Swiss Re Shared Services (India) Pvt. Limited, Bangalore V. Asst.C.I.T., Bangalore

ITA 380/BANG/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0288 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: CHAVALI S NARAYAN
• Keywords: Transfer pricing; International transaction
• Section: 92

Judgement Text

IT(TP)A.380/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER I.T(TP).A NO.380/BANG/2016 (ASSESSMENT YEAR : 2011-12) M/S. SWISS RE SHARED SERVICES (INDIA) P. LTD, VASWAI CENTROPLOLIS, 2 ND TO 6 TH FLOOR, NO.21, LANGFORD ROAD, LANGFORD TOWN, BENGALURU 560 027 .. APPELLANT PAN : AAECS8786L V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 6(1)(2), BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. CHAVALI S. NARAYAN, CA REVENUE BY : SHRI. G. R. REDDY, CIT DR-I HEARD ON : 13.06.2016 PRONOUNCED ON : 08.07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE DIRECTED AGAINST ASSESSMENT ORDER DT.28.01.2016, PASSED BY THE AO U/S.143(3) R.W.S.14 4C OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), IT HAS ALTOGETHER T AKEN 14 GROUNDS OF WHICH IT(TP)A.380/BANG/2016 PAGE - 2 GROUND 14 IS GENERAL AND GROUND 13 IS CONSEQUENTIAL NEEDING NO SPECIFIC ADJUDICATION. 02. OTHER GROUNDS NUMBERED 1 TO 12 CONCERN THE TRAN SFER PRICING ADJUSTMENTS RECOMMENDED BY THE AO TO THE EXTENT CON FIRMED BY THE DRP. LD. AR AT THE OUT SET, SUBMITTED THAT HE WAS PRESSI NG ONLY GROUNDS 7 AND 8 SEEKING EXCLUSION OF CERTAIN COMPARABLE COMPANIES C ONSIDERED BY THE TPO AND FOR CORRECTING ERRORS IN COMPUTING THE OPERATIN G MARGIN OF SUCH COMPARABLES. 03. FACTS APROPOS ARE THAT ASSESSEE IS IN THE BUSIN ESS OF EXPORT OF CUSTOMISED ELECTRONIC DATA INCLUDING REMOTE DATA PR OCESSING AND IT ENABLED BACK OFFICE SERVICE, IN THE FIELD OF INSURANCE. AS SESSEE HAS BEEN REGISTERED AS A STP UNIT. SERVICES ARE PROVIDED BY ASSESSEE T O ITS AE IN KOREA AND SWITZERLAND NAMED AS SWISS RE KOREA AND SWISS RE ZU RICH. SUCH SERVICES WERE NON-LIFE INSURANCE ADMINISTRATION, PROVIDING TECHNICAL ACCOUNTING SERVICES IN THE FIELD OF PROPERTY, CASUALTY, LIFE A ND HEALTH RE-INSURANCE. SWISS REINSURANCE CO, ZURICH IS THE HOLDING COMPANY OF THE ASSESSEE AND A GLOBAL REINSURER. ASSESSEE HAD CLASSIFIED ITS OP ERATION AS FALLING INTO: IT(TP)A.380/BANG/2016 PAGE - 3 04. ASSESSEE HAD COMPUTED ITS PLI AS UNDER : PLI TAKEN WAS THE RATIO OF OPERATING PROFIT TO OPER ATING COST. OUT OF THE TOTAL REVENUE, THE IT ENABLED BACK OFFICE SERVICES CAME TO RS.68,20,71,167/-. ASSESSEE HAD ADOPTED TNMM IN IT S TP STUDY. CONSIDERING ITSELF TO BE IN ITES SEGMENT DOING LOW- END SERVICES, ASSESSEE HAD SELECTED SEVEN COMPARABLE COMPANIES WHICH, IN I TS OPINION, WERE THE BEST COMPARABLES AVAILABLE. LIST OF THESE COMPARAB LES TAKEN BY THE ASSESSEE AND ITS AVERAGE PLI IS GIVEN HEREUNDER : IT(TP)A.380/BANG/2016 PAGE - 4 6 INFOSYS BPO LTD 22.03% 7 JINDAL INTELLICOM LTD 9.75% AVERAGE PLI 15.26% 04. AS PER THE ASSESSEE, AVERAGE PLI OF THE COMPARA BLES BEING 15.26% FELL WITHIN THE + / - 5% OF ITS OWN PLI OF 12.78%. THUS ACCORDING TO IT, IT WAS NOT NECESSARY TO MAKE ANY ADJUSTMENT ON THE PRI CING OF ITS INTERNATIONAL TRANSACTIONS WITH AES. IT(TP)A.380/BANG/2016 PAGE - 5 05. TPO AFTER DOING AN ANALYSIS OF THE TP STUDY OF THE ASSESSEE, HELD THAT EXCEPT FOR FOUR COMPARABLES AMONG THE SEVEN SELECTE D BY ASSESSEE, OTHERS WERE TO BE REJECTED ON APPLICATION OF RPT FILTER, D IFFERENT FINANCIAL YEAR CRITERIA, OTHER INCOME EXCEEDING OPERATING INCOME E TC., . AMONG THE COMPANIES WHICH WERE ACCEPTED BY THE TPO WERE E4E H EALTHCARE BUSINESS SERVICES LTD, ICRA TECHNO ANALYTICS LTD, INFOSYS BP O LTD AND JINDAL INTELLICOM LTD. THEREAFTER THE TPO MADE HIS OWN ST UDY ON THE CAPITAL AND PROWESS DATA BASES AND ZEROED IN ON A LIST OF TEN C OMPARABLES INCLUDING FOUR FROM ASSESSEES OWN LIST. TEN COMPARABLES SEL ECTED BY THE TPO AND THEIR PLI READ AS UNDER : IT(TP)A.380/BANG/2016 PAGE - 6 06. THEREAFTER THE TPO ALLOWED AN ADJUSTMENT OF 1.4 7% FOR WORKING CAPITAL. FINAL ADJUSTMENT RECOMMENDED BY THE TPO U /S. 92 CA, READ AS UNDER: WHEN A PROPOSAL ON THE ABOVE LINES WAS PUT TO THE A SSESSEE BY THE AO, ASSESSEE CHOSE TO MOVE THE DRP. 07. BEFORE THE DRP ASSESSEE PLEADED FOR APPLICATION OF TURNOVER FILTER AND ALSO MADE SUBMISSIONS WITH REGARD TO FUNCTIONAL DIFFERENCES OF SOME OF THE COMPANIES SELECTED BY THE TPO. HOWEVER ONLY AD JUSTMENT GRANTED BY THE DRP WAS WITH REGARD TO APPLICATION OF TURNOVER FILTER AND IN THE PROCESS OF INFOSYS BPO LTD, MINDTREE LTD (SEG), IGATE GLOBA L SOLUTIONS LTD, WENT OUT OF THE LIST OF COMPARABLES. WHAT WERE LEFT AFT ER THE DRP DIRECTIONS WERE ACCENTIA TECHNOLOGIES LTD, ACROPETAL TECHNOLOG IES (SEG), COSMIC GLOBAL LTD, E4E HEALTHCARE, ICRA ONLINE LTD (SEG), JEEVAN SCIENTIFIC TECHNOLOGY LTD AND JINDAL INTELLICOM. D RP ALSO IT(TP)A.380/BANG/2016 PAGE - 7 DIRECTED THE AO TO REWORK THE PLI OF THE COMPARABLE S AFTER INCLUDING THE FOREIGN EXCHANGE GAIN / LOSS. AS PER THE DRP, SUCH FOREIGN EXCHANGE GAINS / LOSS WERE OPERATIONAL IN NATURE AND HAD TO BE CON SIDERED AS A PART OF THE EARNINGS / EXPENDITURE INCURRED DURING THE COURSE O F THE BUSINESS OF THE ASSESSEE. THEREAFTER ASSESSMENT WAS FINALLY COMPLE TED. HOWEVER IN THE SAID ASSESSMENT, AO DID NOT GIVE EFFECT TO THE DIRE CTIONS OF THE DRP WITH REGARD TO THE FOREIGN EXCHANGE GAINS / LOSS. OR IN OTHER WORDS, PLI OF COMPARABLES MENTIONED ABOVE WERE WORKED OUT WITHOUT CONSIDERING THE FOREIGN EXCHANGE GAINS / LOSS AS OPERATIONAL IN NAT URE. 08. NOW BEFORE US, LD. AR SUBMITTED THAT OUT OF THE SEVEN COMPANIES THAT WERE LEFT AFTER GIVING EFFECT TO DRP DIRECTION S, HE WAS SEEKING EXCLUSION OF ACCENTIA TECHNOLOGIES LTD, ACROPETAL T ECHNOLOGIES(SEG), ICRA ONLINE LTD (SEG) AND JEEVAN SCIENTIFIC TECHNO LOGY LTD (SEG). ACCORDING TO LD. AR NONE OF THESE COMPANIES WERE AP PEARING IN THE TP STUDY OF THE ASSESSEE. 09. ADVERTING TO ACCENTIA TECHNOLOGIES LTD, LD. AR SUBMITTED THAT THE SAID COMPANY HAD INORGANIC GROWTH DURING THE RELEVA NT PREVIOUS YEAR DUE TO CREATION OF A US BASED LOCALISED FRONT-END COMPA NY. AS PER THE LD. AR, ACCENTIA TECHNOLOGIES LTD, WAS DOING OUTSOURCING WO RK AS WELL AS CODING. IT(TP)A.380/BANG/2016 PAGE - 8 CODING WORK FELL WITHIN THE REALM OF SOFTWARE DEVEL OPMENT ONLY. ACCORDING TO THE LD. AR, MEDICAL TRANSCRIPTION EARN INGS OF ACCENTIA TECHNOLOGIES LTD, COMPRISED OF PREPARATION OF CUSTO MISED NOTES OF PATIENTS, RECORD KEEPING OF PATIENTS, INSURANCE VER IFICATION OF PATIENTS, APPOINTMENT SCHEDULING OF PATIENTS, PROVIDING ACCES SIBLE PRACTICE MANAGEMENT SYSTEM, PROVIDING EMR SYSTEMS INCLUDING EMR CODING, BILLING, BILL PAYMENT MANAGEMENT SYSTEM, ADHOC REPO RTING ETC., AS PER THE LD.AR, SAID COMPANY CATERED TO THE HEALTH CARE INDU STRY AND THEIR PRODUCTS WERE CUSTOMISED AND NOT SIMILAR TO WHAT ASSESSEE WA S DOING. AS PER THE LD. AR THE WORK DONE BY ACCENTIA TECHNOLOGIES LTD, REQUIRED SKILLED KNOWLEDGE AND ADVANCED ANALYTICS. LD. AR SUBMITTED THAT DURING THE RELEVANT PREVIOUS YEAR, THE SAID COMPANY HAD INVEST ED IN ANOTHER COMPANY WHICH HAD AN EXPERTISE IN EMR SOFTWARE AND SAAS. I N ANY CASE, AS PER THE LD. AR, SEGMENTAL RESULTS OF ACCENTIA WAS NOT AVAIL ABLE IN BETWEEN VARIOUS SEGMENTS LIKE MT BILLING COLLECTION AND CODING. WH EN SEGMENTAL RESULTS WERE NOT AVAILABLE, AS PER THE LD. AR IT WAS NOT PR OPER TO CONSIDER ACCENTIA TECHNOLOGIES LTD, AS A GOOD COMPARABLE. R ELIANCE WAS ALSO PLACED ON DECISION OF DELHI BENCH OF THE TRIBUNAL I N THE CASE OF EQUANT SOLUTIONS INDIA P. LTD V. DCIT [ITA.1202/DEL/2015, DT.21.01.2016] AND THAT OF COORDINATE BENCH IN THE CASE OF AMBA RESEAR CH (INDIA) P. LTD, V. IT(TP)A.380/BANG/2016 PAGE - 9 DCIT [IT(TP)A.286/BANG/2015, DT.09.03.2016]. AS PE R THE LD. AR THOUGH THE ABOVE DECISIONS WERE FOR A. Y. 2010-11, ACCENTI A TECHNOLOGIES LTD, WAS DOING THE VERY SAME ACTIVITIES DURING THE RELEV ANT PREVIOUS YEAR ALSO. HENCE ACCORDING TO HIM THESE DECISIONS COULD BE TAK EN AS A PRECEDENCE FOR EXCLUDING THE SAID COMPANY FROM THE LIST OF COMPARA BLES. 10. PER CONTRA, LD. DR SUBMITTED THAT 80% OF THE RE VENUE OF ACCENTIA TECHNOLOGIES LTD, WERE FROM MEDICAL TRANSCRIPTION, WHICH FELL WITHIN ITES ONLY. AS PER THE LD. DR, ACTUAL ACTIVITIES OF THE ASSESSEE COMPARED FAVOURABLE WITH ACCENTIA TECHNOLOGIES LTD. WHEN 80 % OF THE INCOME WAS FROM ITES SERVICES, AS PER THE LD. DR FURTHER SEGME NTATION WAS NOT REQUIRED. AS FOR THE RELIANCE PLACED ON THE DECISI ONS OF DELHI BENCH IN THE CASE OF EQUANT SOLUTIONS INDIA P. LTD, (SUPRA) AND COORDINATE BENCH IN THE CASE OF AMBA RESEARCH INDIA P. LTD (SUPRA), LD. DR SUBMITTED THAT THESE WERE FOR A. Y. 2010-11 AND THERE WAS A CLEAR FINDIN G BY THE TRIBUNAL THAT RESULTS OF ACCENTIA TECHNOLOGIES LTD, WERE SKEWED B ECAUSE OF ACQUISITION OF A BUSINESS DURING THAT YEAR AND ALSO DUE TO INOR GANIC GROWTH. 11. IN REPLY LD. AR SUBMITTED THAT EVEN WITHIN THE SAME ITES SEGMENT DIFFERENTIATION COULD BE MADE BASED ON HIGH-END AND LOW-END SERVICES. RELYING ON JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF IT(TP)A.380/BANG/2016 PAGE - 10 RAMPGREEN SOLUTIONS P. LTD V. CIT [ITA.102/2015, DT .10.08.2015], LD. AR SUBMITTED THAT THERE COULD BE HIGH-END AND LOW-END SERVICES WHICH MAY NOT BE COMPARABLE. AS PER LD. AR IN THE CASE OF ASSESS EE, IT WAS DOING LOW- END BPO SERVICES IN THE FIELD OF INSURANCE AND COUL D NOT BE COMPARED WITH A HIGH-END SERVICE PROVIDER IN THE MEDICAL FIELD. 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. TWENTIETH ANNUAL REPORT OF ACENTIA TECHNOLOGIES LTD , FOR FINANCIAL YEAR 2010-11 HAS BEEN FILED AT PAPER BOOK PAGE 491 TO 56 8. IN THE PART CAPTIONED MANAGEMENT DISCUSSION AND ANALYSIS, THE COMPANY MENTIONED ITS MEDICAL TRANSCRIPTION BUSINESS BEING MOVED FROM A LOW-END CATEGORY TO A HIGH-END CATEGORY. MANAGEMENT OF THE SAID COMPAN Y HAD DECIDED TO ACQUIRE NECESSARY SKILLS INORGANICALLY SO THAT IT C OULD DO MEDICAL CODING AND PROVIDE END TO END SERVICES IN HRCM. IN WHAT I S CALLED BY THE SAID COMPANY AS EMR METHOD, IT CAPTURED AND STORED ALL DEMOGRAPHIC AND CLINICAL DATA IN DATA BASE FORMAT RATHER THAN KEEPI NG PHYSICAL REPORTS AS DONE IN ORTHODOX MEDICAL TRANSCRIPTION METHODS. TH AT M/S. ACCENTIA TECHNOLOGIES LTD, WAS PROVIDING INTEGRATED END TO E ND SOFTWARE SERVICES AND REMODELLING ITS OWN BUSINESS IS CLEAR FROM PAGE 25 OF ITS ANNUAL REPORT WHICH IS REPRODUCED HEREUNDER : IT(TP)A.380/BANG/2016 PAGE - 11 13. TYPE OF WORK DONE BY THE SAID COMPANY HAS BEEN EXPLAINED IN DETAIL AT PAGES 24 AND 25 OF ANNUAL RE PORT. THIS IS REPRODUCED HEREUNDER : IT(TP)A.380/BANG/2016 PAGE - 12 IT(TP)A.380/BANG/2016 PAGE - 13 IT(TP)A.380/BANG/2016 PAGE - 14 14. IF WE HAVE A LOOK AT THE BILLINGS MADE BY M/S. ACCENTIA TECHNOLOGIES LTD, ITS INCOME FOR THE RELEVANT PREVIOUS YEAR READ AS UNDER : NOT ONLY WAS THE MEDICAL TRANSCRIPTION WORK DONE BY IT OF A HIGH-END VARIETY, IT ALSO HAD SUBSTANTIAL INCOME FROM CODING COMING TO ABOUT 16% GROSS RECEIPTS. NO SEGMENTAL RESULTS WERE ALSO AVA ILABLE. ITS AUDITED FINANCIAL STATEMENTS AT PARA 7 OF THE NOTES TO ACCO UNTS MENTIONED AS UNDER : 15. AS AGAINST THE ABOVE, ASSESSEE WAS PROVIDING BACK OFFICE SUPPORT TO ITS GROUP COMPANIES AND AFFILIATES, IN THE FIELD OF REINSURANCE, WHICH ITS AFFILIATES WERE ENGAGED IN. WORK DONE BY THE ASSES SEE HAS BEEN CAPTURED BY US AT PARA THREE ABOVE. THIS IN OUR OPINION WAS ENTIRELY DIFFERENT FROM THE TYPE OF ACTIVITIES THAT ACCENTIA TECHNOLOGIES L TD, WAS INTO. TYPE OF SERVICES RENDERED BY THE ASSESSEE IS ALSO CLEAR FRO M THE SERVICE AGREEMENT IT(TP)A.380/BANG/2016 PAGE - 15 ENTERED WITH ITS AE CALLED SWISS RE, ZURICH, DT.01. 02.2009. ANNEXURE-1 TO THIS AGREEMENT, IS REPRODUCED HEREUNDER : 16.A READING OF THE ABOVE WOULD SHOW THAT ASSESSEE WAS FUNCTIONING IN A FIELD DIFFERENT FROM M/S. ACCENTIA TECHNOLOGIES LTD . WHAT IT WAS PROVIDING MAY NOT BE LOW-END SERVICES, NEITHER WAS IT OF A HI GH-END VARIETY. THE IT(TP)A.380/BANG/2016 PAGE - 16 DELIVERABLES THAT ASSESSEE WAS EXPECTED TO GIVE IT S AE ABROAD IS MENTIONED IN SCHEDULE 2 OF ITS AGREEMENT WHICH IS REPRODUCED HEREUNDER : 17. THUS THE FUNCTIONS WHICH WERE DONE BY ACCENTIA TECHNOLOGIES LTD, AND THE FUNCTIONS WHICH WERE RENDERED BY THE ASSESS EE WERE ENTIRELY DIFFERENT. WE CANNOT SAY THAT THE TYPE OF SERVICES DONE BY THE ASSESSEE WAS OF A LEVEL AS SOPHISTICATED AS THE ONE WHICH WAS BE ING PROVIDED BY ACCENTIA TECHNOLOGIES LTD. IN THE CASE OF RAMPGREEN SOLUTIO NS P. LTD (SUPRA), HONBLE DELHI HIGH COURT MENTIONED AS UNDER AT PARA 31 OF ITS ORDER, WHICH READS AS UNDER : 31. IN THE PRESENT CASE, THE TRIBUNAL NOTED THAT VI SHAL AND ECLERX WERE BOTH ENGAGED IN RENDERING ITES. THE TRI BUNAL HELD THAT, 'ONCE A SERVICE FALLS UNDER THE CATEGORY OF ITES, THEN THERE IS NO SUB-CLASSIFICATION OF SEGMENT'. TH US, ACCORDING TO THE TRIBUNAL, NO DIFFERENTIATION COULD BE MADE BETWEEN THE ENTITIES RENDERING ITES. WE FIND IT DIF FICULT TO ACCEPT THIS VIEW AS IT IS CONTRARY TO THE FTC1AMENT AT RATIONALE OF DETERMINING ALP BY COMPARING CONTROLLE D TRANSACTIONS/ENTITIES WITH SIMILAR UNCONTROLLED TRANSACTIONS/ENTITIES. ITES ENCOMPASSES A WIDE SPEC TRUM OF SERVICES THAT USE INFORMATION TECHNOLOGY BASED DELI VERY. SUCH SERVICES COULD INCLUDE RENDERING HIGHLY TECHNI CAL SERVICES BY QUALIFIED TECHNICAL PERSONNEL. INVOLVIN G ADVANCED IT(TP)A.380/BANG/2016 PAGE - 17 SKILLS AND KNOWLEDGE, SUCH AS ENGINEERING, DESIGN A ND SUPPORT. WHILE, ON THE OTHER END OF THE SPECTRUM ITES WOULD ALSO INCLUDE VOICE-BASED CALL CENTERS THAT RENDER ROUTINE CUSTOM ER SUPPORT FOR THEIR CLIENTS. CLEARLY, CHARACTERISTICS OF THE SERV ICE RENDERED WOULD BE DISSIMILAR. FURTHER, BOTH SERVICE PROVIDER S CANNOT BE CONSIDERED TO BE FUNCTIONALLY SIMILAR. THEIR BUSINE SS ENVIRONMENT WOULD BE ENTIRELY DIFFERENT, THE DEMAND AND SUPPLY FOR THE SERVICES WOULD BE DIFFERENT, THE ASSETS AND CAPITAL EMPLOYED WOULD DIFFER, THE COMPETENCE REQUIRED TO OPERATE TH E TWO SERVICES WOULD BE DIFFERENT. EACH OF THE AFORESAID FACTORS W OULD HAVE A MATERIAL BEARING ON THE PROFITABILITY OF THE TWO ENTITIES. TREATING THE SAID ENTITIES TO BE COMPARAB LES ONLY FOR THE REASON THAT THEY USE INFORMATION TECHNOLOGY FOR THE DELIVERY OF THEIR SERVICES, WOULD, IN OUR OPINION, BE ERRONEOUS. 18. THUS WHEN CHARACTERISTICS OF SERVICES RENDERED WERE DISSIMILAR AND THE COMPETENCE REQUIRED TO OPERATE THE SERVICES WER E DIFFERENT, IT WILL NOT BE CORRECT TO COMPARE THE RESULTS OF TWO COMPANIES. 19. IN THE CASE OF AMBA RESEARCH INDIA P. LTD (SUPR A), THIS TRIBUNAL HAD DIRECTED EXCLUSION OF ACCENTIA TECHNOLOGIES LTD, FO R COMPARISON PURPOSES. ASSESSEE IN THE SAID CASE WAS PROVIDING ITES SERVIC ES TO ITS HOLDING COMPANY AT BRITISH VIRGIN ISLANDS. OBSERVATION OF THE TRIBUNAL AT PARA 8 OF THE ORDER DT.09.03.2016, IS REPRODUCED HEREUNDER : 08. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. NO DOUBT ACCENTIA TECHNOLOGIES LTD, FORMED A PART OF THE LIST OF COMPARABLES CONSIDERED BY THE ASSESSEE IN ITS TP ST UDY. HOWEVER ASSESSEE HAD OBJECTED TO ITS INCLUSION CITING FUNCT IONAL DISSIMILARITY BEFORE THE AO AS WELL AS THE DRP. QUESTION REGARDI NG COMPARABILITY IT(TP)A.380/BANG/2016 PAGE - 18 OF ACCENTIA TECHNOLOGIES IN THE ITE SEGMENT FOR A. Y. 2010-11 HAD COME UP BEFORE THIS TRIBUNAL IN THE CASE OF NOVO NO RDISK INDIA P. LTD (SUPRA). IT WAS HELD AS UNDER AT PARAS 31 AND 32 O F THE ORDER DT.30.07.2015 : 31. WE DEAL WITH THE COMPARABLE COMPANIES WHICH THE ASSESSEE SEEKS EXCLUSION. 1. ACCENTIA TECHNOLOGY LTD., 2. IN FOSYS BPO LTD. THE COMPARABILITY OF THESE COMPANY WITH A ITES COMP ANY WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF PARAXEL INTERNATIONAL (INDIA) PVT. LTD. (SUPRA) AND THE TRIBUNAL HELD AS FOLLOWS ON THE COMPARABILITY OF THE AFORESAID COMPANIES WITH A COM PANY PROVIDING ITES IN THE FOLLOWING MANNER:- 10. IN GROUNDS NO.4 TO 6, THE ASSESSEE HAS CHALLEN GED THE COMPARABLES SELECTED BY THE TPO FOR THE PURPOSE OF TP ANALYSIS AND AS SUBMITTED BY THE LEARNED COUNSEL OR THE ASSE SSEE, THE ASSESSEE IS OBJECTING TO THE SELECTION OF ONLY THE FOLLOWING FIVE COMPARABLES, OUT OF THE TWELVE COMPANIES SELECTED A S COMPARABLES- SL. NO. COMPANY NAME 1. ACCENTIA TECHNOLOGIES LIMITED 2. COSMIC GLOBAL LTD. 3. ECLERX SERVICES LTD. 4. GENESYS INTERNATIONAL LTD. 5. INFOSYS B P O LTD. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THE ISSUE OF INCLUSION/EXCLUSION OF THE ABOVE FIVE COMPANIES AS COMPARABLES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD IN CLUDING THE VARIOUS DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. ACCENTIA TECHNOLOGIES LIMITED 12. AS REGARDS THE SELECTION OF ACCENTIA TECHNOLOGI ES LIMITED AS COMPARABLE, THE LEARNED COUNSEL FOR THE ASSESSEE HA S RELIED ON THE DECISIONS OF THIS TRIBUNAL IN THE CASES OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. V/S. ADDL./DY. COMMISSION ER OF INCOME- TAX, CIRCLE 1(2), HYDERABAD AND VICE VERSA (ITA NO. 124 AND IT(TP)A.380/BANG/2016 PAGE - 19 170/HYD/2014 DATED 31.7.2014); EXCELLENCE DATA RESE ARCH PVT. LTD., HYDERABAD V/S. ITO WARD 2(1), HYDERABAD (ITA NO.159/HYD/2014 DATED 31.7.2014); AND HYUNDAI MOTOR S INDIA ENGINEERING P. LTD., HYDERABAD V/S. DCIT, CIRCLE 2( 2), HYDERABAD (ITA NHO.255/HYD/2014 DATED 31.7.2014), WHEREIN M/S . ACCENTIA TECHNOLOGIES LIMITED(SEG) WAS EXCLUDED BY THE TRIBU NAL FROM THE LIST OF COMPARABLES ON THE GROUND THAT IT WAS A CAS E OF MERGERS AND ACQUISITION, AND THE COMPANY WAS ALSO FOUND TO BE F UNCTIONALLY DIFFERENT. THE RELEVANT OBSERVATIONS OF THE TRIBUNA L AS RECORDED IN PARA 19.2 OF THE ORDER PASSED IN THE CASE OF EXCELL ENCE DATA RESEARCH PVT. LTD., HYDERABAD (SUPRA), BEING RELEVA NT IN THIS CASE, ARE REPRODUCED BELOW- 19.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND NOTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWTH AS ITS STR ATEGY. IN EARLIER YEARS ON THE REASON OF ACQUISITION OF VARIO US COMPANIES, BEING AN EXTRAORDINARY EVENT WHICH HAD A N IMPACT ON THE PROFIT, THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED COUNSEL, THIS YEAR ALSO, T HE ACQUISITION OF SOME COMPANIES BY THAT COMPANY MAY H AVE IMPACT ON THE PROFIT. CONSIDERING THE PROFIT MARGIN S OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA, WE ARE OF IT(TP)A NO.146/BANG/2015 PAGE 42 OF 52 THE OPINION THAT THI S COMPANY CANNOT BE SELECTED AS A COMPARABLE. MOREOVE R, THIS IS ALSO NOT A COMPARABLE IN THE CASE OF M/S. MERCER CONSULTING (INDIA) P. LTD. (SUPRA), WHICH INDICATES THAT THE TPO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS CO MPARABLE, FROM THE LIST OF COMPARABLES SELECTED. 13. AS POIN TED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THERE WAS ACQ UISITION OF A COMPANY BY M/S. ACCENTIA TECHNOLOGIES LIMITED DUR ING THE RELEVANT YEAR, AND THE SAID COMPANY, THEREFORE, CAN NOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRAORDINARY EVENT WHICH OCCURRED IN THE RELEVANT YEAR AS RIGHTLY HELD BY THE TRIBUNAL INTER ALIA IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD. (SUPRA). ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SOUGHT TO CONTEND THAT THE ACQUI SITION OF A COMPANY BY M/S. ACCENTIA TECHNOLOGIES LTD. TOOK PLA CE AT IT(TP)A.380/BANG/2016 PAGE - 20 THE FAG END OF THE YEAR UNDER CONSIDERATION, THE LE ARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE P ROCESS OF ACQUISITION HAD STARTED ON 15.5.2008 ITSELF, I.E. I N THE EARLIER PART OF THE YEAR UNDER CONSIDERATION. WE, THEREFORE , FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF EXCELLENCE DATA RESEARCH SERVICES PVT. LTD. (SUPRA) AND DIRECT THE AO/TPO TO EXCLUDE THE ACCENTIA TECHN OLOGIES LIMITED FROM THE LIST OF COMPARABLES. .. INFOSYS BPO 20. AS REGARDS SELECTION OF INFOSYS BPO AS A COMPAR ABLE COMPANY, THE LEARNED COUNSEL FOR THE ASSESSEE HAS C ONTENDED THAT THE SAID COMPANY CANNOT BE TAKEN AS COMPARABLE BECAUSE OF ITS UNCOMPARABLE SIZE OF OPERATIONS. HE HAS CONTENDED THAT THE TURNOVER OF THE SAID COMPANY WAS MANY TIMES HIGHER THAN THAT OF THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION. ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE SIZE OF OPERA TIONS DOES NOT MATTER AS FAR AS SELECTION OF COMPARABLES IS CO NCERNED ESPECIALLY IN THE SECTOR OF IT ENABLED SERVICES, IT IS OBSERVED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. AGNITY TECHNOLOG IES PVT. LTD. (219 TAXMAN 26) HOLDING THAT HUGE TURNOVER COM PANIES LIKE INFOSYS AND WIPRO CANNOT BE CONSIDERED AS COMP ARABLES WITH SMALLER COMPANIES LIKE THE ASSESSEE IN THE PRE SENT CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF AGNITY TECHNOLOGIES P. LTD. (S UPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE INFOSYS BPO FROM THE LIST OF COMPARABLES. 32. AS FAR AS ACCENTIA TECHNOLOGY LTD., IS CONCERNE D, EVEN DURING THE PREVIOUS YEAR RELEVANT TO AY 2010-11, THERE WAS AMALGAMATION OF ASCENT INFOSERVE PRIVATE LIMITED WI TH ACCENTIA TECHNOLOGY LTD., AND CONSEQUENT THERETO THE ASSETS AND LIABILITIES AND ACCUMULATED RESERVES AND THE FINANCIAL RESULTS FOR THE YEAR ENDED 31ST MARCH, 2010, OF THE AMALGAMATING COMPANY WERE IT(TP)A.380/BANG/2016 PAGE - 21 INCORPORATED IN THE AMGALAMATED COMPANY. AS FAR AS INFOSYS BPO LTD., IS CONCERNED, THE OBSERVATIONS MADE BY THE TR IBUNAL IN THE DECISION REFERRED IN THE EARLIER PARAGRAPH WILL HOL D GOOD FOR THE PRESENT AY 2010-11 ALSO. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE DIRECT THAT THE AFOR ESAID 2 COMPANIES BE EXCLUDED FROM THE LIST OF COMPARABLE C OMPANIES FOR THE PURPOSE OF COMPUTING ARITHMETIC MEAN FOR COMPAR ABILITY PURPOSE. THE TPO IS DIRECTED TO GIVE EFFECT ACCORDI NGLY. EVEN AFTER EXCLUSION OF ACCENTIA TECHNOLOGIES LTD, ALONG WITH THE EXCLUSION OF FOUR COMPARABLE COMPANIES DIRECTED BY DRP, THERE WILL BE FOUR COMPANIES LEFT IN THE LIST OF COMPARAB LES WHICH, IN OUR OPINION, CANNOT BE CONSIDERED AS TOO SMALL A SAMPLE FOR AN EFFECTIVE TP STUDY. IN THE CIRCUMSTANCES, WE DIREC T EXCLUSION OF ACCENTIA TECHNOLOGIES LTD ALSO FROM THE LIST OF COM PARABLES. ORDERED ACCORDINGLY. 20. NO DOUBT THE SAID DECISION WAS FOR A. Y. 2010-1 1, BUT THE CONDITIONS WHICH PREVAILED IN THE SAID PREVIOUS YEAR MORE OR L ESS EXISTED IN THE IMPUGNED ASSESSMENT YEAR ALSO. CONSIDERING ALL THE SE ASPECTS, WE ARE THEREFORE OF THE OPINION THAT ACCENTIA TECHNOLOGIES LTD, WAS NOT A GOOD COMPARABLE FOR THE PURPOSE OF ALP STUDY OF THE ASSE SSEE. 21. ARGUING FOR EXCLUSION OF ACROPETAL TECHNOLOGIES LTD, (SEG), LD. AR SUBMITTED THAT ACROPETAL TECHNOLOGIES LTD, WAS REND ERING SERVICE IN THE FIELD OF ENGINEERING DESIGN FOR HEALTH-CARE ENTERPR ISE SOLUTIONS AND IT INFRASTRUCTURE SOLUTIONS. AS PER THE LD. AR, AO TO OK THE ENGINEERING DESIGN SERVICES DONE BY ACROPETAL TECHNOLOGIES LTD, AS A COMPARABLE IT(TP)A.380/BANG/2016 PAGE - 22 SEGMENT WITH ITES SERVICES OF THE ASSESSEE. LD. AR POINTED OUT THAT ENGINEERING DESIGN SERVICES RENDERED BY M/S. ACROPE TAL WAS ENTIRELY DIFFERENT FROM THE TYPE OF SERVICES DONE BY THE ASS ESSEE. FURTHER ACCORDING TO HIM HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD V. ITO [ITA.159/HYD/2014, DT.31.07. 2014 HAD HELD THAT ACROPETAL TECHNOLOGIES LTD, WAS NOT A GOOD COMPARAB LE IN THE BPO SEGMENT. AS PER THE LD. AR M/S. EXCELLENCE DATA RE SEARCH P. LTD, WAS RENDERING BACK OFFICE DATA CREATION, CONTENT DEVELO PMENT AND SUPPORT SERVICES WHICH WERE NOT COMPARABLE TO WHAT ASSESSEE WAS DOING. THOUGH THE DECISION OF THE HYDERABAD BENCH WAS FOR A. Y. 2 009-10, AS PER THE LD. AR, M/S. ACROPETAL TECHNOLOGIES LTD, WAS DOING THE VERY SAME BUSINESS DURING THE RELEVANT PREVIOUS YEAR ALSO AND THEREFOR E IT COULD BE CONSIDERED AS A GOOD PRECEDENT. 22. PER CONTRA, LD. DR SUBMITTED THAT TPO HAD CONSI DERED THE ARGUMENT OF THE ASSESSEE THAT BPO AND KPO HAD TO BE DISTINGU ISHED. ACCORDING TO HIM, ACROPETAL TECHNOLOGIES LTD, WAS GIVING ENGINEE RING DESIGN SERVICES AND THE ASSESSEE WAS RENDERING INSURANCE SUPPORT SE RVICES. THOUGH THESE SERVICES DID NOT FIT IN THE SAME MOULD, THE L EVEL OF EXPERTISE REQUIRED STOOD MORE OR LESS ON THE SAME PEDESTAL. IT(TP)A.380/BANG/2016 PAGE - 23 ACCORDING TO HIM, APPLYING THE YARDSTICKS LAID DOWN BY HONBLE DELHI HIGH COURT IN THE JUDGMENT OF RAMPGREEN SOLUTIONS P . LTD (SUPRA), ACROPETAL TECHNOLOGIES LTD, COULD BE TAKEN AS A GOO D COMPARABLE. 23. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT M/S. ACROPETAL WAS HAVING AT LEAST THREE SEGMENTS, NAMELY, ENGINEERING DESIGN SERVICES, IT SERVICE AND HEALTH CARE. TPO HAD TAKEN ENGINEERING DESIGN SERVICE AS A GOOD COMPARABLE WIT H THAT OF THE SERVICES DONE BY THE ASSESSEE. ENGINEERING DESIGN SERVICES THAT WERE BEING RENDERED BY ACROPETAL TECHNOLOGIES LTD, APPEARS AT PAGE 8 OF ITS ANNUAL REPORT. IT COMPRISED OF ARCHITECTURAL , STRUCTURAL , ELECTRICAL, PLUMBING, STEEL DETAILING, AND UTILITIES DESIGNING. ITS REVENUE M ODEL APPEARS AT PAGE 9 OF ITS ANNUAL REPORT. IT IS MENTIONED THAT THE SAID C OMPANY WAS PROVIDING COMPREHENSIVE OFFERINGS USING ITS DEEP DOMAIN UNDER STANDING OF INFRASTRUCTURAL HEALTHCARE, ENGINEERING DESIGN AND ENTERPRISE SOLUTIONS. IN OUR OPINION, THE TYPE OF SERVICES THAT WAS BEING PR OVIDED BY ACROPETAL TECHNOLOGIES LTD, WAS NOT AT ALL COMPARABLE WITH TH E TYPE OF SERVICES THAT THE ASSESSEE WAS PROVIDING. IT IS ALSO MENTIONED I N THE ANNUAL REPORT OF THE SAID COMPANY THAT IT WAS PROVIDING HIGH END SERVICE S IN THE ENGINEERING DESIGN SERVICES. NO DOUBT AS MENTIONED BY THE LD. DR, IT MAY NOT BE IT(TP)A.380/BANG/2016 PAGE - 24 FEASIBLE TO HAVE COMPARABLES WHICH FIT IN THE EXACT MOULD AS THAT OF AN ASSESSEE IN TP ANALYSIS. HOWEVER, WHEN ONE COMPANY IS GIVING SOPHISTICATED SET OF SERVICES WHICH INVOLVES HIGHER LEVEL OF SKILL SETS, AND THE OTHER IS DOING IT ON A LOWER LEVEL, WE CANNOT S AY THAT THE FORMER SHOULD BE CONSIDERED AS A COMPARABLE TO THE LATTER. THOUG H FOR A DIFFERENT YEAR, COMPARABILITY OF ACROPETAL TECHNOLOGIES LTD, (SEG) HAD COME UP BEFORE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF EXCE LLENCE DATA RESEARCH P. LTD (SUPRA). OBSERVATIONS OF THE TRIBUNAL AS IT APPEARS AT PARA 18.1 READS AS UNDER : 18.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AG REE WITH THE OBJECTIONS RAISED BY ASSESSEE. AS SEEN FRO M THE ANNUAL REPORT, THIS COMPANY IS INVOLVED IN ENGINEERING DES IGN SERVICES AND HAS PRODUCTS ALSO, WHICH MAKES IT FUNCTIONALLY NOT COMPARABLE. EVEN AT THE SEGMENTAL LEVEL, IT PROVIDE S ENGINEERING DESIGN SERVICES, WHICH WAS CONSIDERED A S HIGH END, BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING( SUPRA) IN EARLIER YEAR. T HEREFORE, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELE CTED AS A COMPARABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFF ICER/TPO TO EXCLUDE THIS COMPANY. 24. CONSIDERING ALL THESE, WE ARE CONSTRAINED TO TA KE A VIEW THAT ENGINEERING DESIGN SERVICES SEGMENT OF M/S. ACROPET AL TECHNOLOGIES LTD, (SEG), CANNOT BE CONSIDERED AS A PROPER COMPARABLE FOR THE TP STUDY OF THE ASSESSEE. IT(TP)A.380/BANG/2016 PAGE - 25 25. SEEKING EXCLUSION OF ICRA ONLINE LTD, LD. AR SU BMITTED THAT THE SAID COMPANY HAD THREE LINES OF BUSINESS NAMELY, OU TSOURCING SERVICES, INFORMATION SERVICE AND SOFTWARE PRODUCT SERVICES. AS PER THE LD. AR, TPO HAD TAKEN THE OUTSOURCING SERVICE FOR COMPARING THE ASSESSEE. RELYING ON THE ANNUAL REPORT OF THE SAID COMPANY, P LACED AT PAPER BOOK PAGES 645 TO 667, LD. AR SUBMITTED THAT ICRA ONLINE LTD, WAS PROVIDING KNOWLEDGE PROCESS OUTSOURCING. AS PER THE LD. AR T HE BACK END ANALYTICAL SERVICES DONE BY THE SAID COMPANY WHICH INCLUDED DA TA EXTRACTION, AGGREGATION, VALIDATION AND ANALYSIS COULD NOT BE C OMPARED WITH THE LOW END SERVICES IN THE INSURANCE FIELD THAT WAS BEING DONE BY THE ASSESSEE. RELIANCE WAS ONCE AGAIN PLACED ON THE CASE OF RAMPG REEN SOLUTIONS P. LTD, (SUPRA) OF HONBLE DELHI HIGH COURT. 26. PER CONTRA, LD. DR SUBMITTED THAT ICRA ONLINE L TD, WAS ALSO PROVIDING SUPPORT SERVICES. ACCORDING TO HIM JUST BECAUSE THE SAID COMPANY CALLED ITSELF A KNOWLEDGE PROCESS OUTSOURCI NG PROVIDER WOULD NOT MEAN IT WAS GIVING ANY SUCH HIGH END SERVICES. AS PER THE LD. DR NATURE OF ACTIVITIES OF ICRA ONLINE LTD, COMPARED FAVOURAB LY WITH THAT OF THE ASSESSEE. IT(TP)A.380/BANG/2016 PAGE - 26 27. WE HAVE HEARD THE RIVAL CONTENTIONS. WHAT THE ASSESSEE HAS BEEN DOING IS REPRODUCED BY US AT PARA THREE ABOVE. WHA T ICRA ONLINE LTD, WAS DOING AS IT APPEARS IN ITS ANNUAL REPORT FOR TH E RELEVANT FINANCIAL YEAR IS REPRODUCED HEREUNDER : THE KPO DIVISION OF ICRON OFFERS KNOWLEDGE PROCESS OUTSOURCING SERVI CES THAT COMBINE ADVANCED ANALYTICAL ABILITIES AND DEEP DOMAIN EXPERTISE TO DELIVER VALUE BY TRANSLATING DATA AND INFORMATION I NTO STRUCTURED BUSINESS INPUTS. IT PROVIDES BACK-END ANALYTICAL SERVICES SU PPORT TO ITS CLIENTS IN THE AREAS OF DATA EXTRACTION AGGREGATION, VALIDATION AND ANALYSI S ACCOUNTING AND FINANCE, RESEARCH, REPORT PREPARATION AND MODELLING. THE DIV ISION HAS ATTAINED ISO 27001 CERTIFICATION THROUGH RIGOROUS ADHERENCE TO D ATA SECURITY POLICIES AND PRACTICES. 28. TYPE OF WORK BEING DONE BY THE ASSESSEE CAPTURE D BY US AT PARA THREE ABOVE WOULD SHOW THAT ASSESSING WAS ALSO DOING ANAL YSIS OF RESULTS, TESTING AND CALIBRATION ETC., IT HAD TO USE MARKET INTELLI GENCE, MAINTAIN E-TOOLS AND PROVIDE REPORTING ANALYTICS. IN OUR OPINION THE LE VEL OF EXPERTISE BEING IT(TP)A.380/BANG/2016 PAGE - 27 USED BY THE ASSESSEE IN ITS TECHNOLOGY ENABLED SERV ICES AND THAT BEING USED BY ICRA ONLINE LTD, WERE COMPARABLE, THOUGH THEY WE RE IN DIFFERENT STREAMS OF OPERATION. HERE WE ARE ONE WITH THE ARG UMENT OF LD. DR THAT EXACT FITTING IN THE MOULD OF COMPARABLES IS NOT NE CESSARY IN A TNMM STUDY. HOWEVER, ONCE THE LEVEL OF KNOWLEDGE THAT I S BEING USED FOR THE OUTSOURCING IS ON A REASONABLY COMPARABLE PEDESTAL, THE TYPE OF SERVICE INDUSTRY TO WHICH THE CONCERNS CATER MAY NOT MATTER MUCH. IN THE CASE OF RAMPGREEN SOLUTIONS P. LTD, (SUPRA), THEIR LORDSHI P HAD OBSERVED THAT THERE COULD BE DIFFERENT LEVEL OF SKILL SETS USED W ITHIN THE VERY SAME ITES SERVICES AND A COMPARISON CAN BE ATTEMPTED ONLY AFT ER MAKING A PROPER ANALYSIS OF THE SKILL SETS THAT WERE BEING EMPLOYED . IN OUR OPINION CONSIDERING THE OBSERVATION OF THEIR LORDSHIP IN RA MPGREEN SOLUTIONS P. LTD, (SUPRA), ICRA ONLINE LTD, WAS CORRECTLY CONSID ERED BY THE LOWER AUTHORITIES AS A PROPER COMPARABLE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF AUTHORITIES BELOW IN THIS REGARD . 29. SEEKING EXCLUSION OF JEEVAN SCIENTIFIC TECHNOLO GIES LTD, (SEG), LD. AR SUBMITTED THAT THE TURNOVER OF THE SAID COMPANY WAS LESS THAN RS.1 CRORE. AS PER THE LD. AR, TPO HIMSELF HAD EXCLUDED COMPANIES HAVING TURNOVER BELOW RS.1 CRORE. RELYING ON PAPER BOOK, PAGE 719, WHICH IS A IT(TP)A.380/BANG/2016 PAGE - 28 PART OF THE ANNUAL REPORT OF JEEVAN SCIENTIFIC TECH NOLOGIES LTD, (SEG), LD. AR SUBMITTED THAT THE REVENUES FROM BPO OPERATIONS OF THE SAID COMPANY CAME TO ONLY RS.79.21 LAKHS. AS PER THE LD. AR, TH E TOTAL OPERATING REVENUE OF THE SAID COMPANY FOR THE RELEVANT PREVIO US YEAR WAS ONLY RS.2.49 CRORES OF WHICH SUBSTANTIAL PART WAS FROM O THER STREAMS OF OPERATION. 30. PER CONTRA, LD. DR SUBMITTED THAT THE SEGMENT C ONSIDERED BY THE TPO HAD A TURNOVER OF RS.246,75,00,000/-. THUS ACC ORDING TO HIM JEEVAN SCIENTIFIC TECHNOLOGIES LTD, (SEG), WAS A GOOD COM PARABLE. 31. WE HAVE HEARD THE RIVAL CONTENTIONS. AUDITED B ALANCE SHEET AND FINANCIAL STATEMENT OF JEEVAN SCIENTIFIC TECHNOLOGI ES LTD, (SEG), TAKEN FROM CAPITALINE DATA BASE HAS BEEN FILED BEFORE US BY TH E ASSESSEE AT PAPER BOOK PAGE.677 TO 740. NET REVENUE OF THE SAID COMPANY F OR THE RELEVANT PREVIOUS YEAR FROM ITS OPERATION WAS RS.2,45,39,231 /-, AS PER ITS INCOME STATEMENT AT PAPER BOOK PAGE 725. TPO HAD CONSIDER ED THE REVENUE AS RS.2,46,75,000/-. HOWEVER SEGMENTAL REVENUE OF THE SAID COMPANY, AS IT APPEAR AT PAPER BOOK PAGE 719 SHOW ITS EARNINGS FRO M BPO OPERATIONS IS RS.71.219 LAKHS. THUS TPO HAD CONSIDERED THE TOTAL REVENUE INSTEAD OF THE SEGMENTAL REVENUE. THE TURNOVER OF THE SEGMENT WHI CH WAS BEING IT(TP)A.380/BANG/2016 PAGE - 29 COMPARED WAS LESS THAN RS.1 CRORE AND BY THE YARDST ICK APPLIED BY THE TPO HIMSELF, THE COMPANY OUGHT HAVE BEEN EXCLUDED FROM THE LIST OF COMPARABLES. WHETHER THE SEGMENTAL INFORMATION OF THE SAID COMPANY GIVEN BY THE ASSESSEE AT PAPER BOOK PAGE 719, NEVER THELESS REQUIRES A VERIFICATION. WE THEREFORE SET ASIDE THE COMPARABI LITY OF JEEVAN SCIENTIFIC TECHNOLOGIES LTD, (SEG), BACK TO THE FILE OF THE A O / TPO FOR CONSIDERATION AFRESH. IN CASE THE EARNING OF THE SAID COMPANY FR OM ITS BPO OPERATIONS IS LESS THAN RS.1 CRORE IT HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 32. IN THE RESULT, WE DIRECT EXCLUSION OF ACCENTIA TECHNOLOGIES LTD, ACROPETAL TECHNOLOGIES LTD, (SEG) FROM THE LIST OF COMPARABLES, WHEREAS WE UPHOLD THE INCLUSION OF ICRA ONLINE LTD, (SEG) I N THE LIST OF COMPARABLES. HOWEVER, VIZ., JEEVAN SCIENTIFIC TECH NOLOGIES LTD, (SEG), WE ARE REMITTING THE ISSUE OF ITS FITNESS FOR COMPARIS ON BACK TO THE AO / TPO FOR CONSIDERING THE TURNOVER OF THE BPO SEGMENT OF THE SAID COMPANY. ORDERED ACCORDINGLY. 33. THE ONLY OTHER GROUND PRESSED BY THE LD. AR CON CERNS INCLUSION OF FOREIGN EXCHANGE GAINS / LOSSES AS OPERATING IN NAT URE. DIRECTIONS OF THE DRP IN THIS REGARD AS IT APPEARS AT PAGE.10 OF ITS ORDER IS REPRODUCED HEREUNDER : IT(TP)A.380/BANG/2016 PAGE - 30 34. IT IS CLEAR FROM THE ABOVE THAT DRP HAD DIRECTE D THE AO / TPO TO CONSIDER FOREIGN EXCHANGE GAINS / LOSSES IN RESPECT OF ASSESSEE AS WELL AS THE COMPARABLES AS OPERATING IN NATURE FOR THE TP A NALYSIS. SINCE REVENUE IS NOT IN APPEAL ON THE ABOVE DIRECTIONS OF THE DRP , WE ARE OF THE OPINION THAT THE AO / TPO HAS NO OPTION BUT TO FOLLOW THE D IRECTIONS OF THE DRP. WE DIRECT SO. 35. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF JULY, 2016. SD/- SD/- (VIJAY PAL RAO) (ABRA HAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN IT(TP)A.380/BANG/2016 PAGE - 31 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR IT(TP)A.380/BANG/2016 PAGE - 32