WILLIS PROCESSING SERVICES (INDIA) P.LTD, MUMBAI V. ASST CIT (OSD) 2(3), MUMBAI

ITA 6877/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7903 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 24-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS CHANDA
• Assessee Lawyers: R R VORA
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Services rendered outside India
• Section: 92C; 143(3); 234B; 6; 11

Judgement Text

P A G E | 1 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 6877 / MUM/ 2012 ( / ASSESSMENT YEAR: 2008 - 09 ) M/S WILLIS PROCESSING SERVICES (INDIA) PVT. LTD. PLANT NO.6, GODREJ & BOYCE MFG.CO. COMPOUND, PIROJSHNAGAR, L.B.S MARG, VIKHROLI (WEST), MUMBAI 400 079. / VS. ACIT (OSD) - 2(3), AAYKAR BHAWAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABFL 2160 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SH. R.R VORA AND NIKHIL TIWARI. / RESPONDENT BY : SH. DEBASHIS CHAND A / DATE OF HEARING : 03/0 3 /2017 / DATE OF PRONOUNCEMENT : 22 /0 3 /2017 P A G E | 2 / O R D E R RA VISH SOOD, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME - TAX (OSD) - 2(3) (FOR SHORT ACIT) UNDER SEC. 143(3) R.W SECTION 144C OF THE INCOME - TAX ACT, 1961(FOR SHORT ACT) , DATED 26 .0 3 .2012 THE ASSESSEE ASSAILING THE ORDER PASSED BY THE ACIT HA D FILED BEFORE THE TRIBUNAL SUMMARI Z ED AND MODIFIED GROUNDS OF APPEAL, AS UNDER: - ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LEARNED ASSESSING OFFICER (AO)/DISPUTE RESOLUTION PANEL ('HONBLE DRP') HAS: A. TRANSFER PRICING ADJUSTMENT TRANSFER PRICING ADJUSTMENT 1. ERRED IN LAW AND IN FACT IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS.7,29,53,949/ - UNDER SECTION 92C(4) OF THE ACT TO THE TOTAL INCOME OF THE APPELLANT ON THE PREMISE THAT THE INTERNATIONAL TRANSACTIONS (I.E. IT ENABLED SERVICES) RENDERED BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISES (AES) WERE NOT AT ARM'S LENGTH; 2. ERRED IN PROCEEDING TO DETERMINE THE ARM'S LENGTH PRICE WITHOUT COMPLYING WITH THE CONDITIONS LAID DOWN IN SECTION 92C(3) AND ALSO FAILING TO SERVE A PROPER SHOW CAUSE NOTICE TO THIS EFFECT AND HENCE ENTIRE TRANSFER PRICING ADJUSTMENT PROPOSED IS BAD IN LAW. P A G E | 3 USE OF CONTEMPORANEOUS DATA 3. ERRED IN DETERMINING THE ARMS LENGTH PRICE USING DATA FOR FINANCIAL YEAR (FY) 2007 - 08 ONLY AND IN UNDERTAKING A NEW SEARCH AFTER THE SPECIFIED DATE I.E. 30 SEPTEMBER 2008, DISREGARDING THE FACT THAT 5 COMPARABLES FROM THE APPELLANTS SET WERE ACCEPTED AND HENCE A NEW SEARCH WAS NOT WARRANTED. COMPARABLE COMPANIES SELECTED BY THE APPELLANT 4. ERRED IN REJECTING COMPARABLES SELECTED BY THE APPELLANT UNDER THE TRANSACTIONAL NET MARGIN METHOD (TNMM') IN ITS TRANSFER PRICING STUDY REPORT WITHOUT PROVIDING ADEQUATE OPPORTUNITY TO THE APPELLANT TO SUBMIT REBUTTALS AS TO WHY THE COMPARABLE COMPANIES SHOULD NOT BE REJECTED. ADDITIONAL COMPARABLES IDENTIFIED BY THE LEARNED TPO 5. ERRED IN SELECTING ADDITIONAL COMPARABLES FOR THE BENCHMARKING A NALYSIS, DISREGARDING THE APPELLANT'S CONTENTIONS AS TO WHY THESE COMPARABLE SHOULD BE REJECTED. 6. ERRED IN CONSIDERING CROSSDOMAIN SOLUTIONS PRIVATE LIMITED AND E4E (EARLIER NITTANY OUTSOURCING SERVICES LIMITED) AS COMPARABLES WITHOUT APPRECIATING THAT THE FUNCTIONAL ASSET AND RISK PROFILE OF THESE COMPANIES IS DIFFERENT AND HENCE THEY ARE NOT COMPARABLE TO THE APPELLANT. 7. ERRED IN CONSIDERING CORAL HUB(EARLIER KNOWN AS VISHAL INF ORMATION TECHNOLOGY LIMITED), AS A COMPARABLE DISREGARDING THE FACT THAT THE COMPANY HAS VERY LOW EMPLOYEE COST IMPLYING THAT IT OUTSOURCES A MAJOR PORTION OF ITS WORK TO THIRD PARTY VENDORS AND HENCE IS FUNCTIONALLY DIFFERENT FROM THE APPELLANT. 8. ERRED IN CONSIDERING ECLERX SERVICES LIMITED AND MOLD - TEK TECHNOLOGIES LIMITED AS COMPARABLES DISREGARDING THE FACT P A G E | 4 THAT THE COMPANIES ARE ENGAGED IN HIGH END KNOWLEDGE PROCESS OUTSOURCING SERVICES AS COMPARED TO APPELLANT WHICH IS ENGAGED IN PROVISION OF ROUTIN E IT ENABLED SERVICES. 9. ERRED IN VIOLATING THE RULES OF NATURAL JUSTICE BY NOT PROVIDING SHARING THE COMPLETE DETAILS OF THE BENCH MARKING ANALYSIS, CARRIED OUT BY HIM, USE OF DATA OBTAINED UNDER SECTION 133 (6) OF THE ACT 10. ERRED IN USING DATA/INFORMA TION OBTAINED FROM VARIOUS THIRD PARTY COMPANIES UNDER SECTION133 (6) OF THE ACT, ERRONEOUS MARGIN COMPUTATION 11. ERRED IN NOT CONSIDERING THE EVIDENCE PROVIDED BY THE APPELLANT IN RELATION TO THE ERRORS COMMITTED BY THE TPO WHILE COMPUTING THE OPERATING MARGINS OF CERTAIN COMPARABLE COMPANIES. WORKING CAPITAL ADJUSTMENT 12. ERRED IN NOT ALLOWING THE APPELLANT THE BENEFIT OF THE WORKING CAPITAL ADJUSTMENT IGNORING THE FACT THAT WORKING CAPITAL ADJUSTMENT HAS BEEN PREVIOUSLY ALLOWED IN APPELLANT'S OW N CASE BY THE TPO FOR AY 2006 - 07. RISK ADJUSTMENT 13. ERRED IN NOT GRANTING THE APPELLANT THE BENEFIT OF RISK ADJUSTMENTS WHICH IS REQUIRED TO BE UNDERTAKEN TO ACCOUNT FOR THE DIFFERENCES IN LEVEL OF RISKS ASSUMED BETWEEN THE COMPARABLE COMPANIES AND THE A PPELLANT IN TERMS OF RULE 10C(2)(E) OF THE RULES. BENEFIT OF +/ - 5% RANGE 14. ERRED BY NOT CONSIDERING THAT THE ADJUSTMENT TO THE ARM'S LENGTH PRICE, IF ANY, SHOULD BE LIMITED TO THE LOWER END OF THE 5 PERCENT RANGE AS THE APPELLANT HAS THE RIGHT TO P A G E | 5 EXERCI SE THIS OPTION UNDER THE PROVISO TO SECTION 92C OF THE ACT. 15. WITHOUT PREJUDICE TO GROUND NO. 12, THE APPELLANT WISHES TO SUBMIT THAT NO ADJUSTMENT SHOULD BE MADE TO THE TOTAL INCOME OF THE APPELLANT, IF THE VARIATION BETWEEN TRANSFIX PRICE AND ARM'S LEN GTH PRICE IS WITHIN THE RANGE OF +/ - 5%. B. CORPORATE TAX GROUND DEDUCTION UNDER SECTION 10A 16. ERRED IN DISALLOWING THE DEDUCTION OF RS.6,70,56,096/ - AS CLAIMED UNDER SECTION 10A OF THE ACT. NOT FOLLOWED APPELLATE ORDER IN OWN CASE 17. ERRED IN NOT FOLLOWING THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN THE APPELLANT'S OWN CASE FOR THE A Y 2006 - 07 IN ITA NO. 8772/MUM/ 2010 WHICH HAS BEEN RELIED UPON BY THE APPELLANT. EXCLUSION OF MISCELLANEOUS INCOME WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. 18 ERRED IN EXCLUDING THE MISCELLANEOUS INCOME AMOUNTING TO RS.2,47,374/ - FROM THE ELIGIBLE PROFITS WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. INTEREST 19. ERRED IN COMPUTING THE INTEREST UNDER SECTION 234B OF THE ACT. PENALTY PROCEEDING . 20. ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) . THE APPELLANT CRAVES IEAVE TO ADD , ALTER, AMEND OR DELETE THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING OF THE P A G E | 6 APPEAL SO AS TO ENABLE THE HONBLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. THE ASSESSEE COMPANY AFTER SEEKING LIBERTY HAD THEREAFTER VIDE ITS LETTER DATED. 03.06.2014 RAISED ADDITIONAL GROUNDS OF APPEAL, AS UNDER: - ADDITI0NAL GROUNDS OF APPEAL BASED ON THE FACTS AND IN THE CIRCUMSTANCES, OF THE CASE AND IN LAW, THE APPELLANT RESPECTFULLY CRAVE LEAVE TO PREFER AN APPEA L AGAINST THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, RANGE - 2(3). MUMBAI (LEARNED AO), UNDER SECTION 143(3) R.W.S 144 C(13) OF THE INCOME - TAX ACT, 1961 (ACT) IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL - II, MUMBAI (HONBLE DRP), ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TP0 HAS: REJECTION OF COMPARABLES ON EXTRAORDINARY ACTIVITIES. 21. ERRED IN CONSIDERING ACCENTIA TECHNOLOGIES LIMITED AND MOLD - TEK TECHNOLOGIES LIMITED AS COMPARABLE TO THE APPELLANT, WITHOUT APPRECIATING THAT THE COMPANIES HAVE EARNED SUPERNORMAL PROFITS DUE TO EXTRAORDINARY EVENTS. 22. ERRED IN CONSIDERING ECLERX SERVICES LIMITED AS COMPARABIE WITHOUT APPRECIATING THE FACT THAT AN EXTRAORDINARY EVENT TOOK PLACE DURING THE YEAR AND HENCE THE COMPANY CANNOT B E CONSIDERED COMPARABLE TO THE APPELLANT REJECTION OF COMPARABLE ON RELATED PARTY TRANSACTION FILTER 23. ERRED IN CONSIDERING HCL, CO NNECT SYSTEMS AND SERVICES LIMITED AND BNR UDYOG LIMITED AS COMPARABLE WITHOUT APPRECIATING THE FACT THAT THE COMPANY FAILS THE RELATED PARTY TRANSACTIONS (RPT') TO SALES FILTER OF 25% APPL IED BY THE TPO. SEGMENTAL RESULTS SHOULD NOT BE CONSIDERED WHEN DIRECT COMPARABLES ARE AVAILABLE P A G E | 7 24. ERRED IN CONSIDERING THE SEGMENTAL RESULTS OF CERTAIN COMPANIES VIZ: HCL CON NEC T SYSTEMS AND SERVICES LIMITED AND DATAMATRICS FINANCIAL SERVICES LIMITED F OR THE BENCHMARKING ANALYSIS WITHOUT APPRECIATING THAT THERE WERE SUFFICIENT NUMBER OF COMPARABLES ENGAGED SOLELY IN INFORMATION TECHNOLOGY ENABLED SERVICES AND HENCE USE OF SUCH SEGMENTAL DATA WAS NOT WARRANTED. INCONSISTENT APPROACH FOLLOWED BY THE TP O WHILE COMPUTING THE OPERATING MARGINS. 25. ERRED IN CONSIDERING FOREX FLUCTUATION AS OPERATING IN NATURE FOR THE PURPOSE OF COMPUTING THE OPERATING MARGINS OF CERTAIN COMPARABLES WHEREAS THE SAME HAS BEEN CONSIDERED AS NON - OPERATING IN NATURE WHILE COMPU TING THE OPERATING MARGIN OF THE APPELLANT, THEREBY, ADOPTING AN INCONSISTENT APPROACH. BRIEF BACKGROUND : 1. THE ASSESSEE COMPANY, VIZ WILLIS PROCESSING SERVICE (INDIA) PRIVATE LIMITED (FORMERLY KNOWN AS TRINITY COMPUTER PROCESSING (INDIA) PRIVATE LIMITED) IS AN INDIAN COMPANY WHICH WAS INCORPORATED ON 12 .05. 1992 AS AN EXPORT ORIENTED UNIT (EOU) UNDER THE SOFTWARE TECHNOLOGY PARK OF INDIA SCHEME (STP1) OF THE GOVERNMENT OF INDIA. THE ASSESSEE IS A 99.99% SUBSIDIARY OF WILLIS EUROPE B V , A COMPANY INCORPORATE D IN NETHERLANDS. THAT D URING THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2008 - 09, THE ASSESSEE PROVIDED IT ENABLED SERVICES ('ITES') TO ITS ASSOCIATE ENTERPRIS ES ('AE') IN VARIOUS COUNTRIES. THE ITES SER VICES PROVIDED BY THE ASSESSEE COMPANY INCLUDE D PROCESSIN G OF INSURANCE CLAIMS, PREMIUMS AND DATA PROCESSING. 2. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2008 - 09 AS ON 29 /09/2008 DECLARING AN INCOME OF RS . 1,48,60,850 / - UNDER THE NORMAL PROVISIONS OF THE ACT, AND RS . 6,79,18,437 / - UN DER P A G E | 8 THE PROVISIONS OF SECTION 11 5J B . THE A SSESSEE ALONGWITH ITS RETURN OF INCOME H A D FILED AN A UDIT REPORT IN FORM 3CEB , REPORTING THEREIN THE PARTICULARS OF ITS INTERNATIONAL TRANSACTIONS WITH ITS AE. THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH U NDER SECTION 143(1) OF THE ACT . BEFORE THE A.O & TPO : 3. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY PROCEEDINGS U/S 143(2). THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS MADE A REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (' TPO') FOR DETERMINATION OF THE ARM S LENGTH PRICE ('ALP') OF THE INTERNATIONAL TRANSACTIONS ENTERED B Y THE ASSESSEE COMPANY WITH ITS AE. THE INTERNATIONAL TRANSACTION S OF THE ASSESSEE COMPANY WITH ITS AE DURING THE YEAR U NDER CONSIDERATION, I N RESPECT OF WHICH ADJUSTMENT HAD BEEN MADE BY THE TPO, WERE AS UNDER: NATURE OF INTERNATIONAL TRANSACTIONS. AMOUNT (RS.) METHOD APPLIED OPERATING PROFIT PROVISION OF PROCESSING SERVICES. 60,69,23,951 TRANSACTION NET MARGIN METHOD (TNMM) 12.50% 4. THE ASSESSEE HAD TAKEN TNMM AS THE MOST APPROPRIATE METHOD ('MAM') TO DETERMINE THE ALP. THAT FOR THE APPLICATION OF TNMM THE ASSESSEE HAD CONDUCTED SEARCH FOR IDENTIFYING THE COMPARABLE COMPANIES ON 'PROWESS' AND CAPITALINE DATABASE . THE ASSESSEE HAD SELECTED 7 COMPARABLE COMPANIES WITH SIMILAR FUNCTIONAL PROFILE AND IDENTIFIED THE COMPARABLE COMPANIES USING CERTAIN FILTERS , AS UNDER: - P A G E | 9 S.NO. NAME OF THE COMPANY PLI % (COST PLUS RATIO) 1. BNR UDYOG 17.86 2. GALAXY COMMERCIAL LTD. 11.63 3. ICRA ONLINE LTD. 15.48 4. MAARS SOFTWARE INTERNATIONAL LTD. 2.48 5. SPARSH BPO SERVICES 6.83 6. TRANSWORKS INFORMATION SERVICES LTD. 8.98 7. VISUALSOFT TECHNOLOGIES LTD. 7.26 ARITHMETIC MEAN 10. 0 7 THE ASSESSEE HAD USED OPERATING PROFIT/OPERATING COST (OP/OC) AS THE PROFIT LEVEL INDICATOR (PLI). THE ARITHMETIC MEAN PLI OF COMPARABLE COMPANIES USING 3 YEARS WEIGHTED AVERAGE WORKED OUT TO 10. 0 7%., AS AGAINST THE PLI OF 12.50% OF THE ASSESSEE FOR THE YEAR UNDER CON SIDERATION, VIZ. A.Y. 2008 - 09. THAT AS THE PLI OF THE ASSESSEE WAS HIGHER THAN THE AVERAGE PLI OF THE COMPARABLE COMPANIES, THEREFORE THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE WITH ITS AE WERE TAKEN TO BE AT ARMS LENGTH. 5. THE TPO DURING THE COURSE OF THE PROCEEDINGS ACCEPTED THE ANALYSIS CARRIED OUT BY THE ASSESSEE USING THE TNMM AS THE MAM FOR DETERMINATION OF THE ALP , AND COMPUTED THE OPERATING MARGIN OF THE APPELLANT AT 12.50%. THE TPO HOWEVER REJECTED THE ECONOMIC ANALYSIS CARRIED OU T BY THE ASSESSEE AND CONDUCTED A FRESH ECONOMIC ANALYSIS. THE TPO CONSIDERED SINGLE YEAR FINANCIAL DATA FOR AY 2008 - 09 AS AVAILABLE AT THE TIME OF TP ASSESSMENT FOR THE ANALYSIS AND OBTAINED CERTAIN INFORMATION WHICH WAS NOT AVAILABLE IN PUBLIC DOMAIN FROM SOME COMPANIES AND USED THE SAME FOR JUDGING COMPARABILITY WITH THE APPELLANT. THE TPO REJECTED 2 COMPANIES OUT OF 7 COMPARABLES SELECTED IN THE TP REPORT , FOR THE REASON THAT THEY AS PER HIM WERE P A G E | 10 FOUND TO BE FUNCTIONALLY DIFFERENT THAN THE ASSESSEE C OMPANY. THE TPO THEREAFTER CARRIED OUT A FRESH SEARCH AND AFTER FINALLY INCLUDING CERTAIN COMPARABLES (WHICH INCLUDED CERTAIN COMMON COMPARABLES), THEREIN CAME UP WITH A SET OF 22 COMPARABLES, THE ARITHMETIC MEAN PLI OF WHICH WORKED OUT AT 25.75% , AS UNDER : - S.NO. NAME OF THE COMPARABLE SINGLE YEAR COST PLUS RATIO % 1 ADITYA BIRLA MINACS WORLDWIDE LIMITED (EARLIER TRANSWORKS INFORMATION SERVICES LTD) (0.55) 2 ACCENTIA TECHNOLOGIES LIMITED. 44.50 3 ASIT C. MEHTA FINANCIAL SERVICES LIMITED 8.55 4 BNR UDYOG LTD. (SEG) 39.22 5 CALIBER POINT BUSINESS SOLUTIONS LIMITED 10.70 6 CORAL HUB (EARLIER VISHAL INFORMATION TECHNOLOGIES LIMITED) 50.72 7 COSMIC GLOBAL LIMITED 24.30 8 CROSSDOMAIN SOLUTION PRIVATE LIMITED 27.00 9 DATAMTICS FINANCIAL SERVICES LIMITED (SEG) 34.87 10 E 4E (EARLIER KNOWN AS NITTANY OUTSOURCING SERVICES LIMITED) 17.23 11 ELCERX SERVICES LIMITED. 65.87 12 HCL CONNECT SYSTEMS & SERVICES LIMITED (SEG) 32.97 13 ICRA LIMITED. 10.42 14 INFOSYS BPO LIMITED 20.03 15 ISERVICES INDIA PRIVATE LIMITED HCL CONNECT SYSTEMS & SERVICES LIMITED (SEG) 10.92 16 JINDAL INTELLICOM (8.66) 17 MAPLE ESOLUTIONS LIMITED 20.71 1 8 MOLD - TEK TECHNOLOGIES LIMITED. 106.79 1 9 SPANCO LIMITED (SEG) 8.94 20 TRITON CORP LIMITED 23.44 2 1 GALAXY COMMERCIAL LTD. 11.63 2 2 SPAARSH BPO SERVICES LTD. 6.83 AVERAGE 25.75 P A G E | 11 6. THE TPO THUS A PPLIED THE ARITHMETIC MEAN OF THE PLI OF 25.75% OF THE AFORESAID SET OF 22 COMPARABLES TO THE VALUE OF ITES SERVICES OF RS. 60,69,23,951/ - PROVIDED BY THE ASSESSEE TO ITS AE, AND THEREIN RECASTED THE ALP OF THE ASSESSEE, AS UNDER: - S.NO. PARTICULARS AS PER ASSES SEE (FORM 3CEB) ALP DETERMINED BY DEPARTMENT. 1 VALUE OF ITES SERVICES PROVIDED TO THE AE IN RELATION TO PROMO PRODUCTION SEGMENT. RS.60,69,23,951/ - RS.67,84,21,250/ - 2 OPERATING COST (OC) RS.53,95,00,000/ - RS.53,95,00,000/ - 3 OPERATING PROFIT (OP) RS. 6,74,23,951/ - RS.13,89,21,250/ - 4 OP/OC 12.4974% 25.75% 5 105% OF THE VALUE OF THE TRANSACTION. RS.63,72,70,149/ - 6 SINCE THE ALP FALLS OUTSIDE THE VALUE OF 1.05 TRANSACTION, DIFFERENCE BETWEEN ALP OF SALES AND VALUE OF INTERNATIONAL TRANSACT - - ION. (RS. 67,84,21,250/ - ( - ) RS. 60,69,23,951/ - ). RS.7,14,97,299/ - THE TPO THUS ON THE BASIS OF HIS AFORESAID EXERCISE APPLIED THE PLI DIFFERENTIAL OF 13.25% (25.75% - 12.50%) TO THE VALUE OF THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE WITH ITS AE DURING THE YEAR UNDER CONSIDERATION, AND THEREIN MADE AN ADJUSTMENT OF RS. 7,14,97,299/ - TO THE ALP. 7 . T HE A . O THEREAFTER ISSUED A DRAFT ASSESSMENT ORDER U/S 14 3(3) R.W SEC. 144C, DATED 23 /11/ 2011 , THEREIN PROPOSING TO ASSESS THE TOTAL I NCOME AT RS. 14, 46,43,127/ - (INCLUDING ADJUSTMENT OF P A G E | 12 RS .7, 14,97,299 / - MADE BY THE TPO ) TO THE RETURNED INCOME OF THE A SS ESSEE COMPANY . 8. THE A . O FURTHER EXCLUDED THE M ISCELLANEOUS INCOME OF RS. 2,47,374/ - INCLUDED BY THE ASSESSEE FOR COMPUTING THE PROFITS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10A, AND NOT FINDING FAVOR WITH THE METHOD ADOPTED AND THE RESULTANT CLAIM OF DEDUCTION OF RS. 6,70,56,096/ - RAISED BY THE ASSESSEE U/S 10A, THEREIN CARRIED OUT THE FOLLOWING DISALLOWANCES/ADDITIONS TO THE INCOME OF THE ASSESSEE, AS UNDER: - SR. NO. PARTICULARS AMOUNT (IN RS.) 1 TRANSFER PRICING ADJUSTMENT RS. 7,14,97,299 2 DISALLOWANCE OF CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT RS. 6,70,56,096 3 RESTRICTED THE CLAIM U/S 10A OF THE ACT BY EXCLUDING MISCELLANEOUS INCOME IN COMPUTING PROFITS DERIVED FROM THE BUSINESS OF THE UNDERTAKING (ON A WITHOUT PREJUDICE BASIS) RS. 2,47,374 BEFORE THE DRP & A.O : 9. THE ASSESSEE FILED OBJECTIONS AGAINST THE DRAFT ASSESSMENT ORDER BEFORE THE DRP , WHO AFTER ACCEPTING THE ASSESSES CONTENTION AS REGARDS EXCLUSION OF 1 COMPARABLE CH OSEN BY THE TPO , VIZ INFOSYS BPO LTD , THEREIN RECASTED THE OPERATING MARGIN AT 26.02 % AND RESULTANTLY W HILE PASSING THE ASSESSMENT ORDER U/S 143(3) R.W SEC. 144C, ON THE BASIS OF THE AVERAGE OPERATING MARGIN OF THE REMAINING 21 COMPARABLES, M ADE A TRANSFER PRICING ADJUSTMENT OF RS. 7,29,53,949/ - AND ASSESSED THE INCOME OF THE ASSESSEE COMPANY U/S P A G E | 13 143(3) R.W SEC.144C, VIDE HIS ORDER DATED. 26.09.2012 AT RS. 14,60,99,780/ - . 10. THE ASSESSEE BEING AGGRIEVED WITH THE ASSESSMENT FRAMED BY THE A.O VIDE HIS ORDER PASSED U/SS. 143(3) R.W SEC. 144C, HAD THEREIN CARRIED THE MATTER IN APPEAL BEFORE US. THAT AT THE VER Y OUTSET OF THE HEARING OF THE APPEAL IT WAS SUBMITTED BY THE LD. A.R THAT IT WOULD RESTRICT ITS CHALLENGE ONLY AS REGARDS THE 5 COMPARABLES (OUT OF THE LIST OF 22 COMPARABLES) WHICH HAD BEEN INCLUDED BY THE TPO FOR DETERMINING THE ALP OF THE ITES TRANSACT IONS CARRIED OUT BY THE ASSESSEE WITH ITS AE DURING THE YEAR UNDER CONSIDERATION, WHICH AS STATED BY THE LD. A.R WOULD TAKE CARE OF ITS GROUND NO. 1 TO 15 OF THE SUMMARI Z ED AND MODIFIED GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL. THAT IN THE BACKDROP OF THE AFORESAID CONCESSION OF THE LD. A . R, WE HEREIN RESTRICT OURSELVES TO THE 5 COMPARABLES AS HAD BEEN ASSAILED BEFORE US , AS UNDER: - S.NO. NAME OF COMPANY AS PER TP STUDY (3 YEAR WEIGHTED MARGINS) 1. CORAL HUB ( EARLIER VISHAL INFORMATION TECHNOLOGIE S LTD.) 50.72% 2. CROSSDOMAIN SOLUTION PRIVATE LIMITED. 27.00% 3. ECLE R X SERVICES LTD. 65.87% 4. MOLD - TEK TCHNOLOGIES LTD. 106.79% 5. ACCENTIA TECHNOLOGIES LTD. 44.50% THAT IN THE BACKDROP OF THE AFORESAID CONCESSION OF THE LD. A . R, WE HEREIN RESTRICT OURSELVES TO THE 5 COMPARABLES AS HAD BEEN ASSAILED BEFORE US. THE LD. A.R HAD DURING THE C O URSE OF HEARING OF THE APPEAL THEREIN PLACED ON RECORD A CHART, MARKED AS SUMMARY OF OBJECTIONS RAISED BY IT IN CONTEXT OF THE 5 COMPARABLES ADOPTED BY T HE TPO FOR P A G E | 14 DETERMINING THE ALP OF THE ASSESSEE . W E THUS IN THE BACKDROP OF THE AFORESAID CHART AND THE RELEVANT PAGES OF THE FACT SHEET/ APB TO WHICH REFERENCE WAS MADE BY THE LD. A.R DURIN G THE COURSE OF HEARING OF THE APPEAL, THEREIN ADVERT TO AND DEA L WITH THE AFOREMENTIONED 5 COMPARABLES, AS UNDER: - (A). CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY L TD. ) : (1). THAT IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO/AO HAD ERRED IN CONSIDERING CORAL HUB (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) AS A COMPARABLE , AND IN ORDER TO DRIVE HOME HIS CONTENTION HAD REFERRED TO PAGE 1190 OF THE CHART, AS WELL AS THE RELEVANT PAGES OF THE FACT SHEET/ APB , AS ST O OD MENTIONED THEREIN. IT WAS SUBMITTED BEFORE US THAT THE TPO HAD ERRED IN FAILING TO APPRECIATE THAT UNLIKE THE ASSESSEE THE AFORE SAID COM PARABLE HA D A VERY LOW EMPLOYEE COST , FROM WHERE IT COULD BE SAFELY GATHERED THAT IT HAD OUTSOURCE D A MAJOR PORTION OF ITS WORK TO THIRD PARTY VENDORS AND HENCE WAS F UNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY . THE LD. A.R DISTINGUISHING THE GLARING VARIANCE OF THE COMPARABLE AS AGAINST THE ASSESSEE COMPANY, HAD THEREIN SUBMITTED THAT THE SAID COMPARABLE OUTSOURCE D A MAJOR PORTION OF ITS WORK TO THIRD PARTY VENDORS , WHICH WAS EVIDENT FROM THE FACT THAT THE PERSONNEL COST OF THE AFORESAID COMPARABLE, VIZ. CORAL HUB LTD., AS A PERCENTAGE OF ITS TURNOVER WAS ONLY 2.93% , WHICH WAS FAR LESSER THAN THE COST INCURRED WITH RESPECT TO PROVISION OF DATA DIGITIZATION SERVICES WHICH HA D BEEN OUTSOURCED BY THE COMPARABLE . THE DETAILS OF EMPLOYEE COST AND VENDOR PAYMENTS FOR THE CURRENT YEAR AND LAST 3 YEARS OF THE SAID P A G E | 15 COMPARABLE AND THE ASSESSEE COMPANY AS ARE FOUND TABULATED AT PAGE 1178 OF THE FACT SHEET (FOR SHORT AFS), A RE REPRODUCED AS UNDER: - PARTICULARS AY 2005 - 06 AY 2006 - 07 AY 2007 - 08 AY 2008 - 09 DATA ENTRY AND VENDOR PAYMENTS 1,135.12 1,149.15 1,312.07 2,565 PERSONNEL COSTS 19.71 32.02 70.28 111 TOTAL COST (INCLUDING OTHER ADMINISTRATION EXPENSES) 1,444.57 1,741.72 2,028.35 2,533 TOTAL REVENUE 2,082.33 2,564.29 3,060.10 3,808 VENDOR PAYMENT AS A PERCENTAGE OF TOTAL REVENUE 54.51% 44.81% 42.87% 67.37% PERSONNEL COST AS A PERCENTAGE OF TOTAL REVENUE 0.94% 1.25% 2.30% 2.93% PERSONNEL COST AS A PERCENTAGE OF TOTAL COST 1.36% 1.84% 3.46% 4.40% WILLIES INDIA : PERSONNEL COST 1,688.18 2,500.04 2,610.86 3,179.15 TOTAL COST 3,197,53 4,181.29 4,195.60 5,511.95 TOTAL REVENUE 3,527.22 4,491.14 4,636.41 6,069.24 PERSONNEL COST A PERCENTAGE OF TOTAL REVENUE 47.86% 54.45% 48.47% 52.38% PERSONNEL COST AS A PERCENTAGE OF TOTAL COST 52.80% 59.79% 62.23% 57.68% (2). TH AT IN THE BACKDROP OF THE AFORESAID FACTS , IT WAS CLAIMED BY THE LD. A.R THAT THE COMPARABLE DID NOT OPERATE LIKE A PURE PLAY ITES COMPANY WHERE THE AVERAGE EMPLOYEE COST TO SALES IS RELATIVELY HIGH AS EMPLOYEES ARE THE MAJOR ASSETS EMPLOYED BY ITES COMPANIES. IT WAS FURTHER CLAIMED THAT THE EMPLOYEE COST OF THE ASSESSEE COMPANY FOR A . Y : 20 08 - 09 WORKED OUT TO 57.68% OF ITS REVENUE , WHILE FOR THE AVERA GE EMPLOYEE COST OF ALL THE OTHER COMPARABLES CONSIDERED BY THE P A G E | 16 TPO WAS AROUND 25% OF REVENUE . THAT IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF : RAMPGREEN SOLUTION PVT. LTD V S. CIT (ITA 102/2015 ) HAD REJECTED T HE AFORESAID COMPARABLE , VIZ. CORAL HUB LTD. , ON THE BASIS OF THE FUNCTIONAL DISSIMILARITY OF THE AFORESAID COMPARABLE, VIZ. CORAL HUB LTD., FOR THE REASON THAT THE LATTER WAS FOUND TO BE A D IFFERENT BUSINESS MODEL. THE LD. A.R HAD FURTHER RELIED ON THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, VIZ ITAT, MUMBAI SO PASSED IN THE ASSESSES OWN CASE FOR A.Y. 2005 - 06 , WHEREIN THE AFORESAID COMPARABLE HAD BEEN REJECTED ON THE GROUND THAT THE LATTERS PERSONNEL COST AS A PERCENTAGE OF ITS TURNOVER WAS ONLY 0.95% , WHICH SIGNIFIE D THAT THE SAID COMPANY WAS NOT CARRY ING OUT ITES ACTIVITIES ON ITS OWN , BUT HAD RATHER OUTSOURCE D IT TO THIRD PARTY VENDORS. THAT TO FORTIFY ITS CONTENTION THAT THE AFORESAID COMPANY, VIZ CORAL HU B LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) ON ACCOUNT OF ITS DIFFERENT BUSINESS MODEL, THUS COULD NOT BE TAKEN AS A COMPARABLE, RELIANCE HAD BEEN PLACED ON THE FOLLOWING ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL: - (I) ACIT VS M/S HAPAG LLYOD GLOBAL SERVICES PVT. LTD - ITA NO.8499/MUM/2010 [AY 2005 - 06] DATED28 FEBRUARY 2013 (MUM) (II). ACIT VS M/S MAERSK GLOBAL SERVICE CENTRE (INDIA) PVT.LTD - ITA NO.3774/MUM/2011 [AY 2005 - 06] DATED 9 NOVEMBER 2011 (MUM) 66 DTR (MUM) (III). UN ITED HEALTH GROUP INFORMATION VS. ACIT - ITA NO. 6312/DEL/2012 [AY 2008 - 09] DATED 28 AUGUST 2014 P A G E | 17 (IV). M/S HSBC ELECTRONIC DATA PROCESSING INDIA LTD VS ACIT - ITA NO.1624/HYD/2010 [AY 2006 - 07] DATED 26 JUNE 2013 (HYD) (V). M/S STREAM INTERNATIONAL SERVICES PVT. LTD VS ACIT [AY 2006 - 07] 141 ITD 492 (MUM) DATED 11 JANUARY 2013. (VI). M/S SYMPHONY MARKETING SOLUTIONS INDIA P. LTD. 37 CCH 253 [AY 2008 - 09 (BANG) 14 AUGUST2013 . (VII) PTC SOFTWARE (INDIA) PRIVATE LIMITED VS DCIT [ AY 2009 - 10] - ITA NO.336/PN/2014 DATED 31OCTOBER 2014 . (VIII). ITO VS M/S NEXTLINX INDIA PVT. LTD - ITANO.454/BANG/2011 [AY 2005 - 06]DATED OCTOBER 2012(BANG) (IX) ZAVATA INDIA PVT.LTD VS DCIT - ITA NO. 1781/HYD/2011 [AY 2007 - 08] 36 CCH 136 (HYD) DATED07 JUNE 2013 (X) M/S AVINEON INDIA PVT LTD VS DCIT - 37 CCH 487 [AY 2007 - 08] DATED 31 OCTOBER 2013 (HYD) (XI) M/S 24/7 CUSTOMER.COM PVT. LTD VS DCIT - 140 LTD 344 [AY 2004 - 05] DATED 9 NOVEMBER 2012 (BANG) (XII). M/S CAPITAL IQ INFORMATION SYSTEMS PVT. LTD VS DCIT - 57 SOT 14 [AY 2007 - 081 DATED 23NOVEMBER 2012 (BANG) (3) . THAT IT WAS FURTHER SUBMITTED BEFORE US THAT A REVIEW OF THE A NNUAL REPORT AND OTHER INFORMATION AVAILABLE IN PUBLIC DOMAIN OF THE AFORESAID COMPARABLE THEREIN REVEALED THAT IT WAS ENGAGED INTO DATA DIGITIZING AND CONVERSION AND E - PUBLISHING , AND THUS IN THE ABSENCE OF SEGMENTAL BREAK - UP FOR ITS IT ES SEGMENT, THE SAME WAS P A G E | 18 LIABLE TO BE REJECTED AS BEING FUNCTIONALLY DIFFERENT. THAT IT WAS FURTHER SUBMITTED BEFORE US THAT AS THE AFORESAID COMPARABLE WAS EARNING SUPER NORMAL PROFITS , THEREFORE THE SAME WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES FOR THE SAID VERY REASON , BECAUSE SUCH ALIKE COMPANIES HAVE A TENDENCY TO SKEW THE RESULTS AND THUS CANNOT BE CONSIDER ED AS A REPRESENTATIVE OF THE INDUSTRY. THAT IN SUPPORT OF THE CONTENTION THAT COMPANIES WHICH ARE SHOWING ABNORMAL PROFITS ARE NOT TO BE ADOPTED AS COMPARABLE, RELIANCE HAD BEEN PLACED BY THE ASSESSEE ON THE FOLLOWING ORDERS PASSED BY THE COORDINATE BENCH ES OF THE TRIBUNAL: - (I). M/S ADOBE SYSTEMS INDIA PRIVATE LIMITED (ITA NO. 5043/DEL/2010) (II). SAP LABS PVT LTD (ITA NO. 398/BANG/20 ) . (III). TEVA INDIA PVT LTD (6107/MUM/2009) . (IV) SAUNAY JEWELS PVT LTD (5758/MUM/2007) . (V). MENTOR GRAPHICS (P) LTD (112 TTJ 408) . ( 4 ) . THAT IT WAS THUS SUBMITTED BEFORE US THAT THE AFORESAID COMPARABLE, VIZ. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) WAS FUNCTIONALLY DIFFERENT, THEREFORE THE SAME MAY BE EXCLUDED FROM THE LIST OF THE COMPARA BLES. THAT ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD PLACED HEAVY RELIANCE ON THE ORDER OF THE TPO/AO AND THEREIN SUBMITTED THAT THE LOWER AUTHORITIES AFTER THOROUGH VETTING THE VARIOUS FACTORS, HAD AS SUCH RIGHTLY ADOPTED THE AFORESAID COMPARABLE. ( 5 ) . WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RECORDS P A G E | 19 AVAILABLE BEFORE US. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE C LAIM OF THE ASSESSEE THAT THE FACTS MADE AVAILABLE ON RECORD THEREIN REVEAL ED THAT THE AFORESAID COMPARABLE , VIZ . CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) HAD A VERY LOW EMPLOYEE COST , ON THE BASIS OF WHICH IT COULD BE SAFELY GATHERED THAT IT WAS I NTO OUTSOURC ING OF A MAJOR PORTION OF ITS WORK TO THIRD PARTY VENDORS , AND HENCE WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY . WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2008 - 09, AS AGAINST THE PERSONNEL COST AS A PERCENTAGE OF THE TOTAL COST OF 57.68% IN THE CASE OF THE ASSESSEE, IN THE CASE OF THE AFORESAID COMPARABLE, VIZ CORAL HUB THE SAME STOOD REFLECTED AT 4.40%. THAT IT WAS ON ACCOUNT OF THE SAID SUBSTANTIALLY LOW PERSONNEL COST THAT THE HONBLE HIGH COURT OF DELHI HAD IN THE CASE OF : RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT (2015) 377 ITR 533 (DEL) , THEREIN OBSERVING THAT AS THE EXPENDITURE ON EMPLOYMENT COST DURING THE RELEVANT PERIOD OF THE AFORE SAID COMPARABLE WAS A SMALL FRACTION OF THE PROPORTIONATE COST I NCURRED BY THE A SSESSEE , FOR THE REASON THAT MOST OF ITS WORK WAS OUTSOURCED TO OTHER VENDORS/SERVICE PROVIDERS, HAD THUS CONCLUDED THAT THE SAME IN ITSELF PROVED THAT THE AFORESAID COMPARABLE VIZ. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TEC HNOLOGY LIMITED) HAD A BUSINESS MODEL WHERE SERVICES ARE OUTSOURCED, AS AGAINST THE BUSINESS MODEL OF THE ASSESSEE WHERE SERVICES ARE RENDERED BY EMPLOYING OWN EMPLOYEES AND USING ONES OWN INFRASTRUCTURE, WAS THUS IN ITSELF A JUSTIFIABLE REASON WHICH DID GO TO PROVE T HAT THE SAID COMPARABLE WAS FUNCTIONALLY DIFFERENT , AND AS SUCH WOULD HAVE A DIFFERENT COST STRUCTURE AS COMPARED TO A BUSINESS MODEL WHERE INHOUSE SERVICES ARE EMPLOYED , HAD HELD AS UNDER: - . P A G E | 20 38. IN OUR VIEW, EVEN VISHAL COULD NOT BE CONSIDERED AS A COMPARABLE, AS ADMITTEDLY, ITS BUSINESS MODEL WAS COMPLETELY DIFFERENT. ADMITTEDLY, VISHALS EXPENDITURE ON EMPLOYMENT COST DURING THE RELEVANT PERIOD WAS A SMALL FRACTION OF THE PROPORTIONATE COST INCURRED BY THE ASSESSEE, AP PARENTLY, 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 VITAL DIFFERENCE BY OBSERVING THAT OUTSOURCING WAS COMMON IN ITES INDUSTRY AND THE SAME WOULD NOT HAVE A BEARING ON PROFITABILITY. PLAINLY, A BUSINESS MODEL WHERE SERVICES ARE RENDERED BY EMPLOYING 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. WE FURTHER FIND THAT AS AVERRED BY THE LD. A.R, A COORDINATE BENCH OF THE TRIBUNAL, VIZ ITAT, MUMBAI WHILE DI SPOSING OF THE ASSESSES OWN APPEAL FOR A.Y. 2005 - 06 HAD REJECTED THE AFORESAID COMPARABLE ON THE BASIS THAT THE LATTERS PERSONNEL COST AS A PERCENTAGE OF ITS TURNOVER WAS ONLY 0.95%, WHICH SIGNIFIED THAT THE SAID COMPANY WAS NOT CARRYING OUT ITES ACTIVITIE S ON ITS OWN, BUT HAD RATHER OUTSOURCED IT TO THIRD PARTY VENDORS. WE FURTHER FIND THAT THOUGH IT HAS BEEN AVERRED BY THE LD. A.R THAT A REVIEW OF THE ANNUAL REPORT AND OTHER INFORMATION AVAILABLE IN PUBLIC DOMAIN OF THE AFORESAID COMPARABLE , VIZ. CORAL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) THEREIN REVEALED THAT IT WAS ENGAGED INTO DATA DIGITIZING AND CONVERSION AND E - PUBLISHING, AND THUS IN ABSENCE OF SEGMENTAL BREAK - UP FOR ITS IT ES SEGMENT, THE SAME WAS LIABLE TO BE REJEC TED AS BEING FUNCTIONALLY DIFFERENT , BUT THEN WE ARE NOT IMPRESSED BY THE SAID CONTENTION OF THE LD. A.R FOR THE REASON THAT EXCEPT FOR THE SAID HOLLOW STATEMENT, NEITHER THE COPY OF THE ANNUAL REPORT OF THE P A G E | 21 SAID COMPARABLE HAD BEEN PLACED ON OUR RECORD, NOR OUR ATTENTION HAD BEEN DRAWN TO ANY SUCH MATERIAL FROM WHERE WE COULD SAFELY CONCUR WITH THE SAID VIEW OF THE ASSESSEE. THUS IN LIGHT OF THE HALF HEARTED ATTEMPT ON THE PART OF THE ASSESSEE, WE DECLINE TO ENTERTAIN THE UNSUBSTANTIATED OBJECTION SO RAI SED BEFORE US. THAT AS REGARDS THE CONTENTION OF THE LD. A.R THAT THE AFORESAID COMPARABLE WAS EARNING SUPER NORMAL PROFITS AND HENCE WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES, FOR THE VERY REASON THAT SUCH ALIKE COMPANIES HAVE A TENDENCY TO SKEW THE RESULTS AND THUS CANNOT BE CONSIDERED AS A REPRESENTATIVE OF THE INDUSTRY , WE FIND THAT THE SAID ISSUE HAD CAME UP BEFORE THE TRIBUNAL IN THE ASSESSEE S OWN APPEAL FOR A.Y. 2007 - 08 , TITLED AS WILLS PROCEESING SERVICES (I) PVT. LTD. VS. DCIT - 2(3), MUMBAI [ITA NO. 4429 & 4547(MUM) OF 2012] , WHEREIN THE TRIBUNAL HAD HELD AS UNDER: T HE FACTORS FOR DETERMINING INCLUSION OR EXCLUSION OF ANY CASE IN THE LIST OF COMPARABLES ARE SPECIFICALLY PROVIDED UNDER RULE 10B(2). THEREFORE, UNLESS AND UNTIL T HERE ARE SPECIFIC REASONS AND FACTORS AS PROVIDE D UNDER THE RULE 10B, AN ENTITY CANNOT BE EXCLUDED OR ELIMINATED FROM THE LIST OF COMPARABLES SOLELY ON THE BASIS OF HIGH PROFIT MAKING UNIT OR LOSS MAKING UNIT BECAUSE NO SUCH FACTOR FINDS PLACE EITHER IN RULE 10B(2) OR 10B(3) OF IT RULE. FURTHER HELD : EVEN THE LOSS MAKING OR HIGH PROFIT MAKING COMPARABLES THAT SATISFY COMPARABILITY ANALYSIS SHOULD NOT BE REJECTED ON THE SA M E BASIS THAT THEY SUFFER LOSS OR EARNED HIGH PROFIT. P A G E | 22 FURTHER HELD : INCLUSION AND EXCLUSION OF THE COMPARABLES CANNOT BE DECID ED ON THE BASIS OF THE FACTORS OTHER THAN THE FACTOR SPECIFIED UNDER RULE 10B(2). HENCE, THE OBJECTIONS OF THE ASSESSEE CANNOT BE ACCEPTED THAT BECAUSE OF THE ABNORMAL PROFIT MARGIN THIS COMPANY SHOULD BE REJECTED AS A COMPARABLE. THUS IN LIGHT OF THE AFORESAID VIEW ALREADY TAKEN BY THE TRIBUNAL WHILE DISPOSING OF THE ASSESSES OWN APPEAL FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2007 - 08, THAT INCLUSION AND EXCLUSION OF THE COMPARABLES CANNOT BE DECIDED ON THE BASIS OF THE FACTOR S OTHER THAN THOSE SPECIFIED UNDER RULE 10B(2), WE ARE THUS UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID CONTENTION OF THE LD. A.R THAT BECAUSE OF THE ABNORMAL PROFIT MARGIN THE AFORESAID COMPARABLE SHOULD B E REJECTED AS A COMPARABLE. (6). WE THOUGH IN LIGHT OF OUR AFORESAID OBSERVATIONS HAD PARTLY DISAGREED WITH CERTAIN GROUNDS AS HAD BEEN AVERRED BY THE LD. A.R TO FACILITATE EXCLUSION OF THE AFORESAID COMPARABLE, HOWEVER AS OBSERVED BY US HEREINABOVE THAT THE AFORESAID COMPARABLE VIZ. COR AL HUB LIMITED (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGY LIMITED) HAD A BUSINESS MODEL WHERE SERVICES ARE OUTSOURCED, AS AGAINST THE BUSINESS MODEL OF THE ASSESSEE WHERE SERVICES ARE RENDERED BY EMPLOYING OWN EMPLOYEES AND USING ONES OWN INFRASTRUCT URE, ON THE BASIS OF WHICH WE ARE OF THE CONSIDERED VIEW THAT 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 COMPARABLES . THAT OUR AFORESAID VIEW STANDS FORTIFIED BY THE AFORESAID ORDER PASSED BY THE P A G E | 23 TRIBUNAL WHILE DISPOSING OF THE APPEAL OF THE ASSESSES OWN APPEAL FOR A.Y. 2005 - 06, AS WELL AS THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF : RAMPGREEN SOLUTIONS PVT. LTD. THUS AS THERE HAS BEEN NO MATERIAL SHIFT IN THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, AS OBSERVED BY US HEREINABOVE, WE ARE THUS OF THE CONSIDERED VIEW THAT AS THE BUSINESS MODEL OF THE AFORE SAID COMPARABLE , VIZ. CORAL HUB LIMITED (SUPRA) IS S UBSTANTIALLY DIFFERENT FROM THAT OF THE ASSESSEE, THEREFORE THE SAME CANNOT BE ACCEPTED AS A COMPARABLE AND HENCE IS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. (B). CROSSDOMAIN SOLUTIONS PRIVATE LIMITED : (1). IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO/AO HAD ERR E D IN CONSIDERING C ROSSDOMAIN SOLUTIONS PRIVATE LIMITED AS A COMPARABLE , WITHOUT APPRECIATING THAT THE FUNCTIONAL, ASSET AND RISK PROFILE OF THE COMPAN Y WAS SUBSTANTIALLY DIFFERENT , AND HENCE WAS NOT C OMPARABLE TO THE ASSESSEE . TH AT IN ORDER TO DRIVE HOME THE AFORESAID CONTENTION , RELIANCE HAD BEEN PLACED ON PAGE 1190 OF THE CHART, AS WELL AS THE RELEVANT PAGES OF THE FACT SHEET/ APB AS STOOD MENTIONED THEREIN. THAT IT WAS AVERRED BY THE LD. A.R THAT THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED BEING FUNCTIONALLY DIFFERENT, THEREFORE HAD WRONGLY BEEN SELECTED BY THE TPO AS A COMPARABLE. TH AT IN SUPPORT OF THE AFORESAID C ONTENTION THAT THE COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS FUNCTIONALLY DIFFERENT, IT WAS SUBMITTED THAT AS PER THE INFORMATION WHICH COULD BE GATHERED FROM THE WEBSITE OF THE AFORESAID COMPARABLE, VIZ. WWW.CROS S - DOMAIN.COM , IT STOOD REVEALED THAT THE ACTIVITIES CARRIED OUT BY THE P A G E | 24 SAID COMPARABLE WERE M O RE IN THE NATURE OF KNOWLEDGE PROCESS OUTSOURCING ('KPO'). IT WAS SUBMITTED BEFORE US THAT T HE BUSINESS AND FUNCTIONS OF THE SAID COMPARABLE WERE PRIMARILY PROVID ING HIGH END KNOWLEDGE PROCESS OUTSOURCING (FOR SHORT KPO ) SERVICES WHICH VARIES FROM THE SERVICES PROVIDED BY A LOW END ITES SERVICE PROVIDER. IT WAS FURTHER SUBMITTED THAT T HE ANNUAL REPORT OF THE COMPARABLE COMPANY, VIZ. CROSSDOMAIN SOLUTIONS PRI VATE LIMITED DID NOT PROVIDE ADEQUATE INFORMATION ON THE COMPANY'S OPERATIONS , ON THE BASIS OF WHICH ITS FUNCTIONAL COMPARABILITY COULD BE EVALUATED . TH AT IN ORDER TO FORTIFY THE CLAIM THAT THE AFORESAID COMPARABLE WAS A KPO PROVIDER, REFER ENCE HAD BEEN MADE TO THE WEBSITE EXTRACT OF THE AFORESAID COMPARABLE , WHICH PROVED THE SAID FACT. IT WAS FURTHER SUBMITTED THAT E VEN THE LOGO OF THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED HIGHLIGHTS THAT IT IS A 'PARTNER OF CHOICE FOR KNOWLEDG E PROCESS OUTSOURCING SERVICES' , WHICH CLEARLY SPECIFIES THAT THE SAID COMPARABLE FUNCTION S AS A KPO SERVICE PROVIDER, AND NOT AS A BUSINESS PROCESS OUTSOURCING ('BPO') SERVICE PROVIDER. THUS IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BEFORE US THAT AS THE PRIMARY BUSINESS OF THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED IS PROVISION OF HIGH END KPO SERVICES , WHICH VARIES FROM A ROUTINE LOW END ITES SERVICE PROVIDER IN TERMS OF SKILL SETS USED AND NATURE OF SERVICES PROV IDED , THEREFORE THE SAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS THUS LIABLE TO B EXCLUDED FROM THE LIST OF THE COMPARABLES . (2). IT WAS FURTHER SUBMITTED T HAT THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS REJE CTED BY THE ITAT , MUMBAI WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE P A G E | 25 IMMEDIATELY SUCCEEDING YEAR, VIZ. A . Y 2009 - 10 , TITLED AS : DCIT VS. M/S WILLIS PROCESSING SERVICES (INDIA) LIMITED ( ITA NO. 2152/MUM/2014; DT. 10/10/2014 ) ON THE BASIS THAT THE SAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS A KPO ENGAGED IN PROVIDING VALUE BASED QUALITY SERVICES IN PAYROLL, HR FINANCE, ACCOUNTING, ADMINISTRATION AND TAX PROCESSES, ETC. , AND HENCE CANNOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE COMPANY WHICH IS A ROUTINE BPO SERVICE PROVIDER . TH AT IN ORDER TO FORTIFY THE AFORESAID CONTENTION, SUPPORT WAS DRAWN FROM THE CASES OF SIMILARLY PLACED ASSESSE S , WHERE TOO THE COORDINATE BENCHE S OF THE TRIBUNAL HA D EXCLUDED THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED ON THE BASIS THAT IT WAS FUNCTIONALLY DIFFERENT , AS UNDER : (I). DCIT VS M/S WILLIS PROCESSING SERVICES (INDIA) LIMITED ( ITA NO. 2152/MUM/2014 [AY 2009 - 10] DATED 10 OCTOBER 2014. ) (II). MINDCREST (INDIA) PVT LTD. VS. DCIT ( AY 2008 - 09 - ITA NO.7289/MUM/20 12 ; DATED 12 DECEMBER, 2014). (III). M/S SYMPHONY MARKETING SOLUTIONS INDIA P. LTD. ( 37 CCH 253 [AY 2008 - 09] (BANG) 14 AUGUST2013 ) (IV). MARKET TOOLS RESEARCH PVT. VS DCIT. ( 37 CCH 60 5 [AY 2008 - 09] (1 - LYD) DATED 24 OCTOBER 2013 ) . THAT ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD PLACED HEAVY RELIANCE ON THE ORDER OF THE TPO/AO AND THEREIN SUBMITTED THAT THE LOWER AUTHORITIES AFTER THOROUGH VETTING THE VARIOUS FACTORS, HAD AS SUCH RIGHTLY ADOPTED THE AFORESAID COMPARABLE , VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED . P A G E | 26 (4). WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE RECORDS MADE AVAILABLE BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT AS THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED , WHICH STANDS IRREBUTABLY PROVED TO BE PRIMARILY PROVID ING HIGH END KNOWLEDGE PROCESS OUTSOURCING (FOR SHORT KPO) SERVICES, WHICH SUBSTANTIALLY VARIES FROM A LOW END ITES SERVICE PROVIDER, THEREFORE IT CAN SAFELY BE CONCLUDED THAT THE SAID COMPARABLE WAS FUNCTIONALLY DIFFERENT, AND AS SUCH COULD NOT BE ADO PTED AS A COMPARABLE. THAT OUR AFORESAID VIEW STANDS FORTIFIED BY THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE IMMEDIATELY SUCCEEDING YEAR, VIZ. A.Y. 2009 - 10, TITLED AS : DCIT VS. M/S WILLIS PROCESSING SERVICES (INDIA) LIMITED (ITA NO. 2152/MUM/2014; DT. 10/10/2014) WHEREIN THE TRIBUNAL ON THE BASIS THAT THE SAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS A KPO ENGAGED IN PROVIDING VALUE BASED QUALITY SERVICES IN PAYROLL, HR FINANCE, ACCOUNTING, ADMINISTRATION AND TAX PROCESSES, ETC. , HAD THEREIN CONCLUDED THAT THE SAME THUS COULD NOT BE CONSIDERED AS A COMPARABLE TO THE ASSESSEE COMPANY WHICH IS A ROUTINE BPO SERVICE PROVIDER. THUS FINDING NO REASON TO TAKE A DIFFERENT VIEW AS AGAINST THAT ARRIVE D AT BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y. 2009 - 10, WE HEREIN CONCLUDE THAT AS THE AFORESAID COMPARABLE, VIZ. CROSSDOMAIN SOLUTIONS PRIVATE LIMITED WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, THEREFORE THE SAME IS LIABLE TO BE EXCLUDED FROM THE LIST OF THE FINAL COMPARABLES, AND HENCE DIRECT ACCORDINGLY. P A G E | 27 (C). ECLERX SERVICES LIMITED : - ( 1 ) . IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO/AO HAD ERRED IN CONSIDERING ECLERX SERVICES LIMITED AS A COMPARABLE, DISREGARDING THE FACT THAT THE SAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS ENGAGED IN HIGH END KNOWLEDGE PROCESS OUTSOURCING (FOR SHORT KPO) SERVICES, AS COMPARED TO THE ASSESSEE COMPANY WHICH WAS ENGAGED IN PROVIDING ROUTINE IT ENABLED SERVICES (I TES) . THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENTION HAD REFERRED TO PAGE 1190 OF THE CHART, AS WELL AS THE RELEVANT PAGES OF THE FACT SHEET/APB AS STOOD MENTIONED THEREIN. THAT IT WAS SUBMITTED BEFORE US THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED BEING FUNCTIONALLY DIFFERENT, HAD THEREFORE WRONGLY BEEN SELECTED BY THE TPO AS A COMPARABLE. IT WAS SUBMITTED BY THE LD. A.R THAT THE AFORESAID COMPARABLE COMPANY, VIZ. ECLERX SERVICES LIMITED WAS PROVIDING HIGH END DATA ANALYTICS AND CU STOMIZED PROCESS SOLUTION , AND WAS A LEADING INDIAN PROVIDER OF KPO SERVICES. THE LD. A.R IN ORDER TO FORTIFY HIS CONTENTION HAD REFERRED TO THE RELEVANT EXTRACTS OF THE ANNUAL REPORT OF THE COMPARABLE, WHICH CLEARLY SUGGESTED THAT IT WAS ENGAGED INTO KN OWLEDGE PROCESS OUTSOURCING (KPO), CRM, DATA INTEGRATION SERVICES ETC. IT WAS FURTHER SUBMITTED THAT IN THE ABSENCE OF SEPARATE SEGMENTAL, THE SAID COMPANY WAS LIABLE TO BE REJECTED AS A COMPARABLE. THAT IN ORDER TO FORTIFY THE AFORESAID CLAIM THAT THE COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS A KPO, RELIANCE HAD BEEN PLACED ON THE RELEVANT EXTRACTS OF THE ANNUAL REPORT ( PAGE 785 & PAGE 789 OF THE APB) WHICH DID GO TO SUBSTANTIATE BEYOND ANY SCOPE OF DOUBT THAT THE AFORESAID COMP ARABLE WAS A DATA ANALYTICS KPO P A G E | 28 SERVICE PROVIDER , SPECIALIZING IN TWO BUSINESS VERTICALS FINANCIAL SERVICES AND RETAIL AND MANUFACTURING , AND WAS A LEADING INDIAN PROVIDER OF KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES. THE AFORESAID COMPARABLE, VIZ. EC LERX SERVICES LIMITED WAS ESTABLISHED IN 2001 AND WAS PROVIDING DATA ANALYTICS AND CUSTOMIZED PROCESS SOLUTIONS TO COMPLEX BUSINESS NEEDS THROUGH A COST - EFFECTIVE COMBINATION OF PEOPLE, PROCESSES AND TECHNOLOGY. THUS IN THE BACKDROP OF T H E AFORESAID FACTS, IT WAS SUBMITTED THAT AS THE ASSESSEE WAS ENGAGED IN PROVI DING BPO SERVICES VIZ - PROCESSING OF INSURANCE CLAIMS AND INSURANCE PREMIUMS AND DATA PROCESSING SERVICE FOR WHICH IT EMPLOYED ORDINARY GRADUATES , THEREFORE IT COULD BY NO MEANS BE COMPARED TO THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WHICH WAS PROVIDING KPO SERVICES . (2). THAT THE LD. A.R BY REFERRING TO THE RELEVANT PAGES OF THE FACT SHEET HAD THEREIN SUBMITTED THAT THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [A.Y: 2008 - 09] 39 CCH 130 (MUM); DATED. 07.03.2014 , HAD SPECIFICALLY REJECTED THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED, ON THE BASIS THAT COMPANIES PREDOMINANTLY ENGAGED IN KPO SERVICES CANNOT BE CONSIDERED AS A COMPARABLE TO A COMPANY PREDOMINANTLY ENGAGED IN BPO ACTIVITIES , BY OBSERVING AS UNDER: - KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY M/S ECLERX SERVICES PVT. LTD. AND ITS FUNCTIONAL PROFILE, WE ARE OF THE VIEW THAT THIS COMPANY IS ALSO MAINLY ENGAGED IN PROVIDING HIGH END SERVICES INVOLVING SPECIALIZED KNOWLEDGE P A G E | 29 AND DOMAIN EXPERTISE IN THE FIELD AND THE SAME CANNOT BE COMPARED WITH THE ASSESSEE C OMPANY WHICH IS MAINLY ENGAGED IN PROVIDING LOW - END SERVICES TO THE GROUP CONCERNS. THAT IT WAS FURTHER SUBMITTED THAT THE AFORESAID COMPARABLE HAD ALSO BEEN REJECTED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF : RAMPGREEN SOLUTIONS PVT. LTD. VS . CIT (2015) 377 ITR 533 (DEL) , WHICH HAD UPHELD THE ACTION OF THE TRIBUNAL AND REJECTED THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED, STATING THAT AS THE LATTER WAS ENGAGED IN KPO ACTIVITIES , THEREFORE IT COULD NOT BE COMPARED TO ROUTINE BPO SERVICE PROVIDERS. IT WAS FURTHER SUBMITTED THAT THE DRP HAD VIDE ITS ORDER DATED 27 .11.2015 IN THE CASE OF ASSESSEE FOR AY 2011 - 12 HA D ACCEPTED THE CONTENTION OF THE ASSESSEE AND REJECT E D THE AFORESAID COMPARABLE COMPANY, VIZ. ECLERX SERVICES LIMITED ON THE BASIS THAT IT WAS ENGAGED IN KPO SERVICE , AND THE D EPARTMENT HAD ACCEPTED THE SAID ORDER OF THE DRP AND HAD NOT CARRIED THE SAME IN FURTHER A PPEAL BEFORE THE TRIBUNAL . THAT THE LD. A.R BY REFERRING TO THE FACT SHEET, HAD THEREIN FURTHER SUBMITTED THAT IN THE A SSESSES OWN CASE FOR AY 2009 - 10, THE DRP AS WELL AS THE TRIBUNAL HAD HELD THAT COMPANIES ENGAGED IN KPO SERVICES CANNOT BE COMPARED TO THE ROUTINE BPO SERVICES PROVIDED BY THE A SSESSEE COMPANY . ADDITIONALLY, IT WAS SUBMITTED THAT THE ITAT IN THE ASSESSES OWN CASE FOR AY 2010 - 11 IN ITS RECENT ORDER PASSED IN ITA NO. 1890/MUM/2015, DATED. 09.12.2015 ( PAGE 1135 1152 OF APB), HAD HELD THAT AS THE ASSESSEE IS A ROUTIN E BPO SERVICE PROVIDER , THEREFORE IT CANNOT BE COMPARED TO HIGH END KPO SERVICE P A G E | 30 PROVIDERS SUCH AS ECLERX SERVICE LIMITED. THUS IN LIGHT OF THE AFORESAID JUDICIAL PRECEDENTS AND CONSISTENT VIEW OF THE TRIBUNAL IN THE ASSESSES OWN CASES, IT WAS SUBMITTED THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS LIABLE TO EXCLUDED FROM THE LIST OF THE COMPARABLES. (3). THAT IN ORDER TO SUPPORT THE CONTENTION THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES, RELIANCE WAS PLACED BY THE ASSESSEE ON A HOST OF DECISIONS OF THE DIFFERENT COORDINATE BENCHES OF THE TRIBUNAL WHICH HAVE UPHELD THE REJECTION OF AFORESAID VIZ. ECLERX SERVICES L IMITED FROM THE FINAL SET OF COMPARABLES , AS UNDER : ITAT ORDER DATED 9 DECEMBER 2015 IN THE CASE OF THE WILLIS INDIA FOR AY 2010 - 11 (ITA NO. 1890/MUM/2015) . DRP ORDER DATED 27 NOVEMBER 2015 IN THE CASE OF WILLIS INDIA FOR AY 2011 - 12 ITAT ORDER DATED 10 OCTOBER 2014 IN THE CASE OF THE WILLIS INDIA FOR AY 2009 - 10 (ITA NO. 2152/MUM/2014) . DRP ORDER DATED 30 DECEMBER 2013 IN THE CASE OF WILLIS INDIA FOR AY 2009 - 10 . [DEPARTMENT IS NOT IN APPEAL FOR AY 2011 - 12) BP INDIA SERVICES PRIVATE LIMITED VS ACIT (ITA N O. 6977/MUM/2012) [AY 2008 - 09] DATED 21 JANUARY 2015 . MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [AY 2009 - 10] ITA NO. 2594/MUM/2014 DATED 16 JANUARY 2015 . MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [AY 2008 - 09] 39 CCH 130 (MUM) DATED 7 MARCH 2 014 . P A G E | 31 STREAM INTERNATIONAL SERVICES PRIVATE LIMITED VS. ACIT (ITA NO. 8290/MUM/2011) [AY 2007 - 08] DATED 10 OCTOBER 2014 . LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED VS. ITO ITA NO. 7498/MUM/2012 [AY 2008 - 09] DATED 9 JULY 2014 . MINDCREST (INDIA) PVT LTD. VS. D CIT [AY 2008 - 09] ITA NO. 7289/MUM/2012] DATED 12 DECEMBER 2014 . MARKET TOLLS RESEARCH PVT. VS. DCIT. 37 CCH 605 [AY 2008 - 09] (HYD) DATED 24 OCTOBER 2013 . UNITED HEALTH GROUP INFORMATION SERVICES PVT. LTD. VS. ACIT [AY 2008 - 09] ITA NO. 6312/DEL/2012 DATED 28 AUGUST 2014 M/S SYMPHONY MARKETING SOLUTIONS INDIA P. LTD. 37 CCH 253 {AY 2008 - 09] (BANG) 14 AUGUST 2013 . ZAVATA INDIA PRIVATE LIMITED VS DCIY 36 CCH 136 (AY 2007 - 08) (HYD) DATED 7 JUNE 2013. COGNIZANT TECHNOLOGY SERVICES PVT. LTD VS. ACIT 37 CCH 155 [AY 2007 - 08 & 2008 - 09] (HYD) , DATED 22 MAY 2013 M/S HYUNDAI MOTORS INDIA ENGINEERING P. LTD VS. DCIT [AY 2009 - 10] ITA NO. 225/HYD/2014 DATED 31 JULY 2014 . M/S PAREXEL INTERNATIONAL (INDIA) PVT. LTD. VS. AC IY [AY 2009 - 10] ITA NO. 607/HYD/2014 DATED 30 SEPTEMBER 2014. CAPITAL IQ INFORMATION SYSTEM (INDIA) PVT LTD [AY 2009 - 10] ITA NO. 170/HYD/2014 AND ITA NO. 124/HYD/2014 , DATED 31 JULY 2014 (HYD) PTC SOFTWARE (INDIA) PRIVATE LIMITED VS DCIT [AY 2009 - 10] I TA NO. 336/PN/2014 DATED 31 OCTOBER 2014. M/S EXCELLENCE DATA RESEARCH PVT. LTD. [AY 2009 - 10] ITA NO. 159/HYD/2014 DATED 31 JULY 2014 (HYD) P A G E | 32 M/S BERKADIA SERVICES INDIA PRIVATE LTD. [AY 2009 - 10] ITA NO. 1802/HYD/2013 DATED 19 SEPTEMBER 2014 (HYD) CAPITAL IQ INFORMATION SYSTEM (INDIA) PVT LTD [AY 2007 - 08] ITA NO. 1961/HYD/2011 DATED 23 NOVEMBER 2012 (HYD) HSBC ELECTRONIC DATA PROCESSING INDIA P. LTD. VS. ACIT [AY 2007 - 08] ITA NO. 1826/HYD/2011 DATED 24 OCTOBER 2014 . HSBC ELECTRONIC DATA PROCESSING INDIA P. LTD. VS. ACIT [AY 2008 - 09] ITA NO. 1647/HYD/2012 DATED 24 OCTOBER 2014 . (3). THAT IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT D URING THE YEAR, THE AFORESAID COMPARABLE COMPANY VIZ. ECLERX SERVICES LIMITED HA D ACQUIRED UK BASED COMPANY , VIZ. IGNETICA TRAVEL SOLUTIONS LTD., WHICH THUS HAD LED TO THE ACQUISITION OF NEW CUSTOMERS . THUS IN THE BACKDROP OF THE AFORESAID EVENT, IT WAS SUBMITTED THAT T HIS KIND OF INORGANIC GROWTH DURING THE YEAR HA D CONTRIBUTED TO INCREASED REVENUES TO THE SAID COMPA RABLE, VIZ. ECLERX SERVICES LIMITED, DURING THE YEAR UNDER CONSIDERATION . TH AT IN ORDER TO FORTIFY THE AFORESAID FACT OF ACQUISITION BY THE AFORESAID COMPANY, THE ASSESSEE HAD REFERRED TO THE A NNUAL REPORT OF THE COMPANY ( PAGE 796 OF APB) . THUS IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS THUS SUBMITTED THAT THE AFORESAID COMPARABLE WAS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF THE COMPARABLES. THAT ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD PLACED HEAVY RELIANCE ON THE ORDER OF THE TPO/AO AND THEREIN SUBMITTED THAT THE LOWER AUTHORITIES AFTER THOROUGH VETTING THE VARIOUS FACTORS, HAD AS SUCH RIGHTLY ADOPTED THE A FORESAID COMPARABLE , VIZ. ECLERX SERVICES LIMITED . THE LD. D.R FURTHER ADVERTING TO THE CONTENTION WHICH WAS RAISED BY THE ASSESSEE ON THE BASIS OF AN ADDITIONAL GROUND OF APPEAL , THAT IN LIGHT OF THE P A G E | 33 EXTRAORDINARY EVENT AS THAT OF ACQUISITION BY THE AFORE SAID COMPARABLE , VIZ. ECLERX SERVICES LIMITED OF A UK BASED COMPANY, VIZ. IGNETICA TRAVEL SOLUTIONS LTD.(FOR SHORT ITS) DURING THE YEAR UNDER CONSIDERATION , THE AFORESAID COMPANY COULD NOT HAVE BEEN SAFELY SELECTED AS A COMPARABLE, THEREIN REFERRING TO THE RELEVANT PAGES OF THE A NNUAL REPORT OF THE SAID COMPARABLE ( PAGE 796 OF APB) AVERRED THAT A PERUSAL OF THE ANNUAL REPORT DID NOT REVEAL AS TO WHETHER THE COMPANY WHICH HAD BEEN TAKEN OVER, I.E ITS WAS ENGAGED IN THE SAME LINE OF BUSINESS AS THAT OF THE AFORESAID COMPARABLE , OR NOT. THUS IN THE BACKDROP OF THE AFORESAID FACTS, THE LD. D.R TAKING SUPPORT OF THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSE S OWN CASE FOR A.Y. 2007 - 08, VIZ. WILLS PROCESSING SERVICES (I) LTD. VS. DCIT - 2(3), MUMBAI (2 013) 30 TAXMANN.COM 350 (MUMBAI - TRIB) (COPY PLACED ON RECORD BY THE LD. D.R), THEREIN REFERRED TO THE OBSERVATIONS OF THE TRIBUNAL AT PARA 18.3 OF THE ORDER, WHEREIN IT HAD BEEN HELD THAT EVEN IF THERE IS AN EXTRAORDINARY EVEN T IN THE FORM OF MERGER/DEMERG ER, IT IS ONLY WHEN IT IS SHOWN THAT PURSUANT TO SUCH EXTRAORDINARY EVENT THE COMPARABLE HAD BECOME FUNCTIONALLY DIFFERENT , AND AS SUCH INCOMPARABLE , IT IS ONLY THEN THAT THE SAME WOULD RENDER IT LIABLE TO BE EXCLUDED AS A COMPARABLE . IT WAS THUS AVERRED B Y THE LD. D.R THAT IN THE ABSENCE OF ANY MATERIAL WHICH COULD GO TO IRREBUTABLY PROVE THAT THE AFORESAID COMPARABLE , VIZ. ECLERX SERVICES LIMITED , PURSUANT TO ACQUISITION OF ITS HAD BECOME FUNCTIONALLY INCOMPARABLE, THE CONTENTION OF THE ASSESSEE THAT IT M AY BE EXCLUDED FROM THE LIST OF THE FINAL COMPARABLES, THUS COULD NOT BE SUMMARILY ACCEPTED. P A G E | 34 (4). WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTION OF THE ASSESSEE THAT THE TPO/AO HAD ERRED IN CONSIDERING THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED AS A COMPARABLE, WITHOUT APPRECIATING THE FACT THAT THE EXTRAORDINARY EVENT AS THAT OF ACQUISITION OF UK - BASED I GNETICA TRAVEL SOLUTIONS LIMITED (ITS) ON JULY 27, 2007 HAD TAKEN PLACE DURING THE YEAR, WHICH AS PER THE ASSESSEE, BEING AN EXTRAORDINARY ITEM THAT HAD TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION, THEREFORE JUSTIFIED THE EXCLUSION OF THE AFORESAID COMPANY AS A COMPARABLE . WE FIND THAT A PERUSAL OF THE RELEVANT EXTRACT OF THE ANNUAL REPORT OF THE COMPARABLE ( PAGE 796 OF APB) RELIED UPON BY THE ASSESSEE THEREIN READS AS UNDER: - ACQUISITION ECLERX HAS ACQUIRED UK - BASED IGNETICA TRAVEL SOLUTIONS LIMITED (ITS) ON JULY 27, 2007. THIS ACQUISITION IS CONSISTENT WITH THE COMPANYS STRATEGY OF LOOKING FOR INORGANIC GROWTH VIA BOLT ON ACQUISITION WHICH FIT WELL WITH THE EXISTING STRENGTHS OF THE COMPANY. ITS HAS PROVIDED THE COMPANY WITH A SET OF 28 LARGE CUSTOMERS, PRIMARILY IN EUROPE, THUS STRENGTHENING THE COMPANYS PRESENCE IN THAT GEOGRAPHY. IT HAS ALSO GIVEN THE COMPANY AN ENTRY PLATFORM INTO A NEW VERTICAL TRAVEL AND HOSPITALITY, BESIDES CONSOLIDATING THE COMPANYS POSITION IN THE RETAIL AND MANUFACTURING SPACE. THE INTEGRATION PROCESS WAS ON TRACK AS OF MARCH 2008. , HOWEVER WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CONTENTION OF THE ASSESSEE THAT THE SAID EVEN T IN ITSELF WOULD JUSTIFY EXCLUSION OF THE AFORESAI D COMPARABLE FROM THE LIST OF COMPARABLES. WE P A G E | 35 FIND THAT THE ISSUE AS TO WHERE A MERGER AND DEMERGER OR AMALGAMATION OF TWO FUNCTIONALLY SIMILAR COMPANIES TAKES PLACE, THEN CAN THE SAID EVENT OF MERGER ITSELF CANNOT BE A REASON FOR EXCLUSION OF A COMPANY FR OM THE LIST OF COMPARABLES, HAD BEEN ADJUDICATED BY THE TRIBUNAL WHILE DISPOSING OF THE ASSESSES OWN APPEAL FOR AY: 2007 - 08, REPORTED AS : WILLS PROCESSING SERVICES (I) P. LTD. VS. DCIT - 2(3), MUMBAI [(2013) 30 TAXMANN.COM 350 (MUMBAI - TRIB) , WHEREIN THE TRIBUNAL HAD ANSWERED THE SAID ISSUE, BY OBSERVING AS UNDER: - WE ARE ALSO OF THE VIEW THAT IF EXTRAORDINARY EVENTS LIKE MERGER AND DE - MERGER OR AMALGAMATION TOOK PLACE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, AND BECAUSE OF THE MERGER/DE - MERGER THE COMPANY BECAME FUNCTIONALLY DIF FERENT THEN THE SAID COMPANY SHOULD BE EXCLUDED FROM THE COMPARABLES. HOWEVER, IF THE MERGER OF TWO FUNCTIONALLY SIMILAR COMPANIES TOOK PLACE THEN EVENT OF MERGER ITSELF CANNOT BE TAKEN AS A FACTOR FOR EXCLUSION OF THE SAID COMPARABLE. ACCORDINGLY, WE DIRE CT THE AO/TPO TO VERIFY THIS FACT AND ACCORDINGLY DECIDE THE COMPARABILITY OF THE COMPANY NAMELY ACCENTIA TECHNOLOGIES LTD. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y. 2007 - 08, THAT MERELY THE EVENT OF ACQUISITION BY THE AFORESAID COMPARABLE COMPANY, VIZ. ECLERX SERVICES LIMITED OF THE UK - BASED COMPANY, VIZ. IGNETICA TRAVEL SOLUTIONS LIMITED (ITS) ON JULY 27, 2007 , ITSELF CANNOT IPSO FACTO FORM THE BASIS FOR EXCLUSION OF THE AFORESAID COM PARABLE . THAT NEITHER FROM A PERUSAL OF THE ANNUAL REPORT IT IS REVEALED THAT THE SAID ACQUISITION P A G E | 36 OF THE UK BASED COMPANY BY THE ASSESSEE DURING THE YEAR HAD THEREIN RENDERED THE COMPARABLE FUNCTIONALLY DIFFERENT, NOR ANY SUCH MATERIAL WHICH COULD GO TO PROVE SO HAD BEEN BROUGHT ON RECORD BEFORE US. WE RATHER FIND FROM THE EXTRACT OF THE ANNUAL REPORT THAT THE INTEGRATION PROCESS OF SUCH ACQUISITION WAS ON TRACK ONLY IN THE MONTH OF MARCH, 2008. THUS IN THE BACKDROP OF THE AFORESAID FACTS, IN THE ABSEN CE OF ANY MATERIAL WHICH COULD GO TO JUSTIFY THAT THE AFORESAID COMPARABLE HAD BEEN RENDERED FUNCTIONALLY DIFFERENT BECAUSE OF THE AFORESAID ACQUISITION, WE HEREIN DECLINE TO ACCEPT THE SAID CONTENTION OF THE ASSESSEE THAT ON THE SAID BASIS THE SAID COMPAR ABLE IS LIABLE TO BE EXCLUDED. (5). WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RECORDS MADE AVAILABLE BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT THOUGH WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION OF T H E LD. D.R AND HAVE NOT FOUND FAVOR WITH THE CONTENTION OF THE ASSESSEE THAT AS THE AFORESAID COMPARABLE HAD CARRIED OUT AN ACQUISITION OF A U.K BASED COMPANY, THEREFORE SIMPLICITER ON THE SAID COUNT, WITHOUT ESTABLISHING THAT SUCH ACQUISITION HAD RENDERED THE AFORESAID COMPARABLE FUNCTIONA LLY DIFFERENT, COULD NOT BE ACCEPTED AS A FACTOR FOR EXCLUSION OF THE SAID COMPARABLE, BUT THEN WE ARE OF THE CONSIDERED VIEW THAT THE FACT AS AVERRED BY THE LD. A.R BEFORE US THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS P ROVIDING HIGH E ND DATA ANALYTICS AND CUSTOMIZED PROCESS SOLUTION AND WAS A LEADING INDIAN PROVIDER OF KPO SERVICES , WHICH SUBSTANTIALLY VARIES FROM A LOW END P A G E | 37 ITES SERVICE PROVIDER, WHILE FOR THE ASSESSEE WAS ENGAGED IN PROVIDING BPO SERVICES , VIZ - PROCESSING OF INSURANCE CLAIMS AND INSURANCE PREMIUMS AND DATA PROCESSING SERVICE FOR WHICH IT EMPLOYED ORDINARY GRADUATES, THEREFORE THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, AND AS SUCH COULD NOT BE SELECTED AS A COMPARABLE. WE FIND THAT THE DRP HAD VIDE ITS ORDER DATED 27 .11. 2015 PASSED IN THE CASE OF ASSESSEE FOR AY 2011 - 12 HAD ACCEPTED THE CONTENTION OF THE ASSESSEE AND REJECTED THE AFORESAID COMPARABLE COMPANY, VIZ. ECLERX SERVICES LIMITED ON THE BASIS THAT I T WAS ENGAGED IN KPO SERVICE, AND THE DEPARTMENT BY ACCEPTING THE SAID ORDER OF THE DRP FOR A.Y. 2011 - 12 BY NOT CARRYING THE MATTER IN FURTHER APPEAL BEFORE THE TRIBUNAL , HAD THUS ALLOWED ITTO ATTAIN FINALITY . WE FURTHER FIND THAT IN THE ASSESSES OWN C ASE FOR THE IMMEDIATELY SUCCEEDING YEAR, I.E A.Y 2009 - 10, THE DRP AS WELL AS THE TRIBUNAL HAD HELD THAT COMPANIES ENGAGED IN KPO SERVICES CANNOT BE COMPARED TO THE ROUTINE BPO SERVICES PROVIDED BY THE ASSESSEE. THAT STILL FURTHER THE TRIBUNAL WHILE DISPOSI NG OF THE APPEAL OF THE ASSESSES FOR AY 2010 - 11 HAD HELD THAT AS THE ASSESSEE WAS A ROUTI NE BPO SERVICE PROVIDER, THEREFORE IT CANNOT BE COMPARED TO HIGH END KPO SERVICE PROVIDERS SUCH AS ECLERX SERVICE LIMITED. WE FURTHER FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [A.Y: 2008 - 09] 39 CCH 130 (MUM); DATED. 07.03.2014 , HAD SPECIFICALLY REJECTED THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED, ON THE BASIS THAT COMPANIES PREDOMINANTL Y ENGAGED IN KPO SERVICES CANNOT BE CONSIDERED AS A COMPARABLE TO A COMPANY PREDOMINANTLY ENGAGED IN BPO ACTIVITIES. WE ARE THUS OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE VIEW P A G E | 38 TAKEN BY THE TRIBUNAL WHILE DISPOSING OF THE APPEALS OF THE ASSESSEE FOR A.Y(S): 2009 - 10 & 2010 - 11, THEREIN CONCLUDING THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WHICH WAS A KPO COULD NOT BE TAKEN AS A COMPARABLE AS AGAINST THE ASSESSEE COMPANY WHICH IS PROVIDING BPO SERVICES, COUPLED WITH THE FACT THAT IN THE ASSESSES OWN CASE FOR A.Y 2011 - 12 THE EXCLUSION BY THE DRP OF THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED FROM THE LIST OF COMPARABLES HAD BEEN ACCEPTED BY THE DEPARTMENT, AND LA ST BUT NOT THE LEAST THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD.(SUPRA) HAD THEREIN HELD THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WHICH IS A KPO CANNOT BE COMPARED AS AGAINST THE ASSESSEE WH ICH IS PROVIDING BPO SERVICES, WE THUS FINDING NO R EASON TO TAKE A DIFFERENT VIEW AND BEING OF THE CONSIDERED VIEW THAT THE AFORESAID COMPARABLE, VIZ. ECLERX SERVICES LIMITED WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, THEREFORE HOLD THAT IT CANN OT BE ACCEPTED AS A COMPARABLE AND HENCE IS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. (D) MOLD - TEK TECHNOLOGIES LTD : (1). IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO/AO HAD ERRED IN CONSIDERING MOLD - TEK TECHNOLOGIES LIMITED AS A COMPARABLE , THEREIN DISREGARDING THE VERY FACT THAT THE SAID COMPAN Y WAS ENGAGED IN HIGH END KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES , AS IN COMPARISON TO THE ASSESSEE COMPANY WHICH WAS ENGAGED IN PROVIDING ROUTINE IT ENABLED SERVICES. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT AS THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED HAD EARNED SUPERNORMAL PROFITS , THEREFORE THE SAID COMPARABLE IN LIGHT OF THE SAID P A G E | 39 EXTRAORDINARY EVENT COULD NOT B E SELECTED AS A COMPARABLE. IT WAS FURTHER SUBMITTED THAT TH E DRP DISREGARDING THE FACT THAT THE SAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, HAD THUS WRONGLY ACCEPTED IT AS A COMPARABLE. (2). THE ASSESSEE THEREIN SUBMITTED THAT AS THE AFORESAID COMPARABL E, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS ENGAGED IN PROVIDING HIGH END STRUCTURAL ENGINEERING CONSULTING SERVICES WHICH IS A HIGH END SEGMENT SERVICE AND CANNOT BE COMPARED TO THE ROUTINE IT ENABLED SERVICES PROVIDED BY THE ASSESSEE, THEREFORE IT WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, AND AS SUCH COULD NOT HAVE BEEN SELECTED AS A COMPARABLE. THE ASSESSEE REFERRING TO THE ANNUAL REPORT OF THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED, THEREI N SUBMITTED THAT AT PAGE 10 OF THE SAID REPORT ( PAGE 843 OF APB) , UNDER THE HEAD 'REVIEW OF OPERATIONS' THE COMPANY HA D MENTIONED THAT IT IS ENGAGED IN KPO BUSINESS. IT W A S FURTHER SUBMITTED THAT AS PER THE WEBSITE OF THE COMPANY , VIZ. WWW.MOLDTEKINDIA.COM/ABOUT - US.HTML ( PAGE 1051 OF THE APB ) , WHICH READ AS UNDER : 'MOLD - TEK TECHNOLOGIES IS A LEADING KPO IN ENGINEERING AND DESIGN SERVICES. LOCATED IN HYDERABAD, MOLD - TEK SPECIALIZES IN CIVIL, STRUCTURAL AND MECHANICAL ENGINEERING SERVICES. MOLDTEK HAS A STRONG TEAM OF SKILLED RESOURCES WITH WORLD CLASS RESOURCES AND SKILL SETS COMPLEMENTED BY TWO SUBSIDIARIES IN USA - CROSSROADS DETAILING, INC. INDIANAPOLIS, IN & RMM GLOB AL LLC AKRON, OH.' P A G E | 40 , IT COULD SAFELY BE GATHERED THAT THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS A LEADING KPO. (3). THAT IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE AFORE SAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS R EJECTED BY THE TPO HIMSELF IN THE ASSESSES OWN CASE FOR AY 2006 - 07 ON THE BASIS THAT AS IT WAS FOUND TO BE AN EXTREME OUTLIER , THEREFORE IT COULD NOT BE COMPARED TO THE ASSESSEE COMPANY . STILL FURTHER IT WAS SUBMITTED THAT THE TRIBUNAL IN ASSESSES OWN CASE FOR AY 2010 - 11 HA D HELD THAT AS THE ASSESSEE COMPANY WAS A ROUTINE BPO SERVICE PROVIDER , THEREFORE IT COULD NOT BE COMPARED TO HIGH END KPO SERVICE PROVIDERS . THUS IN THE BACKDROP OF THE AFORESAID OBSERVATIONS OF THE TRIBUNAL, IT WAS SUBMITTED THAT NOW WH EN IT WAS AN ESTABLISHED FACT THAT THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS ALSO ENGAGED IN KPO BUSINESS , THEREFORE FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN ASSESSES OWN CASE FOR THE SUBSEQUENT YEAR , THE SAID COMPARABLE WAS LIABL E TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. THAT IN ORDER TO FORTIFY ITS AFORESAID CONTENTION, IT WAS FURTHER SUBMITTED THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [A.Y: 2008 - 09] 39 CC H 130 (MUM); DATED. 07.03.2014 , HAD SPECIFICALLY HELD THAT COMPANIES PREDOMINANTLY ENGAGED IN KPO SERVICES CANNOT BE CONSIDERED AS A COMPARABLE TO A COMPANY PREDOMINANTLY ENGAGED IN BPO ACTIVITIES (4). THE ASSESSEE IN FURTHER SUPPORT OF ITS CONTENTION THAT THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES, THUS RELIED ON A HOST OF P A G E | 41 ORDERS OF THE TRIBUNAL IN THE CASE OF SIMILARLY PLACED ASSESSES, AS UNDER: - (I). MAERSK GLOBAL CENTRES (INDIA) PVT LTD VS ACIT [AY 2008 - 09 - 39 CCH 130 (MUM) , DATED 7MARCH 2014 ] (II). LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED VS ITO ( ITA NO.7498/MUM/2012 [AY 2008 - 09] , DATED 9 JULY 2014 ) . (III). MINDCREST (INDIA) PRIVATE LIMITED VS DCIT ( IT A NO.7289/MUM/201 2 [AY 2008 - 09] DATED 12 , DECEMBER 2014 ) . (IV). COGNIZANT TECHNOLOGY SERVICES PVT. LTD. VS. ACIT. ( 37 CCH 155 [AY 2007 - 08 & 2008 - 09] (HYD) , DATED 22 MAY 2013 ) . (V). STREAM INTERNATIONAL SERVICES PVT LTD . [ (AY 2007 - 08) (IT A NO.8920/MUM/201 1) , DATED 10 OCTOBER 2014 . ] (VI). E4E BUSINESS SOLUTIONS INDIA PVT. LTD (AY 2007 - 08) [ (ITA NO. 819/BANG/2011) , DATED 26 MAY 2015 ] (VII). M/S SYMPHONY MARKETING SOLUTIONS INDIA P. LTD. [ 37 CCH 253 [AY 2008 - 09 (BANG) , 14 AUGUST2013 ] (5). THAT IT WAS FURTHER SUBMITTED THAT AS THE YEAR UNDER CONSIDERATION WAS A N EXCEPTIONAL YEAR OF PERFORMANCE OF THE COMPANY AND THERE WAS A DRASTIC INCREASE IN TURNOVER DURING THE YEAR UNDER CONSIDERATION . IT WAS SUBMITTED BEFORE US THAT THE Y EAR UNDER CONSIDERATION HAD WITNESSED AN AMALGAMATION BETWEEN M/S TECK - MEN TOOLS PRIVATE LIMITED (TPL), THE TRANSFEROR COMPANY AND THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED . IT WAS THUS SUBMITTED THA T ON THE P A G E | 42 SAID GROUND ITSELF THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES. THAT ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD PLACED HEAVY RELIANCE ON T HE ORDER OF THE TPO/AO AND THEREIN SUBMITTED THAT THE LOWER AUTHORITIES AFTER THOROUGH VETTING OF THE VARIOUS FACTORS, HAD AS SUCH RIGHTLY SELECTED THE AFORESAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED . THE LD. D.R FURTHER ADVERTING TO THE CONTENTION WHICH WAS RAISED BY THE ASSESSEE THAT ON THE BASIS OF AN ADDITIONAL GROUND OF APPEAL, THAT IN LIGHT OF THE EXTRAORDINARY EVENT AS THAT OF AMALGAMATION BETWEEN M/S TECK - MEN TOOLS PRIVATE LIMITED (TPL) AND TH E AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED DURING THE YEAR UNDER CONSIDERATION, THE AFORESAID COMPANY COULD NOT HAVE BEEN TAKEN AS A COMPARABLE, THEREIN REFERRING TO THE RELEVANT PAGES OF THE ANNUAL REPORT OF THE SAID COMPARABLE ( PAGE 842 OF APB) , THEREIN AVERRED THAT IT DID NOT EMERGE FROM THE RECORDS AS TO WHETHER M/S TECK - MEN TOOLS PVT. LTD., THE COMPANY WHICH WAS TAKEN OVER BY THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED , WAS ENGAGED IN THE SAME LINE OF BUSINESS, OR NOT. THUS IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS AVERRED BY THE LD. D.R THAT IN LIGHT OF THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSES OWN CASE FOR A.Y. 2007 - 08, WHEREIN IT HAD BEEN HELD THAT EVEN IF THERE IS AN EXTRAORDINARY EVENT IN THE FORM O F MERGER/DEMERGER, IT IS ONLY WHEN IT IS SHOWN THAT PURSUANT TO SUCH EXTRAORDINARY EVENT THE COMPARABLE HAD BECOME FUNCTIONALLY DIFFERENT, AND AS SUCH INCOMPARABLE, THAT THE SAME WOULD RENDER IT LIABLE TO BE EXCLUDED AS A COMPARABLE. IT WAS THUS AVERRED BY THE LD. D.R THAT IN LIGHT OF THE AFORESAID FACTS, THE CONTENTION OF THE ASSESSEE THAT THE P A G E | 43 AFORESAID COMPARABLE MAY BE EXCLUDED FROM THE LIST OF THE FINAL COMPARABLES, THUS COULD NOT BE SUMMARILY ACCEPTED ON THE VERY FACE OF IT, AS SUCH . (6). THAT STILL F URTHER IT WAS SUBMITTED BY THE ASSESSEE THAT AS DURING THE YEAR UNDER CONSIDERATION T HE COMPANY HAD EARNED ABNORMALLY HIGH PROFITS (I.E. OPERATING PROFITS / OPERATING COST OF 106.82%) , IT WAS THUS ON THE SAID COUNT ITSELF LIABLE TO BE EXCLUDED FROM THE LIST OF COMPARABLE S , AS SUCH LIKE COMPANIES HAVE A TENDENCY TO SKEW THE RESULTS AND CANNOT BE CONSIDERED AS REPRESENTATIVE OF THE INDUSTRY. ACCORDINGLY, IT WAS SUBMITTED THAT THIS COMPANY SHOULD BE REJECTED ON ACCOUNT OF BEING AN OUTLIER . IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL HA D UPHELD THE REJECTION OF A COMPANY EARNING SUPER NORMAL PROFITS , VIZ EXCEL INFOWAYS LTD IN THE ASSESSES OWN CASE FOR AY 2009 - 10. RELIANCE IN SUPPORT OF THE AFORESAID CONTENTION WAS PLACED BY THE ASSESSEE ON THE FOLLOWING ORDE RS OF THE COORDINATE BENCHES OF THE TRIBUNAL : - (I). M/S ADOBE SYSTEMS INDIA PRIVATE LIMITED (ITA NO. 5043/DEL/2010) . (II). SAP LABS PVT LTD (ITA NO. 398/BANG/20 (III). TEVA INDIA PVT LTD (6107/MUM/2009) (IV) SAUNAY JEWELS PVT LTD (5758/MUM!2007) (V). MENTO R GRAPHICS (P) LTD (112 TTJ 408 . THAT AS REGARDS THE AFORESAID CONTENTION THAT THE COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED , WHICH DURING THE YEAR UNDER CONSIDERATION HAD EARNED ABNORMALLY HIGH PROFITS , WAS LIABLE TO BE P A G E | 44 EXCLUDED AS A COMPARABLE ON THE SAID COUNT ITSELF, IT WAS SUBMITTED BY THE LD. D.R THAT THE TRIBUNAL HAD IN A NUMBER OF DECISIONS THEREIN HELD THAT A COMPANY WHICH IS OTHERWISE FUNCTIONALLY COMPARABLE WILL NOT BE REJECTED SOLELY ON THE GROUND OF SUPER NORMAL PROFITS , AND IN ORDER TO FORTIFY HIS CONTENTION, THEREIN RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF : CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) (P). LTD. VS. DCIT (2015) 56 TAXMANN.COM 417 (DELHI) , THUS IN THE BACKDROP OF HIS AFORESAID CONTENTI ON, IT WAS SUBMITTED BY THE LD. D.R THAT THE CONTENTION OF THE ASSESSEE, THEREIN SEEKING EXCLUSION OF THE AFORESAID COMPARABLE THUS WAS LIABLE TO BE REJECTED. (7). WE HAVE HEARD BOTH THE LD. REPRESENTATIVES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RECORDS MADE AVAILABLE BEFORE US. WE FIND THAT THE AFORESAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS ENGAGED IN HIGH END KNOWLEDGE PROCESS OUTSOURCING (KPO) SERVICES, AND THEREIN PROVIDING HIGH END STRUCTURAL ENGINEERING CONSULTING SERVICE S , WHICH IS A HIGH END SEGMENT SERVICE , AS IN COMPARISON TO THE ASSESSEE COMPANY WHICH WAS ENGAGED IN PROVIDING ROUTINE IT ENABLED SERVICES. WE FIND THAT THAT THE SAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED WAS REJECTED BY THE TPO HIMSELF IN THE ASSESSES OWN CASE FOR AY 2006 - 07 FOR THE REASON THAT THE SAID COMPANY WAS AN EXTREME OUTLIER , AND HENCE COULD NOT BE COMPARED WITH THE ASSESSEE COMPANY. THAT STILL FURTHER THE TRIBUNAL IN ASSESSES OWN CASE FOR AY 2010 - 11, HAS HELD THAT AS THE ASSESSEE COMPANY IS A ROUTINE BPO SERVICE PROVIDER, THEREFORE IT CANNOT BE COMPARED TO HIGH END KPO SERVICE PROVIDERS . WE FURTHER FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. P A G E | 45 VS. ACIT [A.Y: 2008 - 09] 39 CCH 130 (MUM); DATED. 07.03.2014 , HAD SPECIFICALLY REJECTED THE AFORESAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED, ON THE BASIS THAT COMPANIES PREDOMINANTLY ENGAGED IN KPO SERVICES CANNOT BE CONSIDERED AS A COMPARABLE TO A COMPAN Y PREDOMINANTLY ENGAGED IN BPO ACTIVITIES. WE ARE OF THE CONSIDERED VIEW THAT AS THE AFORESAID COMPARABLE , VIZ. MOLD - TEK TECHNOLOGIES LIMITED IS A LEADING KPO IN ENGINEERING AND DESIGN SERVICES, SPECIALIZING IN CIVIL, STRUCTURAL AND MECHANICAL ENGINEERING SERVICES, WITH A STRONG TEAM OF SKILLED RESOURCES WITH WORLD CLASS RESOURCES AND SKILL SETS COMPLEMENTED BY TWO SUBSIDIARIES IN USA - CROSSROADS DETAILING, INC. INDIANAPOLIS, IN & RMM GLOBAL LLC AKRON, OH, THEREFORE THE SAME BEING SUBSTANTIALLY FUNCTIONALL Y DIFFERENT FROM THE ASSESSEE COMPANY WHICH IS A ROUTINE BPO SERVICE PROVIDER, THEREFORE CANNOT BE TAKEN AS A COMPARABLE. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF : MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT [A.Y: 2008 - 09] 39 CCH 130 (MUM) HAD REJECTED THE AFORESAID COMPARABLE ON THE BASIS THAT IT WAS ENGAGED IN KPO SERVICES, AND AS SUCH COULD NOT BE COMPARED TO A COMPANY PREDOMINANTLY ENGAGED IN BPO SERVICES. WE THUS ARE OF THE CONSIDERED VIEW THAT THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED WHICH IS A KPO CANNOT BE COMPARED AS AGAINST THE ASSESSEE WHICH IS PROVIDING BPO SERVICES, AND AS SUCH BEING FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, THER EFORE CANNOT BE ACCEPTED AS A COMPARABLE AND IS THUS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. T HAT AS THE AFORESAID COMPARABLE, VIZ. MOLD - TEK TECHNOLOGIES LIMITED BEING FOUND TO BE FUNCTIONALLY DIFFERENT, HAS BEEN DIRECTED TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES, P A G E | 46 THEREFORE THE REMAINING ISSUES ON THE BASIS OF WHICH THE INCLUSION OF THE SAID COMPARABLE HAD BEEN ASSAILED BEFORE US ARE RENDER E D AS INFRUCTUOUS AND ARE THUS NOT BEING ADJUDICATED UPON. (E). ACCENTIA TECHNOLOGIES LTD : (1). THE LD. A.R HAD SUBMITTED AT THE VERY OUTSET THAT THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. WAS REJECTED BY THE DRP IN ASSESSES OWN CASE FOR A . Y 2009 - 10 FOR THE REASON THAT UNLIKE THE ASSESSEE COMPANY THE SAID COMP ARABLE EARN ED REVENU E FROM SALE OF SOFTWARE SERVICES AND WAS THUS FUNCTIONALLY DIFFERENT , AS WELL AS THE FACT THAT THERE WAS NO SEPARATE SEGMENTAL INFORMATION AVAILABLE IN THIS REGARD. THAT IT WAS SUBMITTED THAT THE SAID ORDER OF THE DRP WAS NOT FURTHER CARRIED IN APPEAL BY THE DEPARTMENT BEFORE THE ITAT , AND BY SO DOING THE SAID FINDINGS OF THE DRP COULD SAFELY BE HELD TO HAVE BEEN ACCEPTED BY THE DEPARTMENT, AND AS SUCH HAD BEEN ALLOWED TO ATTAIN FINALITY . IT WAS FURTHER SUBMITTED THAT THE TPO HIMSELF HAD REJECTED TH E SAID COMPARABLE IN THE CASE OF THE ASSESSEE FOR A . Y 2010 - 11 AND A . Y 2011 - 12 , FOR THE REASON THAT THE SAID COMPARABLE , UNLIKE THE ASSESSEE WAS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES AND WAS THUS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY . THE ANNUAL RE PORT OF THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. FOR THE YEAR UNDER CONSIDERATION THEREIN REVEALS THAT ITS OPERATIONS HAVE BEEN CLASSIFIED UNDER A SINGLE SEGMENT , VIZ. 'HEALTHCARE RECEIVABLES MANAGEMENT'. THAT STILL FURTHER FROM A PERUSAL OF THE P ROFIT AND LOSS ACCOUNT OF THE AFORESAID COMPARABLE, THOUGH IT CAN FAIRLY BE GATHERED THAT IT HAD GEN ERATED INCOME FROM THREE SOURCES , I.E. MEDICAL TRANSCRIPTION, BILLING & CODING AND SOFTWARE DEVELOPMENT & P A G E | 47 IMPLEMENTATION , BUT HOWEVER NO SEGMENTA L INFORMATION IS PROVIDED IN THE SAID ANNUAL REPORT. IT WAS FURTHER SUBMITTED BEFORE US THAT T HE TPO HA D CONSIDERED THE PROFITABILITY OF THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. AT AN OVERALL ENTITY LEVEL , WHICH INCLUDES INCOME FROM SOFTWARE DEVELOPMENT , WHICH HAD LED TO AN INFEASIBLE COMPARISON . THAT IN THE BACKDROP OF THE AFORESAID FACTS IT WAS SUBMITTED THAT ON THE BASIS OF SUCH INCOMPLETE INFORMATION , THE AFORESAID COMPANY COULD NOT HAVE BEEN CONSIDERED AS A COMPARABLE . THAT IN SU PPORT OF THE AFORESAID CONTENTION R ELIANCE WAS PLACED ON THE FOLLOWING JUDGEMENTS: (I) VODAFONE INDIA SERVICES P. LTD. VS DC IT . 36 CCH 550 [AY 2007 - 08] (MUM) DATED 26 APRIL .2013 (II) MAERSK GLOBAL SERVICE CENTRES (INDIA) PVT. LTD . [AY 2009 - 10] - ITA NO. 2594/MUM/2014 DATED 16 JANUARY 2015 (III). STREAM INTERNATIONAL SERVICES ( AY 2007 - 8) (ITA NO.8920/MM/2011 ) DATED 29 SEPTEMBER 2014 . (IV). XCHANGING TECHNOLOGY SERVICES INDIA PRIVATE LI MITED (ITA NO. - 813/2015/ DEL HC) [AY 2009 - 101 DATED 20 OCTOBER 2015 . (V). XCHANGING TECHNOLOGY SERVICES INDIA PRIVATE LIMITED (ITA NO. 1897/DEL/2014) DATED 24 APRIL 2015 . (VI) M/S M INDTECK (INDIA) LTD (ITA NO. 70/2014) [AY 2009 - 10 DARED 21 AUGUST 2014 . (VII). T NS INDIA PVT LTD [AY 2008 - 09] - ITA NO. 1875/HYD/2012 DATED 17 APRIL 2015 . P A G E | 48 (VIII). AEGIS LIMITED VS ACIT - ITA NO. 1213/MU M/ 2014 [AY 2009 - 10] DATED 27 JULY 2015 . (IX). P T C SOFTWARE (INDIA) PRIVATE LIMITED VS DCIT [AY 2009 - 10 - ITA NO.336/PN/2014 DATED 31 OCTOBER 20 14. IT WAS SUBMITTED THAT THE AFORESAID COMPANY WAS REJECTED BY THE TPO IN THE CASE OF THE ASSESSEE COMPANY FOR AY 2010 - I1 . IT WAS FURTHER SUBMITTED THAT THE DRP HAD REJECTED THE SAID COMPARABLE IN THE CASE OF THE ASSESSEE COMPANY FOR A . Y 2009 - 10 , FOR THE REASON THAT UNLIKE THE ASSESSEE COMPANY THE SAID COMPARABLE WAS A LSO ENGAGED IN SOFTWARE DEVELOPMENT ACTIVITIES , AND IN THE ABSENCE OF SEGMENTAL BREAKUP COULD NOT BE CONSIDERED AS A COMPARABLE . THAT THE AFORE SAID ORDER OF THE DRP WAS ACCEPTED BY THE DEPARTMENT , AND NO APPEAL WAS FILED AGAINST THE SAME BEFORE THE TRIBUNAL. THUS IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BEFORE US THAT AS THE COMPARABLE COMPANY, VIZ. ACCENTIA TECHNOLOGIES LTD. , WAS FUNCTIONALLY INCOMPA RABLE, THEREFORE IT HAD WRONGLY BEEN SELECTED AS A COMPARABLE. (2). THAT STILL FURTHER, IT WAS SUBMITTED THAT PAGE 29 OF THE ANNUAL REPORT OF THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. ( PAGE 717 OF APB) REVEALED THAT DURING THE YEAR, TWO OF THE COMPANIES, VIZ. M/S GEOSOFT TECHNOLOGIES (TRIVANDRUM) LIMITED ( A COMPANY ENGAGED IN PROVISION OF MEDICAL TRANSCRIPTION SERVICES ) AND M/S INDIUM TECHNOLOGIES INDIA PVT . LTD . , ( A COMPANY ENGAGED IN PRODUCT DEVELOPMENT FOR HEALTHCARE INDUSTRY ) HAD AMALGAMATED INTO THE PARENT COMPANY, VIZ. ACCENTIA TECHNOLOGIES LTD. THAT STILL FURTHER DURING THE YEAR THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD., HAD ACQUIRED CERTAIN COMPANIES VIZ THUNGA SOFTWARE PRIVATE P A G E | 49 LIMITED, GSR SYSTEMS INC . , GSR PH YSICIAN BILLING SERVICES INC . , DENMED TRANSCRIPTION SERVICES INC AND ACCENTIA FZE . THUS IN THE BACKDROP OF THE AFORESAID FACTS IT WAS SUBMITTED THAT AS ONE OF AMALGAMATING COMPANY WAS FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE COMPANY, AND AS SUCH THE SAI D COMPARABLE , VIZ. ACCENTIA TECHNOLOGIES LTD. WAS ENGAGED IN RENDERING TWO ACTIVITIES , I.E ME DICAL TRANSCRIPTION SERVICES AND DEVELOPMENT OF PRODUCTS FOR THE HEALTHCARE INDUSTRY , THEREFORE IN LIGHT OF THE FACT THAT THERE WAS NO SEGMENTAL REPORTING FOR THESE TWO ACTIVITIES , IT COULD NOT HAVE BEEN SELECTED AS FUNCTIONALLY COMPARABLE TO THE ASSESSEE. THAT STILL FURTHER IT WAS SUBMITTED THAT DUE TO THE AFORESAID RESTRUCTURING UNDERTAKEN BY THE COMPARABLE , VIZ. ACCENTIA TECHNOLOGIES LTD., WHICH AS CLAIMED BY THE ASSESSEE WAS AN EXCEPTIONAL CIRCUMSTANCE RESULTING IN AN EXCEPTIONAL YEAR OF PERFORMANCE , WHICH HAD LED TO SIGNIFICANT INCREASE OF THE REVENUES OF THE SAID COMPARABLE FROM 28.72 CR ORE S IN FY 2006 - 07 TO 50 .93 CR ORES IN FY 2007 - 08 , I.E. AN INCREASE BY 7 7.38% , IT WAS THEREFORE SUBMITTED THAT EVEN ON THE COUNT OF THE SAID EXCEPTIONAL EVEN T OCCASIONED BY THE RESTRUCTURING OF THE AFORESAID COMPARABLE, THE LATTER WAS LIABLE TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES. THE ASSESSEE IN SUPPORT OF ITS AFORES AID CONTENTION HAD RELIED ON A HOST OF JUDICIAL PRONOUNCEMENTS. THAT ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) HAD PLACED HEAVY RELIANCE ON THE ORDER OF THE TPO/AO AND THEREIN SUBMITTED THAT THE LOWER AUTHORITIES AFTER THOROUG H VETTING THE VARIOUS FACTORS, HAD AS SUCH RIGHTLY SELECTED THE AFORESAID COMPANY , VIZ. ACCENTIA TECHNOLOGIES LTD. , AS A COMPARABLE. THE LD. D.R FURTHER ADVERTING TO THE CONTENTION WHICH WAS RAISED BY THE ASSESSEE ON THE BASIS OF AN ADDITIONAL GROUND P A G E | 50 OF APPEAL, THAT IN LIGHT OF THE EXTRAORDINARY EVENT AS THAT OF AMALGAMATION OF UNITS IN TRIVANDRUM, NAMELY IRIDIUM TECHNOLOGIES AND GEOSOFT TECHNOLOGIES IN THE PARENT COMPANY, VIZ. ACCENTIA TECHNOLOGIES LTD., DURING THE YEAR UNDER CONSIDERATION, THE AFORES AID COMPANY COULD NOT HAVE BEEN SAFELY SELECTED AS A COMPARABLE, THEREIN REFERRING TO THE RELEVANT PAGES OF THE ANNUAL REPORT OF THE SAID COMPARABLE ( PAGE 717 OF APB), THEREIN AVERRED THAT THE ASSESSEE COULD NOT DEMONSTRATE AS TO WHETHER A MERGER HAD A CTUALLY TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION, AND EVEN IF IT WAS SO, STILL NOTHING WAS PLACED ON RECORD FROM WHERE IT COULD BE GATHERED THAT THE MERGED ENTITY WAS ENGAGED IN A DIFFERENT LINE OF BUSINESS. THUS IN THE BACKDROP OF THE AFORESAID FAC TS, IT WAS AVERRED BY THE LD. D.R THAT IN LIGHT OF THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSES OWN CASE FOR A.Y. 2007 - 08, WHEREIN IT HAD BEEN HELD THAT EVEN IF THERE IS AN EXTRAORDINARY EVENT IN THE FORM OF MERGER/DEMERGER, IT IS ONLY WHEN IT IS SHOWN THAT PURSUANT TO SUCH EXTRAORDINARY EVENT THE COMPARABLE HAD BECOME FUNCTIONALLY DIFFERENT, AND AS SUCH INCOMPARABLE, THAT THE SAME WOULD RENDER IT LIABLE TO BE EXCLUDED AS A COMPARABLE. IT WAS THUS AVERRED BY THE LD. D.R THAT IN LIGHT OF THE AFORESAID FA CTS, THE CONTENTION OF THE ASSESSEE THAT THE AFORESAID COMPARABLE MAY BE EXCLUDED FROM THE LIST OF THE FINAL COMPARABLES, THUS COULD NOT BE ACCEPTED. (3). WE HAVE HEARD BOTH THE LD. REPRESENTATIVES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RECO RDS MADE AVAILABLE BEFORE US. WE FIND THAT THE AFORESAID COMPARABLE , VIZ. ACCENTIA TECHNOLOGIES LTD. WAS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES AND WAS THUS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY . WE FIND THAT THE FACT THAT THE P A G E | 51 AFORESAID COMP ARABLE WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY HAD DULY BEEN ACKNOWLEDGED BY THE TPO HIMSELF WHO FOR THE SAID REASON HAD REJECTED TH E SAID COMPARABLE , VIZ. ACCENTIA TECHNOLOGIES LTD. IN THE CASE OF THE ASSESSEE FOR A . Y 2010 - 11 AND A . Y 2011 - 12 . WE FURTHER FIND THAT THAT THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. WAS REJECTED BY THE DRP IN ASSESSES OWN CASE FOR A . Y 2009 - 10 , FOR THE REASON THAT UNLIKE THE ASSESSEE COMPANY THE SAID COMP ARABLE EARN ED REVENUE FROM SALE OF SOFTWARE SER VICES AND WAS THUS FUNCTIONALLY DIFFERENT , AND THERE WAS NO SEPARATE SEGMENTAL INFORMATION AVAILABLE IN THIS REGARD , AND THE SAID ORDER OF THE DRP HAVING NOT BEEN FURTHER ASSAILED BY THE DEPARTMENT BEFORE THE TRIBUNAL HAD THUS ATTAINED FINALITY. WE FURTHER FIND THAT AS STANDS GATHERED FROM A PERUSAL OF T HE ANNUAL REPORT AND PROFIT & LOSS A/C OF THE AFORESAID COMPARABLE, THE LATTER WAS GENERATING INCOME FROM THREE SOURCES , I.E. MEDICAL TRANSCRIPTION, BILLING & CODING AND SOFTWARE D EVELOPMENT & IMPLEMENTA TION , BUT HOWEVER NO SEGMENTAL INFORMATION WAS AVAILABLE IN THE ANNUAL REPORT. WE ARE FURTHER PERSUADED TO BE IN AGREEMENT WITH THE ASSESSEE THAT T HE TPO HA D CONSIDERED THE PROFITABILITY OF THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. AT AN OVERALL ENTITY LEVEL , WHICH INCLUDES INCOME FROM SOFTWARE DEVELOPMENT , WHICH HAD LED TO AN INFEASIBLE COMPARISON IN THE HANDS OF THE ASSESSEE COMPANY . WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF SUCH INCOMPLETE INFORMATION , THE AFORESAID COMPANY COULD NOT HAVE BEEN CONSIDERED AS A COMPARABLE . WE H A VE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERATE VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS, IT CAN SAFELY BE CONCLUDED THAT THE COMPARA BLE , VIZ. ACCENTIA TECHNOLOGIES P A G E | 52 LTD. , BEING FUNCTIONALLY DIFFERENT ON AN ENTITY LEVEL, THUS IN THE ABSENCE OF COMPLETE SEGMENTAL INFORMATION COULD NOT BE TAKEN AS A COMPARABLE. THAT AS OBSERVED BY US HEREINABOVE, OUR VIEW STANDS FORTIFIED BY THE VERY FACT THAT THE TPO HIMSELF IN THE CASE OF THE ASSESSEE COMPANY FOR THE A.Y.2010 - 11 AND 2011 - 12, FOR THE AFORESAID REASONS HAD REJECTED THE SAID COMPANY, VIZ. ACCENTIA TECHNOLOGIES LTD. AS A COMPARABLE. STIL L FURTHER THE ORDER PASSED BY THE DRP IN THE CASE OF THE ASSESSEE COMPANY, THEREIN REJECTING THE SAID COMPARABLE VIZ. ACCENTIA TECHNOLOGIES LTD. , HAVING BEEN ACCEPTED BY THE DEPARTMENT BY NOT ASSAILING THE SAME BEFORE THE TRIBUNAL, FURTHER STRENGTHENS AND SUPPORT S OUR AFORESAID VIEW. THUS IN LIGHT OF OUTR AFORE SAID OBSERVATIONS, WE HEREIN BEING OF THE VIEW THAT THE COMPARABLE , VIZ. ACCENTIA TECHNOLOGIES LTD. BEING FUNCTIONALLY DIFFERENT, THUS CANNOT BE TAKEN AS A COMPARABLE, AND THEREFORE DIRECT THE EXCLUSION OF THE SAME FROM TH LIST OF THE COMPARABLES. T HAT AS THE AFORESAID COMPARABLE, VIZ. ACCENTIA TECHNOLOGIES LTD. , BEING FOUND TO BE FUNCTIONALLY DIFFERENT, HAS BEEN DIRECTED TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES, THEREFORE THE REMAINING ISSUES ON THE BASIS OF WHICH THE INCLUSION OF THE SAID CO MPARABLE HAD BEEN ASSAILED BEFORE US ARE RENDERED AS INFRUCTUOUS AND ARE THUS NOT BEING ADJUDICATED UPON. WE IN LIGHT OF THE CONTENTION OF THE LD. A.R THAT IF THE AFORESAID 5 COMPARABLES ARE EXCLUDED FROM THE LIST OF THE COMPARABLES AND THE ALP OF THE I NTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS AE IS RECOMPUTED BY TAKING INTO CONSIDERATION THE ARITHMETIC MEAN OF THE MARGINS OF THE REMAINING COMPARABLES, THE DIFFERENCE BETWEEN SUCH ALP AND THE PRICE CHARGED BY THE ASSESSEE WOULD BE WITHIN THE SAFE HARBOR LIMIT OF 5% , THUS REQUIRING NO TP ADJUSTMENT. WE P A G E | 53 ACCORDINGLY DIRECT THE A.O TO RECOMPUTE THE ALP OF THE TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS AE BY APPLYING THE AVERAGE PROFIT MARGIN OF THE REMAINING COMPARABLES, AFTER GIVING EFFEC T TO OUR AFORESAID DIRECTIONS AS REGARDS EXCLUSIONS OF THE ABOVESAID COMPARABLES. IF THE DIFFERENCE BETWEEN THE ALP SO RECOMPUTED AND THE PRICE ACTUALLY CHARGED BY THE ASSESSEE IS WITHIN THE SAFE HARBOR LIMIT OF (+) OR ( - ) 5%, THE A.O IS DIRECTED NOT TO MAKE ANY TP ADJUSTMENT AS PER THE SECOND PROVISO TO SEC. 92C(2) OF THE ACT. IN SO FAR AS GROUND OF APPEAL NO. 12 AND 13 ARE CONCERNED, THE SAME RELATE TO THE ADJUSTMENT FOR DIFFERENCES IN WORKING CAPITAL AND RISKS ASSUMED. THOUGH THE TRIBUNAL HAS ALLOWED SUCH CLAIM FOR A.Y(S).2006 - 07 AND 2007 - 08, BUT THE SAME ARE RENDERED ACADEMIC IN V IEW OF OUR EARLIER OBSERVATIONS. THUS IN LIGHT OF OUR AFORESAID OBSERVATIONS, THE GROUND OF APPEAL NO(S).1 TO 15 ARE ALLOWED , WHICH ARE TO BE CONSIDERED IN THE BACKDROP OF THE CONCESSION OF THE LD. A.R AS RECORDED BY US HEREINABOVE, THEREIN AVERRING THAT THE ORDER OF THE AO/TPO IS BEING ASSAILED BY HIM TO THE EXTENT OF INCLUSION OF THE AFOREMENTIONED 5 COMPARABLES. FURTHER, THE RELATABLE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE US, MARKED AS GROUND OF APPEAL NO. 21 TO 2 5 ARE ALSO NOT AD JUDICATED AS THE SAME WERE NOT PRESSED, AND ARE ACCORDINGLY DISMISSED. 11. THE LD. A.R FURTHER ADVERTING TO GROUND OF APPEAL NO. 18 SO RAISED BEFORE US, THEREIN ASSAILED THE DISALLOWANCE BY THE A.O OF CLAIM OF DEDUCTION OF RS. 6,70,56,096/ - WHICH WAS RAISED BY THE ASSESSEE U/S 10A OF THE ACT IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. IT WAS AVERRED BY THE LD. A.R THAT THE A.O HAD ERRED IN EXCLUDING THE MISCELLANEOUS INCOME AMOUNTING TO RS.2,47,374/ - FROM P A G E | 54 THE ELIGIBLE PROFI TS FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 10A . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE AO HAD GRAVELY ERRED IN LAW AND FACTS OF THE CASE BY DECLINING TO ALLOW THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION OF RS.6,70,56,096/ - UNDER SEC. 10A IN TOTO , FOR THE REASON THAT AS PER HIM THE METHOD ADOPTED BY THE ASSESSEE FOR COMPUTING THE DEDUCTION WAS NOT CORRECT. THE LD. A.R HAD AT THE VERY OUTSET SUBMITTED THAT THE ISSUE UNDER CONSIDERATION, VIZ. THE ENTITLEMENT OF THE ASSESSEE TOWARDS CLAIM OF DEDUCTION U/S 10A INVOLVING THE SAME FACTS ON THE BASIS OF WHICH THE SAME HAD BEEN DECLINED BY THE A.O DURING THE YEAR UNDER CONSIDERATION, WAS COVERED BY THE ITAT ORDER FOR AY 2006 - 07 IN THE ASSESSES OWN CASE , AND TO SUPPORT HIS CONTENTION HE TOOK US TO THE ORDER OF THE TRIBUNAL FORMING PART OF HIS PAPER BOOK ( P AGE 504 - 505 OF APB ). IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE SAID ORDER OF THE TRIBUNAL HAD THEREAFTER BEEN FOLLOWED BY THE DRP IN THE ASSESSES OWN CASE FOR AY 2009 - 10 ( PAGE 964 - 968 OF APB) , WHICH WAS ACCEPTED BY THE DEPARTMENT BY NOT ASSAILING THE SAM E BEFORE THE T R I BUNAL. 12. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RECORDS PRODUCED BEFORE US. BRIEFLY STATED, THE FACTS LEADING TO THE ISSUE UNDER CONSIDERATION ARE THAT THE ASSESSEE HAD TWO UNITS LOCATED AT VIK HROLI AND THANE. THE UNIT AT VIKHROLI WHICH WAS FORMED IN THE YEAR RELEVANT TO A.Y. 2000 - 01, I.E. AFTER 1 ST APRIL 1994 AS SPECIFIED IN SECTION 10A(2)(I)(B), THUS QUALIFIED FOR CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHILE FOR THE UNIT AT THANE WAS A NON - STPI UNIT. THE ASSESSEE HAD A UNIT IN SEEPZ WHICH WAS CLOSED IN DECEMBER 2003. THAT AS THE P A G E | 55 ENTIRE INCOME OF THE VIKHROLI UNIT W ERE BY WAY OF EARNINGS FROM THE SERVICES RENDERED TO TRINITY PROCESSING SERVICES LIMITED, UK ; WILLIS PROCESSING SERVICES I NC. USA AND TRINITY PROCESSING SERVICES PTY. LIMITED, AUSTRALIA, THE REFORE THE SAME QUALIFIED FOR DEDUCTION UNDER SECTION 10A OF THE ACT. THAT AS FOR THE THANE UNIT, SEPARATE RECORDS WERE MAINTAINED , AND AS SUCH ITS PROFIT WAS WORKED OUT ON ACTUAL BASIS AND NO INCOME WAS ALLOCATED SEPARATELY TO IT. THE UNIT OF THE ASSESSEE IN SEEPZ WAS CLOSED IN DECEMBER , 2003 , AND IN F.Y 2003 - 04 CERTAIN EMPLOYEES AND COMPUTERS WERE TRANSFERRED FROM THE SEEPZ UNIT TO THE VIKHROLI UNIT, HOWEVER T HE VALUE OF SUCH ASSETS WAS MUCH LESS THAN 20% OF THE TOTAL ASSET BASE OF THE VIKHROLI UNIT , WHICH AS OBSERVED BY US HEREINABOVE WAS FORMED IN F . Y 1999 - 01 WITH NEW EMPLOYEES AND NEW ASSETS WITH NO TRANSFER OF EMPLOYEES OR ASSETS FROM THE SEEPZ UNIT TO THE VIKHROLI UNIT TILL F . Y 2003 - 04 . THOUGH THE VIKHROLI UNIT OF THE ASSESSEE SATISFIED ALL THE PRESCRIBED CONDITIONS LAID DOWN U/S. 10A AND THE ENTIRE INCOME GENERATED BY THE ASSESSEE FROM EXPORT OF SERVICES THEREFROM WAS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 1 0A OF THE ACT, H OWEVER, THE ASSESSEE AS IN THE PAST, HAD ON A CONSERVATIVE BASIS CLAIMED A LOWER DEDUCTION UNDER SECTION 1 0 A , BY CONSIDERING THE PROPORTIONATE PROFITS RELATING TO SEEPZ UNIT AS TAXABLE, BASED ON THE ESTIMATED NUMBER OF EMPLOYEES RELATABLE T O THE LATTER, EVEN THOUGH THE UNIT HAS BEEN CLOSED IN THE PAST YEARS. THE AFORESAID METHODOLOGY OF ALLOCATING INCOME AND EXPENSES BETWEEN BOTH THE UNITS HA D BEEN FOLLOWED CONSISTENTLY BY THE ASSESSEE COMPANY OVER THE PAST YEARS. IT WAS THUS IN THE BACKDROP OF THE AFORESAID FACTS THEREIN AVERRED BEFORE US THAT IN THE ABSENCE OF ANY PARTICULAR METHOD BEING SPECIFIED UNDER THE ACT, THE ASSESSEE HAD P A G E | 56 ADOPTED A REASONABLE METHOD FOR COMPUTING THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A, AND THUS IT WAS ENTITLED TOWARDS CLAIM OF DEDUCTION UNDER SECTION 10A AS CLAIMED IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, SPECIFICALLY WHEN THE SAID CLAIM OF THE ASSESSEE TOWARDS DEDUCTION U/S 10A HAD BEEN APPROVED BY THE TRIBUNAL IN THE ASSESSES OWN CAS E FOR A.Y. 2006 - 07, WHICH THEREAFTER HAD BEEN FOLLOWED BY THE DRP IN THE CASE OF THE ASSESSEE FOR A.Y. 2009 - 10, WHICH NOT HAVING BEEN ASSAILED BY THE DEPARTMENT BEFORE THE TRIBUNAL, HAD THUS ATTAINED FINALITY. 13. WE THOUGH ARE NOT OBLIVIOUS OF THE FACT THAT THE INCOME - TAX ACT DO NOT PROVIDE FOR A SEPARATE METHOD OF ALLOCATING INCOME AND EXPENSES FOR COMPUTATION OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A , AND RATHER ONLY PROVIDES FOR THE MANNER I N WHICH THE AMOUNT E LIGIBLE FOR DEDUCTION MUST BE ARRIVED AT. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSES OWN CASE FOR AY 2006 - 07 IN ITA NO. 8772/MUM/2010), DATED 7 DECEMBER 2012, WHEREIN THE TRIBUNAL AFTER PERUSING THE METHODOLOGY WHICH HAD CONSISTENTLY BEEN FOLLOWED BY THE ASSESSEE FOR COMPUTING ITS CLAIM FOR DEDUCTION U/S 10A, HAD FOUND FAVOR WITH THE SAME AND HELD THAT THE ASSESSEE WAS ENTITLED TOWARDS CLAIM FOR DEDUCTION U/S 10A AND HAD REMANDED THE CASE TO THE A . O FOR THE LIMITED PURPOSE OF DETERMIN I NG THE QUANTUM OF DEDUCTION. WE FURTHER FIND THAT THE DRP IN THE CASE OF THE ASSESSEE FOR A.Y. 2009 - 10 HAD FOLLOWED THE ORDER OF THE TRIBUNAL, AND THE DEPARTMENT BY NOT ASSAILING THE SAME BEFORE THE TRIBUNAL, THUS CAN SAFELY BE CONCLUDED TO HAVE ACCEPTED T HE SAME BY ALLOWING IT TO ATTAIN FINALITY. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS AS THEY SO REMAIN, IN THE ABSENCE OF ANY MATERIAL BEING PLACED ON RECORD OR P A G E | 57 AVERMENT BY THE LD. D.R WHICH COULD PROVE EITHER ANY PERVERSITY IN THE AFORESAID ORDERS OR ANY FACT WHICH COULD GO TO PROVE THAT THE CASE OR THE FACTS INVOLVED THEREIN DURING THE YEAR UNDER CONSIDERATION WERE DISTINGUISHABLE AS AGAINST THOSE OF A.Y. 2006 - 07, THUS ARE PERSUADED TO FOLLOW THE OBSERVATIONS OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE FOR AY 2006 - 07 IN ITA NO. 8772/MUM/2010), DATED 7 DECEMBER 2012. THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE HEREIN HOLDING THAT THE ASSESSEE STANDS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10A, THEREIN REMAND THE MATTER TO THE FILE OF THE A.O FOR THE LIMITED PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION SO RAISED BY THE ASSESSEE U/S 10A IN ITS RETURN OF INCOME. THAT AS REGARDS THE CONTENTION OF THE LD. A.R THAT THE A.O HAD ERRED IN EXCLUDING THE MISCELLANEOUS INCOME OF RS. 2,47,374/ - FR OM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A, WE ARE OF THE CONSIDERED VIEW THAT THE ENTITLEMENT OF AN ASSESSEE TOWARDS CLAIM OF SUCH DEDUCTION, AS HAD CLEARLY BEEN SPELT OUT IN SEC. 10A(4), IS RESTRICTED ONLY AS REGARDS THE PROF ITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE , HOWEVER , AS NEITHER FROM THE ORDERS OF THE LOWER AUTHORITIES, NOR FROM THE RECORDS AVAILABLE BEFORE US IT CAN BE GATHERED AS TO WHAT IS THE NATURE OF MISCELLANEOUS INCOME OF RS. 2,47,374/ - , NOR ANYTHING AS REGARDS THE SAME HAD BEEN SUBMITTED BEFORE US BY EITHER OF THE PARTIES DURING THE COURSE OF HEARING OF THE APPEAL, WE THEREFORE KEEPING IN VIEW THE FACT THAT AS THE ISSUE AS REGARDS DETERMINING THE QUANTUM OF DEDUCTION U/S 10A, AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME HAD BEEN RESTORED BY US TO THE F ILE OF THE A.O, THEREFORE RESTORE TH IS ISSUE ALSO TO THE FILE OF THE A.O. THAT IN CASE IF THE MISCELLANEOUS INCOME OF RS. 2,47,374/ - (SUP RA) FALLS P A G E | 58 WITHIN THE BRACKET OF PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE , THEN THE A .O SHALL BE PRECLUDED FROM EXCLUDING THE SAME FROM THE SCOPE OF THE PROFITS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10A. NEEDLESS TO SAY, THE A.O SHALL DURING THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS CLAIM, BOTH AS REGARDS THE QUANTIFICATION OF THE DEDUCTION AS CLAIMED U/S 10A IN THE RETURN OF INCOME, AS WELL AS ITS ENTITLEMENT TOWARDS CLAIM OF THE SAID DEDUCTION W.R.T THE AMOUNT OF RS. 2,47,374/ - (SUP RA). THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, THE GROUND(S) OF APPEAL NO.16 TO 18 ARE PARTLY ALLOWED . 14. TH AT AS REGARDS THE GROUND OF APPEAL NO. 19 THEREIN ASSAILING THE LEVY OF INTEREST U/S 234B , NO AVERMENT AS REGARDS THE SAME HAD BEEN RAISED BEFORE US DURING THE COURSE OF HEARING OF THE APPEAL, THEREFORE THE SAME BEING CONSEQUENT IAL TO THE ASSESSMENT, THE A.O IS THUS DIRECTED TO GIVE EFFECT TO THE SAME AFTER DETERMINING THE INCOME IN THE SET ASIDE PROCEEDINGS. THE GROUND OF APPEAL NO. 20 THEREIN ASSAILING THE INITIATION OF THE PENALTY PROCEEDINGS U/S 271(1)(C), BEING PREMATURE, IS THEREFORE DISMISSED. 15. THE APPEAL OF THE ASSESSEE IS THUS PARTLY ALLOWED IN LIGHT OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 22 /0 3 /2017 SD/ - SD/ - (G.S PANNU) (RAVISH SOOD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER P A G E | 59 MUMBAI ; DATED : 22 .0 3 .2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / D.R, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI