LRN TECHNOLOGY AND CONTENT SOLUTIONS (INDIA) P.LTD, MUMBAI V. DCIT CIR 9(2), MUMBAI

ITA 329/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2941 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KEERTHIKA R SHARMA
• Assessee Lawyers: KARISHMA R PHATARPHEKAR
• Keywords: Transfer pricing; International transaction; Question of law; Wholly owned subsidiary
• Section: 143(3); 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL K BE NCH, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER, / I .TA NO.329/MUM/2015 ( / ASSESSMENT YEAR: 2010-11 LRN TECHNOLOGY AND CONTENT SOLUTIONS (INDIA) PVT. LTD., NIRLON KNOWLEDGE PARK, BLOCK B6, 3 RD FLOOR, OFF WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI-400 063 / VS. THE DCIT - CIRCLE 9(2), AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: KARISHMA R. PHATARPHEKAR / RESPONDENT BY: SHRI KEERTHIKA R. SHARMA / DATE OF HEARING : 18.04.2016 ! / DATE OF PRONOUNCEMENT : 24.06.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE DI RECTIONS OF THE DRP-III, MUMBAI DATED 26.9.2014 PERTAINING TO ASSES SMENT YEAR 2010-11. 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS REGARDING TRANSFER PRICING ADJUSTMENT RELATING TO SOFTWARE DE VELOPMENT ITA NO. 329/M/2015 2 SERVICES BY SELECTING COMPARABLES FUNCTIONALLY DISS IMILAR TO THE ASSESSEE BY THE TPO/ASSESSING OFFICER UNDER THE DIR ECTIONS OF DRP. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPAN Y REGISTERED IN INDIA UNDER THE INDIAN COMPANIES ACT, 1956 AND IS A WHOLLY OWNED SUBSIDIARY OF LRN LTD, A UK BASED COMPANY HAVING IT S PARENT COMPANY AS LRB CORPORATION IN LOS ANGELES, USA. TH E ASSESSEE IS A CAPTIVE SERVICE PROVIDER ENGAGED IN PROVIDING ON-LI NE SOFTWARE CONTENT DEVELOPMENT AND PARTNER SUPPORT SERVICES ON A COST PLUS BASIS TO ITS ASSOCIATED ENTERPRISE (AE). THE SERVI CES RENDERED BY LRN LTD ARE CARRIED OUT AS PER SPECIFICATIONS RECEI VED FROM THE AES. DURING THE YEAR, THE ASSESSEE HAD ENTERED INTO INTE RNATIONAL TRANSACTIONS WITH ITS AES, IN RESPECT OF PROVISIONS OF SOFTWARE CONTENT DEVELOPMENT SERVICES FOR AN AMOUNT OF RS. 1 5,12,35,313/-. THE ASSESSEE ADOPTED TRANSACTIONAL NET MARGIN METHO D AS THE MOST APPROPRIATE METHOD AND COMPUTED THE ARMS LENGTH P RICE BY SELECTING 15 COMPARABLES. OUT OF 15, TPO ACCEPTED 7 COMPARABLES AND HE HAS TAKEN 5 NEW COMPARABLES AND ARRIVED AT A RITHMETIC MEAN OF 24.11% AS AGAINST 14.79% ARRIVED BY THE ASSESSEE . THE TPO MADE ADJUSTMENT OF RS. 91,56,111/- IN THE ORDER PASSED U /S. 92CA (3) OF THE ACT DATED 30.1.2014. DRAFT ASSESSMENT ORDER WAS PASSED ON 10.2.2014 U/S. 143(3) R.W. SEC. 144C(1) OF THE ACT ADOPTING ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTI ON WITH AE AT RS. 91,56,111/- BY THE ASSESSING OFFICER. 4. THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP ON 11.3.2014 CONTENTING THAT THE TPO ERRED IN DISREGARDING THE D ETAILED BENCH MARKING EXERCISE CONDUCTED BY THE ASSESSEE. THE TP O ERRED IN CONDUCTING A FRESH BENCHMARKING ANALYSIS WITHOUT P ROVIDING THE ITA NO. 329/M/2015 3 DETAILS OF SEARCH FILTERS/CRITERIAS APPLIED. THE ASSESSEE FILED OBJECTIONS STATING THAT TPO NOT PROVIDED AN OPPORTU NITY TO PROVIDE REASONS AND TO REFUTE AGAINST THE ACTION OF REJECTI NG COMPARABLES FORMING PART OF THE DETAILED TP STUDY CONDUCTED BY THE ASSESSEE. IT WAS ALSO SUBMITTED BEFORE THE DRP THAT TPO ERRED IN ARBITRARILY REJECTING COMPARABLES BY APPLYING INAPPROPRIATE FIL TERS AND NOT GIVING DUE CONSIDERATION TO THE FUNCTIONAL PROFILE OF THE ASSESSEE VIS- -VIS THE COMPARABLE COMPANIES ADOPTED IN THE TP ST UDY. IT WAS ALSO CONTENDED BEFORE THE DRP THAT TPO GROSSLY ERRED IN BENCHMARKING THE TRANSACTIONS OF THE CAPTIVE SOFTWARE SERVICES O F THE ASSESSEE WITH COMPANIES OPERATING AS FULL-FLEDGED ENTREPRENEURS W ITHOUT CONSIDERING THE DIFFERENCES IN THE FUNCTIONS PERFOR MED, ASSETS EMPLOYED AND RISK UNDERTAKEN BY THE ASSESSEE VIS- -VIS COMPARABLE COMPANIES. THEREFORE, IT WAS CONTENDED THAT TPO ER RED IN COMPARING THE ASSESSEE WITH COMPANIES CONSIDERING THE TURNOVE R, SIZE, GOODWILL AND FUNCTIONS PERFORMED BY THE ASSESSEE AND THE COM PANIES. IT WAS ALSO CONTENDED THAT THE TPO ADOPTED CHERRY PICKING APPROACH BY SELECTING THE ADDITIONAL 5 COMPARABLES AND DID NOT PROVIDE DETAILS OF SEARCH PROCESS I.E. FILTERS/CRITERIAS UNDERTAKEN F OR SELECTION OF THE ADDITIONAL 5 COMPANIES. THEREFORE, IT WAS CONTENDED THAT NOT PROVIDING THE DETAILS OF SEARCH FILTERS/CRITERIA AP PLIED ETC., WOULD TANTAMOUNT TO DENIAL OF PRINCIPLES OF NATURAL JUSTI CE AND LEAD TO A CONCLUSION THAT THESE COMPANIES HAVE BEEN ARBITRARI LY SELECTED/ CHERRY PICKED. THE DRP HOWEVER REJECTED THE CONTEN TIONS OF THE ASSESSEE AND AFFIRMED THE ORDER OF THE TPO IN SELEC TING 5 COMPARABLES AND REJECTING 8 COMPARABLES OF THE ASSE SSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US SUBMI TS THAT EVEN IF ONE COMPARABLE I.E. INFOSYS TECHNOLOGIES LTD., WHIC H WAS TAKEN AS ITA NO. 329/M/2015 4 COMPARABLE BY THE TPO IS EXCLUDED IT WILL NOT RESUL T IN ANY TP ADJUSTMENT. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TS THAT INFOSYS TECHNOLOGIES LTD., IS FUNCTIONALLY DIFFERENT FROM T HE ASSESSEE COMPANY. HE SUBMITS THAT INFOSYS TECHNOLOGIES LTD. , ENGAGED IN VARIOUS ACTIVITIES AND HENCE IS NOT FUNCTIONALLY CO MPARABLE TO ASSESSEE WHICH IS A CAPTIVE SOFTWARE SERVICES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT INFOSYS TECHNOLOGIES LTD., HA S A DIFFERENT BUSINESS MODEL AND ITS 48.70% OF REVENUES ARE FROM ONSITE ACTIVITIES. HE SUBMITS THAT ITS TURNOVER IS 1396.3 0 TIMES MORE AS COMPARED TO THE TURNOVER OF ASSESSEE AND ITS R &D E XPENDITURE IS SIGNIFICANTLY HIGH WHICH IS APPROXIMATELY 438 CROR ES IN FINANCIAL YEAR 2009-10 AND HAS IN POSSESSION OF SIGNIFICANT INTANG IBLES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT INFOSYS TECHN OLOGIES LTD., HAS SIGNIFICANT BRAND VALUE AS IT HAS BEEN RANKED AMO NG THE 50 MOST RESPECTED COMPANIES IN THE WORLD BY REPUTATION INST ITUTES GLOBAL REPUTATION PULSE 2009. THE LD. COUNSEL FOR THE ASS ESSEE SUBMITS THAT INFOSYS TECHNOLOGIES LTD., IS ENGAGED IN DIVERSIFIE D SERVICES LIKE SOFTWARE ENGINEERING SERVICES, DESIGNING ETC. 5.1. HE FURTHER SUBMITS THAT THE BOMBAY HIGH COURT IN THE CASE OF M/S. PENTAIR WATER INDIA PVT. LTD IN TAX APPEAL NO . 18 OF 2015 DATED 16 TH SEPTEMBER, 2015 CONSIDERED A SITUATION WHERE THE T URNOVER OF THE COMPARABLES IS MUCH MORE THAN THE TURNOVER OF T HE ASSESSEE I.E. HCL COMNET SYSTEMS & SERVICES LTD HAVING TURNOVER OF MORE THAN 23 TIMES OF AN ASSESSEE, INFOSIS BPO LTD. HAVING TURNOVER OF MORE THAN 65 TIMES OF AN ASSESSEE AND M/S. WIPRO LTD., HAVING TURNOVER OF 939 CRORES AS AGAINST 11 CRORES OF AN ASSESSEE I.E. PENTAIR WATER INDIA PVT. LTD., AND IN SUCH CIRCUMSTANCES, THE HONBLE H IGH COURT HELD THAT ITA NO. 329/M/2015 5 THESE COMPANIES ARE LARGE AND DISTINCT COMPANIES AN D THE AREA OF DEVELOPMENT OF SUBJECT SERVICES ARE DIFFERENT AND AS SUCH THE PROFIT EARNED THEREFROM CANNOT BE BENCH-MARKED OR EQUATED WITH THE RESPONDENT-COMPANY. PLACING RELIANCE ON THE SAID D ECISION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE TURNOVER OF INFOSYS TECHNOLOGIES LTD., WHICH WAS CONSIDERED AS COMPARAB LES BY THE TPO HAS TURNOVER OF 1396.30 TIMES MORE THAN THE TURNOV ER OF THE ASSESSEE AND THEREFORE THE INFOSYS TECHNOLOGIES LTD ., CANNOT BE TAKEN AS COMPARABLE. HE FURTHER SUBMITS THAT INFOSYS TEC HNOLOGIES LTD., IS FUNCTIONALLY DIFFERENT COMPANY HAVING DIVERSIFIED A CTIVITIES AND HENCE CANNOT BE TAKEN AS COMPARABLE COMPANY. THE L D. COUNSEL FOR THE ASSESSEE SUBMITS THAT IF INFOSYS TECHNOLOGIES L TD., IS EXCLUDED FROM COMPARABLES, IT WOULD NOT RESULT ANY TP ADJUST MENT. THE DETAILED WORKING OF AVERAGE MARGIN COMPARABLES EXC LUDING INFOSYS IS GIVEN AS UNDER: S. NO. NAME OF COMPARABLE COMPANY AS PER TPO EXCLUDING INFOSYS 1. AKSHAY SOFTWARE TECHNOLOGIES LTD. - 3.19 -3.19 2. HELIOS & MATHESON INFORMATION TECHNOLOGY LTD 16.12 16.12 3. L G S GLOBAL LTD 10.02 10.02 4. MINDTREE LTD. 22.98 22.98 5. PERSISTENT SYSTEMS LTD. 30.53 30.53 6. SASKEN COMMUNICATION TECHNOLOGIES LTD. 24.71 24.71 7. THIRDWARE SOLUTIONS LTD. 29.59 29.59 8. F C S SOFTWARE SOLUTIONS LTD 30.38 30.38 ITA NO. 329/M/2015 6 9. INSOSYS TECHNOLOGIES LTD 45.47 - 10. KALS INFORMATION SYSTEMS LTD (SEG) 34.41 34.41 11. LARSEN & TOUBRO INFOTECH LTD. 20.11 20.11 12. BODHTREE CONSULTING LTD. 28.15 28.15 A. AVERAGE 24.11 22.16 MARGIN OF ASSESEE B OPERATING REVENUE 15,13,98,218 C OPERATING COST 12,93,64,539 D OPERATING PROFIT (D=B - C 2,20,33,679 E OP/OC(E=D/C 17.03 F ARMS LENGTH OPERATING MARGIN (F=C *22.16%) 2,86,73,062 G ARMS LENGTH OPERATING REVENUE (G= C+F) 15,80,37,601 H DIFFERENCE BETWEEN ACTUAL REVENUE AND OPERATING REVENUE (H=G-B) 6,39,383 I 5% OF OPERATING REVENUE (I=B * 5%) 75,69,911 TP ADJUSTMENT (ADJUSTMENT ONLY IF DIFFERENCE BETWEEN ACTUAL REVENUE AND OPERATING REVENUE EXCEEDS 5% OF OPERATING REVENUE) NIL 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TURNOVER NEVER HAD AN INFLUENCE ON PROFITABILITY AND THERE I S NO DIFFERENCE BETWEEN THE ASSESSEE COMPANY AND THE INFOSYS TECHNO LOGIES LTD., AS ASSESSEE IS ALSO INTO OTHER SERVICES. THE LD. DEPA RTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF TH E AUTHORITIES BELOW IN TAKING INFOSYS TECHNOLOGIES LTD., AS ONE OF THE COMPARABLE COMPANIES AND MAKING TRANSFER PRICING ADJUSTMENT. ITA NO. 329/M/2015 7 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE TPO & DRP AND THE CASE LAWS RELIED ON BY THE LD. CO UNSEL FOR THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CAPTIVE SERVICE PROVIDER AND PROVIDING ONLINE SOFTWARE CONTENT DEVE LOPMENT AND PARTNER SUPPORT SERVICES ON A COST PLUS BASIS TO IT S AES. THE ASSESSEE BENCHMARKED INTERNATIONAL TRANSACTIONS WITH AES ADO PTING TNMM AND SELECTING 15 COMPARABLES. THE TPO REJECTED 8 C OMPARABLES AND ADDED 5 NEW COMPARABLES AND WITH A SET OF 12 COMPA RABLES ARRIVED AT ARMS LENGTH MARGIN AT 24.11% AS AGAINST 14.79% AND MADE AN ADJUSTMENT OF RS. 91,56,111/- REJECTING THE SUBMISS ION OF THE ASSESSEE THAT THE COMPARABLES SELECTED BY THE TPO A RE FUNCTIONAL, DISSIMILAR AND IN SELECTING COMPARABLES, NO PROPER OPPORTUNITY WAS GIVEN AND NO DETAILS WERE PROVIDED REGARDING SUCH F ILTERS/CRITERIA SELECTING COMPARABLES. THE DRP ALSO SIMPLY ACCEPTED THE TPOS ADJUSTMENT WITHOUT ADDRESSING THE SUBMISSION OF THE ASSESSEE. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT EVEN IF ONE COMPARABLE I.E. INFOSYS TECHNOLOGIES LTD., IS TAKEN OUT, THERE WILL NOT BE ANY TP ADJUSTMENT AND HE ALSO SUBMITS THAT THE I NFOSYS TECHNOLOGIES LTD., IS FUNCTIONALLY, DISSIMILAR AND IT HAS A HUGE TURNOVER WITH DIVERSIFIED ACTIVITIES AND IT HAS SO MANY DIVISIONS LIKE SOFTWARE ENGINEERING, DESIGNING, BPO ETC., THEREFOR E PLACING RELIANCE ON THE BOMBAY HIGH COURT IN THE CASE OF PENTAIR WAT ER INDIA PVT. LTD (SUPRA) SUBMITS THAT INFOSYS TECHNOLOGIES LTD. SHOU LD BE EXCLUDED FROM COMPARABLES. ON GOING THROUGH THE DECISION OF THE HONBLE BOMBAY HIGH COURT WE SEE CONSIDERABLE FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IN THE CASE OF P ENTAIR WATER INDIA PVT. LTD., THE HONBLE HIGH COURT HAS AFFIRMED THE ORDER OF THE TRIBUNAL IN HOLDING THAT WHEN THE COMPARABLE COMPAN IES TURNOVER IS ITA NO. 329/M/2015 8 MUCH MORE THAN THE TURNOVER OF THE ASSESSEE THEIR M ARGINS CANNOT BE COMPARED FOR BENCHMARKING THE INTERNATIONAL TRANSAC TIONS. WHILE COMING TO SUCH CONCLUSION, THE HONBLE HIGH COURT H ELD AS UNDER : ON PERUSAL OF THE IMPUGNED ORDER PASSED BY THE TR IBUNAL DATED 23.05.2014, WE FIND THAT THE TRIBUNAL HAS RECORDED THE REASONS FOR NOT ACCEPTING THE SAID THREE COMPANIES ARE COMPARABLE B Y STATING AS FOLLOWS : (I) HCL COMNET SYSTEMS & SERVICES LTD :- WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT THIS COMPANY CANN OT BE A COMPARABLE AS THE TURNOVER OF THIS COMPANY IS 260.1 8 CRORES WHILE IN THE CASE OF THE ASSESSEE, THE TURNO VER IS AROUND RS.11 CRORES ONLY. WHILE MAKING THE SELECTIO N OF COMPARABLES, THE TURNOVER FILTER, IN OUR OPINION, H AS TO BE THE BASIS FOR SELECTION. A COMPANY HAVING TURNOVER OF RS.11 CRORES CANNOT BE COMPARED WITH A COMPANY WHIC H IS HAVING TURNOVER OF RS.260 CRORES WHICH IS MORE THAN 23 TIMES THE TURNOVER OF THE ASSESSEE. THIS COMPANY CA NNOT BE REGARDED TO BE IN EQUAL SIZE TO THE ASSEESSEE. WE, ACCORDINGLY, DIRECT THE AO TO EXCLUDE THIS COMPANY OUT OF THE COMPARABLES. (II) (II) INFOSYS BPO LTD. :- IN THIS CASE ALSO WE NOTED THE TURNOVER IN RESPECT OF THIS COMPANY IS RS.649.56 CR ORES WHILE THE TURNOVER OF THE ASSEESSEE COMPANY IS AROU ND RS. 11 CRORES WHICH IS MUCH MORE THAN 65 TIMES OF THE ASSESSEE'S TURNOVER. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF CIT(A) IN E XCLUDING THIS COMPANY OUT OF THE COMPARABLES. ACCORDINGLY, W E CONFIRM THE ORDER OF THE CIT(A). (III) (III) WIPRO LTD. :- AFTER HEARING THE RIVAL SUBMISS IONS, WE NOTED THAT THE CIT(A) APPLYING THE TURNOVER FILTER HAS EXCLUDED THIS COMPANY OUT OF THE COMPARABLES. THE TURNOVER REPORTED IN THE CASE OF WIPRO LTD. IS RS.9 39.78 CRORES WHILE IN THE CASE OF THE ASSEESSEE THE TURNO VER IS AROUND RS. 11 CRORES. THEREFORE, ON THE BASIS OF TH E TURNOVER FILTER ITSELF THIS COMPANY CANNOT BE REGAR DED TO BE COMPARABLE TO THE ASSEESSEE COMPANY AND ACCORDINGLY , WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF CIT(A) WHILE HE EXCLUDED THIS COMPANY ON THE TURNOVER CRITERIA FOLL OWING THE DECISION OF THIS TRIBUNAL IN : SONY INDIA (P) LTD. VS. DCIT, 114 ITD 448 DELHI, E-GAIN COMMUNICATION, 2008 TIOL 282 ITAT (PUNE) DELOITTEE CONSULTING INDIA PVT. LTD. VS. DCIT, ITA NO. 1082/HYD/2010 ITA NO. 329/M/2015 9 GENISYS INTEGRATING SYSTEM (INDIA)(P.) LTD. VS DCIT ,, 53 SOT 159 (BANG) 6. THE SAID FINDINGS OF THE TRIBUNAL IN RESPECT OF THE SAID THREE COMPANIES ARE ON THE BASIS OF APPRECIATION OF EVIDE NCE ON RECORD. WE FIND NO INFIRMITY IN THE SAID FINDINGS OF THE TRIBU NAL ON THAT COUNT. IN FACT, THE TRIBUNAL HAS ENDORSED THE VIEWS OF THE CI T APPEALS WHILST COMING TO SUCH CONCLUSIONS. THE CONCURRENT FINDINGS OF FACTS ARRIVED AT BY THE AUTHORITIES BELOW, CANNOT BE REAPPRECIATED B Y THIS COURT IN THE PRESENT APPEAL. 7. IN THIS CONNECTION, THE APEX COURT IN THE JUDGME NT REPORTED IN 2011(1) SCC 673 IN THE CASE OF VIJAY KUMAR TALWA R VS. CIT, HAS OBSERVED AT PARA 23 THUS : 23. A FINDING OF FACT MAY GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW, INTER ALIA, IN THE EVE NT THE FINDINGS ARE BASED ON NO EVIDENCE AND/OR WHILE ARRI VING AT THE SAID FINDING, RELEVANT ADMISSIBLE EVIDENCE H AS NOT BEEN TAKEN INTO CONSIDERATION OR INADMISSIBLE EVIDE NCE HAS BEEN TAKEN INTO CONSIDERATION OR LEGAL PRINCIPL ES HAVE NOT BEEN APPLIED IN APPRECIATING THE EVIDENCE, OR WHEN THE EVIDENCE HAS BEEN MISREAD. (SEE MADAN LAL V. GOPI, NARENDRA GOPAL VIDYARTHI V. RAJAT VIDYARTHI, COMMR. OF CUSTOMS V. VIJAY DASHARATH PATEL, METROAR K LTD. V. CCE AND W.B. ELECTRICITY REGULATORY COMMISSION V. CESC LTD) 8. IN THE PRESENT APPEAL, THE APPELLANT-REVENUE HAS NOT BEEN ABLE TO CONTROVERT OR DENY THE DATA RELIED UPON BY THE AUTHORITIES BELOW TO COME TO SUCH CONCLUSION. THE SAID COMPANIE S ARE NO DOUBT LARGE AND DISTINCT COMPANIES WHERE THE AREA OF DEVE LOPMENT OF SUBJECT SERVICES ARE DIFFERENT AND AS SUCH THE PROFIT EARNE D THEREFROM CANNOT BE A BENCH-MARKED OR EQUATED WITH THE RESPONDENTCOM PANY. 9. SHRI JAIN, LEARNED COUNSEL HAS RIGHTLY RELIED UP ON THE JUDGMENT OF THE DELHI HIGH COURT REPORTED IN (2013) 36 TAXMANN.COM 289(DELHI) IN THE CASE OF COMMISSIONER OF INCOME-TA X VS. AGNITY INDIA TECHNOLOGIES (P.) LTD. LEARNED COUNSEL HAS ALSO BRO UGHT TO OUR NOTICE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL WHIL ST EXAMINING SIMILAR CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2005- 06. HE HAS TAKEN US THROUGH THE FINDINGS THEREIN TO POINT OUT THAT T HE CONCLUSIONS ARRIVED AT ARE BASED ON A COMPARISON THAT THE CONDI TION IN ANY UNCONTROLLED TRANSACTION BETWEEN AN INDEPENDENT ENT ERPRISES FOR THE PURPOSE OF SUCH COMPARISON, ECONOMICALLY RELEVANT C HARACTERISTICS MUST BE SUFFICIENTLY COMPARABLE IF TWO PARTIES ARE TO BE PLACED IN A SIMILAR SITUATION. LEARNED COUNSEL AS SUCH SUBMITTE D THAT IT IS NOT OPEN FOR THE APPELLANT TO NOW CONTEND A DIFFERENT CRITER IA TO ASCERTAIN THE COMPARABILITY. IN FACT THE TRIBUNAL WHILST PASSING THE IMPUGNED ORDER HAS CONSIDERED THE SAID PRINCIPLES WHILST COMING TO THE CONCLUSION THAT ITA NO. 329/M/2015 10 THE SAID THREE COMPANIES CANNOT BE TREATED TO BE CO MPARABLE TO THE RESPONDENT-ASSESSEE COMPANY. THE TURNOVER IS OBVIOU SLY A RELEVANT FACTOR TO CONSIDER THE COMPARABILITY. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE JU RISDICTIONAL HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO EXCL UDE INFOSYS TECHNOLOGIES LTD., FROM THE COMPARABLE COMPANIES FO R ARRIVING AT TP ADJUSTMENT. 8. REST OF THE GROUNDS TAKEN BY THE ASSESSEE ARE W ITH REGARD TO LEVY OF PENALITY U/S. 271(1)(C) AND INTEREST U/S. 234B & C OF THE ACT. AS THESE GROUNDS ARE CONSEQUENTIAL THEY NEED NOT BE ADJUDICATED. HENCE THESE GROUNDS ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED 24 TH JUNE, 2016 . % . ./ RJ , SR. PS ITA NO. 329/M/2015 11 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI