CNO IT Services (India) Private Limited, Hyd, Hyderabad V. DCIT, Circle-1(2), Hyd, Hyderabad

ITA 336/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3086 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: ABHIROOP BHARGAV ARS
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.336/HYD/2015 : ASSESSMENT YEARS 2010-1 1 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD (PAN AACBCC 3575 G) V/S D Y. COMMISSIONER OF INCOME -TAX CIRCLE 1(2), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI DHANESH B AFNA & ABHIROOP BHARGAV, ARS RESPONDENT BY : SMT. VASUNDHARA SINHA DATE OF HEARING 15.02.2016 DATE OF PRONOUNCEMENT 19.02.20 16 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE ASSESSING OFFICER PASSED UNDER S.143(3 ) READ WITH S.144(5) OF THE INCOME TAX ACT,1961, CONSEQUENT TO THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL, HYDERABAD. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ADDITION OF RS.1,11,51,669 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IN RESPECT OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, AND MORE SPECIFICALLY, THE GRIEVANCE OF T HE ASSESSEE IS AGAINST THE INCLUSION OF THE FOLLOWING THREE COMPAN IES IN THE LIST OF COMPARABLES SELECTED BY THE TPO, WHICH HAS BEEN UPH ELD BY THE DISPUTE RESOLUTION PANEL - ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 2 (A) E-INFOCHIPS BANGALORE LTD. (B) KALS INFORMATION SYSTEMS LTD. (C) TATA ELXSI LTD.(SRG) 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY, ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND EXPORT SERVICES, FILED ITS RETURN OF INCOME ON 25.9.2010 ADMITTING A TOTAL INCOME OF RS.2,71,72,072 UNDER NORMAL PROVISIONS AND RS.2,35, 78,050 UNDER S.155JB. DURING THE COURSE OF ASSESSMENT, THE ASSES SEE FURNISHED A REPORT IN FORM NO.3CEB IN ACCORDANCE WITH THE PROVI SIONS OF S.92E, ACCORDING TO WHICH THE ASSESSEE HAD INTERNATIONAL T RANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER THERE FORE, MADE A REFERENCE TO THE TRANSFER PRICING OFFICER AS PER TH E PROVISIONS OF S.92CA FOR DETERMINATION OF ARMS LENGTH PRICE. THE TRANS FER PRICING OFFICER, IN THE COURSE OF HIS TRANSFER PRICING STUDY SELECTED E IGHTEEN COMPARABLES AND ARRIVED AT THE ARITHMETIC MEAN MARGIN OF OP/TC OF THE COMPARABLES POST WORKING CAPITAL ADJUSTMENT AT 20.59% IN THE F OLLOWING MANNER- NAME OF THE COMPANY SELECTED OP/OC % 1. AVANI CIMCON TECHNOLOGIES LTD., - 2.34 2. CAT TECHNOLOGIES LTD., - 6.83 3. EVOKE TECHNOLOGIES PVT LTD., - 19.07 4. PERSISTENT SYSTEMS AND SOLUTIONS LTD., - 9.07 5. RS SOFTWARE INDIA LTD., - 10.51 6. THINKSOFT GLOBAL SERVICES LTD., - 8.94 7. E ZEST SOLUTIONS LTD., - 21.12 8. KULILZA TECHNOLOGIES PVT LTD., - 24.44 ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 3 9. PERSISTENT SYSTEMS LTD. - 30.34 10. SASKEN COMMUNICATION TECHNOLOGIES LTD., - 24.93 11. ZYLOG SYSTEMS LTD., - 14.93 12. . COMP-U-LEARN TECH INDIA LTD., - 14.09 13. INFOSYS TECHNOLOGY LTD. - 43.86 14. L& T INFOTECH LTD. - 20.78 15. MINDTREE LTD (SEG) - 18.53 16. E INFOCHIPS BANGALORE LTD., - 66.28 17. KALS INFORMATION SYSTEMS LTD (SEG) - 19.01 18. TATA ELXSI LTD (SEG) - 15.66 ARITHMETIC MEAN MARGIN OF COMPARABLES - 20.59 SINCE THE MARGIN OF DIFFERENCE BETWEEN PROFIT MARGI N DECLARED BY THE ASSESSEE AND THE ARITHMETIC MEAN MARGIN OF THE COMP ARABLE COMPANIES SELECTED BY THE TRANSFER PRICING OFFICER WAS MORE T HAN 5%, APPLYING THE ABOVE ARITHMETIC MEAN MARGIN OF 20.59 TO THE OP ERATING COST OF RS.17,96,31,488, THE TPO DETERMINED THE ARMS LENGT H PRICE OF THE ASSESSEE AT RS.21,66,17,611, AND REDUCING THEREFROM THE PRICE RECEIVED (OR) OF RS.20,34,54,070, THE TRANSFER PRICING OFFICER R ECOMMENDED TRANSFER PRICE ADJUSTMENT OF RS.1,31,63,541. 4. AGAINST THE DRAFT ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER ON THE BASIS OF THE ABOVE ORDER OF THE TRAN SFER PRICING OFFICER, THE ASSESSEE RAISED OBJECTIONS BEFORE THE DISPUTE R ESOLUTION PANEL. THE ASSESSEES OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL WAS WITH REGARD TO THE INCLUSION OF EIGHT OUT OF THE EIGHTEE N COMPARABLE COMPANIES SELECTED BY THE TRANSFER PRICING OFFICER, WHICH ARE AGAINST SL. NOS. 11 TO 18 ABOVE. THE DISPUTE RESOLUTION PANEL, VIDE ITS DIRECTIONS DATED 28.11.2014, ACCEPTED THE OBJECTIONS OF THE AS SESSEE WITH REGARD ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 4 TO FIVE COMPARABLES LISTED AGAINST SL.NOS.11 TO15 A BOVE, BUT REJECTED THE PLEAS OF THE ASSESSEE FOR EXCLUSION OF THREE OT HER COMPARABLES, WHICH ARE AGAINST SL. NOS.16 TO 18 ABOVE. 5. IN PURSUANCE OF THE ORDER OF THE DISPUTE RESOLU TION PANEL DATED 28.11.2014, ASSESSING OFFICER PASSED THE IMPU GNED ASSESSMENT ORDER 9.1.2015, MAKING AN ADDITION OF RS.1,11,51,66 9, BY WAY OF TRANSFER PRICING ADJUSTMENT, TO THE INCOME DECLARED BY THE ASSESSEE UNDER NORMAL PROVISIONS. HE ACCORDINGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.3,83,23,741. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. AS NOTED HEREINABOVE, THE ONLY GRIEVANCE OF THE ASS ESSEE IN THIS APPEAL IS AGAINST THE INCLUSION OF THE FOLLOWING COMPANIES IN THE LIST OF COMPARABLES, FOR THE PURPOSES OF DETERMINING THE AR MS LENGTH PRICE. (A) E-INFOCHIPS BANGALORE LTD. (B) KALS INFORMATION SYSTEMS LTD. (C) TATA ELXSI LTD.(SEG) ADMITTEDLY, COMPARABLE NATURE OF THE ABOVE THREE CO MPANIES IN SIMILAR CIRCUMSTANCES, HAS COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA PVT. LTD., HYDERABAD (ITA NO.1758/HYD/2014 OF THE ASSESSEE & ITA NO.1936/HYD/ 2014 OF THE REVENUE FOR THE ASSESSMENT YEAR 2010-11, WHEREIN TH E TRIBUNAL HAS ACCEPTED THE OBJECTIONS OF THE ASSESSEE IN THAT CAS E AGAINST THE INCLUSION OF THE ABOVE THREE COMPANIES, AFTER DISCU SSING THE SAME IN ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 5 PARA 8, PARA 10 AND PARA 12 OF ITS ORDER DATED 16 .10.2015, EXTRACTED BELOW- E INFOCHIPS BANGALORE LTD., : 8. THIS COMPANY IS SELECTED BY TPO EVEN THOUGH ASS ESSEE OBJECTED TO THE SAME (VIDE PAGE 34 AND 35 OF THE OR DER OF TPO). ASSESSEE OBJECTED THAT THE INFORMATION FOR FY. 2009 -10 WAS NOT AVAILABLE IN PUBLIC DOMAIN. IT WAS FURTHER CONTENDE D THAT COMPANY IS FUNCTIONALLY DIFFERENT AND IS HAVING TWO DIFFERENT SEGMENTS I.E., SOFTWARE DEVELOPMENT SERVICES AND ITES. COMPANY OF FERS BROAD PORTFOLIO OF SERVICES COMPRISING NEW PRODUCTS, PROD UCT DEVELOPMENT, PRODUCT SUSTENANCE AND MAINTENANCE, PRODUCT QUALITA TIVE ANALYSIS (QA) AND INDEPENDENT TESTING HARDWARE AND SOFTWARE DESIGN ETC. TPO DID NOT ACCEPT ASSESSEES DOCUMENTS BY REFERRIN G TO THE SCHEDULES LIKE RESEARCH AND DEVELOPMENT, INVENTORIE S, SALES AND OTHER INCOMES. HE ALSO REPORTED THAT COMPANY IN TH E NOTES TO THE ACCOUNTS HAS STATED THAT IT IS ENGAGED IN THE DEVEL OPMENT AND MAINTENANCE OF COMPUTER SOFTWARE. THE PRODUCTION A ND SALES OF SOFTWARE CANNOT BE EXPRESSED IN ANY GENERIC UNIT. THUS, TPO REJECTED ASSESSEES OBJECTIONS AND RETAINED IT AS A COMPARABLE. DRP ALSO AGREED WITH TPO. 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. 2009-1 0 WAS NOT AVAILABLE IN PUBLIC DOMAIN. IT IS ALSO SUBMITTED T HAT THIS COMPANY WAS NEVER SELECTED EITHER BY TPO IN EARLIER YEAR OR IN LATER YEAR. IT WAS ALSO SUBMITTED THAT PROFITABILITY VARIES FROM Y EAR TO YEAR AND IN THIS YEAR, THERE WAS ARBNORMALLY VERY HIGH MARGIN, THE REASONS OF WHICH COULD NOT BE ANALYSED IN THE ABSENCE OF ANNUA L REPORT. IT WAS FURTHER CONTENDED THAT SEGMENTAL INFORMATION WAS NO T AVAILABLE. ON THE ARGUMENT THAT THE SAID COMPANY IS PROVIDING BOT H SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES LD. COUNSEL PLA CED 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 COMPARAB LE WITH ASSESSEES ON FUNCTIONAL ANALYSIS. IT WAS FURTHER SU BMITTED THAT COMPANY HAS MERGED IN 2012 WITH ANOTHER COMPANY AND IT WILL BE DIFFICULT TO OBTAIN FURTHER INFORMATION/SEGMENTAL I NFORMATION ABOUT ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 6 THE COMPANY NOW. IN VIEW OF ITS FLUCTUATING PROFIT S OVER THE YEARS, THIS COMPANY WAS NOT SELECTED AS A COMPARABLE EARLI ER OR IN LATER YEARS BY REVENUE. SINCE THE DISCLOSURE IN ANNUAL REPORT IS COMMON, ASSESSEE RELIED ON THE DECISION OF AHMADABAD BENCH OF ITAT IN THE CASE OF ALL SCRIPS (INDIA) PRIVATE LTD., IN ITA NO. 771/AHD/2014 FOR AY. 2009-10, WHEREIN THIS COMPARABLE WAS REJECTED O N THE BASIS OF LACK OF SEGMENTAL INFORMATION. ASSESSEE RELIED ON PARA 10 OF THE CO- ORDINATE BENCH ORDER, WHICH IS AS UNDER: PARA 10 WITH RESPECT TO E-INFOCHIP BANGALORE L TD., WE FIND THAT IN THE ANNUAL ACCOUNTS OF THE COMPANY, WITH RESPECT TO THE SEGMENT INFORMATION IT IS STATED THA T THE COMPANY IS PRIMARILY ENGAGED IN SOFTWARE DEVELOPMEN T AND I.T ENABLED SERVICES WHICH IS CONSIDERED THE ONLY R EPORTABLE BUSINESS SEGMENT AS PER ACCOUNTING STANDARD AS-17 SEGMENT REPORTING PRESCRIBED IN COMPANIES (ACCOUNT ING STANDARD) RULES, 2006. WE THUS FIND THAT NO SEGME NTAL INFORMATION IS AVAILABLE ..CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE AFORES AID TWO COMPANIES NEEDS TO BE EXCLUDED WHILE WORKING OUT TH E COMPARABILITY ANALYSIS AND THEREFORE UPHOLD THE PLE A OF THE ASSESSEE IN EXCLUDING THE MARGINS OF THE AFORESAID 2 COMPANIES. 8.2. LD. DR, HOWEVER, REFERRED TO THE EXTRACTS MAD E BY TPO IN THE ORDER TO SUBMIT THAT ASSESSEE IS A COMPARABL E COMPANY WITH THAT OF ASSESSEE. 8.3. AFTER CONSIDERING THE RIVAL CONTENTIONS AND P ERUSING THE ANNUAL REPORTS PLACED ON RECORD, WE ARE OF THE OPIN ION THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE COMPANY FO R TP ANALYSIS. FIRST OF ALL, THIS COMPANY IS ENGAGED IN BOTH SOFTW ARE DEVELOPMENT AS WELL AS ITES. ASSESSEE BEING ONLY CAPTIVE SERVI CE PROVIDER, THE ABOVE COMPANY CANNOT BE CONSIDERED AS COMPARABLE ON FUNCTIONAL BASIS. NOT ONLY THAT, AS POINTED OUT, SEGMENTAL IN FORMATION PERTAINING TO THE ABOVE COMPANY IS NOT AVAILABLE. AS SEEN FROM THE TP ORDERS, DOCUMENTS PLACED ON RECORD, TPO RELIED O N LATER YEARS ANNUAL REPORT IN EXTRACTING THE INFORMATION. VARIA TION IN PROFITABILITY OVER THE YEARS ALONE CANNOT BE A REASON TO EXCLUDE THE COMPANY FROM COMPARABILITY ANALYSIS BUT AS RIGHTLY POINTED, THE ABSENCE OF SEGMENTAL INFORMATION, HOW MUCH PROFIT EARNED WAS O N THE SOFTWARE DEVELOPMENT OR ITES CANNOT BE EXAMINED. IN THE AB SENCE OF CLARITY ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 7 ON OPERATIONAL DETAILS AND COMPARABLE COMPANY HAVIN G DIVERSIFIED ACTIVITIES, WE ARE OF THE OPINION THAT THIS COMPAN Y CANNOT BE CHOSEN AS A COMPARABLE COMPANY IN ASSESSEES CASE IN THIS ASSESSMENT YEAR. WE ARE ALSO AWARE OF THE DECISION OF THE CO- ORDINATE BENCH GIVEN IN EARLIER ASSESSMENT YEAR ON THE REASON THAT SEGMENTAL REPORTING WAS NOT AVAILABLE. BE THAT AS IT MAY, SI NCE THE SAID COMPANY IS FUNCTIONALLY DIFFERENT FROM ASSESSEES A CTIVITIES AND IN THE ABSENCE OF SEGMENTAL INFORMATION, WE DIRECT AO/TPO TO EXCLUDE THE ABOVE WHILE WORKING OUT THE COMPARABILITY ANALYSIS. WE UPHOLD THE PLEA OF ASSESSEE IN THIS REGARD. KALS INFORMATION SYSTEMS LTD : 10. ASSESSEE OBJECTED TO THE ABOVE COMPANY BEFORE TPO STATING THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS. IT HAS INVENTORIES EQUIVALENT TO 27% OF THE REVENUE. TPO HOWEVER REJECTED ASSESSEES CONTENTIONS STATING THAT COMPAN Y CLASSIFIED ITSELF AS PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER. FUR THER, EXTRACTING PAGE NO. 22 OF THE ANNUAL REPORT OF THE COMPANY, TP O OPINED THAT THE SEGMENTAL 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 FU NCTIONALITY OF THE COMPARABLE COMPANY. AS SEEN FROM THE ANNUAL REPORT OF 2008-09 AND 2009-10 AND COMPARATIVE STATEMENT PLACE D BY ASSESSEE, THE COMPANY CLASSIFIED ITSELF AS THE COM PANY ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS SINCE ITS INCEPTION. THE COMPANY CONSISTING OF STPI UNIT ENGAGED IN DEVE LOPMENT OF SOFTWARE AND SOFTWARE PRODUCTS AND A TRAINING CENTR E ENGAGED IN TRAINING OF SOFTWARE PROFESSIONALS ON ON-LINE PROJE CTS. THIS INDICATES THAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE AND PRODUCTS AND ITS INVENTORY ALSO INDICATES THAT ASSESSEE HAS BEEN USING ITS READYMADE LIBRARIES FOR SALES. THIS COMPANY WAS RE JECTED IN EARLIER YEAR ON FUNCTIONAL ANALYSIS BY ITAT IN THE CASE OF PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 WHERE IN IT WAS HELD THAT COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS. SINCE ITS ANNUAL REPORT STATES THE SAME FACTS IN THIS ASSESSMENT YEA R ALSO, WE ARE OF THE OPINION THAT THE COMPANY CANNOT BE SELECTED AS A COMPARABLE AS IT WAS ENGAGED IN DEVELOPMENT OF SOFTWARE AND SOFTW ARE PRODUCTS. ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 8 ACCORDINGLY, ASSESSEES OBJECTIONS ARE ACCEPTED AND AO IS DIRECTED TO EXCLUDE THE COMPANY. TATA ELXSI LTD (SEG): 12. BEFORE TPO, ASSESSEE CONTENDED THAT THE ABOVE SAID COMPANY IS FUNCTIONALLY DIFFERENT AS IT SPECIALIZED IN EMBEDDED SOFTWARE DEVELOPMENT TECHNOLOGY. IT WAS ALSO OBJEC TED BEFORE TPO THAT IN EARLIER YEAR THIS COMPANY HAS CLEARLY STATE D THAT IT CANNOT BE COMPARED TO ANY OTHER SOFTWARE SERVICES COMPANY DUE TO COMPLEX NATURE OF ITS BUSINESS. ASSESSEE RELIED ON THE DEC ISIONS OF ITAT IN THE CASE OF CONEXANT SYSTEMS INDIA PVT. LTD. (ITA NO.1429/HYD/2 010 AND 1978/HYD/2011) AND OTHER CASES AS STATED BY TPO IN PAGE 41 OF HIS ORDER. HOWEVER, TPO DID NOT AGREE WITH THE OBJ ECTIONS STATING THAT THE COMPANY HAS TWO SEGMENTS INCLUDING SOFTWAR E DEVELOPMENT SERVICES AND REVENUE FROM SOFTWARE DEVELOPMENT SERV ICES IS RS. 33,649 CRORES OUT OF TOTAL TURNOVER OF RS. 37,637 C RORES, WHICH IS AT 89.52%. THIS SIGNIFIED THE FACT THAT COMPANY IS PR EDOMINANTLY INTO SOFTWARE DEVELOPMENT SERVICES. TPO REJECTED THE OB JECTIONS OF ASSESSEE SO AS DRP. 12.1. IT WAS THE OBJECTION OF ASSESSEE THAT ABOVE COMPANY IS PREDOMINANTLY INTO PRODUCT DESIGN SERVICES, INNOVATION DESIGN ENGINEERING AND VISUAL COMPUTING LABS DIVISION WHIC H ARE SPECIALIZED SERVICES. HE REFERRED TO THE ORDER OF ITAT IN AY. 2 009-10 IN THE CASE OF PLANET ONLINE PVT. LTD., IN ITA NO. 464/HYD/2014 (SUPRA), WHEREIN THIS COMPANY WAS REJECTED ON THE REASON THAT IT IS ENGAGED IN MULTIPLE SEGMENTS. THERE IS NO BREAK-UP IN THE ANN UAL REPORT AND DATA ON WHICH MARGIN FROM SOFTWARE SERVICES ACTIVIT Y ONLY CAN BE COMPUTED IS ALSO NOT AVAILABLE. MOREOVER, THE COMP ANY ITSELF HAS INDICATED THAT IT CANNOT BE COMPARED WITH ANY OTHER SOFTWARE SERVICE COMPANY BECAUSE OF ITS COMPLEX NATURE. SIMILAR VIE W WAS TAKEN BY MANY OF THE CO-ORDINATE BENCHES IN EARLIER YEARS TH AT TATA ELXSI LTD., CANNOT BE SELECTED AS COMPARABLE COMPANY. CONSISTE NT WITH THE ABOVE VIEW, WE ARE OF THE OPINION THAT A COMPANY LI KE TATA ELXSI LTD., WHICH HAS COMPLEX ACTIVITIES AND SEGMENTAL IN FORMATION OF WHICH IS NOT AVAILABLE CANNOT BE SELECTED AS COMPAR ABLE COMPANY TO ASSESSEE. MOREOVER, AS SEEN FROM THE TURNOVER AS R EPORTED BY TPO ITSELF, IT WAS MANY TIMES ASSESSEES TURNOVER AND T HEREFORE CANNOT BE EXACTLY CONSIDERED AS A SIMILAR COMPANY UNLESS T HE NATURE OF ACTIVITY, THE INCOMES ARE ANALYSED IN DETAIL. SINC E NO SEGMENTAL DATA IS AVAILABLE, CONSIDERING THE SOFTWARE DEVELOPMENT SERVICES AS A SEGMENT BY TPO CANNOT BE CONSIDERED AS SEGMENTAL DA TA, UNLESS THE ITA NO.336/HYD/2015 M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, HYDERABAD 9 SERVICES RENDERED BY THAT COMPANY ARE SIMILAR TO TH E SERVICES RENDERED BY ASSESSEE. IN VIEW OF THIS, WE ARE OF T HE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE. AO IS DIRECTED TO EXCLUDE THE SAME. EVEN THOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ACTION OF THE REVENUE AUTHORITIES IN TAKING THE ABOVE THREE C OMPANIES AS COMPARABLES, HE DID NOT DISPUTE THE POSITION THAT THE ABOVE DECISIO N OF THE TRIBUNAL IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA PVT. LTD. HYDERABAD, N OTED ABOVE, SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE IN FAVOUR OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF PEGASYSTEMS WORLDWIDE INDIA PVT. LTD. HYDERABAD, NOTED ABOVE, W E ACCEPT THE CONTENTIONS OF THE ASSESSEE IN ITS APPEAL AND DIRECT THE ASSESSING OFFICER/TPO TO REDETERMINE THE TRANSFER PRICING ADJUSTMENT, IF ANY, WARRANTED, AFT ER EXCLUDING THE ABOVE THREE COMPARABLES FROM THE TP STUDY. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 1 9.02.2016 SD/- SD/- ( S.S . VISWANETHRA RAVI ) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 19 TH FEBRUARY, 2016 COPY FORWARDED TO: 1. M/S. CNO IT SERVICES (INDIA) PRIVATE LIMITED, NO.20 8, OVAL BUILDING, ILABS CENTER, HITECH CITY, MADHAPUR, HYDERABAD 500 081 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 1(2), HYD ERABAD 3. 4. DISPUTE RESOLUTION PANEL HYDERABAD COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.