M/s.Navigant BPM (India) P. Ltd(earlier known as Revenue Med India P. Ltd), Trivandrum V. The ACIT, Trivandrum

ITA 57/COCH/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5113 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 04-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: RAGHUNATHAN S
• Keywords: Related party transaction; Business income; Depreciation; Transfer pricing; International transaction; Application of stay; Wholly owned subsidiary; Bad and doubtful debts
• Section: 143(3); 10B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM IT (TP) A NO. 57 /COCH/201 6 : ASST.YEAR 201 1 - 201 2 SA NO. 62 /COCH/201 7 M/S.NAVIGANT BPM (INDIA) PRIVATE LIMITED 2 ND FLOOR, PAMBA BUILDING TECHNOPARK CAMPUS TRIVANDRUM 695 581. PAN : AACCR7900F . VS. THE ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1) TRIVANDRUM. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.RA GHUNATHAN S RESPONDENT BY : SMT.A.S.BINDHU , SR.DR DATE OF HEARING : 17 .10.2018 DATE OF PRONOUNCEMENT : 23 .10.2018 O R D E R PER GEORGE GEORGE K., JM THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 16.12.2016 PASSED U/S 143(3) R.W.S. 144C OF THE INCOME - TAX ACT. THE RELEVANT ASSESSMENT YEAR IS 2011 - 2012. THE ASSESSEE HAD ALSO FILED STAY PETITION SEEKING TO STAY THE RECOVERY OF OUTSTANDING TAX ARREARS. 2. BRIEF FACTS OF TH E CASE ARE AS FOLLOWS: - THE ASSESSEE IS A 100% SUBSIDIARY OF NAVIGANT CONSULTING INC EUROPE. THE ASSESSEE PROVIDES HEALTH CARE DATA PROCESSING SERVICES TO ITS HOLDING COMPANY AT USA. FOR THE ASSESSMENT YEAR 2011 - 2012, THE ASSESSEE HAD RENDERED IT ENABLED SERVICES AMOUNTING TO RS. 19,53,44,992 TO ITS ASSOCIATE ENTERPRISE (AE). THE RETURN OF INCOME WAS FILED FOR IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 2 THE ASSESSMENT YEAR 2011 - 2012 ON 29.11.2011 DECLARING TOTAL INCOME OF RS.5,07,700 AFTER CLAIMING DEDUCTION U/S 10B OF THE I.T.ACT AMOUNTING TO RS. 1, 8 5,34,036. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CASE WAS REFERRED TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF ARMS LENGTH PRICE (ALP) OF THE IT ENABLED TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH ITS AE. THE TPO VIDE ITS ORDER DA TED 28.01.2015 HAD MADE A TRANSFER PRICING ADJUSTMENT OF RS.4,12,31,390. ON RECEIPT OF THE TPOS ORDER, DRAFT ASSESSMENT ORDER U/S 144C OF THE I.T.ACT WAS PASSED ON 26.02.2015. IN THE DRAFT ASSESSMENT ORDER, THE TAXABLE INCOME WAS RE - COMPUTED AT RS.6,02,73 ,126 BY MAKING THE FOLLOWING ADDITIONS: - ( I ) TRANSFER PRICING ADJUSTMENT OF RS.4,12,31,390 AS PER TPOS ORDER; AND ( II ) DISALLOWANCE OF DEDUCTION U/S 10B OF THE I.T.ACT AMOUNTING TO RS.1,85,34,036. 3. AGAINST THE DRAFT ASSESSMENT ORDER, THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) U/S 144C(2B) OF THE I.T.ACT. THE DRP VIDE ITS DIRECTIONS DATED 23.11.2015 DISPOSED OFF THE ASSESSEES APPLICATION / OBJECTIONS FILED BEFORE IT. THE DRP CONFIRMED THE DISALLOWANCE U/S 10B OF THE I.T.ACT AND THE ARMS LENGTH PRICE WAS RE - DETERMINED AT RS.4,62,38,575 INSTEAD OF RS.4,12,31,390 PROPOSED IN THE DRAFT ASSESSMENT ORDER. SUBSEQUENT LY FINAL ASSESSMENT ORDER WAS PASSED ON 16.12.2015 , INCORPORATI NG THE DIRECTION OF THE DRP . IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 3 4 . THE ASSESSEE BEING AGGRIEVED BY THE FINAL ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C OF THE I.T.ACT HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THOUGH SEVERAL GROUNDS ARE RAISED BEFORE THE TRIBUNAL, THE LEARNED AR CONFINED HIS SUBMISSION ONLY TO THE FOLLOWING ISSUES: - ( I ) EXCLUSION OF FORWARD PREMIUM WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE; AND ( II ) TPO HAS ERRONEOUSLY INCLUDED THE FOLLOWING COMPANIES AS COMPARABLE COMPANIES, VIZ., ICRA ONLINE LIMITED , ACROPE TAL TECHNOLOGIES, ACCENTIA TECHNOLOGIES LIMITED, AND JEEVAN SCIENTIFIC TECHNOLOGIES LIMITED. ( III ) THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION U/S 10A OF THE I.T.ACT. 5. WE SHALL TAKE UP FOR ADJUDICATION THE ABOVE ISSUES AND DISPOSE OFF THE SAME AS UNDER : - (I) ASSESSEE IS ENTITLED TO DEDUCTION U/S 10A OF THE I.T.ACT (CORPORATE TAX) THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION U/S 10A OF THE I.T.ACT AMOUNTING TO RS.1,85,34,036. THE ASSESSING OFFICER DENIED THE DEDUCTION U/S 10B OF THE I.T.ACT BY PLAC ING RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT V. REGENCY CREATIONS LTD. [(2013) 255 CTR 63 (DEL.)] . ACCORDING TO THE A.O., THE ASSESSEES UNIT WAS NOT APPROVED BY AN APPROPRIATE AUTHORITY CONSTITUTED U/S 14 OF THE INDUSTRI AL (DEVELOPMENT & REGULATIONS) ACT, 1951 AND HENCE WAS NOT ENTITLED TO DEDUCTION U/S 10B OF THE I.T.ACT. IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 4 THE ASSESSEE IN THE COURSE OF ASSESSMENT HAD MADE AN ALTERNATIVE CLAIM THAT IT WAS ENTITLED TO DEDUCTION U/S 10B OF THE I.T.ACT. THE A.O. REJECTED THE ALTERNATIVE CLAIM OF THE ASSESSEE MADE U/S 10A OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT MADE A CLAIM IN THE RETURN OF INCOME, SAME CANNOT BE CONSIDERED IN VIEW OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE O F GOETZ (INDIA) LTD. V. CIT [(2006) 284 ITR 323 (SC)] . 5.1 BEFORE THE DRP, THE OBJECTIONS WERE RAISED STATING THAT THE ASSESSEES UNIT WAS APPROVED BY THE INTERNAL MINISTRY STANDING COMMITTEE, WHICH IS A VALID APPROVAL FOR THE PURPOSE OF DEDUCTION U/S 10B OF THE I.T.ACT. FURTHER IT WAS STATED THAT THE ASSESSEE WAS GRANTED THE BENEFIT OF DEDUCTION U/S 10B OF THE I.T.ACT IN THE PREVIOUS ASSESSMENT YEAR AND FOR THE PURPOSE OF CONSISTENCY DEDUCTION U/S 10B OF THE I.T,ACT OUGHT TO HAVE BEEN GRANTED. ALTERNATIVELY IT WAS SUBMITTED THAT THE ASSESSEE WAS ENTITLED TO DEDUCT ION U/S 10A OF THE I.T.ACT , WHICH IS PARI MATERIA WITH SECTION 10B OF THE I.T.ACT. THE DRP, HOWEVER, REJECTED THE OBJECTIONS OF THE ASSESSEE ON THIS ISSUE. 5.2 BEFORE US THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE WAS ADJUDICATED BY THE TRIBUNAL IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2010 - 2011 IN ITA NO.146/COCH/2015 (ORDER DATED 07.09.2018). THE LEARNED AR SUBMITTED THAT THE TRIBUNAL RESTORED THE ALTERNATIVE CLAIM OF THE ASSESSEE U/S 10A OF THE I.T.ACT TO THE A.O. FOR FRESH CONSIDERATION. IT WAS STATED BY THE LEARNED AR THAT THE TRIBUNAL FOR ASSESSMENT YEAR 2010 - 2011 (SUPRA) HAS RESTORED THE ISSUE TO THE A.O. IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 5 AFTER GIVING SPECIFIC DIRECTION AND SAME DIRECTION MAY BE GIVEN IN THIS ASSESSMENT YEAR ALSO. 5.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON TH E OTHER HAND, RELIED ON THE ASSESSMENT ORDER AND THE DIRECTIONS OF THE DRP. 5. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS, IT WAS HELD THAT SECTION 10A OF TH E I.T.ACT IS PARI MATERIA WITH SECTION 10B OF THE I.T.ACT. ( I ) M/S.US TECHNOLOGY INTERNATIONAL PVT. LTD. (ITA NO.133/C/2016) ( II ) M/S.QBURST TECHNOLOGIES P LTD. (ITA NOS.172 & 173/COCH/2015) ( III ) CRONOS CONSULTING INDIA (P) LTD. (ITA NO.105/COCH/2014) ( IV ) DEVICE DRIVEN (INDIA) [TS - 613 - ITAT - 2013 (COCH)] ( V ) FAST BOOKING (I) PRIVATE LIMITED (DELHI HIGH COURT) [TS - 516 - HC - 2015 (DEL.) ( VI ) J.C.INFOSOFT TECHNOLOGIES (ITA NO.1135/DEL/2011) ( VII ) VALIANT COMMUNICATIONS LTD. (ITA 438 - 441/2012) (DELHI HC). 5. 5 IN THE ABOVE MENTIONED CASES IT WAS HELD THAT IF SECTION 10B WA S DENIED FOR THE REASON THAT UNIT WAS NOT HAVING NECESSARY APPROVAL FROM THE APPROPRIATE AUTHORITY, THE AUTHORITIES ARE DUTY BOUND TO CONSIDER THE ALTERNATIVE CLAIM OF DEDUCTION U/S 10A OF THE I.T.ACT AND GRANT THE SAME, PROVIDED IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 6 THE CONDITIONS ARE SATISFIED AS PRESCRIBED U/S 10A OF THE I.T.ACT. THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT IT SHOULD BE GRANTED DEDUCTION U/S 10A OF THE I.T.ACT WAS NOT CONSIDERED BY THE ASSESSING OFFICER NOR THE DRP IN ITS DIRECTIONS FOR THE REASON THAT NO CLAIM WAS MADE U/S 10A OF THE I.T.ACT IN THE RETURN OF INCOME. ADMITTEDLY, THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE I.T.ACT IN ITS RETURN OF INCOME. WHEN THE CLAIM U/S 10B OF THE I.T.ACT WAS SOUGHT TO BE DENIED, THE ASSESSEE DURING THE C OURSE OF ASSESSMENT PROC EEDINGS CLAIMED DEDUCTION U/S 10A OF THE I.T.ACT. IN THE ABOVE MENTIONED CASES, IT WAS STATED WHEN CLAIM U/S 10B OF THE I.T.ACT IS DENIED, THE ASSESSEES ALTERNATIVE CLAIM U/S 10A OF THE I.T.ACT MADE DURING THE ASSESSMENT PROCEEDING OR BEFORE APPELLATE AUT HORITIES HAS TO BE CONSIDERED AND GRANTED , PROVIDED CONDITIONS ARE SATISFIED FOR SUCH DEDUCTION, SINCE BOTH SECTIONS 10A AND 10B OF THE I.T.ACT ARE PARI MATERIA . IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT, WE DEEM IT APPROPRIATE TO REMIT THE ISSUE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ASSESSING OFFICER SHALL FOLLOW THE DICTUM LAID DOWN BY THE ABOVE MENTIONED JUDICIAL PRONOUNCEMENTS AND SHALL GRANT DEDUCTION U/S 10A OF THE I.T.ACT PROVIDED THE CONDITIONS ARE SATISFIED BY THE ASSESSEES UNIT AS PRESCRIBED U/S 10A OF THE I.T.ACT. IT IS ORDERED ACCORDINGLY. 5.6 IN THE RESULT, THE GROUND NO. 2 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 7 (II) ERRONEOUS E XCLUSION OF FORWARD PREMIUM WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE (TRANSFER PRICING). 6. BRIEF FACTS IN RELATION TO THE ABOVE ISSUE IS WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE, THE AO / TPO EXCLUDED THE FORWARD PREMIUM FROM THE OPERATING PROFITS OF THE ASSESSEE. 6.1 THE ASSESSEE SUBMITTED DETAILED OBJECTIONS BEFORE THE DRP VIDE SUBMISSIONS DATED 20.11.2015 AS TO WHY FORWARD PREMIUM AMOUNTING TO RS.19,07,688 SHOULD BE CONSIDERED AS OPERATING IN NATURE. THE DRP, HOWEVER, FAILED TO CONSIDER THE CONTENTION OF THE ASSESSEE AND DID NOT GIVE ANY DIRECTION IN RESPECT OF CONSIDERATION OF FORWARD CONTRACT PREMIUM AS OPERATING IN NATURE. 6. 2 AGGRIEVED, THE ASSESSEE HAS RAISED THIS ISSUE BEFORE THE TRIBUNAL. THE CONTENTIONS RAISED BEFORE THE TRIBUNAL ARE AS FOLLOWS: - (I) THE ASSESSEE IS A CAPTIVE UNIT EARNING FOREIGN EXCHANGE REVENUE ONLY FROM ITS PARENT ENTITY; (II) IN ORDER TO PROTECT THE COMPANY FROM FOREIGN EXCHANGE FLUCTUATIONS, THE COMPANY HAS OPTED FOR A FORWARD CONTRACT AND HEDGES A PART OF ITS RECEIVABLES AGAINST LOSSES ARISING DUE TO FOREIGN EXCHANGE FLUCTUATION; (III) THE DIFFERENCE BETWEEN SPOT RATE (RATE OF FOREIGN CURRENCY ON THE DATE ON WHICH THE ASSESSEE HAS ENTERED INTO CONTRACT WITH THE BANK) AND THE FORWARD RATE (RATE AGREED WITH THE BANK) IS ACCOUNTED BY THE ASSESSEE AS FORWARD IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 8 PREM IUM IN ITS BOOKS OF ACCOUNTS OVER THE PERIOD OF CONTRACT; (IV) THE INCOME ARISING ON ACCOUNT OF FORWARD EXCHANGE CONTRACTS ARE DIRECTLY ATTRIBUTABLE TO THE BUSINESS OPERATIONS OF THE ASSESSEE; AND (V) IN SUPPORT OF THE ABOVE ARGUMENTS, THE ASSESSEE HAD SUBMITTED THE FOLLOWING BEFORE THE DRP - (A) RBI NOTIFICATION NO.FEMA 25/RB - 2000, DATED 3 RD MAY, 2000; (B) LEDGER EXTRACTS; AND (C) FORWARD CONTRACTS WITH THE BANK. 6. 3 THE LEARNED DEPARTMENTAL REPRESENTATIVE PRESENT SUPPORTED THE ORDERS PASSED BY THE INCOME - TAX AUTHORITIES. 6. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IN ITA NO.146/COCH/2015 (O RDER DATED 07.09.2018) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011 , WHEREIN THE TRIBUNAL HAD RESTORED THE ISSUE TO THE TPO WITH CERTAIN SPECIFIC DIRECTIONS. THE RELEVANT FINDING OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 2 011 READS AS FOLLOWS: - 6.1 THE TRANSFER PRICING OFFICER IN ITS ORDER DATED 23.01.2014 HAD EXCLUDED THE FOREIGN EXCHANGE GAINS WHILE ARRIVING AT THE PROFIT LEVEL INDICATOR (PLI). BEFORE THE DRP, THE ASSESSEE HAD TAKEN THE GROUND THAT FOREIGN EXCHANGE GAIN S IS PART OF THE OPERATING PROFIT MARGIN OF THE ASSESSEE. FURTHER, THE ASSESSEE IN THE ADDITIONAL GROUND BEFORE THE DRP, HAD ALSO RAISED A CONTENTION THAT PREMIUM ON FORWARD EXCHANGE CONTRACT IS ALSO TO BE CONSIDERED AS PART OF THE OPERATING MARGIN OF THE ASSESSEE TO ARRIVE AT THE PLI. THE DRP DIRECTED THE TPO TO INCLUDE THE FOREIGN EXCHANGE GAINS WHILE ARRIVING AT IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 9 THE ASSESSEES PLI. HOWEVER, THE DRP DID NOT GIVE DIRECTION WITH REGARD TO THE OBJECTIONS OF THE ASSESSEE THAT PREMIUM ON FORWARD EXCHANGE CONTR ACT HAS TO BE CONSIDERED AS PART OF THE OPERATING PROFIT MARGIN OF THE ASSESSEE. THE TRIBUNAL IN THE CASE OF AMBATTUR CLOTHING LTD. V. JCIT (ITA NOS.1436 & 1643/MADS/14 & ITA NO.910/MDS/2015) HAD HELD THAT WHEN PREMIUM ON FORWARD EXCHANGE CONTRACT IS ON AC COUNT OF PROXIMITY WITH THE EXPORT TURNOVER, THE SAME SHOULD BE TAKEN AS PART OF THE OPERATING PROFIT MARGIN. SINCE THE DRP HAS NOT CONSIDERED THE SPECIFIC PLEA OF THE ASSESSEE, IN THE INTEREST OF JUSTICE AND EQUITY, THE MATTER NEEDS TO BE CONSIDERED BY TH E TPO. THE ASSESSEE IS DIRECTED TO PLACE NECESSARY EVIDENCE BEFORE THE TPO TO CLAIM THAT PREMIUM ON FORWARD EXCHANGE CONTRACT IS EARNED IN THE NORMAL COURSE OF THE BUSINESS TO HEDGE AGAINST FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATE AND GAINS FROM SUCH CONTRACT HAS TO BE CONSIDERED WHILE COMPUTING THE PLI IN THE INTERNATIONAL TRANSACTION WITH THE AE. IT IS ORDERED ACCORDINGLY. 6.2 IN THE RESULT, THE ADDITIONAL GROUND RAISED IS ALLOWED FOR STATISTICAL PURPOSES. 6. 5 IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILES OF THE TPO. THE TPO SHALL ADHER E TO THE DIRECTIONS ISSUED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 2011, IN THIS CASE ALSO. IT IS ORDERED ACCO RDINGLY. 6. 6 IN THE RESULT, GROUND NO.4.9 IS ALLOWED FOR STATISTICAL PURPOSES. (III) AO / TPO HAS ERRONEOUSLY TAKEN THE FOLLOWING COMPANIES AS COMPARABLE, VIZ., ICRA ONLINE LIMITED, ACROPETAL TECHNOLOGIES, ACCENTIA TECHNOLOGIES LIMITED, AND JEEVAN SCIEN TIFIC TECHNOLOGIES LIMITED. 7. THE TPO HAD INCLUDED THE ABOVE FOUR COMPANIES AS COMPARABLE COMPANIES. THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THE ABOVE SAID COMPANIES AS COMPARABLE. THE IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 10 OBJECTIONS RAISED BEFORE THE TPO AND THE DRP IS REPRODUCED BELO W FOR READY REFERENCE : - COMPANIES IDENTIFIED BY THE TPO CONTENTIONS OF THE ASSESSEE ICRA ONLINE LIMITED *FUNCTIONALLY NOT COMPARABLE. *RELATED PARTY TRANSACTIONS GREATER THAN 25% OF TOTAL SALES (29.33%) *ERRONEOUS MARGIN COMPUTATION. ACCENTIA TECHNOLOGIES LIMITED *NON - AVAILABILITY OF SEGMENTED ACCOUNTS. * FUNCTIONALLY NOT COMPARABLE. *ON SITE SERVICES. *PRESENCE OF INTANGIBLES. ACROPETAL TECHNOLOGIES LIMITED * FUNCTIONALLY NOT COMPARABLE. *RESEARCH AND DEVELOPMENT ACTIVITIES. * BUSINESS PROMOTIO N EXPENSES. *IT ENABLED SERVICE REVENUE (I.E. NON - FINANCIAL SERVICES) LESS THAN 75% OF TOTAL TURNOVER (34.90%) * ERRONEOUS MARGIN COMPUTATION. JEEVAN SCIENTIFIC TECHNOLOGY LIMITED *FUNCTIONALLY NOT COMPARABLE. *IT ENABLED SERVICE REVENUE LESS THAN INR 1 CR ORE (INR 769.21 LACS). *IT ENABLED SERVICE REVENUE (I.E. NON - FINANCIAL SERVICES) LESS THAN 75% OF TOTAL TURNOVER (70.15%) * SIGNIFICANT MARKETING COST. *ABNORMAL PROFITS AND PECULIAR ECONOMIC CIRCUMSTANCES. *ERRONEOUS MARGIN COMPUTATION. 7.1 THE DRP REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE WITHOUT PASSING A SPEAKING ORDER. THE DRP CONFIRMED THE FINDING OF THE TPO. 7.2 AGGRIEVED BY THE INCLUS ION OF THE ABOVE SAID COMPANIES AS COMPARABLE COMPANIES, THE ASSESSEE HAS RAISED THIS ISSUE BEFOR E THE TRIBUNAL. BEFORE THE TRIBUNAL, THE LEARNED AR FURTHER ELABORATED THE REASONS WHY ABOVE COMPANIES CANNOT BE ADOPTED AS COMPARABLE COMPANIES. THE CONTENTIONS RAISED IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 11 BEFORE THE TRIBUNAL REGARDING EACH OF THE COMPANIES ARE AS FOLLOWS: - COMPARABLE COMPANI ES AS PER TP STUDY SUMMARY OF ASSESSEES CONTENTIONS BEFORE THE ITAT ICRA ONLINE LIMITED (A) FUNCTIONALLY DISSIMILAR: BODY SHOPPING COMPANY. THE COMPANY PROVIDES KPO SERVICES THAT REQUIRE HIGHLY SKILLED EMPLOYEES WITH SPECIALIZED TECHNICAL KNOWLEDGE COMPARED TO THE LOW VALUE ROUTINE MEDICAL CODING RELATED SERVICES RENDERED BY THE ASSESSEE TO ITS AES. (B) ERRONEOUS MARGIN COMPUTATION: TPO FAILED TO ALLOCATE AMOUNT PERTAINING TO DEPRECIATION AND ERRONEOUSLY REDUCED THE COST BASE BY PROVISION FOR BAD AND DOUBTFUL DEBTS AND ADVANCES CREATED (CORRECTED MARGIN 21.63%) ACROPETAL TECHNOLOGIES LIMITED (A) FUNCTIONALLY NOT COMPARABLE: EDS SEGMENT HAS BEEN CONSIDERED FOR COMPARISON WHICH IS COMPLETELY A KNOWLEDGE PROCESS OUTSOURCING (KPO) AND ACCORDINGLY CANNOT BE CONSIDERED AS A COMPANY COMPARABLE TO THE ASSESSEE. HEALTH SEGMENT (COMPARABLE SEGMENT) OF ACROPETAL FAILS LOWER TURNOVER FILTER. ACCENTIA TECHNOLOGIES LIMITED (A) FUNCTIONALLY NOT COMPARABLE: IN ADDITION TO THE PROVISION OF IT ENABLED SERVICES, ACC ENTIA IS ALSO ENGAGED IN SOFTWARE DEVELOPMENT SERVICES. BASED ON THE ANNUAL REPORT, DURING FY 2010 - 11 , THE MANAGEMENT DECIDED TO DEVELOP THEIR OWN EMR SOFTWARE AND ALSO HAS INVESTED LARGE AMOUNTS OF FUNDS FOR THE DEVELOPMENT OF EMR SOFTWARE AND THE SAAS MODEL AND ONE ACQUISITION HAS TAKEN PLACE DURING THE YEAR. IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 12 (B) NON AVAILABILITY OF SEGMENTAL ACCOUNTS: ASSESSEE FURTHER SUBMITS THAT IT WOULD BE INCORRECT TO COMPARE ITSELF WITH ACCENTIA, WHICH IS A COMPANY RENDERING DIVERSIFIED SERVICES AND THE COMPANY DOES NOT DISCLOSE SEGMENTED FINANCIAL FOR THE DIVERSIFIED ACTIVITIES UNDERTAKEN BY IT. (C) PRESENCE OF INTANGIBLES: (41.24% OF TOTAL FIXED ASSETS). JEEVAN SCIENTIFIC TECHNOLOGY LIMITED (A) FAILS IT ENABLED SERVICES REVENUE FILTER OF INR 1 CRORE APPLIED BY TPO (REVENUE FROM BPO RS.79,21,000) 7.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER S OF THE TPO AND THE DRP. 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE OBJECTIONS RAISED BY THE ASSESSEE HAVE BEEN DISPOSED OFF BY THE DRP WITHOUT PASSING A SPEAKING ORDER. THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS WHY THE ABOVE MENTIONED COMPANIES ARE NOT COMPARABLE COMPANIES. THE OBJECTIONS WITH REGARD TO NON - AV AILABILITY OF SEGMEN TAL ACCOUNT DETAILS FOR THE ABOVE COMPARABLES, PRESENCE OF INTANGIBLES FOR ABOVE MENTIONED COMPANIES AND FAILURE TO SATISFY CERTAIN FILTERS ADOPTED BY THE TPO HIMSELF WERE NOT DISCUSSED IN TPOS ORDER NOR IN DRPS ORDER. THE DRP ON ITS PART HAS MERELY CON FIRMED THE TPOS ORDER WITHOUT PASSING A SPEAKING ORDER. THEREFORE, WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILES OF THE TPO. THE ASSESSEE SHALL RAISE ALL THE CONTENTIONS RAISED BEFORE US AND SHALL PLACE NECESSARY EVIDENCE TO PROVE ITS CASE THA T THE ABOVE MENTIONED COMPANIES SHOULD NOT BE ADOPTED AS COMPARABLE COMPANIES. IT (TP) A NO. 57 / COCH /201 6 SA NO. 62 /COCH/201 7 . M/S.NAVIGANT BPM (INDIA) PVT.LTD . 13 7.5 IN THE RESULT, GROUND NO.4.4 IS ALLOWED FOR STATISTICAL PURPOSES. SA NO. 62 /COCH/201 7 8. SINCE THE APPEAL IS DISPOSED OFF, THE S TAY A PPLICATION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF OCTOBER, 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 23 RD OCTOBER, 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE PR.CIT THIRUVANANTHAPURAM . 4. THE DRP - 2, BANGALORE . 5. DR, ITAT, COCHIN 6 . GUARD FILE.