INTERGREON MANAGED SOLUITONS (INDIA) P.LTD, MUMBAI V. ASST CIT 12(2)(2), MUMBAI

ITA 6927/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9131 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Question of law; Wholly owned subsidiary
• Section: 143(3); 92D; 234B; 10B; 144

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.6927/ MUM/2016 ( / ASSESSMENT YEAR : 2012 - 13) INTEGREON MANAGED SOLUTIONS (INDIA) PVT. LTD., 602, 6 TH FLOOR, IT B UILDING - 3, NESCO IT PARK, NESCO COMPLEX, WESTERN EXPRESS HIGHWAY, GOREGAON ( EAST ) , MUMBAI - 400063 / V. ACIT 12(2)(2) R.NO. 145, 1 ST FLOOR, AAYAKAR BHAVAN, M.K R OAD, MUMBAI - 400020 ./ PAN : AAACI 7431A ./ S.A NO.429/ MUM/2018 ARISING OUT OF ITA NO. I.T.A. NO.6927/MUM/2016 ( / ASSESSMENT YEAR : 2012 - 13) INTEGREON MANAGED SOLUTIONS (INDIA) PVT. LTD., 602, 6 TH FLOOR, IT BUILDING - 3, NESCO IT PARK, NESCO COMPLEX, WESTERN EXPRESS HIGHWAY, GOREGAON (EAST), MUMBAI - 400063 / V. ACIT 12(2)(2) R.NO. 145, 1 ST FLOOR, AAYAKAR BHAVAN, M.K ROAD, MUMBAI - 400020 ./ PAN : AAACI7431A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. PERCY J. PA RDIWALA, SHRI. NIRAJ SH ETH & SHRI KETAN VED REVENUE BY : SHRI. JAYANT KUMAR ( CIT - DR) I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 2 / DATE OF HEARING : 24. 09 .2018 / DATE OF PRONOUNCEMENT : 14 .12.2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY ASSESSEE, BEING I.T.A. NO.6927/ MUM/2016 , IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 23 RD SEPTEMBER 2016 PASSED BY THE ASSESSING OFFICER (HEREINAFTER CALLED THE AO) DATED 23 RD SEPTEMBER 2016 U/S 143(3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT,1961 (HEREINAFTER CALLED THE ACT) , WHICH WAS PASSED BY THE AO IN PURSUANCE TO THE DIREC TIONS DATED 19.07.2016 ISSUED BY LEARNED DISPUTE RESOLUTION PANEL - I , MUMBAI (HEREINAFTER CALLED THE DRP ) U/S 144C(5) OF THE 1961 ACT , FOR ASSESSMENT YEAR 2012 - 13 . THE LEARNED TRANSFER PRICING OFFICER(HE REINAFTER CALLED THE TPO) HAD EARLIER ISSUED A N ORDER DATED 25.01.2016 U/S 92CA(3) OF THE 1961 ACT WHICH LED TO PASSING OF AN DRAFT ASSESSMENT ORDER DATED 07 TH MARCH 2016 BY THE AO U/S 143(3) READ WITH SECTION 144C(1) OF THE 1961 ACT , WHICH WAS THEN CHALLENGED BY THE ASSESSEE BEFORE LEARNED DRP WHEREIN OBJECTIONS WERE F I LED BY THE ASSESSEE AGAINST DRAFT ASSESSMENT ORDER PASSED BY THE AO LEADING TO ISSUANCE OF AFORESAID DIRECTIONS BY LEARNED DRP DATED 19.07.2016 U/S 144C(5) OF THE 1961 ACT , FOR AY 2012 - 13. 2. THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1.0 ADJUSTMENT/ADDITION OF RS. 66,066,596/ - ON ACCOUNT OF PROVISION OF BACK OFFICE SUPPORT SERVICES TO ASSOCIATED ENTERPRISES ('AES'): 1.1 THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP')/ LD. ASSESSING OFFICER ('AO')/ LD. TRANSFER PRICING OFFICER ( TPO') HAVE ERRED ON THE FACTS OF THE CASE AND IN LAW IN MAKING I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 3 AN UPWARD ADJUSTMENT OF RS. 66,066,596 / - TO THE TOTAL INCOME OF THE APPELLANT BY HOLDING THAT THE INTERNATIONAL TRANSACTIO N RELATING TO BACK OFFICE SUPPORT SERVICES PROVIDED BY THE APPELLANT TO ITS AES IS NOT AT ARM'S LENGTH. 1.2 THE HON'BLE DRP/ LD. AO/ LD. TPO ERRED IN FACTS OF THE CASE AND IN LAW IN C HARACTERIZING THE APPELLANT'S LOW END BACK - OFFICE SERVICES WHICH ARE IN THE NATURE OF 'BUSINESS PROCESS OUTSOURCING' AS HIGH - END 'KNOWLEDGE PROCESS OUTSOURCING' SERVICES BY RELYING ON THE ORDERS/ DIRECTIONS FOR EARLIER YEARS. 1.3 THE HON'BLE DRP/ LD. AO/ LD. TPO ERRED IN FACTS OF THE CASE AND IN LAW IN DISREGARDING THE BENCHMARKING ANALYSIS AND COMPARABLE COMPANIES SELECTED BY THE APPELLANT BASED ON THE CONTEMPORANEOUS DATA IN THE TRANSFER PRICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE INCOM E TAX ACT, 1961 ('THE ACT') READ WITH RULE 10D OF THE INCOME - TAX RULES, 1962 ('THE RULES') AND THEREBY REJECTING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE APPELLANT. 1.4 THE HON'BLE DRP/ LD. AO/ LD. TPO ERRED IN FACTS OF THE CASE IN CHERRY P ICKING COMPANIES HAVING HIGH OPERATING MARGINS WITHOUT APPRECIATING THAT SUCH COMPANIES ARE FUNCTIONALLY DISSIMILAR TO THE APPELLANT. 1.5 THE HON'BLE DRP / LD. AO/ LD. TPO ERRED IN FACTS OF THE CASE AND IN LAW IN ADOPTING AN INCONSISTENT APPROACH IN SELE CTION OF COMPARABLE COMPANIES VIS - A - VIS THEIR OWN ORDERS/ DIRECTIONS ISSUED IN EARLIER YEARS TO REACH AN ERRONEOUS CONCLUSION REGARDING THE ARM'S LENGTH NATURE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 1.6 THE HON'BLE DRP/ LD. AO/ L D. TPO ERRED IN FACTS OF THE CASE AND IN LAW BY NOT ALLOWING THE USE OF MULTIPLE YEAR DATA AS PRESCRIBED UNDER RULE 10B(4) OF THE RULES READ WITH THE OECD TRANSFER PRICING GUIDELINES FOR MULTINATIONAL ENTERPRISE AND TAX ADMINISTRATIONS, FOR DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION OF THE APPELLANT. 2.0 GENERAL 2.1. THE LD. AO ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 2.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271( 1 )(C) OF THE ACT. I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 4 2.3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APP EAL . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS WHOLLY OWNED SUBSIDIARY OF INTEGREON MANAGED SOLUTIONS INC. , USA . THE ASSESSEE IS PROVIDING I NFORMATION T ECHNOLOGY ENABLED SERVICES TO ITS ASSOCIATED ENTERPRISES BASED AT USA AND UK. THE ASS ESSEE HAD CLAIMED THAT IT IS PROVIDING LOW END BPO SERVICES WHILE REVENUE IS OF THE VIEW THAT THE ASSESSEE IS PROVIDING HIGH END I NFORMATION T ECHNOLOGY ENABLED KPO SERVICES. TH E ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES AS REPORTED IN FORM NO. 3CEB AND IN ITS TRANSFER PRICING STUDY REPORT, WHICH ARE LISTED BELOW AS UNDER: - THE ASSESSEE HAS EARNED P ROFIT L EVEL I NDICATOR(PLI) BEING NET C OST M ARGIN OF OP/TC OF 24.46% FROM INFORMATION TECHNOLOGY ENABLED SERVICES. THE ASSESSEE SUBMITTED ITS TP STUDY REPORT AND AUDIT REPORT IN FORM NO. 3CEB DURING ASSESSMENT PROCEEDINGS . REFERENCE WAS MADE BY AO TO LEARNED T RANSFER P RICING O FFICER(TPO) BY THE AO U/S 9 2CA(1) OF THE 1961 ACT REFERRING AFORESAID INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE FOR COMPUTATION OF ARMS LENGTH PRICE. T HE ASSESSEE HAS CONTENDED THAT IT IS AN LOW E ND BP O I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 5 ENGAGED IN THE PROVIDING LOW E ND IT ENABLED SERVICES BUT TPO WAS OF THE VIEW T HAT ASSESSEE IS PROVIDING HIGH E ND IT BASE D SERVICES TO ITS ASSOCIATED ENTERPRISES AND THE ASSESSEE IS AN KPO. THE ASSESSEE WAS ALSO TREATED AS KPO IN PRECEDING YEARS BY THE TPO. T HE TPO AFTER DETAILED ANALYSIS AND STUDY OF ALL T HE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH ITS AE AND OTHER MATERIAL ON RECORD REJECTED TP STUDY REPORT PREPARED BY THE ASSESSEE WHEREIN THE ASSESSEE HAD SELECTED SIX COMPARABLES WHICH WE RE ALL REJECTED BY THE TPO IN ITS OR DER DATED 25 - 01 - 2016 PASSED U/S. 92CA (3) OF THE 1961 ACT , FOR THE REASONS CITED IN THE SAID ORDER . T HE TPO APPLIED ITS OWN FILTERS AND USED TNMM METHOD TO COMPUTE ALP WHILE TREATING ASSESSEE AS KPO PROVIDING HIGH END IT ENABLED SERVICES BASED UPON FUNCTIONAL ANALYSIS , ASSETS DEPLO YED AND RISKS ASSUMED BY THE ASSESSEE . AFTER REJECTING ALL THE COMPARABLES AS WERE SUBMITTED BY THE ASSESSEE IN ITS TP STUDY REPORT TO COMPUTE ARMS LENGTH PRICE(ALP), T HE TPO SHORTLISTED THREE COMPARABLES WHICH WERE USED FOR COMPUTING ALP OF THE INTERNATI ONAL TRANSACTIONS BY TREATING ASSESSEE AS TESTED PARTY , AS UNDER: ECLERX SERVICES LTD. THE COMPANY THOUGH APPEARING IN THE TAXPAYER'S ACCEPT REJECT MATRIX AT S. NO. 25 OF HIS SEARCH IN PROWESS DATABASE, HAD BEEN REJECTED ON ACCOUNT OF AN EXCEPTIONAL YEAR OF OPERATION AND ON THE BASIS OF BEING FUNCTIONALLY NON COMPARABLE. IT IS PERTINENT TO NOTE THAT THE TAXPAYER WHILE REJECTING THIS COMPANY HAS CATEGORIZED IT AS AN ITES (ON THE BASIS OF INDUSTRY) BUT ITSELF HAS CONFIRMED THAT: 'THIS COMPANY IS ENGAGED IN DATA ANALYTICS SERVICES AND PROCESS SOLUTIONS AND THAT THE COMPANY OPERATES AS A KPO. THIS CLARIFIES THE TAXPAYER'S APPROACH OF DELIBERATE CHERR Y - PICKING WITHOUT GIVING ANY REG ARD TO FUNCTIONAL SIMILARITY. THE COMPANY PROVIDES AN EXPERT C ONSULTING AND OUTSOURCING OPTION FOR MANAGERS OF FINANCIAL INSTITUTIONS I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 6 THAT DEMAND RELIABILITY, ACCURACY, CONTROL, AND COST EFFICIENCY. WE PROVIDE CONSULTING AND OUTSOURCING SERVICES TO SUPPORT FINANCIAL TRANSACTIONS FROM TRADE CLOSING THROUGH SETTLEMENT, CLEARING, ASSET SERVICING AND EXPOSURE MANAGEMENT. IT ALSO PROVIDES REFERENCE DATA AND RISK MANAGEMENT SERVICES, AS WELL AS FINANCIAL CONTROL, ACCOUNTING AND REPORTING SERVICES TO HELP OUR CLIENTS MANAGE THEIR INCREASINGLY COMPLEX BUSINESSES. THE COMPANY' S SOLUTIONS FOR DISCRETE AND COMPLEX FINANCIAL PROCESSES SUPPORT THE LARGEST PLAYERS IN THE GLOBAL FINANCIAL SERVICES INDUSTRY AND OUR EXPERTISE SPANS EQUITIES, BONDS, DERIVATIVES, LOANS, COMMODITIES, FOREIGN EXCHANGE AND STRUCTURED PRODUCTS. THE COMPANY P ROVIDES FOLLOWING SERVICES: FINANCIAL TRANSACTION OPERATIONS REFERENCE DATA MANAGEMENT FINANCE CONTROL, ACCOUNTING AND REPORTING TECHNOLOGY PROTOTYPING AND MIGRATIONS METRICS AND CONTROL REPORTING THE FINANCIAL OF THE SAID COMPARABLE COMPANY FO R LAST 3 YEARS CLEARLY ESTABLISHED THE FACT THAT COMPANY IS REGULARLY IN THE PROFITABILITY RANGE OF 40% PLUS. THE OPERATING MARGIN OF THE SAID COMPARABLE FOR THE YEAR IS BEING ADOPTED FOR COMPARABILITY ANALYSIS. THIS COMPANY HAS ARRIVED AT AN OPERATING MAR GIN OF 61.21% DURING THE FINANCIAL YEAR 20 11 - 12. ACROPETAL TECHNOLOGIES (EDS): IN THE FINANCIAL YEAR I.E. FOR A.Y.2010 - 11, IN THE ASSESSEE'S OWN CASE, THE SAID COMPANY WAS CONSIDERED AS AN APPROPRIATE COMPARABLE BY THE TPO. THE TPO HAD CONSIDERED THE NET COST MARGINS OF THE COMPARABLE AT ENTITY LEVEL. THE H'BLE DISPUTE RESOLUTION PANEL (DRP) HAS CONFIRMED THE COMPANY AS AN APPROPRIATE COMPARABLE BUT HAS DIRECTED TO ADOPT THE MARGINS OF THE ENGG DESIGN SEGMENT OF THE SAID COMPARABLE.7HE H'BLE DRP HAS SP ECIFICALLY COMMENTED THAT THE SERVICES OF THE EDS, AKIN TO THAT OF THE KPO AND HENCE THE MARGINS OF THIS SEGMENT SHOULD BE COMPARED WITH THE ASSESSEE. ACCORDINGLY THIS COMPANY WITH THE MARGINS OF EDS SEGMENT IS BEING CONSIDERED FOR THE FINAL BENCHMARKING. THIS COMPANY HAS ARRIVED AT AN OPERATING MARGIN OF 18.92% DURING THE FINANCIAL YEAR 2011 - 12. TCS E - SERVE: I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 7 THE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING HIGH - END KPO SERVICES FOR ITS CUSTOMERS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. ITS OPERATIONS INCLUDE DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS/INSIGHTS AND SUPPORT SERVICES FOR BOTH DATA AND VOICE PROCESSES. THIS COMPANY HAS ARRIVED AT AN OPERATING MARGIN OF 65.95% DURING THE FINANCIAL YEAR 2011 - 12. AS MENTIONED ABOVE, T HE TAXPAYER'S SERVICES RENDERED TO THE AE ARE IN THE NATURE OF HIGH END DATA ANALYSIS SERVICES, WHICH ARE IN THE NATURE OF KPO SERVICES. THUS THE TPO CONSIDERED ONLY THOSE COMPARABLE COM PANIES, WHICH ARE ENGAGED IN KPO SERVICES FROM THE SPECTRUM AS GIVEN A BOVE. THUS FROM THE ABOVE SHORT LISTED COMPANIES, THE TPO CONSIDERED ONLY THOSE COMPANIES WHICH ARE ENGAGED IN KPO SERVICES. THESE THREE COMPARABLES HAD AN PLI BEING OP/TC AS UNDER: - THE ASSESSEE HAD DECLARED PLI BEING OP/TC OF 24.46% WHILE ARITHMETIC MEANS OF PLI BEING OP/TC OF ABOVE THREE COMPARABLES SHORTLISTED BY TPO WAS 48.69% . T HE ASSESSEE WAS SHOW CAUSED BY TPO TO WHICH THE ASSESSEE RAISED ITS OBJECTIONS BOTH ON LEGAL GROUNDS AS WELL ON MERITS BEFORE THE TPO , INTER - ALIA CHALLENGING INCLUSION OF ECLERX SERVICES LIMITED AND TCS E - S ERVE LIMITED AS COMPARABLES BY THE TPO , WHILE THE ASSESSEE A CCEPTED ACROPATEL TECHNOLOGIES (EDS) AS COMPARABLE AS WAS SELECTED BY TPO , WHICH WERE ACCEPTED BY THE ASSESSEE WITHOUT PREJUDICE TO ITS OTHER RIGHTS TO CHALLENGE ON OTHER GROUNDS . THE CONTENTIONS OF THE ASSESS E E WERE REJECTED BY TPO INCLUDING CHALLENGE T O COMPARABLE E CLERX SERVICES LIMITED AND TCS E - I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 8 S ERVE LIMITED . THE ASSESSEE HAD ALSO , INTER - ALIA , CONTENDED WITHOUT PREJUDICE TO ITS RIGHTS THAT ACCENTIA TECHNOLOGIES LTD. BE INCLUDED AS COMPARABLE AS IN VIEW OF THE ASSESSEE , IT IS AN APPROPRIATE COMPARA BLE WHICH SUBMISSION OF THE ASSESSEE WAS ACCEPTED BY TPO , WHICH LED TO THE FINAL SELECTION OF FOLLOWING FOUR COMPARABLES BY THE TPO HAVING AN ARITHMETIC MEAN OF PLI BEING OP/OC OF 35. 7 6 % AS AGAINST PLI OF 24.46% DECLARED BY THE ASSESSEE, AS TABULATED H ERE UNDER: - THE ASSESSEE HAD ON OTHER HAND DECLARED PLI OF 24.46% WHICH FINALLY LED TO THE ADDITION S TO THE INCOME OF THE ASSESSEE OF RS. 6,60,66,596/ - BY TPO VIDE ITS ORDERS DATED 25.01.2016 PASSED U/S 92CA(3) OF THE 1961 ACT . THIS ORDER PASSED BY TPO CULMINATED INTO AN DRAFT ASSESSMENT ORDER DATED 07 TH MARCH 2016 PASSED BY THE AO U/S 143(3) READ WITH SECTION 144C(1) OF THE 1961 ACT , WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE LEARNED DRP - 1 MUMBAI, WHO WERE PLEASED TO PASSED AN ORD ERS DATED 19.07.2016 WHEREIN EC LERX SERVICES LTD. AS WELL TCS E - S ERVE LTD., WERE ACCEPTED BY LEARNED DRP AS COMPARABLE DESPITE OBJECTION S RAISED BY THE ASSESSEE WHICH OBJECTIONS STOOD REJECTED BY LEARNED DRP , VIDE DIRECTIONS DATED 19.07.2016 PASSED U/S 144 C(5) OF THE 1961 ACT. THE AFORESAID DIRECTIONS ISSUED BY LEARNED DRP CULMINATED INTO AN ASSESSMENT ORDER DATED 23 RD SEPTEMBER 2016 PASSED U/S 143(3) READ WITH SECTION 144C(13) OF THE 1961 ACT. 4 . NOW, THE ASSESSEE IS BEFORE THE TRIBUNAL CHALLENGING THE ADD ITIONS MADE TO THE INCOME OF THE ASSESSEE BY COMPUTING ALP TO ITS I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 9 INTERNATIONAL TRANSACTIONS WITH ITS AE TO THE TUNE OF RS.6,60,66,596/ - . THE LEARNED SENIOR C OUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ASSESSEE IS NOT RAISING ANY CHALLENGE TO THE REJECTION OF ASSESSEES TP STUDY AS WELL REJECTION OF THE ASSESSEES COMPARABLE BY TPO AND AS CONFIRMED BY LEARNED DRP . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IT HAS NO OBJECTION TO THE SELECTION OF ASSESSEE AS TESTED PARTY AND SELEC TION OF TNMM METHOD AS WAS ADOPTED BY TPO FOR COMPUTING ALP OF ITS INTERNATIONAL TRANSACTIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CHALLENGE IS NOW BEING RESTRICTED ONLY TO INCLUSION OF TCS E - S ERVE LIMITED BY THE TPO AS COMPARABLE FOR COMPU TING ALP. IT IS SUBMITTED THAT THE ASSESSEE IS NOT RAISING ANY CHALLENGE TO INCLUSION OF REST OF THE THREE COMPARABLES AS WERE SHORT LISTED BY THE TPO FOR COMPUTING ALP WHICH WERE ALL UPHELD TO BE VALID COMPARABLES UPTO THE STAGE OF PASSING OF THE FINAL AS SESSMENT ORDER BY THE AO I.E. BOTH TPO AS WELL LEARNED DRP HAD ACCEPTED THEM AS COMPARABLES FOR THE PURPOSES OF COMPUTING ALP OF ITS INTERNATIONAL TRANSACTIONS WITH ITS AE . THUS, IN NUT - SHELL LEARNED SENIOR COUNSEL FOR THE ASSESSEE HAS RAISED OBJ ECTION AS TO INCLUSION OF TCS E - SERVE LTD. AS COMPARABLE BY LEARNED DRP FOR COMPUTING ALP. OUR ATTENTION WAS DRAWN TO THE ORDER OF THE LEARNED DRP WHEREIN THE LEARNED DRP HAS , INTER - ALIA, COMMENTED THAT THE TCS E - S ERVE LIMITED IS INCLUDED AS COMPARABLE BE CAUSE ITS ANNUAL REPORT IS NOT SUBMITTED BY THE ASSESSEE AND HENCE LEARNED DRP IS NOT ABLE TO VALIDATE ARGUMENT OF THE ASSESSEE THAT THE SAME CANNOT BE INCLUDED AS IT HAS AN HIGH TURNOVER OF RS. 1578 CRORES WHILE ASSESSEE TURNOVER IS RS. 68 CRORES , WHICH IS 23 TIMES THE TURNOVER OF THE ASSESSEE . IT WAS SUBMITTED BY LEARNED SENIOR C OUNSEL FOR THE ASSESSEE THAT THIS FINDING OF LEARNED DRP IS PERVERSE AS THE ANNUAL REPORTS OF TCS E - SERVE LIMITED WAS SUBMITTED BEFORE LEARNED DRP IN CD IN ELECTRONIC FORMAT. IT WAS SUBMITTED THE TCS E - SERVE LTD., H AS PLI BEING OP/OC OF 63.73 % WHILE ASSESSEE HAD PLI OF 24.46% . THE COPY OF THE RELEVANT EXTRACT OF FINANCIAL STATEMENTS OF TCS E - SERVICE LIMITED FOR IMPUGNED ASSESSMENT YEAR IS NOW PLACED BEFORE THE BENCH BOTH BY LEAR NED I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 10 SENIOR COUNSEL FOR THE ASSESSEE AS WELL BY LEARNED CIT - DR , WHICH IS PLACED IN FILE . I T WAS SUBMITTED THAT TPO HAS COMPUTED ARITHMETIC MEANS OF PLI OF COMPARABLE S BEING 35. 7 6 % . I T WAS SUBMITTED THAT TCS E - S E RVE LTD. WAS NOT INCLUDED BY TPO IN PRECEDING YEAR AS COMPARABLE , WHILE FOR THE SUCCEEDING YEAR I.E. AY 2013 - 14 , THE TPO HAS EXCLUDED TCS E - S ERVE LIMITED AS COMPARABLE FOR COMPUTING ALP AFTER DETAILED DELIBERATIONS AND DISCUSSIONS BY TPO WHILE PASSING ORDER DATED 31.10.2016 FOR AY 2013 - 14 U/S 92CA (3) OF THE 1961 ACT . THE SAID ORDER DATED 31.10.2016 PASSED BY TPO FOR AY 2013 - 14 IN ASSESSEES OWN CASE IS PLACED IN FILE. I T WAS SUBMITTED THAT ONLY FOR THIS YEAR I.E. AY 2012 - 13 , THE TCS E - S ERVE LTD. WAS INCLUDED AS COMPARABLE FOR COMPUTING ALP. IT WAS SUBMITTED THAT TCS E - S ERVE LTD., BELONGS TO A VERY LARGE AND REPUTED INDUSTRIAL HOUSE NAMELY TATA GROUP AND IS A LARGE COMPANY HAVING STANDALONE TURNOVER OF RS. 1578.44 CRORES AS AGAINST ASSESSEES TURNOVER OF RS. 68 CRORES WHICH IS ALMOST 23 TIMES TURNOV ER OF THE ASSESSEE COMPANY. IT WAS SUBMITTED BY LEARNED SENIOR COUNSEL FOR THE ASSESSEE THAT TCS E - SERVE LIMITED IS PROVID ING HIGH E ND SERVICES INCLUDING KNOWLEDGE SERVICES . THE LEARNED CIT - DR DREW OUR ATTENTION TO THE COPY OF ANNUAL REPORT FOR THE FINANCI AL YEAR 2011 - 12 FILED BY THE ASSESSEE WHEREIN IT IS STATED THAT THE SAID COMPANY IS PROVIDING BUSINESS PROCESS SERVICES(BPO) FOR ITS CUSTOMERS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. IT WAS SUBMITTED THAT TCS E - SERVE LIMITED OPERATIONS INCLUDE D DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS/INSIGHT AND SUPPORT SERVICES FOR BOTH DATA AND VOICE PROCESSES. HOWEVER, BY LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE BEING HUGE DIFFERENTIAL IN TURNOVER, TCS E - SERVE LIMITED CANNOT BE TAKEN INTO CONSIDERATION AS COMPARABLE FOR COMPUTING ALP OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE . IT WAS SUBMITTED THAT T HE TPO ERRED IN NOT APPLYING TURNOVER FILTER WHILE COMPUTING ALP OF ITS INTERNATIONAL TRANSACTIONS . THE LD SENIOR COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PENTAIR WATER INDIA P. LTD,. (2016) 381 I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 11 ITR 216 (B OM) AND HONBLE DELHI HIGH COURT IN THE CASE OF CIT V . NEW RIVER SOFTWARE SERVICES P LTD., (2 017) 85 TAXMAN.COM 302 (DELHI) TO CONTENT THAT TURNOVER, SIZE AND SCALE OF OPERATIONS ARE RELEVANT CRITERIA TO COMPUTE ALP OF INTERNATIONAL TRANSACTIONS OF THE TAX - PAYERS WITH ITS AE . THE ASSESSEE ALSO RELIED UPON DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF PR. CIT V. TOLUNA INDIA PRIVATE LIMITED IN ITA NO. 393 & 394 /2016 , ORDERS DATED 29.07.2016. IT WAS SUBMITTED THAT REVENUE ITSELF HA S NOT INCLUDED TCS E - SERVE LTD. AS COMPARABLE IN ASSESSMENT YEAR 2013 - 14 , WHEREIN THE TPO HAS DELETED THE SAME BY FOLLOWING THE AFORESAID DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PENTAIR WATER INDIA PRIVATE LIMITED(SUPRA), VIDE ORDE R S DATED 31.10.2016 PASSED U/S 92CA(3) OF THE 1961 ACT, AS UNDER: TCS E - SERVE LIMITED: ASSESSEE'S CONTENTION THE ASSESSEE HAS CONTENDED THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES FOR ITS CUSTOME RS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. ITS OPERATIONS INCLUDE DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS/INSIGHTS AND SUPPORT SERVICES FOR BOTH DATA AND VOICE PROCESSES AND HENCE, IS FUNCTIONALLY DISSIMILAR AND NOT COMPARABLE TO THE ACTIVITIES UNDERTAKEN BY T HE ASSESSEE. THE ASSESSEE ALSO STATED THAT TCS E - SERVE LTD. HAS SUPER NORMAL PROFITS DURING THE YEAR AND CANNOT BE COMPARED TO THE ASSESSEE. IN THIS REGARD, THE ASSESSEE PLACES RELIANCE ON THE JURISDICTIONAL TRIBUNALS DECISION IN CASE OF M/S CAPITAL IQ INF ORMATION SYSTEM (INDIA) PRIVATE LIMITED, HYDERABAD (ITA NO. 1961/HYD/2011) WHEREIN IT HAS HELD THAT THE COMPANIES HAVING SUPPER NORMAL PROFITS DURING THE YEAR CANNOT BE ACCEPTED AS THE COMPARABLE COMPANY. THE ASSESSEE CONTENDS THAT WHILE CONSIDERING TCS A S A COMPARABLE COMPANY, DUE CONSIDERATION SHOULD BE GIVEN TO THE FACT THAT TCS POSSESSES BRAND VALUE BEING A SUBSIDIARY OF TATA GROUP WHICH WILL TEND TO INFLUENCE THE PRICING POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY TCS. FURTHER, THE AS SESSEE STATE D TCS E - SERVE HAS A TURNOVER INR 17,916.4 MILLION, WHICH IS MORE THAN 25 TIMES THE TURNOVER .OF THE ASSESSEE WHICH IS INR 714.93 MILLION. IN I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 12 THIS REGARD, THE ASSESSEE PLACES RELIANCE ON THE FOLLOWING HIGH COURT JUDGEMENTS: IN THE CASE OF PENTA IR WATER INDIA PVT, LTD., THE HIGH COURT OF BOMBAY AT GOA [(2016) 381 ITR 0216 (BOMBAY)] HELD THE FOLLOWING: ''WHILE MAKING THE SELECTION OF COMPARABLES, THE TURNOVER FILTER, IN OUR OPINION, HAS TO BE THE BASIS FOR SELECTION. A COMPANY HAVI NG TURNOVER OF RS. 11 CRORES CANNOT BE COMPARED WITH A COMPANY WHICH IS HAVING TURNOVER OF RS.260 CRORES WHICH IS MORE THAN 23 TIMES THE TURNOVER OF THE .ASSESSEE. THIS COMPANY CANNOT BE REGARDED, TO BE IN EQUAL SIZE TO THE ASSESSEE. WE, ACCORDINGLY, DIREC T THE AO TO EXCLUDE THIS COMPANY OUT OF THE COMPARABLES.' IN THE CASE OF TOLUNA INDIA PVT. LTD. [ITA 393/2016 & 394/2016], THE DELHI HIGH COURT HELD THE FOLLOWING: 'ON THE QUESTION, OF EXCLUSION OF THE ABOVE COMPARABLES, THE COURT FINDS THAT G IVEN THE SC ALE OF OPERATIONS OF THE ABOVE ENTITIES, THEIR EXCLUSION FROM THE LIST OF COMPARABLES FOR THE PURPOSES OF DETERMINATION OF ALP APPEARS JUSTIFIED.' HENCE, THIS COMPARABLE SHOULD BE REJECTED. TPOS COMMENTS: THE CONTENTIONS OF THE ASSESSEE REGARDIN G THE COMPARABLE TCS E - SERVE ARE CONSIDERED. IT IS EN GAGED IN TRANSACTION PROCESSING (FINANCIAL INFORMATION PROCESSING), ANALYTICS, SOFTWARE TESTING, SOFTWARE VALIDATION AND DATA - CENTRE MANAGEMENT ACTIVITIES. FROM THE DIRECTOR'S REPORT FOLLOWING PARAS ARE REPRO DUCED SHOWING FUNCTIONALITY: YOUR COMPANY IS ONE OF THE PIONEERS IN THE ITES - BPO INDUSTRY IN INDIA. IT IS IN THE BUSINESS OF PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES IN THE BANKING AND FINANCIAL SERVICES (BFSI) VERTICAL (IE INDUSTRY' VERTICAL) TO HE LP ITS CUSTOMERS ACHIEVE THEIR BUSINESS OBJECTIVES BY PROVIDING INNOVATIVE, BEST - IN - CLASS SERVICES. YOUR COMPANY IS AN INTEGRAL PART OF THE TATA CONSULTANCY SERVICES' (TCS) STRATEGY TO BUILD ON ITS 'FULL SERVICES OFFERING' THAT OFFER GLOBAL CUSTOMERS AN IN TEGRATED PORTFOLIO OF SERVICES RANGING FROM IT SERVICES LO BPO SERVICES. COMPANY PROVIDES A B ROAD RANGE OF I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 13 SERVI CES THAT CATER TO THE PROCESS MANAGEMENT REQUIREMENTS FOR DELIVERY OF WIDE RANGE OF FINANCIAL PRODUCTS AND ENTERPRISE SUPPORT FUNCTIONS, WHICH I NCLUDE - FINANCIAL INFORMATION PROCESSING (DATA PROCESSING) CUSTOMER CONTACT (VOICE BASED) BUSINESS PROCESS MANAGEMENT ANALYTIC S AS SEEN FROM THE ABOVE, IT CAN BE INFERRED THAT. TCS ESERVE IS A KPO. THE ASSESSEE ITSE LF IS A HIGH - END KPO SERV ICE PROVIDER AS DISCUSSED IN ELABORATE IN PARA 7 ABOVE. THE ASSESSEE IS ENGAGED IN KNOWLEDGE SERVICES AND BUSINESS RESEARCH. THESE ARE AKIN TO A KPO AND THEREFORE SHOULD BE BENCHMARKED USING A KPO COMPARABLE LIKE TCS E - SERVE. HOWEVER, AS SEEN FROM THE ANNUAL REPORT, OF TCS E - SERVE AND AS THE ASSESSEE STATED TCS E - SERVE HAS A TURNOVER INR 17.916.4 MILLION, WHICH IS MORE THA N 25 TIMES THE TURNOVER OF THE A SSESSEE WHICH IS INR 714.93 MILLION. THUS, RELYING ON THE CASE OF PENTAIR WATER INDIA PVT. LTD., THE HIGH COURT OF BOMBAY AT GOA [(2016) 381 1TR 0216 (BOMBAY)] IT IS CONSIDERED THAT TCS E - SERVE HAS A TURNOVER MULTIPLE TIMES THAT OF THE ASSESSEE FOR REASONS DISCUSSED ABOVE, TCS E - SER VE IS REJECTED AS A COMPARABLE. THE LEARNED SENIOR COUNSEL FOR THE ASS ESSEE FAIRLY SUBMITTED THAT HONBLE DELHI HIGH COURT IN CHRYSCAP IT AL INVESTMENT ADVISOR S INDI A P. LTD., (2015) 376 ITR 183 (D EL HI ) VIDE ORDERS DATED 27.04.2015 HAD HELD THAT HIGH TURNOVER IS NOT A GOOD CRITERIA TO REJECT COMPARABLE .THE LD. CIT - DR SUBMITTED THAT PENTAIR WATER INDIA P. LTD.(SUPRA) D ID NOT LAY DOWN PRO POSITION OF LAW THAT HIGH TURNOVER COMPANIES ARE TO BE EXCLUDED WHILE THE SAID PROPOSITION OF LAW WAS LAID DOWN IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS INDIA PRIVATE LIMITED(SUPR A) AND JUST BECAUSE TURNOVER IS HIGH THE SAME CANNOT BE CRITERIA TO EXCLUDE COMPRABLE . THE LD. CIT - DR SUBMITTED THAT ASSESSEE DID NOT FILED ANNUAL REPORT OF TCS E - SERVE LIMITED FOR THE IMPUGNED ASSESSMENT YEAR BEFORE LEARNED DRP AND HENCE THE REVENUE COULD NOT MAKE PROPE R FAR ANALYSIS. THE LD. SENIOR C OUNSEL REITERATED AND STATED I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 14 BEFORE THE BENCH THAT CD WAS FILED WHICH CONTAINED AUDITED FINANCIAL STATEMENTS OF ALL COMPARABLE COMPANIES IN ELECTRONIC FORM FOR THE RELEVANT PERIOD WHICH INCLUDED AUDITED FINANC IAL STATEMENTS OF TCS E - SERVE LIMITED FOR FINANCIAL YEAR 2011 - 123 . IT WAS SUBMITTED THAT DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PENTAIR WATER INDIA P. LTD . (SUPRA) HAS CLEARLY HELD THAT TURNOVER IS A RELEVANT FACTOR. 5 . WE HAVE CONSIDERED R IVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THE ASSESSEE IS WHOLLY OWNED SUBSIDIARY OF INTEGREON MANAGED SOLUTIONS INC. , USA . THE ASSESSEE IS PROVIDING IT ENABLED SERVICES TO ITS ASSOCIATED ENTERPRISES BASED AT USA AND UK. THE ASSESSEE HAD CLAIMED THAT IT IS PROVIDING LOW END BPO SERVICES WHILE REVENUE IS OF THE VIEW THAT THE ASSESSEE IS PROVIDING HIGH END IT ENABLED KPO SERVICES. THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTION WITH IT S ASSOCIATED ENTERPRISES REPORTED IN FORM NO. 3CEB AND IN ITS TRANSFER PRICING STUDY REPORT WHICH ARE LISTED BELOW AS UNDER: - THE ASSESSEE HAS EARNED PROFIT LEVEL INDICATOR(PLI) BEING NET COST MARGIN OF OP/TC OF 24.46% FROM INFORMATION TECHNOLOGY ENABLED SERVICES. THE ASSESSEE SUBMITTED ITS TP STUDY REPORT AND AUDIT REPORT IN FORM NO. 3CEB WAS ALSO SUBMITTED BEFORE THE AUTHORITIES BELOW . THE TOTAL TURNOVER OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS. 68 CRORES. THE ASSESSEE HAS CONTENDED TH AT IT IS AN LOW END I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 15 BPO ENGAGED IN THE PROVIDING LOW END I NFORMATION T ECHNOLOGY ENABLED SERVICES BUT TPO WAS OF THE VIEW THAT ASSESSEE IS PROVIDING HIGH END IT BASED SERVICES TO ITS ASSOCIATED ENTERPRISES AND THE ASSESSEE IS AN KPO. THE ASSESSEE WAS ALS O TREATED AS KPO IN PRECEDING YEARS BY THE TPO. THE TPO AFTER DETAILED ANALYSIS AND STUDY OF ALL THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH ITS AE AND OTHER MATERIAL ON RECORD REJECTED TP STUDY REPORT PREPARED BY THE ASSESSEE WHEREIN THE ASSESSEE HAD SELECTED SIX COMPARABLES WHICH WERE ALL REJECTED BY THE TPO FOR DETAILED REASONS CITED IN THE SAID ORDER OF THE TPO. THE TPO APPLIED ITS OWN FILTERS AND USED TNMM METHOD TO COMPUTE ALP WHILE TREATING ASSESSEE AS KPO PROVIDING HIGH END IT ENABLED SERVICES BASED UPON FUNCTIONAL ANALYSIS , ASSETS DEPLOYED AND RISKS ASSUMED BY THE ASSESSEE. AFTER REJECTING ALL THE COMPARABLES AS WERE SUBMITTED BY THE ASSESSEE IN ITS TP STUDY REPORT TO COMPUTE ARMS LENGTH PRICE(ALP) AND CONSIDERING THE SUBMISSIONS OF THE ASSESS EE WHICH WERE WITHOUT PREJUDICE , THE TPO SHORTLISTED FOUR COMPARABLES WHICH WERE USED FOR COMPUTING ALP OF THE INTERNATIONAL TRANSACTIONS BY TREATING ASSESSEE AS TESTED PARTY , WHICH HAD AN ARITHMETIC MEAN OF PLI I.E. OP/OC OF 35.76%, AS UNDER: THE CH ALLENGE OF THE ASSESSEE TO TPO SELECTION OF COMPARABLES AND OTHER LEGAL CONTENTIONS RAISED WITH THE LEARNED DRP MET WITH AN UNFAVOURABLE FATE WHICH LED ASSESSEE TO FILE APPEAL WITH THE TRIBUNAL. THE ASSESSEE HAS RESTRICTED ITS CHALLENGE ONLY TO INCLUSION O F TCS E - SERVE LIMITED AS COMPARABLE BY THE AUTHORITIES BELOW FOR COMPUTING ALP AND AT THE SAME TIME ACCEPTING THE ENTIRE PROCESS OF COMPUTATION I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 16 OF ALP BY THE TPO. T HE ASSESSEE IS NOW CONTEMPLATING EXCLUSION OF TCS E - SERVE LIMITED AS A CHOSEN COMPARABLE BY TPO WHICH WAS UPHELD BY LEARNED DRP , ON THE GROUNDS THAT TURNOVER CRITERIA WAS NOT AD OPTED BY THE AO WHICH IS AN ERROR COMMITTED BY AUTHORITIES BELOW. THE STANDALONE TURNOVER OF TCS E - SERVE LIMITED WAS RS. 1578.44 CRORES WHILE THE ASSESSEE COMPANY WHO HA S ONLY TURNOVER OF RS. 68 CRORES , WHICH IS 23 TIMES MULTIPLE. WE HAVE OBSERVED THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PENTAIR WATER INDIA PRIVATE LIMITED(SUPRA) HAS HELD THAT TURNOVER IS A RELEVANT CRITERIA FOR SELECTION OF COMPARABLES FOR C OMPUTING ALP OF AN INTERNATIONAL TRANSACTIONS IN ANY UNCONTROLLED TRANSACTIONS BETWEEN INDEPENDENT ENTERPRISES. THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PENTAIR WATER INDIA PRIVATE LIMITED(SUPRA) IS REPRODUCED HEREUNDER: 2. BRIEFLY, IT IS THE CONTENTION OF THE APPELLANT THAT THE ASSESSEE - RESPONDENT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF FIBRE GLASS PRESSURE VESSEL USED FOR WATER TREATMENT, SWIMMING POOL EQUIPMENTS AND THAT THE RESPONDENT - COMPANY IS MAKING THREE KINDS O F VESSELS NAMELY (I) CODE LINE, (II) COMPOSITE PRESSURE VESSELS AND (III) FRP PRESSURE VESSELS AND SET UP AN IN - HOUSE FACILITY FOR CATERING TO ITS NEEDS ON THE AREA OF ENGINEERING, DESIGNING & PRODUCT DEVELOPMENT. IT IS FURTHER THEIR CASE THAT THE COMPANY HAS RENDERED SUCH SERVICES IN THE RELEVANT ASSESSMENT YEAR 2007 - 2008 TO SOME OF ITS GROUP COMPANIES ABROAD AND THAT THE RESPONDENT IS THE SUBSIDIARY TO PENTAIR INC, USA AND IS INVOLVED IN THE SAME BUSINESS. THE SAID RESPONDENT - COMPANY HAS A UNIT AT VERNA I NDUSTRIAL ESTATE WHERE THE SAID MANUFACTURING ACTIVITY IS TAKING PLACE. IT IS FURTHER THEIR CASE THAT THE RESPONDENT - ASSESS HAS FILED RETURNS OF INCOME ON 30.10.2007 DISCLOSING TOTAL INCOME OF RS. 5,28,09,795/ - ON WHICH TOTAL TAX WAS RS. 1,81,13,280/ - . AN ORDER UNDER SECTION 92CA WAS PASSED ON 27.10.2010 BY THE TPO AND THE AO ON 21.12.2010 ADDED AN AMOUNT OF RS. 1,68,60,877/ - IN THE ORDER PASSED UNDER SECTION 143 (3) OF THE SAID ACT. IT IS FURTHER THE CONTENTION OF THE APPELLANT THAT BEING AGGRIEVED BY THE SAID ORDER, THE RESPONDENT - ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER INCOME TAX APPEAL AND BY ITS ORDER DATED 16.11.2012, DIRECTED THE AO TO COMPUTE THE TP ADJUSTMENT BY TAKING THE OPERATING MARGIN AT THE COMPARABLE RATE OF 22.92%. BEING AGGRIEV ED BY THE SAID ORDER, BOTH THE RESPONDENT AS WELL AS THE APPELLANT FILED APPEALS BEFORE THE INCOME TAX APPELLATE TRIBUNAL WHICH CAME TO BE DISPOSED OF BY ORDER DATED 23.05.2014. BEING AGGRIEVED BY THE SAID ORDER, THE APPELLANT HAS PREFERRED THE PRESENT APP EAL. 3. MS. ASHA DESAI, LEARNED COUNSEL APPEARING FOR THE APPELLANT, HAS PRESSED FOR ONLY TWO SUBSTANTIAL QUESTIONS OF LAW FRAMED AT PARA 5A AND 5B OF THE APPEAL MEMO. LEARNED COUNSEL HAS FURTHER POINTED OUT THAT THE INCOME TAX APPELLATE TRIBUNAL HAS ERRED IN HOLDING THAT THE PROFITS ON COSTS OF FIVE COMPARABLE COMPANIES AS ABNORMAL WITHOUT GIVING REASONS HOW THE FUNCTIONS I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 17 DISCHARGED, ASSETS DEPLOYED AND RISKS ASSUMED OF SUCH COMPANIES WERE DIFFERENT FROM THE RESPONDENT - COMPANY. LEARNED COUNSEL FURTHER POIN TED OUT THAT THE TRIBUNAL HAS ALSO ERRED IN HOLDING THAT THE SIZE AND TURNOVER OF THE COMPANY ARE DECIDING FACTORS FOR TREATING A COMPANY AS COMPARABLE AND ACCORDINGLY ERRED IN EXCLUDING M/S. HCL COMNET SYSTEMS & SERVICES LTD., M/S INFOSYS BPO LIMITED AND M/S. WIPRO LTD., AS COMPARABLES. 4. ON THE OTHER HAND, SHRI JAIN, LEARNED COUNSEL APPEARING FOR THE RESPONDENT, HAS POINTED OUT THAT BOTH THE AUTHORITIES HAVE CONCURRENTLY COME TO THE CONCLUSION THAT THE SAID COMPANIES ARE NOT COMPARABLE TO THE RESPONDENT - ASSESSEE COMPANY AND, AS SUCH, THIS COURT CANNOT RE - APPRECIATE THE EVIDENCE ON RECORD TO COME TO ANY CONCURRENT FINDING. LEARNED COUNSEL FURTHER SUBMITS THAT THESE CONCURRENT FINDINGS OF FACTS BASED ON THE MATERIAL ON RECORD CANNOT BE RE - APPRECIATED BY T HIS COURT IN THE PRESENT APPEAL AS THERE IS NO SUBSTANTIAL QUESTION OF LAW WHICH ARISE THEREIN. LEARNED COUNSEL FURTHER POINTED OUT THAT TO ANSWER THE SAID TWO SUBSTANTIAL QUESTIONS OF LAW, THIS COURT WOULD HAVE TO RE - APPRECIATE THE MATERIAL ON RECORD WHIC H IS NOT AT ALL PERMISSIBLE. LEARNED COUNSEL FURTHER SUBMITS THAT THE BIFURCATION INTENDED TO BE AFFECTED BY THE LEARNED COUNSEL APPEARING FOR THE APPELLANT WAS NOT EVEN RAISED BEFORE THE TRIBUNAL AND, CONSEQUENTLY, THE ABOVE APPEAL DESERVES TO BE REJECTED . 5. ON PERUSAL OF THE IMPUGNED ORDER PASSED BY THE TRIBUNAL DATED 23.05.2014, WE FIND THAT THE TRIBUNAL HAS RECORDED THE REASONS FOR NOT ACCEPTING THE SAID THREE COMPANIES ARE COMPARABLE BY STATING AS FOLLOWS : ( I ) HCL COMNET SYSTEMS & SERVICES LTD : - WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT THIS COMPANY CANNOT BE A COMPARABLE AS THE TURNOVER OF THIS COMPANY IS 260.18 CRORES WHILE IN THE CASE OF THE ASSESSEE, THE TURNOVER IS AROUND RS. 11 CRORES ONLY. WHILE MAKING THE SELECTION OF COMPARABLES, THE TURNOVER FILTER, IN OUR OPINION, HAS TO BE THE BASIS FOR SELECTION. A COMPANY HAVING TURNOVER OF RS. 11 CRORES CANNOT BE COMPARED WITH A COMPANY WHICH IS HAVING TURNOVER OF RS. 260 CRORES WHICH IS MORE THAN 23 TIMES THE TURNOVER OF THE ASSESSEE. THIS COMPANY CANNOT BE REGARDED TO BE IN EQUAL SIZE TO THE ASSESSEE. WE, ACCORDINGLY, DIRECT THE AO TO EXCLUDE THIS COMPANY OUT OF THE COMPARABLES. ( II ) INFOSYS BPO LTD. : - IN THIS CASE ALSO WE NOTED THE TURNOVER IN RESPECT OF THIS COMPANY IS RS. 649.56 CROR ES WHILE THE TURNOVER OF THE ASSESSEE COMPANY IS AROUND RS. 11 CRORES WHICH IS MUCH MORE THAN 65 TIMES OF THE ASSESSEE'S TURNOVER. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF CIT (A) IN EXCLUDING THIS COMPANY OUT OF THE COMPARABL ES. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT (A). ( III ) WIPRO LTD. : - AFTER HEARING THE RIVAL SUBMISSIONS, WE NOTED THAT THE CIT (A) APPLYING THE TURNOVER FILTER HAS EXCLUDED THIS COMPANY OUT OF THE COMPARABLES. THE TURNOVER REPORTED IN THE CASE OF WIPRO LTD. IS RS. 939.78 CRORES WHILE IN THE CASE OF THE ASSESSEE THE TURNOVER IS AROUND RS. 11 CRORES. THEREFORE, ON THE BASIS OF THE TURNOVER FILTER ITSELF THIS COMPANY CANNOT BE REGARDED TO BE COMPARABLE TO THE ASSESSEE COMPANY AND ACCORDINGLY, WE DO NO T FIND ANY INFIRMITY IN THE FINDING OF CIT (A) WHILE HE EXCLUDED THIS COMPANY ON THE TURNOVER CRITERIA FOLLOWING THE DECISION OF THIS TRIBUNAL IN : I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 18 SONY INDIA (P.) LTD. V. DY. CIT [2008] 114 ITD 448 (DELHI) E - GAIN COMMUNICATION (P.) LTD. V. ITO [2008] 23 SOT 385 (PU NE) DELOITTEE CONSULTING INDIA (P.) LTD. V. DY. CIT [2013] 144 ITD 451/36 TAXMANN.COM 68 (HYD.) GENISYS INTEGRATING SYSTEM (INDIA) (P.) LTD. V. DY. CIT [2012] 53 SOT 159/20 TAXMANN.COM 715 (BANG.) 6. THE SAID FINDINGS OF THE TRIBUNAL IN RESPECT OF THE SAID THREE COMPANIES ARE ON THE BASIS OF APPRECIATION OF EVIDENCE ON RECORD. WE FIND NO INFIRMITY IN THE SAID FINDINGS OF THE TRIBUNAL ON THAT COUNT. IN FACT, THE TRIBUNAL HAS ENDORSED THE VIEWS OF THE CIT APPEALS WHILST COMING TO SUCH CONCLUSIONS. THE CONCURRENT FINDINGS OF FACTS ARRIVED AT BY THE AUTHORITIES BELOW, CANNOT BE RE - APPRECIATED BY THIS COURT IN THE PRESENT APPEAL. 7. IN THIS CONNECTION, THE APEX COURT IN THE JUDGMENT REPORTED IN THE CASE OF VIJAY KUMAR TALWAR V. CIT [2011] 1 SCC 673 HAS OBSERVED AT PARA 23 THUS : '23. A FINDING OF FACT MAY GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW, INTER ALIA, IN THE EVENT THE FINDINGS ARE BASED ON NO EVIDENCE AND/OR WHILE ARRIVING AT THE SAID FINDING, RELEVANT ADMISSIBLE EVIDENCE HAS NOT BEEN TAKEN INTO CONSIDERATION OR INADMISSIBLE EVIDENCE HAS BEEN TAKEN INTO CONSIDERATION OR LEGAL PRINCIPLES HAVE NOT BEEN APPLIED IN APPRECIATING THE EVIDENCE, OR WHEN THE EVIDENCE HAS BEEN MISREAD. (SEE MADAN LAL V. GOPI , NARENDRA GOPAL VIDYARTHI V. RAJAT VIDYARTHI , COMMR. OF CUSTOMS V. VIJAY DASHARATH PATEL , METROARK LTD. V. CCE AND W.B. ELECTRICITY REGULATORY COMMISSION V. CESC LTD )' 8. IN THE PRESENT APPEAL, THE APPELLANT - REVENUE HAS NOT BEEN ABLE TO CONTROVERT OR DENY THE DATA RELIED UPON BY THE AUTHORITIES BELOW TO COME TO SUCH CONCLUSION. THE SAID COMPANIES ARE NO DOUBT LARGE AND DISTINCT COMPANI ES WHERE THE AREA OF DEVELOPMENT OF SUBJECT SERVICES ARE DIFFERENT AND AS SUCH THE PROFIT EARNED THEREFROM CANNOT BE A BENCH - MARKED OR EQUATED WITH THE RESPONDENT - COMPANY. 9. SHRI JAIN, LEARNED COUNSEL HAS RIGHTLY RELIED UPON THE JUDGMENT OF THE DELHI HIG H COURT IN THE CASE OF CIT V. AGNITY INDIA TECHNOLOGIES (P.) LTD. [2013] 219 TAXMAN 26/36 TAXMANN.COM 289 . LEARNED COUNSEL HAS ALSO BROUGHT TO OUR NOTICE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL WHILST EXAMINING SIMILAR CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2005 - 06. HE HAS TAKEN US THROUGH THE FINDINGS THEREIN TO POINT OUT THAT THE CONCLUSIONS ARRIVED AT ARE BASED ON A COMPARISON THAT THE CONDITION IN ANY UNCONTROLLE D TRANSACTION BETWEEN AN INDEPENDENT ENTERPRISES FOR THE PURPOSE OF SUCH COMPARISON, ECONOMICALLY RELEVANT CHARACTERISTICS MUST BE SUFFICIENTLY COMPARABLE IF TWO PARTIES ARE TO BE PLACED IN A SIMILAR SITUATION. LEARNED COUNSEL AS SUCH SUBMITTED THAT IT IS NOT OPEN FOR THE APPELLANT TO NOW CONTEND A DIFFERENT CRITERIA TO ASCERTAIN THE COMPARABILITY. IN FACT THE TRIBUNAL WHILST PASSING THE IMPUGNED ORDER HAS CONSIDERED THE SAID PRINCIPLES WHILST COMING TO THE CONCLUSION THAT THE SAID THREE COMPANIES CANNOT BE TREATED TO BE COMPARABLE TO THE RESPONDENT - ASSESSEE COMPANY. THE TURN OVER IS OBVIOUSLY A RELEVANT FACTOR TO CONSIDER THE COMPARABILITY. 10. IN VIEW OF THE ABOVE, WE FIND THAT THE SAID TWO SUBSTANTIAL QUESTIONS OF LAW PROPOSED BY THE LEARNED COUNSEL APPEA RING FOR THE APPELLANT DO NOT ARISE IN THE PRESENT APPEAL TAKING NOTE OF THE CONCURRENT FINDINGS OF FACT ARRIVED AT BY THE AUTHORITIES BELOW. THE APPEAL STANDS ACCORDINGLY REJECTED. I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 19 THE HONBLE DELHI HIGH C OURT IN THE CASE OF PCIT V. NEW RIVER SOFTWARE SE RVICES PRIVATE LIMITED(SUPRA) HAS ALSO TAKEN A SIMILAR VIEW, HELD AFTER CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PENTAIR WATER INDIA PRIVATE LIMITED(SUPRA) THAT SIZE AND SCALE ARE RELEVANT CRITERIA FOR EXCLUSION OF COMPARABLES , BY HOLDING AS UNDER: 11. AS REGARDS THE EXCLUSION OF M/S. INFOSYS BPO, THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION IN CIT V. PENTAIR WATER INDIA (P.) LTD. [2016] 69 TAXMANN.COM 180/381 ITR 216 (BOM.) AND THE DECISION DATED 10TH JULY, 2013 OF THIS COURT IN CIT V. AGNITY INDIA TECHNOLOGIES (P.) LTD. [2013] 36 TAXMANN.COM 289/219 TAXMAN 26 . 12. WIPRO BPO IS MORE OR LESS ON THE SAME FOOTING AS INFOSYS BPO AS FAR AS THE SIZE AND SCALE ARE CONCERNED. CONSEQUENTLY THE COURT FINDS NO LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT, WHICH HAS, APART FROM EXCLUDING THE ABOVE COMPARABLES, REMANDED THE MATTER TO THE TPO ON THE QUESTION OF WORKING CAPITAL ADJUSTMENT. 13. THE APPEAL IS DISMISSED THEREFORE ON ACCOUNT OF BOTH DELAY AS WELL AS MERITS. SIMI LAR VIEW HAS BEEN TAKEN BY HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT V. TOLUNA INDIA PRIVATE LIMITED (SUPRA) VIDE ITS ORDERS DATED 29.07.2016 WHEREIN THE HONBLE COURT HAS TAKEN A VIEW THAT SCALE S OF OPERATION OF THE ENTITIES HAVE BEARING ON THEIR SE LECTION AS COMPARABLE FOR DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE TAX - PAYER WITH ITS AE. THE REVENUE HAS RELIED UPON DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHRSYCAPITAL INVESTMENT ADVISORS (INDIA) LIMITED (SU PRA) WHICH HAS ALBEIT TAKEN A DIFFERENT VIEW BY HOLDING AS UNDER : 33 . SUCH BEING THE CASE, IT IS CLEAR THAT EXCLUSION OF SOME COMPANIES WHOSE FUNCTIONS ARE BROADLY SIMILAR AND WHOSE PROFILE - IN RESPECT OF THE ACTIVITY IN QUESTION CAN BE VIEWED INDEPENDENTLY FROM OTHER ACTIVITIES - CANNOT BE SUBJECT TO A PER SE STANDARD OF L OSS MAKING COMPANY OR AN 'ABNORMAL' PROFIT MAKING CONCERN OR HUGE OR 'MEGA' TURNOVER COMPANY. AS EXPLAINED EARLIER, RULE 10B (2) GUIDES THE SIX METHODS OUTLINED IN CLAUSES (A) TO (F) OF RULE 10B(1), WHILE JUDGING COMPARABILITY. RULE 10B (3) ON THE OTHER HA ND, INDICATES THE APPROACH TO BE ADOPTED WHERE DIFFERENCES AND DISSIMILARITIES ARE APPARENT. THEREFORE, THE MERE CIRCUMSTANCE OF A COMPANY - I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 20 OTHERWISE CONFORMING TO THE STIPULATIONS IN RULE 10B (2) IN ALL DETAILS, PRESENTING A PECULIAR FEATURE - SUCH AS A HUGE PROFIT OR A HUGE TURNOVER, IPSO FACTO DOES NOT LEAD TO ITS EXCLUSION. THE TPO, FIRST, HAS TO BE SATISFIED THAT SUCH DIFFERENCES DO NOT 'MATERIALLY AFFECT THE PRICE...OR COST'; SECONDLY, AN ATTEMPT TO MAKE REASONABLE ADJUSTMENT TO ELIMINATE THE MATERIA L EFFECT OF SUCH DIFFERENCES HAS TO BE MADE. LEARNED CIT - DR COULD NOT PRODUCE ANY CONTRARY DECISION OF HONBLE JURISDICTIONAL HIGH COURT NOR ANY DECISION OF HONBLE APEX COURT WAS CITED WHICH HAS TAKEN A VIEW IN FAVOUR OF REVENUE. WE HAVE ALSO OBSERVED TH AT TPO ITSELF HAS NOT INCLUDED TCS E - SERVE LIMITED AS COMPARABLE IN ASSESSEES OWN CASE FOR PRECEDING YEAR I.E. AY 2011 - 12 WHILE COMPUTING ALP OF ITS INTERNATIONAL TRANSACTIONS WITH ITS AE VIDE ORDERS DATED . WE ALSO NOTE THAT IN IMMEDIATELY SUCCEEDING YEA R I.E. AY 2013 - 14 , THE TPO HAS IN ASSESSEES OWN CASE DELETED TCS E - SERVE LIMITED WHILE COMPUTING ALP OF ITS INTERNATIONAL TRANSACTIONS VIDE ORDERS DATED 31.10.2016, BY HOLDING AS UNDER: TCS E - SERVE LIMITED: ASSESSEE'S CONTENTION THE ASSESSEE H AS CONTENDED THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES FOR ITS CUSTOME RS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. ITS OPERATIONS INCLUDE DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS/INSIGHTS AND SUPPORT SERVI CES FOR BOTH DATA AND VOICE PROCESSES AND HENCE, IS FUNCTIONALLY DISSIMILAR AND NOT COMPARABLE TO THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE. THE ASSESSEE ALSO STATED THAT TCS E - SERVE LTD. HAS SUPER NORMAL PROFITS DURING THE YEAR AND CANNOT BE COMPARED TO T HE ASSESSEE. IN THIS REGARD, THE ASSESSEE PLACES RELIANCE ON THE JURISDICTIONAL TRIBUNALS DECISION IN CASE OF M/S CAPITAL IQ INFORMATION SYSTEM (INDIA) PRIVATE LIMITED, HYDERABAD (ITA NO. 1961/HYD/2011) WHEREIN IT HAS HELD THAT THE COMPANIES HAVING SUPPER NORMAL PROFITS DURING THE YEAR CANNOT BE ACCEPTED AS THE COMPARABLE COMPANY. THE ASSESSEE CONTENDS THAT WHILE CONSIDERING TCS AS A COMPARABLE COMPANY, DUE CONSIDERATION SHOULD BE GIVEN TO THE FACT THAT TCS POSSESSES BRAND VALUE BEING A SUBSIDIARY OF TATA GROUP WHICH WILL TEND TO INFLUENCE THE PRICING POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY TCS. FURTHER, THE ASSESSEE STATE D TCS E - SERVE HAS A TURNOVER INR 17,916.4 MILLION, WHICH IS MORE THAN 25 TIMES THE I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 21 TURNOVER .OF THE ASSESSEE WHICH I S INR 714.93 MILLION. IN THIS REGARD, THE ASSESSEE PLACES RELIANCE ON THE FOLLOWING HIGH COURT JUDGEMENTS: IN THE CASE OF PENTAIR WATER INDIA PVT, LTD., THE HIGH COURT OF BOMBAY AT GOA [(2016) 381 ITR 0216 (BOMBAY)] HELD THE FOLLOWING: ''WHILE MAKING THE SELECTION OF COMPARABLES, THE TURNOVER FILTER, IN OUR OPINION, HAS TO BE THE BASIS FOR SELECTION. A COMPANY HAVING TURNOVER OF RS. 11 CRORES CANNOT BE COMPARED WITH A COMPANY WHICH IS HAVING TURNOVER OF RS.260 CRORES WHICH IS MORE THAN 2 3 TIMES THE TURNOVER OF THE .ASSESSEE. THIS COMPANY CANNOT BE REGARDED, TO BE IN EQUAL SIZE TO THE ASSESSEE. WE, ACCORDINGLY, DIRECT THE AO TO EXCLUDE THIS COMPANY OUT OF THE COMPARABLES.' IN THE CASE OF TOLUNA INDIA PVT. LTD. [ITA 393/2016 & 394/2016], T HE DELHI HIGH COURT HELD THE FOLLOWING: 'ON THE QUESTION, OF EXCLUSION OF THE ABOVE COMPARABLES, THE COURT FINDS THAT G IVEN THE SCALE OF OPERATIONS OF THE ABOVE ENTITIES, THEIR EXCLUSION FROM THE LIST OF COMPARABLES FOR THE PURPOSES OF DETERMINATION OF ALP APPEARS JUSTIFIED.' HENCE, THIS COMPARABLE SHOULD BE REJECTED. TPOS COMMENTS: THE CONTENTIONS OF THE ASSESSEE REGARDIN G THE COMPARABLE TCS E - SERVE ARE CONSIDERED. IT IS EN GAGED IN TRANSACTION PROCESSING (FINANCIAL INFORMATION PROCESSING), ANALYTICS , SOFTWARE TESTING, SOFTWARE VALIDATION AND DATA - CENTRE MANAGEMENT ACTIVITIES. FROM THE DIRECTOR'S REPORT FOLLOWING PARAS ARE REPRODUCED SHOWING FUNCTIONALITY: YOUR COMPANY IS ONE OF THE PIONEERS IN THE ITES - BPO INDUSTRY IN INDIA. IT IS IN THE BUSINESS OF PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES IN THE BANKING AND FINANCIAL SERVICES (BFSI) VERTICAL (IE INDUSTRY' VERTICAL) TO HELP ITS CUSTOMERS ACHIEVE THEIR BUSINESS OBJECTIVES BY PROVIDING INNOVATIVE, BEST - IN - CLASS SERVICES. YOUR COMPANY IS AN INTEGR AL PART OF THE TATA CONSULTANCY SERVICES' (TCS) STRATEGY TO BUILD ON ITS 'FULL SERVICES OFFERING' THAT OFFER GLOBAL CUSTOMERS AN INTEGRATED PORTFOLIO OF SERVICES RANGING FROM IT SERVICES I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 22 LO BPO SERVICES. COMPANY PROVIDES A B ROAD RANGE OF SERVI CES THAT CATE R TO THE PROCESS MANAGEMENT REQUIREMENTS FOR DELIVERY OF WIDE RANGE OF FINANCIAL PRODUCTS AND ENTERPRISE SUPPORT FUNCTIONS, WHICH INCLUDE - FINANCIAL INFORMATION PROCESSING (DATA PROCESSING) CUSTOMER CONTACT (VOICE BASED) BUSINESS PROCESS MANAGEMENT ANALYTIC S AS SEEN FROM THE ABOVE, IT CAN BE INFERRED THAT. TCS ESERVE IS A KPO. THE ASSESSEE ITSE LF IS A HIGH - END KPO SERV ICE PROVIDER AS DISCUSSED IN ELABORATE IN PARA 7 ABOVE. THE ASSESSEE IS ENGAGED IN KNOWLEDGE SERVICES AND BUSINESS RESEARCH. THESE ARE AKIN TO A KPO AND THEREFORE SHOULD BE BENCHMARKED USING A KPO COMPARABLE LIKE TCS E - SERVE. HOWEVER, AS SEEN FROM THE ANNUAL REPORT, OF TCS E - SERVE AND AS THE ASSESSEE STATED TCS E - SERVE HAS A TURNOVER INR 17.916.4 MILLION, WHICH IS MORE THA N 25 TIMES THE TURNOVER OF THE A SSESSEE WHICH IS INR 714.93 MILLION. THUS, RELYING ON THE CASE OF PENTAIR WATER INDIA PVT. LTD., THE HIGH COURT OF BOMBAY AT GOA [(2016) 381 1TR 0216 (BOMBAY)] IT IS CONSIDERED THAT TCS E - SERVE HAS A TURNOVER MULTIPLE TIMES THAT OF THE ASSESSEE FOR REASONS DISCUSSED ABOVE, TCS E - SER VE IS REJECTED AS A COMPARABLE. RESPECTFULLY FOLLOWING JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT V. PENTAIR WATER INDIA PRIVATE LIMITED(SUPRA) , WE ORDER EXCLUSION OF TCS E - SERVE LIMITED AS COMPARABLE WHILE COMPUTING ALP OF THE ASSESSEES INTERNATIONAL TRANSACTIONS WITH ITS AE , WHILE REST OF THE COMPARABLES AS WERE ADOPTED BY THE TPO AND CONFIRMED BY LEARNED DRP SHALL BE TAKEN INTO CONSIDERATION FOR COMPUTING ALP OF INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AE . THIS DISPOSES OF ALL THE GROUNDS RAISED BY THE ASSESSEE AS THE ASSESSEE HAS NARROWED ITS CHALLENGE DURING THE COURSE OF HEARING BEFORE THE BENCH ONLY TO THE INCLUSION OF TCS E - S ERVE LIMITED AS COMPARABLE FOR COMPUTING ALP FOR ITS INTERNATIONAL TRANSACTIONS WITH ITS AE. T H E A P P E A L O F T H E A S S E S S E E I S P A R T L Y A L L O W E D A S INDICATED A B O V E . WE ORDER ACCORDINGLY. I.T.A. NO.6927/MUM/2016 S.A NO.429/MUM/2018 23 6 . SINCE WE HAVE DECIDED THE ISSUES ARISING IN ITA NO. 6927/MUM/2016 FOR AY 2012 - 13 ON MERITS AS DE TAILED ABOVE BY ORDERING EXCLUSION OF TC S E - SERVE LIMITED AS COMPARABLE, T HE STAY APPLICATI ON IN SA NO. 429/MUM/2018 ARISING OUT OF ITA NO. 6927/MUM/2016 FOR AY 2012 - 13 HAS BECOME INFRUCTUOUS AND IS DISMISSED. WE ORDER ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 14 .12.2018. 14 .12.2018 SD/ - SD/ - ( C.N.PRASAD ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 .12.201 8 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI