Global e-Business Operations Private Limited , Bangalore V. Assistant Commissioner of Income Tax Circle-3(1)(2), Bangalore

ITA 725/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2053 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SARATH RAO
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Question of law
• Section: 143(3); 144C; 43; 13

Judgement Text

IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER IT(TP)A NO.725/BANG/2017 ASSESSMENT YEAR: 2012-13 M/S. GLOBAL E-BUSINESS OPERATIONS PVT. LTD. 2 ND FLOOR KALYANI PLATINA, PHASE-II BUILDING SURVEY NUMBER 16 & 24 OF KUNDANAHALLI VILLAGE K.R. PURAM, HOBLI BANGALORE-560 066 PAN NO : AABCG2843D VS. ACIT CIRCLE-3(1)(2) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI SARATH RAO, A.R. RESPONDENT BY : SHRI SANJAY KUMAR, D.R. DATE OF HEARING : 01.12.2020 DATE OF PRONOUNCEMENT : 04.12.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER DATED 23.01.2017 PASSED BY THE ASSESSING OFFI CER U/S 143(3) R.W.S 144C OF THE INCOME-TAX ACT,1961 ['THE ACT' FO R SHORT] FOR ASSESSMENT YEAR 2012-13 IN PURSUANCE OF DIRECTIONS GIVEN BY LD DISPUTE RESOLUTION PANEL (DRP). 2. THOUGH THE ASSESSEE HAS RAISED MANY GROUNDS, AT THE TIME OF HEARING THE LD A.R PRESSED THE GROUNDS RELATING TO THE ISSUE OF IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 2 OF 18 (A) EXCLUSION OF TWO COMPARABLE COMPANIES VIZ., M/S INFOSYS BPO LTD AND M/S TCS E-SERVE LIMITED AND (B) TREATMENT OF FOREIGN EXCHANGE GAIN/LOSS AS OPER ATING INCOME/EXPENSES OR NOT. 3. THE ASSESSEE IS A COMPANY BELONGING TO M/S. HEWLETTE PACKARD (HP) GROUP. THE ASSESSEE IS ENGAGED IN ITES SERVIC ES. THE ASSESSEE UNDERTAKES HPS WORLDWIDE ACCOUNTING AND TRANSACTIO N PROCESSING WORK, PROVISION OF BACK OFFICE OPERATION AND CUSTOM ER SUPPORT SERVICES TO VARIOUS ASSOCIATED ENTERPRISES. THE AS SESSEE IS BEING COMPENSATED AT COST + 8%. THE ASSESSEE ADOPTED TNM M METHOD TO BENCHMARK HIS TRANSACTIONS AND THE PROFIT LEVEL IND ICATOR WAS TAKEN AS OPERATING PROFIT BY OPERATING COST (OP/OC). THE ASSESSEE DECLARED NET MARGIN OF 19.08%. THE TPO RECOMPUTED THE MARGI N OF THE ASSESSEE BY EXCLUDING INTEREST INCOME AND NON-OPERA TING INCOME AND ALSO REDUCING THE EXPENDITURE. ACCORDINGLY, HE COM PUTED THE NET MARGIN OF THE ASSESSEE AT 15.75%. 4. THE ASSESSEE HAD SELECTED 11 COMPARABLE COMPANIE S IN ITS TRANSFER PRICING STUDY. THE TPO REJECTED THE TRANS FER PRICING STUDY AND HE SELECTED FOLLOWING SET OF COMPARABLE COMPANI ES: SL.NO. NAME OF THE CASE OPERATING INCOME OPERATING COST OP/OC 1 ACCENTIA TECHNOLOGIES LTD. 126,38,02,000 112,89,16,000 11.75 2 UNIVERSAL PRINT SYSTEMS LTD. (SEG)(BPO) 6,17,67,000 3,87,49,000 52.46 3 INFORMED TECHNOLOGIES INDIA LTD. 1,96,36,431 1,82,45,770 6.08 4 INFOSYS B P O LTD. 1316,75,11,974 962,91,06,964 36.30 5 JINDAL INTELLICOM LTD. 30,27,51,875 30,29,02,990 0.05 6 MICROGENETIC SYSTEMS LTD. 1,29,93,217 1,08,63,390 19.61 7 T C S E - SERVE LTD. 15,78,44,000 9,64,28,000 63.69 8 B N R UDYOG LTD. (SEG)(MEDICAL TRANSCRIPTION) 1,47,04,000 97,87,000 41.58 9 EXCEL INFOWAYS LTD. (SEG) (IT/BVPO) 790,96,95,000 559,06,04,000 29.79 10 E4E HEALTHCARE SERVICES PVT. LTD. 89,50,04,209 74,59,23,078 19.85 AVERAGE PLI 28.11% IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 3 OF 18 5. AFTER ADDING NEGATIVE WORKING CAPITAL ADJUSTMENT OF -0.06%, THE ADJUSTED MARGIN WAS ARRIVED AT BY THE TPO AT 28 .17%. WHILE WORKING OUT THE MARGIN, THE ASSESSING OFFICER TREAT ED THE FOREIGN EXCHANGE GAIN AS NON-OPERATING IN NATURE. ACCORDIN GLY, HE MADE TRANSFER PRICING ADJUSTMENT OF RS.57,69,82,545/-. THE LD. DRP GAVE PARTIAL RELIEF TO THE ASSESSEE WHICH RESULTED IN RE LIEF OF RS.45.20 CRORES. ACCORDINGLY, THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER. 6. AS NOTICED EARLIER, THE ASSESSEE SEEKS EXCL USION OF M/S INFOSYS BPO LTD AND M/S TCS E-SERVE LIMITED. THE LD A.R SU BMITTED THAT THE CO-ORDINATE BENCH, VIDE ITS ORDER DATED 21.04.2 017 PASSED IN THE ASSESSEES OWN CASE IN IT(TP)A NO.147/BANG/2015 FOR ASSESSMENT YEAR 2010-11, HAS EXCLUDED M/S INFOSYS BPO LTD. H E SUBMITTED THAT THE HONBLE KARNATAKA HIGH COURT DID NOT ADMIT THE APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER PASSED BY THE TRIBUNAL BY OBSERVING THAT NO SUBSTANTIAL QUESTION OF LAW ARISE S, VIDE ITS ORDER DATED 6 TH JULY, 2018 IN ITA NO.896/2017. 7. WITH REGARD TO FUNCTIONALITY OF M/S INFOSYS BP O LTD, THE ASSESSEE SUBMITTED AS UNDER:- (A) IT IS ENGAGED IN PROVIDING INTEGRATED IT AND BU SINESS PROCESS OUTSOURCING SOLUTIONS, (B) IT IS ALSO ENGAGED IN PROVIDING CONSULTANCY, M ANAGEMENT AND STRATEGIC TRANSFORMATION SERVICES (C) IT CATERS TO DIVERSE BUSINESS SEGMENTS. (D) IT HAS GOT DELIVERY CENTRES IN USA, AUSTRALIA, CZECH REPUBLIC, POLAND, THAILAND AND PHILLIPPINES AND ALS O EARNS ON SITE REVENUES. (E) IT IS A MARKET LEADER. IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 4 OF 18 ACCORDINGLY IT WAS SUBMITTED THAT THIS COMPANYS FU NCTIONS ARE DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. IT IS ALSO SUBMITTED THAT THIS COMPANY OWNS IPR AND BRAND AND INCURS ADVERTIS EMENT AND MARKETING EXPENSES ON BRAND BUILDING. IT IS BACKED BY M/S INFOSYS LTD. IT WAS FURTHER SUBMITTED THAT THERE WAS AN EX TRA ORDINARY EVENT DURING THE YEAR, I.E., IT HAS ACQUIRED PORTLAND GRO UP PTY LTD, AUSTRALIA DURING THE YEAR UNDER CONSIDERATION. THE ABOVE SAID COMPANY HAS EXPERTISE IN STRATEGIC OUTSOURCING AND CATEGORY MANAGEMENT SERVICES. FURTHER THE SAID ACQUISITION HAS ENHANCED THE DELIVERY PRESENCE IN HIGH END SOURCING AND PROC UREMENT SPACE IN ASIA PACIFIC REGION. IT WAS SUBMITTED THAT THIS CO MPANY HAS BEEN EXCLUDED IN VARIOUS DECISIONS. 8. WITH REGARD TO FUNCTIONALITY OF M/S TCS E-SE RVE LIMITED, THE ASSESSEE SUBMITTED AS UNDER:- (A) IT IS ENGAGED IN DELIVERING CORE BUSINESS PROC ESSING SERVICES, ANALYTICS/INSIGHTS (KPO) AND SUPPORT SERV ICES FOR BOTH DATA AND VOICE PROCESSES. (B) IT OFFERS INTEGRATED PORTFOLIO OF SERVICE RANGI NG FROM IT SERVICES TO BPO SERVICES. ACCORDINGLY, IT IS SUBMITTED THAT THIS COMPANY IS P ROVIDING KPO SERVICES AND HENCE FUNCTIONALLY DIFFERENT. IT IS FU RTHER SUBMITTED THAT THE COMPANY IS BACKED BY M/S TCS LTD AND TATA BRAND EQUITY. THIS COMPANY DID NOT DISCLOSE BPO SERVICES AS SEPARATE S EGMENT. IT WAS SUBMITTED THAT MAJOR BUSINESS OF TCS E SERVICE IS F ROM CITI GROUP PURSUANT TO PRIOR GLOBAL ARRANGEMENT MAKING IT A DE EMED INTERNATIONAL TRANSACTION. FURTHER, CITI HAS SIGNE D AN AGREEMENT WITH TCS TO PROVIDE PROCESS OUTSOURCING SERVICES TO CITI AND ITS AFFILIATES FOR AN AGGREGATE AMOUNT OF USD 2.5 BILLI ON OVER A PERIOD OF 9 YEARS DURING THE FY 2008-09. THE LD A.R SUBMITTE D THAT THIS COMPANY HAS ALSO BEEN EXCLUDED IN MANY DECISIONS. IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 5 OF 18 9. THE LD D.R SUBMITTED THAT BOTH THE ASSESSEE AND INFOSYS BPO LTD FALL UNDER THE CATEGORY OF COMPANIES PROVIDING ITES SERVICES IN THE FORM OF BUSINESS PROCESS OUTSOURCING, I.E., BOT H THE COMPANIES ARE PROVIDING SOLUTIONS TO BUSINESS PROCESSES OUTSO URCED TO THEM. EVEN THOUGH M/S INFOSYS BPO IS CATERING TO VARIOUS TYPES OF INDUSTRIES AND THE ASSESSEE IS CATERING TO THE NEED S OF HP GROUP, YET THE FUNCTIONS PERFORMED BY THEM REMAIN THE SAME. H E SUBMITTED THAT BOTH THE COMPANIES ARE OPERATING WORLDWIDE. T HE TURNOVER OF BOTH THE COMPANIES ARE ALSO COMPARABLE, I.E., THE T URNOVER OF THE ASSESSEE COMPANY WAS RS.1130 CRORES, WHILE THE TURN OVER OF M/S INFOSYS BPO LTD WAS RS.1530 CRORES. THE HE SUBMITT ED THAT THE ASSESSEE HEREIN IS PART OF HEWLETT-PACKARD GROUP. HENCE BOTH THE COMPANIES HAVE HUGE BRAND PRESENCE. HENCE IT CANNO T BE SAID THAT THE BRAND VALUE WOULD AFFECT PROFITABILITY OF THE C OMPANIES. HE FURTHER SUBMITTED THAT THE EXTRA ORDINARY EVENT, VI Z., ACQUISITION OF PORTLAND GROUP PTY LTD, AUSTRALIA HAS TAKEN PLACE I N THE LAST QUARTER OF THE FINANCIAL YEAR AND HENCE THE SAID ACQUISITIO N WOULD NOT AFFECT FAR ANALYSIS. 10. THE LD D.R FURTHER SUBMITTED THAT ASSESSEE COMPANY ALSO REPORTS ALL ITS REVENUES UNDER SINGLE HEAD REVENUE FROM DATA PROCESSING AND OTHER ITES. HENCE THERE IS NO MATE RIAL DIFFERENCE IN THIS ASPECT ALSO. THE LD D.R FURTHER SUBMITTED THAT VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE. 11. HE SUBMITTED THAT ALL THE ABOVE SAID CONTENT IONS WOULD APPLY TO TCS E-SERVE LTD ALSO. ACCORDINGLY HE SUBMITTED THAT THE LD DRP WAS JUSTIFIED IN INCLUDING BOTH THE ABOVE SAID COMP ARABLE COMPANIES. 12. THE LD A.R SUBMITTED THAT, UNDER BROAD CLASS IFICATION, BOTH THE COMPANIES WOULD FALL UNDER ITES SEGMENT. HOWEVER, SPECIFIC IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 6 OF 18 SERVICES RENDERED BY BOTH THE COMPANIES WOULD SHOW THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE COMPANY IS DIFF ERENT FROM THE FUNCTIONS PERFORMED BY M/S INFOSYS BPO LTD AND M/S TCS E-SERVE LTD. WHILE THE ASSESSEE IS PROVIDING BASIC BACKEND SERVICES TO HP GROUP, BOTH THE ABOVE SAID COMPANIES ARE PROVIDING MULTIPLE SERVICES ACROSS THE GLOBE. HE SUBMITTED THAT THE ASSESSEE I S PROVIDING SERVICES ONLY TO ITS GROUP COMPANIES AND HENCE THE EFFECT OF BRAND VALUE WILL NOT BE THERE. WHILE DEALING WITH THIRD PARTIES, BRAND VALUE COMMANDS A PREMIUM ON PRICING. HENCE BOTH T HE COMPANIES CANNOT BE COMPARED WITH THE ASSESSEE COMPANY. 13. THE LD A.R SUBMITTED THAT WHILE HEWLETT-PAC KARD MAY BE A KNOWN BRAND, YET IT IS NOT KNOWN FOR RENDERING BACK -END BPO SUPPORT SERVICES, I.E., IT IS KNOWN FOR PROVIDING H ARDWARE AND IT SOLUTIONS TO ITS CUSTOMERS. HENCE PROVIDING ITES S ERVICES IS NOT THE CORE BUSINESS OF HP GROUP AND HENCE ITS BRAND VALUE OF HP CANNOT BE COMPARED WITH THAT OF M/S INFOSYS AND M/S TATA G ROUP. HE SUBMITTED THAT M/S INFOSYS LTD, THE PARENT COMPANY HAS PROVIDED PERFORMANCE GUARANTEE TO CLIENTS OF M/S INFOSYS BPO LTD. HE SUBMITTED THAT THERE IS CLOSE CONNECTION BETWEEN M/ S TCS E-SERVE AND TATA CONSULTANCY SERVICES LTD, WHICH HAS GOT HI GH BRAND VALUE. 14. THE LD D.R SUBMITTED THAT THE SERVICE DELI VERY IS MORE IMPORTANT THAN THE BRAND VALUE. HE FURTHER SUBMIT TED THAT THE ANNUAL REPORTS DO NOT SHOW THAT THE REVENUE GROWTH OF BOTH THE COMPANIES ARE ATTRIBUTABLE TO ITS PARENT COMPANIES. THE ANNUAL REPORT ADDUCES OTHER REASONS FOR THEIR GROWTH. HE SUBMITTED THAT THE DETAILS OF PERFORMANCE GUARANTEE PROVIDED BY M/S IN FOSYS LTD ARE NOT AVAILABLE AND HENCE IT CANNOT BE PRESUMED THAT SUCH TYPE OF GUARANTEE WAS PROVIDED TO ALL THE CLIENTS. THE LD D.R SUBMITTED THAT THE IMPACT OF BRAND VALUE WAS NOT EXAMINED IN ANY O F THE EARLIER DECISIONS RENDERED BY THE TRIBUNAL IN THE ASSESSEE S OWN CASE. HE IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 7 OF 18 FURTHER SUBMITTED THAT TO PERPETUATE AN ERROR IS NO HEROISM AS HELD BY HONBLE SUPREME COURT IN THE CASE OF DISTRIBUTOR S BARODA LTD (155 ITR 120). HE SUBMITTED THAT THE HONBLE SUPRE ME COURT HAS HELD IN THE CASE OF RAMESHLAL SANWARMAL (122 ITR 16 2) HAS HELD THAT THE ERROR COMMITTED IN EARLIER DECISION COULD BE CO RRECTED IN A LATER DECISION. 15. THE LD A.R, IN REPLY, SUBMITTED THAT, IN VAR IOUS DECISIONS RENDERED BY HIGH COURTS, IT HAS BEEN HELD THAT THE BRAND VALUE PLAYS A SIGNIFICANT ROLE. HE SUBMITTED THAT M/S INFOSYS LTD HAS GIVEN BRAND VALUE COMPUTATION AT PAGE 70 OF ITS ANNUAL REPORT. IT IS STATED THAT ITS TOTAL PROFIT BEFORE INTEREST AND TAX WAS RS.116 83 CRORES, CONSISTED OF BRAND PROFITS OF 9969 CRORES AND NON-BRAND INCOM E OF RS.1714 CRORES. HE SUBMITTED THAT ABOVE CONSOLIDATED PROFI TS ALSO INCLUDE PROFITS OF INFOSYS BPO LTD AS WELL. 16. WE HAVE HEARD RIVAL CONTENTIONS AND PERUS ED THE RECORD. WE NOTICE THAT THE MAIN THRUST OF LD D.RS CONTENTION WAS THAT THE HP GROUP IS ALSO POSSESSING EQUAL BRAND VALUE, THAT TH E TURNOVER OF THE ASSESSEE AND THAT OF M/S INFOSYS LTD FALLS UNDER TH E SAME BRACKET, THAT THERE IS NO EVIDENCE TO SHOW THAT THE COMPARAB LE COMPANIES HAVE CAPITALISED ITS BRAND VALUE, THAT BOTH THE COM PANIES ARE RENDERING ITES SERVICES ONLY. WITH REGARD TO THE S UBMISSION ON PERFORMANCE GUARANTEE PROVIDED BY PARENT COMPANY, T HE LD D.R SUBMITTED THAT THE RELEVANT DETAILS ARE NOT AVAILAB LE. IN RESPECT OF ACQUISITION OF A NEW COMPANY IN AUSTRALIA BY M/S IN FOSYS, THE LD D.R CONTENDED THAT IT MAY NOT HAVE IMPACT DURING THE YE AR, SINCE THE ACQUISITION HAS TAKEN PLACE IN THE LAST QUARTER OF THE YEAR. 17. ON THE CONTRARY, THE CONTENTION OF LD A.R I S THAT BOTH THE COMPARABLE COMPANIES HAVE BEEN EXCLUDED IN MANY CAS ES ON THE REASONING THAT THEY POSSESS HUGE BRAND VALUE. ONE MAIN DISTINCTION IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 8 OF 18 BROUGHT OUT BY LD A.R WAS THAT THE HEWLETT-PACKARD IS HAVING BRAND VALUE FOR PROVIDING HARDWARE AND IT SOLUTIONS TO IT S CUSTOMERS, I.E., IT IS NOT KNOWN FOR RENDERING BACK-END BPO SUPPORT SERVICES. WE APPRECIATE THIS DISTINCTION BROUGHT OUT BY LD A.R. THERE SHOULD NOT HAVE ANY DOUBT THAT THE BRAND VALUE POSSESSED BY A COMPANY HAS DEFINITE ROLE TO PLAY IN FIXING THE PRICING OF PROD UCT/SERVICES, BUT IT MAY HAVE EFFECT ONLY IN THE FIELD, IN WHICH IT POSS ESSES EXPERTISE. HENCE THE BRAND VALUE HELD BY M/S HEWLLETT-PACKARD MAY BE HELPFUL IN MARKETING OF HARDWARE AND IT SOLUTIONS, I.E., IT CANNOT BE SAID THAT THEIR BRAND VALUE WOULD COMMAND A PREMIUM IN RESPEC T OF BACK END BPO SUPPORT SERVICES. 18. THE LD A.R PLACED HIS RELIANCE ON HOST OF DECISIONS TO CONTEND THAT THE COMPANIES HAVING HUGE BRAND VALUE CANNOT B E CONSIDERED AS COMPARABLE COMPANY. IN THE CASE OF PR. CIT VS. M/S SANVIH INFO GROUP P LTD (ITA 420/2019 DATED 16.05.2019)(DELHI), THE HONBLE DELHI HIGH COURT REFERRED M/S INFOSYS LTD AS GIAN T CORPORATION. IN THE CASE OF AVAYA INDIA (P) LTD VS. ACIT (2019)(108 TAXMANN.COM 222), THE HONBLE DELHI HIGH COURT HAS MADE FOLLOWI NG OBSERVATIONS WITH REGARD TO TCS E-SERVE LTD:- 21. A REFERENCE MAY NEXT BE MADE TO THE DECISION IN EVALUESERVE SEZ (GURGAON) (P.) LTD. ( SUPRA ) WHERE A REFERENCE IS MADE TO THE EARLIER DECISION TO THE BC MANAGEMENT SERVICES (P.) LTD . ( SUPRA ). THIS DECISION DEALT WITH THE EXCLUSION OF THREE SPE CIFIC COMPARABLES, WHICH HAVE ALSO INVOLVED IN THE PRESEN T CASE NAMELY M/S. TCS E-SERVE LTD., M/S. TCS E-SERVE INTERNATION AL LTD. AND M/S. INFOSYS BPO LTD. THIS COURT UPHELD THE EXC LUSION OF ALL THREE COMPARABLES AND IN PARTICULAR SINCE THE E NTITIES HAD 'A HIGH BRAND VALUE AND THEREFORE WERE ABLE TO COMM AND GREATER PROFITS; BESIDES THEY OPERATED ON ECONOMIC UPSCALE.' 22. THE REVENUE'S APPEAL AGAINST THE SAME ASSESSEE FOR AY 2011-2012 AGAINST ANOTHER ORDER OF THE ITAT EXCLUDI NG TCS E- SERVE INTERNATIONAL LIMITED, INFOSYS BPO LIMITED FR OM COMPARABLES MET THE SAME FATE. IN ITS DECISION DATE D 29 TH AUGUST, 2018 THE COURT REFERRED TO THE EARLIER DECISION DAT ED 26 TH FEBRUARY, IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 9 OF 18 2018 WHICH AGAIN PERTAINED TO AY 2010-2011. REFEREN CE WAS AGAIN MADE TO THE DECISION IN BC MANAGEMENT SERVICES LTD . 23. IT APPEARS THEREFORE THAT THIS COURT HAS CONSISTEN TLY UPHELD DECISIONS OF THE ITAT EXCLUDING BOTH THESE VERY COM PARABLES. THE ITAT ITSELF APPEARS TO HAVE TAKEN A CONSISTENT VIEW IN A LARGE NUMBER OF CASES EXCLUDING THESE TWO COMPARABL ES AND ITS DECISIONS HAVE BEEN UPHELD BY THIS COURT. ILLUSTRATIVELY REFERENCE MAY BE MADE TO THE DECISION OF THE TRIBUN AL IN VERTEX CUSTOMER SERVICES INDIA (P.) LTD. V. DY. CIT [2017] 88 TAXMANN.COM 286 (DELHI - TRI.), STRYKER GLOBAL TECHNOLOGY CENTRE (P.) LTD. V. DY. CIT [2017] 87 TAXMANN.COM 43 ( DELHI - TRI.) , SAMSUNG HEAVY INDUSTRIES INDIA (P.) LTD. V. DY. CIT [2017] 84 TAXMANN.COM 154 ( DELHI - TRI.) AND EQUANT SOLUTIONS INDIA (P.) LTD. V. DY. CIT [2016] 66 TAXMANN.COM 192/157 ITD 292 ( DELHI - TRIB.) . 24. ALL OF THESE DECISIONS PERTAINED TO AY 2010-2011. WHAT WEIGHED INVARIABLY IS THE FACT THAT BOTH COMPANIES HAD HUGE TURNOVERS WHEN COMPARED TO THE TESTED ENTITY. BOTH ENTITIES HAD CLOSE CONNECTION OF THE TATA GROUP OF COMPANIES AND TCS E- SERVE INTERNATIONAL HAD GIVEN A HUGE AMOUNT TO TCS TOWARDS BRAND EQUITY. FURTHER THERE WAS NO SEGMENTAL BIFURC ATION BETWEEN THE TRANSACTION PROCESSING AND TECHNICAL SE RVICES. THE ASSETS EMPLOYED BY TCS E-SERVE ALONG WITH HUGE INTANGIBLES IN THE FORM OF BRAND VALUE WERE FOUND T O HAVE A DEFINITE CONSIDERABLE EFFECT ON ITS PLI . THESE FACTORS VITIATED ITS COMPARABILITY UNDER THE FAR ANALYSIS WITH THE TESTE D COMPANY, WHICH COULD BE A CAPITAL SERVICE PROVIDER WITHOUT M UCH INTANGIBLE AND RISKS. 25. IN THIS CONTEXT IT REQUIRES TO BE NOTED THAT THE I TAT ALSO REFERRED TO THE DECISION OF THIS COURT CIT V. AGNITY INDIA TECHNOLOGIES (P.) LTD. [2013] 36 TAXMANN.COM 289/219 TAXMAN 26 . 26. THE COURT MAY ALSO NOTE THAT THE KARNATAKA HIGH CO URT HAS IN PR. CIT V. SOFTBRANDS INDIA (P.) LTD. [2018] 94 TAXMANN.COM 426/406 ITR 513 (KAR.) NOTED AS UNDER: '48. THE TRIBUNAL OF COURSE IS EXPECTED TO ACT FAIR LY, REASONABLY AND RATIONALLY AND SHOULD SCRUPULOUSLY A VOID PERVERSITY IN THEIR ORDERS. IT SHOULD REFLECT DUE A PPLICATION IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 10 OF 18 OF MIND WHEN THEY ASSIGN REASONS FOR RETURNING THE PARTICULAR FINDINGS. 49. FOR INSTANCE, WHILE DEALING WITH COMPARABLES OF FILTERS, IF UNEQUALS LIKE SOFTWARE GIANT INFOSYS OR WIPRO AR E COMPARED TO A NEWLY ESTABLISHED SMALL SIZE COMPANY ENGAGED IN SOFTWARE SERVICE, IT WOULD OBVIOUSLY BE WRONG AND PERVERSE. THE VERY WORD 'COMPARABLE' MEANS THAT THE GROUP OF ENTITIES SHOULD BE IN A HOMOGENEOUS GROUP. THEY SHOULD NOT BE WILDLY DISSIMILAR OR UNLIKE OR POLES APART. SUCH WILD COMPARISONS MAY RESULT IN THE BEST JUDGME NT ASSESSMENT GOING HAYWIRE AND DIRECTIONLESS WILD, WH ICH MAY LAND UP THE FINDINGS OF THE TRIBUNAL IN THE REA LM OF PERVERSITY ATTRACTING INTERFERENCE UNDER SECTION 26 0-A OF THE ACT.' 27. THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE T HAT THE SCALE OF OPERATIONS OF THE COMPARABLES WITH THE TESTED EN TITY IS A FACTOR THAT REQUIRES TO BE KEPT IN VIEW. TCS E-SERVE HAS A TURNOVER OF RS. 1359 CRORES AND HAS NO SEGMENTAL REVENUE WHEREA S THE ASSESSEE'S ENTIRE SEGMENTAL REVENUE IS A MERE 24 CR ORES. AS OBSERVED BY THIS COURT IN ITS DECISION IN PR. CIT V. ACTIS GLOBAL SERVICE (P.) LTD. [IT APPEAL NO. 417 OF 2016, DATED 5-8- 2016]'SIZE AND SCALE OF TCS'S OPERATION MAKES IT AN INAPPOSITE COMPARABLE VIS-A- VIS THE PETITIONER.' AS ALREADY POINTED OUT EARLIER THERE IS A CLOSER COMPARISON OF TCS E-SERVE LIMITED WITH INFOSYS BPO LIMITED WITH EACH OF THEM EMPLOYING 13, 342 AND 17,934 EMPLOYEES RESPECTIVELY AND MAKING RS. 37 CRO RES AND RS. 19 CRORES AS CONTRIBUTION TOWARDS BRAND EQUITY. WHE N RULE 10(B) (2) IS APPLIED I.E. THE FAR ANALYSIS, NAMELY, FUNCT IONS PERFORMED, ASSETS OWNED AND RISKS ASSUMED IS DEPLOYED THEN BRA ND AND HIGH ECONOMIC UPSCALE WOULD FALL WITHIN THE DOMAIN OF 'A SSETS' AND THIS ALSO WOULD MAKE BOTH THESE COMPANIES AS UNSUIT ABLE COMPARABLES. 28. THE DIRECTOR'S REPORT OF TCS E-SERVE LIMITED BEARS OUT THE CONTENTION OF THE ASSESSEE THAT BOTH ENTITIES HAVE BEEN LEVERAGING TCSS SCALE AND LARGE CLIENT BASE TO INCR EASE THEIR BUSINESS IN A SIGNIFICANT WAY. THE SUBMISSION THAT THE TWO COMPARABLES OFFER AN ILLUSTRATION OF 'AN IDENTICAL TRANSACTION BEING CONDUCTED IN AN UNCONTROLLED MANNER' OVERLOOKS THE EFFECT OF THE TATA BRAND ON THE PERFORMANCE OF THE IMPUGNED COMPA RABLES. THE QUESTION WAS NOT MERELY WHETHER THE MARGINS EARNED BY THE TATA IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 11 OF 18 GROUP IN PROVIDING CAPTIVE SERVICE TO THE CITI ENTI TIES WERE AT ARM'S LENGTH. THE QUESTION WAS WHETHER THEY OFFERED A REL IABLE BASIS TO RE-CALIBRATE THE PLI OF THE ASSESSEE WHOSE SCALE OF OPERATIONS WAS OF A MUCH LOWER ORDER THAN THE TWO IMPUGNED COMPARA BLES. THE MERE FACT THAT THE TRANSACTIONS WERE IDENTICAL WAS NOT, IN TERMS OF THE LAW EXPLAINED IN THE ABOVE DECISIONS, EITHER A SOLE OR A RELIABLE YARDSTICK TO DETERMINE THE APPOSITE CHOICE OF COMPA RABLES. IN THE ABOVE SAID CASE, THE HONBLE HIGH COURT HAS CONSIDERED MULTIPLE CRITERIA TO HOLD THAT M/S TCS E SERVE LTD AND M/S INFOSYS BPO LTD ARE NOT COMPARABLE. FURTHER ALL THESE DECI SIONS PERTAINED TO AY 2010-11. WE ARE CONSCIOUS OF THE FACT THAT W E ARE DEALING WITH THE CASE RELATING TO AY 2012- 19. IN OUR VIEW, THE DECISION RENDERED BY THE HON BLE HIGH COURT AND VARIOUS BENCHES OF TRIBUNAL HOLDING THAT THE COMPAN IES HAVING HIGH BRAND VALUE CANNOT BE CONSIDERED AS COMPARABLE COMP ANIES CAN BE CONVENIENTLY APPLIED TO THE YEAR UNDER CONSIDERATIO N ALSO. WE HAVE ALSO NOTICED THAT M/S INFOSYS BPO LTD IS BEING CONS ISTENTLY EXCLUDED IN THE ASSESSEES OWN CASE IN THE EARLIER YEARS. 20. M/S TCS E SERVE LTD WAS CONSIDERED BY THE C O-ORDINATE BENCH IN THE CASE OF M/S ARCTERN CONSULTING PVT LTD (IT(T P)A NO.352/BANG/2017 DATED 15.10.2019 RELATING TO AY 20 12-13) AND IT WAS HELD AS UNDER:- 10. AS FAR AS TCS E SERVICE LTD., IS CONCERNED, TH E COMPARABILITY OF THIS COMPANY WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF ZYME SOLUTIONS LTD., IN ITS ORDER DATED 16.11.2018 AS FOLLOWS:- '11. TCS E SERVICE LTD.: THIS COMPANY WAS SELECTED BY THE TPO AND OBJECTED B Y THE ASSESSEE FOR INCLUSION IN THE LIST OF COMPARABLES O N THE GROUND THAT IT IS FUNCTIONALLY DIFFERENT AS IT IS E NGAGED IN THE BUSINESS OF BPO, BANKING, FINANCE, INSURANCE DOMAIN . THIS CONTENTION WAS REJECTED BY THE TPO BY HOLDING THAT IT IS ENGAGED IN BPO, BUSINESS OF BANKING, FINANCE, INSUR ANCE IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 12 OF 18 DOMAIN, WHICH ARE PURELY IN THE NATURE OF ITES. EVE N THE HON'BLE DRP CONFIRMED THE FINDINGS OF THE TPO. 11.1 BEING AGGRIEVED, THE ASSESSEE IS BEFORE US CON TENDING THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT I S ENGAGED IN DIVERSIFIED BUSINESS ACTIVITIES OF BPO SUCH AS B ANKING, FINANCE, INSURANCE. LEARNED AR OF THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO THE ANNUAL REPORT PLACED AT PAGES 563 TO 563 OF THE PAPER BOOK AND RELIANCE IN THIS R EGARD WAS PLACED ON THE FOLLOWING DECISIONS: TURNOVER FILTER: I. MCAFEE SOFTWARE (INDIA) PVT LTD US-136-ITAT- 2016(BANG)-TP] II. SWISS RE GLOBAL BUSINESS SOLUTIONS INDIA (P.) L TD. FS- 307-ITAT- 2017(BANG) FUNCTIONALLY DIFFERENT FILTER: I. XL HEALTH CORPORATION INDIA (P.) LTD. (SUPRA) II. BAXTER INDIA (P.) LTD. V. ACIT12017185 TAXMANN.COM 285 (DELHI - TRIB.) III. CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULT ANTS (P.) LTD.(SUPRA) IT(TP)A NO. 352/BANG/2017 11.2 ON THE OTHER HAND, LD. CIT(DR) OPPOSED ITS EXC LUSION. HE SUBMITTED THAT THIS COMPANY IS ENGAGED IN KPO SE RVICES AND THERE IS NO DIFFERENCE BETWEEN KPO AND ITES. 11.3 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MA TERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF THIS COMPA NY WAS CONSIDERED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF XLHEALTH CORPN. INDIA (P.) DD. (SUPRA). THE RELE VANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: '. . . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. FROM THE PERUSAL OF THE ANNUAL REPORT OF THIS ENTITY PLACED AT PAGE NOS. 58 3 TO 678 OF PAPER BOOK, AT PAGE NO. 604 IT IS STATED AS UNDER. '2. COMPANY OVERVIEW YOUR COMPANY, ALONG WITH ITS SUBSIDIARY COMPANIES - TCS E-SERVE INTERNATIONAL LIMITED AND TCS E-SERVE AMERICA IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 13 OF 18 INC., IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS PROCESS SERVICES (BPO) FOR ITS CUSTOMERS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. THE COMPANY'S OPERATIONS INCLUDE DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS & INSIGHTS (KPO) AND SUPPORT SERVICES FOR BOTH DATA AND VOICE PROCESSES. YOUR COMPANY IS AN INTEGRAL PART OF THE TATA CONSULTANCY SERVICES' (TCS) STRATEGY TO BUILD ON IT S 'FULL SERVICES OFFERINGS' THAT OFFER GLOBAL CUSTOME RS AN INTEGRATED PORTFOLIO OF SERVICES RANGING FROM IT SERVICES TO BPO SERVICES. THE COMPANY PROVIDES ITS SERVICES FROM VARIOUS PROCESSING FACILITIES, BACKED BY A ROBUST AND SCALA BLE INFRASTRUCTURE NETWORK TAILORED TO MEET CLIENTS' NE EDS. A DETAILED BUSINESS CONTINUITY PLAN HAS ALSO BEEN PUT IN PLACE TO ENSURE THE SERVICES ARE PROVIDED TO THE CUSTOMERS WITHOUT ANY DISRUPTIONS.' THUS, THIS COMPANY IS ALSO STATED TO BE A KNOWLEDGE PROCESS OUTSOURCING AND THEREFORE FOR THE REASONS S TATED BY US WHILE DEALING WITH THIS ISSUE OF COMPARABILITY O F THE COMPANY INFOSYS BPO LTD. SHALL EQUALLY HOLD GOOD AN D THEREFORE WE DIRECT THE AO/TPO TO EXCLUDE THIS COMP ANY FROM THE LIST OF COMPARABLES. SINCE THE APPELLANT COMPANY IS INTO LOW END BPO, IT CANNOT BE COMPARED WITH KPO SERVICE PROVIDER. 11.4 RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF TRIBUNAL, WE DIRECT FOR EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLE.' 11. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT TCS E SERVICE LTD., SHOULD BE EXCLUDED FROM THE LIS T OF COMPARABLE COMPANIES. WE NOTICE THAT M/S TCS E-SERVE LTD HAS BEEN EXCLUDE D, INTER ALIA, FOR THE REASON THAT IT IS PROVIDING KPO SERVICES AN D FURTHER IT IS IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 14 OF 18 EXPLICITLY STATED THAT IT IS AN INTEGRAL PART OF TA TA CONSULTANCY SERVICES STRATEGY TO BUILD ON ITS FULL SERVICE OFF ERINGS THAT OFFER GLOBAL CUSTOMERS AN INTEGRATED PORTFOLIO OF SERVICE S RANTING FROM IT SERVICES TO BPO SERVICES. IT IS FURTHER OBSERVED B Y THE CO-ORDINATE BENCH THAT THE DECISION TAKEN IN RESPECT OF M/S INF OSYS BPO LTD WOULD EQUALLY APPLY TO M/S TCS E SERVE LTD ALSO. 21. WE HAVE NOTICED THAT THE ASSESSEE HEREIN IS UNDERTAKING BACKEND PROCESSING OF ACCOUNTING AND OTHER TRANSACT IONS, BACK OFFICE OPERATIONS, CUSTOMER SUPPORT SERVICES TO VARIOUS AS SOCIATED ENTERPRISES. HENCE THEY ARE IN THE NATURE OF BPO S ERVICES ONLY, WHILE M/S INFOSYS BPO LTD AND M/S TCS E SERVE LTD ARE PRO VIDING VARIETY OF OTHER SERVICES. BESIDES BOTH THE ABOVE SAID COM PANIES ARE SUPPORTED BY THEIR PARENT COMPANIES, HAVING HUGE BR AND VALUE. ACCORDINGLY, WE HOLD THAT BOTH THE ABOVE SAID COMPA NIES CANNOT BE CONSIDERED AS COMPARABLE COMPANIES. ACCORDINGLY, W E DIRECT THE AO/TPO TO EXCLUDE BOTH M/S INFOSYS BPO LTD AND M/S TCS E SERVE LTD FROM FINAL LIST OF COMPARABLES. 22. THE NEXT ISSUE IS WHETHER FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS SHALL FORM PART OF OPERATING INCOME/LOSS OR NOT. WE NOTICE THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO- ORDINATE BENCH IN THE CASE OF M/S ARCTERN CONSULTING PVT LTD (IT(TP)A NO.352/BANG/2017 DATED 15.10.2019) AS UNDER:- 12. THE NEXT ISSUE THAT NEEDS TO BE ADJUDICATED IS AS TO WHETHER FOREIGN EXCHANGE FLUCTUATION GAIN OR LOSS SHOULD BE CONSIDERED AS PART OF THE OPERATING PROFIT WHILE COMPUTING THE PR OFIT MARGIN OF THE ASSESSEE AS WELL AS THE COMPARABLE COMPANIES. T HE MAIN REASON WHY THE DRP CONSIDERED FOREIGN EXCHANGE GAIN SHOULD NOT BE TREATED AS A PART OF THE OPERATING PROFIT WAS DU E TO THE FACT THAT THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR DID N OT CONSIDER FOREIGN EXCHANGE LOSS AS OPERATING IN NATURE. THE D RP WAS OF THE IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 15 OF 18 VIEW THAT THE ASSESSEE HAS TO BE CONSISTENT IN THE APPROACH IN THIS REGARD. 13. AT THE TIME OF HEARING, HOWEVER, THE LEARNED CO UNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF FINASTRA SOFTWARE SOLUTIONS (I NDIA) PVT. LTD., VS. ACIT (2018) 93 TAXMANN.COM 460 (BANGALORE - TRI B.) WHEREIN THIS TRIBUNAL CONSIDERED THE VERY SAME ISSU E AND HELD AS FOLLOWS:- '38. AS FAR THE ISSUE TREATING FOREIGN EXCHANGE GAI N AS OPERATING REVENUE IS CONCERNED, IT HAS BEEN HELD A SEVERAL DECISIONS OF VARIOUS BENCHES OF ITAT THAT FOREIGN EXCHANGE GAIN, TO THE EXTENT IT RELATES TO OR CONNE CTED WITH THE BUSINESS FOR WHICH ALP IS DETERMINED, IS TO BE REGARDED AS OPERATING REVENUE OR LOSS AS THE CASE MAY BE. IN THE CASE OF SAP LABS INDIA (P.) LTD. V. ASSTT . CIT [2010] 8 TAXMANN.COM 207/[2011] 44 SOT 156 (BANG.) AND TRILO GY E BUSINESS SOFTWARE INDIA (P.) LTD. V. DY. CIT [2011] 12 TAXMANN.COM 464/47 SOT 45 (BANG)(URO), WHICH DECISIONS HAVE SUBSEQUENTLY BEEN CONSISTERVS FOLLOW ED BY THIS TRIBUNAL, LAYS DOWN THE PROPOSITION THAT FOREI GN EXCHANGE GAIN OR LOSS HAS TO BE REGARDED AS IT(TP)A NO. 352/BANG/2017 OPERATING REVENUE OR LOSS. THE LEARNE D DR HOWEVER BROUGHT TO OUR NOTICE A DECISION OF THE ITA T BANGALORE BENCH IN THE CASE OF COMMONSCOPE NETWORKS (INDIA) (P.) LTD. V. ITO IT(TP : A.NO.166 & 181/BANG/2016 ORDER DATED 22.2.2017 WHEREIN IT WAS THE FOREIGN EX CHANGE GAIN OR LOSS THAT ARISES SHOULD RELATE TO THE CONCE RNED AY BECAUSE WHAT IS COMPARED IS THE PROFIT MARGIN OF A PARTICULAR AY. ACCORDING TO HIM THEREFORE THE TPO/A O SHOULD EXAMINE THE NATURE OF FOREIGN EXCHANGE GAIN OR LOSS IN THE CASE OF THE ASSESSEE AND THE COMPARABLE COMP ANIES AND TO THE EXTENT IT RELATES TO TURNOVER OF THE REL EVANT AY AND THE SEGMENT FOR WHICH ALP IS BEING DETERMINED, THE SAME SHOULD ALONE BE CONSIDERED AS PART OF THE OPER ATING REVENUE OR LOSS. THE LEARNED COUNSEL FOR THE ASSESS EE POINTED OUT THAT IT IS IMPOSSIBLE TO CARRY OUT SUCH AN EXERCISE. THE ASSESSEE MIGHT BE WILLING TO CARRY OU T SUCH AN EXERCISE BUT THE SAME CANNOT BE EXPECTED FROM TH E COMPARABLE COMPANIES WHO HAVE TO FURNISH THE RELEVA NT DATA. HE ALSO POINTED OUT THAT UNDER RULE 10B(3) OF THE IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 16 OF 18 CRITERIA FOR COMPARABILITY IS THE EFFECT OF PROFIT ON ACCOUNT OF DIFFERENCES. RULE 10B(3) READS THUS: '(3) AN UNCONTROLLED TRANSACTION SHALL BE COMPARABL E TO AN INTERNATIONAL TRANSACTION IF-- (I) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TR ANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT T HE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM , SUCH TRANSACTIONS IN THE OPEN MARKET; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. ' THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE SUBM ITTED THAT PROFIT ARISING FROM COMPARABLE TRANSACTION WIL L NOT BE MATERIALLY AFFECTED BY ADOPTING THE FOREIGN EXCHANG E GAIN AS REFLECTED IN THE ACCOUNTS OF THE COMPARABLE COMP ANIES BECAUSE THE TERMS OF CREDIT ARE ALMOST IDENTICAL IN THE LINE OF BUSINESS OF SWD SERVICES AND ITES. 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AR E OF THE VIEW THAT IN THE LIGHT OF RULE 10B(3) OF THE RULES AND THE BUSINESS CYCLE IN THE RELEVANT BUSINESS, THE COMPAR ABILITY WILL NOT BE MATERIALLY AFFECTED IF THE FOREIGN EXCH ANGE GAIN IS CONSIDERED AS REFLECTED IN THE ACCOUNTS OF THE C OMPARABLE COMPANIES AS AVAILABLE IN PUBLIC DOMAIN. TO THIS EX TENT THE DECISION RENDERED BY THE BANGALORE BENCH OF ITAT IN THE CASE OF COMMONSCOPE NETWORKS (INDIA) PVT.LTD. (SUPR A) IS DISTINGUISHABLE. THEREFORE RESPECTFULLY FOLLOWING T HE DECISION OF THE ITAT BANGALORE IN THE CASE OF SAP L ABS INDIA (P.) LTD. (SUPRA), WE HOLD THAT THE DRP WAS J USTIFIED IN DIRECTING THE AO TO IT(TP)A NO. 352/BANG/2017 CONSIDER THE FOREIGN EXCHANGE GAIN OR LOSS AS OPERATING IN NATURE. THEREFORE, IN LIGHT OF THE ABOVE, THIS GROUND OF THE REVENUE IS LIABLE TO BE DISMISSED.' 14. IN VIEW OF THE AFORESAID DECISION, WE ARE OF TH E VIEW THAT THE FOREIGN EXCHANGE GAIN HAS TO BE TREATED AS PART OF THE OPERATING PROFIT WHILE COMPUTING THE PROFIT MARGIN OF THE ASS ESSEE AS WELL OF THE COMPARABLE COMPANIES. THE TPO IS DIRECTED TO COMPUTE THE IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 17 OF 18 ALP IN THE LIGHT OF THE DIRECTIONS GIVEN ABOVE, AFT ER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ALL OTH ER ISSUES ARISING ON ACCOUNT OF TP ADJUSTMENTS WERE NOT ARGUED AND TH EREFORE TREATED AS NOT PRESSED FOR ADJUDICATION. 23. THE LD D.R SUBMITTED THAT THE TPO HAD TREATE D THE FOREIGN EXCHANGE FLUCTUATION LOSS INCURRED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR AS NON-OPERATING IN NATU RE AND THE ASSESSEE DID NOT OBJECT TO THE SAME. ACCORDINGLY H E SUBMITTED THAT THE ASSESSEE CANNOT CHANGE ITS STAND AND CONTEND TH AT THE FOREIGN EXCHANGE GAIN SHOULD BE TREATED AS OPERATING INCOME . THE LD A.R SUBMITTED THAT THE ASSESSEE, IN ITS TRANSFER PRICIN G STUDY, HAS ALWAYS BEEN TREATING FOREIGN EXCHANGE LOSS/GAIN AS OPERATI NG IN NATURE. IN THE PRECEDING YEAR, THE ASSESSEE HAD INCURRED FOREI GN EXCHANGE FLUCTUATION LOSS AND EXCLUSION OF THE SAME RESULTED IN INCREASE OF OPERATING MARGIN. SINCE IT WAS ADVANTAGEOUS TO THE ASSESSEE, THE ACTION OF TPO WAS NOT OBJECTED TO. HE SUBMITTED TH AT THE NATURE OF TRANSACTION IS MORE RELEVANT THAN THE STAND TAKEN B Y THE ASSESSEE. 24. WE NOTICE THAT THE TRIBUNAL, IN THE ABOVE S AID CASE, HAS TAKEN THE VIEW THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN /LOSS IS OPERATING IN NATURE. ACCORDINGLY, FOLLOWING THE SAME, WE HOL D THAT THAT FOREIGN EXCHANGE FLUCTION GAIN/LOSS SHOULD BE TREATED AS OP ERATING PROFIT/LOSS IN NATURE WHILE COMPUTING THE PROFIT MA RGIN OF THE ASSESSEE AS WELL AS OF THE COMPARABLE COMPANIES. 25. IN VIEW OF THE FOREGOING DISCUSSIONS, THE A LP OF THE TRANSACTIONS REQUIRE TO BE DETERMINED AFRESH IN THE LIGHT OF DEC ISIONS RENDERED SUPRA. ACCORDINGLY, WE RESTORE THIS MATTER TO THE FILE OF THE AO/TPO. IT(TP)A NO.725/BANG/2017 GLOBAL E-BUSINESS OPERATIONS PVT. LTD., BANGALORE PAGE 18 OF 18 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DEC, 2020 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 4 TH DEC, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.