IHG IT Services (India) Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 6381/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97537 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 11-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR SENIOR
• Assessee Lawyers: VASANTH VASUDEVAN
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 115JB; 133(6); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.6381 /DEL./2012 (ASSESSMENT YEAR : 2008-09) IHG IT SERVICES (INDIA) PVT. LTD., VS. DCIT, CIRCL E 11 (1), 11 TH FLOOR, TOWER C, BUILDING NO.10, NEW DELHI. DLF CYBER CITY, DLF PHASE II, GURGAON 122 002 (HARYANA) (PAN : AAHCS8349E) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI ATUL JAIN & VASANTH VASUDEVAN , CA REVENUE BY : MS. Y. KAKKAR, SENIOR DR DATE OF HEARING : 11.08.2015 DATE OF PRONOUNCEMENT : 30.09.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER DATED 18.10.2012 UNDER SECTION 143 (3) RE AD WITH SECTION 144C (5) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER R EFERRED TO THE ACT) IN PURSUANCE TO THE DIRECTION OF THE DISPUTE RESOLUTION PANEL (DRP) I, NEW DELHI FOR THE ASSESSMENT YEAR 2008-0 9. 2. THE ASSESSEE FILED E-RETURN OF INCOME ON 29.09.2 009 DECLARING AN INCOME OF RS.3,64,378/- UNDER THE ACT AND RS.2,0 3,77,803/- AS PER 2 ITA NO.6381/DEL/2012 THE PROVISIONS OF SECTION 115JB OF THE ACT WHICH WA S PROCESSED U/S 143 (1) OF THE ACT. LATER, THE CASE WAS SELECTED FO R SCRUTINY. 3. THE ASSESSEE COMPANY, A WHOLLY OWNED SUBSIDIARY OF INTERCONTINENTAL HOTELS GROUP (ASIA PACIFIC) PTE. L TD., SINGAPORE, IS ENGAGED INTER ALIA IN THE BUSINESS OF PROVIDING BAC K OFFICE ACCOUNTING SUPPORT TO GROUPS VARIOUS HOTELS AND CORPORATE OFF ICES ALL OVER THE WORLD AND REGISTERED AS 100% EXPORT ORIENTED UNIT F OR EXPORT OF COMPUTER SOFTWARE/IT ENABLED SERVICES (ITES). THIS ASSESSMENT YEAR IS THE FIRST YEAR OF COMMENCING ITS OPERATION. DUR ING THE YEAR, RECEIPTS FROM THE EXPORTS OF RS.16,87,42,181/- AND OTHER INCOME OF RS.3,64,378/- HAS BEEN SHOWN. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD ENTERED INTO INTERNATIONAL TRANSACTION (AS MENTIONED IN THE 92CE REPORT) AS UNDER :- S.NO. DESCRIPTION OF THE TRANSACTIONS AMOUNT (IN RUPEES) 1 PROVISION OF IT ENABLED SERVICES 16,87,42,180 2 COST REIMBURSEMENT 37,71,220 3 ITA NO.6381/DEL/2012 THE CASE WAS REFERRED TO THE TRANSFER PRICING OFFIC ER (TPO) FOR COMPUTATION OF ARMS LENGTH PRICE (ALP) FOR INTERNA TIONAL TRANSACTION. 5. THE ALP OF THE INTERNATIONAL TRANSACTIONS REPRES ENTING THE ITES PROVIDED TO THE ASSOCIATED ENTERPRISES (AE) IS DETE RMINED BY APPLYING OF TRANSACTIONAL NET MARGIN METHOD (TNMM) WHICH IS STATED TO BE THE MOST APPROPRIATE METHOD IN THE FAC TS AND CIRCUMSTANCES OF THE CASE. THE OPERATING PROFIT TO TOTAL COST (OP/TC) RATIO IS TAKEN AS PROFIT LEVEL INDICATOR (PLI) IN T HE TNMM ANALYSIS. FOR COMPARING ASSESSEES NET PROFIT, THE ASSESSEE H AD IDENTIFIED 13 COMPARABLE COMPANIES AND THREE YEARS AVERAGE PLI OF THESE SEVEN (7) COMPANIES WAS COMPUTED AS 14.62% (PAGE 3 OF THE TPO ). THE TPO VIDE ORDER DATED 27.10.2011 REJECTED THE TRANSFER P RICING STUDY OF THE ASSESSEE AND TOOK THE FOLLOWING COMPARABLES TO ARRI VE AT THE PLI FOR COMPUTATION OF ALP :- SL.NO. COMPANY PBIT/ COST (%) 1. ACCENTIA 44.5 2. ADITYA BIRLA MINACS -0.55 3. ASIT C MEHTA 9.42 4. CALIBER POINT BUSINESS SOLUTION (SEG) 10.97 5. CORAL HUB (VISHAL INF) 51.84 4 ITA NO.6381/DEL/2012 6. COSMIC GLOBAL 24.3 7. CROSSDOMAIN SOLUTION P LTD. 26.96 8. DATAMATICS FINANCIAL (BPO DIV) 34.87 9. E4E (EARLIER KNOWN NITANNY) 16.87 10. ECLERX 66.5 11. GENESYS INTERNATIONAL 48.15 12. HCL COMNET SYSTEMS & SERVICES LTD. (SEG.) 32.97 13. ICRA (SEG.) 11.22 14. INFOSYS BPO 20.03 15. I-SERVICE IND P LTD. 9.73 16. MOLD TEX 96.66 17. SPANCO LTD. (SEG.) 8.94 18. ACROPETAL TECHNOLOGIES LTD. (SEG.) 35.3 19. WIPRO BPO 30.23 20. R SYSTEM INTERNATIONAL LTD. (SEG.) 4.3 AVG 29.16 THEREAFTER, THE TPO COMPUTED THE ALP AS UNDER :- ARITHMETIC MEAN PLI : 29.16% LESS : WORKING CAPITAL ADJUSTMENT : 3.89% ARMS LENGTH PRICE : 25.27% OPERATING COST RS.146,383,404 ARMS LENGTH MARGIN 25.27% OF THE OPERATING COST ARMS LENGTH PRICE (ALP) RS.183,374,490 B. PRICE RECEIVED VIS--VIS THE ARMS LENGTH PRICE : THE PRICE CHARGED BY THE TAX PAYER TO ITS ASSOCIAT ED ENTERPRISES IS COMPARED TO THE ARMS LENGTH PRICE AS UNDER :- ARMS LENGTH PRICE RS.183,374,490 PRICE SHOWN IN THE INTERNATIONAL TRANSACTIONS RS.16 8,742,180 SHORTFALL BEING ADJUSTMENT U/S 92CA RS. 14,632,310 5 ITA NO.6381/DEL/2012 THE ABOVE SHORTFALL OF RS.14,632,310 IS TREATED AS TRANSFER PRICING ADJUSTMENT U/S 92CA. BASED ON THE ABOVE DETAILED DISCUSSION, THE ARMS LENGTH PRICE OF THREE INTERNATIONAL TRANSACTIONS PERTAINING TO PROV IDING IT ENABLED SERVICES IS DETERMINED AT RS.183,374,490 INSTEAD OF RS.168,742,180 CHARGED IN ITS INTERNATIONAL TRANSACTIONS, RESULTIN G IN AN ADJUSTMENT TO THE EXTENT OF RS.14,632,310. THEREAFTER, THE DRP VIDE ORDER DATED 03.09.2012 DIR ECTED THE TPO TO RECOMPUTE THE TRANSFER PRICING ADJUSTMENT AFTER REE XAMINING THE ALP AND EXCLUDED MOLDTEK FROM THE LIST OF COMPARABLES. AS PER THE SAID DIRECTION, THE REVISED FINAL LIST OF COMPARABLES IS AS UNDER :- SL.NO. NAME OF COMPANY NCP (%) 1. CALIBER POINT BUSINESS SOLUTIONS LIMITED 6.46 2. COSMIC GLOBAL LIMITED 23.24 3. R SYSTEM INTERNATIONAL LTD. 2.37 4. SPANCO TELESYSTEM & SOLUTIONS LTD. 2.83 5. ACCENTIA TECHNOLOGIES LIMITED 39.52 6. ADITYA BIRLA MINACS -9.49 7. ASIT C MEHTA 6.68 8. CORAL HUB (PREVIOUSLY VISHAL INFO TECH) 39.04 9. CROSSDOMAIN SOLUTION PRIVATE LTD. 25.24 10. DATAMATICS FINANCIAL SERVICES 32.37 11. E4E HEALTHCARE (NITTANY) 13.86 12. ECLERX SERVICES LIMITED 64.05 13. GENESYS INTERNATIONAL 44.01 14. HCL COMNET SYSTEMS & SERVICES 29.46 15. ICRA TECHNO ANALYTICS 7.39 16. INFOSYS BPO 17.96 17. I-SERVICE PRIVATE LIMITED 7.53 18. ACROPETAL TECHNOLOGIES LIMITED 27.85 19. WIPRO BPO 35.39 AVERAGE 21.88 6 ITA NO.6381/DEL/2012 ACCORDINGLY, THE TPO HAS GIVEN THE EFFECT TO THE DI RECTIONS ISSUED BY THE DRP AND DETERMINED THE ALP AT RS.96,69,913/- IN STEAD OF RS.1,46,32,310/-. 6. AS A RESULT OF THE FINAL ASSESSMENT COMPLETED VI DE ORDER DATED 18.10.2012 PASSED U/S 143(3) R.W.S. 144C OF THE ACT ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.96,69,913/- WHIC H IS AS UNDER :- PARTICULARS DETAILS ASSESSEES COST BASE RS.14.6 CRORES ASSESSEES REVENUE RS.16.8 CRORES IHG ITS NET COST PLUS (NCP) MARGIN 15.27% ARMS LENGTH COST-PLUS MARGIN DETERMINED BY AO 21.88% ADJUSTMENT AMOUNT RS.9,669,913 7. DURING THE COURSE OF THE HEARING, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT ALL HIS CONTENTIONS VIS--VIS RAISED IN THE MEMO OF APPEAL ARE CONFINED TO THE INCLUSION / EXCLUSION OF CERTAIN COMPARABLES. (I) CORAL HUB (PREVIOUSLY VISHAL INFO TECH) 8. THE ASSESSEE IS AGGRIEVED BY THE INCLUSION OF TH IS COMPANY IN THE FINAL LIST OF COMPARABLES THOUGH THE SAID COMPA NY WAS INCLUDED BY 7 ITA NO.6381/DEL/2012 THE ASSESSEE IN ITS LIST OF COMPARABLES TO CALCULAT E THE ALP. THE ASSESSEE THOUGH HAD INCLUDED THE SAID COMPANY IN IT S LIST OF COMPARABLES HAS EVERY RIGHT TO OBJECT TO ITS INCLUS ION BEFORE THE TPO BECAUSE THERE IS NO ESTOPPEL AGAINST LAW. SO THE C ONTENTION OF THE LD. DR AGAINST THE ASSESSEE TURNING AROUND TO OBJECT TO THE SAID COMPANY BEING INCLUDED IN THE LIST OF COMPARABLES IS REJECT ED. 9. THE OBJECTION OF THE ASSESSEE THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND HAS PECULIAR ECONOMIC CIRCUMSTANCES WAS REJECTED BY THE TPO AS UNDER:- THE TAXPAYER CONTENTION FOR FUNCTIONALITY OF THE C OMPANY IS NOT ACCEPTABLE AS NEITHER THE TPO NOR THE TAXPAYER CONSIDERED FUNCTIONAL LINES WITHIN IT ENABLED SERVICES. FINAL COMPARABLES CONSIDERED BY THE TAXPAYER AS WELL AS THE TPO CONSI STS OF COMPANIES ENGAGED IN BOTH HIGH END AND LOW END IT E NABLED SERVICES. THE TAXPAYER IS ALSO NOT DENYING THE FAC T THAT THE COMPANY IS INTO IT ENABLED SERVICES. THUS THE COMP ANY IS CONSIDERED AS A COMPARABLE AS THE TPO AS WELL AS TH E TAXPAYER DID NOT GO INTO HORIZONTALS OR FUNCTIONAL LINES WIT HIN THE ITES INDUSTRY. REFERRING TO A LETTER FROM THE CORAL HUB, THE TPO R EPELLED THE CONTENTION OF THE ASSESSEE IN RESPECT TO HIGH OUTSO URCING OF THE SERVICES BY THE SAID COMPANY AS UNDER :- THAT DATA CONVERSION SERVICES (ITES) RENDERED BY THE TAXPAYER INVOLVED 9 10 STEPS. OF THIS PROCESS, STAGES 1 T O 5 ARE PERFORMED 8 ITA NO.6381/DEL/2012 BY MANPOWER VENDORS PERSONNEL IN THE OFFICE PREMIS ES OF THE COMPANY AND STAGES 6 TO 9 ARE PERFORMED BY THE EMPL OYEES OF THE COMPANY. THE EXPENSES INCURRED FOR VENDORS PERSON NEL ARE DEBITED TO DATA ENTRY CHARGES, VENDOR PAYMENTS ETC. THUS, AS CLARIFIED BY THE COMPANY, THE EXPENSES UNDER THE HE AD DATA ENTRY AND VENDOR PAYMENTS ARE TOWARDS PERSONNEL OF VENDO RS WORKING FROM THE PREMISES OF THE COMPANY. HENCE, THE TAXPA YERS ARGUMENT THAT THE COMPANY OUTSOURCES ITS MAJOR WORK IS INCORRECT AND ALSO CLARIFIED BY THE COMPANY AS ABOVE. THE CO MPANY IS THUS RENDERING IT ENABLED SERVICES USING ITS OWN ASSETS AND HUMAN RESOURCES (MAY NOT BE ON THE ROLL OF THE COMPANY), AND IS FUNCTIONALLY SIMILAR TO THE TAXPAYER. 10. LD. AR SUBMITTED THAT THE SAID COMPARABLE COMPA NY HAS AN EXPENDITURE HEAD OF DATA ENTRY CHARGES AND VENDOR PAYMENTS AMOUNTING TO RS.21.68 CRORES WHICH IS 84.52% OF THE TOTAL EXPENDITURE. HE SUBMITTED THAT IN OTHER WORDS, IT IS ENGAGED IN TRADING OF SERVICES ON ITS OWN. HE SUBMITTED TH AT THE EMPLOYEE COSTS OF COMPARABLE COMPANY IS MERELY 4.40% OF THE OPERATING REVENUE. THE LD. AR SUBMITTED THAT THE MAIN ASSET USED IN ITES INDUSTRY IS MANPOWER ONLY, SO THE WAGES/ SALES RATI O SHOULD BE A PRIMARY FILTER FOR SELECTING COMPARABLE IN ITES IND USTRY HE FURTHER SUBMITTED THAT THE ASSESSEES WAGES TO SALES IS 53. 09% WHICH CANNOT BE CONSIDERED AS COMPARABLE TO VISHAL AT 4.40%. 11. LD. DR RELIED ON THE ORDER OF THE TPO. 9 ITA NO.6381/DEL/2012 12. HAVING CONSIDERED THE ABOVE OBJECTION, WE ARE I N AGREEMENT WITH THE SUBMISSION OF THE LD. COUNSEL THAT VISHAL INFORMATION TECHNOLOGIES LTD. IS NOT A VALID COMPARABLE AS HELD IN GOOGLE INDIA PVT. LTD. VS. DCIT, BANGALORE (ITA NO.1368/BANG./20 10 FOR AY 2006-07) WHEREIN GOOGLE INDIA WAS ENGAGED IN THE BU SINESS OF SOFTWARE DEVELOPMENT SERVICES AND ITES. THE OBJECT ION IN REGARD TO EXCLUSION OF THE SAID COMPANY FROM THE LIST OF COMP ARABLES WAS ACCEPTED BY THE TRIBUNAL AND HELD AS UNDER :- 15. AS REGARDS THE ISSUE OF (8) VISHAL INFORMATION TECHNOLOGIES LTD., WE FIND THAT, IT IS ADOPTED BY T HE TPO. THE DRP HELD THAT VISHAL INFORMATION TECHNOLOGIES HAS O UTSOURCED ITS CALL CENTRE WORK AND, THEREFORE, THE EMPLOYEE C OST IS LESS THAN 25% AS IS THE COMMON PRACTICE AMONG OTHER ITES SERV ICES. THE TPO AS WELL AS THE DRP HAVE RECORDED THAT IN THE IT ES SECTOR, EMPLOYEES FILTER OF LESS THAN 25% ALONE IS NOT APPL ICABLE FOR THE REASON THAT IN ADDITION TO THE AMPLE COSTS, THE COM MISSION COSTS ARE ALSO IMPORTANT. WHEN COMPANY HAS OUTSOURCED ITS ITES SERVICES, IT CANNOT BE SAID THAT ITS BUSINESS RESUL TS WOULD BE COMPARABLE TO ANY OTHER ITES SERVICE PROVIDER RENDE RING THE SERVICES ENTIRELY ON ITS OWN. IN SUCH CIRCUMSTANCES , THE NET MARGINS OF THE TWO COMPARABLES CANNOT BE ON THE SAM E BASIS. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FO R THE ASSESSEE ALSO HELD THAT THE EMPLOYEE COST FILTER IS IMPORTAN T FILTER TO BE ADOPTED FOR THE PURPOSE OF COMPUTING ALP. IN THE CA SE OF MAERSK GLOBAL SERVICES CENTRE (INDIA) PVT. LTD., IN ITA NO.3774/M/2011, THE TRIBUNAL AT MUMBAI HAS HELD THA T VISHAL INFORMATION TECHNOLOGIES LTD. HAS TO BE EXCLUDED FR OM THE LIST OF COMPARABLES OF ITES COMPANY AS IT HAS OUTSOURCED ITS SERVICES. IN VIEW OF THE SAME, WE DIRECT THE AO TO EXCLUDE THIS COMPANY ALSO FROM THE LIST OF COMPARABLES. 10 ITA NO.6381/DEL/2012 HAVING REGARD TO THE ABOVE DECISION AND HAVING GONE THROUGH THE ANNUAL REPORT, WE CONCUR THAT WHEN THE COMPANY HAS OUTSOURCED ITS SERVICE, IT CANNOT BE SAID THAT ITS BUSINESS RESULT S WOULD BE COMPARABLE TO ANY OTHER ITES PROVIDER RENDERING THE SERVICES E NTIRELY ON ITS OWN. SO, THE NET MARGINS OF THE TWO COMPANIES CANNOT BE ON THE SAME BASIS. WE RELY ON THE HONBLE JURISDICTIONAL HIGH COURT DE CISION IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT (ITA 102/2 015 ORDER DATED 10.08.2015) WHEREIN THE HONBLE HIGH COURT HELD AS UNDER :- 38. IN OUR VIEW, EVEN VISHAL COULD NOT BE CONSIDER ED AS A COMPARABLE, AS ADMITTEDLY, ITS BUSINESS MODEL WAS C OMPLETELY DIFFERENT. ADMITTEDLY, VISHALS EXPENDITURE ON EMPL OYMENT COST DURING THE RELEVANT PERIOD WAS A SMALL FRACTION OF THE PROPORTIONATE COST INCURRED BY THE ASSESSEE, APPARENTLY, FOR THE REASON THAT MOST OF ITS WORK WAS OUTSOURCED TO OTHER VENDORS/SERVICE PROVIDERS. THE DRP AND THE TRIBUNAL ERRED IN BRUSHING ASIDE THIS V ITAL DIFFERENCE BY OBSERVING THAT OUTSOURCING WAS COMMON IN ITES IN DUSTRY AND THE SAME WOULD NOT HAVE A BEARING ON PROFITABILITY. PLAINLY, A BUSINESS MODEL WHERE SERVICES ARE RENDERED BY EMPLO YING OWN EMPLOYEES AND USING ONES OWN INFRASTRUCTURE WOULD HAVE A DIFFERENT COST STRUCTURE AS COMPARED TO A BUSINESS MODEL WHERE SERVICES ARE OUTSOURCED. THERE WAS NO MATERIAL FOR THE TRIBUNAL TO CONCLUDE THAT THE OUTSOURCING OF SERVICES BY VISHAL WOULD HAVE NO BEARING ON THE PROFITABILITY OF THE SAID ENTITY. 13. IN THE LIGHT OF THE ABOVE, WE ARE OF THE OPINIO N THAT CORAL HUB (PREVIOUSLY KNOWN AS VISHAL) CANNOT BE USED AS A CO MPARABLE AND SO 11 ITA NO.6381/DEL/2012 WE DIRECT THE AO TO EXCLUDE THIS COMPANY FROM THE L IST OF COMPARABLES. (II) ECLERX SERVICES LIMITED 14. LD. AR SUBMITTED THAT ECLERX IS A PROVIDER OF K NOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES. HE SUBMITTED T HAT THE SAID COMPARABLE COMPANY IS LEADING INDIAN PROVIDER OF KP O SERVICES AND WAS ESTABLISHED IN 2001. HE FURTHER SUBMITTED THAT THE SAID COMPARABLE COMPANY PROVIDES DATA ANALYTICS AND CUST OMIZED PROCESS SOLUTION TO A HOST OF GLOBAL CLIENTS AND IN THIS RE GARD, REFER TO PAGE 13 OF THE MANAGEMENT DISCUSSION ANALYSIS IN THE ANNUAL REPORT. HE SUBMITTED THAT ECLERX INCURRED EXPENSES UNDER THE H EAD CONTRACT FOR SERVICES AND OUTSOURCED SERVICES AMOUNTING TO IN R 150.72 MILLION WHICH IS 20.39% OF TOTAL COST OF THE COMPANY. 15. LD. DR RELIED ON THE ORDER OF THE TPO. 16. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) HAS HELD AS U NDER :- 12 ITA NO.6381/DEL/2012 36. AS POINTED OUT EARLIER, THE TRANSFER PRICING A NALYSIS MUST SERVE THE BROAD OBJECT OF BENCHMARKING AN INTERNATI ONAL TRANSACTION FOR DETERMINING AN ALP. THE METHODOLOGY NECESSITATES THAT THE COMPARABLES MUST BE SIMILAR IN MATERIAL AS PECTS. THE COMPARABILITY MUST BE JUDGED ON FACTORS SUCH AS PRO DUCT/SERVICE CHARACTERISTICS, FUNCTIONS UNDERTAKEN, ASSETS USED, RISKS ASSUMED. THIS IS ESSENTIAL TO ENSURE THE EFFICACY OF THE EXE RCISE. THERE IS SUFFICIENT FLEXIBILITY AVAILABLE WITHIN THE STATUTO RY FRAMEWORK TO ENSURE A FAIR ALP. 37. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS ONCE AGAIN CLEAR THAT BOTH VISHAL AND ECLERX COULD NOT BE TAKEN AS COMPARABLES FOR DETERMINING THE ALP. VI SHAL AND ECLERX, BOTH ARE INTO KPO SERVICES. IN MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. (SUPRA) , THE SPECIAL BENCH OF THE TRIBUNAL HAD NOTED THAT ECLERX IS ENGAGED IN DATA ANALYTICS, DAT A PROCESSING SERVICES, PRICING ANALYTICS, BUNDLING OPTIMIZATION, CONTENT OPERATION, SALES AND MARKETING SUPPORT, PRODUCT DAT A MANAGEMENT, REVENUE MANAGEMENT. IN ADDITION, ECLERX ALSO OFFERE D FINANCIAL SERVICES SUCH AS REAL-TIME CAPITAL MARKETS, MIDDLE AND BACK-OFFICE SUPPORT, PORTFOLIO RISK MANAGEMENT SERVICES AND VAR IOUS CRITICAL DATA MANAGEMENT SERVICES. CLEARLY, THE AFORESAID SE RVICES ARE NOT COMPARABLE WITH THE SERVICES RENDERED BY THE ASSESS EE. FURTHER, THE FUNCTIONS UNDERTAKEN (I.E. THE ACTIVITIES PERFO RMED) ARE ALSO NOT COMPARABLE WITH THE ASSESSEE. IN OUR VIEW, THE TRIB UNAL ERRED IN HOLDING THAT THE FUNCTIONS PERFORMED BY THE ASSESSE E WERE BROADLY SIMILAR TO THAT OF ECLERX OR VISHAL. THE OPERATING MARGIN OF ECLERX, THUS, COULD NOT BE INCLUDED TO ARRIVE AT AN ALP OF CONTROLLED TRANSACTIONS, WHICH WERE MATERIALLY DIFF ERENT IN ITS CONTENT AND VALUE. IN MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. (SUPRA) , THE SPECIAL BENCH OF THE TRIBUNAL HAD NOTED THE SAM E AND HAD, THUS, EXCLUDED ECLERX AS A COMPARABLE . IT IS FURTHER OBSERVED THAT THE COMPARABILITY OF ECLERX HAD ALSO BEEN EXAM INED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN M/S CAPITAL IQ INFORMATION SYSTEMS(INDIA) (P.) LTD. V. ADDITIONAL COMMISSIONER OF INCOME- TAX (SUPRA) , WHEREIN, THE TRIBUNAL DIRECTED THE EXCLUSION OF E CLERX AS A COMPARABLE FOR THE REASON THAT IT WAS ENGAGED IN PROVIDING KPO SERVICES AND FURTHER THAT IT HAD ALSO RETURNED SUPERNORMAL PROFITS. 13 ITA NO.6381/DEL/2012 IN THE LIGHT OF THE AFORESAID DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) WHEREIN CONCURRING WITH THE VIEW OF SPECIAL BENCH O F THE TRIBUNAL IN MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. (SUPRA) IT WAS HELD THAT ECLERX NEED TO BE EXCLUDED TAKING INTO CONSIDERATIO N THE FACT THAT ECLERX IS ENGAGED IN DATA ANALYTICS, DATA PROCESSIN G SERVICES, PRICING ANALYTICS, BUNDLING OPTIMIZATION, CONTENT OPERATION , SALES AND MARKETING SUPPORT, PRODUCT DATA MANAGEMENT, REVENUE MANAGEMENT AND IN ADDITION, ECLERX ALSO OFFERED FINANCIAL SERV ICES SUCH AS REAL- TIME CAPITAL MARKETS, MIDDLE AND BACK-OFFICE SUPPOR T, PORTFOLIO RISK MANAGEMENT SERVICES AND VARIOUS CRITICAL DATA MANAG EMENT SERVICES AND THE HONBLE HIGH COURT HELD THAT THIS COMPANY I S ENGAGED IN KPO SERVICES AND SO, THIS COMPANY CANNOT BE COMPARE D WITH THE LOW END SERVICE PROVIDER LIKE THE ASSESSEE IN THIS CASE . WE ORDER THE EXCLUSION OF THIS COMPANY FROM THE SET OF COMPARABL ES. (III) INFOSYS BPO 17. LD. AR SUBMITTED THAT THE BRAND VALUE OF INFOSY S IS AT RS.31,863 CRORES AND THE SAID COMPANY INCURRED 6.17% OF THE T OTAL REVENUE AS 14 ITA NO.6381/DEL/2012 SALES AND MARKETING EXPENSES AND REFERRED TO PAGE 2 0 & 25 OF THE ANNUAL REPORT. HE FURTHER SUBMITTED THAT THE SAID COMPARABLE COMPANY CHARGES PREMIUM BEING A MARKET LEADER AND T HE ASSESSEE IS NOT A MARKET LEADER AND DOES NOT ENJOY ANY SUCH ADV ANTAGES. HE SUBMITTED THAT THE SAID COMPARABLE COMPANY HAS A TU RNOVER OF MORE THAN 49 TIMES TO THAT OF THE ASSESSEE COMPANY AND I N THIS REGARD, HE REFERRED TO PAGE 20 OF THE ANNUAL REPORT OF INFOSYS BPO. HE FURTHER SUBMITTED THAT DURING THE YEAR, INFOSYS BPO CONCLUD ED A SALE AND PURCHASE AGREEMENT WITH KONINKLIJIKE PHILIPS ELECTR ONICS N.V. (PHILIPS) BY MEANS OF WHICH IT MADE A 100% INVESTME NT IN THE SHARE CAPITAL AMOUNTING TO RS.107 CRORES IN P-FINANCIAL S ERVICES HOLDING B.V., THE NETHERLANDS ENTITY (HOLDING COMPANY) AND THIS ACQUISITION WILL HELP THE SAID COMPARABLE IN ACQUIRING DOMAIN S KILL SETS IN THE FINANCE AND ADMINISTRATION SPACE AS WELL AS ENHANCE ITS GLOBAL PRESENCE WITH CENTRES IN THAILAND AS WELL AS POLAND . 18. LD. DR RELIED ON THE ORDER OF THE TPO. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE CONTENTION OF THE LD. AR THAT THIS COMPANY CANNOT B E USED AS 15 ITA NO.6381/DEL/2012 COMPARABLE BECAUSE THE OPERATING REVENUE OF THE INF OSYS BPO IS 49 TIMES THAN THAT OF THE TESTED PARTY (ASSESSEE), CAN NOT BE COUNTENANCED IN VIEW OF THE HONBLE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PVT. LT D IN ITA 417/2014 JUDGMENT DATED 27.04.2015. THOUGH WE HAVE HELD IN THE CASE OF AVAYA INDIA (P) LTD. VS. ADDL.CIT, RANGE 2, NEW DELHI IN ITA NO.5528/DEL./2011 ORDER DATED 18.09.2015 FOR AY 2007-08 THAT THE INFOSYS BPO IS A COMPARABLE COMPANY TO AVAYA, S INCE IT IS RENDERING ITES SERVICES, HOWEVER, WE TAKE NOTE THAT AN EXTRA-ORDINARY EVENT HAS BEEN REPORTED AT PAGE 36 OF THE ANNUAL R EPORT FOR FINANCIAL YEAR 2007-08, WHICH HAS BEEN RECORDED AS GIVEN BELO W :- INFOSYS BPO LIMITED HAS ACQUIRED THE SHARED SERVIC E CENTRES OF PHILIPS AT POLAND, THAILAND AND CHENNAI THROUGH ITS INVESTMENT IN P FINANCIAL SERVICES HOLDING B.V. NETHERLANDS AS PER SALE AND PURCHASE AGREEMENT DATED JULY 25, 2007 WITH KON INKLIJKE PHILIPS ELECTRONIC N.V. FOR A PURCHASE CONSIDERATIO N OF 107.12 CRORES OF WHICH RS.5.59 CRORES IS YET TO BE PAID TO WARDS ADDITIONAL PURCHASE CONSIDERATION. THE SHARED SERV ICE CENTRES AT POLAND AND INDIA HAVE BECOME 100% SUBSIDIARY OF THE COMPANY ON OCTOBER 1, 2007 WHERE AS THE SHARED SERVICE CENT RE AT THAILAND HAS BECOME A WHOLLY OWNED SUBSIDIARY ON DE CEMBER 3, 2007, THE DATE ON WHICH ALL NECESSARY CONDITIONS IN THE AGREEMENT WERE FULFILLED. 16 ITA NO.6381/DEL/2012 WE TAKE NOTE THAT THE AFORESAID EXTRA ORDINARY EVEN T OF AMALGAMATION DURING THE YEAR HAS HELPED INFOSYS BPO IN ACQUIRING DOMAINS SKILL SETS IN THE FINANCE, ADMINISTRATION SPACE AS WELL A S ENHANCED ITS GLOBAL PRESENCE WITH CENTERS AT THAILAND AND POLAND. IN V IEW OF THE SAID EXTRA ORDINARY EVENT BROUGHT TO OUR NOTICE, WE EXCL UDE INFOSYS BPO FROM THE LIST OF COMPARABLES. (IV) WIPRO BPO 20. THE CASE OF THE ASSESSEE IS THAT WIPRO BPO SHOUL D BE EXCLUDED FROM THE LIST OF COMPARABLE SINCE COMPLETE ANNUAL R EPORT OF THE COMPANY IS NOT AVAILABLE IN PUBLIC DOMAIN AND IT HA S HUGE TURNOVER. THE TPO REPELLED THE CONTENTION OF THE ASSESSEE BY STATING THAT HE HAD CALLED FOR SEGMENTAL INFORMATION ON STANDALONE BASI S AND THE SAME WAS PROVIDED BY THE WIPRO. THEREFORE, HE CONSIDERED THIS COMPANY AS A COMPARABLE. 21. BEFORE US THE LEARNED COUNSEL, VIDE WRITTEN SUB MISSIONS, SUBMITTED AS UNDER :- (I) ANNUAL REPORT NOT AVAILABLE IN PUBLIC DATABASE : THE ANNUAL REPORT OF WIPRO BPO WAS NOT AVAILABLE IN PUB LIC DATABASE FOR FY 2007-08. WE HAVE RELIED UPON THE 17 ITA NO.6381/DEL/2012 SEGMENT WISE FINANCIAL STATEMENTS ON STANDALONE BAS IS OF WIPRO LIMITED. DIRECTORS REPORT AND NOTES TO THE ACCOUNTS ARE AVAILABLE IN THE PUBLIC DOMAIN; (II) HIGH TURNOVER : INDUSTRIAL GIANTS CONSIDERING TURNOVER AND MARKET LEADERS; TURNOVER OF INR 1158.80 CRORES FOR FY 2007-08 VIS--VIS INR 16.87 CRORES OF ASSESSEE (NEA RLY 68 TIMES OF THE ASSESSEE); (III) DATA USED NOT CONTEMPORANEOUS : WIPRO BPO DID NOT APPEAR IN THE ASSESSEES SEARCH PROCESS; (IV) COMPANY NOT COMPARABLE ON TURNOVER CRITERION : THE TURNOVER OF WIPRO BPO FOR FY 2007-08 IS AROUND INR 1158.80 CRORES AGAINST INR 16.87 CRORES OF THE ASSE SSEE. HENCE, THE COMPANY IS NOT COMPARABLE ON THE BASIS O F HIGH TURNOVER; (V) SUBSTANTIAL SALES AND MARKETING EXPENSES AND BRAND PREMIUM : WIPRO BPO IS A MARKET LEADER IN ITS INDUSTRY WHICH INCURRED SUBSTANTIAL QUANTUM AS SELLING AND MARKETING EXPENSES. DUE TO THIS FACT, CUSTOMERS PA Y A PREMIUM ON THEIR SERVICES, THEREFORE, SHOULD BE EXC LUDED. 22. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT WIPRO BPO IS A GOOD COMPARABLE. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE ARGUMENTS OF THE LD. AR THA T ONLY ON ACCOUNT OF SUPER NORMAL PROFIT THIS COMPARABLE SHOULD BE EX CLUDED IS NOT TENABLE IN THE LIGHT OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION 18 ITA NO.6381/DEL/2012 IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (IN DIA) PVT. LTD IN ITA 417/2014 JUDGMENT DATED 27.04.2015. THE DRP IS SILENT TO THE OBJECTIONS I.E. THIS COMPANY IS RENDERING DIFFERENT SERVICES AND THERE IS INSUFFICIENT SEGMENTAL INFORMATION AND IT FAILS RPT FILTER. SO, WHEN THE ASSESSEE ASKED FOR THE COMPLETE ANNUAL REPORT A T THE TIME OF THE ORIGINAL TP PROCEEDINGS OR THE PROCEEDINGS PURSUANT TO THE DRP, THE TPO FAILED TO PROVIDE THE COMPLETE ANNUAL REPORT OF THE SAID COMPARABLE TO THE ASSESSEE. IF THE TPO WANTED TO US E WIPRO BPO AS A COMPARABLE, THE ONUS WAS ON HIM TO PROVIDE THE COMP LETE ANNUAL REPORT TO THE ASSESSEE. IT IS A SETTLED LAW THAT ON US IS ON THE PERSON WHO ASSERTS THE FACTS. IN ANY CASE, WE FAIL TO SEE HOW WITHOUT THE COMPLETE ANNUAL REPORT OF WIPRO BPO, THE DRP UPHELD THE INCLU SION OF THE SAID COMPANY. FROM THE ANNUAL REPORT, WHICH IS FEW PAGES OF THE EXTRACT, WE TAKE NOTE THAT NO REVENUE OR SEGMENTAL BREAK UP IS AVAILABLE BETWEEN SOFTWARE SERVICES AND INFRASTRUCTURE SUPPOR T SERVICES AND NO INFORMATION ABOUT THE NATURE OF BUSINESS IS AVAILAB LE IN THE ANNUAL REPORT. WE FIND FORCE IN THE SUBMISSIONS ADVANCED B Y LD. AR THAT IN THE ABSENCE OF THE DIRECTORS REPORT AND NOTES TO A CCOUNT FOR THIS COMPARABLE ARE NOT AVAILABLE IN PUBLIC DOMAIN IT WO ULD NOT BE PRUDENT 19 ITA NO.6381/DEL/2012 TO TAKE THIS COMPANY AS A COMPARABLE. LD. DR HAS N OT BEEN ABLE TO CONTROVERT THIS FACT. SINCE SUFFICIENT INFORMATION FOR THIS COMPARABLE IS NOT AVAILABLE, WE DIRECT EXCLUSION OF THIS COMPA NY AS A COMPARABLE AS WE HAVE DONE IN THE CASE OF AVAYA INDIA (P) LTD. VS. ADDL.CIT, RANGE 2, NEW DELHI IN ITA NO.5528/DEL./2011 FOR AY 2007-08 ORDER DATED 18.09.2015. (V) HCL COMNET SYSTEMS & SERVICES LTD. 24. LD. AR SUBMITTED THAT THE HCL IS AN INDUSTRIAL GIANT CONSIDERING ITS TURNOVER AND MARKET LEADERS AND ITS TURNOVER IS OF 29 TIMES TO THE ASSESSEE COMPANY I.E. INR 495.1299 FOR FY 2007-08 VIS- -VIS INR 16.87 CRORES OF THE ASSESSEE. THE SAID C OMPARABLE IS MARKET LEADER IN ITS INDUSTRY AND INCURRED SUBSTANT IAL SELLING AND MARKETING EXPENSES AND HAS A BRAND VALUE. HE SUBMI TTED THAT THE CUSTOMERS OF THE SAID COMPARABLE PAY A PREMIUM ON T HEIR SERVICES AND, THEREFORE, THE SAME SHOULD BE EXCLUDED. HE SU BMITTED THAT FINANCIALS FOR FY 2007-08 ARE NOT AVAILABLE IN PUBL IC DOMAIN, HENCE IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO ID ENTIFY THE COMPANY AND AT ITS FUNCTIONAL PROFILE FOR SELECTION AS COMP ARABLE. HE FURTHER 20 ITA NO.6381/DEL/2012 SUBMITTED THAT THE SAID COMPARABLE DID NOT APPEAR I N THE SEARCH PROCESS OF THE ASSESSEE DURING THE PREPARATION OF D OCUMENTATION U/S 10(D), HENCE, IT WOULD NOT HAVE BEEN POSSIBLE FOR T HE ASSESSEE TO SELECT THE COMPANY AS A COMPARABLE. LD. AR ALSO SUBMITTED THAT THE COMPANY HAD A DIFFERENT YEAR ENDING THAN MARCH 2008 AND THE TPO CONSIDERED CLUBBING THE DATA OF THREE QUARTERS FROM APRIL 2007 TO DECEMBER 2007 WITH DATA OF QUARTER ONE OF 2008 I.E. JANUARY 2008 TO MARCH 2008 AND IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO UNDERTAKE SUCH AN ARBITRARY ACTIVITY WHILE PERFORMI NG ITS SEARCH PROCESS. 25. LD. DR RELIED ON THE ORDER OF THE TPO. 26. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE HCL IS FUNCTIONALLY SIMIL AR TO THAT OF THE ASSESSEE. LD. AR COULD NOT POINT OUT ANY FUNCTIONA L DIFFERENCE TO OUR ATTENTION. IN THE SAID SCENARIO, WE UPHOLD THE INC LUSION OF THE SAID COMPANY IN THE SET OF COMPARABLES. THE ASSESSEE FA ILS. 21 ITA NO.6381/DEL/2012 (VI) GENESYS INTERNATIONAL 27. THE ASSESSEES GRIEVANCE IS THAT THE SAID COMPA NY HAS BEEN INCLUDED BY THE TPO BY HOLDING AS UNDER :- THE TPO IS IN DISAGREEMENT WITH THE TAXPAYER REGAR DING HORIZONTALS OR FUNCTIONAL LINES WITHIN IT ENABLED S ERVICES. NEITHER THE TAXPAYER NOR THE TPO DID GO INTO FUNCTI ONAL LINES / HORIZONTALS WITHIN IT ENABLED SERVICES. THUS THE TA XPAYER CANNOT TAKE THE PLEA THAT THE DATA CONVERSION, MIGR ATION, MAINTENANCE SERVICES BEING PROVIDED BY GENESYS ARE NOT SIMILAR TO THE IT ENABLED SERVICES BEING PERFORMED BY THE T AXPAYER. AS DISCUSSED ABOVE UNDER THE HEAD 'DEFINITION OF IT EN ABLED SERVICES', THE SERVICES RENDERED BY THE COMPANY COM ES WITHIN THE PURVIEW OF THE CBDT CIRCULAR SO 890 (E) DT. 26. 9.2000, WHICH HAD GIVEN A DETAILED LIST OF PRODUCTS OR SERV ICES THAT, COULD BE CLAIMED UNDER ITES FOR THE PURPOSE OF 10A AND 10B AS UNDER. 'THE INFORMATION TECHNOLOGY ENABLED PRODUCTS OR SERVICES TO MEAN: (I) BACK OFFICE OPERATIONS (II) CALL CENTERS (III) CONTENT DEVELOPMENT OR ANIMATION; (IV) DATA PROCESSING (V) ENGINEERING AND DESIGN (VI) GEOGRAPHIC INFORMATION SYSTEM SERVICES. (VII) HUMAN RESOURCES SERVICES. (VIII) INSURANCE CLAIM PROCESSING. (IX) LEGAL DATABASES. (X) MEDICAL TRANSCRIPTION; (XI) PAYROLL; 22 ITA NO.6381/DEL/2012 (XII) REMOTE MAINTENANCE; (XIII) REVENUE ACCOUNTING, (XIV) SUPPORT CENTERS, AND (XV) WEB SITE SERVICES. AS DISCUSSED ABOVE UNDER THE HEAD 'VERTICALS/HORIZO NTALS, THE TAXPAYER DID NOT CONSIDER DIFFERENT FUNCTIONAL LINE S WITHIN IT ENABLED SERVICES FOR SELECTION OF COMPARABLE COMPAN IES. THUS THE COMPANY CANNOT BE REJECTED ON THE BASIS THAT IT IS INTO DIFFERENT FUNCTIONAL LINE WITHIN ITES. HENCE THE CO MPANY IS RETAINED AS A COMPARABLE. THE TAXPAYER FURTHER CONT ENDS THAT THE COMPANY HAS INTANGIBLES, RESEARCH AND DEVELOPMENT A CTIVITIES AND IT OWNS PRODUCTS WHICH MAKE THE COMPANY UN COMP ARABLE TO THE TAXPAYER IN TERMS OF FUNCTIONS. THESE OBJECT IONS OF THE TAXPAYER ALSO DESERVE REJECTION ON THE SAME GROUND THAT THE TPO HAS NOT GONE INTO THE FUNCTIONAL AND VERTICAL L INES OF THE COMPARABLE COMPANIES ON WHICH ISSUE THE TAXPAYER HA S NOT RAISED OBJECTIONS. THE TAXPAYER HAS NOT STATED ANYTHING REGARDING THE PECULIAR CIRCUMSTANCES FACED BY THIS COMPARABLE. THEREFORE T HE COMPANY IS RETAINED AS COMPARABLE. 28. LD. AR SUBMITTED THAT THE SAID COMPARABLE COMPA NY IS ENGAGED IN PROVISION OF GEOSPATIAL AND CONTENT PROVIDING SE RVICES AND IT ALSO PROVIDES GEOGRAPHICAL INFORMATION SERVICES COMPRISI NG OF PHOTOGRAMMETRY, REMOTE SENSING, CARTOGRAPHY, DATA C ONVERSION, RELATED COMPUTER BASED SERVICES. HE SUBMITTED THAT THE SAID COMPARABLE COMPANY ALSO WORKS IN A SINGLE SEGMENT I .E GIS BASED SERVICE. THEREFORE, HE SUBMITTED THAT THE SAID COM PARABLE COMPANY IS FUNCTIONALLY DIFFERENT. HE SUBMITTED THAT THE COMP ARABLE COMPANY 23 ITA NO.6381/DEL/2012 HAS INTANGIBLE ASSETS CONSTITUTING 22.57% OF TOTAL FIXED ASSETS OF THE COMPANY. FOR BUTTRESSING HIS ARGUMENT, THE LD. AR TOOK OUR ATTENTION TO THE ANNUAL REPORT OF GENESYS INTERNATIONAL CORPO RATION LTD. WHEREIN SCHEDULE M COMPANYS BACKGROUND IS STATED THAT GENESYS INTERNATIONAL CORPORATION LTD. IS ENGAGED IN PROVID ING GEOGRAPHICAL INFORMATION SERVICES COMPRISING PHOTOGRAMMETRY, REM OTE SENSING, CARTOGRAPHY, DATA CONVERSION, RELATED COMPUTER BASE D SERVICES AND INFORMATION TECHNOLOGY ENABLED AND OTHER RELATED SE RVICES, WHEREAS THE ASSESSEE IS ONLY ENGAGED IN BACK OFFICE SUPPORT I.E. ITES TO ITS AE AND POINTED OUT THAT THE FUNCTIONAL PROFILE OF THIS COMPANY, GENESYS INTERNATIONAL CORPORATION LTD., IS TECHNOLOGY DRIVE N. SO, THEREFORE, IT IS NOT FUNCTIONALLY SIMILAR AND, THEREFORE, THE TPO RIGHTLY DID NOT INCLUDE THE SAID COMPANY IN THE LIST OF COMPARABLES THOUGH HAS NOT COMMENTED UPON THE FUNCTIONAL DIS-SIMILARITY WITH T HE ASSESSEE. 29. WE HAVE HEARD BOTH THE PARTIES, HAVE GONE THROUG H THE RECORDS AND GONE THROUGH THE ANNUAL REPORT OF GENESYS INTER NATIONAL CORPORATION LTD. WE FIND THAT THE ASSESSEE IS ENGA GED IN THE BACK OFFICE SUPPORT ITES SYSTEM FOR ITS AE IN RESPECT OF ACCOUNTING SUPPORT FOR HOTELS AND ITS CORPORATE OFFICES WHEREA S WE FIND THAT 24 ITA NO.6381/DEL/2012 GENESYS INTERNATIONAL CORPORATION LTD. IS INTO MAPP ING BUSINESS AND IT PROVIDES GEOGRAPHICAL INFORMATION SERVICES COMPR ISING PHOTOGRAMMETRY, REMOTE SENSING, CARTOGRAPHY, DATA C ONVERSION, RELATED COMPUTER BASED SERVICES AND INFORMATION TEC HNOLOGY ENABLED AND OTHER RELATED SERVICES, WHICH CANNOT BE BY ANY STRETCH OF IMAGINATION BE SAID TO BE COMPARABLE TO THAT OF THE ASSESSEE. SINCE GENESYS INTERNATIONAL CORPORATION LTD. IS FUNCTIONA LLY DIS-SIMILAR WITH THAT OF THE ASSESSEE, WE DIRECT THE TPO TO EXC LUDE THE SAID COMPANY FROM THE LIST OF COMPARABLES. (VII) ACROPETAL 30. ACCORDING TO THE ASSESSEE, THIS COMPANY IS INTO ENG INEERING SERVICES BEING IN THE NATURE OF DESIGN AND DRAWING AND SO, THESE SERVICES ARE HIGH END IN NATURE AND CANNOT BE COMPA RED WITH THE BACK OFFICE SERVICES PROVIDED BY THE ASSESSEE. THE TPO REJECTED THE SAME, BY HARPING ON THE CBDT CIRCULAR NO.SO 890 (E) DATED 26.09.2000 WHICH HAS GIVEN THE DETAILED LIST OF PRODUCT AND SE RVICES THAT COULD BE CLAIMED UNDER ITES WHEREIN ENGINEERING AND DESIGN A S ITEM NO.5, AS UNDER :- 25 ITA NO.6381/DEL/2012 AS CAN BE SEEN FROM ABOVE, ENGINEERING AND DESIGN SERVICES AS RENDERED BY THE COMPANY ARE IN THE NATURE OF IT ENA BLED SERVICES. THUS, THE TAXPAYERS ARGUMENT THAT ENGINEERING SERV ICES RENDERED BY THE COMPANY ARE NOT IT ENABLED SERVICES IS INCOR RECT. HENCE, ALL THE THREE SERVICES ENGINEERING SERVICES, BPO AND DATA PROCESSING RENDERED BY THE COMPANY FOR THE FY 200 7-08 FORMS PART OF IT ENABLED SERVICES AND THUS, THE COMPANYS IT DIVISION IS COMPARABLE TO THE TAXPAYER. HENCE, THE COMPANY IS RETAINED AS A COMPARABLE. 31. THE LD. AR TOOK OUR ATTENTION TO PAGE 62 WHEREI N THE TPO HAS ISSUED 133(6) NOTICE TO THE SAID COMPANY PURSUANT T O WHICH A REPLY WAS SENT TO THE TPO VIDE LETTER DATED 08.03.2011 WH ICH HAS BEEN MADE PART OF THE TPO ORDER AT PAGE 43 OF HIS ORDER. HE TOOK OUR ATTENTION TO THE SAID PAGE WHERE, IN PARA 3, THE SA ID COMPANY HAS WRITTEN AS FOLLOWS :- 3. DURING THOSE FINANCIAL YEARS OUR SOFTWARE DEVEL OPMENT SERVICES WERE PRIMARILY CONFINED IN THE FIELD OF AP PLICATION SOFTWARE DEVELOPMENT, SYSTEM SOFTWARE DEVELOPMENT A ND WEB DEVELOPMENT. APART FROM THE SAME WE ALSO USED TO P ROVIDE ENGINEERING DESIGN SERVICES WHICH MAY BE CONSIDERED AS INFORMATION TECHNOLOGY ENABLED SERVICES (ITES). 32. THE LD. AR REFERRED TO THE SAID PARA AND POINTE D OUT THAT THE SAID COMPANY IS INTO SOFTWARE DEVELOPMENT. SINCE SEGMEN TAL INFORMATION IS NOT AVAILABLE FOR THE RELEVANT FINANCIAL YEAR AN D THE ASSESSEE IS NOT 26 ITA NO.6381/DEL/2012 INTO DEVELOPING ANY SOFTWARE, THE SAME CANNOT BE US ED AS A COMPARABLE. 33. THE LD. DR COULD NOT CONTROVERT THE SAID FACTS WHICH HAVE BEEN BROUGHT TO OUR NOTICE AND HE RELIED ON THE ORDER OF THE TPO. 34. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND FROM A PERUSAL OF THE SAID LETTER DATED 08.03. 2011 TO THE TPO THAT ACROPETAL IS INTO SOFTWARE DEVELOPMENT ALSO AND SIN CE THE SEGMENTAL INFORMATION IS NOT AVAILABLE, IT WOULD NOT BE SAFE TO RELY ON THE FINANCE OF THIS COMPANY. THEREFORE, WE ORDER EXCLUSION OF THIS COMPARABLE FROM THE SET OF COMPARABLES. 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (R.S. SYAL) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 30 TH DAY OF SEPTEMBER, 2015 TS 27 ITA NO.6381/DEL/2012 COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A)-IX, NEW DELHI. 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI