Tata McGraw Hill Education Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5857/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86823 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 19-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JUDY JAMES
• Assessee Lawyers: G C SRIVASTAVA; SAURABH SRIVASTAVA
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM ITA NO.5857/DEL/2011 ASSESSMENT YEAR : 2007-08 TATA MCGRAW HILL EDUCATION PVT. LTD., 7, WEST PATEL NAGAR, NEW DELHI. PAN : AAACT0179L VS. ACIT, CIRCLE 16(1), CR BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA, ADVOCATE & SHRI SAURABH SRIVASTAVA, FCA DEPARTMENT BY : SHRI JUDY JAMES, STANDING COUNSEL ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E FINAL ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) ON 31.10.2 011 IN RELATION TO THE ASSESSMENT YEAR 2007-08. ITA NO.5857/DEL/2011 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A JOINT VENTURE BETWEEN MH, USA AND THE TATA GROUP OF INDIA . ITS ACTIVITIES ENCOMPASS PUBLISHING ORIGINAL BOOKS AND SELLING MCG RAW HILL PRODUCTS IN INDIA. THE COMPANY PUBLISHES BOOKS FOR SCHOOLS, COLLEGES AND PROFESSIONAL MARKETS. THE ASSESSEES PUBLISHING AC TIVITY COMPRISES SOURCING AUTHORS AND DEVELOPING BOOKS TO SUIT READE RS IN VARIOUS DISCIPLINES. THE ASSESSEE IS ALSO PROVIDING BACK O FFICE SUPPORT SERVICES IN THE NATURE OF IT ENABLED SERVICES, TRANSACTION P ROCESSING AND DATA PROCESSING SERVICES TO ITS ASSOCIATED ENTERPRISES ( AES). THE ASSESSEE REPORTED CERTAIN INTERNATIONAL TRANSACTIONS IN FORM NO.3CEB. IN THE PRESENT APPEAL, WE ARE CONCERNED ONLY WITH THE INTE RNATIONAL TRANSACTION OF RENDERING IT SUPPORT SERVICES TO MCGRAW HILL EDU CATION (ASIA), SINGAPORE WITH A VALUE OF RS.4,07,64,433/-. THE ASS ESSEES GROSS REVENUE FROM THE `PUBLISHING SEGMENT AMOUNTED TO R S.108.94 CRORE WITH OPERATING PROFIT OF RS.18.75 CRORE. IN THE `B ACK OFFICE SUPPORT SERVICES SEGMENT, THE ASSESSEE EARNED A GROSS REVE NUE AMOUNTING TO RS.4.07 CRORE WITH OPERATING PROFIT OF RS.37.05 LAC . THOUGH THE ASSESSEE MAINTAINED BOOKS OF ACCOUNT ON AGGREGATE BASIS COMB INING THE ITA NO.5857/DEL/2011 3 TRANSACTIONS OF THESE TWO MAJOR SEGMENTS, HOWEVER, FOR THE PURPOSES OF TRANSFER PRICING ANALYSIS, IT SPLITTED ITS COMBINED RESULTS INTO PUBLISHING BUSINESS SEGMENT AND BACK OFFICE SUPPORT SERVICES S EGMENT. THE ASSESSEE ADOPTED THE TRANSACTIONAL NET MARGIN METHO D (TNMM) AS THE MOST APPROPRIATE METHOD FOR THE INTERNATIONAL TRANS ACTIONS UNDER BOTH THE ABOVE SEGMENTS. IT DISCLOSED THE PROFIT LEVEL INDI CATOR (PLI) AS RATIO OF OPERATING PROFIT TO OPERATING COST AT 22.67% UNDER THE `PUBLISHING BUSINESS SEGMENT AND 10.00% IN THE `BACK OFFICE SU PPORT SERVICES SEGMENT. 3. WE HAVE NOTICED ABOVE THAT IN THE PRESENT APP EAL, THE MAJOR DISPUTE IS ABOUT THE INTERNATIONAL TRANSACTIONS IN THE `BAC K OFFICE SUPPORT SERVICES SEGMENT. THE ASSESSEE SELECTED CERTAIN C OMPANIES AS COMPARABLE UNDER THIS SEGMENT TO DEMONSTRATE THAT I TS INTERNATIONAL TRANSACTIONS WERE AT ARMS LENGTH PRICE (ALP). THE TRANSFER PRICING OFFICER (TPO) WAS NOT SATISFIED WITH THE COMPANIES SELECTED BY THE ASSESSEE AS COMPARABLES. HE SHORT-LISTED 26 COMPAN IES WITH THE AVERAGE OP/TC AT 25%. AFTER CONSIDERING WORKING CAPITAL AD JUSTMENT OF 0.96%, ITA NO.5857/DEL/2011 4 THE TPO WORKED OUT THE REVISED ARITHMETIC MEAN OF T HE COMPARABLES AT 25.96%. BY CONSIDERING THIS PROFIT RATE AS BENCHMA RK, THE TPO WORKED OUT TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.59, 14,548/-. THE AO MADE THE ADDITION FOR THE EQUIVALENT SUM AGAINST WH ICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE WANT TO MAKE IT CLEAR THAT THE ASSESSEE HAS MAINLY CONTESTED THE SELECTION OF CERT AIN COMPANIES AS COMPARABLE. BEFORE EVALUATING THE COMPARABILITY OR OTHERWISE OF THE COMPANIES WHICH HAVE BEEN ASSAILED IN THE PRESENT A PPEAL, IT IS SINE QUA NON TO CONSIDER THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY. FOR DETERMINING THE NATURE OF WORK DONE BY THE ASSESSEE UNDER THIS SEGMENT, WE WOULD GO THROUGH THE RELEVANT CLAUSES OF THE AGR EEMENT DATED 01.01.2005 ENTERED INTO BETWEEN THE ASSESSEE AND IT S AES, A COPY OF WHICH IS AVAILABLE ON PAGES 419 ONWARDS OF THE PAPE R BOOK. IT IS APPARENT FROM THIS AGREEMENT THAT THE AES ENGAGED T HE ASSESSEE: TO PROVIDE ADMINISTRATIVE AND OTHER SIMILAR SERVICES F OR THE BUSINESS UNITS ITA NO.5857/DEL/2011 5 AS INCLUDED IN SCHEDULE A IN TMHS TERRITORY. SU CH SERVICES SHALL INCLUDE, BUT NOT BE LIMITED TO, GENERAL ACCOUNTING SERVICES, ACCOUNTS PAYABLE SERVICES, PAYROLL PROCESSING SERVICES, ANY OTHER ADMINISTRATIVE AND ACCOUNTING SERVICES AND ALL OTHER ASSISTANCE AS REQUESTED BY MHCI (HEREIN REFERRED TO AS THE SERVICES). AS A COMPE NSATION FOR THE ABOVE SERVICES, THE AES AGREED TO REIMBURSE ALL THE EXPEN SES DIRECTLY OR INDIRECTLY INCURRED BY THE ASSESSEE IN THE PERFORMA NCE OF THE SERVICES WITH 10% MARK-UP. THE ASSESSEE, VIDE ITS LETTER DA TED 13.09.2010 ADDRESSED TO THE TPO, NARRATED THE NATURE OF SERVIC ES RENDERED BY IT TO THE AES, THE RELEVANT PART OF WHICH IS AS UNDER:- BACK OFFICE SUPPORT SERVICES PROVIDED BY TMH INDIA ARE IN THE NATURE OF ROUTINE IT ADMINISTRATION AND SUPPORT AND SOFTWARE SUPPORT TYP E OF SERVICES RELATED TO DATA AND TRANSACTIONS. A PERUSAL OF THE AGREEM ENT BETWEEN THE ASSESSEE AND ITS AES DIVULGES THAT THE ASSESSEE REN DERED GENERAL ACCOUNTING SERVICES, ACCOUNTS PAYABLE SERVICES, PAY ROLL PROCESSING SERVICES, ANY OTHER ADMINISTRATIVE AND ACCOUNTING S ERVICES TO ITS AES. THE TPO HAS DESIGNATED SUCH SERVICES AS `SOFTWARE D EVELOPMENT ITA NO.5857/DEL/2011 6 SERVICES, WHEREAS THE ASSESSEE IS CONTENDING THAT THE SERVICES RENDERED BY IT DO NOT FALL IN THE REALM OF `SOFTWARE DEVELOP MENT SERVICES. 5. AT THIS STAGE, IT IS RELEVANT TO UNDERSTAND T HE DIFFERENCE BETWEEN A SOFTWARE SERVICE COMPANY AND A SOFTWARE PRODUCT COM PANY. A SOFTWARE SERVICE COMPANY MAY AGAIN BE OF TWO TYPES, VIZ., A COMPANY PROVIDING SOFTWARE DEVELOPMENT SERVICES AND A COMPANY PROVIDI NG SOFTWARE SERVICES OTHER THAN SOFTWARE DEVELOPMENT SERVICES ( HEREINAFTER ALSO CALLED A COMPANY PROVIDING NON-DEVELOPMENT SOFTWAR E SERVICES), THOUGH BOTH RENDER SOFTWARE RELATED SERVICES. IN OR DER TO PROPERLY APPRECIATE THE VITAL DIFFERENCE BETWEEN THESE THREE TYPES OF COMPANIES, IT IS SIGNIFICANT TO NOTE THAT THE ULTIMATE THING IS A SOFTWARE PRODUCT, WITH WHICH THE DESIRED RESULTS ARE OBTAINED. FOR EXAMPLE , IF A PERSON WANTS TO MAINTAIN ACCOUNTS ON COMPUTER OR WANTS SOME SPECIFI C TYPES OF ACCOUNTS REPORTING, THEN HE NEEDS TO HAVE A SOFTWARE, CAPAB LE OF DELIVERING THE DESIRED RESULTS. A SOFTWARE CATERING TO SUCH REQUIR EMENTS IS CALLED A SOFTWARE PRODUCT. A COMPANY WHICH DEVELOPS SOFTWAR E PRODUCTS, IN ENTIRETY OR IN PARTS, FOR ANOTHER, IS CALLED A COMP ANY RENDERING SOFTWARE ITA NO.5857/DEL/2011 7 DEVELOPMENT SERVICES. SOFTWARE DEVELOPMENT SERVICES ALSO INCLUDE TIMELY UPDATION OF THE SOFTWARE PRODUCTS SO AS TO S UIT THE EVER CHANGING REQUIREMENTS OF THE USERS. A COMPANY USING, INTER ALIA, A SOFTWARE PRODUCT FOR OBTAINING THE DESIRED ACCOUNTING RESULT S, IS CALLED A COMPANY PROVIDING NON-DEVELOPMENT SOFTWARE SERVICES. THIS C AN BE SEEN IN A CYCLE. FIRST STEP IS THE DEVELOPMENT OF SOFTWARE, W HICH CAN BE DONE IN- HOUSE BY THE OWNER HIMSELF OR OUTSOURCED IN ENTIRET Y OR IN PARTS FROM DIFFERENT COMPANIES PROVIDING SOFTWARE DEVELOPMENT SERVICES. ONCE A SOFTWARE IS FULLY DEVELOPED, IT BECOMES A SOFTWARE PRODUCT, WHICH CAN EITHER BE SELF-USED OR SOLD OFF-THE-SHELF BY GIVING LICENSES TO VARIOUS CUSTOMERS, UNLESS IT IS CUSTOMIZED FOR A PARTICULAR CUSTOMER. THIS IS THE SECOND STAGE. WHEN THE SOFTWARE PRODUCT GOES INTO T HE HANDS OF A USER, IT IS HE WHO USES THE SOFTWARE FOR GETTING THE DESIRED RESULTS FROM THE RAW DATA. THIS IS THE THIRD STAGE. COMING BACK TO OUR CONTEXT, A COMPANY PROVIDING SOFTWARE DEVELOPMENT SERVICES IS IN THE F IRST STAGE AND A COMPANY PROVIDING NON-DEVELOPMENT SOFTWARE SERVICES IS IN THE THIRD STAGE. THE SECOND STAGE IS THE CASE OF A SOFTWARE P RODUCT COMPANY. IT IS MANIFEST THAT THERE IS A PHENOMENAL DIFFERENCE BETW EEN A COMPANY ITA NO.5857/DEL/2011 8 PROVIDING SOFTWARE DEVELOPMENT SERVICES AND A COMPA NY PROVIDING SOFTWARE NON-DEVELOPMENT SERVICES IN TERMS OF EXPER TISE, PROFESSIONAL QUALIFICATION AND EXPERIENCE REQUIRED FOR RENDERING SUCH SERVICES. A COMPANY PROVIDING SOFTWARE NON-DEVELOPMENT SERVICES PERFORMS A RELATIVELY LOW-END SERVICE. FROM THE ABOVE, IT IS A MPLY CLEAR THAT WHEREAS A COMPANY PROVIDING SOFTWARE DEVELOPMENT SE RVICES HELPS IN THE CREATION OF A SOFTWARE, ON THE OTHER HAND, A CO MPANY PROVIDING NON- DEVELOPMENT SOFTWARE SERVICES OBTAINS THE DESIRED S ERVICES WITH THE USE OF A SOFTWARE. FURTHER, WHEREAS THE OUTPUT OF THE F ORMER IS A SOFTWARE IN ITSELF OR A STAGE IN THE ULTIMATE CREATION OF A SOF TWARE, THE OUTPUT OF THE LATER IS THE PROCESSED INFORMATION FROM THE RAW DAT A OBTAINED WITH THE HELP, INTER ALIA, OF A SOFTWARE. THE LATER COMPANY DOES NOT CREATE OR DEVELOP ANY SOFTWARE BUT SIMPLY USES AN ALREADY EXI STING SOFTWARE. FROM THE ABOVE DISCUSSION, IT IS OVERT THAT AS A SOFTWAR E PRODUCT COMPANY CANNOT BE COMPARED WITH A COMPANY PROVIDING SOFTWAR E DEVELOPMENT SERVICES, SIMILARLY, A COMPANY PROVIDING SOFTWARE D EVELOPMENT SERVICES IS AS DIFFERENT FROM A COMPANY PROVIDING NON-DEVELO PMENT SOFTWARE SERVICES AS IS CHALK AND CHEESE. ITA NO.5857/DEL/2011 9 6. BEFORE EMBARKING UPON MAKING A COMPARISON OF THE NATURE OF SERVICES RENDERED BY THE COMPANIES, WHICH THE ASSES SEE IS AGITATING IN THE PRESENT APPEAL, WE WOULD LIKE TO MENTION THAT T HE TPO IDENTIFIED 26 COMPANIES AS COMPARABLE. WHEN WE TURN TO THE FACTS OF THE INSTANT CASE, IT IS FOUND THAT THE TPO CATEGORIZED THE ASSESSEE A S A SOFTWARE DEVELOPMENT SERVICES PROVIDER. HOWEVER, WE HAVE NOT ICED SUPRA FROM THE NATURE OF SERVICES ACTUALLY RENDERED BY THE ASS ESSEE TO ITS AES, THAT IT IS A PROVIDER OF SOFTWARE NON-DEVELOPMENT SERVICES. WITH THIS BACKGROUND IN MIND, WE WILL PROCEED TO EXAMINE THE COMPARABILITY OR OTHERWISE OF THE COMPANIES CHALLENGED BEFORE US, ON E BY ONE. (I) ACCEL TRANSMATIC LTD. (SEG.) 7.1. THE TPO TREATED THIS COMPANY AS COMPARABLE WIT H THE PROFIT MARGIN OF 20.90% DESPITE THE ASSESSEES CONTENTION THAT IT IS FUNCTIONALLY DIFFERENT. HOWEVER, THE TPO CONFINED HIMSELF ONLY TO THE SOFTWARE SEGMENT WHICH, IN HIS OPINION, QUALIFIED ALL THE FI LTERS. THE ASSESSEE IS AGITATING AGAINST THE INCLUSION OF THIS COMPANY. ITA NO.5857/DEL/2011 10 7.2. WE HAVE HEARD BOTH THE SIDES AND PERUSED TH E RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN FROM THE ANNUAL REPORT O F THIS COMPANY, A COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK, THAT THIS COMPANY HAS THREE DIVISIONS, NAMELY, SYSTEMS AND SERVICES DIVISION, T ECHNOLOGIES DIVISION AND ANIMATION DIVISION. FROM THE SEGMENTA L REPORTING OF THIS COMPANY, WHICH IS AVAILABLE ON PAGE 48 OF THE PAPER BOOK, IT CAN BE SEEN THAT THE MANAGEMENT OF THE COMPANY IDENTIFIED FOUR BUSINESS SEGMENTS, NAMELY, HARDWARE PRODUCTS/SERVICES, SOFTWARE SERVIC ES, EDUCATION & TRAINING AND ANIMATION. WHEN WE CONSIDER THE SOFT WARE SERVICES SEGMENT OF THIS COMPANY, THE SAME IS FOUND TO BE CO MPRISING OF RESEARCH AND DEVELOPMENT, MARKETING, MANUFACTURING AND SERVI CES OF AUTOMATED PAYMENT COLLECTION TERMINALS, UNINTERRUPTED POWER S UPPLY SYSTEMS, RAILWAY PLATFORM VENDING MACHINES, ETC. THE FOCUS OF THIS DIVISION IS ON PRODUCTS AND SOLUTIONS AT THE CUSTOMER INTERFACE FO R UTILITIES, BANKING & FINANCE AND E-GOVERNANCE. IT HAS ALSO BEEN MENTIONE D IN THE ANNUAL REPORT THAT THIS SEGMENT COMPRISES OF THE FOLLOWING CATEGORIES, NAMELY, MANNED AND UNMANNED PAYMENT COLLECTION TERMINALS, M ULTI FUNCTIONS KIOSKS, QUEUE MANAGEMENT SYSTEMS, TICKED ISSUING MA CHINES AND ITA NO.5857/DEL/2011 11 UNINTERRUPTED POWER SUPPLY SYSTEMS. A BARE PERUSAL OF THE NATURE OF ACTIVITIES DONE BY THIS COMPANY UNDER THIS SEGMENT DIVULGES THAT IT IS INTO SOFTWARE DEVELOPMENT SERVICES AND ALSO THE SAL E OF SOFTWARE PRODUCTS. ON THE OTHER HAND, THE ASSESSEE IN QUEST ION IS INVOLVED INTO RENDERING SOFTWARE NON-DEVELOPMENT SERVICES, WHICH ARE FAR AWAY DIFFERENT FROM SOFTWARE DEVELOPMENT SERVICES. WE, THEREFORE, ORDER FOR THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMP ARABLES. (II) AVANI CIMCON TECHNOLOGIES LTD . 8.1. THE TPO INCLUDED THIS COMPANY IN THE FINA L SET OF COMPARABLES BY OBSERVING THAT: AS PER THE INFORMATION AVAILABL E IN THE PUBLIC DOMAIN, IT IS A SOFTWARE DEVELOPMENT AND CONSULTING COMPANY. AFTER SEEKING INFORMATION FROM THIS COMPANY U/S 133(6) OF THE ACT, THE TPO FOUND IT TO BE QUALIFYING ALL THE FILTERS. THAT IS HOW THIS COMPANY WAS HELD TO BE COMPARABLE. THE ASSESSEE IS AGGRIEVED A GAINST THE INCLUSION OF THIS COMPANY IN THE FINAL SET OF COMPARABLES. 8.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE RELEVANT MATERIAL ON RECORD, IT CAN BE NOTICED FROM THE TPO S OBSERVATIONS THAT ITA NO.5857/DEL/2011 12 THIS COMPANY IS INTO SOFTWARE DEVELOPMENT. FROM TH E ANNUAL REPORT OF THIS COMPANY, A COPY OF WHICH IS AVAILABLE IN THE P APER BOOK, IT CAN BE SEEN THAT THIS COMPANY IS ENGAGED IN PROVIDING SOFT WARE DEVELOPMENT SERVICES. IN VIEW OF THE FACT THAT THE ASSESSEE IS NOT PROVIDING ANY SOFTWARE DEVELOPMENT SERVICES, THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE. WE, THEREFORE, ORDER TO ELIMINATE THIS COMPANY FROM THE LIST OF COMPARABLES. (III) CELESTIAL LABS LTD . 9.1. THE TPO OBSERVED THAT THIS COMPANY IS ENGAGED IN THE PROVISION OF SOFTWARE DEVELOPMENT SERVICES. NOTICE U/S 133(6 ) OF THE ACT WAS ISSUED. AS PER THE REPLY RECEIVED FROM THE COMPANY , THE TPO NOTED THAT: IT IS MAINLY A SOFTWARE DEVELOPMENT COMPANY QUALI FYING ALL THE FILTERS. HE, THEREFORE, INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES. 9.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THIS COMPAN Y IS NOT ONLY ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES, BUT ALS O INTO THE SOFTWARE PRODUCTS. IT IS NOTICEABLE FROM THE TPOS ORDER PA GE 73 THAT THE ASSESSEE ITA NO.5857/DEL/2011 13 OBJECTED TO THE INCLUSION OF THIS COMPANY BY STATIN G THAT IT DEVELOPED A NEW DRUG DESIGN TOOL ELSUITE TO DRUG DISCOVERY I N FINDING THE LEAD MOLECULES FOR DRUG DISCOVERY AND PROTECTED THE IPR BY FILING UNDER THE COPYRIGHT/PATENT ACT. IT CAN BE NOTICED FROM THE A NNUAL REPORT OF THE COMPANY, WHICH IS AVAILABLE IN THE PAPER BOOK, THAT THERE IS A REFERENCE TO THE DEVELOPMENT OF A DENOVO DRUG DESIGN TOOL CELSUITE, WHICH IS A REVENUE GENERATING ACTIVITY. WHEN WE EXAMINE THE T URNOVER OF THIS COMPANY WITH THE NARRATION GIVEN ON PAGE 24 OF THE ANNUAL REPORT, IT CAN BE SEEN THAT THE SAME COMPRISES: BIO-INFORMATICS S ERVICES, DATA WAREHOUSING AND MANNING, SOFTWARE DEVELOPMENT, PROD UCTS AND SERVICES. IT IS MANIFEST FROM THE ANNUAL REPORT O F THIS COMPANY THAT THE SAME CANNOT BE CONSIDERED AS COMPARABLE ON ENTITY L EVEL WHEN IT HAS DEALT NOT ONLY WITH SOFTWARE PRODUCTS, BUT HAS ALSO ENGAGED ITSELF INTO SOFTWARE DEVELOPMENT AND ALSO RENDERING SERVICES. IN COMPARISON WITH THAT, THE ASSESSEE COMPANY IS SIMPLY PROVIDING SOFT WARE NON- DEVELOPMENT SERVICES TO ITS AES. AS SUCH, THIS COM PANY CANNOT BE CONSIDERED AS COMPARABLE. WE, THEREFORE, DIRECT TO REMOVE THE NAME OF THIS COMPANY FROM THE LIST OF COMPARABLES. ITA NO.5857/DEL/2011 14 (IV) FLEXTRONICS SOFTWARE SYSTEMS LTD. (SEG.) 10.1. THE TPO INCLUDED THIS COMPANY WITH OPERATING PROFIT RATIO OF 25.31%, IN THE LIST OF COMPARABLES DESPITE THE ASS ESSEES CONTENTION THAT IT IS A SOFTWARE PRODUCTS COMPANY AS WELL AS A SERV ICE PROVIDER. 10.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AN D PERUSING THE RELEVANT MATERIAL ON RECORD, IT CAN BE SEEN FROM THE ANNUAL REPORT OF THIS COMPANY THAT IT IS AN END-TO-END PROVIDER OF COMMUN ICATION PRODUCTS, SERVICES AND SOLUTIONS TO NETWORK EQUIPMENT PROVIDE RS, HANDSET MANUFACTURERS, SERVICE PROVIDERS AND BUSINESS PROCE SS OUTSOURCING SECTORS. FROM THE NOTES TO THE FINANCIAL STATEMENT S OF THIS COMPANY, IT CAN BE OBSERVED THAT: THE ACTIVITIES OF THE COMPAN Y INCLUDE DEVELOPMENT OF PACKAGE SOFTWARE, PROVIDING SOFTWARE CONSULTING SERVICES AND OTHER ANCILLARY PRODUCTS AND SERVICES, PRIMARILY FOR USE IN THE TELECOMMUNICATIONS INDUSTRY. IN VIEW OF THE F ACT THAT IT IS A SOFTWARE PRODUCTS COMPANY AND IS ALSO PROVIDING SOF TWARE DEVELOPMENT SERVICES, EVEN THE SEGMENTAL RESULTS OF SOFTWARE DE VELOPMENT SERVICES CANNOT BE EQUATED WITH THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FOR ITS ITA NO.5857/DEL/2011 15 AES. WE, THEREFORE, ORDER TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (V) HELIOS & MATHESON INFORMATION TECHNOLOGY LTD . 11.1. THE TPO INCLUDED THIS COMPANY IN THE FINAL S ET OF COMPARABLES BY NOTICING THAT IT WAS ENGAGED IN THE SIMILAR BUSINESS ACTIVITY. 11.2. AFTER HEARING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL ACCOUNT S OF THIS COMPANY, A COPY OF WHICH IS AVAILABLE ON RECORD, THAT IT IS EN GAGED INTO SIMILAR BUSINESS ACTIVITY AS IS DONE BY THE ASSESSEE. AFT ER GOING THROUGH SOME PAGES OF THE ANNUAL REPORT, GIVING DETAILS ABOUT TH E NATURE OF BUSINESS ACTIVITY DONE BY THIS COMPANY, THE LD. AR ALSO CAND IDLY ACCEPTED THAT FUNCTIONAL PROFILE OF THIS COMPANY IS COMPARABLE WI TH THE ASSESSEE COMPANY. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES. ITA NO.5857/DEL/2011 16 (VI) INFOSYS TECHNOLOGIES LTD . 12.1. THE TPO INCLUDED THIS COMPANY DESPITE THE ASSESSEES OBJECTIONS THAT IT WAS A VERY HIGH TURNOVER COMPANY WITH SEVERAL OTHER FUNCTIONAL DISSIMILARITIES. 12.2. IT IS AN UNDISPUTED FACT THAT THE ASSESS EE RENDERED SERVICES TO ITS AES AS A CAPTIVE UNIT WITHOUT RETAINING ANY RIGHTS IN INTELLECTUAL PROPERTY IN THE WORK DONE BY IT. IN CONTRAST TO THAT, INFOS YS LTD. IS A GIANT COMPANY IN TERMS OF RISK PROFILE, SCALE, NATURE OF SERVICES, REVENUE OWNERSHIP OF BRANDED/PROPRIETARY PRODUCTS, ON SITE AND OFFSHORE SERVICES, ETC. THIS COMPANY CANNOT BE CONSIDERED A COMPARABLE. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE JU RISDICTIONAL HIGH COURT IN CIT VS. AGNITY INDIA TECHNOLOGIES PVT. LTD. (2013) 219 TAXMANN 29 (DEL) IN WHICH INFOSYS TECHNOLOGIES LTD., HAS BEEN HELD TO BE NOT COMPARABLE WITH A COMPANY ENGAGED IN THE BU SINESS OF DEVELOPMENT OF SOFTWARE FOR ITS PARENT COMPANY. SI MILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF TOLUNA INDIA P VT. LTD. AS THE ITA NO.5857/DEL/2011 17 ASSESSEES NATURE OF BUSINESS IS OF NO MATCH WITH I NFOSYS LTD., WE DIRECT NOT TO CONSIDER THIS COMPANY AS A COMPARABLE. (VII) KALS INFORMATION SYSTEMS LTD. (SEG.) 13.1. THE TPO INCLUDED THIS COMPANY IN THE LI ST OF COMPARABLES BY OBSERVING THAT ITS OPERATIONS WERE IN SOFTWARE PROD UCTS, SOFTWARE SERVICES AND TRAINING. INFORMATION U/S 133(6) OF T HE ACT WAS CALLED FROM THIS COMPANY, WHICH HAS BEEN REPRODUCED ON PAGE 94 OF THE TPOS ORDER. FROM SUCH SUBMISSIONS, THE TPO INFERRED THA T THE SOFTWARE PRODUCTS CONSTITUTED ONLY 3% OF ITS REVENUES AND TR AINING CONSTITUTED ONLY 8.56%, THEREBY LEAVING AROUND 88% OF THE TOTAL REVENUES TO THE SOFTWARE SERVICES. THAT IS HOW, THE ASSESSEES OBJ ECTIONS WERE REPELLED AND THIS COMPANY WAS CONSIDERED AS COMPARABLE. 13.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AN D PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ENTIRE PREMISE OF THE TPOS INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE S IS THAT THE SOFTWARE PRODUCTS CONSTITUTE ONLY 3% OF ITS REVENUE. THIS I NFERENCE HAS BEEN DRAWN ON THE BASIS OF THE INFORMATION SUPPLIED BY T HIS COMPANY STATING: ITA NO.5857/DEL/2011 18 THE USE OF READYMADE OBJECT LABORATORIES IS ONLY T O THE TUNE OF ABOUT (0.33 TO 3) % IN THE YEAR 2005-06 AND 2006-07. W E FAIL TO COMPREHEND AS TO HOW THE ABOVE LINE CONVEYS THAT THE SOFTWARE PRODUCTS REVENUE STANDS AT 3%. WHAT HAS BEEN WRITTEN IS THAT THE CO MPANYS USE THE READYMADE OBJECT LABORATORIES IS ONLY TO THE TUNE O F MAXIMUM 3%. BY NO IMAGINATION THIS CAN BE CONSTRUED AS REVENUES FR OM SOFTWARE PRODUCTS. WHEN WE PERUSE THE ANNUAL REPORT OF THIS COMPANY, WHICH IS AVAILABLE IN THE PAPER BOOK, IT CAN BE SEEN THAT TH ERE IS NO SUCH MENTION OF SOFTWARE PRODUCTS REVENUE LIMITED TO 3%. ON TH E CONTRARY, IT HAS BEEN MENTIONED IN THE NOTES TO THE FINANCIAL STATEM ENT THAT: THE COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE AND S OFTWARE PRODUCTS SINCE ITS INCEPTION. THE COMPANY CONSISTING OF STP I UNIT ENGAGED SOFTWARE PRODUCTS AND IN DEVELOPMENT OF SOFTWARE I S ALSO UNDERTAKING TRAINING ACTIVITY OF SOFTWARE PROFESSIONALS ON ONLI NE PROJECTS. NOT ONLY THE REVENUES OF THE SEGMENT CONSIDERED BY THE TPO A LSO INCLUDE THE REVENUE FROM SOFTWARE PRODUCTS, BUT ALSO FROM TRAIN ING IMPARTED ON COMMERCIAL BASIS. WHEN WE CONSIDER THE ASSESSEES FUNCTIONAL PROFILE, THE ONLY IRRESISTIBLE CONCLUSION WHICH CAN BE DRAWN IS THAT IT IS NOT A ITA NO.5857/DEL/2011 19 COMPARABLE COMPANY. ACCORDINGLY, THIS COMPANY IS O RDERED TO BE EXPUNGED FROM THE SET OF COMPARABLES. (VIII) LUCID SOFTWARE LTD . 14.1. THE TPO INCLUDED THIS COMPANY IN THE LIS T OF COMPARABLES ON ENTITY LEVEL DESPITE THE ASSESSEES OBJECTIONS. 14.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS COMPANY HAS B EEN RIGHTLY INCLUDED IN THE LIST OF COMPARABLES. THE WHOLE THRUST OF THE SUBMISSIONS OF THE LD. AR FOR THE EXCLUSION OF THIS COMPANY WAS ON THE FAC T THAT THIS COMPANY DEVELOPED SOFTWARE PRODUCTS IN-HOUSE AND, HENCE, IT WAS A SOFTWARE PRODUCT COMPANY. WE ARE UNABLE TO ACCEPT THIS PROP OSITION FOR THE REASON THAT THIS COMPANY DEVELOPED SOFTWARE PRODUCT S FOR ITS INTERNAL USE FOR RENDERING SOFTWARE SERVICES TO ITS CUSTOMERS. THE FACT THAT THE IN- HOUSE SOFTWARE DEVELOPED BY IT WERE USED IN RENDERI NG SOFTWARE SERVICES IS BORNE OUT FROM THE DEBIT OF AN ACCOUNT TO ITS PR OFIT & LOSS ACCOUNT WITH THE NARRATION: AMORTIZATION OF PRODUCT DEVELO PMENT EXPENSES. FROM NOTE 1.4.1 ON ACCOUNTS OF THIS COMPANY, IT CAN BE OBSERVED THAT: ITA NO.5857/DEL/2011 20 THE TOTAL EXPENDITURE INCURRED ON IN-HOUSE DEVELOP MENT OF SOFTWARES GETS AMORTISED OVER A PERIOD OF 36 MONTHS FROM THE LAUNCH DATE. THE UNAMORTIZED PRODUCT DEVELOPMENT EXPENDITURE IS SHOW N UNDER ASSETS TILL IT IS FULLY WRITTEN OFF. DURING THE YEAR, THE RE IS NO SUCH EXPENDITURE INCURRED. WHEN WE CONSIDER THIS NOTE ALONG WITH TH E PROFIT & LOSS ACCOUNT AND THE BALANCE SHEET OF THIS COMPANY, IT B ECOMES PALPABLE THAT IT SPENT A PARTICULAR AMOUNT ON IN-HOUSE SOFTWARE D EVELOPMENT FOR INTERNAL USE AND WROTE OFF 1/3 RD IN ITS PROFIT & LOSS ACCOUNT FOR THE YEAR IN QUESTION AND RETAINING THE BALANCE UNAMORTISED A MOUNT IN ITS BALANCE SHEET. IF THIS EXPENDITURE HAD BEEN INCURRED FOR S OFTWARE DEVELOPMENT ON BEHALF OF ITS CUSTOMERS, THEN, THE EXPENDITURE W OULD NOT HAVE FOUND ITS PLACE IN THE BALANCE SHEET AS UNAMORTIZED AMOUN T, BECAUSE THE AMOUNT SPENT ON THE SOFTWARE DEVELOPMENT WOULD HAVE BEEN RECEIVED WITH RELEVANT MARK-UP. WHEN WE CONSIDER THE ASSESS EES BALANCE SHEET, WHICH IS AVAILABLE IN THE PAPER BOOK, IT TURNS OUT THAT THE ASSESSEE HAS ALSO SHOWN A PARTICULAR AMOUNT UNDER THE HEAD SOFT WARE IN ITS SCHEDULE OF FIXED ASSETS, AND, THEREAFTER, IT ALSO CLAIMED DEDUCTION ON ACCOUNT OF AMORTIZATION DURING THE YEAR, LEAVING TH E BALANCE ITA NO.5857/DEL/2011 21 UNAMORTIZED AMOUNT UNDER THE HEAD SOFTWARE. IT SH OWS THAT THE ASSESSEE IS ALSO USING ITS SOFTWARE FOR RENDERING T HE SERVICES IN THE SIMILAR MANNER AS IS DONE BY LUCID SOFTWARE LTD. A PART FROM THAT, THE LD. AR COULD NOT POINT OUT ANY FUNCTIONAL DIFFERENC E WITH LUCID SOFTWARE LTD. WE, THEREFORE, APPROVE THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES. (IX) MEGASOFT LTD. (SEG.) 15.1. THE TPO INCLUDED THIS COMPANY IN THE LIST O F COMPARABLES. THE LD. AR ARGUED FOR ITS REMOVAL ON THE BASIS OF CERTA IN ACQUISITIONS DONE BY THIS COMPANY DURING THE YEAR. 15.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AN D PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE NOTES TO ACCOU NTS IN THE ANNUAL REPORT OF THIS COMPANY THAT THERE WAS, IN FACT, AMA LGAMATION OF VISUALSOFT TECHNOLOGIES LTD. NOTE NO. 25 WITH THE C APTION AMALGAMATION OF VISUALSOFT TECHNOLOGIES LTD. WITH THE COMPANY READS THAT: THE PRIOR YEAR COMPARATIVES INCLUDE EF FECT OF AMALGAMATION OF VISUALSOFT TECHNOLOGIES LTD. (VISUALSOFT) WITH THE COMPANY W.E.F. ITA NO.5857/DEL/2011 22 1 ST OCTOBER, 2006. THE ASSETS, LIABILITIES, RIGHTS AN D OBLIGATIONS OF VISUALSOFT HAVE BEEN RECORDED AT THEIR RESPECTIVE F AIR VALUES UNDER THE PURCHASE METHOD OF ACCOUNTING FOR AMALGAMATION. 15.3. THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO-AROLDITE (P) LTD VS. DCIT, (2013) 154 TTJ (MUM.) 176 HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESULTS DUE TO MERGERS/DEMERGERS ETC. SIMILAR VIEW HAS BEEN TAK EN BY THE DELHI BENCHES OF THE TRIBUNAL IN SEVERAL CASES INCLUDING TOLUNA INDIA PVT. LTD. VS. ACIT (ITA NO. 564/D/2013). IT IS PATENT THAT THE MERGERS/DEMERGERS LARGELY INFLUENCE THE PROFITABILI TY OF A COMPANY DURING THE YEAR OF HAPPENING OF SUCH EVENT, WHICH M AKES IT INCOMPARABLE. AS THERE HAVE BEEN ACQUISITIONS BY M EGASOFT LTD., DURING THE YEAR IN QUESTION AND THE FINANCIAL RESULTS OF T HE ERSTWHILE COMPANY STAND INCLUDED IN THE OVERALL PROFITABILITY OF THIS COMPANY, RESPECTFULLY FOLLOWING THE PRECEDENTS, WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. ITA NO.5857/DEL/2011 23 (X) PERSISTENT SYSTEMS. 16.1. HERE AGAIN, WE FIND THAT THERE HAVE BEE N CERTAIN ACQUISITIONS WHICH IS EVIDENT FROM THE ANNUAL REPORT OF THIS COM PANY, THAT IS AVAILABLE ON PAGE 781 OF THE PAPER BOOK. NOTE NO. 6 STATES THAT : `THE COMPANY RECEIVED SANCTION FROM THE BOMBAY HIGH COUR T, MUMBAI AND BOMBAY HIGH COURT, GOA BENCH FOR AMALGAMATION OF CO NTROLNET (INDIA) PVT. LTD. (CONTROLNET) EFFECTIVE FROM APRIL 1, 2006. PURSUANT TO THIS, ALL ASSETS, LIABILITIES AND LOSSES OF CONTROL NET ARE MERGED WITH THE ASSETS, LIABILITIES AND RESERVES OF THE COMPANY WIT H EFFECT FROM APRIL 1, 2006 BY FOLLOWING POOLING OF INTEREST METHOD AS P RESCRIBED IN ACCOUNTING STANDARD 14 (AS-14) AS ISSUED BY THE INS TITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THUS, THE ACQUISITION TOOK P LACE IN THIS COMPANY DURING THE RELEVANT TO THE ASSESSMENT YEAR UNDER CO NSIDERATION. FOLLOWING THE REASONS GIVEN ABOVE WHILE DISCUSSING THE CASE OF MEGASOFT LTD., WE ORDER FOR THE EXCLUSION OF THIS C OMPANY FROM THE LIST OF COMPARABLES. ITA NO.5857/DEL/2011 24 (XI) SASKEN COMMUNICATION TECHNOLOGIES LTD . 17.1. HERE AGAIN, WE FIND THAT THE FINANCIAL RESUL TS OF THIS COMPANY STAND DISTORTED DUE TO CERTAIN ACQUISITIONS MADE BY IT DURING THE RELEVANT YEAR. IT IS EVIDENT FROM THE ANNUAL REPORT OF THIS COMPANY, WHICH IS AVAILABLE ON PAGE 868 AND 924 OF THE PAPER BOOK. I T HAS BEEN CATEGORICALLY MENTIONED IN ITS ANNUAL REPORT THAT D URING THE YEAR THIS COMPANY ACQUIRED BOTNIA HITECH OY, FINLAND AND ITS TWO WHOLLY OWNED SUBSIDIARIES. IT HAS ALSO BEEN STATED IN THE SAME PARA THAT DURING THE YEAR THE COMPANY ALSO SUCCESSFULLY COMPLETED THREE MERGE RS, NAMELY, SASKEN NETWORK SYSTEMS LTD., AND INTEGRATED SOFTTECH SOLUT IONS PVT. LTD., THE TWO INDIAN BASED WHOLLY OWNED SUBSIDIARIES WHICH ME RGED WITH THE ASSESSEE. IT ALSO TRANSPIRES FROM THIS ANNUAL REPO RT THAT THE COMPANIES GETTING MERGED WITH THE ASSESSEE COMPANY ALSO PROVI DED SOFTWARE SERVICES FOCUSED ON TELECOM OPERATING SYSTEMS. THUS , IT IS ABUNDANTLY PATENT THAT THE SEGMENTAL RESULTS TAKEN BY THE TPO OF THIS COMPANY HAVE BEEN INFLUENCED BY THE MERGERS AND ACQUISITIONS TAK EN PLACE DURING THE YEAR, THEREBY MAKING SUCH FINANCIAL RESULTS AS INCO MPARABLE. FOLLOWING ITA NO.5857/DEL/2011 25 THE REASON GIVEN ABOVE, WE ORDER FOR THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. (XII) TATA ELXSI LTD. (SEG.) 18.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES NOTWITHSTANDING THE ASSESSEES OBJECTIONS ABOUT IT S INCOMPARABILITY. 18.2. HAVING HEARD BOTH THE SIDES ON THIS ISSU E AND PERUSED THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE TPO HAS TAKEN SOFTWARE DEVELOPMENT SERVICES SEGMENT OF THIS COM PANY FOR THE PURPOSES OF INCLUSION IN THE LIST OF COMPARABLES. THIS SEGMENT COMPRISES OF THREE SUB-SEGMENTS, NAMELY, I) PRODUCT DESIGN SERVICES, II) ENGINEERING DESIGN SERVICES AND III) VISUAL COMPUTI NG LABS. THIS INFORMATION IS GIVEN ON PAGE 118 OF THE TPOS ORDER . IT IS THIS SOFTWARE DEVELOPMENT AND SERVICES SEGMENT IN ENTIRETY, COMP RISING THE ABOVE THREE SUB-SEGMENTS, WHICH HAS BEEN CONSIDERED AS C OMPARABLE. WHEN WE CONSIDER THE DESCRIPTION OF THE THREE SUB-SEGMEN TS, NAMELY, PRODUCT DESIGN SERVICES, ENGINEERING DESIGN SERVICES AND VI SUAL COMPUTING LABS, IT TURNS OUT THAT THE SAME FALLS INTO THE SOFTWARE DEVELOPMENT SERVICES ITA NO.5857/DEL/2011 26 SEGMENT AND NOT THE SOFTWARE NON-DEVELOPMENT SERVIC ES SEGMENT. SINCE THE ASSESSEE IS ENGAGED IN PROVIDING SOFTWARE NON-D EVELOPMENT SERVICES TO ITS AES, THIS SEGMENT OF TATA ELXSI LTD., BEING THAT OF SOFTWARE DEVELOPMENT SERVICES CANNOT BE CONSIDERED AS COMPA RABLE. IT IS, THEREFORE, DIRECTED TO BE ELIMINATED FROM THE LIST OF COMPARABLES. (XIII) WIPRO LTD. (SEG.) 19.1. THE TPO INCLUDED SEGMENT OF WIPRO LTD. IN TH E LIST OF COMPARABLES BY REJECTING THE ASSESSEES CONTENTION THAT IT WAS FUNCTIONALLY DIFFERENT. 19.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS A ND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE TPO H AS HIMSELF MENTIONED ON PAGE 123 OF HIS ORDER THAT: THE IT SERVICES SEG MENT OF THE COMPANY IS INTO SOFTWARE DEVELOPMENT SERVICES AND SEGMENTAL DETAILS ARE AVAILABLE, THE COMPANY IS CONSIDERED AS COMPARABLE AT SEGMENTAL LEVEL. AS THE TPO HAS HIMSELF NOTICED THAT THIS COMPANY IS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES AS AGAINST THE ASSESSEES ITA NO.5857/DEL/2011 27 PROVISION OF SOFTWARE NON-DEVELOPMENT SERVICES, WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE. 20. HAVING CONSIDERED THE COMPARABILITY OR OTHERW ISE OF THE COMPANIES DISPUTED BY THE ASSESSEE IN THE PRESENT A PPEAL, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO NS UNDER THIS SEGMENT AFRESH, IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY O F BEING HEARD. 21. THE NEXT ISSUE ARGUED BY THE LD. AR IS ABOUT NO T APPROVING THE USE OF MULTIPLE YEAR DATA OF COMPARABLES. THE ASSESSEE ADOPTED MULTIPLE YEAR DATA OF COMPARABLE COMPANIES, WHICH THE TPO MO DIFIED ONLY TO THE CURRENT YEARS DATA. RULE 10B(4) PROVIDES THAT : ` THE DATA TO BE USED IN ANALYSING THE COMPARABILITY OF AN UNCONTROLLED TRAN SACTION WITH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATIN G TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERE D INTO. NOTHING HAS BEEN PLACED ON RECORD BY THE LD. AR TO DEMONSTRATE THAT THE CASE FALLS UNDER PROVISO TO RULE 10B(4), WHICH PROVIDES THAT T HE DATA RELATING TO A ITA NO.5857/DEL/2011 28 PERIOD NOT BEING MORE THAN TWO YEARS PRIOR TO SUCH FINANCIAL YEAR MAY ALSO BE CONSIDERED IF SUCH DATA REVEALS FACTS WHICH COULD HAVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES I N RELATION TO THE TRANSACTIONS BEING COMPARED. IN VIEW OF A PLETHORA OF DECISIONS INCLUDING THE SPECIAL BENCH DECISION IN THE CASE OF AZTECH SOFTWARE TECHNOLOGIES LTD. (2007) 107 ITD 141 (BANG.) (SB), WE APPROVE THE VIEW TAKEN BY THE AUTHORITIES BELOW IN CONSIDERING ONLY THE CURRENT YEARS DATA. THIS GROUND IS NOT ALLOWED. 22. ANOTHER ISSUE RAISED BY THE ASSESSEE IS AGAINS T THE SEEKING OF INFORMATION U/S 133(6) OF THE ACT BY THE TPO FROM T HE COMPANIES CONSIDERED AS COMPARABLE. HERE AGAIN, WE DO NOT FI ND ANY EMBARGO ON THE POWERS OF THE TPO IN SEEKING THE RELEVANT INFOR MATION FROM THE COMPANIES. UNLESS GERMANE INFORMATION IS OBTAINED, WE FAIL TO SEE AS TO HOW THE TPO CAN BE SURE ABOUT THE COMPARABILITY OR OTHERWISE OF A PARTICULAR COMPANY WITH THE ASSESSEE. HOWEVER, THE RIDER IS THAT SUCH INFORMATION OBTAINED FROM THE COMPANIES MUST BE CON FRONTED TO THE ASSESSEE BEFORE USING AGAINST IT. AS THE NEEDFUL H AS BEEN DONE BY THE ITA NO.5857/DEL/2011 29 TPO, WE SEE NO REASON TO DISTURB THE VIEW TAKEN BY THE TPO IN COLLECTING INFORMATION U/S 133(6) OF THE ACT. 23. NO SPECIFIC ARGUMENT WAS ADVANCED IN RESPECT OF THE LAST ISSUE ABOUT THE RISK ADJUSTMENT. WE, THEREFORE, UPHOLD T HE IMPUGNED ORDER ON THIS ISSUE. 24. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.02.201 5. SD/- SD/- [A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 20 TH FEBRUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.