Giesecke & Devrient India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 5924/DEL/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3356 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 27-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Depreciation; Transfer pricing; Principle of natural justice; International transaction; Question of law; Wholly owned subsidiary; Competent authority
• Section: 143(3); 92D; 234B; 133(6); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBE R & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-5924/DEL/2012 ( ASSESSMENT YEAR: 2008-09) GIESECKE & DEVRIENT INDIA PVT. LTD. CORPORATE OFFICE, PLOT #57, SECTOR-44 GURGAON PAN : AABCG4223D VS DCIT CIRCLE-12(1), CENTRAL REVENUE BUILDING NEW DELHI ASSESSEE BY SH. HARPREET AJMANI, ADV., SH. ROHAN KHARE, ADV. REVENUE BY MS. VATSALA JHA, CIT, DR ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS PRESENT APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE FINAL ASSESSMENT ORDER DATED 18.09.2012 PASSED UNDER SECTION 144C READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF GIESECKE & DEVRIENT GMBH(G&D G MBH) AND IS ENGAGED IN THE BUSINESS OF TRADING OF CURREN CY VERIFICATION AND PROCESSING SYSTEMS (CVPS) AND ASSEMBLING AND DISTRIBUTION OF SIM CARDS TO THE TELECOMMUNICATION SERVICE DATE OF HEARING 24.05.2018 DATE OF PRONOUNCEMENT 23.08.2018 2 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PROVIDERS. FURTHER, THE COMPANY IS ALSO ENGAGED IN PROVIDING SOFTWARE SERVICES TO G&D GMBH. 2.1 THE RETURN OF INCOME FOR YEAR WAS FILED DECLAR ING AN INCOME OF RS.1,89,362/-. SUBSEQUENTLY, THE RETURN W AS REVISED DECLARING AN INCOME OF RS. 3,34,31,113/-. SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS, REFERE NCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) TO DETERMIN E THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION S. DETAILS OF THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE ARE AS UNDER:- S. NO. NATURE OF TRANSACTION AMOUNT (IN INR) 1. IMPORT OF CVPS MACHINES AND SPARE PARTS (DISTRIBUTION FUNCTION') 32,65,84,552 2. IMPORT OF RAW MATERIAL FOR SIM CARD (ASSEMBLY FUNCTION) 11,97,70,998 3. SOFTWARE DEVELOPMENT 8,93,34,164 4. SALE OF S IM CARDS 4,94,72,539 5. IMPORT OF CAPITAL EQUIPMENT 2,22,07,884 6. PROVISION OF INSTALLATION SERVICES 93,23,193 7. SERVICE EXPENSES 1,11,21,465 8. COMMISSION EXPENSES 48,84,400 9. INTEREST ON EXTERNAL COMMERCIAL BORROWING 73,87,140 10. REPAIRS AND MAINTENANCE 59,09,162 11. OTHER EXPENSES 34,97,831 12. REIMBURSEMENT OF EXPENSES 51,43,772 13. SALE OF OTHERS 1,13,248 3 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 2.2 FROM THE INTERNATIONAL TRANSACTIONS DECLARED B Y THE ASSESSEE, THE TPO PICKED UP THE TRANSACTIONS REGARD ING THE SOFTWARE DEVELOPMENT SEGMENT AND THE SIM CARD ASSEMBLY SEGME NT. WITH REGARD TO THE SOFTWARE DEVELOPMENT SEGMENT, THE ASS ESSEE HAD SELECTED OP/OC AS THE PROFIT LEVEL INDICATOR (PLI ) WHILST APPLYING TNMM AS THE MOST APPROPRIATE METHOD (MAM) AND DEC LARED ITS MARGIN AT 11.04%. THE ASSESSEE, FURTHER, IN ITS TRA NSFER PRICING STUDY (TP STUDY) HAD SELECTED A TOTAL OF 18 COMPARABLES W ITH AN AVERAGE OP/OC OF 14.05% AND HENCE CLAIMED THE SAID TRANSACT ION TO BE AT ARMS LENGTH. THE TPO WHILE ACCEPTING THE MAM AS SE LECTED BY THE ASSESSEE, ACCEPTED ONLY 7 OUT OF THE 18 COMPARABLES AND FURTHER INTRODUCED 12 ADDITIONAL COMPARABLES WITH AN AVERAG E OP/OC OF 24.95% THEREBY DETERMINING AN ADJUSTMENT OF RS. 1,1 0,57,340/- FOR THE SOFTWARE DEVELOPMENT SEGMENT. 2.3 IN THE SIM CARD ASSEMBLY SEGMENT, THE ASSESSEE HAD DECLARED A PLI OF (15.22%) AND JUSTIFIED THE SAME T O BE OWING TO VARIOUS CIRCUMSTANCES SUCH AS INITIAL YEARS OF OPER ATION, HIGH COMPETITION IN THE MARKET ETC. THE ASSESSEE, IN ITS TP STUDY, HAD SELECTED 5 COMPARABLES WITH AN AVERAGE OP/OC OF 6.3 9%. DURING THE TRANSFER PRICING PROCEEDINGS, THE TPO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND VIDE THE ASSESSEES REPLY DATED 05 .10.2011, THE ASSESSEE SUBMITTED A DETAILED REASONING AS TO WHY I T HAD INCURRED 4 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) LOSSES AND ADDITIONALLY ALSO OBJECTED TO ONE OF THE COMPARABLES SELECTED BY THE ASSESSEE ITSELF WHICH WAS ACCEDED T O BY THE TPO. THEREAFTER, THE FINAL OP/OC OF THE COMPARABLES WAS WORKED OUT AT 4.78% AS OPPOSED THE MARGIN OF (15.22%) OF THE ASSE SSEE AND AN ADJUSTMENT OF RS. 12,04,39,125/- WAS DETERMINED BY THE TPO. 2.4 AGGRIEVED, THE ASSESSEE PREFERRED TO FILE OBJE CTIONS BEFORE THE LD. DISPUTE RESOLUTION PANEL (DRP), WHICH WER E DISPOSED OFF VIDE DIRECTIONS DATED 08.08.2012. THE LD. DRP UPHEL D THE ACTION OF THE TPO VIS--VIS THE SOFTWARE DEVELOPMENT SEGMENT. REGARDING THE SIM CARD ASSEMBLY SEGMENT, THE LD. DRP REJECTED THE PLEA OF THE ASSESSEE REGARDING PROVISION FOR CAPACITY UNDER-UTI LIZATION ADJUSTMENT AND WORKING CAPITAL ADJUSTMENT, BUT GRAN TED PARTIAL RELIEF WHILST DIRECTING EXCLUSION OF ONE COMPARABLE NAMELY M/S SOLECTRON EMS LIMITED. 2.5 THE SAID DIRECTIONS CULMINATED INTO THE FINAL ASSESSMENT ORDER DATED 18.09.2012 AGAINST WHICH THE ASSESSEE H AS APPROACHED THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- TRANSFER PRICING- SOFTWARE DEVELOPMENT SEGMENT [RS . 1,10,57,340] 1. ON THE FACTS AND IN LAW, THE LEARNED TRANSFER PRICI NG OFFICER I(2), NEW DELHI (LD. TPO) AND DEPUTY COMMISSION ER OF INCOME TAX, THE LEARNED ASSESSING OFFICER (LD. AO ) ERRED 5 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) IN DETERMINING AND THE HONBLE DISPUTE RESOLUTION P ANEL (HONBLE DRP) ERRED IN CONFIRMING THE ADDITION OF RS.1,10,57,340 IN RELATION TO INTERNATIONAL TRANSAC TIONS PERTAINING TO SOFTWARE DEVELOPMENT SEGMENT. 1.1 ON FACTS AND IN LAW, THE LD. TPO, LD. AO AND THE HO NBLE DRP ERRED IN REJECTING THE TRANSFER PRICING (TP) DOCUMENTATION MAINTAINED BY THE APPELLANT U/S 92D O F THE INCOME TAX ACT, 1961 (THE ACT), READ WITH RULE 10 D OF THE INCOME TAX RULES, 1962 (THE RULES) AND IN CARRYIN G OUT A FRESH SEARCH FOR COMPARABLE COMPANIES USING INAPPRO PRIATE FILTERS. 1.2 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN USING DATA OBTAINED PURSUANT T O ISSUANCE OF NOTICE UNDER SECTION 133(6) OF THE ACT WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF MAINT ENANCE OF TRANSFER PRICING DOCUMENTATION, THEREBY CONTRAVENIN G THE PROVISIONS OF RULE 10B(4) OF THE RULES AND FURTHER, ERRED IN NOT PROVIDING THE COMPLETE INFORMATION WHICH WAS CA LLED PURSUANT TO ISSUANCE OF NOTICE UNDER SECTION 133(6) OF THE ACT. 1.3 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN SELECTING CERTAIN COMPANIES AS COMPARABLE, WITH A PREJUDICED INTENTION OF MAKING A N ADDITION TO THE RETURNED INCOME OF THE APPELLANT, W ITHOUT APPRECIATING THAT IN COGNIZANCE OF RULE 10B(2)(B), THE 6 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) FUNCTIONAL, ASSET AND RISK PROFILE OF THESE ALLEGED COMPARABLE COMPANIES ARE DISSIMILAR WITH THAT OF THE APPELLANT . 1.4 ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED I N CHANGING THE PROFIT MARGIN COMPUTATION OF ALLEGED COMPARABLE COMPANIES BY INCORRECTLY CONSIDERING CER TAIN INCOME / EXPENSE AS OPERATING / NON-OPERATING. 1.5 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN NOT ALLOWING RISK ADJUSTMENT T O THE APPELLANT, THEREBY CONTRAVENING THE RULE 10B(1)(E)( III). TRANSFER PRICING SIM CARD ASSEMBLY SEGMENT [RS.11 8,461,592] 2. ON THE FACTS AND IN LAW, THE LD. TPO AND THE LD. AO ERRED IN DETERMINING AND THE HONBLE DRP ERRED IN CONFIRMING THE ADDITION OF RS.11,84,61,592 IN RELATION TO INTERNAT IONAL TRANSACTIONS PERTAINING TO SIM CARD ASSEMBLY SEGMEN T. 2.1 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN DIRECTLY APPLYING THE OPERATIN G MARGIN (OP MARGIN) OF COMPARABLE COMPANIES IN THE SIM CA RD ASSEMBLY SEGMENT TO THAT OF THE APPELLANT WITHOUT T AKING INTO ACCOUNT COMMERCIAL REASONS AND FACTUAL DATA TO SUPPORT THE LOSSES INCURRED IN THE SIM CARD ASSEMBLY SEGMEN T. 2.2 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN MAKING A CONJECTURE THAT THE A PPELLANT 7 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) IMPORTED CHIPS FROM ITS ASSOCIATED ENTERPRISE AT A CONSIDERABLY HIGHER PRICE WITHOUT NEGOTIATING FOR R EDUCTION IN PRICE OR SUBSIDY. 2.3 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN DISREGARDING THE INTERNAL COMP ARABILITY ANALYSIS WITH RESPECT TO IN-HOUSE ASSEMBLY OF SIM C ARDS VIS- -VIS OUTSOURCING THE ASSEMBLY OF SIM CARDS TO A TH IRD PARTY. 2.4 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN CONSIDERING THE ERRONEOUS MARG INS OF COMPARABLE COMPANIES ACCORDINGLY ERRED IN COMPUTING THE AMOUNT OF ADJUSTMENT ON ACCOUNT OF TRANSFER PRICE. 2.5 ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND TH E HONBLE DRP VIOLATED THE PROVISIONS OF RULE 10B(1)(E)(III) AND RULE 10B(3) OF THE RULES BY DENYING THE BENEFIT OF WORKI NG CAPITAL ADJUSTMENT BASED ON ERRONEOUS REASONS. 2.6 ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND TH E HONBLE DRP VIOLATED THE PROVISIONS OF RULE 10B(1)(E)(III) AND RULE 10B(3) OF THE RULES BY DENYING THE BENEFIT OF IDLE CAPACITY ADJUSTMENT TO ELIMINATE DIFFERENCES ON ACCOUNT OF C APACITY UTILIZATION OF THE APPELLANT VIS--VIS THE COMPARAB LE COMPANIES. 2.7 ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND TH E HONBLE DRP ERRED IN RELYING ON ERRONEOUS CALCULATION FOR C OMPUTING CASH LOSSES (BEFORE DEPRECIATION) FOR THE PURPOSE S OF 8 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ELIMINATING DIFFERENCES ARISING ON ACCOUNT OF CAPAC ITY UTILIZATION VIS--VIS COMPARABLES AND FURTHER, FAIL ED TO PRODUCE CORRECT COMPUTATION IN THIS REGARD. 2.8 ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN COMPUTING THE AMOUNT OF ADJUST MENT BY CONSIDERING TOTAL COST AND SALES, INSTEAD OF APP ORTIONING THE SAME TO RELEVANT TRANSACTIONS OF THE APPELLANT WITH ASSOCIATED ENTERPRISES AND NON-ASSOCIATED ENTERPRIS ES. 3. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. A.O. AND THE HONBLE DRP ERRED IN DISREGARDING PRIOR YEARS DATA USED BY THE APPELLANT TO BENCHMARK THE INTERNATIONAL TRANSA CTIONS IN ITS TP DOCUMENTATION FOR THE YEAR AND HOLDING THAT CURRENT YEAR (I.E. FINANCIAL YEAR 2007-08) DATA FOR COMPARA BLE COMPANIES SHOULD BE USED DESPITE THE FACT THAT THE SAME WAS NOT NECESSARILY AVAILABLE TO THE APPELLANT AT T HE TIME OF PREPARING ITS TP DOCUMENTATION, AND GROSSLY MISINTE RPRETING THE REQUIREMENT OF CONTEMPORANEOUS DATA IN THE RU LE 10B(4) OF THE RULES TO NECESSARILY IMPLY CURRENT YE AR DATA, THEREBY BREACHING THE PRINCIPLES IN NATURAL JUSTICE AND IMPOSSIBILITY OF PERFORMANCE. 4. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN NOT GRANTING THE BENEFIT OF TH E 5% VARIATION AS PER THE PROVISO TO SECTION 92C(2) OF T HE ACT TO THE APPELLANT, AS THE LAW STOOD AT THE TIME OF PREPARAT ION OF TP DOCUMENTATION. 9 ITA N O. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTI ON 271(1)(C) OF THE ACT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED IN NOT GRANTING FULL CREDIT OF ADVANCE TA X OF RS.20,698,500 PAID BY THE APPELLANT AND ALSO SHORT CREDIT OF TAX DEDUCTED AT SOURCE OF RS.15,01,872 ON THE INCOM E OF THE APPELLANT. 2.6 THE ASSESSEE, VIDE APPLICATION DATED 24.09.201 4, HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS:- 2.9 WITHOUT PREJUDICE TO OUR OTHER GROUNDS OF APPEA L, THE LD. TPO OUGHT TO HAVE CONSIDERED THAT IN VIEW OF THE PE CULIAR FACTS OF THE MATTER GIESECKE & DEVRIENT GMBH SHOULD HAVE BEEN TAKEN AS TESTED PARTY FOR THE PURPOSE OF BENCHMARKING INTERNATIONAL TRANSACTION IN RESPECT T O SIM CARD ASSEMBLY SEGMENT. 2.10 WITHOUT PREJUDICE TO OUR OTHER GROUNDS OF APPE AL, THE LD. TPO OUGHT TO HAVE CONSIDERED THAT PURSUANT TO RULE 10B OF THE INCOME TA RULES, 1962 AND THE OECD GUIDELINES T HE TESTED PARTY IS ONE WITH LESS COMPLEX FUNCTIONAL ANALYSIS 10 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) WHERE PROFITABILITY CAN BE RELIABLY ASCERTAINED WIT H LEAST ADJUSTMENTS. 3.0 AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT GROUND NOS. 3 TO 5 ARE NOT BEING PRESSED. WE D ISMISS THESE TWO GROUNDS AS NOT PRESSED. 3.1 WE NOW TAKE UP THE ASSESSEES GROUNDS (GROUND NOS. 1 TO 1.5) REGARDING THE SOFTWARE DEVELOPMENT SEGMENT. BO TH THE PARTIES HAVE AGREED THAT LOWER AUTHORITIES HAVE NOT DISPUTE D THE FUNCTIONAL PROFILE OF THE ASSESSEE UNDER THE SOFTWARE DEVELOPM ENT SEGMENT, WHEREIN THE ASSESSEE WAS ACTING AS A CAPTIVE SERVIC E PROVIDER AND ALL THE RISKS WERE BORNE BY THE ASSOCIATED ENTERPRISE ( AE). THE ASSESSEE DID NOT OWN ANY INTELLECTUAL PROPERTY. THE ASSESSEE , VIDE A DETAILED CHART, HAS AGITATED THE EXCLUSION OF THE FOLLOWING 16 COMPARABLES AND THE INCLUSION OF 2 COMPARABLES FINALLY SELECTED BY THE TPO: (A) COMPARABLES BEING SOUGHT TO BE EXCLUDED : I. AVANI CINCOM TECHNOLOGIES II. BODHTREE CONSULTING LIMITED III. CELESTIAL LABS IV. E-ZEST SOLUTIONS LIMITED V. IGATE GLOBAL SOLUTIONS LTD. VI. INFOSYS TECHNOLOGIES LTD. VII. KALS SYSTEMS LIMITED (SEGMENTAL) 11 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) VIII. LGS GLOBAL LTD. IX. MINDTREE LIMITED (SEGMENTAL) X. PERSISTENT SYSTEMS PVT. LTD. XI. QUINTEGRA SOLUTIONS LIMITED XII. R SYSTEM INTERNATIONAL LIMITED XIII. SOFTSOL INDIA LIMITED XIV. TATA ELXI LIMITED XV. THIRDWARE SOLUTION LIMITED XVI. WIPRO LIMITED (SEGMENTAL) (B) COMPARABLES BEING SOUGHT TO BE INCLUDED: I. SIP TECHNOLOGIES AND EXPORTS LIMITED II. PSI DATA SYSTEM LTD. 3.2.0 NOW, WE WILL DEAL WITH ALL THESE COMPARABLES INDIVIDUALLY. WE WILL FIRST TAKE UP THE COMPARABLES WHICH THE ASS ESSEE IS AGITATING FOR EXCLUSION FROM THE FINAL SET OF COMPARABLES SEL ECTED BY THE TPO AND AS AFFIRMED BY THE LD. DRP. (I) AVANI CINCOM TECHNOLOGIES (AVANI CINCOM): 3.2.1 THIS COMPARABLE WAS REJECTED BY THE ASSESSEE IN THE TP STUDY FOR THE REASON OF THERE BEING INSUFFICIENT DA TA IN THE PUBLIC DOMAIN BUT WAS INTRODUCED BY THE TPO. THE ASSESSEE OBJECTED TO THE INCLUSION OF AVANI CINCOM BUT THE OBJECTIONS WERE R EJECTED BY THE TPO/ LD. DRP. BEFORE US, THE LD. COUNSEL FOR THE AS SESSEE, VIDE A DETAILED CHART AND A HAND OUT FROM OF THE WEBSITE, ARGUED THAT AVANI 12 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) CINCOM WAS NOT FUNCTIONALLY COMPARABLE TO THE ASSES SEE SINCE THE ASSESSEE WAS A CAPTIVE SOFTWARE SERVICE PROVIDER AN D ON THE CONTRARY AVANI CINCOM WAS ENGAGED IN PROVISION OF BOTH SOFTW ARE DEVELOPMENT SERVICES AND ALSO DEVELOPMENT OF SOFTWARE PRODUCTS. ADDITIONALLY, IT WAS ARGUED THAT THE SEGMENTAL DETAILS OF THE COMPAN Y WERE NOT AVAILABLE AND THAT THE ANNUAL REPORT AVAILABLE IN T HE PUBLIC DOMAIN WAS ALSO INCOMPLETE. THE LD. COUNSEL PLACED HEAVY R ELIANCE ON THE ORDER OF THE CO-ORDINATE BENCH OF ITAT BANGALORE IN THE CASE OF SUN GARD SOLUTIONS INDIA PVT. VS. ACIT REPORTED IN [20 15] 63 TAXMANN.COM 323 (BANGALORE - TRIB.) AND OTHER DECIS IONS OF COORDINATE BENCHES REFERRED IN HIS CHART, WHICH ARE FOR THE SAME ASSESSMENT YEAR I.E. 2008-09, WHERE THE CO-ORDINATE BENCHES HAD TAKE A VIEW THAT AVANI CINCOM WAS NOT FUNCTIONALLY COMPARABLE TO A CAPTIVE SOFTWARE SERVICE PROVIDER. 3.2.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE (CIT DR), ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS VEHEMENTLY ARGUED BEFORE US THAT SINCE THIS COMPANY PASSES ALL THE FILTERS, THUS, IT IS A FIT COMPARABLE. 3.2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CARE FULLY CONSIDERED THE MATERIAL ON RECORD. THIS COMPANY WAS SELECTED BY THE TPO AS A COMPARABLE, IN SPITE OF THE OBJECTIONS OF THE ASSESSEE THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT IS 13 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) INTO SOFTWARE PRODUCTS WHEREAS THE ASSESSEE OFFERS SOFTWARE DEVELOPMENT SERVICES TO ITS ASSOCIATED ENTERPRISE ( 'AE'). THE TPO REJECTED THE ASSESSEE'S OBJECTIONS ON THE GROUND TH AT THISCOMPANY HAD CATEGORISED ITSELF AS A PURE SOFTWARE DEVELOPER , JUST LIKE THE ASSESSEE. IN SELECTING THIS COMPANY AS A COMPARABLE , THE TPO HAD RELIED ON INFORMATION SUBMITTED BY THIS COMPANY COL LECTED UNDER SECTION 133(6) OF THE ACT. WE NOTICE THAT THE CO-OR DINATE BENCH OF TRIBUNAL IN THE CASE OF SUN GARD SOLUTIONS INDIA PV T. VS. ACIT REPORTED IN [2015] 63 TAXMANN.COM 323 (BANGALORE - TRIB.), WHILE CONSIDERING THIS COMPARABLE FOR THE SAME FINANCIAL YEAR, HAS OBSERVED AS FOLLOWS : '6.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL DECISIONS CITED AND PLACED RELIANCE UPON. WE FIND T HAT THE CO- ORDINATE BENCH IN THE CASE OF 3DPLM SOFTWARE SOLUTI ONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT T HIS COMPANY IS FUNCTIONALLY DIS-SIMILAR AND DIFFERENT FROM THE ASSESSEE WHO IS A PROVIDER OF SOFTWARE DEVELOPMENT SERVICES TO ITS AES AND DIRECTED THAT THIS COMPANY BE OMITTED FROM THE LIST OF COMPARABLES. AT PARAS 7.6.1 AND 7.6.2 OF ITS ORDER, THE CO-ORDINATE BENCH HELD AS UNDER: '7.6.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY I N THE FINAL SET OF COMPARABLES ONLY ON THE BASIS OF INFOR MATION OBTAINED UNDER SECTION 133(6) OF THE ACT. IN THESE 14 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) CIRCUMSTANCES, IT WAS THE DUTY OF THE TPO TO HAVE NECESSARILY FURNISHED THE INFORMATION SO GATHERED T O THE ASSESSEE AND TAKEN ITS SUBMISSIONS THEREON INTO CONSIDERATION BEFORE DECIDING TO INCLUDE THIS COMPA NY IN ITS FINAL LIST OF COMPARABLES. NON-FURNISHING THE INFOR MATION OBTAINED UNDER SECTION 133(6) OF THE ACT TO THE ASS ESSEE HAS VITIATED THE SELECTION OF THIS COMPANY AS A COMPARA BLE. 7.6.2 WE ALSO FIND SUBSTANTIAL MERIT IN THE CONTENT ION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THIS COMPANY HAS BEEN SELECTED BY THE TPO AS AN ADDITIONAL COMPARABL E ONLY ON THE GROUND THAT THIS COMPANY WAS SELECTED IN THE EARLIER YEAR. EVEN IN THE EARLIER YEAR, IT IS SEEN THAT THI S COMPANY WAS NOT SELECTED ON THE BASIS ON ANY SEARCH PROCESS CARRIED OUT BY THE TPO BUT ONLY ON THE BASIS OF INFORMATION COLLECTED UNDER SECTION 133(6) OF THE ACT. APART FROM PLACING RELIANCE ON THE JUDICIAL DECISION CITED ABOVE, INCLUDING THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS BROUGHT ON RECORD EVIDENCE THAT THIS COMPANY IS FUN CTIONALLY DIS-SIMILAR AND DIFFERENT FROM THE ASSESSEE AND HEN CE IS NOT COMPARABLE. THEREFORE THE FINDING EXCLUDING IT FROM THE LIST OF COMPARABLES RENDERED IN THE IMMEDIATELY PRECEDING Y EAR IS APPLICABLE IN THIS YEAR ALSO. SINCE THE FUNCTIONAL PROFILE AND OTHER PARAMETERS BY THIS COMPANY HAVE NOT UNDERGONE ANY CHANGE DURING THE YEAR UNDER CONSIDERATION WHICH FA CT HAS BEEN DEMONSTRATED BY THE ASSESSEE, FOLLOWING THE DE CISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 DT.22.2.2013, AND IN THE CASE OF TRIOLOGY E-BUSINESS SOFTWARE INDIA PVT. LTD. (ITA NO.1054/BANG/2011), WE DIRECT THE A.O./TPO TO OMIT THIS COMPANY FROM THE LIST OF COMPARABLES.' 6.4.2 FOLLOWING THE AFORESAID DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIO NS LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO EXC LUDE THIS COMPANY FROM THE LIST OF COMPARABLES.' 15 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.4 WE ARE OF THE VIEW THAT THE FACTUAL MATRIX I S SIMILAR WITH THE DECISION OF CO-ORDINATE BENCH IN SUN GARD SOLUT IONS INDIA PVT. VS. ACIT, [2015] 63 TAXMANN.COM 323 (BANGALORE - TRIB.) . RESPECTFULLY FOLLOWING THE VIEW TAKEN BY CO-ORDINATE BENCHES OF THE TRIBUNAL, WE DIRECT THE AO / TPO TO EXCLUDE THIS COMPANY FROM TH E LIST OF COMPARABLES. WE ALSO NOTE THAT SINCE COMPLETE DETAI LS OF THIS COMPARABLE IS NOT AVAILABLE IN PUBLIC DOMAIN AND TH ERE IS CONTRADICTION IN THE INFORMATION COLLECTED UNDER SE CTION 133(6) OF THE ACT AND THE ANNUAL REPORT THEN SUCH A COMPANY CANNO T BE SELECTED AS A FIT COMPARABLE. (II) BODHTREE CONSULTING LIMITED (BODHTREE): 3.2.5 THE NEXT COMPARABLE BEING AGITATED BY THE AS SESSEE IS BODHTREE CONSULTING LIMITED. THE SAID COMPARABLE WA S REJECTED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY FOR NOT BEING FUNCTIONALLY COMPARABLE AND BEING ENGAGED IN NICHE IT SERVICES. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY ARGUED FOR EXCLUS ION OF THE SAID COMPARABLE ON THE GROUND THAT BODHTREE IS AN END TO END WEB SOLUTIONS PROVIDER AND WAS EARNING INCOME FROM SALE OF ITS SOFTWARE PRODUCTS. ADDITIONALLY, IT WAS POINTED OUT WHILST R EFERRING TO THE 16 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ANNUAL REPORT THAT THERE WAS INSUFFICIENT SEGMENTAL DATA VIS--VIS THE INCOMES FROM SERVICES AND PRODUCTS. THE LD. COUNSEL PLACED STRONG RELIANCE ON THE CO-ORDINATE BENCH DECISION IN THE C ASE OF SUN GARD SOLUTIONS INDIA PVT. VS. ACIT REPORTED IN [2015] 6 3 TAXMANN.COM 323 (BANGALORE - TRIB.) AND ORDER OF THE DELHI BENCH OF TRIBUNAL IN THE CASE OF NOKIA SIEMENS NETWORKS INDIA PVT. LTD V ACI T IN ITA NO. 333/DEL/2013, WHEREIN THE SAID COMPARABLE WAS EXCLU DED PRIMARILY FOR BEING A SOFTWARE PRODUCT COMPANY. RELIANCE WAS ALSO PLACED ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN SAXO INDIA PRIVATE LIMITED VS. ACIT (ITA NO. 6148/DEL/2015) [SUBSEQUEN TLY AFFIRMED BY HON'BLE DELHI HIGH COURT IN ITA 682/2016] WHEREIN T HE COMPARABLE WAS EXCLUDED AS BEING ENGAGED IN THE BUSINESS OF SO FTWARE DEVELOPMENT AND SOFTWARE PRODUCT AND NO SEGMENTAL D ETAILS BEING AVAILABLE. IT WAS FAIRLY POINTED OUT THAT THOUGH TH ERE IS NO FINDING OF THE LD. DRP ON THIS COMPARABLE BUT IT WAS SUBMITTED THAT SINCE ALL THE MATERIAL FACTS ARE AVAILABLE ON RECORD AND THER E IS NO DISPUTE ON APPLICATION OF FILTERS, THE ISSUE MAY BE ADJUDICATE D. 3.2.6 THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . IT WAS FAIRLY CONCEDED BEFORE US THAT THERE IS NO DIFFICULTY IN A DJUDICATION OF THIS COMPARABLE BASIS THE FACTS ON RECORD. IT WAS VEHEME NTLY ARGUED 17 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) BEFORE US THAT SINCE THIS COMPANY PASSES ALL FILTER S, THUS, IT IS A FIT COMPARABLE. 3.2.7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD ALONG WITH THE VARIOUS DECISIONS OF THE CO-ORDINATE BENCHES. WE ARE OF THE OPINION THAT IN VIEW OF ALL RELEVANT FACTS BEING AVAILABLE ON RECORD, THERE IS NO IMPEDIMENT IN ADJU DICATING THE ISSUE. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF PR. CIT VS. PITNEY BOWES SOFTWARE IN DIA PVT. LTD IN ITA 681/2015, VIDE ORDER DATED 28.09.2015, WHEREIN THE HIGH COURT HAD CATEGORICALLY HELD THAT THE TRIBUNAL WAS JUSTIFIED IN ADJUDICATING A COMPARABLE WHICH WAS NOT AGITATED BY THE ASSESSEE E ITHER BEFORE THE TPO OR THE LD. DRP. 3.2.8 WE NOTE THAT THE COORDINATE BENCH OF THE ITA T IN NOKIA SIEMENS NETWORKS INDIA PVT. LTD VS. ACIT IN ITA NO. 333/DEL/2013 HAS EXCLUDED THIS COMPARABLE BY OBSERVING AS FOLLOW S: '43. FROM PAGE NO 12 OF THE PAPER BOOK CONTAINING A NNEXURE II TO THE DIRECTORS' REPORT, A PART OF THE ANNUAL REPORT OF THE COMPANY, WE FIND THAT THIS COMPANY IS ENGAGED IN ONLY ONE SE GMENT WHICH COMPRISES OF INCOME FROM SOFTWARE DEVELOPMENT, OPEN AND END TO END WEB SOLUTIONS, SOFTWARE CONSULTANCY DESIGNS AND SOFTWARE PRODUCTS; WHEREAS THE ASSESSEE IS ENGAGED IN RENDER ING SOFTWARE DEVELOPMENT SERVICES. UNDER NOTE 5 'SEGMENTAL INFOR MATION', IT IS STATED THAT THE COMPANY HAS ONLY ONE IDENTIFIABLE R EPORTING SEGMENT THAT IS SOFTWARE DEVELOPMENT SERVICE, SHOWI NG THAT NO 18 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) SEPARATE SEGMENTAL FINANCES RELATING TO THE SOFTWAR E DEVELOPMENT OPEN AND END-TO-END WEB SOLUTIONS, SOFTWARE CONSULT ANCY DESIGNS AND SOFTWARE PRODUCTS ARE AVAILABLE. 44. IT IS ARGUED ON BEHALF OF THE ASSESSEE THAT THI S COMPANY IS FOLLOWING A DIFFERENT PRICING MODEL, AS IS EVIDENT FROM THE ANNUAL REPORT TO BE FOUND AT PAPER BOOK PAGE NO. 24 THAT T HE REVENUES FROM SOFTWARE DEVELOPMENT IS RECOGNIZED BASED ON SO FTWARE DEVELOPED AND BILLED TO THE CLIENT WHEREAS THE ASSE SSEE IS A CAPTIVE SOFTWARE DEVELOPER FOR ITS AES. 45. LD. AR PLACED RELIANCE ON A DECISION OF THIS TR IBUNAL IN ITA NO. 6402/DEL/2012 (AY 2008-09) IN THE CASE OF AIRCOM IN TERNATIONAL (INDIA) PVT LTD V DCIT, (2017) 50 CCH 0280 (HEREINA FTER AIRCOM) IN SUPPORT OF HIS PLEA THAT BODHTREE IS ENGAGED IN PROVIDING OPEN AND END-TO-END WEB SOLUTIONS, SOFTWARE CONSULTANCY, DESIGN AND DEVELOPMENT OF SOLUTIONS, USING THE LATEST TECHNOLO GIES AND NOT COMPARABLE WITH THE COMPANY WHICH IS INTO THE BUSIN ESS OF SOFTWAREDEVELOPMENT AND PROVIDING RELATED SERVICES TO ITS AE. THE COORDINATE BENCH IN THE JUDGMENT OF AIRCOM (SUPRA) HAS EXCLUDED THIS COMPARABLE COMPANY BY MAKING FOLLOWING OBSERVA TIONS: 15.2. WE FIND FROM THE ANNUAL REPORT OF THIS COMPA NY THAT IT: HAS ONLY ONE SEGMENT, NAMELY, SOFTWARE DEVELOP MENT. BEING A SOFTWARE SOLUTIONS COMPANY, WHICH IS ENGAGE D IN PROVIDING OPEN AND END-TO-END WEB SOLUTIONS, SOFTWA RE CONSULTANCY, DESIGN AND DEVELOPMENT OF SOLUTIONS, U SING THE LATEST TECHNOLOGIES. THUS, IT CAN BE SEEN THAT THI S COMPANY IS PROVIDING END-TO-END SOLUTIONS AND ALSO CONSULTA NCY WHICH IS NOT THE CASE WITH THE ASSESSE COMPANY. ANOTHER R ELEVANT FACTOR TO BE NOTICED IS PAGE 1254 OF THE PAPER BOOK , WHICH DIVULGES THE SIGNIFICANT ACCOUNTING POLICIES OF THI S COMPANY. UNDER THE HEAD REVENUE RECOGNITION, IT HAS BEEN M ENTIONED THAT: REVENUE FROM SOFTWARE DEVELOPMENT IS RECOGNI ZED BASED ON SOFTWARE DEVELOPED AND BILLED TO CLIENTS. AS 19 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) AGAINST THIS, THE SCHEDULE FORMING PART OF THE ACCO UNTS OF THE ASSESSEE COMPANY PROVIDES FOR REVENUE RECOGNITION I N THE TERMS: REVENUE FROM SOFTWARE DEVELOPED IS RECOGNIZ ED OVER THE CONTRACTED PERIOD OF DEVELOPMENT ON COST PLUS B ASIS. IT CAN BE SEEN THAT THERE IS A LOT OF DIFFERENCE IN TH E REVENUE RECOGNITION MODELS OF THE ASSESSEE AS WELL AS BODHT REE CONSULTING LTD. THIS FACTOR, IN ADDITION TO THE FUN CTIONAL DISSIMILARITY AS DISCUSSED ABOVE, MAKES THIS COMPAN Y NON COMPARABLE WITH THE ASSESSE COMPANY. WE, THEREFORE, ORDER TO EXCLUDE IT FROM THE LIST OF COMPARABLES. 46. THERE IS NO DISPUTE THAT THE AIRCOM IS ALSO INT O THE BUSINESS OF SOFTWARE DEVELOPMENT AND PROVIDING RELATED SERVICES TO ITS AE. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT BEIN G A SOFTWARE SOLUTIONS COMPANY WHICH IS ENGAGED IN PROVIDING OPE N AND END- TO-END WEB SOLUTIONS, SOFTWARE CONSULTANCY, DESIGN AND DEVELOPMENT OF SOLUTIONS, USING THE LATEST TECHNOLO GIES, BODHTREE COMPANY CANNOT BE COMPARED TO THE ASSESSEE WHICH IS A CAPTIVE SOFTWARE DEVELOPER FOR ITS AES.' 3.2.9 WE ARE OF THE VIEW THAT THE FACTUAL MATRIX I N THE PRESENT MATTER IS SIMILAR WITH THE DECISION OF COORDINATE B ENCH IN NOKIA SIEMENS NETWORKS INDIA PVT. LTD VS. ACIT IN ITA NO. 333/DEL/2013 AND RESPECTFULLY FOLLOWING THE VIEW TAKEN BY CO-ORD INATE BENCH OF TRIBUNAL, WE DIRECT THE AO / TPO TO EXCLUDE THIS CO MPANY FROM THE LIST OF COMPARABLES. OUR VIEW IS FURTHER FORTIFIED BY THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SAXO IN DIA (SUPRA) WHEREIN THEIR LORDSHIPS HAVE CLARIFIED THAT A COMPA NY ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICE CANNOT BE RE GARDED AS A FIT 20 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) COMPARABLE TO A COMPANY ENGAGED IN PROVIDING BOTH S OFTWARE DEVELOPMENT AND SOFTWARE PRODUCT SERVICES AND SUFFI CIENT SEGMENTAL DETAILS ARE NOT AVAILABLE. (III) CELESTIAL LABS ('CELESTIAL'): 3.2.10 THE NEXT COMPARABLE BEING CHALLENGED BY THE ASSESSEE IS CELESTIAL LABS. THE SAID COMPARABLE WAS INTRODUCED BY THE TPO AS BEING FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND A LSO ON THE GROUND THAT THE SAID COMPARABLE WAS CONSIDERED AS A COMPAR ABLE IN THE PRECEDING ASSESSMENT YEAR. BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE FIRSTLY CONTENDED THAT MERELY BECAUSE THE COMPARABLE WAS TAKEN AS A COMPARABLE IN THE PRECEDING ASSESSMENT Y EAR WOULD NOT BY ITSELF BE A GROUND FOR ITS ACCEPTANCE IN THE SUBSEQ UENT ASSESSMENT YEAR. THE LD. COUNSEL PLACED RELIANCE ON THE JUDGME NTS OF THE HON'BLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. V S. CIT REPORTED IN [2015] 377 ITR 533 (DELHI), CHRYSCAPITAL INVESTMENT ADVISORS PVT. LTD. VS. DCIT REPORTED IN [2015] 376 ITR 183 (DELHI) AND AVENUE ASIA ADVISORS PRIVATE LIMITED VS. DCIT (ITA NO. 350/2016 ) AND SUBMITTED THAT THE FUNCTIONALITY OF AN ENTITY IS THE KEY DETE RMINATIVE FACTOR FOR ITS INCLUSION OR EXCLUSION IN THE LIST OF COMPARABL ES AND THERE IS NO SUCH THING AS ESTOPPEL ON THE GROUND THAT THE ASSESSEE HAD ACCEPTED THE ENTITY AS BEING FUNCTIONALLY COMPARABLE IN A PR EVIOUS ASSESSMENT 21 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) YEAR. IT WAS FAIRLY ACCEPTED THAT THOUGH THERE IS N O FINDING OF THE LD. DRP ON THIS COMPARABLE BUT SINCE ALL MATERIAL FACTS ARE AVAILABLE ON RECORD AND THERE IS NO DISPUTE ON APPLICATION OF FI LTERS, ADJUDICATION ON THIS COMPARABLE COULD BE MADE. 3.2.11 ON MERITS, THE LD. COUNSEL SUBMITTED THAT CE LESTIAL COULD NOT BE HELD AS A COMPARABLE SINCE ITS FUNCTIONALITY WAS VERY DIFFERENT FROM THAT OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT CELESTIAL WAS INTO BIO-INFORMATICS SOFTWARE PRODUCTS AND OWING TO INSUFFICIENCY OF SEGMENTAL DATA IN THE ANNUAL REPORT, THE SAME COULD NOT BE ACCEPTED AS A COMPARABLE. THE LD. COUNSEL TOOK US THROUGH TH E ANNUAL REPORT TO SHOW THAT DURING THE IMPUGNED YEAR CELESTIAL HAD ISSUED AN IPO AND ALSO OWNED INTANGIBLES. 3.2.12 ON THE CONTRARY, THE LD. CIT DR APPEARING ON BEHALF OF THE DEPARTMENT CONTENDED THAT THE SAID COMPARABLE HAD A LREADY BEEN ACCEPTED BY THE ASSESSEE AS BEING FUNCTIONALLY COMP ARABLE IN THE PRECEDING YEAR AND HENCE THE ASSESSEE WAS BARRED FR OM TAKING A CONTRARY STAND IN THE IMPUGNED YEAR. ON MERITS SHE PLACED STRONG RELIANCE ON THE ORDERS OF THE TPO/ LD. DRP AND CONT ENDED THAT THE FINDINGS OF THE TPO WERE WELL SUBSTANTIATED. 3.2.13 HAVING HEARD THE PARTIES, WE ARE IN AGREEMEN T WITH THE CONTENTIONS OF THE LD. COUNSEL FOR ASSESSEE THAT UN LESS THE FUNCTION, ASSETS AND RISK PROFILE OF A COMPARABLE IS DEMONSTR ATED TO BE 22 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) SIMILAR/DISSIMILAR FROM RECORD, A COMPARABLE CANNOT PER SE BE EXCLUDED / INCLUDED ONLY ON ACCOUNT OF ITS SELECTIO N IN THE PREVIOUS ASSESSMENT YEAR. RULE 10B(1)(E) READ WITH RULE 10B( 2)/(3) OF THE INCOME TAX RULES, 1962 LAYS DOWN BROAD PARAMETERS R EGARDING COMPARABILITY OF A CONTROLLED TRANSACTION WITH AN U NCONTROLLED TRANSACTION. IT IS WELL SETTLED THAT THERE CAN BE N O ESTOPPEL AGAINST LAW. SELECTION OF COMPARABLE BEING A FACTUAL EXERCI SE NEEDS TO BE UNDERTAKEN BY LOOKING AT THE FUNCTIONS, ASSETS AND RISK PROFILE OF A COMPARABLE FOR THAT RELEVANT ASSESSMENT PERIOD. OUR VIEW IS FURTHER FORTIFIED BY THE JUDGMENTS OF THE HON'BLE DELHI HIG H COURT IN RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT, [2015] 377 I TR 533 (DELHI), CHRYSCAPITAL INVESTMENT ADVISORS PVT. LTD. VS. DCIT [2015] 376 ITR 183 (DELHI) AND AVENUE ASIA ADVISORS PRIVATE LIMITE D VS. DCIT (ITA NO. 350/2016). 3.2.14 ON MERITS, WE ARE OF THE VIEW THAT THE FACTU AL POSITION IN THE PRESENT MATTER IS SIMILAR WITH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN SUN GARD SOLUTIONS INDIA PVT. VS . ACIT REPORTED IN [2015] 63 TAXMANN.COM 323 (BANGALORE - TRIB.), WHER EIN THIS COMPARABLE WAS EXCLUDED BY THE COORDINATE BENCH WHI LST OBSERVING AS FOLLOWS : '7.4.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUD ING THE JUDICIAL 23 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) DECISIONS CITED. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA ) FOR ASSESSMENT YEAR 2008-09 HAD HELD THAT THIS COMPANY, BEING INTO BIO-INFORMATICS AND SOFTWARE PRODUCTS AND SERVICES, IS TO BE OMITTED FROM THE LIST OF COMPARABLES AS IT WAS FUNC TIONALLY DIS- SIMILAR AND DIFFERENT FROM A CAPTIVE SOFTWARE SERVI CE PROVIDER. AT PARAS 9.4.1 AND 9.4.2 OF THE ABOVE ORDER, THE CO-OR DINATE BENCH HELD AS UNDER: '9.4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED A ND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WHILE IT IS TRUE THAT THE DECISIONS CITED AND RELIED ON BY THE ASSES SEE WERE WITH RESPECT TO THE IMMEDIATELY PREVIOUS ASSESSMENT YEAR, AND THERE CANNOT BE AN ASSUMPTION THAT IT WOULD CON TINUE TO BE APPLICABLE FOR THIS YEAR AS WELL, THE SAME PARIT Y OF REASONING IS APPLICABLE TO THE TPO AS WELL WHO SEEM S TO HAVE SELECTED THIS COMPANY AS A COMPARABLE BASED ON THE REASONING GIVEN IN THE TPO'S ORDER FOR THE EARLIER YEAR. IT IS EVIDENTLY CLEAR FROM THIS THAT THE TPO HAS NOT CARR IED OUT ANY INDEPENDENT FAR ANALYSIS FOR THIS COMPANY FOR T HIS YEAR VIZ. ASSESSMENT YEAR 2008-09. TO THAT EXTENT, IN OU R CONSIDERED VIEW, THE SELECTION PROCESS ADOPTED BY T HE TPO FOR INCLUSION OF THIS COMPANY IN THE LIST OF COMPAR ABLES IS DEFECTIVE AND SUFFERS FROM SERIOUS INFIRMITY. 9.4.2 APART FROM RELYING ON THE AFORE CITED JUDICIA L DECISIONS IN THE MATTER (SUPRA), THE ASSESSEE HAS BROUGHT ON RECORD SUBSTANTIAL FACTUAL EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DIS-SIMILAR AND DIFFERENT FROM THE ASSESSEE IN THE CASE ON HAND AND IS THEREFORE NOT COMPARABLE AN D ALSO THAT THE FINDINGS RENDERED IN THE CITED DECISIONS F OR THE EARLIER YEARS I.E. ASSESSMENT YEAR 2007-08 IS APPLI CABLE FOR THIS YEAR ALSO. WE AGREE WITH THE SUBMISSIONS OF TH E ASSESSEE THAT THIS COMPANY IS FUNCTIONALLY DIFFEREN T FROM THE ASSESSEE. IT HAS ALSO BEEN SO HELD BY CO-ORDINATE B ENCHES OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESS MENT 24 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) YEAR 2007-08 (SUPRA) AS WELL AS IN THE CASE OF TRIO LOGY E- BUSINESS SOFTWARE INDIA PVT. LTD. (SUPRA). IN VIEW OF THE FACT THAT THE FUNCTIONAL PROFILE OF AND OTHER PARAMETERS OF THIS COMPANY HAVE NOT CHANGED IN THIS YEAR UNDER CONSIDE RATION, WHICH FACT HAS ALSO BEEN DEMONSTRATED BY THE ASSESS EE, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCHES O F THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.845/BANG/2011 AND TRIOLOGY E-BUSI NESS SOFTWARE INDIA PVT. LTD. IN ITA NO. 1054/BANG/2011, WE HOLD THAT THIS COMPANY OUGHT TO BE OMITTED FROM THE LIST OF COMPARABLES. THE A.O. /TPO ARE ACCORDINGLY DIRECTED .' 7.4.2 FOLLOWING THE AFORESAID DECISION OF THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIO NS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09, WE DIRECT THE ASSESSIN G OFFICER/TPO TO OMIT THIS COMPANY FROM THE LIST OF C OMPARABLES.' 3.2.15 RESPECTFULLY FOLLOWING THE DECISION OF COORD INATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. VS. ACIT REPORTED IN [2015] 63 TAXMANN.COM 323 (BANGALORE - TRIB.), WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. (IV) E-ZEST SOLUTIONS LIMITED(E-ZEST): 3.2.16 THE LD. COUNSEL FOR THE ASSESSEE HAS ARGUED FOR EXCLUSION OF E-ZEST FROM THE FINAL LIST OF COMPARABLES ON THE GROUND THAT THE SAID COMPANY IS FUNCTIONALLY DISSIMILAR TO ASSESSEE , AS IT IS ENGAGED IN PROVIDING E-BUSINESS CONSULTING SERVICES INCLUDING PRODUCT 25 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) DEVELOPMENT SERVICES AND TECHNICAL SERVICES WHICH T HEY THEMSELVES CHARACTERISE AS KNOWLEDGE PROCESS OUTSOURCING ('KPO ') SERVICES. HE SUBMITTED THAT EVEN AS PER THE INFORMATION GATHERED BY THE TPO UNDER SECTION 133(6) OF THE ACT, THIS COMPARABLE IS ALSO ENGAGED IN SOFTWARE PRODUCTS. WHILST PLACING HEAVY RELIANCE ON THE COMPANYS WEBSITE HANDOUT ALONG WITH THE ANNUAL REPORT, HE SU BMITTED THAT THE ASSESSEE BEING A CAPTIVE SOFTWARE DEVELOPMENT COMPA NY CANNOT BE COMPARED WITH A KPO. ADDITIONALLY, HE TOOK US THROU GH THE ANNUAL REPORT TO EVIDENCE THAT NO SEGMENTAL DATA VIS--VIS THE SERVICES AND PRODUCTS WAS AVAILABLE. 3.2.17 PER CONTRA, THE LD. CIT DR SUPPORTED THE ORD ERS OF THE TPO IN INCLUDING THIS COMPANY AS A COMPARABLE. 3.2.18 WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE PARTIES AND ALSO THE MATERIAL AVAILABLE ON RECORD. WE ARE OF TH E VIEW THAT THE FACTUAL POSITION IN THE PRESENT MATTER IS SIMILAR W ITH DECISION OF COORDINATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. L TD. VS. ACIT IN ITA NO. 1487/BANG/2012, WHEREIN IT IS HELD AS FOLLO WS: '8.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL DECISION CITED. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA ) FOR ASSESSMENT YEAR 2008-09 HAS OMITTED THIS COMPANY FR OM THE LIST OF COMPARABLES ON THE GROUND THAT THE KPO SERVICES RENDERED BY IT 26 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ARE NOT COMPARABLE TO THOSE RENDERED BY A CAPTIVE P ROVIDER OF SOFTWARE DEVELOPMENT SERVICES. AT PARA 14.4 OF ITS ORDER, THE CO- ORDINATE BENCH HAS HELD AS UNDER: '14.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORD THAT THE TPO HAS INCLUDED THIS COMPANY I N THE LIST OF COMPARABLES ONLY ON THE BASIS OF THE STATEMENT M ADE BY THE COMPANY IN ITS REPLY TO THE NOTICE UNDER SECTIO N 133(6) OF THE ACT. IT APPEARS THAT THE TPO HAS NOT EXAMINED T HE SERVICES RENDERED BY THE COMPANY TO GIVE A FINDING WHETHER THE SERVICES PERFORMED BY THIS COMPANY ARE SIMILAR TO THE SOFTWARE DEVELOPMENT SERVICES PERFORMED BY THE ASSE SSEE. FROM THE DETAILS ON RECORD, WE FIND THAT WHILE THE ASSESSEE IS INTO SOFTWARE DEVELOPMENT SERVICES, THIS COMPANY I.E. E- ZEST SOLUTIONS LTD., IS RENDERING PRODUCT DEVELOPME NT SERVICES AND HIGH END TECHNICAL SERVICES WHICH COME UNDER THE CATEGORY OF KPO SERVICES. IT HAS BEEN HELD BY T HE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CAPI TAL I-Q INFORMATION SYSTEMS (INDIA) (P.) LTD. (SUPRA) THAT KPO SERVICES ARE NOT COMPARABLE TO SOFTWARE DEVELOPMENT SERVICES AND ARE THEREFORE NOT COMPARABLE. FOLLOWIN G THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF THE HYDERABAD TRIBUNAL IN THE AFORESAID CASE, WE HOLD THAT THIS C OMPANY, I.E. E-ZEST SOLUTIONS LTD. BE OMITTED FROM THE SET OF COMPARABLES FOR THE PERIOD UNDER CONSIDERATION IN T HE CASE ON HAND. THE A.O./ TPO IS ACCORDINGLY DIRECTED.' 8.4.2 FOLLOWING THE ABOVE DECISION OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LT D. (SUPRA) FOR ASSESSMENT YEAR 2008-09, WE DIRECT THE ASSESSING OF FICER TO EXCLUDE THIS COMPANY I.E. E-ZEST SOLUTIONS LTD., FR OM THE LIST OF COMPARABLES.' 27 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.19 RESPECTFULLY FOLLOWING THE DECISION OF COORD INATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. VS. ACIT REPORTED IN [2015] 63 TAXMANN.COM 323 (BANGALORE - TRIB.), WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. (V) IGATE GLOBAL SOLUTIONS LTD. (IGATE): 3.2.20 THE NEXT COMPARABLE BEING CONTESTED FOR EXCL USION IS IGATE GLOBAL SOLUTIONS LIMITED. THE ASSESSEE REJECTED IGA TE IN ITS TP STUDY HOLDING THE SAME TO BE FUNCTIONALLY DIFFERENT. THE TPO, HOWEVER, INCLUDED THE SAME IN THE FINAL LIST OF COMPARABLES. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IGATE DESERV ED TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES SINCE IGATE WAS ENGAGED IN RENDERING BOTH SOFTWARE DEVELOPMENT AS WELL AS ITES SERVICES. WHILE REFERRING TO THE NOTES TO ACCOUNTS OF THE ANNUAL RE PORT, HE ARGUED THAT THAT NO PROPER SEGMENTAL DATA WERE MAINTAINED BY TH E SAID COMPANY. HE ALSO DREW OUR ATTENTION TO THE FACT THAT THERE W AS A MERGER DURING THE RELEVANT YEAR. HENCE, IT WAS SUBMITTED THAT THE SAID COMPARABLE DESERVES TO BE EXCLUDED. IT WAS FAIRLY ACCEPTED THA T THOUGH THERE IS NO FINDING OF THE LD. DRP ON THIS COMPARABLE BUT SINCE ALL THE MATERIAL FACTS WERE AVAILABLE ON RECORD AND AS THERE WAS NO DISPUTE ON APPLICATION OF FILTERS,THE ISSUE COULD BE ADJUDICAT ED. HE RELIED ON THE 28 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) CO-ORDINATE BENCHS DECISION IN THE CASE OF NOKIA S IEMENS NETWORKS INDIA PVT. LTD VS. ACIT IN ITA NO. 333/DEL/2013 IN WHICH THE CO- ORDINATE BENCH, WHILST APPRECIATING THE FACT THAT I GATE WAS PROVIDING VARIOUS SERVICES AND OWING TO THE FACT THAT THERE W AS NO SEGMENTAL DATA, DIRECTED ITS EXCLUSION. 3.2.21 THE LD. CIT DR, ON THE OTHER HAND, WHILST TA KING SUPPORT FROM THE ORDERS OF THE LOWER AUTHORITIES VEHEMENTLY SUPPORTED IGATES INCLUSION. SHE FAIRLY CONCEDED THAT SINCE THE ASSES SEE IS NOT ARGUING REGARDING APPLICATION OF FILTERS AND RELIANCE IS PL ACED ONLY ON THE FINANCIALS TO DEMONSTRATE DIFFERENCE IN FUNCTIONALI TY, SHE HAS NO OBJECTION IF THE ISSUE OF EXCLUSION OF THIS COMPARA BLE IS ADJUDICATED BY THE BENCH. 3.2.22 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IN VIEW OF THE NECESSARY FACTS BEING AVAILABLE ON RECORD, WE DO NOT SEE ANY IMPEDIMENT IN ADJUDICATIN G THIS COMPARABLE. ON MERITS, WE DO NOT AGREE WITH THE SUB MISSIONS OF LD. COUNSEL FOR THE ASSESSEE THAT THIS COMPANY OUGHT TO BE REMOVED FROM THE LIST OF COMPARABLES ONLY ON ACCOUNT OF DISCLOSU RE OF 'AMALGAMATION' IN THE ANNUAL REPORT BEING UNDERTAKE N DURING THIS RELEVANT PERIOD. THE LD. COUNSEL HAS NOT SHOWN THE EFFECT OF THIS EXCEPTIONAL EVENT (AMALGAMATION) ON THE FINANCIALS FOR THE RELEVANT PERIOD. HOWEVER, WE AGREE WITH THE SUBMISSIONS OF T HE LD. COUNSEL FOR 29 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ASSESSEE THAT THIS COMPANY IS ENGAGED IN PROVIDING ARRAY OF SERVICES UNDER THE HEAD SOFTWARE DEVELOPMENT AND ITES AND TH ERE ARE INSUFFICIENT SEGMENTAL DETAILS VIS-A-VIS SERVICES RENDERED UNDER THESE HEADS. WE NOTE THAT FOR SIMILAR REASONS THIS COMPAN Y WAS EXCLUDED BY COORDINATE BENCH IN THE CASE OF NOKIA SIEMENS NE TWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE A O/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (VI) INFOSYS TECHNOLOGIES LTD. (INFOSYS): 3.2.23 THE NEXT COMPARABLE WHICH IS BEING AGITATED FOR EXCLUSION BY THE ASSESSEE IS INFOSYS TECHNOLOGIES LTD. THE SA ID COMPARABLE WAS INCLUDED BY THE TPO WHILST HOLDING THAT INFOSYS PAS SES ALL FILTERS AND WAS, HENCE, COMPARABLE TO THE ASSESSEE. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NOT ONLY IS INFOSYS AN INDUSTRY GIANT BUT IT ALSO SPENDS HEAVILY ON ITS RESEARCH & DEVELOPMEN T (R&D) ACTIVITIES AND OWNS SIGNIFICANT INTANGIBLES. HE TOOK US THROUG H THE ANNUAL REPORT OF INFOSYS TO SUBSTANTIATE THAT THERE IS SIG NIFICANT DIFFERENCE IN THE SCALE OF OPERATIONS. ADDITIONALLY, FROM THE VAR IOUS PAGES OF THE ANNUAL REPORT, HE SHOWCASED AS TO HOW INFOSYS WAS P ROVIDING A WIDE ARRAY OF SERVICES INCLUDING SOFTWARE PRODUCTS, BUT INSUFFICIENT SEGMENTAL DETAILS WERE MENTIONED IN THE FINANCIALS. 30 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.24 PER CONTRA THE LD. CIT DEPARTMENTAL REPRESEN TATIVE PLACED HEAVY RELIANCE ON THE ORDER PASSED BY THE LOWER AUT HORITIES. 3.2.25 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. WE NOTICE THAT ON SIMI LAR SET OF FACTS COORDINATE BENCH OF TRIBUNAL IN THE CASE OF NOKIA S IEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, H AS EXCLUDED THIS COMPARABLE BY OBSERVING AS FOLLOWS: '78. THIS COMPANY IS UNDOUBTEDLY A CORPORATE GIANT WITH ITS LARGE SCALE OF OPERATIONS VIS--VIS THE ASSESSEE COMPANY; THAT IT HAD A BRAND IMPACT TO DETERMINE THE PREMIUM PRICING; THAT IT HAS A DIFFERENT MODEL OF REVENUE RECOGNITION. IT IS SUBMI TTED ON BEHALF OF THE ASSESSEE THAT THIS COMPARABLE HAS BEEN REJECTED IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDING YEAR, I.E. AY 2007- 08 BY THE TRIBUNAL ON ACCOUNT OF DIFFERENT RISK PRO FILE, SCALE, NATURE OF SERVICES, REVENUE OWNERSHIP OF BRANDED/ P ROPRIETARY PRODUCTS, ONSITE AND OFFSHORE SERVICES ETC. THIS FA CT IS NOT CONTRADICTED BY THE REVENUE. 79. FURTHER, THE ASSESSEE HAS PLACED RELIANCE ON AI RCOM (SUPRA), IN ORDER TO EXCLUDE THIS COMPARABLE COMPANY ON THE BASIS OF ITS MAGNITUDE. THE COORDINATE BENCH HAS REJECTED THIS C OMPARABLE BY MAKING FOLLOWING OBSERVATIONS:- 17.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN THAT THE TPO HAS INCLUDED THIS COMPANY IN THE LIST OF CO MPARABLES BY REJECTING THE ASSESSEES CONTENTIONS. THE ASSESS EE IS PROVIDING AND ASSIGNING SOFTWARE SERVICES TO ITS AE ALONE WITHOUT ACQUIRING ANY INTELLECTUAL PROPERTY RIGHTS IN THE WORK DONE BY IT IN THE DEVELOPMENT OF SOFTWARE. THE HON BLE DELHI 31 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) HIGH COURT IN CIT VS. AGNITY INDIA TECHNOLOGIES (P) LTD. (2013) 219 TAXMANN 26 (DEL) CONSIDERED THE GIANTNES S OF INFOSYS LTD., IN TERMS OF RISK PROFILE, NATURE OF S ERVICES, NUMBER OF EMPLOYEES, OWNERSHIP OF BRANDED PRODUCTS AND BRAND RELATED PROFITS, ETC. IN COMPARISON WITH SUCH FACTORS PREVAILING IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD., BEING, A CAPTIVE UNIT PROVIDING SOFTWARE DEVELOPMEN T SERVICES WITHOUT HAVING ANY IP RIGHTS IN THE WORK D ONE BY IT. AFTER MAKING COMPARISON OF VARIOUS FACTORS AS ENUME RATED ABOVE, THE HONBLE DELHI HIGH COURT HELD INFOSYS LT D. TO BE NON-COMPARABLE WITH AGNITY INDIA TECHNOLOGIESPVT. L TD. THE FACTS OF THE INSTANT CASE ARE SIMILAR TO THE EXTENT THAT THE EXTANT ASSESSEE IS ALSO NOT OWNING ANY BRANDED PROD UCTS AND HAVING NO EXPENDITURE ON R&D ETC. WHEN WE CONSI DER ALL THE ABOVE FACTORS IN A HOLISTIC MANNER, THERE R EMAINS ABSOLUTELY NO DOUBT THAT INFOSYS TECHNOLOGIES LTD. IS NOT COMPARABLE WITH THE ASSESSE COMPANY. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT IN AGNITY INDIA (SUPRA), WE HOLD THAT INFOSYS TECHNOLOGIES LTD., CANNOT BE TREATED AS COMPARABLE WITH THE ASSESSEE COMPANY. THIS COMPANY IS, THEREFORE, DIREC TED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 80. THE DIVERSIFIED ACTIVITIES OF BUSINESS, ITS DEP LOYMENT OF CAPITAL, RESOURCES AND THE BRAND NAME MAKE THIS COM PANY NOT COMPARABLE WITH THE ASSESSEE AND, THEREFORE, THIS C OMPANY HAS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLE COMPAN IES FOR BENCHMARKING INTERNATIONAL TRANSACTION RELATED TO S OFTWARE SEGMENT.' 3.2.26 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WHILST, FOLLOWING THE JUDGMENT OF THE HON'BL E DELHI HIGH COURT, AS AFORE MENTIONED, WE DIRECT THE AO/ TPO TO EXCLUDE INFOSYS FROM THE FINAL LIST OF COMPARABLES. 32 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (VII) KALS SYSTEMS LIMITED (SEGMENTAL) [KALS]: 3.2.27 THE NEXT COMPARABLE BEING AGITATED BEFORE US IS KALS SYSTEMS LIMITED. IN ITS TP STUDY, THE ASSESSEE HAS REJECTED THE SAID COMPARABLE AS NOT BEING FUNCTIONALLY COMPARABLE. TH E TPO, HOWEVER, INTRODUCED KALS AS A COMPARABLE THAT IT PASSES ALL FILTERS. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE STRONGLY OPPOSED TH E INCLUSION OF KALS AND REFERRING TO THE ANNUAL REPORT OF KALS SUBMITTE D THAT THIS COMPARABLE DEALT IN SOFTWARE PRODUCTS AS WELL AS SE RVICES. BY RELYING ON THE SCREENSHOT OF WEBSITE OF KALS, HE ARGUED THA T THIS COMPANY IS ENGAGED IN PROVIDING VARIED ARRAY OF ACTIVITIES INC LUDING SOFTWARE PRODUCTS. HE ARGUED THAT EVEN THOUGH THE TPO HAD TA KEN SEGMENTAL DETAILS OF KALS NAMELY SOFTWARE DEVELOPMENT & TRAI NING SEGMENT FOR COMPARISON WITH ASSESSEE, BUT, AS PER THE FINANCIAL S, THERE IS LACK OF SEGMENTAL DATA/BIFURCATION VIS--VIS THE INCOME AND EXPENSES IN RELATION TO THE PRODUCTS DEVELOPED AND SOLD BY KALS . 3.2.28 THE LD. CIT DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE LOWER AUTHORITIES AND STRONGLY ARGUED FOR ITS INCLUSION. 3.2.29 WE HAVE HEARD THE RIVAL CONTENTIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE NOTE TH AT ON SIMILAR SET OF FACTS, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF NOKIA 33 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) SIEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO . 333/DEL/2013 HAS EXCLUDED THIS COMPARABLE BY OBSERVING AS FOLLOW S: '81. AT THE OUTSET IT IS BROUGHT TO OUR NOTICE THAT THIS COMPANY WAS CONSIDERED BY A COORDINATE BENCH OF THIS TRIBUNAL I N THE IMMEDIATELY PRECEDING YEAR THAT IS ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE AND THIS TRIBUNAL REJECTED THIS COMPANY TO BE INCLUDED AS A COMPARABLE TO THE ASSESSEE. 82. ON A PERUSAL OF THE ORDER DATED 18.5.2016 IN IT A NO. 5837/DELHI/2011 IN ASSESSEES OWN CASE, WE FIND THA T THIS COMPANY WAS CONSIDERED BY THIS TRIBUNAL VIDE PARAGR APH NUMBERS 37 TO 39 AND FOUND THAT THE SOFTWARE SEGMEN T OF THIS COMPANY ALSO INCLUDES REVENUES FROM SOFTWARE AND TR AINING, WHEREAS THE ASSESSEE COMPANY IS NOT ENGAGED IN IMPA RTING ANY TRAINING OR SELLING ITS SOFTWARE PRODUCTS TO ATTRAC T REVENUE. ON THIS PREMISE, THIS TRIBUNAL HELD THAT THE FINANCES OF TH IS COMPANY ARE NOT COMPARABLE WITH THE ASSESSEE COMPANY AND ON THA T GROUND THIS COMPANY IS NOT A VALID COMPARABLE. 83. FURTHER, THE ASSESSEE HAS PLACED RELIANCE ON AI RCOM (SUPRA), IN ORDER TO EXCLUDE THIS COMPARABLE COMPANY ON THE GROUND THAT THIS COMPANY CONSISTING OF STP UNIT IS ENGAGED IN S OFTWARE PRODUCTS AND DEVELOPMENT OF SOFTWARE AND IS ALSO UN DERTAKING TRAINING ACTIVITY OF SOFTWARE PROFESSIONALS ON ONLI NE PROJECTS AND NOT A GOOD COMPARABLE. THE COORDINATE BENCH HAS REJ ECTED THIS COMPARABLE BY MAKING FOLLOWING OBSERVATIONS:- 18.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE E NTIRE PREMISE OF THE TPOS INCLUSION OF THIS COMPANY IN T HE LIST OF COMPARABLES IS THAT THE SOFTWARE PRODUCTS AND TRAIN ING CONSTITUTE ONLY 4.24% OF ITS REVENUE. THIS INFERENC E HAS BEEN 34 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) DRAWN ON THE BASIS OF THE INFORMATION SUPPLIED BY T HIS COMPANY STATING: THE USE OF READYMADE OBJECT LABOR ATORIES IS ONLY TO THE TUNE OF ABOUT (3.4 TO 6.96) % IN THE YEAR 2007- 08 TO 2008-09 . WE FAIL TO COMPREHEND AS TO HOW THE ABOVE LINE CONVEYS THAT THE SOFTWARE PRODUCTS REVENUE ST ANDS AT 4.24%. WHAT HAS BEEN WRITTEN IS THAT THE COMPANYS USE OF THE READYMADE OBJECT LABORATORIES IS ONLY TO THE TU NE OF MAXIMUM 4.24%. BY NO IMAGINATION THIS CAN BE CONSTR UED AS REVENUES FROM SOFTWARE PRODUCTS. WHEN WE PERUSE THE ANNUAL REPORT OF THIS COMPANY, WHICH IS AVAILABLE I N THE PAPER BOOK, IT CAN BE SEEN THAT THERE IS NO SUCH ME NTION OF SOFTWARE PRODUCTS REVENUE LIMITED TO 4.24%. ON THE CONTRARY, IT HAS BEEN MENTIONED IN THE NOTES TO THE FINANCIAL STATEMENT THAT: THE COMPANY IS ENGAGED IN DEVELOPMENT OF SOF TWARE AND SOFTWARE PRODUCTS SINCE ITS INCEPTION. THE COM PANY CONSISTING OF STPI UNIT IS ENGAGED IN SOFTWARE PROD UCTS AND DEVELOPMENT OF SOFTWARE AND IS ALSO UNDERTAKING TRA INING ACTIVITY OF SOFTWARE PROFESSIONALS ON ONLINE PROJEC TS. NOT ONLY THE REVENUES OF THE SEGMENT CONSIDERED BY THE TPO A LSO INCLUDE THE REVENUE FROM SOFTWARE PRODUCTS, BUT ALS O FROM TRAINING IMPARTED ON COMMERCIAL BASIS. IT IS CLEAR THAT THE ASSESSEE IS NOT PROVIDING ANY TRAINING UNDER THIS S EGMENT, WHICH HAS BEEN RATHER INCLUDED BY THE ASSESSEE IN T HE SECOND CATEGORY OF THE ASSESSEES BUSINESS, NAMELY, SOFTWARE DEPLOYMENT, TRAINING, CONSULTANCY AND EQUIPMENT RENTAL. SINCE THE ASSESSEES ACTIVITY UN DER THIS SEGMENT DOES NOT INCLUDE ANY REVENUE FROM TRAINING, BUT THE REVENUE OF KALS INFORMATION SYSTEMS LTD., FOR THE P URPOSE OF COMPARISON INCLUDES INCOME FROM TRAINING, THIS COMP ANY CEASES TO BE COMPARABLE WITH THE ASSESSEES SEGMENT OF `SOFTWARE DEVELOPMENT SERVICES. SIMILAR VIEW HAS B EEN TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE IMMEDIATELY PRECEDING ASSESSMENT YEARS 2006-07 AND 2007-08. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE HOLD THAT KALS INFORMATION SYSTEMS LTD. (SEG.) SHOULD BE EXPU NGED FROM THE SET OF COMPARABLES. 35 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 84. NO CHANGE OF CIRCUMSTANCES IS BROUGHT TO OUR NO TICE EITHER BY THE ASSESSE OR THE REVENUE, AS SUCH WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW FROM THE VIEW TAKEN BY THIS T RIBUNAL FOR THE EARLIER YEAR. WE, THEREFORE, CONSEQUENTLY HOLD THAT THIS COMPANY IS NOT A VALID COMPARABLE TO THAT OF THE ASSESSEE AND HAS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLE COMPANIES FOR BENCHMARKING INTERNATIONAL TRANSACTION RELATED TO S OFTWARE SEGMENT. 3.2.30 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE KALS FROM TH E LIST OF COMPARABLES. (VIII) LGS GLOBAL LTD. (LGS): 3.2.31 THE NEXT COMPARABLE BEING CONTESTED BEFORE U S IS LGS GLOBAL LTD. AT THE OUTSET, IT WAS FAIRLY ACCEPTED B Y THE LD. COUNSEL OF THE ASSESSEE THAT THE SAID COMPARABLE WAS SUBMITTED BY THE ASSESSEE ITSELF IN ITS TRANSFER PRICING STUDY. HE, HOWEVER, SUBMITTED THAT THIS IS NOT A FIT COMPARABLE AND THERE IS DIFFERENCE IN THE FAR PROFILE OF THIS COMPANY VIS-A-VIS THAT OF THE ASSESSEE AND, THUS, IS NOT A SUITABLE COMPARABLE IN TERMS OF RULE 10B (1)(E) READ WITH RU LE 10B(2)/(3) OF THE INCOME TAX RULES, 1962. BY RELYING ON THE DECIS ION OF THE SPECIAL BENCH IN THE CASE OF DCIT V QUARK SYSTEMS PVT. LTD. REPORTED IN [2010] 38 SOT 307 (CHD)(SB) [WHICH NOW STANDS CONFI RMED BY THE 36 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) HONBLE HIGH COURT OF PUNJAB AND HARYANA IN [2011] 244 CTR 542] HE ARGUED THAT THERE IS NO ESTOPPEL AGAINST LAW AND THE ASSESSEE CAN AGITATE ITS OWN COMPARABLES. HE SUBMITTED THAT RECE NTLY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. TATA PO WER SOLAR SYSTEMS LTD. REPORTED IN [2017] 298 CTR 197 (BOMBAY) HAS TA KEN SIMILAR VIEW. HE SUBMITTED THAT ALTHOUGH THE SAID COMPARABLE WAS SUBMITTED BY THE ASSESSEE ITSELF IN THE TRANSFER PRICING STUDY, BUT IT WAS OBJECTED TO DURING THE TP PROCEEDINGS ITSELF AS IS EVIDENT FROM PG. 68 OF THE TPOS ORDER. 3.2.32 ON MERITS, THE LD. COUNSEL SUBMITTED THAT LG S COULD NOT BE CONSIDERED AS A COMPARABLE OWING TO FUNCTIONAL D IFFERENCES IN THE PROFILE OF LGS IN COMPARISON TO THAT OF THE ASSESSE E. HE TOOK US THROUGH VARIOUS PAGES OF THE ANNUAL REPORT TO DEMON STRATE THAT LGS WAS AN END-TO-END SERVICE PROVIDER AND WAS PROVIDIN G PRODUCT EVALUATION, DESIGN AND DEVELOPMENT OF PRODUCTS. ADD ITIONALLY, IT WAS ALSO POINTED OUT THAT THIS COMPARABLE WAS PROVIDING BPO SERVICES IN THE FIELD OF HUMAN RESOURCES, LIFE SCIENCES, LEGAL SERVICES, SUPPLY CHAIN MANAGEMENT, SALES, CUSTOMER SUPPORT ETC. HE D REW OUR ATTENTION TO THE NOTES TO ACCOUNTS TO SUBSTANTIATE THAT SEGMENTAL DATA FOR THE VARIETY OF SERVICES WAS NOT AVAILABLE. IT W AS FURTHER SUBMITTED THAT THE SAID COMPARABLE FAILED THE TPOS OWN FOREI GN EXCHANGE EARNING FILTER. 37 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.33 THE LD. CIT DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY OPPOSED THE ASSESSEE AGITATING THE S AID COMPARABLE SINCE THE SAME WAS SUBMITTED AND ACCEPTED BY THE AS SESSEE IN ITS TRANSFER PRICING STUDY. ADDITIONALLY, THE LD. CIT D R RELIED ON THE ORDERS OF THE TPO AND THE LD. DRP. 3.2.34 WE HAVE HEARD THE PARTIES AT LENGTH AND ALSO PERUSED THE MATERIAL ON RECORD. WE AGREE WITH THE ARGUMENTS ADV ANCED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE CAN BE NO ESTOPPEL AGAINST LAW IN TERMS OF SELECTION OF A COMPARABLE AND THE COMPARAB ILITY HAS TO BE ADJUDICATED IN TERMS OF PARAMETERS LAID DOWN UNDER RULE 10B OF THE RULES. OUR VIEW IS FURTHER FORTIFIED BY THE JUDGMEN T OF THE HON'BLE BOMBAY HIGH COURT IN CIT VS. TATA POWER SOLAR SYSTE MS LTD. REPORTED IN [2017] 298 CTR 197 (BOMBAY), WHEREIN IT HAS BEE N OBSERVED AS FOLLOWS : 'WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL HO LDING THAT A PARTY IS NOT BARRED IN LAW FROM WITHDRAWING FROM IT S LIST OF COMPARABLES, A COMPANY, IF THE SAME IS FOUND TO HAV E BEEN INCLUDED ON ACCOUNT OF MISTAKE AS ON FACTS, IT IS N OT COMPARABLE. THE TRANSFER PRICING MECHANISM REQUIRES COMPARABILI TY ANALYSIS TO BE DONE BETWEEN LIKE COMPANIES AND CONTROLLED AN D UN-CONTROLLED TRANSACTIONS. THIS COMPARISON HAS TO BE DONE BETWEEN LIKE COMPANIES AND REQUIRES CARRYING OUT OF FAR ANALYSIS TO FIND THE SAME. MOREOVER, THE ASSESSEE'S SUBMISSI ON IN ARRIVING 38 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) AT THE ALP IS NOT FINAL. IT IS FOR THE TPO TO EXAMI NE AND FIND OUT THE COMPANIES LISTED AS COMPARABLES WHICH ARE, IN FACT COMPARABLE.' 3.2.35 ON MERITS, WE NOTE THAT ON SIMILAR SET OF FA CTS, THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF NOKIA S IEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, H AS EXCLUDED THIS COMPARABLE BY OBSERVING AS FOLLOWS: '85. INITIALLY THE ASSESSEE OFFERED THIS COMPANY AS A COMPARABLE, BUT THE ASSESSEE CLAIMS TO HAVE FOUND THAT THIS COM PANY IS NOT A COMPARABLE AND WRONGLY INCLUDED IN THE FINAL LIST O F COMPARABLE COMPANIES. INASMUCH AS THE KEY DETERMINATIVE FACTOR AS FAR AS THE INCLUSION/EXCLUSION OF ANY COMPANY FROM THE LIS T OF COMPARABLES IS THE FUNCTIONALITY OF AN ENTITY, WE A RE OF THE CONSIDERED OPINION THAT THIS COMPANY HAS TO BE CONS IDERED ON THE PARAMETERS OF FUNCTIONALITY AND ASSESSEE CANNOT BE PREVENTED FROM CHALLENGING THE SAME. 86. PAGE NO. 26 OF THE 9TH ANNUAL REPORT 2007-08 OF THIS COMPANY CAN BE FOUND AT PAGE NO. 935 OF THE PAPER BOOK CLEA RLY ESTABLISHES THAT THIS COMPANY IS ENGAGED IN A MULTI FARIOUS ACTIVITIES INCLUDING AN END TO END SERVICE PROVIDER AND OFFERS VARIETY OF SERVICES. IT IS INVOLVED IN PRODUCT EVAL UATION, DESIGN & DEVELOPMENT ETC. OF THE PRODUCTS. FURTHER, IT ALSO RENDERS BPO SERVICES IN THE FIELD OF HUMAN RESOURCES, LIFE SCIE NCES, LEGAL SERVICES, SUPPLY CHAIN MANAGEMENT, SALES, AND CUSTO MER SUPPORT ETC. FURTHER, THE FINANCIAL STATEMENTS LACK S IN PROVIDING THE SEGMENTAL RESULTS AS WELL. 39 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 87. FURTHER READING OF THE NOTES FORMING PART OF TH E ACCOUNTS VIDE SCHEDULE 14 INCORPORATED AT PAGE NO. 971 OF THE PAP ER BOOK COUPLED WITH ENTRIES IN SCHEDULED 5 AT PAGE NO. 966 THEREOF SHOW THAT THERE IS AN EXCEPTIONAL CIRCUMSTANCES DURING T HE YEAR, I.E. THE COMPANY HAS WRITTEN OFF GOODWILL, WHICH AROSE ON AC COUNT OF MERGER OF LANCO GLOBAL SYSTEMS INC. 88. IN VIEW OF THE VAST FUNCTIONAL DIVERSITY OF THI S COMPANY AS IS EVIDENT FROM THE 'OFFERINGS OF THE LGS SERVICE AND SOLUTION' TO BE FOUND AT PAGE NO. 935 OF ITS ANNUAL REPORT COUPLED WITH THE FACT OF THE EXCEPTIONAL CIRCUMSTANCE OCCURRED DURING THE YE AR, WE ARE OF THE CONSIDERED OPINION THAT THIS COMPANY IS NOT A G OOD COMPARABLE WITH THE ASSESSEE AND ON THAT SCORE IT H AS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLE COMPANIES FOR THE PRESENT YEAR UNDER CONSIDERATION.' 3.2.36 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (IX) MINDTREE LIMITED (SEGMENTAL) [MINDTREE]: 3.2.37 THE ASSESSEES NEXT CONTENTION IS REGARDING THE EXCLUSION OF MINDTREE AS A COMPARABLE. AS IN THE CASE OF LGS, TH E LD. COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THAT THE SAID COMPARAB LE WAS PROPOSED AS A COMPARABLE BY THE ASSESSEE ITSELF IN ITS TP ST UDY AND PLACED 40 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) RELIANCE ON HIS ARGUMENTS ADVANCED FOR THE EARLIER COMPARABLE I.E. LGS GLOBAL LTD. 3.2.38 ON MERITS, THE LD. COUNSEL SUBMITTED THAT MI NDTREE IS STRUCTURED INTO TWO BUSINESS UNITS THAT FOCUS ON SO FTWARE DEVELOPMENT RESEARCH AND DEVELOPMENT SERVICES AND I T SERVICES. IT WAS FURTHER SUBMITTED THAT IN ADDITION TO THESE SER VICES, MINDTREE ALSO OFFERS IT STRATEGIC CONSULTING SERVICES, APPLI CATION DEVELOPMENT, DATA WAREHOUSING AND BUSINESS INTELLIGENCE, APPLICA TION MAINTENANCE, PACKAGE IMPLEMENTATION, PRODUCT ARCHITECTURE, DESIG N AND ENGINEERING EMBEDDED SOFTWARE, TECHNICAL SUPPORT, T ESTING AND INFRASTRUCTURE MANAGEMENT SERVICE. ADDITIONALLY, IT WAS SUBMITTED THAT EVEN THOUGH THE SOFTWARE DEVELOPMENT SEGMENT H AS BEEN TAKEN BY THE TPO, THE SERVICES PROVIDED UNDER THE UMBRELL A OF SOFTWARE DEVELOPMENT ARE IN A WIDE ARRAY AND CAN BY NO STRET CH OF IMAGINATION BE COMPARED TO A SOFTWARE DEVELOPER LIKE THE ASSESS EE. HE FURTHER INVITED OUR ATTENTION TO VARIOUS PAGES OF THE ANNUA L REPORT AND SUBMITTED THAT THE INCOME DECLARED DURING THE YEAR INCLUDES REVENUE OF WOS [TES PV AND PROJECTS SOLUTIONS PVT. LTD.] WH ICH WAS ACQUIRED ON 17.12.2007. ADDITIONALLY, IT WAS ALSO SUBMITTED THAT THE SAID COMPANY EARNED SUBSTANTIALLY FROM ONSITE PROJECTS A ND HENCE, HAD A DIFFERENT BUSINESS MODEL ALTOGETHER. IT WAS ALSO FA IRLY ACCEPTED THAT THOUGH THERE IS NO FINDING OF THE LD. DRP ON THIS C OMPARABLE BUT 41 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) SINCE ALL MATERIAL FACTS ARE AVAILABLE ON RECORD AN D AS THERE IS NO DISPUTE ON APPLICATION OF FILTERS, THE ISSUE CAN BE ADJUDICATED. 3.2.39 PER CONTRA, THE LD. CIT DR STRONGLY OPPOSED THE SUBMISSIONS OF THE ASSESSEE AND VEHEMENTLY ARGUED T OWARDS MINDTREES INCLUSION. LIKE EARLIER COMPARABLES, SHE FAIRLY CONCEDED THAT SINCE THE ASSESSEE IS NOT ARGUING REGARDING AP PLICATION OF FILTERS, SHE HAS NO OBJECTION IF THE ISSUE OF EXCLUSION OF T HIS COMPARABLE IS ADJUDICATED BY THE BENCH. 3.2.40 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF ALL MATERIA L FACTS BEING AVAILABLE ON RECORD, WE PROCEED TO ADJUDICATE THIS ISSUE. ON MERITS, WE ARE OF THE VIEW THAT THE FACTUAL POSITION IN THE PRESENT CASE IS SIMILAR TO THE DECISION OF COORDINATE BENCH OF TRIB UNAL IN THE CASE OF NOKIA SIEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, WHEREIN THIS COMPARABLE WAS EXCLUDED BY OBSERVING AS FOLLOWS: '91. ASSESSEE SOUGHT THE EXCLUSION OF THIS COMPANY ON THE GROUND OF FUNCTIONAL DISSIMILARITY. HOWEVER LD. TPO INCLUD ED IT ON THE GROUND THAT THIS COMPANY IS DERIVING REVENUE FROM B OTH SOFTWARE AS WELL AS ITES AND SUFFICIENT SEGMENTAL INFORMATIO N IS NOT AVAILABLE IN THE FINANCIAL STATEMENTS. UNDER THE HE AD 'THE BUSINESS PERFORMANCE', AT PAGE NO. 1010 OF THE PAPE R BOOK IT IS REVEALED THAT THIS COMPANY IS STRUCTURED INTO TWO B USINESS UNITS 42 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THAT FOCUS ON SOFTWARE DEVELOPMENT R&D SERVICES, AN D IT SERVICES. IT ALSO OFFERS IT STRATEGIC CONSULTING, A PPLICATION DEVELOPMENT, DATA WAREHOUSING AND BUSINESS INTELLIG ENCE, APPLICATION MAINTENANCE, PACKAGE IMPLEMENTATION, PR ODUCT ARCHITECTURE, DESIGN AND ENGINEERING, EMBEDDED SOFT WARE, TECHNICAL SUPPORT, TESTING AND INFRASTRUCTURE MANAG EMENT SERVICE. 92. FURTHER AT PAGE NO. 27 OF THE ANNUAL REPORT INC ORPORATED AT PAGE NO. 1027 OF THE PAPER BOOK IT IS MENTIONED THA T ON 17/12/2007 THE COMPANY ACQUIRED HUNDRED PERCENT OF THE OUTSTANDING EQUITY SHARES OF TES PV AND PROJECTS SO LUTIONS PRIVATE LIMITED WHICH WAS SUBSEQUENTLY RENAMED AS M INDTREE TECHNOLOGIES PRIVATE LIMITED AT A TOTAL CONSIDERATI ON OF RS. 259.7 MILLION EQUIVALENT TO USD 6.55 MILLION. IT IS FURTH ER STATED THAT AS A CONSEQUENCE OF THIS, THE REVENUES OF THIS COMPANY A S ON 31ST MARCH 2008 OF RS. 64.80 MILLIONS HAS BEEN INCLUDED IN THE ABOVE REVENUES FOR THAT YEAR. 93. NEEDLESS TO SAY THE VAST FUNCTIONAL DISSIMILARI TY COUPLED WITH THE EXTRAORDINARY EVENT OF ACQUISITION OF EQUITY SH ARES STATED ABOVE SUGGESTS THAT THIS COMPANY IS NOT A GOOD COMP ARABLE WITH THE ASSESSEE AND CONSEQUENTLY IS LIABLE TO BE EXCLU DED FROM THE LIST OF COMPARABLES.' 3.2.41 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 43 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (X) PERSISTENT SYSTEMS PVT. LTD. (PERSISTENT): 3.2.42 THE NEXT COMPARABLE BEING AGITATED BY THE AS SESSEE BEFORE US IS PERSISTENT SYSTEMS PVT. LIMITED. THE LD. COUN SEL FAIRLY ACCEPTED THAT PERSISTENT WAS THE ASSESSEES OWN COMPARABLE A ND PLACED RELIANCE ON HIS ARGUMENTS ADVANCED IN RESPECT OF LG S AND MINDTREE. 3.2.43 ON MERITS, THE LD. COUNSEL SUBMITTED THAT PE RSISTENT COULD NOT BE CONSIDERED AS A COMPARABLE SINCE THEY PRIMAR ILY DEALT IN PRODUCT DEVELOPMENT AND ANALYTICAL SERVICES. TO EST ABLISH THE DIFFERENCE IN FUNCTIONALITY, HE REFERRED TO THE HAN DOUTS OF THE SCREENSHOT OF WEBSITE OF PERSISTENT AND VARIOUS PAG ES OF THE ANNUAL REPORT. HE FURTHER SUBMITTED THAT PROPER SEGMENTAL DETAILS OF THIS COMPARABLE ARE NOT AVAILABLE IN PUBLIC DOMAIN AND, THUS, THIS COMPANY CANNOT BE CONSIDERED TO BE A COMPARABLE TO THE ASSESSEE. HE FURTHER TOOK US THROUGH THE ANNUAL REPORT AND ARGUE D THAT THE COMPANY HAD UNDERTAKEN ACQUISITIONS DURING THE YEAR , WHICH HAD BEARING ON THE FINANCIALS. IT WAS ALSO SUBMITTED TH AT THOUGH THERE IS NO FINDING OF THE DRP ON THIS COMPARABLE BUT SINCE ALL MATERIAL FACTS ARE AVAILABLE ON RECORD AND AS THERE IS NO DISPUTE ON APPLICATION OF FILTERS, THE ISSUE COULD BE ADJUDICATED. 3.2.44 PER CONTRA, THE LD. CIT DEPARTMENTAL REPRESE NTATIVE PLACED HEAVY RELIANCE ON THE ORDERS OF THE LOWER AUTHORITI ES AND PRAYED THAT SINCE THIS COMPANY PASSES ALL FILTERS, IT IS A SUIT ABLE COMPARABLE. IN 44 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) TERMS OF THE SUBMISSION MADE BY THE LD. COUNSEL FOR ASSESSEE THAT HE IS NOT DISPUTING THE APPLICATION OF FILTERS, THE LD . CIT DEPARTMENTAL REPRESENTATIVE CONCEDED TO THE ADJUDICATION OF THIS COMPARABLE BY THIS BENCH. 3.2.45 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE OPINION THAT SINCE ALL THE RELEVANT FACTS ARE AVAILABLE ON RECORD AND SINCE TH E ASSESSEE IS NOT DISPUTING THE APPLICATION OF FILTERS, THERE IS NO R EASON TO REMIT THE MATTER BACK TO THE LOWER AUTHORITIES. WE NOTE THAT ON SIMILAR SET OF FACTS, THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF TRIANZ HOLDINGS PVT. LTD. VS. DCIT IN ITA NO. 1568/BANG/2012, HAS E XCLUDED THIS COMPARABLE BY OBSERVING AS FOLLOWS: 17.1.1 THIS COMPANY WAS SELECTED BY THE TPO AS A C OMPARABLE. THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMP ANY AS A COMPARABLE FOR THE REASONS THAT THIS COMPANY BEING ENGAGED IN SOFTWARE PRODUCT DESIGNING AND ANALYTIC SERVICES, I T IS FUNCTIONALLY DIFFERENT AND FURTHER THAT SEGMENTAL RESULTS ARE NO T AVAILABLE. THE TPO REJECTED THE ASSESSEE'S OBJECTIONS ON THE GROUN D THAT AS PER THE ANNUAL REPORT FOR THE COMPANY FOR FINANCIAL YEA R 2007-08, IT IS MAINLY A SOFTWARE DEVELOPMENT COMPANY AND AS PER THE DETAILS FURNISHED IN REPLY TO THE NOTICE UNDER SECTION 133( 6) OF THE ACT, SOFTWARE DEVELOPMENT CONSTITUTES 96% OF ITS REVENUE S. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER INCLUDED THIS COMPANY I.E. 45 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PERSISTENT SYSTEMS LTD., IN THE LIST OF COMPARABLES AS IT QUALIFIED THE FUNCTIONALITY CRITERION. 17.1.2 BEFORE US, THE ASSESSEE OBJECTED TO THE INCL USION OF THIS COMPANY AS A COMPARABLE SUBMITTING THAT THIS COMPAN Y IS FUNCTIONALLY DIFFERENT AND ALSO THAT THERE ARE SEVE RAL OTHER FACTORS ON WHICH THIS COMPANY CANNOT BE TAKEN AS A COMPARAB LE. IN THIS REGARD, THE LEARNED AUTHORISED REPRESENTATIVE SUBMI TTED THAT: (I) THIS COMPANY IS ENGAGED IN SOFTWARE DESIGNING SERVICES AND ANALYTIC SERVICES AND THEREFORE IT IS NOT PURELY A SOFTWARE DEVELOPMENT SERVICE PROVIDER AS IS THE ASS ESSEE IN THE CASE ON HAND. (II) PAGE 60 OF THE ANNUAL REPORT OF THE COMPANY F OR F.Y. 2007-08 INDICATES THAT THIS COMPANY, IS PREDOM INANTLY ENGAGED IN 'OUTSOURCED SOFTWARE PRODUCT DEVELOPMENT SERVICES' FOR INDEPENDENT SOFTWARE VENDORS AND ENTE RPRISES. (III) WEBSITE EXTRACTS INDICATE THAT THIS COMPANY IS IN THE BUSINESS OF PRODUCT DESIGN SERVICES. (IV) THE ITAT, MUMBAI BENCH IN THE CASE OF TELECOR DIA TECHNOLOGIES INDIA PVT. LTD. (SUPRA) WHILE DISCUSSI NG THE COMPARABILITY OF ANOTHER COMPANY, NAMELY LUCID SOFT WARE LTD. HAD RENDERED A FINDING THAT IN THE ABSENCE OF SEGMENTAL INFORMATION, A COMPANY BE TAKEN INTO ACCOUNT FOR COMPARABILITY ANALYSIS. THIS PRINCIPLE IS SQUARELY APPLICABLE TO THE COMPANY PRESENTLY UNDER CONSIDERATION, WHICH IS INTO PRODUCT DEVELOPMENT AND PRODUCT DESIGN SERVICES AND FOR WHICH THE SEGMENTAL DATA IS NOT AVAILABLE. THE LEARNED AUTHORISED REPRESENTATIVE PRAYS THAT IN VIEW OF THE ABOVE, THIS COMPANY I.E. PERSISTENT SYSTEMS LTD . BE OMITTED FROM THE LIST OF COMPARABLES. 17.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORT THE ACTION OF THE TPO IN INCLUDING THIS COMPANY IN THE LIST OF COMPARABLES. 17.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE 46 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) DETAILS ON RECORD THAT THIS COMPANY I.E. PERSISTENT SYSTEMS LTD., IS ENGAGED IN PRODUCT DEVELOPMENT AND PRODUCT DESIGN S ERVICES WHILE THE ASSESSEE IS A SOFTWARE DEVELOPMENT SERVIC ES PROVIDER. WE FIND THAT, AS SUBMITTED BY THE ASSESSEE, THE SEG MENTAL DETAILS ARE NOT GIVEN SEPARATELY. THEREFORE, FOLLOWING THE PRINCIPLE ENUNCIATED IN THE DECISION OF THE MUMBAI TRIBUNAL I N THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. (SUPRA) THA T IN THE ABSENCE OF SEGMENTAL DETAILS/INFORMATION A COMPANY CANNOT B E TAKEN INTO ACCOUNT FOR COMPARABILITY ANALYSIS, WE HOLD THAT TH IS COMPANY I.E. PERSISTENT SYSTEMS LTD. OUGHT TO BE OMITTED FROM TH E SET OF COMPARABLES FOR THE YEAR UNDER CONSIDERATION. IT IS ORDERED ACCORDINGLY. 3.2.46 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (XI) QUINTEGRA SOLUTIONS LIMITED (QUINTEGRA): 3.2.47 QUINTEGRA WAS REJECTED BY THE ASSESSEE IN IT S TP STUDY AS NOT BEING FUNCTIONALLY COMPARABLE TO THE ASSESSEE. THE TPO HOWEVER INCLUDED THE SAME HOLDING IT TO BE COMPARABLE TO TH E ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US TH AT QUINTEGRA COULD NOT BE TAKEN AS A COMPARABLE SINCE THE SAME W AS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. IT WAS SUBMITTED THAT QUINTEGRA WAS 47 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) MAINLY A KPO AND WAS ENGAGED IN PRODUCT ENGINEERING SERVICES, HAVING PROPRIETARY SOFTWARE PRODUCTS AND WAS HENCE NOT A PURE SOFTWARE DEVELOPER LIKE THE ASSESSEE. ADDITIONALLY, IT WAS SUBMITTED THAT OWING TO THE LACK OF SEGMENTAL DATA BETWEEN TH E PRODUCTS AND SERVICES, THE SAME COULD NOT BE HELD TO BE COMPARAB LE TO THE ASSESSEE. HE ALSO TOOK US THROUGH THE ANNUAL REPORT TO DEMONSTRATE THAT QUINTEGRA WAS MAKING SUBSTANTIAL INVESTMENTS I N ITS RESEARCH & DEVELOPMENT ACTIVITIES AND, AS A RESULT, WAS OWNING SUBSTANTIAL INTANGIBLES. HE FURTHER ARGUED THAT THERE WAS AN AC QUISITION DURING THE YEAR AND, HENCE, QUINTEGRA ON THIS COUNT AS WEL L COULD NOT BE ACCEPTED AS A COMPARABLE. IT WAS ALSO FAIRLY ACCEPT ED THAT THOUGH THERE IS NO FINDING OF THE LD. DRP ON THIS COMPARAB LE BUT SINCE ALL THE MATERIAL FACTS ARE AVAILABLE ON RECORD AND AS THERE IS NO DISPUTE ON APPLICATION OF FILTERS, THE ISSUE COULD BE ADJUDICA TED. 3.2.48 IN RESPONSE, THE LD. CIT DEPARTMENTAL REPRES ENTATIVE VEHEMENTLY OPPOSED THE SUBMISSIONS OF THE ASSESSEE S COUNSEL AND PRAYED THAT SINCE THIS COMPANY PASSES ALL FILTERS, IT IS A SUITABLE COMPARABLE. IN TERMS OF THE SUBMISSION MADE BY THE LD. COUNSEL FOR ASSESSEE THAT HE IS NOT DISPUTING THE APPLICATION O F FILTERS, THE LD. CIT DEPARTMENTAL REPRESENTATIVE, IN ALL FAIRNESS, ACCEP TED THAT THE BENCH COULD TAKE A VIEW ON THE COMPARABILITY. 48 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.49 WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE PARTIES AND ALSO THE MATERIAL AVAILABLE ON RECORD. WE ARE OF TH E OPINION THAT SINCE ALL THE NECESSARY FACTS FOR ADJUDICATION OF THIS CO MPARABLE ARE AVAILABLE ON RECORD, THERE IS NO REASON TO REMIT TH IS ISSUE BACK TO THE FILE OF THE LOWER AUTHORITIES. WE ARE OF THE VIEW T HAT THE FACTUAL POSITION IN THE PRESENT MATTER IS SIMILAR WITH DECI SION OF THE COORDINATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. L TD. VS. ACIT IN ITA NO. 1487/BANG/2012, WHEREIN IT IS HELD AS FOLLO WS: 12.1 THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO INSPITE OF THE ASSESSEE'S OBJECTIONS THAT THIS COMP ANY IS FUNCTIONALLY DIFFERENT AND ALSO SINCE THERE WERE PE CULIAR ECONOMIC CIRCUMSTANCES IN THE FORM OF ACQUISITIONS MADE DURI NG THE YEAR. THE TPO REJECTED THE ASSESSEE'S OBJECTIONS, HOLDING THAT THIS COMPANY QUALIFIES ALL THE FILTERS APPLIED. ON THE I SSUE OF ACQUISITIONS, THE TPO REJECTED THE ASSESSEE'S OBJEC TIONS OBSERVING THAT THE ASSESSEE HAD NOT ADDUCED ANY EVIDENCE TO S HOW THAT THIS EVENT HAD ANY INFLUENCE ON THE PRICING OR THE MARGIN EARNED. 12.2 BEFORE US, THE ASSESSEE OBJECTED TO THE INCLUS ION OF THIS COMPANY IN THE LIST OF COMPARABLES ON THE GROUND TH AT IT WAS FUNCTIONALLY DIFFERENT AND ALSO THAT THERE WERE OTH ER FACTORS FOR WHICH THIS COMPANY CANNOT BE CONSIDERED AS A COMPAR ABLE TO THE ASSESSEE IN THE CASE ON HAND WHO WAS A CAPTIVE SOFT WARE SERVICE PROVIDER TO ITS AES. IT IS SUBMITTED THAT THIS COMP ANY I.E. QUINTEGRA SOLUTIONS LTD. IS ENGAGED IN PRODUCT ENGI NEERING SERVICES AND ITS ANNUAL REPORT STATES THAT IT IS EN GAGED IN PROPRIETARY SOFTWARE PRODUCTS AND IN RESEARCH AND D EVELOPMENT 49 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ACTIVITIES WHICH HAS RESULTED IN CREATION OF ITS OW N IPRS. IN SUPPORT OF ITS PLEA FOR EXCLUSION OF THIS COMPANY F ROM THE LIST OF COMPARABLES, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) F OR ASSESSMENT YEAR 2008-09 WHERE THIS COMPANY WAS EXCLUDED FROM T HE LIST OF COMPARABLES ON THE GROUND OF FUNCTIONAL DIFFERENCES FROM A CAPTIVE SOFTWARE SERVICE PROVIDER. 12.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDER OF THE TPO IN INCLUDING THIS CO MPANY AS A COMPARABLE TO THE ASSESSEE. 12.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL DECISION CITED AND PLACED RELIANCE ON BY THE ASSESS EE. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 HAS OMITTED THIS COMPANY I.E. QUINTEGRA SOLUTIONS LTD. FROM THE LIST OF COMPARABLES SINCE IT IS INTO PRODUCT ENGINEERING SE RVICES; IS ENGAGED IN PROPRIETARY SOFTWARE PRODUCTS, HAS SUBST ANTIAL R&D ACTIVITY WHICH HAS RESULTED IN CREATION OF IPRS AND ITS OWN INTANGIBLE ASSETS THEREBY MAKING IT FUNCTIONALLY DI FFERENT FROM THE ASSESSEE IN THE CASE ON HAND IS A CAPTIVE SOFTWARE SERVICE PROVIDER; AS IS THE ASSESSEE IN THE CASE ON HAND. A T PARAS18.3.1 TO 18.3.3 OF ITS ORDER, THE CO-ORDINATE BENCH HAS H ELD AS UNDER: '18.3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE DETAILS BROUGHT ON RECORD THAT THIS COMPAN Y I.E. QUINTEGRA SOLUTIONS LTD. IS ENGAGED IN PRODUCT ENGI NEERING SERVICES AND IS NOT PURELY A SOFTWARE DEVELOPMENT S ERVICE 50 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PROVIDER AS IS THE ASSESSEE IN THE CASE ON HAND. IT IS ALSO SEEN THAT THIS COMPANY IS ALSO ENGAGED IN PROPRIETA RY SOFTWARE PRODUCTS AND HAS SUBSTANTIAL R&D ACTIVITY WHICH HAS RESULTED IN CREATION OF ITS IPRS. HAVING APPLIE D FOR TRADE MARK REGISTRATION OF ITS PRODUCTS, IT EVIDENCES THE FACT THAT THIS COMPANY OWNS INTANGIBLE ASSETS. THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF 24/7 CUSTOMER.COM P VT. LTD. (ITA NO.227/BANG/2010 DT.9.11.2012) HAS HELD THAT I F A COMPANY POSSESSES OR OWNS INTANGIBLES OR IPRS, THEN IT CANNOT BE CONSIDERED AS A COMPARABLE COMPANY TO ONE THAT DOES NOT OWN INTANGIBLES AND REQUIRES TO BE OMITTED FROM THE LIST OF COMPARABLES, AS IN THE CASE ON HAND. 18.3.2 WE ALSO FIND FROM THE ANNUAL REPORT OF QUINT EGRA SOLUTIONS LTD. THAT THERE HAVE BEEN ACQUISITIONS MA DE BY IT IN THE PERIOD UNDER CONSIDERATION. IT IS SETTLED PR INCIPLE THAT WHERE EXTRAORDINARY EVENTS HAVE TAKEN PLACE, WHICH HAS AN EFFECT ON THE PERFORMANCE OF THE COMPANY, THEN THAT COMPANY SHALL BE REMOVED FROM THE LIST OF COMPARABL ES. 18.3.3 RESPECTFULLY FOLLOWING THE DECISION OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF 24/7 CUSTOMER. COM PVT. LTD. (SUPRA), WE DIRECT THAT THIS COMPANY I.E. QUIN TEGRA SOLUTIONS LTD. BE EXCLUDED FROM THE LIST OF COMPARA BLES IN THE CASE ON HAND SINCE IT IS ENGAGED IN PROPRIETARY SOF TWARE PRODUCTS AND OWNS ITS OWN INTANGIBLES UNLIKE THE AS SESSEE IN THE CASE ON HAND WHO IS A SOFTWARE SERVICE PROVI DER.' 12.4.2 FOLLOWING THE ABOVE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL (SUPRA), WE DIRECT THE ASSESSING OFFI CER/TPO TO OMIT THIS COMPANY FROM THE LIST OF COMPARABLES.' 3.2.50 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO / TPO TO EXCLUDE THIS COMPA RABLE FROM THE LIST OF COMPARABLES. 51 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (XII) R SYSTEM INTERNATIONAL LIMITED (R SYSTEM): 3.2.51 R SYSTEM INTERNATIONAL LIMITED WAS A COMPARA BLE CHOSEN BY THE ASSESSEE ITSELF IN ITS TP STUDY. THE LD. COU NSEL FOR THE ASSESSEE RELIED ON THE CASE OF LAWS AS REFERRED IN THE CASE OF LGS AND OTHER COMPARABLES, TO CONTEND ITS EXCLUSION EVEN TH OUGH THIS COMPARABLE WAS CHOSEN BY THE ASSESSEE ITSELF IN THE TRANSFER PRICING DOCUMENTATION. 3.2.52 ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE, WHILST TAKING US THROUGH THE VARIOUS PAGES OF THE ANNUAL REPORT, SUBMITTED THAT R SYSTEM WAS MAINLY INTO THE BUSINESS OF OUTSOURCED P RODUCT DEVELOPMENT AND CUSTOMER SUPPORT SERVICES AND FROM THE NOTES TO ACCOUNTS IT WAS ARGUED THAT SUFFICIENT SEGMENTAL DE TAILS ARE NOT AVAILABLE. ADDITIONALLY, IT WAS ALSO SUBMITTED THAT R SYSTEMS WAS PROVIDING BPO SERVICES TO ITS CUSTOMERS, WHICH IS N OT AKIN TO SOFTWARE DEVELOPMENT AND HENCE COULD NOT BE FUNCTIONALLY COM PARABLE TO THE PROFILE OF THE ASSESSEE. FURTHER, HE TOOK US THROUG H PAGES 18, 23, 32 AND 104 OF THE ANNUAL REPORT TO SHOW HOW THE COMPAN Y HAD ISSUED AN IPO AND ALSO MADE STRATEGIC ACQUISITIONS DURING THE IMPUGNED YEAR. FROM THE FINANCIALS HE SUBMITTED HOW R SYSTEM S WAS SPENDING EXTENSIVELY ON THEIR R&D ACTIVITIES AND RESULTANTLY OWNED INTANGIBLES 52 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) AS WELL. IT WAS ALSO FAIRLY ACCEPTED THAT THOUGH TH ERE IS NO FINDING OF THE LD. DRP ON THIS COMPARABLE, THE SAME COULD BE A DJUDICATED. 3.2.53 THE LD. CIT DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE LOWER AUTHORITIES AND PRAYED THAT SIN CE THIS COMPANY PASSES ALL FILTERS, IT IS A SUITABLE COMPARABLE. IN TERMS OF THE SUBMISSION MADE BY THE LD. COUNSEL FOR ASSESSEE THA T HE IS NOT DISPUTING THE APPLICATION OF FILTERS, THE LD. CIT D EPARTMENTAL REPRESENTATIVE HAD NO OBJECTION TO THE ADJUDICATION OF THIS COMPARABLE BY THIS BENCH. 3.2.54 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT ALL THE RELEVANT FACTS NECESSARY FOR ADJUDICATION OF THIS COMPARABLE ARE A VAILABLE ON RECORD AND, THEREFORE, WE DO NOT SEE ANY REASON TO REMIT T HE MATTER BACK TO THE FILE OF THE LOWER AUTHORITIES. WE ARE OF THE VI EW THAT THE FACTUAL POSITION IN THE PRESENT CASE IS SIMILAR TO THE DECI SION OF COORDINATE BENCH OF TRIBUNAL IN THE CASE OF NOKIA SIEMENS NETW ORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, WHEREIN THIS COMPARABLE WAS EXCLUDED BY OBSERVING AS FOLLOWS: 103. ASSESSEE OBJECTED THE INCLUSION OF THIS COMPA NY IN THE SET OF COMPARABLES ON THE GROUND THAT THIS COMPANY WAS FUN CTIONALLY DIFFERENT FROM THE ASSESSEE. HOWEVER, THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO AND THE ASSESSEE HAS ARG UED FOR ITS EXCLUSION ON THE GROUND THAT IT FUNCTIONALLY DISSIM ILAR TO THAT OF 53 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THE ASSESSEE AS THIS COMPANY IS ENGAGED IN THE OUTS OURCED PRODUCT DEVELOPMENT AND CUSTOMER SUPPORT SERVICES. FURTHER, IT ALSO OFFERS LOW END BPO SERVICES. PAGE NO. 9 OF THE ANNUAL REPORT OF THIS COMPANY ESTABLISHES THIS FACT. 104. HAVING REGARD TO THE INFORMATION FURNISHED IN THE ANNUAL REPORT OF THIS COMPANY VIDE PAGE NUMBERS 1356, 1362 , 1366, 1371, 1378 AND 1380 OF THE PAPER BOOK, WE ARE CONVI NCED THAT THAT THIS COMPANY IS NOT A PURE SOFTWARE SERVICE PR OVIDER BUT IS ENGAGED IN DEVELOPMENT AND SALE OF PRODUCTS AND ON THE GROUND EXCLUDABLE FROM THE FINAL SET OF COMPARABLE COMPANI ES FOR BENCHMARKING INTERNATIONAL TRANSACTION RELATED TO S OFTWARE SEGMENT.' 3.2.55 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (XIII) SOFTSOL INDIA LIMITED (SOFTSOL): 3.2.56 THE NEXT COMPARABLE BEING AGITATED BEFORE US IS SOFTSOL INDIA LTD. THE SAID COMPARABLE WAS REJECTED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY ON THE GROUND THAT IT FAILED THE RPT FILTER. THE TPO HOWEVER REJECTED THE FILTER APPLIED BY THE ASSE SSEE AND APPLIED THE FILTER OF RPT< 25% AS OPPOSED TO RPT<15% AS APP LIED BY THE ASSESSEE. HENCE, THE TPO HELD SOFTSOL OF BEING A FI T COMPARABLE AND ADDED THE SAME TO THE FINAL LIST. BEFORE US, THE LD . COUNSEL FOR THE 54 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ASSESSEE SUBMITTED THAT SOFTSOL WAS NOT FUNCTIONALL Y COMPARABLE TO THE FAR PROFILE OF THE ASSESSEE SINCE THE SAME IS I N THE BUSINESS OF PROVIDING END TO END SERVICES. REFERRING THE SCREEN SHOT OF WEBSITE (HANDOUT) OF SOFTSOL, HE ARGUED THAT THE COMPANY WA S IN THE BUSINESS OF MANUFACTURING WIDE RANGE OF SOFTWARE PRODUCTS, S OFTWARE DEVELOPMENT AND TRAINING SERVICES. HE ALSO TOOK US THROUGH THE ANNUAL REPORT OF THE COMPANY WHEREIN IT WAS MENTION ED THAT THEY DEAL IN SOFTWARE PRODUCTS AND FROM THE NOTES TO ACC OUNTS IT WAS SHOWN THAT THE COMPANY DOES NOT MAINTAIN PROPER SEG MENTALS. THEREAFTER, THE LD. COUNSEL TOOK US THOUGH THE FINA NCIALS AND IT WAS SUBMITTED THAT THE COMPANY DEVELOPS INTANGIBLES AND ALSO THAT THEIR REVENUE RECOGNITION MODEL WAS DIFFERENT FROM THAT O F THE ASSESSEE. ADDITIONALLY, WITHOUT PREJUDICE TO THE ABOVE ARGUME NTS, THE LD. COUNSEL SUBMITTED THAT THE FILTER AS ADOPTED BY THE TPO OF RPT<25% WAS NOT A VALID FILTER AND FOR THE SAME THE ASSESSE E PLACED RELIANCE ON THE BENGALURU BENCHS DECISION IN THE CASE OF LSI T ECHNOLOGIES INDIA PVT. LTD. VS. ITO IN ITA NO. 1380/BANG/2010, ORDER DATED 13.05.2016. AS IN THE CASE OF SOME OF THE EARLIER C OMPARABLES BEING CONTESTED, IT WAS FAIRLY POINTED OUT THAT THOUGH TH ERE IS NO FINDING BY THE LD. DRP ON THIS COMPARABLE, THE BENCH COULD ADJ UDICATE THE ISSUE ALL THE SAME. FURTHER, THE LD. COUNSEL FOR THE ASSE SSEE ALSO SUBMITTED 55 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THAT THE ARGUMENTS REGARDING APPLICATION OF FILTERS MAY BE TREATED AS NOT PRESSED AND PRAYED FOR ADJUDICATION OF THIS COM PARABLE. 3.2.57 THE LD. CIT DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED FOR THE COMPARABLES INCLUSION AND TOOK SUPP ORT FROM THE TPOS ORDER. IN TERMS OF THE SUBMISSION MADE BY THE LD. COUNSEL FOR ASSESSEE THAT HE IS NOT DISPUTING THE APPLICATION O F FILTERS, THE LD. CIT DEPARTMENTAL REPRESENTATIVE HAD NO OBJECTION TO THE ADJUDICATION OF THIS COMPARABLE BY THE BENCH. 3.2.58 WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE OPINION THAT SINCE ALL THE RELEVANT FACTS NECESSARY FOR ADJUDICATION OF THIS C OMPARABLE ARE AVAILABLE ON RECORD WE CAN PROCEED TO ADJUDICATE TH IS COMPARABLE. WE ARE OF THE VIEW THAT THE FACTUAL POSITION IN THE PR ESENT CASE IS SIMILAR TO THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF NOKIA SIEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, WHEREIN THIS COMPARABLE WAS RETAINED BY OBSERVING AS FOLLOWS: 105. THE ASSESSEE OBJECTED THIS COMPANY FROM THE LI ST OF COMPARABLE WHILE PREPARING ITS TP STUDY ON THE GROU ND OF RELATED PARTY TRANSACTIONS AND ALSO BASING ON THE STATEMENT IN THE ANNUAL REPORT TO THE EFFECT THAT THIS COMPANY IS A PROVIDE R OF E-COMMERCE, NETWORK TECHNOLOGY, INTERNET INFRASTRUCTURE AND OTH ER SPECIAL 56 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) TECHNOLOGY AREAS AND HAS DIVERSE CLIENT BASE RANGIN G FROM LARGE CUSTOMERS TO SMALL HIGH-TECH START-UP COMPANIES. 106. LD. TPO OBSERVED THAT THE COMPANY AT PRESENT I S IN VARIOUS AREAS OF SOFTWARE DEVELOPMENT INDUSTRY AND WHAT IS STATED ABOVE IN THE ANNUAL REPORT IS A FUTURISTIC STATEMENT. LD. TPO REFERRED TO PARA 2.1 TO BE FOUND ON PAGE NO. 1533 OF THE PAPER BOOK TO THE EFFECT THAT NO INVENTORY IS HELD, SINCE THE COMPANY IS ENGAGED IN DEVELOPING SOFTWARE AND PROVIDING IT SOLUTIONS. THI S FACT EVIDENCES THAT THIS COMPANY IS CONFINED ONLY TO SOF TWARE DEVELOPMENT AND NOT YET INTO NET WORK OR INTERNET I NFRASTRUCTURE. EVEN THE PROFIT AND LOSS ACCOUNT TO BE FOUND AT PAG E NO. 1536 ALSO SHOWS THAT OTHER THAN THE OTHER INCOME, THE CO MPANY IS DERIVING INCOME ONLY FROM SOFTWARE EXPORTS. EVEN TH E NOTE 15 OF THE NOTES ON ACCOUNT READS THAT THERE ARE NO SEPARA TE REPORTABLE SEGMENTS. WE DO NOT FIND ANY MATERIAL FROM THE RECO RD THAT THIS COMPANY HAS ACTUALLY BEEN ENGAGED IN THE ACTIVITIES LIKE A) BUSINESS OF SOFTWARE PRODUCTS B) SOFTWARE DEVELOPME NT C) TRAINING SERVICES; AND D) MANUFACTURE OF VIDE RANGE OF PRODUCTS OR THAT IT PROVIDES END TO END BUSINESS SOLUTIONS. 107. WE THEREFORE FIND IT DIFFICULT THAT THIS COMPA NY IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE OR THAT IT IS NOT A GOO D COMPARABLE FOR WANT OF ANY SEGMENTAL INFORMATION OR RELATED PARTY INFORMATION. WE, THEREFORE, FIND THAT THIS COMPANY HAS TO BE RET AINED AS A GOOD COMPARABLE IN THE FINAL LIST OF COMPARABLES.' 3.2.59 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE REJECT THE ARGUMENTS OF THE ASSESSEE AND DIRECT THE AO/TPO TO INCLUDE THIS COMPANY IN THE FINAL LIST OF COMPARABLES. 57 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (XIV) TATA ELXSI LIMITED (TATA ELXSI): 3.2.60 THE NEXT COMPARABLE BEING AGITATED BEFORE US IS TATA ELXSI LIMITED. THE SAID COMPARABLE WAS CHOSEN BY THE ASSE SSEE ITSELF IN ITS TP STUDY. THE LD. COUNSEL FOR THE ASSESSEE RELIED O N THE CASE LAWS AS RELIED UPON WHILE ARGUING FOR EXCLUSION OF LGS AND SOME OTHER COMPARABLES, TO CONTEND EXCLUSION OF TATA ELXSI EVE N THOUGH THE COMPARABLE WAS CHOSEN BY THE ASSESSEE ITSELF IN ITS TP STUDY. 3.2.61 ON MERITS, THE LD. COUNSEL SUBMITTED THAT TH E SAID COMPANY COULD NOT BE CONSIDERED AS A COMPARABLE SIN CE THE COMPANY, ALONG WITH PROVIDING SOFTWARE DEVELOPMENT, ALSO DEALT IN PRODUCT DESIGN SERVICES, INNOVATION DESIGN ENGINEER ING, VISUAL COMPUTING AND SYSTEMS INTEGRATION AND SUPPORT. THE LD. COUNSEL DREW OUR ATTENTION TO THE 'NOTES TO ACCOUNTS' OF TH E ANNUAL REPORT TO ARGUE THAT THE COMPANY, ALTHOUGH, DEALT WITH WIDE A RRAY OF SERVICES, IT DID NOT MAINTAIN PROPER SEGMENTALS, AND, HENCE, THE SAME COULD NOT BE RETAINED AS A COMPARABLE. LIKE SOME OF THE EARLI ER COMPARABLES, IT WAS ALSO FAIRLY ACCEPTED THAT THOUGH THERE IS NO FI NDING OF THE LD. DRP ON THIS COMPARABLE BUT IN VIEW OF ALL THE MATERIAL FACTS BEING AVAILABLE ON RECORD AND AS THERE BEING NO DISPUTE ON APPLICAT ION OF FILTERS, ADJUDICATION ON THIS COMPARABLE BE DONE. 58 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.62 THE LD. CIT DEPARTMENTAL REPRESENTATIVE PLAC ED RELIANCE ON THE ORDERS OF THE LD. DRP AND TPO. THE LD. CIT D R HAD NO OBJECTION TO THE ADJUDICATION OF THIS COMPARABLE BY THE BENCH. 3.2.63 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE OPINION THAT SINCE ALL THE NECESSARY FACTS FOR ADJUDICATION OF T HIS COMPARABLE ARE AVAILABLE ON RECORD, WE CAN ADJUDICATE THIS ISSUE. WE ARE OF THE VIEW THAT THE FACTUAL POSITION IN THE PRESENT MATTER IS SIMILAR WITH DECISION OF THE COORDINATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. LTD. V ACIT IN ITA NO. 1487/BANG/2012, WHEREIN IT IS HELD AS FO LLOWS: 13.1 THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO OVERRULING THE OBJECTIONS OF THE ASSESSEE TO THE IN CLUSION OF THIS COMPANY ON SEVERAL COUNTS LIKE FUNCTIONAL DIS-SIMIL ARITY, HAVING SIGNIFICANT R&D ACTIVITY, BRAND VALUE, SIZE, ETC. 13.