Cognizant Technology Services Pvt.Ltd., Hyd, Hyderabad V. DCIT, Circle-1(2), Hyd, Hyderabad

ITA 459/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6067 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: H DESAI
• Keywords: Depreciation; Transfer pricing; International transaction; Bad and doubtful debts
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.459/HYD/2015 ASSESSMENT YEAR 2010-2011 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., (FORMERLY KNOWN AS UBS SERVICE CENTRE (INDIA) P. LTD., HYDERABAD 500 032. PAN AADCR0712J VS. DCIT, CIRCLE-1(2) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. DHANESH BAFNA, MR. ABHIROOP BHARGAV & MISS. H. DESAI FOR REVENUE : SMT. K. MYTHILI RANI DATE OF HEARING : 2 1 .01.2016 DATE OF PRONOUNCEMENT : 29 .01.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2010- 2011 AGAINST THE FINAL ASSESSMENT ORDER PASSED BY T HE A.O. UNDER SECTION 143(3) READ WITH SECTION 144C OF THE I.T. ACT, 1961, IN ACCORDANCE WITH THE DIRECTIONS O F THE DRP. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : THE GROUNDS MENTIONED HEREIN ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DEPUTY COMMISSIONER OF INCOME- TAX CIRCLE-1(2) (LD. AO) / DISPUTE RESOLUTION PAN EL ('LD. PANEL') / ADDITIONAL COMMISSIONER OF INCOME- TAX (TRANSFER PRICING) ('LD. TPO') ERRED IN MAKING AN ADJUSTMENT OF RS.23,97,01,758 PERTAINING TO PROVISION OF IT ENABLED BACK OFFICE SERVICES PROVIDED TO AE IN PRE AND POST-ACQUISITION PERIOD ; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. TPO AND THE LD. PANEL ERRED IN: I. AGGREGATING THE APPELLANT'S INTERNATIONAL TRANSACTIONS PERTAINING TO PRE-ACQUISITION AND POST-ACQUISITION II. DISREGARDING THE SEGMENTED FINANCIALS ADOPTED BY THE APPELLANT IN RESPECT OF PRE AND POST-ACQUISITION PERIOD; III. REJECTING THE ECONOMIC ANALYSIS CONDUCTED BY THE APPELLANT PERTAINING TO THE PRE- ACQUISITION AND POST-ACQUISITION PERIOD. IV. IN REJECTING THE SELECTION OF THE ASSOCIATED ENTERPRISE(S) AS THE 'TESTED PARTY' AS SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION IN RESPECT OF THE POST-ACQUISITION PERIOD; V. REJECTING MULTIPLE YEAR DATA; VI. REJECTING THE SEARCH PROCESS FOLLOWED BY THE APPELLANT IN RESPECT OF PRE-ACQUISITION AND POST-ACQUISITION PERIOD; VII. INCLUDING CERTAIN COMPANIES EVEN THOUGH THEY ARE NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; VIII. EXCLUDING CERTAIN COMPANIES ON ARBITRARY/ FRIVOLOUS GROUNDS EVEN THOUGH THEY ARE COMPARABLE TO THE APPELLANT IN TERMS OF 3 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; IX. NOT GRANTING DEPRECIATION ADJUSTMENT; X. CONSIDERING FOREIGN EXCHANGE LOSS/GAIN, MISCELLANEOUS AND OTHER INCOME AS OPERATING IN NATURE AND PROVISION FOR DOUBTFUL DEBTS AS NON-OPERATING; AND XI. CONSIDERING RETENTION BONUS AND SERVICE TAX CREDIT REVERSAL AS PART OF OPERATING COST IGNORING THE FACT THAT THEY ARE EXTRAORDINARY IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO AND THE LD. PANEL ERRED IN EXCLUDING COMPONENT OF TRAVEL AND CONVEYANCE EXPENSES AMOUNTING TO RS.3,06,20,196 INCURRED IN FOREIGN CURRENCY' TREATING THE SAME AS COMMUNICATION EXPENSES FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. 4. WITHOUT PREJUDICE TO THE GROUND NO.4, IF THE ABOVE COMMUNICATION EXPENSES ARE TO BE REDUCED FROM THE EXPORT TURNOVER, THE LD. AO MAY BE DIRECTED TO REDUCE THE SAME FROM THE TOTAL TURNOVER ALSO AND TO ALLOW DEDUCTION UNDER SECTION 10A ACCORDINGLY. 5. WITHOUT PREJUDICE TO THE GROUND NO. 4 & 5, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND .; THE LD. AO AND THE LD. PANEL ERRED IN EXCLUDING COMPONENT OF TRAVEL AND CONVEYANCE EXPENSES AMOUNTING TO RS.3,06,20,196 (INSTEAD OF RS.95,47,670 BEING ACTUAL COMMUNICATION EXPENSES) INCURRED IN FOREIGN CURRENCY TREATING THE SAME AS COMMUNICATION EXPENSES FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. 4 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. 6. WITHOUT PREJUDICE TO THE GROUND NO. 4 & 5, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. A.O. AND THE LD. PANEL ERRED IN EXCLUDING THE ENTIRE COMMUNICATION EXPENSES FROM THE EXPORT TURNOVER OF THE COMPANY, IGNORING THE FACT THAT THE COMPANY ALSO HAS A SEZ UNIT AND PART OF THE COMMUNICATION EXPENSES PERTAINS TO THE SEZ UNIT. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING INTEREST UNDER SECTION 234A OF THE ACT, IGNORING THE FACT THAT THE DUE DATE FOR FILING THE CORPORATE TAX RETURN FOR TH E CONCERNED A Y WAS EXTENDED TO OCTOBER 15,2010 AND THE SAME WAS FILED BY THE COMPANY ON OCTOBER 15, 2010. 8. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 234D OF THE ACT AMOUNTING TO RS. 99,72,062 AND RS. 1,29,95,904 RESPECTIVELY. 9. THE APPELLANT PRAYS THAT APPROPRIATE RELIEF BE GRANTED. THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTE R, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT ASSESSEE IS NOT PRESSING G ROUND NO.3 IN VIEW OF ALTERNATE GROUND RAISED BY THE ASSE SSEE IN GROUND NO.4. WE FIND THAT THE ALTERNATE GROUND OF T HE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT & ANOTHER VS. TATA ELXSI LTD., AND OTHERS REPOR TED IN (2012) 349 ITR 98 WHEREIN IT HAS BEEN HELD THAT IF ANY EXPENDITURE OR THE INCOME IS TO BE EXCLUDED FROM TH E 5 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. EXPORT TURNOVER, THEN THE SAME HAS TO BE REDUCED FR OM THE TOTAL TURNOVER AS WELL. THEREFORE, GROUND NO.4 OF THE ASSESSEE IS ALLOWED AND GROUND NO.3 OF THE ASSESSEE IS REJECTED AS NOT PRESSED. 3. AS REGARDS GROUND NO.5, IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE QUANTUM T AKEN BY THE A.O. TOWARDS TRAVEL AND CONVEYANCE EXPENSES IS INCORRECT AS STATED IN THE GROUND OF APPEAL. HE HAS SUBMITTED THAT THE A.O. HAS ERRED IN TAKING THE COR RECT FIGURE FROM THE P & L A/C. AS IT IS AN APPARENT MIS TAKE, WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE TO TH E FILE OF THE A.O. WITH A DIRECTION TO TAKE THE CORRECT FIGUR E FROM THE P & L A/C OF THE ASSESSEE AND CONSIDER THE SAME FOR COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE I .T. ACT. GROUND NO.5 OF THE ASSESSEE IS THUS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. 4. AS REGARDS GROUND NO.6 ALSO WHICH IS CONNECTED TO GROUND NOS. 4 AND 5 OF ASSESSEES APPE AL, WE FIND THAT THE CONTENTIONS OF THE ASSESSEE NEEDS VERIFICATION BY THE A.O. ACCORDINGLY, GROUND NO.5 O F THE ASSESSEE IS ALSO REMITTED TO THE FILE OF THE A.O. F OR VERIFICATION AND RE-CONSIDERATION IN ACCORDANCE WIT H LAW. 5. AS REGARDS GROUNDS NO.7, IT IS THE CASE OF THE ASSESSEE THAT FOR THE RELEVANT A.Y, THE DUE DATE FO R FILING THE CORPORATE RETURN WAS EXTENDED TO OCTOBER 15, 20 10 AND THAT THE ASSESSEE HAS FILED THE RETURN ON 15 TH OCTOBER, 2010, BUT THE A.O. HAS ERRONEOUSLY CONSIDE RED 6 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. THE DUE DATE AS 30 TH SEPTEMBER, 2010. THE ASSESSEE HAS ALSO FILED COPY OF NOTIFICATION ISSUED BY THE CBDT WITH REGARD TO EXTENSION OF THE DATE OF FILING OF THE RE TURN. WE FIND THAT THIS FACT ALSO NEEDS VERIFICATION BY THE A.O. AND THEREFORE, WE DEEM IT FIT TO REMIT THIS ISSUE ALSO TO THE FILE OF THE A.O. FOR VERIFICATION. ACCORDINGLY, GROUND N O.7 OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. AS REGARDS GROUND NO.8 RELATING TO LEVY OF INTEREST UNDER SECTION 234B AND 234D OF THE I.T. AC T, WE FIND THAT THE RELIEF SOUGHT IS CONSEQUENTIAL IN N ATURE AND THEREFORE, THIS ISSUE ALSO IS REMITTED TO THE FILE OF THE A.O. FOR GIVING CONSEQUENTIAL RELIEF, IF ANY, TO THE ASS ESSEE WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. GROUND NO.8 OF THE ASSESSEE IS THUS TREATED AS ALLOWED FOR STATIST ICAL PURPOSES. 7. NOW COMING TO GROUND NO.2, LD. COUNSEL FOR THE ASSESSEE HAS MAINLY ARGUED ON SUB-GROUND (VII) THEREOF, WHICH IS AGAINST CERTAIN COMPARABLES ADOPT ED BY THE TPO AND CONFIRMED BY THE DRP AS COMPARABLE TO T HE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FILE D A CHART SHOWING VARIOUS COMPANIES TAKEN BY THE TPO AS COMPARABLE TO THE ASSESSEE AND THE COMPANIES WHICH HAVE BEEN EXCLUDED BY THE DRP ITSELF AND THE COMPA NIES WHICH HAVE BEEN ACCEPTED BY THE ASSESSEE. IN THIS A PPEAL, THE ASSESSEE IS CHALLENGING THE INCLUSION OF THE FO LLOWING COMPANIES VIZ., 7 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. (1) ACCENTIA TECHNOLOGIES LTD., (2) TCS E-SERVE INTERNATIONAL LTD., (3) ECLERX SERVICES LTD., AND (4) COSMIC GLOBAL LTD. 7.1. ASSESSEE HAS ALSO GIVEN DETAILS OF THE DECISI ONS ON WHICH ASSESSEE IS PLACING RELIANCE UPON FOR EXCL USION OF THESE COMPANIES FROM THE FINAL LIST OF COMPARABL ES. 8. THE LD. D.R., ON THE OTHER HAND, ARGUED ON THE BASIS OF THE WRITTEN SUBMISSIONS FILED BY HER AND T AKING BOTH THE ASSESSEES CHART AS WELL AS REVENUES WRIT TEN SUBMISSIONS, WE DECIDE THE GROUND AS UNDER. 9. THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROVIDING I.T. ENABLED SERVICES (ITES) TO ITS ASS OCIATED ENTERPRISE (AE'). THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS A.ES AND THERE FORE, THE A.O. REFERRED THE DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTIONS TO THE TPO UNDER SECTION 92CA OF THE ACT. DURING THE T.P. PROCEEDINGS. THE TPO OB SERVED THAT THE ERSTWHILE COMPANY UBS SERVICE CENTRE INDIA P. LTD., WAS ACQUIRED BY M/S. COGNIZANT TECHNOLOGY SOLUTIONS INDIA P. LTD., ON 30 TH DECEMBER, 2009, AND THAT SUBSEQUENT THERETO, THE COMPANY WAS RENAMED AS COGNIZANT TECHNOLOGY SERVICES P. LIMITED. HE OBSER VED THAT DUE TO THIS REASON, THE ASSESSEE HAD DESCRIBED THE COMPANY PROFILE IN TWO PARTS I.E., ONE IN PRE-ACQUI SITION PERIOD AND THE OTHER IN POST-ACQUISITION PERIOD. TH E TPO HOWEVER OBSERVED THAT THE ACTIVITIES OF THE ASSESSE E PRE- 8 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. ACQUISITION AND POST-ACQUISITION ARE SIMILAR I.E., ITES AND THEREFORE, THE INTERNATIONAL TRANSACTIONS OF PRE AS WELL AS POST ACQUISITION PERIODS ARE TO BE CLUBBED AND ANAL YSED UNDER TNMM METHOD TAKING THE TAX PAYER AS A TESTED PARTY. THEREAFTER, THE TPO PROCEEDED TO CONSIDER T HE FILTERS ADOPTED BY THE ASSESSEE AND THE COMPARABLES ARRIVED THEREAFTER. THE ASSESSEE HAD ARRIVED AT THE FOLLOWING 11 COMPANIES AS COMPARABLES. SL.NO. NAME OF THE COMPANY 1. ACROPETAL TECHNOLOGIES LTD., (SEG.) 2. AXIS IT & T LTD., 3. JEEVAN SOFTECH LTD., (SEG .) 4. MICROGENETICS SYSTEMS LTD., 5. CROSSDOMAIN SOLUTIONS P. LTD., 6. INFOSYS BPO LTD., 7. TCS E - SERVE LTD., 8. ACCENTIA TECHNOLOGIES LTD., 9. TCS E - SERVE INTERNATIONAL LTD., 10. ECLERX SERVICES LTD., 11. COSMIC GLOBAL LTD., 9.1. OUT OF THE ABOVE COMPANIES, EXCEPT FOR COSMIC GLOBAL LIMITED, ALL OTHER COMPANIES WERE REJECTED B Y THE TPO AND HE CONDUCTED A FRESH ANALYSIS ON THE DATABA SES CAPITALINE AND PROWESS AND ARRIVED AT THE FOLLOWING 11 COMPANIES AS FINAL COMPARABLES. S.NO. NAME OF THE COMPANY OR OP/OC 1. ACCENTIA TECHNOLOGIES LTD., 93,12,44,808 49.02 2. ACROPETAL TECHNOLOGIES LTD., (SEG.) 46,39,36,810 10.12 3. AXIS IT & T LTD., 20,29,67,892 11.89 4. COSMIC GLOBAL LTD., 5,86,37,419 16.59 5. ECLERX SERVICES LTD., 2,57,02,10,000 42.17 6. INFOSYS BPO LTD., 11,30,05,01,306 31.63 7. TCS E-SERVE INTERNATIONAL LTD., 1,49,29,56,000 51.51 8. TCS E-SERVE LTD., 14,05,10,05,000 67.58 9 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. 9. JEEVAN SOFTECH LTD., (SEG.) 1,74,43,000 8.04 10. MICROGENETICS SYSTEMS LTD., 2,40,42,539 6.60 11. CROSSDOMAIN SOLUTIONS P. LTD., 37,69,57,428 17.13 TOTAL 312.28 AVERAGE 28.39 9.2. THOUGH THE ASSESSEE HAD TAKEN COSMIC GLOBAL AS A COMPARABLE COMPANY IN ITS T.P. STUDY BEFORE TH E TPO, THE ASSESSEE HAD CHALLENGED THE ADOPTION OF TH E SAID COMPANY IN THE FINAL COMPARABLES ON THE GROUND THAT IT WAS INTO DIFFERENT BUSINESS MODEL WHEREIN IT OUTSOU RCED A CONSIDERABLE PORTION OF ITS BUSINESS. THE TPO, HOWE VER, HOLDING THAT ASSESSEE ITSELF HAS ADOPTED THIS COMPA NY AS A COMPARABLE IN ITS T.P. STUDY, DID NOT CONSIDER AS SESSEES CONTENTIONS. THEREAFTER, THE TPO ARRIVED AT THE AVE RAGE MARGIN OF THE COMPARABLES AT 26.23% AFTER MAKING WORKING CAPITAL ADJUSTMENT AND PROPOSED THE ADJUSTM ENT TOWARDS THE SHORT-FALL OF THE ARMS LENGTH PRICE AT RS.36,71,13,790. IN CONSONANCE WITH THE SAME, THE A .O. PASSED THE DRAFT ASSESSMENT ORDER, AGAINST WHICH, ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP. A FTER CONSIDERING ASSESSEES CONTENTIONS, THE DRP DIRECTE D EXCLUSION OF INFOSYS BPO LTD., AND TCS E-SERVE LIMI TED. THE REVENUE IS NOT IN APPEAL AGAINST THE EXCLUSION OF THESE TWO COMPANIES. THE ASSESSEE IS IN APPEAL AGAI NST THE INCLUSION OF (1) ACCENTIA TECHNOLOGIES LIMITED (2) TCS E-SERVE INTERNATIONAL LIMITED (3) ECLERX SERVICES L IMITED AND (4) COSMIC GLOBAL LIMITED. 10. AS REGARDS THE ACCENTIA TECHNOLOGIES LTD., IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE, SUBMIT TED 10 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. THAT THIS COMPANY IS TO BE REJECTED AS THERE IS AN EXTRAORDINARY EVENT I.E., AMALGAMATION OF ASSCENT INFOSERVE PVT. LTD., WITH THE COMPANY AND FURTHER THAT THE COMPANY IS INTO A DIVERSIFIED KNOWLEDGE PROCESS OUTSOURCING. HE HAS SUBMITTED THAT FOR VERY SAME A. Y. 2010-2011, THIS TRIBUNAL IN THE CASE OF ACIT, CIRCL E-2(2), HYDERABAD VS. HYUNDAI MOTORS INDIA ENGINEERING P. L TD., IN ITA.NOS.1743 & 1917/HYD/2014 DATED 13.11.2015 HAS CONSIDERED THE NATURE OF THE ACTIVITY CARRIED ON BY IT AS WELL AS THE EXTRAORDINARY EVENT SO AS TO EXCLUDE IT FROM THE LIST OF FINAL COMPARABLES THEREIN WHICH IS ALSO ENGAGED IN THE BUSINESS OF ITES. 10.1. AS REGARDS THE TCS E-SERVE INTERNATIONAL LIMITED IS CONCERNED, HE HAS SUBMITTED THAT THERE I S AN EXTRAORDINARY EVENT DURING THE RELEVANT ASSESSMENT YEAR IN THE CASE OF THIS COMPANY ALSO WHICH HAS BEEN TAK EN NOTE OF BY THIS TRIBUNAL IN THE CASE OF ACIT VS. HY UNDAI MOTORS INDIA ENGINEERING P. LTD., (CITED SUPRA) AND FOR THE SAID REASON, THIS COMPANY IS ALSO TO BE EXCLUDED. 10.2. AS REGARDS THE ECLERX SERVICES LIMITED IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE, SUBMIT TED THAT THIS COMPANY IS ALSO CONSIDERED AS NOT COMPARA BLE TO ITES COMPANY IN THE ORDER OF THE TRIBUNAL IN THE CA SE OF ACIT VS. HYUNDAI MOTORS INDIA ENGINEERING P. LTD., (CITED SUPRA) AND FURTHER IN ASSESSEES OWN CASE FOR THE A .YS. 2007-08 AND 2008-09. HE FURTHER DREW OUR ATTENTION TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE 11 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. OF RAMP GREEN SOLUTIONS P. LTD., ITA.NO.102 OF 2015 DATED 10.08.2015 WHEREIN THE HONBLE HIGH COURT HAS BROUGHT OUT ALL THE DIFFERENCES BETWEEN THE BPO AND KPO SERVICES AND HAS HELD THAT ECLERX SERVICES LIMITED IS NOT COMPARABLE TO SIMPLE ITES COMPANIES SUCH AS THE ASSESSEE HEREIN. 10.3. AS REGARDS THE COSMIC GLOBAL LIMITED IS CONCERNED, HE REITERATED THE SUBMISSIONS MADE BEFOR E THE AUTHORITIES BELOW THAT THIS COMPANY HAS A DIFFERENT BUSINESS MODEL WHEREIN IT OUTSOURCED A CONSIDERABLE PORTION OF ITS BUSINESS. 10.4. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED COPIES OF THE DECISIONS OF THIS TRIBUNAL ON WHICH H E HAS PLACED RELIANCE UPON AS WELL AS THE JUDGMENT OF THE HONBLE DELHI HIGH COURT BEFORE US. HE HAS ALSO DRA WN OUR ATTENTION TO THE T.P. ORDER AS WELL AS THE INFO RMATION FILED BY THE ASSESSEE IN ITS T.P. STUDY AS REGARDS THESE COMPANIES. 11. THE LD. D.R., IN HER WRITTEN SUBMISSIONS HAS BASICALLY PLACED RELIANCE UPON THE DECISION OF THE TPO AS WELL AS THE DRP AND HAS NOT BROUGHT ANY OTHER DECIS IONS OF THE TRIBUNAL OR ANY HIGH COURT ON RECORD IN FAVO UR OF REVENUES CONTENTIONS BEFORE US. 12. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE COORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. HYUNDAI MOTOR S INDIA 12 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. ENGINEERING P. LTD., (CITED SUPRA), (TO WHICH ONE O F US I.E., J.M. IS THE SIGNATORY) HAS CONSIDERED THE COMPARABI LITY OF THESE COMPANIES TO THE ASSESSEE THEREIN AND HAS DIR ECTED THE EXCLUSION OF THESE COMPANIES ON SIMILAR GROUND AS RAISED BY THE ASSESSEE IN THIS APPEAL BEFORE US. WE FIND THAT HYUNDAI MOTORS INDIA ENGINEERING P. LTD., (SUP RA) WAS ALSO ENGAGED IN THE BUSINESS OF RENDERING ITES SERVICES AND HAD ADOPTED TNMM AS THE MOST APPROPRIA TE METHOD. THE TRIBUNAL AT PARA-10.3 OF ITS ORDER HAS CONSIDERED THE COMPARABILITY OF COSMIC GLOBAL LIMIT ED AND HAS HELD AS UNDER : 10.3. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THA T THE ASSESSEE HAD RAISED OBJECTIONS AGAINST THIS COMPANY IN THE EARLIER A.Y. 2009-10 ON A SIMILAR GROUND I.E., THE INCOME FROM TRANSLATION SERVICES WHICH IS OUTSOURCED IS MUCH HIGHER AND THEREFORE, SHOULD NOT BE CONSIDERED AS A COMPARABLE. THE TRIBUNAL, BY RELYING ON THE DECISION OF THE TRIBUNA L AT DELHI IN THE CASE OF MERCER CONSULTING (INDIA) P. L TD., ITA.NO.966/DEL/2014 DATED 06.07.2014 HAS HELD AS UNDER : (4) COSMIC GLOBAL LTD. 14. THE MAIN OBJECTION OF ASSESSEE WITH REFERENCE TO THE INCLUSION OF THIS COMPANY IS WITH REFERENCE TO OUTSOURCING OF ITS MAIN ACTIVITY. EVEN THOUGH THIS COMPANY WAS SELECTED AS COMPARABLE IN ASSESSEES TP STUDY, IT HAS RAISED OBJECTION BEFORE THE TPO THAT THIS COMPANYS EMPLOYEE COST IS LESS THAN 21.30% AND MOST OF THE COST IS WITH REFERENCE TO THE OUTSOURCING CHARGES OR TRANSLATION CHARGES, AND AS SUCH THIS IS NOT A COMPARABLE COMPANY. THE TPO, THOUGH CONSIDERED THESE SUBMISSIONS, REJECTED THE SAME, ON THE REASON THAT THIS DOES NOT IMPACT THE 13 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. PROFIT MARGIN OF THE COMPANY. OPPOSING THE VIEW TAKEN BY THE TPO, IT IS SUBMITTED THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE, AS SIMILAR ISSU E WAS DISCUSSED BY THE COORDINATE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF MERCER CONSULTING (INDIA) P. LTD. (SUPRA), VIDE PARAS 13.2 TO 13.3 WH ICH READ AS UNDER- 13.2. NOW COMING TO THE FACTUAL MATRIX O F THIS CASE, WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CONSTITUTE 57.31% OF THE TOTAL OPERATING COSTS. THIS DO ES NOT APPEAR TO US TO BE A VALID REASON FOR ELIMINATING THIS CASE FROM THE LIST OF COMPARABL ES. ON GOING THROUGH THE ANNUAL ACCOUNTS OF COSMIC GLOBAL LIMITED, A COPY OF WHICH HAS BEEN PLACED ON RECORD, WE FIND THAT ITS TOTAL REV ENUE FROM OPERATIONS ARE AT RS.7.37 CRORE DIVIDED INTO THREE SEGMENTS, NAMELY, MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES AT RS.9.90 LACS, TRANSLATION CHARGES AT RS.6.99 CRORE AND ACCOUNTS BPO AT RS.27.76 LAC. THE LD. AR HAS MADE OUT A CASE THAT OUTSOURCING ACTIVITY CARRIED OUT BY THIS COMPANY CONSTITUTES 57% O F TOTAL EXPENSES. THE REASON FOR WHICH WE ARE NOT AGREEABLE WITH THE LD. AR IS THAT WE HAVE TO EXAMINE THE REVENUE OF THIS CASE ONLY FROM ACCOUNTS BPO SEGMENT AND NOT ON THE ENTITY LEVEL, BEING ALSO FROM MEDICAL TRANSCRIPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMINING THE RESULTS OF THIS COMPANY FROM THE ACCOUNTS BP O SEGMENT ALONE, THERE IS NO NEED TO EXAMINE THE POSITION UNDER OTHER SEGMENTS. THE ENTIRE OUTSOURCING IS CONFINED TO TRANSLATION CHARGES PAID AT RS.3.00 CRORE, WHICH IS STRICTLY IN THE REA LM OF THE TRANSLATION SEGMENT, REVENUES FROM WHICH ARE TO THE TUNE OF RS.6.99 CRORE. IF THIS SEGMENT OF TRANSLATION IS NOT UNDER CONSIDERATION FOR DECIDING AS TO WHETHER THIS CASE IS COMPARABLE OR NOT, WE CANNOT TAKE RECOURSE TO THE FIGURES WHICH ARE RELEVANT FOR SEGMENTS OTHER THAN ACCOUNTS BPO. THUS IT IS HELD THAT THIS CASE CANNOT BE EXCLUDED ON TH E 14 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. STRENGTH OF OUTSOURCING ACTIVITY, WHICH IS ALIEN TO THE RELEVANT SEGMENT. 13.3. HOWEVER, WE FIND THIS CASE TO BE INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCED BY THE LD. AR TO THE EFFECT THAT T OTAL REVENUE OF THE ACCOUNTS BPO SEGMENT OF COSMIC GLOBAL LIMITED IS VERY LOW AT RS.27.76 LACS. WE HAVE DISCUSSED THIS ASPECT ABOVE IN THE CONTEXT OF CG-VAKS CASE AND HELD THAT A CAPTIVE UNIT CANNOT BE COMPARED WITH A GIANT CASE AND THUS EXCLUDED CG-VAK WITH TURNOVER FROM ACCOUNTS BPO SEGMENT AT RS.86.10 LACS. AS THE SEGMENTAL REVENUE OF BPO SEGMENT OF COSMIC GLOBAL LIMITED AT RS.27.76 LAC IS STILL ON MUCH LOWER SIDE, THE REASONS GIVEN ABOVE WOULD FULLY APPLY TO HOLD COSMIC GLOBAL LIMITED AS INCOMPARABLE. THIS CASE IS, THEREFORE, DIRECTE D TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN VIEW OF THE DETAILED ANALYSIS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ABOVE REFERRED CASE, IN THIS CASE ALSO WE ACCEPT THE CONTENTIONS OF ASSESSE E AND DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THI S COMPARABLE FOR THE SAME REASONS. 12.1. AS REGARDS THE TCS E-SERVE LIMITED, THE TRIBUNAL AT PARA 11.2 TO 11.2.2 HAS HELD AS UNDER : 11.2. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT DURING THE RELEVANT FINANCIAL YEAR, THE TCS E-SERVE INTERNATIO NAL LTD., HAD ACQUIRED THE CITI GROUP INDIA BASED CAPTI VE BUSINESS PROCESSING OUTSOURCING (BPO) ARM FOR AN AL L- CASH CONSIDERATION AND IN RETURN, HAD ACQUIRED THE BUSINESS OF AN AGGREGATE AMOUNT OF $ 2.5 BILLION OV ER A PERIOD OF 9.5 YEARS. THIS DEFINITELY IS AN EXCEPT IONAL CIRCUMSTANCE WHICH HAS BEEN TAKEN NOTE OF BY THE TPO IN THE CASE OF M/S. IGS IMAGING SERVICES (INDIA ) P. LTD., TO EXCLUDE THE SAME FROM THE LIST OF COMPARABLE. THIS EXCEPTIONAL CIRCUMSTANCE WAS NOT TAKEN NOTE OF BY THE TPO AND THE DRP FAILED TO 15 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. APPRECIATE THE OBJECTION OF THE ASSESSEE IN PROPER PERSPECTIVE. ANY CIRCUMSTANCE WHICH WOULD INFLUENCE OR RESULT IN ABNORMAL RESULT IN THE FINANCIALS OF A COMPANY HAVE TO BE ADJUSTED OR WHERE NO ADJUSTMENT CAN BE DONE TO MAKE IT COMPARABLE TO THE TESTED PARTY, SUCH A COMPANY HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. THIS TRIBUNAL IN A NUMBER OF DECISIONS HELD THAT EXCEPTIONAL CIRCUMSTANCE IS A REASONABLE FILTER TO EXCLUDE A COMPANY FROM THE LIS T OF COMPARABLES. THEREFORE, WE DIRECT THE A.O./TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. 11.2.1. AS REGARDS TCS E-SERVE LIMITED IS CONCERNED, WE FIND THAT IT POSSESSES BRAND VALUE AS IS EVIDENT FROM THE SCHEDULE-N (OPERATION AND OTHER EXPENSES) TO THE P & L A/C OF THE ANNUAL REPORT FOR THE FINANCIAL YEAR 2009-10 OF RS.46,065 THOUSANDS AND ALSO THAT IT POSSESSES INTANGIBLES IN THE FORM OF SOFTWARE LICENSES WHICH HAVE NOT BEEN TAKEN NOTE OF BY THE AUTHORITIES BELOW WHILE ADOPTING ITS MARGIN. IT IS ALSO THE CASE OF THE ASSESSEE THAT THIS COMPANY HAS A TURNOVER OF RS.1405.10 CRORES WHICH IS 25 TIMES OF THE TURNOVER OF THE ASSESSEE AND HENCE, IS NOT COMPARABLE TO THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAD ALSO PLACED RELIANCE UPON THE TPO S ORDER IN THE CASE OF M/S. IGS IMAGING SERVICES INDI A LTD., TO HOLD THAT THERE ARE EXCEPTIONAL CIRCUMSTAN CES DURING THE RELEVANT FINANCIAL YEAR DUE TO WHICH THI S COMPANY IS NOT COMPARABLE TO THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE SEGMENTAL DETAILS OF THIS COMPANY ARE NOT AVAILABLE AND HENCE, HAS TO BE EXCLUDED ON THIS COUNT ALSO. 11.2.2. WE FIND THAT THE ASSESSEES CONTENTIONS ABOUT THE PRESENCE OF BRAND VALUE AND OWNING OF INTANGIBLES IS SUPPORTED BY THE EVIDENCE ON RECOR D. HOWEVER, AS REGARDS THE EXTRAORDINARY EVENT OR EXCEPTIONAL CIRCUMSTANCE THERE IS NO MATERIAL PLACE D BEFORE US BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE, MERELY BECAUSE THE TPO IN ANOTHER CASE HAS HELD THAT THERE IS AN EXTRAORDINARY EVENT FOR WHICH THIS COMPANY HAS TO BE EXCLUDED FROM THE LIST 16 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. OF COMPARABLES, IT CANNOT BE EXCLUDED. SUCH CLAIM HAS TO BE SUPPORTED BY EVIDENCE ON RECORD. AS REGARDS THE FUNCTIONAL DISSIMILARITY AND HUGE TURNOVER AND BRAND VALUE IS CONCERNED, WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009- 10 WHILE CONSIDERING THE COMPARABILITY OF THE ASSESSEE WITH INFOSYS BPO LTD., HAS TAKEN NOTE OF THE POSSESSION OF THE BRAND VALUE AND INTANGIBLES WHICH INFLUENCED THE FINANCIAL RESULTS OF THIS COMPANY. T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGN ITY INDIA TECHNOLOGIES P. LTD., (2013) 219 TAXMAN 26 (DEL.), HELD THAT HUGE TURNOVER COMPANIES LIKE INFO SYS AND WIPRO CANNOT BE CONSIDERED AS COMPARABLE TO SMALLER COMPANIES LIKE ASSESSEE THEREIN. IN THE CAS E BEFORE THE HONBLE HIGH COURT (SUPRA), THE TURNOVER OF THE ASSESSEE WAS ABOUT RS.15.79 CRORES AS AGAINST THE TURNOVER OF RS.1016 CRORES OF THE INFOSYS. CONSIDERING THESE FACTS, THE HONBLE HIGH COURT HAD DIRECTED FOR EXCLUSION OF INFOSYS BPO BECAUSE OF IT S BRAND VALUE AND ALSO ON THE GROUNDS OF FUNCTIONAL DISSIMILARITY AND HUGE TURNOVER. THOUGH, THE COMPANY BEFORE US IS TCS E-SERVICE LTD., AND NOT INFOSYS BPO, WE FIND THAT THE TURNOVER OF THE ASSESSEE COMPANY FOR THIS ASSESSMENT YEAR IS AROUND RS.50 CRORES AS AGAINST THE TURNOVER OF TCS E- SERVE LIMITED OF RS.1405.10 CRORES. THEREFORE, FOLLOWING THE TURNOVER FILTER AS WELL AS TAKING NOT E OF THE FACT THAT IT OWNS AND POSSESSES BRAND VALUE AND INTANGIBLES AS COMPARED TO THE ASSESSEE WHICH DOES NOT OWN SUCH ASSETS, WE DIRECT THAT THIS COMPANY BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES. ACCORDINGLY, ASSESSEES GROUNDS OF APPEAL NO.6 IS PARTLY ALLOWED. 12.2. AS REGARDS ACCENTIA TECHNOLOGIES LIMITED IS CONCERNED, THE TRIBUNAL AT PARA 18 AND 18.1 HAS HEL D AS UNDER : 18. AS REGARDS M/S. ACCENTIA TECHNOLOGIES LTD., IS CONCERNED, WE FIND THAT THE DRP HAS DIRECT ED TO EXCLUDE THIS COMPANY BY PLACING RELIANCE UPON TH E 17 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. ORDER OF THE ITAT IN THE ASSESSEES OWN CASE FOR TH E A.Y. 2009-10 BY HOLDING THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWTH AS ITS STRATEGY AND CONSIDERING THE PROFIT MARGINS OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA, HELD THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. IT WAS ALSO HEL D BY THE DRP THAT ON THE VERY SAME REASON OF ACQUISITION OF VARIOUS COMPANIES, BEING AN EXTRAORDINARY EVENT, IT HAD AN IMPACT ON THE PROFIT OF THE COMPANY AND THE SAID COMPANY WAS DIRECTED TO BE EXCLUDED. 18.1. FOR THE RELEVANT A.Y. 2010-11, THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE INFORMATION AVAILABLE ON ACCENTIA TECHNOLOGIES LTD., TO DEMONSTRATE THAT THE SAID COMPANY IS INTO DIVERSIFIED KNOWLEDGE PROCESS OUTSOURCING ACTIVITIE S. IT IS SEEN THEREFROM THAT THE SAID COMPANY IS INVOL VED IN HEALTHCARE DOCUMENTATION AS WELL AS RECEIVABLES, MANAGEMENT SERVICES INCLUDING INSTALLATION AND MAINTENANCE OF ALL SOFTWARE, HARDWARE AND BAND WIDTH INFRASTRUCTURE REQUIRED FOR THE SAME, DEPLOYMENT OF MAN POWER AND SERVICE DELIVERY IN ALL THESE AREAS. IT IS ALSO SEEN THAT IT IS ENGAGED IN LEGAL PROCESS OUTSOURCING. FROM SCHEDULE-IV SHOWING THE FIXED ASSETS OF THE ASSESSEE, IT IS ALSO SEEN THAT THE SAID COMPANY OWNS GOODWILL/BRAND/IPRS (INTELLECTUAL PROPERTY RIGHTS). FROM THE NOTES TO T HE ACCOUNTS, IT IS ALSO SEEN THAT A SUBSIDIARY OF THE COMPANY ASSCENT INFOSERVE PVT. LTD., HAS BEEN AMALGAMATED WITH THE COMPANY CONSEQUENT TO WHICH, ASSETS AND LIABILITIES OF THE ERSTWHILE COMPANY WER E TRANSFERRED AND VESTED IN THE COMPANY W.E.F. 1 ST APRIL, 2008 AND THE SCHEME HAS BEEN GIVEN EFFECT TO IN THE ACCOUNTS OF THE YEAR. THEREFORE, IT IS CLEAR THAT THERE IS AN EXTRAORDINARY EVENT IN THE CASE OF ACCE NTIA TECHNOLOGIES LTD., DURING THE RELEVANT FINANCIAL YE AR PARTICULARLY SINCE THE APPROVAL FOR AMALGAMATION HA S BEEN GIVEN BY THE HONBLE HIGH COURT OF MUMBAI VIDE ORDERS DATED 21 ST AUGUST, 2009 AND BY THE HONBLE KARNATAKA HIGH COURT VIDE ORDERS DATED 6 TH FEBRUARY, 2010. THIS EVENT WOULD DEFINITELY HAVE AN 18 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. EFFECT ON THE PROFIT MARGINS OF THE SAID COMPANY AN D THEREFORE, HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES AS RIGHTLY DONE BY THE DRP. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE DRP ON THIS COMPANY ALSO. ACCORDINGLY, GROUN D NO.3 OF THE REVENUE IS DISMISSED. 12.3. AS REGARDS THE ECLERX SERVICES LIMITED IS CONCERNED, THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS P. LTD., VS. CIT IN ITA.NO.102 OF 2015 DATED 10.08.2015 HAS HELD AS UNDER : 31. IN THE PRESENT CASE, THE TRIBUNAL NOTED THAT VISHAL AND ECLERX WERE BOTH ENGAGED IN RENDERING ITES. THE TRIBUNAL HELD THAT, ONCE A SERVICE FALLS UNDER THE CATEGORY OF ITES, THEN THERE IS NO SUB-CLASSIFICATION OF SEGMENT. THUS, ACCORDING TO THE TRIBUNAL, NO DIFFERENTIATION COULD BE MADE BETWEEN THE ENTITIES RENDERING ITES. WE FIND IT DIFFICULT TO ACCEPT THIS VIEW AS I T IS CONTRARY TO THE FUNDAMENTAL RATIONALE OF DETERMINING ALP BY COMPARING CONTROLLED TRANSACTIONS/ENTITIES WITH SIMILAR UNCONTROLLED TRANSACTIONS/ENTITIES. ITES ENCOMPASSES A WIDE SPECTRUM OF SERVICES THAT USE INFORMATION TECHNOLOGY BASED DELIVERY. SUCH SERVICES COULD INCLUDE RENDERING HIGHLY TECHNICAL SERVICES BY QUALIFIED TECHNICAL PERSONNEL INVOLVING ADVANCED SKILLS AND KNOWLEDGE, SUCH AS ENGINEERING, DESIGN AND SUPPORT. WHILE, ON THE OTHER END OF THE SPECTRUM ITES WOULD ALSO INCLUDE VOICE-BASED CALL CENTERS THAT RENDER ROUTINE CUSTOMER SUPPORT FOR THEIR CLIENTS. CLEARLY, CHARACTERISTICS OF THE SERVICE RENDERED WOULD BE DISSIMILAR. FURTHER, BOTH SERVICE PROVIDERS CANNOT BE CONSIDERED TO BE FUNCTIONALLY SIMILAR. THEIR BUSINESS ENVIRONMENT WOULD BE ENTIRELY DIFFERENT, THE DEMAND AND SUPPLY FOR THE SERVICES WOULD BE DIFFERENT, THE ASSETS AND CAPITAL EMPLOYED WOULD DIFFER, THE 19 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. COMPETENCE REQUIRED TO OPERATE THE TWO SERVICES WOULD BE DIFFERENT. EACH OF THE AFORESAID FACTORS WOULD HAVE A MATERIAL BEARING ON THE PROFITABILITY OF THE TWO ENTITIES. TREATING THE SAI D ENTITIES TO BE COMPARABLES ONLY FOR THE REASON THAT THEY USE INFORMATION TECHNOLOGY FOR THE DELIVERY OF THEIR SERVICES, WOULD, IN OUR OPINION, BE ERRONEOUS. 12.4. AS HELD ABOVE, THE FINDINGS OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE-2(2), HYDERABAD VS. HYUNDA I MOTORS INDIA ENGINEERING P. LTD., (CITED SUPRA) ARE APPLICABLE TO THE FACTS OF THE CASE BEFORE US AS RE GARDS ACCENTIA TECHNOLOGIES LIMITED, TCS E-SERVE INTERNAT IONAL LIMITED AND COSMIC GLOBAL LIMITED AND RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL, WE DIRECT THE TPO/A.O. TO EXCLUDE THESE COMPANIES FROM THE FINAL LIST OF COMPARABLES AND RE - COMPUTE THE ARMS LENGTH ADJUSTMENT ACCORDINGLY. SIM ILAR BY RESPECTFULLY FOLLOWING THE DECISION OF THE HONB LE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS P. LT D., VS. CIT (CITED SUPRA), WE DIRECT THE TPO/A.O. TO EXCLUD E THIS COMPANY FROM THE FINAL LIST OF COMPARABLES AND RE- COMPUTE THE ARMS LENGTH ADJUSTMENT ACCORDINGLY. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THESE FOUR COMPANIES ARE EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THE ASSESSEES MARGIN WOULD FA LL WITHIN + OR 5% OF THE BALANCE OF THE COMPARABLE COMPANIES AND THE OTHER GROUNDS OF THE ASSESSEE IN GROUND NO.2 WOULD BECOME PURELY ACADEMIC. THEREFORE , 20 ITA.NO.459/HYD/2015 M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., HYD. THE OTHER GROUNDS ARE NOT DISCUSSED OR ADJUDICATED AT THIS STAGE AND ARE REJECTED ACCORDINGLY. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH JANUARY, 2016 VBP/- COPY TO : 1. M/S. COGNIZANT TECHNOLOGY SERVICES P. LTD., (FORMERLY KNOWN AS UBS SERVICE CENTRE (INDIA) P. LTD., PLOT NO.24, 25 & 26, NANAKRAMGUDA, HYDERABAD 500032. 2. THE DCIT, CIRCLE - 1(2 ), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. DISPUTES RESOLUTION PANEL, HYDERABAD. 4. THE COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, I.T. TOWERS, 10-2-3, A.C. GUARDS, HYDERABAD 500 004. 4 . THE ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICING), HYDERABAD 500 004. 5 . THE CIT - 4, HYDERABAD. 6. D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE