Ms. Saxo India Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 6148/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6927 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 02-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: MANOJ PARDWANI
• Keywords: Related party transaction; Depreciation; Transfer pricing; International transaction; Avoidance of tax; Onus to prove
• Section: 92C; 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI KULDIP SINGH, JM ITA NO.6148/DEL/2015 ASSESSMENT YEAR : 2011-12 SAXO INDIA PVT. LTD., 20 TH FLOOR, TOWER 10C, CYBER CITY, DLF PHASE II, GURGAON. PAN: AACCC1382J VS. ACIT, CIRCLE 22(2), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANOJ PARDWANI, CA DEPARTMENT BY : SHRI AMRENDRA KUMAR, CIT, DR DATE OF HEARING : 02.02.2016 DATE OF PRONOUNCEMENT : 05.02.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E FINAL ASSESSMENT ORDER DATED 26.10.2015 PASSED BY THE AS SESSING OFFICER (AO) UNDER SECTIONS 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) IN RE LATION TO THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ASSAIL IN THIS APPEAL IS TO THE ADDITI ON ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS. 7,76,6 6,682/-. 2 3. SUCCINCTLY, THE ASSESSEE COMPANY, EARLIER CALLE D SAXO IT INDIA PRIVATE LTD., IS A PART OF INITTO GROUP WHICH TEAM ED UP WITH SAXO BANK. IT IS ENGAGED IN THE BUSINESS OF DESIGN AND D EVELOPMENT OF CUSTOMIZED SOFTWARE APPLICATIONS. APART FROM THAT, IT ALSO PROVIDED TECHNICAL SUPPORT SERVICES DURING THE RELEVANT YEAR TO SOME UNRELATED ENTERPRISES IN INDIA. THE ASSESSEE REPORTED FOUR IN TERNATIONAL TRANSACTIONS INCLUDING PROVISION OF SOFTWARE DEVE LOPMENT WITH TRANSACTED VALUE OF RS. 20,72,25,235/-, WHICH IS D ISPUTED IN THE INSTANT APPEAL. THERE IS NO QUARREL ON THE OTHER TH REE INTERNATIONAL TRANSACTIONS. THE ASSESSEE APPLIED THE TRANSACTIONA L NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR DE MONSTRATING THAT THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT WAS AT ARMS LENGTH PRICE (ALP). THE AS SESSEES PROFIT MARGIN FROM THIS TRANSACTION WAS SHOWN AT 22.63% AS AGAINST THE MEAN MARGIN OF FIVE COMPARABLES CHOSEN BY THE ASSES SEE AT 17.91%. ON A REFERENCE MADE BY THE ASSESSING OFFICER FOR DE TERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS, THE TRANSFER PRICING OFFICER (TPO) OBSERVED THAT THE OVERALL PROFIT LEVEL INDICA TOR (PLI) OF OPERATING PROFIT TO OPERATING COST (OP/OC) AS PER T HE ASSESSEES 3 PROFIT AND LOSS ACCOUNT WAS (-) 15.34%, WHEREAS IT HAD SHOWN PROFIT MARGIN FROM THE INTERNATIONAL TRANSACTION AT 22.63 %. THE TRANSFER PRICING OFFICER NOTICED FROM THE TRANSFER PRICING S TUDY REPORT THAT THE COMPARABILITY ADJUSTMENT WAS CARRIED OUT TO ARRIVE AT SUCH PLI AT 22.63%. ON PERUSAL OF THE DETAILS FILED BY THE ASSE SSEE, IT WAS SEEN THAT THE EXPENDITURE ON PERSONNEL COST WAS ALLOCATE D ON THE BASIS OF MAN-DAYS UTILIZED VIS--VIS THE MAN DAYS AVAILABLE. SIMILARLY, ADJUSTMENTS WERE FOUND TO HAVE BEEN CARRIED OUT BY THE ASSESSEE IN RESPECT OF OTHER OPERATING EXPENSES INCLUDING DEPRE CIATION. THE TPO NOTICED THAT THE ASSESSEE CLAIMED CAPACITY UTILIZAT ION ADJUSTMENT BY CONSIDERING FULL BENCH CAPACITY AT 300, WHEREAS ACT UALLY UTILIZED BENCH CAPACITY WAS ONLY 115. HE OBSERVED THAT THE NUMBER OF EMPLOYEES ACTUALLY WORKING RANGED FROM 59 IN APRIL, 2010 TO 2 13 IN MARCH, 2011. THE TPO DID NOT CONCUR WITH THE ASSESSEES CA LCULATION OF PROFIT AT 22.83% BY HOLDING THAT FULL BENCH CAPACITY COULD NOT BE CONSIDERED AT 300 FOR THE ENTIRE YEAR AS WAS CLAIMED BY THE AS SESSEE. HE FURTHER REQUIRED THE ASSESSEE TO SHOW THAT THE COMPARABLES WERE OPERATING AT 100% CAPACITY UTILIZATION LEVEL, AS WAS ITS BASIS F OR CALCULATING CAPACITY UTILIZATION ADJUSTMENT IN ITS PROFIT MARGI N. IN RESPONSE, THE 4 ASSESSEE MADE GENERAL SUBMISSIONS THAT THE COMPARAB LES WERE INCORPORATED LONG AGO AND WERE WELL ESTABLISHED VIS--VIS THE ASSESSEE. HOWEVER, NO SPECIFIC DETAILS OF THE CAPACITY UTILIZ ATION OF COMPARABLES WERE GIVEN BY THE ASSESSEE. IN THIS BACKDROP OF FAC TS, THE TRANSFER PRICING OFFICER REFUSED TO ALLOW ANY COMPARABILITY ADJUSTMENT AS CLAIMED BY THE ASSESSEE. HE COMPUTED PLI OF SOFTWAR E EXPORT SEGMENT, BEING THE INTERNATIONAL TRANSACTION IN QUE STION, AS UNDER: PARTICULARS AMOUNT SOFTWARE EXPORTS 207225235 ADD: MISC. INCOME 102495 OPERATING INCOME 207327730 EXPENDITURE PERSONNEL COST 156849561 ADD: OPERATING EXPENDITURE 78341959 DEPRECIATION 2158188 OPERATING EXPENDITURE 237349708 OPERATING PROFIT -30021978 OP/OC (%) -12.65 4. THEREAFTER, HE TOOK UP FIVE COMPARABLE COMPANIE S CITED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY REPORT WITH THEIR WEIGHTED AVERAGE PROFIT OF LAST THREE YEARS AT 17.91%. THE T RANSFER PRICING OFFICER RESTRICTED THE COMPARISON TO THE CURRENT YE AR DATA OF COMPARABLES AND ALSO MADE FURTHER ADDITIONS TO SUCH A LIST OF 5 COMPARABLES, WHICH AFTER THE DIRECTIONS GIVEN BY TH E DISPUTE RESOLUTION PANEL (DRP), STOOD AT 18. IT IS ON THIS BASIS, THAT THE ADDITION OF TRANSFER PRICING ADJUSTMENT AMOUNTING T O RS. 7.76 CRORE WAS MADE, WHICH IS THE SUBJECT MATTER OF THE INSTAN T APPEAL. 5. THE ASSESSEE HAS CHALLENGED THE TRANSFER PRICIN G ADJUSTMENT BROADLY ON TWO COUNTS, VIZ., CALCULATION OF ITS PRO FIT LEVEL INDICATOR (OP/OC) AND INCLUSION OF CERTAIN COMPARABLES. I. CALCULATION OF ASSESSEES PLI (OP/OC) 6.1. IT HAS BEEN NOTICED ABOVE THAT THE ASSESSEE S PROFIT AND LOSS ACCOUNT SHOWED OVERALL OP/OC AT (-)15.43%, WHEREA S THE ASSESSEE COMPUTED ITS OP/OC FROM THE INTERNATIONAL TRANSACTI ON OF `PROVISION OF THE SOFTWARE DEVELOPMENT AT 22.63%. THE TPO W ORKED OUT SUCH PLI AT (-)12.65%. IT IS THIS CALCULATION MADE BY TH E TRANSFER PRICING OFFICER, WHICH HAS BEEN CHALLENGED BEFORE US ON THE SOLE ISSUE OF NON- GRANTING OF CAPACITY UTILIZATION ADJUSTMENT. APART FROM THAT, THE LD. AR DID NOT ADVANCE ARGUMENT ON ANY OTHER ASPECT OF THE CALCULATION OF THE ASSESSEES PLI. 6.2. BEFORE PROCEEDING FURTHER, WE WANT TO CLARIF Y THAT THE LD. AR HAS NOT DISPUTED THE ABOVE EXTRACTED CALCULATION MADE B Y THE TPO OF THE 6 PROFIT LEVEL INDICATOR AT (-)12.65% FROM THE INTERN ATIONAL TRANSACTION OF `PROVISION OF SOFTWARE DEVELOPMENT, IN SO FAR AS T HE ADOPTION OF FIGURES IS CONCERNED. IN OTHER WORDS, THE LEARNED A UTHORIZED REPRESENTATIVE HAS ACCEPTED THAT THE FIGURES TAKEN BY THE TRANSFER PRICING OFFICER FOR CALCULATION OF THE OP/OC AT (-) 12.65% ARE BASED ON THE ACTUAL RELEVANT FIGURES FROM THE ASSESSEES PROFIT AND LOSS ACCOUNT. IT IS CLEAR FROM THE ASSESSEES CALCULATIO N OF OPERATING COSTS RELATING TO THE SERVICES RENDERED TO THE AE AND NON -AES, A COPY OF WHICH IS AVAILABLE ON PAGE 324 OF THE PAPER BOOK, T HAT OUT OF TOTAL OPERATING REVENUE OF RS.21.78 CRORE, REVENUE FROM A E IS TO THE TUNE OF RS.20.81 CRORE. THIS SHOWS THAT MAJOR PORTION OF THE ASSESSEES REVENUE IS FROM INTERNATIONAL TRANSACTIONS ONLY. 6.3. THE ONLY ISSUE ASSAILED AND ARGUED BY THE LEA RNED AUTHORIZED REPRESENTATIVE IS AGAINST NOT GRANTING OF CAPACITY UTILIZATION ADJUSTMENT IN THE CALCULATION OF THE ASSESSEES PRO FIT LEVEL INDICATOR. THE LEARNED AUTHORIZED REPRESENTATIVE CONTENDED THA T THE TRANSFER PRICING OFFICER OUGHT TO HAVE ALLOWED ADJUSTMENT ON ACCOUNT OF THE ASSESSEES UNDER UTILIZATION OF CAPACITY FROM THE C ALCULATION OF ITS PROFIT MARGIN. SOUNDING A CONTRA NOTE, THE LEARNED DEPARTMENTAL 7 REPRESENTATIVE ARGUED THAT THE TP PROVISIONS DO NOT PERMIT ALLOWING OF ANY ADJUSTMENT FROM THE CALCULATION OF PROFIT LE VEL INDICATOR OF THE TESTED PARTY. HE ARGUED THAT ADJUSTMENT, IF ANY, CA N BE MADE ONLY IN COMPUTATION OF PROFIT MARGIN OF THE COMPARABLES. TH US, THE FOREMOST QUESTION FOR OUR CONSIDERATION IS WHETHER CAPACITY ADJUSTMENT, OR FOR THAT MATTER, ANY OTHER ADJUSTMENT ON ACCOUNT OF DIS SIMILARITY BETWEEN THE ASSESSEE AND COMPARABLES, IS WARRANTED IN THE A SSESSEES CALCULATION OF PROFIT LEVEL INDICATOR OR THAT OF CO MPARABLES. 6.4. CHAPTER-X OF THE ACT CONTAINS SPECIAL PROVI SIONS RELATING TO AVOIDANCE OF TAX. SECTION 92, WHICH IS THE FIRST SE CTION OF THIS CHAPTER, PROVIDES FOR COMPUTATION OF INCOME FROM AN INTERNAT IONAL TRANSACTION HAVING REGARD TO ARMS LENGTH PRICE. SUB-SECTION (1 ) OF THE SECTION PROVIDES THAT : ANY INCOME ARISING FROM AN INTERNA TIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. SECTION 92C OF THE ACT ENSHRINES PROVISIONS RELATING TO COM PUTATION OF ARMS LENGTH PRICE. SUB-SECTION (1) OF THE SECTION STATES THAT THE ARMS LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION S HALL BE DETERMINED BY ANY OF THE METHODS LISTED HEREIN WHICH INCLUDE, INTER ALIA, THE TRANSACTIONAL NET MARGIN METHOD. SUB-SECTION (2) OF SECTION 92C 8 PROVIDES THAT THE MOST APPROPRIATE METHOD REFERRED IN SUB-SECTION (1) SHALL BE APPLIED FOR THE DETERMINATION OF ALP ` IN THE MANNER AS MAY BE PRESCRIBED . CALCULATION OF ALP UNDER THE TNMM HAS BEEN PRESCRIBED UNDER RULE 10B(1)(E) OF THE INCOME-TAX R ULES, 1962, WHICH STATES THAT FOR THE PURPOSES OF SECTION 92C(2), THE ALP IN RELATION TO THE INTERNATIONAL TRANSACTION SHALL BE DETERMINED A S UNDER : `(E) TRANSACTIONAL NET MARGIN METHOD, BY WHICH, (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSO CIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFF ECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAV ING REGARD TO ANY OTHER RELEVANT BASE ; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTI ON OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO T HE SAME BASE ; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAU SE (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 TH E ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERI ALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET ; (IV) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE AND 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 TAKEN INTO ACCOUNT TO ARRIVE AT AN ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION. 6.5. A BARE PERUSAL OF SUB-CLAUSE (I) OF RULE 10B( 1)(E) BRINGS OUT THAT THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM AN INTERNATIONAL 9 TRANSACTION IS TO BE COMPUTED IN RELATION TO A PART ICULAR BASE. SUB- CLAUSE (II) PROVIDES THAT THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM THE COMPARABLE UNCONTROLLED TRANSACTION IS COM PUTED HAVING REGARD TO THE SAME BASE. SUB-CLAUSE (III) PROVIDES THAT THE NET PROFIT MARGIN REALIZED BY A COMPARABLE COMPANY, DETERMINED AS PER SUB- CLAUSE (II) ABOVE, IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS, ..... WHICH COULD MATERI ALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET. IT IS THIS ADJUSTED NET PROFIT MARGIN OF THE UNRELATED TRANSACTIONS OR OF T HE COMPARABLE COMPANIES, AS DETERMINED UNDER SUB-CLAUSE (III), WH ICH IS USED AS BENCHMARK FOR THE PURPOSES OF MAKING COMPARISON WIT H THE NET PROFIT MARGIN REALIZED BY THE ASSESSEE FROM ITS INTERNATIO NAL TRANSACTION AS PER SUB-CLAUSE (I). SUB-CLAUSE (IV) STATES THAT THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE, AS REFERRED IN SUB CLAUSE (I), IS ESTABLISHED TO BE THE SAME AS A NET PROFIT MARGIN REFERRED IN S UB-CLAUSE (III) OF THE COMPARABLES. SUB-CLAUSE (V) STATES THAT THE NET PRO FIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT TO ARRIVE AT AN ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTION. ON GOING THROUGH THE ABOVE 10 SUB-CLAUSES OF RULE 10B(1)(E), IT BECOMES PATENT TH AT AS PER THE FIRST STEP, THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION IS TO BE COMPUTED. USE OF THE WORD REALIZED IN THE PROVISION RICHLY INDICATES THAT IT IS THE CA LCULATION OF ACTUAL OPERATING PROFIT MARGIN OF THE ASSESSEE EARNED FROM INTERNATIONAL TRANSACTION, WHICH IS NOT ANY ADJUSTED FIGURE. SIM ILAR POSITION CAN BE TRACED FROM THE LANGUAGE OF SUB-CLAUSE (IV), WHERE AGAIN REFERENCE HAS BEEN MADE TO PROFIT MARGIN `REALIZED BY THE ASSESS EE FROM THE INTERNATIONAL TRANSACTION. WHEN WE CONSIDER SUB-CL AUSES (II) AND (III), IT TURNS OUT THAT, FIRSTLY, THE NET OPERATING MARGI N ACTUALLY REALIZED FROM THE COMPARABLE UNCONTROLLED TRANSACTION IS COMPUTED , WHICH IS DETERMINED IN THE SAME WAY AS THAT OF THE ASSESSEE AS PER CLAUSE (I), THAT IS, ACTUAL FIGURES WITHOUT MAKING ANY ADJUSTME NT. THEN SUB-CLAUSE (III) TALKS OF ADJUSTING THE ACTUALLY REALIZED MARG IN OF COMPARABLES TO BRING THE SAME AT PAR WITH THE INTERNATIONAL TRANSA CTION UNDERTAKEN BY THE ASSESSEE, SO AS TO IRON OUT THE EFFECTS OF DIFF ERENCES BETWEEN THE INTERNATIONAL TRANSACTION AND COMPARABLE UNCONTROLL ED TRANSACTIONS. ON GOING THROUGH ALL THE SUB-CLAUSES OF RULE 10B(1)(E) , THE NATURAL COROLLARY WHICH FOLLOWS IS THAT THE NET PROFIT MARG IN REALIZED BY THE 11 ASSESSEE FROM ITS INTERNATIONAL TRANSACTION IS TAKE N AS SUCH AND THE ADJUSTMENTS, IF ANY, DUE TO DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION AND COMPARABLE UNCONTROLLED TRANSACTION S, ARE GIVEN EFFECT TO IN THE PROFIT MARGIN OF COMPARABLES. THE VIEWPOI NT CANVASSED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT ADJUSTM ENT DUE TO DIFFERENCE BETWEEN COMPARABLES AND THE ASSESSEE SHO ULD BE CARRIED OUT IN THE PROFIT MARGIN OF THE ASSESSEE IS, ERGO, DEVO ID OF MERIT AND CONTRARY TO THE LEGAL PROVISIONS, WHICH IS HEREBY R EPELLED. 6.6. THE LEARNED AUTHORIZED REPRESENTATIVE TRIED TO CONVINCE US ON HIS POINT OF VIEW OF ALLOWING CAPACITY ADJUSTMENT I N THE PROFIT MARGIN OF THE ASSESSEE, BY PRESSING INTO SERVICE SUB-RULE (3) OF RULE 10B, WHICH READS AS UNDER : `(3) AN UNCONTROLLED TRANSACTION SHALL BE COMPARABL E TO AN INTERNATIONAL TRANSACTION IF (I) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TR ANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT THE PR ICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM, SUCH TRANSA CTIONS IN THE OPEN MARKET ; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. 6.7. A CURSORY LOOK AT THIS SUB-RULE INDICATES THAT AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION, IF 12 EITHER THERE ARE NO DIFFERENCES BETWEEN THE INTERNA TIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTION OR IF S UCH DIFFERENCES EXIST, THEN A REASONABLY ACCURATE ADJUSTMENT CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. A PLAIN R EADING OF SUB-RULE (3) OF RULE 10B BRINGS TO THE FORE THAT THIS SUB-RULE I S MEANT ONLY FOR ASCERTAINING WHETHER OR NOT A PROBABLE COMPARABLE U NCONTROLLED TRANSACTION IS FIT FOR BEING TREATED AS ACTUAL COMP ARABLE. THIS IS ONLY AN ENTRY LEVEL JUDGMENTAL PROVISION FOR ASCERTAINING T HE COMPARABILITY OF AN OTHERWISE BROADLY COMPARABLE UNCONTROLLED TRANSA CTION. IN OTHER WORDS, IF THE BROADER COMPARABLE UNCONTROLLED TRANS ACTION IS SIMILAR TO THE INTERNATIONAL TRANSACTION OR IF THERE ARE DIFFE RENCES BETWEEN THE TWO, WHICH ARE CAPABLE OF ADJUSTMENT, THEN SUCH BRO ADLY COMPARABLE UNCONTROLLED TRANSACTIONS GAINS ENTRY IN TO THE FIN AL LIST OF COMPARABLES TO BE CONSIDERED FOR THE PURPOSES OF SUB-CLAUSE (II ) OF RULE 10B(1)(E). IF, ON THE OTHER HAND, THERE ARE DIFFERENCES BETWEE N THE TWO, WHICH ARE NOT CAPABLE OF ADJUSTMENT, THEN SUCH OTHERWISE BROA DLY COMPARABLE UNCONTROLLED TRANSACTION GOES OUT OF THE RECKONING AND DOES NOT GAIN ENTRY IN THE FINAL TALLY OF COMPARABLES FOR THE PUR POSES OF COMPUTING ALP OF THE INTERNATIONAL TRANSACTION AS PER THE MAN DATE OF RULE 13 10B(1)(E). IN OTHER WORDS, ROLE OF SUB-RULE (3) TO RULE 10B IS ONLY TO FILTER OUT COMPARABLE UNCONTROLLED TRANSACTIONS QUA LIFYING FOR INCLUSION IN THE DETERMINATION OF THE ALP UNDER RUL E 10B(1). MECHANISM FOR DETERMINING ALP UNDER THE TNMM HAS BE EN ENSHRINED IN RULE 10B(1)(E) ALONE WHICH CLEARLY PRO VIDES FOR MAKING ADJUSTMENTS ON ACCOUNT OF DIFFERENCES BETWEEN UNCON TROLLED TRANSACTION AND INTERNATIONAL TRANSACTION IN THE PR OFIT MARGIN OF COMPARABLES. SUB-RULE (3) IS NEITHER A MACHINERY PR OVISION IN ITSELF NOR A PART OF THE MACHINERY FOR CALCULATING ARMS L ENGTH PRICE OF AN INTERNATIONAL TRANSACTION, WHICH FALLS EXCLUSIVELY AND IN THE SOLE DOMAIN OF SUB-RULE (1). IF WE ACCEPT THE CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT RULE 10B(3)(II) IS T O BE CONSTRUED AS A PROVISION FOR ALLOWING ADJUSTMENT ON ACCOUNT OF DIF FERENCES BETWEEN UNCONTROLLED TRANSACTION AND INTERNATIONAL TRANSACT IONS FROM THE PROFIT MARGIN OF THE ASSESSEE, THEN WE WILL HAVE TO READ S UB-RULE (3) AS A PART OF MACHINERY FOR CALCULATING ALP UNDER RULE 10B(1)( E), WHICH HAS NO STATUTORY SANCTION. THUS, IT FOLLOWS FROM A CONJOIN T READING OF RULE 10B(1)(E) WITH RULE 10B(3), THAT WHEREAS LATER RULE IS ONLY MEANT FOR DECIDING THE INCLUSION OR OTHERWISE OF A PROBABLE C OMPARABLE IN THE 14 FINAL LIST OF COMPARABLES, THE FORMER RULE DETERMIN ES THE ALP OF THE INTERNATIONAL TRANSACTION UNDER THE PRESCRIBED METH OD ON THE BASIS OF SUCH A LIST OF COMPARABLES. WE, THEREFORE, JETTISON THE ASSESSEES CONTENTION THAT THE ADJUSTMENT ON ACCOUNT OF DIFFER ENCE BETWEEN CAPACITY UTILIZATION OF COMPARABLE COMPANIES AND TH E ASSESSEE SHOULD BE ADJUSTED IN THE PROFIT MARGIN OF THE ASSESSEE. T WO CONTRARY DECISIONS, POINTED OUT BY THE LD. AR, ARE BASED ON DIFFERENT AND PECULIAR FACTS, WHICH HAVE NO APPLICATION TO THE IN STANT CASE. OUR VIEW IS FORTIFIED BY SEVERAL ORDERS PASSED BY THE DELHI BENCHES OF THE TRIBUNAL ON THIS ISSUE INCLUDING DCIT VS. CLAAS IND IA PVT. LTD. (ITA NO.1783/DEL/2011) DT. 12.08.2015 (TO WHICH ONE OF U S, NAMELY, THE AM IS A PARTY). EX CONSEQUENTI , IT IS HELD THAT CAPACITY ADJUSTMENT, OR FOR THAT MATTER ANY OTHER ADJUSTMENT, CAN BE LEGALL Y MADE ONLY IN THE PROFIT MARGIN OF THE COMPARABLES, IF OTHERWISE FACT UALLY WARRANTED. 7.1. THE FOREGOING DISCUSSION BRINGS US TO THE NE XT ISSUE OF GRANTING ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN THE CAPACITY UTILIZATION, WHICH IS OTHERWISE AN IMPORTANT FACTOR, AND IN PRINCIPLE, THE SAME NEEDS TO BE ADJUSTED BY INCREASING OR REDUCING FIXED OPERATING COSTS AND FIXED PART OF SEMI-VARIABLE OPERATING COSTS OF COMPARABLES BY SEEING THEIR 15 CAPACITY UTILIZATION VIS--VIS THAT OF THE ASSESSEE. HOWEVER, ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT CAPA CITY ADJUSTMENT AS CLAIMED BY THE ASSESSEE, IS TOTALLY UNJUSTIFIED. 7.2. THE ASSESSEE CALCULATED ITS PROFIT MARGIN AT 22.63% ON THE BASIS OF WORKING GIVEN AT PAGE 324 OF THE PAPER BOOK. WHE N WE PERUSE THIS CALCULATION, IT BECOMES VIVID THAT OUT OF TOTAL OPE RATING EXPENSES OF RS. 25.72 CRORE, THE ASSESSEE HAS NOT ACCOUNTED FOR OPERATING EXPENSES TO THE TUNE OF RS. 8.65 CRORE ANYWHERE, EITHER IN T HE CALCULATION OF OPERATING PROFIT MARGIN FROM THE AE OR NON-AE TRANS ACTIONS. ON A SPECIFIC QUERY, THE LEARNED AUTHORIZED REPRESENTATI VE SUBMITTED THAT THIS COST OF RS. 8.65 CRORE REPRESENTS OPERATING EX PENSES OF IDLE CAPACITY WHICH HAS BEEN CONSIDERED BY THE ASSESSEE AS A THIRD SEGMENT WITH NO CORRESPONDING REVENUE. WE ARE HARD PRESSED TO CONCUR WITH SUCH A CONTENTION FOR THE OBVIOUS REASON THAT THE A CTUAL COSTS INCURRED BY THE ASSESSE HAVE TO BE ACCOUNTED FOR IN THE CALC ULATION TO WHICH THEY PERTAIN, THAT IS, EITHER AE OR NON-AE TRANSA CTIONS. IT IS TOTALLY ABSURD TO CREATE A SEPARATE SEGMENT OF IDLE CAPACIT Y WITH NO REVENUE AND ALLOCATE A LARGER CHUNK OF COSTS TO THE SAME WI THOUT ADJUSTING IT AGAINST AE OR NON-AE SEGMENTS. WE HAVE NOTICED SUPRA FROM THE 16 LANGUAGE OF RULE 10B(1)(E)(I) THAT IT TALKS OF FIND ING OUT PROFIT MARGIN `REALIZED, WHICH CAN BE COMPUTED BY CONSIDERING AL L THE OPERATING COSTS INCURRED. IT DOES NOT PERMIT IGNORING ANY OPE RATING COST ACTUALLY INCURRED. BY DOING SO, THE ASSESSEE HAS DEVISED A U NIQUE METHOD FOR CONVERTING ITS LOSS FROM THE AE SEGMENT INTO PROFIT , BY ARTIFICIALLY EXCLUDING HUGE OPERATING COSTS ACTUALLY INCURRED FR OM THE CONSIDERATION ZONE, THEREBY PROJECTING A ROSY PICTU RE OF PROFIT FROM ITS INTERNATIONAL TRANSACTIONS SO AS TO DEMONSTRATE THA T THE SAME IS AT ALP. THIS COURSE OF ACTION ADOPTED BY THE ASSESSEE IS LE GALLY UNACCEPTABLE. 7.3. FURTHER, THE ASSESSEE HAS CALCULATED CAPACIT Y ADJUSTMENT BY CONSIDERING FULL BENCH CAPACITY FOR THE ENTIRE YEAR AT 300 EMPLOYEES. ON A SPECIFIC QUERY AS TO WHAT THIS `FULL BENCH CAP ACITY REPRESENTS, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH ESE ARE THE NUMBER OF SEATS ON WHICH SOME WORK CAN BE POSSIBLY DONE NOTWITHSTANDING THE ACTUAL NUMBER OF EMPLOYEES WORK ING ON THEM. WHEN WE CONSIDER THE NUMBER OF EMPLOYEES ACTUALLY E MPLOYED BY THE ASSESSEE, IT COMES OUT THAT FOR THE MONTHS OF APRIL TO SEPTEMBER, 2010, IT WAS BETWEEN 58 TO 98; FROM OCTOBER, 2010 TO FEB RUARY, 2011, IT WAS BETWEEN 106 TO 181; AND FOR MARCH, 2011, IT WA S 213. IT IS 17 BEYOND OUR COMPREHENSION AS TO HOW THE ASSESSEE IS CALCULATING CAPACITY ADJUSTMENT WITH FULL CAPACITY AT 300, WHEN ACTUAL NUMBER OF EMPLOYEES IS FAR LESS, AND THE QUESTION OF THEIR BE ING SITTING IDLE IS ONLY SECONDARY. 7.4. THAT APART, ANY ADJUSTMENT INCLUDING CAPACIT Y ADJUSTMENT, IS ALWAYS PERMISSIBLE IN TERMS OF RULE 10B(1)(E)(III). IN ORDER TO BE GOVERNED BY THIS RULE, IT IS FOR THE ASSESSEE TO SH OW THAT THE COMPARABLES HAD PARTICULAR CAPACITY UTILIZATION AS AGAINST THE ASSESSEES CAPACITY UTILIZATION AT A DIFFERENT LEVE L. SUPPOSE, THERE ARE 15 COMPARABLES AND THE ASSESSEES CAPACITY UTILIZA TION DURING THE YEAR IS 80%. IN ORDER TO CLAIM ANY CAPACITY ADJUSTMENT, IT IS FOR THE ASSESSEE TO SHOW THAT EACH OF SUCH COMPARABLES HAD THEIR RES PECTIVE CAPACITY UTILIZATION OF LESS THAN 80% SO AS TO CALL FOR ANY FAVORABLE ADJUSTMENT. IF ONE OF THE COMPARABLES, SAY A, HAS CAPACITY UTIL IZATION OF 50%, THEN THE PROFIT MARGIN OF SUCH COMPARABLES IS REQUI RED TO BE ADJUSTED WITH THE DIFFERENTIAL CAPACITY ADJUSTMENT OF 30% (8 0% - 50%). IF ANOTHER COMPARABLE, SAY B, HAS CAPACITY UTILIZATION OF 70%, THEN THE PROFIT MARGIN OF B IS REQUIRED TO BE ADJUSTED WITH THE DIFFERENTIAL OF 10% (80% - 70%). IF STILL ANOTHER COMPARABLE, SAY C, HAS CAPACITY 18 UTILIZATION OF 90%, ITS PROFIT MARGIN IS REQUIRED T O BE ADJUSTED ADVERSELY BY (-)10%, BEING THE DIFFERENCE BETWEEN 80%, THAT IS, THE CAPACITY UTILIZATION OF THE ASSESSEE AND 90%, THAT IS, THE CAPACITY UTILIZATION OF C. IT IS ALWAYS THE ASSESSEE WHO HA S TO PREPARE ITS TRANSFER PRICING STUDY REPORT AND CONSIDER COMPARAB LES WITH THE RESPECTIVE PROFIT MARGINS DULY ADJUSTED TO TAKE CAR E OF DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTION AND COMPARABL E UNCONTROLLED TRANSACTIONS. THEN THE MATTER COMES UP BEFORE THE T PO TO VET THE CORRECTNESS OF THE ASSESSEES CLAIM. THUS IT IS APP ARENT THAT ONUS TO CLAIM ANY CAPACITY ADJUSTMENT IS ALWAYS ON THE ASSE SSEE, WHICH CAN BE DISCHARGED BY DEMONSTRATING DIFFERENT CAPACITY UTIL IZATION LEVELS. IT IS TRITE LAW THAT THE BURDEN OF PROOF IS ALWAYS ON THE ONE WHO CLAIMS SO. IT IS ONLY WHEN THE ASSESSEE BRINGS ON RECORD SOME EVIDENCE, EITHER FROM THE ANNUAL REPORT OF ITS COMPARABLE COMPANIES OR FROM ANY OTHER RELIABLE DATA, TO THE EFFECT THAT THERE EXISTED DIF FERENCES IN THE UTILIZATION OF CAPACITY OF SUCH COMPARABLES VIS--VIS THE ASSESSEE, THAT ANY ADJUSTMENT CAN BE ALLOWED IN THE PROFIT MARGIN OF THE RESPECTIVE COMPARABLES. CONTENTION OF THE LD. AR CASTING BURDE N ON THE REVENUE TO SHOW THAT IN EACH COMPARABLE CASE CAPACITY UTILI ZATION WAS LESS THAN 19 100%, AS A CONDITION PRECEDENT FOR DENYING THE CLA IM OF CAPACITY ADJUSTMENT, IS AKIN TO PUTTING CART IN FRONT OF HOR SE, WHICH IS MANIFESTLY IMPERMISSIBLE. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN A STAND THAT CAPACITY ADJUSTMENT BE ALLOWED ON THE AS SUMPTION OF ALL THE COMPARABLES OPERATING AT 100% CAPACITY LEVEL, WHICH IS NOT EVIDENCED FROM ANY MATERIAL ON RECORD. ON A PERTINENT QUERY, THE LEARNED AUTHORIZED REPRESENTATIVE CANDIDLY ADMITTED THAT NO SUCH DATA WAS AVAILABLE TO VOUCH SUCH A CLAIM. IN THE ABSENCE OF ANY RELIABLE DATA TO SUPPORT THE DIFFERENCE BETWEEN THE CAPACITY UTILIZA TION LEVELS OF THE ASSESSEE AND THE COMPARABLES, WE ARE HELPLESS IN GR ANTING ANY SUCH ADJUSTMENT. 8. SUMMING UP, WE HOLD THAT NEITHER THERE IS ANY WARRANT FOR ADJUSTING THE ASSESSEES PROFIT MARGIN WITH CAPACIT Y ADJUSTMENT, NOR SUCH ADJUSTMENT, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, CAN BE ALLOWED IN THE PROFIT MARGIN OF COMPARABLES. WE, THEREFORE, DISMISS THIS GROUND OF APPEAL. II. INCLUSIOIN OF COMPARABLES 9.1. WE HAVE BRIEFLY OBSERVED THAT THE ASSESSEE SEL ECTED FIVE COMPANIES AS COMPARABLE AND AFTER THE DIRECTION GIV EN BY THE DRP, 20 THE FINAL LIST AS DRAWN BY THE TRANSFER PRICING OFF ICER, STOOD REDUCED TO 18 COMPARABLES. THE ASSESSEE HAS AGITATED INCLUS ION OF 10 COMPANIES FROM SUCH A LIST OF COMPARABLES WHICH WE WILL EXAMINE IN SERIATIM HEREIN BELOW. 9.2. BEFORE VENTURING TO CONSIDER THE COMPARABILIT Y OR OTHERWISE OF THESE COMPANIES ASSAILED IN THE EXTANT APPEAL, IT I S DESIRABLE TO FIRST UNDERSTAND THE NATURE OF WORK CARRIED OUT BY THE AS SESSEE FOR ITS AE UNDER THE INTERNATIONAL TRANSACTION OF `PROVISION O F SOFTWARE DEVELOPMENT. THE TRANSFER PRICING OFFICER HAS MENT IONED AT PAGE 2 OF HIS ORDER THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF DESIGN AND DEVELOPMENT OF CUSTOMIZED SOFTWARE APPLICATIONS FOR ITS AE. THE ASSESSEES AUDIT REPORT IN FORM NO. 3CEB ALSO PROVI DES THE DESCRIPTION OF THE NATURE OF BUSINESS AS PROVISION OF SOFTWARE DEVELOPMENT. THE ASSESSEE PROVIDED SUCH SERVICES PURSUANT TO AGREEME NT DATED 19.01.2009 WITH INITTO -A/S DENMARK, WHOSE COPY IS AVAILABLE AT PAGES 377 ONWARDS OF THE PAPER BOOK. THIS AGREEMENT STATES THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CE RTAIN SOFTWARE AND CONSULTING SERVICES AND SOLUTIONS TO BUYER (I.E. IT S AE). DEFINITION OF `SOFTWARE SERVICES RENDERED BY THE ASSESSEE TO ITS AE GIVEN IN THIS 21 AGREEMENT MEANS AND INCLUDES SERVICES TOWARDS SOFTW ARE DEVELOPMENT, SOFTWARE SUPPORT, SOFTWARE PROJECT MAN AGEMENT SERVICES, DEVELOPMENT OF NEW APPLICATION, MAINTENAN CE OR UPGRADING OR REWORK ON ANY EXISTING SOFTWARE PROJECTS/APPLIAN CES, CUSTOMER SUPPORT ETC. OR ANY OTHER SERVICES PROVIDED THROUGH ITS SOFTWARE DEVELOPERS. REMUNERATION TO THE ASSESSEE HAS BEEN SET OUT UNDER ARTICLE 3 READ WITH APPENDIX 1, WHICH SHOWS THAT TH E ASSESSEE IS ENTITLED TO A MONTHLY FIXED AMOUNT IN ADDITION TO H OURLY RATE FOR THE ACTUAL MAN-HOURS USED IN RENDERING SPECIFIC SERVICE S. THE AGREEMENT PROVIDES THAT THE : `SOFTWARE, WHICH THE SERVICE PR OVIDER (I.E. THE ASSESSEE) CONCEIVES OR REDUCES TO PRACTICE WHETHER ALONE OR WITH OTHERS DURING THE COURSE OF ITS PERFORMANCE UNDER T HIS AGREEMENT, SHALL BE THE EXCLUSIVE PROPERTY OF BUYER (I.E. ITS AE). NEXT PARA 12.2 OF THE AGREEMENT PROVIDES THAT : `THE SOFTWARE SHAL L BE DEEMED BUYERS PROPRIETARY INFORMATION AND SHALL NOT BE DI SCLOSED TO ANYONE OUTSIDE OF BUYER, OR USED BY SERVICE PROVIDER OR O THERS WITHOUT THE PRIOR, WRITTEN CONSENT OF BUYER. THESE CLAUSES OF THE AGREEMENT ADEQUATELY INDICATE THAT THE ASSESSEE IS SIMPLY ENG AGED IN SOFTWARE DEVELOPMENT AND SOFTWARE SUPPORT SERVICES INCLUDING DEVELOPMENT OF 22 NEW APPLICATIONS AND MAINTENANCE OR UP-GRADATION OF SUCH APPLICATIONS ETC. FOR A PARTICULAR SUM AND THE WORK DONE BY IT IN THE SHAPE OF NEWLY DEVELOPED SOFTWARE OR APPLICATIONS B ECOMES EXCLUSIVE PROPERTY OF ITS FOREIGN AE, WHICH THE ASSESSEE CANN OT USE, INTERFERE WITH OR SELL TO OTHERS. ITS ROLE IS SIMPLY TO DEVE LOP AND MAINTAIN THE SOFTWARE AND AFTER DOING THE NEEDFUL ASSIGN IT TO I TS AE FOR A DEFINED CONSIDERATION. NO INTELLECTUAL PROPERTY RIGHTS IN T HE WORK DONE BY THE ASSESSEE VEST IN IT. THE LD. AR CONTENDED THAT THE ASSESSEE IS MAINLY DEVELOPING SOFTWARE AND SOLUTIONS TO BE USED IN BAN KING BUSINESS. HOWEVER, HE COULD NOT CORRELATE SUCH A CONTENTION W ITH ANY MATERIAL ON RECORD. WITH THE ABOVE BRIEF INTRODUCTION OF THE ASSESSEES NATURE OF WORK, NOW WE WILL EXAMINE THE DISPUTED COMPANIES AS TO THEIR COMPARABILITY OR OTHERWISE. (I) E-INFOCHIPS LIMITED: 10.1. THE TRANSFER PRICING OFFICER INCLUDED THIS CO MPANY IN THE LIST OF COMPARABLES. ON BEING CALLED UPON TO EXPLAIN AS TO WHY IT SHOULD NOT BE CONSIDERED AS A COMPARABLE, THE ASSESSEE CONTEND ED THAT THERE WAS FUNCTIONAL DISSIMILARITY INASMUCH AS THIS COMPANY W AS ENGAGED IN SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES AND AL SO PRODUCTS. THE 23 TRANSFER PRICING OFFICER OBSERVED THAT THE REVENUES OF THIS COMPANY FROM PRODUCTS WAS ONLY 15% OF TOTAL REVENUE AND H ENCE THE SAME QUALIFIED TO BE ELIGIBLE FOR COMPARISON. THE DRP DI D NOT ALLOW ANY RELIEF. 10.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ANNUA L REPORT OF THIS COMPANY IS AVAILABLE IN THE PAPER BOOK WITH ITS PRO FIT AND LOSS ACCOUNT AT PAGE 1025. SCHEDULE OF INCOME INDICATES ITS OPER ATING REVENUE FROM SOFTWARE DEVELOPMENT, HARDWARE MAINTENANCE, INFORMA TION TECHNOLOGY, CONSULTANCY ETC. REVENUE FROM HARDWARE MAINTENANCE STANDS AT RS. 3.92 CRORE, WHICH HAS BEEN CONSIDERED BY THE TRANSFER PRICING OFFICER HIMSELF AS SALE OF PRODUCTS. SUCH S ALE OF PRODUCTS CONSTITUTES 15% OF TOTAL REVENUE. THERE IS NO SEGME NTAL INFORMATION AVAILABLE AS REGARDS THE REVENUE FROM SALE OF PRODU CTS AND REVENUE FROM SOFTWARE DEVELOPMENT SEGMENT. AS THE ASSESSEE IS SIMPLY ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES AND THERE IS NO SALE OF ANY SOFTWARE PRODUCTS, THIS COMPANY, IN OUR CONSIDERED OPINION, CEASES TO BE COMPARABLE. IT IS OBVIOUS THA T FROM THE COMMON POOL OF INCOME FROM BOTH THE STREAMS OF SOFTWARE PR ODUCTS AND 24 SOFTWARE SERVICES, ONE CANNOT DEDUCE THE REVENUE FR OM SOFTWARE SERVICES AND NO ONE KNOWS THE IMPACT OF REVENUE FRO M PRODUCTS ON THE OVERALL KITTY OF PROFIT, WHICH MAY BE SIGNIFICANT. SINCE NO SEGMENTAL DATA OF THIS COMPANY IS AVAILABLE INDICATING OPERAT ING PROFIT FROM SOFTWARE DEVELOPMENT SERVICES, WE ORDER TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. (II) E-ZEST SOLUTIONS 11.1. THE TRANSFER PRICING OFFICER CONSIDERED THIS COMPANY AS COMPARABLE BY OBSERVING THAT IT PROVIDED SIMILAR SE RVICES AS WERE BEING PROVIDED BY THE ASSESSEE. HE REPRODUCED THE R ELEVANT PORTION FROM THE ANNUAL REPORT OF THIS COMPANY INDICATING T HAT IT WAS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES. THE ASS ESSEE REMAINED UNSUCCESSFUL BEFORE THE DRP. 11.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. THE ONLY BASIS WHICH H AS BEEN CHALLENGED BY THE LEARNED AUTHORIZED REPRESENTATIVE SEEKING EX CLUSION OF THIS COMPANY IS ITS FUNCTIONAL DISSIMILARITY. WE HAVE GO NE THROUGH THE ANNUAL REPORT OF THIS COMPANY WHICH IS AVAILABLE IN THE PAPER BOOK. ITS PROFIT AND LOSS ACCOUNT SPECIFIES `INCOME FROM OPERATIONS. IT IS 25 FURTHER BORNE OUT THAT IT IS PROVIDING END-TO-END D EVELOPMENT, SOFTWARE PROJECT DEVELOPMENT SERVICES. AS THE ASSESSEE IS AL SO ENGAGED IN THE CUSTOMISED SOFTWARE DEVELOPMENT, WE FIND THIS COMPA NY TO BE FUNCTIONALLY SIMILAR. THE SAME IS, THEREFORE, RETAI NED IN THE LIST OF COMPARABLES. (III) L&T INFOTECH LTD. 12.1. THE ASSESSEE ARGUED AGAINST THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES BEFORE THE TRANSFER PRICING OFF ICER BY CONTENDING THAT IT WAS FUNCTIONALLY DIFFERENT AND THERE WAS IN SUFFICIENT SEGMENTAL INFORMATION. APART FROM THAT, IT WAS ALSO ARGUED TH AT IT WAS EXCEPTIONAL YEAR OF ITS OPERATIONS AND THERE WERE SIGNIFICANT I NTANGIBLE ASSETS POSSESSED BY IT. THE TRANSFER PRICING OFFICER DID N OT ACCEPT THIS CONTENTION AND INCLUDED THE SAME IN THE LIST OF COM PARABLES. 12.2. HAVING REGARD TO THE RIVAL SUBMISSIONS AND PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUA L REPORT OF THIS COMPANY, WHICH IS AVAILABLE IN THE THIRD PAPER BOOK THAT ITS PROFIT AND LOSS ACCOUNT SHOWS REVENUE REVENUE SOFTWARE DEVE LOPMENT SERVICES AND PRODUCTS. PROFIT AND LOSS ACCOUNT OF THIS COMPANY HAVING A LIST OF SOFTWARE DEVELOPMENT EXPENSES CONT AINS AN ITEM `COST 26 OF BOUGHT-OUT ITEMS FOR RE-SALE WITH A VALUE OF RS . 25.55 CRORE. APART FROM THAT, THE BALANCE-SHEET OF THIS COMPANY SHOWS CERTAIN `SOFTWARE IN ITS SCHEDULE OF FIXED ASSETS UNDER THE HEAD `INT ANGIBLE ASSETS. THE ABOVE FACTS CONCLUSIVELY PROVE THAT THIS COMPANY IS ALSO ENGAGED IN THE SALE OF PRODUCTS APART FROM RENDERING SOFTWARE DEVELOPMENT SERVICES. ADOPTING THE SAME REASONS AS GIVEN FOR TH E EXCLUSION OF E- INFOCHIPS LTD., WE ORDER FOR THE EXCLUSION OF THIS COMPANY AS WELL. IV) PERSISTENT SYSTEMS AND SOLUTIONS LTD. 13.1. THE ASSESSEE CONTENDED THAT THIS COMPANY WA S DEALING IN SOFTWARE PRODUCTS ALONG WITH SOFTWARE DEVELOPMENT S ERVICES AND ITS REVENUE FROM LICENSING OF SOFTWARE PRODUCTS WAS INC LUDED IN TOTAL REVENUE. THE TPO OBSERVED FROM THE ANNUAL REPORT O F THIS COMPANY THAT IT WAS PROVIDING SUPPORT IN SOFTWARE DEVELOPME NT, CONSULTANCY AND SYSTEM INTEGRATION SERVICES. HE, THEREFORE, CO NSIDERED IT AS COMPARABLE. THE ASSESSEE IS AGGRIEVED. 13.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. THE ANNUAL REPORT OF THIS COMP ANY HAS BEEN PLACED IN THE SECOND PAPER BOOK, FROM WHICH IT IS L UCID THAT THIS COMPANY IS ENGAGED ONLY IN PROVIDING SOFTWARE DEVEL OPMENT AND 27 CONSULTANCY SERVICES, WHICH IS SIMILAR TO THOSE REN DERED BY THE ASSESSEE. WHEN CONFRONTED, THE LD. AR DID NOT RAISE ANY OBJECTION TO THE INCLUSION OF THIS COMPANY IN THE FINAL SET OF C OMPARABLES. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER IN TREATING TH IS COMPANY AS COMPARABLE. V) PERSISTENT SYSTEMS LTD. 14.1. THE ASSESSEE OBJECTED TO THE INCLUSION OF T HIS COMPANY IN THE TALLY OF COMPARABLES BY ARGUING THAT IT WAS FUNCTIO NALLY DIFFERENT AND THERE WAS INSUFFICIENT SEGMENTAL INFORMATION. THE TPO NEGATIVED THIS CONTENTION AND INCLUDED THE SAME IN THE FINAL SET O F COMPARABLES. 14.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM PROFIT & LOSS ACCOUNT OF THIS COMPANY, A COPY OF WHICH IS PLACED AT PAGE 153 4 OF THE PAPER BOOK, THAT ITS INCOME FROM SALE OF SOFTWARE SERVIC ES AND PRODUCTS IS AMOUNTING TO RS.6101.27 MILLIONS. THE TPO HAS HIMS ELF OBSERVED THAT THIS COMPANY DOES HAVE SOME PRODUCTS, BUT, PRO DUCT REVENUE IS ONLY 7.2% AND, HENCE, THIS COMPANY IS PREDOMINANTLY A SOFTWARE SERVICE PROVIDER. THIS DISCUSSION IS CONTAINED IN PARA 21.67 OF THE TPOS ORDER. EVEN SCHEDULE-11 TO THE PROFIT & LOSS ACCOUNT ALSO 28 SHOWS SALE OF SOFTWARE SERVICES AND PRODUCTS. TH IS SHOWS THAT THIS COMPANY IS ENGAGED IN BOTH RENDERING SOFTWARE DEVEL OPMENT SERVICES AS WELL AS SALE OF SOFTWARE PRODUCTS. ALBEIT THE P ERCENTAGE OF SOFTWARE PRODUCTS IN THE TOTAL REVENUE IS LESS, AS HAS BEEN NOTED BY THE TPO, YET, WE ARE INCLINED TO TAKE IT AS NON-COMPARABLE B ECAUSE THERE IS NO PRECISE INFORMATION ABOUT THE CONTRIBUTION MADE BY SUCH SMALL SALE OF SOFTWARE PRODUCTS TO THE TOTAL PROFIT OF THE COMPAN Y. AS NO SEGMENTAL INFORMATION IS AVAILABLE IN RESPECT OF THIS COMPANY AND THE FIGURES HAVE BEEN ADOPTED BY THE TPO AT ENTITY LEVEL, WE, T HEREFORE, ORDER FOR THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMP ARABLES. VI) SASKEN COMMUNICATIONS TECHNOLOGIES LTD. 15.1. THE TPO INCLUDED THIS COMPANY IN THE SET OF COMPARABLES DESPITE THE ASSESSEES OBJECTION THAT IT WAS FUNCTI ONALLY DIFFERENT AND ALSO HAD PRODUCT PORTFOLIO. 15.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND FROM PAGE 58 OF THE TPOS ORDER THAT HE HAS RECOGNIZED SALE OF S OFTWARE PRODUCTS TO THE TUNE OF RS.37 CRORE AND ODD. THOUGH THE BREAK- UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCTS IS AVA ILABLE, BUT, THE BREAK-UP OF OPERATING COSTS AND NET OPERATING REVEN UES FROM THESE TWO 29 SEGMENTS HAVE NOT BEEN GIVEN. IT IS FURTHER OBSERV ED THAT THE TPO HAS TAKEN ENTITY LEVEL FIGURES FOR THE PURPOSES OF MAKI NG COMPARISON. SINCE SUCH ENTITY LEVEL FIGURES CONTAIN REVENUE FRO M BOTH SOFTWARE SERVICES AND SOFTWARE PRODUCTS, AS AGAINST THE ASSE SSEE ONLY PROVIDING SOFTWARE SERVICES, WE ARE DISINCLINED TO TREAT THIS COMPANY AS COMPARABLE. THE ASSESSEES CONTENTION IS ACCEPTED ON THIS ISSUE. VII) WIPRO TECHNOLOGY SERVICES LTD. 16.1. THE ASSESSEE OBJECTED TO THE INCLUSION OF T HIS COMPANY IN THE LIST OF COMPARABLES BY ARGUING THAT APART FROM THIS COMPANY BEING FUNCTIONALLY DIFFERENT AND THE AVAILABILITY OF INSU FFICIENT SEGMENTAL INFORMATION, THERE WERE ALSO SIGNIFICANT RELATED PA RTY TRANSACTIONS. THE TPO DID NOT ACCEPT THE ASSESSEES CONTENTION OF THE RELATED PARTY TRANSACTIONS AND PROCEEDED TO INCLUDE IT IN THE FIN AL SET OF COMPARABLES. 16.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. PAGE 57 OF THE TPOS ORDER IS REPRODUCTION OF THE ASSESSEES CONTENTION ABOUT THE RELATED PARTY TRANSACTIONS AS UNDER :- WIPRO TECHNOLOGY SERVICES LIMITED (FORMERLY CITI T ECHNOLOGY SERVICES LIMITED) (THE COMPANY) WAS INCORPORATED ON 15 SEPTEMBER, 2004. THE ENTIRE SHARE CAPITAL OF THE C OMPANY WAS HELD 30 BY CITICORP BANKING CORPORATION, A COMPANY INCORPOR ATED UNDER LAWS OF DELAWARE, USA, UPTO 20 JANUARY, 2009. WIPRO LIMITED (WIPRO) EXECUTED AN AGREEMENT WITH CI TIGROUP INC. FOR ACQUIRING ALL OF CITIGROUP INTEREST IN THE COMP ANY W.E.F. 21 JANUARY 2009. ON 21 JANUARY 2009, WIPRO SIGNED A M ASTER SERVICE AGREEMENT (MSA) WITH CITIGROUP INC. FOR THE DELIVER Y OF TECHNOLOGY INFRASTRUCTURE SERVICES AND APPLICATION DEVELOPMENT AND MAINTENANCE SERVICES FOR THE PERIOD OF SIX YEARS. THE MSA PROV IDES FOR THE DELIVERY OF AT LEAST $500 MILLION IN SERVICE REVENU ES OVER THE PERIOD OF THE CONTRACT. AFTER THE ACQUISITION BY WIPRO, T HE NAME OF THE COMPANY WAS CHANGED TO WIPRO TECHNOLOGY SERVICES LI MITED (WTS OR THE COMPANY) ON 16 MARCH 2009. 16.3. IT IS OBSERVED FROM THE ABOVE CONTENTION RE PRODUCED IN THE TPOS ORDER THAT WIPRO TECHNOLOGY SERVICES LTD., WH ICH WAS EARLIER CITI TECHNOLOGY SERVICES LTD., WAS HELD BY CITI COR P. BANKING CORPORATION, USA UPTO 20TH JANUARY, 2009. WIPRO LT D., PARENT COMPANY OF THE ASSESSEE, EXECUTED AN AGREEMENT WITH CITI GROUP INC., FOR ACQUIRING CITI TECHNOLOGY SERVICES LTD., NOW CA LLED WIPRO TECHNOLOGY SERVICES LTD. ON 21.1.2009, WIPRO LTD. SIGNED A MASTER AGREEMENT WITH CITI GROUP INC., FOR THE DELIVERY OF TECHNOLOGY INFRASTRUCTURE SERVICES AND APPLICATION DEVELOPMENT AND MAINTENANCE SERVICES FOR THE PERIOD OF SIX YEARS, WHICH ALSO IN CLUDES THE YEAR UNDER 31 CONSIDERATION. THIS SHOWS THAT INCOME FROM SOFTWARE DEVELOPMENT SUPPORT AND MAINTENANCE SERVICES WAS EARNED BY WIPR O TECHNOLOGY SERVICES LTD., FROM CITI GROUP INC., BY MEANS OF MA STER SERVICE AGREEMENT ENTERED INTO BETWEEN WIPRO LTD., ITS PARE NT COMPANY AND CITI GROUP INC., A THIRD PERSON. 16.4. WE HAVE NOTICED ABOVE FROM THE LANGUAGE OF RULE 10B(1)(E)(II) THAT IT IS THE NET PROFIT MARGIN REALIZED FROM A CO MPARABLE UNCONTROLLED TRANSACTION, WHICH IS CONSIDERED FOR THE PURPOSES O F BENCHMARKING. THE EPITOME OF `COMPARABLE UNCONTROLLED TRANSACTION IS THAT THE COMPANIES OR TRANSACTIONS IN ORDER TO FALL WITHIN T HE AMBIT OF SUB- CLAUSE (II) OF RULE 10B(1)(E), SHOULD BE BOTH COMP ARABLE AS WELL AS UNCONTROLLED. `UNCONTROLLED TRANSACTION HAS BEEN DEFINED IN RULE 10A(A) TO MEAN: A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES , WHETHER RESIDENT OR NON-RESIDENT. THIS SHOWS THAT IN ORDER TO BE CALLED AS AN UNCONTROLLED TRANS ACTION, IT IS SINE QUA NON THAT THE SAME SHOULD BE BETWEEN THE ENTERPRISES OT HER THAN THE ASSOCIATED ENTERPRISES. SECTION 92B(2) PROVIDES THA T: `A TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER T HAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOSES OF SUB-SECTION ( 1), BE DEEMED TO BE A 32 TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATED ENT ERPRISES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVAN T TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BE TWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE. ON GOING TH ROUGH THE PRESCRIPTION OF SUB-SECTION (2) OF SECTION 92B, IT IS CLEARLY BORNE OUT THAT A TRANSACTION WITH A NON-AE SHALL BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO AES IF THERE EXISTS A PRIO R AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN THE TH IRD PERSON AND THE AE OR THE TERMS OF THE RELEVANT TRANSACTION ARE DET ERMINED IN SUBSTANCE BETWEEN THE THIRD PERSON AND THE AE. WHEN WE CONSIDER SECTION 92B(2) IN COMBINATION WITH RULE 10A(A), IT FOLLOWS THAT THE TRANSACTION BETWEEN NON-AES SHALL BE CONSTRUED AS A TRANSACTION BETWEEN TWO AES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN THIRD PERSON AND THE A E. IF SUCH AN AGREEMENT EXISTS, THE THIRD PERSON IS ALSO CONSIDER ED AS AN AE AND THE TRANSACTION WITH SUCH THIRD PERSON BECOMES INTERNAT IONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B. ONCE THERE IS A TRANSACTION BETWEEN TWO ASSOCIATED ENTERPRISES, IT CEASES TO BE AN UNCONTROLLED 33 TRANSACTION AND, THEREBY, GOES OUT OF RECKONING UNDER RULE 10B(1)(E)(II). 16.5. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT WIPRO TECHNOLOGY SERVICES LTD. EARNED A REVENUE FROM MAST ER SERVICES AGREEMENT WITH CITIGROUP INC. FOR THE DELIVERY OF T ECHNOLOGY INFRASTRUCTURE SERVICES. THIS AGREEMENT WAS, IN FA CT, EXECUTED BETWEEN THE ASSESSEES AE, WIPRO LTD., AND CITIGROUP INC., A THIRD PERSON. THIS UNFOLDS THAT THE TRANSACTION OF EARNING REVENUE FRO M SOFTWARE DEVELOPMENT SUPPORT AND MAINTENANCE SERVICES BY WIP RO TECHNOLOGY SERVICES LTD., IS AN INTERNATIONAL TRANSACTION BECA USE OF THE APPLICATION OF SECTION 92B(2) I.E., THERE EXISTS A PRIOR AGREEM ENT IN RELATION TO SUCH TRANSACTION BETWEEN CITIGROUP INC. (THIRD PERSON) AND WIPRO LTD. (ASSOCIATED ENTERPRISE). IN THE LIGHT OF THIS STRU CTURE OF TRANSACTION, IT CEASES TO BE UNCONTROLLED TRANSACTION AND, HENCE, W IPRO TECHNOLOGY SERVICES LTD., DISQUALIFIES TO BECOME A COMPARABLE UNCONTROLLED TRANSACTION FOR THE PURPOSES OF INCLUSION IN THE FI NAL LIST OF COMPARABLES UNDER RULE 10B(1)(E)(II). WE, THEREFOR E, DIRECT REMOVAL OF THIS COMPANY FROM THE LIST OF COMPARABLES. 34 VIII) ACROPETAL TECHNOLOGIES LTD. (SEG.) 17.1. THE TPO CONSIDERED THIS COMPANY AS COMPARAB LE ON SEGMENTAL LEVEL. THE ASSESSEES CONTENTIONS IN THIS REGARD W ERE REJECTED. 17.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUA L ACCOUNTS OF THIS COMPANY, A COPY OF WHICH IS AVAILABLE AT PAGE 892 O F THE PAPER BOOK, THAT IT HAS A SEPARATE SEGMENT OF SOFTWARE DEVELOPM ENT COVERING `ENTERPRISE SOLUTIONS AND `IT INFRASTRUCTURE SOLUT IONS. THE NATURE OF ACTIVITY DONE BY THIS COMPANY UNDER THESE SEGMENTS IS BROADLY SIMILAR TO THAT CONDUCTED BY THE ASSESSEE. SINCE THE TPO H AS CONSIDERED ONLY THE SEGMENTAL FIGURES OF THIS COMPANY FOR THE PURPO SES OF INCLUSION IN THE LIST OF COMPARABLES, WE FIND NO REASON TO ACCEP T THE ASSESSEES CONTENTION FOR ITS EXPULSION FROM THE SET OF COMPAR ABLES. THE IMPUGNED ORDER IS, THEREFORE, UPHELD ON THIS SCORE. IX) SANKHYA INFOTECH LTD. (SEG.) 18.1. THE TPO REJECTED THE ASSESSEES CONTENTION ABOUT THE FUNCTIONAL DISSIMILARITIES OF THE SOFTWARE DEVELOPMENT SEGMENT OF THIS COMPANY AND INCLUDED THE SAME IN THE FINAL TALLY OF COMPARA BLES. THE ASSESSEE IS AGGRIEVED AGAINST SUCH INCLUSION. 35 18.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. ANNUAL ACCOUNTS OF THIS COMPANY ARE AVAILABLE IN THE PAPER BOOK. IT CAN BE SEEN THAT THIS COMPANY H AS REVENUES FROM SOFTWARE DEVELOPMENT AND PRODUCTS. THE LD. ARS CO NTENTION THAT THIS COMPANY WAS DOING HUGE RESEARCH AND DEVELOPMENT AND , HENCE, THE SAME SHOULD BE EXCLUDED, DOES NOT MERIT ACCEPTANCE BECAUSE THE RESEARCH AND DEVELOPMENT ACTIVITY IS RESTRICTED TO THE PRODUCT SEGMENT AS IS APPARENT FROM PAGE 1198 OF THE PAPER BOOK WHI CH STATES THAT: THE COMPANY HAS IN-HOUSE RESEARCH AND DEVELOPMENT CENTR E INVOLVED IN DEVELOPMENTAL ACTIVITIES FOR NEW PRODUCTS IN THE FIELDS OF SIMULATIONS AND TRAINING. ONCE THIS CONTENTION OF THE ASSESSE E IS REJECTED AND REVENUE FROM SOFTWARE PRODUCTS IS EXCLUDED TO THE O NLY INCLUSION OF REVENUE FROM SOFTWARE DEVELOPMENT SERVICES SEGMENT WHICH IS AKIN TO THAT OF ASSESSEE, WE FEEL NO DIFFICULTY IN CONSIDER ING THIS COMPANY AS COMPARABLE ON SEGMENTAL LEVEL. THE IMPUGNED ORDER IS UPHELD. X) ZYLOG SYSTEMS LTD. 19.1. THE TPO CONSIDERED THIS COMPANY AS COMPARAB LE BY NOTING IN HIS ORDER THAT THE ASSESSEES OBJECTIONS TO ITS INC LUSION WERE UNSUSTAINABLE. 36 19.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. AR SUBMITTED THAT THE TPO DID NOT CONFRONT THE ASSESSEE WITH THE INCLUSION OF ZYL OG SYSTEMS LTD. IN THE SET OF COMPARABLES AND IT WAS A SHOCK TO SEE FR OM HIS ORDER THAT THIS COMPANY WAS INCLUDED WITHOUT A NOTICE TO THE A SSESSEE. IN ORDER TO SUPPORT THIS CONTENTION, THE LD. AR INVITED OUR ATTENTION TOWARDS PAGE 9 OF THE TPOS ORDER CONTAINING LIST OF 19 COM PANIES ON WHICH THE ASSESSEES OBJECTIONS WERE SOUGHT FOR THE PURPO SES OF THEIR INCLUSION IN THE LIST OF COMPARABLES. NAME OF ZYLO G SYSTEMS LTD. IS ABSENT FROM SUCH LIST. 19.3. WITHOUT GOING INTO THE MERITS OF COMPARABIL ITY, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD M EET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND T HE MATTER IS RESTORED TO THE FILE OF AO/TPO FOR DECIDING THE INCLUSION OR OTHERWISE OF ZYLOG SYSTEMS LTD. IN THE FINAL SET OF COMPARABLES AFRESH AFTER ENTERTAINING OBJECTIONS FROM THE ASSESSEE. 20. IN THE ULTIMATE ANALYSIS, WE SET ASIDE THE IM PUGNED ORDER AND REMIT THE MATTER OF COMPUTATION OF ALP OF THE INTER NATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT TO THE AO/TPO TO 37 BE DONE IN CONFORMITY WITH THE DISCUSSION MADE ABOV E IN THIS ORDER. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REA SONABLE OPPORTUNITY OF HEARING. 21. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.201 6. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 05 TH FEBRUARY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.