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE CONTENDED THAT THIS COMPANY I.E. TATA ELXSI LTD., IS NOT FUNC TIONALLY COMPARABLE TO THE ASSESSEE AS IT PERFORMS A VARIETY OF FUNCTIONS UNDER SOFTWARE DEVELOPMENT SERVICES SEGMENT, NAMELY PRODUCT DESIGN, INNOVATION DESIGN ENGINEERING, VISUAL COMPU TING LABS ETC. AS PER THE DETAILS REFLECTED IN ITS ANNUAL REPORT; WHEREAS THE ASSESSEE IN THE CASE ON HAND IS A CAPTIVE SOFTWARE SERVICE PROVIDER. IN SUPPORT OF ITS PLEA FOR EXCLUDING THIS COMPANY FROM THE LIMIT OF COMPARABLES, THE LEARNED AUTHORISED REPRES ENTATIVE PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LT D. (SUPRA) FOR 59 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ASSESSMENT YEAR 2008-09, WHEREIN THIS COMPANY WAS O MITTED FROM THE LIST OF COMPARABLES ON GROUNDS OF BEING FU NCTIONALLY DIFFERENT AND DIS-SIMILAR TO A CAPTIVE SOFTWARE SER VICE PROVIDER. 13.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDERS OF THE TPO IN INCLUDING THIS C OMPANY AS A COMPARABLE TO THE ASSESSEE. 13.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL DECISION CITED BY THE ASSESSEE. WE FIND THAT THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLU TIONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT T HIS COMPANY IS TO BE OMITTED FROM THE SET OF COMPARABLES AS IT IS FUNCTIONALLY DIFFERENT AND DIS-SIMILAR FROM A CAPTIVE SOFTWARE S ERVICE PROVIDER, AS IS THE ASSESSEE IN THE CASE ON HAND. AT PARAS 13 .4.1 AND 13.4.2 OF ITS ORDER, THE CO-ORDINATE BENCH HAS HELD AS UNDER: '13.4.1 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PE RUSED AND CONSIDERED THE MATERIAL ON RECORD. FROM THE DET AILS ON RECORD, WE FIND THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN PRODUCT DESIGNING SERVICES AND NOT PURELY SOFTWA RE DEVELOPMENT SERVICES. THE DETAILS IN THE ANNUAL REP ORT SHOW THAT THE SEGMENT 'SOFTWARE DEVELOPMENT SERVICES' RE LATES TO DESIGN SERVICES AND ARE NOT SIMILAR TO SOFTWARE DEV ELOPMENT SERVICES PERFORMED BY THE ASSESSEE. 13.4.2 THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. V. ACIT (IT A NO.7821/MUM/2011) HAS HELD THAT TATA ELXSI LTD. IS NOT A SOFTWARE DEVELOPMENT SERVICE PROVIDER AND THEREFORE IT IS NOT FUNCTIONALLY COMPARABLE. IN THIS CONTEXT THE RELEVA NT PORTION OF THIS ORDER IS EXTRACTED AND REPRODUCED BELOW:- '... TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES WHICH IS ENTIRELY 60 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) DIFFERENT FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTA TIVE THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE N OT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FRO M PRODUCT AND SERVICES. THUS, ON THESE FACTS, WE ARE UNABLE TO TREAT THIS COMPANY AS FIT FOR COMPARABILI TY ANALYSIS FOR DETERMINING THE ARM'S LENGTH PRICE FOR THE ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST O F COMPARABLE PORTION.' AS CAN BE SEEN FROM THE EXTRACTS OF THE ANNUAL REPO RT OF THIS COMPANY PRODUCED BEFORE US, THE FACTS PERTAINING TO TATA ELXSI HAVE NOT CHANGED FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2008-09. WE, THEREFORE, HOLD THAT T HIS COMPANY IS NOT TO BE CONSIDERED FOR INCLUSION IN TH E SET OF COMPARABLES IN THE CASE ON HAND. IT IS ORDERED ACCO RDINGLY.' 13.4.2 FOLLOWING THE ABOVE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL (SUPRA), WE DIRECT THE ASSESSING OFFI CER/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES T O THE ASSESSEE.' 3.2.64 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO / TPO TO EXCLUDE THIS COMPA NY FROM THE LIST OF COMPARABLES. (XV) THIRDWARE SOLUTION LIMITED ('THIRDWARE'): 3.2.65 THE NEXT COMPARABLE AGITATED BEFORE US IS TH IRDWARE SOLUTION LIMITED. THE LD. COUNSEL FOR THE ASSESSEE HAS OBJECTED TO THE 61 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) INCLUSION OF THIS COMPANY AS A COMPARABLE ON THE GR OUND THAT APART FROM SOFTWARE DEVELOPMENT SERVICES, IT IS IN THE BU SINESS OF PRODUCT DEVELOPMENT; TRADING IN SOFTWARE AND GIVING LICENSE S FOR THE USE OF SOFTWARE. HE ALSO POINTED OUT FROM THE ANNUAL REPOR T THAT THIS COMPANY HAS NOT PROVIDED ANY SEPARATE SEGMENTAL PRO FIT AND LOSS ACCOUNT FOR SOFTWARE DEVELOPMENT SERVICES AND PRODU CT DEVELOPMENT SERVICES. HE FURTHER ARGUED THAT THE TPO HAS WRONGL Y COMPUTED THE MARGIN OF THIS COMPARABLE AND HAS TAKEN ENTITY LEVE L SALES FIGURE WHILST CALCULATING THE OPERATING MARGIN AND NOT THE SALES OF THE SOFTWARE SEGMENT. HE ARGUED THAT NO DETAILS ARE GIV EN IN THE FINANCIALS IN RESPECT OF NATURE OF TRANSACTION WITH SUBSIDIARIES. IT WAS ALSO FAIRLY ACCEPTED THAT THOUGH THERE IS NO FINDIN G OF THE LD. DRP ON THIS COMPARABLE BUT IN VIEW OF ALL THE MATERIAL FAC TS BEING AVAILABLE ON RECORD AND THERE BEING NO DISPUTE ON APPLICATION OF FILTERS, REQUEST WAS MADE TO ADJUDICATE THIS COMPARABLE. 3.2.66 THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . SHE ALSO HAD NO OBJECTION TO THE ADJUDICATION OF THIS COMPARABLE BY THE BENCH. 3.2.67 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE OPINION THAT ALL NECESSARY FACTS FOR ADJUDICATION OF THIS COMPARABLE BEING AVAILABLE ON RECORD, WE CAN ADJUDICATE THIS ISSUE. WE ARE OF THE VIEW THAT THE 62 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) FACTUAL POSITION IN THE PRESENT MATTER IS SIMILAR W ITH DECISION OF COORDINATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. L TD. V ACIT INITA NO. 1487/BANG/2012, WHEREIN IT IS HELD AS FOLLOWS: 14.1 THIS COMPANY WAS SELECTED AS A COMPARABLE BY THE TPO INSPITE OF THE ASSESSEE'S OBJECTIONS TO ITS INCLUSI ON ON THE GROUND THAT ITS TURNOVER WAS IN EXCESS OF RS.500 CRORES. B EFORE US, THE ASSESSEE HAS OBJECTED TO THE INCLUSION OF THIS COMP ANY AS A COMPARABLE ON THE GROUND THAT APART FROM SOFTWARE D EVELOPMENT SERVICES, IT IS IN THE BUSINESS OF PRODUCT DEVELOPM ENT; TRADING IN SOFTWARE AND GIVING LICENSES FOR THE USE OF SOFTWAR E. THE LEARNED AUTHORISED REPRESENTATIVE ALSO POINTED OUT FROM THE ANNUAL REPORT THAT THIS COMPANY HAS NOT PROVIDED ANY SEPAR ATE SEGMENTAL PROFIT AND LOSS ACCOUNT FOR SOFTWARE DEVE LOPMENT SERVICES AND PRODUCT DEVELOPMENT SERVICES. IN SUPPO RT OF ITS PLEA FOR EXCLUSION OF THIS COMPANY FROM THE LIST OF COMP ARABLES, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CA SE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09, WHEREIN IT WAS HELD TO BE NOT COMPARABLE TO A PUREL Y SOFTWARE DEVELOPMENT SERVICE PROVIDER. 14.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDER OF THE TPO IN INCLUDING THIS CO MPANY IN THE LIST OF COMPARABLES TO THE ASSESSEE. 14.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND C AREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL DECISION RELIED ON BY THE ASSESSEE. WE FIND THAT THE CO-ORDI NATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWARE SOLUTIO NS LTD. (SUPRA) 63 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) FOR ASSESSMENT YEAR 2008-09 HAS DIRECTED EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES TO A PURE SOFT WARE SERVICE PROVIDER, LIKE THE ASSESSEE IN THE CASE ON HAND, AS IT IS FUNCTIONALLY DIFFERENT; BEING ENGAGED IN PRODUCT DE VELOPMENT AND EARNS REVENUE FROM SALE OF LICENSES AND SUBSCRIPTIO N, ETC. HOLDING AS UNDER AT PARA 15.3 OF ITS ORDER: '15.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE MATERIAL ON RECORD THAT THE COMPANY IS ENGAGED IN PRODUCT DEVELOPMENT AND EARNS REVENUE FROM SALE OF LICENSES AND SUBSCRIPTION. HOWEVER, THE SEGMENTAL PR OFIT AND LOSS ACCOUNTS FOR SOFTWARE DEVELOPMENT SERVICES AND PRODUCT DEVELOPMENT ARE NOT GIVEN SEPARATELY. FURTHER, AS P OINTED OUT BY THE LEARNED AUTHORISED REPRESENTATIVE, THE P UNE BENCH OF THE TRIBUNAL IN THE CASE OF E-GAIN COMMUNI CATIONS PVT. LTD. (SUPRA) HAS DIRECTED THAT SINCE THE INCOM E OF THIS COMPANY INCLUDES INCOME FROM SALE OF LICENSES, IT O UGHT TO BE REJECTED AS A COMPARABLE FOR SOFTWARE DEVELOPMENT S ERVICES. IN THE CASE ON HAND, THE ASSESSEE IS RENDERING SOFT WARE DEVELOPMENT SERVICES. IN THIS FACTUAL VIEW OF THE M ATTER AND FOLLOWING THE AFORE CITED DECISION OF THE PUNE TRIB UNAL (SUPRA), WE DIRECT THAT THIS COMPANY BE OMITTED FRO M THE LIST OF COMPARABLES FOR THE PERIOD UNDER CONSIDERATION I N THE CASE ON HAND.' 14.3.2 FOLLOWING THE ABOVE DECISION OF THE CO-ORDIN ATE BENCH (SUPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO EXC LUDE THIS COMPANY FROM THE LIST OF COMPARABLES.' 3.2.68 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO / TPO TO EXCLUDE THIS COMPA NY FROM THE LIST OF COMPARABLES. 64 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (XVI) WIPRO LIMITED (SEGMENTAL) [WIPRO]: 3.2.69 THE LAST COMPARABLE BEING AGITATED FOR EXCLU SION BEFORE US IS WIPRO LIMITED. THE SAID COMPARABLE WAS INTRODUCE D BY THE TPO BY HOLDING THAT IT SATISFIES ALL FILTERS. BEFORE US TH E LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID COMPANY CANNOT BE HELD TO BE COMPARABLE TO THE ASSESSE SINCE THE SAME IS FUNCTIO NALLY DIFFERENT. IT WAS SUBMITTED THAT ALTHOUGH THE TPO HAS TAKEN THE S OFTWARE SEGMENT, WIPRO IS ENGAGED IN SEVERAL OPERATIONS WIT HIN THE SAID SEGMENT ITSELF AND ADDITIONALLY DEALS IN SOFTWARE P RODUCTS TOO. THE LD. COUNSEL TOOK US THROUGH VARIOUS PAGES OF THE ANNUAL REPORT TO SUBSTANTIATE THE ABOVE ARGUMENT AND WHILST REFERRIN G TO THE 'NOTES TO ACCOUNTS' OF THE FINANCIALS IT WAS SUBMITTED THAT T HE SAID COMPANY DID NOT MAINTAIN PROPER SEGMENTALS BIFURCATING THE REVENUES/EXPENSES BETWEEN THE SERVICES AND PRODUCTS WITHIN THE SOFTWARE SEGMENT. ADDITIONALLY, BY REFERRING TO THE FINANCIALS, IT WAS SUBMITTED THAT THE SAID COMPANY OWNED INTANGIBLES A ND WHILST TAKING US THROUGH VARIOUS PAGES IT WAS ALSO SUBMITTED THAT THE SAID COMPANY HAD UNDERTAKEN VARIOUS ACQUISITIONS DURING THE RELEVANT ASSESSMENT YEAR. 3.2.70 THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 65 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.2.71 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE VIEW THAT THE FACTUAL POSITION IN THE PRESENT MATTER IS SIMILAR W ITH DECISION OF THE COORDINATE BENCH IN SUN GARD SOLUTIONS INDIA PVT. L TD. VS. ACIT IN ITA NO. 1487/BANG/2012, WHEREIN IT IS HELD AS FOLLO WS: 15.1 THIS COMPANY WAS SELECTED AS A COMPARABLE BY T HE TPO INSPITE OF THE OBJECTIONS BY THE ASSESSEE TO ITS IN CLUSION IN THE LIST OF COMPARABLES ON SEVERAL GROUNDS LIKE FUNCTIONAL D IS- SIMILARITY, BRAND VALUE, SIZE, TURNOVER ETC. 15.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE OF THE ASSESSEE CONTENDED THAT THIS COMPANY NAMELY, WIPRO LTD., IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT OWNS SIGNIFICANT INTANGIBLES IN THE NATURE OF CUSTOMER RELATED INTAN GIBLES AND TECHNOLOGY RELATED INTANGIBLES; HAS HUGE BRAND VALU E, IS A MARKET LEADER IN SIZE AND TURNOVER WHICH RENDER IT NOT FUN CTIONALLY COMPARABLE TO A CAPTIVE PROVIDER OF SOFTWARE DEVELO PMENT SERVICES. IN SUPPORT OF ITS PLEA FOR EXCLUSION OF T HIS COMPANY FROM THE LIST OF COMPARABLES, THE LEARNED AUTHORISED REP RESENTATIVE OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF 3DPLM SOFTWARE SOLUTIONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09, WHEREIN THIS COMPANY WAS H ELD TO BE FUNCTIONALLY DIFFERENT AND DIS-SIMILAR AND NOT COMP ARABLE TO A CAPTIVE PROVIDER OF SOFTWARE DEVELOPMENT SERVICES. 66 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 15.3 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDER OF THE TPO IN INCLUDING THIS CO MPANY IN THE LIST OF COMPARABLES TO THE ASSESSEE. 15.4.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND C AREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 3DPLM SOFTWAR E SOLUTIONS LTD. (SUPRA) FOR ASSESSMENT YEAR 2008-09 HAS HELD T HAT THIS COMPANY IS TO BE EXCLUDED FROM THE LIST OF COMPARAB LES AS IT IS FUNCTIONALLY DIFFERENT AND DIS-SIMILAR FROM A CAPTI VE SOFTWARE DEVELOPMENT SERVICE PROVIDER, AS IS IN THE CASE ON HAND. AT PARA 12.4.1 AND 12.4.2 OF ITS ORDER THE CO-ORDINATE BENC H IN ITS ORDER (SUPRA) HAS HELD AS UNDER: '12.4.1 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PE RUSED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND MERI T IN THE CONTENTIONS OF THE ASSESSEE FOR EXCLUSION OF THIS C OMPANY FROM THE SET OF COMPARABLES. IT IS SEEN THAT THIS C OMPANY IS ENGAGED BOTH IN SOFTWARE DEVELOPMENT AND PRODUCT DEVELOPMENT SERVICES. THERE IS NO INFORMATION ON TH E SEGMENTAL BIFURCATION OF REVENUE FROM SALE OF PRODU CT AND SOFTWARE SERVICES. THE TPO APPEARS TO HAVE ADOPTED THIS COMPANY AS A COMPARABLE WITHOUT DEMONSTRATING HOW T HE COMPANY SATISFIES THE SOFTWARE DEVELOPMENT SALES 75 % OF THE TOTAL REVENUE FILTER ADOPTED BY HIM. ANOTHER MA JOR FLAW IN THE COMPARABILITY ANALYSIS CARRIED OUT BY THE TP O IS THAT HE ADOPTED COMPARISON OF THE CONSOLIDATED FINANCIAL STATEMENTS OF WIPRO WITH THE STAND ALONE FINANCIALS OF THE ASSESSEE; WHICH IS NOT AN APPROPRIATE COMPARISON. 12.4.2 WE ALSO FIND THAT THIS COMPANY OWNS INTELLEC TUAL PROPERTY IN THE FORM OF REGISTERED PATENTS AND SEVE RAL PENDING APPLICATIONS FOR GRANT OF PATENTS. IN THIS REGARD, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 2 4/7 CUSTOMER.COM PVT. LTD. (ITA NO.227/BANG/2010) HAS H ELD 67 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THAT A COMPANY OWNING INTANGIBLES CANNOT BE COMPARE D TO A LOW RISK CAPTIVE SERVICE PROVIDER WHO DOES NOT OWN ANY SUCH INTANGIBLE AND HENCE DOES NOT HAVE AN ADDITIONAL AD VANTAGE IN THE MARKET. AS THE ASSESSEE IN THE CASE ON HAND DOES NOT OWN ANY INTANGIBLES, FOLLOWING THE AFORESAID DECISI ON OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I.E. 24/7 CUSTOME R.COM PVT. LTD. (SUPRA), WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE. WE, THE REFORE, DIRECT THE ASSESSING OFFICER/TPO TO OMIT THIS COMPA NY FROM THE SET OF COMPARABLE COMPANIES IN THE CASE ON HAND FOR THE YEAR UNDER CONSIDERATION.' 15.4.2 FOLLOWING THE ABOVE DECISION OF THE CO-ORDIN ATE BENCH (SUPRA), WE DIRECT THE ASSESSING OFFICER/TPO TO OMI T THIS COMPANY FROM THE LIST OF COMPARABLES. 3.2.72 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 3.3.0 NOW, WE WILL DEAL WITH COMPARABLES WHICH THE ASSESSEE IS AGITATING FOR INCLUSION IN THE FINAL SET OF COMPARA BLES SELECTED BY THE TPO / DRP. SIP TECHNOLOGIES AND EXPORTS LIMITED (SIP TECHNOLO GIES) 3.3.1 THE FIRST INCLUSION BEING PRAYED BY THE ASSE SSEE IS OF SIP TECHNOLOGIES. THE SAID COMPARABLE WAS REJECTED BY T HE TPO WHILST HOLDING THAT THE SAID COMPANY HAS DECLINING REVENUE . BEFORE US, THE 68 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DIMINIS HING REVENUE HAS TO BE SEEN FOR THREE CONSECUTIVE YEARS AND SINCE TH IS COMPANY DOES NOT HAVE LOSSES FOR THREE CONSECUTIVE YEARS, THE SA ID COMPARABLE OUGHT TO BE INCLUDED. IT WAS FURTHER SUBMITTED THAT THE TPO HIMSELF HAS NOT DISPUTED THE FACT THAT SIP TECHNOLOGIES IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND THE TPO HAS ONLY REJ ECTED THE SAID COMPARABLE ON THE GROUND THAT THE SAID COMPANY HAS DIMINISHING REVENUE. IT WAS FURTHER SUBMITTED THAT TURNOVER CAN NOT BE A CRITERIA FOR INCLUSION OR EXCLUSION OF A COMPARABLE. 3.3.2 ON SPECIFIC QUERY BY THE BENCH, THE LD. CIT DEPARTMENTAL REPRESENTATIVE FAIRLY ACCEPTED THAT IN PRINCIPLE TH E CRITERIA OF CHECKING THE FINANCIALS OF THREE YEAR CONSECUTIVE YEARS HAS CONSISTENTLY BEEN FOLLOWED BY BOTH THE DEPARTMENT AS WELL AS THE ASSE SSEES OVER THE YEARS. ON MERITS SHE RELIED ON THE ORDERS OF THE LO WER AUTHORITIES. 3.3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE VIEW THAT THE FACTUAL POSITION IN THE PRESENT CASE IS SIMILAR TO THE DECISION OF COORDINATE BENCH OF TRIBUNAL IN THE CASE OF NOKIA S IEMENS NETWORKS INDIA PVT. LTD. VS. ACIT IN ITA NO. 333/DEL/2013, W HEREIN THIS COMPARABLE WAS INCLUDED BY OBSERVING AS FOLLOWS: 116. THIS COMPANY SELECTED BY THE ASSESSEE WAS REJ ECTED BY THE TPO ON THE GROUND OF DIMINISHING REVENUES. LD. DRP ALSO HELD 69 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THAT THE COMPANIES HAVING DIMINISHING REVENUES/PERS ISTENT LOSSES FOR THE PREVIOUS 3 YEARS WERE EXCEPTIONS AND REFUSE D TO INTERFERE WITH THE FINDINGS OF THE LD. TPO. 117. IT IS SUBMITTED BY THE LD. AR THAT THIS COMPAN Y WAS ACCEPTED AS FUNCTIONALLY COMPARABLE TO THE ASSESSEE BY THE DEPARTMENT AS WELL AS BY A COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE PREVIOUS ASSESSMENT YEA R OF 2007 08. IT IS ARGUED BY THE LD. AR THAT THE DIMINISHING REVENUE FILTER IS INVALID FOR THE SIMPLE REASON THAT REVENUE IS NOT A TRUE INDICATOR OF THE PERFORMANCE OF COMPANY AS DURING ITS BUSINESS L IFE CYCLE OWING TO CHANGING ECONOMIC CONDITIONS, A COMPANY CO ULD HAVE VARIATION IN ITS REVENUE PATTERN OVER A PERIOD OF T IME. FOR EXAMPLE A COMPANY WITH INCREASING REVENUES OVER A PERIOD OF TIME DOES NOT NECESSARILY REFLECT THAT IT IS PERFORMING BETTE R AS THE CORRESPONDING INCREASE IN EXPENSES COULD BE HIGHER THAN REVENUES AND THE COMPANY MIGHT STILL INCUR LOSSES. SIMILARLY , A COMPANY WITH DIMINISHING REVENUES OVER A PERIOD OF TIME NEE D NOT IMPLY THAT THE PERFORMANCE OF THE COMPANY IS DETERIORATIN G AS IT MIGHT STILL HAVE GOOD PROFIT MARGIN ON ACCOUNT OF COST EF FICIENCY I.E. MINIMIZING/ REDUCING ITS EXPENSES. THEREFORE, THE N ET OPERATING MARGIN OF THE COMPANY WITH INCREASING REVENUES OVER A PERIOD OF TIME IS A BETTER INDICATOR OF THE PERFORMANCE OF TH E COMPANY. THUS IT IS SUBMITTED THAT EXCLUDING COMPANIES HAVING PER SISTENT LOSSES IS A MORE APPROPRIATE FILTER AND ON THIS BASIS, ASS ESSEE HIMSELF HAS EXCLUDED COMPANIES WHICH HAVE SHOWN PERSISTENT LOSSES. IT IS FURTHER SUBMITTED BY THE LD. AR THAT THE LD. DRP AS WELL AS TPO HAS TAKEN A STAND THAT SUCH DIMINISHING REVENUE GOE S AGAINST THE INDUSTRY TREND, THAT THERE CAN BE NOTHING FARTHER F ROM THE TRUTH AS VARIANCE IN PROFITABILITY IS THE VERY ESSENCE OF BU SINESS AND WHICH 70 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) MORE THAN DEMONSTRATES THE ARMS LENGTH CHARACTER P REVALENT IN A FREE MARKET ECONOMY, AND IT WOULD DEFY COMMERCIAL L OGIC AND RATIONALE, AND ECONOMIC BUSINESS CYCLE IF EVERY COM PANY WERE TO ONLY MAKE PROFITS AND INCREASE PROFITS YEAR AFTER Y EAR. LOW PROFITS IN SOME YEARS AND LOSSES IN SOME YEARS IS A BUSINES S REALITY. IF ONE WERE TO GO WITH THE LOGIC ASSUMED BY THE LEARNE D TPO, EVERY COMPANY SHOULD HAVE INCREASING REVENUES AND THE COM PANY WHICH HAS LOWER PROFITS OR RETURNS LOSSES SHOULD DI SCONTINUE BUSINESS OPERATIONS BECAUSE IT WOULD NOT REPRESENT AN ARMS LENGTH NATURE OF BUSINESS. 118. LD. AR SUBMITS THAT THIS POSITION HAS NOW BEEN ACCEPTED BY THE DELHI HIGH COURT AND VARIOUS BENCHES OF THIS TR IBUNAL. IN A RECENT ORDER PASSED BY THE COORDINATE BENCH IN CASE OF AITHENT TECHNOLOGIES (P.) LTD. VS. DCIT [2016] 74 TAXMANN.C OM 214 (DELHI- TRIB.) ON THE ADOPTION OF DIMINISHING REVENUE FILTE R IT HAS BEEN HELD AS UNDER:- 14.3 A CAREFUL PERUSAL OF THE PATTERN OF PROFIT/LO SS EARNED BY THE ASSESSE AS PER ITS AUDITED ACCOUNTS DIVULGES THAT AS AGAINST THE CURRENT YEAR'S PROFIT OF RS. 62.39 LAC, THE EARLIER YEARS' PROFIT WAS RS. 92.74 LAC. THIS MANIFESTS THA T THE PROFIT FOR THIS YEAR HAS DIMINISHED FROM THE EARLIER YEAR. WHEN WE CONSIDER THE FIGURES OF LOSSES FOR THE FINANCIAL YE ARS 2005-06 AND EARLIER YEARS, IT COMES TO LIGHT THAT THERE WER E LOSSES RIGHT FROM FINANCIAL YEAR 2002-03 UP TO 2005-06. ON AN OVERVIEW OF THE ABOVE EXTRACTED TABLE, IT CAN BE SE EN THAT THE ASSESSEE'S PROFIT IS NOT STEADY, BUT, HAS DIMIN ISHED DURING THE INSTANT YEAR FROM THE PRECEDING YEAR. IN SUCH A SITUATION, IF WE EXCLUDE THE COMPANIES HAVING DIMIN ISHING PROFITS, IT WOULD MEAN THAT THE COMPANIES WHOSE PRO FIT PATTERN IS ALSO SIMILAR TO THAT OF THE ASSESSE WOUL D FACE THE AXE. DOING SO WOULD MEAN EXCLUDING THE COMPARABLE COMPANIES FROM THE FINAL TALLY, WHICH IS NOT APPROP RIATE. 71 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) HOWEVER, THE COMPANIES HAVING PERSISTENT LOSSES, OB VIOUSLY, CANNOT BE COMPARED WITH THE ASSESSEE BECAUSE IT HAS EARNED POSITIVE INCOME NOT ONLY IN THIS YEAR, BUT, IN THE PRECEDING YEAR AS WELL. WE, THEREFORE, HOLD THAT TH E COMPANIES HAVING DIMINISHING REVENUE SHOULD NOT BE EXCLUDED, BUT, ONLY THE COMPANIES HAVING PERSISTENT LOSSES SHOULD BE EXPELLED FROM THE FINAL TALLY OF COMPARAB LES. 119. WHILE FOLLOWING THE DECISION OF THE HON'BLE DE LHI HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (IN DIA) (P.) LTD. THIS VIEW HAS FURTHER BEEN AFFIRMED BY ANOTHER CO-O RDINATE BENCH OF THIS ITAT IN CASE OF VESTERGAARD ASIA (P.) LTD. VS. DCIT [2017] 88 TAXMANN.COM 313 (DELHI-TRIB.) WHEREIN THE COURT HAS OBSERVED THAT:- 28. THIS COMPARABLE SOUGHT TO BE INCLUDED BY THE A SSESSEE WAS REJECTED BY THE TPO ON THE GROUND THAT ITS REVE NUE IS CONTINUOUSLY DIMINISHING OVER THE YEARS. 30. THE LD. DR ON THE OTHER HAND ARGUED THAT THE RE VENUE OF THE COMPANY HAS BEEN REDUCING OVER A NUMBER OF YEAR S. THIS FACT INDICATES THAT THE COMPANY IS UNDERGOING ABNORMAL/EXCEPTIONAL CIRCUMSTANCES AND THEREFORE IT S MARGINS CANNOT BE TAKEN AS REFLECTING THOSE OF THE INDUSTRY. HE VEHEMENTLY ARGUED THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE COMPARABILITY ANALYSIS. . 33. AS REGARDS THE ARGUMENT OF DIMINISHING REVENUE, WE NOTE THAT THE REDUCTION OF REVENUE FROM FY 2009-10 (3.99 CRORE) TO FY 2010-11 (3.98 CRORE) IS APPROXIMATELY RS. 1 LAC. IN OUR VIEW, SUCH A MINOR DIFFERENCE IN REVENUE CAN NOT BE TAKEN TO MEAN THAT THE COMPANY IS UNDERGOING ABNORM AL CIRCUMSTANCES AND SHOULD BE REJECTED. EVEN OTHERWIS E, IF THE FUNCTIONAL SIMILARITY OF THE COMPANY WITH THE ASSES SEE IS ACCEPTED, THE SAME SHOULD NOT BE REJECTED SIMPLY BE CAUSE OF DIFFERENCE IN REVENUE. OUR VIEW IS SUPPORTED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHRY SCAPITAL 72 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) INVESTMENT ADVISORS (INDIA) (P.) LTD. (SUPRA), IN W HICH IT WAS OBSERVED: '33. SUCH BEING THE CASE, IT IS CLEAR THAT EXCLUSI ON OF SOME COMPANIES WHOSE FUNCTIONS ARE BROADLY SIMILAR AND WHOSE PROFILE - IN RESPECT OF THE ACTIVITY IN Q UESTION CAN BE VIEWED INDEPENDENTLY FROM OTHER ACTIVITIES CANNOT BE SUBJECT TO A PER SE STANDARD OF LOSS MAKI NG COMPANY OR AN 'ABNORMAL' PROFIT MAKING CONCERN OR HUGE OR 'MEGA' TURNOVER COMPANY. AS EXPLAINED EARLIER, RULE 1OB (2) GUIDES THE SIX METHODS OUTLINED IN CLAUSES (A) TO (F) OF RULE 10B (1), - WHILE JUDGING COMPARABILITY. RULE 10B (3) ON THE OT HER HAND INDICATES THE APPROACH TO BE ADOPTED WHERE DIFFERENCES AND DISSIMILARITIES ARE APPARENT. THERE FORE, THE MERE CIRCUMSTANCE OF A COMPANY - OTHERWISE CONFORMING TO THE STIPULATIONS IN RULE 10B (2) IN A LL DETAILS, PRESENTING A PECULIAR FEATURE - SUCH AS A HUGE PROFIT OR A HUGE TURNOVER, IPSO FACTO DOES NOT LEAD TO ITS EXCLUSION. THE TPO, FIRST, HAS TO BE SATISFIED THAT SUCH DIFFERENCES DO NOT 'MATERIALLY AFFECT THE PRICE...O R COST'; SECONDLY, AN ATTEMPT TO MAKE REASONABLE ADJUSTMENT TO ELIMINATE THE MATERIAL EFFECT OF SUCH DIFFERENCES H AS TO BE MADE. IN LIGHT OF THE ABOVE, WE DIRECT THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES. 120. WITH REGARDS TO REVENUES STAND THAT SIP TECHN OLOGIES NEED TO BE REJECTED ON THE GROUND THAT IT SUFFERED LOSSE S, IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT FOR THE FILTER OF PE RSISTENT LOSSES TO COME INTO PLAY IT SHOULD BE SHOWN THAT THE COMPARAB LE UNDER DISPUTE HAS INCURRED LOSSES FOR THREE PRECEDING YEA RS INCLUDING THE ASSESSMENT YEAR IN QUESTION. RELIANCE IN THIS R EGARD IS PLACED ON THE PUNE ITAT ORDER IN CASE OF BOBST INDIA (P.) LTD. VS. DCIT [2015] 63 TAXMANN.COM (PUNE-TRIB.) WHEREIN THE BEN CH OBSERVED THAT A COMPANY CAN BE REJECTED AS PERSISTENT LOSS M AKER ONLY IF IT HAS INCURRED LOSSES FOR MORE THAN 3 YEARS. IN THE P RESENT CASE IN THE IMMEDIATE PRECEDING YEAR THE COMPARABLE COMPANY HAS SHOWED OPERATING PROFIT OF 13.90%, THUS, AS THE COM PANY HAS NOT 73 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) SUFFERED LOSSES AND ITS FUNCTIONALITY HAS NOT BEEN CHALLENGED BY THE TPO, IT BECOMES CLEAR THAT THERE IS NO VALID GR OUND TO EXCLUDE THIS COMPANY AS COMPARABLE. 121. ON A CAREFUL CONSIDERATION OF THE FACTUAL AND LEGAL POSITION, WE FIND THAT THIS COMPANY IS A VALID COMPARABLE TO THE ASSESSEE AND, THEREFORE, HAS TO BE INCLUDED IN THE FINAL SET OF COMPARABLES.' 3.3.4 RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE DIRECT THE AO / TPO TO INCLUDE THIS COMPA NY IN THE LIST OF COMPARABLES. (II) PSI DATA SYSTEM LTD. (PSI DATA): 3.3.5 THE NEXT COMPARABLE BEING AGITATED FOR INCLU SION BY THE ASSESSEE IS PSI DATA WHICH THE LD. COUNSEL MENTIONE D WAS SUBMITTED AS A COMPARABLE IN ITS TP STUDY AND BEEN ACCEPTED B Y THE TPO AS WELL, AS EVIDENCED FROM PAGE 44 OF THE TPOS ORDER, HOWEVER THE SAME HAS NOT BEEN INADVERTENTLY BEEN ADDED IN THE FINAL LIST OF COMPARABLES. 3.3.6 THE LD. CIT DEPARTMENTAL REPRESENTATIVE FAIR LY ACCEPTED THAT IF THIS COMPANY PASSES ALL FILTERS AND HAS BEE N ACCEPTED BY THE TPO ITSELF, THEN THIS COMPARABLE MAY BE INCLUDED. 3.3.7 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF THE ACCEPTANCE 74 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) GIVEN BY THE LD. CIT DEPARTMENTAL REPRESENTATIVE, W E DIRECT THE AO/ TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARAB LES. 3.4.0 AS REGARDS GROUND NOS. 1.4 AND 1.5, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE COMPUTING THE PROFIT MARGIN OF THE COMPARABLES, THE TPO HAS INCORRECTLY CONSIDERED CER TAIN INCOME/ EXPENSES AS OPERATING/NON-OPERATING AND PRAYED THAT NECESSARY DIRECTIONS MAY BE PASSED TO RE-COMPUTE THE MARGIN/S OF COMPARABLE/S. FURTHER, HE PRAYED THAT RISK ADJUSTME NT MAY BE ALLOWED IN TERMS OF RULE 10B (1)(E) READ WITH RULE 10B(2)/(3) OF THE RULES. 3.4.1 ON THE ISSUE OF CLAIM FOR RISK ADJUSTMENT, T HE LD. COUNSEL SUBMITTED THAT THE CLAIM HAD BEEN MADE BOTH BEFORE THE TPO AS WELL AS THE LD. DRP. HOWEVER, BOTH HAVE DENIED THE ASSES SEE'S CLAIM. THE LD. COUNSEL FURTHER SUBMITTED THAT WHILE ESTIMATING THE RETURN FOR UNCONTROLLED COMPANY, THERE IS A NEED TO GIVE AN APPROPRIATE ADJUSTMENT PERTAINING TO MARKET/SYSTEMA TIC RISK FACED. UNCONTROLLED COMPARABLE COMPANIES OPERATE UNDER UNC ONTROLLED CONDITIONS BEARING CERTAIN RISKS DURING THE COURSE OF ITS OPERATIONS. THEREFORE, SUCH COMPARABLE UNCONTROLLED COMPANIES E ARN A RISK PREMIUM WHICH IS NOT EARNED BY A CAPTIVE SOFTWARE D EVELOPMENT PROVIDER SIMILAR TO THE ASSESSEE WHICH IS A RISK AV ERSE AND, THEREFORE, 75 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THE PROFITS OF THE CAPTIVE UNIT WOULD BE LESS THAN RISK TAKING COMPANIES AND HENCE, AN ADJUSTMENT IN THIS REGARD I S REQUIRED. HE PLACED RELIANCE ON THE DECISION OF THE COORDINATE B ENCH IN MOTOROLA SOLUTIONS INDIA (P.) LTD'S CASE, INTELLINET TECHNOL OGIES INDIA (P.) LTD. VS. ITO REPORTED IN [2012] 22 TAXMANN.COM 28/53 SOT 92 (BANG.) (URO) AND BEARING POINT BUSINESS CONSULTING (P.) LT D. VS. DY. CIT REPORTED IN [2013] 33 TAXMANN.COM 92/57 SOT 244 (BANG. - TRIB.) IN SUPPORT OF ASSESSEE'S CLAIM FOR RISK ADJU STMENT. 3.4.2 THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND VEHEMENTLY ARGUED THAT SINCE CONTEMPORANEOUS DATA WAS NOT PROD UCED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF RISK ADJUSTME NT THE CLAIM HAS BEEN CORRECTLY REJECTED. 3.4.3 WE HAVE CONSIDERED THE SUBMISSIONS OF THE PA RTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ON OVERALL FACTUAL MATRIX OF THE ISSUES AND AS LAST AND FINAL OPPORTUNITY AND IN THE INTEREST OF JUSTICE, IT IS OUR CONSIDERED OPINION THAT THE ISSU ES RAISED IN GROUND NOS. 1.4 AND 1.5 REQUIRE RECONSIDERATION AND RE-EXA MINATION AND ARE THUS RESTORED TO THE FILE OF AO/TPO FOR PASSING APP ROPRIATE ORDERS IN ACCORDANCE WITH LAW AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 76 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.5.0 NOW WE WILL DEAL WITH GROUNDS RELATING TO SI M CARD ASSEMBLY SEGMENT (GROUND NOS. 2 TO 2.8 AND ADDITION AL GROUND/S NO. 2.9 AND 2.10). 3.5.1 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE H AS SUBMITTED THAT HIS PLEADINGS CAN BE SUMMARIZED ON THE FOLLOWI NG LEGAL POINTS: A. TRANSFER PRICING ADJUSTMENT SHOULD BE RESTRICTED TO THE VALUE OF INTERNATIONAL TRANSACTION (I.E. EXCLUDING DOMESTIC TRANSACTION WITH UNRELATED PARTIES) B. CAPACITY ADJUSTMENT MAY BE GRANTED C. WORKING CAPITAL ADJUSTMENT MAY BE GRANTED D. AS AN ALTERNATIVE ARGUMENT, IT IS SUBMITTED THAT SI NCE THE ASSESSEE HAS ALSO UNDERTAKEN DOMESTIC TRANSACTIONS IN SIM CARD ASSEMBLY SEGMENT AND AN INTERNAL COMPARABL E IN THAT REGARD IS AVAILABLE, NECESSARY DIRECTIONS M AY BE PASSED TO USE INTERNAL COMPARABLE TO DETERMINE THE ARM'S LENGTH PRICE. E. LASTLY, AS AN ALTERNATIVE ARGUMENT, IT IS SUBMITTED THAT IF RELIABLE DATA IS NOT AVAILABLE TO DETERMINE ARM'S L ENGTH PRICE OF AN INTERNATIONAL TRANSACTION BY TAKING THE INDIAN ENTITY AS THE TESTED PARTY, THEN THE FOREIGN ASSOCI ATED ENTERPRISE ('AE') MAY BE TAKEN AS THE TESTED PARTY. 77 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.5.2 THE ADDITIONAL GROUNDS (GROUND NOS. 2.9 AND 2.10) FILED IN THE PRESENT APPEAL DEAL WITH TAKING FOREIGN AE AS T HE TESTED PARTY. FURTHER, CONTEMPORANEOUS DATA AND TRANSFER PRICING ANALYSIS BY TAKING FOREIGN AE AS THE TESTED PARTY HAVE BEEN PRO DUCED BEFORE US VIDE A SEPARATE APPLICATION TO FILE ADDITIONAL EVID ENCE. 3.5.3 IT IS SUBMITTED BEFORE US THAT IF THE LEGAL SUBMISSIONS REGARDING THE FIRST THREE ARGUMENTS ARE ACCEPTED TH EN THERE WOULD BE NO NECESSITY TO ADJUDICATE THE ALTERNATIVE ARGUMENT S. 3.5.4 THE FIRST ISSUE RAISED BY THE LD. COUNSEL FO R THE ASSESSEE IS REGARDING RESTRICTING THE TRANSFER PRICING ADJUSTME NT TO THE VALUE OF THE INTERNATIONAL TRANSACTION. OUR ATTENTION WAS DR AWN TO PAGES 32, 46, 57 AND 288 OF THE PAPER BOOK TO SHOW THAT DURIN G THE RELEVANT PERIOD THE TOTAL OPERATING EXPENSES OF RS. 63,79,13 ,808/- WERE INCURRED ON THE SIM CARD SEGMENT. OUT OF THE TOTAL OPERATING EXPENSES, A SUM OF RS. 41,04,24,653/- RELATED TO RA W MATERIALS, STORES AND SPARES CONSUMES AND OUT OF THIS A SUM OF RS. 7,07,33,702/- PERTAINED TO INDIGENOUS PURCHASE (DOM ESTIC TRANSACTION). IT WAS ARGUED BEFORE US THAT THE TPO, WHILE DETERMINING THE ARM'S LENGTH PRICE OF THIS TRANSACTION, HAS ERR ONEOUSLY TAKEN THE TOTAL OPERATING EXPENSES AT THE ENTITY LEVEL, WHICH IS NOT PERMISSIBLE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ALSTOM PROJECTS INDIA LTD. REPORTED IN 78 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) [2017] 394 ITR 141 (BOMBAY) AND OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT V. KEIHIN PANALFA LTD. (ITA NO.1 1 OF 2015), JUDGMENT DATED 09.09.2015. HE FURTHER POINTED OUT THAT THE L D. DISPUTE RESOLUTION PANEL HAS DECIDED THIS ISSUE IN FAVOUR O F ASSESSEE IN ASSESSMENT YEAR 2014-15 WHILST DIRECTING THE TPO TO ALLOW PROPORTIONATE ADJUSTMENT AND RESTRICTING THE TRANSF ER PRICING ADJUSTMENT TO RELATED PARTY INTERNATIONAL TRANSACTI ONS. 3.5.5 THE LD. CIT DEPARTMENTAL REPRESENTATIVE PLAC ED HEAVY RELIANCE ON THE ORDER OF THE TPO / DRP. 3.5.6 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE NOTICE THAT THE TPO, WHILE BENCHMARKING THIS TRANSACTION (SIM CARD ASSEM BLY SEGMENT), HAS TAKEN THE VALUE OF TRANSACTION AT ENTITY LEVEL RATHER THAN RESTRICTING THE EXERCISE OF BENCHMARKING TO THE VAL UE OF INTERNATIONAL TRANSACTION BETWEEN THE ASSOCIATED ENTERPRISES AND ALSO INCLUDED THE VALUE OF INDIGENOUS PURCHASES FROM THE LOCAL PARTIE S. WE ARE OF THE CONSIDERED OPINION THAT THE MANDATE OF CHAPTER X OF THE ACT IS VERY CLEAR AND ONLY THE INTERNATIONAL TRANSACTIONS BETWE EN RELATED PARTIES ARE TO BE CONSIDERED FOR THE PURPOSES OF BENCHMARKI NG. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CIT VS. ALSTOM PROJECTS INDIA LTD REPORTED IN [2017] 39 4 ITR 141 (BOMBAY), WHEREIN IT IS HELD AS FOLLOWS : 79 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) '2. MR. P.C. CHHOTARAY, LEARNED COUNSEL FOR THE APP ELLANT URGES THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION : 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING T HAT THE TPO HAS APPLIED THE TRANSFER PRICING ADJUSTMENT TO ALL TRANSACTIONS, I.E. ENTITY LEVEL IN THE ABSENCE OF A CTUAL SEGMENTAL ACCOUNTS BEING MAINTAINED ON REGULAR BASI S BY THE ASSESSEE ?' 3. THE IMPUGNED ORDER OF THE TRIBUNAL UPHELD THE RE SPONDENT- ASSESSEE'S CONTENTION THAT THE TRANSFER PRICING ADJ USTMENT HAS TO BE MADE ONLY IN RESPECT OF TRANSACTION ENTERED INTO BY THE RESPONDENT-ASSESSEE WITH ITS ASSOCIATED ENTERPRISES . 4. THE GRIEVANCE OF THE REVENUE IS THAT IN THE ABSE NCE OF SEGMENTAL ACCOUNTS BEING MAINTAINED BY THE RESPONDE NT- ASSESSEE, TRANSFER PRICING ADJUSTMENT HAD TO BE DON E AT ENTITY LEVEL. WE SPECIFICALLY ASKED MR. CHHOTARAY, LEARNED COUNSEL FOR THE APPELLANT WHETHER ANY SUCH SUBMISSION WAS ADVAN CED BY THE REVENUE BEFORE THE TRIBUNAL. AT THIS, HE FAIRLY STA TES THAT NO SUCH SUBMISSION WAS MADE ON BEHALF OF THE REVENUE. THUS WE FAIL TO UNDERSTAND HOW THE PRESENT QUESTION ARISES FROM THE IMPUGNED ORDER OF THE TRIBUNAL. 5. BE THAT AS IT MAY, MR. CHHOTARAY, LEARNED COUNSE L FOR THE REVENUE SUBMITS THAT IDENTICAL QUESTION AS RAISED H EREIN HAD BEEN ADMITTED BY THIS COURT AND IN PARTICULAR INVIT ED OUR ATTENTION TO THE FOLLOWING ORDERS PASSED AT THE STAGE OF ADMI SSION: (A) CIT VS. SUPER DIAMONDS, INCOME TAX APPEAL NO. 2 98 OF 2013; (ORDER DATED 16 FEBRUARY 2015); AND (B) CIT V. GLOBAL JEWELLERY (P.) LTD. INCOME TAX AP PEAL NO.1395 OF 2013. (ORDER DATED 16 APRIL 2015) 80 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 6. IN BOTH THE ABOVE APPEALS WE FIND THAT THE QUEST ION ADMITTED WAS WITH REGARD TO TRANSFER PRICING ADJUSTMENT BEIN G DONE AT THE ENTITY LEVEL AND NOT RESTRICTED ONLY TO THE TRANSAC TIONS WITH ASSOCIATED ENTERPRISES. HOWEVER, BOTH THE APPEALS W ERE ADMITTED WITHOUT THE COURT HAVING HAD BENEFIT OF SUBMISSIONS ON BEHALF OF THE RESPONDENT-ASSESSEE. 7. THEREAFTER THIS COURT CONSEQUENT TO THE ABOVE TW O ORDERS HAD OCCASION TO CONSIDER THE ISSUE OF TRANSFER PRICING ADJUSTMENTS BEING DONE IN RESPECT OF ALL TR ANSACTIONS (ENTITY LEVEL) OR ONLY IN RESPECT OF TRANSACTION EN TERED INTO WITH ASSOCIATED ENTERPRISES IN THE FOLLOWING CASES: (I) CIT V. HINDUSTAN UNILEVER LTD. [2017] 394 ITR 73/[2016] 72 TAXMANN.COM 325 (BOM.); (II) CIT V. TARA JEWELS EXPORTS (P.) LTD. [2016] 38 1 ITR 404/80 TAXMANN.COM 117 (BOM.); (III) CIT V. PETRO ARALDITE (P.) LTD. INCOME TAX AP PEAL NO.1804 OF 2013 RENDERED ON 24TH NOVEMBER 2015; (IV) CIT V. THYSSEN KRUPP INDUSTRIES (P.) LTD. [201 6] 381 ITR 413/70 TAXMANN.COM 329 (BOM.); (V) CIT V. SUMMIT DIAMOND (INDIA) PVT. LTD. INCOME TAX APPEAL NO.1647 OF 2013 RENDERED ON 11TH JULY 2016. IN ALL ABOVE APPEALS, THIS COURT AFTER HEARING BOTH SIDES UPHELD THE VIEW OF THE TRIBUNAL THAT THE TRANSFER PRICING ADJUSTMENT HAS TO BE DONE ONLY IN RESPECT OF INTERNATIONAL TRANSAC TIONS WITH ASSOCIATED ENTERPRISES AND NOT AT AN ENTITY LEVEL. IT MAY BE POINTED OUT THAT DURING THE COURSE OF ALL THE ABOVE APPEALS, THE FACT THAT TWO APPEALS HAD BEEN ADMITTED ON THE ABOV E ISSUE WERE NOT POINTED OUT. 81 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 8. NEVERTHELESS, THE DISTINCTION SOUGHT TO BE MADE BY THE REVENUE IS THAT THE ISSUE OF NON KEEPING OF SEGMENTAL ACCOU NTS BY THE ASSESSEE WAS NOT FOR CONSIDERATION IN THE ABOVE CAS ES WHICH WERE DISMISSED, AS IN THIS CASE. 9. THIS VERY ISSUE/QUESTION AS RAISED HEREIN WAS RA ISED BY THE REVENUE IN PETRO ARALDITE (P.) LTD. (SUPRA). THE Q UESTION RAISED THEREIN WAS AS UNDER: 'WHETHER ON THE FACTS AND LAW THE TRIBUNAL WAS JUST IFIED IN DIRECTING AO/TPO TO BENCH MARK AS AE TRANSACTIONS W ITHOUT APPRECIATING (A) THE ASSESSEE ITSELF IN ITS TRANSFE R PRICING STUDY & REPORT (TPSR) HAS CHOSEN ENTITY LEVEL PLI T O BENCHMARK THE AE TRANSACTIONS; (B) THE ASSESSEE HAD ITSELF FAILED TO FURNISH AUDITED SEGMENTAL ACCOUNTS AND TH EREFORE, THE TPO HAD RIGHTLY APPLIED REVISED PLI AT THE ENTI TY LEVEL TO DETERMINE THE ALP?' AT THE ABOVE HEARING, THE REVENUE ACCEPTED THAT EVE N IN THE ABSENCE OF SEGMENTAL ACCOUNTS, THE ADJUSTMENT HAS T O BE DONE ONLY IN RESPECT OF THE INTERNATIONAL TRANSACTIONS W ITH ASSOCIATED ENTERPRISES. THIS IS SO RECORDED IN THE ORDER DATED 24 NOVEMBER 2015. THEREFORE, ON THE ABOVE GROUND ITSELF, THE QU ESTION AS PROPOSED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUES TION OF LAW. 10. WE MAY ONCE MORE NOTE THAT THE INCOME TAX DEPAR TMENT WITHIN THE JURISDICTION OF THIS COURT MUST ADOPT A CONSISTENT VIEW ON ISSUES OF LAW. IN THIS CASE, WE FIND THAT THE RE VENUE URGES THE ABSENCE OF SEGMENTAL ACCOUNTS WOULD WARRANT ENTITY WISE ADJUSTMENT, WHEN THE REVENUE HAD ITSELF IN PET RO ARALDITE (P.) LTD. (SUPRA) DID NOT CANVAS THE POINT, AS EVEN ACCORDING TO IT 82 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THE ISSUE STOOD COVERED BY THE EARLIER ORDERS OF TH IS COURT IN FAVOUR OF THE ASSESSEE. THE REVENUE MUST APPLY THE LAW EQUALLY TO ALL AND CANNOT TAKE INCONSISTENT POSITION IN LAW (DE HORS THE FACTS) TO APPLY DIFFERENT STANDARDS TO DIFFERENT AS SESSEE. THE ADMINISTRATION OF THE TAX LAWS SHOULD NOT DEGENERAT E INTO AN ARBITRARY AND INCONSISTENT APPLICATION OF LAW DEPEN DENT UPON THE ASSESSEE CONCERNED. 11. WE ALSO NOTE THAT THE DELHI HIGH COURT IN CIT V . KEIHIN PANALFA LTD. (ITA NO.11 OF 2015) DECIDED ON 9TH SEP TEMBER, 2015 HAS WHILE DEALING WITH TRANSFER PRICING ADJUSTMENT IN THE ABSENCE OF SEGMENTAL ACCOUNTS HELD THAT ADJUSTMENTS HAVE TO BE RESTRICTED ONLY TO TRANSACTIONS WITH ASSOCIATED ENTERPRISES. I T FURTHER HELD THAT WHERE SEPARATE ACCOUNTS ARE NOT AVAILABLE, THEN PROPORTIONATE ADJUSTMENTS TO BE MADE ONLY IN R ESPECT OF THE INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRI SES. 12. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW OF THE DELHI HIGH COURT IN KEIHIN PANALFA LTD. (SUPRA). ONE MUST NOT LOSE SIGHT OF THE FACT THAT THE TRANSFER PRICING ADJUSTMENT IS DONE U NDER CHAPTER X OF THE ACT. THE MANDATE THEREIN IS ONLY TO REDETERM INE THE CONSIDERATION RECEIVED OR GIVEN TO ARRIVE AT INCOME ARISING FROM FOR INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRI SES. THIS IS PARTICULARLY SO AS IN RESPECT OF TRANSACTION WITH N ON ASSOCIATED ENTERPRISES, CHAPTER X OF THE ACT IS NOT TRIGGERED TO MAKE ADJUSTMENT TO CONSIDERATIONS RECEIVED OR PAID UNLESS THEY ARE SPECIFIED DOMESTIC TRANSACTIONS. THE TRANSACTIO N WITH NON- ASSOCIATED ENTERPRISES ARE PRESUMED TO BE AT ARMS L ENGTH AS THERE IS NO RELATIONSHIP WHICH IS LIKELY TO INFLUEN CE THE PRICE. IF THE CONTENTION OF THE REVENUE IS ACCEPTED, IT WOULD LEA D TO ARTIFICIAL 83 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) INCREASE IN THE PROFITS OF TRANSACTIONS ENTERED INT O WITH NON ASSOCIATED ENTERPRISES BY APPLYING THE MARGIN AT EN TITY LEVEL WHICH IS NOT THE OBJECT OF CHAPTER X OF THE ACT. AB SENCE OF SEGMENTAL ACCOUNTING IS NOT AN INSURMOUNTABLE ISSUE , AS PROPORTIONATE BASIS COULD BE ADOPTED AS DONE BY THE DELHI HIGH COURT IN KEIHIN PANALFA LTD. (SUPRA). 13. IN THE ABOVE VIEW, NO SUBSTANTIAL QUESTION OF L AW ARISES. THEREFORE, WE DO NOT ENTERTAIN THE PRESENT APPEAL.' 3.5.7 AFTER CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT AND THE HON'BLE DELHI HIGH COURT, WE HOLD THAT THE PROPORTIONATE ADJUSTME NT IS TO BE ALLOWED TO THE ASSESSEE AND THE EXERCISE OF BENCHMA RKING IS TO BE RESTRICTED TO THE VALUE OF INTERNATIONAL TRANSACTIO N. ON THE OVERALL FACTUAL MATRIX, WE RESTORE THIS ISSUE TO THE FILE O F AO/TPO TO RE- COMPUTE AND BENCHMARK THIS TRANSACTION, AFTER GIVIN G SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 3.6.0 THE SECOND ISSUE ARGUED BY THE LD. COUNSEL F OR THE ASSESSEE IS REGARDING ALLOWABILITY OF CAPACITY ADJU STMENT. DURING THE COURSE OF ASSESSMENT, TPO HAS DEALT WITH THE ISSUE OF ALLOWABILITY OF CAPACITY ADJUSTMENT WHILST OBSERVING AS FOLLOWS: 'THE ASSESSE HAS PROVIDED SOME OF THE CAPACITY UTIL IZATION FIGURES OF THE COMPARABLES. HOWEVER OUT OF THE 4 COMPARABLE S, DATA IS NOT AVAILABLE IN RESPECT OF CIRCUIT SYSTEMS INDIA LTD. IN RESPECT OF 84 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) FINE-LINE CIRCUIT LTD, THE DATA IS NOT AVAILABLE IN RESPECT OF HIGH TECHNOLOGY MULTILAYER BROAD SEGMENT. UNDER THESE CI RCUMSTANCES, THIS DATA CANNOT BE USED TO COME TO A CONCLUSION IN THIS REGARD. NEVERTHELESS, AN ANALYSIS WAS MADE AS TO WHAT IS TH E PERCENTAGE OF TOTAL EXPENDITURE THAT DEPRECIATION ACCOUNTS FOR IN RESPECT OF THE ASSESSE VIS--VIS THE COMPARABLES. IN RESPECT OF TH E ASSESSE IT WAS FOUND THAT DEPRECIATION WAS 4.27% OF THE TOTAL EXPENDITURE OF THIS SEGMENT. IN RESPECT OF THE COMPARABLES IT WAS SEEN AS BELOW. S.NO. NAME DEPN./TC (%) 1. BCC FUBA INDIA LTD. 10.06 2. CIRCUIT SYSTEMS INDIA LTD. 3.95 3. FINE-LINE CIRCUITS INDIA LTD. 5.32 4. SOLECTRON EMS INDIA LTD. 1.80 AVERAGE 5.28 AS IT CAN BE SEEN, THE DIFFERENCE IS NOT SO LARGE A S TO HAVE A TELLING EFFECT ON THE PROFITABILITY OF THE ASSESSE. ANOTHER EXERCISE WAS UNDERTAKEN, OF CALCULATING THE OP/SALE MARGIN OF TH E ASSESSE AND COMPARABLES AFTER EXCLUDING DEPRECIATION. THE RESUL T IN THE CASE OF THE ASSESSE WAS (-) 15.22%. IN THE CASE OF THE COMP ARABLES IT WAS AS FOLLOWS: S.NO. NAME OP/SALES (%) 1. BCC FUBA INDIA LTD. 1.18 2. CIRCUIT SYSTEMS INDIA LTD. 12.76 3. FINE-LINE CIRCUITS INDIA LTD. (-)1.45 4. SOLECTRON EMS INDIA LTD. 6.64 AVERAGE 4.78 AS CAN BE SEEN, THE DIFFERENCE BETWEEN THE ASSESSEE S MARGIN AND THAT OF THE COMPARABLES WITH OR WITHOUT DEPRECI ATION REMAINS 85 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) MORE OR LESS CONSTANT. HENCE, THERE IS NO CASE FOR A COMPARABILITY ADJUSTMENT ON ACCOUNT OF UNUTILIZED CAPACITY IN THI S CASE. BESIDES THIS, ADMITTEDLY THE CAPACITY UTILIZATION R ISK IN THIS SEGMENT IS ALSO BORNE BY THE ASSESSE. HENCE, AS ARG UED EARLIER, THERE CAN BE NO CASE FOR COMPARABILITY ADJUSTMENT O NCE THE RISK IS BORNE BY THE ASSESSE.' 3.6.1 WHILE DEALING WITH THE OBJECTIONS FILED BY T HE ASSESSEE REGARDING ALLOWABILITY OF CAPACITY ADJUSTMENT, THE LD. DRP HAS OBSERVED AS FOLLOWS: 'THE ISSUE OF CAPACITY ADJUSTMENT HAS BEEN CONSIDER ED IN DETAIL BY THE TPO. SINCE THE DATA OF THE COMPARABLES WAS N OT AVAILABLE WITH THE TPO, HE TRIED TO MAKE A STUDY USING DEPREC IATION FIGURE IN ORDER TO FIND OUT IF THERE WAS ANY MARKED DIFFER ENCES IN ASSET UTILIZATION LEVELS. IT WAS NOT AN IMPLIED POSITION OF THE TPO TO ASCERTAIN CASH LOSS OF THE ASSESSE. HOWEVER, SINCE THE CAPACITY UTILIZATION FIGURES DULY CERTIFIED BY AUDITORS ARE NOT AVAILABLE, THE CAPACITY UTILIZATION WAS NOT CONSIDERED. WE DO NOT FIND ANY INFIRMITY IN THIS.' 3.6.2 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY ARGUED THAT, UNDISPUTEDLY, ASSESSEE WAS BEARING THE RISK OF IDLE CAPACITY AND THIS BEING ONE OF THE INITIAL YEARS OF OPERATION OF ITS BUSINESS, CAPACITY ADJUSTMENT OUGHT TO HAVE BEEN GR ANTED IN TERMS OF RULE 10B (1)(E)(III) READ WITH RULE 10B(2)/(3) OF T HE INCOME TAX RULES, 86 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 1962 ('RULES'). ON THE ISSUE OF ALLOWABILITY AND TH E MANNER OF COMPUTING THE CAPACITY ADJUSTMENT, HE PLACED HEAVY RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENTS: I. CIT VS PETRO ARALDITE PVT. LTD. [2018] 93 TAXMANN.C OM 438 (BOMBAY)/[2018] 256 TAXMAN 16 (BOMBAY) II. M/S. ROYAL STAR JEWELLERY PVT. LTD. VS ACIT & OTHER , ITA 2463/2013, ORDER DATED 30.01.2017 (BOMBAY HIGH COUR T) III. TRANSWITCH INDIA (P.) LTD. V. DY. CIT [2012] 21 TAXMANN.COM 257/53 SOT 151 (DELHI - TRIB.) IV. DY. CIT V. CLASS INDIA (P.) LTD. [2015] 62 TAXMANN. COM 173 (DELHI); V. SAXO INDIA (P.) LTD. V ASSTT. CIT [2016] 67 TAXMANN .COM 155 (DELHI - TRIB.) VI. MOLEX INDIA TOOLING (P.) LTD. VS DCIT [2016] 75 TAXMANN.COM 303 (BANGALORE - TRIB.) VII. HCL TECHNOLOGIES BPO SERVICES LTD. V. ASSTT. CIT [2 015] 60 TAXMANN.COM 186/69 SOT 571 (DELHI) VIII. GLOBAL TURBINE SERVICES INC. V. ADIT (INTERNATIONAL TAXATION) [2013] 38 TAXMANN.COM 220 (DELHI) IX. DY. CIT V. INNODATA ISOGEN INDIA (P.) LTD. [IT APPE AL NO. 5390 (DELHI) OF 2010] X. GOOGLE INDIA (P.) LTD. [IT APPEAL NO. 1170 (BANG.) OF 2011] XI. CALSONIC KANSEL MOTHERSON PRODUCTS LTD. VS DCIT [20 16] 72 TAXMANN.COM 109 (DELHI - TRIB.) XII. FIAT INDIA (P.) LTD. [IT APPEAL NO. 1848 (MUM.) OF 2009] XIII. GLOBAL VANTEDGE (P.) LTD. V. DY. CIT [2010] 37 SOT 1 (DELHI). 87 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) XIV. TASTY BITE EATABLES LTD. VS ACIT [2015] 59 TAXMANN. COM 437 (PUNE - TRIB.) 3.6.3 FURTHER, THE LD. COUNSEL FAIRLY ACCEPTED OUT THAT THE ISSUE OF ALLOWABILITY OF CAPACITY ADJUSTMENT WAS DECIDED AGAINST THE ASSESSEE IN EARLIER ASSESSMENT YEAR BY THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL VIDE ORDER DATED 15.03.2013. HE SUBMITTED THAT THOUGH AN APPEAL WAS FILED CHALLENGING THE SAID ORDER DATED 1 5.03.2013 PASSED BY THE TRIBUNAL, THE HON'BLE DELHI HIGH COURT, VIDE ORDER DATED 27.08.2014, DISMISSED THE APPEAL OF THE ASSESSEE AS BEING BARRED BY LIMITATION, BUT WITH A LIBERTY TO AGITATE THIS ISSU E BEFORE THE TRIBUNAL IN SUBSEQUENT YEARS AND TO SUITABLY REPRESENT THE R ELEVANT FACTS AND LEGAL POSITION BEFORE THE TRIBUNAL IN ACCORDANCE WI TH LAW. HE FURTHER TRIED TO DISTINGUISH THE EARLIER DECISION OF THE CO ORDINATE BENCH WHILST ARGUING THAT THE TRIBUNAL IN ITS EARLIER DECISION H AD PER SE NOT CONSIDERED THE ISSUE OF ALLOWABILITY OF CAPACITY AD JUSTMENT AND HAD REFUSED TO INTERFERE WITH THE FINDINGS OF LOWER AUT HORITIES ON THIS ISSUE AS THE RELEVANT DATA WAS NOT AVAILABLE ON RECORD. H E SUBMITTED THAT THE RELEVANT DATA IS NOW AVAILABLE ON RECORD. TO BU TTRESS HIS ARGUMENTS, HE PLACED HEAVY RELIANCE ON A RECENT DEC ISION OF THE HON'BLE SUPREME COURT IN CANARA BANK VS. N.G. SUBBA RAYA SETTY & ANR. REPORTED IN 2018 SCC ONLINE SC 427, WHEREIN EXCEPTIONS TO THE 88 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PRINCIPLE OF RES JUDICATA HAVE BEEN EXPLAINED. HE ARGUED THAT SINCE NOW ISSUE OF ALLOWABILITY AND COMPUTATION OF CAPACI TY ADJUSTMENT HAS BEEN SETTLED BY A HIGHER FORUM, I.E., THE BOMBAY HI GH, WHILST INTERPRETING THE PROVISIONS OF RULE 10B (1)(E) READ WITH RULE 10B(2)/(3) OF THE RULES, A LEGALLY SUSTAINABLE CLAI M OF ASSESSEE CANNOT BE REJECTED. 3.6.4 THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ARGUED THAT THE DECISION OF THIS TRIBUNAL REJECTING THE CLAIM O F CAPACITY ADJUSTMENT BE FOLLOWED. 3.6.5 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND FO RCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THA T IN TERMS OF THE LIBERTY GRANTED BY THE HON'BLE HIGH COURT IN ASSESS EE'S OWN CASE AND IN VIEW OF THE RECENT DECISION OF HON'BLE BOMBAY HI GH COURT IN CIT VS. PETRO ARALDITE PVT. LTD. REPORTED IN [2018] 93 TAXM ANN.COM 438 (BOMBAY)/[2018] 256 TAXMAN 16 (BOMBAY), WHEREIN IT IS HELD THAT CAPACITY ADJUSTMENT IS ALLOWABLE IN TERMS OF RULE 1 0B (1)(E)(III) READ WITH RULE 10B(2)/(3) OF THE RULES, THE EARLIER DECI SION OF COORDINATE BENCH IN ASSESSEE'S OWN CASE WOULD NO ACT AS A IMPE DIMENT TO ALLOW CAPACITY ADJUSTMENT FOR THE RELEVANT PERIOD. WE NOT ICE THAT LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD REVIS ED WORKING WITH 89 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) RESPECT TO COMPUTATION OF CAPACITY ADJUSTMENT IN TE RMS OF THE RECENT DECISION OF COORDINATE BENCHES OF THE TRIBUNAL AND THE HON'BLE HIGH COURT AND, THEREFORE, THE EARLIER DECISION OF TRIBU NAL IS DISTINGUISHABLE ON THIS COUNT ITSELF. WE ARE OF THE OPINION THAT IF CORRECT AND RELIABLE DATA IS AVAILABLE, THEN CAPACI TY ADJUSTMENT DESERVES TO BE ALLOWED IN TERMS OF RULE 10B OF THE RULES. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF HON'BLE SUPREM E COURT IN CANARA BANK VS. N.G. SUBBARAYA SETTY & ANR. REPORTED IN 20 18 SCC ONLINE SC 427, WHEREIN EXCEPTIONS TO THE PRINCIPLE OF RES JUDICATA HAVE BEEN EXPLAINED, BY OBSERVING AS FOLLOWS: '34. GIVEN THE CONSPECTUS OF AUTHORITIES THAT HAVE BEEN REFERRED TO BY US HEREINABOVE, THE LAW ON THE SUBJECT MAY BE STATED AS FOLLOWS: (1) THE GENERAL RULE IS THAT ALL ISSUES THAT ARISE DIRECTLY AND SUBSTANTIALLY IN A FORMER SUIT OR PROCEEDING BETWEE N THE SAME PARTIES ARE RES JUDICATA IN A SUBSEQUENT SUIT OR PROCEEDING BETWEEN THE SAME PARTIES. THESE WOULD IN CLUDE ISSUES OF FACT, MIXED QUESTIONS OF FACT AND LAW, AN D ISSUES OF LAW. (2) TO THIS GENERAL PROPOSITION OF LAW, THERE ARE C ERTAIN EXCEPTIONS WHEN IT COMES TO ISSUES OF LAW: (I) WHERE AN ISSUE OF LAW DECIDED BETWEEN THE SAME PARTIES IN A FORMER SUIT OR PROCEEDING RELATES TO THE JURISDIC TION OF THE COURT, AN ERRONEOUS DECISION IN THE FORMER SUIT OR PROCEEDING 90 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) IS NOT RES JUDICATA IN A SUBSEQUENT SUIT OR PROCEED ING BETWEEN THE SAME PARTIES, EVEN WHERE THE ISSUE RAIS ED IN THE SECOND SUIT OR PROCEEDING IS DIRECTLY AND SUBST ANTIALLY THE SAME AS THAT RAISED IN THE FORMER SUIT OR PROCE EDING. THIS FOLLOWS FROM A READING OF SECTION 11 OF THE CODE OF CIVIL PROCEDURE ITSELF, FOR THE COURT WHICH DECIDES THE S UIT HAS TO BE A COURT COMPETENT TO TRY SUCH SUIT. WHEN READ WI TH EXPLANATION (I) TO SECTION 11, IT IS OBVIOUS THAT B OTH THE FORMER AS WELL AS THE SUBSEQUENT SUIT NEED TO BE DE CIDED IN COURTS COMPETENT TO TRY SUCH SUITS, FOR THE FORMER SUIT CAN BE A SUIT INSTITUTED AFTER THE FIRST SUIT, BUT WHIC H HAS BEEN DECIDED PRIOR TO THE SUIT WHICH WAS INSTITUTED EARL IER. AN ERRONEOUS DECISION AS TO THE JURISDICTION OF A COUR T CANNOT CLOTHE THAT COURT WITH JURISDICTION WHERE IT HAS NO NE. OBVIOUSLY, A CIVIL COURT CANNOT SEND A PERSON TO JA IL FOR AN OFFENCE COMMITTED UNDER THE INDIAN PENAL CODE. IF I T DOES SO, SUCH A JUDGMENT WOULD NOT BIND A MAGISTRATE AND/OR SESSIONS COURT IN A SUBSEQUENT PROCEEDING BETWEEN T HE SAME PARTIES, WHERE THE MAGISTRATE SENTENCES THE SA ME PERSON FOR THE SAME OFFENCE UNDER THE PENAL CODE. E QUALLY, A CIVIL COURT CANNOT DECIDE A SUIT BETWEEN A LANDLORD AND A TENANT ARISING OUT OF THE RIGHTS CLAIMED UNDER A RE NT ACT, WHERE THE RENT ACT CLOTHES A SPECIAL COURT WITH JUR ISDICTION TO DECIDE SUCH SUITS. AS AN EXAMPLE, UNDER SECTION 28 OF THE BOMBAY RENT ACT, 1947, THE SMALL CAUSES COURT HAS EXCLUSIVE JURISDICTION TO HEAR AND DECIDE PROCEEDIN GS BETWEEN A LANDLORD AND A TENANT IN RESPECT OF RIGHT S WHICH ARISE OUT OF THE BOMBAY RENT ACT, AND NO OTHER COUR T HAS JURISDICTION TO EMBARK UPON THE SAME. IN THIS CASE, EVEN 91 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) THOUGH THE CIVIL COURT, IN THE ABSENCE OF THE STATU TORY BAR CREATED BY THE RENT ACT, WOULD HAVE JURISDICTION TO DECIDE SUCH SUITS, IT IS THE STATUTORY BAR CREATED BY THE RENT ACT THAT MUST BE GIVEN EFFECT TO AS A MATTER OF PUBLIC POLIC Y. (SEE, NATRAJ STUDIOS (P) LTD. V. NAVRANG STUDIOS, ( 1981) 1 SCC 523 : (1981) 2 SCR 466 AT 482). AN ERRONEOUS DE CISION CLOTHING THE CIVIL COURT WITH JURISDICTION TO EMBAR K UPON A SUIT FILED BY A LANDLORD AGAINST A TENANT, IN RESPE CT OF RIGHTS CLAIMED UNDER THE BOMBAY RENT ACT, WOULD, THEREFORE , NOT OPERATE AS RES JUDICATA IN A SUBSEQUENT SUIT FILED BEFORE THE SMALL CAUSES COURT BETWEEN THE SAME PARTIES IN RESP ECT OF THE SAME MATTER DIRECTLY AND SUBSTANTIALLY IN ISSUE IN THE FORMER SUIT. (II) AN ISSUE OF LAW WHICH ARISES BETWEEN THE SAME PARTIES IN A SUBSEQUENT SUIT OR PROCEEDING IS NOT RES JUDICATA I F, BY AN ERRONEOUS DECISION GIVEN ON A STATUTORY PROHIBITION IN THE FORMER SUIT OR PROCEEDING, THE STATUTORY PROHIBITIO N IS NOT GIVEN EFFECT TO. THIS IS DESPITE THE FACT THAT THE MATTER IN ISSUE BETWEEN THE PARTIES MAY BE THE SAME AS THAT D IRECTLY AND SUBSTANTIALLY IN ISSUE IN THE PREVIOUS SUIT OR PROCEEDING. THIS IS FOR THE REASON THAT IN SUCH CASES, THE RIGH TS OF THE PARTIES ARE NOT THE ONLY MATTER FOR CONSIDERATION ( AS IS THE CASE OF AN ERRONEOUS INTERPRETATION OF A STATUTE IN TER PARTIES), AS THE PUBLIC POLICY CONTAINED IN THE STATUTORY PRO HIBITION CANNOT BE SET AT NAUGHT. THIS IS FOR THE SAME REASO N AS THAT CONTAINED IN MATTERS WHICH PERTAIN TO ISSUES OF LAW THAT RAISE JURISDICTIONAL QUESTIONS. WE HAVE SEEN HOW, I N NATRAJ STUDIOS (SUPRA), IT IS THE PUBLIC POLICY OF THE STA TUTORY 92 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PROHIBITION CONTAINED IN SECTION 28 OF THE BOMBAY R ENT ACT THAT HAS TO BE GIVEN EFFECT TO. LIKEWISE, THE PUBLI C POLICY CONTAINED IN OTHER STATUTORY PROHIBITIONS, WHICH NE ED NOT NECESSARILY GO TO JURISDICTION OF A COURT, MUST EQU ALLY BE GIVEN EFFECT TO, AS OTHERWISE SPECIAL PRINCIPLES OF LAW ARE FASTENED UPON PARTIES WHEN SPECIAL CONSIDERATIONS R ELATING TO PUBLIC POLICY MANDATE THAT THIS CANNOT BE DONE. (III) ANOTHER EXCEPTION TO THIS GENERAL RULE FOLLOW S FROM THE MATTER IN ISSUE BEING AN ISSUE OF LAW DIFFERENT FRO M THAT IN THE PREVIOUS SUIT OR PROCEEDING. THIS CAN HAPPEN WH EN THE ISSUE OF LAW IN THE SECOND SUIT OR PROCEEDING IS BA SED ON DIFFERENT FACTS FROM THE MATTER DIRECTLY AND SUBSTA NTIALLY IN ISSUE IN THE FIRST SUIT OR PROCEEDING. EQUALLY, WHE RE THE LAW IS ALTERED BY A COMPETENT AUTHORITY SINCE THE EARLI ER DECISION, THE MATTER IN ISSUE IN THE SUBSEQUENT SUIT OR PROCE EDING IS NOT THE SAME AS IN THE PREVIOUS SUIT OR PROCEEDING, BECAUSE THE LAW TO BE INTERPRETED IS DIFFERENT.' 3.6.6 ON THE ISSUE OF ALLOWABILITY OF CAPACITY ADJ USTMENT, WE ARE OF THE CONSIDERED VIEW THAT HIGHER CAPACITY UTILIZA TION WOULD LEAD TO HIGHER PROFITABILITY AS FIXED COSTS WOULD BE SPREAD OVER IN A LARGER NUMBER OF UNITS MANUFACTURED. THE DIFFERENCE IN CAP ACITY UTILIZATION WOULD MATERIALLY AFFECT THE PROFIT MARGIN. THUS, IF THERE IS A DIFFERENCE IN THE LEVEL OF CAPACITY UTILIZATION OF THE ASSESSE E AND THE LEVEL OF CAPACITY UTILIZATION OF THE COMPARABLE, THEN ADJ USTMENT WOULD BE REQUIRED TO BE MADE TO THE PROFIT MARGIN OF THE COM PARABLE ON 93 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ACCOUNT OF DIFFERENCE IN CAPACITY UTILIZATION IN TE RMS OF RULE 10B (1)(E)(III) READ WITH RULE 10B(2)/(3) OF THE RULES. OUR VIEW IS FORTIFIED BY THE RECENT DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PETRO ARALDITE PVT. LTD. REPORTED IN [2018] 93 TAXMANN.COM 438 (BOMBAY)/[2018] 256 TAXMAN 16 (BOMBAY). AFTER C ONSIDERING PLETHORA OF CASE LAWS ON THE ISSUE OF ALLOWABILITY OF CAPACITY ADJUSTMENT, THE COORDINATE BENCH OF THE DELHI TRIBU NAL IN HCL TECHNOLOGIES BPO SERVICES LTD. VS. ACIT REPORTED IN [2015] 172 TTJ 1 (DELHI - TRIB.), OBSERVED AS FOLLOWS : '29. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE RECENT DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF MANDO INDIA STEERING SYSTEMS (P.) LTD. V. ASSTT. CIT [2014] 49 ITD 284/4 5 TAXMANN.COM 160 WHEREIN, THE HON'BLE BENCH HAS REMITTED THE ISS UE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO C ONSIDER THE CLAIM OF THE ASSESSEE WITH RESPECT TO IDLE CAPACITY ADJUSTME NT DURING THE RELEVANT PERIOD WHILE DETERMINING THE ALP COST. THE RELEVANT EXTRACT OF THE DECISION READS AS UNDER: 'WE ARE OF THE CONSIDERED VIEW THAT UNDER-UTILIZATI ON OF PRODUCTION CAPACITY IN THE INITIAL YEARS IS A VITAL FACTOR WHICH HAS BEEN IGNORED BY THE AUTHORITIES BELOW WHILE DET ERMINING THE ALP COST. THE TPO SHOULD HAVE MADE ALLOWANCE FO R THE HIGHER OVERHEAD EXPENDITURE DURING THE INITIAL PERI OD OF PRODUCTION. IN VIEW OF THE ABOVE, WE DEEM IT APPROP RIATE TO REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER THE CLAIM OF THE ASSESSEE WITH RESPECT TO IDLE CAPACITY ADJUSTMENT DURING THE RELEVANT PERIOD WHIL E DETERMINING THE ALP COST. THE ASSESSEE IS ALSO DIRE CTED TO PRODUCE RELEVANT DOCUMENTS IN COMPARABLE UNITS FOR THE 94 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) NECESSARY ANALYSIS. THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES IN THE AFORESAID TERMS.' 30. RELIANCE IN THIS REGARD IS PLACED ON THE DECISI ON OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AMDOCS BUSINESS SERV ICES (P.) LTD. V. DY. CIT [2012] 54 SOT 46 (URO)/26 TAXMANN.C OM 120 WHEREIN, THE TRIBUNAL ALLOWED ECONOMIC ADJUSTME NT ON ACCOUNT OF UNDER CAPACITY UTILIZATION HOLDING THAT THE APPELLANT WAS IN START UP PHASE DURING THE ASSESSMENT YEAR CO NSIDERATION. THE RELEVANT EXTRACT OF THE DECISION IS REPRODUCED AS UNDER: '9. THE NEXT MAJOR POINT MADE OUT BY THE APPELLANT IS THAT THIS BEING THE FIRST FULL YEAR OF OPERATION, THE AS SESSEE HAD INCURRED CERTAIN EXPENDITURE WHICH ARE START-UP COS TS AND CANNOT BE FULLY RECOVERED IN THE INSTANT YEAR ITSEL F, AND SUCH AN EXPENDITURE HAS ABNORMALLY AFFECTED THE PROFIT M ARGIN. IT IS ALSO CANVASSED THAT DUE TO THE START-UP YEAR THE CAPACITY UTILIZATION WAS NOT SATISFACTORY, WHEREAS ITS PROFI TABILITY HAS BEEN BENCH MARKED AGAINST COMPARABLES WHICH ARE ESTABLISHED ENTITIES -AND HAVE BEEN SET UP OVER THE YEARS. THE PLEA SET- UP BY THE ASSESSEE FOR ECONOMIC ADJUS TMENTS ON ACCOUNT OF UNDER CAPACITY UTILIZATION AND BEING IN START UP PHASE, IS NOT SOMETHING WHICH IS UNREASONABLE AND N EITHER IT IS OTIOSE TO THE MECHANISM OF TRANSFER PRICING ASSE SSMENTS. IN FACT, IN PRINCIPLE, THE PLEA OF THE ASSESSEE IS IN LINE WITH THE DECISIONS OF THE TRIBUNAL IN THE CASE OF GLOBAL VENTTEDGE (P.) LTD. V. DCIT IN ITA NOS. 1763-2764/ DEL/09 (DEL); BRINTONS CARPETS' ASIA (P) LTD. V. DCIT 139 TTJ -177; AND, SKODA, AUTO INDIA (P.) LTD. V. ACIT 122 TT J 6 99. IN OUR VIEW, THE MATTER REQUIRING FACTUAL APPRECIATION, TH E SAME IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL CONSIDER THE PROPOSITIONS PUT FORTH BY THE ASSESSEE AND ALLOW APPROPRIATE ECONOMIC ADJUSTMENTS ON A REASONA BLE BASIS.' 31. ON THE SAME LINES, DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL TURBINE SERVICES INC. V. ADIT (INTERNATIO NAL 95 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) TAXATION) [2013] 38 TAXMANN.COM 220 ALLOWED ECONOMI C ADJUSTMENT ON-ACCOUNT OF UNDER CAPACITY UTILIZATION CONSIDERING THE FACT THAT THE YEAR UNDER CONSIDERATION WAS THE FIRST FULL YEAR OF OPERATION OF THE APPELLANT. RELEVANT EXTRACT OF THE DECISION READS AS UNDER: '10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE SUITABLE ADJUSTME NT FOR NON-UTILISATION OF CAPACITY IS TO BE TAKEN IN TO AC COUNT AFTER CONSIDERING THE ALP WHILE WORKING OUT TP ADJUSTMENT , THIS PROPOSITION HAS BEEN HELD BY CO-ORDINATE BENCH IN T HE CASE OF THE AMDOCS BUSINESS SERVICES (P.) LTD. (SUPRA ) A ND VARIOUS OTHER CASES AS CITED HERE IN ABOVE. 11. IN THE GIVEN FACTS AND CIRCUMSTANCES IT WAS REQ UIRED ON THE PART OF THE LOWER AUTHORITIES TO HAVE GIVEN DUE EFFECT TO UNDER CAPACITY UTILIZATION OF THE ASSESSEE WHICH HA S NOT BEEN DONE TPO FOR ADJUSTMENT FOR ALP DETERMINATION. IN VIEW OF THE FACTS AND CIRCUMSTANCES WE ARE INCLINED TO S ET ASIDE THE MATTER AND RESTORE THE ISSUE OF UNDER CAPACITY UTILIZATION BACK TO THE FILE OF THE ASSESSING OFFICER/TPO TO DE CIDE THE SAME AFRESH AFTER GIVING ASSESSEE ADEQUATE OPPORTUN ITY OF BEING HEARD AND TO FILE THE NECESSARY EVIDENCE ON T HIS BEHALF. NEEDLESS TO SAY THAT A PROPER AND SPEAKING ORDER WILL BE PASSED DECIDING THE ISSUE IN ACCORDANCE WIT H LAW.' 32. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOW ING OBSERVATION OF THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. FIAT INDIA (P.) LTD. [IT APPEAL NO 1848 (MUM) OF 2009): 'AS RIGHTLY HELD BY THE LD. CIT(A), THE SAID SUBMIS SION MADE BY THE APPELLANT IS SUFFICIENT TO DEMONSTRATE THAT THERE WAS A MATERIAL DIFFERENCE IN THE FACTS OF THE APPELLANT'S CASE AND THAT OF THE COMPARABLE CASES I N TERMS OF CAPACITY UTILIZATION AS WELL AS IN OTHER T ERMS. APPROPRIATE ADJUSTMENTS THUS WERE REQUIRED TO BE MA DE TO ELIMINATE SUCH DIFFERENCES' 96 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 33. FURTHER, THE HON'BLE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BRINTONS CARPETS ASIA (P.) LTD. V. DY. CIT [2011 ] 46 SOT 289 (URO)/12 TAXMANN.COM 148 WHILE ALLOWING ADJUSTMENT FOR IDLE CAPACITY CAUSED DUE TO LABOUR UNREST/STRIKE AND REL YING UPON THE ABOVE OBSERVATION OF THE MUMBAI TRIBUNAL HELD AS FO LLOWS: '15. FROM THE ABOVE, IT IS CLEAR THE AO HAS AUTHORITY VIDE CLAUSE (III) ABOVE TO MAKE THE ADJUS TMENTS. SUCH ADJUSTMENTS ARE NECESSARY ONLY TO REMOVE OR MINIMIZE THE DIFFERENCES IN THE COMPARABLE OR ANOMA LY IN THE SAID COMPARABLE. - SUCH ADJUSTMENTS ARE AUTHENTICATED BY THE OECD GUIDELINES TOO. IN THIS REGARD, WE HAVE PERUSED THE IMPORTANT FINDINGS OF THE TRIBUNAL IN THE CASE OF T HE FIAT INDIA (P.) LTD (SUPRA ) PLACED AT PAGE 191 OF THE PAPER BOOK. FOR THE SAKE COMPLETENESS, THE SAME IS REPROD UCED AS UNDER. . . . . . AS REGARDS THE ADJUSTMENTS MADE BY THE APPELLANT TO WORK OUT ITS OPERATING MARGIN FOR COMPARING THE SAME WITH THE PROFIT MARGIN OF COMPARABLE CASES, IT WAS HELD THAT THERE WAS A MATERIAL DIFFERENCE IN THE FACTS OF THE APPELLANT'S CASE AND THAT OF THE COMPARABLE CASES IN TERMS OF CAPACI TY UTILIZATION AS WELL AS IN OTHER TERMS. APPROPRIATE ADJUSTMENTS THUS WERE REQUIRED TO BE MADE TO ELIMINATE SUCH DIFFERENCES. FURTHER, THE TPO HIMSEL F HAS ALLOWED SIMILAR ADJUSTMENTS MADE BY THE APPELLANT IN THE IMMEDIATE PRECEDING YEARS I.E. AY 2002- 03, 2003-04 AS WELL AS IN THE IMMEDIATE SUCCEEDING YEARS I.E. 2005-06 AND 2006-07 WHEREIN THE FACTS INVOLVED WERE SIMILAR TO THAT OF THE YEAR UNDER CONSIDERATION I.E. AY 2004-05; ACCORDINGLY, NO INFIRMITY IS FOUND IN THE IMPUGNED ORDER OF THE CIT (A) AS THE ADJUSTMENTS MADE BY THE APPEL LANT IN TNMM ANALYSIS WERE REASONABLE AND ACCURATE AND AS REFLECTED IN THE SAID ANALYSIS, INTERNATIONAL TRANS ACTIONS MADE BY THE APPELLANT COMPANY WITH ITS ASSOCIATED 97 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) CONCERNS DURING THE YEAR UNDER CONSIDERATION WERE A T ARM'S LENGTH REQUIRING NO ADJUSTMENT/ADDITION ON TH IS ISSUE. 16. FROM THE ABOVE, IT IS EVIDENT THAT THE APPELLAN T IS ENTITLED TO ECONOMIC ADJUSTMENTS IN THE CIRCUMSTANC ES OF UNDER CAPACITY UTILIZATION OF THE COMPANY. OF COURS E, SUCH ADJUSTMENTS MUST BE RESTRICTED TO FIXED COST/OVERHE ADS ONLY. IN THE INSTANT CASE, THE AO/TPO DID NOT HAVE THE OCCASION TO GO INTO THE PERIOD OR THE EXTENT OF THE LABOUR UNREST, BREAK-UP OF THE CLAIMED ADJUSTMENTS AMOUNTI NG RS. 7.32 CRORES (ROUNDED OFF), FIXED COST VERSUS TH E VARIABLE COST ETC. AS THEY SUMMARILY REJECTED THE E XTERNAL COMPARABLES IN VIEW OF THEIR PREFERENCE TO THE OPER ATING PROFITS OF THE DOMESTIC SEGMENT OF THE CARPETS. THE REFORE AND CONSEQUENTLY, THIS KEY ISSUE ALSO HAS TO BE SET ASIDE TO THE FILES OF THE TPO/AO FOR FRESH EXAMINATION OF THE ISSUE. PRIMA FACIE WE SEE THE NEED FOR SUCH ECONOMIC ADJUSTMENTS TO THE TOTAL COST OF THE CARPET OF THE EXPORT SEGMENT. WE REFUSE TO COMMENT ON THE FACTS RELATING TO THE FIGURES AS NONE OF THE AUTHORITIES HAS GONE INTO TH E DETAILS OF SUCH ECONOMIC ADJUSTMENTS AND THEY SUMMARILY REJECTED THE CLAIMS. AS SUCH, THE REQUISITE ADJUSTM ENTS ARE BORNE OUT OF THE RELEVANT RULES/PROVISIONS AND THER EFORE, THE CLAIM IS BONA FIDE AND HAS SUPPORT OF THE LAW. FOR THIS, THE APPELLANT PREFERS TO GO TO THE FILES OF T HE AO FOR WANT OF A SPEAKING ORDER ON THIS ISSUE. IN OUR OPIN ION, THE REQUEST OF THE APPELLANT DESERVES TO BE CONSIDERED FAVOURABLE.' 34. ALSO, IN THE CASE OF E.I. DUPONT INDIA (P.) LTD . V. DY. CIT [2012] 49 SOT 123/[2011] 16 TAXMANN.COM 352 (DELHI), THE H ON'BLE DELHI BENCH OF THE TRIBUNAL, WHILE ALLOWING THE ADJUSTMEN T FOR CAPACITY UTILIZATION HELD THAT: 98 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ''IT IS A MATTER OF FACT THAT FIXED COSTS REMAIN TH E SAME EVEN WHEN THERE IS UNDER UTILIZATION OF CAPACITY. THEREFORE, THE CASE OF THE APPELLANT AND THE COMPAR ABLE CASES HAVE TO BE EXAMINED IN RESPECT OF CAPACITY UTILIZATION SO AS TO MAKE THE CONTROLLED AND UNCONT ROLLED TRANSACTIONS COMPARABLE.' ALSO, THE HON'BLE DELHI BENCH OF THE TRIBUNAL IN TH E CASE OF ITO V. CRM SERVICES INDIA PVT. LTD. UPHELD THE C LAIM OF THE APPELLANT TOWARDS ADJUSTMENT OF IDLE CAPACITY: '8.1 THIS BRINGS US TO THE ALTERNATIVE ARGUMENT THA T THE APPELLANT IS ENTITLED TO GET ADJUSTMENT IN RESPECT OF CAPACITY UNDER-UTILIZATION. NO OBJECTION HAS BEEN R AISED BY THE LD. CIT, DR IN THIS MATTER. AS A MATTER OF F ACT, HE HAS FAIRLY ACCEPTED THE PROPOSITION THAT ADJUSTMENT IN THIS REGARD IS REQUIRED TO BE MADE. AT THE SAME TIME, IT IS ALSO HELD THAT SUITABLE ADJ USTMENT HAS TO BE MADE TO SUCH PLI IN RESPECT OF IDLE CAPAC ITY.'' 35. FURTHER, THE HON'BLE BANGALORE BENCH OF THE TRI BUNAL IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) (P.) LT D. V. DY. CIT [2012] 53 SOT 159/20 TAXMANN.COM 715 THE HON'BL E TRIBUNAL HELD AS UNDER: 'THE APPELLANT SHOULD ALSO BE GIVEN ADJUSTMENT FOR UNDER UTILIZATION OF ITS INFRASTRUCTURE. THE AO SHALL CON SIDER THIS FACT ALSO WHILE DETERMINING THE ALP FIND MAKE THE T P ADJUSTMENTS. WITH THESE DIRECTIONS, THE APPEAL OF T HE APPELLANT IS DISPOSED OF. ' 36. FURTHER, THE HON'BLE DELHI' BENCH OF THE TRIBUN AL IN THE CASE OF TRANSWITCH INDIA (P.) LTD. V. DY. CIT [2012] 53 SOT 151/21 TAXMANN.COM 257 HELD AS UNDER: '4.11 ANOTHER TPO'S CONTENTION IS THAT CLAIM OF THE APPELLANT THAT THE SEALING DRIVE REDUCED ITS REVENU E IS 99 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) UNSUBSTANTIATED. IN THIS REGARD, APPELLANT HAS SUBM ITTED THAT THE APPELLANT HAD PLACED ON RECORD ITS QUARTER LY 'CAPACITY' UTILIZATION STATEMENT DEMONSTRATING THE FALL IN ITS CAPACITY UTILIZATION DURING THE QUARTER JANUARY TO MARCH, 2006. THE CAPACITY UTILIZATION, OF THE APPEL LANT DURING THE QUARTER JANUARY TO MARCH, 2006 FELL TO 7 2% AS' AGAINST THE NORMAL CAPACITY UTILIZATION OF 87% TO 9 4% DURING THE FINANCIAL YEAR ENDING DECEMBER, 31, 2005 . FURTHER, THE FACT THAT THE APPELLANT HAD TO SHIFT I TS OFFICE PREMISES AT A VERY SHORT NOTICE, SUFFICIENTLY SUBST ANTIATES THE LOW CAPACITY UTILIZATION OF THE APPELLANT DURIN G THE LAST QUARTER OF FINANCIAL YEAR 2005-06. WE FIND OUT OURS ELVES IN AGREEMENT WITH THE APPELLANT'S SUBMISSION IN THI S REGARD.' 37. HON'BLE DELHI HIGH COURT, IN THE APPEAL PREFERR ED BY THE REVENUE IN THE CASE OF TRANSWITCH INDIA (P.) LTD. (SUPRA), VIDE ORDER DATED 17.07.2013, UPHELD T HE ADJUSTMENT CLAIMED BY THE ASSESSEE ON ACCOUNT OF CAPACITY UTIL IZATION. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE RECEN T DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT V. PANASONIC AVC NETWORKS INDIA CO. LTD. [2014] 63 SOT 121 (URO) /42 TAXMANN.COM 420, WHEREIN THE HON'BLE BENCH HAS HELD THAT CAPACITY UNDERUTILIZATION IS AN IMPORTANT FACTOR AF FECTING NET PROFIT MARGIN AS LOWER CAPACITY UTILIZATION RESULTS IN HIG HER PER UNIT COSTS WHICH IN TURN RESULTS IN LOWER PROFITS. THE R ELEVANT FINDING OF THE DECISION READS AS UNDER: '5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS T O INTERFERE IN VERY WELL REASONED FINDINGS AND DIRECT IONS OF THE LEARNED CIT (A). RULE 10B (1)(E)(II) OF THE INC OME TAX RULES 1962 DOES INDEED PROVIDE THAT THE NET PROFIT MARGIN REALIZED IN A COMPARABLE UNCONTROLLED TRANSACTION I S ADJUSTED, INTER ALIA, FOR DIFFERENCES IN ENTERPRISE ENTERING 100 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFE CT THE NET PROFIT MARGIN IN OPEN MARKET. CAPACITY UNDERUTILIZATION BY ENTERPRISES IS CERTAINLY AN IMP ORTANT FACTOR AFFECTING NET PROFIT MARGIN IN THE OPEN MARK ET BECAUSE LOWER CAPACITY UTILIZATION RESULTS IN HIGHE R PER UNIT COSTS, WHICH, IN TURN, RESULTS IN LOWER PROFIT S. OF COURSE, THE FUNDAMENTAL ISSUE, SO FAR AS ACCEPTABIL ITY OF SUCH ADJUSTMENTS IS CONCERTED, IS REASONABLE ACCURA CY EMBEDDED IN THE MECHANISM FOR SUCH ADJUSTMENTS, 'EN D AS LONG AS SUCH AN ADJUSTMENT MECHANISM CAN BE FOUN D, NO OBJECTION CAN BE TAKEN TO THE ADJUSTMENT. IN OUR CONSIDERED VIEW, THE LEARNED CIT (A)'S APPROACH IS REASONABLE IN THIS REGARD AND THE ADJUSTMENTS ARE O N A CONCEPTUALLY SOUND BASIS. IN ANY CASE, AS POINTED O UT BY THE LEARNED COUNSEL, THE ADJUSTMENTS SO DIRECTED BY THE LEARNED CIT(A) HAVE DULY BEEN MADE BY THE ASSESSING OFFICER, AND THERE HAVE BEEN NO ISSUES REGARDING IMPLEMENTING THESE ADJUSTMENTS. WE APPROVE THE CONCLUSIONS ARRIVED BY THE CIT (A) ON THIS ISSUE AN D DECLINE TO INTERFERE IN THE MATTER.' 38. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SU BMITTED THAT APPROPRIATE ADJUSTMENT FOR IDLE CAPACITY IS REQUIRE D TO BE MADE WHILE COMPUTING THE OPERATING MARGIN OF THE APPELLA NT. 39. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. WE FIND THAT THERE IS FORCE IN TH E ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE THAT WHILE CALCULATING OPE RATING COST, THE ABNORMAL COST INCURRED ON ACCOUNT OF START-UP SHOUL D BE EXCLUDED. FOLLOWING THE SAME PARITY OF REASONING IN THE CASES CITED BY HIM AND KEEPING IN VIEW THAT THE JUDGEMENT OF ITAT CO-O RDINATE BENCH IN THE CASE OF TRANSWITCH INDIA (P.) LTD. (SUPRA ) AFFIRMED BY HON'BLE DELHI HIGH COURT. THEREFORE, RESPECTFULLY F OLLOWING THE DECISION OF HON'BLE HIGH COURT, WE DIRECT TPO/A.O. TO ADJUST OPERATING COST BY EXCLUDING ABNORMAL COST INCURRED ON ACCOUNT OF 101 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) START-UP COMPANY LIKE SALARY, RENT AND DEPRECIATION . THIS MATTER IS RESTORED TO THE FILE OF TPO/A.O. TO RE-DETERMINE TH E OPERATING COST ON THE ABOVE LINES TO ARRIVE AT OPERATING PROFIT.' 3.6.7 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE H ON'BLE BOMBAY HIGH COURT AND THE DECISION/S OF THE COORDINATE BEN CHES OF TRIBUNAL AS AFOREMENTIONED, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF CAPACITY ADJUSTMENT W HILST BENCHMARKING THE INTERNATIONAL TRANSACTION OF SIM CARD ASSEMBLY. 3.6.8 ANOTHER LINKED ISSUE IS REGARDING COMPUTATIO N OF CAPACITY ADJUSTMENT. IN OUR OPINION, THE METHODOLOGY ADOPTED BY TPO/DRP IN COMPUTING 'CAPACITY ADJUSTMENT' WHILST ONLY CONSIDE RING THE DEPRECIATION, IS ERRONEOUS. RECENTLY, THE ISSUE OF COMPUTATION OF CAPACITY ADJUSTMENT HAS BEEN CONSIDERED BY THE COOR DINATE BENCH OF THE DELHI TRIBUNAL IN DCIT VS. CLAAS INDIA (P) LTD REPORTED IN [2015] 62 TAXMANN.COM 173 (DELHI - TRIB.) BY OBSERVING AS FOLLOWS: '8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE EMBARKING UPON THE QUEST ION OF ALLOWABILITY AND EXTENT OF CAPACITY ADJUSTMENT UNDE R THE TNMM, WE WANT TO MAKE IT CLEAR THAT THE ASSESSEE REDUCED ITS OPERATING COSTS BY CONSIDERING ITS CAPACITY UTILIZATION VIS- -VIS THAT OF COMPARABLES AND RESULTANTLY CLAIMED THAT ITS INCREA SED PROFIT AS A RESULT OF SUCH REDUCED OPERATING COSTS BE COMPARED WITH THAT OF THE COMPARABLES. THE TPO HAS ALSO AGREED IN PRINCIP LE WITH THE 102 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) OTHERWISE AVAILABILITY OF THE CAPACITY ADJUSTMENT. THE ISSUE OF ALLOWING CAPACITY ADJUSTMENT BEFORE US CAN BE DIVID ED INTO TWO SUB-ISSUES FOR CONSIDERATION, VIZ., FIRST, WHETHER THE ADJUSTMENT SHOULD BE ALLOWED IN THE HANDS OF THE ASSESSEE AS H AS BEEN DONE BY THE AUTHORITIES BELOW OR COMPARABLES AND SECOND, HOW TO COMPUTE CAPACITY UTILIZATION ADJUSTMENT UNDER THE T NMM. WE WILL DEAL WITH THESE ASPECTS ONE BY ONE. I. CAPACITY ADJUSTMENT SHOULD BE ALLOWED IN WHOSE H ANDS? 9.1 IT HAS BEEN NOTICED ABOVE THAT THE ASSESSEE CLA IMED IDLE CAPACITY ADJUSTMENT BY REDUCING ITS OWN OPERAT ING COSTS. IT IS FURTHER OBSERVED THAT THE AUTHORITIES BELOW HAVE RE DUCED THE AMOUNT OF ADJUSTMENT BY EXCLUDING CERTAIN COSTS FRO M THE AMBIT OF THE COSTS QUALIFYING FOR ADJUSTMENT. HOWEVER, THE A DJUSTMENT HAS BEEN ULTIMATELY ALLOWED FROM THE OPERATING COSTS IN CURRED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE QUESTION ARISE S AS TO WHETHER THE ACTION OF THE AUTHORITIES IN ALLOWING T HE REDUCTION OF THE OPERATING COSTS INCURRED BY THE ASSESSEE, IS IN ACCORDANCE WITH LAW? IN ORDER TO FIND ANSWER TO THIS QUESTION, WE NEED TO REFER TO THE MANNER OF COMPUTATION OF THE ARM'S LEN GTH PRICE UNDER TNMM, WHICH HAS BEEN SET OUT IN RULE 10B (1)(E) AS UNDER: '(E) TRANSACTIONAL NET MARGIN METHOD, BY WHICH, (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE FR OM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSOCIATED ENTERPRISE IS COMPUTED IN RELATION TO CO STS INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD TO ANY OTHER RELEVANT BASE ; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO THE SAME BASE ; 103 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) (III) THE NET PROFIT MARGIN REFERRED TO IN SUB- CLAUSE (II) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET ; (IV) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE AN D REFERRED TO IN SUB- CLAUSE (I) IS ESTABLISHED TO BE THE SAME AS THE NET PROFIT MARGIN REFERRED TO IN SUB- CLAUSE (III) ; (V) THE NET PROFIT MARGIN THUS ESTABLISHED IS THEN TAKE N INTO A CCOUNT TO ARRIVE AT AN ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION.' 9.2 SUB-CLAUSE (I) IN THE PROCESS OF DETERMINATION OF THE ALP UNDER THE TNMM TALKS OF THE COMPUTATION OF NET OPERATING PROFIT MARGIN REALIZED BY THE ASSESSEE FROM AN INTERNATIONAL TRAN SACTION. SUB- CLAUSE (II) IS THE COMPUTATION OF NET OPERATING PRO FIT MARGIN REALIZED BY AN UNRELATED ENTERPRISE FROM A COMPARAB LE UNCONTROLLED TRANSACTION. THIS REFERS TO DETERMININ G THE OPERATING PROFIT MARGIN OF COMPARABLES WITH THE SAME BASE AS THAT OF THE ASSESSEE. SUB-CLAUSE (III) PROVIDES THAT THE NET PR OFIT MARGIN REALIZED BY A COMPARABLE COMPANY, DETERMINED AS PER SUB-CLAUSE (II) ABOVE, 'IS ADJUSTED TO TAKE INTO ACCOUNT THE D IFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPA RABLE UNCONTROLLED TRANSACTIONS, WHICH COULD MATERIALLY A FFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET.' IT IS THIS ADJUSTED NET PROFIT MARGIN OF THE UNRELATED TRANSACTIONS OR OF THE COMPARABLE COMPANIES, AS DETERMINED UNDER SUB-CLAUS E (III), WHICH IS USED FOR THE PURPOSES OF MAKING COMPARISON WITH THE NET PROFIT MARGIN REALIZED BY THE ASSESSEE FROM ITS INT ERNATIONAL TRANSACTION AS PER SUB-CLAUSE (I). 9.3 SUB-RULE (2) OF RULE 10B PROVIDES THAT THE COMP ARABILITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRAN SACTION SHALL BE 104 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) JUDGED WITH REFERENCE TO CERTAIN FACTORS WHICH HAVE BEEN ENUMERATED THEREIN. RULE 10B(3) STATES THAT AN UNCO NTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION, IF EITHER THERE ARE NO DIFFERENCES BETWEEN THE TWO OR A 'REASONABLY ACCURATE ADJUSTMENT CAN BE MADE TO ELIMINATE THE MA TERIAL EFFECTS OF SUCH DIFFERENCES.' WHEN WE READ SUB-CLAUSES (II) & (III) OF RULE 10B(1)(E) IN JUXTAPOSITION TO SUB-RULES (2) & (3) O F RULE 10B, THE POSITION WHICH EMERGES IS THAT THE NET OPERATING PR OFIT MARGIN OF COMPARABLE COMPANIES CALLS FOR ADJUSTMENT IN SUCH A MANNER SO AS TO BRING BOTH THE INTERNATIONAL TRANSACTION AND COMPARABLE CASES AT THE SAME PEDESTAL. IN OTHER WORDS, IF THER E ARE NO DIFFERENCES IN THESE TWO, THEN THE AVERAGE OF THE N ET OPERATING PROFIT MARGIN OF THE COMPARABLE COMPANIES BECOMES A BENCHMARK. HOWEVER, IN CASE THERE ARE SOME DIFFERENCES BETWEEN THE COMPARABLES AND THE ASSESSEE, THEN THE EFFECT OF SU CH DIFFERENCES SHOULD BE IRONED OUT BY MAKING SUITABLE ADJUSTMENT TO THE OPERATING PROFIT MARGIN OF COMPARABLES. THAT IS THE WAY FOR BRINGING BOTH THE TRANSACTIONS, NAMELY, THE INTERNA TIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, ON THE SAME PLATFORM FOR MAKING A MEANINGFUL AND EFFECTIVE COMPARISON. THE ABOVE ANALYSIS OVERTLY TRANSPIRES THAT THE LAW PROVIDES FOR ADJUSTING THE PROFIT MARGIN OF COMPARABLES ON ACCOU NT OF THE MATERIAL DIFFERENCES BETWEEN THE INTERNATIONAL TRAN SACTION OF THE ASSESSEE AND COMPARABLE UNCONTROLLED TRANSACTIONS. IT IS NOT THE OTHER WAY AROUND TO ADJUST THE PROFIT MARGIN OF THE ASSESSEE. IN OTHER WORDS, THE NET OPERATING PROFIT MARGIN REALIZ ED BY THE ASSESSEE FROM ITS INTERNATIONAL TRANSACTION IS TO B E COMPUTED AS SUCH, WITHOUT ADJUSTING IT ON ACCOUNT OF DIFFERENCE S WITH THE COMPARABLE UNCONTROLLED TRANSACTIONS. THE ADJUSTMEN T, IF ANY, IS REQUIRED TO BE MADE ONLY IN THE PROFIT MARGINS OF T HE COMPARABLES. 9.4 REVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE AUTHORITIES BELOW HAVE ADJUSTED THE OPERATING COSTS OF THE ASSESSEE IN ALLOWING THE CAPACITY ADJUSTMENT. AS AG AINST THAT, THE CORRECT COURSE OF ACTION PROVIDED UNDER THE LAW IS TO ADJUST THE OPERATING COSTS OF THE COMPARABLE AND THEIR RESULTA NT OPERATING PROFIT. THERE IS HARDLY NEED TO ACCENTUATE THAT THE RE CAN BE NO ESTOPPEL AGAINST THE LAW. ONCE THE LAW ENJOINS FOR DOING A 105 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) PARTICULAR THING IN A PARTICULAR MANNER ALONE, IT I S NOT OPEN TO ANYONE TO ADOPT A CONTRARY OR DIFFERENT APPROACH. A S THE AUTHORITIES BELOW HAVE ADOPTED A COURSE OF ACTION I N ALLOWING ADJUSTMENT, WHICH IS NOT IN CONSONANCE WITH LAW, WE CANNOT APPROVE THE SAME. THE IMPUGNED ORDER IS SET ASIDE A ND THE MATTER IS RESTORED TO THE FILE OF THE TPO/AO FOR GI VING EFFECT TO THE AMOUNT OF IDLE CAPACITY ADJUSTMENT IN THE OPERATING PROFIT OF THE COMPARABLES AND NOT THE ASSESSEE. II. HOW TO COMPUTE CAPACITY UTILIZATION ADJUSTMENT UNDER TNMM: 10.1 UNDER THE TNMM, THE ALP OF AN INTERNATIONAL TR ANSACTION IS DETERMINED BY COMPUTING AND COMPARING THE PERCENTAG E OF OPERATING PROFIT MARGIN REALIZED BY THE ASSESSEE WI TH THAT OF THE COMPARABLES. WE HAVE NOTICED ABOVE THAT THE DIFFERE NCE IN THE CAPACITY UTILIZATIONS IS AN IMPORTANT FACTOR, W HICH NEEDS TO BE ADJUSTED. NO MECHANISM HAS BEEN GIVEN UNDER THE ACT OR THE RULES FOR COMPUTING THE AMOUNT OF CAPACITY UTILIZATION AD JUSTMENT. 10.2 ON AN OVERALL UNDERSTANDING, WE FEEL THAT UNDE R THE TNMM, THE FIRST STEP IN GRANTING CAPACITY UTILIZATION ADJ USTMENT IS TO ASCERTAIN THE PERCENTAGE OF CAPACITY UTILIZATION BY THE ASSESSEE AND COMPARABLES. THERE CAN BE NO DIFFICULTY IN WORK ING OUT THESE PERCENTAGES. THE SECOND STEP IS TO GIVE EFFECT (POS ITIVE OR NEGATIVE) TO THE DIFFERENCE IN THE PERCENTAGE OF CAPACITY UTI LIZATIONS OF THE ASSESSEE VIS--VIS COMPARABLES, ONE BY ONE, IN THE OPERATING PROFIT OF COMPARABLES BY ADJUSTING THEIR RESPECTIVE OPERAT ING COSTS. OPERATING COSTS CAN BE EITHER FIXED OR VARIABLE OR SEMI-VARIABLE. ONE NEEDS TO SPLIT SEMI-VARIABLE COSTS INTO THE FIX ED PART AND VARIABLE PART. IN SO FAR AS THE VARIABLE COSTS AND THE VARIABLE PART OF THE SEMI-VARIABLE COSTS ARE CONCERNED, THESE REM AIN UNAFFECTED DUE TO ANY UNDER OR OVER UTILIZATION OF CAPACITY. A CCORDINGLY, SUCH VARIABLE OPERATING COSTS REMAIN UNCHANGED. THE ADJU STMENT IS CALLED FOR ONLY IN RESPECT OF THE FIXED OPERATING C OSTS AND FIXED PART OF SEMI-VARIABLE COSTS. SUCH COSTS ARE SCALED UP OR DOWN BY CONSIDERING THE PERCENTAGE OF CAPACITY UTILIZATION BY THE ASSESSEE AND SUCH COMPARABLE. IT CAN BE ILLUSTRATED WITH THE HELP OF A SIMPLE EXAMPLE. SUPPOSE THE FIXED COSTS INCURRED BY A COMPARABLE (SAY, A) ARE RS. 100 AND IT HAS CAPACITY UTILIZATIO N OF 50% AS 106 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) AGAINST THE CAPACITY UTILIZATION OF 25% BY THE ASSE SSEE. THE ABOVE PERCENTAGES SHOW THAT THE ASSESSEE HAS INCURRED FUL L FIXED COSTS WITH 25% OF THE UTILIZATION OF ITS CAPACITY, AS AGA INST A INCURRING FULL FIXED COSTS WITH 50% OF ITS CAPACITY UTILIZATI ON. THIS DIVULGES THAT THE ASSESSEE HAS INCURRED RELATIVELY MORE FIXE D COSTS AND A HAS INCURRED LOWER COSTS. IN ORDER TO MAKE AN EFFEC TIVE COMPARISON, THERE ARISES A NEED TO OBLITERATE THE E FFECT OF THIS DIFFERENCE IN CAPACITY UTILIZATIONS. IT CAN BE DONE BY PROPORTIONATELY SCALING UP THE FIXED COSTS INCURRED BY A SO AS TO MAKE IT FULLY COMPARABLE WITH THE ASSESSEE. THIS WE CAN DO BY INCREASING THE FIXED COSTS OF A TO RS. 200 (RS. 100 INTO 50/25) AS AGAINST THE ACTUALLY INCURRED FIXED COSTS BY IT AT RS. 100. WHEN WE COMPUTE OPERATING PROFIT OF A BY SUBSTITUTING TH E FIXED COSTS AT RS. 200 WITH THE ACTUALLY INCURRED AT RS. 100, IT W OULD MEAN THAT THE FIXED COSTS INCURRED BY THE ASSESSEE AND A ARE AT THE SAME CAPACITY UTILIZATION. THERE CAN BE CONVERSE SI TUATION AS WELL. SUPPOSE THE FIXED COSTS INCURRED BY A COMPARABLE (S AY, B) ARE RS. 100 AND IT HAS CAPACITY UTILIZATION OF 25% AS AGAIN ST THE CAPACITY UTILIZATION OF 50% BY THE ASSESSEE. TH E ABOVE PERCENTAGES SHOW THAT THE ASSESSEE HAS INCURRED FUL L FIXED COSTS AT 50% OF THE UTILIZATION OF ITS CAPACITY, AS AGAIN ST B INCURRING FULL FIXED COSTS AT 25% OF THE CAPACITY UTILIZATION. THI S DECIPHERS THAT THE ASSESSEE HAS INCURRED RELATIVELY LOWER FIXED CO STS AND B HAS INCURRED HIGHER COSTS. THIS DIFFERENCE IN CAPACITYU TILIZATIONS CAN BE ELIMINATED BY PROPORTIONATELY SCALING DOWN THE F IXED COSTS INCURRED BY B SO AS TO MAKE IT FULLY COMPARABLE. TH IS WE CAN DO BY REDUCING THE FIXED COSTS OF B TO RS. 50 (RS.100 INTO 25/50) AS AGAINST THE ACTUALLY INCURRED FIXED COST BY IT AT R S.100. WHEN WE COMPUTE OPERATING PROFIT OF B BY SUBSTITUTING THE F IXED COSTS AT RS. 50 WITH THE ACTUALLY INCURRED AT RS. 100, IT WOULD MEAN THAT THE FIXED COSTS INCURRED BY THE ASSESSEE AND B ARE AT T HE SAME CAPACITY UTILIZATION LEVEL. 10.3 TURNING TO THE FACTS OF THE INSTANT CASE, WE F IND THAT BOTH THE TPO AS WELL AS THE LD. CIT(A) HAVE PROCEEDED ON A W RONG PREMISE NOT ONLY BY ALLOWING CAPACITY UTILIZATION ADJUSTMEN T IN THE ASSESSEE'S PROFIT, WHICH IS CONTRARY TO THE LEGAL P OSITION AS DISCUSSED ABOVE, BUT ALSO BY CONSIDERING ALL THE CO MPARABLES AS 107 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ONE UNIT WITH THE AVERAGE PERCENTAGE OF THEIR RESPECTIVE CAPACITY UTILIZATIONS. IT IS FURTHER OBS ERVED THAT IN THE CALCULATION OF SUCH CAPACITY UTILIZATION ADJUSTMENT , THE LD. CIT (A) HAS CONSIDERED FOUR COMPANIES AS COMPARABLE, WHICH VIEW HAS BEEN MODIFIED BY US SUPRA INASMUCH AS WE HAVE HELD THAT M/S EICHER MOTORS AND M/S. FORCE MOTORS ARE INCOMPARABL E. NATURALLY, THEY WOULD ALSO GO OUT OF RECKONING IN THE COMPUTAT ION OF IDLE CAPACITY UTILIZATION ADJUSTMENT. IN THE ABSENC E OF THE AVAILABILITY OF FINANCIALS OF ALL THE COMPARABLE CO MPANIES, IT IS NOT POSSIBLE AT OUR END TO WORK OUT THE AMOUNT OF CAPAC ITY ADJUSTMENT IN THE MANNER DISCUSSED ABOVE. ERGO, WE SET ASIDE T HE IMPUGNED ORDER AND DIRECT THE TPO/AO TO WORK OUT THE AMOUNT OF CAPACITY UTILIZATION ADJUSTMENT AFRESH IN TERMS OF OUR ABOVE OBSERVATIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING IN SUCH FRESH PRO CEEDINGS. 3.6.9 RESPECTFULLY FOLLOWING THE DECISION OF THE C OORDINATE BENCH OF THE TRIBUNAL IN DCIT VS. CLAAS INDIA (P) LTD. RE PORTED IN [2015] 62 TAXMANN.COM 173 (DELHI - TRIB.), WE ARE OF THE OPIN ION THAT THE ISSUE OF COMPUTATION OF CAPACITY ADJUSTMENT REQUIRES RECO NSIDERATION AND IS THUS, RESTORED TO FILE OF AO/TPO FOR RE-COMPUTATION IN LIGHT OF OUR OBSERVATIONS IN THE PRECEDING PARAGRAPH, AFTER GRAN TING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 3.7.0 THE NEXT ISSUE IS REGARDING ALLOWABILITY OF WORKING CAPACITY ADJUSTMENT. BEFORE US, THE LD. COUNSEL FOR THE ASSE SSEE HAS VEHEMENTLY ARGUED THAT THE TPO/LD. DRP HAS ERRED IN NOT ALLOWING WORKING CAPITAL ADJUSTMENT IN TERMS OF RULE 10B (1) (E)(III) READ WITH 108 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) RULE 10B(2)/ (3) OF THE RULES. HE POINTED OUT THAT DURING THE RELEVANT PERIOD, WORKING CAPITAL ADJUSTMENT HAS BEEN GRANTED FOR SOFTWARE DEVELOPMENT SEGMENT, HOWEVER, THE SAME HAS NOT BEEN GRANTED FOR THE SIM CARD ASSEMBLY SEGMENT. PLACING RELIANCE ON THE RECENT DECISION OF THE COORDINATE BENCH OF THE DELHI TRIBU NAL IN AGILENT TECHNOLOGIES (INTERNATIONAL) (P) LTD. VS. ITO REPOR TED IN [2018] 91 TAXMANN.COM 59 (DELHI - TRIB.), HE SUBMITTED THAT T HE CLAIM OF WORKING CAPITAL ADJUSTMENT IS TO BE ALLOWED FOR SER VICE INDUSTRY ALSO. HE ARGUED THAT SUCH AN ADJUSTMENT IS RESTRICTED TO INVENTORY, TRADE RECEIVABLES AND TRADE PAYABLES. IT WAS SUBMITTED TH AT IF A COMPANY CARRIES HIGH TRADE RECEIVABLES, IT WOULD MEAN THAT IT IS ALLOWING ITS CUSTOMERS RELATIVELY LONGER PERIOD TO PAY THEIR DUE S, WHICH WILL RESULT INTO HIGHER INTEREST COST AND THE RESULTANT LOW NET PROFIT. SIMILARLY, BY CARRYING HIGH TRADE PAYABLES, A COMPANY BENEFITS FR OM A RELATIVELY LONGER PERIOD AVAILABLE TO IT FOR PAYING BACK THE D UES TO ITS SUPPLIERS, WHICH REDUCES THE INTEREST COST AND INCREASES PROFI TS. IN ORDER TO NEUTRALIZE THE DIFFERENCES ON ACCOUNT OF CARRYING H IGH OR LOW INVENTORY, TRADE PAYABLES AND TRADE RECEIVABLES, AS THE CASE MAY BE, IT BECOMES EMINENT TO ALLOW WORKING CAPITAL ADJUSTMENT SO AS TO BRING THE CASE OF THE ASSESSEE AT PAR WITH THE OTHER FUNC TIONALLY COMPARABLE ENTITIES. 109 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) 3.7.1 ON THE OTHER HAND, THE LD. CIT DEPARTMENTAL REPRESENTATIVE PLACED HEAVY RELIANCE ON THE ORDER O F LOWER AUTHORITIES. 3.7.2 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE P ARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE ARE OF THE OPINION THAT ONCE THE TPO/LD. DRP HAS PRINCIPALLY ALLOWED THE CL AIM OF WORKING CAPITAL ADJUSTMENT WITH RESPECT TO SOFTWARE DEVELOP MENT SEGMENT THAN THERE IS NO OCCASION TO DISALLOW SIMILAR CLAIM FOR SIM CARD ASSEMBLY SEGMENT. NOW THERE ARE VARIOUS GUIDELINES AND FACTORS THAT HAVE BEEN LAID DOWN TO WORK OUT THE WORKING CAPITAL ADJUSTMENT AND ACCORDINGLY, WE DIRECT THE ASSESSEE TO PROVIDE THE DETAILED WORKING OF THE WORKING CAPITAL ADJUSTMENT TO THE TPO AND HE IS DIRECTED TO VERIFY THE CORRECTNESS OF THE AMOUNT AND THE WORKING CAPIT AL ADJUSTMENT AS GIVEN BY THE ASSESSEE AND ALLOW THE SAME IN ACCORDA NCE WITH SETTLED PRINCIPLES. THUS, WITH THIS DIRECTION, THIS ISSUE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 3.8.0 HAVING CONSIDERED THE MAIN ARGUMENTS OF THE ASSESSEE REGARDING ALLOWABILITY OF PROPORTIONATE ADJUSTMENT, CAPACITY ADJUSTMENT AND WORKING CAPITAL ADJUSTMENT AND ALLOW ING THE SAME FOR STATISTICAL PURPOSE, WHILE RESTORING THEM TO THE FI LE OF AO/TPO FOR COMPUTATION, WE ARE NOT INCLINED TO ADJUDICATE ON T HE OTHER ALTERNATIVE LEGAL ISSUES REGARDING ADMISSIBILITY OF INTERNAL COMPARABLE AND TAKING FOREIGN AE AS THE TESTED PARTY. THE ASS ESSEE IS, HOWEVER, 110 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) AT LIBERTY TO RAISE SUCH ISSUES BEFORE THE LOWER AU THORITIES, SHOULD THE NEED ARISE. 3.9.0 GROUND NO. 6 OF THE APPEAL DEALING WITH LEVY OF INTEREST UNDER SECTION 234B OF THE ACT, IS DISPOSED OFF AS B EING MANDATORY AND CONSEQUENTIAL. 3.10.0 GROUND NO. 7 OF THE APPEAL DEALS WITH CORPOR ATE TAX ISSUE REGARDING NOT GRANTING FULL CREDIT OF ADVANCE TAX O F RS.20,698,500/- PAID BY THE ASSESSEE AND ALSO SHORT CREDIT OF TAX D EDUCTED AT SOURCE OF RS.15,01,872/- ON THE INCOME OF THE APPELLANT. T HE LD. COUNSEL FOR THE ASSESSEE HAS PRAYED THAT THIS ISSUE MAY BE REST ORED TO THE FILE OF THE AO FOR VERIFICATION. PER CONTRA, THE LD. CIT DE PARTMENTAL REPRESENTATIVE HAS FAIRLY CONCEDED THAT SHE HAS NO OBJECTION WITH VERIFICATION OF SUCH CLAIM. IN TERMS OF THE ABOVE, WE DIRECT THE AO TO VERIFY AND ALLOW THE CLAIM OF THE ASSESSEE REGARDIN G GRANTING FULL CREDIT OF ADVANCE TAX OF RS.20,698,500/- PAID BY TH E ASSESSEE AND ALSO SHORT CREDIT OF TAX DEDUCTED AT SOURCE OF RS.1 5,01,872/-. 4.0 IN THE FINAL RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR ABOVE OBSERVAT IONS. 111 ITA NO. 5924/DEL/2012 (GIESECKE & DEVRIENT INDIA PVT. LTD.) ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2018 SD/- SD/- (PRAMOD KUMAR) (SUDHANSHU SRI VASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD AUGUST, 2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI