BP INDIA SERICES P. LTD, MUMBAI V. ACIT 8(1), MUMBAI

ITA 6977/MUM/2012

• Counselvise Citation: 697719914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 30-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K , MUMBAI , BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUD ICIAL MEMBER ITA NO. : 6977 /MUM/20 1 2 (ASSESSMENT YEAR: 2008 - 0 9 ) BP INDIA SERVICES PRIVATE LIMITED , TECHNOPOLIS KNOWLEDGE PARK, MAHAKALI CAVES ROAD, CHAKALA, ANDHERI (EAST), MUMBAI - 400 093 PAN: AAACN 4042 N VS ASST. COMMISSIONER OF INCOME T AX CIRCLE - 8 ( 1 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : MR KANCHUN KAUSHAL MR DHANESH BAFNA MR ARPIT AGRAWAL RESPONDENT BY : MR KISHAN VYAS /DATE OF HEARING : 30 - 1 0 - 201 4 DATE OF PRONOUNCEMENT : 21 - 01 - 2015 ORDER , . PER R.C. SHARMA , A M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 143(3) R.W.S. 144C(1) FOR THE ASSESSMENT YEAR 2008 - 09. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASST. COMMISSIONER OF INCOME TAX 8(1)(AO) ERRED IN CONCLUDING THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1962 READ WITH SECTION 144C(13) O F THE ACT, AS FOLLOWS: 1. DETERMINING THE ARMS LENGTH PRICE OF THE APPELLANTS INTERNATIONAL TRANSACTIONS OF PROVISION OF BUSINESS SUPPORT SERVICES AT RS. 86,06,41,040/ - INSTEAD OF RS. 73,11,16,570/ - AS DETERMINED BY THE APPELLANT; 2. DISREGARDING THE APPELL ANTS TRANSFER PRICING DOCUMENTATION AND CONDUCTING HIS OWN COMPARABILITY (AND IN THIS REGARD, OBTAINING THE FINANCIAL DATA OF CERTAIN POTENTIAL COMPARABLES USING HIS POWERS UNDER SECTION 133(6) OF THE ACT) WHICH IS NOT IN ACCORDANCE WITH THE CONTEMPORANEO US DOCUMENTATION REQUIREMENT OF THE INDIAN TP REGULATIONS; BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 2 3. REQUIRING FINANCIAL DATA OF ONLY THE CURRENT YEAR (FY 2007 - 08) OF THE COMPARABLE COMPANIES TO BE USED FOR BENCHMARKING THE APPELLANTS INTERNATIONAL TRANSACTIONS; 4. HOLDING THAT THE AMOUNTS PAID TO C ASTROL INDIA LIMITED BY THE APPELLANT ARE NOT PASS - THROUGH EXPENSES, AND THAT THE APPELLANT OUGHT TO HAVE CHARGED A MARK - UP TO THE ASSOCIATED ENTERPRISES IN RELATION TO SUCH COSTS; 5. NOT GRANTING A RISK ADJUSTMENT TO THE APPELLANT TO ACCOUNT FOR THE DIFFEREN CES IN THE RISK PROFILE OF THE COMPARABLES VIS - - VIS THE APPELLANT; 6. THE LEARNED AO BE DIRECTED TO GRANT (+/ - ) 5% BENEFIT AS AVAILABLE UNDER PROVISO TO SECTION 92C(2) OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO CONSIDER THE INTERNATIONAL TRA NSACTION OF THE ASSESSEE AS ARMS LENGTH AND ACCORDINGLY THE TRANSFER PRICING ADJUSTMENT OF RS. 12,95,24,470/ - SHOULD BE DELETED THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING ADVISORY AND SUPP ORT SERVICES TO VARIOUS BP GROUP COMPANIES. THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH THE ASSOCIATED ENTERPRISES EXCEEDING RS. 15 CRORES. HENCE, CONSIDERING THE NATURE OF TRANSACTIONS, THE AO REFER RED ALL THE TRANSACTIONS CONTAINED IN T HE AUDIT REPORT IN FORM NO. 3CEB TO THE TRANSFER PRICING OFFICER TO COMPUTE THE ARMS LENGTH PRICE. THEREUPON, THE TRANSFER PRICING OFFICER - I(1), MUMBAI VIDE ORDER PASSED U/S 92CA(3) DATED 20.10.2011, HAS MADE AN UPWARD ADJUSTMENT TO THE ARMS LENGTH PRICE BY RS. 1 5 ,95,57,149/ - IN RELATION TO THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS ASSOCIATED ENTERPRISES DURING THE FINANCIAL YEAR 2007 - 08 RELEVANT TO ASSESSMENT YEAR 2008 - 09. AGAINST THE DRAFT ORDER ASSESSEE FILED OBJECTIO N BEFORE DRP. THEREAFTER AS PER DIRECTION OF DRP, THE TPO RECOMMENDED THE ADJUSTMENT TO ARMS LENGTH PRICE AT RS.12,95,24,470/ - . 3. ACCORDINGLY IN THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S 144C(13) THE AO MADE AN ADJUSTMENT IN ARMS LENGTH PRICE BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 3 IN PUR SUANCE OF ORDER U/S 92CA(3) AMOUNTING TO RS. 1 2 ,95, 24 , 470 / - . 4. AGAINST THIS ORDER, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS PASSED BY LOWER AUTHORITIES. FROM THE RECORD WE FOUND T HAT I N ITS TRANSFER PRICING STUDY REPORT THE ASSESSEE ARRIVED AT BENCHMARKING MARGIN AT COST PLUS 12.33% BY TAKING FOURTEEN COMPARABLES. HOWEVER, THE TPO ARRIVED AT BENCHMARKING MARGIN OF 30.49% ON THE BASIS OF 19 COMPARABLES TAKEN BY HIM AT P.27 OF HIS OR DER DATED 20 - 10 - 2011 PASSED U/S.92CA(3). THE TPO ARRIVED AT BENCHMARKING MARGIN OF 30.49% AFTER EXCLUDING SOME OF THE COMPARABLES TAKEN BY ASSESSEE AND ALSO INCLUDING SOME MORE NEW COMPARABLES. 6. LD. AR CONTENDED FOR EXCLUSION OF CROSS DOMAIN SOLUTIONS L TD. FROM THE LIST OF COMPARABLES ON THE PLEA THAT THIS COMPANY IS ENGAGED IN THE DEVELOPMENT OF INFORMATION SYSTEM S . W ITH A DECADE OF EX PERIENCE IN PAYROLL OUTSOURCING, CROSS DOMAIN HAS CREATED A REENGINEERED PAYROLL SERVICE EFFIPAY THAT PROCESS DELIVERS ACCURATE PAYROLL TO CLIENTS WITH HEADCOUNT UP TO 1000 EMPLOYEES IN JUST 4 HOURS WITH EFFIPAY LITE AND EFFIPAY LITE PLUS OUR BOUQUET OF SERVICES COVER END TO END PAYROLL, RETRIALS, REIMBURSEMENT, TAX PROOF VERIFICATIONS UP TO ISSUE OF FORM 16 FOR EMPLOYEES OF OUR CLIENTS ACROSS DIFFERENT INDUSTRY VERTICALS. AS PER LD. AR, THESE PROCESSES ARE HIGHLY SCALABLE AND PROVIDE END TO END PAYROLL SOLUTIONS TO CLIENTS WITH HEADCOUNT RANGING FROM 5 TO 65,000. CROSSDOMAINS IT KNOWLEDGE AND DOMAIN COMPETENCE HAS PROVIDE D THE EDGE TO DEVELOP INFORMATION SYSTEMS TO IMPLEMENT PROCESS INNOVATION AND CONTINUOUSLY INCREASE EFFICIENCY AND TURN - AROUND - TIME FOR BUSINESS CRITICAL PROCESSES. BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 4 FOR THIS PURPOSE LD AR PLACED HIS RELIANCE IN THE CASE OF SYMPHONY MARKETING SOLUTION INDIA P LTD VS ITO (IN ITA NO. 1316/BANG/2012) FOR AY 2008 - 09, WHEREIN BANGALORE BENCH OF THE TRIBUNAL HELD THE BUSINESS OF CROSS DOMAIN RANGES FROM HIGH END KP SERVICES, DEVELOPMENT OF PRODUCT SUITES AND ROUTINE LOW AND ITES SERVICE. HOWEVER, THERE IS NO B IFURCATION AVAILABLE FOR SUCH VERTICALS OF SERVICES. THEREFORE THE ASSESSEE CONTENDS THAT CROSS DOMAIN CANNOT BE COMPARED TO A ROUTINE ITES SERVICE PROVIDER . 7 . FURTHER RELIANCE WAS PLACED ON THE DECISION ON THE HYUNDAI MOTORS INDIA ENGINEERING P LTD VS ITO (ITA NO. 1850/HYD/2012) 8 . RELIANCE WAS FURTHER PLACED ON THE DECISION OF DCIT VS WILLIS PROCESSING SERVICES (INDIA) LTD. IN ITA 2152/MUM/2014, WHEREIN ALSO CROSS DOMAIN SOLUTIONS LTD WERE EXCLUDED AFTER HAVING FOLLOWING OBSERVATION: THIS COMPAN Y HAS BEEN REJECTED BY THE DRP ON THE GROUND THAT IT IS INDULGED IN HIGH SKILL IT SERVICES WHICH ARE NOT COMPARABLE TO THE ROUTINE I.T. ENABLED SERVICES. THE TRIBUNAL HYDERABAD BENCH IN THE CASE OF M/S MARKET TOOLS RESEARCH PVT LTD IN ITA NO. 1811/HYD/12 H AS HELD THAT THIS COMPANY IS PROVIDING SERVICES WHICH ARE IN THE NATURE OF KPO. FURTHER, THE COMPANY IS ENGAGED IN PROVIDING NICHE SERVICES AS WELL AS DEVELOPED ITS OWN BRAND EXDION TO TARGET THE INSURANCE INDUSTRY IN US. THE TRIBUNAL FOLLOWED THE FINDIN GS OF THE BANGALORE BENCH IN THE CASE OF M/S SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. IN ITA NO. 1316/BANG/2012 WHILE REJECTING THE ISSUE OF THIS COMPANY IN THE FINAL SET OF COMPARABLES. RESPECTFULLY FOLLOWING THE FINDINGS OF THE COORDINATE BENCH, WE U PHOLD THE DIRECTIONS OF THE DRP FOR THE REJECTION OF THIS COMPANY FROM THE FINAL LIST OF COMPARABLE. 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS SUPPORTING THE CONTENTION OF THE ASSESSEE FOR EXCLUDING CR OSS DOMAIN SOLUTIONS LTD. FROM THE LIST OF COMPARABLES. WE FOUND THAT THIS COMPANY IS ENGAGED IN DEVELOPMENT OF PRODUCTS SUITES AND ROUTINE LOW END ITES SERVICE. CROSSDOMAINS IT KNOWLEDGE AND DOMAIN COMPETENCE HAS PROVIDED THE EDGE TO DEVELOP INFORMATION SYSTEMS TO BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 5 IMPLEMENT PROCESS INNOVATION AND CONTINUOUSLY INCREASE EFFICIENCY AND TURN - AROUND - TIME FOR BUSINESS CRITICAL PROCESSES. THE BUSINESS OF CROSS DOMAIN RANGES FROM HIGH END KPO SERVICES, DEVELOPMENT OF PRODUCT SUITS AND ROUTINE LOW END ITES SERVIC E AS COMPARED TO THE ADVISORY AND SUPPORT SER V ICES PROVIDED BY ASSESSEE . THUS, WE FOUND IT FUNCTIONALLY DIFFERENT. ACCORDINGLY, WE DIRECT THE AO /TPO TO EXCLUDE M/S CROSS DOMAIN SOLUTIONS LIMITED FROM THE LIST OF COMPARABLES. 10 . LD. AR ALSO CONTENDED FOR EXCLUSION OF GENES YS INTERNATIONAL COR PORATION LTD., IT WAS CONTENDED THAT GENESYS INTERNATIONAL CORPORATION LTD. IS ENGAGED IN PROVIDING GEOGRAPHICAL INFORMATION SERVICES COMPRISING PHOTOGRAMMENTARY, REMOTE SENSING, CARTOGRAPHY, DATA CONVERSION, RELATED C OMPUTER BASE SERVICES AND OTHER RELATED SERVICES. 11 . IT WAS CONTENDED BY LD. AR THAT IN THE FOLLOWING DECISION WHEREIN THIS COMPANY HAS BEEN REJECTED SINCE THIS COMPANY IS HELD TO BE FUNCTIONALLY DIFFERENT. 1. SYMPHONY MARKETING SOLUTION INDIA P LTD VS ITO (ITA NO. 1316/BANG/2012)(BANG) (AY 2008 - 09) (PAGE 17 - 19, PARA 22 - 23) (SR. NO. 4 OF COJ) (6) GENESIS INTERNATIONAL CORPORATION LTD. 22. THIS COMPANY IS LISTED AT SL. NO. 12 IN THE LIST OF COMPARABLE COMPANIES CHOSEN BY TPO. AS FAR AS THIS COMPANY IS CONCE RNED, THE STAND OF THE ASSESSEE HAS BEEN THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE AND THAT IT HAS A DIFFERENT EMPLOYEE SKILL SET AND THAT THIS COMPANY PERFORMS R&D SERVICES AND ALSO OWNS INTANGIBLES. THIS COMPANY IS A GEOSPATIAL SERVICES CONTENT PR OVIDER SPECIALIZING IN LAND BASED TECHNOLOGIES. FROM THE NOTES TO ACCOUNTS OF THIS COMPANY, IT IS SEEN THAT THIS COMPANY IS ENGAGED IN PROVIDING GEOGRAPHICAL INFORMATION SERVICES COMPRISING OF PHOTOGRAMMENTRY, REMOTE SENSING CARTOGRAPHY, DATA CONVERSION RE LATED COMPUTED BASED SERVICES AND OTHER RELATED SERVICES. 23. IT IS THUS CLEAR FROM THE AFORESAID DECISION OF THE TRIBUNAL THAT AMONG THE ITES COMPANIES THERE IS A HIERARCHY IN TERMS OF SKILL REQUIRED TO PROVIDE SERVICES. IT RANGES FROM PROVIDING ROUTINE S ERVICES WHERE NO SKILLS AND REQUIRED AND PROVIDING SERVICES WHERE HIGHLY PROFESSIONALIZED SKILLS ARE REQUIRED. DEPENDING ON THE SKILLS REQUIRED TO PERFORM ITES THE COMPARABILITY HAS TO BE DONE. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THIS COMPANY CAN NOT BE REGARDED AS A COMPARABLE AND DESERVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES. BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 6 12 . RELIANCE WAS ALSO PLACED BY THE LD. AR ON THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYUNDAI MOTORS INDIA ENGINEERING PVT. LTD., ITA NO.1 850/HYD/2012 (AY 2008 - 09) . 13 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND IN VIEW OF ABOVE JUDICIAL PRONOUNCEMENTS THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE AND IT HAS A DIFFERENT EMPLOYEE SKILL SET AND ALSO PERFORMS R&D SERVICES AND ALSO OWNS I NTANGIBLES. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE GENESYS INTERNATIONAL CORPORATION LTD. FROM THE LIST OF COMPARABLES. 14. WITH REGARD TO E - CLERX SERVICES PRIVATE LIMITED , I T WAS CONTENDED BY LD. AR THAT THIS COMPANY IS ENGAGED IN PROVIDING DATA ANALYT ICS AND DATA PROCESS SOLUTION TO THE LARGEST BRANDS IN THE WORLD. THEY ARE RECOGNIZED EXPERTS IN FINANCIAL SERVICES, RETAILS AND MANU FACTURING. HE FURTHER DREW OUR ATTENTION TO THE FOLLOWING DECISION OF ITAT, WHEREIN THIS COMPANY WAS EXCLUDED FROM THE LIST OF COMPARABLES : - I) SYMPHONY MARKETING SOLUTION INDIA PVT. LTD., ITA NO.1316/BANG/2012(AY2008 - 09); II) HYUNDAI MOTORS INDIA ENGINEERING PVT. LTD., ITA NO.1850/HYD/2012)(AY 2008 - 09) ; III) MAERSK GLOBAL CENTRES (INDIA) PRIVATE LTD.,ITA NO.7466/MUM/2012(SB) (AY 2008 - 09); AND IV) LIONBRIDGE TECHNOLOGIES LTD. VS. ITO, ITA NO.7498/MUM/2012(AY 2008 - 09). 15 . CONSIDERING THE JUDICIAL PRONOUNCEMENTS AS CITED ABOVE, WE DIRECT THE AO TO EXCLUDE E - CLERX SERVICES PRIVATE LIMITED FROM THE LIST OF COMPARABLES. 16 . LD. A R ALSO CONTENDED FOR EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. WE FOUND THAT THE TPO AFTER COLLECTING INFORMATION U/S.133(6) OF THE ACT HAD INCLUDED IT AS A COMPARABLE. THE PLEA OF THE LD. AR IS THAT IT HAS SOFTWARE DEVELOPMENT ACTIVITY ALSO, THEREFORE, NON COMPARABLE WITH THE FUNCTIONAL ACTIVITY OF THE ASSESSEE. IN THE INTEREST OF JUSTICE, WE BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 7 RESTORE THIS MATTER BACK TO THE FILE OF THE TPO FOR EXAMINING AFRESH . T HE INFORMATION COLLECTED BY HIM U/S.133(5) IS TO BE SUPPLIED TO ASSESSEE . WE DIRECT ACCORDINGLY. 17 . THE LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF MOLD TEK TECHNOLOGIES LTD. ON THE PLEA THAT IT HAS EXTRA ORDINARY EVENTS HAPPENED DURING THE YEAR I.E. AMALGAMATION WITH TECH MEN TOOLS PRIVATE LIMITED. LD. AR ALSO RELIED ON THE FOLLOWING DECISIONS OF TH E TRIBUNAL , WHEREIN MOLD TEK TECHNOLOGIES LTD HAS BEEN EXCLUDED FROM THE COMPARABLES : - I) MAERSK GLOBAL CENTRES (INDIA) PRIVATE LTD. VS. ACIT, ITA NO.7466/MUM/2012(SB)(2008 - 09) ; AND II) LIONBRIDGE TECHNOLOGIES LTD. VS. ITO, ITA NO.7498/MUM/2012(AY 2008 - 0 9). 18 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ITAT SPECIAL BENCH IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) PRIVATE LTD. , HAS DIRECTED FOR EXCLUSION OF MOLD TEK TECHNOLOGIES LTD. ON THE PLEA THAT THE FINANCIAL YEAR 2007 - 028 RELEVANT AS SESSMENT YEAR 2008 - 09 WAS A UNIQUE YEAR FOR MOLD TEK TECHNOLOGIES LTD. AS THE SCHEME OF ARRANGEMENT INVOLVING AMALGAMATION BETWEEN TEKMEN TOOL PVT. LTD. AND MOLD. TEK TECHNOLOGIES LTD. AND DE - MERGER BETWEEN MOLD - TEK TECHNOLOGIES LTD. SIMULTANEOUSLY WAS SAN CTIONED BY THE HONBLE AP HIGH COURT BY 15 TH JULY, 2008 WITH THE APPOINTED DATE FOR AMALGAMATION AND DE - MERGER BEING 1 ST OCTOBER, 2007 AND 1 ST APRIL, 2007, RESPECTIVELY. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL BENCH, WE DIRECT THE TPO TO EXCLUDE MOLD TEK TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. 19 . LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF INFOSYS BPO LTD. ON THE PLEA THAT IT IS A GIANT COMPANY HAVING TURNOVER OF RS.825.08 CRORE. RELIANCE WAS PLACED ON CIT VS. AGNITY IN DIA PRIVATE LIMITED, ITA NO.1204/DEL/2011 AND SYMPHONY MARKETING SOLUTION INDIA PVT. LTD., ITA NO.1316/BANG/2012(AY BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 8 2008 - 09) , WHEREIN INFOSYS BPO LTD. WAS EXCLUDED FROM THE LIST OF COMPARABLES. 20 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT INFOSY S BPO LTD., BEING A SUBSIDIARY OF INFOSYS, HAS AN ELEMENT OF BRAND VALUE ASSOCIATED WITH IT. THIS IS ALSO CLEAR FROM THE PRESENCE OF BRAND RELATED EXPENSES INCURRED BY THIS COMPANY. PRESENCE OF A BRAND COMMANDS PREMIUM PRICE AND THE CUSTOMERS WOULD BE WILL ING TO PAY, FOR THE SERVICES/PRODUCTS OF THE COMPANY. INFOSYS BPO IS AN ESTABLISHED PLAYER WHO IS NOT ONLY A MARKET LEADER BUT ALSO A COMPANY EMPLOYING SHEER BREADTH IN TERMS OF ECONOMIES OF SCALE AND DIVERSITY AND GEOGRAPHICAL DISPERSION OF CUSTOMERS. THE PRESENCE OF THE AFORESAID FACTORS WILL TAKE THIS COMPANY OUT OF THE LIST OF COMPARABLES. WE, THEREFORE, ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE REGARDED AS A COMPARABLE. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE IT FROM THE LIST OF COMPARABLES. 21 . LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF WIPRO LIMITED ON THE PLEA THAT IT IS A GIANT COMPANY HAVING TURNOVER OF RS.11,57.20 CRORES AND IT OWNS TANGIBLES. RELIANCE WAS PLACED ON SYMPHONY MARKETING SOLUTION INDIA PVT. LTD., ITA NO.1 316/BANG/2012(AY2008 - 09); II) HYUNDAI MOTORS INDIA ENGINEERING PVT. LTD., ITA NO.1850/HYD/2012)(AY 2008 - 09); AND (III) STREAM INTERNATIONAL SERVICES INDIA PRIVATE LTD. VS. ACIT, ITA NO.8290/MUM/2011(AY:2007 - 08) . 22 . WE HAVE CONSIDERED RIVAL CONTENTIONS. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS , WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT WIPRO LIMITED CANNOT BE TREATED AS COMPARABLE. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 23 . LD. AR HAS ALSO CONTENDED FOR EXCLU SION OF MAPLE E - SOLUTION LTD. ON THE PLEA THAT SINCE THE DIRECTORS OF THIS BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 9 COMPANY WERE FOUND TO BE INVOLVED IN FRAUDULENT ACTIVITIES, THEREFORE, THE FINANCIALS OF THIS COMPANY CANNOT BE RELIED UPON. RELIANCE WAS PLACED ON THE DECISION OF TRIBUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES INDIA PRIVATE LTD. VS. ACIT, ITA NO.8997/MUM/201 0 (AY:200 6 - 0 7 ) AND STREAM INTERNATIONAL SERVICES INDIA PRIVATE LTD. VS. ACIT, ITA NO.8290/MUM/2011(AY:2007 - 08) . THE LD. AR ALSO PLACED RELIANCE ON THE DECISION OF HYDERABA D BENCH OF THE TRIBUNAL IN THE CASE OF BRIGADE GLOBAL SERVICES PRIVATE LIMITED, ITA NO.1494/HYD/2010, 988/HYD/2011. 24 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD . WE FOUND THAT EMPLOYEES COST TO SALES IN CASE OF MAPLE E - SOLUTIO N LTD. WORKS OUT TO 15.62% AS AGAINST ASSESSEES RATIO OF 48.85%. FURTHERMORE, IN VIEW OF THE JUDICIAL PRONOUNCEMENTS, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE MAP LE E - SOLUTION LTD. FROM THE LIST OF COMPARABLES. 25 . LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF ACROPETAL TECHNOLOGIES LTD. ON THE PLEA THAT THE LOW EMPLOYEES COST TO SALES IS 8.20% AS AGAINST ASSESSEES EMPLOYEES COST TO SALES IS 48.54%, THEREFORE, THI S COMPANY CANNOT BE TREATED AS COMPARABLE. LD. AR PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES INDIA PRIVATE LTD. VS. ACIT, ITA NO.8290/MUM/2011(AY:2007 - 08) AND BRIGADE GLOBAL SERVICES PRIVATE LIMITED, ITA NO.149 4/HYD/2010, 988/HYD/2011. 26 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS, AS CITED ABOVE, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE. ACCORDI NGLY, WE BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 10 DIRECT THE TPO TO EXCLUDE ACROPETAL TECHNOLOGIES FROM THE LIST OF COMPARABLES. 2 7 . LD. AR HAS ALSO CONTENDED FOR EXCLUSION OF COSMIC GLOBAL LTD. ON THE PLEA THAT THE LOW EMPLOYEES COST TO SALES IS 8.20% AS AGAINST ASSESSEES EMPLOYEES COST TO SA LES IS 48.54%. LD. AR ALSO SUBMITTED THAT THE TRANSLATION CHARGES PAID RS.2,86,29,348/ - , WHICH IMPLIES THAT THIS COMPANY OUTSOURCES MOST OF ITS OPERATION, AND, THEREFORE, THIS COMPANY CANNOT BE TREATED AS COMPARABLE. RELIANCE WAS PLACED ON THE DECISION OF TRIBUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES INDIA PRIVATE LTD. VS. ACIT, ITA NO.8290/MUM/2011(AY:2007 - 08 AND BRIGADE GLOBAL SERVICES PRIVATE LIMITED, ITA NO.1494/HYD/2010, 988/HYD/2011. 2 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY PERUS ED THE RECORD. WE FOUND THAT ON THE PLEA OF WIDE VARIATION IN THE EMPLOYEE COST, THE DRP IN YEAR UNDER CONSIDERATION, HAS EXCLUDED CAROL HUBS LTD. SINCE IT HAS LOW EMPLOYEE COST. THE DRP HELD THAT IT HAS DIFFERENT OUTSOURCING MODEL. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS, WE ACCEPT THE CONTENTION OF THE ASSESSEE THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE COSMIC GLOBAL LTD. FROM THE LIST OF COMPARABLES. 2 9 . WITH REGARD TO DATAMATICS FINANCIAL SERVICES LTD., LD. AR SUBMITTED THAT THE TPO OBTAINED SEGMENTAL INFORMATION FOR ITES SEGMENT U/S.133(6). HOWEVER, THE COMPANY IN REPLY TO NOTICE U/S.133(6) HAS NOT PROVIDED ANY BASIS FOR ALLOCATION OF EXPENSES. ACCORDINGLY, IT WAS CONTENDED THAT IT SHOULD BE EXCLUDED F ROM THE LIST OF COMPARABLES. 30 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE TPO HAS COLLECTED SEGMENTAL INFORMATION BY ISSUING NOTICE U/S.133(6). THE CONTENTION OF LD. AR WAS THAT THE SAME ARE NOT AUDITED. IN THE INTEREST OF JUSTICE, WE RESTO RE THIS ISSUE BACK TO BP INDIA SERVICES PRIVATE LIMITED ITA 6977 /M/201 2 11 THE FILE OF AO/TPO WITH A DIRECTION TO PROVIDE THE INFORMATION COLLECTED BY THE TPO U/S.133(6) OF THE ACT TO ASSESSEE AND AFTER CALLING ASSESSEES OBJECTION DECIDE AFRESH THE INCLUSION/EXCLUSION OF M/S DATAMATICS FINANCIAL SERVICES LT D. FROM THE LIST OF COMPARABLES. WE DIRECT ACCORDINGLY. 31 . IN VIEW OF THE ABOVE, THE MATTER IS RESTORED BACK TO THE FILE OF AO/TPO FOR RECOMPUTING BENCHMARKING MARGIN AND TO DETERMINE ARMS LENGTH PRICE OF ASSESSEE S INTERNATIONAL TRANSACTION OF PROVISION S OF BUSINESS SUPPORT SERVICES. 3 2 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY , 201 5 . SD/ - SD/ - ( VIVEK VARMA ) ( R C SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER , MUMBAI, DATE: 21 ST JANUARY , 201 5 COPY TO: - THE APPELLANT. 1) THE RESPONDENT. 3) THE DRP (INT. TAX. II), MUMBAI/ CIT (CONCERNED___) , MUMBAI. 4) THE CIT /DIT CONCERNED - ______ , MUMBAI. 5) / THE D.R. K BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS /PK M,PS.