTING SERVICES. FURTHER IT HAS BEEN SUBMITTED THAT THERE IS NO SEGMENTAL INFORMATION AVAILABLE IN THE ANNUAL REPOR TS OF THIS COMPANY. LD.AR SUBMITTED THAT THIS COMPANY OWNS ITS OWN BRAND AND HAVE PRODUCTS AND ARE ENGAGED IN TRADING ACTIVITY. THIS COMPANY ALSO HAS R&D SERVICES AND PRESENCE OF HUGE INTANGIBLES AND BRANDS. 20.19 ON THE CONTRARY LD.CIT DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 20.20 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.21 WE NOTE THAT THIS COMPARABLE WAS EXCLUDED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF LG SOFT INDIA ( P. ) LTD. ( SUPRA ) PAGE 19 OF 33 IT(TP)A NO.3286/BANG/2018 20.22 WE NOTE THAT IN CASE OF LG SOFT INDIA PVT.LITD (SUPRA) , THIS COMPARABLE WAS EXCLUDED ON THE GROUND THAT IT IS FUNCTIONALLY INCOMPARABLE TO THE ASSESSEE ON VARIOU S COUNTS. THE COMPANY DEALS WITH SOFTWARE PRODUCTS AND RENDERS AF TERMARKET SERVICE MANAGEMENT SERVICES, INTEGRATED IT SERVICE MANAGEMENT SOLUTION, BUSINESS PROCESS MANAGEMENT IMPLEMENTATIO N SERVICES, CLOUD COMPUTING, CONSULTING, ENTERPRISE INTEGRATION , GEOGRAPHICAL INFORMATION SYSTEM AND INFRASTRUCTURE MANAGEMENT SE RVICES. DESPITE RENDERING THESE DIVERSE SERVICES, THE SEGME NTAL DETAILS OF THE VARIOUS SERVICES AND PRODUCTS ARE NOT AVAILABLE . THE COMPANY'S BUSINESS SEGMENTS ARE DIVIDED INTO SERVIC E CLUSTER, INDUSTRIAL CLUSTER AND TELECOM BUSINESS. IN THE ABS ENCE OF SEGMENTAL DATA BEING MADE AVAILABLE AS REGARDS THE DIVERSE SERVICES, IT IS NOT POSSIBLE TO DETERMINE WHETHER T HE COMPANY PASSES THE FILTERS APPLIED BY THE TPO. THEREFORE, T HE COMPANY OUGHT TO BE EXCLUDED. FURTHER, THE COMPANY IS A MAR KET LEADER AND THUS ENJOYS SIGNIFICANT BENEFITS ON ACCOUNT OF OWNERSHIP OF MARKETING INTANGIBLES, INTELLECTUAL PROPERTY RIGHTS AND BUSINESS RIGHTS. ALSO, IN ADDITION TO THE ABOVE, THE COMPANY OWNS PROPRIETARY SOFTWARE PRODUCTS WHICH ARE DEVELOPED I N-HOUSE. ACCORDINGLY, THE APPELLANT SUBMITS THAT L&T IS A PR ODUCT COMPANY HAVING SIGNIFICANT INTANGIBLES AND IS THUS NOT COMPARABLE TO CAPTIVE SOFTWARE DEVELOPMENT SERVICE PROVIDERS SUCH AS THE APPELLANT WHO DOES NOT OWN ANY SIGNIFIC ANT OR NON- ROUTINE INTANGIBLES. FURTHER, L&T ENJOYS SIGNIFICAN T BRAND VALUE. PAGE 20 OF 33 IT(TP)A NO.3286/BANG/2018 AS A RESULT OF THIS HIGH BRAND VALUE, THE COMPANY E NJOYS A HIGH BARGAINING POWER IN THE MARKET. BASED ON THE ABOVE OBSERVATION WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. 2. CIGNITY TECHNOLOGIES LTD. 20.23 THE LD.AR SUBMITTED THAT TURNOVER OF THIS COM PANY IS RS. 54.63 CRORES AND MARGIN IS 27.62%. IT IS ALSO S UBMITTED THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND OFFERS PUBLICATION NETWORK SERVICES AND SOLUTIONS AND HAS EXPANDED THE BUSINESS OPERATIONS IN AUSTRALIA AND UK .THIS COMPANY HAS EX TRAORDINARY EVENTS WITH ACQUISITION OF TWO COMPANIES. THE LD.AR RELIED ON DECISION OF LG SOFT INDIA ( P. ) LTD. ( SUPRA ). 20.24 ON THE CONTRARY THE LD. CIT DR PLACED RELIANC E ON ORDERS PASSED BY AUTHORITIES BELOW. 20.25 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 20.26 WE NOTE THAT COORDINATE BENCH OF TRIBUNAL IN CASE OF LG SOFT INDIA (P.) LTD (SUPRA) OBSERVED AS UNDER : 9. WE HAVE NOTICED THAT THE ASSESSEE SEEKS EXCLUSI ON OF M/S CIGNITI TECHNOLOGIES LTD. IT IS PERTINENT TO NOTE T HAT THE ASSESSEE ITSELF HAD SELECTED THIS COMPANY AS A COMP ARABLE AND IT HAS URGED FOR EXCLUSION OF THE SAME ONLY BEF ORE LD DRP. THE LD A.R. SUBMITTED THAT THE LD DRP DID NOT ADDRE SS THE SAME. THE LD A.R SUBMITTED THAT M/S CIGNITI TECHNOL OGIES LTD IS A TESTING COMPANY AND HENCE IT CANNOT BE CONSIDE RED AS A COMPARABLE. HOWEVER, WE NOTICE THAT THIS CONTENTION HAS BEEN PAGE 21 OF 33 IT(TP)A NO.3286/BANG/2018 RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE LD DRP AND THERE WAS NO OCCASION FOR THE TPO TO EXAMINE THE SA ME. ACCORDINGLY WE RESTORE THIS COMPARABLE TO THE FILE OF AO/TPO FOR EXAMINING IT AFRESH.' BASED ON THE ABOVE OBSERVATION WE DIRECT LD.TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. MSS SEGMENT 1. I MEDIA CORP LTD. 21. THE LD.AR SUBMITTED THAT THIS COMPARABLE IS NOT FUNCTIONALLY SIMILAR WITH THAT OF ASSESSEE. IT HAS BEEN SUBMITTED THAT THIS COMPARABLE HAD AN EXTRAORDINARY EVENT OF ENTERING INTO A SCHEME OF AMALGAMATION WITH SYNERGY MEDIA ENTERTA INMENT LTD. DURING THE PREVIOUS YEAR RELEVANT TO YEAR UNDE R CONSIDERATION. THE LD.AR SUBMITTED THAT DURING THE YEAR THIS COMPARABLE HAS EARNED REVENUE FROM EVENT MANAGEMENT WHICH IS NOT AKIN TO MARKETING SUPPORT SERVICES. IT HAS ALSO BEEN SUBMITTED THAT THIS COMPANY HAS ALSO NOT INCURRED A NY EMPLOYEE COST FOR THE YEAR UNDER CONSIDERATION WHICH IS EVID ENT FROM PAGE 3933 OF PAPER BOOK. 21.1 ON THE CONTRARY THE LD. CIT DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 21.1 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN LIGHT OF RECORDS PLACED BEFORE US. 21.3 FROM THE RELEVANT PAGE RELIED BY LD.AR, IT IS CLEAR THAT FOR YEAR UNDER CONSIDERATION THIS COMPARABLE HAS EARNED REVENUE FROM EVENT MANAGEMENT AND CATEGORICALLY THERE IS NO INCOME THAT PAGE 22 OF 33 IT(TP)A NO.3286/BANG/2018 HAS EARNED FROM ADVERTISEMENTS WHICH IS AKIN TO MAR KETING SUPPORT SERVICES. IT ALSO CANNOT BE IGNORED THAT TH ERE IS AN EXTRAORDINARY EVENT OF AMALGAMATION THAT HAS EFFECT UATED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT WHICH CANNOT BE IGNORED OF HAVING AN IMPACT. UNDER SUCH CIRCUMSTANCES WE DO NO T FIND THIS COMPARABLE TO BE FIT TO BE INCLUDED IN THE FINALIST . ACCORDINGLY LD. AO/TPO IS DIRECTED TO EXCLUDE THIS COMPARABLE FROM THE FINALIST. IRUNWAY INDIA PVT.LTD 21.4 THE LD.AR HAS SUBMITTED THAT THIS COMPARABLE I S FUNCTIONALLY DISSIMILAR AS IT PROVIDES TECHNOLOGY A NALYSIS AND RESEARCH SERVICES TO CORPORATIONS, LAW FIRMS AND OT HER LEADING TECHNOLOGY INVESTMENT AND LICENSING FIRMS WORLDWIDE . IT IS ALSO SUBMITTED THAT RELATED PARTY TRANSACTION OF THIS CO MPARABLE FOR THE YEAR UNDER CONSIDERATION IS 30.89%. IT HAS BEEN SUBMITTED THAT THESE SERVICES RENDERED BY THIS COMPARABLE ARE NOT DISCERNIBLE FROM THE ANNUAL REPORT HOWEVER FROM THE WEBSITE OF THE COMPANY THE DETAILS HAVE BEEN ASCERTAINED. IT I S ALSO SUBMITTED THAT FROM THE BALANCE SHEET IT IS CLEAR T HAT THIS COMPARABLE OWNS HUGE INTANGIBLES AND IS INTO SOME K IND OF RESEARCH AND DEVELOPMENT AS EVERY YEAR THERE IS AN ADDITION TO THE INTANGIBLE ASSET WHICH IS CLEAR FROM PAGE 3954 OF PAPER BOOK. ON THE CONTRARY, THE LD.CIT.DR PLACED RELIANCE ON O RDERS PASSED BY AUTHORITIES BELOW. PAGE 23 OF 33 IT(TP)A NO.3286/BANG/2018 21.5 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN LIGHT OF RECORDS PLACED BEFORE US. 21.6 IS ON PERUSAL OF THE ANNUAL ACCOUNTS PLACED IN THE PAPER BOOK, WE NOTE THAT THE FUNCTIONS CARRIED OUT BY THI S COMPANY IS NOT VERY CLEAR THE NOTES TO THE FINANCIAL STATEMENT S ONLY REFERS TO SERVICE INCOME WITHOUT MENTIONING THE NATURE OF SER VICES RENDERED BY THIS COMPARABLE ALSO FROM THE PROFIT AN D LOSS ACCOUNT IT IS NOT DISCERNIBLE THE KIND OF SERVICES RENDERED BY THIS COMPANY THAT HAS BEEN CONSIDERED BY THE LD.TPO AKIN TO MSA SERVICES RENDERED BY ASSESSEE. WE OWE NOTE THAT THE LD.TPO HAS INCLUDED THIS INTO THE FINAL LIST ONLY BY MENTIONIN G THAT THE FUNCTIONS PERFORMED BY THIS COMPANY ARE SIMILAR TO ASSESSEE AND UNDER TNMM ONLY SIMILARITIES TO BE SEEN AND NOT EXA CT COMPARABILITY. THE LD.TPO ALSO NOTE THAT THE RPT OF THIS COMPARABLE IS ONLY 3.7% HOWEVER FROM PAGE 3959 OF P APER BOOK TRANSACTIONS WITH RELATED PARTY HAVE BEEN RECORDED AND IT DOES NOT TALLY WITH THE RATE COMPUTED BY THE LD.TPO. UND ER SUCH CIRCUMSTANCES WE DO NOT FIND THIS COMPARABLE TO BE FIT TO BE INCLUDED IN THE FINALIST. ACCORDINGLY WE DIRECT LD.AO/TPO TO EXCLUDE THIS COM PARABLE FROM FINAL LIST. KILLICK AGENCIES AND MARKETING LTD. 21.7 THIS COMPARABLE HAS BEEN ARGUED BY THE LD.AR T O BE HAVING DIVERSIFY ACTIVITIES. IT IS STATED THAT THIS COMPAN Y EARNS INCOME FROM COMMISSION, SALES, DREDGERS, DREDGING EQUIPMEN T, PROPELLERS, MARITIME AND AVIATION LIGHTING, A CAUST IC PAGE 24 OF 33 IT(TP)A NO.3286/BANG/2018 COMMUNICATION EQUIPMENT AND ALSO DOES AFTER SALES S ERVICES FOR THE SAME. IT HAS BEEN SUBMITTED THAT THIS COMPARABL E IS NOT AT ALL INVOLVED IN MARKETING SUPPORT SERVICE. ON THE CONTRARY, THE LD.CIT.DR SUB PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMIS SIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED B EFORE US. THE ANNUAL ACCOUNTS OF THIS COMPARABLE HAS BEEN PLA CED AT PAGE 04/07/2006 OF PAPER BOOK WHEREIN WE NOTE THAT THE S UBMISSION MADE BY THE LD.AR APPEARS TO BE CORRECT. WE DO NOT FIND ANY INCOME EARNED BY THIS COMPARABLE WHICH IS AKIN TO M ARKETING SUPPORT SERVICES AND THEREFORE DESERVES TO BE REJEC TED AT THE THRESHOLD. ACCORDINGLY, WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM THE FINALIST. 22. IN GROUND 2.9 ASSESSEE IS SEEKING INCLUSION OF FOLLOWING COMPARABLES UNDER SWD AND MSS SEGMENTS: SWD SEGMENT I2T2 INDIA LTD. KIREETI SOFT TECHNOLOGIES LTD. EXILIANT TECHNOLOGIES PVT.LTD CELSTREAM TECHNOLOGIES LTD. EVOKE TECHNOLOGIES LTD. MSS SEGMENT CONCEPT PUBLIC RELATION INDIA LTD. MCI MANAGEMENT INDIA LTD. 1. I2T2 INDIA LTD. PAGE 25 OF 33 IT(TP)A NO.3286/BANG/2018 22.1 THE LD.AR SUBMITTED THAT THIS COMPANY IS FUNCT IONALLY SIMILAR AS IT IS ENGAGED IN SOFTWARE DEVELOPMENT SE RVICES. IT IS ALSO SUBMITTED THAT THIS COMPARABLE SATISFIES ALL T HE FILTERS APPLIED BY THE LD.TPO. HOWEVER THE LD.TPO REJECTED THIS COMPARABLE AS IT DOES NOT HAVE RELATED PARTY TRANSA CTION DETAILS IN THE ANNUAL REPORT. 22.2 THE LD.CIT.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 22.3 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN REGARDS RECORDS PLACED BEFORE US. 22.4 THE LD.AR HAD SUBMITTED THAT, THIS COMPARABLE HAS BEEN CONSIDERED TO BE A GOOD COMPARABLE BY COORDINATE BE NCH OF THIS TRIBUNAL IN CASE OF LG SOFT INDIA PVT.LLTD. (SUPRA) ON THE CONTRARY, LD.CIT.DR PLACED RELIANCE UPON ORD ERS OF AUTHORITIES BELOW. 22.5 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 22.6 THE ONLY REASON FOR EXCLUDING THIS COMPARABLE BY THE AUTHORITIES BELOW IS FOR THE REASON THAT RPT TRANSA CTIONS HAVE NOT BEEN REPORTED IN THE ANNUAL REPORT. WE HAVE PERUSED THE DECISION OF THIS TRIBUNAL IN CASE OF LG SOFT INDIA (P.) LTD . ( SUPRA ) WHEREIN ON SIMILAR REASONING THE LD.TPO EXCLUDED THIS COMPA RABLE THEREIN AND THIS TRIBUNAL OBSERVED AS UNDER: '12. WE FIND FORCE IN THE CONTENTIONS OF LD. AR. IF THE ANNUAL REPORT OF THIS COMPANY DOES NOT MENTION ABOUT RELATED PARTY TRANSA CTIONS, THEN THE ASSESSEE CANNOT BE HELD RESPONSIBLE TO PROVE A FACT RELATING TO A 3RD PARTY, WHICH MAY OR MAY NOT EXIST. WE NOTICE FROM AUDITORS REPORT THAT THE AUDITOR PAGE 26 OF 33 IT(TP)A NO.3286/BANG/2018 IN PARAGRAPH 5 (B) OF ANNEXURE TO THE AUDITORS REPO RT HAS MENTIONED AS UNDER: 'THERE ARE NO TRANSACTIONS THAT ARE MADE ENTERPRISE S EXCEEDING RS. 5 LACS IN RESPECT OF ANY PART WHO IS COVERED UNDER SE CTION 301 OF THE ACT DURING THE FINANCIAL YEAR.' HENCE, IN THE ABSENCE O F ANY SPECIFIC INFORMATION, THERE IS MERIT IN THE CONTENTIONS OF T HE ASSESSEE THAT THE ABOVE SAID COMPANY MIGHT NOT HAVE HAD RELATED PARTY TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE DO NOT AGREE WITH THE REASONING GIVEN BY LD. DRP FOR EXCLUDING THIS C OMPANY AS A COMPARABLE. ACCORDINGLY WE DIRECT THE LD. AO/U.S. I NCLUDE THIS COMPANY.' 22.7 ANNUAL REPORT OF THIS COMPARABLE HAS BEEN PLAC ED AT PAGE 593 OF PAPER BOOK VOLUME 2. IT IS OBSERVED FUNCTION ALLY IT IS PROVIDING EXPORT OF SOFTWARE AND SERVICES. ANNUAL R EPORT PLACED IN PAPER BOOK DOES NOT CONTAIN FUNCTIONS PERFORMED BY THIS COMPARABLE IN ORDER TO ASCERTAIN WHETHER THIS COMPA NY IS RENDERING SWD SERVICES OR NOT. WE THEREFORE, SET AS IDE THIS ISSUE TO LD.AO/TPO FOR VERIFICATION. THE LD.AO/TPO SHALL CALL FOR REQUISITE INFORMATION FROM THIS COMPANY, A COPY OF WHICH SHALL BE PROVIDED TO ASSESSEE ALSO. COMPARABILITY OF THIS CO MPANY WITH ASSESSEE SHALL THEN BE CONSIDERED BY GIVING PROPER OPPORTUNITY TO ASSESSEE. ACCORDINGLY, THIS COMPARABLE IS SET ASIDE TO LD.AO/ TPO 2. KIREETI SOFT TECHNOLOGIES LTD. 22.8 THE LD.AR SUBMITTED THAT THIS COMPARABLE IS EN GAGED IN SOFTWARE DEVELOPMENT OPERATIONS AND ALL ITS REVENUE S PERTAINS TO THIS SEGMENT ONLY HE PLACED RELIANCE ON PAGE 3678, 3679 AND 3863 OF PAPER BOOK. THE LD.TPO HAS NOT RELIED ON AN Y BASIS TO HOLD THAT THIS COMPANY IS FUNCTIONALLY NOT SIMILAR. EXILIANT TECHNOLOGIES PVT.LTD PAGE 27 OF 33 IT(TP)A NO.3286/BANG/2018 22.9 LD.AR SUBMITTED THAT THE ASSESSEE PRAYED FOR I NCLUSION OF THIS COMPANY BEFORE DRP. HOWEVER, DRP REJECTED THE PRAYER OF THE ASSESSEE FOR THE REASON THAT FINANCIAL RESULT O F THIS COMPANY IS NOT AVAILABLE IN PUBLIC DOMAIN. CELSTREAM TECHNOLOGIES LTD. 22.10 THE LD.AR SUBMITTED THAT THIS COMPANY IS ALSO ENGAGED IN SOFTWARE DEVELOPMENT SERVICE SEGMENT AND IS PROVIDING SERVICES IN THE FIELD OF DATA AND ANALYTI CS, CLOUD AND MOBILE COMPUTING. HE SUBMITTED THAT THE COMPANY WAS REJECTED BY THE LD. TPO AS ANNUAL ACCOUNTS WERE NOT AVAILABL E ON THE PUBLIC DOMAIN. EVOKE TECHNOLOGIES LTD. 22.11 LD.AR SUBMITTED THAT THE ASSESSEE PRAYED FOR INCLUSION OF THIS COMPANY BEFORE DRP. HOWEVER, DRP REJECTED T HE PRAYER OF THE ASSESSEE FOR THE REASON THAT FINANCIAL RESULTS INCORPORATED BRANCH REVENUE AND PROFIT, WHICH WAS BASED ON UNAUD ITED FINANCIAL STATEMENTS OF BRALNCH OUTSIDE INDIA. IT W AS ALSO OBSERVED BY THE DRP THAT EXPORT REVENUE CONSTITUTED ONLY 20.34% WHICH DID NOT FULFILL FILTER APPLIED BY THE LD.TPO. THE LD.AR PLACED RELIANCE UPON ANNUAL REPORTS OF THIS C OMPANY PLACED AT PAGE 3439 OF PAPER BOOK WHEREIN INCOME FR OM SOFTWARE SERVICES AND PRODUCTS BY THIS COMPANY HAS BEEN SHOW N TO BE AT RS.3621.72 LAKHS. 22.12 IN RESPECT OF ABOVE, COMPARABLES BEING KIREET I, EXLIANT, ULSTREAM AND EVOKE THE LD.CIT DR SUBMITTED THAT THE SE PAGE 28 OF 33 IT(TP)A NO.3286/BANG/2018 COMPANIES MAY BE SENT BACK TO THE LD.AO/TPO FOR DUE VERIFICATION DUE TO CONTRADICTIONS IN RESPECT OF AN NUAL REPORT. 22.13 WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 22.14 IN OUR OPINION THE LD.AO/TPO SHALL VERIFY A NNUAL REPORTS FILED BY ASSESSEE IN RESPECT OF THESE COMPARABLES A ND THEN ASCERTAIN THE FUNCTIONAL COMPARABILITY WITH THAT OF ASSESSEE. IF THE SEGMENTAL DETAILS COULD BE ASCERTAINED IN RESPE CT OF SOFTWARE SERVICES THEN THESE COMPARABLES MAY BE CONSIDERED A FRESH FOR PURPOSES COMPARABILITY WITH THAT OF ASSESSEE IN ACC ORDANCE WITH LAW, KEEPING IN MIND THAT ASSESSEE IS A CAPTIVE SER VICE PROVIDER THAT OPERATES AT LOW RISK LEVELS. ACCORDINGLY THESE COMPARABLES ARE REMANDED TO THE LD.AO/TPO FOR VERIFICATION AFRESH. MSS SEGMENT 1. CONCEPT PUBLIC RELATION INDIA LTD. 2. MCI MANAGEMENT INDIA LTD. 23. WE NOTE THAT PER SE, THE AUTHORITIES BELOW HAVE NOT DISPUTED OF FUNCTIONALITY, HOWEVER REJECTS THEM WITHOUT ANY COGENT REASONS. WE NOTE THAT BOTH THE ABOVE COMPARABLES HA VE BEEN EXCLUDED BY AUTHORITIES BELOW WITHOUT VERIFYING FAR WITH THAT OF ASSESSEE. UNDER SUCH CIRCUMSTANCES WE DEEM IT FIT T O REMAND THESE COMPARABLES TO LD.TPO/AO FOR CONSIDERING IT A FRESH. ASSESSEE IS DIRECTED TO FURNISH ALL RELEVANT DETAIL S TO CARRY OUT THE FUNCTIONAL SIMILARITY WITH THAT OF ASSESSEE. IN THE EVENT THEY ARE PAGE 29 OF 33 IT(TP)A NO.3286/BANG/2018 FOUND TO BE CARRYING OUT SIMILAR FUNCTIONS, THESE C OMPARABLES MAY BE INCLUDED IN THE FINAL LIST. ACCORDINGLY, WE REMAND THESE COMPARABLES TO LD.TPO/ AO. ACCORDINGLY GROUND NO. 2.8-2.9 STANDS ALLOWED AS IN DICATED HEREINABOVE. 24. GROUND NO. 3 IS IN RESPECT OF INTEREST ON RECEIVABLES COMPUTED BY THE LD.AO/TPO. 24.1 THE LD.TPO COMPUTED INTEREST ON OUTSTANDING RE CEIVABLES UNDER WEIGHTED AVERAGE METHOD USING LIBOR + 300 BAS IS POINTS APPLICABLE FOR YEAR UNDER CONSIDERATION THAT WORKED OUT TO 3.3758% ON RECEIVABLES THAT EXCEEDED 30 DAYS. IT HA S BEEN ARGUED BY LD.AR THAT AUTHORITIES BELOW DISREGARDED BUSINESS/COMMERCIAL ARRANGEMENT BETWEEN THE ASSESSE E AND ITS AE'S, BY HOLDING OUTSTANDING RECEIVABLES TO BE AN I NDEPENDENT INTERNATIONAL TRANSACTION. 24.2 WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BO TH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 24.3 FROM TP STUDY, IT IS OBSERVED THAT PAYMENTS TO ASSESSEE ARE NOT CONTINGENT UPON PAYMENT RECEIVED BY AES FROM TH EIR RESPECTIVE CUSTOMERS. FURTHER LD.AR SUBMITTED THAT WORKING CAPITAL ADJUSTMENT UNDERTAKEN BY ASSESSEE INCLUDES THE ADJUSTMENT REGARDING THE RECEIVABLES AND THUS RECEI VABLES ARISING OUT OF SUCH TRANSACTION HAVE ALREADY BEEN ACCOUNTED FOR. 24.4 24.4 ALTERNATIVELY, HE SUBMITTED THAT UNDER TNMM, WORKING PAGE 30 OF 33 IT(TP)A NO.3286/BANG/2018 CAPITAL SUBSUMES SUNDRY CREDITORS AND THEREFORE SEP ARATE ADDITION IS NOT CALLED FOR. 24.5 THIS BENCH REFERRED TO DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN CASE OF INSTRUMENTATION CORPN. LTD. V. ASSTT. DIT IN [IT APPEAL NO. 1548 AND 1549 (KOL.) OF 2009, DATED 15- 7-2016], HELD THAT OUTSTANDING SUM OF INVOICES IS AKIN TO LOAN AD VANCED BY ASSESSEE TO FOREIGN AE., HENCE IT IS AN INTERNATION AL TRANSACTION AS PER EXPLANATION TO SECTION 92 B OF THE ACT. IT H AS BEEN ARGUED THAT, WORKING CAPITAL ADJUSTMENT SUBSUMES SUNDRY CR EDITORS. IN SUCH SITUATION COMPUTING INTEREST ON OUTSTANDING RE CEIVABLES AND LONE AND ADVANCES TO INTERNATIONAL TRANSACTION WOUL D AMOUNT TO DOUBLE TAXATION. HON'BLE DELHI TRIBUNAL IN CASE OF ORANGE BUSINESS SERVICES INDIA SOLUTIONS (P.) LTD. V. DY. CIT REPORTED IN [2018] 91 TAXMANN.COM 286 HAS OBSERVED THAT: 'THERE MAY BE A DELAY IN COLLECTION OF MONIES FOR S UPPLIES MADE, EVEN BEYOND THE AGREED LIMIT, DUE TO A VARIETY OF FACTOR S WHICH WOULD HAVE TO BE INVESTIGATED ON A CASE TO CASE BASIS. IMPORTANTL Y, THE IMPACT THIS WOULD HAVE ON THE WORKING CAPITAL OF THE ASSESSEE W OULD HAVE TO BE STUDIED. IT WENT ON TO HOLD THAT, THERE HAS TO BE A PROPER INQUIRY BY THE TPO BY ANALYSING THE STATISTICS OVER A PERIOD OF TI ME TO DISCERN A PATTERN WHICH WOULD INDICATE THAT VIS--VIS THE RECEIVABLES FOR THE SUPPLIES MADE TO AN AE, THE ARRANGEMENT REFLECTED AN INTERNATIONA L TRANSACTION INTENDED TO BENEFIT THE AE IN SOME WAY. SIMILAR MATTER ONCE AGAIN CAME UP FOR CONSIDERATION BEFORE THE HON'BLE DELHI HIGH COURT I N AVENUE ASIA ADVISORS PVT. LTD. V. DCIT [2017] 398 ITR 120 (DEL). FOLLOWI NG THE EARLIER DECISION IN KUSUM HEALTHCARE (SUPRA), IT WAS OBSERVED THAT THER E ARE SEVERAL FACTORS WHICH NEED TO BE CONSIDERED BEFORE HOLDING THAT EVE RY RECEIVABLE IS AN INTERNATIONAL TRANSACTION AND IT REQUIRES AN ASSESS MENT ON THE WORKING CAPITAL OF THE ASSESSEE. APPLYING THE DECISION IN K USUM HEALTH CARE (SUPRA), THE HON'BLE HIGH COURT DIRECTED THE TPO TO STUDY THE IMPACT OF THE RECEIVABLES APPEARING IN THE ACCOUNTS OF THE ASSESS EE; LOOKING INTO THE VARIOUS FACTORS AS TO THE REASONS WHY THE SAME ARE SHOWN AS RECEIVABLES PAGE 31 OF 33 IT(TP)A NO.3286/BANG/2018 AND ALSO AS TO WHETHER THE SAID TRANSACTIONS CAN BE CHARACTERIZED AS INTERNATIONAL TRANSACTIONS.' 24.6 IN VIEW OF THE ABOVE, WE DEEM IT APPROPRIATE T O SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER T O THE FILE OF THE LD.AO/TPO FOR DECIDING IT IN CONFORMITY WITH TH E ABOVE REFERRED JUDGMENT. THE LD.AO SHALL ALSO CONSIDER TH E ALTERNATE ARGUMENT TAKEN BY THE LD.AR AND CARRYOUT NECESSARY VERIFICATION AND THEN TO DECIDE THE ISSUES IN ACCORDANCE WITH L AW. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE O PPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. ACCORDINGLY THESE GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 25. GROUND NO.4 IS IN RESPECT OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 25.1 THE LD.AR SUBMITTED THAT ASSESSEE HAD DEDUCTED TAX UNDER RELEVANT PROVISIONS OF THE ACT. IT HAS BEEN ALSO DE POSITED WITH THE GOVERNMENT TREASURY. HOWEVER THE SAME HAS NOT BEEN VERIFIED. THE LD.AR SUBMITTED THAT ASSESSEE HAS ALL THE EVIDE NCES OF PAYMENTS HAVING BEEN MADE AND DEPOSITED. 25.2 THE LD. CIT DR UNDER SUCH CIRCUMSTANCES SUBMIT TED THAT THE ISSUE MAY BE REMANDED TO THE LD. AO FOR VERIFIC ATION OF THE EVIDENCES. 25.3 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN LIGHT OF RECORDS PLACED BEFORE US. 25.4 WE REMAND THIS ISSUE TO LD.AO FOR DUE VERIFICA TION OF THE TDS DEDUCTED IN THE LIGHT OF RECORDS AND DOCUMENTS FILED BY PAGE 32 OF 33 IT(TP)A NO.3286/BANG/2018 ASSESSEE. THE LD.AO SHALL VERIFY THE SAME AND GRANT CREDIT TO THE TDS AGAINST WHICH TAX HAS BEEN DEDUCTED AND DEPOSIT ED. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 22 ND MARCH, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 33 OF 33 IT(TP)A NO.3286/BANG/2018 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -3-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -3-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -3-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -3-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -3-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -3-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -3-2021 SR.PS 9. FILE SENT TO THE BENCH CLERK -3-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS