Blackrock Services India Pvt. Ltd., Gurgaon V. ACIT, Gurgaon

ITA 6408/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3713 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 28-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMAN CHOPRA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 92D; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6408/DEL/2012 ASSESSMENT YEAR : 2008-09 BLACKROCK SERVICES INDIA PVT. LTD., (FORMERLY KNOWN AS HELIX ADVISORS INDIA PVT. LTD.), 3 RD FLOOR, ROLTA CORPORATE TOWERS, 187, PHASE- I, UDYOG VIHAR, GURGAON. VS. ACIT, CIRCLE- 1(1), GURGAON. PAN : AABCH4449Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI SHARMA, ADV. SHRI ANUBHAV RASTOGI, ADV. DEPARTMENT BY : SHRI RAMAN CHOPRA, CIT-DR DATE OF HEARING : 06-11-2017 DATE OF PRONOUNCEMENT : 02-02-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 26.10.2012 PASSED BY THE ASSESSING OFFICER U/S 144C /143(3) OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 IN JUNE, 2004 AND IS A WHOLLY OWNED SUBSIDIARY OF HELIX FINANCIAL GROUP LL C. THE ASSESSEE 2 ITA NO.6408/DEL/2012 COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING INF ORMATION TECHNOLOGY ENABLED BACK OFFICE PROCESS OUTSOURCING AND RELATED SERVICES I.E. ITES TO ITS ASSOCIATED ENTERPRISE (AE), HELIX US. THE IT ENABL ED BACK OFFICE PROCESS OUTSOURCING AND RELATED SERVICES PERFORMED BY BLACK ROCK INDIA MAINLY INCLUDE WEB SEARCH, DATA ENTRY, DATA MANAGEMENT SUPPORT SER VICES ETC. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2008 DECLARING TOTAL INCOME OF RS.2,07,80,346/-. THE ASSESSING OFFICER MADE A REF ERENCE TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE U/S 92CA(3) IN R ESPECT OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO THE IMPUGNED ASSESSMENT YEAR I.E. A.Y. 2008-09. DURING THE TP ASSESSMENT PROCEEDINGS, THE TPO OBSERVED THAT THE A SSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS UNDERTAKEN THE FOLLOWI NG INTERNATIONAL TRANSACTIONS WITH ITS AE AS PER THE REPORT IN FORM NO.3CEB :- 1) PROVISION OF IT ENABLED BACK OFFICE PROCESS OUTSTANDING AND RELATED SERVICE - RS.16,80,92,913/- 2) REIMBURSEMENT OF EXPENSES - RS.1,17,837/- 3. THE TPO OBSERVED THAT AS PER THE TP STUDY REPORT , THE ASSESSEE UNDERTOOK A DETAILED FUNCTIONS, ASSETS AND RISK ANALYSIS IN A CCORDANCE WITH RULE 10B(2) AND SELECTED ITSELF AS THE TESTED PARTY BASED ON IT S LEAST COMPLEX CHARACTER WHILE UNDERTAKING THE INTERNATIONAL TRANSACTIONS WITH AES . THE ASSESSEE SELECTED 3 ITA NO.6408/DEL/2012 TNMM AS THE MOST APPROPRIATE METHOD AND SELECTED OP ERATING PROFIT/TOTAL COST (OP/TC) AS THE RELEVANT PROFIT LEVEL INDICATOR (PLI). THE ASSESSEE TOOK 5 COMPARABLES FOR ITS TP STUDY AND DETERMINED THE OP/ TC OF THOSE COMPARABLES AT 11.74%. AFTER CONSIDERING THE OP/TC OF THE ASSESSE E AT 12.52%, IT WAS ARGUED THAT THE INTERNATIONAL TRANSACTION WITH ITS AE IS A T ARMS LENGTH. 4. HOWEVER, THE TPO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAS SELECT ED SOME OF THE COMPARABLES BY CONSIDERING THE FINANCIAL RESULTS FOR THE PERIOD ENDING BETWEEN 01.04.2006 AND 31.06.2008. THE EARLIER YEARS DATA WAS CONSID ERED WHEREVER THE DATA WAS NOT AVAILABLE FOR THE RELEVANT FINANCIAL YEAR 2007- 08. CERTAIN OTHER DEFECTS WERE ALSO POINTED OUT BY THE TPO AS PER PAGE 3 OF THE OR DER OF THE TPO. THEREAFTER, THE ASSESSEE CONDUCTED A FRESH SEARCH AND SELECTED SIX COMPARABLES WITH AVERAGE PROFIT MARGIN @ 7.64% ON COST. SINCE THE MARGIN EA RNED BY THE TAXPAYERS WAS AT 12.52% ON OPERATING COST, IT WAS ARGUED THAT THE TRANSACTIONS WITH ITS AE IS AT ARMS LENGTH BEING WITHIN +/- 5% RANGE. 5. HOWEVER, THE TPO WAS AGAIN NOT SATISFIED WITH TH E ARGUMENTS ADVANCED BY THE ASSESSEE AND REJECTED THE FILTERS ADOPTED BY THE ASSESSEE AND WENT FOR ADDITIONAL FILTERS FOR THE SELECTION OF COMPARABLES . THE TPO, THEREAFTER, ARRIVED AT THE SET OF 20 COMPARABLES AND DETERMINED THE ARM S LENGTH PRICE MARGIN AT 29.16%, THE DETAILS OF WHICH ARE AS PER PAGE 98 OF THE ORDER OF THE TPO. AFTER 4 ITA NO.6408/DEL/2012 GRANTING BENEFIT OF WORKING CAPITAL ADJUSTMENT TO T HE ASSESSEE, THE TPO REDUCED THE OPERATING MARGIN BY 3% AND, THEREAFTER, MADE AN UPWARD ADJUSTMENT OF RS.2,12,63,763/- TO THE TOTAL INCOME OF THE ASSESSE E, THE DETAILS OF WHICH ARE GIVEN AT PAGE 136 OF THE ORDER OF THE TPO :- A. COMPUTATION OF ARMS LENGTH PRICE: THE ARITHMETIC MEAN OF THE PROFIT LEVEL INDICATORS IS TAKEN AS THE ARMS LENGTH MARGIN. (PLEASE SEE ANNEXURE E FOR DETAILS OF COMPUTATION O F PLI OF THE COMPARABLES). BASED ON THIS, THE ARMS LENGTH PRICE OF THE IT ENABLED SE RVICES RENDERED BY YOU IS COMPUTED AS UNDER : ARITHMETIC MEAN PLI : 29.16% LESS: WORKING CAPITAL ADJUSTMENT : 3.00% ARMS LENGTH PRICE: : 26.16% OPERATING COST RS.150,092,483 ARMS LENGTH MARGIN 26.16% OF THE OPERATING COST ARMS LENGTH PRICE (ALP) RS.189,356,676 B. PRICE RECEIVED VIS--VIS THE ARMS LENGTH PRICE: THE PRICE CHARGED BY THE TAX PAYER TO ITS ASSOCIATE D ENTERPRISES IS COMPARED TO THE ARMS LENGTH PRICE AS UNDER : ARMS LENGTH PRICE RS.189,356,676 PRICE SHOWN IN THE INTERNATIONAL TRANSACTIONS RS.16 8,092,913 SHORTFALL BEING ADJUSTMENT U/S 92CA RS.21,263,763 THE ABOVE SHORTFALL OF RS.21,263,763 IS TREATED AS TRANSFER PRICING ADJUSTMENT U/S 92CA. 6. THE ASSESSING OFFICER, THEREAFTER, FRAMED THE DR AFT ASSESSMENT ORDER DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 4,20,44,109/- AS AGAINST RETURNED INCOME OF RS.2,07,80,346/-. 7. THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DRP , WHO VIDE ORDER DATED 03.09.12012 UPHELD MOST OF THE COMPARABLES TAKEN BY THE TPO/ASSESSING 5 ITA NO.6408/DEL/2012 OFFICER. HOWEVER, THE DRP DIRECTED THE TPO TO EXCL UDE THE COMPARABLE NAMELY MOLD-TEK TECHNOLOGIES LTD. FOR DETERMINATION OF THE ARMS LENGTH PRICE. THE DRP ALSO DIRECTED THE ASSESSING OFFICER /TPO FOR EXCLUSION OF FOREIGN EXCHANGE GAINS/LOSS FROM THE CALCULATION OF OPERATING INCOME/EXPENDITURE OF THE ASSESSEE AS WELL AS THE C OMPANIES SELECTED BY THE TPO. 8. BASED ON THE DIRECTIONS OF THE DRP, THE TPO ISSU ED A REVISED ORDER DATED 19.10.2012 RE-COMPUTING THE ARMS LENGTH PRICE AT 2 2.46% AFTER WORKING CAPITAL ADJUSTMENT OF 2.88%. THE PROFIT MARGIN OF COMPARAB LE AS COMPUTED BY THE TPO IN HIS REVISED TP ORDER IS AS UNDER :- S.NO. NAME OF THE COMPANY MARGIN (OP/TC) 1 ACCENTIA TECHNOLOGIES LTD. 44.68 2 ADITYA BIRLA MINACS WORLDWIDE LTD. - 3.87 3 ASIT C MEHTA 9.42 4 CALIBER POINT BUSINESS SOLUTIONS LTD. (SEG) 13.46 5 CORAL HUB LTD. (VISHAL INFORMATION TECHNOLOGIES L TD) 51.84 6 COSMIC GLOBAL LTD. 24.30 7 CROSSDOMAIN SOLUTION PVT. LTD. 26.96 8 DATAMATICS FINANCIAL SERVICES LTD. (SEG) 34.87 9 E4E HEALTHCARE BUSINESS SOLUTIONS P. LTD. (EARLIE R KNOWN AS NITTANY OUTSOURCING SERVICES LTD.) 18.70 10 ECLERX SERVICES LTD. 59.39 11 GENESYS INTERNATIONAL CORPN. LTD. 48.15 12 H C L COMNET SYSTEMS & SERVICES LTD. (SEG) 32.97 13 I C R A ONLINE LTD. (SEG) 11.22 14 INFOSYS B P O LTD. 19.66 15 I - SERVICE INDIA PRIVA TE LTD. 10.92 16 SPANCO LTD. (SEG) 8.94 17 ACROPETAL TECHNOLOGIES LTD. (SEG) 35.30% 18 WIPRO LTD. (BPO DIVISION) 30.23% 19 R SYSTEM INTERNATIONAL LTD. (SEG) 4.30% 6 ITA NO.6408/DEL/2012 20 MOLD TECH TECHNOLOGIES DELETED BY DRP AVERAGE 25.34% LESS: WORKING CAPITAL ADJUSTMENT 2.88% FINAL COMPARABLE MARGIN 22.46% 9. ACCORDINGLY, THE TPO MADE AN UPWARD ADJUSTMENT O F RS.1,48,66,764/- AS AGAINST EARLIER PROPOSED ADDITION OF RS.2,12,63,763 /-. 10. AGGRIEVED WITH SUCH ORDER OF THE ASSESSING OFFI CER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSE SSING OFFICER (LD. AO') PURSUANT TO THE DIRECTIONS OF LEARNED DISPUTE RESOL UTION PANEL (LD. DRP') BASED ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE IS BA D IN LAW AND VOID AB-INITIO. 2. THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JU RISDICTIONAL ERROR AS THE LD. AO HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT O RDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS 'NECESSARY OR EXPEDIENT' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE ARM'S LENGTH PRICE (ALP'), AS IS REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 3. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECT IONS OF THE LD. DRP), ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 1,48,66,764 HOLDING THAT THE INTERNATIONAL TRANSACTIONS PERTAIN ING TO PROVISION OF ROUTINE IT ENABLED SERVICES DO NOT SATISFY THE ARM'S LENGTH PR INCIPLE ENVISAGED UNDER THE ACT AND IN DOING SO HAVE GROSSLY ERRED BY: 3.1 NOT FINDING ANY MERIT IN THE OBJECTIONS OF T HE APPELLANT THAT NONE OF THE CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT ARE SATISFIED IN THE PRESENT CASE; 3.2 REJECTING THE TRANSFER PRICING (TP') DOCUMENT ATION MAINTAINED BY THE APPELLANT UNDER SECTION 92D OF THE ACT AND RULE 10D OF THE RULES AND DISREGARDING THE ALP AS DETERMINED BY THE APPELLANT IN THE TP DOCUMENTATION; 3.3 DISREGARDING THE FACT THAT THE APPELLANT IS A CAPTIVE IT ENABLED SERVICE PROVIDER WHICH DOES NOT BEAR SUBSTANTIAL RISKS ASSO CIATED WITH ITS FUNCTIONS AND THEREFORE CANNOT BE COMPARED TO FULL FLEDGED ENTREPRENEUR SERVICE PROVIDERS; 3-4 DISREGARDING MULTIPLE YEAR/PRIOR YEARS' DATA U SED BY THE APPELLANT IN THE TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR (I.E. FINANCIAL YEAR (FY') 2007-08) DATA FOR COMPARABLE COMPANIES SHOULD BE USED 7 ITA NO.6408/DEL/2012 DESPITE THE FACT THAT THE SAME WAS NOT NECESSARILY AVAILABLE TO THE APPELLANT AT THE TIME OF PREPARING ITS TP DOCUMENTA TION; 3.5 REJECTING COMPARABILITY ANALYSIS UNDERTAKEN BY THE APPELLANT IN THE TP DOCUMENTATION/FRESH SEARCH AND CONDUCTING A FRESH C OMPARABILITY ANALYSIS BASED ON APPLICATION OF THE FOLLOWING ADDI TIONAL/REVISED FILTERS IN DETERMINING THE ALP: (I) EXCLUSION OF COMPANIES WHOSE DATA FOR FY 200 7-08 WAS NOT AVAILABLE; (II) EXCLUSION OF COMPANIES WITH RELATED PARTY T RANSACTIONS GREATER THAN 25% OF THEIR SALES; (III) EXCLUSION OF COMPANIES WITH EXPORT SALES T HAT ARE LESS THAN 25% OF THEIR TOTAL REVENUE; (IV) EXCLUSION OF COMPANIES WITH DIMINISHING REV ENUES/PERSISTENT LOSSES FOR LAST THREE YEARS UP TO AND INCLUDING FY 2007-08; (V) EXCLUSION OF COMPANIES HAVING DIFFERENT FINA NCIAL YEAR ENDING (I.E. NOT MARCH 31, 2008); AND REJECTING, IN PARTICULAR, THE FOLLOWING FILTERS APPLIED BY THE APPELLANT IN ITS FRESH SEARCH: (I) COMPANIES HAVING OTHER OPERATING INCOME (I.E. INCOM E OTHER THAN MANUFACTURING AND TRADING INCOME) TO SALES GRE ATER THAN 50% WERE ACCEPTED; (II) COMPANIES HAVING RESEARCH & DEVELOPMENT COSTS TO SALES LESS THAN 3% WERE ACCEPTED; (III) COMPANIES WITH NET WORTH LESS THAN ZERO WERE REJECT ED; (IV) COMPANIES HAVING ADVERTISING, MARKETING AND DISTRIB UTION COSTS TO SALES LESS THAN 3% WERE ACCEPTED. 3.6 INCLUDING HIGH-PROFIT MAKING COMPANIES WITH DIFFERE NT SCALE OF OPERATIONS AND HIGH TURNOVER IN THE FINAL COMPARABLES' SET FOR BENCHMARKING A CAPTIVE SERVICE PROVIDER SUCH AS THE APPELLANT (DISREGARDIN G JUDICIAL PRONOUNCEMENTS ON THE ISSUE), THUS DEMONSTRATING AN INTENTION TO ARRI VE AT A PRE-FORMULATED OPINION WITHOUT COMPLETE AND ADEQUATE APPLICATION OF MIND W ITH THE SINGLE-MINDED INTENTION OF MAKING AN ADDITION TO THE RETURNED INC OME OF THE APPELLANT; 3.7 INCLUDING CERATIN COMPANIES THAT ARE NOT COMPAR ABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND R ISKS ASSUMED; 3.8 INCLUDING CERTAIN COMPANIES IN THE COMPARABLES' SET THAT HAD ACHIEVED SUPERNORMAL GROWTH AS A RESULT OF EXTRAORDINARY CIR CUMSTANCES DURING THE YEAR, THEREBY INCORRECTLY COMPARING SUCH COMPANIES TO THE APPELLANT WHICH OPERATES AS A CAPTIVE SERVICES PROVIDER AND HAS STABLE GROWTH U NDER NORMAL CIRCUMSTANCES; 8 ITA NO.6408/DEL/2012 3.9 RESORTING TO ARBITRARY REJECTION OF LOW-PROFIT/ LOSS MAKING COMPANIES BASED ON ERRONEOUS AND INCONSISTENT REASONS; 3.10 EXCLUDING CERTAIN COMPANIES ON ARBITRARY/ FRIVOLOUS GROUNDS EVEN THOUGH THEY ARE COMPARABLE TO THE APPELLANT IN TERMS OF FU NCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; 3.11 IGNORING THE BUSINESS/ COMMERCIAL REALITY THAT SINC E THE APPELLANT IS REMUNERATED ON AN A COST PLUS BASIS, (I.E. IT IS CO MPENSATED FOR ALL ITS OPERATING COSTS PLUS A PRE-AGREED MARK-UP) THE APPELLANT UNDE RTAKES MINIMAL BUSINESS RISKS AS AGAINST COMPARABLE COMPANIES THAT ARE FULL-FLEDG ED RISK TAKING ENTREPRENEURS, AND BY NOT ALLOWING A RISK ADJUSTMENT TO THE APPELL ANT ON ACCOUNT OF THIS FACT; 3.12 COLLECTING SELECTIVE INFORMATION OF THE COMPANIES B Y EXERCISING POWER GRANTED TO HIM UNDER SECTION 133(6) OF THE ACT THAT WAS NOT AVAILABLE TO THE APPELLANT IN THE PUBLIC DOMAIN AND RELYING ON THE S AME FOR COMPARABILITY PURPOSES (AND TO THE EXTENT OF COMPLETELY IGNORING RELIABLE DATA AVAILABLE IN PUBLIC DOMAIN/ ANNUAL REPORTS IN NUMEROUS CASES); 3.13 EXCLUSION OF CERTAIN COST SUCH AS PROVISION FOR DOU BTFUL DEBTS FROM THE COST BASE IN COMPUTATION OF MARK-UP OF COMPARABLE COMPAN IES. 4. THE LD. AO HAS GROSSLY ERRED ON FACTS AND IN LAW BY INITIATING PENALTY UNDER SECTION 271(1)(C) OF THE ACT MECHANICALLY AND WITHO UT RECORDING ANY SATISFACTION FOR ITS INITIATION. 5. THE LD. AO HAS GROSSLY ERRED ON FACTS AND IN LAW BY PROPOSING TO COMPUTE INTEREST UNDER SECTION 234A, 234B, 234C AND 234D OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY SATISFACTORY REASONS FOR THE SAME. 6. THE LD. AO HAS GROSSLY ERRED ON FACTS AND IN LAW BY DISREGARDING JUDICIAL PRONOUNCEMENT IN INDIA IN UNDERTAKING THE TP ADJUST MENT. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUD ICIAL TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR WITHD RAW ALL OR ANY GROUNDS HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CONSIDERED NECESS ARY EITHER BEFORE OR DURING THE HEARING. 11. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED B Y THE ASSESSEE IN THE GROUNDS OF APPEAL. LD. COUNSEL FOR THE ASSESSEE CO NFINED HIS ARGUMENTS TO GROUNDS OF APPEAL NO.3.6 TO 3.9 WHEREIN THE ASSESSE E HAS CHALLENGED THE SELECTION OF THE FOLLOWING COMPARABLES :- 9 ITA NO.6408/DEL/2012 S.NO. NAME OF THE COMPANY 1 ACCENTIA TECHNOLOGIES LTD. 2 CORAL HUB LTD. (VISHAL INFORMATION TECHNOLOGIES L TD) 3 DATAMATICS FINANCIAL SERVICES LTD. (SEG) 4 ECLERX SERVICES LTD. 5 GENESYS INTERNATIONAL CORPN. LTD. 6 H C L COMNET SYSTEMS & SERVICES LTD. (SEG) 7 ACROPETAL TECHNOLOGIES LTD. (SEG) 12. SO FAR AS INCLUSION OF ACCENTIA TECHNOLOGIES LI MITED IS CONCERNED, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID CO MPANY IS FUNCTIONALLY DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. HE SU BMITTED THAT ACCENTIA WAS ENGAGED IN PROVIDING DIVERSIFIED SERVICES I.E. SOFT WARE DEVELOPMENT AND IT ENABLED SERVICES. THE COMPANYS SERVICES AND SOLUT IONS ARE FOCUSED INTO TWO AREAS I.E. HEALTHCARE RECEIVABLES CYCLE MANAGEMENT (HRCM) SERVICES, TRAINING PROGRAMS AND DEVELOPMENT OF SOFTWARE PRODU CTS. THIS COMPANY IS ENGAGED IN TRANSCRIPTION SERVICES WHICH IS CONSIDER ED AS HIGH END SERVICES (KPO). HE SUBMITTED THAT CERTAIN EXTRAORDINARY CIR CUMSTANCES OCCURRED DURING THE YEAR. ACCENTIA HAS MADE MAJOR ACQUISITIONS DUR ING THE YEAR AS WELL AS IT HAS AMALGAMATED ITS UNITS WITH ITSELF THEREBY MAKING IT S PROFITABILITY SKEWED. HE SUBMITTED THAT DESPITE VARIOUS SUBMISSIONS MADE BEF ORE THE DRP, THERE IS NO SPECIFIC DIRECTION BY THEM. REFERRING TO THE FOLLO WING DECISIONS HE SUBMITTED THAT ACCENTIA TECHNOLOGIES LTD. HAS BEEN HELD AS NO T A GOOD COMPARABLE 10 ITA NO.6408/DEL/2012 BECAUSE OF DIFFERENT FUNCTIONS AND EXTRAORDINARY CI RCUMSTANCES THAT COMPANY OCCURRED DURING THE YEAR :- A. BA CONTINUUM INDIA (P.) LTD. VS. ADDL.CIT, (201 7) 79 TAXMANN.COM 85. B. IT CUBE SOLUTIONS (P.) LTD. VS. ITO, (2016) 76 TAXMANN.COM 187. C. AVAYA INDIA (P.) LTD. VS. DCIT, (2016) 71 TAXMA NN.COM 76. D. FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA (P .) LTD. (2014) 52 TAXMANN.COM 408. 13. SO FAR AS INCLUSION OF CORAL HUB LIMITED (FORME RLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LIMITED) IS CONCERNED, HE SUBMITTED THAT THE ABOVE COMPANY IS ALSO FUNCTIONALLY DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. HE SUBMITTED THAT CORAL HUB LIMITED IS INTO DATA DIGIT IZATION, CONVERSION AND PUBLISHING WHEREAS THE ASSESSEES ACTIVITY IS WITH REGARD TO PROVISION OF ROUTINE OUTSOURCED BUSINESS PROCESSES LIKE FINANCE AND ACCO UNTING, COLLECTIONS, INSURANCE, CUSTOMER FULFILLMENT, DATA MODELING AND ANALYTICS SUPPORT, ETC. WHICH IS LOW-END IN NATURE. ACCORDINGLY, CORAL HUB LIMIT ED CANNOT BE INCLUDED AS IT IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEES BU SINESS. HE SUBMITTED THAT A PERUSAL OF THE ANNUAL REPORT OF THE COMPANY SHOWS T HAT THE COMPANY HAS SIGNIFICANT PAYMENT TOWARDS VENDORS. THE INTERMEDI ARY FUNCTIONS OF CORAL HUB LIMITED CAN ONLY BE COMPARED TO THAT OF A DISTRIBUT OR WHICH TAKES TITLE TO SERVICE/ PRODUCT FOR RESALE TO THE CUSTOMER. ON TH E CONTRARY THE ASSESSEE IS A 11 ITA NO.6408/DEL/2012 PROVIDER OF BACK OFFICE SERVICES ON ITS OWN. CORAL HUB LIMITED DOES NOT APPEAR TO BE A SERVICE PROVIDER AT ALL BUT IS MORE OF DIST RIBUTOR AND HENCE, IT IS NOT COMPARABLE TO THE ASSESSEE. FOR THE ABOVE PROPOSIT ION, HE RELIED ON THE FOLLOWING DECISIONS :- A. BA CONTINUUM INDIA (P.) LTD. VS. ADDL.CIT, (2017 ) 79 TAXMANN.COM 85. B. IT CUBE SOLUTIONS (P.) LTD. VS. ITO, (2016) 76 TAXMANN.COM 187. C. AVAYA INDIA (P.) LTD. VS. DCIT, (2016) 71 TAXMA NN.COM 76. 14. SO FAR AS DATAMATICS FINANCIAL SERVICES LIMITED IS CONCERNED, HE SUBMITTED THAT THE SAID COMPANY IS FUNCTIONALLY DIF FERENT FROM THAT OF THE ASSESSEE COMPANY, SINCE DATAMATICS IS ACTING AS REG ISTRAR AND SHARE TRANSFER AGENT AS WELL AS PROVIDING ITES. REFERRING TO PAGE 150, 155 OF THE ANNUAL REPORT COMPENDIUM, HE SUBMITTED THERE IS NO SEGMENT INFORMATION AVAILABLE, THEREFORE, THE REVENUES FROM BOTH THE STREAMS ARE N OT SEPARABLE. RELYING ON A NUMBER OF DECISIONS, HE SUBMITTED THAT WHEN THE SEG MENTAL DETAILS ARE NOT AVAILABLE, THE COMPANY CANNOT BE SELECTED AS A COMP ARABLE. HE ACCORDINGLY SUBMITTED THAT THE DATAMATICS FINANCIAL SERVICES LI MITED IS INCLUDED FROM THE LIST OF COMPARABLE. 15. SO FAR AS E CLERX SERVICES LIMITED IS CONCERNED , HE SUBMITTED THAT SINCE THIS COMPANY IS ENGAGED IN PROVIDING DATA ANALYTICS AND DATA PROCESS SOLUTIONS 12 ITA NO.6408/DEL/2012 TO THE CUSTOMERS, THEREFORE, IT IS FUNCTIONALLY DIF FERENT FROM THAT OF THE ASSESSEE COMPANY WHICH IS ENGAGED IN OUTSOURCED BUSINESS PRO CESSES LIKE TECHNICAL SUPPORT SERVICES, ACCOUNT MANAGEMENT, ETC. FOR THE ABOVE PROPOSITION, HE REFERRED TO PAGE 159, 163, 170, 201 OF ANNUAL REPOR T COMPENDIUM. RELYING ON THE FOLLOWING DECISIONS, HE SUBMITTED THAT THE E CL ERX SERVICES LIMITED HAS BEEN HELD TO BE AS NOT A GOOD COMPARABLE :- A. BA CONTINUUM INDIA (P.) LTD. VS. ADDL.CIT, (2017 ) 79 TAXMANN.COM 85. B. AVAYA INDIA (P.) LTD. VS. DCIT, (2016) 71 TAXMA NN.COM 76. C. FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA (P .) LTD. (2014) 52 TAXMANN.COM 408. D. HSBC ELECTRONIC DATA PROCESSING INDIA (P.) LTD. VS. ACIT, (2015) 53 TAXMANN.COM 43. E. GOLDMAN SACHS SERVICES (P.) LTD. VS. DCIT, (2015 ) 60 TAXMANN.COM 310. 16. SO FAR AS GENESYS INTERNATIONAL CORPORATION LIM ITED IS CONCERNED, HE SUBMITTED THAT THE ABOVE COMPARABLE IS FUNCTIONALLY DIFFERENT FROM THE FUNCTIONS PERFORMED BY THE ASSESSEE UNDER OUTSOURCED BUSINESS PROCESSES LIKE FINANCE AND ACCOUNTING, COLLECTIONS, INSURANCE, CUSTOMER FULFIL LMENT, DATA MODELING AND ANALYTICS SUPPORT, MANAGED IT SERVICES, ETC. HE SU BMITTED THAT THE GIS SERVICES BEING PROVIDED BY GENESYS IS MORE VALUE ADDED AND H IGH END IN NATURE THAN THE OUTSOURCED SERVICE FUNCTIONS BEING PERFORMED BY THE ASSESSEE. RELYING ON THE 13 ITA NO.6408/DEL/2012 FOLLOWING DECISIONS, HE SUBMITTED THAT GENESYS INTE RNATIONAL CORPORATION LIMITED CANNOT BE CONSIDERED AS A COMPARABLE :- A. BA CONTINUUM INDIA (P.) LTD. VS. ADDL.CIT, (2017 ) 79 TAXMANN.COM 85. B. FLAGSTONE UNDERWRITING SUPPORT SERVICES INDIA (P .) LTD. (2014) 52 TAXMANN.COM 408. C. HSBC ELECTRONIC DATA PROCESSING INDIA (P.) LTD. VS. ACIT, (2015) 53 TAXMANN.COM 43. 17. SO FAR AS HCL COMNET SYSTEMS AND SERVICES LIMIT ED IS CONCERNED, HE SUBMITTED THAT THE ABOVE COMPANY IS FUNCTIONALLY DI FFERENT FROM THAT OF THE ASSESSEE COMPANY. REFERRING TO THE ANNUAL REPORT O F THE COMPANY, HE SUBMITTED THAT THE RELEVANT SEGMENT OF THE ABOVE CO MPANY IS INTO DATA CENTRE MANAGEMENT, END USER COMPUTING, MANAGED SECURITY SE RVICES, NETWORKING SERVICES AND TOOLS AND PROCESS CONSULTING SERVICES ETC. REFERRING TO PAGE 28 OF THE TPOS ORDER, HE SUBMITTED THAT THE TPO HIMSELF HAS REJECTED COMPANIES HAVING FINANCIAL YEAR ENDING OTHER THAN 31 ST MARCH, 2008. SINCE THE FINANCIAL YEAR OF HCL ENDS ON 30 TH JUNE, 2008, THEREFORE, IT FAILS THE TPOS OWN FILT ER OF DIFFERENT FINANCIAL YEAR. RELYING ON VARIOUS DECIS IONS, HE SUBMITTED THAT THE ABOVE COMPANY HAS BEEN EXCLUDED FROM THE LIST OF CO MPARABLES ON ACCOUNT OF ITS FUNCTIONAL DIFFERENCE AS IT IS ENGAGED IN THE B USINESS OF PROVIDING TELECOMMUNICATION AND REMOTE INFRASTRUCTURE MANAGEM ENT SERVICES. 14 ITA NO.6408/DEL/2012 18. SO FAR AS ACROPETAL TECHNOLOGIES LIMITED (ENGIN EERING DESIGN SERVICE SEGMENT) IS CONCERNED, HE SUBMITTED THAT THIS COMPA NY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS WHEREAS THE ASSESS EE IS DOING ITES SERVICES WHICH CANNOT BE COMPARED WITH THE SOFTWARE DEVELOPM ENT COMPANIES. HE FURTHER SUBMITTED THAT AS PER INFORMATION OBTAINED U/S 133(6) BY THE ASSESSING OFFICER, IT HAS BEEN REPLIED BY THE SAID COMPANY TH AT THEY PROVIDED ENGINEERING DESIGN SERVICES. REFERRING TO ANNUAL REPORT COMPEN DIUM OF ACROPETAL TECHNOLOGIES LIMITED, COPY OF WHICH IS PLACED AT PA GE 104, 106, 107 OF THE PAPER BOOK, HE SUBMITTED THAT THE ITES ACTIVITY OF THE ASSESSEE ARE NOT COMPARABLE TO ENGINEERING SERVICES. REFERRING TO T HE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HSBC ELECTRONI C DATA PROCESSING INDIA (P.) LTD. (SUPRA), HE SUBMITTED THAT THIS COMPANY W AS EXCLUDED FROM THE LIST OF COMPARABLE ON ACCOUNT OF DIFFERENTIATION OF HIGH EN D SERVICES BEING PROVIDED BY THIS COMPANY WHEREAS THE ASSESSEE IS INTO LOW END S ERVICE. HE ACCORDINGLY SUBMITTED THAT THE ABOVE COMPANY BE EXCLUDED FROM T HE LIST OF COMPARABLES FINALLY RETAINED BY THE ASSESSING OFFICER. 19. LD. COUNSEL FOR THE ASSESSEE FURTHER DREW THE A TTENTION OF THE BENCH TO CERTAIN FACTUAL/COMPUTATION ERROR WHILE COMPUTING T HE ARMS LENGTH MARGIN. HE SUBMITTED THAT WHILE COMPUTING THE OPERATING MARGIN OF DATAMATICS FINANCIAL SERVICES LTD. (BPO DIVISION) THE LD. TPO DID NOT FO LLOW THE DIRECTIONS ISSUED BY 15 ITA NO.6408/DEL/2012 THE DRP CORRECTLY AND INCLUDED FOREIGN EXCHANGE GAI N. REFERRING TO THE DIRECTION OF THE DRP AT PARA 3.21 AT PAGE 26 OF THE APPEAL SET (PAGE 13 OF THE DRP ORDER), HE DREW THE ATTENTION OF THE BENCH TO T HE FINDINGS OF THE DRP AND SUBMITTED THAT THE TPO INCLUDED FOREIGN EXCHANGE GA IN AMOUNTING TO RS.13,28,776/- AND DETERMINED THE PROFIT MARGIN OF THE COMPANY AT 34.87% AS AGAINST CORRECT PROFIT MARGIN AT 29.11%. HE SUBMIT TED THAT SINCE THERE IS AN ERROR ON THE PART OF THE TPO IN NOT FOLLOWING THE D IRECTION OF THE DRP, HE MAY BE DIRECTED TO MAKE CORRECT COMPUTATION OF OP/TC AT 29.11% AS AGAINST 34.87% DETERMINED BY HIM. 20. LD. DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE TPO/DRP. HE SUBMITTED THAT SINCE IT IS NOT POSSIBLE TO FIND OUT IDENTICAL COMPARABLES, THEREFORE, THE TPO HAS SELECTED COMPARABLES WHICH A RE MORE OR LESS MATCHING WITH OR VERY NEAR TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE COMPANY. HE SUBMITTED THAT THE DRP AFTER CONSIDERING THE VARIOU S SUBMISSIONS MADE BY THE ASSESSEE HAD RETAINED THESE COMPARABLES AND, THEREF ORE, NO INTERFERENCE IS CALLED FOR OF THE COMPARABLES RETAINED BY THE DRP. HE ACC ORDINGLY SUBMITTED THAT THE ORDER OF THE DRP/ASSESSING OFFICER/TPO BE UPHELD AN D THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 21. SO FAR AS THE SUBMISSIONS OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE TPO HAS NOT FOLLOWED THE DIRECTION OF THE DRP AS PER PA RA 3.21 OF THE ORDER OF THE 16 ITA NO.6408/DEL/2012 DRP IS CONCERNED, HE SUBMITTED THAT THE DRP HAD DIR ECTED THE TPO TO KEEP THE FOREX COMPONENT OUT OF THE CALCULATION OF PLI IN BO TH THE CASE OF THE TAXPAYER AND COMPARABLES. THEREFORE, HE HAS NO OBJECTION IF THIS ISSUE IS RESTORED TO THE FILE OF THE TPO FOR MAKING SUITABLE CALCULATION. 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER/TPO/DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. AS MENTIONED EARLIER SINCE THE LD. COUN SEL FOR THE ASSESSEE CONFINED HIS ARGUMENTS TO CERTAIN COMPARABLES ONLY APART FRO M THE COMPUTATION ERROR OF OPERATING MARGIN OF DATAMATICS, THEREFORE, WE ARE S TRAIGHTWAY DEALING WITH THE SAME ONLY WITHOUT GOING INTO THE OTHER GROUNDS RAIS ED BY THE ASSESSEE IN THE GROUNDS OF APPEAL WHICH ACCORDING TO US ARE MERE AC ADEMIC IN NATURE. 23. SO FAR AS EXCLUSION/INCLUSION OF ACCENTIA TECHN OLOGIES LIMITED IS CONCERNED, WE FIND FROM THE ANNUAL REPORT COMPENDIU M THAT THE COMPANY IN ITS ANNUAL REPORT AT PAGE 29 HAS MENTIONED ABOUT TH E ACQUISITION OF THUNGA SOFTWARE PVT. LTD., ACQUIRED GSR PHYSICIANS BILLIN G SERVICE, ACQUIRED GSR SYSTEMS, A SOFTWARE COMPANY SPECIALIZING IN HRCM BA SED IN FLORIDA, USA, ACQUIRED DENMED INC., A MEDICAL TRANSCRIPTION COMPA NY BASED IN SALEM, OREGON, USA. FURTHER, THIS COMPANY IS ENGAGED IN P ROVIDING DIVERSIFIED 17 ITA NO.6408/DEL/2012 SERVICES. THIS COMPANY IS ENGAGED IN TRANSCRIPTION SERVICES WHICH IS CONSIDERED AS A HIGH END SERVICE (KPO). 24. WE FIND THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BA CONTINUUM INDIA (P.) LTD. (SUPRA) HAS EXCLUDED ACCE NTIA TECHNOLOGIES LIMITED ON ACCOUNT OF EXTRAORDINARY EVENTS THAT TOOK PLACE IN THIS COMPANY. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF IT CUBE SOLUTI ONS (P.) LTD. (SUPRA) HAS ALSO EXCLUDED ACCENTIA TECHNOLOGIES LIMITED FROM THE LIS T OF COMPARABLES ON ACCOUNT OF EXTRAORDINARY EVENTS THAT HAVE TAKEN PLA CE. SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS BENCH OF THE TRIBUNAL. SINCE IT IS AN ADMITTED FACT THAT EXTRAORDINARY EVENTS HAVE TAKEN PLACE DURING THE YE AR IN CASE OF ACCENTIA TECHNOLOGIES LIMITED, THEREFORE, WE ARE OF THE CONS IDERED OPINION THAT THIS COMPANY CANNOT BE HELD AS A COMPARABLE WITH THAT OF THE ASSESSEE COMPANY ON ACCOUNT OF DIFFERENT FUNCTIONS AS WELL AS EXTRAORDI NARY EVENTS SUCH AS ACQUISITIONS THAT HAVE TAKEN PLACE. WE, THEREFORE, DIRECT THE TPO/ASSESSING OFFICER TO EXCLUDE THIS COMPANY FROM THE LIST OF CO MPARABLES. 25. SO FAR AS CORAL HUB LIMITED IS CONCERNED, WE FI ND FROM THE ANNUAL REPORT COMPENDIUM OF THE ABOVE COMPANY, COPY OF WHI CH IS PLACED AT PAGE 354 TO 374 OF THE PAPER BOOK THAT THIS COMPANY IS I NTO DATA DIGITIZATION, CONVERSION AND PUBLISHING WHEREAS THE ACTIVITIES OF THE ASSESSEE COMPANY IS WITH REGARD TO THE PROVISION OF ROUTINE OUTSOURCED BUSINESS PROCESSES LIKE 18 ITA NO.6408/DEL/2012 FINANCE AND ACCOUNTING, COLLECTION, INSURANCE, CUST OMER FULFILLMENT, DATA MODELING AND ANALYTICS SUPPORT, ETC., WHICH IS LOW- END IN NATURE. FURTHER, WE OBSERVE FROM PAGE 84 OF THE ANNUAL REPORT (PAGE 336 OF THE ANNUAL REPORT COMPENDIUM) THAT THIS COMPANY HAS MADE SIGNIFICANT PAYMENT TOWARDS VENDORS. THUS, INTERMEDIARY FUNCTIONS OF THIS COMP ANY CAN ONLY BE COMPARED TO THAT OF A DISTRIBUTOR WHICH TAKES TITLE TO SERVI CE/ PRODUCTS FOR RESALE TO THE CUSTOMERS. HOWEVER, THE ASSESSEE COMPANY IS A PROV IDER OF BACK OFFICE SERVICES ON ITS OWN. WE, THEREFORE, FIND MERIT IN THE ARGUM ENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. 26. WE FIND THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BA CONTINUUM INDIA (P.) LTD. (SUPRA) HAS EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES BY OBSERVING AS UNDER :- 11.3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS RELIED ON. AS FAR AS THIS COMPARABLE IS CONCERNED, THE SAME HAS B EEN DECIDED BY THE CO-ORDINATE BENCH OF DELHI IN THE CASE OF UNITED HEALTH GROUP I NFORMATION SERVICES PVT. LTD. VS. ACIT [ITA NO.6312/DEL/2012-AY 2008-09] DT. 28-08-20 14, WHEREIN THE CO-ORDINATE BENCH HELD AS UNDER: 'VISHAL INFORMATICS 12.1. THE TPO INCLUDED THIS COM PANY IN THE LIST OF COMPARABLES BY NOTICING THAT IT WAS ENGAGED IN PROV IDING BPO SERVICES. THE ASSESSEE FAILED TO CONVINCE HIM AND THE DRP THAT IT WAS INCOMPARABLE. 12.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL REPORT OF THIS COMP ANY THAT IT IS MAINLY ENGAGED IN E-PUBLISHING BUSINESS. IT HAS MORE THAN 10,000 CLASSIC BOOKS TO ITS CREDIT WHICH ARE ALSO CONVERTED INTO LARGE FONT TIT LES FOR VISUALLY CHALLENGED. APART FROM E-PUBLISHING, THIS COMPANY IS ALSO ENGAG ED IN DOCUMENTS SCANNING & INDEXING. IT CAN BE SEEN FROM THE FINANCIAL RESUL TS OF THIS COMPANY THAT BOTH THE SEGMENTS VIZ., E- PUBLISHING AND DOCUMENTS SCAN NING ETC. HAVE BEEN 19 ITA NO.6408/DEL/2012 COMBINED AND THERE ARE NO SEPARATE FINANCIAL RESULT S IN RESPECT OF DOCUMENTS SCANNING WORK, WHICH MAY BE COMPARABLE WITH THE ASS ESSEE TO SOME EXTENT. AS THE ASSESSEE IS NOT ENGAGED IN ANY E-PUBLISHING BUS INESS AND THE FINANCIALS GIVEN BY THIS COMPANY ARE ON CONSOLIDATED BASIS, WE DIRECT TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THE ASSESSEE SUCCEEDS'. 11.4. RESPECTFULLY FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE CORAL HUB LIMITED (FORMERLY KNOWN AS VISHAL INFORMATION TECHNOLOGIES LIMITED) FROM THE LIST OF COMPARABLES. 27. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF IT CUBE SOLUTIONS (P.) LTD. (SUPRA) HAS EXCLUDED CORAL HUB LIMITED FR OM THE LIST OF COMPARABLES ON THE GROUND THAT THE CORALS WORK IS SUBSTANTIALL Y OUTSOURCED AND THUS BUSINESS MODULE HAS ACQUIRED A DIFFERENT CHARACTER ON THE TOUCHSTONE OF FAR ANALYSIS. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ALSO SUPPORT ITS CASE. IN VIEW OF ABOVE A ND CONSIDERING THE FACT THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT FROM THAT OF THE ASSESSEE COMPANY AND IT HAS SIGNIFICANT OUTSOURCING OF WORK, WE DIRECT EXCL USION OF CORAL HUB LIMITED FROM THE LIST OF COMPARABLES. 28. SO FAR AS DATAMATICS FINANCIAL SERVICES LIMITED IS CONCERNED, WE FIND THIS COMPANY IS ACTING AS REGISTRAR AND SHARE TRANS FER AGENT AS WELL AS ITES. THERE IS NO SEGMENTAL INFORMATION AVAILABLE IN THE AUDITED ACCOUNTS. THEREFORE, THE REVENUES FROM BOTH THE STREAMS ARE NOT SEPARABL E. IT HAS BEEN HELD IN VARIOUS DECISIONS THAT WHEN SEGMENTAL DETAILS ARE N OT AVAILABLE, THE COMPANY CANNOT BE ACCEPTED AS A COMPARABLE. SINCE ADMITTED LY IN THE INSTANT CASE NO 20 ITA NO.6408/DEL/2012 SEGMENTAL DETAILS ARE AVAILABLE, THEREFORE, WE DIRE CT THE ASSESSING OFFICER/TPO TO EXCLUDE DATAMATICS FINANCIAL SERVICES LIMITED FR OM THE LIST OF COMPARABLES. 29. SO FAR AS E CLERX SERVICES LIMITED IS CONCERNED , WE FIND THIS COMPANY IS ENGAGED IN PROVIDING DATA ANALYTICS AND DATA PROCES S SOLUTIONS TO THE CUSTOMERS WHICH IN OUR OPINION ARE FUNCTIONALLY DIFFERENT FRO M THE FUNCTIONS PERFORMED BY THE ASSESSEE UNDER OUTSOURCED BUSINESS PROCESSES LI KE TECHNICAL SUPPORT SERVICES, ACCOUNT MANAGEMENT, ETC.. WE FIND THE DE LHI BENCH OF THE TRIBUNAL IN THE CASE OF AVAYA INDIA (P.) LTD. (SUPRA) FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT IN ITA NO.102/2015 ORDER DATED 10.08.2015 HAS HELD THAT E CLERX SERVICES LIMITED AND CORAL HUB LIMITED (VISHAL INFORMATION TECHNOLOGIES LIMITED) BEING HIGH-END SERVICE PROVIDERS CANNOT BE COMPARED WITH LOW-END S ERVICE PROVIDER. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BA CONTINUUM INDIA (P.) LTD. (SUPRA) ON THE GROUND THAT THIS COMPANY IS CLASSIFIED AS HIGH-END KPO AND WAS HAVING SUPERNORM AL PROFIT. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMAN SACHS SERVICES (P.) LTD. (SUPRA) HAS ALSO EXCLUDED THIS COMPANY FROM THE LIST OF COM PARABLES ON ACCOUNT OF THE SAID COMPANY BEING MAINLY ENGAGED IN PROVIDING HIGH -END KPO SERVICES INVOLVING SPECIALIZED EXPERTISE IN THE FIELD AND TH E SAME CANNOT BE COMPARED WITH COMPANY MAINLY ENGAGED IN PROVIDING LOW-END SE RVICES TO ITS GROUP 21 ITA NO.6408/DEL/2012 CONCERNS. SINCE THE ASSESSEE IN THE INSTANT CASE I S A LOW-END SERVICE PROVIDER, THEREFORE, FOLLOWING THE DECISION OF THE DELHI BENC H OF THE TRIBUNAL IN THE CASE OF AVAYA INDIA (P.) LTD. (SUPRA) AND THE VARIOUS DE CISIONS CITIED (SUPRA), WE HOLD THAT THE E CLERX SERVICES LIMITED CANNOT BE HE LD AS COMPARABLE WITH THAT OF THE ASSESSEE COMPANY. THE VARIOUS OTHER DECISIO NS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE SYNOPSIS ALSO SUPPO RT ITS CASE. WE, THEREFORE, DIRECT THE EXCLUSION OF E CLERX SERVICES LIMITED FR OM THE LIST OF COMPARABLES. 30. SO FAR AS GENESYS INTERNATIONAL CORPORATION LIM ITED IS CONCERNED, WE FIND THIS COMPANY ALSO IS FUNCTIONALLY DIFFERENT FR OM THAT OF THE FUNCTIONS OF THE ASSESSEE COMPANY. FROM THE ANNUAL REPORT OF THE CO MPANY, WE FIND IT IS ENGAGED IN THE BUSINESS OF PROVIDING GEOGRAPHICAL I NFORMATION SERVICES COMPRISING PHOTOGRAMMETRY, REMOTE SENSING, CARTOGRA PHY, DATA CONVERSION SERVICES ETC.. FURTHER, AS PER THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BA CONTINUUM INDIA (P.) LTD . (SUPRA), WE FIND THERE WAS ABNORMAL GROWTH OF AROUND 605.43% FOR ITS GEOSPATIA L SERVICES FOR THE FINANCIAL YEAR 2007-08. WE FIND AFTER CONSIDERING THE ARGUME NTS ADVANCED BY THE ASSESSEE, THE HYDERABAD BENCH OF THE TRIBUNAL EXCLU DED THE GENESYS INTERNATIONAL CORPORATION LIMITED FROM THE LIST OF COMPARABLES BY OBSERVING AS UNDER :- 22 ITA NO.6408/DEL/2012 14.2. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS RELIED ON. AS FAR AS THIS COMPARABLE IS CONCERNED, THE SAME HAS B EEN DECIDED BY THE CO-ORDINATE BENCH IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERI NG P. LTD., VS. ITO IN ITA NO. 1850/HYD/2012 (AY. 2008-09) DT. 21-02-2014, WHEREIN THE CO- ORDINATE BENCH HELD AS UNDER: 'V. GENESYS INTERNATIONAL CORPORATION LTD. THIS COMPANY IS LISTED AT SL. NO.11 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, TH E STAND OF THE ASSESSEE HAS BEEN THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARAB LE AND THAT IT HAS A DIFFERENT EMPLOYEE SKILL SET AND THAT THIS COMPANY PERFORMS R&D SERVICES AND ALSO OWNS INTANGIBLES. THIS COMPANY IS A GEOSPATIAL SERVICES CONTENT PROVIDER SPECIALISING IN LAND BASED TECHNOLOGIES. FROM THE N OTES TO ACCOUNTS OF THIS COMPANY, IT IS SEEN THAT THIS COMPANY IS ENGAGED IN PROVIDING GEOGRAPHICAL INFORMATION SERVICES COMPRISING OF PHOTOGRAMMETRY, REMOTE SENSING CARTOGRAPHY, DATA CONVERSION RELATED COMPUTED BASED SERVICES AND OTHER RELATED SERVICES. FURTHER THE BUSINESS OF THIS COMP ANY REQUIRES SKILLED MANPOWER AND SCIENTISTS, CIVIL ENGINEERS, ETC. BESI DES THE ABOVE, THIS COMPANY ALSO CARRIES OUT R&D SERVICES AND OWN INTANGIBLES. THE AFORESAID FACTS, IN OUR VIEW, WILL TAKE THIS COMPANY OUT OF THE LIST OF COM PARABLES. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF SYMPHONY MARKETING SOLUTI ONS INDIA(P) LTD (SUPRA) BY THE BANGALORE BENCH. IN VIEW OF THE ABOVE, WE AR E OF THE VIEW THAT THIS COMPANY CANNOT BE REGARDED AS A COMPARABLE AND DESE RVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES'. 14.3. RESPECTFULLY FOLLOWING THE DECISION OF THE CO -ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXCLUDE GENESYS INTERNATIONAL CORPORATION LTD., FROM THE LIST OF COMPARABLES. 31. SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS OTHE R DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE SYNOPSIS. WE, THEREFORE, DIRECT THE TPO/ASSESSING OFFICER TO EXCLUDE GENESYS INTERNATIO NAL CORPORATION LIMITED FROM THE LIST OF COMPARABLE ON ACCOUNT OF FUNCTIONA LLY DIFFERENT. 32. SO FAR AS HCL COMNET SYSTEMS AND SERVICES LIMIT ED IS CONCERNED, WE FIND THIS COMPANY IS INTO DATA CENTRE MANAGEMENT, E ND USER COMPUTING, 23 ITA NO.6408/DEL/2012 MANAGED SECURITY SERVICES, NETWORKING SERVICES AND TOOLS AND PROCESS CONSULTING SERVICES WHICH IN OUR OPINION IS FUNCTIO NALLY DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. WE FIND THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HSBC ELECTRONIC DATA PROCESSING INDIA (P.) LTD. (SUPRA) HAS RESTORED THE ISSUE TO THE FILE OF THE TPO WITH THE FOLLOWING DIRECTION :- 14.6.2. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. IT IS NOT DISPUTED THAT THESE C OMPANIES ARE HAVING HUGE TURNOVERS LIKE THAT OF ASSESSEE DURING THE YEAR. THEREFORE TU RNOVER FILTER AS CONSIDERED IN OTHER CASES DOES NOT APPLY HERE. HOWEVER AS SUBMITTED THE FUNCTIONAL PROFILE OF COMPANIES AS SUCH IS DIFFERENT. BUT, IF THE BPO DIVISION IS S IMILAR TO ASSESSEE THE SAME CAN BE CONSIDERED AFTER PROPER FAR ANALYSIS. THEREFORE WE ARE OF THE OPINION THAT TPO/AO CAN RECONSIDER THE COMPARABLES AFTER GIVING DUE OPP ORTUNITY TO ASSESS AND FAIRLY ANALYZING ITS OBJECTIONS. IN CASE THE DATA (SEGMENT AL OR UNIT) IS INCOMPLETE OR FUNCTIONAL PROFILE ETC ARE DIFFERENT AO/TPO SHOULD EXCLUDE THE SAME. WITH THESE OBSERVATIONS THE ISSUE OF SELECTION OF THESE COMPAN IES AS COMPARABLES IS RESTORED TO TPO/AO TO DO THE NEEDFUL. 33. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE O F THE TPO WITH THE DIRECTION TO RE-ADJUDICATE THE ISSUE IN THE LIGHT OF THE DIRE CTION OF THE TRIBUNAL CITED (SUPRA). NEEDLESS TO SAY, THE TPO SHALL GIVEN DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER FACT AND LAW. 34. SO FAR AS ACROPETAL TECHNOLOGIES LIMITED IS CON CERNED, WE FIND THIS COMPANY IS ENGAGED IN DEVELOPMENT OF SOFTWARE PRODU CTS, WHEREAS ASSESSEE IS DOING ITES SERVICES WHICH IN OUR OPINION CANNOT BE COMPARED WITH SOFTWARE DEVELOPMENT COMPANY. FROM THE NOTES OF ACCOUNT, CO PY OF WHICH IS PLACED AT 24 ITA NO.6408/DEL/2012 PAGE 104 OF THE PAPER BOOK, WE FIND THIS COMPANY IS ENGAGED IN DEVELOPMENT OF COMPUTER SOFTWARE. WE FIND THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HSBC ELECTRONIC DATA PROCESSING INDIA (P.) LTD. (SUPRA) HAS EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES BY OBSERVING A S UNDER :- 14.2.1 THIS COMPANY IS LISTED AT SL.NO.2 OF THE CO MPARABLES CHOSEN BY THE TPO. AS FAR AS THIS COMPANY IS CONCERNED, THE OBJEC TION OF THE ASSESSEE IS THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE. THE ASSESSE E IS A BPO COMPANY THAT PROVIDES CAD/ CAE SERVICES. AS FAR AS ACROPETAL TEC HNOLOGIES LTD. IS CONCERNED, THIS COMPANY DOES THE BUSINESS OF EXPORT OF SOFTWARE SER VICES. IT IS ALSO SEEN FROM THE SEGMENTAL REVENUE OF THIS COMPANY (NOTE 15 TO THE N OTES ON ACCOUNTS TO ANNUAL REPORT FOR 07-08) THAT IT DERIVES INCOME FROM ENGIN EERING DESIGN SERVICES AND SOFTWARE DEVELOPMENT SERVICES. IT IS ALSO PERTINENT TO POINT OUT THAT BEFORE THE TPO, THE ASSESSEE RAISED AN OBJECTION THAT THIS COMPANY PERFORMS DIFFERENT FUNCTIONS AND MAINLY ENGAGED IN THE AREA OF SOFTWARE DEVELOPMENT SERVICES AND ENGINEERING DESIGN SERVICES. THE TPO IN HIS ORDER HAS OBSERVED THAT TH E SERVICES RENDERED BY THIS COMPANY FALL IN THE DEFINITION OF ITES. 14.2.2 WE HAVE CONSIDERED THE SUBMISSIONS OF THE L EARNED COUNSEL FOR THE ASSESSEE. LD COUNSEL SUBMISSION WAS THAT THIS COMPA NY WAS EXCLUDED IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA(P) LTD (SUPRA) B Y THE BANGALORE BENCH, SO THE SAME REQUIRE EXCLUSION. IN THE ABOVE CASE IT WAS CO NSIDERED LIKE THIS: 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE ASSESSEE. ON A PERUSAL OF THE NOTE NO.15 OF NOTES T O ACCOUNTS WHICH GIVES SEGMENTAL REVENUE OF THIS COMPANY, IT IS CLEAR THAT THE MAJOR SOURCE OF INCOME FOR THIS COMPANY IS FROM PROVIDING ENGINEERING DESI GN SERVICE AND INFORMATION TECHNOLOGY SERVICES. THE FUNCTIONS PERF ORMED BY THE ENGINEERING DESIGN SERVICES SEGMENT OF THE COMPANY CANNOT BE CO NSIDERED AS COMPARABLE TO THE ITES/BPO FUNCTIONS PERFORMED BY THE ASSESSEE . THE PERFORMANCE OF ENGINEERING DESIGN SERVICES IS REGARDED AS PROVIDIN G HIGH END SERVICES AMONG THE BPO WHICH REQUIRES HIGH SKILL WHEREAS THE SERVICES PERFORMED BY THE ASSESSEE ARE ROUTINE LOW END ITES FUNCTIONS. WE THEREFORE HOLD THAT THIS COMPANY COULD NOT HAVE BEEN SELECTED AS A COMPARABL E, ESPECIALLY WHEN IT PERFORMS ENGINEERING DESIGN SERVICES WHICH ONLY A K NOWLEDGE PROCESS OUTSOURCING [KPO] WOULD DO AND NOT A BUSINESS PROCE SS OUTSOURCING [BPO]. AS CAN BE SEEN ABOVE, SAID COMPANY WAS EXCLUDED ON THE DIFFERENTIATION OF HIGH END SERVICES BEING PROVIDED BY THIS COMPANY. ASSESSEE D OES NOT PROVIDE HIGH END SERVICES AS SUBMITTED. THEREFORE WE ARE OF THE OPINION THAT FUNCTIONS OF ASSESSEE ARE NOT SIMILAR TO THE ABOVE COMPANY. WE DIRECT THE TPO/AO TO EXCLUDE THIS COMPANY. 25 ITA NO.6408/DEL/2012 35. IN VIEW OF THE DECISION OF HYDERABAD BENCH OF T HE TRIBUNAL WHICH, IN TURN, HAS FOLLOWED THE BANGALORE BENCH OF THE TRIBU NAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE HOLD TH AT ACROPETAL TECHNOLOGIES LIMITED SHOULD BE EXCLUDED FROM THE LIST OF COMPARA BLES. 36. SO FAR AS FACTUAL/COMPUTATION ERROR WHILE COMPU TING THE ARMS LENGTH MARGIN IN THE CASE OF DATAMATICS FINANCIAL SERVICES LTD. IS CONCERNED, WE FIND THE DRP AT PARA 3.21 OF THE ORDER HAS DIRECTED THE TPO TO KEEP THE FOREX COMPONENT OUT OF THE CALCULATION OF PLI IN BOTH THE CASES OF THE TAXPAYER AND COMPARABLES. LD. COUNSEL FOR THE ASSESSEE AT THE T IME OF HEARING HAS FILED THE FOLLOWING CHART FOR THE PROPOSITION THAT THE CORREC T COMPUTATION OF OP/TC IS 29.11% AS AGAINST 34.87% COMPUTED BY THE TPO :- PARTICULARS AMOUNT [AS PER REVISED ORDER OF TPO DATED OCTOBER 19, 2012] (RS.) CORRECT COMPUTATION (RS.) SEGMENTAL SALES 60,596,243 60,596,243 ADD: FOREIGN EXCHANGE GAIN 1,328,776 OPERATING INCOME 61,925,019 60,596,243 TOTAL EXPENDITURE 129,539,089 129,539,089 TOTAL COST (TC) ALLOCATED TO BPO DIVISION 45,915,837 46,935,045 OPERATING PROFIT (OP) 16,009,182 13,661,198 OP/TC 34.87% 29.11% 37. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE O F THE TPO/ASSESSING OFFICER WITH DIRECTION TO VERIFY THE ABOVE AND ADOPT THE CO RRECT OP/TC IN CASE OF 26 ITA NO.6408/DEL/2012 DATAMATICS FINANCIAL SERVICES (BPO DIVISION). THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED IN THE TERMS INDIC ATED ABOVE. 38. SINCE, WE HAVE CONFINED OUR DECISION TO ONLY GR OUNDS OF APPEAL NO.3.6 TO 3.9, THEREFORE, THE OTHER GROUNDS WHICH WERE NOT AR GUED BY THE LD. COUNSEL FOR THE ASSESSEE ARE DISMISSED AS BEING NOT PRESSED. 39. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 ND FEBRUARY, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 02-02-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE DRP 4) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI