IT Cube Solutions Pvt. Ltd., Pune V. ITO, Ward 1(4), Pune

ITA 340/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1953 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP GARG
• Keywords: Related party transaction; Transfer pricing; International transaction; Avoidance of tax
• Section: 92C; 143(3); 234B; 10B; 92

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.340/PN/2013 ASSESSMENT YEAR : 2008-09 IT CUBE SOLUTIONS PVT. LTD., CRYSTAL CORPORATE, G BUILDING, 4 TH FLOOR, 572/C, SURYAPRABHA GARDEN, BIBEWADI, PUNE 411 037. PAN : AABCI1951J . APPELLANT VS. THE INCOME TAX OFFICER, WARD 1(4), PUNE. . RESPONDENT / APPELLANT BY : SHRI KISHOR PHADKE / RESPONDENT BY : SHRI SANDEEP GARG, CIT / DATE OF HEARING : 18.02.2016 / DATE OF PRONOUNCEMENT: 15.04.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE IS A GAINST THE ORDER OF THE ASSESSING OFFICER, PUNE RELATING TO ASSESSMENT YEAR 2008-09 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT) ORDER DATED 8-11-2012 PASSED IN PURSUANCE OF DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP) UNDER S. 144C(5) DATED 5-9-2 012. 2. BRIEFLY STATED, THE ASSESSEE FILED ORIGINAL RETU RN OF INCOME ELECTRONICALLY ON 19.09.2008 WHICH WAS SUBSEQUENTLY REVISED. THE A SSESSEE COMPANY WAS INCORPORATED ON 13.12.2003. THE ASSESSEE COMPANY, A SUBSIDIARY OF IT CUBE, LLC, IS INCORPORATED UNDER THE COMPANIES ACT, 1956. THE ASSESSEE CO. IS ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY E NABLED SERVICES (ITES), BY PROVIDING, MANAGING AND ASSISTING BUSINESS PROCESS OUTSOURCING OF FUNCTIONS 2 ITA NO.340/PN/2013 SUCH AS ACCOUNTING, FINANCE, LEGAL PRODUCTION, STAF FING, COMMUNICATION MARKETING, DISTRIBUTION OR SALES. THE ASSESSEE IS ALSO INTO DEVELOPING SOFTWARE FOR MARKET RESEARCH, FINANCIAL ANALYTICAL SERVICES, SPECIFIC KNOWLEDGE/ BUSINESS PROCESS PAYROLL, RECRUITMENT, EMPLOYEE TRAINING AND DEVELOPMENT, RETIREMENT PLAN ADMINISTRATION CUSTOMER CALL CENTERS, TECHNICA L SUPPORT CENTERS, BILLING CLAIMS PROCESSING INBOUND AND OUTBOUND LOGISTICS, W AREHOUSING AND INVENTORY, MANAGEMENT, DOCUMENT PROCESSING AND DIGITIZING, AUD ITING AND MEDICAL/ ENTERTAINMENT TRANSCRIPTION. 2.1 DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE COMPANY HAS UNDERTAKEN CERTAIN INTERNATIONAL TRANSACTIONS WITH ITS OVERSEAS AFFILIATES I.E. ASSOCIATE ENTERPRISE (AE) IN THE FIELD OF SOFTWARE CONSULTANCY SERVICES & IT ENABLED SERVICES AMOUNTING TO RS.7,84,92,342/-. AS PER THE INDIAN TRANSFER PRICING REGULATIONS, THE INCOME ARISING FROM INTERN ATIONAL TRANSACTIONS IS REQUIRED TO BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE (ALP). AS REPORTED IN THE ACCOUNTANTS REPORT IN FORM NO.3CEB , THE ASSESSEE SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS A MOST AP PROPRIATE TRANSFER PRICING METHOD FOR ITS TP STUDY FOR THE IMPUGNED FI NANCIAL YEAR 2007-08 RELEVANT TO A.Y. 2008-09 FOR THE PURPOSES OF ESTABL ISHING THAT IMPUGNED CONTROLLED TRANSACTIONS WITH AE ARE CONSISTENT WITH ARM LENGTH PRINCIPLES (ALP). AS PER THE INTERNAL TNMM METHOD ADOPTED, THE ASSESSEE EXAMINED THE PROFIT LEVEL INDICATOR (PLI) OF ITS CONTROLLED INTE RNATIONAL TRANSACTIONS WITH THAT OF OTHER COMPARABLE UNCONTROLLED INTERNATIONAL TRAN SACTIONS ENTERED INTO BY IT AND ALSO COMPARABLE UNCONTROLLED TRANSACTIONS WITH DOMESTIC ENTITIES. THE RATIO OF OPERATING COST RELATIVE TO OPERATING PROFIT ( OP / OC) WAS TAKEN AS AN APPROPRIATE BASE FOR THE PURPOSES OF DETERMINATION OF PLI OF CONTROLLED TRANSACTIONS VIS A VIS UNCONTROLLED COMPARABLE TRANSACTIONS. THUS, THE AS SESSEE APPLIED INTERNAL OP/OC AS PLI. AS PER TP REPORT OF THE ASSESSEE, THE PLI ON THE TOTAL REVENUE EARNED BY THE ASSESSEE CO. BY PRO VING ITES/ BPO SERVICES TO ITS AE FOR THE RELEVANT ASSESSMENT YEAR IS HIGHER T HAN THE NET MARGINS EARNED FORM COMPARABLE UNCONTROLLED TRANSACTIONS OF THE AS SESSEE. IT IS THUS THE CASE OF THE ASSESSEE THAT IT HAS COMPLIED WITH THE TRANS FER PRICING REGULATIONS AS PROVIDED IN SECTION 92 AND OTHER ALLIED PROVISIONS OF THE INCOME TAX ACT, 1961 3 ITA NO.340/PN/2013 (THE ACT) IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH ITS AES WITH REGARD TO PROVISION OF IT ENABLED SERVICES (ITES)/BPO SERVICE S ETC AND THE PROFITABILITY ARISING FROM THE CONTROLLED INTERNATIONAL TRANSACTI ONS WITH AES ARE IN CONSONANCE WITH ARMS LENGTH STANDARD REQUIRED UNDE R THE INDIAN TRANSFER PRICING REGULATIONS. 2.2 IN THE COURSE OF ASSESSMENT PROCEEDINGS, A REFE RENCE WAS MADE BY THE ASSESSING OFFICER (AO) TO THE TRANSFER PRICING OFFI CER (TPO) UNDER SECTION 92CA(1) OF THE ACT FOR COMPUTATION OF ARM'S LENGTH PRICE OF THE IMPUGNED INTERNATIONAL TRANSACTIONS ENTERED INTO WITH AE UND ER SECTION 92C OF THE ACT. PURSUANT THERETO, THE TPO PASSED ORDER UNDER SECTIO N 92CA(3) OF THE ACT DATED 28.10.2011 AND DETERMINED THE ALP BY MAKING AN UPWA RD TRANSFER PRICING ADJUSTMENT IN RELATION TO INTERNATIONAL TRANSACTION S BY RS.91,27,129/-. 2.3 WHILE DOING SO, THE TPO REJECTED THE INTERNAL T NMM METHOD ADOPTED BY THE ASSESSEE AS THE MOST APPROPRIATE METHOD (MAM ) WHEREIN THE ASSESSEE COMPARED THE INTERNAL PROFIT LEVEL INDICATOR FROM C ONTROLLED TRANSACTIONS VIS A VIS PLI THAT THE ASSESSEE EARNS FROM COMPARABLE UNCONT ROLLED TRANSACTIONS WITH NON AE ( INTERNAL COMPARABLES) FOR THE PURPOSE OF D ETERMINATION OF ALP. AS REQUIRED BY TPO, THE ASSESSEE ASSISTED THE TPO AND UNDERTOOK A SEARCH PROCESS ON A DATABASE FOR EXTERNAL INDEPENDENT COMP ARABLES. TO TEST THE ARM LENGTH CHARACTER OF CONTROLLED TRANSACTIONS, THE AS SESSEE IDENTIFIED 9 EXTERNAL COMPANIES CONSIDERED AS COMPARABLE TO THE TRANSACTI ONS UNDERTAKEN BY THE ASSESSEE CO.. WHICH ARE TABULATED AS UNDER: SR. NO. COMPANY PLI (OP/OC) 1 CCE SOFTWARE PVT. LTD. 4.76% 2 E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 19.38% 3 IDHSOFT LTD. 17.97% 4 MANTHAN SOFTWARE SERVICES PVT. LTD. -13.84% 5 MPHASIS FINSOURCE LTD. 11.87% 6 OMEGA HEALTHCARE MANAGEMENT SERVICES PVT. LTD. -0 .73% 7 PROTEANS SOFTWARE SOLUTIONS PVT. LTD. 18.58% 8 SAVI INFOSERVICES INDIA PVT. LTD. 5.86% 9 TECHNOFORTE SOFTWARE PVT. LTD. 10.34% ARITHMETIC MEAN 8.24% 4 ITA NO.340/PN/2013 2.4 THE TPO AFTER ELABORATE DISCUSSION IN ITS ORDER ARRIVED AT FINAL SET OF 9 INDEPENDENT ENTITIES AS COMPARABLES AND DEDUCED AVE RAGE PLI FROM THESE EXTERNAL ENTITIES TABULATED AS UNDER. OPERATING MARGIN% MARGIN SR. NAME OF THE (OP/OC) AFTER WORKING WORKING WORKING NO. COMPANY B Y BY CAPITAL TPO ASSESSEE ADJUSTMENT 1 ACCENTIA 4270 4434 42.47 TECHNOLOGIES LTD 2 CORAL HUBS LTD 5179 51.79 3737 (EARLIER KNOWN AS .. VISHAL INFORMATION TECHNOLOGIES LTD) 3 CROSS DOMAIN 2759 2694 SOLUTIONS LTD 22.26 4 E4E - HEALTH 1938 1938 16.33 SOLUTIONS LTD (FORMERLY KNOWN AS NITTANY OUTSOURCING SERVICES PVT LTD) 5 IDHSOFT LTD. -- 17.10 17.10 6 ICRA ONLINE -- 5.69 3.25 7 LINKSON INTL. -- 1.52 1.18 8 MAPLE E-SOLUTIONS -- 20.67 15.94 LTD. 9 CEPHA IMAGING -- 4.35 4.35 PVT. LTD. ARITHMETIC MEAN 17.80% (160.25/9) THUS, THE TPO BENCHMARKED THE GROSS MARGIN (OP/OC) ON REVENUE FROM INTERNATIONAL TRANSACTIONS AT 17.80% AFTER EXCLUDIN G SOME OF THE COMPARABLES TAKEN BY THE ASSESSEE AND SIMULTANEOUSLY BY INCLUDI NG SOME MORE NEW COMPARABLES. 2.5 THE ARITHMETIC MEAN OF THE PLI SO DETERMINED FR OM THESE FINAL SET OF COMPARABLES WAS COMPARED WITH THE PLI DETERMINED AT 6.50% BY THE ASSESSEE AS PER INTERNAL TNMM AS OBSERVED IN THE DRAFT ASSES SMENT ORDER. THIS DIFFERENCE OF 11.30% WAS FACTORED FOR COMPUTATION O F ARM'S LENGTH PRICE BY THE 5 ITA NO.340/PN/2013 ASSESSING OFFICER WHICH LED TO TRANSFER PRICING ADJ USTMENT TO THE TUNE OF RS.91,27,129/-. HENCE, THIS AMOUNT WAS ADDED BY TH E AO IN RESPECT OF INTERNATIONAL TRANSACTIONS RELATING TO THE ASSOCIAT ED ENTERPRISE (AE) TO ARRIVE AT THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSAC TIONS IN ITS DRAFT ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 144C DATED 30.12. 2011. IN CONSEQUENCE, THE IMPUGNED TRANSFER PRICING ADJUSTMENT WAS PROPOSED T O BE TAKEN AS ADDITIONAL INCOME OF THE ASSESSEE IN THE DRAFT ASSESSMENT ORDE R. 2.6 THE ASSESSEE RAISED OBJECTION AGAINST THE IMPUG NED DRAFT ASSESSMENT ORDER BEFORE THE DRP. THE DRP PASSED DIRECTIONS UN DER S. 144C(5) OF THE ACT DATED 5/9/2012 AND REQUIRED THE ASSESSING OFFICER T O INCLUDE ADDITIONAL ENTITY NAMELY CG-VAK AS COMPARABLE WITH A FURTHER DIRECT ION TO CALCULATE THE PLI AFTER CONSIDERING FOREX LOSS AS NON-OPERATING EXPEN DITURE. THE ASSESSING OFFICER WAS ALSO DIRECTED BY DRP TO ALSO INCLUDE AN OTHER INDEPENDENT ENTITY PROTEANS SOFTWARE SOLUTIONS (P) LTD. AS COMPARABL E IN THE FINAL SET OF COMPARABLES. IN TERMS OF THE DIRECTIONS OF THE DRP , THE ASSESSING OFFICER PASSED A FINAL ASSESSMENT ORDER UNDER SECTION 143(3 ) R.W.S. 144C(13) OF THE ACT DATED 08.11.2012 MAKING TRANSFER PRICING ADJUST MENT TO THE TUNE OF RS. 64,70,396/- HAVING REGARD TO ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION OF ASSESSEE WITH ITS AES. 2.7 THE FINAL SET OF COMPARABLES AS PER THE FINAL A SSESSMENT ORDER IS TABULATED AS UNDER :- SR. NAME OF THE COMPANY PLI MARGIN AFTER NO. WORKING CAPITAL A DJUSTMENT 1. ACCENTIA TECHNOLOGIES LTD. 42.47 2. CORAL HUBS LTD. 37.37 (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD.) 3. CROSS DOMAIN SOLUTIONS LTD., 22.26 4. E4E-HEALTH SOLUTIONS LTD. (FORMERLY 16.33 KNOWN AS NITTANY OUTSOURCING SERVICES PVT. LTD. 6 ITA NO.340/PN/2013 5. IDHSO FT LTD., 17.10 6. ICRA ONLINE 3.25 7. LINKSON INTI. 1.18 8. MAPLE E-SOLUTIONS LTD., 15.94 9. CEPHA IMAGING PVT. LID., 4.35 10. CG- VAK SOFTWARE & EXPORTS LTD., 5.15 11. PROTEANS SOFTWARE SOLUTIONS PVT. LTD. 14.35% ARITHMETIC MEAN 16.34% 2.8 THE ARITHMETIC MEAN WAS COMPUTED BY THE AO AT 1 4.35% [ CORRECT MEAN 16.34% AS PER ASSESSEE WORKING AS NOTED ABOVE] IN T ERMS OF DIRECTIONS FROM DRP AND REVISED TRANSFER PRICING ADJUSTMENT COMPUTE D AT RS.64,70,396/- WAS ADDED IN HANDS OF THE ASSESSEE QUA ITS INTERNATIONA L TRANSACTIONS ENTERED WITH AES. 3. AGGRIEVED BY THE DIRECTIONS OF THE DRP AND CONSE QUENTLY WITH THE FINAL ASSESSMENT ORDER OF THE AO WITH REGARD TO AFORESAID ADJUSTMENTS MADE TO THE PURPORTED REVENUE FROM INTERNATIONAL TRANSACTIONS C ARRIED ON BY THE ASSESSEE WITH ITS AES, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL BY THE ASSESSEE READ AS UNDER :- BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, ITCUBE SOLUTIONS PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE 'AP PELLANT') RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED ('LD.') INCOME TAX OFFICER WARD 1(4) PUNE ('AO') IN PURSUANCE OF THE D IRECTIONS ISSUED BY HON'BLE DISPUTE RESOLUTION PANEL (DRP'), PUNE, DATED SEPTE MBER 5, 2012 UNDER SECTION 253 OF THE INCOME-TAX ACT, 1961 ('ACT') ON THE FOLL OWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. TRANSFER PRICING OFFICER ('TPO') AND THE AO, AND FURTHER THE HON'BLE DRP ERRED AND CONSEQUENTIALLY: 1) ERRED IN COMPUTING THE ARM'S LENGTH PRICE OF INT ERNATIONAL TRANSACTION AND CONFIRMING THE ADJUSTMENT OF RS 6,582,750/-. 2) ERRED BY INCORRECTLY RECOMPUTING THE PROFIT LEV EL INDICATOR ('PLI') OF THE APPELLANT. 3) ERRED BY INCLUDING THIRD PARTY AND/OR NON AE AND /OR DOMESTIC PROJECT COST WHILE COMPUTING THE TRANSFER PRICING ADJUSTMENT. 7 ITA NO.340/PN/2013 4) ERRED IN REJECTING THE MOST APPROPRIATE METHOD ( 'MAM') I.E. INTERNAL TRANSACTIONAL NET MARGIN METHOD ('TNMM') AS SELECTE D BY THE APPELLANT FOR BENCHMARKING THE INTERNATIONAL TRANSACTION(S) ENTER ED BETWEEN THE APPELLANT AND ITS ASSOCIATED ENTERPRISES ('AE') FOR AY 08-09. 5) ERRED BY APPLYING ADDITIONAL FILTERS AND REJECTI NG/MODIFYING APPELLANT'S FILTER FOR SELECTING COMPANIES AS COMPARABLES. 6) ERRED IN REJECTING COMPARABLE COMPANIES ON THE B ASIS OF NEGATIVE PROFIT EARNED BY THE COMPARABLE COMPANIES IN THE CONCERNED YEAR. 7) ERRED IN INCLUDING HIGH/SUPER PROFIT MAKING COMP ANIES AS COMPARABLE IN THE FINAL SET. 8) ERRED IN ADDING COMPARABLE COMPANIES/SEGMENTS WH ICH DIFFER IN FUNCTIONS UNDERTAKEN AND/OR ASSETS EMPLOYED AND/OR RISK ASSUM ED AS COMPARED TO THE APPELLANTS ASSOCIATED ENTERPRISE SEGMENT. ALSO, ERR ED BY NOT CONSIDERING CASE LAWS/ DECISIONS WHICH HAVE UPHELD THE NON-INCL USION OF CONCERNED COMPARABLES; 9) ERRED IN ADDING NEW COMPARABLE COMPANIES/SEGMENT S WHERE THE CONCERNED COMPANIES/SEGMENT FAIL TO MEET QUANTITATIVE CRITERI A APPLIED BY THE LD. TPO AND/OR THE APPELLANT. 10) ERRED IN UNJUSTLY REJECTING THE COMPARABLE COMP ANIES SELECTED BY THE APPELLANT; 11) ERRED BY CONSIDERING INCORRECT OP /TC OF COMPAR ABLE COMPANIES; 12) ERRED IN NOT PROVIDING/ALLOWING ANY ADJUSTMENTS ASSUMED TOWARDS DIFFERENCES IN RISKS AND ASSETS EMPLOYED BY THE APP ELLANT VIS-A-VIS COMPARABLE COMPANIES/SEGMENTS; 13) ERRED IN NOT APPLYING THE PROVISO TO SECTION 92 C(2) OF THE ACT AND HAS FAILED TO GRANT THE RELIEF FOR THE DOWNWARD ADJUSTMENT OF 5 PERCENT FROM THE ARITHMETIC MEAN, WHICH IS PERMITTED TO AND WHICH HA S ALSO BEEN OPTED FOR BY THE APPELLANT; 14) ERRED BY IGNORING THE FACT, THAT, ASSOCIATED EN TERPRISE HAS INCURRED A LOSS DURING THE YEAR AND HAS YET BEEN COMPENSATING THE A PPELLANT FOR ITS INTERNATIONAL TRANSACTIONS ON AN ARM'S LENGTH BASIS . THE LD.TPO HAS ERRED IN IGNORING THIS BUSINESS AND ECONOMIC REALITY; 15) ERRED BY IGNORING THE FACT, THAT, THE APPELLANT IS AN STPI UNIT & CLAIMED TAX HOLIDAY UNDER SECTION 10B OF THE ACT THEREFORE THER E IS NO INTENT AND NO ACTUAL AVOIDANCE OF TAX IN INDIA; 16) ERRED BY ERRONEOUS LEVY OF INTEREST UNDER SECTI ON 234B OF THE ACT; 17) ERRED BY INITIATION PENALTY PROCEEDING UNDER S ECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT. 5. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE, SHRI KISHOR PHADKE AT THE OUTSET SUBMITTED THAT NOTWITHSTANDING SEVERA L GROUNDS RAISED IN THE PRESENT APPEAL, THE ASSESSEE IS PRE-DOMINANTLY AGGR IEVED BY THE INCLUSION OF THREE COMPANIES NAMELY (I) ACCENTIA TECHNOLOGIES LI MITED, (II) CORAL HUBS LIMITED AND (III) MAPLE E-SOLUTIONS LIMITED IN THE FINAL SET OF COMPARABLES FOR THE PURPOSE OF DETERMINATION OF ARM'S LENGTH PRICE. HE SUBMITTED THAT NONE OF THESE ABOVE THREE COMPANIES COULD BE INCLUDED IN TH E FINAL SET OF COMPARABLES 8 ITA NO.340/PN/2013 BY THE TPO/DRP IN ABSENCE OF COMPARABILITY AND NON RELIABILITY OF DATA OF THESE COMPANIES. HE SUBMITTED THAT THERE ARE MATERI AL DIFFERENCES IN THE FAR (FUNCTIONS, ASSETS AND RISKS) ANALYSIS OF THE INTER NATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AND THESE 3 COMPARABLES SELECTED BY THE TPO/DRP WHICH CALLS FOR EXCLUSION THEREOF. HE FURTHER CANV ASSED THAT ONCE THESE THREE ENTITIES OR EVEN TWO COMPANIES NAMELY ACCENTIA AN D CORAL HUBS ARE EXCLUDED FROM THE LIST OF FINAL SET OF COMPARABLES AS IT DESERVES TO BE, THE RESULTANT ARITHMETIC MEAN OF PLI FLOWING FROM OTHER ENTITIES IN THE LIST OF COMPARABLES FOR THE PURPOSE OF CALCULATION OF ARM'S LENGTH PRICE SHALL FALL WITHIN THE TOLERANCE LIMIT OF +/- 5% RANGE PRESCRIB ED AS PER SECOND PROVISO TO SECTION 92C(2) OF THE ACT. HENCE, NO TRANSFER PRICI NG ADJUSTMENT WILL SURVIVE ON SUCH EXCLUSION AND THE PREJUDICE CAUSED TO THE A SSESSEE WILL CEASE TO EXIST. 6. THE LD. AR FIRSTLY CONTENDED FOR EXCLUSION OF A CCENTIA TECHNOLOGIES LIMITED FROM THE FINAL SET OF COMPARABLES. IT WAS SUBMITTED THAT DURING THE FINANCIAL YEAR 2007-08, THE AFORESAID ENTITY IS FUN CTIONALLY DIFFERENT. MORE THAN 80% OF THE TOTAL REVENUE IS DERIVED FROM MEDICAL T RANSCRIPTION AND CODING. THUS, SUCH ITES ACTIVITY IS FUNCTIONALLY NOT COMPAR ABLE. THE INSIGNIFICANT EMPLOYEE COSTS (15% OF TOTAL OPERATING COSTS) AGAIN ST 63% IN THE CASE OF THE ASSESSEE SUGGESTS THAT THE AFORESAID ENTITY HAS OUT SOURCED ITS WORK AND HAS NOT PROVIDED SERVICES BY ITSELF. FURTHER, THE REVENUE A ND PROFITABILITY OF THE ENTITY WAS AFFECTED BY EXTRA ORDINARY EVENTS LIKE MERGERS AND ACQUISITIONS. IT WAS ALSO SUBMITTED THAT TURNOVER OF ASSESSEE BEING MEAGER RS . 7.85 CRORE, THE COMPANY FAILED THE TURNOVER FILTER IN THE RANGE OF RS.1-50 CRORES APPLIED BY THE ASSESSEE. RELIANCE WERE PLACED UPON THE DECISIONS OF THE ITAT IN THE CASE OF (I) BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PVT. LTD. V S. ACIT IN ITA NO.2380/PN/2012, ORDER DATED 10.10.2014, (II) PTC S OFTWARE (INDIA) PVT. LTD. VS. DCIT IN ITA NO.336/PN/2014, ORDER DATED 31.10.2 014 AND (III) AMERIPRISE INDIA P. LTD. VS. ACIT REPORTED IN 44 CCH 504 (DELH I). WITH REFERENCE TO AFORESAID DECISIONS, IT WAS SUBMITTED THAT CO-ORDIN ATE BENCHES OF THE ITAT HAVE TAKEN A CONSISTENT VIEW THAT ACCENTIA TECHNOL OGIES LIMITED CANNOT BE TAKEN AS A GOOD COMPARABLE IN THE SIMILAR CIRCUMSTA NCES. 9 ITA NO.340/PN/2013 7. AS REGARDS EXCLUSION OF CORAL HUBS LIMITED THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE INCLUSION OF THIS ENTITY IS NOT JUSTIFIED AS ITS TURNOVER WAS MORE THAN RS.50 CRORE S WHICH IS THE FILTER APPLIED BY THE TAXPAYERS. IT WAS FURTHER SUBMITTED THAT TH E ENTITY IS FUNCTIONALLY DIFFERENT FOR COMPARISON AS IT IS ENGAGED IN MERE T RADING I.E. PURCHASE AND SALE OF PRODUCTS AND GOODS. IT WAS FURTHER SUBMITTED TH AT CORAL HUBS LIMITED IS ENGAGED IN E-PUBLISHING, DOCUMENT SCANNING, ETC. AC TIVITY THUS THE PRODUCTS ARE DIFFERENT. FURTHER, IT HAS OUTSOURCED MOST OF ITS BUSINESS WHEREAS THE ASSESSEE IS DEPENDENT ON ITS OWN PERSONNEL AND EMPLOYEES. TH E AR CANVASSED THAT THE ASSESSEE OPERATES IN DIFFERENT FIELD I.E. SOFTWARE CONSULTANCY SERVICES AND IT ENABLES SERVICES WHICH IS QUITE DIFFERENT FROM THE BUSINESS OF E-PUBLISHING ACTIVITY ETC.. THE LD. AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE EXCLUSION OF CORAL HUBS LIMITED FROM THE L IST OF COMPARABLE IS JUSTIFIED IN THE LIGHT OF THE ITAT DECISIONS IN THE CASE OF (I) CUMMINS TURBO TECHNOLOGIES LTD. VS. DDIT, (2015) 53 TAXMANN.COM 4 92 (PUNE TRIB.), (II) BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PVT. LT D. VS. ACIT IN ITA NO.2380/PN/2012, ORDER DATED 10.10.2014, (III) M/S FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA P. LTD. VS. DCIT IN ITA NO.1 018/HYD/2013, ORDER DATED 19.11.2014 AND (IV) PTC SOFTWARE (INDIA) PVT. LTD. VS. DCIT IN ITA NO.336/PN/2014, ORDER DATED 31.10.2014. IN ALL THE SE DECISIONS, CORAL HUBS LIMITED HAS BEEN REJECTED FOR BENCHMARKING PURPOSES . 8. TO CANVASS THE EXCLUSION OF MAPLE E-SOLUTIONS LT D. FROM THE LIST COMPARABLES, THE LD. AR SUBMITTED THAT THERE IS CON SIDERABLE DIFFERENCE IN PROFILE OF THE AFORESAID ENTITY QUA THAT OF ASSESSEE AND THEREFORE THE COMPARISON IS NOT PLAUSIBLE WITHOUT ADJUSTMENT FOR THE RISK PR OFILE. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ADVERTED OUR ATTENT ION TO THE PROFIT AND LOSS ACCOUNT OF THE AFORESAID ENTITY FOR THE CONTEMPORAN EOUS PERIOD AND SUBMITTED THAT MAPLE SHOULD BE REJECTED FOR THE PURPOSE OF DETERMINATION OF ARM'S LENGTH PRICE FOR THE REASON THAT IT DERIVES 50% OF THE TOTAL REVENUE FOR THE YEAR FROM TRADING IN IT PERIPHERALS AND IT SOFTWARE WHIC H IS NOT COMPARABLE WITH THE BUSINESS MODULE OF THE ASSESSEE. HE ALSO SUPPOR TED ITS PLEA FOR EXCLUSION ON THE GROUND THE EMPLOYEE COST IN MAPPLE IS AT NOM INAL PERCENTAGE OF 15.62% 10 ITA NO.340/PN/2013 QUA NEARLY 60% IN THE CASE OF PRESENT ASSESSEE REND ERING IT UN-COMPARABLE. HE NEXT SUBMITTED THAT NOTWITHSTANDING THE FACT THAT T HE ASSESSEE HIMSELF HAD SELECTED THIS CONCERN AS A COMPARABLE IN HIS SUBMIS SION IN THE COURSE OF PROCEEDINGS BEFORE THE TPO, THERE IS NO JUSTIFICATI ON FOR INCLUSION OF MAPPLE IN THE LIST OF COMPARABLES FOR THE PURPOSE OF DETERMIN ATION OF ARM'S LENGTH PRICE. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BP INDI A SERVICES (P.) LTD. VS. ACIT, (2015) 55 TAXMANN.COM 150 (MUMBAI TRIB.) TO SUBMIT THAT THE MAPLE E-SOLUTIONS LTD. WAS REJECTED FROM THE LIST OF GOOD COMPARABLE ON THE GROUND THAT THE EMPLOYEE COSTS IN MAPLE E-SOLUTIONS LTD. W ORKS OUT TO 15.62% AS AGAINST 48.85% IN THE CASE OF THE ASSESSEE. HE NEX T RELIED UPON THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF COGNIZANT TECHNOLOGY SERVICES (P.) LTD. VS. ACIT, 47 TAXMANN.COM 209 (HY DERABAD TRIB.) RELEVANT TO ASSESSMENT YEAR 2008-09 WHEREIN ALSO MAPLE WAS N OT CONSIDERED AS GOOD COMPARABLE ON SIMILAR CIRCUMSTANCES. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ON BEHALF OF THE REVENUE SUBMITTED THAT THE ASSESSING OFFICER HAS ARRIVED AT THE FINAL SET OF COMPARABLES AFTER CONSIDERING THE ELABORATE ORDER OF THE TPO AN D THE DRP IN THIS REGARD. HE SUBMITTED THAT THE ORDER OF THE TPO AS WELL AS T HE DRP IS WELL REASON AND NO INTERFERENCE IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE ASSESSEE IS ENGAGED IN THE SOFTWARE CONSULTANCY SERVICES AND IT ENABLED SERVICES. THE ASSESSEE SELECTED INTERNAL TNNM AS MOST APPROPRIATE METHOD IN ITS TP STUDY REPORT FOR THE FINANCIAL YEAR 2007-08 RELEVANT TO A SSESSMENT YEAR 2008-09. THE TPO REJECTED THE INTERNAL TNMM AND SELECTED EXTERNA L TNMM FOR THE DETERMINATION OF ARM'S LENGTH PRICE. LIST OF EXTER NAL COMPARABLES COMPRISING OF 9 INDEPENDENT ENTITIES WERE PROPOSED FOR DETERMI NATION OF ALP OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESS EE WITH ITS AE BASED ON ARITHMETIC MEAN OF PLI OF THESE INDEPENDENT ENTITIE S. THE DRP HAS BROADLY ACCEPTED THE ORDER OF THE TPO SUBJECT TO CERTAIN AD JUSTMENTS IN THE LIST OF COMPARABLES. IT IS THE CASE OF THE ASSESSEE THAT B ASED ON THE FAR ANALYSIS, 11 ITA NO.340/PN/2013 THERE IS NO JUSTIFICATION FOR INCLUSION OF THREE EN TITIES NAMELY (I) ACCENTIA TECHNOLOGIES LIMITED, (II) CORAL HUBS LIMITED AND ( III) MAPLE E-SOLUTIONS LIMITED FOR THE PURPOSE OF DETERMINATION OF PLI MAR GIN. IT IS FURTHER CASE OF THE ASSESSEE THE VARIANCE BETWEEN THE ARITHMETIC ME AN OF PLI VIS--VIS THAT OF ASSESSEE WILL BE WITHIN THE RANGE OF 5% VARIANCE AN D THEREFORE IN VIEW OF THE PROVISO TO SECTION 92C(2) OF THE ACT NO TRANSFER PR ICING ADJUSTMENT WILL BE REQUIRED IF HIS CONTENTIONS ARE ACCEPTED FOR EXCLUS ION OF THESE THREE COMPANIES. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IF ACCENTIA TECHNOLOGIES LIMITED AND CORAL HUBS LIMITED ARE REM OVED FROM THE LIST OF COMPARABLES, THE REVISED ARITHMETIC AVERAGE OF PLI WORKS OUT TO 11.10% WHEREAS IF MAPLE E-SOLUTIONS LIMITED IS ALSO DIRECT ED TO BE EXCLUDED, THE REVISED AVERAGE PLI WILL GO DOWN FURTHER TO 10.50%. THE AVERAGE PLI AS PER THE INTERNAL TNMM ADOPTED BY THE ASSESSEE AS NOTED IN DRAFT ASSESSMENT ORDER STANDS AT 6.50% AND THEREFORE THE DIFFERENCE BETWEE N PLI MARGIN WOULD BE LESS THAN +/- 5% ON SUCH EXCLUSION IN TERMS OF SECOND PR OVISO TO S. 92C (2). IN THIS BACKDROP, WE PROCEED TO ANALYSE THE PL EA RAISED BY THE ASSESSEE IN RESPECT OF THESE THREE ENTITIES. 10.1 ON CONSIDERATION OF RIVAL SUBMISSIONS, ORDER O F THE DRP/TPO/AO AND ALSO JUDICIAL PRECEDENTS, WE FIND THAT THERE IS CON SIDERATION MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR EXCLUSION OF ACCENTI A FROM THE LIST OF COMPARABLES. THE RELEVANT OBSERVATION OF PUNE ITAT IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. (SUPRA) FOR THE EXCLUSIO N OF ACCENTIA TECHNOLOGIES LIMITED IS EXTRACTED HEREUNDER :- 47. THE NEXT OBJECTION OF THE LEARNED AUTHORIZED R EPRESENTATIVE FOR THE ASSESSEE WAS WITH REGARD TO THE INCLUSION OF M/S. ACCENTIA T ECHNOLOGIES LTD. WHICH ADMITTEDLY WAS ENGAGED IN DEVELOPING ITS OWN SOFTWA RE PRODUCTS AND WAS RENDERING MEDICAL TRANSCRIPTION SERVICES. FURTHER, THE SAID COMPANY DURING THE YEAR UNDER CONSIDERATION HAD MADE CERTAIN ACQUISITIONS WHICH I N TURN AFFECTED THE MARGINS OF THE YEAR OF THE ACQUISITION. WE FIND THAT HYDERABA D BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. (SUPRA) HAD REJECTED ACCENTIA TECHNOLOGIES LTD. FOR HAVING EXTRA-ORDINAR Y CIRCUMSTANCES I.E. AMALGAMATION. FOLLOWING THE PARITY OF REASONING AS ADOPTED BY THE HYDERABAD BENCH OF THE TRIBUNAL, WE HOLD THAT THE SAID COMPAN Y HAD DIFFERENT FUNCTIONAL PROFILE AS COMPARED TO THE ASSESSEE, WHICH IN TURN EXPLAINE D THE ABNORMALLY HIGH PROFIT MARGINS EARNED BY THE SAID COMPANY AS COMPARED TO T HE ASSESSEE. ACCORDINGLY, WE ACCEPT THE PLEA OF THE ASSESSEE AND HOLD THAT THE S AID COMPANY IS NOT TO BE USED AS COMPARABLE IN ITES SEGMENTS OF THE ASSESSEE. 12 ITA NO.340/PN/2013 10.2 SIMILARLY, WE FIND THAT HONBLE DELHI HIGH COU RT IN AMERIPRISE INDIA (SUPRA) OBSERVED THAT DUE TO CORPORATE ACTION OF ME RGER, SEGMENTAL FIGURES ARE NOT AVAILABLE AND DUE TO AVAILABILITY OF ENTITY LEV EL FIGURES ALONE, IT CEASES TO BE A GOOD COMPARABLE. LIKEWISE, PUNE BENCH OF ITAT IN THE CASE OF BNY MELLON INTERNATIONAL OPERATIONS (INDIA ) PVT. LTD. (SUPRA) RELIED UPON BY THE ASSESSEE HAS AFTER CONSIDERATION OF OTHER DECISIONS OF TRIBU NAL HELD THAT EXTRAORDINARY EVENTS LIKE MERGER AND ACQUISITION IN THIS ENTITY H AS RENDERED IT TO BE UNWORTHY FOR COMPARISON PURPOSES. FOLLOWING PARITY AND KEEP ING WITH THE DECISION OF COORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW THA T ACCENTIA DESERVES TO BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES FOR DET ERMINATION OF PLI AND IN TURN ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIO NS. WE DIRECT ACCORDINGLY. 10.3 WE ALSO FIND JUSTIFICATION IN EXCLUSION OF CO RAL HUBS FROM THE FINAL LIST OF COMPARABLES OWING TO THE FACT THAT CORALS WORK IS SUBSTANTIALLY OUTSOURCED AND THUS BUSINESS MODULE HAS ACQUIRED A DIFFERENT C HARACTER ON THE TOUCHSTONE OF FAR ANALYSIS. THE RELEVANT OBSERVATION OF PUNE ITAT IN THE CASE OF PTC SOFTWARE (INDIA) PVT. LTD. (SUPRA) FOR THE EXCLUSIO N OF CORAL HUBS (EARLIER KNOWN AS M/S VISHAL INFORMATION TECHNOLOGIES LTD.) IS EXTRACTED HEREUNDER :- 45. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. IN THE TP STUDY CARRIED OUT BY THE TPO IN THE ITES SEGMENTS, FRESH SEARCH CRITERIA WERE APPLIED BY THE TPO AND LIST OF COMPARABLES WHICH WERE NOT SELE CTED BY THE ASSESSEE WERE PICKED UP IN THE TP STUDY AND THE MARGINS OF THE SA ID COMPARABLES WERE APPLIED TO DETERMINE THE ARMS LENGTH PRICE OF THE TRANSACTION S OF THE ASSESSEE IN ITES SEGMENTS. THE ASSESSEE WAS AGGRIEVED BY THE SELECT ION OF THE SAID COMPARABLES AND THE PLEA OF THE ASSESSEE WAS THAT IN CASE SAID COMP ARABLES WERE NOT INCLUDED IN THE TP STUDY, THE MARGINS SHOWN BY THE ASSESSEE WOULD B E AT ARMS LENGTH. THE FIRST COMPARABLE REFERRED TO BY THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE WAS M/S. VISHAL INFORMATION TECHNOLOGIES LTD. THE SAID COMPANY WAS PROVIDING IT ENABLED SERVICES AND WAS ALSO ENGAGED IN OTHER DIVE RSIFIED ACTIVITIES. FURTHER, IT HAS OUTSOURCED ITS SERVICES TO THIRD PARTY VENDOR AND A CTED AS INTERMEDIARY BETWEEN THE FINAL CUSTOMER AND THE VENDOR. THE ASSESSEE ON THE OTHER HAND WAS ENGAGED IN THE RUNNING OF A CALL CENTRE AND WAS PROVIDING TECHNICA L SUPPORT TO ITS AES. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE RELATING T O ASSESSMENT YEAR 2006-07 IN ITA NO.1346/PN/2010 AND IN ASSESSMENT YEAR 2007-08 IN I TA NO.1605/PN/2011 HAD EXCLUDED THE SAID COMPARABLES OBSERVING AS UNDER: 30. THE NEXT POINT RAISED BY THE ASSESSEE IS AGAIN ST THE INCLUSION OF VISHAL INFORMATION TECHNOLOGIES LTD., APPEARING AT ITEM (10) IN THE TABULATION IN PARA 25 AS A COMPARABLE CASE. THE TP O HAS DISCUSSED THE ISSUE IN PARA 6.9.6. OF THE ORDER. AS PER THE TPO, THE SAID CONCERN IS FUNCTIONALLY COMPARABLE TO THE IT-ENABLED SERVICES SEGMENT OF THE ASSESSEE AND FOR THAT REASON, THE SAID CONCERN HAS BEEN INCL UDED AS A COMPARABLE FOR THE PURPOSES OF COMPARABILITY ANALYSIS. IN THIS CO NNECTION, THE PLEA SET UP BY THE ASSESSEE IS THAT THE SAID CONCERN IS ENGAGED IN NOT ONLY IT-ENABLED 13 ITA NO.340/PN/2013 SERVICES, BUT ALSO IN PROVIDING QUALITY PRODUCTS AN D IN THE CREATION OF ANIMATED FILMS AND BOOKS. IT HAS ALSO BEEN ASCERTA INED BY REFERRING TO THE ANNUAL REPORT OF THE SAID CONCERN THAT IT IS ENGAGE D IN PROVIDING AGENCY SERVICES BY WAY OF OUTSOURCING THE SERVICES TO THIR D PARTY VENDORS AND ACTING AS AN INTERMEDIARY BETWEEN THE FINAL CUSTOMER AND T HE VENDOR. THE ASSESSEE FURNISHED DETAILED SUBMISSIONS IN THIS REGARD BEFOR E THE LOWER AUTHORITIES, COPIES OF WHICH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 420.8 TO 420.31. BY REFERRING TO THE WRITTEN SUBMISSIONS, IT IS ALSO SOUGHT TO BE POINTED OUT THAT THE INTERMEDIARY FUNCTIONS PERFORM ED BY THE SAID CONCERN CAN BE COMPARED TO THAT OF A DISTRIBUTOR WHICH TAKE S TITLE TO SERVICE/PRODUCT FOR RESALE TO THE CUSTOMERS. THE AFORESAID ASSERTI ON IS SOUGHT TO BE SUBSTANTIATED BY THE DETAILS OF PAYMENTS MADE BY TH E SAID CONCERN FOR DATA ENTRY AND VENDOR PAYMENTS, PERSONNEL COSTS AND SALE S. IT IS, THEREFORE, CONTENDED THAT THE SAID CONCERN IS FUNCTIONALLY DIS SIMILAR TO THAT OF THE IT-ENABLED SERVICES SEGMENT OF THE ASSESSEE. IT HA S ALSO BEEN ARGUED THAT THE SAID CONCERN HAS EARNED SUPERNORMAL PROFITS AS HIGH AS 59.19% AND THEREFORE, THE SAME IS NOT INCLUDIBLE IN THE LIST O F COMPARABLES SO AS TO AVOID SKEWING OF THE COMPARABILITY ANALYSIS. ON THE OTHER HAND, THE STAND OF THE REVENUE AS BROUGHT OUT BY THE TPO IN PARA 6.9.6. OF THE ORDER IS TO THE EFFECT THAT THE SAID CONCERN BEING CATEGORIZED AS AN IT-EN ABLED SERVICES CONCERN, THE SAME IS LIABLE TO BE INCLUDED. 31. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THIS ASPECT. AT THE OUTSET, WE MAY REFER TO PAGE 810 OF THE PAPER B OOK, WHEREIN THE NOTES TO ACCOUNTS FOR THE YEAR ENDED 31.3.2007 OF THE SAID C ONCERN HAVE BEEN PLACED. AS PER THE AVAILABLE INFORMATION, THE SAID CONCERN HAS RELATED PARTY TRANSACTIONS AS REPORTED BY THE CONCERN AT PARA 7 O F THE SAID NOTES AT 86.92%, WHICH BREACHES THE RPT FILTER. FURTHERMOR E, THE FUNCTIONAL PROFILE OF THE SAID CONCERN BROUGHT OUT BY THE ASSESSEE ALS O REVEALS DIFFERENTIATION IN THE ACTIVITY PROFILE. THE TPO, IN OUR VIEW, HAS N OT APPRECIATED THE QUALITATIVE DIFFERENCE IN THE FUNCTIONS PERFORMED B Y THE SAID CONCERN AS SOUGHT OUT TO BE BROUGHT OUT BY THE ASSESSEE. CONS IDERING THE AFORESAID, WE THEREFORE, FIND THAT THE ASSESSEE WAS JUSTIFIED IN ASCERTAINING THAT THE SAID CONCERN BE EXCLUDED FROM THE LIST OF COMPARABLES FO R THE REASONS CANVASSED. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 46. THE TRIBUNAL IN THE ASSESSEES OWN CASE HAD HEL D THAT THE SAID CONCERN WAS FOUND TO BE OPERATING IN DIFFERENT FUNCTIONAL ENVIR ONMENT AND THE SAME WAS EXCLUDED FOR THE PURPOSE OF COMPARABILITY ANALYSIS. FOLLOWI NG THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2006-07 AND 2007-08 (SUPRA), WE UPHOLD THE PLEA OF THE ASSESSEE IN EXCLUDING THE MARGINS OF THE SAID CONCERN M/S. VISHAL TECHNOLOGIES LTD. 10.4 SIMILAR VIEW HAS BEEN TAKEN IN THE CASE LAWS R ELIED UPON THE ASSESSEE AS NOTED ABOVE. IN THE LIGHT OF THE JUDICIAL PRECEDENT S AVAILABLE FOR THIS ENTITY, WE DIRECT EXCLUSION OF CORAL HUBS FOR COMPARISON OF GROSS PROFIT MARGIN/PLI. 10.5 AS REGARDS INCLUSION OF MAPPLE AGITATED BY ASSESSEE, WE NOTICE THAT WHILE THE BUSINESS MODEL OF THE ASSESSEE IS HIGHLY EMPLOYEE INTENSIVE, THE ENTITY NAMELY MAPLE OPERATES ON A VERY LOW EMPLOYEE BASE AND MAINLY OUTSOURCES ITS NEEDS. FOR SIMILAR REASONINGS, CO-OR DINATE BENCH OF TRIBUNAL IN THE CASE OF BP INDIA SERVICES (SUPRA) HAS CONCLUDED THAT MAPPLE CANNOT BE 14 ITA NO.340/PN/2013 TREATED AS GOOD COMPARABLE IN THE CIRCUMSTANCES. T HE RELEVANT OBSERVATION OF MUMBAI ITAT IN THE CASE OF BP INDIA SERVICES (P.) L TD. (SUPRA) FOR THE EXCLUSION OF MAPLE E-SOLUTIONS LTD. IS EXTRACTED HEREUNDER :- 23. LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF MAP LE E-SOLUTION LTD. ON THE PLEA THAT SINCE THE DIRECTORS OF THIS COMPANY WERE FOUND TO BE INVOLVED IN FRAUDULENT ACTIVITIES, THEREFORE, THE FINANCIALS OF THIS COMPA NY CANNOT BE RELIED UPON. RELIANCE WAS PLACED ON THE DECISION OF TRIBUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES (P.) LTD. V. ASSTT. DIT (INTERNATIONAL TAXATION) [2 013] 141 ITD 492/31 TAXMANN.COM 227 (MUM. TRIB.) AND STREAM INTERNATIONAL SERVICE S (P.) LTD.S CASE (SUPRA). THE LD. AR ALSO PLACED RELIANCE ON THE DECISION OF HYDE RABAD BENCH OF THE TRIBUNAL IN THE CASE OF BRIGADE GLOBAL SERVICES (P.) LTD. V. IT O [2013] 143 ITD 59/33 TAXMANN.COM 618 (HYD. TRIB.). 24. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFU LLY PERUSED THE RECORD. WE FOUND THAT EMPLOYEES' COST TO SALES IN CASE OF MAPL E E-SOLUTION LTD. WORKS OUT TO 15.62% AS AGAINST ASSESSEE'S RATIO OF 48.85%. FURTH ERMORE, IN VIEW OF THE JUDICIAL PRONOUNCEMENTS, WE ACCEPT THE CONTENTION OF THE ASS ESSEE THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE. ACCORDINGLY, WE DIRECT TH E TPO TO EXCLUDE MAPLE E- SOLUTION LTD. FROM THE LIST OF COMPARABLES. 10.6 FOLLOWING PARITY, WE HOLD THAT MAPPLE ALSO NEE DS TO EXCLUDED FROM THE LIST OF COMPARABLE. 11. SINCE, THE GRIEVANCE OF THE ASSESSEE STANDS RED RESSED ON ADJUDICATION IN FAVOUR OF THE ASSESSEE IN RELATION TO THREE ENTITIE S (SUPRA), OTHER GROUNDS RAISED ARE RENDERED INFRUCTUOUS AND DOES NOT REQUIRE SEPAR ATE ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF APRIL, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 15 TH APRIL, 2016. 15 ITA NO.340/PN/2013 % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE DRP, PUNE; 4) THE DIT (INTERNATIONAL TAXATION), PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY/ / $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE