MORGAN STANLEY SOLUTIONS INDIA P.LTD, MUMBAI V. DCIT RG 9(2), MUMBAI

ITA 6522/MUM/2014

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9193 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2008-2009
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET DUGGAL
• Assessee Lawyers: SUNIL M LALA
• Keywords: Transfer pricing; International transaction
• Section: 133(6); 13

Judgement Text

1 ITA 6522/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI MANISH BORAD (ACCOUNTANT MEMBER) I.T.A. NO.6522/MUM/2014 (ASSESSMENT YEAR 2008-09) MORGAN STANLEY SOLUTIONS ADVANTAGE SERVICES PVT LTD ( AS A SUCCESSOR OF MORGAN STANLEY SOLUTIONS INDIA PVT LTD), ATHENA BUILDING NO. 5, SECTOR 30, MINDSPACE, GOREGAON (W), MUMBAI-400 090 PAN : AADCM7403M VS DY.CIT,RANGE 9(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI SUNIL M LALA, (AR) RESPONDENT BY SHRI MANPREET DUGGAL (DR) DATE OF HEARING 09-08-2021 DATE OF PRONOUNCEMENT 12-08-2021 O R D E R PER SAKTIJIT DEY (JM) CAPTIONED APPEAL BY THE ASSESSEE ARISES OUT OF ORD ER DATED 29-08-2014 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-11, MU MBAI FOR THE ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE IN RESPEC T OF A COMMON ISSUE RELATING TO ADDITION MADE ON ACCOUNT OF TRANSFER PR ICING ADJUSTMENT. 2 ITA 6522/MUM/2014 3. BRIEFLY THE FACTS ARE, THE ASSESSEE, A RESIDENT COMPANY, IS A PART OF MORGAN STANLEY GROUP AND AS A CAPTIVE SERVICE PROVIDER, PR OVIDES BACK OFFICE SUPPORT SERVICES TO GROUP ENTITIES, WORLDWIDE. THUS, THE SE RVICES PROVIDED BY THE ASSESSEE ARE IN THE NATURE OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES). IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS OVERSEAS ASSOCIATED ENTERPRISES (AES) BY P ROVIDING BACK OFFICE SUPPORT SERVICES AND HAS EARNED REVENUE OF RS.33,62,71,615/ -. ASSESSEE HAS BENCHMARKED THE TRANSACTIONS WITH THE AES BY ADOPTING TRANSACTI ONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD. FOR COMPARAB ILITY ANALYSIS, THE ASSESSEE SELECTED 13 COMPANIES WHICH WAS SUBSEQUENT LY REDUCED TO 7 WITH ARITHMETIC MEAN OF 16.91%. SINCE, THE MARGIN SHOWN BY THE ASSESSEE WAS HIGHER THAN THE AVERAGE MARGIN OF THE COMPARABLES, THE TRA NSACTION WITH AES WAS CLAIMED TO BE AT ARMS LENGTH. THE TRANSFER PRICING OFFICER, HOWEVER, DID NOT ACCEPT THE BENCHMARKING OF THE ASSESSEE. AFTER ANAL YZING THE FUNCTIONALITY OF THE ASSESSEE, HE HELD THAT THE SERVICES PROVIDED BY THE ASSESSEE ARE IN THE NATURE OF KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES WHICH FALLS WITHIN THE BROAD CATEGORY OF ITES/BPO SERVICES. THUS, HE WAS OF THE VIEW THAT THE COMPANIES PROVIDING KPO SERVICES WOULD BE FUNCTIONALLY SIMILA R TO ASSESSEE; HENCE, HAVE TO BE SELECTED AS COMPARABLES. WHEREAS, HE OBSERVED, T HE ASSESSEE HAS EXCLUDED ALL KPO COMPANIES. FURTHER, APPLYING CERTAIN ADDITIONAL FILTERS, HE REJECTED ALMOST ALL THE COMPARABLES OF THE ASSESSEE. HAVING DONE SO, TH E TPO PROCEEDED TO SELECT COMPARABLES INDEPENDENTLY. IN THE PROCESS, HE SHORT LISTED THE FOLLOWING COMPANIES AS THE FINAL SET OFF OF COMPARABLES WITH AVERAGE MARGIN OF 49.88%:- 1 ACCROPETAL TECHNOLOGIES LIMITED (SEGMENTAL) 35.30 2 CORAL HUBS LIMITED (EARLIER, VISHAL INFORMATION TECHNOLOGIES LIMITED) 50.68 3 ITA 6522/MUM/2014 3 CROSSDOMAIN SOLUTIONS LIMITED 29.96 4 ECLERX SERVICES LIMITED 65.88 5 MOLD-TEK TECHNOLOGIES LIMITED 96.66 6 TRITON CORP LIMITED 23.81 AVERAGE 49.88 4. APPLYING THE AVERAGE MARGIN OF 49.88% TO THE OPE RATING COST, THE TPO DETERMINED THE ALP AT RS.43,93,06,335/-. THUS, THE RESULTANT SHORTFALL OF RS.10,30,34,720/- WAS PROPOSED AS ADJUSTMENT TO THE ALP. ASSESSEE CONTESTED THE AFORESAID ADJUSTMENT BEFORE LEARNED COMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNE D COMMISSIONER (APPEALS) EXCLUDED THREE COMPARABLES, VIZ. ACCROPETAL TECHNOL OGIES LIMITED (SEGMENTAL), MOLD-TEK TECHNOLOGIES LIMITED, AND TRITON CORP LIMI TED, OUT OF THE COMPARABLES SELECTED BY THE TPO WHILE RETAINING THE BALANCE THR EE. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US. 5. THOUGH, THE ASSESSEE HAS RAISED MULTIPLE GROUNDS ON VARIOUS ASPECTS OF THE TP ADJUSTMENT; HOWEVER, AT THE TIME OF HEARING, LEAR NED COUNSEL FOR THE ASSESSEE RESTRICTED HIS ARGUMENT TO SELECTION/REJECTION OF CE RTAIN COMPARABLES. 6. HE SUBMITTED, THE FIRST APPELLATE AUTHORITY HAS ACCEPTED ASSESSEES CONTENTION THAT IT IS NOT PROVIDING KPO SERVICES. T HEREFORE, HE SUBMITTED, THE COMPANIES WHICH HAVE BEEN FINALLY RETAINED, BEING K PO COMPANIES, CANNOT BE TREATED AS COMPARABLE. HE SUBMITTED, THE BENCHMARKI NG DONE BY THE ASSESSEE IN THE PRECEDING THREE ASSESSMENT YEARS BY CHARACTERIZ ING IT AS AN ITES/BPO COMPANY WAS ACCEPTED BY THE TPO. THEREFORE, THERE I S NO JUSTIFIABLE REASON TO TREAT THE ASSESSEE AS A KPO COMPANY. HE SUBMITTED, BEFORE THE MERGER WITH THE PRESENT ASSESSEE, THE MERGED COMPANY, MORGAN STANLE Y SOLUTIONS INDIA PVT LTD WAS CARRYING OUT THE SAME SERVICES AS IS BEING CARR IED OUT BY THE PRESENT ASSESSEE. 4 ITA 6522/MUM/2014 HE SUBMITTED, FOR THE IMPUGNED ASSESSMENT YEAR, TWO PARALLEL PROCEEDINGS WERE UNDERTAKEN IN CASE OF MORGAN STANLEY SOLUTIONS INDI A PVT LTD, THE MERGED COMPANY AND MORGAN STANLEY ADVANTAGE SOLUTIONS INDI A PVT LTD, THE SUCCESSOR COMPANY. HE SUBMITTED, IDENTICAL ORDERS WERE PASSED BY TPO AND LEARNED COMMISSIONER (APPEALS) IN RESPECT OF BOTH THE COMPA NIES SELECTING SAME SET OF COMPARABLES. HE SUBMITTED, EVEN IN THE CASE OF SUCC ESSOR COMPANY, THE TPO HAD RE-CHARACTERIZED THE SERVICES AS KPO SERVICES. HE S UBMITTED, WHEN THE SUCCESSOR COMPANY DISPUTED THE SELECTION/REJECTION OF COMPARAB LES BEFORE THE TRIBUNAL IN ORDER DATED 23-07-2020, THE TRIBUNAL, HOLDING THAT THE ASSESSEE AS AN ITES/BPO SERVICE PROVIDER, REJECTED KPO COMPANIES, SUCH AS, E CLERX SERVICES LTD, CORAL HUBS LIMITED (VISHAL INFORMATION TECHNOLOGIES LIMITED) A ND CROSSDOMAIN SOLUTIONS LIMITED. FURTHER, THE TRIBUNAL DIRECTED INCLUSION OF THREE COMPARABLES SELECTED BY THE ASSESSEE, VIZ. ALLSEC TECHNOLOGIES, R SYSTEMS I NTERNATIONAL LTD AND CG VAK SOFTWARE & EXPORTS LTD. THUS, HE SUBMITTED, ISSUE I S SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D, THE ASSESSEE HAS NOT PROPERLY APPLIED THE FILTERS WHICH OTHERWISE ARE AP PLICABLE FOR SELECTION OF COMPARABLES. HE SUBMITTED, THE NATURE OF SERVICES P ROVIDED BY THE ASSESSEE WOULD CATEGORIZE IT AS A HIGH END BPO SERVICE PROVI DER. HE SUBMITTED, THE COMPARABLES SELECTED SHOULD BE RETAINED. 8. AS REGARDS INCLUSION OF CERTAIN COMPARABLES SELE CTED BY THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, ALLS EC TECHNOLOGIES AND CG VAK SOFTWARE & EXPORTS LTD ARE CONSISTENT LOSS MAKING C OMPANIES. HE SUBMITTED, THE REASONS FOR WHICH THE COMPANIES HAVE MADE LOSS ARE NOT FORTHCOMING. HE 5 ITA 6522/MUM/2014 SUBMITTED, WHETHER LOSS IS ON ACCOUNT OF ANY EXTRAO RDINARY EVENT, SUCH AS, MERGER / DEMERGER, REQUIRES TO BE EXAMINED. 9. IN REJOINDER, LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED, ALLSEC TECHNOLOGIES AND CG VAK SOFTWARE & EXPORTS LTD CANN OT BE CONSIDERED AS CONSISTENT LOSS MAKING COMPANY, AS, THEY HAVE INCUR RED LOSS ONLY IN THE CURRENT YEAR, WHEREAS, THEY HAVE SHOWN PROFIT IN THE PRECED ING TWO ASSESSMENT YEARS. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIALS ON RECORD. AS DISCUSSED EARLIER, THE DISPUTE BEFORE US IS CONFINE D TO SELECTION/REJECTION OF CERTAIN COMPARABLES. BEFORE, WE PROCEED TO DEAL WIT H THE ACCEPTABILITY OR OTHERWISE OF THE COMPARABLES DISPUTED BEFORE US, IT IS NECESSARY TO OBSERVE, THE ASSESSEE, UNDOUBTEDLY, PROVIDES BACK OFFICE SUPPORT SERVICES TO ITS GROUP ENTITIES. THE ASSESSEE HAS CLAIMED ITSELF TO BE A ROUTINE ITE S/BPO SERVICE PROVIDER, WHEREAS, THE TPO HAS RE-CHARACTERIZED THE ASSESSEE AS A KPO COMPANY AND ACCORDINGLY, HAS SELECTED SIMILAR NATURE OF COMPANI ES. HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS ACCEPTED ASSESSEES CONT ENTION THAT IT IS NOT A KPO SERVICE PROVIDER. ADMITTEDLY, THE DEPARTMENT HAS NO T CHALLENGED THE AFORESAID DECISION OF THE FIRST APPELLATE AUTHORITY. THUS, KE EPING IN PERSPECTIVE THE AFORESAID FACTUAL POSITION, WE HAVE TO EXAMINE WHET HER CERTAIN COMPANIES ARE COMPARABLES TO THE ASSESSEE OR NOT. 11. AT THE OUTSET, WE WILL DEAL WITH THE COMPANIES SELECTED BY THE TPO, VIZ. ECLERX SERVICES LTD, CORAL HUBS LIMITED (VISHAL INF ORMATION TECHNOLOGIES LIMITED) AND CROSSDOMAIN SOLUTIONS LIMITED. AS FAR AS ECLERX SERVICES LTD AND CROSSDOMAIN SOLUTIONS LIMITED ARE CONCERNED, NOW IT IS FAIRLY W ELL SETTLED THAT THESE TWO COMPANIES ARE KPO SERVICE PROVIDERS. THIS HAS BEEN HELD IN A NUMBER OF JUDICIAL PRECEDENTS INCLUDING THE DECISION OF THE HONBLE DE LHI HIGH COURT IN CASE OF 6 ITA 6522/MUM/2014 RAMPGREEN SOLUTIONS PVT LTD VS COMMISSIONER OF INCO ME TAX 377 ITR 533 (DEL). IN OUR VIEW, LEARNED COMMISSIONER (APPEALS) HAS MAD E A FUNDAMENTAL ERROR BY INCLUDING THESE TWO COMPANIES IN SPITE OF THE FACT THAT HE HIMSELF WAS SATISFIED THAT THE ASSESSEE IS NOT A KPO SERVICE PROVIDER. AS REGARDS CORAL HUBS LIMITED (EARLIER, VISHAL INFORMATION TECHNOLOGIES LIMITED), IT IS A FACT ON RECORD THAT IT HAS ABNORMALLY LOW EMPLOYEE COST, WHICH, PRE-SUPPOSES T HAT MOST OF THE WORK OF THIS COMPANY IS OUTSOURCED TO THIRD PARTY VENDORS. WHERE AS, ASSESSEE ITSELF PROVIDES SERVICES WITHOUT OUTSOURCING. THEREFORE, THE BUSINE SS MODEL OF THE COMPANY IS COMPLETELY DIFFERENT FROM THE ASSESSEE. THOUGH, IT MAY BE A FACT THAT IN THE TP STUDY ANALYSIS, THE ASSESSEE HAS INCLUDED VISHAL I NFORMATION TECHNOLOGIES LIMITED AS A COMPARABLE, MAY BE, DUE TO INSUFFICIENT DATA A VAILABLE IN PUBLIC DOMAIN, HOWEVER, AS HAS BEEN HELD IN A NUMBER OF JUDICIAL PR ECEDENTS INCLUDING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS PVT LTD VS CIT (SUPRA), DUE TO ITS DIFFERENT BUSINE SS MODEL THE COMPANY CANNOT BE TREATED AS COMPARABLE. THEREFORE, THE AFORESAID THR EE COMPANIES CANNOT BE TREATED AS COMPARABLE TO THE ASSESSEE. 12. AS REGARDS ASSESSEES CONTENTION REGARDING INCL USION OF THREE COMPARABLES, VIZ. ALLSEC TECHNOLOGIES, CG VAK SOFTWARE & EXPORTS LTD AND R SYSTEMS INTERNATIONAL LTD, THE PRIMARY OBJECTION OF THE LEAR NED DEPARTMENTAL REPRESENTATIVE IS, ALLSEC TECHNOLOGIES AND CG VAK S OFTWARE & EXPORTS LTD ARE CONSISTENT LOSS MAKING COMPANIES. HOWEVER, ON PERUS AL OF MATERIAL ON RECORD INCLUDING THE STATEMENT OF FACT FILED BEFORE LEARNE D COMMISSIONER (APPEALS), WE HAVE NOTICED THAT BOTH THESE COMPANIES HAVE SHOWN P ROFIT IN THE PRECEDING TWO ASSESSMENT YEARS. ONLY IN THE CURRENT ASSESSMENT YE AR, THE COMPANIES HAVE REPORTED LOSS. THEREFORE, THEY CANNOT BE CONSIDERED AS CONSISTENT LOSS MAKING 7 ITA 6522/MUM/2014 COMPANIES. AS FAR AS R SYSTEMS INTERNATIONAL LTD IS CONCERNED, THE ONLY REASON FOR EXCLUSION IS IT HAS A DIFFERENT FINANCIAL YEAR ENDI NG. THE DEPARTMENTAL AUTHORITIES HAVE NOT EXAMINED WHETHER CONTEMPORANEOUS DATA OF T HE COMPANY RELATING TO THE FINANCIAL YEAR CORRESPONDING TO THE FINANCIAL Y EAR OF THE ASSESSEE IS AVAILABLE OR NOT. IN THE AFORESAID FACTUAL POSITIONS, WE DO N OT FIND ANY STRONG REASON TO UPHOLD THE DECISION OF THE DEPARTMENTAL AUTHORITIES IN EXCLUDING THE AFORESAID THREE COMPANIES SELECTED BY THE ASSESSEE. 13. PERTINENTLY, WHILE FRAMING THE ORDER UNDER SECT ION 92CA(3) OF THE ACT IN CASE OF THE SUCCESSOR COMPANY (THE PRESENT ASSESSEE ) WITH WHOM THE ERSTWHILE COMPANY MERGED, THE TRANSFER PRICING OFFICER HAD PA SSED AN IDENTICAL ORDER SELECTING/REJECTING THE VERY SAME COMPARABLES BY RE- CHARACTERIZING THE SUCCESSOR COMPANY AS A KPO SERVICE PROVIDER. IN AN IDENTICAL ORDER LEARNED COMMISSIONER (APPEALS), THOUGH, HELD THAT THE SUCCESSOR COMPANY IS NOT A KPO SERVICE PROVIDER; HOWEVER, HE RETAINED SOME OF THE COMPANIES SELECTED BY THE TPO WHILE UPHOLDING THE REJECTION OF COMPANIES SELECTED BY THE CONCERNED ASSESSEE. WHILE DECIDING THE APPEAL FILED BY THE CONCERNED ASSESSEE IN MORGAN STANLEY ADVANTAGE SERVICES (P) LTD VS DCIT (2020) 118 TAXMANN.COM 112 (MUMTRIB), THE TRIBUNAL HAS HELD, AS UNDER:- 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PE RUSED THE RECORDS. THE ASSESSEE IN THE PRESENT CASE IS A SUBSIDIARY OF MOR GAN STANLEY INTERNATIONAL HOLDINGS INCORPORATED USA. THE ASSESSEE PROVIDES BACK OFFICE SUPPORT FUNCTIONS TO ITS ASSOCIATED ENTERPRISES. THE TRANSACTIONS OF IT ENAB LED SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES AND THE ARMS LENGTH PRICE CO MPUTED BY THE ASSESSEE WAS ACCEPTED BY THE REVENUE IN A.Y. 2005-06 AND A.Y. 20 06-07. THE SAME WAS ALSO UPHELD BY THE ITAT FOR ASSESSMENT YEAR 2007-08. FOR THE CURRENT ASSESSMENT YEAR, THE TRANSFER PRICING OFFICER CHARACTERIZED THE ASSE SSEE'S FUNCTIONS AS KNOWLEDGE PROCESS OUTSOURCING KPO. THEREAFTER, THE TRANSFER P RICING OFFICER MADE GENERAL COMMENTS ON THE SELECTION SYSTEMS ADOPTED BY THE AS SESSEE. HE PROCEEDED TO REJECT THE SAME. HE DID NOT SPECIFY AS TO WHICH OF THE COM PARABLES IS BEING REJECTED FOR WHICH SPECIFIC REASONS THEREOF. THEREAFTER, THE TRA NSFER PRICING OFFICER MENTIONED HIS OWN CRITERIA AND PROCEEDED TO SELECT COMPARABLES AN D ACCORDINGLY MADE THE TRANSFER PRICING ADJUSTMENT. UPON THE ASSESSEE'S APPEAL, THE ID. CIT(A) HAS ACCEPTED THAT THE 8 ITA 6522/MUM/2014 CHARACTERIZATION BY THE TRANSFER PRICING ' OFFICER OF THE ASSESSEE'S FUNCTIONS AS KNOWLEDGE PROCESS OUTSOURCING WAS NOT CORRECT. THER EAFTER, THE ID. CIT(A) CONTRADICTED HIMSELF BY STATING THAT THE FUNCTIONS OF THE ASSESSEE ARE IN ALIGNMENT WITH THE KNOWLEDGE PROCESS OUTSOURCING COMPARABLE D EALT WITH BY THE TRANSFER PRICING OFFICER. IN THIS REGARD, THE LEARNED CIT APPEALS RE LIED UPON THE ITAT DECISION IN THE CASE OF MAERSK GLOBAL CENTERS (INDIA) (P.) LTD. THE REAFTER, THE LEARNED CIT(A) UPHELD THE ASSESSING OFFICER'S ACTION OF SELECTION OF FOUR OF THE COMPARABLES AND ACCEPTED THE ASSESSEE'S CONTENTION IN REJECTION OF THE TWO COMPARABLES. NOW IN APPEAL BEFORE US, THE SUBMISSION OF THE LEAR NED COUNSEL OF THE ASSESSEE IS THAT ASSESSEE'S FUNCTIONS ARE THAT OF ITES WHICH HAS BEE N DULY ACCEPTED BY THE REVENUE AS WELL AS BY THE ITAT IN EARLIER YEARS. HENCE, THE RE -CHARACTERISATION OF THE ASSESSEE'S FUNCTIONS AS KNOWLEDGE PROCESS OUTSOURCING IS NOT S USTAINABLE. WE ARE IN FULL AGREEMENT WITH THIS CONTENTION. FURTHERMORE, WE FIN D THAT THE ID. CIT(A) HAS CLEARLY CONTRADICTED HIMSELF BY STATING BOTH THAT ASSESSEE IS NOT A KPO AND AT THE SAME TIME ACCEPTING THE COMPARABLES SELECTED BY THE TRANSFER PRICING OFFICER FROM THE DATABASE FOR KNOWLEDGE PROCESS OUTSOURCING COMPANIES. 13. AS REGARDS THE REJECTION OF FOUR COMPANIES, IT IS T HE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE THAT THE FUNCTIONS OF ECLERX SERVIC ES LTD. AND VISHAL INFORMATION TECHNOLOGIES LTD. (EARLIER CORAL HUB LTD.) HAS BEEN HELD TO BE NOT COMPARABLE TO THE ASSESSEE BY THE ITAT FOR THE ASSESSMENT YEAR 2007-0 8. IN THIS REGARD, WE FIND THAT ITAT IN THE AFORESAID ORDER HAS OBSERVED AS UNDER: 32. AS NOTED EARLIER THE ID. AR FOR THE ASSESSEE S UBMITTED THAT THE ASSESSEE SUBMITS THAT ECLERX SERVICES LTD. HAS NOT CONSIDERE D AS A COMPARABLE IN EARLIER YEARS. ECLERX SERVICES LTD. IS A KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICE PROVIDER WHICH IS NOT COMPARABLE TO A SSESSEE; ASSESSEE IS ENGAGED IN PROVIDING BACK OFFICE SUPPORT SERVICES. IN SUPPORT OF HIS SUBMISSION, THE ID. AR OF THE ASSESSEE RELIED UPON THE DECISION OF DELHI HIGH COURT IN RAWPGREEN SOLUTION (P.) LTD. V. (77 (20 151 377 ITR 533 (DELHI). THE TPO INCLUDED THIS COMPARABLE BY TAKING HIS VIEW THAT THIS COMPANY IS IN DATE PROCESS AND ANALYTICAL SERVICES. THE ID. CIT(A ) CONFIRMED THE ACTION OF THE TPO BY TAKING HIS VIEW THAT THIS COMPARABLE COM PANY IS INTO THE HEALTH CARE RECEIVABLE MANAGEMENT AND THEREFORE RENDERS IT ES SERVICES. THE HON'BLE DELHI COURT IN RAMPGRECN SOLUTION (P.) LTD. (SUPRA} HELD ENTITIES RENDERING VOICE CALL CENTER SERVICES FOR CUSTOMER SUPPORT AND A KPO SERVICE PROVIDER EMPLOY IT-BASED DELIVERY SYSTEMS, BUT CHARACTERISTI CS OF SERVICES, FUNCTIONAL ASPECTS, BUSINESS ENVIRONMENT, RISKS AND QUALITY OF HUMAN RESOURCE EMPLOYED ARE MATERIALLY DIFFERENT; AND THEREFORE, BENCHMARKI NG INTERNATIONAL TRANSACTIONS ON BASIS OF COMPARISON OF PLI OF HIGH- END KPO SERVICE PROVIDERS WITH PLI OF VOICE CALL CENTERS, WOULD BE UNRELIABLE. FURTHER, MUMBAI TRIBUNAL IN WILLS PROCESSING SERVICES (INDIA) LTD. V, ACIT (SUPRA) ON CONSIDERING SIMILAR CONTENTIONS EXCLUDED THIS CO MPARABLE. SERVICES TO OVERSEAS MARKETS AND INCLUDED IN THE LI ST OF COMPARABLE. THE ID. CIT(A) CONFIRMED THE ACTION OF TPO HOLDING THAT THE TPO CONDUCTING BENCHMARKING AFTER CALLING INFORMATION UNDER SECTIO N 133(6) AND IS BENCHMARKING ANALYSIS ARC CORRECT. WE HAVE NOTED TH AT, THOUGH THE ID. AR HAS RELIED UPON A NUMBER OF DECISIONS OF TRIBUNAL/CO-OR DINATE BENCH. WE HAVE NOTED THAT IN A RECENT DECISION OF TRIBUNAL IN WILLS PROCESSING SERVICES (I) (P.) LTD. (SUPRA) ON COMPARABILITY, THE TRIBUNAL HELD AS UNDER: 9 ITA 6522/MUM/2014 WE THOUGH IN LIGHT OF OUR AFORESAID OBSERVATIONS HA D PARTLY DISAGREED WITH CERTAIN GROUNDS AS HAD BEEN AVERRED BY THE LD. AR T O FACILITATE EXCLUSION OF THE AFORESAID COMPARABLE, HOWEVER AS OBSERVED BY US HEREINABOVE THAT THE AFORESAID COMPARABLE VIZ. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) HAD A BUSINESS MODE L WHERE SERVICES ARE OUTSOURCCD, AS AGAINST THE BUSINESS MODEL OF THE AS SESSEE WHERE SERVICES ARE RENDERED BY EMPLOYING OWN EMPLOYEES AND USING ONE'S OWN INFRASTRUCTURE, ON THE BASIS OF WHICH WE ARE OF THE CONSIDERED VIEW TH AT IT CAN SAFELY BE CONCLUDED THAT THE SAID COMPARABLE WAS FUNCTIONALLY DIFFERENT, AND AS SUCH WAS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF CO MPARABLES. THAT OUR AFORESAID VIEW STANDS FORTIFIED BY THE AFORESAID OR DER PASSED BY THE TRIBUNAL WHILE DISPOSING OF THE APPEAL OF THE ASSESSEES OWN APPEAL FOR A.Y. 2005-06, AS WELL AS THE JUDGMENT OF THE HON'BLE HIGH COURT O F DELHI IN THE CASE OF RAMPGRCEN SOLUTIONS (P.) LTD. (SUPRA). THUS AS THERE HAS BEEN NO MATERIAL SHIFT IN THE FACTS INVOLVED IN THE CASE OF THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION, AS OBSERVED BY US HEREINABOVE, WE AR E THUS OF THE CONSIDERED VIEW THAT AS THE BUSINESS MODEL OF THE AFORESAID CO MPARABLE, VIZ. CORAL HUB LTD. (SUPRA) IS SUBSTANTIALLY DIFFERENT FROM THAT OF THE ASSESSE E, THEREFORE THE SAME CANNOT BE ACCEPTED AS A COMPARABLE AND HENCE I S DIRECTED TO BE EXCLUDED FROM THE LIST ./OF COMPARABLES.' 14. ACCORDINGLY, FOLLOWING THE AFORESAID DECISION O F THE TRIBUNAL, WE HOLDING THAT THE ECLERX SERVICES LTD. AND VISHAL INFORMATION TECHNOL OGIES LTD. (EARLIER CORAL HUB LTD.) ARE LIABLE TO BE REJECTED AS INVALID COMPARABLE. AS REGARDS THE OTHER COMPARABLES NAMELY CROSSDOMAIN SOLUTIONS AND DATAMATICS FINANCIAL SERVICES, WE FIND ' THAT THE TRANSFER PRI CING OFFICER AND THE ID. CIT(A) HAVE FOUND THEIR FUNCTIONS TO BE SIMILAR TO THAT OF KPO I AND THAT OF ECLERX AND VISHAL TECHNOLOGIES. SINCE, THE ITAT HAS DULY UPHELD THE R EJECTION OF THE AFORESAID /. COMPANIES, I.E., THESE TWO COMPANIES ARE ALSO LIABLE TO BE REJECTED. FURTHERMORE, DATAMATICS FINANCIAL// SERVICES ALSO FAILS THE EXPO RT FILTER OF 75% WHICH HAS BEEN ADOPTED BY THE TRANSFER PRICING OFFICER. HENCE, INL ' THE BACKGROUND OF AFORESAID, WE HOLD THAT FOLLOWING COMPARABLE ARE TO BE REJECTED: * ECLERX SERVICES LTD. * VISHAL INFORMATION TECHNOLOGIES LTD. * CROSSDOMAIN SOLUTIONS * DATAMATICS FINANCIAL SERVICES. 15. NOW WE DEAL WITH THE FOLLOWING COMPARABLES WHIC H WERE SELECTED BY THE ASSESSEE, BUT HAVE BEEN REJECTED BY THE TRANSFER PR ICING OFFICER: * ALLSEC TECHNOLOGIES * R SYSTEMS INTERNATIONAL LTD. + CG VAK SOFTWARE & EXPORTS LTD. 16. THE TRANSFER PRICING OFFICER HAS NOT MENTIONED THE SPECIFIC REASONING IN REJECTING THE ABOVE COMPARABLE. WHILE DISCUSSING HIS GENERAL REASONING FOR ELECTION/REJECTION, THE TRANSFER PRICING OFFICER MENTIONED THAT HE IS O NLY ACCEPTING COMPARABLES WHERE THE CURRENT YEAR DATA ARE AVAILABLE. IN THIS REGARD, WE NOTE THAT THOUGH INITIALLY THE ASSESSEE HAD SUBMITTED TWO-YEAR DATA, SUBSEQUENTLY, IT HAS DULY SUBMITTED THE CURRENT YEAR DATA. THE TRANSFER PRICING OFFICER HAS ALSO M ENTIONED THAT HE IS REJECTING THE PERSISTENT LOSS MAKING COMPANIES. THOUGH SOME OF T HESE COMPANIES HAVE SUFFERED LOSS IN THE CURRENT ASSESSMENT YEAR THE AVERAGE OF TWO YEARS SHOWED THE ROBUST POSITIVE FIGURE. HENCE, IT CANNOT BE SAID THAT THE SE ARE PERSISTENTLY LOSS MAKING 10 ITA 6522/MUM/2014 COMPANY. FURTHERMORE, WE NOTE THAT THESE COMPARABL ES HAVE BEEN DULY ACCEPTED AS COMPARABLE IN EARLIER ASSESSMENT YEAR BY THE OFFICE R HIMSELF. HENCE, TAKING A CONTRARY STAND BY THE TRANSFER PRICING OFFICER WITH OUT GIVING A SPECIFIC REASONING IS NOT SUSTAINABLE. ACCORDINGLY, WE DIRECT FOR INCLUS ION OF THESE COMPARABLES. 14. THUS, AS COULD BE SEEN, IN PARALLEL PROCEEDINGS UNDERTAKEN IN CASE OF THE SUCCESSOR COMPANY HAVING IDENTICAL BUSINESS MODEL, THE TRIBUNAL HAS ALREADY DECIDED ISSUES RELATING TO SELECTION/REJECTION OF CO MPARABLES AS ARE DISPUTED IN THE PRESENT APPEAL. THUS, FACTS BEING IDENTICAL, TH E AFORESAID DECISION OF THE CO- ORDINATE BENCH WOULD SQUARELY APPLY. 15. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSI NG OFFICER TO INCLUDE R SYSTEM INTERNATIONAL LTD, ALLSEC TECHNOLOGIES AND CG VAK S OFTWARE & EXPORTS LTD AS COMPARABLES. WHEREAS, HE IS DIRECTED TO EXCLUDE ECL ERX SERVICES LTD, CORAL HUBS LIMITED (EARLIER, VISHAL INFORMATION TECHNOLOGIES L IMITED) AND CROSSDOMAIN SOLUTIONS LIMITED FROM THE LIST OF COMPARABLES. AFT ER COMPLETING THE AFORESAID EXERCISE, HE MUST COMPUTE THE ALP OF THE INTERNATIO NAL TRANSACTIONS. GROUNDS 4 AND 6 ARE ALLOWED. WHEREAS, OTHER GROUNDS BEING PUR ELY OF ACADEMIC INTEREST ARE DISMISSED. 16. IN THE RESULT, APPEAL IS ALLOWED AS INDICATED A BOVE. ORDER PRONOUNCED ON 12/08/2021. SD/- SD/- (MANISH BORAD) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 12/08/2021 PAVANAN 11 ITA 6522/MUM/2014 COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI