M/s. Corporate Executive Board India Pvt. Ltd., Gurgaon V. ACIT, Gurgaon

ITA 6328/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6340 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 25-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 21-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: Not Found
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Working capital adjustments; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 234B; 133(6); 201; 143(2); 64; 43; 48; 73; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I - 1 NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 6328 /DEL/ 2012 ASSESSMENT YEAR: 2008 - 09 AND ITA NO. 1088/DEL/2014 ASSESSMENT YEAR: 2009 - 10 AND ITA NO. 963/DEL/2015 ASSESSMENT YEAR: 2010 - 11 M/S. CORPORATE EXECUTIVE BOARD INDIA PVT. LTD., 6 TH FLOOR, BUILDING 10B, DLF CYBER CITY, DLF PHASE - II, GURGAON VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), GURGAON PAN : AACCC3453C (APPELLANT) (RESPON DENT) AND ITA NO. 6683/DEL/2015 ASSESSMENT YEAR: 2011 - 12 CEB INDIA PVT. LTD., (FORMERLY KNOWN AS CORPORATE EXECUTIVE B OARD INDIA PVT. LTD.) 6 TH FLOOR, BUILDING 10B, DLF CYBER CITY, DLF PHASE - II, GURGAON . VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), GURGAON PAN : AACCC3453C (APPELLANT) (RESPONDENT) 2 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 ASSESSEE BY SH. S.P. SINGH, AR; SH. MANONEET DALAL, ADV.; SH. YISHU GOEL, ADV.; & MS. SOMYA SETH, CA RESPONDENT BY SH. AMRENDRA KUMAR, CIT(DR) DATE OF HEARING 25.01.2017 DATE OF PRONOUNCEME NT 17.03.2017 ORDER PER O.P. KANT , A. M. : THESE FOUR APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE ASSESSING OFFICER UNDER SECTION 144C/143(3) OF THE INCOME - TAX ACT, 196 1 . ALL THESE FOUR APPEALS ARE IN RESPECT OF SAME ASSESSEE AN D THE GROUNDS RAISED IN APPEALS ARE ALMOST SIMILAR AND THUS SAME ARE HEA RD TOGETHER AND DISPOSED OF F BY THIS CONSOLIDATED ORDER FOR CONVENIENCE . ITA NO. 6328/DEL/2012 FOR AY: 2008 - 09 2. FIRST WE TAKE UP ITA NO. 6328/DEL/2012 FOR AY: 2008 - 09 FOR ADJUDICAT ION. GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER ( AO ) IS BAD IN LAW AND VOID AB - INITIO. 2. THAT ON FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, THE REFERENCE MADE BY THE LEARNED ASSESSING OFFICER SUFFERS FROM JURISDICTIONAL ERROR AS THE LEARNED ASSESSING OFFICER DID NOT RECORD ANY REASONS IN THE DRAFT ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS EXPEDIE NT AND NECESSARY TO REFER THE MATTER TO THE LEARNED TRANSFER PRICING OFFICER ( TPO ) FOR COMPUTATION OF THE ARM S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE INCOME TAX ACT, 1961 ( ACT ). 3 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 3. THE ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE LEARNED ASSESSING OFFICER ERRED IN MAKING AN ADDITION OF RS.1,34,72,719/ - TO THE RETURNED INCOME OF THE APPELLANT BY RE - COMPUTING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE ACT. 4. THE LEARNED AO/LD. TPO/LD. DRP E RRED ON FACTS AND IN LAW IN THE ASSESSMENT OF THE ARM S LENGTH PRICE OF THE ASSESSEE S INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES IN THE FOLLOWING MANNER - 4.1 USING THE POWER CONFERRED UNDER SECTION 133(6) OF THE ACT FOR COLLECTING INFORMATIO N THAT WAS NOT AVAILABLE TO THE ASSESSING IN THE PUBLIC DOMAIN AND USING THE INFORMATION SO COLLECTED FOR THE PURPOSE OF SELECTION OF COMPARABLE COMPANIES. THE SAID ACTION IS IN COMPLETE VIOLATION OF THE FUNDAMENTAL PRINCIPLES OF NATURAL JUSTICE AS (A) INF ORMATION WHICH WAS NOT AVAILABLE WITH THE ASSESSEE HAS BEEN USED; AND (B) THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS - EXAMINE THE COMPANIES WHOSE INFORMATION HAS BEEN USED BY THE LEARNED TRANSFER PRICING OFFICER. 4.2 REJECTING, BASED ON HIS SUBJE CTIVE GROUNDS AND PRESUMPTIONS, THE COMPARABILITY ANALYSIS CONDUCTED BY THE ASSESSEE FOR DETERMINING THE ARM S LENGTH PRICE AND CONDUCTING A FRESH COMPARABILITY ANALYSIS. 4.3 REJECTING THE COMPARABLE COMPANIES SET ADOPTED BY THE ASSESSEE ON THE BASIS OF ADDITIONAL/MODIFIED QUANTITATIVE FILTERS, WHICH LACK VALID BASIS AND ACCEPTING COMPANIES WHICH ARE FUNCTIONALLY OR OTHERWISE NOT COMPARABLE TO THE APPELLANT. 4.4 INCORRECTLY COMPUTING MARGINS OF COMPARABLE COMPANIES SELECTED IN THE FINAL COMPARABLE SET. 5. THE LD. AO/LD. TPO/LD. DRP HA VE ERRED IN APPLYING DIFFERENT TRANSFER PRICING METHODOLOGY, INCLUDING DIFFERENT QUANTITATIVE AND QUALITATIVE FILTERS, DESPITE THE FACT THAT THE FACTUAL MATRIX, CIRCUMSTANCES AND THE TERMS OF INTERNATIONAL TRANSACTIONS CONTI NUE TO BE THE SAME AS IN EARLIER YEARS. 6. THE LD. AO/LD. TPO/LD. DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS ENJOYING THE TAX HOLIDAY BENEFITS CONFERRED UNDER THE TAX HOLIDAY BENEFITS AS PER THE SOFTWARE TECHNOLOGY PARK 4 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 OF INDIA (HEREIN AFTER REFERRED TO AS STPI ) SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE ASSESSEE TO SHIFT THE PROFITS TO ANY OTHER JURISDICTION. 7. LD. AO/LD. TPO/LD. DRP ERRED IN NOT CORRECTLY APPRECIATING THE FUNCTION, ASSET AND RISK PROFIT OF THE APPELLANT AND TH US ERRED IN DENYING THE ADJUSTMENT FOR THE DIFFERENCE IN RISK PROFILE AND OTHER ECONOMIC ADJUSTMENT TO THE APPELLANT. 8. LD. AO/LD. TPO/LD. DRP ERRED IN SELECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2007 - 08) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE ASSESSEE, THE COMPLETE DATE FOR FINANCIAL YEAR 2007 - 08 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN. THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALT ER, DELETE, RESCIND, FORGO OR WITHDRAW ANY OF THE ABOVE GROUNDS OF OBJECTION EITHER BEFORE OR DURING THE COURSE OF THE PROCEEDINGS IN THE INTEREST OF NATURAL JUSTICE. 4 . THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED IN IN DIA ON 4 TH MARCH, 2004 AS A WHOLLY - OWNED SUBSIDIARY OF CEB INDIA, WHICH IS BASED IN UNITED STATE OF AMERICA (USA). THE ASSESSEE COMPANY WAS ENGAGED IN PROVIDING DATA COLLECTION, WEB SERVICES, INFORMATION RESEARCH AND RELATED SUPPORT SERVICES TO ITS ASSOCIA TED ENTERPRISES (AE). THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER, 2008, DECLARING TOTAL INCOME OF RS.21,306/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME - TAX ACT , 1961 ( FOR SHORT THE ACT ) WAS ISSUED A ND COMPLIED WITH. THE ASSESSING OFFICER REFERRED THE MATTER TO THE TRANSFER PRICING OFFICER (FOR SHORT TPO') UNDER SECTION 92CA(1) OF THE ACT FOR DETERMINATION OF ARM S LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE DUR ING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN CONSIDERATION. I N THE TRANSFER PRICING REPORT SUBMITTED TO THE TPO, THE 5 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 ASSESSEE REPORTED INTERNATIONAL TRANSACTION OF CALL CENTRE SERVICES AMOUNTING TO RS. 17 ,93,85,154/ - AND OPERATING PROFIT TO CO ST (OP/OC) RATIO OF 15.26 . THE ASSESS EE COMPANY WAS CHOSEN AS TESTED PARTY AND SELECTED TNMM AS THE MOST APPROPRIATE METHOD. AFTER CARRYING OUT SEARCH FOR COMPARABLE USING P ROWESS AND C APITALINE DATABASE , THE ASSESSEE SELECTED 9 COMPARABLES WITH A N A VERAGE PROFIT MARGIN OF 13.50% ON COST , BASED ON THE DATA FOR THREE YEARS. T HE ASSESSEE CLAIMED THAT ITS MARGIN WAS 15.26% AS COMPARED TO THE AVERAGE PROFIT MARGI N OF 13.50% OF THE COMPARABLES AND ACCORDINGLY , THE ASSESSEE TREATED THE PRICE CHARGED TO ITS AES AT ARM S LENGTH. THE LEARNED TPO ACCEPTED THE ASSESSEE AS A TESTED PARTY AND THE TNMM A S THE MOST APPROPRIATE METHOD AS APPLIED BY THE ASSESSEE. THE LD. TPO USED CURRENT YEAR S DATA FOR CARRYING OUT HIS OWN SEARCH OF THE COMPARABLE S OVER THE DATA B ASE S . HE CHOSE 20 COMPARABLES FOR COMPUTING AVERAGE MARGIN OF THE COMPARABLES. THE LD. TPO COMPUTED AVERAGE MARGIN OF COMPARABLES AS 29.16% AND AFTER ALLOWING WORKING CAPITAL ADJUSTMENTS OF 1.7 7%, HE COMPUTED THE ARM S LENGTH MARGIN AT 27.39%. T HE LEARNED TPO AFTER APPLYING THE ARM S LENGTH MARGIN OF 27.39% ON THE OPERATING COST OF RS. 15,56,56,072 / - , COMPUTED THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION AT RS. 19,82,90,270 / - . THE LEARNED TPO AFTER REDUCING THE AMOUNT OF TRANSACTION PRICE OF RS.17 ,93,85, 1 54 / - WITH ITS AE S , COMPUTED THE SHORTFALL I.E. ADJUSTMENT TO THE INTERNATIONAL TRANSACTION AMOUNTING TO RS.1,89,05,116/ - . AFTER INCORPORATING THE TRANSFER PRICING ADJUSTMENTS AS PROPOSED BY THE TPO, THE ASSESSING OFFICER ISSUED DRAFT ASSESSMENT O RDER TO THE ASSESSEE. AGAINST THE DRAFT ASSESSMENT ORDER, THE ASSESSEE FILED OBJECTION BEFORE THE LEARNED DISPUTE RESOLUTION PANEL (FOR SHORT DRP ) , NEW DELHI. AFTER TAKING INTO CONSIDERATION THE OBJECTION S OF THE ASSESSEE, THE LEARNED DRP EXCLUDED ONE CO MPARABLE M/S. MOLD TEK LTD. FROM THE LIST OF THE COMPARABLES 6 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 CHOSEN BY THE TPO . A LIST OF 19 COMPARABLES CHOSEN FINALLY BY THE LEARNED DRP ARE AS UNDER: S. NO. NAME OF COMPANY OP/OC % 1. ACCENTIA 44.50 2. ADITYA BIRLA MINAES - 0.55 3. ASIT C MEHTA 9.40 4. CALIBER POINT BUSINESS SOLUTIONS (SEGMENT) 10.97 5. CORAL HUB (VISHAL INT.) 51.84 6. COSMIC GLOBAL 24.30 7. CROSSDOMAIN SOLUTION PVT. LTD. 26.96 8. DATAMATICS FINANCIAL (BPO DIVISION) 34.87 9. E4E (EARLIER KNOWN NITANNY) 16.87 10. ECLERX 66.50 11. GENESYS INTERNATIONAL 48.15 12. HCL COMNET SYSTEMS & SERVICES LTD. (SEG.) 32.97 13. ICRA (SEG.) 11.11 14. INFOSYS BPO 20.03 15. I - SERVICE INDIA PRIVATE LIMITED 9.73 16. SPANCO LIMITED (SEG.) 8.94 17. ACROPETAL TECHNOLOGIES LTD. (SEG.) 35.30 18 . WIPRO BPO 30.23 19. R SYSTEM INTERNATIONAL LIMITED (SEG.) 4.30 AVERAGE 25.61 4.1 FOLLOWING THE DIRECTIONS OF THE LEARNED DRP, THE ASSESSING OFFICER COMPUTED THE REVISED AVERAGE MARGIN OF 19 COMPARABLES AT 25.61% AND AFTER ALLOWING THE WORKING CAPI TAL ADJUSTMENTS OF 1.7 1 %, THE ARM S LENGTH PR ICE MARGIN WAS COMPUTED AT 23.90 %. APPLYING THE SAID AVERAGE MARGIN OVER OPERATING COST, THE ASSESSING OFFICER COMPUTED THE ADJUSTMENT UNDER SECTION 19 2CA OF THE ACT, AMOUNTING TO RS.1,34,72 , 790/ - I N THE IMPUGNE D ORDER. AGGRIEVED WITH THE ADJUSTMENT SO MADE , THE ASSESSEE 7 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 5 . BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE DID NOT P RESS GR OUNDS OTHER THAN THE GROUND NO. 4.3 , WHEREIN ALSO HE DISPUTED THE FOLLOWING 3 COMPARABLES ONLY: A. ACCENTIA TECHNOLOGIES LTD. B. CORAL HUB (EARLIER VISHAL INFORMATION TECHNOLOGIES LTD.) C. ECLERX SERVICES LTD. 6 . THE L EARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT IF THE ABOVE COMPARABLES ARE EXCLUDED FROM THE SET OF COMPARABLES, THE AVERAGE MARGIN OF THE COMPARABLES WILL BE IN THE SAFE LIMIT. THE SUBMISSIONS OF THE LD. C OUNSEL FOR EXCLUDING THE ABOVE COMPARABLES ARE SUMMARIZED AS UNDER : (A) ACCENTIA TECHNOLOGIES LTD. 6.1 THE LEARNED AUTHORIZED REPRESENTATIVE SUB MITTED TO EXCLUDE THE ABOVE COMPARABLE DUE TO THE FOLLOWING REASON S : I. HE REFERRED TO PAGE NO. 26 OF THE PAPER BOOK AND SUBMITTED THAT THE COMPARABLE COMPANY HAD ACQUIRED FIVE COMPANIES /BUSINESS IN THE RELEVANT YEAR , NAMELY, THUNAGA SOFTWARE PVT. INC. LTD. , PURCHASE OF BUSINESS IN GSR SYSTEMS INC., PURCHASE OF BUSINESS IN GSR PHYSICIAN BILLING SERVICE INC., PURCHASE OF BUSINESS IN DENMED TRANSCRIPTION SERVICES INC. AND INVESTMENT IN ACCENTIA FZE AND PURCHASE OF BUSINESS IN DENMED TRANSCRIPTION SERVI CE INC AN D IN POST ACQUISITION PERIOD THE PROFITABILITY OF THE COMPANY HAS GONE SUBSTANTIALLY HIGH , THUS IT CANNOT BE CONSIDERED AS ONE OF THE COMPARABLES BECAUSE OF THIS EXTRAORDINARY EVENTS DURING THE YEAR. 8 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 II. HE REFERRED TO PAGE 28 OF THE PAPER BOOK AND SUBMITTED THAT APART FROM THE IT ES ENABLED SERVICES, THE COMPANY EAR NED REVENUE FROM SOFTWARE DEVELOPMENT AND IMPLEMENTATION AND FOR WHICH NO SEGMENT INFORMATION IS AVAILABLE IN THE ANNUAL REPORT OF THE COMPANY . III. HE FURTHER SUBMITTED THAT THE LD. TPO CONSIDERED THE PROFITABILITY OF THE ACCENTIA AT AN OVERALL ENTITY LEVEL WHICH INCLUDES INCOME FROM SOFTWARE DEVELOPMENT (19.13%) WHICH CANNOT BE COMPARED WITH THE ASSESSEE COMPANY. IV. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT IN THE FOLLOWING CASES ACCENTIA T ECHNOLOGIES LTD. HAD BEEN DIRECTED TO BE REJECT ED AS COMPARABLE AS COMPARED TO ITES COMPANIES. 1. SYMPHONY MARKETING SOLUTION INDIA (P) LTD. VS. INCOME TAX OFFICER (AY: 2008 - 09)[2013] 38 TAXMANN.COM 55 (BANGALORE - TRIB.) [ PARA 10 & 11, PAGE 82 OF CNV. PAP ERBOOK]. 2. BNY MELLON INTERNATIONAL OPERATIONS (INDIA) P. LTD. (ASSESSMENT YEAR - 2008 - 09) VS. ASSTT. COMMISSIONER OF INCOME TAX [2014] 52 TAXMANN.COM 306 (PUNE - TRIB.) [PARA 9 - 9.2, PAGE 97 OF CNV. PAPERBOOK]. (B) CORAL H UB ( PREVIOUSLY KNOWN AS VISHAL INFORMAT ION TECHNOLOGIES LTD.) 6.2 THE LEARNED AUTHORIZED REPRESENTATIVE REQUESTED FOR REJECTION OF THE COMPARABLE DUE TO THE FOLLOWING REASONS: I. REFERRING TO PAGE 31 OF THE PAPER BOOK, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE BUSINESS MODEL OF THE COMPANY CORAL HUB IS DIFFERENT FROM THE BUSINESS MODEL OF THE ASSESSEE COMPANY. HE SUBMITTED THAT THE CORAL HUB SUBCONTRACT S MAJOR ITY OF ITS WORK TO THIRD PARTY VENDOR S , WHICH WAS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT OF THE COMPANY FOR RELEVANT Y EAR. HE SUBMITTED 9 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THAT THE VENDOR PAYMENT IS APPROXIMATELY 85.58% OF THE TO T AL COST INCURRED BY THE CORAL HUB. A C HART OF SUCH EXPENSES WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE , WHICH IS REPRODUCED AS UNDER: ASSESSMENT YEAR VENDOR PAYMENTS (INR) VENDOR PAYMENT/COST EMPLOYEE COST (INR) EMPLOYEE COST/COST 2008 - 09 261,801,923 85.58% 11,140,357 4.40% 2009 - 10 398,376,162 81.83% 231,15,053 4.75% II. THE L EARNED AUTHORIZED REPRESENTATIVE FURTHER REFERRED TO PAGE NO. 29 OF THE PAPER BOOK AND SUBMITT ED THAT AS PER DIRECTOR S REPORT CONTAINED IN THE ANNUAL REPORT, CORAL HUB ENTERED INTO A NEW VERTICAL I.E. DIGITAL LIBRARY & PRINT ON DEMAND ( POD ) IN FINANCIAL YEAR 2007 - 08 . HE ALSO REFERRED TO PAGE NO. 30 OF THE PAPER BOOK AND SUBMITTED THAT THE COMPAN Y CAPITALIZED EXPENSES OF INR 4.27 CRORES PERTAINING TO CONVERSION OF BOOKS INTO POD. III. HE REFERRED TO PAGE NO. 30 OF THE PAPER BOOK AND SUBMITTED THAT IN SCHEDULE 6 OF THE PROFIT AND LOSS ACCOUNT, THE COMPANY HAS HUGE INVENTORIES OF POD PUBLISHING TITLES. IV. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL SUBMITTED THAT THE CORAL HUB IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY AND NEED TO BE EXCLUDED FROM THE SET OF COMPARABLES. V. IN SUPPORT OF THE ABOVE CONTENTION S , THE LEARNED COUNSEL FURTHER SUBMITTED THAT IN THE FOLLOWING DECISIONS, THE CORAL HUB WAS DIRECTED TO BE REJECTED AS COMPARABLES TO ITES COMPANIES: 1. DELHI HIGH COURT RULING OF RAMPGREEN SOLUTIONS PVT. LTD. V S. CIT (ASSESSMENT YEAR - 2008 - 09 ) 10 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 ONCE AGAIN CLEAR THAT BOTH VISHAL AND ECLERX COULD NOT BE TAKEN AS COMPARABLES FOR DETERMINING THE ALP. VISHAL AND ECLERX, BOTH ARE INTO KPO SERVICES. 2. SYMPHONY MARKETING SOLUTIONS INDIA (P) LTD. VS. INCOME TAX OFFICER (AY: 2008 - 09), 38 TAXMANNN.COM 55 (BANGALORE - TRIB.) 3. BNY MELLON INTERNATIONAL OPERATIONS (INDI A) P. LTD. (ASSESSMENT YEAR 2008 - 09) VS. ASSTT. COMMISSIONER OF INCOME TAX [2014] 52 TAXMANN.COM 306 (PUNE - TRIB.) (C) ECLERX SERVICED LIMITED ( ECLERX ) 6.3 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED FOR REJECTION OF THE ABOVE COMPARABLE DUE TO THE F OLLOWING REASONS: I. THE LEARNED AUTHORIZED REPRESENTATIVE REFERRED TO PAGE 33 OF THE PAPER BOOK AND SUBMITTED THAT DURING RELEVANT YEAR THE ECLERX ACQUIRED A UK BASED COMPANY, WHICH LED TO THE ACQUISITION OF NEW CUSTOMERS TO ECLERX. HE SUBMITTED THAT ECL ERX SERVICES LTD. ACQUIRED IGENTICA TRAVEL SOLUTIONS LTD. ( ITS ) DURING THE RELEVANT YEAR AND THE SAID ACQUISITION PROVIDED THE COMPANY WITH 28 LARGE CUSTOMERS THEREBY INCREASING THE CUSTOMER BASE AND OVERALL REVENUES OF THE COMPANY. HE SUBMITTED T HAT TRA NSFER PRICING OFFICER ADOPTED A FILTER AND REJECTED THE COMPARABLE ALLSEC TECHNOLOGIES ON THE BASIS THAT DURING THE YEAR THAT THERE WAS AMALGAMATIONS AND ACQUISITIONS. ACCORDINGLY, HE SUBMITTED THAT ECLERX SERVICES LTD . SHOULD ALSO BE EXCLUDED FORM TH E SET OF COMPARABLES IN VIEW OF THESE EXTRAORDINARY EVENTS OF ACQUISITION OF THE COMPANIES DURING THE YEAR. II. THE L EARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE FUNCTIONS PERFORMED BY THE ECLERX SERVICES LTD. ARE NOT 11 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 COMPARABLE WITH THE ASSESSEE COM PANY DUE FOLLOWING OBSERVATIONS : (A) ECLERX SERVICES LTD. PROVIDES DATA ANALYTICS AND DATA PROCESS SOLUTIONS TO SOME OF THE LARGEST BRANDS IN THE WORLD. (B) IT IS RECOGNIZED AS EXPERT IN CHOSE N MARKET FINANCIAL SERVICE S AND RETAIL AND MANUFACTURING. (C ) I T IS INDUSTRY SPECIALIZED COMPANY AND HELPS IN MEETING COMPLEX CLIENT NEEDS, DATE ANALYTICS SPECIALIZATION IN TWO BUSINESS VERTICALS FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. (D) IT ALSO PROVIDES TAILORED OUTSOURCING PROCESS AND MANAGEMENT SE RV ICES INCLUDING MULTITUDE OF DATA AGGREGATION, MINING AND MAINTENANCE SERVICES. (E) IT HAS EMPLOYED OVER 1500 DOMAIN SPECIALISTS AND PROVIDES COMPLETE BUSINESS SOLUTIONS WITH THE HELP OF PROCESS IMPROVEMENT, AUTOMATION AND DEDICATED WORKFORCE. IN VIEW OF ABOVE, LEARNED COUNSEL SUBMITTED THAT M/S. ECLERX SERVICES LTD. IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, THUS, THE SAME NEED TO BE EXCLUDED FROM THE SET OF COMPARABLES . III. THE L EARNED COUNSEL SUBMITTED THAT ECLERX SER VICES LTD. INCURRED INR 14.6 CRORES ON ADVERTISING AND MARKETING DURING THE YEAR , WHICH IS 12.50% OF SALES , WHICH CREATED A BRAND FOR THE COMPANY, WHEREAS THE ASSESSEE COMPANY DID NOT INCUR EXPENDITURE ON ADVERTISEMENT OR MARKETING. IV. THE L EARNED AUTHORIZED REPRESENTATIVE FURTHER RELIE D ON THE FOLLOWING DECISIONS WHEREIN ECLERX SERVICES LTD. HAS BEEN DIRECTED TO BE REJECTED AS COMPARABLES TO ITES COMPANIES : DELHI HIGH COURT RULING OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT (AY: 2008 - 09) 12 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 ONCE AGAIN CLEAR THAT BOTH VISHAL AND ECLERX COU LD NOT BE TAKEN AS COMPARABLES FOR DETERMING THE ALP. VISHAL AND ECLERX, BOTH ARE INTO KPO SERVIES. SYMPHONY MARKETING SOLUTIONS INDIA (P) LTD. VS. INCOME TAX OFFICER (AY: 2008 - 09) [2013] 38 TAXMAN.COM 55 (BANGALORE TRIB.) 7. ON THE OTHER HAND, IN RESP ECT OF THE EXCLUSION OF THE THREE COMPARABLES, T HE LEARNED CIT (DR) RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE APPEAL, THE LEARNED AUTHORIZED REP RESENTATIVE HAS CONTESTED THE COMPARABILITY OF 3 COMPARABLES OUT OF THE FINAL SET OF 19 COMPARABLES IN THE ORDER OF THE LEARNED DRP. NO OTHER GROUNDS HAVE BEEN ARGUED BEFORE US. THE COMPARABILITY OF ABOVE THREE COMPARABLES IS DECIDED AS UNDER: A) ACCENTIA TECHNOLOGIES LTD. 8.1 THE LEARNED AUTHORIZED REPRESENTATIVE HAS REFERRED TO THE EXTRAORDINARY EVENTS OF THE ACQUISITION OF 4 COMPANIES DURING THE RELEVANT YEAR. THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. AMRIPRISE INDIA PVT . LTD . IN ITA 461/2016 , OBSERVED THAT EXCLUSION OF THREE COMPARABLES BY THE ITAT , WHERE THE ACQUISITIONS RESULTED IN HIGHER PROFITS , W AS NOT UNREASONABLE . SINCE THE ACCENTIA TECHNOLOGIES LTD. HAS ACQUIRED FIVE COMPANIES DURING THE YEAR AND SALES OF PRE ACQU ISITION PERIOD ( AY 2007 - 08) AMOUNTING TO RS. 287.23 MILLIONS HAS GONE UPTO RS. 503.63 MILLIONS FOR POST ACQUISITION PERIOD ( AY 2008 - 09 ) , HAS GONE TO RS. 503.63 MILLIONS. WHICH IS EVIDENT FROM THE FOLLOWING CHART SUBMITTED BY LEARNED AUTHORIZED REPR ESENTATIVE: 13 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 PARTICULARS PRE - ACQUISITION PERIOD (AY) POST ACQUIT ION PERIOD (AY) 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 SALES 0.35 0.29 287.23 503.63 787.21 927.62 1069.03 OPERATING COST 1.00 1.61 215.30 348.91 516.21 648.42 718.90 OPERATING PROFIT - 0.65 - 1.32 71.93 154.72 271.00 279.21 350.13 OP/OC - 65.11% - 82.26% 33.41% 44.34% 52.50% 43.06% 48.70% AVERAGE SALES 95.96 821.87 AVERAGE OP/OC - 37.98 47.15% 8.2 FURTHER, ON PERUSAL OF THE PAGE 27 OF THE PAPER BOOK, IT IS EVIDENT TH AT THE COMPARABLE COMPANY WAS HAVING REVENUE FROM SOFTWARE DEVELOPMENT AND IMPLEMENTATION AND THUS, THE COMPANY CANNOT BE COMPARED WITH THE ASSESSEE COMPANY AT ENTITY LEVEL. THE ASSESSEE COMPANY IS CLAIMED TO BE ENGAGED ONLY IN THE ITES SEGMENT. 8.3 FURTH ER WE FIND THAT , I N THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA (P) LTD. VS. INCOME TAX OFFICER (SUPRA) , THE ACCNETIA TECHNOLOGIES LTD HAS BEEN EXCLUDED AS ONE OF THE COMPARABLE TO ITES COMPANIES BY THE TRIBUNAL AS UNDER: (1) ACCENTIA TECHNOLOGIES LTD . (SEG.) 10. THIS WAS CONSIDERED AS A COMPARABLE BY THE TPO AND LISTED AT SL.NO.1 OF THE COMPARABLE COMPANIES CHOSEN BY THE TPO. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THERE ARE EXTRA ORDINARY EVENTS THAT OCCURRED DURING THE P REVIOUS YEAR IN THIS COMPANY. OUR ATTENTION WAS DRAW TO THE ANNUAL REPORT OF THIS COMPANY FOR THE A.Y. 2007 - 08 WHEREIN THE FACT THAT THIS COMPANY HAD ACQUIRED THUNGA SOFTWARE PVT. LTD., GSR PHYSICIANS BILLING SERVICES INC., GSR SYSTEMS INC. AND DENMED INC . IS MENTIONED. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HYDERABAD ITAT BENCH IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA ITA NO.1316/BANG/2012 PVT. LTD. V. DCIT [ 2013] 32 TAXMAN.COM 21 (HYD. TRIB). IN THE AFORESAID DECISION, THE HYDERA BAD BENCH OF THE TRIBUNAL HAD TO DEAL WITH A CASE OF DETERMINATION OF ALP IN THE CASE OF AN ASSESSEE WHO WAS PROVIDING ITES BUSINESS SUPPORT SERVICES FOR THE A.Y. 2007 - 08. THE TPO HAD CONSIDERED ACCENTIA TECHNOLOGIES LTD. AS A COMPARABLE. THE DRP HOWEVER H ELD THAT THE SAID COMPANY CANNOT BE COMPARED AS A COMPARABLE OWING TO EXTRA ORDINARY EVENTS THAT TOOK PLACE DURING THE 14 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 PREVIOUS YEAR. THE TRIBUNAL UPHELD THE ORDER OF THE DRP OBSERVING AS FOLLOWS: - 'I. ACCENTIA TECHNOLOGIES LTD. 10. IT IS THE SUBMISSION O F THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS A COMPARABLE BECAUSE OF UNCOMPARABLE FINANCIAL RESULTS ARISING OUT OF AMALGAMATION IN THE COMPANY. IN THIS REGARD, THE ASSESSEE HAS RELIED UPON THE ORDER OF THE DRP FOR THE ASSESSMENT YEAR 2008 - 09 IN AS SESSEE'S OWN CASE. IT IS SEEN THAT THE DRP WHILE CONSIDERING SIMILAR OBJECTION PLACED BY THE ASSESSEE IN THE CASE OF ANOTHER COMPANY, VIZ. MOLD TEK TECHNOLOGIES LTD., IN THE PROCEEDINGS RELATING TO THE ASSESSMENT YEAR 2008 - 09, HAS OBSERVED IN THE FOLLOWING MANNER - '17.5. IN ADDITION TO THE ABOVE, THE DIRECTOR'S REPORT OF THE COMPANY FOR THE FY 2007 - 08 REVEALED THE MERGER AND THE DEMERGER. A COMPANY KNOWN AS TECHMEN TOOLS PVT. LTD. HAD AMALGAMATED WITH MOLD - TEK TECHNOLOGIES LTD. WITH EFFECT FORM 1ST OCTOBER , 2006. THERE WAS A DE - MERGER OF PLASTIC DIVISION OF THE COMPANY AND THE RESULTING COMPANY IS KNOWN AS MOLDTEK PLASTICS LIMITED. THE DE - MERGER FROM THE MOLDTEK TECHNOLOGIES TOOK PLACE WITH EFFECT FROM 1ST APRIL, 2007. THE MERGER AND THE DE - MERGER NEEDED THE APPROVAL OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND ALSO THE APPROVAL OF THE SHAREHOLDERS. THE SHAREHOLDERS OF THE COMPANY GAVE APPROVAL FOR THE MERGER AND THE DE - MERGER ON 25.01.2008 AND THE HON'BLE HIGH COURT OF ANDHRA PRADESH HAD APPROVED THE MERGER AND DE - MERGER ON 25TH JULY, 2008. SUBSEQUENTLY, THE ITA NO.1316/BANG/2012ACCOUNTS OF MOLDTEK TECHNOLOGIES FOR FY 2007 - 08 WERE REVISED. ON A PERUSAL OF THE ANNUAL REPORT IT IS NOTICED THAT TECKMEN TOOLS PVT. LTD. AND THE PLASTIC DIVISION OF THE COMPA NY WERE DEMERGED AND THE RESULTING COMPANY WAS NAMED AS MOLDTEK PLASTICS LTD. THE KPO BUSINESS REMAINED WITH THE COMPANY. A PERUSAL OF THE ANNUAL REPORT REVEALED THAT TO GIVE EFFECT TO THE MERGER AND DEMERGER, THE FINANCIAL STATEMENTS WERE REVISED AND REST ATED AFTER SIX MONTHS FORM THE END OF THE FINANCIAL YEAR 31.3. 2008. THE ASSESSEE FILED FORM NO.21 UNDER THE COMPANIES ACT WITH THE REGISTRAR OF COMPANIES ON 26TH AUGUST, 2008. THUS THE EFFECTIVE DATE OF THE SCHEME OF MERGER AND DEMERGER WAS 26TH AUGUST, 2008. THE ANNUAL REPORT SUPPORTED THE ARGUMENT OF THE ASSESSEE THAT THERE WERE MERGER AND DEMERGER IN THE FINANCIAL YEAR AND IT WAS AN EXCEPTIONAL YEAR OF PERFORMANCE AS FINANCIAL STATEMENTS WERE REVISED B Y THIS COMPANY MUCH AFTER THE CLOSURE OF THE PREVIOUS YEAR. THE PANEL AGREES WITH THE CONTENTION OF THE ASSESSEE THAT IT IS AN EXCEPTIONAL YEAR HAVING SIGNIFICANT IMPACT ON THE PROFITABILITY ARISING OUT OF MERGER AND DEMERGER.' 11. ON CAREFUL CONSIDERATIO N OF THE MATTER, WE ALSO AGREE WITH THE AFORESAID VIEW OF THE DRP THAT EXTRA - ORDINARY EVENT LIKE MERGER AND DE - MERGER WILL HAVE AN EFFECT ON THE PROFITABILITY OF THE COMPANY IN THE 15 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 FINANCIAL YEAR IN WHICH SUCH EVENT TAKES PLACE. IT IS THE CONTENTION OF THE ASSESSEE THAT IN CASE OF THE AFORESAID COMPANY, THERE IS AMALGAMATION IN DECEMBER, 2006, WHICH HAS IMPACTED THE FINANCIAL RESULT. THIS FACT HAS TO BE VERIFIED BY THE TPO. IF IT IS FOUND UPON SUCH VERIFICATION THAT THE AMALGAMATION IN FACT AHS TAKEN PLACE, THEN THE AFORESAID COMPARABLE HAS TO BE EXCLUDED.' 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF THE ITAT IS SQUARELY APPLICABLE TO THE PRESENT CASE ALSO. IT IS CLEAR THAT DURING THE PREVIOUS YEAR THERE WERE EXTRA ORDINARY EVENTS THAT TOOK PLACE IN THIS COMPANY WHICH WARRANTS EXCLUSION OF THIS COMPANY AS A ITA NO.1316/BANG/2012COMPARABLE. WE THEREFORE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARAB LE. 8.4 FURTHER, IN THE CASE OF BNY MELLON INTERNATIONAL OPERATION (INDIA) P. LTD. , THE TRIBUNAL HELD AS UNDER: 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER/TPO/DRP. WE HAVE ALSO CONSIDERE D THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE BANGALORE BENCH OF THE TRIBUNAL, FOLLOWING THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA (P.) LTD. V. DY. CIT (INTERNATIONAL TAXATION) 120131 57 SOT 14 (UROV32 TAXMANN.COM 21 HELD THAT CERTAIN EXTRAORDINARY EVENTS TOOK PLACE IN THE CASE OF ACCENTIA TECHNOLOGIES LTD. FOR WHICH IT WARRANTS EXCLUSION OF THIS COMPANY AS A COMPARABLE. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PAGES 6 TO 9 OF THE ORDER READ AS UNDER : (1) ACCENTIA TECHNOLOGIES LTD. (SEG.) 10. THIS WAS CONSIDERED AS A COMPARABLE BY THE TPO AND LISTED AT SL. NO. 1 OF THE COMPARABLE COMPANIES CHOSEN BY THE TPO. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THERE AR E EXTRA ORDINARY EVENTS THAT OCCURRED DURING THE PREVIOUS YEAR IN THIS COMPANY. OUR ATTENTION WAS DRAW TO THE ANNUAL REPORT OF THIS COMPANY FOR THE A.Y. 2007 - 08 WHEREIN THE FACT THAT THIS COMPANY HAD ACQUIRED THUNGA SOFTWARE PVT. LTD., GSR PHYSICIANS BILL ING SERVICES INC., GSR SYSTEMS INC. AND DENMED INC. IS MENTIONED. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HYDERABAD IT AT BENCH IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA ITA NO. 1 316/BANG/2012 PVT. LTD. V. DC IT F20131 32 TAXMAN.COM 2 1 (HYD. TRIB). IN THE AFORESAID DECISION, THE HYDERABAD BENCH OF THE TRIBUNAL HAD TO DEAL WITH A CASE OF DETERMINATION OF ALP IN THE CASE OF AN ASSESSEE WHO WAS PROVIDING ITES BUSINESS SUPPORT SERVICES FOR THE A.Y. 2007 - 08. THE TPO HAD CONSIDERED ACCENTIA TECHNOLOGIES LTD. AS A COMPARABLE. THE DRP HOWEVER HELD THAT THE SAID COMPANY CANNOT BE COMPARED AS A COMPARABLE OWING TO EXTRA ORDINARY EVENTS THAT TOOK PLACE DURING THE PREVIOUS YEAR. THE TRIBUNAL UPHELD THE ORDER OF THE DRP OBSERVING AS FOLLOWS: 16 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 'I. A CCENTIA TECHNOLOGIES LTD. 10. IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS A COMPARABLE BECAUSE OF UNCOMPARABLE FINANCIAL RESULTS ARISING OUT OF AMALGAMATION IN THE COMPANY. IN THIS REGARD, THE ASSESSEE HAS RELIED UPON THE O RDER OF THE DRP FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE'S OWN CASE. IT IS SEEN THAT THE DRP WHILE CONSIDERING SIMILAR OBJECTION PLACED BY THE ASSESSEE IN THE CASE OF ANOTHER COMPANY, VIZ. MOLD TEK TECHNOLOGIES LTD., IN THE PROCEEDINGS RELATING TO THE A SSESSMENT YEAR 2008 - 09, HAS OBSERVED IN THE FOLLOWING MANNER - '17.5. IN ADDITION TO THE ABOVE, THE DIRECTOR S REPORT OF THE COMPANY FOR THE FY 2007 - 08 REVEALED THE MERGER AND THE DEMERGER. A COMPANY KNOWN AS TECHMEN TOOLS PVT. LTD. HAD AMALGAMATED WITH MO LD - TEK TECHNOLOGIES LTD. WITH EFFECT FROM 1ST OCTOBER, 2006. THERE WAS A DE - MERGER OF PLASTIC DIVISION OF THE COMPANY AND THE RESULTING COMPANY IS KNOWN AS MOLDTEK PLASTICS LIMITED. THE DE - MERGER FROM THE MOLDTEK TECHNOLOGIES TOOK PLACE WITH EFFECT FROM 1S T APRIL, 2007. THE MERGER AND THE DE - MERGER NEEDED THE APPROVAL OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND ALSO THE APPROVAL OF THE SHAREHOLDERS. THE SHAREHOLDERS OF THE COMPANY GAVE APPROVAL FOR THE MERGER AND THE DE - MERGER ON 25.01.2008 AND THE HO N'BLE HIGH COURT OF ANDHRA PRADESH HAD APPROVED THE MERGER AND DE - MERGER ON 25TH JULY, 2008. SUBSEQUENTLY, THE ITA NO.L316/BANG/2012 ACCOUNTS OF MOLDTEK TECHNOLOGIES FOR FY 2007 - 08 WERE REVISED. ON A PERUSAL OF THE ANNUAL REPORT IT IS NOTICED THAT TECKMEN TOOLS PVT. LTD. AND THE PLASTIC DIVISION OF THE COMPANY WERE DEMERGED AND THE RESULTING COMPANY WAS NAMED AS MOLDTEK PLASTICS LTD. THE KPO BUSINESS REMAINED WITH THE COMPANY. A PERUSAL OF THE ANNUAL REPORT REVEALED THAT TO GIVE EFFECT TO THE MERGER AND DEM ERGER, THE FINANCIAL STATEMENTS WERE REVISED AND RESTATED AFTER SIX MONTHS FORM THE END OF THE FINANCIAL YEAR 31.3. 2008. THE ASSESSEE FILED FORM NO.21 UNDER THE COMPANIES ACT WITH THE REGISTRAR OF COMPANIES ON 26TH AUGUST, 2008. THUS THE EFFECTIVE DATE OF THE SCHEME OF MERGER AND DEMERGER WAS 26TH AUGUST, 2008. THE ANNUAL REPORT SUPPORTED THE ARGUMENT OF THE ASSESSEE THAT THERE WERE MERGER AND DEMERGER IN THE FINANCIAL YEAR AND IT WAS AN EXCEPTIONAL YEAR OF PERFORMANCE AS FINANCIAL STATEMENTS WERE REVISED BY THIS COMPANY MUCH AFTER THE CLOSURE OF THE PREVIOUS YEAR. THE PANEL AGREES WITH THE CONTENTION OF THE ASSESSEE THAT IT IS AN EXCEPTIONAL YEAR HAVING SIGNIFICANT IMPACT ON THE PROFITABILITY ARISING OUT OF MERGER AND DEMERGER.' 11. ON CAREFUL CONSIDERATI ON OF THE MATTER, WE ALSO AGREE WITH THE AFORESAID VIEW OF THE DRP THAT EXTRA - ORDINARY EVENT LIKE MERGER AND DE - MERGER WILL HAVE AN EFFECT ON THE PROFITABILITY OF THE COMPANY IN THE FINANCIAL YEAR IN WHICH SUCH EVENT TAKES PLACE. IT IS THE CONTENTION OF TH E ASSESSEE THAT IN CASE OF THE AFORESAID COMPANY, THERE IS AMALGAMATION 17 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 IN DECEMBER, 2006, WHICH HAS IMPACTED THE FINANCIAL RESULT. THIS FACT HAS TO BE VERIFIED BY THE TPO. IF IT IS FOUND UPON SUCH VERIFICATION THAT THE AMALGAMATION IN FACT HAS TAKEN PLACE , THEN THE AFORESAID COMPARABLE HAS TO BE EXCLUDED.' 11 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE ID. COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF THE ITAT IS SQUARELY APPLICABLE TO THE PRESENT CASE ALSO . IT IS CLEAR THAT DURING THE PREVIOUS YEAR THERE WERE EXTRA ORDINARY EVENTS THAT TOOK PLACE IN THIS COMPANY WHICH WARRANTS EXCLUSION OF THIS COMPANY AS A ITA NO.L316/BANG/2012 COMPARABLE. WE THEREFORE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPA RABLE.' 9 . 1 SIMILARLY, WE FIND THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING (P.) LTD. (SUPRA) FOLLOWING THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL HAS HELD ACCENTIA TECHNOLOGIES LTD. WARRANTS EXCLUSION AS A COMPARABLE DUE TO THE HAPPENING OF CERTAIN EXTRAORDINARY EVENTS IN THIS COMPANY DURING THE IMPUGNED ASSESSMENT YEAR. THE RELEVANT OBSERVATION OF TRIBUNAL FROM PAGES 7 TO 9 OF THE ORDER READ AS UNDER: 'I ACCENTIA TECHNOLOGIES LTD. (SEG.) THIS WAS CONSIDERE D AS A COMPAR ABLE BY THE TPO AND LISTED AT SL. NO. 1 OF THE COMPARABLE COMPANIES CHOSEN BY THE TPO. THE ID. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THERE ARE EXTRA ORDINARY EVENTS THAT OCCURRED DURING THE PREVIOUS YEAR IN THIS COMPANY. OUR ATTENTION WAS DRAWN TO THE ANNUAL REPORT OF THIS COMPANY FOR THE A.Y. 2007 - 08 WHEREIN THE FACT THAT THIS COMPANY HAD ACQUIRED THUNGA SOFTWARE PVT. LTD., GSR PHYSICIANS BILLING SERVICES INC., GSR SYSTEMS INC. AND DENMED INC. WAS MENTIONED. OUR ATTENTI ON WAS ALSO DRAWN TO THE DECISION OF THE HYDERABAD IT AT BENCH IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA JTA NO.L316/BANG/2012 PVT. LTD. V. DC IT [2013] 32 TAXMAN.COM 21 (HVD. TRIB). IN THE AFORESAID DECISION, THE HYDERABAD BENCH OF THE TRIBUNAL HAD TO DEAL WITH A CASE OF DETERMINATION OF ALP IN THE CASE OF AN ASSESSEE WHO WAS PROVIDING ITES BUSINESS SUPPORT SERVICES FOR THE A.Y. 2007 - 08. THE TPO HAD CONSIDERED ACCENTIA TECHNOLOGIES LTD. AS A COMPARABLE. THE DRP HOWEVER HELD THAT THE SAID COMPANY CANNOT BE COMPARED AS A COMPARABLE OWING TO EXTRA ORDINARY EVENTS THAT TOOK PLACE DURING THE PREVIOUS YEAR. THE TRIBUNAL UPHELD THE ORDER OF THE DRP OBSERVING AS FOLLOWS : - 'I. ACCENTIA TECHNOLOGIES LTD. 10. IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS A COMPARABLE BECAUSE OF UNCOMPARABLE FINANCIAL RESULTS ARISING OUT OF AMALGAMATION IN THE COMPANY. IN THIS REGARD, THE ITA.NO.1850/HYD/2012 HYUNDAI MOTORS INDIA ENGINEERING P. LTD. ASSESSEE HAS RELIED UPON THE ORDER OF THE DRP FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE'S OWN CASE. IT IS SEEN THAT THE DRP WHILE 18 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 CONSIDERING SIMILAR OBJECTION PLACED BY THE ASSESSEE IN THE CASE OF ANOTHER COMPANY, VIZ. MOLD TEK TECHNOLOGIES LTD., IN THE PROCEEDINGS RELATING TO THE ASSESSMENT YEAR 2008 - 09, HAS OBSERVED IN THE FOLLOWING MANNER - '17.5 IN ADDITION TO THE ABOVE, THE DIRECTOR S REPORT OF THE COMPANY FOR THE FY 2007 - 08 REVEALED THE MERGER AND THE DEMERGER. A COMPANY KNOWN AS TECHMEN TOOLS PVT. LTD. HAD AMALGAMATED WITH MOLD - TEK TECHNOLOG IES LTD. WITH EFFECT FROM 1ST OCTOBER, 2006. THERE WAS A DE - MERGER OF PLASTIC DIVISION OF THE COMPANY AND THE RESULTING COMPANY IS KNOWN AS MOLDTEK PLASTICS LIMITED. THE DE - MERGER FROM THE MOLDTEK TECHNOLOGIES TOOK PLACE WITH EFFECT FROM 1ST APRIL, 2007. T HE MERGER AND THE DE - MERGER NEEDED THE APPROVAL OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND ALSO THE APPROVAL OF THE SHAREHOLDERS. THE SHAREHOLDERS OF THE COMPANY GAVE APPROVAL FOR THE MERGER AND THE DE - MERGER ON 25.01.2008 AND THE HON'BLE HIGH COURT OF ANDHRA PRADESH HAD APPROVED THE MERGER AND DE - MERGER ON 25TH JULY, 2008. SUBSEQUENTLY, THE ITA NO.L316/BANG/2012 ACCOUNTS OF MOLDTEK TECHNOLOGIES FOR FY 2007 - 08 WERE REVISED. ON A PERUSAL OF THE ANNUAL REPORT IT IS NOTICED THAT TECKMEN TOOLS PVT. LTD. A ND THE PLASTIC DIVISION OF THE COMPANY WERE DEMERGED AND THE RESULTING COMPANY WAS NAMED AS MOLDTEK PLASTICS LTD. THE KPO BUSINESS REMAINED WITH THE COMPANY. A PERUSAL OF THE ANNUAL REPORT REVEALED THAT TO GIVE EFFECT TO THE MERGER AND DEMERGER, THE FINANC IAL STATEMENTS WERE REVISED AND RESTATED AFTER SIX MONTHS FORM THE END OF THE FINANCIAL YEAR 31.3. 2008. THE ASSESSEE FILED FORM NO.21 UNDER THE COMPANIES ACT WITH THE REGISTRAR OF COMPANIES ON 26TH AUGUST, 2008. THUS THE EFFECTIVE DATE OF THE SCHEME OF ME RGER AND DEMERGER WAS 26TH AUGUST, 2008. THE ANNUAL REPORT SUPPORTED THE ARGUMENT OF THE ASSESSEE THAT THERE WERE MERGER AND DEMERGER IN THE FINANCIAL YEAR AND IT WAS AN EXCEPTIONAL YEAR OF PERFORMANCE AS FINANCIAL STATEMENTS WERE REVISED BY THIS COMPANY M UCH AFTER THE CLOSURE OF THE PREVIOUS YEAR. THE PANEL AGREES WITH THE CONTENTION OF THE ASSESSEE THAT IT IS AN EXCEPTIONAL YEAR HAVING SIGNIFICANT IMPACT ON THE PROFITABILITY ARISING OUT OF MERGER AND DEMERGER.' 11. ON CAREFUL CONSIDERATION OF THE MATTER, WE ALSO AGREE WITH THE AFORESAID VIEW OF THE DRP THAT EXTRA - ORDINARY EVENT LIKE MERGER AND DE - MERGER WILL HAVE AN EFFECT ON THE PROFITABILITY OF THE COMPANY IN THE FINANCIAL YEAR IN WHICH SUCH EVENT TAKES PLACE. IT IS THE CONTENTION OF THE ASSESSEE THAT I N CASE OF THE AFORESAID COMPANY, THERE IS AMALGAMATION IN DECEMBER, 2006, WHICH HAS IMPACTED THE FINANCIAL RESULT. THIS FACT HAS TO BE VERIFIED BY THE TPO. IF IT IS FOUND UPON SUCH VERIFICATION THAT THE AMALGAMATION IN FACT HAS TAKEN PLACE, THEN THE AFORES AID COMPARABLE HAS TO BE EXCLUDED.' WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF THE ITAT IS SQUARELY APPLICABLE TO THE PRESENT CASE ALSO. SIMILAR VIEW WAS AL SO TAKEN IN THE CASE OF SYMPHONY MARKETING 19 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 SOLUTIONS INDIA (P.) LTD. (SUPRA) BY THE BANGALORE BENCH. IT IS CLEAR THAT DURING THE PREVIOUS YEAR THERE WERE EXTRA ORDINARY EVENTS THAT TOOK PLACE IN THIS COMPANY WHICH WARRANTS EXCLUSION OF THIS COMPANY AS A CO MPARABLE. WE THEREFORE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE.' 9 .2 RESPECTFULLY FOLLOWING THE DECISIONS OF THE BANGALORE AND HYDERABAD BENCHES OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE HOLD TH AT ACCENTIA TECHNOLOGIES LTD. CANNOT BE TAKEN AS A COMPARABLE DUE TO HAPPENING OF CERTAIN EXTRAORDINARY EVENTS DURING THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SAID COMPANY AS A COMPARABLE. 8.5 IN VIEW OF T HE ABOVE DISCUSSION AND THE FINDING OF THE TRIBUNAL (SUPRA) IN ABOVE CASES, WE ARE OF THE OPINION THAT M/S. ACCENTIA TECHNOLOGIES LTD. BEING FUNCTIONALLY DIFFERENT AND HAVING EXTRAORDINARY EVENTS DURING THE RELEVANT YEAR , CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEE COMPANY AND ACCORDINGLY , WE DIRECT THE AO/TPO TO EXCLUDE THE SAID COMPANY FROM THE SET OF COMPARABLES. (B) CORAL HUB (PREVIOUSLY KNOWN AS VISHAN INFORMATION TECHNOLOGIES LTD.) 8.6 THE L EARNED AUTHORIZED REPRESENTATIVE REFERRED TO PAGE 3 0 WHEREIN AS PER THE FINANCIALS OF CORAL HUB, THE C OMPANY HAS CAPITALIZED EXPENSES OF INR 4.27 CRORES PERTAINING TO CONVERSION OF BOOKS INTO POD AND THE COMPANY HAS HUGE INVENTORIES OF POD PUBLISHING TITLES. WE FIND THAT T HE CORAL HUB OUTSOURCES ITS SERVIC ES TO V ENDORS AND DOES NOT PERFORM ALL SERVICES AT OWN . AS AGAINST, THE ASSESSEE COMP ANY IS NOT HAVING ANY INVENTORY/STOCK AND PERFORMS SERVICES AT OWN. 8.7 THE COMPANY HAS DIFFERENT BUSINESS MODEL AS IT SUBCONTRACTS MAJORITY OF ITS WORK TO THIRD PARTY VEN DORS. FROM THE PERUSAL OF THE 20 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 COST ITEMS IN THE PROFIT AND LOSS ACCOUNT OF THE CORAL HUB FOR ASSESSMENT YEAR 2007 - 08, WE FIND DATA ENTRY CHARGES & VENDOR PAYMENTS AS PART OF THE OPERATING COST IN SCHEDULE 14 AND THE SAID VENDOR PAYMENTS APPROXIMATE 85.5 8% OF THE T OTAL COST INCURRED BY CORAL HUB. AS AGAINST ASSESSEE HAS CARRIED OUT ITS FUNCTIONS WITH OWN EMPLOYEES. THUS, THE ASSESSEE COMPANY IS FUNCTIONALLY DIFFERENT FROM THE CORAL HUB. 8.8 IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA (P) LTD. (SUP RA), THE TRIBUNAL HAS DIRECTED TO REJECT CORAL HUB AS COMPARABLES TO ITES COMPANIES. THE RELEVANT PARA OF THE DECISION (SUPRA) IS REPRODUCED AS UNDER: 15. FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE, WE HOLD THAT CORAL HUBS LTD. CANNOT BE CON SIDERED AS A COMPARABLE. IT MAY ALSO BE RELEVANT TO POINT OUT THAT THE TPO IN HIS ORDER HAS OBSERVED THAT THIS COMPANY IS RETAINED AS A COMPARABLE ON THE BASIS OF DETAILED DISCUSSION IN THE TP ORDER FOR THE A.Y. 2007 - 08. IN FACT IN A.Y. 2007 - 08, THERE WAS NO DETERMINATION OF ALP AND THEREFORE THERE WAS NO OCCASION FOR ANY ORDER BEING PASSED BY THE TPO. IT IS ALSO SEEN THAT THIS COMPANY ENTERED INTO AN AREA OF BUSINESS KNOWN AS NEW VERTICAL DIGITAL LIBRARY & PRINT ON DEMAND ITA NO.1316/BANG/2012 IN F.Y. 2007 - 08. IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. (SUPRA), THE ITAT HYDERABAD BENCH IN THE CASE OF ITES COMPANY CONSIDERED THE COMPARABLE OF THIS COMPANY AS AN ITES COMPANY AND HELD AS FOLLOWS: - 'IV. CORAL HUB LIMITED (EARLIER KNOWN AS VIS HAL INFORMATION TECHNOLOGIES LTD.): 16. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING TAKEN AS COMPARABLE MAINLY ON THE GROUND THAT THE ACTIVITIES OF THE COMPANY IS NOT ONLY FUNCTIONALLY DIFFERENT, BUT THE BUSINESS MODEL OF THE COMPANY IS ALSO DIFFERENT AS IT SUB - CONTRACTS MAJORITY OF ITS ITES WORKS TO THIRD PARTY VENDORS AND HAS ALSO MADE SIGNIFICANT PAYMENTS TO THOSE VENDORS. THE PAYMENTS MADE TO VENDORS TOWARDS THE DATA ENTRY CHARGES ALSO SUPPORTS THE FACT THAT THE COMPANY OUTSOURCES ITS WORKS. IN THE CIRCUMSTANCES, IT CANNOT BE TAKEN AS A COMPARABLE TO THE ITES FUNCTIONS PERFORMED BY THE ASSESSEE. SINCE THIS COMPANY IS ACTING AS AGENT ONLY BY OUTSOURCING ITS WORKS TO THE THIRD PARTY VENDORS. IN THIS CONTEXT, THE ASSESSEE RELIED UPON THE ORDER OF THE D RP IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, WHEREIN THE DRP, AFTER TAKING INTO CONSIDERATION, THE AFORESAID ASPECT, HAS ACCEPTED THE CLAIM OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT THE INCOME - TAX APPELLATE TRIBUNAL MUMBAI BENCH IN THE CASE OF ASSTT. CIT V. MAERSK 21 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 GLOBAL SERVICE CENTRE (INDIA) (P .) LTD. [2011] 133 ITD 543/16 TAXMANN.COM 47 (MUM.), A COPY OF WHICH IS SUBMITTED BEFORE US, HAS ALSO DIRECTED FOR THE EXCLUSION OF THE A FORESAID COMPANY SINCE IT HAS OUTSOURCED A CONSIDERABLE PORTION OF ITS BUSINESS. 17. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, WE FIND THAT THE DRP, IN THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2008 - 09 IN AS SESSEE'S OWN CASE, AFTER TAKING NOTE OF THE COMPOSITION OF THE VENDOR PAYMENTS OF CORAL HUB FOR THE LAST THREE YEARS, AND THE FACT THAT IT HAS ALSO COMMENCED A NEW LINE OF BUSINESS OF PRINTING ON DEMAND(POD), WHEREIN IT PRINTS UPON CLIENTS REQUEST, CONCLUD ED AS FOLLOWS - ITA NO.1316/BANG/2012 '18.4. IN VIEW OF THIS MAJOR DIFFERENCE IN FUNCTIONALITY AND THE BUSINESS MODEL, THIS PANEL IS OF THE VIEW THAT 'CORAL HUB' IS NOT A SUITABLE COMPARABLE TO THE TAXPAYER AND HENCE NEEDS TO BE DROPPED FORM THE FINAL LIST OF COMPARABLES.' IN CASE OF MAERSK GLOBAL SERVICE CENTRE INDIA (P.) LTD. (SUPRA), THE ITAT MUMBAI BENCH HAS ALSO DIRECTED FOR EXCLUSION OF THE AFORESAID COMPANY, BY OBSERVING IN THE FOLLOWING MANNER - 'INSOFAR AS THE CASES OF TULSYAN TECHNOLOGIES LIMITED AN D VISHAL INFORMATION TECHNOLOGIES LIMITED ARE CONCERNED, IT IS NOTICED FROM THEIR ANNUAL ACCOUNTS THAT THESE COMPANIES OUTSOURCED A CONSIDERABLE PORTION OF THEIR BUSINESS. AS THE ASSESSEE CARRIED OUT ENTIRE OPERATIONS BY ITSELF, IN OUR CONSIDERED OPINION, THESE TWO CASES WERE RIGHTLY EXCLUDED.' IN VIEW OF THE OBSERVATIONS MADE BY THE DRP AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MAERSK GLOBAL SERVICE CENTRE, (SUPRA), WE ACCEPT THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE.' 16. IT IS ALS O FURTHER NOTICED THAT THE EMPLOYEE COST/OPERATING SALES OF THIS COMPANY IS A MERE 3%, WHEREAS THE THRESHOLD LIMIT FOR ACCEPTANCE AS A COMPARABLE ON THE BASIS OF EMPLOYEE COST TO SALES SHOULD BE AT LEAST 25%. THIS TRIBUNAL IN THE CASE OF FIRST ADVANTAGE OF FSHORE SERVICES LTD. V. CIT, IT(TP)A NO.1086/BANG/2011, ORDER DATED 30.4.2013, HAS TAKEN THE FOLLOWING VIEW: - '36. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE HAD ARISEN IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07. THIS TRIBUNAL HAS HELD THAT EMPLOYEE COST FILTER IS TO BE THE SAME EVEN FOR ITES SEGMENT ALSO. THE LEARNED DR'S ARGUMENT THAT THE EMPLOYEE COST FILTER IS APPLICABLE ONLY TO ITA NO.1316/BANG/2012 SOF TWARE DEVELOPMENT SEGMENT AND NOT TO ITES SEGMENT IS NOT ACCEPTABLE. THOUGH IT IS WITHOUT ANY DISPUTE THAT THE SOFTWARE DEVELOPMENT WOULD REQUIRE SKILLED EMPLOYEES AND, THEREFORE, THE EMPLOYEE COST WOULD DEFINITELY BE MORE THAN 25% OF THE TOTAL EXPENSES, I T CANNOT BE SAID THAT THE SAID FILTER IS NOT APPLICABLE TO ITES SEGMENT, WHERE COMPARABLY LESS SKILLED EMPLOYEES ARE EMPLOYED. IN THE ITES SEGMENT, THE ENTIRE WORK IS TO BE DONE BY THE EMPLOYEES AND, THEREFORE, EVEN THOUGH THEY MAY BE LESS SKILLED COMPARED TO SOFTWARE DEVELOPMENT SEGMENT, THE NUMBER OF EMPLOYEES WOULD DEFINITELY BE MORE AND THUS THE EMPLOYEE 22 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 COST WOULD BE HIGH AND THUS APPLICATION OF EMPLOYEE COST FILTER TO THE ITES SECTOR IS ALSO JUSTIFIED. IN VIEW OF THE SAME, WE DIRECT THE TPO TO APPLY T HE EMPLOYEE COST FILTER TO EXCLUDE COMPANIES WITH EMPLOYEE COST OF LESS THAN 25% FROM THE LIST OF COMPARABLES FOR THE COMPUTATION OF ALP.' 17. APPLYING THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. 8.9 FURTHER, IN THE CASE OF BNY MELLON INTERNATIONAL OPERATIONS (INDIA) P. LTD. (SUPRA), THE TRIBUNAL HELD AS UNDER: 9.3 SO FAR AS CORAL HUBS LTD. (FORMERLY KNOWN AS VISHAL INFORMATICS TECHNOLOGIES LTD.,) IS CONCERNED WE FIND THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA (P.) LTD. {SUPRA) HAS HELD CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PAGES 10 TO 14 READ AS UNDER: '(3) CORAL HUBS LTD. 14. THIS COMPANY IS LISTED AT SL.NO.6 OF THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, IT IS SEEN THAT THIS COMPANY WAS EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD. THE COMPARABILITY OF THIS COMPANY IN THE CASE OF AN ITE S COMPANY BY NAME 24 X 7 CUSTOMER.COM PVT. LTD. WAS CONSIDERED BY ITA NO.L316/BANG/2012 THE TRIBUNAL IN ITA NO.227/BANG/2010 AND BY ORDER DATED 09.11.2012 THE TRIBUNAL HELD THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE WITH ITES FOR THE FOLLOWING REASON : '17.3 VISHAL INFORMATION TECHNOLOGIES LTD. (VIT) - IN THE CASE OF THIS COMPARABLE, WE FIND THAT THE MUMBAI TRIBUNAL IN THE CASE OF MEARSK GLOBAL SERVICES (I) PVT LTD IN ITA NO.3774/MUM/2011 BY ORDER DT.9.11.2011 HAS HELD THAT SINCE VISHAL INFORMATION T ECHNOLOGIES LTD IS OUTSOURCING MOST OF ITS WORK IT HAS TO BE EXCLUDED FROM THE LIST WHEREAS THE ASSESSEE IN THE CITED CASE WAS CARRYING OUT THE WORK BY ITSELF. IN THE INSTANT CASE OF THE ASSESSEE ALSO THE ASSESSEE WAS CARRYING OUT ITS WORK BY ITSELF WHEREA S IN THE CASE OF VITL, IT IS OUTSOURCING MOST OF ITS WORK. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE DECISION OF THE ITAT, MUMBAI IN THE CITED CASE ON THE ISSUE OF EXCLUDING VITL AS A COMPARABLE SQUARELY APPLIES. THIS DECISION WAS FOLLOWED BY THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NETLINX INDIA (P) LTD IN ITA NO.454/BANG/2011 DT.19.10.2012 WHEREIN IT WAS HELD THAT VISHAL INFORMATION TECHNOLOGIES LTD CANNOT BE CONSIDERED AS A COMPARABLE. WE, THEREFORE, RESPECTFULLY FO LLOWING THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF MEARSK GLOBAL SERVICES (I) PVT LTD, 23 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE VISHAL INFORMATION TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES.' 15. FOLLOWING THE DECISION OF THE TRIBUNAL REFER RED TO ABOVE, WE HOLD THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE, FT MAY ALSO BE RELEVANT TO POINT OUT THAT THE TPO IN HIS ORDER HAS OBSERVED THAT THIS COMPANY IS RETAINED AS A COMPARABLE ON THE BASIS OF DETAILED DISCUSSION IN THE TP ORDER F OR THE A.Y. 2007 - 08. IN FACT IN A.Y. 2007 - 08, THERE WAS NO DETERMINATION OF ALP AND THEREFORE THERE WAS NO OCCASION FOR ANY ORDER BEING PASSED BY THE TPO. IT IS ALSO SEEN THAT THIS COMPANY ENTERED INTO AN AREA OF BUSINESS KNOWN AS NEW VERTICAL DIGITAL LIBR ARY & PRINT ON DEMAND IN F.Y. 2007 - 08. IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. {SUPRA), THE ITAT HYDERABAD BENCH IN THE CASE OF ITES COMPANY CONSIDERED THE COMPARABLE OF THIS COMPANY AS AN ITES COMPANY AND HELD AS FOLLOWS: 'IV. CORA L HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD.): 16. THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING TAKEN AS COMPARABLE MAINLY ON THE GROUND THAT THE ACTIVITIES OF THE COMPANY IS NOT ONLY FUNCTIONALLY DIFFERENT, BUT THE BUSINESS MO DEL OF THE COMPANY IS ALSO DIFFERENT AS IT SUB - CONTRACTS MAJORITY OF ITS ITES WORKS TO THIRD PARTY VENDORS AND HAS ALSO MADE SIGNIFICANT PAYMENTS TO THOSE VENDORS. THE PAYMENTS MADE TO VENDORS TOWARDS THE DATA ENTRY CHARGES ALSO SUPPORTS THE FACT THAT THE COMPANY OUTSOURCES ITS WORKS. IN THE CIRCUMSTANCES, IT CANNOT BE TAKEN AS A COMPARABLE TO THE ITES FUNCTIONS PERFORMED BY THE ASSESSEE. SINCE THIS COMPANY IS ACTING AS AGENT ONLY BY OUTSOURCING ITS WORKS TO THE THIRD PARTY VENDORS. IN THIS CONTEXT, THE ASS ESSEE RELIED UPON THE ORDER OF THE DRP IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, WHEREIN THE DRP, AFTER TAKING INTO CONSIDERATION, THE AFORESAID ASPECT, HAS ACCEPTED THE CLAIM OF THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT THE INCOME - TA X APPELLATE TRIBUNAL MUMBAI BENCH IN THE CASE OF ASSTT. CIT V. MAERSK GLOBAL SERVICE CENTRE (INDIA) (P.) LTD. 120111 133 ITD 543/16 TAXMANN.COM 47 (MUM.), A COPY OF WHICH IS SUBMITTED BEFORE US, HAS ALSO DIRECTED FOR THE EXCLUSION OF THE AFORESAID COMPANY SINCE IT HAS OUTSOURCED A CONSIDERABLE PORTION OF ITS BUSINESS.] 17. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, WE FIND THAT THE DRP, IN THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE'S OWN CA SE, AFTER TAKING NOTE OF THE COMPOSITION OF THE VENDOR PAYMENTS OF CORAL HUB FOR THE LAST THREE YEARS, AND THE FACT THAT IT HAS ALSO COMMENCED A NEW LINE OF BUSINESS OF PRINTING ON DEMAND(POD), WHEREIN IT PRINTS UPON CLIENTS REQUEST, CONCLUDED AS FOLLOWS - '18.4 IN VIEW OF THIS MAJOR DIFFERENCE IN FUNCTIONALITY AND THE BUSINESS MODEL, THIS PANEL IS OF THE VIEW THAT 'CORAL HUB' IS NOT A SUITABLE 24 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 COMPARABLE TO THE TAXPAYER AND HENCE NEEDS TO BE DROPPED FROM THE FINAL LIST OF COMPARABLES.' IN CASE OF MAERSK G LOBAL SERVICE CENTRE INDIA (P.) LTD. {SUPRA), THE ITAT MUMBAI BENCH HAS ALSO DIRECTED FOR EXCLUSION OF THE AFORESAID COMPANY, BY OBSERVING IN THE FOLLOWING MANNER - 'INSOFAR AS THE CASES OF TULSYAN TECHNOLOGIES LIMITED AND VISHAL INFORMATION TECHNOLOGIES L IMITED ARE CONCERNED, IT IS NOTICED FROM THEIR ANNUAL ACCOUNTS THAT THESE COMPANIES OUTSOURCED A CONSIDERABLE PORTION OF THEIR BUSINESS. AS THE ASSESSEE CARRIED OUT ENTIRE OPERATIONS BY ITSELF, IN OUR CONSIDERED OPINION, THESE TWO CASES WERE RIGHTLY EXCLUD ED.' IN VIEW OF THE OBSERVATIONS MADE BY THE DRP AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MAERSK GLOBAL SERVICE CENTRE, (SUPRA), WE ACCEPT THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE.' 16. IT IS ALSO FURTHER NOTICED THAT THE EMPLOY EE COST/OPERATING SALES OF THIS COMPANY IS A MERE 3%, WHEREAS THE THRESHOLD LIMIT FOR ACCEPTANCE AS A COMPARABLE ON THE BASIS OF EMPLOYEE COST TO SALES SHOULD BE AT LEAST 25%. THIS TRIBUNAL IN THE CASE OF FIRST ADVANTAGE OFFSHORE SERVICES LTD. V. CIT, IT(T P)A NO.L086/BANG/2011, ORDER DATED 30.4.2013, HAS TAKEN THE FOLLOWING VIEW: - '36. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE HAD ARISEN IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07. THIS TRIBUNAL HAS HELD THAT EMPLOYEE COST FILTER IS TO BE THE SAME EVEN FOR ITES SEGMENT ALSO. THE LEARNED DR'S ARGUMENT THAT THE EMPLOYEE COST FILTER IS APPLICABLE ONLY TO SOFTWARE DEVELOPMENT SEGMENT AND NOT TO ITES SEGMENT IS N OT ACCEPTABLE. THOUGH IT IS WITHOUT ANY DISPUTE THAT THE SOFTWARE DEVELOPMENT WOULD REQUIRE SKILLED EMPLOYEES AND, THEREFORE, THE EMPLOYEE COST WOULD DEFINITELY BE MORE THAN 25% OF THE TOTAL EXPENSES, IT CANNOT BE SAID THAT THE SAID FILTER IS NOT APPLICABL E TO ITES SEGMENT, WHERE COMPARABLY LESS SKILLED EMPLOYEES ARE EMPLOYED. IN THE ITES SEGMENT, THE ENTIRE WORK IS TO BE DONE BY THE EMPLOYEES AND, THEREFORE, EVEN THOUGH THEY MAY BE LESS SKILLED COMPARED TO SOFTWARE DEVELOPMENT SEGMENT, THE NUMBER OF EMPLOY EES WOULD DEFINITELY BE MORE AND THUS THE EMPLOYEE COST WOULD BE HIGH AND THUS APPLICATION OF EMPLOYEE COST FILTER TO THE ITES SECTOR IS ALSO JUSTIFIED. IN VIEW OF THE SAME, WE DIRECT THE TPO TO APPLY THE EMPLOYEE COST FILTER TO EXCLUDE COMPANIES WITH EMPL OYEE COST OF LESS THAN 25% FROM THE LIST OF COMPARABLES FOR THE COMPUTATION OF ALP.' 17. APPLYING THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE.' 9.4 SIMILARLY, THE DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF UNITED HEALTH GROUP INFORMATION SERVICES (P.) LTD. (SUPRA) HAS ALSO HELD VISHAL 25 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 INFORMATIONAL TECHNOLOGIES LTD. (NOW CORAL HUBS LTD.,) AS NOT COMPARABLE SINCE IT IS ENGAGED IN E - PUBLISHING BUSINESS. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM AT PAGES 9 AND 10 OF THE ORDER READ AS UNDER : 'VISHAL INFORMATICS 12.1 THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES BY NOTICING THAT IT WAS ENGAGED IN PROVIDING BPO SERVICES. THE ASSESSEE FAILED TO CONVINCE HIM AND THE DRP THAT IT WAS INCOMP ARABLE. 12.2 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL REPORT OF THIS COMPANY THAT IT IS MAINLY ENGAGED IN E - PUBLISHING BUSINESS. IT HAS MORE THAN 10,000 CLASSIC BOOKS TO ITS CREDIT WHICH ARE A LSO CONVERTED INTO LARGE FONT TITLES FOR VISUALLY CHALLENGED. APART FROM E - PUBLISHING, THIS COMPANY IS ALSO ENGAGED IN DOCUMENTS SCANNING & INDEXING. IT CAN BE SEEN FROM THE FINANCIAL RESULTS OF THIS COMPANY THAT BOTH THE SEGMENTS VIZ., E - PUBLISHING AND DO CUMENTS SCANNING ETC. HAVE BEEN COMBINED AND THERE ARE NO SEPARATE FINANCIAL RESULTS IN RESPECT OF DOCUMENTS SCANNING WORK, WHICH MAY BE COMPARABLE WITH THE ASSESSEE TO SOME EXTENT. AS THE ASSESSEE IS NOT ENGAGED IN ANY E - PUBLISHING BUSINESS AND THE FINANC IALS GIVEN BY THIS COMPANY ARE ON CONSOLIDATED BASIS, WE DIRECT TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THE ASSESSEE SUCCEEDS.' 9.5 SINCE THE ASSESSEE IN THE INSTANT CASE IS ADMITTEDLY NOT ENGAGED IN E - PUBLISHING BUSINESS, THEREFORE, CORAL H UBS LTD. IN OUR OPINION CANNOT BE CONSIDERED AS COMPARABLE. IN VIEW OF THE 2 DECISIONS CITED (SUPRA) WE HOLD THAT CORAL HUBS LTD. CANNOT BE CONSIDERED AS A COMPARABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO EXCLUDE CORAL HUBS LTD. ALSO FROM THE LIS T OF COMPARABLES. THE ASSESSING OFFICER IS DIRECTED TO DETERMINE THE ALP ACCORDINGLY. GROUNDS OF APPEAL NO.3 BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 8.10 IN VIEW OF THE ABOVE DISCUSSION AND THE FINDING OF THE TRIBUNAL (SUPRA) , WE ARE OF THE OPINION THAT M/S. CORAL HUB IS ENGAGED IN DIFFERENT VERTICALS AND WORK THROUGH OUTSOURCING MODELS, THUS, BEING FUNCTIONALLY DIFFERENT , CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEE COMPANY AND ACCORDINGLY WE DIRECT TO EXCLUDE THE SAID COMPANY FROM THE SET OF COMP ARABLES. (C) ECLERX SERVICES LTD. ( ECLERX ) 26 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 8.11 THE L EARNED AUTHORIZED REPRESENTATIVE REFERRED TO PAGE NO. 33 AND SUBMITTED THAT THE ECLERX HAS ACQUIRED A UK BASED COMPANY. ON PAGE 14 OF THE ANNUAL REPORT FOR FINANCIAL YEAR 2007 - 08, IT IS MENTIONED THAT THE COMPANY HAS ACQUIRED IGENTICAL TRAVEL SOLUTIONS LTD. THE SAID ACQUISITION HAS PROVIDED THE COMPANY WITH 28 LARGE CUSTOMERS THEREBY INCREASING THE CUSTOMER BASE AND OVERALL REVENUES OF THE COMPANY. THUS THERE BEING AN EXTRA ORDINARY EVENT OF MERG ER WHICH HAS INCREASED THE PROFITABILITY OF THE COMPANY, IT NEED TO BE EXCLUDED FROM THE SET OF COMPARABLES AS HELD IN THE CASE OF ACCENTIA TECHNOLGIES LTD IN PRECEDING PARAS. 8.12 THE FUNCTION OF THE ASSESSEE COMPANY IS DIFFERENT AS COMPARED TO ECLAR X SERVICES LTD. AS THE ECLARX SERVICES LTD. PROVIDES SPECIALIZED SERVICES IN THE NATURE OF A KNOWLEDGE PROCESS OUTSOURCING ( KPO) LIKE DATA ANALYTICS, DATA PROCESS SOLUTION, TAILORED OUTSOURCING PROCESS AND MANAGEMENT SERV ICES INCLUDING MULTITUDE OF DATA AGGREGATION, MINING AND MAINTENANCE SERVICES. ECLARX SERVICES LTD. IS INDUSTRY SPECIALIZED COMPANY AND HELPS IN MEETING COMPLEX CLIENTS NEEDS, DATA ANALYTICS SPECIALIZATION IN TWO BUSINESS VERTICALS FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. THUS, THE SERVICES PROVIDED BY THE ASSESSEE COMPANY TO ITS AES IS COMPLETE LY DIFFERENT FROM THE SERVICES PROVIDED BY ECLARX SERVICES LTD. 8.13 IN THE CASE OF SYMPHONY MARKETING SOLUTION INDIA (P.) LTD. (SUPRA), THE TRIBUNAL HAS DIRECTED TO REJECT ECLARX SERV IC ES LTD. AS COMPARABLES TO ITES COMPANIES. THE RELEVANT PARAS ARE REPRODUCED AS UNDER: (5) ECLERX SERVICES LTD. 20. THIS COMPANY IS LISTED AT SL.NO.11 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY OFFERS 27 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 SOLUTIONS THAT INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RECONCILIATION AND THEREFORE HAS TO BE CLASSIFIED AS HIGH END KPO. IN SUPPORT OF THE STAND OF THE ASSESSEE, EXTRACTS FROM THE ANNUAL REPORT OF THIS COMPANY HAVE BEEN POINTED OU T. IT HAS FURTHER BEEN SUBMITTED THAT EXTRA ORDINARY EVENTS AND PECULIAR CIRCUMSTANCES PREVAIL IN THE CASE OF THE ASSESSEE IN AS MUCH AS THIS COMPANY ACQUIRED A UK BASED COMPANY WHICH HAS SIGNIFICANTLY CONTRIBUTED TO THE INCREASE IN THE CUSTOMER AND REVENU E BASE OF THE COMPANY. THIS TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA PVT. LTD. (SUPRA) HAD AN OCCASION TO DEAL WITH COMPARABILITY OF THIS COMPANY IN THE CASE OF AN ITES COMPANY SUCH AS THE ASSESSEE AND THE TRIBUNAL HELD AS FOLLOWS: - '14 . THE ASSESSEE HAS OBJECTED FOR THIS COMPANY BEING TAKEN AS COMPARABLE MAINLY ON THE GROUND THAT IT WAS HAVING A SUPERNORMAL PROFIT OF 89%, AND AS SUCH IT CANNOT BE TAKEN AS A COMPARABLE IN VIEW OF THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE M/S. TEVA INDIA LTD. (SUPRA). THAT APART, RELYING UPON THE ANNUAL REPORT OF THE COMPANY, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS CONTENDED THAT THAT THE CONCERNED COMPANY IS ENGAGED IN PROVIDING KNOWLEDGE PROCESS OUTSOURCING(KPO) SERV ICES. 15. ON CONSIDERING THE OBJECTIONS OF THE ASSESSEE IN RELATION TO THIS COMPANY, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE BOTH FOR THE REASONS THAT IT WAS HAVING SUPERNORMAL PROFIT AND IT IS ENGAGED IN PROVIDING KPO SERVICES, WHICH IS DISTINCT FROM THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE.' 21. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DECISION OF THE HYDERABAD BENCH REFERRED TO ABOVE, THIS COMPANY CANNOT BE REGARDED AS A COMPARABLE FOR THE REA SON THAT IT WAS FUNCTIONALLY DIFFERENT. 8.14 IN VIEW OF THE ABOVE DISCUSSION AND THE FINDING OF THE TRIBUNAL (SUPRA) , WE ARE OF THE OPINION THE ECLARX SERVICES LTD. BEING FUNCTIONALLY DIFFERENT AND HAVING EXTRAORDINARY EVENTS DURING THE RELEVANT YEAR , CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEE COMPANY AND ACCORDINGLY , WE DIRECT TO EXCLUDE THE SAID COMPANY FROM THE SET OF COMPARABLES. 8.15 WE FURTHER DIRECT THE ASSESSING OFFICER/TPO TO COMPUTE THE AVERAGE MARGIN OF COMPARABLES AFTER EXCLUDING T HREE COMPARABLES ABOVE AND COMPUTE THE ARM S LENGTH PRICE OF THE INTERN ATIONAL TRANSACTION ACCORDINGLY . THE GROUND NO. 4.3 OF THE APPEAL IS ACCORDINGLY ALLOWED. 28 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 9.0 THE REMAINING GROUNDS HAVE NOT BEEN PRESSED BEFORE US BY THE LD. COUNSEL OF THE ASSESSEE, AND HENCE SAME ARE DISMISSED AS INFRUCTUOUS. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1088/DEL/2014 FOR AY: 2009 - 10 1 1 . NOW WE TAKE UP ITA NO. 1088/DEL/2014 FOR AY: 2009 - 10 . THE GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ( AO ) IS BAD IN LAW AND VOID AB - INITIO. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO DID NOT RECORD ANY REASONS IN THE DRAFT ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS EXPEDIENT AND NECESSARY TO REFER THE MATTER TO THE LD. TRANSFER PRICING OFFICER ( TPO ) FOR COMPUTATION OF THE ARM S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE INCOME TAX ACT, 1961 ( ACT ). 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. TPO/LD. DISPUTE RESOLUTION PANEL ( DRP ) ERRED IN MAKING AN ADDITION OF RS. 23,814,797/ - TO THE RETURNED INCOME OF THE APPELLANT BY RE - COMPUTING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE ACT. THUS, IN PASSING THE ORDER, THE LD. AO/LD. TPO/LD. DRP ERRED IN: 3.1 REJECTING THE COMPARABL E COMPANIES SET ADOPTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION ON THE BASIS OF ADDITIONAL/MODIFIED QUANTITATIVE FILTERS WHICH LACKED VALID AND SUFFICIENT REASONING; 3.2 ACCEPTING COMPANIES WHICH WERE FUNCTIONALLY NOT COMPARABLE TO THE APPE LLANT IN TERMS OF FUNCTIONS, ASSETS AND RISK PROFILE. 3.3 INCLUDING COMPANIES WITH HIGH/SUPERNORMAL MARGINS IN THE COMPARABLE SET ADOPTED 29 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 3.4 NOT PROVIDING THE BENEFIT OF ECONOMIC ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN WORKING CAPITAL PROFILE 3.5 DENIED THE BENEFIT OF ECONOMIC ADJUSTMENTS ON ACCOUNT OF DIFFERENCE IN RISK PROFILE IN ARRIVING AT THE ARM S LENGTH MEAN MARGIN 4. THE LD. AO/ LD. TPO HAS ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF TH E COMPANIES ACT, 1956 AND ENJOYING THE TAX HOLIDAY BENEFITS CONFERRED UNDER THE TAX HOLIDAY BENEFITS AS PER THE SOFTWARE TECHNOLOGY PARK OF INDIA (HEREIN AFTER REFERRED TO AS STPI ) SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE APPELLANT TO SHIFT TH E PROFITS TO ANY OTHER JURISDICTION. HENCE THE CASE OF THE APPELLANT FALLS SQUARELY WITHIN THE AMBIT OF AFOREMENTIONED PRINCIPLE 5. THE LD. AO/ LD. TPO ERRED IN DISREGARDING THE MULTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION AND IN SE LECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2008 - 09) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE APPELLANT, THE COMPLETE DATA FOR FINANCIAL YEAR 2008 - 09 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN 6. THE LD. AO/LD. TPO WRONGLY COMPUTED THE MARGINS OF COMPARABLE COMPANIES SELECTED BY HIM. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE SATISFACTION FOR SUCH INITIATION. 8. THAT THE LD. AO ERRED IN FACTS AND IN LAW IN CHARGING AND COMPUTING INTEREST UNDER SECTION 234B AND 234D OF THE ACT. THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE, RESCIND, FORGO OR WITHDRAW ANY OF THE ABOVE GROUNDS OF OBJECTION EITHER BEFORE OR DURING THE COURSE OF PROCEEDINGS IN THE INTEREST OF THE NATURAL JUSTICE. 30 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 12 . T HE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS IN APPEAL HAVING ITA NO. 6328/DEL/2012 , EXCEPT THE AMOUNT OF INT ERNATIONAL TRANSACTION AND THE P ROFIT L EVEL I NDICATOR ( PLI ). DURING THE YEAR, IN ITS TRANSFER PRICING STUDY, THE ASSESSEE HAS SHOWN INTERNATIONAL TRANSACTION OF PROVISION OF ITES SERVICES AMOU NTING TO RS.32,36,23,222/ - AND COMPUTED OP/OC MARGIN AT 14.69%. THE ASSESSEE COMPUTED AVERAGE MARGIN OF COMPARABLE AT 14.28%, WHEREAS, POST DRP DIRECTIONS, THE TPO COMPUTED THE ARM S LENGTH MARGIN AT 25.02%, WHICH RE SULTED INTO ADJUSTMENT OF RS. 3,11,74,426 / - . 13 . AT THE TIME OF HEARING BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED ONLY GROUND NO. 3.2 AND GROUND NO. 3.4 OF THE APPEAL. 14 . IN GROUND NO. 3.2, LEARNED AUTHORIZED REPRESENTATIVE DISPUTED THE COMPARABILITY OF THE FOLLOWING TWO COMPAR ABLES: (A) CORAL HUB (PREVIOUSLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD : 14.1 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED TO REJECT THE COMPANY DUE TO THE FOLLOWING REASONS: I. THE LD. AR REFERRED TO PAGE NO. 42 OF THE PAPER BOOK AND SUBMITTED THAT AS PER THE FINANCIAL REPORT OF THE CORAL HUB , THE COMPANY HAS CAPITALIZED EXPENSES OF RS.4.66 CRORES PERTAIN ING TO CONVERSATION OF BOOKS IN TO POD. HE FURTHER SUBMITTED THAT THE BUSINESS MODEL OF THE COMPANY IS ALSO DIFFERENT AS IT SUBCONTRACTS MAJOR ITY OF ITS WORK TO THIRD PARTY VENDORS . THE SAID VENDOR PAYMENTS APPROXIMATE 90.57% OF THE TOTAL COST INCURRED BY THE CORAL HUB AND THE CORAL HUB DOES NOT ADOPT THE NORMAL AND ROUTINE BUSINESS MODEL FOR AN OTHERWISE PURE PLAY ITES COMPANY. THE L EARNED COUN SEL FURTHER SUBMITTED THAT THE CORAL HUB 31 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 OUTSOURCES ITS SERVICES TO VENDOR AND DOES NOT PERFORM SERVICES AT ITS OWN . THE LD. COUNSEL REFERRED TO PAGE 43 OF THE PAPER BOOK AND SUBMITTED THAT CORAL HUB HAS HUGE INVENTORIES OF POD PUBLISHING TITLES , WHICH IN CLUDES ELECTRONIC PUBLISHING/DIGITAL PUBLICATION OF THE BOOKS, HE ARTICLES ETC . II. LD. AR RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF MERCER CONSULTING INDIA PRIVATE LIMITED IN ITA NO. 966/DEL/2014 WHEREIN IT IS HELD THAT CORAL HUB HAS OUTSOURCED M OST OF ITS WORK. (B) ECLERX SERVICES LTD . ( ECLERX ) 14.2 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED TO REJECT THE COMPANY DUE TO FOLLOWING REASONS: I. T HE LD. AR REFERRED TO PAGE 45 OF THE PAPER BOOK AND SUBMITTED THAT THE COMPANY ACQUIRED IGENTICA SOLUTIONS LTD (ITS) DURING THE YEAR AND THREE SUBSIDIARIES OF ITS WERE WOUND UP TO REDUCE THE CORPORATE STRUCTURE AND TRANSFER THE CONTRACTS TO THE PARENT. FURTHER THE COMPANY COMMISSIONED ITS SEZ FACILITATE PUNE DURING THE YEAR. HE SUBMITTED THAT IN VIEW OF THESE EXTRAORDINARY EVENTS, THE COMPANY CANNOT BE COMPARED WITH ASSESSEE. II. THE LD. AR SUBMITTED THAT THE SERVICES FUNCTIONS PERFORMED BY THE COMPANY ARE SIMILAR TO FUNCTIONS PERFORMED IN LAST YEAR, AND WHICH ARE DIFFERENT FROM THE RESEARCH RELATED SERVI CES RENDERED BY THE ASSESSEE TO ITS AE AND THUS THE COMPANY BEING FUNCTIONALLY DIFFERENT, CANNOT BE COMPARED WITH ASSESSEE. III. THE LD. AR ALSO DRAWN OUR ATTENTION TOWARDS RS. 27 CRORE SPENT ON ADVERTISING AND MARKETING FOR CREATING A BRAND OF THE COMPANY, 32 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 WH ICH IS 13.73 PERCENT OF SALES. WHEREAS THE ASSESSEE DID NOT INCUR ANY EXPENDITURE ON ADVERTISING AND MARKETING. IV. THE LD. AR RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED IN ITA NO. 124/HYD/2 014 AND ITA NO. 170/HYD/2014 FOR ASSESSMENT YEAR 2009 - 10 WHEREIN E - CLERX HAS BEEN DIRECTED TO BE REJECTED AS COMPARABLE TO ITES COMPANIES. 1 5 . THE LD. CIT ( DR ), ON THE OTHER HAND , RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 1 6 . WE HAVE HEARD THE RIVAL S UBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF ABOVE TWO COMPANIES IS DECIDED AS UNDER: (A) CORAL HUB 16.1 W E DO NOT FIND ANY SUBSTANTIAL CHANGE IN THE FUNCTIONS PERFORMED BY THE COMPANY IN THE IMMEDIATELY PRECEDING YEAR, WHEREIN WE HAVE ALREADY HELD THE COMPAN Y AS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE. IN THE YEAR UNDER CONSIDERA TION ALSO THE COMPANY IS HAVING HUGE INVENTORY OF POD PUBLISHING TITLES AND VENDOR PAYMENT BEING MORE THAN 90% OF TOTAL COST. THE TRIBUN AL IN THE CASE OF MERCER CONSULTING (INDIA) PRIVATE LIMITED (SUPRA) DIRECTED TO REJECT THE COMPANY A S COMPARABLE TO ITES COMPANIES . THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER : CORAL HUB LTD. 12.1 THIS CASE WAS EARLIER INCLUDED BY THE AS SESSEE IN THE LIST OF COMPARABLES IN THE TRANSFER PRICING STUDY BY CONSIDERING MULTIPLE - YEAR DATA. HOWEVER, WHEN THE TPO REQUIRED THE ASSESSEE TO FURNISH DATA OF COMPARABLES FOR THE CURRENT YEAR ALONE, THE ASSESSEE REQUESTED FOR THE EXCLUSION OF THIS CASE FROM THE LIST OF COMPARABLES. THE ID. DR OPPOSED THIS 33 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 CONTENTION BY URGING THAT THE ASSESSEE CANNOT BE ALLOWED TO RESILE FROM ITS ORIGINAL STAND. 12.2 WE ARE DISINCLINED TO SUSTAIN THE LEGAL OBJECTION TAKEN BY THE ID. DR THAT THE ASSESSEE SHOULD BE PROHIB ITED FROM TAKING A STAND CONTRARY TO THE ONE WHICH WAS TAKEN AT THE STAGE OF THE TP STUDY OR DURING THE COURSE OF PROCEEDINGS BEFORE THE AUTHORITIES BELOW. IT GOES WITHOUT SAYING THAT THE OBJECT OF ASSESSMENT IS TO DETERMINE THE INCOME IN RESPECT OF WHICH THE ASSESSEE IS RIGHTLY CHARGEABLE TO TAX. AS THE INCOME NOT ORIGINALLY OFFERED FOR TAXATION, IF OTHERWISE CHARGEABLE, IS REQUIRED TO BE INCLUDED IN THE TOTAL INCOME, IN THE SAME BREATH, ANY INCOME WRONGLY INCLUDED IN THE TOTAL INCOME, WHICH IS NOT OTHERWI SE CHARGEABLE, SHOULD BE EXCLUDED. THERE CAN BE NO ESTOPPEL AGAINST THE PROVISIONS OF THE ACT. EXTENDING THIS PROPOSITION FURTHER TO THE CONTEXT OF THE TRANSFER PRICING, IF THE ASSESSEE FAILS TO REPORT AN OTHERWISE COMPARABLE CASE, THEN THE TPO IS OBLIGED TO INCLUDE IT IN THE LIST OF COMPARABLES, AND IN THE SAME MANNER, IF THE ASSESSEE WRONGLY REPORTED AN INCOMPARABLE CASE AS COMPARABLE IN ITS TP STUDY AND THEN LATER ON CLAIMS THAT IT SHOULD BE EXCLUDED THEN, THERE SHOULD BE NOTHING TO FORBID THE ASSESSEE F ROM CLAIMING SO, PROVIDED THE TPO IS SATISFIED THAT THE CASE SO ORIGINALLY REPORTED AS COMPARABLE IS, IN FACT, NOT COMPARABLE. THE SPECIAL BENCH OF THE TRIBUNAL IN DY. CIT V. QUARK SYSTEMS LTD. 120101 38 SOT 307 (CHD) HAS ALSO HELD THAT A CASE WHICH WAS IN CLUDED BY THE ASSESSEE AND ALSO BY THE TPO IN THE LIST OF COMPARABLES AT THE TIME OF COMPUTING ALP, CAN BE EXCLUDED BY THE TRIBUNAL IF THE ASSESSEE PROVES THAT THE SAME WAS WRONGLY INCLUDED. 12.3 REVERTING TO THE FACTS OF THE EXTANT CASE, WE FIND THAT THE POSITION AS OBTAINING IN THE PRESENT CASE IS RATHER SIMPLE INASMUCH AS THE ASSESSEE, HAVING ORIGINALLY INCLUDED THIS CASE IN THE LIST OF COMPARABLES, MADE A CATEGORICAL CLAIM BEFORE THE TPO FOR EXCLUDING IT BECAUSE OF NON - COMPARABILITY. AS NO REASON HAS B EEN GIVEN BY THE TPO FOR ACCEPTING OR REJECTING THE ASSESSEE'S REQUEST, IT WOULD BE WORTHWHILE TO TAKE UP THE REASONS NOW GIVEN BY THE ASSESSEE FOR CONSIDERATION AND DECISION. THE ID. AR HAS POINTED OUT THAT VISHAL INFORMATION TECHNOLOGIES LTD., NOW KNOWN AS CORAL HUB LTD., OUTSOURCES SIGNIFICANT PORTION OF ITS WORK FROM OUTSIDE VENDORS. WE FIND FROM THE MATERIAL ON RECORD SUGGESTS THAT OUTSOURCING CHARGES CONSTITUTE 90% OF THE TOTAL OPERATING COST IN THIS CASE. ON A SPECIFIC QUERY, THE ID. DR ADMITTED THAT OUR ASSESSEE IS ENGAGED IN THE BUSINESS OF DOING ACTIVITIES AT ITS OWN WITHOUT ANY OUTSOURCING. THIS CRUCIAL FACTOR, HAVING A GREATER BEARING ON THE PROFITABILITY, MAKES IT DISTINGUISHABLE FROM THE ASSESSEE. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HAPAG LLOYD GLOBAL SERVICES {SUPRA) HAS HELD THAT VISHAL INFORMATION TECHNOLOGIES LTD. CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF THE OVERWHELMING OUTSOURCING ACTIVITY CARRIED OUT BY IT. THIS VIEW WAS TAKEN BY RELYING ON ANOTHER ORDER PASSED BY THE MUM BAI BENCH OF THE TRIBUNAL IN ASSTT. CLT V. MAERSK GLOBAL SERVICE CENTER (INDIA) (P.) LTD. F20111 133 ITD 543/16 TAXMANN.COM 47. IN THE LATER CASE ALSO, THE TRIBUNAL HELD THAT THE CASE OF VISHAL INFORMATION TECHNOLOGIES LTD. OR CORAL HUB LTD. WAS NOT INCLUD IBLE IN THE LIST OF COMPARABLES BECAUSE OF MAJOR OUTSOURCING. SINCE THE FACTS OF THE INSTANT CASE ARE ON ALL FOURS WITH THESE TWO CASES, WE ARE OF 34 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THE CONSIDERED OPINION THAT THIS CASE IS REQUIRED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. WE ORDER ACCOR DINGLY. 16.2 IN VIEW OF THE DISCUSSION ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF MERCER C ONSULTING (INDIA) PRIVATE L IMITED (SUPRA), THE COMPANY IS DIRECTED TO BE EXCLUDED FROM THE SET OF COMPARABLES FOR THE YEAR UNDER C ONSIDERATION. (B) ECLERX SERVICES LTD. 16.3 T HE FUNCTIONS PERFORMED BY THE COMPANY DURING THE YEAR ARE ALMOST IDENTICAL TO THE FUNCTIONS PERFORMED IN THE IMMEDIATELY PRECEDING YEAR, WHEREIN WE HAVE HELD THE COMPANY A S FUNCTIONALLY DISSIMILAR TO THE ASSE SSEE. IT IS EVIDENT FROM THE PAGE 50 OF THE PAPER BOOK THAT THE COMPANY IS EXPERT IN THE MARKETS OF FINANCIAL SERVICES, RETAIL AND MANUFACTURING. THE COMPANY HAS EMPLOYED 1500 SPECIALIST AND PROVIDED COMPLETE BUSINESS SOLUTION. IN VIEW OF ABOVE, THE RESEAR CH RELATED SERVICES RENDERED BY THE ASSESSEE TO ITS AES IS COMPLETELY DIFFERENT FROM THE SERVICES PROVIDED/FUNCTIONS PERFORMED BY THE COMPANY AND THUS IT CANNOT BE COMPARED WITH THE ASSESSEE. FURTHER THE TRIBUNAL IN THE CASE OF M/S CAPITAL IQ INFORMATION S YSTEMS (INDIA) PRIVATE L IMITED (SUPRA) HAS DIRECTED TO REJE CT E - CLERX A S COMPARABLE TO ITES COMPANIES. THE RELEVANT PARA OF THE SAID DECISION IS REPRODUCED AS UNDER: (3) ECLERX SERVICES LTD. 18. THE OBJECTION OF ASSESSEE TO THIS COMPARABLE IS THAT THIS C OMPANY IS FUNCTIONALLY DISSIMILAR. IT IS IN THE BUSINESS OF CONSULTANCY AND ADVISORY SERVICE AND PROVIDES ONLY ANALYTICAL DATA. IT IS ALSO INVOLVED IN QUALITY MONITORING. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY OFFERS SOLUTIONS THAT INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RECONCILIATION AND THEREFORE HAS TO BE CLASSIFIED AS HIGH END KPO. IN SUPPORT OF THE STAND OF THE ASSESSEE, EXTRACTS FROM THE ANNUAL REPORT OF THIS COMPANY HAVE BEEN POINTED OUT. THEREFORE, THE FUNCTIONS OF THE ABOVE COMPANY ARE DISSIMILAR TO ASSESSEE, WHICH IS A CAPTIVE SERVICE PROVIDER. ON 35 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THE PRINCIPLES LAID DOWN BY THE HON'BLE SPECIAL BENCH OF THE ITAT (MUMBAI) IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) LTD. V. ASSTT. CIT [20141 147 ITD 83 AND THE PRINCIPLE S LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF MERCER CONSULTING (INDIA) (P.) LTD. {SUPRA), ASSESSEE SUBMITS THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. 18.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, SUBMITTED THAT HAVING ACCEPTED ADITYA BIRLA MINACS WORLDWIDE LTD., AS A COMPARABLE COMPANY, THIS COMPANY SHOULD ALSO BE INCLUDED, AS OTHERWISE, BOTH THE COMPANIES SHOULD BE EXCLUDED. 18.2 WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE ANNUAL REPORT AND THE OBJECTION S OF ASSESSEE. AS SEEN FROM THE ANNUAL REPORT, THE ABOVE COMPANY IS INVOLVED IN DIVERSE NATURE OF SERVICES AND THERE WAS NO SEGMENTAL DATA FOR DIVERSIFIED SERVICE PORT FOLIO. MOREOVER THIS COMPANY CAN BE CONSIDERED AS KPO AND WE ARE OF THE OPINION THAT THI S COMPANY IS NOT COMPARABLE TO ASSESSEE'S SERVICES. WE THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. 16.4 IN VIEW OF OUR DISCUSSION AND RESPECTFULLY FOLLOWING THE FINDING OF T HE TRIBUNAL IN THE CASE OF M/S CAPITAL IQ INFORMATION S YSTEMS (INDIA) PRIVATE L IMITED (SUPRA) , WE HOLD THAT SAID COMPANY IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY AND DIRECT THE AO/TPO TO EXCLUDE THE ABOVE COMPANY FROM THE SET OF COMPARABLES. 17 . IN GROUND NO. 3.4, THE ASSESSEE HAS CHALLENGED DISALLO WANCE OF WORKING CAPITAL ADJUSTMENT. 1 8 . T H E LD. AR SUPPORTING THE GROUND INVITED OUR ATTENTION THAT IN THE IMMEDIATELY PRECEDING YEAR , THE ASSESSEE HAS BEEN ALLOWED WORKING CAPITAL ADJUSTMENT BY THE LD. TPO AS WELL AS BY THE LD. DRP. THE LD. AUTHORIZED REPRE SENTATIVE SUBMITTED THAT BY ALLOWING CUSTOMERS/CREDITORS TO DEFER PAYMENTS FOR A CERTAIN PERIOD, ANY COMPANY FOREGOES THE RIGHT TO RECEIVE ITS REVENUE IMMEDIATELY AND EARN ADDITIONAL INCOME BY REINVESTING THESE REVENUES OVER THE DEFERRAL PERIOD. HE FURTHER SUBMITTED THAT ALL COMPANIES HAVE THEIR OWN LIMIT FOR DEFERRING SUCH PAYMENTS AND THE LIMITS DETERMINE THAT WORKING CAPITAL CYCLES AND SUCH 36 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 CYCLES WOULD HAVE DIRECT IMPACT ON THE REVENUE AND COST OF ANY ENTITY. HE FURTHER SUBMITTED THAT FOR DUE ECONOMIC A NALYSIS, IT BECOMES IMPORTANT TO MAKE AN ADJUSTMENT FOR DIFFERENT WORKING CAPITAL POSITION S SO AS TO ELIMINATE THE IMPACT OF SUCH FACTORS FROM AN ARM S LENGTH COMPARISON. IN SUPPORT OF HIS CONTENTION, HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE DEMAG CRANES & COMPONENT ( INDIA) PVT LIMITED IN ITA NO. 120/PN/2011. 19. . ON THE OTHER HAND, THE LD. CITDR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 20 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF THE ASSESSEE COMPANY, THE WORKING CAPITAL ADJUSTMENT HAS BEEN ALLOWED IN ASSESSMENT YEAR 2008 - 09 AND 2012 - 13 AND THERE HAS BEEN NO CHANGE IN THE FUNCTIONALITY , RISK AND PROFILE OF THE ASSESSEE COMPANY FROM ASSESSMENT YEAR 2008 - 09 TO 2012 - 13. WE DO NOT FIND ANY REASON WHY THE WORKING CAPITAL ADJUSTMENT SHOULD NOT BE ALLOWE D TO THE ASSESSEE, WHEN IT HAS BEEN ALLOWED IN IMMEDIATELY PRECEDING YEAR. THE OBJECT OF THE ENTIRE COMPARABILITY PROCESS IS TO REDUCE THE DIFFERENCE BETWEEN THE COMPA RABLES AND THE ASSESSEE COMPANY . THE TRIBUNAL , IN VARIOUS JUDGMENTS ALLOWED WORKING CAPITAL ADJUSTMENT TO COMPANIES OF ITES INDUSTRIES. THE RELEVANT PART OF THE DECISION I N THE CASE OF DEMAG CRANES AND COMPONENT (INDIA) PRIVATE L IMITED (SUPRA) IS REPRODUCED AS UNDER: 31. WE HAVE SO FAR ANALYSED RULE 10B(1)(E) ON ONE SIDE AND OTHER SUB - RULES AND IN THE CONTEXT OF THE TNMM, WE HAVE ANALYSED THE NEED FOR THE ELIMINATION OF THE DIFFERENCE, IF ANY IN THE COMPARABLE UNCONTROLLED TRANSACTIONS, WHICH MATERIALLY AFFECT THE PR OFIT MARGIN IN THE OPEN MARKET. IT IS THE REQUIREMENT OF THE RULES. WHO SUPPLIES THE SET OF COMPARABLE IS NOT THE DETERMINING FACTOR ON THIS ISSUE. HAVING NOTICED THE DIFFERENCE, THE REVENUE HAS TO QUANTIFY THE DIFFERENCE, IF ANY AND THEN REVENUE MUST DECI DE IF THAT DIFFERENCE CONSTITUTES MATERIALLY AFFECT THE PRICE IN OPEN MARKET. IF THE ANSWER IS AFFIRMATIVE, THE SAID DIFFERENCE HAS TO BE REMOVED AND THE MARGIN HAS TO BE ADJUSTED FOR ARRIVING AT THE CREDIBLE COMPARABLE PLI. FURTHER, IT IS A SETTLED PROP OSITION THAT THE WORKING CAPITAL 37 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 ADJUSTMENT IS ONE SUCH ADJUSTMENT THAT IS REQUIRED TO BE MADE IN TNMM. THE REVENUE S CONTENTION THAT THE DIFFERENCES SPECIFIED SHOULD REFER TO ONLY (I) THE FACTOR OF DEMAND AND SUPPLY; (II) EXISTENCE OF MARKETABLE INTAN GIBILITIES IE BRAND NAME ETC; (III) GEOGRAPHICAL LOCATION AND THE LIKE, AND SUCH DIFFERENCE HAS TO BE IN RESPECT OF THE FUNCTIONS UNDERTAKEN, ASSETS EMPLOYED AND THE RISKS ASSUMED ONLY. FURTHER, THE REVENUE S VIEWS THAT BY MAKING ADJUSTMENTS, THE NET PROFI TS ARRIVED ARE NOT OF REAL TYPE OF PROFITS AND THEY ARE NOTIONAL ONES, WHICH GOES AGAINST THE SPIRIT OF TNMM. ALL THESE OBJECTIONS OF THE REVENUE ARE NOT BASED ONLY SETTLED PROPOSITIONS. THE PROVISIONS OF 10B(1)(E) PROVIDES FOR THE MANNER OF ADJUSTMENTS VI DE ITS SUB CLAUSES (I) TO (IV), WHICH WERE ALREADY ANALYSED IN THE PRECEDING PARAGRAPHS OF THIS ORDER. BRIEFLY, (I) NPM REALIZED FROM TARGET TRANSACTION IS COMPUTED IN RELATION TO COST INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED OR ANY OTHER RELEVANT BASE; (II) NPM REALIZED FROM A COMPARABLE UNCONTROLLED TRANSACTIONS IS COMPUTED HAVING THE SAME BASE; (III) THE NPM MENTIONED AT (II) IS ADJUSTED TAKING INTO ACCOUNT THE DIFFERENCES, IF ANY, WHICH COULD MATERIALLY AFFECT THE NPM IN THE OPEN MARKET. THUS, THE SCOPE OF ADJUSTMENTS IS DEFINED, WHICH IS DISCUSSED BY US IN THE PRECEDING PARAGRAPHS. THE SUB CLAUSE (III) SPECIFIES THAT THE ADJUSTMENTS ARE TO BE MADE ON ACCOUNT OF DIFFERENCES, IF ANY. THEREFORE, IN THIS REGARD, THE LITMUS TEST TO BE APPLIED IS IF THE DIFFERENCE, IF ANY, IS CAPABLE OF AFFECTING THE NPM IN OPEN MARKET? IF ANY FACTOR IS CAPABLE OF SUCH AFFECT, YES, TPO IS UNDER STATUTORY OBLIGATION TO CONSIDER AND EXAMINE AND ELIMINATE SUCH DIFFERENCE. AO/TPO/DRP CANNOT SAY THAT DIFFERE NCE IS LIKELY EXIST IN ALL ACCOUNTS APPEARING IN P&L ACCOUNT OR BALANCE SHEET, WHICH ARE LIKELY TO MATERIALLY AFFECT THE NPM IN OPEN MARKET AND THEREFORE, THE DEMANDS OF THE ASSESSEE SHOULD BE IGNORED, IS NOT THE CORRECT APPROACH. REVENUE S REASONING THAT THE DEMANDED ADJUSTMENTS SHOULD NOT BE ENTERTAINED BY THE TPO MERELY ON THE BASIS THE COMPARABLES ARE SUPPLIED BY THE ASSESSEE IS NOT THE CORRECT. IN OUR OPINION, IT IS THE DUTY OF THE TPO TO APPLY THE PROVISIONS OF RULE 10B(1)(E) TO ESTABLISH THE ALP IN R ELATION TO INTERNATIONAL TRANSACTION AS PER THE TNPM, WHICH IS AN UNDISPUTED METHOD FOUND APPLICABLE TO THE PRESENT CASE BY BOTH THE PARTIES. IT IS A SETTLED ACCOUNTING PRINCIPLE THAT THE NET MARGINS CAN BE INFLUENCED BY SOME OF THE SAME FACTORS WHICH CAN INFLUENCE PRICE OR GROSS MARGINS. FURTHER, IT IS THE REQUIREMENT OF THE RULES / PROVISIONS THAT ANY DIFFERENCE WHICH IS LIKELY TO MATERIALLY AFFECT THE NPM IN OPEN MARKET HAS TO BE ELIMINATED. TPO MUST KNOW THAT THE TNMM VISUALIZES THE UNDERTAKING OF THE T HOROUGH COMPARABILITY ANALYS AND ELIMINATION OF THE DIFFERENCES THROUGH THE REQUISITE ADJUSTMENTS. YES, DATA AVAILABILITY IS THE LIMITATION AND BOTH THE PARTIES NEED TO ENSURE THE PROCUREMENT AND USE OF THE PROPER DOCUMENTATION. THEREFORE, WE DISMISS THE R EVENUE S CONTENTION THAT NO FURTHER ADJUSTMENT IF ANY IS ENTERTAINED ONCE THE COMPARABLES ARE SUPPLIED BY THE ASSESSEE AND WHEN THEY ARE ACCEPTED BY THE TPO. THUS, WORKING CAPITAL IS A FACTOR WHICH INFLUENCE THE PRICE IN THE OPEN MARKET AND THEREFORE THE N ET PROFIT MARGIN OF THE BUSINESS SEGMENT OF THE ASSESSEE WHICH IS TARGETED BY THE TPO/AO/DRP. HENCE, IN PRINCIPLE, WE HOLD THAT THE TPO/AO/DRP HAS FAILED TO ENTERTAIN THE OBJECTIONS OF THE ASSESSEE ON THE WORKING CAPITAL ADJUSTMENTS ISSUE. THEREFORE, WE DIRECT THEM TO ALLOW THE REQUISITE ADJUSTMENT ON ACCOUNT OF THE IMPUGNED WORKING CAPITAL WHILE DETERMINING THE ARM S LENGTH OPERATING MARGIN OF THE COMPARABLES. THUS, RELEVANT GROUNDS OF ASSESSEE S APPEAL ARE ALLOWED. 38 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 2 1 . IN VIEW OF DISCUSSION ABOVE A ND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF DEMAG CRANES AND COMPONENT (INDIA) PRIVATE L IMITED (SUPRA) , WE DIRECT THE TPO/AO TO ALLOW THE WORKING CAPITAL ADJUSTMENTS TO THE ASSESSEE. THE GROUND OF THE APPEAL IS ACCORDINGLY ALLOWED . 2 2 . GROUNDS, OTHER THAN GROUND S NO. 3.2 AND 3.4 WERE NOT PRESSED BEFORE US AND THUS SAME ARE DISMISSED AS INFRUCTUOUS. 2 3 . IN THE RESULT , APPEAL OF ASSESSEE IS PARTLY ALLOWED. ITA NO. 963/DEL/2015 FOR AY 2010 - 11 2 4 . NOW WE TAKE UP APPEAL HAVING ITA NO. 963/DEL/2015 FOR AY 2010. THE GROUNDS RAISED IN THE APPEAL ARE AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ( AO ) IS BAD IN LAW AND VOID AB - INITIO. 2. THAT ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW, THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO DID NOT RECORD ANY REASONS IN THE DRAFT ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS EXPEDIENT AND NECESSARY TO REFER TH E MATTER TO THE LD. TRANSFER PRICING OFFICER ( TPO ) FOR COMPUTATION OF THE ARM S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE INCOME TAX ACT, 1961 ( ACT ). 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. TPO/LD. DIS PUTE RESOLUTION PANEL ( DRP ) ERRED IN MAKING AN ADDITION OF RS. 4,20,24,399/ - TO THE RETURNED INCOME OF THE APPELLANT BY RE - COMPUTING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE ACT. IN PASSING THE SAID ORDERS, THE LD. AO/LD. TPO/LD. DRP ERRED IN: 3.1 NOT ACCEPTING THE QUANTITATIVE FILTERS SELECTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION/FRESH SEARCH AND HAS INSTEAD APPLIED HIS OWN ADDITIONAL/ QUANTITATIVE FILTERS WHICH LACKED VALID AND SUFFICIENT REASON ING; 39 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 3.2 REJECTING THE COMPARABLE COMPANIES SET ADOPTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION; 3.3 ACCEPTING COMPANIES WHICH WERE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS, ASSETS AND RISK PROFILE AND INCLUDING C OMPANIES WITH HIGH/SUPERNORMAL MARGINS / TURNOVER; 3.4 NOT PROVIDING THE BENEFIT OF ECONOMIC ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN WORKING CAPITAL AND RISK PROFILE IN ARRIVING AT THE ARM S LENGTH MEAN MARGIN; 4. THE LD. AO/ LD. TPO HAS ERRED IN NOT APPR ECIATING THE FACT THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND ENJOYING THE TAX HOLIDAY BENEFITS CONFERRED UNDER THE TAX HOLIDAY BENEFITS AS PER THE SOFTWARE TECHNOLOGY PARK OF INDIA (HEREIN AFTER REFERRE D TO AS STPI ) SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE APPELLANT TO SHIFT THE PROFITS TO ANY OTHER JURISDICTION. 5. THE LD. AO/ LD. TPO ERRED IN DISREGARDING THE MULTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION AND IN SELE CTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2009 - 10) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE APPELLANT, THE COMPLETE DATA FOR FINANCIAL YEAR 2009 - 10 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN. 6. THE LD. AO/LD. T PO ERRONEOUSLY COMPUTED THE MARGINS OF COMPARABLE COMPANIES SELECTED BY HIM. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE SATISFACTION FOR SUCH INITIATION. 8. THAT THE LD. AO ERRED IN FACTS AND IN LAW IN CHARGING AND COMPUTING INTEREST UNDER SECTION 234B AND 234D OF THE ACT THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. THE ASSESSE E CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE, RESCIND, FORGO OR WITHDRAW ANY OF THE ABOVE GROUNDS OF OBJECTION EITHER 40 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 BEFORE OR DURING THE COURSE OF PROCEEDINGS IN THE INTEREST OF THE NATURAL JUSTICE. 2 5 . FACTS OF THE YEAR UNDER CONSIDERATION ARE IDENTIC AL TO THE FACTS IN ITA NO. 6328/DEL/2012 EXCEPT AMOUNT OF INTERNATIONAL TRANSACTION AND MARGIN OF OP/OC. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN INTERNATIONAL TRANSACTION OF PROVISION OF ITES SERVICES AMOUNTING TO RS.38,86,71, 106/ - HAVING OP/OC MARGINS OF 16.33%. IN ITS TRANSFER PRICING STUDY THE ASSESSEE COMPUTED AVERAGE MARGIN OF COMPARABLES AT 13.60% AND STATED THAT THE INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESSEE WAS AT ARM S LENGTH PRICE. WHEREAS , POST DRP DIRECTIONS THE TPO/A O COMPUTED AVERAGE MARGIN OF 28.89%, WHICH RESULTED INTO ADJUSTMENT OF RS.4,25,05,514/ - TO THE INTERNATIONAL TRANSACTION. 2 6 . AT THE TIME OF HEARING BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE PREFERRED TO ARGUE ONLY G ROUND NO. 3.3 AND GROUND NO. 3.4 O F THE APPEAL. IN SUPPORT OF GROUND NO. 3.3, THE LD. COUNSEL OF THE ASSESSEE CHALLENGED THE COMPARABILITY OF FOLLOWING THREE COMPARABLES: A. ACCENTIA TECHNOLOGIES LTD B. TCS E - SERVE LIMITED C. TCS E - SERVE INTERNATIONAL LTD. 2 7 . THE ARGUMENTS OF THE LD. COUNSEL IN R ESPECT OF THE ABOVE THREE COMPARABLES ARE SUMMARIZED AS UNDER: (A) ACCENTIA TECHNOLOGIES LTD . 27.1 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE COMPANY NEED TO B E REJECT E D AS COMPARABLE DUE TO THE FOLLOWING REASONS: I. T HERE ARE FOLLOWING EXTRAORDINAR Y EVENTS DURING THE YEAR: 41 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 (A) T HAT DURING THE YEAR THE COMPANY ACQUIRED IQ GROUP COMPANIES NAMELY TACTIQ LTD, CENTRIC LTD AND NEOLOGIG LIMITED, WHICH WERE ENGAGED IN FULL PRODUCT DEVELOPMENT, SOFTWARE DESIGN AND DEVELOPMENT ETC. (B) THAT D URING THE YEAR THE COMPA NY ALSO ACQUIRED ASSENT INFOSERVE PRIVATE LIMITED, WHICH WAS ENGAGED IN BUSINESS OF MEDICAL TRANSCRIPTION ENCODING. ( PAGE 54 TO 56 OF THE PAPER BOOK REFERRED ). (C) T HAT THE ACQUISITIONS ARE REFLECTED IN THE ADDITION TO FIX ED ASSERT SCHEDULE BY WAY OF RECOGN ITION OF GOODWILL AMOUNTING TO INR 19,06,51, 057/ - (D) PROFITABILITY OF THE COMPANY TURN ED AROUND DRAMATICALLY FROM - 65.11% IN FINANCIAL YEAR 2004 - 05 TO 42% IN FINANCIAL YEAR 2009 - 10. (I) THE COMPANY E A R N E D REVENUE FROM SOURCES LIKE MEDICAL TRANSCRIPTION, BILLIN G AND CODING AND SOFTWARE DEVELOPMENT AND IMPLEMENTATION, HOWEVER SEGMENT INFORMATION IS NOT AVAILABLE IN THE ANNUAL REPORT OF THE COMPANY AND IN ABSENCE OF SEGMENTAL DATA THE COMPANY CANNOT BE TAKEN AS COMPARABLE. (PAGE 58 AND 59 OF THE PAPER BOOK REFERRE D) (II) THAT IN FOLLOWING DECISIONS , THE COMPANY HAS BEEN EXCLUDED AS COMPARABLE TO ITES COMPANIES: (A) AMERIPRISE INDIA PRIVATE LIMITED IN ITA NO. 7014/DEL/2014 FOR AY 2010 - 11 (B) EQUANT SOLUTIONS INDIA PVT. LTD IN ITA NO. 1202/DEL/2015 FOR AY 2010 - 11. (B) TCS E - SER VE LTD . 42 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 27.2 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE COMPANY NEED TO BE REJECTED AS COMPARABLE DUE TO THE FOLLOWING REASONS: (I) T HE COMPANY IS NOT FUNCTIONALLY COMPARABLE WITH THE ASSESSEE A S IT WAS ENGAGED IN PROVIDING HIGH - END TRANSAC TION PROCESSING, TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. IN THE SYNOPSIS, THE LEARNED A R SUBMITTED A CHART OF COMPARISON OF THE COMPANY WITH ASSESSEE , WHICH IS REPRODUCED AS UNDER: PARTICULARS TCS E SERVE CEB INDIA FUNCTIONS THE COMPANY IS ENGAGED IN PROVIDING HIGH END TRANSACTION PROCESSING, TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIM E OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. [REFER PAGE 67 OF CNV. PAPERBOOK] CEB INDIA IS ENGAGED IN PROVIDING INFORMATION RESEARCH AND RELATED SUPPORT SERVICES TO ITS AE RISK OPERATE AS FULL - FLEDGED RISK TAKING ENTREPRENEUR OPERATE AT MIN IMAL RISK BRAND ENJOYS THE BRAND VALUE OF ITS HOLDING COMPANY, TATA GROUP. TCS IS PAYING TATA SONS LIMITED, THE ULTIMATE HOLDING COMPANY, A CONTRIBUTION FOR USING ITS BRAND NAME, TATA. [REFER PAGE 68 OF CNV. PAPERBOOK] NIL PAYMENT OF ROYALTY THE COMPANY HAS PAID INR 42,097 THOUSANDS TO TATA SONS LIMITED AS TATA BRAND LOYALTY. [REFER PAGE 68 OF CNV. PAPERBOOK] NIL OTHER ECONOMIES OF SCALE NOT APPLICABLE TO THE APPELLANT (II) T HE COMPANY WAS HAVING SALES TURNOVER OF RS. 1, 359.41 CRORES FOR THE YEAR UNDER CON SIDERATION AS AGAINST THE ASSESSEE S TURNOVER OF RS. 4 0 CRORES FOR THE SAID YEAR, WHICH IS ALMOST 34 43 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 TIMES THE TURNOVER OF THE ASSESSEE (PAGE 69 OF THE PAPER BOOK REFERRED) (III) T HE COMPANY IS A PART OF AN EMINENT TATA GROUP AND RECEIVED SUPPORT FROM IT IN TERM S OF ITS LARGE - SCALE OPERATION AND CLIENTELE. DURING THE YEAR THE TCS PAID INR 42, 09 7 THOUSANDS TO TATA SONS LTD TOWARDS TATA BRAND EQUITY CONTRIBUTION (IV) T HAT IN FOLLOWING DECISIONS OF THE TRIBUNAL, THE COMPANY HAS BEEN EXCLUDED AS COMPARABLE TO ITES C OMPANIES: (A) AMERIPRISE INDIA PVT. LTD., ITA NO. 7014/DEL/2014, FOR AY 2010 - 11 (TCS E - SERVE LTD. IS ENGAGED IN BPO AND HIGH END TECHNICAL SERVICES AND NO SEGMENTAL INFORMATION AVAILABLE). (B) EQUANT SOLUTIONS INDIA PVT. LTD. (INVOLVED IN SOFTWARE TESTING AND HIGH END TECHNICAL SERVICES, IT ALSO OWNS HUGE INTANGIBLE AND USE OF TATA BRAND), ITA NO. 1202/DEL/2015, AY 2010 - 11. (C) TCS E - SERVE I NTERNATIONAL LTD . 27.3 THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE COMPANY IS NOT COMPARABLE TO THE ASSESSEE C OMPANY DUE TO THE FOLLOWING REASONS : (I) T HE COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE. A CHART OF COMPARISON SUBMITTED IN THE SYNOPSIS, BY THE LD. COUNSEL IS REPRODUCED AS UNDER: PARTICULARS TCS E SERVE INTERNATIONAL CEB INDIA FUNCTIONS T CS E SERVE INTERNATIONAL PROVIDES ITES/BPO AND TECHNICAL SERVICES. SUCH TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. [REFER PAGE 61 OF CNV. PAPERBO OK] CEB INDIA IS ENGAGED IN PROVIDING INFORMATION RESEARCH AND RELATED SUPPORT SERVICES TO ITS AE RISK OPERATE AS FULL - FLEDGED RISK TAKING ENTREPRENEUR OPERATE AT MINIMAL RISK 44 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 BRAND ENJOYS THE BRAND VALUE OF ITS HOLDING COMPANY, TATA GROUP. TCS I S PAYING TATA SONS LIMITED, THE ULTIMATE HOLDING COMPANY, A CONTRIBUTION FOR USING ITS BRAND NAME, TATA. [REFER PAGE 62 OF CNV. PAPERBOOK] NIL PAYMENT OF ROYALTY THE COMPANY HAS PAID INR 3,737 THOUSANDS TO TATA SONS LIMITED AS TATA BRAND LOYALTY. [ REFER PAGE 62 OF CNV. PAPERBOOK] NIL OTHER ECONOMIES OF SCALE NOT APPLICABLE TO THE APPELLANT (II) N O SEGMENT INFORMATION WAS AVAILABLE IN RESPECT THE THE COMPANY TO BIFURCATE THE INCOME AND EXPENSES BETWEEN THE ITES/BPO SERVICES AND TECHNICAL SERVICES I N THE NATURE OF SOFTWARE TESTING, VERIFICATION AND VALIDATION (PAGE 63 OF THE PAPER BOOK REFERRED) . (III) THE COMPANY PROVIDES SERVICES PREDOMINANTLY TO ONE CLIENT NAMELY CITIGROUP (PAGE 61 OF THE PAPER BOOK REFERRED) . (IV) THE COMPANY HAS WITNESSED AN ABNORMAL GROWT H IN REVENUE AND PROFITABILITY OF 174% AND 286% RESPECTIVELY AS COMPARED TO THE LAST YEAR. (V) THE COMPANY POSSESSES BRAND VALUE DUE TO ITS ACQUISITION BY TATA GROUP, WHICH TEND TO INFLUENCE THE PRICING POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY THE COMPANY. (VI) THAT IN FOLLOWING DECISIONS OF THE TRIBUNAL, THE COMPANY HAS BEEN EXCLUDED AS COMPARABLE TO ITES COMPANIES: (A) AMERIPRISE INDIA PVT. LTD., ITA NO. 7014/DEL/2014, FOR AY 2010 - 11 (TCS E SERVICE LTD. IS ENGAGED IN BPO AND HIGH END TECHNICAL S ERVICES AND NO SEGMENTAL INFORMATION AVAILABLE). 45 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 (B) EQUANT SOLUTIONS INDIA PVT. LTD. (INVOLVED IN SOFTWARE TESTING AND HIGH END TECHNICAL SERVICES, IT ALSO OWNS HUGE INTANGIBLE AND USE OF TATA BRAND), ITA NO. 1202/DEL/2015, AY 2010 - 11. 28. THE LD. CIT ( D R ), ON THE OTHER HAND , RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 29 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE COMPARABILITY OF THE ABOVE COMPANIES I S DECIDED AS UNDER: (A) ACCENTIA T ECHNOLOGY LTD . 29.1 T HE L EARNE D COUNSEL HAS HIGHLIGHTED THE EXTRA ORDINARY EVENTS OF MERGER AND AMALGAMATION OF VARIOUS COMPANIES WITH THE COMPANY TAKEN PLACE DURING THE YEAR . THE EVENT OF MERGER AND ACQUISITION OF VARIOUS COMPANY WITH ASSESSEE HAS IMPACTED THE PROFITABILITY OF TH E COMPANY DURING THE YEAR AND IN THE CIRCUMSTANCES, FOLLOWING OUR DECISION IN ITA NO. 6328/DEL/2012 FOR ASSESSMENT YEAR 2008 - 09, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE COMPARED WITH ASSESSEE COMPANY. FURTHER , THE COMPANY HAS SHOWN INCOME FROM M EDICAL TRANSCRIPTION, BILLING AND CODING, AND SOFTWARE DEVELOPMENT AND IMPLEMENTATION AND NO SEGMENT DATA IN RESPECT OF IT ES SERVICES IS AVAILABLE IN THE ANNUAL REPORT OF THE COMPANY, THUS FUNCTIONS OF THIS COMPANY CANNOT BE COMPARED AT ENTITY LEVEL WITH THE FUNCTIONS OF ASSESSEE COMPANY. FURTHER WE ALSO NOTE THAT TRIBUNAL IN THE CASE OF AMERIPRISE I NDIA PRIVATE L IMITED (SUPRA) HELD THE COMPANY A S NOT COMPARABLE IN ABSENCE OF SEGMENTAL INFORMATION. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDE R: 46 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 A. CHALLENGE TO THE INCLUSION OF COMPANIES 8 ACCENTIA TECHNOLOGIES LTD. 8.1 THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES ON SEVERAL REASONS NAMELY 'REASONS FOR REJECTION (1). EXTRAORDINARY EVENTS DURING AY 2010 - 11 (ACQUISITIONS) (PG.38,39,79 OF PAPERBOOK - 1) (2). FUNCTIONAL DISSIMILARITY - IT'S A KPO AND HAS DIVERSIFIED BUSINESS OPERATIONS (PG. 4 OF PAPERBOOK - 1) (3). INSUFFICIENT SEGMENTAL DETAILS (PG. 81 OF PAPER BOOK - 1) THIS COMPARABLE HAS BE EN REJECTED RECENTLY BY THE HON'BLE ITAT, IN ASSESSEE'S OWN CASE FOR AY 2009 - 10 ( ITA NO. 2010/ DEL/2014 - AMERIPRISE INDIA PVT. LTD. VS. ACIT ) FOR THE REASON THAT APART FROM ITES, THE COMPANY ALSO GENERATES REVENUE FROM SOFTWARE PRODUCTS AND SEGMENTAL FIGURES ARE NOT AVAILABLE. (PG. 15, 16 OF THE ORDER) ALSO, RECENTLY REJECTED AS A COMPARABLE IN TECHBOOKS INTERNATIONAL PVT. LTD. (ITA NO. 240/DEL/2015 FOR AY 2010 - 11) (PG. 18 AND 19 OF THE ORDER - YEAR OF AMAL GAMATION - EXTRAORDINARY FINANCIAL EVENT). MOREOVER, APPLYING THE HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF RAMPGREEN SOLUTIONS VS. CIT (ITA NO . 102/2015), HON'BLE DELHI ITAT IN AVAYA INDIA PVT. L TDS. VS. ACIT (ITA NO. 5528/DEL/2011) HAS EXCLUDED THIS COMPARABLE ON THE GROUND THAT KPO SERVICES CANNOT BE COMPARED TO BPO SERVICES.' 8.2 THE TPO DISCUSSED THE FUNCTIONAL COMPARABILITY OF THIS COMPANY AND, IN THE ULTIMATE ANALYSIS, CAME TO HOLD THAT IT W AS FUNCTIONALLY COMPARABLE WITH THE ASSESSEE COMPANY AND HENCE INCLUDIBLE. 8.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE ANNUAL REPORT OF THIS COMPANY, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK. NOTES TO ACCOUNTS OF THIS COMPANY, INDICATE ABOUT THE AMALGAMATION OF ASSCENT INFOSERVE PVT. LTD. WITH IT AS APPROVED BY THE SHAREHOLDERS IN THE COURT CONVENED MEETING HELD ON 25.4.2009 AND, SUBSEQUENTLY, SANCTIONED BY THE HON'BLE HIGH COUR T ON 21.8.2009. THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO ARALDITE (P) LTD. VS. DCIT (2013) 154 TTJ (MUM) 176, HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESULTS DUE TO MERGERS/DEMERGERS. SIMILAR VIEW HAS BE EN BOLSTERED BY THE DELHI BENCH OF THE TRIBUNAL IN SEVERAL CASES INCLUDING CIENA INDIA PVT. LTD. VS. DCIT (ITA NO.3324/DEL/2013) VIDE ITS ORDER DATED 23.4.2015 AND TECHBOOK INTERNATIONAL P. LTD. VS DCIT (ITA NO. 240/DEL/2015) VIDE ITS ORDER DATED 47 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 06.07.201 5. IN VIEW OF THE FACT THAT THERE WAS MERGER OF ASSCENT INFOSERVE PVT. LTD. WITH ACCENTIA TECHNOLOGIES LTD. BY WAY OF AMALGAMATION DURING THE YEAR ITSELF, WE HOLD THAT THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRA - ORDINARY FINANCIAL EVE NT. ACCORDINGLY, THE SAME IS DIRECTED TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 29.2 IN THE CASE OF EQUANT S OLUTIONS IND IA PRIVATE L IMITED (SUPRA) THE COMPANY HAS BEEN EXCLUDED FROM THE LIST OF COMPARABLE S A S IT WAS ENGAGED IN SOFTWARE D E V E L O P M E N T A N D N O S E G M E N T A L D A T A A V A I L A B L E OWNED HUGE INTANGIBLES A N D E X T R A O R D I N A R Y E V E N T S DURING T H E Y E A R . THE RELEVANT PART OF THE DECISION IS EXTRACTED AS UNDER: 20. ACCENTIA TECHNOLOGIES LTD. A. THE TPO HAS TAKEN THIS COMPARABLE STATING THAT THE COMPANY IS FUNCTIONALLY SIMILAR AND PASSES BY THE FILTERS APPLIED BY THE TPO. THE TPO FURTHER STATED THAT THE ASSESSEE HAS NOT DEMONSTRATED HOW THE ACQUISITION HAS AFFECTED THE PROFITABILITY AND PRICING OF THE COMPARABLE. BEFORE THE DRP, THE ASSESSEE REITERATED ARGUMENT MADE BEFORE TPO. FUR THER, THE DRP RETAINED THE COMPARABLE HOLDING THAT FAR PROFILE OF THE COMPANY IS SIMILAR. BEFORE US, THE ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 ASSESSEE CONTENDED THAT THE COMPARABLE COMPANY PROVIDES HIGH - END FUNCTIONS SUCH AS KNOWLEDGE PROCESS OUTSOURCING, LEGAL PROCESS OUTSOURCING. FURTHER, THE COMPANY IS PROVIDING SOFTWARE AS A SERVICE IN HEALTHCARE OUTSOURCING AREA. THE COMPANY ALSO DEVELOPED SOFTWARE PRODUCTS IN BPO MANAGEMENT AND HEALTHCARE THEREFORE IT IS FUNCTIO NALLY DISSIMILAR AND SHOULD BE EXCLUDED AS COMPARABLE. HE FURTHER SUBMITTED THAT THE COMPARABLE HAS SIGNIFICANT AMOUNT OF BRAND AND IPR AND FURTHER IT DOES NOT CONTAIN SEGMENT WISE RESULT WITH RESPECT TO VARIOUS SEGMENT IN WHICH IT OPERATES. FURTHER DURING THE FINANCIAL YEAR 2009 - 10 THERE IS AMALGAMATION ALSO IN THE COMPARABLE COMPANY WHICH IS AN EXTRA ORDINARY EVENT AND THEREFORE IT AFFECT OVERALL PROFITABILITY OF THE COMPANY. AS REGARDS THE SELECTION OF THIS COMPARABLE, THE LEARNED COUNSEL FOR THE ASSESSE E HAS RELIED ON THE DECISIONS OF THIS TRIBUNAL IN THE CASES OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. V. ADDL./DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), HYDERABAD AND VICE VERSA (ITA NO. 124 AND 170/HYD/2014 DATED 31.7.2014); HYUNDAI MOTORS IN DIA ENGINEERING P. LTD., HYDERABAD V. DCIT, CIRCLE 2(2), HYDERABAD (ITA NHO. 255/HYD/2014 DATED 31.7.2014), WHEREIN M/S. ACCENTIA TECHNOLOGIES LIMITED(SEG) WAS EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLES ON THE GROUND THAT IT WAS ITA NO. 1202/DEL ./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 A CASE OF MERGERS AND ACQUISITION, AND THE COMPANY WAS ALSO FOUND TO BE FUNCTIONALLY DIFFERENT. B. LD DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND ALSO SUBMITTED THAT ALL THESE REASONS HAVE BEE N CONSIDERED BY TPO WHILE SELECTING THE COMPARABLES. 48 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 C. WE HAVE CONSIDERED THE RIVAL CONTENTION. DURING THE YEAR THIS COMPARABLE HAS BEEN GONE INTO SUBSTANTIAL BUSINESS RESTRUCTURING RESULTING INTO EXTRAORDINARY CIRCUMSTANCES DURING THE FY 2009 - 10 SUBSIDIA RY OF ASCENTIA GOT AMALGAMATED WITH THIS COMPANY AND THE FIGURES OF THE BUSINESS RESULTS FOR THE YEAR ENDING 31ST MARCH 2010. IN THIS CASE ALSO EXCLUDED THE FIGURES OF AMALGAMATED COMPANY AND DUE TO WHICH THE COMPARABLE HAS HIGH OP BY TC MARGIN. THE RELEVA NT OBSERVATIONS OF THE TRIBUNAL AS RECORDED IN PARA 19.2 OF THE ORDER PASSED IN THE CASE OF EXCELLENCE DATA RESEARCH PVT. LTD., HYDERABAD V. ITO WARD 2(1), HYDERABAD (ITA NO. 159/HYD/2014 DATED 31.7.2014); BEING RELEVANT IN THIS CASE, ARE REPRODUCED BELOW - '19.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND NOTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWTH AS ITS STRATEGY. IN EARLIER YEARS ON THE REASON OF ACQUISITION OF VARIOUS COMPANIES, BEING A N EXTRAORDINARY EVENT WHICH HAD AN IMPACT ON THE PROFIT, ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED COUNSEL, THIS YEAR ALSO, THE ACQUISITION OF SOME COMPANIES BY THAT C OMPANY MAY HAVE IMPACT ON THE PROFIT. CONSIDERING THE PROFIT MARGINS OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. MOREOVER, THIS IS ALSO NOT A COMPARABLE IN THE CASE OF M/S. MER CER CONSULTING (INDIA) P. LTD. (SUPRA), WHICH INDICATES THAT THE TPO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPARABLE, FROM THE LIST OF COMPARABLES SELECTED.' AS POINTED OUT BY THE LEARN ED COUNSEL FOR THE ASSESSEE, THERE WAS AMALGAMATION OF A COMPANY DURING THE RELEVANT YEAR, AND THE SAID COMPANY, THEREFORE, CANNOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRAORDINARY EVENT WHICH OCCURRED IN THE RELEVANT YEAR AS RIGHTLY HELD BY THE TRIBUN AL INTER ALIA IN THE CASE OF EXCELLENCE DATA RESEARCH P. LTD. (SUPRA). WE, THEREFORE, FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EXCELLENCE DATA RESEARCH SERVICES PVT. LTD. (SUPRA) AND DIRECT THE AO/TPO TO EXCLUDE THE ACCEN TIA TECHNOLOGIES LIMITED FROM THE LIST OF COMPARABLES ON THIS GROUND. FURTHER, THIS COMPANY ALSO PROVIDES KPO SERVICES, LPO AND DPO BESIDES OFFERING SOFTWARE SERVICES. THEREFORE AS THIS ENROLLED IN KNOWLEDGE PROCESSING OUTSOURCING IT IS FUNCTIONALLY DISSIM ILAR TO THE ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 ASSESSEE. FURTHER, IT DOES NOT CONTAIN SEGMENT WISE FUNCTIONAL RESULTS AND IN ABSENCE OF SUCH SEGMENTAL INFORMATION, IT CANNOT BE USED FOR COMPARING THE PLI OF THE ASSE SSEE. IT IS ALSO NOTED THAT IT IS ALSO HAVING SIGNIFICANT AMOUNT OF BRANDS, INTELLECTUAL PROPERTY RIGHTS AND GOODWILL AS COMPARED TO THE ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE REASONS THIS COMPANY IS REQUIRED TO BE EXCLUDED. FURTHER RELYING ON THE DECIS ION OF JURISDICTIONAL HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS PVT LTD (TS - 387 - HC - 2015(DEL) - TP) WHERE IN IT IS HELD THAT KPO ARE ITES WHERE THE SERVICE PROVIDERS HAVE TO EMPLOY ADVANCED LEVEL OF SKILLS AND KNOWLEDGE. THIS IS ABSENT IN THIS CASE OF ASSESSE E WHICH IS LOW END ITES SERVICE PROVIDER SUCH AS WHICH ENABLES NETWORK MANAGEMENT AND OTHER BACK OFFICE SUPPORT SERVICES PERFORMED BY ASSESSEE WHICH PRIMARILY INCLUDE REMOTE MONITORING AND MAINTENAN CE OF EQUANT GLOBAL NETWORK PLATFORMS AND SERVICES, COORD INATION, REMOTE CONFIGURATION, AND IMPLEMENTATION OF QUALITY CUSTOMER NETWORKING SOLUTIONS. THEREFORE THIS COMPARABLE IS ORDERED FOR ITS EXCLUSION ACCORDINGLY. 49 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 29.3 IN VIEW OF OUR DISCUSSION ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL I N THE CASE OF AMERIPRISE INDIA PRIVATE LIMITED (SUPRA) AND EQUANT SOLUTIONS INDIA PRIVATE LIMITED (SUPRA), WE HOLD THAT IN ABSENCE OF SEGMENTAL INFORMATION, THE COMPANY CANNOT BE COMPARED FUNCTIONALLY WITH ASSESSEE COMPANY AND ACCORDINGLY, WE DIRECT THE AO /TPO TO EXCLUDE THE COMPANY FROM THE SET OF COMPARABLES. TCS E - SERVE LTD . 30.1 T HE COMPANY WAS ENGAGED IN PROVIDING HIGH - END TRANSACTION PROCESSING, TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION AT THE TIME OF IMPLEMENTATION , DATA CENTRE MANAGEMENT ACTIVITIES, WHICH IS EVIDENT FROM PAGE 67 OF THE PAPER BOOK. THIS FACT MAKES THE COMPANY FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY WHICH HAS BEEN CHARACTERIZED AS ITES COMPANY. FURTHER , THE BRAND VALUE OF BEING PART OF TATA GR OUP IS CERTAINLY HAVING IMPACT ON THE PROFITABILITY OF THE COMPANY. IN THE CIRCUMSTANCES COMPANY CANNOT BE COMPARED WITH THE ASSESSEE. FURTHER WE ALSO NOTE THAT TRIBUNAL IN THE CASE OF AMERIPRISE INDIA PRIVATE LI MITED (SUPRA) HELD THE COMPANY A S NOT C OMPARABLE IN ABSENCE OF SEGMENTAL INFORMATION. THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: 12. TCS E - SERVE LTD. 12.1 THE ASSESSEE OBJECTED TO ITS INCLUSION BY CONTENDING THAT THIS IS EXCEPTIONAL YEAR OF OPERATION FOR THIS COMPANY AS IT IS THE FIRST FULL YEAR OF OPERATIONS AFTER ITS TAKEOVER BY TCS. IT WAS ALSO CONTENDED THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND THE SEGMENTAL INFORMATION ARE INSUFFICIENT. THE TPO REPELLED THE ASSESSEE'S OBJECTIONS AND INCLUDED IT IN THE FINAL SET OF COMPARABLES. 50 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 12.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A COPY OF THE ANNUAL REPORT OF THIS COMPANY IS AVAILABLE ON PAGE 398 OF THE PAPER BOOK. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LIKE TCS E - SERVE INTERN ATIONAL LIMITED, THIS COMPANY IS ALSO ENGAGED IN PROVIDING 'TRANSACTION PROCESSING' AND 'TECHNICAL SERVICES'. BY REFERRING TO PROFIT & LOSS ACCOUNT IN STANDALONE FINANCIALS OF THE COMPANY IT WAS POINTED OUT THAT DURING THE RELEVANT FINANCIAL YEAR, THE COMP ANY HAS RECEIVED INCOME OF RS. 1,35,94,110/ - FROM TRANSACTION PROCESSING AND OTHER SERVICES. ON REFERRING TO SCHEDULE 'O' - NOTES TO ACCOUNTS IT IS GIVEN THAT - 'BACKGROUND AND PRINCIPAL ACTIVITIES TCS E - SERVE LIMITED IS ENGAGED IN THE BUSINESS OF PROVID ING INFORMAITON TECHNOLOGY - ENABLES SERVICES (ITES) / BUSINESS PROCESS OUTSOURCING (BPO) SERVICES, PRIMARILY TO CITIGROUP ENTITIES GLOBALLY. THE COMPANY'S OPERATIONS BROADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES. TRANSACTION PROCESSI NG INCLUDES THE BROAD SPECTRUM OF ACTIVITIES INVOLVING THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS CORPORATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION A ND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES.' 12.3 WE ALSO NOTE THAT 'SEGMENTAL INFORMATION' GIVEN IN POINT NO. 8 OF SCHEDULE 'O' - NOTES TO ACCOUNTS IN STANDALONE FINANCIALS OF THE ANNUAL REPORT SHOWS THAT COMPANY IS ENGAGED IN BUSINESS PROCESS OUTSOURCING (TRANSACTION PROCESSING) SERVICES TO THE BANKING & FINANCIAL SERVICES INDUSTRY (BFSI), WHICH IS CONSIDERED AS A SINGLE SEGMENT. 12.4 IT WAS FAIRLY CONCEDED BY LD. AR THAT THIS COMPANY HAS BEEN CONSIDERED AS COMPARABLE BY THE DELHI BENCH OF TRIBUNAL IN TECHBOOK INTERNATIONAL P. LTD. (SUPRA), BY OBSERVING AS FOLLOWS : 'THE COMPANY'S OVERVIEW HAS BEEN DISCUSSED ON PAGE 467 OF THE PAPER BOOK, WHICH DIVULGES THAT THIS COMPANY : 'IS IN THE BUSINESS OF PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES IN THE BANKING AND FINANCIAL SERVICES (BFSI), VERTICAL ( I.E. INDUSTRY VERTICAL) TO HELP ITS CUSTOMERS ACHIEVE THEIR BUSINESS OBJECTIVES BY PROVIDING INNOVATIVE BEST - IN - CLASS SERVICES.' WE FIND THAT THIS COMPANY IS ALSO PROVIDING ITES. UNLIKE TCS E - SERVE INTERNATIONAL LTD., THIS COMPANY IS NOT PROVIDING ANY TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE ETC. SINCE THE FUNCTIONAL PROFILE OF THIS COMPANY ON A BROADER BASIS IS NO DIF FERENT FROM THAT OF THE ASSESSEE, BOTH BEING INVOLVED IN RENDERING ITES, WE ARE NOT INCLINED TO TREAT THIS COMPANY AS INCOMPARABLE. THE LD. AR ARGUED THAT THE NATURE OF 51 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THE ITES PROVIDED BY THIS COMPANY IS DIFFERENT FROM THAT OF THE ASSESSEE AND HENCE THE SAME BE EXCLUDED. WE ARE DISINCLINED TO SUSTAIN THIS OBJECTION. MATCHING OF THE EXACT FUNCTIONAL SIMILARITY IS DISPENSED WITH UNDER THE TNMM, WHICH IS NOT SO UNDER THE COMPARABLE UNCONTROLLED PRICE METHOD. THE TNMM APPROVES COMPARABILITY ON THE BASIS OF BR OADER OVERALL SIMILARITY. WHEN WE CONSIDER THE NATURE OF SERVICES PROVIDED BY THIS COMPANY, BEING THE ITES, WHICH IS SIMILAR TO THAT OF THOSE RENDERED BY THE ASSESSEE, AGAIN THE ITES, WE CANNOT ORDER ITS EXCLUSION SIMPLY FOR THE REASON THAT THE VERTICALS O F ITES ARE SOMEWHAT DIFFERENT. IF ONE GOES TO MAKE A COMPARISON IN THE WAY SUGGESTED BY THE LD. AR UNDER THE TNMM, THEN IT WILL BE VERY DIFFICULT, IF NOT IMPOSSIBLE, TO FIND OUT A DITTO COMPARABLE. A COMPANY WHICH SATISFIES THE BROADER PARAMETERS OF COMPAR ABILITY IN THE OVERALL SAME SEGMENT, CANNOT BE EXCLUDED DUE TO SOMEWHAT DIFFERENT NATURE OF SUCH OVERALL ACTIVITY. AN EXAMINATION OF THE COMPARABLES CHOSEN BY THE ASSESSEE, WHICH HAVE BEEN ACCEPTED BY THE TPO, ALSO SATISFY ONLY THE TEST OF OVERALL SIMILARI TY AND NOT THE PECULIAR SIMILARITY, AS HAS BEEN NOW CONTRASTLY CONTENDED FOR THE EXCLUSION OF THIS COMPANY. THIS ARGUMENT, THEREFORE, FAILS.' 12.5 WE HAVE GONE THROUGH THE ANNUAL REPORT OF COMPANY AND HAVE CAREFULLY CONSIDERED THE REASONING GIVEN BY COORDI NATE BENCH IN THE CASE OF TECHBOOK INTERNATIONAL P. LTD. (SUPRA). ON PERUSAL OF SCHEDULE 'O' - NOTES TO ACCOUNTS OF THE STANDALONE FINANCIALS OF THE COMPANY, IT IS CLEAR THAT THE COMPANY IS ENGAGED IN 'TRANSACTION PROCESSING' AND 'TECHNICAL SERVICES' ACTIV ITIES. NO SEPARATE SEGMENTAL DETAILS ARE AVAILABLE. ON A CAREFUL READING OF THE DECISION OF COORDINATE BENCH IN TECHBOOK INTERNATIONAL P. LTD. (SUPRA) IT IS CLEAR THAT SCHEDULE 'O' - NOTES TO ACCOUNTS IN RESPECT TO CARRIED OUT BY COMPANY AND RELEVANT SEGME NTAL DETAILS WERE NEVER BROUGHT TO THE ATTENTION OF THE BENCH. WE FIND THAT IN THE ABSENCE OF THE AVAILABILITY OF ANY SUCH SEGREGATION OF THE TOTAL REVENUE OF THIS COMPANY, IT IS NOT POSSIBLE TO SEPARATELY CONSIDER ITS PROFITABILITY FROM RENDERING OF `TRAN SACTION PROCESSING SERVICES'. THUS, THE ENTITY LEVEL FIGURES RENDER THIS COMPANY AS UNFIT FOR COMPARISON. FOLLOWING THE ABOVE REASONS ALSO TAKEN NOTE IN THE CASE OF TCS E - SERVE INTERNATIONAL LIMITED, WE ORDER FOR THE ELIMINATION OF THIS COMPANY FROM THE FI NAL SET OF COMPARABLES. 30.2 IN THE CASE OF EQUANT S OLUTIONS INDIA PRIVATE L IMITED (SUPRA) THE COMPANY HAS BEEN EXCLUDED FROM THE LIST OF COMPARABLE AS IT WAS ENGAGED IN SOFTWARE TESTING AND HIGH - END TECHNICAL SERVICES, OWNED HUGE INTA NGIBLES AND USE OF T ATA B RAND. THE RELEVANT PART OF THE DECISION IS EXTRACTED AS UNDER: 24. TCS E SERVE LIMITED 52 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 A. TPO INCLUDED THIS COMPARABLE, WHICH HAS A MARGIN OF 63.42%. THE LD DRP HAS ALSO HELD THAT THE FAR PROFILE OF THE COMPANY IS SIMILAR. BEFORE US, LD. AR SUBMITTE D THAT THE COMPANY IS DISSIMILAR FUNCTIONALLY. IN ADDITION TO BPO SERVICES, IT IS ALSO ENGAGED IN TECHNICAL SERVICES SUCH AS SOFTWARE TESTING, VERIFICATION AND VALIDATION. IT HAS ALSO DEVELOPED SOFTWARE SUCH AS TRANSPORT MANAGEMENT SOFTWARE. IT DOES NOT HA VE SEGMENTAL REPORTING TOO. IT WAS FURTHER SUBMITTED THAT THE COMPANY OWNS SUBSTANTIAL INTANGIBLE ASSETS IN FORM OF SOFTWARE LICENSES AND IT MAKES A PAYMENT FOR TATA BRAND AND THEREFORE IT GETS THE BENEFIT USE BRAND VALUE OF TATA. B. LD. DR RELIED ON THE O RDERS OF LOWER AUTHORITIES AND SUBMITTED THAT ALL THE ABOVE REASONS FOR SELECTION OF THIS COMPARABLE HAS BENE CONSIDERED BY THE TPO. C. WE HAVE ALSO CONSIDERED THE RIVAL CONTENTION FOR EXCLUSION OF TCS E - SERVICE LTD. IT IS MAINLY INVOLVED IN TRANSACTION PR OCESSING AND TECHNOLOGY SERVICES. IT CARRIES ON BUSINESS OF PROVIDING TECHNOLOGY SERVICE SUCH AS SOFTWARE TESTING, VERIFICATION AND ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 VALIDATION. IT IS ALSO DEVELOPED A SOFTWARE SUCH AS TRANSPORT MANAGEMENT SOFTWARE THEREFORE FUNCTIONALLY THIS COMPANY IS DISSIMILAR TO THE ASSESSEE COMPANY. IT ALSO OWNS HUGE INTANGIBLE AND USE OF 'TATA' BRAND, WHICH HAS DEFINITELY BENEFITED THIS COMPARABLE, IT IS DIRECTED TO BE EXCLUDED. 30.3 IN VIEW OF ABOVE DISCUSSION AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF AMERIPRISE IN DIA P RIVATE LIMITED (SUPRA) AND EQUANT SOLUTIONS INDIA PRIVATE L IMITED (SUPRA), WE HOLD THAT COMPANY A S FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY AND ACCORDINGLY WE DIRECT THE AO/TPO TO EXCLUDE THE COMPANY FROM THE SET OF THE COMPARABLES. TCS E - S ERVE I NTERNATIONAL LTD . 31.1 O N PERUSAL OF THE PAGE 61 OF THE PAPER BOOK, WE FIND THAT THAT THE COMPANY WAS ENGAGED IN PROVIDING TECHNICAL SERVICES SUCH AS SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES AND IT IS EVIDENT FROM THE PAGE 63 OF THE PAPER BOOK THAT NO SEGMENT INFORMATION WAS AVAILABLE TO BIFURCATE THE INCOME AND EXPE NSES 53 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 BETWEEN THE ITES SERVICES AND TECHNICAL SERVICES. FURTHER , THE COMPANY IS A PART OF THE TATA GROUP, WHICH HAS IMPACTED THE MARGINS OF THE COMPANY. FURTHER, WE ALSO NOTE THAT TRIBUNAL I N THE CASE OF AMERIPRISE INDIA PRIVATE L IMITED (SUPRA) HELD THAT TH E COMPANY A S NOT COMPARABLE IN ABSENCE OF SEGMENTAL INFORMATION. THE RELEVANT FINDING OF THE DECISION IS REPRODUCED AS UNDER: 11. TCS E - SERVE INTERNATIONAL LTD. 11.1. THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMPANY ON THE GROUND THAT THERE IS EXCEP TIONAL RISE IN TURNOVER AND PROFITS, AS THIS IS THE SECOND YEAR OF OPERATIONS OF THE COMPANY AND FIRST FULL - YEAR AS A STEP DOWN SUBSIDIARY OF TCS. IT WAS ALSO AGITATED THAT COMPANY IS FUNCTIONALLY DISSIMILAR AND THERE ARE INSUFFICIENT SEGMENTAL INFORMATION . THE TPO NOTICED THAT THIS COMPANY WAS ALSO OFFERING ITES. HE DID NOT TREAT HIGH TURNOVER OF THIS COMPANY AS A RELEVANT FACTOR IN CONSIDERING THE COMPARABILITY. EVENTUALLY, THIS COMPANY WAS INCLUDED IN THE FINAL SET OF COMPARABLES. 11.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. NOTES TO ACCOUNTS INDICATE THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES/BPO SERVICES PRIMARILY TO CITIGROUP ENTITIES GLOBALLY. THE OPERATIONS OF THIS COMPANY : 'BROADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES. TRANSACTION PROCESSING INCLUDES THE BROAD SPECTRUM OF ACTIVITIES INVOLVING PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS CORPO RATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES.' IT IS MANIFEST THAT THIS COMPANY IS ENGAGED IN RENDERING BPO SERVICES TO THE BANKING AND FINANCIAL SERVICES INDUSTRY (BFSI) AND TRAVEL, TOURISM AND HOSPITALITY (TTH). IT IS PROVIDING SERVICES TO BFSI AND TTH AND SUCH SERVICES INCLUDE `TRANSACTION PROCESSING' AND `TECHNICAL SERVICES'. IN OTHER WORDS, THE REMUNERATION OF THIS COMPAN Y FROM THE ABOVE REFERRED TWO SEGMENTS INCLUDES COMPENSATION FOR RENDERING `TECHNICAL SERVICES' AND `TRANSACTION PROCESSING'. INSOFAR AS THE `TRANSACTION PROCESSING' SERVICES ARE CONCERNED, THESE ARE ITES, WHICH ARE BROADLY SIMILAR TO THOSE RENDERED BY THE ASSESSEE, THOUGH NOT SPECIFICALLY SIMILAR. HOWEVER, THE `TECHNICAL SERVICES' INVOLVE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE ITEM, IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. THE `TECHNICAL SERVICES' RENDERED BY THIS COMPANY AR E IN THE NATURE OF SERVICING AND MAINTENANCE OF SOFTWARE. AT THIS STAGE, IT IS RELEVANT TO NOTE THAT A COMPANY PROVIDING SOFTWARE SERVICES MAY BE OF TWO TYPES, VIZ., A COMPANY PROVIDING SOFTWARE DEVELOPMENT SERVICES AND A COMPANY PROVIDING SOFTWARE SERVICE S OTHER THAN SOFTWARE DEVELOPMENT SERVICES (HEREINAFTER ALSO CALLED 'A COMPANY PROVIDING NON - DEVELOPMENT SOFTWARE SERVICES'). 54 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 11.3 AT THIS JUNCTURE WE ARE INCLINED TO QUOTE VIEW TAKEN BY THE DELHI BENCH OF TRIBUNAL IN TECHBOOK INTERNATIONAL P. LTD. (SUPRA) , WHILE CONSIDERING THE SAME COMPARABLE, IT IS OBSERVED THAT - 'IN ORDER TO PROPERLY APPRECIATE THE VITAL DIFFERENCE BETWEEN THESE TWO TYPES OF COMPANIES, IT IS SIGNIFICANT TO NOTE THAT A COMPANY WHICH DEVELOPS SOFTWARE IS CALLED A COMPANY RENDERING SOFTWA RE DEVELOPMENT SERVICES. SOFTWARE DEVELOPMENT SERVICES ALSO INCLUDE MAINTENANCE OF SOFTWARE AND UPDATION OF THE SOFTWARE SO AS TO SUIT THE EVER CHANGING REQUIREMENTS OF THE USERS. A COMPANY USING, INTER ALIA, A SOFTWARE FOR OBTAINING THE DESIRED RESULTS, I S CALLED A COMPANY PROVIDING NON - DEVELOPMENT SOFTWARE SERVICES. THUS, IT IS CRYSTAL CLEAR THAT THERE IS A PHENOMENAL DIFFERENCE BETWEEN A COMPANY PROVIDING SOFTWARE DEVELOPMENT SERVICES AND A COMPANY PROVIDING SOFTWARE NON - DEVELOPMENT SERVICES IN TERMS OF EXPERTISE, PROFESSIONAL QUALIFICATION AND EXPERIENCE REQUIRED FOR RENDERING SUCH SERVICES. A COMPANY PROVIDING SOFTWARE NON - DEVELOPMENT SERVICES PERFORMS A RELATIVELY LOW - END SERVICE. THUS THE LINE OF DISTINCTION IS THAT WHEREAS A COMPANY PROVIDING SOFTWAR E DEVELOPMENT SERVICES HELPS IN THE CREATION, MAINTENANCE OR UPDATION OF A SOFTWARE, ON THE OTHER HAND, A COMPANY PROVIDING NON - DEVELOPMENT SOFTWARE SERVICES OBTAINS THE DESIRED RESULT WITH THE USE OF AN EXISTING SOFTWARE. FURTHER, WHEREAS THE OUTPUT OF TH E FORMER IS A SOFTWARE IN ITSELF OR A STAGE IN THE ULTIMATE CREATION OF A SOFTWARE, THE OUTPUT OF THE LATER IS THE PROCESSED INFORMATION FROM THE RAW DATA OBTAINED WITH THE HELP, INTER ALIA, OF A SOFTWARE. FROM THE ABOVE DISCUSSION, IT IS OVERT THAT A COMP ANY PROVIDING SOFTWARE DEVELOPMENT SERVICES IS DISTINCT FROM AND INCOMPARABLE WITH A COMPANY PROVIDING NON - DEVELOPMENT SOFTWARE SERVICES.' 11.4 WE FIND THAT THE ASSESSEE IS A COMPANY PROVIDING NON - DEVELOPMENT SOFTWARE SERVICES, IN THE NATURE OF CONVERSION OF DATA FROM HARD COPY OR FILES INTO ELECTRONIC FORMAT. THE ASSESSEE IS NOT PROVIDING ANY SOFTWARE DEVELOPMENT SERVICES TO ITS AE. ON THE OTHER HAND, THIS COMPANY IS ALSO PROVIDING `TECHNICAL SERVICES' TO ITS AE INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE, WHICH ARE AKIN TO SOFTWARE MAINTENANCE SERVICES FALLING, WITHIN THE OVERALL CATEGORY OF SOFTWARE DEVELOPMENT SERVICES. THE TPO HAS TAKEN ENTITY LEVEL FIGURES OF TCS E - SERVE INTERNATIONAL LTD. FOR COMPARISON. WE NOTE THAT, THERE IS NO BIFURCATION AVAILABLE IN RESPECT OF THE REVENUES OF THIS COMPANY FROM TRANSACTION PROCESSING (WHICH ARE IN THE NATURE OF ITES, THE SAME AS PROVIDED BY THE ASSESSEE) AND TECHNICAL SERVICES (WHICH ARE IN THE NATURE OF SOFTWARE DEVELOPMENT, ABSENT IN THE A SSESSEE'S CASE). IN THE ABSENCE OF THE AVAILABILITY OF ANY SUCH SEGREGATION OF THE TOTAL REVENUE OF THIS COMPANY, IT IS NOT POSSIBLE TO SEPARATELY CONSIDER ITS PROFITABILITY FROM RENDERING OF `TRANSACTION PROCESSING SERVICES'. AS SUCH, THE ENTITY LEVEL FIG URES RENDER THIS COMPANY AS UNFIT FOR COMPARISON. THEREFORE, WE ORDER FOR THE REMOVAL OF THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 55 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 31.2 IN THE CASE OF EQUANT SOLUTIONS INDIA PRIVATE LIMITED (SUPRA) THE COMPANY HAS BEEN EXCLUD ED FROM THE LIST OF CO MPARABLE . THE RELEVANT PART OF THE DECISION IS EXTRACTED AS UNDER: 23. TCS E SERVE INTERNATIONAL LTD. A. THIS COMPARABLE WAS TAKEN BY TPO WHERE THE MARGIN IS 54.02%. THE TPO HAS TAKEN THIS COMPARABLE CONSIDERED THIS A COMPANY IN IPS INDUSTRY AND CONSIDERED IT AS A SINGLED SEGMENT. THE TPO WAS ALSO OF THE VIEW THAT THERE ARE NO EXCEPTIONAL CIRCUMSTANCES, WHICH IS RELATED IN THE INCREASE IN TH E PROFIT. BEFORE DRP THE ARGUMENT OF THE ASSESSEE WERE REJECTED AND IT WAS HELD THAT FAR PROFILE OF THE COMPANY IS SIMILAR TO THAT OF THE APPELLANT. BEFORE US IT WAS SUBMITTED THAT IN ADDITION TO BPO SERVICES THIS COMPANY IS ENGAGED IN PROVIDING TECHNICAL SERVICES LIKE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF THE SOFTWARE WHICH FALLS UNDER SOFTWARE DEVELOPMENT SERVICES ACTIVITY, WHICH ALSO INCLUDES TRANSACTION PROCESSING, TECHNICAL SERVICES, THEREFORE IT IS FUNCTIONALLY DISSIMILAR. FURTHER IT WAS AL SO ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 CONTENDED THAT THERE IS NO SEGMENTAL DATE ITES AND SOFTWARE DEVELOPMENT ACTIVITY OF THE COMPANY IS AVAILABLE AND THIS COMPARABLE OWNS SUBSTANTIAL AMOUNT OF INTANGIBLES IN THE FO RM OF SOFTWARE LICENSES AND IT OWNS TATA BRAN IN WHICH COMPANY IS MAKING PAYMENT. IT WAS FURTHER SUBMITTED THAT THE COMPANY HAS VOLATILE MARGIN OVER THE YEAR AND ITS PROFITABILITY HAS GONE UP 173% ON ACCOUNT INCREASED IN INFRASTRUCTURE AND THEREFORE THIS C OMPARABLE SHOULD BE EXCLUDED. B. LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES AND SUPPORTED THEM. C. WE HAVE CONSIDERED THE RIVAL CONTENTION REGARDING THE EXCLUSION OF TCS E - SERVICE INTERNATIONAL LTD. THE COMPARABLE IS ENGAGED IN THE BUSINESS OF BPO SE RVICE AND PROVIDES HIGH - END TECHNOLOGY SERVICES SUCH AS SOFTWARE TESTING, VERIFICATION AND VALIDATION OF THE SOFTWARE. THEREFORE, IT IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE. FURTHER ANNUAL REPORT OF THE COMPANY DOES NOT PROVIDE ANY SEGMENTAL INFORMATION RELATED TO ITES AS WELL AS SOFTWARE DEVELOPMENT SERVICES. THE COMPANY ALSO OWNS INTANGIBLE OF SUBSTANTIAL AMOUNT AND IS BENEFITTED USUALLY BY THE TATA BRAD. THE COMPANY IS ALSO MAKING APPELLANT FOR USE OF SUCH BRAND. THEREFORE THIS ASPECT ALSO MAKES THIS COMPARABLE IS ITA NO. 1202/DEL./2015 EQUANT SOLUTIONS INDIA PVT. LTD. V DCIT A.Y. 2010 - 11 INAPPROPRIATE AND THEREFORE WE ORDER TO EXCLUDE THIS COMPARABLE. 31.3 IN VIEW OF OUR DISCUSSION ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN TH E CASE OF AMERIPRISE INDIA PRIVATE L IMITED (SUPRA) AND EQUANT SOLUTIONS INDIA P RIVATE LIMITED (SUPRA), WE HOLD THAT THE COMPANY TCS E - SERVE I NTERNATIONAL LTD . CANNOT BE COMPARED WITH 56 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 A SSESSEE COMPANY AND ACCORDINGLY , WE DIRECT THE AO/TPO FOR EXCLUSION OF TH E ABOVE COMPANY FROM THE SET OF THE COMPARABLE FOR COMPUTING AVERAGE MARGIN OF THE COMPARABLES. THUS GROUND NO. 3.3 IS ALLOWED. 32 . IN GROUND NO. 3.4 , THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF THE WORKING CAPITAL ADJUSTMENT. THIS ISSUE OF ALLOWING WORKI NG CAPITAL ADJUSTMENT HAS ALREADY B EEN DECIDED BY US IN PRECEDING P ARAS IN ITA NO. 1088/DEL/2014 FOR ASSESSMENT YEAR 2009 - 10. THERE IS NO SUBSTANTIAL CHANGE IN THE FUNCTIONS OF THE COMPANY AS COMPARED TO ASSESSMENT YEAR 2009 - 10, ACCORDINGLY , FOLLOWING OUR FINDING IN ITA NO. 1088/DEL/2014, WE DIRECT THAT AO/TPO TO ALLOW THE WORKING CAPITAL ADJUSTMENT TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION . THUS , GROUND NO. 3.4 OF THE APPEAL IS ALLOWED. 33 . NO OTHER GROUNDS, EXCEPT GROUND NO. 3.3 AND 3.4 OF THE APPE AL WERE PRESSED BEFORE US AND , THEREFORE , SAME ARE DISMISSED AS INFRUCTUOUS. 34 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 6683/DEL/2015 FOR AY: 2011 - 12 35 . NOW WE TAKE UP APPEAL IN ITA NO. 6683/DEL/2015 FOR ASSESSMENT YEAR 2011 - 12, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED . 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ( AO ) IS BAD IN LAW AND VOID AB - INITIO. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO DID NOT RECORD ANY REASONS IN THE ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS EXPEDIENT AND NECESSARY TO REFER THE MATTER TO THE LD. TRANSFER PRICI NG OFFICER ( TPO ) FOR COMPUTATION OF THE ARM S LENGTH PRICE, AS IS REQUIRED UNDER SECTION 92CA(1) OF THE INCOME TAX ACT, 1961 ( ACT ). 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. TPO/LD. DISPUTE RESOLUTION PANEL ( DRP ) ERRE D IN MAKING AN ADDITION OF RS. 57 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 5,19,95,761/ - TO THE RETURNED INCOME OF THE APPELLANT BY RE - COMPUTING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 OF THE ACT. 4. THE LD. AO/LD. TPO/LD. DRP ERRED IN NOT ACCEPTING THE QUANTITATIV E FILTERS SELECTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION/FRESH SEARCH AND HAS INSTEAD APPLIED HIS OWN ADDITIONAL/ QUANTITATIVE FILTERS WHICH LACKED VALID AND SUFFICIENT REASONING. 5. THE LD. AO/LD. TPO/LD. DRP ERRED IN REJECTING THE COMPA RABLE COMPANIES SET ADOPTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION AND ERRED IN ACCEPTING COMPANIES WHICH WERE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS, ASSETS AND RISK PROFILE AND INCLUDING COMPANIES WITH HIGH/SUP ERNORMAL MARGINS / TURNOVER. 6. THE LD. AO/LD. TPO/LD. DRP ERRED IN NOT PROVIDING THE BENEFIT OF ECONOMIC ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN RISK PROFILE IN ARRIVING AT THE ARM S LENGTH MEAN MARGIN. 7. THE LD. AO/ LD. TPO ERRED IN DISREGARDING THE MU LTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION AND IN SELECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2010 - 11) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT THE TIME OF COMPARISON DONE BY THE APPELLANT, THE COMPLETE DATA FOR FINANCIAL YEAR 2010 - 11 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN. 8. THE LD. AO/LD. TPO ERRONEOUSLY COMPUTED THE MARGINS OF COMPARABLE COMPANIES SELECTED BY HIM. 9. THE LD. TPO, WITHOUT PREJUDICE, ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY CONSIDERING REIM BURSEMENT OF EXPENSES RECEIVED AS OPERATING IN NATURE AND CONSEQUENTLY ROUTED THE SAME THROUGH PROFIT & LOSS ACCOUNT WHILE COMPUTING THE OPERATING INCOME AND OPERATING COST OF THE ASSESSEE FOR ARRIVING AT THE PLI. 10. THE LD. AO/ TPO/DRP ERRED IN FACT AN D IN LAW BY CONSIDERING THE ARM S LENGTH VALUE OF FIXED ASSETS IMPORTED BY THE ASSESSEE FROM ITS AES DURING FY 2010 - 11 AS NIL, THEREBY MAKING AN ADJUSTMENT OF INR 69,550. 11. THE LD. AO/ LD. TPO HAS ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND ENJOYING THE TAX HOLIDAY BENEFITS CONFERRED UNDER THE TAX HOLIDAY BENEFITS AS PER THE SOFTWARE TECHNOLOGY PARK OF INDIA (HEREIN AFTER REFERRED TO AS STPI ) SCHEME. THUS, THERE IS NO MOTIVE ON THE PART OF THE APPELLANT TO SHIFT THE PROFITS TO ANY OTHER JURISDICTION. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271 (L)(C) OF THE ACT MECHANICALLY AND WITHOU T RECORDING ANY ADEQUATE SATISFACTION FOR SUCH INITIATION. 13. THAT THE LD. AO ERRED IN FACTS AND IN LAW IN CHARGING AND COMPUTING INTEREST UNDER SECTION 234B AND 234D OF THE ACT. 58 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER . THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE, RESCIND, FORGO OR WITHDRAW ANY OF THE ABOVE GROUNDS OF OBJECTION EITHER BEFORE OR DURING THE COURSE OF PROCEEDINGS IN THE INTEREST OF THE NATURAL JUSTICE. 3 6 . THE FACTS OF THE CASE ARE MORE OR L ESS IDENTICAL TO THE FACTS IN ITA NO. 6328/DEL/2012 EXCEPT THE AMOUNT OF PROVISION OF SERVICES AND THE PROFITABILITY MARGINS. DURING THE YEAR, THE ASSESSEE HAS SHOWN I NTERNATIONAL TRANSACTION OF RS.44,95,76, 934 / - FROM PROVIDING IT ES SERVICES AND SHOWN OP/O C MARGIN OF 15.86%. IN THE TRANSFER PRICING STUDY, THE ASSESSEE COMPUTED AVERAGE MARGIN OF OF THE COMPARABLES AT 14.8% AND THUS SUBMITTED THAT THE INTERNATIONAL TRANSACTION WAS AT ARM S LENGTH PRICE. THE LD. DRP IN ITS DIRECTION DIRECTED THE AO/TPO TO TAKE AVERAGE MARGIN OF COMPARABLES AT 29.26%, WHICH HAS RESULTED INTO ADJUSTMENT OF RS.5,30,64,095/ - 37. BEFORE US, THE LEARNE D COUNSEL OF THE ASSESSEE ONLY ARGUED GROUND NO. 5 , CHALLENGING THE COMPARABILITY OF COMPARABLE S, NAMELY, M/S E CLERK SERVICE L TD AND M/S TCS E - SERVE LTD. ARGUMENTS OF THE LD. COUNSEL ON THE ISSUE IN DISPUTE ARE SUMMARIZED AS UNDER: (A) TCS E - S ERVE LTD . 37.1 THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE COMPANY NEED TO BE REJECTED AS COMPARABLE DUE TO THE FOLLOWING REASONS: I. T HE COMPANY ENGAGED IN HIGH - END TRANSACTION PROCESSING, TECHNICAL SERVICES INVOLVING SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. THE COMPANY IS A PART OF EMINENT TATA GROUP A ND RECEIVE D SUPPORT FROM IT IN TERMS OF LARGE S CALE OPERATION AND CLIENTELE. DURING THE YEAR , COMPANY HAS PAID INR 26,809 59 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 THOUSANDS TO TATA SONS LTD A S TATA BRAND EQUITY CONTRIBUTION (PAGE 81 OF THE PAPER BOOK REFERRED). THE COMPANY IS HAVING SALES TURNOVE R OF INR 1442.42 CRORES FOR YEAR UNDER CONSIDERATION AS COMPARED TO TURNOVER OF INR 45 CRORE OF THE ASSESSEE FOR THE SAID YEAR, WHICH IS ALMOST 32 TIMES THAT OF THE ASSESSEE. II. THE COMPANY HAS BEEN EXCLUDED FROM THE LIST OF COMPARABLES BY THE TRIBUNAL IN THE CASE OF GOLDMAN SACHS (INDIA) S ECURITIES P RIVATE L IMITED VS. ACIT IN ITA(TP) NO. 927/MUM/2016. (B) ECLERX SERVICES LTD ( ECLERX ) 37.2 T HE LEARNE D A R SUBMITTED THAT THE C O M P A N Y I S FUNCTIONALLY DISSIMILAR TO THE ASSESSEE COMPANY DUE TO FOLLOWING REA SONS: (I) THE COMPANY IS ENGAGED IN PROVIDING DATA ANALYTICS AND DATA PROCESS SOLUTIONS TO SOME OF THE LARGEST BRAND IN THE WORD.( PAGE 73 OF THE PAPER BOOK REFERRED ) (II) THE COMPANY IS EXPORTING IN CHOSEN MARKET - TRADE PROCESSING SUPPORT, REFERENCE DATA MAINTENANC E AND MARGIN AND EXPOSURE MANAGEMENT (PAGE 74 OF THE PAPER BOOK REFERRED) (III) IT IS AN INDUSTRY SPECIALIST COMPANY AND HELPS IN MEETING COMPLEX CLIENTS NEED, THAT ANALYTICS SPECIALISATION INTO TWO BUSINESS VERTICALS - FINANCIAL SERVICES AND RETAIL AND MANUFACTUR ING (PAGE 75 OF THE PAPER BOOK REFERRED) (IV) IT HAS A SCALABLE DELIVERY MODEL AND SERVICES OFFERED INCLUDING TRADE PROCESSING, REFERENCE DATA, ACCOUNTING AND FINANCE AND EXPENSE MANAGEMENT ACTIVITIES 38. THE LD. CIT(DR), ON THE OTHER HAND , RELIED ON THE FIND ING OF THE LOWER AUTHORITIES. 60 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 38. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BOTH THE COMPANIES HAVE BEEN DIRECTED TO EXCLUDE FROM THE SET OF COMPARABLES IN APPEALS OF THE PRECEDING YEARS. FOR THE YEAR UNDER CONSIDERA TION, THE COMPARABILITY OF THE ABOVE TWO COMPANIES I S DECIDED AS UNDER: TCS E - SERVE LTD. 40.1 ON PERUSAL OF THE PAGE 77 OF THE PAPER BOOK, WHICH IS PART OF THE ANNUAL REPORT OF THE COMPANY, WE FIND THAT THE COMPANY WAS ENGAGED IN PROVIDING TECHNICAL SER VICES AS COMPARED TO THE SERVICES OF THE ASSESSEE WHICH ARE CHARACTERIZED AS ITES SERVICES. THE COMPANY IS ALSO HAVING HUGE SALES TURNOVER AS COMPARED TO THE ASSESSEE. THE COMPANY IS ALSO PART OF TATA GROUP , WHICH HAS IMPACTED ITS PROFITABILITY. IN THE CIR CUMSTANCES, THE COMPANY IS FUNCTIONALLY DISSIMILAR TO THE ASSESSEE AND CANNOT BE COMPARED WITH THE ASSESSEE. THE SAID COMPANY HAS ALSO BEEN EXCLUDED BY THE TRIBUNAL A S A COMPARABLE TO ITES COMPANIES IN THE CASE OF GOLDMAN SACHS (INDIA) SECURITIES PRIVATE L IMITED (SUPRA). THE RELEVANT PART OF THE DECISION IS EXTRACTED AS UNDER: 4.2.B. IN THE CASE OF CAPITIA INDIA PVT. LTD. (SUPRA) THE TRIBUNAL HAD HELD THAT TCS WAS NOT A VALID COMPARABLE FOR IT - E SERVICES IN FOLLOWING MANNER: 'I) M/S TCS E - SERVE: - FROM THE PERUSAL OF ITS ANNUAL REPORTS, IT IS SEEN THAT, THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING ITES SERVICES AND BPO SERVICES PRIMARILY TO 'CITI GROUP' ENTITIES GLOBALLY. IT OPERATIONS COMPRISED OF TRANSACTION PROCESSING INCLUDES THE BROAD SPECTRUM O F ACTIVITIES INVOLVING THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS CORPORATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT, THE REVENUE SHOWN FROM TRANSACTION PROCESSING AND OTHER SERVICES IS APPROXIMATELY RS.1442.42 CRORES. THERE ARE NO SEGMENTAL DETAILS AND ANY OTHE R BIFURCATION AS TO WHAT COMPRISED OF TRANSACTION PROCESSING CHARGES AND OTHER SERVICES. THAT APART, IT IS SEEN THAT, THIS 61 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 COMPANY IS A PART OF TATA GROUP AND HAS A HUGE BRAND VALUE ACROSS THE WORLD AND ALSO OWNS HUGE INTANGIBLES. THUS, THERE IS A HUGE DIF FERENCE IN THE ASSETS EMPLOYED BY THIS COMPANY AS COMPARED TO THE ASSESSEE WHICH ALSO REFLECTS IN ITS REVENUE AND PROFIT MARGIN. ITS INTANGIBLE ASSETS ITSELF IS MORE THAN RS. 3337.4 CRORES AS ON 1ST APRIL, 2010 AND ADDITIONS DURING THE YEAR WERE MORE THAN RS.756.24 CRORES. THUS, THIS COMPANY HAVING HUGE INTANGIBLES ASSETS CANNOT BE COMPARED WITH THE ASSESSEE WHO HAS NO SIGNIFICANT INTANGIBLES. THAT APART, IT HAS BEEN POINTED OUT BY THE LD. COUNSEL THAT, THIS COMPANY HAS BEEN EMERGED WITH TCS IN THE YEAR 200 9 WHICH HAS LED TO SHOOTING UP OF ITS PROFIT MARGIN TO 13% TO 68% - 70%. THIS FACTOR ITSELF POINTS OUT THAT ITS HIGH PROFIT MARGIN WERE DUE TO ITS HUGE BRAND VALUE, WHICH CANNOT BE HELD TO BE COMPARABLE WITH CAPTIVE SERVICE PROVIDER LIKE ASSESSEE COMPANY. SO FAR AS THE DECISION OF ITAT DELHI BENCH IN THE CASE OF 'TECHBOOKS INTERNATIONAL PVT. LTD' IS CONCERNED AS POINTED OUT BY THE LD. COUNSEL, WE FIND THAT THIS DECISION OF THE TRIBUNAL HAS BEEN DISTINGUISHED AND EXPLAINED BY THE SUBSEQUENT THREE DECISIONS OF THE DELHI BENCH OF THE ITAT, WHEREIN, THE TRIBUNAL HAS CATEGORICALLY HELD THAT, IN ABSENCE OF ANY SEGMENTAL DETAILS AND SEGREGATION OF THE TOTAL REVENUE THIS COMPARABLE COMPANY CANNOT HELD TO BE COMPARABLE. THE RELEVANT OBSERVATION OF THE TRIBUNAL IN THE C ASE OF AMERIPRISE INDIA PVT. LTD (SUPRA) READS AS UNDER: - 12.5 WE HAVE GONE THROUGH THE ANNUAL REPORT OF COMPANY AND HAVE CAREFULLY CONSIDERED THE REASONING GIVEN BY THE COORDINATE BENCH IN THE CASE OF TECHBOOK INTERNATIONAL P LTD (SUPRA). ON PERUSAL OF SC HEDULE 'O' - NOTES TO ACCOUNTS OF THE STANDALONE FINANCIALS OF THE COMPANY, ITA(TP)/927/M/16(11 - 12)GOLDMAN SACHS (INDIA)SECURITIES PVT.LTD. IT IS CLEAR THAT THE COMPANY IS ENGAGED IN 'TRANSACTION PROCESSING' - AND 'TECHNICAL SERVICES' ACTIVITIES. NO SEPARA TE SEGMENTAL DETAILS ARE AVAILABLE. ON A CAREFUL READING OF THE DECISION OF COORDINATE BENCH IN TECHBOOK INTERNATIONAL P TD (SUPRA) IT IS CLEAR THAT SCHEDULE 'O' - NOTES TO ACCOUNTS IN RESPECT TO CARRIED OUT BY COMPANY AND RELEVANT SEGMENTAL DETAILS WERE N EVER BROUGHT TO THE ATTENTION OF THE BENCH. WE FIND THAT IN THE ABSENCE OF AVAILABILITY OF ANY SUCH SEGREGATION OF THE TOTAL REVENUE OF THIS COMPANY, IT IS NOT POSSIBLE TO SEPARATELY CONSIDER ITS PROFITABILITY FROM RENDERING OF 'TRANSACTION PROCESSING SERV ICES'. THUS, THE ENTITY LEVEL FIGURES RENDER THIS COMPANY AS UNFIT FOR COMPARISON. FOLLOWING THE ABOVE REASONS ALSO TAKEN NOTE IN THE CASE OF TCS E - SERVICE INTERNATIONAL LIMITED, WE ORDER FOR THE ELIMINATION OF THIS COMPANY FROM THE FINAL SET OF COMPARABLE S'. SUBSEQUENTLY IN THE CASE OF EQUANT SOLUTIONS INDIA PVT. LTD ALSO THIS COMPANY HAS BEEN HELD TO BE UN - COMPARABLE ON THE FOLLOWING REASONING: 'WE HAVE ALSO CONSIDERED THE RIVAL CONTENTION FOR EXCLUSION OF TCS E - SERVICE TD. IT IS MAINLY INVOLVED IN TRANSA CTION PROCESSING 62 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 AND TECHNOLOGY SERVICES. IT CARRIES ON BUSINESS OF PROVIDING TECHNOLOGY SERVICE SUCH AS SOFTWARE TESTING, VERIFICATION AND VALIDATION. IT IS ALSO DEVELOPED A SOFTWARE SUCH AS TRANSPORT MANAGEMENT SOFTWARE THEREFORE FUNCTIONALLY THIS COMPAN Y IS DISSIMILAR TO THE ASSESSEE COMPANY. IT ALSO OWNS HUGE INTANGIBLE AND USES OF TATA BRAND, WHICH HAS DEFINITELY BENEFITED THIS COMPARABLE, IT IS DIRECTED TO BE EXCLUDED'. THIS, IN VIEW OF OUR DISCUSSION AND ALSO FOLLOWING THE PRECEDENCE IN THE AFORESAID CASES, WE HOLD THAT TCS E - SERVE CANNOT BE HELD TO BE COMPARABLE COMPANY, ACCORDINGLY, WE DIRECT THE AO/TPO TO EXCLUDE THE SAME FROM COMPARABILITY LIST.' RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT TCE E - SERVICE CANNOT BE CONSIDERED A VALID COMPARABLE IN THE CASE OF THE ASSESSEE. 40.2 IN VIEW OF ABOVE AND RESPECTFULLY FOLLOWING THE PRECEDENCE IN AFORESAID CASE , WE HOLD THAT THE COMPANY CANNOT BE COMPARED WITH ASSESSEE AND ACCORDINGLY , WE DIRECT THE AO/TPO TO EXCLUDE THE COMPANY FROM THE SET OF THE COMPA RABLES FOR THE YEAR UNDER CONSIDERATION. ECLERX SERVICES LTD. 40.3 O N PERUSAL OF THE PAGE 73 TO 75 OF THE PAPER BOOK, WHICH ARE PART OF THE ANNUAL REPORT OF THE COMPANY, AND THE SUBMISSION OF LEARNED AUTHORIZED REPRESENTATIVE , W E FIND THAT SERVICES PROVIDE D BY THE COMPANY ARE COMPLETELY DIFFERENT FROM THE RESEARCH RELATED SERVICES RENDERED BY THE ASSESSEE TO ITS AE AND THUS IT CANNOT BE TREATED AS FUNCTIONALLY SIMILAR TO THE ASSESSEE. FURTHER WE FIND THAT THE TRIBUNAL IN THE CASE OF GOLDMAN SACHS (INDIA) SE CURITIES PRIVATE LIMITED (SUPRA) HAS EXCLUDED THE ABOVE COMPANY FOR COMPARABLE TO ITES COMPANIES. THE RELEVANT PARA OF THE DECISION IS EXTRACTED AS UNDER: 4.2.A. WE WOULD LIKE TO DEAL WITH THE INCLUSION/EXCLUSION OF THE COMPARABLES BY THE DRP. WE FIND THA T THE TRIBUNAL HAD EXCLUDED AT AND ECL FROM THE LIST OF THE VALID COMAPARABLES, WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR THE EARLIER YEAR(SUPRA).WE ARE REPRODUCING THE RELEVANT PARAGRAPHS OF THE ORDER AND SAME READ AS UNDER: 63 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 '56.WE HAVE CONSIDER ED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER THE ANNUAL REPORT OF THIS COMPANY, IT IS NOTED THAT THE COMPANY IS ENGAGED IN OFFERING SOLUTIONS IN THE FIELD OF DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RE - CO NCILIATION, MATRICS MANAGEMENT AND REPORTING SERVICES. THE FUNCTIONALITY OF THE COMPANY WAS NOT ONLY CONSIDERED BY THE TRIBUNAL, MUMBAI SPECIAL BENCH, IN THE CASE OF MAERSK GLOBAL CENTRES INDIA PVT. LTD. (SUPRA), BUT A HOST OF OTHER DECISIONS REFERRED TO E ARLIER, WHEREIN, IT HAS BEEN HELD THAT THE COMPANY IS INVOLVED IN PROVIDING HIGH END SERVICES WHICH IS IN THE NATURE OF KPO, HENCE, CANNOT BE COMPARED TO A GENERAL ITES PROVIDER. IN FACT, THE HON'BLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD., ITA N O.102 O 2015, HAS HELD THAT THIS COMPANY BEING A KPO SERVICE PROVIDER CANNOT BE CONSIDERED AS A COMPARABLE TO ITES COMPANIES. WE MAY FURTHER MENTION, MANY OF THE ORDERS PASSED BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL REJECTING ECLERX SERVICES LTD. AS A C OMPARABLE TO ITES SERVICE PROVIDER IS FOR THE VERY SAME ASSESSMENT YEAR 2008 - 09. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY VARIOUS JUDICIAL AUTHORITIES, WE HOLD THAT ECLERX SERVICES LTD. BEING FUNCTIONALLY DIFFERENT CANNOT BE TREATED AS COMPA RABLE TO THE ASSESSEE.' XXXXXXX ITA(TP)/927/M/16(11 - 12)GOLDMAN SACHS (INDIA)SECURITIES PVT.LTD. '67.WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT THE TRIBUNAL, BANGALORE BENCH, IN SYMPHON Y MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA), AFTER PERUSING THE ANNUAL REPORT OF THIS COMPANY FOUND THAT MAJOR SOURCE OF INCOME IS FROM PROVIDING ENGINEERING DESIGN SERVICE WHICH IS NOT COMPARABLE TO ITES / BPO FUNCTIONS. THE BENCH OBSERVED, PROVISION OF ENGINEERING DESIGN SERVICE IS A HIGH END SERVICE AMONGST THE BPO WHICH REQUIRES HIGH SKILL, HENCE, IT CAN BE REGARDED AS KPO SERVICE. THE BENCH, THEREFORE, EXCLUDED THE COMPANY AS A COMPARABLE TO ITES / BPO SEGMENT. THE TRIBUNAL, HYDERABAD BENCH, IN M/S. MARKET TOOLS RESEARCH PVT. LTD. V/S DCIT, FOLLOWING CO - ORDINATE BENCH DECISION IN SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) HAS ALSO HELD THAT THE COMPANY CANNOT BE TREATED AS COMPARABLE TO A COMPANY PERFORMING ITES / BPO FUNCTIONS. AS THESE DEC ISIONS RENDERED BY THE TRIBUNAL ARE FOR THE VERY SAME ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. IT HAS BEEN SUBMITTED BEFORE US BY THE LEARNED SR. COUNSEL THAT ON EXCLUSION OF THESE COMPANIES, THE MARGIN OF THE ASSESSEE WOULD BE WITHIN +/ - 5% TOLERANCE BAND OF THE ARITHMETIC MEAN OF THE COMPARABLE COMPANIES REQUIRING NO FURTHER ADJUSTMENT TO THE PRICE CHARGED. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED SR. COUNSEL, WE DO NOT CONSIDER IT NECESSARY TO DEAL WITH THE OTHER COMPARABLES OBJECTED TO BY THE ASSESSEE AS IT IS MERELY OF ACADEMIC INTEREST. GROUND NO.2, RAISED BY THE ASSESSEE IS PARTLY ALLOWED.' RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT AT AND ECL HAVE TO BE EXCLUDED FROM THE LIST OF THE VALID COMPARABLES. 64 ITA NOS. 6328/DEL/2012; 1088/DEL/2014; 963/DEL/2015 & 6683/DEL/2015 AY: 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 15 40.4 IN VIEW OF ABOVE DISCUSSION AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF GOLDMAN SACHS (INDIA) SECURITIES PRIVATE LIMITED (SUPRA), WE ARE OF THE OPINION THAT COMPANY CANNOT BE CONSIDE RED AS COMPARABLE TO THE ASSESSEE, AND ACCORDINGLY WE DIRECT THE AO/TPO TO EXCLUDE THE ABOVE COMPANY FROM THE SET OF OF COMPARABLES CHOSEN FINALLY BY THE TPO, POST THE DIRECTION OF THE DRP. 41. THE AO/TPO IS DIRECTED TO COMPUTE THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION AFTER EXCLUDING THE ABOVE TWO COMPANIES FROM THE SET OF COMPARABLES. THE GROUND NO. 5 OF THE APPEAL IS ACCORDINGLY ALLOWED. 42 . NO GROUNDS, OTHER THAN GROUND NO. 5 , WERE PRESSED BEFORE US AND THEREFORE SAME ARE DISMISSED AS I NFRUCTUOUS. 43. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 4 4 . IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSESSEE ARE ALLOWED PARTLY. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 1 7 T H M A R C H , 201 7 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 T H M A R C H , 201 7 . RK / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI