ACIT 14(2)(1), MUMBAI V. HAPAG LLOYD GLOBAL SERVICES P.LTD, THANE

ITA 407/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1494 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: misc
• Appeal Filed On: 28-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL K BENCH MUMB AI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 407/MUM/2016 (ASSESSMENT YEAR 2011-12 ) ACIT- 14(2)(1) 432, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020. VS. M/S HAPAD LLOYD GLOBAL SERVICES PVT. LTD., UNIT NO. 402, 403, DOSTI PINNACLE, PLOT NO.E-7, ROAD NO.22, WAGLE INDUSTRIAL ESTATE, THANE(W)- 400604. PAN: AACCC1314L APPELLANT RESPONDE NT CROSS OBJECTION NO. 27/MUM/2016 (ASSESSMENT YEAR 20 11-12 ) M/S HAPAD LLOYD GLOBAL SERVICES PVT. LTD., UNIT NO. 402, 403, DOSTI PINNACLE, PLOT NO.E-7, ROAD NO.22, WAGLE INDUSTRIAL ESTATE, THANE(W)- 400604. PAN: AACCC1314L V S. ACIT-14(2)(1) 432, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SH. JAYANT KUMAR (CIT-DR) RESPONDENT BY : SHRI DHANESH BAFNA (AR) DATE OF HEARING : 01.03.2019 DATE OF PRONOUNCEMEN T : 15.03.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT (ACT) IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 144C(13) DATED 30.11.2015 PASSED IN PU RSUANCE OF DIRECTION OF LD. DISPUTE RESOLUTION PANEL-1, MUMBA I (FOR SHORT DRP) ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 2 DATED 16.10.2015 FOR ASSESSMENT YEAR 2011-12. THE A SSESSEE FILED ITS CROSS OBJECTION ON THE SERVICE OF NOTICE OF APPEAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS OF THE CASE HONBLE DRP-1 WAS CORRECT IN ALLOWING THE COMPARABLE TAKEN BY THE ASSESSEE I.E. MICROLAND LTD DESPITE TPO HAVING ESTABLISHED THE FUNCTIONAL DISSIMILARITY. 2. WHETHER ON THE FACTS OF THE CASE HONBLE DRP-1 WAS CORRECT IN ALLOWING THE COMPARABLE TAKEN BY THE ASSESSEE I.E. E4E HEALT HCARE BUSINESS ERVIES LTD DESPITE TPO HAVING ESTABLISHED THE FUNCTIONAL DISSI MILARITY. 3. WHETHER ON THE FACTS OF THE CASE HONBLE DRP-1 WAS CORRECT IN REJECTING THE COMPARABLE TAKEN BY THE ASSESSEE I.E. ICRA TECH NO ANALYTICS LTD DESPITE TPO HAVING ESTABLISHED THE FUNCTIONAL SIMILARITY. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR A T THE TIME OF HEARING OF APPEAL. 2. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE BELOW MENTIONED GROUNDS ARE WITHOUT PREJUDICE T O THE RELIEF GRANTED BY THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') / LEARNED ASSESSING OFFICER C'AO') IN RELATION TO THE TRANSFER PRICING ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER ('TPO') ON THE INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED SERVICES PROVIDED BY THE CROSS-OBJECTOR / RESPONDEN T TO ITS ASSOCIATED ENTERPRISES. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE DRP / LD. AO HAS ERRED IN UPHOLDING THE ACTION OF T HE TPO IN INCLUDING ACCENTIA TECHNOLOGIES LIMITED AS COMPARABLE COMPANY IN RELATION TO THE INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLE D SERVICES PROVIDED BY THE CROSS-OBJECTOR / RESPONDENT TO ITS ASSOCIATED ENTER PRISES. IT IS THEREFORE PRAYED THAT ACCENTIA TECHNOLOGIES L IMITED OUGHT TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLE COMPANIES SINCE IT IS FUNCTIONALLY NOT COMPARABLE TO THE CROSS-OBJECTOR / RESPONDENT. ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE DRP / LD. AO HAS ERRED IN UPHOLDING THE ACTION OF T HE TPO IN INCLUDING ACROPETAL TECHNOLOGIES LIMITED AS COMPARABLE COMPAN Y IN RELATION TO THE INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLE D SERVICES PROVIDED BY THE CROSS-OBJECTOR / RESPONDENT TO ITS ASSOCIATED ENTER PRISES. IT IS THEREFORE PRAYED THAT ACROPETAL TECHNOLOGIES LIMITED OUGHT TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLE COMPANIES SINCE IT IS FUNCTIONALLY NOT COMPARABLE TO THE CROSS-OBJECTOR / RESPONDENT. THE CROSS-OBJECTOR / RESPONDENT CRAVES LEAVE TO ADD , ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS 10 0% SUBSIDIARY OF HAPAG LLOYD AG. THE ASSESSEE IS IN THE BUSINESS OF PROVID ING IT ENABLED BACK OFFICE SERVICE RELATING TO DOCUMENTATION PROCESSING TO ITS ASSOCIATED ENTERPRISES (AE). THE ASSESSEE FILED ITS RETURN O F INCOME ON 29.11.2011 DECLARING TOTAL INCOME AT RS. 1,43,41,449/-. THE R ETURN WAS SELECTED FOR SCRUTINY. THE ASSESSEE WITH RETURN OF INCOME FURNIS HED AUDIT REPORT IN FORM NO. 3CEB IN RESPECT OF INTERNATIONAL TRANSACTI ON WITH ITS ASSOCIATED ENTERPRISES (AE). THE ASSESSING OFFICER MADE A REFERENCE UNDER SECTION 92CA(1) TO TPO VIDE REFERENCE DATED 3 0.12.2013 FOR DETERMINATION OF ARMS LENGTH PRICE (ALP) REPORTED IN FORM NO. 3CEB. THE ASSESSEE HAD BENCH MARKED THE TRANSACTION BY SE LECTING TRANSACTION NET MARGIN METHOD (TNMM) AND ARRIVED AT THE ALP BY USING THE FOLLOWING SET OF COMPARABLE. SR. NO. NAME OF THE COMPANY TP STUDY OP/TC (USING 3 YEARS SINGLE YEAR UPDATE OP/TC ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 4 AVERAGE DATA) (FY 2010-11) 1 AOK IN HOUSE BPO SERVICES LTD. 4.29% REJECTED BY TPO DUE TO RPT FILTER OF 25% 2 CAMEO CORPORATE SERVICES LTD. 9.65% 11.43% 3 SOSMIC GLOBAL LIMITED 30.20% 9.81% 4 INFORMED TECHNOLOGIES INDIA LTD. 24.18% 17.73% 5 INFOSYS BPO LTD. 9.22% 10.96% 6 JINDAL INTELLICOM PRIVATE LTD. 2.94% 1.69% 7 PROFESSIONAL MANAGEMENT CONSULTANTS PVT. LTD. 22.44% 9.65% 8 SPARSH BPO SERVICES 3.34% 0.12% 9 E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 28.14% 9.39% 10 IN HOUSE PRODUCTION LTD. 11.84% 10.50% 11 MICROLAND LTD. -9.82% 8.50% 12 TECHPROCESS SOLUTIONS LTD. 33.50% 4.80% 13 DHANUS TECHNOLOGIES LTD. 52.21% DATA NOT AVAILABLE 14 R. SYSTEMS INTERNATIONAL LTD. -24.19% 2.57% 15 AVERAGE 14.16% 8.09% 16 ASSESSEES MARGIN 14.92% 14.92% 4. BASED ON THE FUNCTIONAL ANALYSIS, THE ASSESSEE WAS CHARACTERIZED AS IT ENABLED SERVICES (ITES) PROVIDER, ASSUMING LIMITED RISK NORMALLY ASSOCIATED WITH CARRYING OUT SUCH BUSINESS. THE ASS ESSEE EARNED A MARK- UP OF 14.92% ON COST. ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 5 5. DURING THE TP PROCEEDING, THE TPO APPLIED ADDITIONA L FILTERS FOR SELECTION OF COMPARABLE COMPANIES AND REJECTED 13 C OMPARABLE COMPANIES AND ACCEPTED ONLY ONE COMPANY FROM ASSESS EES SET OF COMPARABLE I.E. JINDAL INTELLICOM PVT. LTD. THE TPO FURTHER INTRODUCED 4 NEW COMPARABLE NAMELY ACROPETAL TECHNOLOGIES LTD., ECLERX SERVICES PVT. LTD., ACCENTIA TECHNOLOGY LTD. AND ICRA TECHNO ANALYTICS LTD. THE TPO ARRIVED AT THE FOLLOWING SET OF COMPARABLE: SR. NO. NAME OF THE COMPANY OP/TC 1 JINDAL INTELLICOM LIMITED (TP STUDY COMPARABLE) 10.96% 2 ACROPETAL TECHNOLOGIES LIMITED 32.92% 3 ICRA TECHNO ANALYTICS 24.83% 4 ACCENTIA TECHNOLOGIES LIMITED 28.89% AVERAGE 24.40% 6. ON THE BASIS OF ABOVE SET OF COMPARABLE, THE TPO DE TERMINED ALP AT 24.40% AND SUGGESTED ADJUSTMENT OF RS. 5.53 CRORE T O THE ASSESSEE TRANSFER PRICE VIDE ITS ORDER DATED 19.01.2015 PASS ED UNDER SECTION 92CA(3). ON THE BASIS OF ADJUSTMENT SUGGESTED BY TP O, THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER DATED 09. 03.2015 UNDER SECTION 143(3) READ WITH SECTION 144C(3). 7. THE ASSESSEE FILED ITS OBJECTION BEFORE THE DRP RAI SING VARIOUS GROUNDS OF APPEAL ON COMPARABILITY AS WELL AS AGAINST INCLU SION OF COMPARABLE COMPANIES NAMELY ACROPETAL TECHNOLOGIES LTD., ACCEN TIA TECHNOLOGY ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 6 LTD. AND ICRA TECHNO ANALYTICS LTD. THE ASSESSEE AL SO MADE SUBMISSION FOR INCLUSION OF MICRO LAND LTD. AND E4E HEALTHCARE BUSINESS SERVICES LTD. THE DRP AFTER CONSIDERING TH E OBJECTIONS OF ASSESSEE AND THE SUBMISSION MADE BEFORE THEM, PARTL Y AGREED WITH THE SUBMISSION OF ASSESSEE AND DIRECTED TO EXCLUDE ICRA TECHNO ANALYTIC AND TO INCLUDE MICROLAND LTD. AND E4E HEALTHCARE BU SINESS SERVICES LTD. IN FINAL SET OF COMPARABLE. THE ASSESSEE ALSO RAISE D THE CONTENTION THAT THE TPO COMPUTED ARMS LENGTH OPERATING PROFIT (OP) OF ASSESSEE AT RS. 5,53,86,509/- AND HAS NOT REDUCED THE OP SHOWN BY T HE ASSESSEE IN THE FINANCIAL OF RS. 3,38,70,976/- AND WITHOUT ALLOWING THE CREDIT FOR OP ALREADY SHOWN, THE TP ADJUSTMENT HAS BEEN DETERMINE S AT RS.5,53,86,509/- WHEREAS THE CORRECT ADJUSTMENT WOU LD BE RS. 2,15,15,553/-. THE TPO/AO DIRECTED TO REDUCE THE OP ALREADY SHOWN BY THE ASSESSEE. THEREFORE, AS PER THE DIRECTION OF DR P, THE ALP WAS 11.85% WHICH IS LOWER THAN THE ASSESSEES MARGIN OF 14.92%. THEREFORE, THE TP ADJUSTMENT SUGGESTED BY TPO WAS DELETED IN T HE FINAL ASSESSMENT ORDER DATED 30.11.2015 PASSED UNDER SECTION 143(3) R.W.S. 144C(13). AGGRIEVED BY THE DIRECTION OF DRP, THE REVENUE HAS FIELD THE PRESENT APPEAL BEFORE US. ON SERVICE OF NOTICE OF APPEAL, T HE ASSESSEE HAS FILED ITS CROSS OBJECTION BEFORE US. 8. ON PERUSAL OF RECORD OF THE CASE, WE HAVE NOTED THA T REGISTRY HAS RAISED OBJECTION THAT THE APPEAL IS BARRED BY 34 DAYS. THE DEFECT MEMO WAS ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 7 ISSUED TO THE REVENUE/ASSESSING OFFICER. THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 144C (13) WAS PASSED ON 30.11.2015 AND THE PRESENT APPEAL WAS FILED BEFORE THE TRIBUNAL ON 28. 01.2016. THUS, THE APPEAL IS FILED WITHIN PRESCRIBED PERIOD OF FILING APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE ( AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. DR FOR THE REVENUE SUBMITS THAT MICROLAND LTD. IS NOT A GOOD COMPARABLE AND SUBMITS THAT THE SAID COMPANY SHOULD BE EXCLUDE ON ACCOUNT OF PE RSISTENT LOSS MAKING COMPANY. THIS COMPANY BASED ON FUNCTIONAL DIFFERENC ES, THE LD DR FOR THE REVENUE RELIED UPON THE DECISION OF MUMBAI TRIB UNAL IN MICROSOFT INDIA (R&D) (P.) LTD. [2018] 97 TAXMANN.COM 360 (DE L TRIB.). 10. FOR EXCLUSION OF E4E HEALTHCARE SERVICES LD. DR SUBMITS THAT THE COMPANY IS ENGAGED IN SOFTWARE DEVELOPMENT AND IS L IABLE TO BE EXCLUDED IN ABSENCE OF P&L A/C. IN SUPPORT OF HIS S UBMISSION, THE LD. DR RELIED UPON THE DECISION OF DELHI TRIBUNAL IN OK S SPAN TECH (P.) LTD. VS. DCIT [2018] 97 TAXMANN.COM 498(DELHI-TRIB. ). 11. FOR ICRA TECHNO ANALYTICS THE LD. DR FURTHER SUBMITS THAT ICRA TECHNO ANALYTICS SHOULD BE INCLUDED AS A PART OF CO MPARABLE ON THE BASIS OF FINDING AND THE REASONING ARRIVED BY TPO. ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 8 12. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF DRP. THE LD. AR FURTHER SUBMITS THAT MICROLAND LTD. IS IT INFRASTRUCTURE ENABLED SERVICE PROVIDER. IT IS ENGAGED IN RENDERIN G SOFTWARE SERVICES COMPRISING NETWORKING AND INFRASTRUCTURE MANAGEMENT SERVICES AND ITES. THE FUNCTIONS UNDERTAKING BY MICROLAND UNDER ITS ITS SEGMENT ARE SIMILAR VIS--VIS ITES PROVIDED BY ASSESSEE TO ITS AE AND SHOULD BE CONSIDERED AS A GOOD COMPARABLE. THE LD. AR FURTHER SUBMITS THAT TPO REJECTED THIS COMPANY BASED ON FUNCTIONAL DIFFERENC ES, THE DRP REVERSED IN ITS DIRECTION AFTER CONSIDERING THE RELEVANT FAC T. THE REVENUE HAS RAISED GROUNDS OF APPEAL FOR EXCLUSION OF THIS COMPANY ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND NOT ON THE GROUND OF P ERSISTENT LOSS MAKING. THE SUBMISSION OF LD. DR THAT MICRO LAND LTD. BEING A PERSISTENT LOSS MAKER IS NOT SUPPORTED BY ANY FACT OR FIGURE OF PAS T MARGINS OF MICRO LAND LTD. THE LD. AR SUBMITS THAT MICRO LAND LTD. I S FUNCTIONALLY SIMILAR TO THE ASSESSEE AND SHOULD BE RETAINED AS F INAL SET OF COMPARABLE. FOR E4E HEALTHCARE BUSINESS SERVICES LTD. THE LD AR FOR THE ASSESSEE SUBMITS THAT THIS COMPANY IS ENGAGED IN PROVIDING H EALTHCARE OUTSOURCING SERVICES WHICH IS CLEARLY IN THE NATURE OF ITES SERVICES AS HELD BY DRP AND IS GOOD COMPARABLE TO THE ASSESSEE. FOR RELIANCE PLACED BY LD. DR FOR THE REVENUE FOR EXCLUSION OF THIS COM PARABLE ON THE BASIS OF DECISION OF OKS SPAN TECK (SUPRA), THE LD. AR SU BMITS THAT THE SAID DECISION WAS RENDERED FOR A.Y. 2010-11 WHEREAS THE YEAR UNDER ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 9 CONSIDERATION IS A.Y. 2011-12. THE FACTS DISCUSSED IN THE DECISION PERTAIN TO A.Y. 2010-11 AND FOR A.Y. 2011-12 THE SA ME FACT PATTERN DOES NOT EXIST. THE LD. AR SUBMITS THAT P&L A/C FOR A.Y. 2011-12 OF E4E HEALTHCARE BUSINESS SERVICES IS AVAILABLE AND IS FI LED ON RECORD VIDE PAGE NO. 456 OF THE PAPER BOOK. THE ANNUAL REPORT O F THE SAID COMPANY CLEARLY STATES THAT IT ENGAGED IN PROVIDING HEALTHC ARE OUTSOURCING SERVICES WHICH IS COMPARABLE TO ITES PROVIDER. THE LD. AR SU BMITS THAT THIS COMPANY WAS RIGHTLY INCLUDED BY DRP IN FINAL SET OF COMPARABLE. 13. FOR ICRA TECHNO ANALYTICS LTD., THE LD. AR SUBMITS THAT THE SAID COMPANY IS ENGAGED IN THE SOFTWARE DEVELOPMENT AND CONSULTANCY, ENGINEERING SERVICES, WEB DEVELOPMENT AND HOSTING A ND SUBSEQUENTLY DIVERSIFIED ITSELF INTO BUSINESS ANALYTICS AND BUSI NESS PROCESS OUTSOURCING. NO SEGMENTAL INFORMATION IS AVAILABLE BIFURCATING ITS ACTIVITIES INTO SOFTWARE DEVELOPMENT AND BUSINESS P ROCESS. THE DRP HAS RIGHTLY HELD THAT ACTIVITIES IS CONDUCTED BY THIS C OMPANY CANNOT BE CONSIDERED AS ITES AND FURTHER IN ABSENCE OF SEGMEN TAL INFORMATION THIS COMPANY IS LIABLE TO BE REJECTED FROM FINAL SET OF COMPARABLE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIE D UPON THE DECISION OF HONBLE DELHI HIGH COURT IN PCIT VS. B.C. MANAGEMEN T [403 ITR 45] (DELHI), WHEREIN IN THE SAME A.Y. I.E. A.Y. 2011-12 , ICRA TECHNO ANALYTICS HAS BEEN HELD TO BE INCOMPARABLE TO THE C OMPANY ENGAGED IN ITES SERVICES. ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 10 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FIRST WE SHALL TAKE UP THE DISPUTED COMPARABLE IN APPEAL OF REVENUE. THE REVEN UE IS SEEKING EXCLUSION OF MICROLAND LIMITED AND E4E HEALTHCARE B USINESS SERVICES PVT. LTD. FOR EXCLUSION OF MICROLAND LIMITED, THE L D. DR FOR THE REVENUE HAS RELIED UPON THE DECISION OF DELHI TRIBUNAL IN M ICROSOFT INDIA (R&D) P. LTD.(SUPRA) WHEREIN THE SAID COMPARABLE WAS EXCL UDED ON ACCOUNT OF PERSISTENT LOSS. THE CO-ORDINATE BENCH ALSO OBSERVE D THAT HAD THERE BEEN COMPARISON BETWEEN COMPANYS SOFTWARE DEVELOPMENT S ERVICES SEGMENT AND ASSESSEES SOFTWARE DEVELOPMENT SEGMENT THE QUE STION OF PERSISTENT LOSSES WOULD HAVE PALED INTO INSIGNIFICANCE. THE D RP DIRECTED TO INCLUDE THIS COMPARABLE ON THE OBSERVATION THAT THI S COMPANY IS INTO ITES SERVICES AND THEREFORE, NO REASON TO REJECT IT AS COMPARABLE AND DIRECTED TO ACCEPT IT AT SEGMENTAL LEVEL. WE FIND F ORCE IN THE SUBMISSION OF ASSESSEE THAT THE REVENUE HAS CHALLENGED THIS CO MPARABLE ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND NOT ON THE G ROUND THAT THIS COMPANY IS PERSISTENT LOSS MAKING COMPANY. THIS COM PANY IS COMPARABLE AS RENDERING SOFTWARE SERVICES COMPRISIN G NETWORKING AND INFRASTRUCTURE MANAGEMENT SERVICES AND ITES. THE FU NCTIONS OF THIS COMPARABLE UNDER ITES ARE SIMILAR AS OF ASSESSEE. E VEN THE CO-ORDINATE BENCH IN MICROSOFT INDIA (R&D) P. LTD. (SUPRA) HELD THAT IN CASE COMPARISON BETWEEN COMPANYS SOFTWARE DEVELOPMENT S ERVICES SEGMENT ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 11 AND ASSESSEES SOFTWARE DEVELOPMENT SEGMENT THE QUE STION OF PERSISTENT LOSSES WOULD HAVE PALED INTO INSIGNIFICANCE. THEREF ORE, WE ARE OF THE VIEW THAT THIS COMPARABLE SHOULD BE RETAINED IN THE LIST OF COMPARABLE. THUS, THE REVENUE FAILED TO CONVINCE US FOR THE EXC LUSION OF THIS COMPARABLE. 15. FOR EXCLUSION OF E4E HEALTHCARE BUSINESS SERVICES L TD., THE LD. DR FOR THE REVENUE HAS STRONGLY RELIED ON THE DECISION OF OKS SPAN TECH (P.) LTD. (SUPRA) ON THE GROUND THAT IN ABSENCE OF P&L A /C AND IS ENGAGED IN SOFTWARE DEVELOPMENT. ON THE OTHER HAND, WE HAVE NO TED THAT THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE DECIS ION IN OKS SPAN TECH (P.) LTD. WAS RENDERED FOR A.Y. 2010-11 WHEREA S THE YEAR UNDER CONSIDERATION IS 2011-12. THE ACCOUNTS OF P&L A/C O F E4E HEALTHCARE BUSINESS SERVICES LTD. IS FILED BY ASSESSEE AS PER PAGE 455 OF PAPER BOOK AND AT PAGE NO. 457 OF PAPER BOOK IN SCHEDULE- 1 OF SIGNIFICANT ACCOUNTING POLICY, THE COMPANY IS PRIMARILY ENGAGED IN PROVIDING HEALTHCARE OUTSOURCING SERVICES FOR HEALTHCARE INDU STRIES IN UNITED STATE OF AMERICA (USA). THE P& L A/C FOR A.Y. 2011-12 IS AVAILABLE ON PAGE 456 OF PAPER BOOK. THEREFORE, IN OUR UTMOST REGARD TO THE DECISION OF CO- ORDINATE BENCH IN OKS SPAN (SUPRA) WHICH IS BASED O N THE FACT THAT IN ABSENCE OF P&L A/C OF THE COMPANY IS NOT COMPARABLE AND ENGAGED IN SOFTWARE DEVELOPMENT. HOWEVER, THE P&L A/C FOR A.Y. 2011-12 IS AVAILABLE AS REFERRED ABOVE AND THE COMPANIES IS PR OVIDING HEALTHCARE ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 12 OUTSOURCING SERVICES WHICH IS COMPARABLE TO ITES PR OVIDER. THUS, THE REVENUE ALSO FAILED FOR EXCLUSION OF THIS COMPARABL E. 16. FOR INCLUSION OF ICRA TECHNO ANALYTICS LTD. (SUPRA. THE DRP HELD THAT ICRA TECHNO ANALYTICS LTD. IS INTO DIVERSIFIED BUSI NESS PROCESS OUTSOURCING AND CANNOT BE CUMULATIVELY CALLED ITES AND FUNCTIONALLY NOT COMPARABLE. THE HONBLE DELHI HIGH COURT FOR SAME A .Y. I.E. A.Y. 2011-12 IN PCIT VS. BC MANAGEMENT (SUPRA) HELD THAT THE SAID COMPANY IS ENGAGED IN PROCESSING AND PROVIDING SOFTWARE DEV ELOPMENT AND CONSULTANCY AND ENGINEERING SERVICES, WEB DEVELOPME NT SERVICES. THEREFORE, THE REVENUE ALSO FAILED FOR INCLUSION OF THIS COMPARABLE TO ASSESSEE-COMPANY. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND NO.1 TO 3 RAISED BY REVENUE IS DISMISSED. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. CROSS OBJECTION NO. 27/MUM/2016 BY ASSESSEE 18. IN SUPPORT OF GROUNDS OF CROSS OBJECTIONS , THE LD. AR OF THE ASSESSEE SUBMITS THAT ACCENTIA TECHNOLOGIES LTD. AND ACROPETAL TECHNOLOGIES LTD. WERE INCLUDED BY TPO AND UPHELD BY DRP. THE LD . AR SUBMITS THAT BOTH THE COMPANY IS LIABLE TO EXCLUDED FROM THE FIN AL SET OF COMPARABLE. FOR ACCENTIA TECHNOLOGY LTD., THE LD. AR SUBMITS TH AT THIS COMPANY IS KNOWLEDGE PROCESS OUTSOURCE (KPO) AND PRODUCT COMPA NY WHICH PROVIDE HIGH END SOFTWARE SERVICES AND SOFTWARE AS A SERVICE (SAAS) TO ITS CUSTOMER. THIS COMPANY IS MAINLY ENGAGED IN RENDERI NG HIGH END AND ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 13 HEALTHCARE MANAGEMENT SERVICES SUCH AS MEDICAL TRAN SCRIPTION, BILLING AND CODING. IT ALSO UNDERTAKES SOFTWARE DEVELOPMENT AND IMPLEMENTATION. THE ANNUAL REPORT OF THIS COMPANY S HOWS THAT IT PROVIDES PRODUCT SUCH INSTAKARE, EMR SOFTWARE, INST AWEB AND INSTAEMR. SEGMENTAL INFORMATION OF THIS COMPANY IS NOT AVAILABLE. THIS COMPANY OWNED SIGNIFICANT AMOUNT OF INTELLECTUAL PR OPERTY RIGHT (IPR), BRANDS AND GOODWILL IN ITS BALANCE-SHEET FOR F.Y. 2 010-11. THIS COMPANY OWNED GOODWILL OF RS. 21.94 CRORE. IN SUPPO RT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN PCIT VS. APTARA TECHNO LOGY PVT. LTD. (ITA NO. 1209 OF 2015) AND HONBLE DELHI HIGH COURT IN PCIT VS. B.C. MANAGEMENT SERVICES PVT. LTD. [89 TAXMANN.COM 68] ( HC DELHI), MUMBAI TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 201 -11 IN ITA NO. 7539/MUM/2014 AND CAPITA INDIA PVT. LTD. VS. ACIT I N ITA NO. 356/MUM/2016. 19. FOR EXCLUSION OF ACROPETAL TECHNOLOGY LTD., THE LD. AR SUBMITS THAT THIS COMPANY IS NOT FUNCTIONARY COMPARABLE. THIS COMPANY IS IN SOFTWARE DEVELOPMENT, WEB DEVELOPMENT AND RENDERING SERVICES IN THE FIELD OF ENGINEERING DESIGN SERVICES AND PRODUCT DEVELOPMENT ACTIVITIES IN MANUFACTURING RETAIL AND EDUCATION SECTOR. THIS COM PANY IS ALSO ENGAGED IN RESEARCH AND DEVELOPMENT ACTIVITIES AND CARRIES OUT SIGNIFICANT ONSITE OPERATIONS AND HAS ONSITE DEVELOPMENT EXPENSES OF R S. 558 CRORE WHICH ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 14 AMOUNTS FOR 34.09% OF TOTAL EMPLOYEES EXPENSES AND 46.99% OF TOTAL EXPENSES. 20. ON THE OTHER HAND, THE LD. DR FOR REVENUE IN REPLY TO THE SUBMISSION OF LD. AR FOR ASSESSEE ON THE GROUNDS OF CROSS OBJECTI ONS SUBMITS FOR EXCLUSION OF ACROPETAL TECHNOLOGY LTD. AND MADE REL IANCE ON THE ORDER OF TPO. IN SUPPORT OF HIS SUBMISSION, THE LD. DR AL SO RELIED UPON THE DECISION OF ACIT VS. MAERSK GLOBAL SERVICES CENTRE [94 TAXMANN.COM 418]. 21. IN REJOINDER, THE LD. AR SUBMITS THAT IN THE CASE O F MAERSK GLOBAL SERVICES CENTRE (SUPRA) DECISION HAS NOT CONSIDERED THE ARGUMENT OF ACROPETAL BEING ENGAGED IN R&D ACTIVITIES. 22. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE ORDER OF AUTHORITIES BELOW. THE ASSESSEE IS SEEKING EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. AND ACROPETAL TECHNOLOGIES. THE DRP WHILE INCLUDING ACCENTIA TECHNOLOGIES LTD. CONCLUDED THAT THIS COMPANY IS INTO HEALTHCARE BPO INCLUDING MEDICAL TRANSCRIPTION AND ALSO PRODUCT BEING SOFTWARE DEVELOPMENT AND MARKETED INDEPENDENT LY. THE PRODUCTS ARE FOR DOCTORS AND PATIENTS. THE COMPANY IS OPERAT ING IN TWO SEGMENT NAMELY IT AND ITES AND THAT THE ASSESSEE HAS IGNORE D THE FACT THAT THESE SERVICES ARE IN THE NATURE OF IT ENABLED SERVICES B ROADLY SIMILAR TO THE INTERNATIONAL SERVICES RENDERED BY ASSESSEE. THE LD . AR OF THE ASSESSEE MAINLY RELIED UPON THE DECISION OF JURISDICTIONAL H IGH COURT IN PCIT VS. ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 15 APTARA TECHNOLOGY PVT. LTD. (SUPRA) WHEREIN IT WAS HELD THAT ACCENTIA TECHNOLOGIES LTD. IS INCOMPARABLE TO ITES PROVIDER. SIMILARLY, THE HONBLE DELHI HIGH COURT IN PCIT VS. B.C. MANAGEMEN T SERVICES (SUPRA) ALSO HELD THAT ACCENTIA TECHNOLOGIES LTD. IS INCOMPARABLE TO ITES. FURTHER IN ASSESSEES OWN CASE FOR A.Y. 2010- 11 IN ITA NO. 7539/M/2014 WAS EXCLUDED FROM THE SET OF COMPARABLE . THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPARABLE. 23. THE ASSESSEE ALSO RAISED GROUND FOR EXCLUSION OF AC ROPETAL TECHNOLOGIES FROM THE FINAL SET OF COMPARABLE. WE HAVE NOTED THA T THE DRP UPHELD THE INCLUSION OF ACROPETAL TECHNOLOGIES, DESPITE OBSER VING THAT THIS COMPANY IS INTO THREE SEGMENT VIZ ENGINEERING DESIG N, ITS AND HEALTHCARE BPO AND OVERRULED THE OBJECTION OF THE A SSESSEE FOR EXCLUSION OF THIS COMPARABLE. THE LD. DR FOR THE REVENUE MAKI NG HIS SUBMISSIONS AND OBJECTED FOR EXCLUSION OF THIS COMPARABLE BY MAKING RELIANCE ON THE DECISION OF MUMBAI TRIBUNAL IN ACIT VS. MAERSK GLOBAL SERVICES CENTRE(I) (P.) LTD. WE MAY ALSO REFER THAT THE LD. AR HAD SUBMITTED THAT IN THE MAERSK GLOBAL SERVICES CENTRE (I) (P.) LTD ( SUPRA) THE ARGUMENT THAT THIS COMPARABLE IS ENGAGED IN R&D ACTIVITIES A ND HAVING HUGE ONSITE EXPENSES WAS NOT CONSIDERED. WE HAVE NOTED T HAT THE CO-ORDINATE BENCH IN MAERSK GLOBAL SERVICES CENTRE (I) (P.) LTD (SUPRA) OBSERVED THAT THIS COMPANY IS INTO DIFFERENT FIELD BEING ENG AGED IN THE BUSINESS OF ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 16 DEVELOPMENT OF COMPUTER SOFTWARE, PRODUCT OFFERING INTEGRATED ENTERPRISES SOLUTIONS AND IS OFFERING COST EFFECTIV E SOLUTION AND CREATED NICHE PRESENCE IN BFSI, HEALTH AND ENERGY AND IS PR IMARILY AND ENGINEERING DESIGN SERVICE COMPANY. THE ONSITE DEVE LOPMENT EXPENSES OF THIS COMPARABLE IS RS. 55.77 CRORE WHICH ACCOUNT S FOR 342.09% OF TOTAL EMPLOYEE COST AS PER PAGE 396 TO 441 OF PAPER BOOK. CONSIDERING THE ABOVE FACTUAL MATRIX AND UTMOST REGARD THE DECI SION OF CO-ORDINATE BENCH IN MAERSK GLOBAL SERVICES CENTRE (I) (P.) LTD . IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. THEREFORE, IN OUR VI EW THAT THIS COMPARABLE IS ALSO NOT COMPARABLE WITH THE ASSESSEE-COMPANY. T HUS, WE DIRECT THE AO/TPO TO EXCLUDE THE ACROPETAL TECHNOLOGIES LTD. F ROM THE SET OF COMPARABLE. 24. IN THE RESULT, GROUNDS OF CROSS OBJECTION RAISED BY REVENUE ARE ALLOWED. 25. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED A ND CROSS OBJECTION FILED BY ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/03/2019. SD/- SD/- R.C. SHARMA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 15.03.2019 SK ITA NO. 2243 MUM 2015-M/S HAPAD LLOYD GLOBAL S ERVICES PVT. LTD. 17 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI