M/s. Omniglobe Information Technologies (India) Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4343/DEL/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3769 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 08-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H K CHOUDHARY CIT DR
• Keywords: Transfer pricing; International transaction; Additional evidence; Set aside
• Section: 271(1)(c); 143(3); 92F; 234B; 144C

Judgement Text

, -2, IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI # ## # # ## # # ## # # ## # %&% %&% %&% %&% ' ' ' ' BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & DR.B.R.R.KUMAR, ACCOUNTANT MEMBER # ## # / ITA NO.4343/DEL/2014 (( (( (( (( / ASSESSMENT YEAR: 2006-07 OMNIGLOBE INFORMATION TECHNOLOGIES (INDIA) PVT. LTD., E-11, RAJOURI GARDEN NEW DELHI-110027. PAN-AAACO6606M .......... )* /APPELLANT VS THE INCOME TAX OFFICER, WARD 13(4), NEW DELHI . +,)* / RESPONDENT )*-.% / APPELLANT BY : SH. NEERAJ JAIN, ADV, SH. ABHISHEK AGGARWAL, ADV, C.A +,)*-.% / RESPONDENT BY : SH. H.K. CHOUDHARY, CIT DR -/0& / DATE OF HEARING: 05.11.2019 12 -/0& / DATE OF PRONOUNCEMENT: 29.11.2019 / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF ASSESSING OFFICER, NEW DELHI, DATED 29.05.2014 RELA TING TO ASSESSMENT ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 2 YEAR 2006-07 PASSED UNDER SECTION 254 R.W.S. 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING ASSESSMENT UNDER SECTION 143(3)/ 144C RE AD WITH SECTION 254 OF THE INCOME-TAX ACT (THE ACT) AT AN INCOME OF RS. 1,15,57,890 AS AGAINST THE RETURNED INCOME OF RS. 3,417. 2. THAT THE ASSESSING OFFICER / TPO ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS. 1,15,57,886 ALLEGEDLY ON ACCOUNT OF DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERN ATIONAL TRANSACTIONS' OF PROVISION OF BPO / ITES SERVICES TO THE ASSOCIAT ED ENTERPRISE ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. 2.1 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN A DOPTING ADDITIONAL FILTER OF EXPORT SALES LESS THAN 75% OF TOTAL INCOME WITHOUT APPRECIATING THAT SELECTION OF COMPARABLE COMPANY S HALL BE ON FAR ANALYSIS AND APPLICATION OF SUCH QUANTITATIVE FILTE RS SELECTIVELY DEFIES THE PURPOSE OF THE BENCHMARKING ANALYSIS. 2.2 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN R EJECTING THE FOLLOWING COMPANIES ON THE BASIS OF EXPORT FILTER A ND NOT APPRECIATING THAT THEY WERE FUNCTIONALLY COMPARABLE TO THE APPEL LANT: A) SUREVIN INTERNET SERVICES LTD. B) E-NXT FINANCIAL LTD. C) COSMIC GLOBAL LTD. D) AOK IN-HOUSE BPO SERVICES LTD. E) CAMEO CORPORATE SERVICES LTD. ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 3 2.3 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN R EJECTING EUREKA OUTSOURCING SOLUTIONS PVT. LTD. ON THE GROUN D THAT IT WAS A PERSISTENT LOSS MAKING COMPANY AND NOT APPRECIATING THAT THE COMPANY IS FUNCTIONALLY COMPARABLE TO THE APPELLANT . 2.4 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT THE COMPANY HAS EARNED A PROFIT M ARGIN OF 0.25% OVER OPERATING COST IN THE RELEVANT YEAR AND ACCORD INGLY IS NOT A PERSISTENT LOSS MAKING COMPANY. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO ERRED IN NOT HOLDING THAT SINCE THE ASSOCIAT ED ENTERPRISE (THE AE) HAS INCURRED A LOSS, IN RELATION TO ITES SERVICES RENDERED BY THE APPELLANT TO THE AE, WHICH, IN TURN, WERE RE NDERED BY THE AE TO ULTIMATE THIRD PARTY CUSTOMER(S), NO TRANSFER PR ICING ADJUSTMENT WAS WARRANTED. 3.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO ERRED IN NOT HOLDING THAT THE TRANSFER PRICI NG ADJUSTMENT, AT BEST, COULD NOT EXCEED THE TOTAL PROFIT EARNED BY T HE GROUP, AS THE SAME WOULD RESULT IN TAXATION OF NOTIONAL INCOME. 3.2 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF RE NDERING LOW END DATA PROCESSING SERVICES RESULTING IN LOW COMBINED PROFITABILITY AND, THEREFORE, THERE COULD NOT BE AN ALLEGATION AS TO T RANSFER PRICING. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT UNDERTAKING COMPARABILITY ADJUSTMENT TO ACCOUNT FOR DIFFERENCE IN WORKING CAPITAL EMPLOYED BY THE APPELLANT VIS-A-VIS COMPARABLE COMPANIES CONSIDERED IN THE ORDER PASSED UNDER SECT ION 92CA(3)/144C OF THE ACT. 5. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT ALLOWING APPROPRIATE RISK ADJUSTMENT TO ESTABLISH C OMPARABILITY ON ACCOUNT OF THE APPELLANT BEING A LOW-RISK-BEARING C APTIVE SERVICE ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 4 PROVIDER AS OPPOSED TO THE COMPARABLE COMPANIES WHO WERE INDEPENDENT ITES SERVICE PROVIDER, EVEN WHILE HOLDI NG THAT THE ASSESSEE CANNOT BE COMPARED TO A RISK FREE ENTITY. 6. WITHOUT PREJUDICE THAT THE ASSESSING OFFICER ERR ED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE INCOME OF THE A PPELLANT BEING EXEMPT UNDER SECTION 10A OF THE INCOME-TAX ACT, 196 1 ('THE ACT), THERE COULD BE NO MOTIVE TO DIVERT ANY PART OF ITS PROFIT TO THE FOREIGN ENTERPRISE 7. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 8. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 3. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE H AD FURNISHED THE RETURN OF INCOME DECLARING INCOME OF RS. 3417/-. TH E CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND DRAFT ASSESS MENT ORDER WAS PASSED ON 17.12.2009 PROPOSING AN ADJUSTMENT OF RS. 3.26 CRORES. THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP WHICH REJECTED THE SAME AND CONFIRMED THE PROPOSED ADDITION. THE ASSES SMENT WAS COMPLETED UNDER SECTION 143(3)/ 144C (13) OF THE AC T AT RS. 3.26 CRORES. THE ASSESSEE FILED AN APPEAL AGAINST THE FI NAL ASSESSMENT ORDER BEFORE THE TRIBUNAL, WHICH IN ITA NO. 5265/DE L/2010, VIDE ORDER DATED 18.02.2011 RESTORED THE ISSUE OF TRANSF ER PRICING ADJUSTMENT TO THE FILE OF DRP OBSERVING THAT IT HAD NOT PASSED ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 5 SPEAKING ORDER ON THE ISSUE. THE DRP ISSUED DIRECTI ONS UNDER SECTION 144(C) (5) TO THE TPO TO RECALCULATE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION. CONSEQUENT THERETO VIDE REPORT DATED 23.12.2011, THE TPO DETERMINED THE TRANSFER PRICING ADJUSTMENT AT RS. 2.66 CRORES. THEREAFTER THE AO PASSED ORDER UND ER SECTION 254 / 143(3) OF THE ACT ON 30.12.2011 DETERMINING THE A SSESSED INCOME AT RS. 2.66 CRORES. THE ASSESSEE PREFERRED AN APPEA L BEFORE THE TRIBUNAL AND VIDE ORDER DATED 29.08.2012 IN ITA NO. 699/DEL/2012, THE TRIBUNAL HELD THAT THE DRP HAD NOT CONSIDERED T HE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE; HENCE THE MATTE R WAS AGAIN RESTORED TO THE FILE OF DRP WITH THE DIRECTION TO C ONSIDER THE ADDITIONAL EVIDENCES. THE DRP AGAIN ISSUED DIRECTIO NS UNDER SECTION 144C(5) OF THE ACT TO THE TPO. IN THE ORDER PASSED UNDER SECTION 254 READ WITH SECTION 143(3) OF THE ACT, DATED 29.5 .2014, THE AO NOTES THAT THE ASSESSEE HAD ENTERED INTO INTERNATIO NAL TRANSACTIONS TOTALLING RS. 20.92 CRORES WHICH WERE IN THE FORM O F SOFTWARE DEVELOPMENT AND DATA PROCESSING. THE ASSESSEE HAD A PPLIED TNMM METHOD AS THE MOST APPROPRIATE METHOD AND OP OVER TC AS THE PROFIT LEVEL INDICATOR. BY USING MULTIPLE YEAR DATA , THE ASSESSEE HAD SELECTED 14 COMPARABLES, WHOSE ARITHMETICAL MEAN MA RGINS WERE 10.01%. THE MARGIN OF THE ASSESSEE WAS 9.9% HENCE THE CLAIM OF THE INTERNATIONAL TRANSACTIONS BEING AT ARMS LENGT H PRICE. THE TPO ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 6 HOWEVER USED CURRENT YEARS DATA AND OUT OF 14 COMPA RABLES SELECTED BY THE ASSESSEE, HE REJECTED 3 COMPARABLES ON THE GROUND OF PERSISTENT LOSSES AND 02 COMPARABLES ON THE GROU ND OF HIGH TURNOVER AND 02 ON THE GROUND OF SUBSTANTIAL RELATE D PARTY TRANSACTIONS I.E. RPT FILTER. WHERE THE CURRENT YEA R DATA WAS NOT AVAILABLE, THE SAID CONCERNS WERE ALSO REJECTED AS BEING COMPARABLE. THUS OUT OF 14 COMPARABLES, ONLY 4 COMPANIES WERE S ELECTED AS COMPARABLE AND THE ARITHMETIC MEAN OF THE SAID COMP ARABLES WORKED OUT TO 26.99%. THE TPO DETERMINED THE ARMS L ENGTH PRICE OF THE INTERNATIONAL TRANSACTION AT RS. 23.94 CRORE S AS AGAINST 20.71 CRORES SHOWN BY THE ASSESSEE AND PROPOSED AN ADJUST MENT OF RS. 3.22 CRORES. BEFORE THE DRP VIDE LETTER DATED 16.11 .2011, THE ASSESSEE HAD FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. CONSEQUENT TO THE DIRECTIONS OF THE TRIBU NAL , THE DRP APPLIES REVISED FILTER OF THE EXPORT TURNOVER TO TH E EXTENT OF 75% AND REJECTED THE CONCERNS WHICH DID NOT FULFILL THE SAI D FILTER AND GAVE DIRECTIONS TO THE AO IN THIS REGARD. THE AO IN THE FINAL ASSESSMENT ORDER IN TURN RELYING ON THE DIRECTIONS OF THE DRP MADE THE FOLLOWING OBSERVATIONS. THE AO NOTES VIDE PARA 6 AT PAGE 4 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD CONDUCTED FRESH SEARCH FOR COMPARABLES AS THE SAID COMPARABLES DID NOT FIGURE IN ACCEPT / REJECT MATRIX. THE AO ALSO NOTES THAT THE SEARCH FOR COMPARABLES HAD T AKEN PLACE AFTER ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 7 THE TPO HAD PASSED THE ORDER AND ONLY DURING THE SE T ASIDE PROCEEDINGS BEFORE THE DRP, THE ASSESSEE HAD FILED FRESH SET OF COMPARABLES. THE AO OBSERVED THAT THE DATA WAS NOT CONTEMPORANEOUS DATA AS ENVISAGED UNDER SECTION 92F (IV) OF THE ACT. FURTHER RULE 10D(4) MANDATED THAT THE DATA US ED FOR BENCHMARKING THE ARMS LENGTH PRICE SHOULD BE CONTE MPORANEOUS AND SHOULD EXIST LATEST BY SPECIFIED DATA REFERRED TO IN CLAUSE 4 OF SECTION 92F OF THE ACT. THE AO WAS OF THE VIEW THAT THE DATA WAS NOT CONTEMPORANEOUS BUT SINCE THE TRIBUNAL HAD GIVEN DI RECTIONS AND HENCE THEY WERE EXAMINED ON MERITS. THE TOTAL NUMBE R OF COMPANIES FINALLY SELECTED IN THE SAID ADDITIONAL E VIDENCE WERE 09 AND THE AVERAGE PLI WAS 12.18%, AS AGAINST THE MARG IN OF THE ASSESSEE AT 9.90%. OUT OF THIS LIST OF 09, ONE ALLSE C TECHNOLOGIES LTD. WAS ACCEPTED. THE AO FURTHER OBSERVED THAT WHE RE THE ASSESSEE WAS ENGAGED IN EXPORT OF 100% OF ITS SOFTWARE / DAT A PROCESSING; THEREFORE, THE COMPARABLES SHOULD HAVE ITS INCOME O UT OF EXPORT ACTIVITY, IF NOT FULL, THEN AT LEAST TO THE EXTENT OF 75%. THIS WAS THE PROPOSITION OF DRP AND HE APPLIED FILTER OF 75% AND AS A RESULT, 05 CONCERNS WERE REJECTED, AS NOT FULFILLING THE SAID FILTER. 4. COMING TO THE NEXT CONCERN I.E. MAPLE ESOLUTIONS LTD . THE SAME WAS REJECTED AS THE SAID CONCERN WAS UNDER SER IOUS ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 8 INDICTMENT. SIMILARLY EUREKA OUTSOURCING SOLUTIONS PVT. LTD., WAS REJECTED ON THE GROUND OF LOSS MAKING CONCERN. ANOT HER CONCERN INFORMED TECHNOLOGIES INDIA LTD., WAS ALSO REJECTED ON THE GROUND THAT IT FAILED THE SERVICE INCOME FILTER OF 75% AND WAS ALSO NOT A FUNCTIONALLY COMPARABLE. IN RESPECT OF THE BALANCE, 03 COMPARABLES USED BY THE TPO IN HIS ORDER DATED 27.02.2009, THE DRP HELD THAT THE SAME SHOULD BE RETAINED IN THE LIST OF THE COMP ARABLES. THUS, THE ADJUSTMENT WAS MADE AT RS. 1.15 CRORE. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE AO / DRP. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT TH E ASSESSEE WAS PROVIDING ITES SERVICES TO ITS AE. IT WAS HANDLING TELECOM SERVICES I.E. PROVIDING SERVICES OF MOBILE PORTABILITY AND A VAILABILITY OF MOBILE NUMBERS. THE ASSESSEE HAD SELECTED TNMM METHOD AS T HE MOST APPROPRIATE METHOD AND APPLIED PLI OF OP OVER TC AN D ITS MARGINS WORKED OUT TO 9.90%. THE ASSESSEE HAD INITIALLY SELE CTED 14 COMPARABLES CONCERNS AS FUNCTIONALLY COMPARABLE WHO SE WEIGHTED MEAN MARGINS WORKED OUT TO 10.01%. THE TPO UPDATED T HE MARGINS AND BY APPLYING DIFFERENT FILTERS HAD SELECTED SET OF COMPARABLES. THE TPO HAD APPLIED FILTER OF THE PERSISTENT LOSS M AKING CONCERNS BEING NOT COMPARABLE AND ALSO HIGH TURNOVER CONCERN S BEING NOT COMPARABLE. FURTHER RPT FILTER OF 25% WAS ALSO APPLIE D AND FINALLY ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 9 SELECTED 04 CONCERNS AS COMPARABLE, WHOSE MEAN MARG IN WAS 24.02% AND ADJUSTMENT OF RS. 2.66 CRORES WAS MADE IN THE HANDS OF THE ASSESSEE. HE POINTED OUT THAT THE TRIBUNAL I N THE SECOND ROUND HAD DIRECTED THE DRP TO CONSIDER THE APPLICAT ION FILED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE, WHIC H IN TURN WAS FILED IN THE FIRST ROUND ITSELF. THE LEARNED AR FOR THE ASSESSEE REFERRED TO THE LIST OF COMPARABLES WHICH WERE FINA LLY SELECTED BY ASSESSEE ADOPTING THE SAME FILTERS AS APPLIED BY TH E TPO. HOWEVER, THE DRP IN THE THIRD ROUND APPLIED NEW FILTER, WHER EIN THE FILTER OF THE CONCERNS HAVING LESS THAN 75% TURNOVER WERE EXCL UDED. IN THIS REGARD 05 CONCERNS WERE REJECTED AS NOT BEING COMPA RABLE. THE LEARNED AR FOR THE ASSESSEE ALSO POINTED OUT THAT T HE TPO HELD EUREKA OUTSOURCING SOLUTIONS PVT. LTD., TO BE PERSISTENT LOSS MAKING CONCERN AND DID NOT APPLY THE MARGIN OF THE SAID CONCERN. HOWEVER IN THE LIST WHEREIN THE NAMES OF THE COMPAR ABLES WERE MENTIONED, THE SAID CONCERN WAS SHOWN AS NOT PERSI STENT LOSS MAKING CONCERN. IN RESPECT OF EXCLUSION OF MAPLE ES OLUTIONS LTD. AND INFORMED TECHNOLOGIES PVT. LTD., BY THE AO / DR P / TPO, LEARNED AR FOR THE ASSESSEE SAYS THAT IT HAD NO OBJ ECTIONS. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITTED THAT IT WAS AN ESTABLISHED POSITION OF LAW, THAT DRP CANNOT APPLY NEW FILTER IN SET ASIDE PROCEEDINGS. IN THIS REGARD, HE PLACED RELIAN CE IN THE CASES OF ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 10 MCORP GLOBAL (P.) LTD. VS. CIT (309 ITR 434, PAPER PRODUCTS LIMITED VS. CIT [(2007) SCC 352 AND S. P. KOCHAR VS. ITO (1 45 ITR 255). HE STRESSED THAT THE DRP IN THE SECOND ROUND CANNOT AP PLY A NEW FILTER IN THE SET ASIDE PROCEEDINGS. THE LEARNED AR FOR TH E ASSESSEE ALSO FAIRLY POINTED OUT THAT THE TPO MAY LOOK INTO THE F UNCTIONALITY OF THE 05 CONCERNS WHICH WERE REJECTED BY THE DRP BY MODIF YING THE TURNOVER FILTER. THE DRP IN THE SECOND ROUND HAD AL SO REJECTED THE ASSESSEES CONTENTIONS OF WORKING CAPITAL ADJUSTMEN T. 6. COMING TO THE INCLUSION OF EUREKA OUTSOURCING SO LUTIONS PVT. LTD., THE LEARNED AR FOR THE ASSESSEE POINTED THAT THE ON LY BASIS ON WHICH THE SAID CONCERN WAS REJECTED BY THE DRP WAS THAT IT WAS A PERSISTENT LOSS MAKING CONCERN. HOWEVER, THE SAID C ONCERN FOR THE YEAR HAD POSITIVE MARGIN OF 0.25% AND HENCE CANNOT B E CALLED AS PERSISTENT LOSS MAKING. IN THIS REGARD, RELIANCE WA S PLACED ON THE PUNE BENCH AND MUMBAI BENCH DECISIONS RESPECTIVELY IN THE CASES OF BOBST INDIA PRIVATE LIMITED VS. DCIT (ITA NO. 13 80/PN/2010) AND GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD. VS. ACIT (ITA NO. 7724/MUM/2011). 7. THE LEARNED DR FOR THE REVENUE PLACING RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW, POINTED THAT THE DRP HAD CORRECTLY APPLIED THE FILTERS. ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 11 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PROCEEDINGS BEFORE US IN THE PRESENT CASE ARE I N THIRD ROUND OF LITIGATION. AS POINTED OUT IN PARAS ABOVE, THE TRIB UNAL IN THE FIRST ROUND HAD SET ASIDE THE MATTER TO THE DRP TO PASS A SPEAKING ORDER ON THE ISSUES. THE DRP DID PASS AN ORDER AND THE TR ANSFER PRICING ADJUSTMENT WAS REDUCED IN THE HANDS OF THE ASSESSEE . HOWEVER, THE ADDITIONAL EVIDENCE WHICH WAS FILED BY THE ASSESSEE IN THE FIRST ROUND ITSELF WAS NOT CONSIDERED BY THE DRP. THE TRI BUNAL AGAIN REMANDED THE ISSUE BACK TO THE DRP TO LOOK INTO THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH CONTAIN RESU LT OF SEARCH OF THE FINALLY APPLIED FILTERS OF THE TPO AND THE LIST OF THE COMPARABLES IS SELECTED BY THE ASSESSEE. THE SAID EVIDENCE IS P LACED AT PAGES 214 TO 240 OF THE PAPER BOOK. THE DRP IN THE THIRD ROUN D OF PROCEEDINGS BEFORE US APPLIED A NEW TURNOVER FILTER I.E. SINCE THE ASSESSEE WAS A 100% EXPORTER, IT DEEMED IT FIT THAT ONLY CONCERNS HAVING EXPORT ACTIVITY ATLEAST TO THE EXTENT OF 75% SHOULD BE SEL ECTED. THUS OUT OF 09 CONCERNS WHICH WERE SELECTED BY ASSESSEE AS A PA RT OF ADDITIONAL EVIDENCE, 05 CONCERNS WERE HELD TO BE AS NOT COMPAR ABLE. 9. THE ASSESSEE WAS ENGAGED IN EXPORT OF 100% OF ITS SOFTWARE / DATA TO ITS AE FOR YEAR UNDER CONSIDERATION. THE A SSESSEE HAD SELECTED TNMM METHOD AS THE MOST APPROPRIATE METHOD AND APPLIED ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 12 PLI OF OP OVER OC. IN THE TP STUDY REPORT, THE ASSE SSEE HAD USED WEIGHTED MARGINS OF THE COMPARABLES; HOWEVER THE TP O APPLIED ONLY THE MARGINS OF THE CONTEMPORANEOUS PERIOD. AS AGAIN ST 14 CONCERNS SELECTED BY THE ASSESSEE, THE TPO APPLIED UPDATED M ARGINS AND ALSO ADDITIONAL FILTERS AND FINALLY SELECTED 04 CONCERNS AS COMPARABLES. THE ASSESSEE APPLYING THE ADDITIONAL FILTERS OF THE TPO I.E. NOT CONSIDERING PERSISTENT LOSS MAKING CONCERNS AND CON CERNS HAVING HIGH TURNOVER AND APPLYING RPT FILTER OF 25%, SELECT ED 09 COMPARABLES AS ADDITIONAL EVIDENCE. THE LIST OF 09 COMPARABLES READS AS UNDER:- S. NO. COMPANY NAME FINANCE YEAR SALES OP/ TC 1. SUREVIN INTERNET SERVICES LTD. 200603 1.01 3.06% 2. E-NXT FINANCIALS LTD. 200603 5.56 2.54% 3. COSMIC GLOBAL LTD. 200603 3.11 16.48% 4. AOK IN-HOUSE BPO SERVICES LTD. 200603 5.22 8.03% 5. CAMEO CORPORATE SERVICES LTD. 200603 8.28 8.64% 6. MAPLE ESOLUTIONS LTD. 200603 7.43 35.15% 7. ALLSEC TECHNOLOGIES LTD. 200603 92.26 28.85% 8. EUREKA OUTSOURCING SOLUTIONS PVT. LTD. 200603 9.00 0.25% 9. INFORMED TEHCNOLOGIES INDIA LTD. 200603 2.12 6.64% AVERAGE PLI 12.18% OP/TC% OF OMNIGLOBE INDIA 9.90 % ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 13 10. THE MEAN MARGINS OF THE COMPARABLES WAS 12.8% AS AGAINST THE MARGIN OF THE ASSESSEE AT 9.90%. IN THE SAID LIS T, THE CONCERN AT SERIAL NO. 7, ALLSEC TECHNOLOGIES INDIA LIMITED IS SELECTED BY AO / DRP AND THERE IS NO DISPUTE. AS FAR AS THE CONCERN AT SR. 6, AND 9, ARE CONCERNED THE LEARNED AR FOR THE ASSESSEE FAIRL Y ADMITTED THERE IS NO DISPUTE VIZ A VIZ ITS EXCLUSION FROM THE FINA L LIST OF COMPARABLES HENCE WE UPHOLD THE SAME. 11. NOW COMING TO THE CONCERN I.E. AT SR. 8 I.E. EU REKA OUTSOURCING SOLUTIONS PVT. LTD., WHERE THE OP / TC OF THE CONCERN WAS 0.25%, WAS REJECTED IN THE FINAL ASSESSMENT ORD ER AND SUCH A CONCERN THOUGH HAVING MARGINAL PROFIT CANNOT BE SAI D TO BE PERSISTENT LOSS MAKING CONCERN. HENCE, WE FIND NO M ERIT IN THE ORDERS OF AUTHORITIES BELOW AND DIRECT THAT THE SAI D CONCERN BE INCLUDED IN THE FINAL LIST OF COMPARABLES. 12. NOW COMING TO THE BALANCE LIST OF 05 COMPARABLE S WHICH WERE REJECTED ON THE GROUND THAT THE INCOME FROM EXPORT ACTIVITY OF THE SAID CONCERN DID NOT FULFILL THE FILTER OF TURNOVER TO THE EXTENT OF 75%. IT MAY BE POINTED OUT THAT THE TPO IN THE FIRST ORD ER UNDER SECTION 92CA (3) OF THE ACT HAD ACCEPTED THE FILTER APPLIED BY THE ASSESSEE OF THE PERSONS ENGAGED IN EXPORT AND NO FILTER OF THE EXTENT OF EXPORT WAS APPLIED. THESE PROCEEDINGS STARTED FROM THE ORD ER OF THE TPO ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 14 AND TRAVEL TO THE TRIBUNAL IN TWO ROUNDS AND HAVE B EEN SET ASIDE BY THE TRIBUNAL, WITH SPECIFIC DIRECTIONS TO CONSIDER THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND IF THE SAME IS B ASED ON THE FILTERS APPLIED BY THE TPO, THEN THE CONCERNS SELECTED BY T HE ASSESSEE MAY BE CONSIDERED IN THE FINAL LIST OF COMPARABLES. THE ORDER OF THE AO / DRP SUFFERS FROM INFIRMITIES IN APPLYING A REVISED FILTER IN THE SET ASIDE PROCEEDINGS. WE FIND NO MERIT IN THE SAME. A CCORDING WE SET ASIDE THE SAID DIRECTIONS OF THE AO / DRP. THE CONC ERNS AT SR. NOS. 1 TO 5 ARE TO BE INCLUDED IN THE FINAL LIST OF COMP ARABLES IF THEY ARE FOUND TO BE FUNCTIONALLY COMPARABLE. THIS ASPECT HA S NOT BEEN VERIFIED BY THE AUTHORITIES BELOW AND THE LEARNED A R FOR THE ASSESSEE HAS FAIRLY ADMITTED THAT THE SAME MAY BE VERIFIED. ACCORDINGLY, WE DIRECT THE TPO TO VERIFY FUNCTIONALITY OF THE SAID 5 CONCERNS AND IF THEY ARE FUNCTIONALLY COMPARABLE TO THE ASSESSEE, T HEN THE SAME MAY BE INCLUDED IN THE FINAL LIST OF COMPARABLE. HE NCE THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD IS ALL OWED. 13. NOW COMING TO THE LAST STAND OF THE ASSESSEE OF WORKING CAPITAL ADJUSTMENT. NO SUCH OBJECTION WAS RAISED BY THE ASSESSEE BEFORE THE DRP AGAINST THE ORIGINAL ORDER AND SINCE THIS IS A SET ASIDE MATTER, THEN NO WORKING CAPITAL ADJUSTMENT CA N BE ALLOWED AT ITA NO.4343/DEL/2014 ASSESSMENT YEAR-2006-07 PAGE | 15 THIS JUNCTURE. HENCE, PLEA OF THE ASSESSEE IS REJEC TED. THUS, GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE P ARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER, 2019. SD/- SD/- (B.R.R.KUMAR) (SUSHMA CHOWLA ) %& %& %& %& /ACCOUNTANT MEMBER /JUDICIAL MEMBER / DATED : 29 TH NOVEMBER, 2019 . * SH * %3-+/45%4/6 COPY OF THE ORDER IS FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT 3. 7 8 9 / THE CIT(A) 4. : 7 / THE PR. CIT 5. 6. 4;<+/ / DR, ITAT, DELHI