Monster.Com India (P) Ltd., Hyd, Hyderabad V. DCIT, Circle-16(2), Hyd, Hyderabad

ITA 5/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2638 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAN KUMAR SINGHANIA
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Depreciation; Transfer pricing; International transaction; Rule of consistency
• Section: 234B; 37(1); 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1 1425/H/15 2010-11 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYD. M/S MONSTER.COM (INDIA) PVT. LTD., HYD. PAN - AACCM3695G 2 5/H/16 2010-11 M/S MONSTER.COM (INDIA) PVT. LTD., HYD. PAN - AACCM3695G DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYD. 3 1509/H/16 2011-12 INCOME-TAX OFFICER, WARD 16(4), HYD. M/S MONSTER.COM (INDIA) PVT. LTD., HYD. PAN - AACCM3695G 4 1175/H/16 2011-12 M/S MONSTER.COM INDIA PVT. LTD., HYD. PAN - AACCM3695G ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2), HYD. REVENUE BY : SHRI MOHAN KUMAR SINGHANIA ASSES SE E BY : SHRI B. SATYANARAYANA MURTHY DATE OF HEARING 27-07-2017 DATE OF PRONOUNCEMENT 30-08-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AS WEL L AS REVENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOM E-TAX (APPEALS) 2 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. (IN SHORT CIT(A)) FOR ASSESSMENT YEARS 2010-11 AND 2011-12. AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THE Y WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PA SSED FOR THE SAKE OF CONVENIENCE. ITA NO. 5/H/16 BY ASSESSEE AND ITA NO. 1425/H/15 BY THE REVENUE FOR AY 2010-11. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING ONLINE RECRUIT MENT SERVICES. IT FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 11/10/ 2010 ADMITTING TOTAL INCOME OF RS. 33,65,95,390/-. THE CASE WAS SELECTED FOR SCRUTINY AND AFTER EXAMINING ALL THE DETAILS AND INFORMATION SUB MITTED BY THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT BY MAKING THE FOLLOWING ADDITIONS AND ASSESSED THE INCOME AT RS. 88,36,13,7 47/-. 1. ACCRUED INCOME SHOWN AS UNMATURED ADVANCES IN TH E BALANCE SHEET OF RS. 51,89,30,155/-. 2. ARMS LENGTH PRICE ADJUSTMENT U/S 92CA OF RS. 1 ,49,51,346/- 3. DISALLOWANCE OF EXPENDITURE INCLUDED IN EMPLOYEE S COST RS. 1,43,70,180/-. 3. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A) AGAINST THE ADDITIONS IN R ESPECT OF ACCRUED INCOME SHOWN AS UNMATURED ADVANCES AND ARMS LENGTH PRICE ADJUSTMENT U/S 92CA OF THE ACT. 4. AS REGARDS THE ISSUE OF TAXING OF ACCRUED INCOME SHOWN AS UNMATURED ADVANCES IN THE BALANCE SHEET, THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REL YING ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEES OWN CASE FOR THE PREVIOUS YEARS, DELETED THE ADDITION M ADE BY THE AO. 5. AS REGARDS THE ADDITION IN RESPECT OF INTERNATIO NAL TRANSACTIONS, THE CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE. 3 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AGAINST THE DELETION OF ADDITION ON ACCOU NT OF UNMATURED ADVANCES AND THE ASSESSEE IS IN APPEAL BEFORE US AG AINST PARTIAL RELIEF ON ACCOUNT OF INTERNATIONAL TRANSACTIONS. 7. AS REGARDS THE ISSUE OF TAXING OF ACCRUED INCOME SHOWN AS UNMATURED ADVANCES IN THE BALANCE SHEET, RAISED BY THE REVENUE IN ITS APPEAL (GROUND NOS. 1 & 2), THE AO OBSERVED AS UNDER: 1. THE ADVANCES SHOWN BY THE ASSESSEE ARE ALREADY A CCRUED TO THE ASSESSEE. THESE ARE NOT REFUNDABLE RECEIPTS. AS PER NOTES TO ACCOUNTS AT POINT NO.2, IT WAS MENTIONED THAT UNMA TURED INCOME INCLUDES THE AMOUNT WHEREOF HAS NOT BEEN LIN KED AND IDENTIFIED WITH THE INDIVIDUAL CUSTOMERS - CONTRACT S IN VIEW OF VOLUMES AND HETEROGENEOUS NATURE OF CONTRACTS. BESI DES, THERE ARE NO UNIFORM PAYMENT TERMS IN THE VARIETY OF CONT RACTS ENTERED INTO DURING THE YEAR. THIS, HOWEVER, DOES NOT IMPAC T INCOME ACCRUAL AND DISCLOSURE IN THE BALANCE SHEET EXCEPT IN CASE OF DEBTORS TO THE EXTENT OF AMOUNT NOT SO DETERMINED.' THIS NOTE TO THE ACCOUNTS CLEARLY INDICATES THAT THE INCOME IS A LREADY ACCRUED IN RESPECT OF THESE ADVANCES. 2. THE ASSESSEE-COMPANY WAS REQUESTED TO SUBMIT CON FIRMATIONS FROM THE COMPANIES FROM WHOM THESE ADVANCES ARE REC EIVED TO SHOW THAT THESE AMOUNTS ARE APPEARING AS LIABILITIE S IN THEIR BALANCE SHEET TO PROVE THE POINT THAT THIS INCOME I S NOT ACCRUED TO THE ASSESSEE. IF THE PAYING COMPANY DEBITS THE F ULL EXPENDITURE ON THESE PAYMENTS, THE RECEIVING COMPAN Y CANNOT SHOW PART OF THE AMOUNT AS RECEIPT AND PART OF THE AMOUNT AS ADVANCE. THE EXAMINATION OF AGREEMENT COPIES ENTERE D BY ASSESSEE WITH OTHERS FOR PROVIDING ON-LINE SERVICES , CLEARLY INDICATE THAT THE INCOME IS ALREADY ACCRUED TO THE ASSESSEE. THERE IS NO CLAUSE FOR REFUND OF THESE ADVANCES IN THE AGREEMENTS ENTERED BY THE ASSESSEE WITH OTHERS. 3. THE ASSESSEE-COMPANY IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING AND THEREFORE, THE COMPANY HAS TO OFFER THE ENTIRE AMOUNT AS RECEIPTS AND PROVIDE FOR PROVISION FOR EX PENSES TO BE INCURRED, IF ANY, IN RESPECT OF THESE AMOUNTS BASED ON SOME SCIENTIFIC METHOD OR PAST EXPERIENCE AND IT CANNOT POSTPONE THE ENTIRE AMOUNTS TO THE SUBSEQUENT PERIOD ON THE GROU ND THAT THE PERIOD OF SERVICE IS NOT YET COMPLETED. THE ASSESSE E-COMPANY ALREADY DEBITED HUGE DIRECT OR INDIRECT EXPENSES ON THESE RECEIPTS AND POSTPONEMENT OF ALL THESE RECEIPTS RES ULTS IN DISTORTION OF TRUE PROFITS. 4 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 4. WHATEVER BE THE METHOD FOLLOWED, RECOGNITION OF REVENUE HAS TO BE IN CONSONANCE WITH THE METHOD OF ACCOUNTING S O FOLLOWED VIS--VIS THE NATURE AND CHARACTER OF THE AMOUNT AC CRUED OR RECEIVED AND THE YEAR OF SUCH ACCRUAL OR RECEIPT [S TATE BANK OF TRAVANCORE 158 ITR 102 (SC)]. THE ASSESSING OFFICER HAS THE POWER TO ADOPT THE CORRECT METHOD OF VALUATION OF C LOSING STOCK INSTEAD OF WRONG METHOD ADOPTED BY THE ASSESSEE FOR A LONG PERIOD. METHOD OF STOCK VALUATION FOLLOWED SHOULD N OT ONLY BE CONSISTENT BUT SHOULD ALSO BE CORRECT. BRITISH PAIN TS INDIA LIMITED 188 ITR 44 (SC). ACCORDINGLY, THE UNMATURED INCOME OF RS. 51,89,30,1 55/- IS TREATED AS ASSESSEES INCOME AND ACCORDINGLY ADDED BACK TO THE INCOME RETURNED. 8. THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE, DELETED THE ADDITION MADE BY THE AO. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 10. BEFORE US, THE LD. DR HAS CONCEDED THAT THE ISS UE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF ITAT IN ASSESSE ES OWN CASE, WHILE, THE LD. AR HAS RELIED ON THE ORDER OF THE CI T(A). 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THE ITAT, HYDERABAD IN ASSESSEES OWN C ASE IN ITA NO. 1762/HYD/11, FOR AY 2007-08, ORDER DATED 31/03/2017 WHEREIN THE COORDINATE BENCH OBSERVED AS UNDER: 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THE ISSUE IS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, HYDERABAD IN ASSESSEES OWN CASE IN ITA NO. 1081/HYD/04, FOR AY 2001-02, OR DER DATED 10/08/2007 WHEREIN THE COORDINATE BENCH OBSERVED AS UNDER: IN THE SECOND GROUND, THE REVENUE IS AGGRIEVED AG AINST THE DELETION OF THE ADDITION MADE ON ACCOUNT OF DIFFERE NCE IN PROFESSIONAL RECEIPTS. IT WAS NOTED BY THE AO THAT AS PER TWO TDS CERTIFICATES, THE ASSESSEE HAD RECEIVED PROFESS IONAL FEES AGGREGATING TO RS. 1,39,125 (RS. 1,18,125 + 21,000) . HOWEVER, THE ASSESSEE HAD SHOWN TOTAL RECEIPTS OF RS. 60,558 /- ONLY. THE EXPLANATION OF THE ASSESSEE WAS THAT IT FOLLOWS MER CANTILE SYSTEM OF ACCOUNTING AND UNDER THE SAID SYSTEM, IT RECOGNI ZES THE 5 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. REVENUE ON THE BASIS OF PROPORTIONATE COMPLETION ME THOD WHICH IS RECOGNIZED BY THE INSTITUTE OF CHARTERED ACCOUNT ANTS OF INDIA (ICAI) IN ITS ACCOUNTING STANDARD OF REVENUE RECOGN ITION. UNDER THIS METHOD, REVENUE IS RECOGNIZED PROPORTIONATELY BY REFERENCE TO THE PERFORMANCE OF EACH ACT. THE REVENUE RECOGNI ZED UNDER THIS METHOD WOULD BE DETERMINED ON THE BASIS OF CON TRACT VALUE, ASSOCIATE COST, NUMBER OF ACTS OR OTHER SUITABLE BA SIS. WHEN SERVICES ARE PROVIDED BY AN INDETERMINATE NUMBER OF ACTS OVER A PERIOD OF TIME, REVENUE IS RECOGNIZED ON A STRAIGHT LINE BASIS OVER THE SPECIFIC PERIOD. HOWEVER, THE ASSESSING OF FICER WAS OF THE VIEW THAT SINCE THE SAID ACCOUNTING STANDARD HA S NOT BEEN NOTIFIED RECOGNIZED BY THE CBDT UNDER S.145(2) OF T HE IT ACT 1961 (THE ACT), THE RECEIPTS HAVE TO BE ACCOUNTED F OR ON THE BASIS OF TDS CERTIFICATES. ACCORDINGLY, THE AMOUNT OF RS.78,567 WAS ADDED AS DIFFERENCE IN PROFESSIONAL RECEIPTS. T HE CIT(A) CONSIDERED THE EXPLANATION OF THE ASSESSEE AND FOLL OWING THE ORDER OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BHARAT TELEVISION LTD. IN ITA NO.1797/HYD/89 AND OF THE MADRAS BENCH IN THE CASE OF SAKURA ELECTRONICS (P) LTD. AL LOWED THE CLAIM OF THE ASSESSEE. THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESEN TATIVE WAS THAT SINCE THE ASSESSEE HAS ACCOUNTED FOR ONLY PROP ORTIONAL RECEIPT, CREDIT FOR THE ENTIRE TDS CANNOT BE ALLOWE D. ON THE OTHER HAND, THE LEARNED COUNSEL SUPPORTED THE ORDER OF TH E CIT(A). ON DUE CONSIDERATION OF THE MATTER, WE UPHOLD THE O RDER OF THE CIT(A). WHETHER A PARTICULAR ACCOUNTING STANDARD HA S BEEN NOTIFIED OR NOT IS NOT MATERIAL. WHAT IS TO BE SEEN IS WHETHER THE ASSESSEE HAS FOLLOWED A RECOGNIZED METHOD OF ACCOUN TING OR NOT. IF METHOD FOLLOWED BY THE ASSESSEE IS SUCH WHEREBY CORRECT INCOME CANNOT BE DEDUCED, THEN ONLY THE ASSESSING O FFICER HAS THE AUTHORITY TO ADOPT A REASONABLE BASIS TO DETERM INE THE TOTAL INCOME. IN THE INSTANT CASE,. IT CANNOT BE DISPUTED THAT THE ASSESSEE HAS FOLLOWED A RECOGNIZED METHOD OF ACCOUN TING AND HENCE, THERE IS NO QUESTION OF ADDING ANY FURTHER A MOUNT TO THE TOTAL INCOME. THERE BEING NO INFIRMITY IN THE ORDER OF THE CIT(A), WE UPHOLD THE SAME. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO FOLLOWING T HE DECISION OF THE ITAT AND, ACCORDINGLY, WE UPHOLD THE ORDER OF T HE CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE IN ITS APP EAL. 11.1 AS THE ISSUE IN THE AY UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF AY 2007-08, FOLLOWING THE DECI SION OF THE ITAT, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROU ND RAISED BY THE REVENUE. 6 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 12. AS REGARDS THE ISSUE REGARDING ALP ADJUSTMENT BY TPO, RAISED BY THE ASSESSEE IN ITS APPEAL (3-10 GROUNDS OF APPE AL), IT IS OBSERVED THAT THE ASSESSEE MADE CERTAIN INTERNATIONAL TRANSA CTIONS PERTAINING TO BPO SERVICES TO ITS AES, COMMISSION RECEIVED ON SELLING OTHER ENTITIES DATABASE FROM ITS ASSOCIATED ENTERPRISES A ND LOANS TAKEN FROM ASSOCIATED ENTERPRISES. THE AO REFERRED THE MA TTER TO TPO VIDE LETTER DATED 06/08/2012 TO DETERMINE ARMS LENGTH P RICE (ALP). TPO VIDE HIS ORDER U/S 92CA(3) OF THE ACT DATED 30/12/2 013 DETERMINED THE ALP ADJUSTMENTS OF THE INTERNATIONAL TRANSACTIO NS AT RS. 1,49,51,346/- U/S 92CA(3) OF THE ACT. 12.1 IT IS OBSERVED THAT AS PER 3CEB REPORT, THE IN TERNATIONAL TRANSACTIONS REFLECTED ARE AS UNDER: AE NATURE OF TRANSACTION AMOUNT (RS.) MONSTER WORLDWIDE INC., USA PROVISIONS OF ITES 3,96,48,126 MONSTER SG PTE LTD., SINGAPORE -DO- 1,35,57,580 MONSTER TECHNOLOGIES MALAYSIA SDS BHD. -DO- 44,78,201 E-CAREER (BEIJING) LTD. COMMISSION RECEIVABLE 7,360 E-CAREER (BEIJING) LTD. COMMISSION PAYABLE 1,32,090 JOBKOREA CO. LTD. COMMISSION RECEIVABLE 25,917 MONSTER JOBS MEXICO, S.DE R.L. DE C.V. -DO- 10,325 MONSTER WORLDWIDE CANADA -DO- 1,51,355 MONSTER WORLDWIDE CANADA COMMISSION PAYABLE 3,55,919 MONSTER WORLDWIDE INC., USA COMMISSION RECEIVABLE 2,28,050 MONSTER WORLDWIDE INC., USA COMMISSION PAYABLE 1,08,87,680 MONSTER WORLDWIDE LTD., UK COMMISSION RECEIVABLE 50,61,270 MONSTER WORLDWIDE LTD., UK COMMISSION PAYABLE 30,25,204 MONSTER.COM HK LTD. COMMISSION RECEIVABLE 2,32,647 7 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. MONSTER.COM HK LTD. COMMISSION PAYABLE 1,15,107 MONSTER.COM SG PTE. LTD. COMMISSION RECEIVABLE 7,96,891 MONSTER.COM SG PTE. LTD. COMMISSION PAYABLE 1,54,678 MONSTER RECRUITMENT INSAN KAYNAKLARI DANISMANLIK LTD., TURKEY 7,550 MONSTER TECHNOLOGIES MALAYSIA SDS BHD 3,987 MONSTER WORLDWIDE INC., USA 1,47,51,888 MONSTER WORLDWIDE INC., USA 2,31,30,276 MONSTER WORLDWIDE INC., USA 4,10,15,063 MONSTER.COM SG PTE. LTD. 63,28,497 MONSTER TECHNOLOGIES MALAYSIA SDN BHD 66,36,314 MONSTER WORLDWIDE INC., USA 27,25,896 17,34,67,871 12.1 AFTER EXAMINING THE TP STUDY SUBMITTED BY THE ASSESSEE, THE TPO OBSERVED THAT THE ASSESSEE HAS CARRIED OUT THE ECONOMIC ANALYSIS, HOWEVER, HE SUMMARIZED IT AS UNDER: SR.N O. NATURE OF INTERNATIONAL TRANSACTION AMOUNT OF TRANSACTION MAM PLI MARGIN OF TAXPAYER MARGIN OF COMPARABLES 1 PROVISION OF ITES 5,76,83,907 CPM OP/ OC 15 15.5 2 COMMISSION RECEIVABLE 65,13,815 CUP NA 10 3 3 COMMISSION PAYABLE 1,46,82,215 CUP NA 10 3 4 PAYMENT OF ROYALTY 1,47,51,888 NA NA NA NA 5 PAYMENT OF SOFTWARE CHARGES 2,31,30,276 NA NA NA NA 6 REIMBURSEMENT OF EXPENSES PAID 4,10,15,063 NA NA NA NA 7 REIMBURSEMENT OF EXPENSES RECEIVED 1,29,64,811 NA NA NA NA 8 RECEIPT OF VIDEO CONFERENCE EQUIPMENT 27,25,896 NA NA NA NA 12.2 THE TPO HAS OBSERVED THAT T HE TAXPAYER HAS CARRIED OUT THE ECONOMIC ANALYSIS IN SEARCH FOR COMPARABLES AT PAGE S 30 TO 35 OF THE T.P. DOCUMENTATION. THE TAXPAYER HAS USED CAPITALIN E DATA BASE IN SEARCH FOR COMPARABLE COMPANIES. WITH REGARD TO THE TRANSACTION 8 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. RELATING O PROVISION OF ITES, AFTER APPLYING CERTAI N FILTERS, THE TAXPAYER USING CPM AS MAM HAS SHORT-LISTED 18 CAMPA RABIES W ITH ARITHMETIC MEAN PLI (OP/OC) WAS COMPUTED AT 15.5% AS AGAINST T HE PLI OF THE TAXPAYER AT 15%. WITH REGARD TO THE TRANSACTION REL ATING TO SALES COMMISSION, THE TAXPAYER SEARCHED FOR COMPARABLES A ND FOUND THAT THE SALES COMMISSION IS BETWEEN 3% TO 15% AND WHERE AS IT HAS EARNED / PAID COMMISSION OF 10%. AS REGARDS ROYALTY , THE TAXPAYER STATED THAT THE BRAND ROYALTY CHARGED BY THE PARENT COMPANY IS 1%, WHICH IS COMPETITIVE AS COMPARED TO NORMAL RATES OF ROYALTY. SIMILARLY FOR THE TRANSACTION RELATING TO SOFTWARE SERVICE CH ARGES, THE AE RECOVERS THE DIRECT DEVELOPMENT COST PLUS 10% MARK UP, WHICH IS COMPETITIVE AS COMPARED TO NORMAL RATES. AS REGARDS THE TRANSACTION RELATING TO REIMBURSEMENT, IT IS STATED THAT THE TP REGULATION DO NOT APPLY AS THESE ARE CHARGED AT COST. ACCORDINGLY, TH E TAXPAYER HOLDS THAT THE TRANSACTIONS ARE WITHIN ARM'S LENGTH. 12.3 AS PER THE AUDITED STATEMENT OF ACCOUNTS, THE FINANCIALS OF THE ASSESSEE ARE AS UNDER: DESCRIPTION AMOUNT (RS.) OPERATING REVENUE 1,22,37,57,108 OPERATING COST 84,51,56,038 OPERATING PROFIT 37,86,01,070 OP/OR (%) 30.94 OP/OC (%) 44.80 12.4 TPO NOTED THAT AS PER THE SEGMENTAL STATEMENT OF ACCOUNTS SUBMITTED BY THE TAXPAYER DURING THE COURSE OF HEAR ING ARE AS UNDER: DESCRIPTION AMOUNT (RS.) OPERATING REVENUE 5,76,83,907 OPERATING COST 5,01,61,751 OPERATING PROFIT 75,22,156 OP/OR (%) 13.04 OP/OC (%) 15.0 12.5 THE TPO OBSERVED THAT THE COMPANY HAD THE FOLL OWING TRANSACTION, WHICH WAS NOT REPORTED IN FORM 3CEB OR BUT NO BENCH MARKING ANALYSIS HAD BEEN DONE IN THE TP STUDY: 9 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. AE NATURE OF TRANSACTION AMOUNT (IN RS.) MONSTER WORLDWIDE INC., USA RECEIVABLE 9,02,43,229 MONSTER.COM SG PTE. LTD. RECEIVABLE 3,13,51,983 MONSTER TECHNOLOGIES MALAYSIA SDN BHD RECEIVABLE 1,76,25,240 E-CAREER (BEIJING) LTD. RECEIVABLE 8,76,714 MONSTER ITALIA SRL RECEIVABLE 53,039 MONSTER RECRUITMENT INSAN KAYNAKLARI DANISMANLIK LTD., TURKEY RECEIVABLE 62,090 MONSTER WORLDWIDE CANADA RECEIVABLE 17,63,607 MONSTER WORLDWIDE SWITZERLAND AG RECEIVABLE 12,238 MONSTER.COM HK LTD. RECEIVABLE 6,72,934 14,26,61,074 12.6 ON GOING THROUGH THE TP DOCUMENT, THE TPO OBSE RVED THAT THE METHOD OF THE SEARCH PROCESS IS NOT IN CONFORMITY W ITH THE TP REGULATIONS AS ALSO THE CHOICE OF FILTERS WHICH RES ULTED IN SELECTION OF INAPPROPRIATE COMPARABLES. THE SEARCH CRITERIA AND THE ACCEPTANCE/REJECTION MATRIX APPLIED BY THE COMPANY FOR SCREENING THE INITIALLY IDENTIFIED CASES FOR ARRIVING AT A FINAL COMPARABLE SET AND THE REMARKS OF THE TPO WERE AS UNDER: 12.7 COMPARABLES PROPOSED BY THE TPO AND ACCEPTED B Y THE ASSESSEE ARE AS UNDER: 1. ACROPETAL TECHNOLOGIES LTD. (SEG.) 2. AXIS IT & T LTD. 3. COSMIC GLOBAL LTD. 4. JEEVAN SOFTECH LTD. (SEG.) 5. MICROGENETICS SYSTEMS LTD. 6. CROSSDOMAIN SOLUTIONS PVT. LTD. 12.8 COMPARABLES PROPOSED BY THE TPO AND OBJECTED B Y THE ASSESSEE, ARE AS UNDER: 10 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 1. ACCENTIA TECHNOLOGIES LTD. 2. ECLERX SERVICES LTD. 3. INFOSYS BPO LTD. 4. TCS E-SERVE INTERNATIONAL LTD. 5. TCS E-SERVE LTD. 12.9 THE FOLLOWING FINAL COMPARABLES SELECTED BY TH E TPO: S.NO. NAME OF THE COMPANY OP/OC 1. ACCENTIAL TECHNOLOGIES LTD. 43.62 2. ACROPETAL TECHNOLOGIES LTD. (SEG.) 10.12 3. AXIS IT & T LTD. 11.89 4. COSMIC GLOBAL LTD. 16.59 5. ECLERX SERVICES LTD. 42.17 6. INFOSYS BPO LTD. 31.63 7. TCS E-SERVICE INTERNATIONAL LTD. 51.51 8. TCS E-SERVE LTD. 67.58 9. JEEVAN SOFTECH LTD. (SEG.) 8.04 10. MICROGENETICS SYSTEMS LTD. 6.60 11. CROSSDOMAIN SOLUTIONS PVT. LTD. 17.13 TOTAL 306.88 AVERAGE 27.90 12.10 AFTER APPLYING THE AVERAGE MARGINS OF THE COM PARABLES TO THE FINANCIALS OF THE ASSESSEE, THE TPO DETERMINED THE ARMS LENGTH PRICE AS UNDER: DESCRIPTION AMOUNT ARMS LENGTH MARGIN 27.90% LESS: WCA 0.00% ADJUSTED ARMS LENGTH PRICE 27.90% OPERATING COST (OC) 5,01,61,751 ADJUSTED ARMS LENGTH MARGIN (%) AALM 27.90% ARMS LENGTH PRICE = (100+AALM)*OC 6,41,56,880 PRICE RECEIVED (OR) 5,76,83,907 ADJUSTMENT U/S 92CA 64,72,973 12.11 THUS, THE ARMS LENGTH PRICE OF THE ASSESSEE WAS RS. 6,41,56,880/- AND THE SHORTFALL OF RS. 64,72,973/- WAS TREATED AS ADJUSTMENT U/S 92CA OF THE IT ACT AND THE TOTAL INC OME OF THE 11 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. ASSESSEE WAS ENHANCED TO THE EXTENT ACCORDINGLY U/S 92CA(3) OF THE ACT. 13. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE A. Y. 2010-11, THE ASSESSEE COMPANY ENTERED INTO CERTAIN INTERNATIONAL TRANSACTIONS PERTAINING TO BP O SERVICES BY WAY OF TELE-CALLING SERVICES AND SALES AGENCY SERVICES IN RESPECT OF DATA BANK BELONGING TO THE ASSOCIATED ENTERPRISES. THE A SSESSEE COMPANY HAS BEEN ADOPTING COST PLUS 15% MARK UP FOR INVOICI NG THESE ASSOCIATED ENTERPRISES IN RESPECT OF TELE-CALLING S ERVICES. THE ASSESSEE COMPANY IN RESPECT OF SALES AGENCY, HAS BE EN CHARGING AND PAYING SALES COMMISSION OF 10%. FOR PURPOSE OF COMP LYING WITH TRANSFER PRICING REGULATIONS, THE ASSESSEE COMPANY ADOPTED COST PLUS 15% MARK UP AS ARMS LENGTH PRICE IN RESPECT OF TELE-CALLING AND COMPARATIVE UNCONTROLLED. THIS MATTER WAS REFERRED BY THE ASSESSING OFFICER TO THE ADDITIONAL COMMISSIONER(TRANSFER PRI CING). THE ASSESSEE COMPANY HAS BROUGHT TO THE NOTICE OF THE T RANSFER PRICING OFFICER THAT THE DOCUMENTATION FILED IN THE PRECEDI NG YEAR IS VALID FOR THIS YEAR IN VIEW OF THE PROVISO TO RULE-LOD(4) OF THE INCOME TAX RULES. 13.1 IT WAS SUBMITTED THAT T HE COMPANY HAS BEEN RENDERING THESE TELE-SALES SERVICES TO THREE ASSOCIATED ENTERPRISES AT USA, SINGAPORE AND MALAYSIA. ALL THE DIRECT AND INDIRECT COSTS ARE TAKEN INTO ACCOUNT SEPARATELY ON A MONTHLY BASIS AND AN INVOICE IS RAI SED AT AN AGREED MARK-UP OF 15% TO ALL THE ASSOCIATED ENTERPRISES. T HE COST AND THE MANAGEMENT FEES OF 15% CHARGED IN RESPECT OF THESE THREE UNITS, ARE AS UNDER: SL. NO. NAME OF THE COMPANY COST (RS.) MARK-UP (RS.) TOTAL (RS.) 1. MONSTER WORLDWIDE INC., USA 3,44,76,631 51,71,495 3,96,48,12 MONSTER SG PTE. 1,17,89,200 17,68,380 1,35,57,580 12 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. LTD., SINGAPORE MONSTER TECHNOLOGIES MALAYSI 38,94,088 5,84,113 44,78,201 13.2 THE ASSESSEE COMPANY HAS CONTENDED THAT IT IS EARNING SALES COMMISSION AND PAYING SALES COMMISSION IN RESPECT O F SALE OF DATA BANKS OF THE ASSOCIATED ENTERPRISES AND THAT IT IS CHARGING AND PAYING A SALES COMMISSION AT 10%. THE DETAILS WERE ALSO PR OVIDED TO THE TPO AS DETAILED BELOW: ASSOCIATED ENTERPRISE NATURE OF TRANSACTION AMOUNT (RS.) E-CAREER (BEIJING LTD.) COMMISSION RECEIVED 7,360 E-CAREER (BEIJING LTD.) COMMISSION PAID 1,32,090 JOB KOREA CO.LTD. COMMISSION RECEIVED 25,917 MONSTER JOBS MEXICO S.DE R.L.DE.CV COMMISSION RECEIVED 10,325 MONSTER WORLDWIDE CANADA COMMISSION RECEIVED 1,51,355 MONSTER WORLDWIDE CANADA COMMISSION PAID 3,55,919 MONSTER WORLDWIDE INC.USA COMMISSION RECEIVED 2,28,050 MONSTER WORLDWIDE INC.USA COMMISSION PAID 1,08,87,680 MONSTER WORLDWIDE LTD., UK COMMISSION RECEIVED 50,61,270 MONSTER WORLDWIDE LTD., UK COMMISSION PAID 30,25,204 MONSTER.COM HK LTD. COMMISSION RECEIVED 2,32,647 MONSTER.COM HK LTD. COMMISSION PAID 1,15,107 MONSTER SG PTE LTD., SINGAPORE COMMISSION RECEIVED 7,96,891 MONSTER SG PTE LTD., SINGAPORE COMMISSION PAID 1,54,678 MONSTER RECRUITMENT INSAN KAYNAKLARI DAANISHMANLIL LTD., TURKEY COMMISISON PAID 7,550 MONSTER TECHNOLOGIES MALAYSIA SDN BHD. COMMISSION PAID 3,987 13.3 IT WAS SUBMITTED THAT THE TRANSFER PRICING OFF ICER IN THE FINAL ORDER U/S 90CA HAS RECOMMENDED COST PLUS 27.90% AS ARMS LENGTH 13 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. PRICE AND SUGGESTED AN ADJUSTMENT OF RS. 64,72,973/ - IN THE TOTAL INCOME OF THE ASSESSEE COMPANY. HE DID NOT CONSIDER THE MARK-UP OF 15% ADOPTED BY THE ASSESSEE COMPANY IN THE CASE OF COST PLUS RELATING TO TELE-CALLING SERVICES, AS AN ARM'S LENG TH PERCENTAGE. THE TRANSFER PRICING OFFICER HAS PASSED AN ORDER U/S 92 CA ON 28-10-2011, WORKING OUT THE ADJUSTMENT FINALLY AS UNDER: 'AFTER APPLYING THE AVERAGE MNRGINS OF THE COMPARAB LES TO THE FINANCIALS OF THE TAX PAYER, THE RESULTS IS AS FOLL OWS: ARM'S LENTH MARGIN 27.90% LESS: WORKING CAPITAL ADJUSTMENT 00.0% ADJUSTMENT ARM'S LENGTH MARGIN 27.90% OPERATING COSTS(OC) RS.5 ,01 ,61,751 ADJUSTED ANN'S LENGTH MARGIN(% ) (AALM) 27.90 % ARM'S LENGTH PRICE=(100+ AALM)*OC RS. 6,41,56,880 PRICE RECEIVED(OF) RS. 5,76,83,967 ADJUSTMENT U /S.92CA RS. 64,72,973 THUS, THE ARM'S LENGTH PRICE OF THE TAX PAYER IS RS . 6,41,56,880/-AND THE SHORTFALL OF RS 64,72,973/- IS TREATED AS ADJUSTMENT U/S 92CA OF I. T. ACT AND THE TOTAL INCO ME OF THE TAX PAYER WILL BE ENHANCED TO THAT EXTENT ACCORDINGLY U /S 92CA(3) OF THE I.T. ACT'. 13.4 IT WAS SUBMITTED THAT IGNORING THE AMOUNTS OF PROFITS OF RS. 75,23,988/- SHOWN BY THE ASSESSEE COMPANY IN RESPEC T OF INTERNATIONAL TRANSACTIONS, AND IN VIEW OF THE INCR EASE IN THE MARKUP IN THE COST PLUS METHOD, THE TRANSFER PRICING OFFIC ER HAS RECOMMENDED AN ADJUSTMENT OF RS. 64,72,973/-. THIS AMOUNT WAS ACCORDINGLY ADDED BY THE ASSESSING OFFICER TO THE T OTAL INCOME. THE TRANSFER PRICING OFFICER AND THE ASSESSING OFFICER HAS ALSO IGNORED THE FACT THAT THE AGREEMENTS IN RESPECT OF TEIE-ROL LING ACTIVITY WERE ENTERED INTO THE YEAR RELEVANT TO THE A.Y. 2007-08 AND THEREFORE, THE MARK-UP AS UPHELD BY THE CIT(APPEALS) IN THE APPEAL IN THE A. Y. 2007-08, SHOULD BE ADOPTED FAR THIS YEAR ALSO. 13.5 IT WAS SUBMITTED THAT THE TRANSFER PRICING OFF ICER HAS APPLIED MARK-UP OF RS. 12,96,481/- EVEN ON THE REIMBURSEMEN T OF EXPENSES 14 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. RECEIVED WITHOUT APPRECIATING THAT THE SAID REIMBUR SEMENT IN THE EARLIER YEARS WERE NOT SUBJECTED TO MARK-UP, THE TR ANSFER PRICING OFFICER HAS ADDED, RS. 30,75,456/- OUT OF BRAND ROY ALTY AND RS. 41,06,436/- OUT OF SOFTWARE CHARGES AS RELATING TO PRIOR PERIOD. WHILE DOING THIS, THE TRANSFER PRICING OFFICER HAS IGNORE D THAT THE PARENT COMPANY RAISED THE BILL FOR THE FIRST TIME THIS YEA R FOR ROYALTY AND SOFTWARE CHARGES. THEREFORE, THE TRANSFER PRICING O FFICER SHOULD HAVE SEEN THAT THESE EXPENSES RELATE TO THE CURRENT YEAR AND NOT TO PRIOR PERIOD. 14. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ASSESSMENT ORDER AND SUBMISSIONS OF THE ASSESSEE. I N THIS CASE THE AO HAS TAKEN SEVERAL COMPARISONS AND ADJUS TMENTS AFTER COMPARING ARMS LENGTH PRICE AND SEVERAL COMP ANIES MADE THE ADDITIONS. THE ASSESSEE MAINLY CONTESTED THAT T HE ASSESSEE COMPANY RECEIVING SALES COMMISSION AND PAYING SALES COMMISSION IN RESPECT OF SALE OF DATA BANKS OF THE ASSOCIATED ENTERPRISES AND CHARGING AND ALSO PAYING SALES COMM ISSION AT 10%. THE TRANSFER PRICING OFFICER IN THE FINAL ORDE R RECOMMENDED COST + 27.90% AS ARM'S LENGTH PRICE AS AGAINST 15% ADOPTED BY THE ASSESSEE. THE ASSESSEE HAS RAISE D VARIOUS OBJECTIONS AGAINST THE ORDER U/S 92CA(3) PASSED BY THE TRANSFER PRICING OFFICER. AS PER THE ASSESSEE, THE ADDITIONS MADE BY THE ASSESSING OFFICER OF RS. 1,49,51,346/- CONSISTS OF FOUR ITEMS AS BELOW. (A) ADDITION IN RESPECT OF BPO OPERATIONS RS. 6 4,72,973/- (B) ADDITION IN RESPECT OF ROYALTY RS. 30,75,456/- (C) ADDITION IN RESPECT OF SOFTWARE CHARGES RS. 41, 06,436/- (D) MARK-UP IN RESPECT OF REIMBURSEMENT OF EXPENSES RECEIVED RS. 12,96,481/- 5.4 DURING THE COURSE OF APPEAL PROCEEDINGS, TO SUB STANTIATE ITS GROUND THE ASSESSEE SUBMITTED CIT(A) ORDER FOR THE A.Y. 2007- 08 WHEREIN THE CIT(A) ACCEPTED 15% VIDE HIS ORDER D ATED 25- 07-2011 AS AGAINST 30.21% OF MARK-UP ADOPTED BY THE TRANSFER PRICING OFFICER. AFTER CONSIDERING ALL THESE, THE S UBMISSIONS OF THE ASSESSEE ARE NOT ACCEPTED SINCE THE AGREEMENT E NTERED WITH BPO OPERATIONS BY THE ASSESSEE ARE VARYING FRO M YEAR TO YEAR. THE TRANSFER PRICING OFFICER DULY COMPARING W ITH THE 15 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. COMPANIES AND AS PER THE DETAILED ORDER, ADOPTED TH E MARK-UP AT 27.90% WHICH WAS ADOPTED BY THE ASSESSING OFFICE R AS AGAINST EARLIER OF 30.21% AS STATED ABOVE. THE TRAN SFER PRICING OFFICER AFTER DULY CONSIDERING THE FACTS AND EXPLAN ATION OF ASSESSEE PASSED THE ORDER U/S 92CA. THE ASSESSING O FFICER RELYING ON THE ORDER OF THE TRANSFER PRICING OFFICE R, ADOPTED THE SAME REASONS FURNISHED BY THE ASSESSEE AND COMPLETE D THE ASSESSMENT BY ACCEPTING 27.90% AS DETERMINED BY THE TRANSFER PRICING OFFICER. AGGRIEVED, BY THE ASSESSMENT ORDER PASSED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A)-4, HYDERABA D. THE ASSESSEE IN HIS SUBMISSIONS STATED ALL FACTS AND DE TAILS AS FILED BEFORE TRANSFER PRICING OFFICER AND AS EXPLAINED, T HE MARK-UP OF 15% ADOPTED BY THE ASSESSEE COMPANY IN THE CASE OF COST PLUS RELATING TO TELE-CALLING SERVICES, AS AN ARM'S LENG TH PERCENTAGE, IS NOT ACCEPTED BY THE TRANSFER PRICING OFFICER. THE TRANSFER PRICING OFFICER HAS ALREADY RECOMMENDED CO ST PLUS 27.90% AS ARMS LENGTH PRICE AFTER CONSIDERING ALL THE SUBMISSIONS OF THE ASSESSEE. HOWEVER, THE ASSESSEE FURNISHED THE SAME SUBMISSIONS BEFORE ME ALSO WHICH WERE ALRE ADY DECIDED BY THE TRANSFER PRICING OFFICER. THEREFORE, I AM NOT FINDING ANY REASON TO INTERFERE WITH THE MARK UP RA TE OF 27.90% ADOPTED BY THE TRANSFER PRICING OFFICER. THEREFORE, I AM IN AGREEMENT WITH THE ASSESSING OFFICER WITH REGARD TO ADOPTING THE MARK UP OF 27.90% AND COMPLETING THE ASSESSMENT BASED ON THE TRANSFER PRICING OFFICER'S ORDER. HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 15. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE US AND SUBMITTED THAT THE ISSUES IN DISPUTE ARE SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASSESSEES O WN CASE FOR AYS 2007-08 TO 2009-10 IN ITA NOS. 1762/H/11 AND OTHERS , VIDE ORDER DATED 31/03/2017. 16. LD. DR NEITHER CONTROVERTED THE SUBMISSIONS OF THE LD. AR NOR BROUGHT ANY CONTRARY DECISION IN THIS REGARD. 17. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE ASSESSEE, THE ISSUES IN DISPUTE ARE SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASS ESSEES OWN CASE FOR AYS 2007-08 TO 2009-10 (SUPRA) WHEREIN THE COOR DINATE BENCH HAS HELD AS UNDER: 36. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE LD. A R OF THE 16 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. ASSESSEE, THE SIX COMPARABLES OBJECTED BY THE ASSES SEE, HAVE BEEN EXCLUDED BY THE COORDINATE BENCHES OF THIS TRI BUNAL IN THE AFORESAID CASES. FOR THE SAKE OF CLARITY, WE EXTRAC T THE FINDINGS OF THE COORDINATE BENCH IN THE CASE OF M/S CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD., (SUPRA) AS UNDER: 15. WE HAVE CONSIDERED THE CONTENTIONS OF THE PART IES AND EXAMINED THE DOCUMENTS AND PAPER-BOOKS PLACED ON RECORD. CORRECT NESS OF INCLUSION/EXCLUSION OF THE ABOVE COMPANIES IS DECIDED HEREUNDER CASE BY CASE. (1) INFOSYS B P O LTD. : 16. IT WAS THE CONTENTION OF ASSESSEE THAT THIS BPO IS A GIANT IN ITS AREA AND HAS BRAND VALUE OF INFOSYS TECHNOLOGIES LIMITED. ASSESS EES MAIN CONTENTION WAS THAT IT IS NOT FUNCTIONALLY SIMILAR AND ITS TURNOVE R IS MUCH MORE WHEN COMPARED TO THAT OF ASSESSEE. IT WAS ALSO CONTENDED THAT THE INFOSYS BPO HAS DONE BRAND BUILDING EXERCISE BY INCURRING LARGE AMOUNTS OF BRA ND BUILDING AND ADVERTISEMENT EXPENDITURE AND UNDERTAKING BRAND CAM PAIGNING OUTSIDE INDIA. FURTHER, IT ALSO HAS HUGE ASSET BASE AND THEREFORE, THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO ASSESSEE. ASSESSEE RELIE D ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S. AG NITY INDIA TECHNOLOGIES PVT. LTD. (2013) 219 TAXMAN 26 (DEL), WHEREIN IT WAS HEL D THAT HUGE TURNOVER COMPANIES LIKE INFOSYS AND WIPRO CANNOT BE CONSIDER ED AS COMPARABLE TO SMALLER COMPANIES LIKE ASSESSEE. 16.1 EVEN THOUGH WE ARE NOT IN AGREEMENT WITH THE C ONTENTIONS OF THE COMPARABILITY ON TURNOVER RATIO OF ASSESSEE WITH TH IS COMPANY ON THE GROUND THAT ASSESSEES TURNOVER IS ABOUT RS.129.8 CRORES, WHICH AS AGAINST TURNOVER OF RS.1016 CRORES OF THE INFOSYS, ( WHICH IS ONLY ABOU T 5 TIMES) WE ARE OF THE VIEW THAT OTHER CONTENTIONS WITH REGARD TO THE BRAND VAL UE AND BRAND BUILDING EXERCISE, HAVING HUGE ASSET BASE, CAN BE CONSIDERED TO ARRIVE AT THE CONCLUSION THAT INFOSYS IS FUNCTIONALLY NOT SIMILAR TO THAT OF ASSESSEE. INFOSYS BPO STANDS ON ITS OWN AS AN EXCLUSIVE BPO OF THE INFOSYS TECHNOLO GIES AND IN EARLIER YEARS, GENERALLY INFOSYS BPO IS EXCLUDED IN MANY OF THE CA SES. CONSIDERING THESE ASPECTS, WE ARE OF THE OPINION THAT EVEN THOUGH THE PROFITS OF THE INFOSYS BPO LTD. IS REASONABLE AND NO SUPER PROFITS ARE EARNED, JUST BECAUSE OF ITS BIG BRAND VALUE, THIS COMPANY HAS TO BE EXCLUDED ON THE GROUN DS OF FUNCTIONAL DISSIMILARITY ON FAR ANALYSIS. THEREFORE, WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. (2) GENESYS INTERNATIONAL LTD. 17. IT WAS THE CONTENTION THAT THIS COMPANY FUNCTIO NS IN TWO HORIZONTALS, AND IS HAVING SUPER PROFITS. IT WAS FURTHER SUBMITTED THAT THIS COMPANY IS NOT ONLY IN SOFTWARE DEVELOPMENT BUT ALSO IN GEOSPATIAL SERVICE S, WHICH ARE HIGHLY TECHNICAL. IT ALSO INVOLVES IN CONSULTING ACTIVITY. IT WAS THE CONTENTION THAT THIS COMPANY WAS ANALYSED BY THE COORDINATE BENCH OF THE TRIBUNAL AT DELHI IN THE CASE OF M/S. MERCER CONSULTING (INDIA) LTD. V/S DCI T (VIDE ORDER DATED 6TH JUNE, 2014 IN ITA NO.966/DEL/2014), WHEREIN THIS COMPANY WAS EXCLUDED IN THAT CASE. LEARNED COUNSEL FOR ASSESSEE RELIED UPON THE FINDIN GS OF THE TRIBUNAL VIDE PARAS 14.2 AND 14.3, IN THAT CASE, WHICH READ AS FOLLOWS- 17 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 14.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RIVAL MATERIALS ON RECORD. IT HAS BEEN NOTICED SUPRA THAT ASSESSEE IS BASICALLY PROVIDING VARIOUS SERVICES TO THE CUSTOMERS OF ITS AES IN RELATION TO HUMAN RESOURCES WHICH ARE MORE OR LESS CENTERED AROUND THE EMPLOYEES OF THE P ROSPECTIVE CLIENTS. WHEN WE CONSIDER THE NATURE OF SERVICES PROVIDED BY GENESYS INTERNATIONAL CORPORATION LTD., IT COMES TO THE FOREFRONT THAT THEY ARE PROVI DING FULL RANGE OF GEOSPATIAL SERVICES TO ITS CUSTOMERS. IN SIMPLE TERMS, GEOSPAT IAL SERVICES MEANS THE SERVICES RELATING TO THE RELATIVE POSITION OF THINGS ON THE EARTHS SURFACE. THESE BASICALLY INCLUDE 3D MAPPING, NAVIGATION MAPS, IMAGE PROCESSI NG, CADASTRAL MAPPING, ETC. IF WE TAKE INTO ACCOUNT THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE, BEING FINANCIAL AND RETIREMENT SECURITY, HEALTH, PR ODUCTIVITY OF EMPLOYEES AND EMPLOYMENT RELATIONSHIPS AND THEN TRY TO COMPARE TH EM WITH THOSE RENDERED BY GENESYS, IT IS MANIFESTED THAT BOTH ARE TOTALLY INC OMPARABLE. 14.3. THE TPO ON PAGE 48 OF HIS ORDER HAS EXAMINED CBDT CIRCULAR SO 890 (E) DATED 26.9.2000 WHICH PROVIDES A DETAILED LIST OF P RODUCTS OR SERVICES THAT CAN BE COVERED UNDER THE ITES FOR THE PURPOSES OF SECTION 10A AND 10B OF THE ACT. IN THIS CIRCULAR, INFORMATION TECHNOLOGY ENABLED PRODU CTS/SERVICES HAVE BEEN DIVIDED INTO FIFTEEN CATEGORIES, STARTING WITH BANK OFFICE OPERATIONS, CALL CENTRES ETC. AND ENDING WITH WEBSITE SERVICES. FROM THE VER Y DESCRIPTION OF SUCH SERVICES, IT IS PALPABLE THAT EVEN THOUGH THESE FAL L UNDER THE OVERALL ITES CATEGORY, BUT SOME OF THEM ARE QUITE DIFFERENT FROM EACH OTHER. TO CITE, SERVICE AT SL.NO. (VI) OF THIS CIRCULAR IS GEOGRAPHIC INFO RMATION SYSTEM SERVICES AND AT SL. NO. (VII) IS HUMAN RESOURCES SERVICES. NO DOUBT, ALL THESE FIFTEEN CATEGORIES OF PRODUCTS/SERVICES HAVE BEEN INCLUDED UNDER THE MAJO R HEAD OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES), BUT MOST OF TH EM ARE QUITE DISTINGUISHABLE FROM OTHERS. IN OUR CONSIDERED OPINION, THE FIFTEEN BROAD CATEGORIES SET OUT IN THIS CIRCULAR CANNOT PER SE BE CLAIMED AS SIMILAR T O EACH OTHER. A CURSORY LOOK AT THESE PRODUCTS/SERVICES TRANSPIRES THAT SOME OF THE M ARE FUNCTIONALLY QUITE DIFFERENT FROM EACH OTHER. FURTHER THE LEVEL OF INV ESTMENT REQUIRED FOR PROVIDING SUCH SERVICES IS ALSO NOT CONSISTENT. IN OUR CONSID ERED OPINION, THE MERE FACT THAT TWO SERVICES ARE PLACED UNDER THIS CATEGORY DO NOT BECOME AUTOMATICALLY COMPARABLE. IF A CASE PROVIDING ONE CATEGORY OF SER VICES UNDER ITES IS CLAIMED AS COMPARABLE WITH ANOTHER IN THE CATEGORY OF SERVICE UNDER ITES AS PER THIS CIRCULAR, THEN IT MUST BE SHOWN EX FACIE THAT IT IS BROADLY SIMILAR. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE SERVICE S RENDERED BY GENESYS FALL UNDER CLAUSE (VI) WITH THE HEADING GEOGRAPHICAL INFORMAT ION SYSTEMS SERVICES, WHEREAS THOSE RENDERED BY THE ASSESSEE FALL PARTLY UNDER CLAUSE (VII) WITH THE HEADING HUMAN RESOURCES SERVICES AND PARTLY UNDER CLAUSE (XI) WITH THE HEADING PAYROLL. ON JUXTAPOSITION EXAMINATION OF THESE TWO SETS OF SERVICES, WE FIND THAT THERE IS A VAST DIFFERENCE WHICH MAKE ONE QUITE DISTINCT FROM THE OTHER. IN VIEW OF SUCH FUNCTIONAL INCOMPARABILITY BETWEEN ASSESSEE AND GENESYS, WE HOLD THAT THIS COMPANY CANNOT BE TREATED AS COMPARA BLE. WE, THEREFORE, DIRECT TO EXCLUDE THIS CASE FROM THE LIST OF COMPARABLES. 17.1. ON CAREFUL CONSIDERATION OF THE MATTER, RESPE CTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH, WE ARE ALSO OF TH E OPINION THAT THERE IS VAST DIFFERENCE BETWEEN THE FUNCTIONS OF THE ABOVE COMPA NY AND THAT OF ASSESSEE. THIS COMPANY AS SUCH, CANNOT BE TREATED AS COMPARAB LE ON FAR ANALYSIS. WE THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO EXCL UDE THIS COMPANY. 18 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. (3) ECLERX SERVICES LTD. 18. THE OBJECTION OF ASSESSEE TO THIS COMPARABLE IS THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR. IT IS IN THE BUSINESS OF C ONSULTANCY AND ADVISORY SERVICE AND PROVIDES ONLY ANALYTICAL DATA. IT IS ALSO INVOL VED IN QUALITY MONITORING. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY OFFERS SOLUTIONS THAT INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RECONC ILIATION AND THEREFORE HAS TO BE CLASSIFIED AS HIGH END KPO. IN SUPPORT OF THE STAND OF THE ASSESSEE, EXTRACTS FROM THE ANNUAL REPORT OF THIS COMPANY HAVE BEEN PO INTED OUT. THEREFORE, THE FUNCTIONS OF THE ABOVE COMPANY ARE DISSIMILAR TO AS SESSEE, WHICH IS A CAPTIVE SERVICE PROVIDER. ON THE PRINCIPLES LAID DOWN BY TH E HONBLE SPECIAL BENCH OF THE ITAT (MUMBAI) IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. V/S. ACIT (ITA NO.7466/MUM/2012 FOR ASSESSMENT YEAR 2008-09 D ATED 7.3.2014) AND THE PRINCIPLES LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF M/S. MERCER CONSULTING (INDIA) PVT. LTD., (SUPRA), ASSESSEE SUBMITS THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. 18.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEV ER, SUBMITTED THAT HAVING ACCEPTED ADITYA BIRLA MINACS WORLDWIDE LTD., AS A C OMPARABLE COMPANY, THIS COMPANY SHOULD ALSO BE INCLUDED, AS OTHERWISE, BOTH THE COMPANIES SHOULD BE EXCLUDED. 18.2 WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE ANNUAL REPORT AND THE OBJECTIONS OF ASSESSEE. AS SEEN FROM THE ANNUAL REP ORT, THE ABOVE COMPANY IS INVOLVED IN DIVERSE NATURE OF SERVICES AND THERE WA S NO SEGMENTAL DATA FOR DIVERSIFIED SERVICE PORT FOLIO. MOREOVER THIS COMPA NY CAN BE CONSIDERED AS KPO AND WE ARE OF THE OPINION THAT THIS COMPANY IS NOT COMPARABLE TO ASSESSEES SERVICES. WE THEREFORE, DIRECT THE ASSESSING OFFICE R/TPO TO EXCLUDE THIS COMPANY. (4) COSMIC GLOBAL LTD. 19. THE MAIN OBJECTION OF ASSESSEE WITH REFERENCE T O THE INCLUSION OF THIS COMPANY IS WITH REFERENCE TO OUTSOURCING OF ITS MAI N ACTIVITY. EVEN THOUGH THIS COMPANY IS IN ASSESSEES TP STUDY, IT HAS RAISED OB JECTION BEFORE THE TPO THAT THIS COMPANYS EMPLOYEE COST IS LESS THAN 21.30% AN D 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 CONSIDERE D THESE SUBMISSIONS, REJECTED THE SAME, ON THE REASON THAT THIS DOES NOT IMPACT THE PROFIT MARGIN OF THE COMPANY. OPPOSING THE VIEW TAKEN BY THE TPO, IT IS SUBMITTED THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE, AS SIMILA R ISSUE 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 OF THIS CAS E, WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CON STITUTE 57.31% OF THE TOTAL OPERATING COSTS. THIS DOES NOT APPEAR TO US TO BE A VALID REASON FOR ELIMINATING THIS CASE FROM THE LIST OF COMPARABLES. ON GOING TH ROUGH THE ANNUAL ACCOUNTS OF COSMIC GLOBAL LIMITED, A COPY OF WHICH HAS BEEN PLA CED ON RECORD, WE FIND THAT ITS TOTAL REVENUE FROM OPERATIONS ARE AT RS.7.37 CR ORE DIVIDED INTO THREE SEGMENTS, NAMELY, MEDICAL TRANSCRIPTION AND CONSULT ANCY SERVICES AT RS.9.90 19 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. LACS, TRANSLATION CHARGES AT RS.6.99 CRORE AND ACCO UNTS BPO AT RS.27.76 LAC. THE LD. AR HAS MADE OUT A CASE THAT OUTSOURCING ACTIVIT Y CARRIED OUT BY THIS COMPANY CONSTITUTES 57% OF TOTAL EXPENSES. THE REASON FOR W HICH WE ARE NOT AGREEABLE WITH THE LD. AR IS THAT WE HAVE TO EXAMINE THE REVE NUE OF THIS CASE ONLY FROM ACCOUNTS BPO SEGMENT AND NOT ON THE ENTITY LEVEL, B EING ALSO FROM MEDICAL TRANSCRIPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMINING THE RESULTS OF THIS COMPANY FROM THE ACCOUNTS BPO SEGMENT ALONE, THERE IS NO NEED TO EXAMINE THE POSITION UNDER OTHER SEGMENTS. THE ENTIRE OUTSO URCING IS CONFINED TO TRANSLATION CHARGES PAID AT RS.3.00 CRORE, WHICH IS STRICTLY INTHE REALM OF THE TRANSLATION SEGMENT, REVENUES FROM WHICH ARE TO THE TUNE OF RS.6.99 CRORE. IF THIS SEGMENT OF TRANSLATION IS NOT UNDER CONSIDERAT ION FOR DECIDING AS TO WHETHER THIS CASE IS COMPARABLE OR NOT, WE CANNOT TAKE RECO URSE TO THE FIGURES WHICH ARE RELEVANT FOR SEGMENTS OTHER THAN ACCOUNTS BPO. THUS IT IS HELD THAT THIS CASE CANNOT BE EXCLUDED ON THE STRENGTH OF OUTSOURCING A CTIVITY, WHICH IS ALIEN TO THE RELEVANT SEGMENT. 13.3. HOWEVER, WE FIND THIS CASE TO INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCED BY THE LD. AR TO THE EFFECT THAT TOTAL REV ENUE 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-VA KS CASE AND HELD THAT A CAPTIVE UNIT CANNOT BE COMPARED WITH A GIANT CASE A ND 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 APP LY TO HOLD COSMIC GLOBAL LIMITED AS INCOMPARABLE. THIS CASE IS, THEREFORE, D IRECTED 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 TH E CONTENTIONS OF ASSESSEE AND DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS CO MPARABLE FOR THE SAME REASONS. 5) ACROPETAL TECHNOLOGIES LTD. (SEG.) 20. THE OBJECTION OF ASSESSEE WITH REFERENCE TO THI S COMPANY IS THAT THE COMPANY IS INVOLVED IN ENGINEERING DESIGN SERVICES AND HIGH END SERVICES AND HAS PRODUCTS IN ITS INVENTORY. IT IS ALSO INVOLVED IN R&D ACTIVITY AND DEVELOPING SOPHISTICATED DELIVERY SYSTEM. IT WAS FURTHER SUBMI TTED THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE AT SEGMENT LEVEL ALSO, AS E NGINEERING DESIGN SERVICES ARE HIGH END SERVICES, AS CONSIDERED IN OTHER CASES . IT IS FURTHER SUBMITTED THAT ALLOCATION OF EXPENSES BETWEEN SEGMENTS IS NOT POSS IBLE AND DEPRECIATION WAS NOT ALLOCATED BETWEEN THE SEGMENTS. THERE ARE EXTRA -ORDINARY EVENTS WHICH IMPACT PROFIT ALSO, AS CAN BE SEEN FROM THE ANNUAL REPORTS. IT IS FURTHER SUBMITTED THAT THIS COMPANY IS NOT SELECTED IN THE LIST OF COMPARABLES SELECTED IN THE CASE OF MERCER CONSULTING (INDIA) PVT. LTD. AND THEREFORE, SELECTION OF THE COMPANY BY THE TPO IN THIS CASE, WHICH IS ALSO IN S IMILAR ITES SERVICES, IS NOT PROPER. 20.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE A GREE WITH THE OBJECTIONS RAISED BY ASSESSEE. AS SEEN FROM THE ANNUAL REPORT, THIS C OMPANY IS INVOLVED IN ENGINEERING DESIGN SERVICES AND HAS PRODUCTS ALSO, WHICH MAKES IT FUNCTIONALLY NOT COMPARABLE. EVEN AT THE SEGMENTAL LEVEL, IT PRO VIDES ENGINEERING DESIGN 20 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. SERVICES, WHICH WAS CONSIDERED AS HIGH END BY THE C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HYUNDAI MOTORS INDIA ENGINE ERING (SUPRA) IN EARLIER YEAR. THEREFORE, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFF ICER/TPO TO EXCLUDE THIS COMPANY. (6) ACCENTIA TECHNOLOGIES LIMITED. 21. THIS COMPANY WAS OBJECTED TO BY ASSESSEE ON THE REASON OF SUPER PROFITS AS WELL AS EXTRA-ORDINARY EVENTS. IT WAS SUBMITTED THA T ACQUISITION OF OAK TECHNOLOGIES & TRANS SERVICES HAS IMPACT ON THE PRO FITS OF THE COMPANY AND HAS TAKEN INORGANIC GROWTH AS STRATEGY TO INCREASE THE PROFITS BECAUSE OF THE PECULIAR ECONOMIC CIRCUMSTANCES AND BRAND VALUE. TH E SAME IN THESE CIRCUMSTANCES CANNOT BE SELECTED. IT WAS SUBMITTED THAT ASSESSEE WAS IN MEDICAL TRANSCRIPTION SERVICES. 21.1. THE DEPARTMENTAL REPRESENTATIVE HOWEVER, OBJE CTED TO THE PLEAS OF ASSESSEE STATING THAT THE EXTRAORDINARY EVENTS OCCU RRED IN EARLIER YEAR AND THEREFORE, THE SAME CANNOT BE CONSIDERED AS HAVING ANY IMPACT IN THE YEAR UNDER CONSIDERATION. 21.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND N OTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIR ING COMPANIES FOR INORGANIC GROWTH AS ITS STRATEGY. IN EARLIER YEARS ON THE REA SON OF ACQUISITION OF VARIOUS COMPANIES, BEING AN EXTRAORDINARY EVENT WHICH HAD A N IMPACT ON THE PROFIT, THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED C OUNSEL, THIS YEAR ALSO, THE ACQUISITION OF SOME COMPANIES BY THAT COMPANY MAY H AVE IMPACT ON THE PROFIT. CONSIDERING THE PROFIT MARGINS OF THE COMPANY AND I NSUFFICIENT SEGMENTAL DATA, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE S ELECTED AS A COMPARABLE. MOREOVER, THIS IS ALSO NOT A COMPARABLE IN THE CASE OF M/S. MERCER CONSULTING (INDIA) P. LTD. (SUPRA), WHICH INDICATES THAT THE T PO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS, WE DIRECT THE ASSESSING OF FICER/TPO TO EXCLUDE THIS COMPARABLE, FROM THE LIST OF COMPARABLES SELECTED. 36.1 THEREFORE, FOLLOWING THE SAID DECISION OF ITAT AS WELL AS RULE OF CONSISTENCY, THE COMPANIES OBJECTED BY THE ASSESSEE IN THE ADDITIONAL GROUNDS HAVE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN VIEW OF THE ABOVE, WE DIRECT THE AO /TPO TO EXCLUDE THE AFORESAID COMPANIES FROM THE LIST OF CO MPARABLES AND RECOMPUTE THE ALP AFRESH. ACCORDINGLY, THE GROU NDS RAISED BY THE ASSESSEE ARE ALLOWED. 17.1 WITH REGARD TO COMPARABLES I.E. CROSSDOMAIN SO LUTIONS LTD. AND TCS E SERVE LTD., THE COORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF S&P CAPITAL IQ (INDIA) LTD., IN ITA NO. 200/HYD/16, ORDER DATED 27/07/2016, HAS DIRECTED THE TPO/AO TO EXCLUDE FRO M THE LIST OF COMPARABLES, BY OBSERVING AS UNDER: 1. CROSSDOMAIN SOLUTIONS LTD. 21 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. THIS COMPANY WAS CONSIDERED AS A COMPARABLE AND LIS TED AT SL.NO.7 OF THE COMPARABLES CHOSEN BY THE TPO. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY IS NOT FUNCTIONAL LY COMPARABLE. IT IS SEEN THAT THE BUSINESS PROFILE OF THIS COMPANY IS RE-ENGINEERED PAYROLL SERVICE. THIS COMPANY IS A LSO ENGAGED IN THE DEVELOPMENT OF INFORMATION SYSTEMS. THE REVI EW AND BUSINESS FUNCTIONS OF CROSS DOMAIN IS AS FOLLOWS:- 'WITH A DECADE OF EXPERIENCE IN PAYROLL OUTSOURCING , CROSSDOMAIN. HAS CREATED A RE-ENGINEERED PAYROLL SE RVICE EFFIPAY - THAT PROCESSES AND DELIVERS ACCURATE PAYR OLL TO CLIENTS WITH HEADCOUNT UP TO 1000 EMPLOYEES IN JUST 4 HOURS', WITH EFFIPAY LITE AND EFFIPAY LITE PLUS, OUR BOUQUE T OF SERVICES COVER END TO END PAYROLL, RETRIALS, REIMBURSEMENT, TAX PROOF VERIFICATIONS UPTO ISSUE OF FORM 16 FOR EMPLOYEES O F OUR CLIENTS ACROSS DIFFERENT INDUSTRY VERTICALS. OUR PROCESSES ARE HIGHLY SCALABLE AND PROVIDE END TO END PAYROLL SOLUTIONS T O CLIENTS WITH HEADCOUNT RANGING FROM 5 TO 65,000. ' 'CROSSDOMAIN'S IT KNOWLEDGE AND DOMAIN COMPETENCE H AS PROVIDED THE EDGE TO DEVELOP INFORMATION SYSTEMS TO IMPLEMENT PROCESS INNOVATION AND CONTINUOUSLY INCREASE EFFICI ENCY AND TUM-A ROUND-TIME FOR BUSINESS CRITICAL PROCESSES. ' SOURCE: HTTP:/ WWW.CROSS-DOMAIN.COM AS CAN BE SEEN FROM THE ABOVE, THE BUSINESS OF CROS S DOMAIN RANGES FROM HIGH END KPO SERVICES, DEVELOPMENT OF P RODUCT SUITES AND ROUTINE LOW END ITES SERVICE. HOWEVER, T HERE IS NO BIFURCATION AVAILABLE FOR SUCH VERTICALS OF SERVICE S. THEREFORE THE ASSESSEE CONTENDS THAT CROSS DOMAIN CANNOT BE C OMPARED TO A ROUTINE ITES SERVICE PROVIDER. III. 1. WE ARE OF THE VIEW THAT IN THE ABSENCE OF A NY REASONS GIVEN TO THE CONTRARY EITHER BY THE TPO OR THE DRP FOR REGARDING THIS C9MPANY AS A COMPARABLE, THIS COMPAN Y SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES, ACCEPTING THE PLEA OF THE ASSESSEE. SIMILAR VIEW WAS ALSO TAKEN IN THE CA SE OF SYMPHONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) B Y THE BANGALORE BENCH. WE HOLD ACCORDINGLY'. 14.3. FACTS ARE BEING SIMILAR IN THIS YEAR, THE SAM E HAS TO BE EXCLUDED. MOREOVER THE WEB REPORT PLACED INDICATES THAT THIS COMPANY IS IN MARKET RESEARCH AND ANALYSIS AND IT SERVICES WHICH INCLUDE SOFTWARE DEVELOPMENT AND MAINTENANCE. THERE IS NO SEGMENTAL INFORMATION. IN THE ABSENCE OF SEGMENT AL DATA, IT CANNOT BE STATED THAT THE COMPANY IS FUNCTIONALLY S IMILAR. IN VIEW OF THE ORDER IN EARLIER YEAR AND BASED ON ANNU AL REPORT AND WEB DATA OF THIS YEAR, IT IS BETTER THE SAME IS EXC LUDED. WE ACCORDINGLY DIRECT THE TPO / AO TO EXCLUDE THE SAME . 22 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 2. TCS E-SERVE LTD: 23. TPO INCLUDED THE SAME IN THE LIST OF COMPARABLE S ON THE REASON THAT THE TURNOVER DOES NOT HAVE ANY EFFECT O N PROFITABILITY. DRP EXCLUDED THE SAME BY STATING AS UNDER: 'HAVING CONSIDERED THE SUBMISSIONS, ON PERUSAL OF A NNUAL REPORT, IT IS NOTICED BY US FROM THE SCHEDULE TO TH E FINANCIAL STATEMENT THAT THE COMPANY IS ENGAGED IN THE BUSINE SS OF PROVIDING INFORMATION TECHNOLOGY - ENABLED SERVICES / BUSINESS PROCESSING OUTSOURCING SERVICE, PRIMARY TO THE CITI GROUP COMPANIES INTRODUCED GLOBALLY THE TRANSACTION PROCE SSING INCLUDE THE BROAD SPECTRUM OF ACTIVITIES INVOLVING THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITI GROUP TO ITS CORPOR ATE AND RETAIL CLIENTS. AS PER THE ANNUAL REPORT, THE COMPANY ALSO PROVIDE TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERI FICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATIO N AND DATA CENTRE MANAGEMENT ACTIVITIES, WHICH MAKES THE COMPA NY FUNCTIONALLY INCOMPARABLE WITH THE ASSESSEE, ACCORD INGLY, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE ABOVE C OMPANY FROM COMPARABLES'. EVEN THOUGH, LD. DR HAS ARGUED VEHEMENTLY FOR INCLU SION, WE DO NOT SEE ANY REASON TO INCLUDE AS THIS COMPANY IS FUNCTIONALLY DIFFERENT AND BEING EXCLUDED IN MANY CASES IN EARLI ER YEARS AS WELL BEING UNIQUE IN THE FUNCTIONALITY. 17.2 EVEN IN THE CASE OF M/S CORPORATE EXECUTIVE B OARD INDIA PVT. LTD., ITA NO. 6328/DEL/2012 AND OTHERS, ORDER DATED 17/03/2017, THE COORDINATE BENCH AT DELHI DIRECTED THE TPO/AO TO EX CLUDE THE SAID COMPANIES AS COMPARABLES. 17.3 THEREFORE, FOLLOWING THE SAID DECISIONS OF ITA T AS WELL AS RULE OF CONSISTENCY, THE COMPANIES OBJECTED BY THE ASSES SEE HAVE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. IN VIEW OF T HE ABOVE, WE DIRECT THE AO/TPO TO EXCLUDE THE AFORESAID COMPANIES FROM THE LIST OF COMPARABLES AND RECOMPUTE THE ALP AFRESH. ACCORDING LY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 18. AS REGARDS GROUND NOS. 11 & 12 REGARDING MARK U P OF 27.90% ON THE REIMBURSEMENT OF EXPENSES RECEIVED OF RS. 12 ,96,481/-, THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT H YDERABAD IN THE CASE OF MYLAN LABORATORIES LTD., (FORMERLY MATRIX L ABORATORIES LTD.) 23 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. IN ITA NO. 66/HYD/2013 FOR AY 2008-09 VIDE ORDER DA TED 01/01/2014, WHEREIN THE COORDINATE BENCH HAS HELD AS UNDER: 31. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE OPINION THAT THIS ISSUE REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER/TPO IN DETAIL WHETHER THE SAID AM OUNT CLAIMED TO HAVE RECEIVED BY THE ASSESSEE AS REIMBUR SEMENT EXPENSES ARE INDEED REIMBURSEMENT OR NOT. IN CASE O F REIMBURSEMENT AT COST OF THE EXPENDITURE INCURRED O N BEHALF OF THE AES AND HAS NOT FORMED PART OF THE EXPENDITURE CLAIMED AS OPERATING COST OF THE ASSESSEE THEN, THE REIMBURSEM ENT SHOULD NOT BE CONSIDERED AS PART OF ASSESSEE'S SALES. THE AMOUNTS SHOULD BE EXCLUDED IN COMPUTING THE OPERATING PROFI TS. SINCE THE ASSESSING OFFICER HAS NOT EXAMINED AND IT IS AL SO NOT ON RECORD WHETHER THE SAID EXPENDITURE WAS NOT PART OF CLAIM UNDER SECTION 37(1) OF THE I.T. ACT IN THE REGULAR COMPUT ATION OR NOT, IN THE INTEREST OF JUSTICE, WE REMIT THE MATTER BACK T O THE FILE OF THE TPO TO EXAMINE THE FACTS AND TO EXCLUDE ONLY IN THE CASE THE SAID AMOUNT IS REIMBURSEMENT OF EXPENDITURE AND THE RE WAS NO CLAIM BY THE ASSESSEE IN ITS COMPUTATION OF INCOME. AS THE ISSUE IN THE PRESENT CASE IS MATERIALLY IDEN TICAL TO THAT OF THE SAID CASE, FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE REMIT THE ISSUE BACK TO THE AO/TPO TO DECIDE THE ISSUE IN LINE WITH THE DIRECTIONS OF THE COORDINATE BENCH IN THE SAID CASE . THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 19. GROUND NO. 13 IS NOT PRESSED BY THE ASSESSEE, T HEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 20. GROUND NO. 14 IS REGARDING TO CHARGING OF INTER EST U/S 234B AND 234C. SINCE CHARGING OF INTEREST UNDER THESE S ECTIONS IS CONSEQUENTIAL IN NATURE, AND THE SAME WILL ULTIMATE LY DEPEND UPON THE OUTCOME OF THE ADJUSTMENT TO BE MADE TO THE ALP, TH E AO/TPO IS DIRECTED TO RECOMPUTE THE INTEREST UNDER THE SAID S ECTIONS ACCORDINGLY. ITA NO. 1509/H/16 FOR AY 2011-12 BY THE REVENUE AND ITA NO. 1175/H/16 FOR AY 2011-12 BY THE ASSESSEE. 24 ITA NO. 1425/H/15 AND OTHERS MONSTER.COM (INDIA) PVT. LTD. 21. AS REGARDS GROUND NOS. 1&2 RAISED BY THE REVENU E REGARDING ACCRUED INCOME SHOWN AS UNMATURED ADVANCES AMOUNTIN G TO RS. 73,61,67,985, SIMILAR ISSUE HAS BEEN DECIDED BY US IN AY 2010-11 IN REVENUES APPEAL VIDE PARA NO. 11(SUPRA). AS THE IS SUE IS MATERIALLY IDENTICAL TO THAT OF AY 2010-11, FOLLOWING THE CONC LUSIONS DRAWN THEREIN, WE UPHOLD THE ORDER OF THE CIT(A) IN DELET ING THE SAID ADDITION AND ACCORDINGLY, DISMISS THE GROUNDS RAISE D BY THE REVENUE. 22. THE GROUNDS RAISED BY THE ASSESSEE IN AY 2011-1 2 ARE SIMILAR TO THE GROUNDS RAISED IN AY 2010-11, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE REMIT ALL THE GROUNDS TO THE FILE OF TH E AO/TPO TO DECIDE THE SAME IN LINE WITH THE DIRECTIONS GIVEN IN AY 20 10-11. THUS, ALL THE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 23. TO SUM UP, REVENUE APPEALS IN AY 2010-11 & 2011 -12 ARE DISMISSED AND THE APPEALS OF ASSESSEE IN AY 2010-11 AND 2011-12 ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2017 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 30 TH AUGUST, 2017. KV COPY TO:- 1. M/S MONSTER.COM (INDIA) PVT. LTD., 8-2-293/82A1 1204 & 1201/1, ROAD NO. 45, JUBILEE HILLS, HYDERABAD. 2. DCIT, CIRCLE 16(2), 7 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 3. CIT(A) IV, HYDERABAD 4. PR. CIT - 4, HYD. 5. DR, ITAT, HYDERABAD 6. GUARD FILE