M/s. SunGard Solutions (India) Pvt. Ltd., Pune V. ADIT (Int. Tax-I), Pune

ITA 370/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2920 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Related party transaction; Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 370/PN/2013 $& ' !(' / ASSESSMENT YEAR : 2005-06 M/S. SUNGARD SOLUTIONS (INDIA) PVT. LTD., [FORMERLY KNOWN AS AUTOMATED SECURITIES CLEARANCE (INDIA)], WESTEND CENTER ONE, SURVEY NO. 169/1, SECTOR-II, AUNDH, PUNE-411007 PAN : AAACE7476K ....... / APPELLANT )& / V/S. ASSISTANT DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION-I, PUNE / RESPONDENT ASSESSEE BY : SHRI HARSH R. SHAH REVENUE BY : SHRI S.K. RASTOGI / DATE OF HEARING : 18-11-2015 / DATE OF PRONOUNCEMENT : 18-01-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE DATED 07 -12-2012 FOR THE ASSESSMENT YEAR 2005-06. 2. IN APPEAL, THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING AS MANY A S 17 2 ITA NO. 370/PN/2013 A.Y. 2005-06 GROUNDS (I.E. FROM 1A TO 1Q). HOWEVER, DURING THE COURSE O F SUBMISSIONS THE LD. AR STATED THAT HE WILL BE MAKING SUBMISS IONS ONLY ON GROUND NOS. 1B, 1E AND 1F. THE LD. AR STATED AT THE BAR THAT HE IS NOT PRESSING THE OTHER GROUNDS RAISED IN APPEAL. THE GR OUNDS ON WHICH THE SUBMISSIONS WERE MADE BY THE LD. AR ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ADDITIONAL COMMISSIONER OF INCOME-TAX (TP)-I , PUNE (LD. TPO) AND THE LD. AO AND THE LEARNED COMMISSIONER O F INCOME- TAX (APPEALS) [LD. CIT(A)], ERRED IN : B. IN CONFIRMING REJECTION OF COMPARABLE COMPANIES SELECTED IN THE TP STUDY FURNISHED BY THE APPELLANT MERELY BECA USE COMPANIES HAD INCURRED LOSSES; E. CHERRY PICKING THE HIGH MARGIN COMPANIES AND REJ ECTING THE LOW MARGIN COMPANIES AND INCONSISTENTLY APPLYING TH E BENCHMARKING CRITERIA; F. APPLYING THE BENCHMARKING CRITERIA INCONSISTENTL Y, AS THE COMPANIES SELECTED BY THE LD. TPO ARE LIABLE TO BE REJECTED SUING THE VERY SAME CRITERIA USED BY THE LD. TPO FO R REJECTING OTHER COMPARABLES; EXCEPT THE ABOVE THREE GROUNDS, THE REMAINING GROUNDS IN THE APPEAL ARE DISMISSED AS NOT PRESSED. 3. THE FACTS OF THE CASE AS EMANATING FROM THE RECORDS ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AE SUNGARD TRADING SYSTEMS, USA. THE ASSESSEE IS A BRANCH OF SUNGARD TRADING SYSTEMS, WHICH IS ONE OF THE 72 SUBSIDIARIES OF SUNGARD DATA SYSTEMS INC., A GLOBAL LEADE R IN INTEGRATED IT AND E-PROCESSING SOLUTIONS FOR THE FINANCIAL S ERVICES INDUSTRY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A SSESSMENT YEAR 2005-06 ON 31-10-2005 DECLARING TOTAL INCOME OF ` 34,38,660/-. 3 ITA NO. 370/PN/2013 A.Y. 2005-06 THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 08-08-2 007. SINCE, THE ASSESSEE HAD UNDERTAKEN INTERNATIONAL TRANSACTIONS WITH IT S AE, THE CASE OF THE ASSESSEE WAS REFERRED TO TRANSFER PRICING OFFIC ER (TPO)-I, PUNE ON 10-12-2007. THE ASSESSEE ADOPTED TRANSACTION AL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR BENCH MARKING ITS INTERNATIONAL TRANSACTIONS AMOUNTING TO ` 17,53,83,201/-. THE OPERATING PROFIT/OPERATING COST OF THE ASSESSEE FOR THE R ELEVANT PERIOD WAS COMPUTED AT 13.67%. THE ASSESSEE HAD SELECTED 20 COMPANIES AS COMPARABLES AND ARRIVED AT WEIGHTED MEAN OF COMPARABLE C OMPANIES AT 10.71%. THE TPO WAS NOT SATISFIED WITH THE TP STUDY AND THE COMPARABLES SELECTED BY THE ASSESSEE. THE TPO ACCEPTE D ONLY 8 COMPANIES SELECTED BY ASSESSEE AS COMPARABLES AND ADDE D 3 MORE COMPANIES AS COMPARABLES TO ARRIVE AT THE SET OF 11 COM PARABLES. AFTER GRANTING CAPITAL WORKING ADJUSTMENT THE ARITHMETICAL MEAN OF FINAL SET OF COMPARABLES WAS WORKED OUT AT 24.31%. THE TPO VIDE O RDER DATED 30-05-2008 MADE ADJUSTMENT OF ` 1,86,60,773/- TO THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH ITS AE. T HE ASSESSING OFFICER INCORPORATED THE ADJUSTMENT IN THE ASSESSMENT OR DER PASSED U/S. 143(3) DATED 23-12-2008. AGGRIEVED BY THE UPWARD ADJUSTMENT MADE BY THE TPO A ND THE CONSEQUENTIAL ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMIS SIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER PARTLY ACCEPT ED THE APPEAL OF THE ASSESSEE. STILL AGGRIEVED THE ASSESSEE IS IN SECON D APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE COMMISSIONER OF INC OME TAX (APPEALS). 4 ITA NO. 370/PN/2013 A.Y. 2005-06 4. SHRI HARSH R. SHAH APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE TPO HAS REJECTED THE COMPARABLES IN THE TP STUDY IN AN ARBITRARY AND UNJUSTIFIED MANNER. THE TPO HAS REJECT ED SOME OF THE COMPARABLES MERELY ON THE GROUND THAT THE COMPANIES H AVE INCURRED LOSSES. THE TPO REJECTED : (I) ASTRO BIO SYSTEMS LIMITED, (II) MAARS SOFTWARE INTERNATIONAL LIMITED AND (III) MEGASOFT LTD., ONLY FOR THE REASON THAT THEY HAVE INCURRED LOSSES IN THE YEAR UNDE R CONSIDERATION. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE FINDINGS OF THE TPO WITHOUT APPRECIATING THE FACTS. FOR APPLYING T HE FILTER TO REJECT LOSS MAKING COMPANIES, THE TRIBUNAL IN THE CASE OF M /S. BOBST INDIA PRIVATE LIMITED VS. DY. CIT IN ITA NO. 1380/PN/2010 FO R THE ASSESSMENT YEAR 2006-07 DECIDED ON 09-10-2014 AND IN THE CASE OF GOLDMAN SACHS (INDIA) SECURITIES PRIVATE LIMITED VS. ASSTT. COMMISSIONER OF INCOME TAX (OSD) IN ITA NO. 7724/MUM/2011 FOR THE ASSESSMENT YEAR 2007-08 DECIDED ON 13-01-2013, HAS HE LD THAT A COMPANY MAKING PERSISTENT LOSS FOR PAST 3 YEARS IS NOT A GOOD COMPARABLE. IN THE PRESENT CASE, THE THREE COMPANIES EXCLUDED BY TPO ON THE GROUND OF LOSS MAKING ENTITIES, HAVE LOSSES ONLY IN ONE YEAR I.E. 2004-05. THUS, IN VIEW OF THE AFORESAID DECISIONS, THE EXCLUS ION OF AFORESAID 3 COMPANIES FROM THE LIST OF COMPARABLES ON THE G ROUND OF LOSS MAKING ENTITIES IS UNJUSTIFIED. THE LD. AR SUBMITTED THAT ALL THE 3 COMPANIES SHOULD BE INCLUDED IN THE LIST OF COMPARABLES. 4.1 THE LD. AR FURTHER SUBMITTED THAT THE TPO HAS ADOPT ED CHERRY PICKING IN SELECTING HIGH MARGIN COMPANIES AS COMPARABLES AN D REJECTING THE LOW MARGIN COMPANIES. THE TPO ON THE ONE HAND HAS REJECTED THE LOSS MAKING COMPANIES AND ON THE OTHER HA ND HAS RETAINED IN THE LIST OF COMPARABLE M/S. V M F SOFT TECH LTD. WHICH IS HAVING 5 ITA NO. 370/PN/2013 A.Y. 2005-06 ABNORMALLY HIGH PROFIT MARGIN OF 35.70%. THE TRIBUNAL IN THE CASE OF BINDVIEW INDIA PVT. LTD. VS. DY. CIT IN ITA NO. 1501/PN/2011 FOR THE ASSESSMENT YEAR 2005-06 DECIDED ON 26-06-2014 HAS EX CLUDED THE COMPANY FROM THE LIST OF COMPARABLES ONLY ON THE GROUND THAT IF LOSS MAKING COMPANY IS EXCLUDED, THEN THE SUPER PROFIT MAKING C OMPANY SHOULD ALSO BE EXCLUDED. 4.2 THE LD. AR CONTENDED THAT THE TPO HAS INCLUDED COMP UCOM SOFTWARE LTD. IN THE LIST OF COMPARABLES. THE TPO HAS APP LIED A RELATED PARTY TRANSACTIONS (RPT) FILTER OF 25% TO REJECT COMPANIES HAVING SUBSTANTIAL RELATED PARTY TRANSACTIONS. IN THE CASE OF COMPUCOM SOFTWARE LTD. THE RELATED PARTY TRANSACTIONS ARE MORE THAN 25%. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE FINDINGS OF THE TPO ON THE GROUND THAT SINCE THE ANNUAL R EPORT OF COMPUCOM SOFTWARE LTD. WAS NOT FILED BY THE ASSESSEE, TH E CLAIM OF THE ASSESSEE COULD NOT BE VERIFIED. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD FURNISHED THE EXTRACT OF THE ANNUAL REPORT FOR THE RELEVANT YEAR BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE LETTER DATED 19- 11-2009 TO SUBSTANTIATE ITS ARGUMENT THAT THE RPT OF T HE SAID COMPANY IS MORE THAN 25%. THE LD. AR HAS FILED SIMILAR EXTRACT OF ANN UAL REPORT FOR THE FINANCIAL YEAR 2004-05 BEFORE THE TRIBUNAL AT PAGE 17 OF THE PAPER BOOK. THE LD. AR FURTHER SUBMITTED THAT THE TRIBU NAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 IN IT A NO. 122/PN/2011 DECIDED ON 30-09-2014 AND IN THE ASSESSME NT YEAR 2007-08 IN ITA NO. 1670/PN/2011 DECIDED ON 30-01-201 5 HAS DIRECTED TO EXCLUDE COMPUCOM SOFTWARE LTD. FROM THE LIST OF COMPA RABLES, AS THE RELATED PARTY TRANSACTIONS WAS MORE THAN 25%. THE LD. AR FURTHER SUBMITTED THAT IF THE COMPUCOM SOFTWARE LTD. IS EXCLUDED FR OM THE LIST 6 ITA NO. 370/PN/2013 A.Y. 2005-06 OF COMPARABLES, THE ARITHMETICAL MEAN OF THE ASSESSEE COM PANY WILL FALL WITHIN 5% MARGIN. 5. ON THE OTHER HAND SHRI S.K. RASTOGI REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS). THE LD. DR SUBMITTED THAT THE TPO HAS RIGHTLY R EJECTED ASTRO BIO SYSTEMS LIMITED, MAARS SOFTWARE INTERNATIONAL LIMITED A ND MEGASOFT LTD. AS COMPARABLES ENTITIES AS ALL THE THREE COM PANIES WERE LOSS MAKING COMPANIES. AS FAR AS EXCLUSION OF COMPUCOM SOFT WARE LTD. ON THE BASIS OF HIGHER RPT IS CONCERNED, THE ASSESS EE HAD NOT BROUGHT ON RECORD THE NECESSARY DOCUMENTS BEFORE THE AUTHORITIES BELOW TO SHOW THAT THE SAID COMPANY IS HAVING RELATED PA RTY TRANSACTIONS GREATER THAN 25%. THE LD. DR PRAYED FOR DIS MISSING THE APPEAL OF THE ASSESSEE AND UPHOLDING THE ORDER OF THE CO MMISSIONER OF INCOME TAX (APPEALS). 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE FIRST ISSUE RAISED BY THE ASSESSE E BEFORE US IS THE REJECTION OF COMPARABLES BY THE TPO MERELY ON THE GROUND THAT THE COMPARABLE COMPANIES HAVE INCURRED LOSSES. THE LD. AR HAS SUBMITTED THAT ASTRO BIO SYSTEMS LIMITED, MAARS SOFTWARE INTERNATIO NAL LIMITED AND MEGASOFT LTD. HAVE INCURRED LOSSES ONLY IN ONE YEAR. THE LOSS MAKING COMPANY SHALL BE CONSIDERED AS BAD COMPARABLE ONL Y IF IT IS HAVING CONSISTENT LOSS FOR THE THREE YEARS. THE RELIANCE HAS BEE N PLACED ON THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/ S. 7 ITA NO. 370/PN/2013 A.Y. 2005-06 BOBST INDIA PRIVATE LIMITED VS. DY. CIT (SUPRA). THE RELEVA NT EXTRACT OF THE FINDINGS OF THE CO-ORDINATE BENCH ON THIS ISSUE ARE AS UNDER: 5.3 WE ALSO FIND THAT ITAT, PUNE A BENCH IN THE CASE OF CUMMINS TURBO TECHNOLOGIES LIMITED VS. DDIT IN ITA NO.118/P N/2011 FOR A.Y. 2006-07 HELD THAT SOME OF THE COMPARABLES FOR THE P URPOSE OF PLI ADOPTED BY THE ASSESSEE WAS SHOWING LOSS, BUT BURDE N WAS ON TPO TO PROVE WHERE THOSE COMPANIES WERE CONSISTENTLY LOSS MAKING COMPANIES. MOREOVER, EXCEPT UNSUPPORTED REASONING, NO DATA WAS BROUGHT ON RECORD BY THE TPO FOR EXCLUDING COMPARABLES SELECTED BY TH E ASSESSEE IN TRANSFER PRICING STUDY. THEREFORE, THE TRIBUNAL HEL D THAT NO JUSTIFICATION TO ADJUSTMENT MADE U/S.92CA(3) OF THE ACT AND DIRECTED TO DELETE THE SAME. 5.4 FURTHER, WE FIND IN THE CASE OF GOLDMAN SACHS ( INDIA) SECURITIES PVT. LTD. VS. ACIT, WHICH HAS BEEN DECIDED BY ITAT, MUMB AI K BENCH, WHEREIN THE TPO REJECTED CAPITAL TRUST AS COMPARABL E BECAUSE OF TWO OUT OF LAST THREE YEARS TAKEN INTO CONSIDERATION. CAPIT AL TRUST WAS IN THE RED AND NOT BECAUSE THE NATURE OF BUSINESS HAD ANY VARI ANCE WITH THAT OF THE ASSESSEE. THE TRIBUNAL LOOKED INTO THE BUSINESS SEGMENT OF CAPITAL TRUST AND FOUND THAT IN THE FOREIGN CONSULTANCY SEG MENT WITH WHICH THE BENCH WAS CONCERNED IN THE YEAR 2004-05, IT HAD OPE RATIVE PROFIT / OPERATIVE COST AT 27.25%. SINCE THE NATURE OF SERVI CES RENDERED BY COMPARABLE WERE EXACTLY ON SIMILAR LINES AS THAT OF THE ASSESSEE, THOUGH, DURING THE YEAR, IT WAS IN THE LOSS COULD NOT BE DI SQUALIFIED AS NON- LEGITIMATE COMPARABLE. THE TRIBUNAL DREW STRENGTH F ROM BRIGADE GLOBAL SERVICES (SUPRA) FOR REACHING THIS CONCLUSION AND H ELD THAT THE ASSESSEE HAD RIGHTLY TAKEN CAPITAL TRUST AS VALID COMPARABLE AND THE REVENUE AUTHORITIES HAVE ERRED IN EXCLUDING THE SAME. A SIM ILAR VIEW HAS BEEN TAKEN BY ITAT, MUMBAI K BENCH IN THE CASE OF TEMA SEK HOLDINGS ADVISORS VS. DCIT. IN SUM AND SUBSTANCE, ALL THE AB OVE CASES IS THAT THE COMPANY MAKING PERSISTENT LOSS FOR PAST 3 YEARS IS NOT GOOD COMPARABLE. ACCORDING TO US, WHEN LOSS MAKING COMPANY HAS BEEN SELECTED FOR COMPARISON IN TP STUDY FOR NECESSARY, WHICH IS PROF IT MAKING ONE, THERE IS A NEED FOR MORE ATTENTION QUA THE CONDITIONS PRE SCRIBED IN CLAUSE (A) TO (D) OF RULE 10B(2) OF IT RULES, 1962 FOR AN ULTIMAT E JUDGMENT OF COMPARABILITY OF IMPUGNED TRANSACTION. SO, THE PERS ISTENT LOSS MAKING MEANS CONTINUOUS LOSS MAKING FOR MORE THAN 3 YEARS BUT IN THE CASE BEFORE US I.E. STOVEC HAS EARNED A MARGIN OF 2.39% IN COMPARABLE SEGMENT IN F.Y. 2003-04. HENCE, IT COULD NOT BE CON SIDERED AS LOSS MAKING, SO THE SAME SHOULD BE EXCLUDED FOR COMPUTING OPERA TIVE MARGIN OF COMPARABLE COMPANIES FOR ARRIVING AT ALP IN RELA TION TO INTERNATIONAL TRANSACTIONS PERTAINING TO EOU OPERATIONS. THE ASSE SSING OFFICER IS DIRECTED ACCORDINGLY. THE REVENUE HAS NOT CONTROVERTED THE FACT THAT THE A FORESAID THREE COMPARABLES HAVE INCURRED LOSSES ONLY IN THE ONE YEAR. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, WE H OLD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHO LDING THE 8 ITA NO. 370/PN/2013 A.Y. 2005-06 FINDINGS OF THE TPO IN REJECTING THE ASTRO BIO SYSTEMS LIMIT ED, MAARS SOFTWARE INTERNATIONAL LIMITED AND MEGASOFT LTD. ONLY ON T HE GROUND THAT THE SAID COMPANIES HAVE INCURRED LOSSES IN THE COM PARABLE YEAR OR IN THE YEAR UNDER CONSIDERATION. WE ARE OF THE CONSIDERE D VIEW THAT THE AFORESAID THREE COMPANIES SHOULD NOT HAVE BEEN EXCLUDED FROM THE LIST OF COMPARABLES FOR ARRIVING AT ALP IN RELATION TO INTERNATIO NAL TRANSACTIONS. WE REMIT THIS ISSUE BACK TO THE FILE OF ASSE SSING OFFICER TO INCLUDE THE ABOVE MENTIONED THREE COMPANIES IN THE LIST OF COMPARABLE ENTITIES AND THEREAFTER WORK OUT THE WEIGHTED AVERAGE M EAN OF THE COMPARABLES. THIS GROUND OF APPEAL OF THE ASSESSEE IS ACC ORDINGLY ACCEPTED. 7. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITH REGA RD TO CHERRY PICKING OF HIGH MARGIN COMPANIES. THE TPO IN THE FINAL LIST OF COMPARABLE HAS RETAINED M/S. V M F SOFT TECH LTD. WHICH IS HAVING PROFIT MARGIN OF 35.70%. ON THE ONE HAND THE TPO HAS RE JECTED LOSS MAKING COMPANIES AND ON THE OTHER HAND HE HAS RETAINED A COMPARABLE HAVING SUPER PROFITS. THE TPO SHOULD EITHER HA VE REJECTED BOTH THE COMPARABLES OR INCLUDED BOTH THE EXTREME COMP ARABLE IN THE LIST OF COMPARABLES. SINCE, WE HAVE DIRECTED THE ASSESSING OFFICER TO INCLUDE THE LOSS MAKING COMPANIES IN THE LIST OF COMPARABLES , M/S. V M F SOFT TECH LTD. CAN BE RETAINED IN THE SAME LIST, ACCORDI NGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 8. THE NEXT ISSUE ON WHICH THE ASSESSEE HAS ASSAILED TH E FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IS WITH RESPECT TO INC LUSION OF COMPUCOM SOFTWARE LTD. IN THE FINAL LIST OF COMPARABLES. T HE TPO APPLIED RPT FILTER OF 25% TO REJECT COMPANIES HAVING SUBSTA NTIAL RELATED 9 ITA NO. 370/PN/2013 A.Y. 2005-06 PARTY TRANSACTIONS. THE ASSESSEE HAS PLACED ON RECORD THE EXTRACT OF ANNUAL REPORT OF THE SAID COMPANY FOR THE FINANCIAL YEAR 20 04-05 TO SHOW THAT THE COMPUCOM SOFTWARE LTD. IS HAVING RELATED PARTY TRANSACTIONS OF MORE THAN 25%. THE LD. AR HAS POINTED O UT THAT IN ASSESSEES OWN CASE IN THE SUBSEQUENT ASSESSMENT YEA RS I.E. ASSESSMENT YEAR 2006-07 AND ASSESSMENT YEAR 2007-08 , THE TRIBUNAL HAD EXCLUDED COMPUCOM SOFTWARE LTD. FROM THE LIST OF COMP ARABLES FOR SIMILAR REASONS. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 122/PN/2011 FOR ASSESSMENT YEAR 2006-07 HAS C ONSIDERED THIS ISSUE AND HAS HELD THAT COMPUCOM SOFTWARE LTD. BE EXCLU DED FROM THE LIST OF COMPARABLES AS IT IS HAVING RELATED PARTY TRANSACTIO NS IN EXCESS OF 25%. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUN AL ARE AS UNDER: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THIS ASPECT AND WE ARE UNABLE TO UPHOLD THE STAND OF THE REVENU E. THE DISCUSSION MADE BY THE TPO IN PARA 6.5.2 OF HIS ORDER ON THE I MPUGNED ISSUE SHOWS THAT HE HAS CONSIDERED A FILTER 25% OF THE RPTS FOR THE PURPOSE OF EXCLUDING A CONCERN FROM THE LIST OF COMPARABLES. W HILE APPLYING THE SAID FILTER IN THE CASE OF COMPUCON SOFTWARE LTD. HE HAS AGGREGATED THE RECEIPTS FOR SERVICES RENDERED AND THE PAYMENTS MAD E FOR SERVICES RECEIVED AND THEREAFTER HE HAS DIVIDED THE TOTAL FI GURE BY THE TOTAL TURNOVER OF THE ASSESSEE. QUITE CLEARLY, THE NUMERA TOR CONSIDERED BY THE TPO COMPRISES OF RECEIPTS FOR SERVICES RENDERED AS ALSO THE PAYMENTS MADE FOR SERVICES RECEIVED MEANING THEREBY THAT SAL ES AS WELL AS EXPENSES HAVING A COMPONENT OF RPTS ARE INCLUDED, W HEREAS THE DENOMINATOR COMPRISED OF ONLY THE SALES COMPONENT. OSTENSIBLY, THE AFORESAID FORMULA WOULD GIVE A DISTORTED PICTURE OF THE RATIO OF RPTS TO THE TOTAL TRANSACTIONS. IF TOTAL EXPENSES INCURRED BY THE ASSESSEE BY WAY OF PAYMENTS TO ASSOCIATED ENTERPRISES IS DIVIDED BY THE TOTAL EXPENSES INCURRED, THE RATIO OF RPTS TO THE TOTAL TRANSACTIO NS EXCEED 25%, AS PER THE WORKING MADE BY THE ASSESSEE. IN VIEW OF THE AF ORESAID INCORRECT APPROACH OF THE TPO IN ORDER TO CALCULATE THE LEVEL OF RPTS, COMPUCON SOFTWARE LTD. HAS BEEN WRONGLY INCLUDED AS A COMPAR ABLE. MOREOVER, THE ASSESSEE HAS ALSO REFERRED TO A DECISION OF THE PUN E BENCH OF THE TRIBUNAL IN THE CASE OF BINDVIEW INDIA (P.) LTD. VS . DCIT, (2013) 34 TAXMANN.COM 164 (PUNE-TRIB.) RELATING TO THE ASSESS MENT YEAR 2006-07 WHEREIN THE RPTS IN THE CASE OF COMPUCON SOFTWARE L TD. HAVE BEEN ACCEPTED AS BEING IN EXCESS OF 25% OF THE TOTAL TRA NSACTIONS. ON THIS BASIS ALSO, WE FIND THAT THE PLEA OF THE ASSESSEE T O EXCLUDE COMPUCON SOFTWARE LTD. FROM THE LIST OF COMPARABLES HAS BEEN WRONGLY NEGATED BY THE LOWER AUTHORITIES. WE ORDER ACCORDINGLY AND ASS ESSEE SUCCEEDS ON THIS ASPECT. 10 ITA NO. 370/PN/2013 A.Y. 2005-06 9. THE TRIBUNAL IN THE SUBSEQUENT ASSESSMENT YEAR 2007 -08 HAS EXCLUDED COMPUCOM SOFTWARE LTD. FROM THE LIST OF COMPARAB LES FOR SIMILAR REASONS. WE ARE OF THE CONSIDERED VIEW THAT THE A UTHORITIES BELOW HAVE ERRED IN NOT CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE WITH RESPECT TO THE RELATED PARTY TRANSACTION S OF COMPUCOM SOFTWARE LTD. FURNISHED BY THE ASSESSEE. WE DEEM IT APP ROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER AND DEC IDE THIS ISSUE AFRESH IN THE LIGHT OF THE ORDER OF TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08. ACCOR DINGLY, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE IN THE AFORESAID TERMS. ORDER PRONOUNCED ON MONDAY, THE 18 TH DAY OF JANUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 18 TH JANUARY, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-IT/TP, PUNE 4. THE DIT(IT/TP), PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE