DCIT, Bangalore V. M/s Goldman Sachs Services Pvt. Ltd., Bangalore

ITA 581/BANG/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1103 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Business income; Transfer pricing; International transaction; Earning of tax free income; Working capital adjustments; Revised return
• Section: 92C; 143(3); 92D; 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER IT(TP)A NO. 581/BANG/2016 & C.O. 21/BANG/2017 ASSESSMENT YEAR: 2011-12 DY. CIT, CIRCLE 3(1)(2), ROOM NO. 228, 2 ND FLOOR, BMTC BUILDING, KORAMANGALA, 6 TH BLOCK, BANGALORE 95. VS. M/S GOLDMAN SACHS SERVICES PVT LTD., CRYSTAL DOWNS, EMBASSY GOLF LINKS BUSINESS PARK, OFF INTERMEDIATE RINK ROAD, BANGALORE 560 071. PAN AACCG2435N (APPELLANT) (CROSS OBJECTOR) (RESPONDENT)/ (CROSS OBJECTOR) REVENUE BY : MS. NEERA MALHOTRA, DR ASSESSEE BY : SHRI MUKESH BHUTANI, CA SHRI SHREYASH SHAH, ADV DATE OF HEARING 29/08/2018 DATE OF PRONOUNCEMENT /09/2018 O R D E R PER G. MANJUNATHA, A.M.: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE DIRECTIONS OF DRP-1, BENGALURU U/S 144C(5) OF THE IT ACT, 1961 DATED 08. 12.2015 FOR THE A.Y 2011-12. SINCE FACTS ARE IDENTICAL AND THE ISSUES ARE COMMON, THIS APPEAL AS WELL AS CROSS OBJECTION WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE REVENUE, IN ITS APPEAL HAS TAKEN UP THE FOLL OWING GROUNDS OF APPEAL: 2 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 3 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 3. THE ASSESSEE , FOLLOWING GROUNDS OF 4 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., , IN ITS CROSS OBJECTION HAS TAKEN UP THE FOLLOWING GROUNDS OF CROSS OBJECTIONS: /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. IN ITS CROSS OBJECTION HAS TAKEN UP THE 5 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 6 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 7 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE DEVEL OPMENT AND IT ENABLED SERVICES. SERVICES TO SUPPORT BUSINESS PROCESS OF GOLDMAN SAC HS GROUP COMPANIES IN THE AREAS OF TECHNOLOGY SUPPORT, OPERA TIONS, FINANCE, LEGAL AND COMPLIANCE, HUMAN CAPITAL MANAGE MENT ALSO PROVIDES SOFTWARE DEVELOPMENT SERVICES TO GOL GROUP COMPANIES. GS INDIA HAS ENTERED INTO A SERVI CE AGREEMENT WITH GOLDMAN SACHS GROUP COMPANIES ON 8 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE DEVEL OPMENT AND IT ENABLED SERVICES. THE GS INDIA PROVIDES BACK SERVICES TO SUPPORT BUSINESS PROCESS OF GOLDMAN SAC HS GROUP COMPANIES IN THE AREAS OF TECHNOLOGY SUPPORT, OPERA TIONS, FINANCE, LEGAL AND COMPLIANCE, HUMAN CAPITAL MANAGE MENT SOFTWARE DEVELOPMENT SERVICES TO GOL DMAN SACHS GROUP COMPANIES. GS INDIA HAS ENTERED INTO A SERVI CE AGREEMENT WITH GOLDMAN SACHS GROUP COMPANIES ON /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE DEVEL OPMENT GS INDIA PROVIDES BACK -END SERVICES TO SUPPORT BUSINESS PROCESS OF GOLDMAN SAC HS GROUP COMPANIES IN THE AREAS OF TECHNOLOGY SUPPORT, OPERA TIONS, FINANCE, LEGAL AND COMPLIANCE, HUMAN CAPITAL MANAGE MENT . IT DMAN SACHS GROUP COMPANIES. GS INDIA HAS ENTERED INTO A SERVI CE AGREEMENT WITH GOLDMAN SACHS GROUP COMPANIES ON 09.03.2006 FOR PROVISION OF BACKEND SUPPORT SERVICE S ENABLED SERVICES AND SOFTWARE DEVELOPMENT SERVICES) . THE ASSESSEE COMPANY HAS FILED I 20011- 12 ON 30.09.2011 AND LATER FILED REVISED RETURN ON 22.03.2013 DECLARING A TOT CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) AND 142(1) OF THE IT ACT, 1961 WERE ISSUED. IN AUTHORISED REPRESENTATIVE THE BOOKS OF ACCOUNTS THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY H AD INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED RESPECT OF IT ENABLED SERVICES AND SOFTWARE DEVELOP MENT SERVICES THE ASSESSEE ALSO INCURRED INTERNATIONAL T RANSACTIONS FOR PURCHASE OF FIXED ASSETS AND REIMBURSEMENT OF E XPENSES. THE ASSESSEE HAS INTERNATION AL TRANSACTIONS ENTERED INTO WITH ITS ASSOCIATED ENTERPRISES AND ADOPTED TNMM METHOD AS THE MOST APP ROPRIATE METHOD TO DETERMINE ARMS TRANSACTIONS. THE DETAILS OF INTERNATIONAL TRANSAC TIONS WITH ITS AES FOR THE YEAR UNDER 9 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., 09.03.2006 FOR PROVISION OF BACKEND SUPPORT SERVICE S ENABLED SERVICES AND SOFTWARE DEVELOPMENT SERVICES) . THE ASSESSEE COMPANY HAS FILED I TS RETURN OF INCOME FOR THE A.Y 12 ON 30.09.2011 AND LATER FILED REVISED RETURN ON 22.03.2013 DECLARING A TOT AL INCOME OF RS. 10,46,76,667/ CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) AND 142(1) OF THE IT ACT, 1961 WERE ISSUED. IN RESPONSE TO THE NOTICES REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED ACCOUNTS AND OTHER DETAILS AS CALLED FOR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY H AD INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES RESPECT OF IT ENABLED SERVICES AND SOFTWARE DEVELOP MENT SERVICES THE ASSESSEE ALSO INCURRED INTERNATIONAL T RANSACTIONS FOR PURCHASE OF FIXED ASSETS AND REIMBURSEMENT OF E XPENSES. THE ASSESSEE HAS CONDUCTED TP STUDY TO BENCH MARK ITS AL TRANSACTIONS ENTERED INTO WITH ITS ASSOCIATED ENTERPRISES AND ADOPTED TNMM METHOD AS THE MOST APP ROPRIATE METHOD TO DETERMINE ARMS LENGTH PRICE OF ITS INTERNATIONAL TRANSACTIONS. THE DETAILS OF INTERNATIONAL TRANSAC TIONS WITH ITS AES FOR THE YEAR UNDER CONSIDERATION ARE AS FOLLOWS: /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 09.03.2006 FOR PROVISION OF BACKEND SUPPORT SERVICE S (IT ENABLED SERVICES AND SOFTWARE DEVELOPMENT SERVICES) . THE TS RETURN OF INCOME FOR THE A.Y 12 ON 30.09.2011 AND LATER FILED REVISED RETURN ON AL INCOME OF RS. 10,46,76,667/ -. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) AND 142(1) TO THE NOTICES , THE OF THE ASSESSEE APPEARED AND FILED AND OTHER DETAILS AS CALLED FOR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY H AD RPRISES IN RESPECT OF IT ENABLED SERVICES AND SOFTWARE DEVELOP MENT SERVICES THE ASSESSEE ALSO INCURRED INTERNATIONAL T RANSACTIONS FOR PURCHASE OF FIXED ASSETS AND REIMBURSEMENT OF E XPENSES. TP STUDY TO BENCH MARK ITS AL TRANSACTIONS ENTERED INTO WITH ITS ASSOCIATED ENTERPRISES AND ADOPTED TNMM METHOD AS THE MOST APP ROPRIATE INTERNATIONAL TRANSACTIONS. THE DETAILS OF INTERNATIONAL TRANSAC TIONS WITH ITS 10 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 5. THE ASSESSEE HAS SELECTED 12 COMPARABLE COMPANIE S IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES SEGMENT. THE ASSESSEE ALSO SELECTED 9 COMPARABLES COMPANIES IN R ESPECT OF IT ENABLED SERVICES AND ARGUED THAT ITS INTERNATIONAL TRANSACTIONS WITH ITS AES IS AT ARMS LENGTH PRICE. IN ORDER TO ASCERTAIN CORRECTNESS OF TP STUDY CONDUCTED BY THE ASSESSEE I N RESPECT OF SOFTWARE DEVELOPMENT SEGMENT AND IT ENABLED SERVICE S SEGMENT, THE A.O REFERRED THE MATTER TO TPO U/S 92C OF THE I T ACT, 1961. THE TPO HAS TAKEN UP TP PROCEEDINGS AND VIDE LETTER DATED 03.03.2014 ASKED THE ASSESSEE TO SUBMIT THE DOCUMEN TS MAINTAINED IN TERMS OF SEC. 92D OF THE IT ACT, 1961 ALONG WITH FINANCIALS, ANNUAL REPORT, COPIES OF AGREEMENTS. I N RESPONSE TO LETTER, THE ASSESSEE VIDE ITS LETTER DATED 02.04.20 14 FILED VARIOUS DETAILS AS CALLED FOR BY THE TPO. THE TPO, AFTER CONSIDERING RELEVANT DETAILS ISSUED A SHOW CAUSE NO TICE ON 23.09.2014 AND CALLED UPON THE ASSESSEE TO SUBMIT I TS EXPLANATIONS IN RESPECT OF TPO REMARKS ON THE FILTE RS ADOPTED BY THE TAXPAYER, FILTERS APPLIED BY THE TPO, THE SE ARCH PROCESS ADOPTED BY THE TPO, ACCEPT / REJECT COMPANIES CONSI DERED BY THE TPO. THE ASSESSEE WAS ALSO FURNISHED COMPUTATI ON OF OPERATING MARGINS IN RESPECT OF FINAL COMPARABLES S ELECTED BY THE TPO. THE ASSESSEE WAS ALSO INFORMED OF THE REA SONS FOR REJECTION OF COMPANIES IN EACH CASE. IN RESPONSE T O NOTICE, THE ASSESSEE VIDE LETTER DATED 10.10.2013, FURNISHED IT S OBJECTIONS. THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE WAS R EPRODUCED BY THE TPO IN ITS ORDER AT PARA 5 AT PAGE 5 TO 8. THE TPO AFTER CONSIDERING RELEVANT OBJECTIONS OF THE ASSESSEE SET OF COMPARABLES OF 13 COMPANIES AND WORKED OUT A VERAGE MEAN MARGIN OF 24.52% IN RESPECT OF SOFTWARE DEVELO PMENT SERVICE SEGMENT. IN SO FAR AS IT 10 FINAL SET OF COMPARABLES AND 24.77%. THE TPO ALSO ALLOWED WORKING CAPITAL ADJUSTMENTS OF 1.63% IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES 1.47% IN RESPECT OF IT TP STUDY CONDUCTED BY THE ASSESSEE AND MADE A FRESH TP STUDY BY INCLUSION AND EXCL TAKING FINAL SET OF COMPARABLES IN RESPECT OF BOTH SEGMENTS MADE ADJUSTMENT OF SHORT FALL IN RESPECT OF SOFTWAR E DEVELOPMENT SEGMENT 41,93,62,940/- IN RESPECT OF ITES ACT, 1961 . THE DETAILS OF COMPUTATION OF ARMS LENGTH PRICE BY THE TPO IS EXTRACTED BELOW: 11 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE WAS R EPRODUCED BY THE TPO IN ITS ORDER AT PARA 5 AT PAGE 5 TO 8. THE TPO AFTER CONSIDERING RELEVANT OBJECTIONS OF THE ASSESSEE , SELECTED SET OF COMPARABLES OF 13 COMPANIES AND WORKED OUT A VERAGE MEAN MARGIN OF 24.52% IN RESPECT OF SOFTWARE DEVELO PMENT SEGMENT. IN SO FAR AS IT ES SEGMENT, THE TPO SELECTED 10 FINAL SET OF COMPARABLES AND WORKED OUT AVERAGE MARGIN OF TPO ALSO ALLOWED WORKING CAPITAL ADJUSTMENTS OF 1.63% IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES SEGMENT 1.47% IN RESPECT OF IT ES SERVICES. THUS, THE TPO HAS REJECTED TP STUDY CONDUCTED BY THE ASSESSEE AND MADE A FRESH TP STUDY BY INCLUSION AND EXCL USION OF CERTAIN COMPARABLE AND AFTER TAKING FINAL SET OF COMPARABLES IN RESPECT OF BOTH SEGMENTS MADE ADJUSTMENT OF SHORT FALL IN RESPECT OF SOFTWAR E SEGMENT OF RS. 23,64,87,475/- IN RESPECT OF ITES SEGMENT U/S 92C OF TH . THE DETAILS OF COMPUTATION OF ARMS LENGTH PRICE BY EXTRACTED BELOW: /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE WAS R EPRODUCED BY THE TPO IN ITS ORDER AT PARA 5 AT PAGE 5 TO 8. THE TPO AFTER SELECTED FINAL SET OF COMPARABLES OF 13 COMPANIES AND WORKED OUT A VERAGE MEAN MARGIN OF 24.52% IN RESPECT OF SOFTWARE DEVELO PMENT THE TPO SELECTED WORKED OUT AVERAGE MARGIN OF TPO ALSO ALLOWED WORKING CAPITAL ADJUSTMENTS OF SEGMENT AND THE TPO HAS REJECTED TP STUDY CONDUCTED BY THE ASSESSEE AND MADE A FRESH TP STUDY USION OF CERTAIN COMPARABLE AND AFTER TAKING FINAL SET OF COMPARABLES IN RESPECT OF BOTH SEGMENTS MADE ADJUSTMENT OF SHORT FALL IN RESPECT OF SOFTWAR E AND RS. SEGMENT U/S 92C OF TH E IT . THE DETAILS OF COMPUTATION OF ARMS LENGTH PRICE BY 6. THE A.O ISSUED DRAFT 144(C) OF THE IT ACT, 1961 DATED 5.03.2015 AND MADE TRANSF ER PRICING ADJUSTMENT TO THE EXTENT OF RS. 65,5850,389 / SUGGESTED BY THE TPO U/S 92C OF THE IT ACT, ASSESSMENT ORDER, THE A.O ALSO RE EXEMPTION U/S 10A TOWARDS COMMUNICATION EXPENSES FROM EXPORT TURNOVER FROM TOTAL TURNOVER . S OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOM E U/S 14A OF 12 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., THE A.O ISSUED DRAFT ASSESSMENT ORDER U/S 143(3) R.W.S OF THE IT ACT, 1961 DATED 5.03.2015 AND MADE TRANSF ER PRICING ADJUSTMENT TO THE EXTENT OF RS. 65,5850,389 / SUGGESTED BY THE TPO U/S 92C OF THE IT ACT, 1961. IN THE DRAFT THE A.O ALSO RE - COMPUTED INCOME ELIGIBLE FOR OF THE IT ACT, 1961 BY MAKING ADJUSTMENTS TOWARDS COMMUNICATION EXPENSES FROM EXPORT TURNOVER . S IMILARLY, THE TPO HAS MA DE DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOM E U/S 14A OF /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. ORDER U/S 143(3) R.W.S OF THE IT ACT, 1961 DATED 5.03.2015 AND MADE TRANSF ER PRICING ADJUSTMENT TO THE EXTENT OF RS. 65,5850,389 / - AS 1961. IN THE DRAFT COMPUTED INCOME ELIGIBLE FOR BY MAKING ADJUSTMENTS TOWARDS COMMUNICATION EXPENSES FROM EXPORT TURNOVER , BUT NOT DE DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOM E U/S 14A OF 13 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. THE IT ACT, 1961, BY INVOKING RULE 8D(2)(III) OF TH E IT RULES, 1962, AND WORKED OUT DISALLOWANCE OF RS. 75,730/-. 7. THE ASSESSEE HAS FILED ITS OBJECTIONS BEFORE THE DRP AGAINST THE DRAFT ORDER PASSED BY THE AO U/S 143(3) R.W.S 144(C) OF THE IT ACT, 1961 AND CHALLENGED TP ADJUST MENT MADE BY THE A.O U/S 92C OF THE IT ACT, 1961. THE ASSESS EE HAS CHALLENGED REJECTION OF TP DOCUMENTATION, FILTERS A ND QUALITATIVE CRITERIA APPLIED BY THE TPO, REJECTION OF COMPANIES , VIZ, SOFTWARE DEVELOPMENT SERVICES AND RELATED SERVICES IS LESS THAN 75% OF TOTAL OPERATING REVENUE, REJECTION OF COMPAN IES WITH RELATED PARTY TRANSACTIONS IS GREATER THAN 25% OF T HE SALES, REJECTION OF COMPANIES HAVING DIFFERENT FINANCIAL Y EAR ENDING AND OTHER FILTERS ADOPTED BY THE TPO IN RESPECT OF BOTH SEGMENTS. THE ASSESSEE ALSO CHALLENGED SELECTION O F ADDITIONAL COMPARABLE COMPANIES WITHOUT CONSIDERING THE DETAIL ED SUBMISSIONS OF THE ASSESSEE IN RESPECT OF BOTH SEGM ENTS. 8. THE DRP, VIDE ITS ORDER DATED 08.12.2015 DIRECTE D THE A.O TO EXCLUDE CERTAIN COMPANIES FOR THE DETAILED REASO NS RECORDED IN ITS ORDER AND ACCORDINGLY, REJECTED ACROPETAL TE CHNOLOGIES LTD, E-ZEST SOLUTIONS LTD, E-INFOCHIPS LTD., ICRA T ECHNO ANALYTICS LTD., INFOSYS LTD., L&T INFOTECH LTD., AS NOT COMPARABLE TO THE PROFILE OF THE ASSESSEE COMPANY I N RESPECT OF SOFTWARE DEVELOPMENT SERVICE SEGMENT, HOWEVER, UPHE LD INCLUSION OF PERSISTENT SYSTEMS SOLUTIONS LTD., AND PERSISTENT 14 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. SYSTEMS LTD., BY HOLDING THAT THERE IS NO REASON TO EXCLUDE THESE COMPANIES FROM THE LIST OF COMPARABLES TO THE PROFILE OF ASSESSEE COMPANY. SIMILARLY, THE DRP HAS DIRECTED THE A.O TO EXCLUDE ACCENTIA TECHNOLOGIES LTD., ACROPETAL TECHN OLOGIES LTD., JEEVAN SCIENTIFIC TECHNOLOGY LTD., IGATE GLOB AL SOLUTIONS LTD., AND INFOSYS BPO LTD., FROM THE LIST OF COMPAR ABLES SELECTED UNDER ITES SEGMENT. BUT, UPHELD INCLUSION OF ICRA ONLINE LIMITED BY HOLDING THAT THE COMPANY IS FUNCT IONALLY COMPARABLE TO THE ASSESSEE COMPANY. AS REGARDS RE- COMPUTATION OF INCOME ELIGIBLE FOR DEDUCTION U/S 10 A OF THE IT ACT, 1961 BY ADJUSTING TELECOMMUNICATION EXPENSES F ROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER, THE DRP BY FOLL OWING THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD VS. CIT (349 ITR 98) AND CIT VS. YOKOGAVA INDIA LTD., (341 ITR 385) HELD THAT IF ANY EXPENDITURE IS EXCLU DED FROM EXPORT TURNOVER, THEN THE SAME NEEDS TO BE EXCLUDED FROM TOTAL TURNOVER AS WELL ACCORDINGLY, DIRECT THE A.O TO EXC LUDE EXPENSES DEDUCTED FROM EXPORT TURNOVER FROM TOTAL TURNOVER F OR COMPUTING DEDUCTION U/S 10A OF THE IT ACT, 1961. S IMILARLY, IN RESPECT OF DISALLOWANCES OF EXPENSES INCURRED IN RE LATION TO EXEMPT INCOME U/S 14A OF THE IT ACT, 1961, THE DRP OBSERVED THAT THE DISALLOWANCES CONTEMPLATED U/S 14A OF THE IT ACT, SHALL BE MANDATORY REQUIRED TO BE WORKED OUT BY INV OKING RULE 8D(2)(III) OF THE IT RULES, 1962 AND THIS VIEW IS A LSO FIND 15 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. SUPPORT FROM THE DECISIONS OF THE HONBLE ITAT, KOL KATA IN THE CASE OF M/S CHAMPION COMMERCIAL COMPANY LTD., AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENTS LTD (TS 668 HC 2011), THEREFORE, THERE IS NO ERROR IN QUANTIFICATION OF DISALLOWANCES WORKED OUT BY TH E A.O IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO EXEM PT INCOME AND ACCORDINGLY, UPHELD DISALLOWANCES MADE BY THE A .O. AGGRIEVED BY THE DRP ORDER, THE REVENUE AS WELL AS THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE REVENUE HAS CHALLENGED EXCLUSION OF CERTAIN COMPARABLES BY THE DRP. THE LD. DR, REFERRING TO T HE GROUNDS OF APPEAL FILED BY THE REVENUE SUBMITTED THAT ALTHO UGH, THE REVENUE HAS SEEKING INCLUSION OF M/S RS SOFTWARE (I NDIA) LTD., ACROPETAL TECHNOLOGIES LTD., L&T INFOTECH LTD, E-I NFOCHIPS LTD, AS COMPARABLE COMPANIES TO THE PROFILE OF THE ASSES SEE COMPANY, BUT THE LARGER ISSUE HAS NOT BEEN CONSIDER ED BY THE DPR IN APPLYING ONSITE REVENUE FILTER ON PICK AND C HOOSE BASIS TO SELECT COMPARABLES, IGNORING THE FACT THAT ONCE A PARTICULAR FILTER IS APPLIED IN RESPECT OF COMPARABLES, IT SHO ULD BE APPLIED FOR ALL COMPARABLES ON BOARD. THE DR FURTHER SUBMI TTED THAT ONCE PARTICULAR FILTER IS ADAPTED TO SELECT COMPARA BLES IT CANNOT BE APPLIED TO A FEW COMPANIES ON PICK AND CHOOSE BA SIS. IN THIS CASE THE DRP, HAS APPLIED ONSITE REVENUE FILTE R TO M/S. RS SOFTWARE (INDIA) LTD., ACROPETAL TECHNOLOGIES LTD., M/S L&T 16 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. INFOTECH LTD., ONLY. THERE IS NO REFERENCE IN THE ORDER OF THE DRP IN SO FAR AS ONSITE REVENUE FILTER FOR OTHER CO MPARABLES. THE DP FURTHER SUBMITTED THAT ALL THESE COMPANIES H AVE SATISFIED QUANTITATIVE FILTERS ADOPTED BY THE TPO. ONCE, A COMPANY IS FUNCTIONALLY SIMILAR TO THE PROFILE OF T HE ASSESEE COMPANY IN RESPECT OF SEGMENTAL BUSINESS, IT IS IMM ATERIAL WHETHER IT GENERATES REVENUE FROM ONSITE OR OFFSHOR E SERVICES. THE DR FURTHER SUBMITTED THAT ONSITE DEVELOPMENT OF SOFTWARE SERVICES IS MORE COST AND THEREBY RESULTS IN LOWER PROFIT MARGIN THEREFORE, MERELY FOR THE REASON THAT ITS REVENUE F OR ONSITE SERVICES IS MORE, THE COMPANIES CANNOT BE EXCLUDED FROM THE LIST COMPARABLES, WHEN THE FUNCTIONS CARRIED OUT BY COMPARABLES ARE SIMILAR TO THE ASSESSEE COMPANY. 10. THE AR FOR THE ASSESSEE, ON THE OTHER HAND SUBM ITTED THAT THE DRP HAS EXCLUDED M/S ACROPETAL TECHNOLOGIES LTD ., M/S L&T INFOTECH LTD., NOT ONLY ON THE BASIS OF ONSITE REVENUE FILTERS, BUT ALSO ON THE BASIS OF OTHER REASONS INC LUDING ABSENCE OF SEGMENTAL INFORMATION CONTAINING THE BREAKUP OF EMPLOYEES COST, EXPORT SALES. THE AR FURTHER SUBMITTED THAT THE ASSESSEE IS CAPTIVE SERVICE PROVIDER AND ITS ENTIRE OPERATIO NS ARE TAKING PLACE I.E. IN INDIA THEREFORE, IT IS UNNATURAL TO C OMPARE THE COMPANIES WHICH ARE PREDOMINANTLY ENGAGED IN ONSITE DEVELOPMENT SOFTWARE SERVICES. THE LD. AR FOR THE ASSESSEE REFERRING TO THE DECISION OF THE ITAT, BANGALORE BE NCH A IN THE 17 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. CASE OF DCIT VS CGI INFORMATION AND MANAGEMENT CONSULTATIONS PVT LTD., (2018) 93 TAXMANN.COM 9, SU BMITTED THAT THE TRIBUNAL HAS CONSIDERED ACROPETAL TECHNOLO GIES LTD., L&T INFOTECH LTD, AND RS SOFTWARE (INDIA) LTD., AND HELD THAT ALL THREE COMPANIES ARE NOT FUNCTIONALLY COMPARABLE TO THE COMPANIES IN SOFTWARE DEVELOPMENT SEGMENT. THE LD. AR FURTHER SUBMITTED THAT IN RESPECT OF ACROPETAL TECH NOLOGIES LTD., A SUBSTANTIAL PORTION OF ITS SOFTWARE DEVELOP MENT ACTIVITIES HAVE BEEN OUTSOURCED ON SUBCONTRACT BASIS. IN RESP ECT OF L&T INFOTECH LTD, 48% OF ITS TOTAL EXPENSES ARE INCURRE D IN FOREIGN CURRENCY WHICH INCLUDES SUBSTANTIAL EXPENSES ON SUB CONTRACT, INDICATING THAT THE COMPANY HAS HIGH ONSITE REVENUE . THE TPO HAS CONSIDERED TOTAL REVENUE FROM ITS THREE SEGMEN TS WHICH INCLUDES FINANCIAL, MANUFACTURING, TELECOM. IT IS PREDOMINANTLY ENGAGED IN ONSITE DEVELOPMENT OF SOFTWARE. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITTED THAT ALTHOUGH THE DRP HA S APPLIED ONSITE REVENUE FILTER TO EXCLUDE THESE COMPANIES, B UT FACTS REMAINS THESE COMPANIES GOES OUT OF COMPARABILITY ON GROUNDS LIKE WHICH ARE FUNCTIONALLY NOT COMPARABLE TO THE A SSESSEE COMPANY. THEREFORE, THE DRP HAS CONSIDERED RELEVAN T FACTS TO DIRECT THE A.O TO EXCLUDE THESE COMPANIES AND ACCOR DINGLY REQUESTED TO UPHOLD THE DIRECTIONS ISSUED BY THE DR P. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE 18 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. AUTHORITIES BELOW. THE REVENUE HAS CHALLENGED EXCL USION OF ACROPETAL TECHNOLOGIES LTD, L&T INFOTECH LTD., AND E-INFOCHIPS LTD, ON THE GROUND THAT THE DRP HAS SUO-MOTO EXCLUD ED ABOVE THREE COMPANIES BY APPLYING FRESH FILTER IN RESPECT OF ONSITE REVENUE FILTER, WITHOUT APPLYING SUCH FILTER TO ALL COMPARABLE SELECTED BY THE TPO. WE FIND THAT ALTHOUGH THE DR P HAS TAKEN ONE OF THE REASONS FOR EXCLUDING THESE COMPANIES ON THE BASIS ONSITE REVENUE FILTER BUT GIVEN OTHER REASONS TO EX CLUDE THESE COMPANIES BY HOLDING THAT THESE COMPANIES ARE FUNCT IONALLY NOT COMPARABLE TO THE PROFILE OF THE ASSESSEE COMPANY. LET US EXAMINE EACH COMPANY AND REASONS GIVEN BY THE DRP T O DIRECT A.O TO EXCLUDE FROM THE LIST OF COMPARABLES. 12. ACROPETAL TECHNOLOGIES LTD. THE DRP HAS DIRECTED THE TPO TO EXCLUDE ACROPETAL TECHNOLOGIES LTD ON THE GROUND THAT ON EXAMINATION OF ANNUAL REPORT OF THE COMPANY THE FOLLOWING FACTS ARE NOTIC ED. 13. THE DRP FUR PROVIDED SEGMENTAL INFORMATION EMPLOYEES COST, EXPORT SALES, THEREFORE IT IS NOT P OSSIBLE TO COME TO CORRECT CONCLUSION AS TO WHETHER THE COM THE EMPLOYEE COST FILTER AND EXPORT EARNING FILTER. THE DRP FURTHER OBSERVED THAT ASSETS AND RISK PROFILE, PRIC ING AS WELL AS PREVAILING MARKET CONDITIONS ARE DIFFERENT IN PREDO MINANTLY ONSITE COMPANIES FROM PREDOMINANTLY OFFSHORE COMPAN IES LI THE TAXPAYERS. S INCE TAKING PLACE OFFSHORE I.E. IN INDIA IT IS WITH COMPANIES HAVING THAT THE ECONOMIC AND PROFITABILITY OF ONSITE OPERA TIONS ARE 19 IT(TP)A NO. 581 /BANG/1 GOLDMAN SACHS SERVICES PVT LTD., THE DRP FUR THER OBSERVED THAT THE COMPANY PROVIDED SEGMENTAL INFORMATION CONTAINING THE BREAKUP OF EMPLOYEES COST, EXPORT SALES, THEREFORE IT IS NOT P OSSIBLE TO COME TO CORRECT CONCLUSION AS TO WHETHER THE COM PANY PASSES THE EMPLOYEE COST FILTER AND EXPORT EARNING FILTER. THE DRP FURTHER OBSERVED THAT ASSETS AND RISK PROFILE, PRIC ING AS WELL AS PREVAILING MARKET CONDITIONS ARE DIFFERENT IN PREDO MINANTLY ONSITE COMPANIES FROM PREDOMINANTLY OFFSHORE COMPAN IES LI INCE , THE ENTIRE OPERATIONS OF TAXPAYERS TAKING PLACE OFFSHORE I.E. IN INDIA IT IS BUT NATURAL TO COMPARE COMPANIES HAVING OFFSHORE OPERATIONS , DUE TO THE REASON THAT THE ECONOMIC AND PROFITABILITY OF ONSITE OPERA TIONS ARE /BANG/1 6 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. THER OBSERVED THAT THE COMPANY IS NOT THE BREAKUP OF EMPLOYEES COST, EXPORT SALES, THEREFORE IT IS NOT P OSSIBLE TO PANY PASSES THE EMPLOYEE COST FILTER AND EXPORT EARNING FILTER. THE DRP FURTHER OBSERVED THAT ASSETS AND RISK PROFILE, PRIC ING AS WELL AS PREVAILING MARKET CONDITIONS ARE DIFFERENT IN PREDO MINANTLY ONSITE COMPANIES FROM PREDOMINANTLY OFFSHORE COMPAN IES LI KE OPERATIONS OF TAXPAYERS IS TO COMPARE , DUE TO THE REASON THAT THE ECONOMIC AND PROFITABILITY OF ONSITE OPERA TIONS ARE 20 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. DIFFERENT FROM OFFSHORE BUSINESS MODEL. IN ABSENCE OF THE CLEAR SEGMENTAL INFORMATION OF THE EMPLOYEES COST, THE CO MPANY CANNOT BE RETAINED AS COMPARABLES. WE FIND THAT TH E ITAT, BANGALORE, IN THE CASE OF DCIT VS. CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTATION PVT LTD., HAS CONSIDERE D ACROPETAL TECHNOLOGIES LTD., AND HELD THAT THIS COM PANY IS NOT COMPARABLE TO THE PROFILE OF THE COMPANY WHICH ARE ENGAGED IN CAPTIVE SERVICE PROVIDER IN RESPECT OF SOFTWARE DEV ELOPMENT SERVICES. THE RELEVANT PORTION OF ORDER IS EXTRACT ED BELOW: 19. ACROPETAL TECHNOLOGIES LIMITED - AS FAR AS EXCL USION OF THIS COMPANY AS A COMPARABLE COMPANY IS CONCERNED, IT IS SEEN FROM THE DIRECTIONS OF THE DRP AT PARAGRAPH 2.7 AT PAGE-9, T HAT THIS COMPANY WAS EXCLUDED ON THE GROUNDS THAT: (I) IT(TP)A NO.502/B/ 16 CO NO.01/B/17 THE SEGMENTAL INFORMATION CONTAINING THE BREAK-UP OF IT S EXPORT SALES AND EMPLOYEE COSTS, WAS NOT AVAILABLE AND IT WAS NOT PO SSIBLE TO ASCERTAIN IF IT PASSED THE EXPORT EARNINGS AND / OR EMPLOYEE COSTS FILTERS; AND (II) A SUBSTANTIAL PORTION OF ITS SOFTWARE DEVELOPMENT ACT IVITIES HAVE BEEN OUTSOURCED ON SUB-CONTRACT AND IT COULD, THEREFORE, NOT BE RETAINED AS A COMPARABLE. THE DRP IN DIRECTING EXCLUSION OF THIS COMPANY FOLLOWED DECISION OF HYDERBAD BENCH OF ITATL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. (ITA NO.1961/HYD/2011). T HE DRP ALSO OBSERVED THAT THIS COMPANY WAS PREDOMINANTLY DOING ON-SITE D EVELOPMENT OF SOFTWARE AND THEREFORE CANNOT BE COMPARED WITH A CO MPANY WHICH DEVELOPS SOFTWARE OFF-SHORE. ONE OF THE FILTERS APP LIED BY THE TPO WAS THAT COMPANIES WHERE EMPLOYEE COSTS ARE LESS THAN 25% OF TURNOVER CANNOT BE REGARDED AS COMPARABLE. IN THE ABSENCE OF SEGMENTAL INFORMATION, IT WAS NOT POSSIBLE TO ASCERTAIN AS TO WHETHER THIS COMPAN Y PASSES THE TEST ADOPTED BY THE TPO HIMSELF FOR COMPARISON. THE LEAR NED DR SUBMITTED THAT THE REQUIRED DATA CAN BE CULLED OUT FROM THE I NFORMATION AVAILABLE IN THE PUBLIC DOMAIN OR BY RESORTING TO A PROCESS OF C ALLING FOR INFORMATION FROM THIS COMPANY U/S.133(6) OF THE ACT. THE LEARNE D COUNSEL FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT THE HON'BL E DELHI HIGH COURT REJECTED A SIMILAR ARGUMENT BY THE REVENUE IN THE C ASE OF PRL.CIT VS. SAXO INDIA PVT. LTD. ITA 682/16 ORDER DATED 28.9.2016. I N THE CIRCUMSTANCES, THIS COMPANY WAS RIGHTLY HELD BY THE DRP TO BE NOT COMPARABLE. WE ARE OF THE VIEW THAT ONCE A COMPANY BECOMES NOT COMPARABLE FOR THE REASON THAT SEGMENTAL INFORMATION TO APPLY FILTERS, WE NEED NOT CONSIDER ANY OTHER ASPECT OF COMPARABILITY. THE LEARNED COUNSEL FOR TH E ASSESSEE MADE SUBMISSIONS BEFORE US THAT THIS COMPANY WAS RIGHTLY DIRECTED TO BE EXCLUDED BY THE DRP ON THE ABOVE BASIS AND FURTHER CONTENDED THAT EVEN OTHERWISE, THIS COMPANY IS NOT FUNCTIONALLY COMPARA BLE TO THE ASSESSEE. 21 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. AS ALREADY STATED, WE DO NOT WISH TO GO INTO THIS A SPECT AS THIS COMPANY GOES OUT OF COMPARABILITY ON OTHER REASONS. 14. L&T INFOTECH LTD., THE DRP EXCLUDED L&T INFOTECH LTD., FROM LIST OF COMPARABLE ON TWO GROUNDS I.E. (1) IT IS PREDOMINAN TLY ENGAGED IN ONSITE SOFTWARE DEVELOPMENT SERVICES; (2) THE C OMPANY HAS SHOWN REVENUES FROM THREE SEGMENTS I.E. FINANCIAL S ERVICES, MANUFACTURING, TELECOM WITHOUT ANY SEGMENTAL REPORT , THEREFORE IT CANNOT BE RETAINED AS COMPARABLE. WE FIND THAT THE ITAT, IN THE CASE DCIT VS. CGI INFORMATION SYSTEMS AND MANAG EMENT CONSULTATION PVT LTD., HAS CONSIDERED L&T INFOTECH LTD., FOR THE FOLLOWING REASON. 20. L & T INFOTECH LTD.- THIS COMPANY WAS DIRECTED TO BE EXCLUDED BY THE DRP FOR THE FOLLOWING REASONS: (I) 48.84% OF ITS TO TAL EXPENSES ARE INCURRED IN IT(TP)A NO.502/B/16 CO NO.01/B/17 FOREIGN CURREN CY, WHICH INCLUDES SUBSTANTIAL EXPENSES ON SUB-CONTRACTING, INDICATING THAT THE COMPANY HAS HIGH ONSITE REVENUE; (II) THE TPO HAS CONSIDERED TH E ENTIRE REVENUE FROM ITS 3 SEGMENTS, VIZ. FINANCIAL SERVICES, MANUFACTUR ING AND TELECOM AS WAS DISCLOSED IN ITS ANNUAL REPORT FOR FY 2010-11, FOR THE PURPOSES OF COMPARABILITY TO THE ASSESSEE'S SOFTWARE DEVELOPMEN T SERVICES; AND (III) PREDOMINANTLY ENGAGED IN THE ONSITE DEVELOPMENT OF SOFTWARE IN FY 2010- 11. THE LEARNED DR SUBMITTED BEFORE US THAT THE ASS ESSEE'S PROFILE ALSO IS SIMILAR TO THE PROFILE OF L & T INFOTECH LTD. AND T HEREFORE THIS COMPANY SHOULD BE INCLUDED AS COMPARABLE COMPANY. HE ALSO S UBMITTED THAT WHAT IS THE QUANTUM OF ON-SITE REVENUE HAS NOT BEEN SPELT O UT BY THE DRP. IN THIS REGARD IT WAS ARGUED BY HIM THAT ON-SITE REVENUE BE YOND 25% OF THE TOTAL REVENUE OF THE COMPANY WOULD BE BEYOND THE TOLERANC E LEVEL AND WITHOUT A FINDING THAT ON-SITE REVENUE IS MORE THAN 25% OF TH E TOTAL REVENUE, THIS COMPANY OUGHT NOT TO HAVE BEEN EXCLUDED FROM THE LI ST OF COMPARABLE COMPANIES. WE AGREE WITH THE SUBMISSION OF THE LEAR NED DR THAT FOR APPLICATION OF ON-SITE REVENUE FILTER, THE DRP OUGH T TO HAVE GIVEN A FINDING REGARDING THE QUANTUM OF REVENUE FROM ON-SITE SOFTW ARE DEVELOPMENT. 22 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. NEVERTHELESS, THIS COMPANY GOES OUT OF COMPARABILIT Y ON THE GROUND THAT THE PROFIT MARGINS ADOPTED BY THE TPO WAS FROM 3 DI VISIONS OF THE ASSESSEE. WE ALSO FIND, AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THIS COMPANY WAS HELD TO BE FUNCTIONALLY N OT COMPARABLE AS IT IS A MARKET LEADER AND THUS ENJOYS SIGNIFICANT BENEFIT S ON ACCOUNT OF OWNERSHIP OF MARKETING INTANGIBLES AND INTELLECTUAL PROPERTY RIGHTS. ALSO, IN ADDITION TO THE ABOVE, THE COMPANY OWNS PROPRIETARY SOFTWARE PRODUCTS WHICH ARE DEVELOPED IN-HOUSE. ACCORDINGLY, THE ASSE SSEE SUBMITS THAT THE COMPANY IS A PRODUCT COMPANY HAVING SIGNIFICANT INT ANGIBLES AND IS THUS NOT COMPARABLE TO CAPTIVE SOFTWARE SERVICE PROVIDER S SUCH AS THE ASSESSEE. IN THIS REGARD THE LEARNED COUNSEL FOR TH E ASSESSEE HAS PLACED RELIANCE ON THE DECISIONS OF THIS HON'BLE TRIBUNAL IN APPLIED MATERIALS INDIA PVT. LTD. V. ACIT [TS-815-ITAT-2016(BANG)-TP AT PAR A 19 ON PAGES 35-36] AND COMMSCOPE NETWORKS (I) PVT. LTD. V. ITO [TS-161 -ITAT-2017(BANG)- TP AT PARA IT(TP)A NO.502/B/16 CO NO.01/B/17 9 ON P AGES 16-17] WHERE THE EXCLUSION OF THE SAID COMPANY FROM THE LIST OF COMPARABLES IN SIMILAR CIRCUMSTANCES WAS UPHELD BY THIS HON'BLE TRIBUNAL. WE THEREFORE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE DIRECTIONS O F THE DRP ON EXCLUSION OF THIS COMPANY. 15 E-INFOCHIPS LTD., THE DRP HAS EXCLUDED E-INFOCHIPS LTD., ON THREE GR OUNDS I.E. (1) IT HAS FLUCTUATING REVENUE / PROFIT MARGIN S; (2) IT HAS FAILED IN SERVICE REVENUE FILTER; (3) LACK OF SEGME NTAL INFORMATION. WE FIND THAT THE COMPANY FUNCTIONALLY DIFFERENT FROM THE PROFILE OF THE ASSESSEE COMPANY AS IT IS E NGAGED IN DEVELOPMENT OF MAINTENANCE OF COMPUTER SOFTWARE AND SOFTWARE DEVELOPMENT CONSULTING AND ALSO MANUFACTURING EVM A ND VDB ELECTRONIC BOARD. AS PER THE WEBSITE OF THE COMPAN Y, IT PROVIDES SILICON ENGINEERING EVOLVING ASIC AND FVGA DESIGN, VERIFICATION AND VALIDATION, PHYSICAL DESIGN AND DF D. FURTHER, THE COMPANY IS ENGAGED IN MANUFACTURING ACTIVITIES AS EVIDENT 23 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. FROM INCOME STATEMENT. IT HAS ITEMS PERTAINING TO C ONSUMPTION OF MATERIALS, CHANGES IN INVENTORY AND MANUFACTURIN G SERVICE COST. IT ALSO FAILS SERVICE REVENUE FILTER AS ITS SOFTWARE DEVELOPMENT FILTER IS 73.78% WHICH IS LESS THAN 75% TO THE TOTAL REVENUE THEREBY FAILING THE SERVICE REVENUE FILTER APPLIED BY THE TPO. FURTHER, THIS COMPANY HAS BEEN CONSIDERED BY ITAT BANGALORE IN THE CASE OF DCIT VS. CGI INFORMATION S YSTEMS AND MANAGEMENT CONSULTATION PVT LTD. AND HELD THAT THIS COMPANY IS NOT COMPARABLE TO THE PROFILE OF COMPANIES WHICH ARE ENGAGED IN CAPTIVE SERVICE PROVIDES IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES. THE RELEVANT PORTION OF THE ORDER IS EXT RACTED BELOW: 24. AS FAR AS GROUND NO.4 RAISED BY THE REVENUE IS CONCERNED, THE SAID GROUND OF APPEAL IS VAGUE AND IN ANY EVENT COMPARAB ILITY OF COMPANIES THAT WERE EXCLUDED BY THE DRP WERE ON VALID GROUNDS CONTEMPLATED BY THE RELEVANT STATUTORY PROVISIONS OF THE ACT AND RULES. AS FAR AS GROUND NO. 5 IN REVENUE'S APPEAL IS CONCERNED, THE REVENUE SEEKS TO CHALLENGE THE EXCLUSION OF E-INFOCHIPS LTD. ON THE GROUND THAT IT FAILED THE SOFTWARE SERVICE INCOME FILTER AT 75%. AT THE OUTSET, THE AS SESSEE SUBMITS THAT E- INFOCHIPS LTD. WAS EXCLUDED BY THE DRP ON THE GROUN D THAT: (I) NO SEGMENTAL INFORMATION REGARDING ITS DIVERSE FUNCTIO NS IS AVAILABLE; (II) IT FAILED THE SOFTWARE SERVICE INCOME FILTER AT 75%; ( III) THERE WERE MAJOR FLUCTUATIONS IN PROFIT AND TURNOVER EVERY YEAR WHIC H SEEMS TO BE INFLUENCED BY EXTRAORDINARY/PECULIAR CIRCUMSTANCES; AND (IV) T HERE IS A PRESENCE OF INVENTORY (PAGE 10 AND 11 OF THE DRP'S DIRECTION). THE REVENUE, IN ITS APPEAL, HAS CHALLENGED ITS EXCLUSION ONLY THE SECON D GROUND. IN OTHER WORDS, THE REVENUE HAS NOT CHALLENGED ITS EXCLUSION ON THE OTHER GROUNDS STATED HEREINABOVE AND THUS ITS EXCLUSION ON THESE GROUNDS HAVE ATTAINED FINALITY AND CANNOT BE DISTURBED BY THIS HON'BLE TR IBUNAL. EVEN OTHERWISE, WE ARE OF THE VIEW THAT THE DRP RIGHTLY ARRIVED AT THE FINDING THAT THE COMPANY'S SOFTWARE DEVELOPMENT SERVICE REVENUE FOR FY 2010-11 WAS LESS THAN 75% OF ITS TOTAL OPERATING REVENUE FOR THAT YE AR. THUS, THE ABOVE ACTION OF THE DRP IN REJECTING THE ABOVE COMPANY IS CORRECT. 24 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. 16. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF DCIT VS. CJ INFORMATION SYSTEMS AND MANAGEMENT CONS ULTANTS PVT LTD., WE ARE OF THE CONSIDERED VIEW THAT ACROPE TAL TECHNOLOGIES LTD, L&T INFOTECH LTD AND E-INFOCHIPS LTD CANNOT BE COMPARABLE TO THE PROFILE OF ASSESSEE COMPANY AN D HENCE THE DRP WAS RIGHT IN DIRECTING THE A.O TO EXCLUDE THESE COMPANIES FROM THE LIST OF COMPARABLES. WE DO NOT FIND ANY E RROR IN THE FINDINGS OF THE DRP, HENCE WE ARE INCLINED TO UPHOL D THE FINDINGS OF DRP AND REJECT GROUND TAKEN BY THE REVE NUE. 17. RS SOFTWARE (INDIA) LTD., THE REVENUE AS WELL AS ASSESSEE HAS TAKEN GROUNDS FOR INCLUSION OF RS SOFTWARE (INDIA) LTD. THE DRP REJE CTED RS SOFTWARE (INDIA) LTD., ON THE GROUND THAT IT HAS SI GNIFICANT ONSITE ACTIVITIES WHICH IS 84% OF TOTAL EXPENSES IN CURRED BY THE ASSESSEE. THE REVENUE WANTS TO INCLUDE RS SOFTWARE (INDIA) LTD., ON THE GROUND THAT IT ENGAGED IN THE ACTIVITY OF CUSTOM APPLICATION DEVELOPMENT, QUALITY ASSURANCE, AND TE STING, APPLICATION MANAGEMENT AND SUPPORT AND THE FUNCTION S PERFORMED BY THE COMPANY IS SIMILAR TO THE FUNCTION S PERFORMED BY THE ASSESSEE. THE ASSESSEE HAS SELECTED THIS CO MPANY AS COMPARABLE WHICH WAS ACCEPTED BY THE TPO, BUT REJEC TED BY THE DRP ON ACCOUNT OF SIGNIFICANT FOREIGN EXPENDITURE. WE FIND THAT THE ITAT BANGALORE, IN THE CASE OF TRILOGY E-BUSINE SS SOFTWARE 25 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. INDIA PVT LTD. REPORTED IN 148 ITD 540 EXCLUDED RS SOFTWARE (INDIA) PVT LTD FROM THE LIST OF COMPARABLES ON THE GROUND THAT ASSETS AND RISK PROFILE, PRICING AS WELL AS PREVAIL ING MARKET CONDITIONS ARE DIFFERENT IN PREDOMINANTLY ONSITE CO MPANIES FROM PREDOMINANTLY OFFSHORE COMPANIES LIKE THE TAXP AYERS. SINCE, THE ENTIRE OPERATIONS OF TAXPAYERS ARE TAKIN G PLACE OFFSHORE I.E IN INDIA, IT IS BUT NATURAL THAT IT SH OULD BE COMPARED WITH COMPANIES WITH MAJOR OPERATIONS OFFSH ORE, DUE TO THE REASON THAT ECONOMICS AND PROFITABILITY OF O NSITE OPERATIONS ARE DIFFERENT FROM THAT OF OFFSHORE BUSI NESS MODEL. WE FIND THAT THOUGH THE ASSESSEE AS WELL AS TPO HAS SELECTED THIS COMPANY AS COMPARABLE, THE DRP ON ITS OWN EXCL UDED THIS COMPANY BY APPLYING ONSITE REVENUE FILTER. SINCE, ASSESSEE AS WELL AS THE REVENUE WANTS TO INCLUDE THIS COMPANY A S COMPARABLE, WE DIRECT THE A.O TO INCLUDE RS SOFTWAR E (INDIA) LTD AS COMPARABLE COMPANY. ITES SEGMENT: 18. THE REVENUE VIDE GROUND NO. 12 TO 13 CHALLENGED THE DIRECTIONS OF THE DRP, DIRECTING THE A.O TO EXCLUDE M/S IGATE GLOBAL SOLUTIONS LTD, FROM THE LIST OF COMPARABLES ON THE GROUND THAT SEGMENTAL INFORMATION IS NOT AVAILABLE. 19. LD. DR SUBMITTED THAT WHEN THE COMPANY HAD CLAS SIFIED ITSELF TO BE OPERATING IN ONE SEGMENT I.E PROVISION OF ITES, THEN 26 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. THERE IS NO REASON TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES ON THE GROUND THAT SEGMENTAL INFORMATIO N IS NOT AVAILABLE. 20. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE DRP WAS RIGHT IN REJECTING M/S IGATE GLOBAL SOLUTIONS LTD F ROM THE LIST OF COMPARABLES, AS IT IS EARNING INCOME FROM INFORMATI ON TECHNOLOGY SERVICES AND INFORMATION TECHNOLOGY ENAB LED SERVICES, AND NO SEGMENTAL INFORMATION IS AVAILABLE . THE AR FURTHER SUBMITTED THAT IT HAS DEBITED MANUFACTURING COST AMOUNTING TO RS. 8,30,094/- THEREBY INDICATING THAT THE COMPANY ALSO DEALING IN PRODUCTS THEREFORE, THE DRP WAS RIGHT IN EXCLUSION OF IGATE GLOBAL SOLUTIONS LTD. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. DRP HAS EXCLUDED IGATE GLOBAL SOLUTIONS LTD., ON THE GROUND THAT THOUGH IT IS EAR NING REVENUE FROM IT SERVICES AND IT ENABLED SERVICES, IT IS CON SIDERED REVENUE RECEIVED FROM BOTH SEGMENT AS ONE SEGMENT. IN THE ABSENCE OF SEGMENTAL INFORMATION, THE COMPANY CANNO T BE RETAINED AS COMPARABLE. WE FIND THAT THOUGH THE CO MPANY IS DERIVING REVENUE FROM TWO DIFFERENT SEGMENTS, IT HA S FAILED TO REPORT SEGMENTAL INFORMATION IN ITS ANNUAL REPORTS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE DRP WAS RIGH T IN REJECTING IGATE GLOBAL SOLUTIONS LTD., AS COMPARAB LE. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE DRP. HEN CE WE ARE 27 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. INCLINED TO UPHELD FINDINGS OF THE DRP AND REJECT T HE GROUND TAKEN BY THE REVENUE. 22. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO. 14 OF REVENUE APPEAL IS EXCLUSION OF TELECOMMUNICATION EXPENSES FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER FOR THE PURPOSE OF DETERMINATION OF INCOME ELIGIBLE FOR DEDUCTION U/S 10A OF THE IT ACT, 1961. 23. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS TATA ELEXI LTD 349 ITR 98, WHEREIN IT WAS HELD THAT ANY EXPEND ITURE IS EXCLUDED FROM EXPORT TURNOVER, THEN THE SAME NEEDS TO BE EXCLUDED FROM TOTAL TURNOVER AS WELL. 24. THE LD. DR, ON THE OTHER HAND FAIRLY ACCEPTED T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELEXI LTD, (SUPRA). 25. HEAVING HEARD BOTH THE SIDES, WE FIND THAT THE ISSUE OF EXCLUSION OF TELECOMMUNICATION EXPENSES FROM EXPORT TURNOVER NEEDS TO BE EXCLUDED FROM TOTAL TURNOVER OR NOT HAS BEEN DECIDED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELEXI (SUPRA), AND HELD THAT EXPENSES EXCL UDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM TOTAL TURN OVER ALSO, 28 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. OTHERWISE ANY OTHER INTERPRETATION MAKES THE FORMUL A UNWORKABLE AND OBSURED AND HENCE SUCH DEDUCTION SHA LL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTION AS WELL. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HCL TECHNOLOGIES LTD., (2018) 404 ITR 719 HAS CONSIDERE D SIMILAR ISSUE AND AFTER CONSIDERING THE RATION LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT, IN THE CASE OF CIT VS. TATA E LEXI LTD., HELD THAT ANY EXPENSES EXCLUDED FROM EXPORT TURNOVE R HAVE TO BE EXCLUDED FROM TOTAL TURNOVER ALSO. 26. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOL LOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. HCL TECHNOLOGIES LTD., (SUPRA), WE ARE OF THE CONSIDERE D VIEW THAT THE DRP IS RIGHT IN DIRECTING THE A.O TO EXCLUDE EX PENSES DEDUCT FROM EXPORT TURNOVER FROM TOTAL TURNOVER. W E DO NOT FIND ANY ERROR IN THE FINDINGS OF THE DRP, HENCE WE ARE INCLINED TO UPHELD THE DRP FINDINGS AND REJECT THE GROUND RA ISED BY THE REVENUE. 27. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 28. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM ASSESSEES C.O IS DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE IT ACT, 1961. THE AO HAS DISALLOWED EXPENSES OF RS. 75,730/- ON THE GROUND T HAT THE 29 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. ASSESSEE HAS INVESTMENTS IN SHARE AND SECURITIES WH ICH ARE CAPABLE OF EARNING EXEMPT INCOME, BUT FAILED TO DIS ALLOW ANY EXPENSES ATTRIBUTABLE TO SUCH INVESTMENTS. THEREFOR E, HE OPINED THAT WHETHER DIVIDEND INCOME IS EARNED OR NOT EXPEN SES INCURRED IN RELATION TO EXEMPT INCOME SHALL BE DISA LLOWED U/S 14A OF THE IT ACT, 1961 BY INVOKING RULE 8D(2) OF T HE IT RULES, 1962 AND ACCORDINGLY, DISALLOWED ADMIN AND OTHER EX PENSES @ 0.5% AT AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D( 2)(III) OF IT RULES, 1962. IT IS A CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT IT DOES NOT EARN ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THEREFORE QUESTION OF DIS ALLOWANCE OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE IT ACT, 1961 DOES NOT ARISE WHEN THERE IS NOT EXEMP T INCOME. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITTED THAT THIS ISSUES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF ITAT IN ASSESSEES OWN CASE FOR THE A.Y 2010-11 IN IT(TP) N O. 267 & 222/BANG/2015, WHERE UNDER SIMILAR SET OF FACTS THE ITAT HELD THAT SEC. 14A OF THE IT ACT, WILL NOT APPLY IF NO E XEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVI OUS YEAR. 29. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ITAT HAS CON SIDERED THE ISSUE OF DISALLOWANCE OF EXPENSES INCURRED IN RELAT ION TO EXEMPT INCOME IN THE LIGHT OF THE FACT THAT THE ASSESSEE H AS NOT EARNED ANY DIVIDEND INCOME FOR THE YEAR UNDER CONSIDERATIO N AND BY 30 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., VS CIT (2015) 378 ITR 33 HELD THAT DISALLOWANCES CONTEMPLATED U/S 14A HAS NO APPLICATI ON, IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE IN THE RELE VANT PREVIOUS YEAR. THE RELEVANT PORTION OF THE ORDER IS EXTRACT ED BELOW: 14. MR. VOHRA HAS PLACED BEFORE THE COURT A LARGE N UMBER OF DECISIONS INCLUDING THE DECISION OF THIS COURT IN EICHER GOOD EARTH LTD. V. COMMISSIONER OF INCOME-TAX [2015] 60 TAXMANN.COM 268 (DELHI) WHICH ANSWERED THE QUESTION IN THE AFFIRMATIVE. MR. VOHRA HAS ALSO PLACED RELIANCE ON DECISIONS OF THE SUPREME COURT IN CIT V . CHUGANDAS & CO . [1964] 55 ITR 17 (SC) AND CIT V. COCANADA RADHASWAM I BANK LTD. [1965] 57 ITR 306 (SC) WHICH HOLD THAT WHERE SHARES WERE H ELD AS BUSINESS INVESTMENT, THE DIVIDEND INCOME THOUGH ASSESSABLE T O TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, WOULD RETAIN ITS CHARACTER AS BUSINESS INCOME FOR ALL INTENTS AND PURPOSES. IN THE LATTER DECISIO N IT WAS SPECIFICALLY HELD THAT THE INCOME FROM SECURITIES WHICH FORMS PART OF THE ASSESSEE S TRADING ASSETS OR PART OF ITS INCOME IN BUSINESS IF LOSS IN CURS IN BUSINESS WOULD BE SET OFF AGAINST THAT INCOME IN SUCCEEDING YEARS. MR . VOHRA POINTED OUT THAT EVEN IN THE ASSESSEE S CASE THE BUSINESS LOSS OF PREVIOUS YEAR HAS BEEN SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 15. TURNING TO THE CENTRAL QUESTION THAT ARISES FOR CONSIDERATION, THE COURT FINDS THAT THE COMPLETE ANSWER IS PROVIDED BY THE D ECISION OF THIS COURT IN CIT V. HOLCIM INDIA (P) LTD. (DECISION DATED 5TH SE PTEMBER 2014 IN ITA NO. 486/2014). IN THAT CASE A SIMILAR QUESTION AROSE, V IZ., WHETHER THE ITAT WAS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SE CTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSE SSEE IN THE RELEVANT AY? THE COURT REFERRED TO THE DECISION OF THIS COUR T IN MAXOPP INVESTMENT LTD. (SUPRA) AND TO THE DECISION OF THE SPECIAL BEN CH OF THE ITAT IN THIS VERY CASE I.E. CHEMINVEST LTD. V. CIT (2009) 317 ITR 86. THE COURT ALSO REFERRED TO THREE DECISIONS OF DIFFERENT HIGH COURT S WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE FIRST WAS THE DECISION I N COMMISSIONER OF INCOME TAX, FARIDABAD V. M/S. LAKHANI MARKETING INC L . (DECISION DATED 2ND APRIL 2014 OF THE HIGH COURT OF PUNJAB AND HARYANA IN ITA NO. 970/2008) WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LIMITED [2010] 323 ITR 518 AND CIT V. WINSOME TEXTILE 31 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. INDUSTRIES LTD . [2009] 319 ITR 204. THE SECOND WAS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I V. CORRTECH E NERGY (P) LTD . [2014] 223 TAXMANN 130 (GUJ.) AND THE THIRD OF THE ALLAHAB AD HIGH COURT IN COMMISSIONER OF INCOME TAX, KANPUR V. SHIVAM MOTORS (P) LTD. (DECISION DATED 5TH MAY 2014 IN ITA NO. 88/2014). THESE THREE DECISIONS REITERATED THE POSITION THAT WHEN AN ASSESSEE HAD NOT EARNED A NY TAXABLE INCOME IN THE RELEVANT AY IN QUESTION 'CORRESPONDING EXPENDIT URE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 30. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE COORDINATE BENCH, IN ASSESSEES OWN CASE, WE DIRECT THE A.O TO DELETE THE ADDITIONS MADE TOWARDS DISALLOWAN CE OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE IT ACT, 1961. 31. THE REVENUE AS WELL AS THE ASSESSEE HAS TAKEN N UMBER OF GROUNDS IN RESPECT OF VARIOUS ISSUES. THE LD. DR, AT THE TIME OF HEARING SUBMITTED THAT EXCEPT GROUNDS TAKEN FOR INC LUSION OF CERTAIN COMPARABLES AND ON THE ISSUE OF CORPORATE T AXATION I.E DEDUCTION U/S 10A OF THE IT ACT, 1961, ALL OTHER GR OUNDS ARE EITHER CONSEQUENTIAL OR GENERAL IN NATURE DOES NOT REQUIRED SPECIFIC ADJUDICATION. THEREFORE, EXCEPT FOR THE G ROUNDS WHICH ARE ALREADY ADJUDICATED IN THE PROCEEDING PARAGRAPH S, ALL OTHER GROUNDS OF REVENUE APPEAL ARE DISMISSED AS NOT PRES SED. SIMILARLY, THE ASSESSEE HAS TAKEN NUMBER OF GROUNDS FOR INCLUSION OF CERTAIN COMPARABLES. THE LD. AR FOR T HE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT IF HE SUCCEED S IN EXCLUSION OF IGATE GLOBAL SOLUTIONS LTD., AS DIRECT ED BY THE LD. DRP, HE DO NOT WANT TO PRESS THE GROUNDS TAKEN FOR INCLUSION OF 32 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. E-FOUR HEALTH CARE LTD IN RESPECT OF ITES SEGMENT. SIMILARLY, IN RESPECT OF SOFTWARE SERVICE SEGMENT THE ASSESSEE HAS TAKEN GROUNDS OF OBJECTION FOR INCLUSION OF EVOK TECHNOLO GIES PVT LTD, MIND TREE LTD AND CG SOFTWARE AND EXPORT LTD. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT IF HE SUCCEED IN EXCLUSION OF THREE COMPARABLE AS DIRECTE D BY THE DRP, THEN HE DO NOT WANT TO PRESS GROUNDS TAKEN FOR INCLUSION OF ABOVE THREE COMPARABLES. THEREFORE ALL OTHER GR OUNDS TAKEN FOR INCLUSION OF ABOVE THREE COMPARABLES HAVE BEEN DISMISSED AS NOT PRESSED. ACCORDINGLY, THE C.O OF THE ASSESS EE IS PARTLY ALLOWED. 32. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALL OWED. PRONOUNCED IN THE OPEN COURT ON 12 TH SEP, 2018. SD/- SD/- (SUNIL KUMAR YADAV) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 12 TH SEP, 2018 KRK/VMS 33 IT(TP)A NO. 581/BANG/16 C.O 21/B/2017 GOLDMAN SACHS SERVICES PVT LTD., BANGALORE. COPY TO:- 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR, I.T.A.T., BANGALORE. 6) GUARD FILE BY ORDER PRIVATE SECRETARY, ITAT, BANGALORE.